EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
XXXXXXXXXXXXX.XXX, INC.
INNOPUMP, INC.
PUMP ACQUISITION CORP.
AND CERTAIN
PARTICIPATING STOCKHOLDERS (AS DEFINED)
RESTATED AS OF AUGUST 9, 2006
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of August 9,
2006, amending and restating the Agreement and Plan of Merger originally signed
on June 10, 2005 (as so amended and restated, this "Agreement"), is among
XXXXXXXXXXXXX.XXX, INC., a Nevada corporation ("Parent"), PUMP ACQUISITION
CORP., a Nevada corporation and a wholly-owned subsidiary of Parent ("Sub"),
INNOPUMP, INC. , a Nevada corporation (the "Company") and the stockholders of
the Company listed on Exhibit A (the "Participating Stockholders") (Sub and the
Company being hereinafter collectively referred to as the "Constituent
Corporations").
RECITALS
A. The respective Boards of Directors of Parent and Sub and the Company
have approved and declared advisable the merger of the Company with and into Sub
upon the terms and subject to the conditions of this Agreement (the "Merger"),
and the respective Boards of Directors of Parent and Sub and the Company have
approved and adopted this Agreement;
B. The respective Boards of Directors of Parent and of the Company have
determined that the Merger is in the best interest of their respective
stockholders;
C. The Participating Stockholders also desire that the Company merge with
Sub; and
D. For federal income tax purposes, it is intended by the parties hereto
that the Merger shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I - THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the Nevada General Corporation Law (the "NGCL"),
the Company shall be merged with and into Sub at the Effective Time (as defined
in Section 1.2). Following the Merger, the separate corporate existence of the
Sub shall cease and Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of the Company in accordance with the NGCL.
SECTION 1.2 EFFECTIVE TIME. The Merger shall become effective when the
certificate of merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the NGCL, is filed with the Secretary of State of the
State of Nevada; provided, however, that, upon mutual consent of the Constituent
Corporations, the Certificate of Merger may provide for a later date of
effectiveness of the Merger not more than thirty (30) days after the date the
Certificate of Merger is filed. When used in this Agreement, the term "Effective
Time" shall mean the date and time at which the Certificate of Merger is
accepted for filing or such later time established by the Certificate of Merger.
The filing of the Certificate of Merger shall be made on the date of the
Closing.
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SECTION 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in this Agreement and applicable provisions of the NGCL.
SECTION 1.4 CHARTER AND BY-LAWS; DIRECTORS AND OFFICERS.
1.4.1 The Articles of Incorporation of Company shall be the Articles
of Incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law. The By-laws of Company in
effect at the Effective Time will be the By-laws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
1.4.2 Those persons who are the directors of the Company immediately
prior to the Effective Time shall be the directors of the Surviving Corporation
immediately following the Merger, and those persons who are the officers of the
Company at the Effective Time shall be the officers of the Surviving Corporation
immediately following the Merger.
SECTION 1.5 CONVERSION OF SECURITIES. As of the Effective Time, by virtue
of the Merger and without any action on the part of Sub, the Company or the
holders of any securities of the Constituent Corporations:
1.5.1 COMMON STOCK OF SUB. Each issued and outstanding share of
common stock, par value $.01 per share, of Sub shall be converted into one
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation Each stock certificate of Sub evidencing ownership of such
shares shall continue to evidence ownership of such shares of common stock of
the Surviving Corporation.
1.5.2 COMPANY COMMON STOCK; MERGER CONSIDERATION; ISSUANCE OF PARENT
SERIES A PREFERRED STOCK. Based on a capital raise of $7,500,000 (to meet the
capital requirement - see ss.5.2.6) all of the Company's Common Stock par value
$0.0001 per share ("Common Stock"), outstanding, or issuable on conversion of
Convertible Securities of Company, on a fully diluted basis calculated as of the
Effective Date shall be converted into common stock, par value $0.001 per share,
of Parent ("Parent Common Stock") equal to 59.3% of the total Parent Common
Stock, on a fully diluted basis, which will be outstanding, issuable, or
underlying any other obligation including warrants and options, on the closing
of the Merger (the "Merger Consideration") and such capital raise transaction.
The Company's Common Stock to be converted is more fully described in Section
3.4.1.
(i) The parties acknowledge that as set forth on Schedule 3.4.1
there are rights to purchase shares of Common Stock of Company that, upon
completion of the transaction contemplated hereby, shall be converted into
rights to purchase Parent Common Stock.
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1.5.3 NO FURTHER ISSUANCE. From the date hereof until the Effective
Time or other termination of this Agreement in accordance with its terms, there
shall be no changes to the number of shares or class of shares of Parent Common
Stock or Parent Series A Preferred Stock by reason of any reclassification,
recapitalization, split up, combination, exchange of shares or readjustment, nor
shall there occur a distribution of warrants or rights or a stock dividend or
stock split of Parent Common Stock or Parent Series A Preferred Stock nor shall
any additional shares of Parent Common Stock or Parent Series A Preferred Stock
or securities exercisable for or convertible into Parent Common Stock or Parent
Series A Preferred Stock be authorized for issuance or issued except as set
forth in this Agreement. Subject to Parent raising $7,500,000, in order for it
to satisfy the capital obligations provided for herein, pursuant to the terms
agreed upon with Company, upon issuance of the Merger Consideration, there will
be outstanding Parent Common Stock (including shares of Parent Common Stock
issuable upon the conversion or exercise of any outstanding notes, warrants, or
other securities of the Parent) representing 40.7% of the issued and outstanding
shares of Parent Common Stock on a fully diluted basis and holders of the
Company's Common Stock and/or Convertible Securities, assuming no Dissenting
Shares, will hold shares of Parent Common Stock representing 59.3% of the issued
and outstanding shares of Parent Common Stock on a fully diluted basis.
1.5.4 CANCELLATION OF COMPANY COMMON STOCK. All such shares of
Common Stock of Company, when so converted, shall no longer be deemed to be
outstanding and shall automatically be canceled and retired, and each holder of
a certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive any dividends and other
distributions in accordance with Section 1.7, certificates representing the
shares of Parent Common Stock into which such shares are converted, and any
cash, without interest, in lieu of fractional shares to be issued or paid in
consideration therefor, upon the surrender of such certificate in accordance
with Section 1.6, acknowledging that anything herein to the contrary, fractional
shares of Parent Series A Preferred may be issued.
SECTION 1.6 PAYMENT OF MERGER CONSIDERATION.
1.6.1 EXCHANGE PROCEDURES. At the Closing, the Company's
stockholders shall deliver to the Parent their certificates which as of the
Effective Time represented shares of Common Stock of Company (the
"Certificates"). Upon surrender of a Certificate at the Closing, the holder of
such Certificate shall be entitled to receive, as provided in Section 1.5.2, in
exchange therefor, the number of shares of Parent Common Stock into which shares
of Common Stock of Company represented by the Certificate so surrendered have
been converted. Following the Closing, any holder of a Certificate not
surrendered at the Closing may deliver such Certificate to the Parent, and the
Parent shall issue the Merger Consideration to which such holder is entitled
pursuant to Section 1.5.2.
1.6.2 DISSENTING STOCKHOLDER INTERESTS. Notwithstanding the
foregoing, no amounts shall be payable at or after the Effective Time with
respect to any Dissenting Shares (as defined in Section 1.12) or any shares of
Common Stock of Company with respect to which dissenters' rights have not
terminated. In the case of Dissenting Shares, payment shall be made in
accordance with Section 1.12 and the NGCL. In the case of any shares of Common
Stock with respect to which dissenters' rights have not terminated as of the
Effective Time, if such shares become Dissenting Shares, payment shall be made
in accordance with NGCL, and if, instead, the dissenters' rights with respect to
such shares of Common Stock irrevocably terminate after the Effective Time, the
holders of such shares shall be entitled only to receive the Merger
Consideration upon delivery of the Certificate(s) representing such shares of
Common Stock.
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1.6.3 NO LIABILITY. Notwithstanding anything to the contrary in this
Sub-section 1.6.3, none of the Parent, the Surviving Corporation nor any party
hereto shall be liable to any holder of Company Common Stock for any Merger
Consideration properly delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
SECTION 1.7 DIVIDENDS; TRANSFER TAXES; WITHHOLDING. No dividends or other
distributions that are declared on or after the Effective Time on Parent Common
Stock, or are payable to the holders of record thereof on or after the Effective
Time will be paid to any person entitled by reason of the Merger to receive
shares of a Parent Common Stock until such person surrenders the related
Certificate or Certificates, as provided in Section 1.6.1. Subject to the effect
of applicable law, there shall be paid to each record holder of a new
certificate representing such Parent Common Stock: (i) at the time of such
surrender or as promptly as practicable thereafter, the amount of any dividends
or other distributions theretofore paid with respect to the shares of Parent
Common Stock represented by such certificate and having a record date on or
after the Effective Time and a payment date prior to such surrender; and (ii) at
the appropriate payment date or as promptly as practicable thereafter, the
amount of any dividends or other distributions payable with respect to such
shares of Parent Common Stock and having a record date on or after the Effective
Time but prior to such surrender and a payment date on or subsequent to such
surrender. In no event shall the person entitled to receive such dividends or
other distributions be entitled to receive interest on such dividends or other
distributions.
SECTION 1.8 NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof shall be deemed to have been issued and paid in
full satisfaction of all rights pertaining to the Company Common Stock
represented by such Certificates.
SECTION 1.9 CLOSING OF COMPANY TRANSFER BOOKS. At least five (5) days
prior to the Effective Time, the Company shall deliver to the Parent a certified
list of the holders of record of the Company Common Stock, and at the Effective
Time the transfer books of the Company shall be closed and no transfer of
Company Common Stock shall thereafter be made on the records of the Company. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation or the Parent, such Certificates shall be canceled and exchanged as
provided in this ARTICLE I.
SECTION 1.10 LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such person of a bond, in such reasonable amount as
Parent may direct as indemnity against any claim that may be made against the
Parent with respect to such Certificate, the Parent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration to which the
holders thereof are entitled (pursuant to Section 1.5.2), and any dividends or
other distributions to which the holders thereof are entitled pursuant to
Section 1.7.
SECTION 1.11 FURTHER ASSURANCES. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Corporations, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Corporation and otherwise
to carry out the purposes of this Agreement.
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SECTION 1.12 DISSENTERS' RIGHTS. Shares of Company Common Stock that have
not been voted for approval of this Agreement or consented thereto in writing
and with respect to which a demand for payment and appraisal have been properly
made in accordance with the NGCL ("Dissenting Shares") will not be converted
into the right to receive the Merger Consideration otherwise payable with
respect to such shares of Company Common Stock at or after the Effective Time,
but will be converted into the right to receive from the Surviving Corporation
such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to the laws of the State of Nevada. If a holder of
Dissenting Shares (a "Dissenting Stockholder") withdraws his or her demand for
such payment and appraisal or becomes ineligible for such payment and appraisal,
then, as of the Effective Time or the occurrence of such event of withdrawal or
ineligibility, whichever last occurs, such holder's Dissenting Shares will cease
to be Dissenting Shares and will be converted into the right to receive, and
will be exchangeable for, the Merger Consideration payable with respect to such
shares of Common Stock in accordance with this Agreement. The Company will give
Parent and Sub prompt notice of any demand received by the Company from a holder
of Dissenting Shares for appraisal of shares of Common Stock, and Parent shall
have the right to participate in all negotiations and proceedings with respect
to such demand. The Company agrees that, except with the prior written consent
of Parent, or as required under the NGCL, it will not voluntarily make any
payment with respect to, or settle or offer or agree to settle, any such demand
for appraisal. Each holder of Dissenting Shares who, pursuant to the provisions
of the NGCL, becomes entitled to payment of the value of the Dissenting Shares
will receive payment therefor but only after the value therefor has been agreed
upon or finally determined pursuant to such provisions. Any portion of the
Merger Consideration that would otherwise have been payable with respect to
Dissenting Shares if such Company shares were not Dissenting Shares will be
retained by Parent.
SECTION 1.13 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") and all actions specified in this Agreement to occur
at the Closing shall take place at the offices of Xxxxxxx, Xxxxxxxxx & Xxxxxxxx,
LLP, at 10:00 a.m., local time, on August 9, 2006 or, if later, the second
Business Day following the day on which the last of the conditions set forth in
ARTICLE V shall have been fulfilled or waived (if permissible), or at such other
time and place as Parent and the Company shall agree (the "Closing Date").
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ARTICLE II - REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB: Each
representation and warranty set forth below is qualified by any and all
exceptions and disclosures set forth in the Parent SEC Documents and the
Schedules to this Agreement. Subject to the foregoing, Parent and Sub represent
and warrant to the Company as follows:
SECTION 2.1 CORPORATE STATUS. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada with full corporate power and authority to carry on its business as now
conducted.
SECTION 2.2 SUBSIDIARIES. The Parent has no direct or indirect ownership
interest in any firm, association, corporation, or business enterprise other
than the Sub.
SECTION 2.3 AUTHORIZATION OF AGREEMENTS. Each of Parent and Sub has the
power and authority to execute and deliver this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance by each of Parent
and Sub of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent and Sub. This Agreement has been duly executed and delivered by each
of Parent and Sub and assuming due execution and delivery by Company constitutes
the legal, valid and binding obligation of each of them, enforceable against
each of them in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization and similar laws of
general application relating to or affecting the rights and remedies of
creditors.
SECTION 2.4 CAPITALIZATION.
2.4.1 The authorized, issued and outstanding capital stock of the
Parent consists solely of (a) 1,300,000,000 shares of Parent Common Stock, par
value $.001 per share, of which 31,125,000 shares are currently issued and
outstanding, and (b) 100,000,000 shares of Preferred Stock, of which no shares
are currently issued and outstanding. The authorized, issued and outstanding
capital stock of Sub consists solely of 1,000 shares of common stock, par value
$.001 per share, of which 100 shares are issued and outstanding and are held
beneficially and of record by Parent. At closing, the authorized capital stock
of the Parent shall consist of (a) 1,000,000,000 shares of Parent Common Stock,
par value $.001 per share and (b) 100,000,000 shares of Preferred Stock, of
which no shares will be issued and outstanding.. Except as set forth in Schedule
Section 2.4, there are no rights, subscriptions, warrants, options, convertible
notes or other instruments or conversion rights of any kind ("Options and
Convertible Securities") authorized or outstanding or no binding agreements
("Purchase Agreements") to purchase or otherwise acquire from the Parent or Sub
or, to the Parent's Knowledge, from any other Person, any shares of stock, or
securities or obligations of any kind convertible into or exchangeable for any
shares of stock, of any class of the Parent or Sub or any other equity interest
in the Parent or Sub.
2.4.2 All of the outstanding capital stock of the Parent and Sub and
all Options and Convertible Securities of the Parent and Sub set forth in
Schedule Section 2.4 have been duly authorized and are validly issued, fully
paid and nonassessable. All capital stock of the Parent and Sub and all Options
and Convertible Securities of the Parent and Sub were issued in compliance with
all applicable federal and state securities laws. The lawful, registered and
beneficial owners (and their addresses) of all issued and outstanding shares of
the Parent Common Stock are reflected in the records of the Transfer Agent, and
the lawful, registered and beneficial owners (and their addresses) of all issued
and outstanding shares of Parent Series A Preferred Stock and the number of
shares held by each and of all Options and Convertible Securities and the number
of shares of Common Stock or Parent Series A Preferred Stock into which such
Options or Convertible Securities are convertible are as indicated on Schedule
Section 2.4 hereto. There is, to the Parent's Knowledge, no proxy, or any
agreement, arrangement or understanding of any kind authorized or outstanding
which restricts, limits or otherwise affects the right to vote any share of
Parent Common Stock, Parent Series A Preferred Stock, or any Options and
Convertible Securities of Parent.
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SECTION 2.5 NO CONFLICTS. The execution, delivery and performance of this
Agreement, any other agreement or document contemplated herein and the
consummation of all of the transactions contemplated hereby and thereby: (i) do
not and will not require the consent, waiver, approval, license, designation or
authorization of, or declaration with, any Person or court to which either
Parent or Sub is subject or any Governmental Entity; and (ii) do not and will
not, with or without the giving of notice or the passage of time or both,
violate or conflict with or result in a breach or termination of any provision
of, or constitute a material default under, or accelerate or permit the
acceleration of the performance required by the terms of, or result in the
creation of any mortgage, security interest, claim, lien, charge or other
material encumbrance upon any of the material assets of either of Parent or Sub
pursuant to, or otherwise give rise to any liability or obligation under, the
Articles of incorporation or By-laws of either of Parent or Sub, any material
agreement, mortgage, deed of trust, indenture, license, permit or any other
material agreement or instrument or any order, judgment, decree, statute or
regulation to which either of Parent or Sub is a party or by which either of
Parent or Sub or any of its assets may be bound; and (iii) will not cause the
termination of any such agreement or instrument, or in any way affect or violate
the terms and conditions of, or cause the cancellation, modification, revocation
or suspension of, any rights of either of Parent or Sub, except with respect to
clauses (i), (ii) and (iii) above, such breach or breaches of the
representations contained therein which individually or in the aggregate would
not have a Material Adverse Effect upon Parent.
SECTION 2.6 LITIGATION; COMPLIANCE WITH LAWS; PERMITS.
2.6.1 Except as disclosed in Schedule Section 2.6, there are no
actions, suits, proceedings, arbitrations or governmental investigations
pending, or, to the Parent's Knowledge, threatened against, by or affecting the
Parent nor has any such suit been pending within three years prior to the date
hereof. The Parent has not been charged with or received notice of any violation
of any applicable federal, state, local or foreign law, rule, regulation,
ordinance, order or decree relating to it, or the operation of its business, and
to the Parent's Knowledge, there is no threatened claim of such violation
(including any investigation) or any basis therefor.
2.6.2 To the Parent's Knowledge, except as set forth in Schedule
Section 2.6, the Parent has complied in all respects with all laws, rules,
regulations, ordinances, orders, judgments, decrees, writs, injunctions,
building codes, safety, fire and health approvals, certificates of occupancy or
other governmental restrictions applicable to them, their assets, employees and
employment practices.
2.6.3 To the Parent's Knowledge, except as set forth in Schedule
Section 2.6, the Parent has all governmental licenses, permits, approvals or
other authorizations required for the conduct of its business as now conducted,
all of which are in full force and effect and all of which are listed on
Schedule Section 2.6 hereto; there is no action pending or, to the Parent's
Knowledge, threatened, to terminate any rights under any such governmental
licenses, permits or authorizations; and, except as disclosed on Schedule
Section 2.6, at the Effective Time, none of such licenses, permits, approvals
and authorizations will be adversely affected by the Merger or the consummation
of the other transactions contemplated by this Agreement.
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SECTION 2.7 PARENT COMMON STOCK. When issued in accordance with this
Agreement at the Effective Time, the shares of Parent Common Stock constituting
the Merger Consideration will (i) have been duly authorized and validly issued,
be fully paid and nonassessable, and be free and clear of any tax, security
interest, claim, lien, pledge or encumbrance whatsoever; (ii) be free of
preemptive rights created by statute, Parent's Articles of Incorporation or
By-laws or any agreement to which Parent is a party or by which Parent is bound,
and (iii) be issued in a transaction exempt from registration under the
Securities Act.
SECTION 2.8 SEC DOCUMENTS AND FINANCIAL STATEMENTS. Parent has filed all
reports and documents required to be filed with the SEC under the Securities
Act, the Exchange Act and the related SEC rules thereunder since January 1, 2002
(the "Parent SEC Documents"). As of their respective dates, the Parent SEC
Documents complied as to form in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and, at the
respective times they were filed, none of the Parent SEC Documents contained any
untrue statement of a material fact or omitted 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.
2.8.1 The financial statements (including, in each case, any notes
thereto) of Parent included in the Parent SEC Documents (i) complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (ii) are
complete and correct in all material respects, (iii) fairly present in all
material respects the financial position of Parent as at the respective dates
thereof and the results of operations and their cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein), and (iv) were
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto), and are in accordance with
the books and records maintained by the Parent, with no material differences
between such financial statements and the financial records maintained and
accounting methods applied by the Parent for tax purposes, except as disclosed
in the notes to such financial statements. Except as disclosed in the Parent SEC
Documents or as required by generally accepted accounting principles, Parent has
not, since March 31, 2006, made any change in the accounting practices or
policies applied in the preparation of financial statements.
SECTION 2.9 NO UNDISCLOSED LIABILITIES. To the Parent's Knowledge, the
Parent has no Liabilities, except for Liabilities (i) disclosed on the Parent's
balance sheet, dated March 31, 2006, included in the Parent's SEC Documents, or
(ii) as set forth in Schedule Section 2.9. "Liability" means any liability or
obligation (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated and whether due or to become due).
SECTION 2.10 TAXES.
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2.10.1 True and correct copies of the Parent's federal and state
income tax returns for the years ended December 31, 2004 and December 31, 2005
have been delivered to the Company. All tax returns (including information
returns) required by any jurisdiction to have been filed as of the date of this
Agreement by or with respect to the Parent have been timely filed, except for
returns with respect to which extensions have been granted, and each such return
is true, correct and complete in all material respects. Schedule Section 2.10
sets forth each jurisdiction in which the Parent is required to file tax
returns.
2.10.2 Except as set forth in Section 2.10, all material liabilities
of the Parent to any jurisdiction for taxes of every kind and nature, including
interest thereon and penalties with respect thereto (collectively "Taxes")
relating to any period prior to March 31, 2006 have been timely paid or are
accrued and provided for in the Parent Financial Statements as of March 31,
2006. Any liability for Taxes incurred by the Parent since December 31, 2005 was
incurred in the ordinary course of business.
2.10.3 The Parent is not required to file any foreign income tax
returns. The state income tax returns of the Parent have not been audited by the
appropriate taxing authorities within the past five (5) years. To the Parent's
Knowledge, neither the Internal Revenue Service nor any state, local or other
taxing authority has proposed any additional Taxes, interest or penalties with
respect to the Parent or any of its operations or business; there are no pending
or, to the Parent's Knowledge, threatened tax claims or assessments; and there
are no pending or, to the Parent's Knowledge, threatened tax examinations by any
taxing authorities.
2.10.4 The Parent has not given any waivers of rights (which are
currently in effect) under applicable statutes of limitations with respect to
the income tax returns for any fiscal year.
SECTION 2.11 NO ADVERSE EFFECTS. Except as disclosed in the Parent SEC
Documents filed with the SEC prior to the date of this Agreement, since December
31, 2005 (i) the business of the Parent has been conducted only in the ordinary
course, (ii) there has been no change affecting the Parent that individually or
in the aggregate has had a Material Adverse Effect on the Parent, and (iii)
there has been no damage, destruction or loss, or to the Parent's Knowledge,
other occurrence or development, whether or not insured, that would,
individually or in the aggregate, result in a Material Adverse Effect on Parent,
and Parent has no Knowledge of any threatened occurrence or development that
would constitute a Material Adverse Effect.
SECTION 2.12 CONDUCT OF BUSINESS. Except as disclosed on Schedule Section
2.12 hereto, since March 31, 2006, the Parent has not: (i) created or incurred
any liability (absolute, accrued, contingent or otherwise) except unsecured
current liabilities incurred in the ordinary course of business consistent with
past practice; (ii) mortgaged, pledged or subjected to any lien or otherwise
encumbered any of its assets, tangible or intangible; (iii) discharged or
satisfied any lien or encumbrance or paid any obligation or liability (absolute,
accrued, contingent or otherwise) other than current liabilities shown on the
Parent Financial Statements as at March 31, 2006 and Taxes and current
liabilities incurred since March 31, 2006 in the ordinary course of business or
under contracts or agreements entered into in the ordinary course of business
(other than as a result of any default or breach of, or penalty under, any such
contracts or agreements); (iv) waived, released or compromised any claims or
rights of substantial value or lost, or been threatened with the loss of, any
key employees; (v) entered into any settlement, compromise or consent with
respect to any claim, proceeding or investigation; (vi) sold, assigned,
transferred, leased or otherwise disposed of any of any material asset, tangible
or intangible, or canceled any debts or claims except, in each case, for fair
consideration in the ordinary course of business (it being understood that the
disposition of any asset, other than inventory consisting of finished products,
or cancellation of any debt or claim carried on the books at more than $20,000
shall be deemed not to be a disposition or cancellation in the ordinary course
of business); (vii) declared or paid any dividends, or made any other
distribution on or in respect of, or directly or indirectly purchased, retired,
redeemed or otherwise acquired any shares of its capital stock, paid any notes
or accounts or paid any amount or transferred any asset of the Parent (other
than intercompany payables in the ordinary course of business); (viii) made or
become a party to, or become bound by, any contract or commitment or renewed,
extended, amended, modified or terminated any contract or commitment which in
any one case involved an amount in excess of $20,000 (or in the aggregate an
amount in excess of $50,000 but excluding therefrom the amount of Parent
Material/Service Agreements (as defined in Subsection 2.17.1) entered into in
the ordinary course of business); (ix) issued or sold any shares of its capital
stock; (x) paid or agreed to pay conditionally or otherwise, any bonus, extra
compensation, pension or severance pay to any of its officers or employees,
whether under any existing profit sharing, pension or other plan or otherwise,
or increased the rate or altered the form of compensation, including without
limitation salaries, fees, commission rates, bonuses, profit sharing, incentive,
pension, retirement or other similar payments, from that being paid at March 31,
2006 to any of its stockholders, directors, officers or employees; (xi) entered
into any transaction not in the ordinary course of business (except for
transactions contemplated by this Agreement); (xii) made or announced any change
in the form or manner of distribution of any of its products or services; (xiii)
changed any of its accounting methods or principles used in recording
transactions on its books or records or in preparing the Parent Financial
Statements; or (xiv) entered into any contract or commitment to do any of the
foregoing.
-10-
SECTION 2.13 TITLE TO AND CONDITION OF ASSETS. The Parent has valid title
to the personal property set forth on Schedule Section 2.13, free and clear of
all Encumbrances, except for the Encumbrances set forth in Schedule Section
2.13. Such assets are (i) sufficient and adequate for the Parent to carry on its
business as presently conducted; and (ii) are in reasonably good condition and
repair, normal wear and tear excepted.
SECTION 2.14 REAL PROPERTY. Parent neither owns nor leases any real
property.
SECTION 2.15 ENVIRONMENTAL COMPLIANCE. The Parent has at all times had and
now has all environmental approvals, consents, licenses, permits and orders
required to conduct the businesses in which it has been or is now engaged. The
Parent has at all times been and is now in compliance in all material respects
with all applicable Environmental Laws. There are no claims, actions, suits or
proceedings pending or, to the Parent's Knowledge, threatened against or
involving the Parent, or any assets of the Parent, under any of the
Environmental Laws (whether by reason of any failure to comply with any of the
Environmental Laws or otherwise). No decree, judgment or order of any kind under
any of the Environmental Laws has been entered against the Parent. The Parent is
not and was not a generator or transporter of hazardous waste, or the owner,
operator, lessor, sublessor, lessee or mortgagee of a treatment, storage or
disposal facility or an underground storage tank, as those terms are defined
under the Resource Conservation and Recovery Act, as amended, or regulations
promulgated pursuant thereto, or of real property on which such a treatment,
storage or disposal facility or underground storage tank is or was located or of
any facility at which any Hazardous Substances were treated, stored, recycled or
disposed or are or were installed or incorporated. There are no other facts,
conditions or situations, whether now or heretofore existing, that could form
the basis for any claim against, or result in any liability of, the Parent under
any of the Environmental Laws.
-11-
SECTION 2.16 ACCOUNTS RECEIVABLE. Except as set forth on Schedule Section
2.16, all accounts receivable shown on the March 31, 2006 balance sheet of the
Parent included in the Parent SEC Documents or thereafter acquired by the Parent
have been collected or are current and payable within ninety (90) days of
issuance and are subject to no known counterclaims or setoffs. All such accounts
receivable have been generated in the ordinary course of business and reflect a
bona fide obligation for the payment of goods or services provided by the
Parent.
SECTION 2.17 MATERIAL/SERVICE AGREEMENTS; OTHER CONTRACTS.
2.17.1 Reserved.
2.17.2 Except as disclosed in Schedule 2.17.2 hereto, the Parent is
not a party to or bound by any oral or written contracts, obligations or
commitments with respect to any of the following:
(a) contract, commitment or arrangement involving, in any one case,
$20,000 or more;
(b) contract with a term of, or requiring performance, more than six
months from its date;
(c) lease or lease purchase agreement, mortgage, conditional sale or
title retention agreement, indenture, security agreement, credit agreement,
pledge or option with respect to any property, real or personal (tangible or
intangible), in any capacity;
(d) employment contracts, undertakings, understandings or
arrangements;
(e) contract or agreement with any labor union or other collective
bargaining group;
(f) bonus, pension, savings, welfare, profit sharing, stock option,
phantom stock, stock appreciation rights, retirement, commission, executive
compensation, hospitalization, insurance or similar plan providing for employee
benefits or any other arrangement providing for benefits for any former or
current employees or for the remuneration, direct or indirect, of the directors,
officers or employees of the Parent;
(g) note, loan, credit or financing agreement or other contract for
money borrowed, and all related security agreements and collateral documents,
including any agreement for any commitment for future loans, credit or
financing;
(h) guarantees;
(i) contract or understanding regarding any capital expenditures in
excess of $20,000;
-12-
(j) agency (sales or otherwise), distribution, brokerage (including,
without limitation, any brokerage or finder's agreement or arrangement with
respect to any of the transactions contemplated by this Agreement) or
advertising agreement;
(k) contract with investment bankers, accountants, attorneys,
consultants or other independent contractors, including those relating to this
Agreement;
(l) shareholder agreement;
(m) any contract or understanding with any director or officer of
the Parent (or any family member thereof) or any Affiliate of such persons;
(n) contract, commitment or arrangement which would restrain the
Parent from engaging or competing in any business;
(o) contract, commitment or arrangement not made in the ordinary
course of business involving an amount payable per annum of $20,000 or more or,
in the aggregate, $100,000; and
(p) license (other than shrink wrap licenses relating to generally
available software), franchise or royalty agreement.
2.17.3 The Parent has delivered or made available to the Company
correct and complete copies of all of the contracts, agreements and other
documents listed in Schedules 2.17.1 and 2.17.2 hereto and all amendments
thereto and any waivers currently in effect granted thereunder (the "Scheduled
Parent Contracts"). Except as specifically set forth on Schedules 2.17.1 and
2.17.2, the Merger and the consummation of the other transactions contemplated
by this Agreement are not a violation of or grounds for the modification or
cancellation of any of the Scheduled Parent Contracts or for the imposition of
any penalty or security interests thereunder. No unresolved disputes are pending
or, to the Parent's Knowledge, threatened under or in respect of any such
Scheduled Parent Contracts.
2.17.4 Except as described in Schedules 2.17.1 and 2.17.2 hereto,
all Scheduled Parent Contracts are valid and enforceable against the Parent and
to the Parent's Knowledge against the other party or parties thereto, as the
case may be, in accordance with their respective terms, and there is not, under
any of such Scheduled Parent Contracts, any existing default by the Parent, to
the Parent's Knowledge, by any other party, or, to the Parent's Knowledge, any
event which with notice, lapse of time, or both, would constitute a default and
which would have a Material Adverse Effect on the continued operation of the
Parent.
SECTION 2.18 INTELLECTUAL PROPERTY Schedule Section 2.18 hereto sets forth
a true and complete list of all (i) trademarks, service marks and tradenames,
and the federal, state and foreign registrations and applications thereof
("Trademarks"), (ii) patents and patent applications and extensions and renewals
thereof ("Patent Rights"), (iii) registered copyrights and copyright
applications and renewals thereof ("Copyrights"), and (iv) licenses held with
respect to any trademark, service xxxx, trade name, patent or copyright (other
than shrink-wrap licenses relating to generally available software) ("License
Rights") held by the Parent. All Trademarks, Patent Rights, Copyrights, License
Rights and Trade Secrets ("Intellectual Property") of the Parent that are owned
by the Parent are owned free and clear of any and all licenses, liens, claims,
security interests, charges or other encumbrances or restrictions of any kind,
except as reflected on Schedule Section 2.18, and no licenses for the use of any
of such rights have been granted by the Company to any third parties, except as
reflected in Schedule Section 2.18 attached hereto. All of such rights are
valid, enforceable and in good standing and are reasonably sufficient and
appropriate for the conduct of the business of the Parent as currently and
proposed to be conducted. The Merger and the consummation of the other
transactions contemplated hereby will not adversely affect any rights of the
Parent in the Intellectual Property of the Parent. To the Parent's Knowledge,
the operation of the Parent does not infringe in any way on or conflict with any
registered or unregistered patent, trademark, trade name, copyright, trade
secret, contract, license or other right, of any person, and the Company does
not license any such right from others except as set forth on Schedule Section
2.18. No claim is pending or, to the knowledge of the Parent, threatened or has
been made within the past five years, to the effect that any such infringement
or conflict has occurred. No other Intellectual Property, other than
Intellectual Property owned or licensed by the Parent, is required by it for its
business as conducted prior to the date hereof. The Parent has no knowledge of
any infringement by any third parties upon any of the Intellectual Property of
the Parent.
-13-
SECTION 2.19 PRIOR ACTIVITIES. The Parent has disposed of all properties
used in, and discharged and satisfied all liabilities pertaining to, Parent's
former business activities, as described in the SEC Reports.
SECTION 2.20 INSURANCE. Schedule Section 2.20 hereto contains a complete
and correct list of all insurance policies maintained by the Parent together
with a schedule of required premiums under each such policy. The Parent has
delivered to the Company complete and correct copies of all such policies
together with all riders and amendments thereto. Such policies are in full force
and effect, and all premiums due thereon have been paid. The Parent has complied
in all material respects with the provisions of such policies. No notice has
been received canceling or threatening to cancel or refusing to renew any of
such insurance. Except as set forth in Schedule Section 2.20, the rights of the
insured under such policies will not be terminated or adversely affected by the
Merger or the consummation of the other transactions contemplated hereby. There
is currently no basis for any insurance claim by the Parent. The Parent has not
created any letters of credit or other funding obligation with respect to such
policies
SECTION 2.21 CUSTOMER AND SUPPLIER RELATIONSHIPS. Attached as Schedule
Section 2.21 is a complete and correct list of all current customers of the
Parent showing the sales to each for the period ended March 31, 2006 and of all
suppliers whose sales to the Parent amounted to more than $200,000 during such
period showing the sales of each such supplier. With respect to any such
customer or supplier or group of related customers or suppliers listed on
Schedule Section 2.21, the Parent has no knowledge that any such customer,
supplier or group of related customers or suppliers has terminated or expects to
terminate a material portion of its normal business with the Parent. Except as
disclosed in Schedule Section 2.21, no shareholder or director or officer of the
Parent or any of their immediate family members has any direct or indirect
interest, either by way of stock ownership or otherwise, other than ownership of
not more than two (2) percent of the outstanding shares of stock of any business
listed on any national stock exchange or listed on Nasdaq, in any firm,
corporation, association or business enterprise, which competes with, is a
supplier or customer of, or is a distributor or sales agent for, or is a party
to any contract with the Parent.
-14-
SECTION 2.22 EMPLOYEES. The Parent has furnished to the Company a true and
complete list setting forth all of the employees and officers of the Parent, the
annual salary of each and the bonus earned by each such employee or officer in
the Parent's most recent fiscal year, together with a description of their job
designations, other compensation , benefits (including severance pay and
bonuses), outstanding loans to officers or employees and all understandings not
in the ordinary course of business relating to terms and conditions of
employment. Proper and accurate amounts have been withheld by the Parent from
its employees' compensation for all periods in full compliance with tax
withholding provisions of applicable federal, state, local or foreign law.
Proper and accurate federal, state, local and foreign returns have been filed by
the Parent for all periods for which returns were due with respect to employee
income tax withholding, social security and unemployment Taxes, and the amounts
shown thereon to be due and payable have been timely paid.
SECTION 2.23 LABOR RELATIONS. There has been no violation of any federal,
state or local statutes, laws, ordinances, rules, regulations, orders or
directives with respect to the employment of individuals by, or the employment
practices or work conditions of the Parent or their respective terms and
conditions of employment, wages and hours. The Parent is not engaged in any
unfair labor practice or other unlawful employment practice (including under any
immigration laws) and there are no unfair labor practice charges or other
employee related complaints against the Parent pending or, to the knowledge of
the Parent, threatened before the National Labor Relations Board, the Equal
Employment Opportunity Commission, the Occupational Safety and Health Review
Commission, the Department of Labor, or any other federal, state, or local, or
other governmental authority by or concerning the employees of the Parent.. No
representation question, grievance or arbitration proceedings arising out of
collective bargaining agreements covering employees of the Parent exists or is
pending or, to the Parent's Knowledge, threatened respecting the employees of
the Parent. There is no work stoppage, strike, slowdown, lockout, picketing or
other similar labor problem involving persons employed by the Parent pending or,
to the Parent's Knowledge, threatened. There are no labor union contracts or
collective bargaining agreements to which the Parent is a party relating to any
employee of the Parent.
SECTION 2.24 BENEFIT PLANS.
2.24.1 Neither the Parent nor Sub maintains or contributes to, or
has previously maintained or contributed to, an "employee pension benefit plan"
(as defined in Section 3(2) of ERISA) nor any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA). Neither the Parent nor Sub currently
contributes to, or has previously contributed to, any multi-employer plan (as
defined in Section 3(37) of ERISA).
2.24.2 Schedule Section 2.24 lists each deferred compensation plan,
bonus plan, employee stock purchase plan, stock option plan and any other
Employee Benefit Plan, agreement, arrangement or commitment maintained by the
Parent or Sub with respect to the compensation of any of the employees of the
Parent or Sub.
SECTION 2.25 CORPORATE RECORDS The copy of the articles of incorporation
and by-laws of the Parent and Sub, as amended to date, included in Schedule
Section 2.25 are complete and correct, and the minute books of the Parent and
Sub correctly reflect all material corporate actions taken at all meetings of
directors (including committees thereof) and the stockholders. The stock
transfer books and stock ledgers of the Parent and Sub are complete and correct
and correctly reflect all issuances and transfers of the capital stock of the
Parent and Sub.
-15-
SECTION 2.26 BANK ACCOUNTS; POWER OF ATTORNEY. Schedule Section 2.26
hereto correctly sets forth: (i) a list of all banks in which the Parent has an
account or safety deposit box, account number, purpose of such account or safety
deposit box and the names of all persons authorized to draw thereon or have
access thereto and (ii) the names of all persons holding powers of attorney from
the Parent and a description of the power of attorney.
SECTION 2.27 WARRANTIES. Except as described in Schedule Section 2.27
annexed hereto, during the past two (2) years the Parent has not given any
written warranties with respect to any of the Parent's products or services, and
except as set forth in such Schedule Section 2.27, in the last two (2) years no
claim for breach of any such written warranty or any implied warranty with
respect to such Parent products or services has been made, or to the Parent's
Knowledge, is threatened. Returns and repairs in respect of the Parent's
products for each of the two (2) calendar years preceding the date of this
Agreement are listed in Schedule Section 2.27, and Schedule Section 2.27 sets
forth all such separate returns and repairs in excess of $25,000 during such two
(2) year period. Schedule Section 2.27 also sets forth a description of all
claims for personal injury or property damage or similar claims for Parent
product liability or arising from services provided by the Parent which have
been made against the Parent during the past two (2) years.
SECTION 2.28 INSIDER INTERESTS. Except as disclosed on Schedule Section
2.28, no officer or director of the Parent or Affiliate of any officer or
director of the Parent has any agreement with the Parent or any interest in any
property, real, personal or mixed, tangible or intangible (including, without
limitation, patents, patent applications, trademarks, trade names or other
intellectual property) used in or pertaining to the business of the Parent or
has engaged in a transaction with the Parent at any time during the Parent's
current fiscal year or three preceding fiscal years, except in each case as a
stockholder or employee.
SECTION 2.29 FOREIGN CORRUPT PRACTICES ACT. The Parent has not made,
offered or agreed to offer anything of value to any government official,
political party or candidate for government office nor has it taken any action
which would cause the Parent to be in violation of the Foreign Corrupt Practices
Act of 1977 or any similar law of any foreign jurisdiction or the United States.
SECTION 2.30 REORGANIZATION. Neither Parent nor any of its Subsidiaries
has taken any action or failed to take any action which action or failure would
cause the Merger not to qualify as a reorganization within the meaning of
Section 368(a) of the Code, and there are, to the knowledge of Parent, no facts
that would prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code as of the Effective Time.
SECTION 2.31 OPERATIONS OF SUB. Sub is a direct, wholly-owned subsidiary
of Parent, was formed solely for the purpose of engaging in the transactions
contemplated hereby and has engaged in no other business activities prior to the
date hereof, and has no assets or Liabilities as of the date hereof.
SECTION 2.32 BROKERS. Except as set forth in Schedule Section 2.32 no
broker, investment banker or other person is entitled to any broker's, finder's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
-16-
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY Each representation
and warranty set forth below is qualified by any and all exceptions and
disclosures set forth in the Schedules to this Agreement. Subject to the
foregoing, the Participating Stockholders and the Company represents and
warrants to Parent and Sub as follows:
SECTION 3.1 ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada, with full corporate power and authority to carry on its business as now
being conducted.
SECTION 3.2 SUBSIDIARIES. The Company has no direct or indirect interest
or interests by stock ownership in any firm, association, corporation or
business enterprise.
SECTION 3.3 AUTHORIZATION OF AGREEMENTS. The Company has the corporate
power and authority to execute and deliver this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance by the Company of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, other than the approval of the Merger by the stockholders of the
Company, as contemplated by Section 4.1. This Agreement has been duly executed
and delivered by the Company and, assuming due execution and delivery by the
Parent and approval of the Merger by the stockholders of the Company,
constitutes the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization and similar
laws of general application relating to or affecting the rights and remedies of
creditors, and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in an action at law or a suit in
equity).
SECTION 3.4 CAPITALIZATION.
3.4.1 The authorized issued and outstanding capital stock of the
Company consists solely of (a) 2,000,000 shares of Common Stock, par value
$.0001 per share, of which 262,500 shares are currently issued and outstanding
and (b) 1,000,000 shares of preferred stock, par value $.0001 per share, of
which no shares are currently issued and outstanding. Except as set forth on
Schedule 3.4.1, there are no Options and Convertible Securities authorized or
outstanding to purchase or otherwise acquire from the Company, or, to the
Company's Knowledge, any other Person, any shares of stock, or securities or
obligations of any kind convertible into or exchangeable for any shares of
Common Stock or other class of capital stock of the Company or any other equity
interest in the Company. Company reserves the right to issue additional Options
and or Convertible Securities between the date of execution of this Agreement
and Closing. Company shall promptly advise Parent of any such issuance. As the
stock to be issued in this transaction is to be issued on a fully diluted basis,
no such issuance shall change the percentage ownership of Parent that will be
held by security holders of Company upon the Closing.
-17-
3.4.2 All of the outstanding shares of capital stock of the Company
have been duly authorized and are validly issued, fully paid and nonassessable.
All outstanding shares of capital stock of the Company were issued in compliance
with all applicable federal and state securities laws. The lawful, registered
and beneficial owners (and their addresses) of all issued and outstanding shares
of capital stock are as indicated on Schedule 3.4.2 hereto. Except as set forth
on Schedule 3.4.2, there is, to the Company's Knowledge, no proxy, or any
agreement, arrangement or understanding of any kind authorized or outstanding
which restricts, limits or otherwise affects the right to vote any Company
capital stock.
SECTION 3.5 NO CONFLICTS. The execution, delivery and performance of this
Agreement, any other agreement or document contemplated herein and the
consummation of all of the transactions contemplated hereby and thereby: (i) do
not and will not require the consent, waiver, approval, license, designation or
authorization of, or declaration with, any Person or court to which the Company
is subject or any Governmental Entity; and (ii) do not and will not, with or
without the giving of notice or the passage of time or both, violate or conflict
with or result in a breach or termination of any provision of, or constitute a
material default under, or accelerate or permit the acceleration of the
performance required by the terms of, or result in the creation of any mortgage,
security interest, claim, lien, charge or other material encumbrance upon any of
the material assets of the Company pursuant to, or otherwise give rise to any
liability or obligation under, the Articles of incorporation or bylaws of the
Company, any material agreement, mortgage, deed of trust, indenture, license,
permit or any other agreement or instrument or any order, judgment, decree,
statute or regulation to which the Company or is a party or by which the Company
or any of its assets may be bound; and (iii) will not cause the termination of
any such agreement or instrument, or in any way affect or violate the terms and
conditions of, or cause the cancellation, modification, revocation or suspension
of, any rights of the Company, except with respect to clauses (i), (ii) and
(iii) above, such breach or breaches of the representations contained therein
which individually or in the aggregate would not have a Material Adverse Effect
upon the Company.
SECTION 3.6 FINANCIAL STATEMENTS.
3.6.1 Attached hereto as Schedule Section 3.6 are the financial
statements , for the years ended June 30, 2004 and 2005 and the nine-month
periods ended March 31, 2005 and March 31, 2006 of the Company (as used in this
Article III, the term Company, when referring to time periods prior to May 25,
2005, includes Sea Change Group LLC, to the extent of the assets and liabilities
of Sea Change Group LLC acquired by the Company on May 25, 2005).
3.6.2 Except as set forth in Schedule Section 3.6, for the relevant
periods the Financial Statements: (1) are complete and correct in all material
respects; (2) present fairly in all material respects the financial position of
the Company at such dates and the results of operations and cash flows for the
respective periods ended on such dates, and (3) were prepared in accordance with
generally accepted accounting principles, consistently applied during the
periods, and are in accordance with the books and records maintained by the
Company with no material differences between such Financial Statements and the
financial records maintained and accounting methods applied by the Company for
tax purposes, except as disclosed in the notes to the Financial Statements.
-18-
SECTION 3.7 LITIGATION; COMPLIANCE WITH LAWS; PERMITS.
3.7.1 Except as disclosed in Schedule Section 3.7 hereto, there are
no actions, suits, proceedings, arbitrations or governmental investigations
pending, or, to the Company's Knowledge, threatened against, by or affecting the
Company or nor has any such suit been pending within five years prior to the
date hereof. Neither the Company nor has been charged with or received notice of
any violation of any applicable federal, state, local or foreign law, rule,
regulation, ordinance, order or decree relating to it, or the operation of its
business, and to the Company's Knowledge, there is no threatened claim of such
violation (including any investigation) or any basis therefor.
3.7.2 To the Company's Knowledge, except as set forth in Schedule
Section 3.7, the Company has complied in all respects with all laws, rules,
regulations, ordinances, orders, judgments, decrees, writs, injunctions,
building codes, safety, fire and health approvals, certificates of occupancy or
other governmental restrictions applicable to it, its assets, employees and
employment practices.
3.7.3 To the Company's Knowledge, except as set forth in Schedule
Section 3.7, the Company has all governmental licenses, permits, approvals or
other authorizations required for the conduct of its business as now conducted,
all of which are in full force and effect and all of which are listed on
Schedule Section 3.7 hereto; there is no action pending or, to the Company's
Knowledge, threatened, to terminate any rights under any such governmental
licenses, permits or authorizations; and except as disclosed on Schedule Section
3.7, at the Effective Time, none of such licenses, permits, approvals and
authorizations will be adversely affected by the Merger or the consummation of
the other transactions contemplated by this Agreement.
SECTION 3.8 NO UNDISCLOSED LIABILITIES. To the Company's Knowledge, the
Company has no Liabilities, except for Liabilities set forth on Schedule Section
3.8.
SECTION 3.9 TAXES.
3.9.1 All tax returns (including information returns) required by
any jurisdiction to have been filed as of the date of this Agreement by or with
respect to the Company have been timely filed, except for returns with respect
to which extensions have been granted, and each such return is true, correct and
complete in all material respects. Schedule Section 3.9 sets forth each
jurisdiction in which the Company is required to file tax returns.
3.9.2 Except as set forth in Schedule Section 3.9, all material
liabilities of the Company to any jurisdiction for taxes of every kind and
nature, including interest thereon and penalties with respect thereto have been
timely paid by the Company or are accrued and provided for in the Company's
books and records. Any liability for taxes incurred by the Company has been
incurred in the ordinary course of business.
3.9.3 The Company is not required to file any foreign income tax
returns. The state income tax returns of the Company have not been audited by
the appropriate taxing authorities. To the Company's Knowledge, neither the
Internal Revenue Service nor any state, local or other taxing authority has
proposed any additional Taxes, interest or penalties with respect to the Company
or any of its operations or business; there are no pending or, to the Company's
Knowledge, threatened tax claims or assessments; and there are no pending or, to
the Company's Knowledge, threatened tax examinations by any taxing authorities.
-19-
3.9.4 The Company has not given any waivers of rights (which are
currently In effect) under applicable statutes of limitations with respect to
the income tax returns for any fiscal year.
SECTION 3.10 NO ADVERSE EFFECTS. Except as disclosed on Schedule Section
3.10 hereto, since April 1, 2006, (i) the business of the Company has been
conducted only in the ordinary course; (ii) there has been no change that
individually or in the aggregate, has had a Material Adverse Effect on the
Company; and (iii) there has been no damage, destruction or loss or, to the
knowledge of the Company, other occurrence or development, whether or not
insured against, which, either singly or in the aggregate, constitute a Material
Adverse Effect, and the Company has no knowledge of any threatened occurrence or
development which would constitute a Material Adverse Effect.
SECTION 3.11 CONDUCT OF BUSINESS Except as disclosed on Schedule Section
3.11 hereto, since April 1, 2006, the Company has not: (i) created or incurred
any liability (absolute, accrued, contingent or otherwise) except unsecured
current liabilities incurred in the ordinary course of business consistent with
past practice; (ii) mortgaged, pledged or subjected to any lien or otherwise
encumbered any of its assets, tangible or intangible; (iii) discharged or
satisfied any lien or encumbrance or paid any obligation or liability (absolute,
accrued, contingent or otherwise) other than current liabilities incurred since
April 1, 2006, in the ordinary course of business or under contracts or
agreements entered into in the ordinary course of business (other than as a
result of any default or breach of, or penalty under, any such contracts or
agreements); and liabilities incurred in connection with incorporation of the
company and acquisition of the Acquired Business (iv) waived, released or
compromised any claims or rights of substantial value or lost, or been
threatened with the loss of, any key employees; (v) entered into any settlement,
compromise or consent with respect to any claim, proceeding or investigation;
(vi) sold, assigned, transferred, leased or otherwise disposed of any of any
material asset, tangible or intangible, or canceled any debts or claims except,
in each case, for fair consideration in the ordinary course of business (it
being understood that the disposition of any asset, other than inventory
consisting of finished products, or cancellation of any debt or claim carried on
the books at more than $200,000 shall be deemed not to be a disposition or
cancellation in the ordinary course of business); (vii) declared or paid any
dividends, or made any other distribution on or in respect of, or directly or
indirectly purchased, retired, redeemed or otherwise acquired any shares of its
capital stock, paid any notes or accounts or paid any amount or transferred any
asset of the Company (other than intercompany payables in the ordinary course of
business); (viii) made or become a party to, or become bound by, any contract or
commitment or renewed, extended, amended, modified or terminated any contract or
commitment which in any one case involved an amount in excess of $200,000 (or in
the aggregate an amount in excess of $500,000 but excluding therefrom the amount
of Company Material/Service Agreements (as defined in Section 3.16.2) entered
into in the ordinary course of business); (ix) issued or sold any shares of
capital stock; (x) paid or agreed to pay conditionally or otherwise, any bonus,
extra compensation, pension or severance pay to any of its officers or
employees, whether under any existing profit sharing, pension or other plan or
otherwise, or increased the rate or altered the form of compensation, including
without limitation salaries, fees, commission rates, bonuses, profit sharing,
incentive, pension, retirement or other similar payments from that being paid at
March 31, 2006 to any of its stockholders, directors, officers or employees;
(xi) entered into any transaction not in the ordinary course of business (except
for transactions contemplated by this Agreement); (xii) made or announced any
change in the form or manner of distribution of any of its products or services;
(xiii) changed any of its accounting methods or principles used in recording
transactions on its books or records or (xiv) entered into any contract or
commitment to do any of the foregoing.
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SECTION 3.12 TITLE TO AND CONDITION OF ASSETS. The Company has valid title
to the personal property set forth on Schedule Section 3.12, free and clear of
all Encumbrances, except for the Encumbrances set forth in Schedule Section 3.12
Such assets are (i) sufficient and adequate for the Company to carry on its
business as presently conducted; and (ii) are in reasonably good condition and
repair, normal wear and tear excepted.
SECTION 3.13 REAL PROPERTY. The Company does not own or lease any real
property.
SECTION 3.14 ENVIRONMENTAL COMPLIANCE. The Company has at all times had
and now has all environmental approvals, consents, licenses, permits and orders
required to conduct the business in which it has been or is now engaged. The
Company has at all times been and is now in compliance in all material respects
with all applicable Environmental Laws. There are no claims, actions, suits or
proceedings pending or, to the Company's Knowledge, threatened against or
involving the Company, or any assets of the Company, under any of the
Environmental Laws (whether by reason of any failure to comply with any of the
Environmental Laws or otherwise). No decree, judgment or order of any kind under
any of the Environmental Laws has been entered against the Company. The Company
is not nor was a generator or transporter of hazardous waste, or the owner,
operator, lessor, sublessor, lessee or mortgagee of a treatment, storage or
disposal facility or underground storage tank, as those terms are defined under
the Resource Conservation and Recovery Act, as amended, or regulations
promulgated pursuant thereto, or of real property on which such a treatment,
storage or disposal facility or underground storage tank is or was located or of
any facility at which any Hazardous Substances were treated, stored, recycled or
disposed or are or were installed or incorporated. There are no other facts,
conditions or situations, whether now or heretofore existing, that could form
the basis for any claim against, or result in any liability of, the Company
under any of the Environmental Laws.
SECTION 3.15 ACCOUNTS RECEIVABLE. Except as set forth on Schedule Section
3.15, all accounts receivable reflected in the books and records of the Company
have been collected or are current and payable within ninety (90) days of
issuance and are subject to no known counterclaims or setoffs. All such accounts
receivable have been generated in the ordinary course of business and reflect a
bona fide obligation for the payment of goods or services provided by the
Company.
SECTION 3.16 COMPANY MATERIAL/SERVICE AGREEMENTS; OTHER CONTRACTS.
3.16.1 Schedule 3.16.1 sets forth a complete list of (i) all bids,
applications or proposals submitted by it to provide materials or services with
a valuation of $200,000 or more per annum to any Person and for which the award,
approval or selection is pending ("Company Material/Service Bids"), and (ii) all
contracts or agreements for the provision of materials or services with a
valuation of $200,000 or more per annum to which the Company is a party and
which have not yet been performed in full ("Company Material/Service
Agreements"). To the Company's Knowledge, all of such Company Material/Service
Bids and Company Material/Service Agreements are fully performable by the
Company in compliance with their terms. No grounds exist for the termination or
cancellation for cause of any Company Material/Service Agreement by the other
party thereto. Schedule 3.16.1 sets forth for each Company Material/Service
Agreement: (i) the customer, (ii) the remaining revenue to be earned, and (iii)
delivery dates.
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3.16.2 Except as disclosed in Schedule 3.16.2 hereto or other than
as disclosed on Schedule 3.16.1, the Company is not a party to or bound by any
oral or written contracts, obligations or commitments with respect to any of the
following:
(a) contract, commitment or arrangement involving, in any one case,
$200,000 or more;
(b) contract with a term of, or requiring performance, more than six
months from its date;
(c) lease or lease purchase agreement, mortgage, conditional sale or
title retention agreement, indenture, security agreement, credit agreement,
pledge or option with respect to any property, real or personal (tangible or
intangible), in any capacity;
(d) employment contracts, undertakings, understandings or
arrangements;
(e) contract or agreement with any labor union or other collective
bargaining group;
(f) bonus, pension, savings, welfare, profit sharing, stock option,
phantom stock, stock appreciation rights, retirement, commission, executive
compensation, hospitalization, insurance or similar plan providing for employee
benefits or any other arrangement providing for benefits for any former or
current employees or for the remuneration, direct or indirect, of the directors,
officers or employees of the Company;
(g) note, loan, credit or financing agreement or other contract for
money borrowed, and all related security agreements and collateral documents,
including any agreement for any commitment for future loans, credit or
financing;
(h) guarantees;
(i) contract or understanding regarding any capital expenditures in
excess of $200,000;
(j) agency (sales or otherwise), distribution, brokerage (including,
without limitation, any brokerage or finder's agreement or arrangement with
respect to any of the transactions contemplated by this Agreement) or
advertising agreement;
(k) contract with investment bankers, accountants, attorneys,
consultants or other independent contractors, including those relating to this
Agreement;
(l) shareholder agreement;
(m) any or contract or understanding with any director or officer of
the Company (or any family member thereof) or any Affiliate of such persons;
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(n) contract, commitment or arrangement which would restrain the
Company from engaging or competing in any business;
(o) contract, commitment or arrangement not made in the ordinary
course of business involving an amount payable per annum of $200,000 or more or,
in the aggregate, $500,000; and
(p) license (other than shrink wrap licenses relating to generally
available software), franchise or royalty agreement.
3.16.3 The Company has delivered or made available to the Parent
correct and complete copies of all of the contracts, agreements and other
documents listed in Schedules Sections 3.16.1 and 3.16.2 hereto and all
amendments thereto and any waivers currently in effect granted thereunder (the
"Scheduled Company Contracts"). Except as specifically set forth on Schedules
3.16.1 and 3.16.2, the Merger and the consummation of the other transactions
contemplated by this Agreement are not a violation of or grounds for the
modification or cancellation of any of the Scheduled Company Contracts or for
the imposition of any penalty or security interests thereunder. No unresolved
disputes are pending or, to the knowledge of the Company, threatened under or in
respect of any such Scheduled Company Contracts. Except as described in
Schedules 3.16.1 and 3.16.2 hereto, all Scheduled Company Contracts described in
such Schedules 3.16.1 and 3.16.2 are valid and enforceable against the Company,
as applicable, and to the Company's Knowledge against the other party or parties
thereto, as the case may be, in accordance with their respective terms, and
there is not, under any of such Scheduled Company Contracts, any existing
default by the Company, to the Company's Knowledge, by any other party, or, to
the Company's Knowledge, any event which with notice, lapse of time, or both,
would constitute a default and which would have a Material Adverse Effect on the
continued operation of the Company.
SECTION 3.17 INTELLECTUAL PROPERTY. Schedule Section 3.17 hereto sets
forth a true and complete list of all (i) Trademarks, (ii) Patent Rights, (iii)
Copyrights, and (iv) License Rights held by the Company. All Trademarks, Patent
Rights, Copyrights, License Rights and Trade Secrets of the Company that are
owned by the Company are owned free and clear of any and all licenses, liens,
claims, security interests, charges or other encumbrances or restrictions of any
kind, except as reflected on Schedule Section 3.17, and no licenses for the use
of any of such rights have been granted by the Company to any third parties,
except as reflected in Schedule Section 3.17 attached hereto. All of such rights
are valid, enforceable and in good standing and are reasonably sufficient and
appropriate for the conduct of the business of the Company as currently and
proposed to be conducted. The Merger and the consummation of the other
transactions contemplated hereby will not adversely affect any rights of the
Company in the Intellectual Property of the Company. To the Company's Knowledge,
the operation of the Company does not infringe in any way on or conflict with
any registered or unregistered patent, trademark, trade name, copyright, trade
secret, contract, license or other right, of any person, and the Company does
not license any such right from others except as set forth on Schedule Section
3.17. No claim is pending or, to the Company's Knowledge, threatened or has been
made within the past five years, to the effect that any such infringement or
conflict has occurred. No other Intellectual Property, other than the
Intellectual Property owned or licensed by the Company, is required by it for
its business as conducted prior to the date hereof. The Company has no knowledge
of any infringement by any third parties upon any of the Intellectual Property
of the Company.
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SECTION 3.18 INSURANCE. Schedule Section 3.18 hereto contains a complete
and correct list of all insurance policies maintained by the Company together
with a schedule of required premiums under each such policy. The Company has
delivered to the Parent complete and correct copies of all such policies
together with all riders and amendments thereto. Such policies are in full force
and effect, and all premiums due thereon have been paid. The Company has
complied in all material respects with the provisions of such policies. No
notice has been received canceling or threatening to cancel or refusing to renew
any of such insurance. Except as set forth in Schedule Section 3.18, the rights
of the insured under such policies will not be terminated or adversely affected
by the Merger or the consummation of the other transactions contemplated hereby.
There is currently no basis for any insurance claim by the Company. The Company
has not created any letters of credit or other funding obligation with respect
to such policies.
SECTION 3.19 CUSTOMER AND SUPPLIER RELATIONSHIPS. Attached as Schedule
Section 3.19 is a complete and correct list of all current customers of the
Company showing the sales to each by the Company for the period ended March 31,
2006 and of all suppliers to the Company whose sales to the Company amounted to
more than $200,000 during such period showing the sales of each such supplier.
With respect to any such customer or supplier or group of related customers or
suppliers listed on Schedule Section 3.19, the Company has no knowledge that any
such customer, supplier or group of related customers or suppliers has
terminated or expects to terminate a material portion of its normal business
with the Company. Except as disclosed in Schedule Section 3.19, no shareholder
or director or officer of the Company or any of their immediate family members
has any direct or indirect interest, either by way of stock ownership or
otherwise, other than ownership of not more than two (2) percent of the
outstanding shares of stock of any business listed on any national stock
exchange or listed on Nasdaq, in any firm, corporation, association or business
enterprise, which competes with, is a supplier or customer of, or is a
distributor or sales agent for, or is a party to any contract with the Company.
SECTION 3.20 EMPLOYEES. The Company has furnished to Parent a true and
complete list setting forth all of the employers and officers of the Company,
the annual salary of each and the bonus to be earned by each such employee or
officer in the Company's current fiscal year, together with a description of
their job designations, other compensation, benefits (including severance pay
and bonuses), outstanding loans to officers or employees and all understandings
not in the ordinary course of business relating to terms and conditions of
employment. Proper and accurate amounts have been withheld by the Company from
its employees' compensation for all periods in full compliance with tax
withholding provisions of applicable federal, state, local or foreign law.
Proper and accurate federal, state, local and foreign returns have been filed by
the Company for all periods for which returns were due with respect to employee
income tax withholding, social security and unemployment Taxes, and the amounts
shown thereon to be due and payable have been timely paid.
SECTION 3.21 LABOR RELATIONS. There has been no violation of any federal,
state or local statutes, laws, ordinances, rules, regulations, orders or
directives with respect to the employment of individuals by, or the employment
practices or work conditions of the Company or their respective terms and
conditions of employment, wages and hours. The Company is not engaged in any
unfair labor practice or other unlawful employment practice (including under any
immigration laws) and there are no unfair labor practice charges or other
employee related complaints against the Company pending or, to the Company's
Knowledge, threatened before the National Labor Relations Board, the Equal
Employment Opportunity Commission, the Occupational Safety and Health Review
Commission, the Department of Labor, or any other federal, state, or local, or
other governmental authority by or concerning the employees of the Company. No
representation question, grievance or arbitration proceedings arising out of
collective bargaining agreements covering employees of the Company exists or is
pending or, to the knowledge of the Company, threatened respecting the employees
of the Company. There is no work stoppage, strike, slowdown, lockout, picketing
or other similar labor problem involving persons employed by the Company pending
or, to the knowledge of the Company, threatened. There are no labor union
contracts or collective bargaining agreements to which the Company is a party
relating to any employee of the Company.
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SECTION 3.22 BENEFIT PLANS.
3.22.1 The Company does not maintain or contribute to, and has not
previously maintained or contributed to, an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA). The Company does not currently contribute to,
and has not previously contributed to, any multiemployer plan (as defined in
Section 3(37) of ERISA).
3.22.2 Schedule Section 3.22.2 sets forth a true and complete list
of each "employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
maintained by the Company or to which the Company contributes or is required to
contribute on behalf of officers and employees of the Company (such employee
welfare benefit plans being hereinafter collectively referred to as the "Company
Welfare Benefit Plans"). With respect to each Company Welfare Benefit Plan, all
contributions or premiums due by the Closing Date have been paid. Each Company
Welfare Benefit Plan has been administered to date in compliance with the
requirements of ERISA and all other applicable laws, and all reports, if any,
required by any government agency with respect to each Welfare Benefit Plan have
been timely filed. There are no actions, suits or claims (other than routine
claims for benefits) pending or which could reasonably be expected to be
asserted against the Company in connection with any Welfare Benefit Plan, and
there are no civil or criminal actions pending or, to the knowledge of the
Company, threatened against the Company with respect to any such Welfare Benefit
Plan.
3.22.3 Schedule 3.22.3 lists each deferred compensation plan, bonus
plan, employee stock purchase plan, stock option plan and any other Employee
Benefit Plan, agreement, arrangement or commitment not required under a previous
subsection to be listed on Schedule 3.22.3 or maintained by the Company with
respect to the compensation of any of the Company's employees.
SECTION 3.23 CORPORATE RECORDS. The copy of the articles of incorporation
of the Company, as amended to date, included in Schedule Section 3.23 is
complete and correct, and the minute books of the Company correctly reflect all
material corporate actions taken at all meetings of directors (including
committees thereof) and the stockholders. The stock transfer books and ledgers
of the Company are complete and correct and correctly reflect all issuances and
transfers of the membership interests of the Company.
SECTION 3.24 BANK ACCOUNTS; POWER OF ATTORNEY. Schedule Section 3.24
hereto correctly sets forth: (i) a list of all banks in which the Company has an
account or safety deposit box, account number, purpose of such account or safety
deposit box and the names of all persons authorized to draw thereon or have
access thereto; and (ii) the names of all persons holding powers of attorney
from the Company and a description of the power of attorney.
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SECTION 3.25 WARRANTIES. Except as described in Schedule Section 3.25
annexed hereto, during the past two (2) years the Company has not given any
written warranties with respect to any of its products or services, and except
as set forth in such Schedule Section 3.25, in the last two (2) years no claim
for breach of any such written warranty or any implied warranty with respect to
such products or services has been made, or to the Company's Knowledge, is
threatened.
SECTION 3.26 INSIDER INTERESTS. Except as disclosed on Schedule Section
3.26, no officer or director of the Company or Affiliate of an officer or
director of the Company has any agreement with the Company or any interest in
any property, real, personal or mixed, tangible or intangible (including,
without limitation, patents, patent applications, trademarks, trade names or
other intellectual property) used in or pertaining to the business of the
Company or has engaged in a transaction with the Company at any time during the
Company's current fiscal year or three preceding fiscal years, except in each
case as a stockholder or employee.
SECTION 3.27 FOREIGN CORRUPT PRACTICES ACT. The Company has not made,
offered or agreed to offer anything of value to any government official,
political party or candidate for government office nor has it taken any action
which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977 or any similar law of any foreign jurisdiction or the
United States.
SECTION 3.28 REORGANIZATION. The Company has not taken any action or
failed to take any action which action or failure would cause the Merger not to
qualify as a reorganization within the meaning of Section 368(a) of the Code,
and there are, to the knowledge of the Company, no facts that would prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code as of the Effective Time.
SECTION 3.29 BROKERS. Except as set forth on Schedule Section 3.29, no
broker, investment banker or other person, is entitled to any broker's, finder's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company or its stockholders.
ARTICLE IV - COVENANTS
SECTION 4.1 STOCKHOLDERS MEETING. Promptly following the execution and
delivery of this Agreement, the Company shall either (i) convene a special
meeting of the Company's stockholders to vote upon the Merger and the Merger
Agreement or (ii) solicit the written consent of the Company's stockholders to
the Merger and the Merger Agreement, in each case in accordance with the NGCL.
The Company shall (i) obtain from each of the Company's stockholders in
connection with such meeting information sufficient to determine whether or not
such stockholder is an accredited investor, and (ii) furnish to Parent, for its
review and approval, copies of all materials to be furnished to the Company's
stockholders in connection with such meeting prior to the time that such
materials are furnished to the Company's stockholders. The Participating
Shareholders shall vote their shares of Company Common Stock in favor of the
Merger and the Merger Agreement and shall use their best efforts to cause the
other Company shareholders to vote in favor of the Merger.
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SECTION 4.2 EXPENSES. The Parent and the Company shall bear their own
respective expenses incurred in connection with this Agreement and the
transaction contemplated hereby and in connection with all obligations required
to be performed by each of them under this Agreement.
SECTION 4.3 REORGANIZATION. Each party shall use all reasonable best
efforts to refrain from taking any action or failing to take any action, which
action or failure to act would cause, or would be reasonably likely to cause,
the Merger to fail to qualify as a reorganization within the meaning of Section
368(a) of the Code. Parent hereby agrees that, for a six-month period following
the Effective Time, (i) it will cause the Surviving Corporation to hold
"substantially all" of the properties of the Company and Sub within the meaning
of Section 368(a) of the Code, and (ii) it will remain in "control" (within the
meaning of Section 368(c) of the Code) of the corporation that is the surviving
corporation in the Merger, except for any transfers to a controlled corporation
in accordance with Section 368(a)(2)(C) of the Code or Treasury Regulation
Section 1.368-2(k).
SECTION 4.4 PUBLIC ANNOUNCEMENTS. Neither Parent nor the Company shall
issue any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any written public statements with respect to such
transactions without prior consultation with the other party, except as may be
required by applicable law. Parent and the Company agree that they will not
identify any of the stockholders of the Company in any press release without
their prior written consent.
SECTION 4.5 CONFIDENTIALITY. Each of the parties covenants and agrees to
keep confidential any and all material non-public information which it has
heretofore obtained or shall hereafter obtain, directly or indirectly, from the
other party pursuant to this Agreement or otherwise, and agrees to use the same
only for the purposes of this Agreement but without disclosing the same to any
party except as provided below, without the other party's prior written consent;
provided that the terms of this Section shall not extend to any such information
that: (a) is already publicly known; (b) has become publicly known without any
fault of the disclosing party or anyone to whom a party hereto has made
disclosure in compliance with the terms of this Section; or (c) is required to
be disclosed to any Governmental Authority as a result of operation of law,
regulation, or court order; provided, however, that party wishing to make any
disclosure pursuant to this clause (c) shall have first given prompt written
notice, if permitted, of such requirement to the other party and cooperates with
the other party to restrict such disclosure and/or obtain confidential treatment
thereof. The foregoing notwithstanding, each of Company and Parent may disclose
such information to its Affiliates and its directors, officers and employees and
representatives or the directors, officers, employees and representatives of any
of its Affiliates that have a need to know such information; provided that the
disclosing party, as the case may be, informs such Persons of the restrictions
set forth in this Section with respect to such information and such Persons
agree to comply with the provisions of this Section.
SECTION 4.6 STANDSTILL AGREEMENT. Except as otherwise provided in this
Agreement and in the securities purchase agreement and related documents to be
entered into to satisfy the financing condition set forth in Section 5.2.6 of
this Agreement, the parties agree that, between the date hereof and the first to
occur of (a) the Closing Date and (b) termination of this Agreement, neither the
Company nor the Parent shall, or shall permit any of its Affiliates to, discuss
or negotiate with any other Person, or entertain or consider any inquiries, or
proposals relating to a possible merger, acquisition or other transaction such
as an exchange of securities, stock or asset acquisition, consolidation or other
transaction that would interfere with the transactions contemplated by this
Agreement, except upon the receipt of an unsolicited offer from a third party
where the board of directors of the party receiving such offer reasonably
believes, upon the written advice of counsel, that its fiduciary duties require
it to enter into discussions with such party. Each party shall promptly notify
the other of all of the relevant details relating to all inquiries and proposals
which it may receive relating to any proposed disposition of the business or
assets, or the acquisition of its capital stock, or the merger of it or any of
its subsidiaries with any corporation or other entity other than as provided by
this Agreement.
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SECTION 4.7 CONDUCT OF BUSINESS IN THE ORDINARY COURSE. Both the Parent
and Company shall conduct business only in the ordinary course. From the date of
this Agreement through the Closing Date or termination of this Agreement,
neither the Parent nor the Company shall take any action that would have
required disclosure under Section 2.12 or Section 3.11, respectively, if such
action had been taken prior to the date hereof without the prior written consent
of the other party, which consent shall not be unreasonably withheld.
SECTION 4.8 INDEMNIFICATION OF COMPANY OFFICERS AND DIRECTORS; DIRECTORS
AND OFFICERS INSURANCE.
4.8.1 From and after the Effective Time, the Surviving Corporation
shall (i) indemnify and hold harmless all past and present officers and
directors of the Company to the same extent and in the same manner such persons
are indemnified as of the date of this Agreement by the Company pursuant to the
NGCL and the Company Articles of Incorporation and in any agreement with the
Company listed on Schedule Section 4.8 for acts or omissions occurring at or
prior to the Effective Time (including indemnifying and holding harmless such
persons for acts or omissions occurring at or prior to the Effective Time in
respect of the Merger and the transactions contemplated thereby), and (ii) pay
the expenses of any such action, suit or proceeding in advance of a final
determination thereof to the same extent and in the same manner as such expenses
are to be paid pursuant to the NGCL and the Company Articles of Incorporation,
upon receipt of any written undertaking required under the NGCL to repay any
advanced expenses an indemnitee may receive that as a result of a final
disposition of such matter he or she was not entitled to receive under the NGCL
or the Company Articles of Incorporation.
4.8.2 This covenant is intended to be for the benefit of, and shall
be enforceable by, each of the indemnified parties and their respective heirs
and legal representatives.
ARTICLE V - CONDITIONS PRECEDENT TO THE MERGER
SECTION 5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing of each of the following
conditions:
5.1.1 STOCKHOLDER APPROVAL. This Agreement shall have been duly
approved by the vote of a majority of the stockholders of the Company in
accordance with applicable law and the Company's Articles of Incorporation, and
no more than 10% of the Company's stockholders shall have exercised dissenters'
rights under the NGCL.
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5.1.2 NO ORDER. No court or other Governmental Entity having
jurisdiction over the Company, Parent, or Sub shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of, directly or indirectly,
restraining, prohibiting or restricting the Merger or any of the transactions
contemplated hereby; provided, however, that the provisions of this Sub-section
5.1.2 shall not be available to any party whose failure to fulfill its
obligations pursuant to this Agreement shall have been the cause of, or shall
have resulted in, the enforcement or entering into of any such law, rule,
regulation, executive order, decree, injunction or other order.
5.1.3 APPROVALS, CONSENTS OR WAIVERS. Other than the requisite
filing of the Certificate of Merger, all authorizations, consents, orders,
declarations or approvals of, or filings with, or terminations or expirations of
waiting periods imposed by, any Governmental Entity, which the failure to
obtain, make or occur would have the effect of, directly or indirectly,
restraining, prohibiting or restricting the Merger or any of the transactions
contemplated hereby or would have, individually or in the aggregate, a Material
Adverse Effect on Parent and the Surviving Corporation (assuming the Merger had
taken place), shall have been obtained, shall have been made or shall have
occurred.
SECTION 5.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of each of the following
additional conditions:
5.2.1 REPRESENTATIONS, PERFORMANCE, ETC. The representations and
warranties of each of Parent and Sub contained in ARTICLE II hereof shall be
true at and as of the date hereof and shall be repeated and shall be true at and
as of the Closing Date with the same effect as though made at and as of such
time. Each of Parent and Sub shall have duly performed and complied with all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by it prior to or on the Closing Date. Parent shall have
delivered to the Company an officer's certificate signed on behalf of Parent
dated the Closing Date to the effect set forth above in this Section 5.2.1.
5.2.2 OPINION OF COUNSEL. The Company shall have received a
favorable opinion, addressed to the Company and its stockholders and dated the
Closing Date, of Xxxxxxxxxx & Xxxxx LLP, counsel for the Parent, in the form
annexed hereto as EXHIBIT B.
5.2.3 PROCEEDINGS AND DOCUMENTATION. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement,
and all documents and instruments incident thereto, shall be reasonably
satisfactory in substance and form to the Company and its counsel, and the
Company and its counsel shall have received all such receipts, documents and
instruments, or copies thereof, certified if requested, to which the Company is
entitled and as may be reasonably requested.
5.2.4 MATERIAL ADVERSE CHANGE. Since March 31, 2006, there shall
have been no Material Adverse Change with respect to Parent. The Company shall
have received an officer's certificate signed on behalf of Parent dated the
Closing Date to such effect.
5.2.5 LITIGATION. No suit, action or other proceeding or
investigation shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain material
damage or other material relief in connection with this Agreement or the
consummation of the transactions contemplated hereby or which is likely to
affect materially the value of the Parent Common Stock or the assets, business
or condition (financial or otherwise) of the Parent.
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5.2.6 FINANCING OBLIGATION. UNLESS SUCH DATE IS OTHERWISE EXTENDED
IN WRITING BY COMPANY, no later than August 9, 2006, and at Closing, Parent
shall have no less than $7,500,000 in cash or cash equivalents and no more than
$80,000 in liabilities.
5.2.7 GOOD STANDING CERTIFICATES. The Parent and Sub shall have
delivered to the Company certificates as of a date not more than three (3) days
prior to the Closing Date attesting to the good standing of the Parent and Sub
as corporations in their jurisdiction of incorporation by the Secretary of State
of such jurisdiction.
5.2.8 PAYMENT OF INTERIM OR BRIDGE FINANCING. With the proceeds from
the sale of the securities used to satisfy the financing obligation set forth in
Section 5.2.6, the presently outstanding obligations of the Company in the
principal amount of $3,000,000 plus accrued and unpaid interest owing to Mellon
HBV Master U.S. Event Driven Fund, L.P. and Mellon H.B.V. Master Global Event
Driven Fund, L.P. shall have been paid in full.
5.2.9 EXPRESS ASSUMPTION OF PARENT LIABILITIES. The Company, as the
corporation surviving the Merger, shall have expressly assumed the obligations
of the Parent under the securities purchase agreement and related promissory
notes, the proceeds from the sale and issuance of which were applied to satisfy
the financing obligation referred to in Section 5.6.
SECTION 5.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE
MERGER. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment or waiver at or prior to the Effective Time of each of the
following additional conditions:
5.3.1 REPRESENTATIONS, PERFORMANCE. The representations and
warranties contained in ARTICLE III hereof shall be true at and as of the date
hereof and shall be repeated and shall be true at and as of the Closing Date
with the same effect as though made at and as of the Closing Date, except as
affected by the transactions contemplated hereby. The Company shall have duly
performed and complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by it prior to or on the Closing
Date. The Company shall have delivered to the Parent an officer's certificate
signed on behalf of the Company dated the Closing Date to the effect set forth
above in this Section 5.3.1.
5.3.2 CONSENTS UNDER SCHEDULED PARENT CONTRACTS. All required
consents to the Merger or any of the other transactions contemplated hereby
under any Scheduled Parent Contracts shall have been obtained.
5.3.3 MATERIAL ADVERSE CHANGE. Since the date of the Financial
Statements, there shall have been no Material Adverse Change with respect to the
Company. Parent and Sub shall have received certificate signed on behalf of the
Company and by the Participating Stockholders dated the Closing Date to such
effect.
5.3.4 LITIGATION. No suit, action or other proceeding or
investigation shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain material
damage or other material relief in connection with this Agreement or the
consummation of the transactions contemplated hereby or which is likely to
affect materially the value of the assets, business or condition (financial or
otherwise) of the Company.
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5.3.5 OPINION OF COUNSEL. The Parent shall have received a favorable
opinion, addressed to the Parent and dated the Closing Date, of Xxxxxxx,
Xxxxxxxxx & Xxxxxxxx, LLP, counsel for the Company and the Participating
Stockholders, in the form annexed hereto as EXHIBIT C.
5.3.6 PROCEEDINGS AND DOCUMENTATION. All corporate and other
proceedings of the Company and its stockholders in connection with the
transactions contemplated by this Agreement, and all documents and instruments
incident to such corporate proceedings, shall be satisfactory in substance and
form to the Parent and the Parent's counsel, and the Parent and the Parent's
counsel shall have received all such receipts, documents and instruments, or
copies thereof, certified if requested, to which the Parent is entitled and as
may be reasonably requested.
5.3.7 GOOD STANDING CERTIFICATES. The Company shall have delivered
to the Parent and Sub certificates as of a date not more than three (3) days
prior to the Closing Date attesting to the good standing of the Company as a
corporation in its jurisdiction of incorporation by the Secretary of State of
such jurisdiction.
5.3.8 DISSENTING STOCKHOLDERS. Stockholders owning no more than ten
(10) percent of the outstanding capital stock of the Company shall have
exercised their dissenter's rights under the NGCL.
ARTICLE VI - TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
6.1.1 by mutual consent of the parties;
6.1.2 by the Parent by notice to the Company, (i) if any of the
conditions set forth in Section 5.1 or Section 5.3 hereof shall not have been
fulfilled by August 31 2006, provided, however, that the right to terminate this
Agreement pursuant to this clause (i) shall not be available to Parent if the
Parent's or Sub's failure to fulfill any of its obligations contained in this
Agreement has been the cause of, or resulted in, the failure of any such
condition to be fulfilled on or prior to the aforesaid date; or (ii) if any
material default under or material breach of any covenant, agreement or
condition of this Agreement, or any misrepresentation or breach of any warranty
contained herein, on the part of the Parent or Sub shall have occurred and shall
not have been cured to the satisfaction of the Company;
6.1.3 by the Company by notice to the Parent, (i) if any of the
conditions set forth in Section 5.1 or Section 5.2 hereof shall not have been
fulfilled by August 31, 2006, provided, however, that the right to terminate
this Agreement pursuant to this clause (i) shall not be available to the Company
if the Company's failure to fulfill any of its obligations contained in this
Agreement has been the cause of, or resulted in, the failure of any such
condition to be fulfilled on or prior to the aforesaid date; or (ii) if any
material default under or material breach of any agreement or condition of this
Agreement, or any misrepresentation or breach of any warranty contained herein,
on the part of the Company shall have occurred and shall not have been cured to
the satisfaction of the Parent and Sub;
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6.1.4 by either the Company or Parent and Sub if a court of
competent jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action (an "Order"), in any case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger, which Order is final and
nonappealable; or
6.1.5 by either the Company or Parent, if the required approvals of
the stockholders of the Company contemplated by this Agreement shall not have
been obtained by reason of the failure to obtain the required vote of the
stockholders.
SECTION 6.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 6.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for Section 4.2 and Section 4.5, which shall survive the
termination); provided, however, that nothing contained in this Section 6.2shall
relieve any party hereto from any liability for any breach of a representation
or warranty contained in this Agreement or the breach of any covenant contained
in this Agreement.
SECTION 6.3 AMENDMENT. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Board of Directors at
any time before or after approval of the matters presented in connection with
the Merger by the stockholders of the Company, subject to the provisions of the
NGCL. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
SECTION 6.4 WAIVER. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party. No delay
on the part of any party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any party hereto of any right, power or privilege hereunder operate as a waiver
of any other right, power or privilege hereunder, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder. Unless otherwise provided, the rights and remedies herein
provided are cumulative and are not exclusive of any rights or remedies which
the parties hereto may otherwise have at law or in equity. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE VII - SURVIVAL OF REPRESENTATIONS & WARRANTIES
SECTION 7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as
expressly provided in this Agreement, all representations and warranties made by
the Company hereunder or pursuant hereto or in connection with the transactions
contemplated hereby shall not terminate, but shall survive the Closing and
continue in effect until the one (1) year anniversary of the Closing Date;
provided, that any such representation or warranty as to which a claim shall
have been asserted during such survival period shall continue in effect until
such time as such claim shall have been resolved or settled.
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SECTION 7.2 SURVIVAL OF COVENANTS AND AGREEMENTS. Except as expressly
provided in this Agreement, all covenants and agreements made hereunder or
pursuant hereto or in connection with the transactions contemplated hereby shall
not terminate but shall survive the Closing.
ARTICLE VIII - GENERAL PROVISIONS
SECTION 8.1 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
If to Parent or Sub, to:
Xxxxxxxxxx & Xxxxx
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Hong, Esq.
Fax: (000) 000-0000
If to the Company, to:
Xxxxxxx, Xxxxxxxxx & Xxxxxxxx, LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx, Esq.
Fax: 000-000-0000
If to the Participating Stockholders, to:
Xxxxxxx, Xxxxxxxxx & Xxxxxxxx, LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx, Esq.
Fax: 000-000-0000
SECTION 8.2 INTERPRETATION. When a reference is made in this Agreement to
a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
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SECTION 8.3 COUNTERPARTS. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
SECTION 8.4 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
constitutes the entire agreement of the parties and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof. This Agreement is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
SECTION 8.5 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.6 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors or assigns.
SECTION 8.7 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
SECTION 8.8 PERFORMANCE BY SUB. Parent hereby agrees to cause Sub to
comply with its obligations hereunder and to cause Sub to consummate the Merger
as contemplated herein and whenever this Agreement requires Sub to take any
action, such requirement shall be deemed to include an undertaking of Parent to
cause Sub to take such action.
SECTION 8.9 DEFINED TERMS. As used herein, the following terms shall have
the following meanings (which meanings shall be equally applicable to the
singular and plural forms of the terms so defined):
8.9.1 Affiliate: with respect to any Person, any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. The term "control" (including, with correlative meaning, the
terms "controlled by" and "under common control with"), as used with respect to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
8.9.2 Business Day: means any day other than a Saturday, Sunday,
Federal holiday or day on which banks in New York City are required or permitted
by law to be closed.
-34-
8.9.3 Code: the Internal Revenue Code of 1986, as amended, together
with the U.S. Treasury rulings and regulations promulgated thereunder.
8.9.4 Company's Knowledge: means the current actual knowledge of the
officers of the Company, after reasonable investigation of the facts relevant
thereto.
8.9.5 Employee Benefit Plan: any pension, retirement,
profit-sharing, deferred compensation, bonus or other incentive plan, or other
employee benefit program, arrangement, agreement or understanding, or medical,
vision, dental or other health plan, or life insurance or disability plan, or
any other employee benefit plan, including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of ERISA to which the Company
contributes or is a party or is bound or under which it may have liability and
which employees or former employees of the Company (or their beneficiaries) are
eligible to participate or derive a benefit.
8.9.6 Environmental Laws means each and every applicable federal,
state, local and foreign law, statute, ordinance, regulation, rule, judicial or
administrative order or decree, permit license, approval, authorization or
similar requirement of each and every federal, and pertinent state, local and
foreign governmental agency or other governmental authority, pertaining to the
protection of human health and safety or the environment including, without
limitation, the Comprehensive Environmental Response Compensation and Liability
Act (CERCLA), 42 U.S.C. 9601 et seq., the Resource Conservation and Recovery Act
(RCRA), 42 U.S.C. 6901 et seq., the Toxic Substances Control Act (TSCA), 15
U.S.C. 2601 et seq., the Water Pollution Control Act (FWPCA), 33 U.S.C. 1251 et
seq., and the Occupational Safety and Health Act (OSHA), 42 U.S.C. 655. .
8.9.7 ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
8.9.8 Exchange Act: the Securities Exchange Act of 1934, as amended.
8.9.9 Governmental Entity: means any domestic (federal, state and
local), foreign or supranational court, commission, governmental body,
regulatory agency, authority or tribunal.
8.9.10 Hazardous Substance: means any substance, compound, chemical
or element which is (i) defined as a hazardous substance, hazardous material,
toxic substance, hazardous waste, pollutant or contaminant under any
Environmental Law, or (ii) a petroleum hydrocarbon, including crude oil or any
fraction thereof, (iii) hazardous, toxic, corrosive, flammable, explosive,
infectious, radioactive, carcinogenic or a reproductive toxicant, or (iv)
regulated pursuant to any Environmental Laws and shall also include
asbestos-containing materials and manufactured products containing Hazardous
Substances.
8.9.11 Material Adverse Change or Material Adverse Effect: when used
with respect to any Person, any change or effect that is or is reasonably likely
(as far as can be foreseen at the time) to be materially adverse to the
business, operations, properties, assets, liabilities, employee relationships,
customer or supplier relationships, earnings or results of operations, or the
business prospects and condition (financial or otherwise) of such Person and its
subsidiaries, if any, taken as a whole other than (i) changes or effects which
are or result from occurrences relating to the economy in general or such
Person's industry in general and not specifically relating to such Person or
(ii) adverse changes, events or effects set forth or described in the Parent's
annual report on Form 10-KSB for the period ending, December 31, 2005 or
subsequently filed SEC Documents.
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8.9.12 OTCBB means the Over-the-Counter Bulletin Board.
8.9.13 Parent's Knowledge: means the current actual knowledge of the
officers of Parent after reasonable investigation of the facts relevant thereto.
8.9.14 Parent Series A Preferred means the convertible Series A
Preferred Stock of Parent, par value $0.001 per share.
8.9.15 Person: any natural person, firm, partnership, association,
corporation, trust, public body or Governmental Entity.
8.9.16 Securities Act: the Securities Act of 1933, as amended.
8.9.17 Subsidiary: means any corporation, partnership, limited
liability company, joint venture or other legal entity of which Parent or
Company, as the case may be (either alone or through or together with any other
Subsidiary), owns or controls, directly or indirectly, fifty percent (50%) or
more of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation, partnership, limited liability company, joint venture
or other legal entity.
8.9.18 Trade Secret: means information, including a formula,
pattern, compilation, program device, method, technique, or process, that: (i)
derives independent economic value from not being generally known to, and not
being readily ascertainable by, proper means by other Persons who can obtain
economic value by its disclosure or use, and (ii) is the subject of efforts that
are reasonable under the circumstances to maintain its secrecy.
Balance of Page Intentionally left Blank
Signature Pages Follow
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers and the Participating Stockholders
have signed in their individual capacities, duly authorized all as of the date
first written above.
XXXXXXXXXXXXX.XXX, INC. PUMP ACQUISITION CORP.
------------------------------- ------------------------------------------
Authorized Signator Authorized Signator
Name: Name:
Title: Title:
INNOPUMP, INC.
-------------------------------
Authorized Signator
Name:
Title:
PARTICIPATING STOCKHOLDERS
------------------------------- ------------------------------------------
Xxxxxxxx Xxxxxxxxx Xxxx Block
-------------------------------
Xxxxxxx Xxxxxxxx
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EXHIBITS
A. Participating Stockholders
B. Opinion of Counsel to Parent and Sub
C. Opinion of Counsel to Company and Participating Stockholders
i
EXHIBIT A
PARTICIPATING STOCKHOLDERS
Xxxxxxxx Xxxxxxxxx
Xxxx Block
Xxxxxxx Xxxxxxxx
xx
EXHIBIT B
OPINION OF COUNSEL
iii
EXHIBIT C
OPINION OF COUNSEL
iv
c
TABLE OF CONTENTS
ARTICLE I THE MERGER..................................................2
SECTION 1.1 THE MERGER..................................................2
SECTION 1.2 EFFECTIVE TIME..............................................2
SECTION 1.3 EFFECTS OF THE MERGER.......................................3
SECTION 1.4 CHARTER AND BY-LAWS; DIRECTORS AND OFFICERS.................3
SECTION 1.5 CONVERSION OF SECURITIES....................................3
SECTION 1.6 PAYMENT OF MERGER CONSIDERATION.............................4
SECTION 1.7 DIVIDENDS; TRANSFER TAXES; WITHHOLDING......................5
SECTION 1.8 NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK................5
SECTION 1.9 CLOSING OF COMPANY TRANSFER BOOKS...........................5
SECTION 1.10 LOST CERTIFICATES...........................................5
SECTION 1.11 FURTHER ASSURANCES..........................................5
SECTION 1.12 DISSENTERS' RIGHTS..........................................6
SECTION 1.13 CLOSING.....................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES..............................7
SECTION 2.1 CORPORATE STATUS............................................7
SECTION 2.2 SUBSIDIDARIES...............................................7
SECTION 2.3 AUTHORIZATION OF AGREEMENTS.................................7
SECTION 2.4 CAPITALIZATION..............................................7
SECTION 2.5 NO CONFLICTS................................................8
SECTION 2.6 LITIGATION..................................................8
SECTION 2.7 PARENT COMMON STOCK.........................................9
SECTION 2.8 SEC DOCUMENTS AND OTHER REPORTS.............................9
SECTION 2.9 NO UNDISCLOSED LIABILITIES..................................9
SECTION 2.10 TAXES.......................................................9
SECTION 2.11 NO ADVERSE EFFECTS.........................................10
SECTION 2.12 CONDUCT OF BUSINESS........................................10
SECTION 2.13 TITLE TO AND CONDITION OF ASSETS...........................11
SECTION 2.14 REAL PROPERTY..............................................11
SECTION 2.15 ENVIRONMENTAL COMPLIANCE...................................11
SECTION 2.16 ACCOUNTS RECEIVABLE........................................12
SECTION 2.17 MATERIAL/SERVICE AGREEMENTS; OTHER CONTRACTS...............12
SECTION 2.18 INTELLECTUAL PROPERTY......................................13
SECTION 2.19 NY SPIN OFF................................................14
SECTION 2.20 INSURANCE..................................................14
SECTION 2.21 CUSTOMER AND SUPPLIER RELATIONSHIPS........................14
SECTION 2.22 EMPLOYEES..................................................15
SECTION 2.23 LABOR RELATIONS............................................15
SECTION 2.24 BENEFIT PLANS..............................................15
SECTION 2.25 CORPORATE RECORDS..........................................16
SECTION 2.26 BANK ACCOUNTS; POWER OF ATTORNEY...........................16
a
SECTION 2.27 WARRANTIES.................................................16
SECTION 2.28 INSIDER INTERESTS..........................................16
SECTION 2.29 FOREIGN CORRUPT PRACTICES ACT..............................16
SECTION 2.30 REORGANIZATION.............................................16
SECTION 2.31 OPERATIONS OF SUB..........................................16
SECTION 2.32 BROKERS....................................................17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............17
SECTION 3.1 ORGANIZATION AND AUTHORITY.................................17
SECTION 3.2 SUBSIDIARIES...............................................17
SECTION 3.3 AUTHORIZATION OF AGREEMENTS................................17
SECTION 3.4 CAPITALIZATION.............................................17
SECTION 3.5 NO CONFLICTS...............................................18
SECTION 3.6 FINANCIAL STATEMENTS.......................................18
SECTION 3.7 LITIGATION; COMPLIANCE WITH LAWS; PERMITS..................19
SECTION 3.8 NO UNDISCLOSED LIABILITIES.................................19
SECTION 3.9 TAXES......................................................19
SECTION 3.10 NO ADVERSE EFFECTS.........................................20
SECTION 3.11 CONDUCT OF BUSINESS........................................20
SECTION 3.12 TITLE TO AND CONDITION OF ASSETS...........................21
SECTION 3.13 REAL PROPERTY..............................................21
SECTION 3.14 ENVIRONMENTAL COMPLIANCE...................................21
SECTION 3.15 ACCOUNTS RECEIVABLE........................................21
SECTION 3.16 MATERIAL/SERVICE AGREEMENTS; OTHER CONTRACTS...............21
SECTION 3.17 INTELLECTUAL PROPERTY......................................23
SECTION 3.18 INSURANCE..................................................24
SECTION 3.19 CUSTOMER AND SUPPLIER RELATIONSHIPS........................24
SECTION 3.20 EMPLOYEES..................................................24
SECTION 3.21 LABOR RELATIONS............................................24
SECTION 3.22 BENEFIT PLANS..............................................25
SECTION 3.23 CORPORATE RECORDS..........................................25
SECTION 3.24 BANK ACCOUNTS; POWER OF ATTORNEY...........................26
SECTION 3.25 WARRANTIES.................................................26
SECTION 3.26 INSIDER INTERESTS..........................................26
SECTION 3.27 FOREIGN CORRUPT PRACTICES ACT..............................26
SECTION 3.28 REORGANIZATION.............................................26
SECTION 3.29 BROKERS....................................................26
ARTICLE IV COVENANTS..................................................26
SECTION 4.1 STOCKHOLDER'S MEETINGS.....................................26
SECTION 4.2 EXPENSES...................................................27
SECTION 4.3 REORGANIZATION.............................................27
SECTION 4.4 PUBLIC ANNOUNCEMENTS.......................................27
SECTION 4.5 CONFIDENTIALITY............................................27
SECTION 4.6 STANDSTILL AGREEMENT.......................................27
SECTION 4.7 CONDUCT OF BUSINESS IN THE ORDINARY COURSE.................28
SECTION 4.8 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE..........28
b
ARTICLE V CONDITIONS PRECEDENT TO THE MERGER.........................28
SECTION 5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER...................................................28
SECTION 5.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER.................................................. 29
SECTION 5.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT
THE MERGER...............................................30
ARTICLE VI TERMINATION, AMENDMENT AND WAIVER..........................31
SECTION 6.1 TERMINATION................................................31
SECTION 6.2 EFFECT OF TERMINATION......................................32
SECTION 6.3 AMENDMENT..................................................32
SECTION 6.4 WAIVER.....................................................32
ARTICLE VII SURVIVAL OF REPRESENTATIONS & WARRANTIES...................32
SECTION 7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................32
SECTION 7.2 SURVIVAL OF COVENANTS AND AGREEMENTS.......................33
ARTICLE VIII GENERAL PROVISIONS.........................................33
SECTION 8.1 NOTICES....................................................33
SECTION 8.2 INTERPRETATION.............................................33
SECTION 8.3 COUNTERPARTS...............................................34
SECTION 8.4 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.............34
SECTION 8.5 GOVERNING LAW..............................................34
SECTION 8.6 ASSIGNMENT.................................................34
SECTION 8.7 SEVERABILITY...............................................34
SECTION 8.8 PERFORMANCE BY SUB.........................................34
SECTION 8.9 DEFINED TERMS..............................................34
c
