Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
KNOBIAS HOLDINGS, INC.,
CONSOLIDATED TRAVEL SYSTEMS, INC.
AND
KHI ACQUISITION, INC.
June 30, 2004
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is entered
into effective as of the 30th day of June, 2004, by and among KNOBIAS HOLDINGS,
INC., a Delaware corporation (the "Company"), CONSOLIDATED TRAVEL SYSTEMS, INC.,
a Delaware corporation ("COVSA") and KHI ACQUISITION, INC., a newly formed
Delaware corporation ("Merger Sub").
WHEREAS, COVSA desires to acquire the Company as a wholly owned
subsidiary and to issue shares of COVSA common stock to the security holders of
the Company upon the terms and conditions set forth herein. Merger Sub is a
wholly owned subsidiary corporation of COVSA that shall be merged with and into
the Company; whereupon the Company shall be the surviving corporation and shall
become a wholly owned subsidiary of COVSA (Merger Sub and the Company are
sometimes collectively hereinafter referred to as the "Constituent
Corporations").
WHEREAS, Merger Sub has an authorized capitalization consisting of
1,000 shares of $0.001 par value common stock, all of which shall be issued and
outstanding and owned by COVSA as of the Effective Time of the Merger, as
defined herein.
WHEREAS, the Company has an authorized capitalization of 46,000,000
shares, $0.001 par value, consisting of 30,000,000 shares of Class A Common
Stock and 1,000,000 shares of Class B Common Stock (the "Company Common Stock");
and 15,000,000 shares of preferred stock issuable from time to time in series,
and currently comprised of Series A Preferred Stock (the "Company A Preferred
Stock"), Series B Preferred Stock (the "Company B Preferred Stock"), Series C
Preferred Stock (the "Company C Preferred Stock") and Series D Preferred Stock
(the "Company D Preferred Stock"), as follows:
CLASS OR SHARES SHARES ISSUED &
SERIES AUTHORIZED OUTSTANDING
-------- ---------- ---------------
Common A 30,000,000 6,509,564
Common B 1,000,000 0
A Preferred 3,570,000 3,565,800
B Preferred 1,645,000 1,641,307
C Preferred 622,500 622,500
D Preferred 2,320,000 419,300
excluding certain debentures convertible into Company D Preferred Stock,
warrants to purchase Company Common Stock, and options granted under the
Company's Amended and Restated 2000 Stock Option Plan.
WHEREAS, the boards of directors of COVSA, Merger Sub and the Company,
respectively, deem it advisable and in the best interests of such corporations
and their respective stockholders that Merger Sub merge with and into the
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Company pursuant to this Agreement and the Certificate of Merger (in the form
attached hereto as Exhibit "A") and pursuant to applicable provisions of law
(such transaction is hereafter referred to as the "Merger").
NOW THEREFORE, in consideration of the premises, the mutual covenants
set out herein, and other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. Plan of Reorganization.
-----------------------
The parties to this Agreement do hereby agree that Merger Sub shall be
merged with and into the Company upon the terms and conditions set
forth herein and in accordance with the provisions of the Delaware
General Corporation Law (the "DGCL"). It is the intention of the
parties hereto that this transaction qualify as a tax-free
reorganization under Section 368(a)(2)(E) of the Internal Revenue Code
of 1986, as amended, and related sections thereunder.
2. Terms of Merger.
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In accordance with the provisions of this Agreement and the
requirements of applicable law, Merger Sub shall be merged with and
into the Company as of the Effective Time of the Merger (the terms
"Closing" and "Effective Time of the Merger" are defined in Section 6
hereof). The Company shall be the surviving corporation (hereinafter
sometimes referred to as the "Surviving Corporation") and the separate
existence of Merger Sub shall cease at the Effective Time of the
Merger. The Company, as the Surviving Corporation, shall succeed to and
assume all the rights and obligations of Merger Sub in accordance with
the DGCL, as described below. Consummation of the Merger shall be upon
the following terms and subject to the conditions set forth herein:
(A) Corporate Existence.
(1) Commencing at the Effective Time of th Merger, the
separate corporate existence of Merger Sub shall cease
and the Surviving Corporation shall continue its
corporate existence as a Delaware corporation and
(a) it shall thereupon and thereafter possess all
rights, privileges, powers, franchises and property
(real, personal and mixed) of each of the
Constituent Corporations;
(b) all debts due to either of th Constituent
Corporations, on whatever account, all causes in
action and all other things belonging to either of
the Constituent Corporations shall, except as
otherwise set forth herein, be taken and deemed to
be transferred to and shall be vested in the
Surviving Corporation by virtue of the Merger
without further act or deed; and
(c) all rights of creditors and all liens, if any, upon
any property of any of the Constituent Corporations
shall be preserved unimpaired, limited in lien to
the property affected by such liens immediately
prior to the Effective Time of the Merger, and all
debts, liabilities and duties of the Constituent
Corporations shall thenceforth attach to the
Surviving Corporation.
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(2) At the Effective Time of the Merger, (i) the Third
Amended and Restated Certificate of Incorporation and
the Bylaws of the Company, as existing and in effect
immediately prior to the Effective Time of the Merger,
shall be and remain the Certificate of Incorporation and
Bylaws of the Surviving Corporation; (ii) the members of
the Board of Directors of the Company holding office
immediately prior to the Effective Time of the Merger
shall remain as the members of the Board of Directors of
the Surviving Corporation until their respective
successors are elected or appointed and qualified (if on
or after the Effective Time of the Merger a vacancy
exists on the Board of Directors of the Surviving
Corporation, such vacancy may thereafter be filled in a
manner provided by applicable law and the Bylaws of the
Surviving Corporation); and (iii) until the Board of
Directors of the Surviving Corporation shall otherwise
determine, all persons who hold offices of the Company
at the Effective Time of the Merger shall continue to
hold the same offices of the Surviving Corporation.
(B) Conversion of Securities.
At the Effective Time of the Merger and without any action on the
part of COVSA, Merger Sub, the Company or the holders of any of
the securities of any of these corporations, each of the following
shall occur:
(1) After giving effect to the Reverse Stock Split defined in
Section 7(C) below, the outstanding shares of capital stock
of the Company shall be converted into the right to receive
shares of common stock, par value $.01 per share, of COVSA
("COVSA Common Stock"). Each one (1) share of Company Common
Stock issued and outstanding immediately prior to the
Effective Time of the Merger shall be converted into the
right to receive 2.2604 shares of COVSA Common Stock. Each
one (1) share of Company A Preferred Stock issued and
outstanding immediately prior to the Effective Time of the
Merger shall be converted into the right to receive 2.2604
shares of COVSA Common Stock. Each one (1) share of Company B
Preferred Stock issued and outstanding immediately prior to
the Effective Time of the Merger shall be converted into the
right to receive 5.2435 shares of COVSA Common Stock. Each
one (1) share of Company C Preferred Stock issued and
outstanding immediately prior to the Effective Time of the
Merger shall be converted into the right to receive 5.6729
shares of COVSA Common Stock. Each one (1) share of Company D
Preferred Stock issued and outstanding immediately prior to
the Effective Time of the Merger shall be converted into the
right to receive 2.2604 shares of COVSA Common Stock. All
such shares of Company
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Common Stock, Company A Preferred Stock, Company B Preferred
Stock, Company C Preferred Stock, and Company D Preferred
Stock shall no longer be outstanding and shall automatically
be canceled and shall cease to exist, and each certificate
previously evidencing any such shares shall thereafter
represent the right to receive, upon the surrender of such
certificate in accordance with the provisions of Section 3
hereof, certificates evidencing such number of shares of
COVSA Common Stock, respectively, into which such shares of
the Company's common and preferred stock were converted. No
fraction of any share of COVSA Common Stock will be issued to
any former holder of capital stock of the Company; rather,
the number of shares of COVSA Common Stock otherwise
issuable, if other than a whole number, shall be rounded to
the nearest whole number. The holders of such certificates
previously evidencing shares of Company Common Stock, Company
A Preferred Stock, Company B Preferred Stock, Company C
Preferred Stock, and Company D Preferred Stock outstanding
immediately prior to the Effective Time of the Merger shall
cease to have any rights with respect to such shares of the
Company's common and preferred stock except as otherwise
provided herein or by law.
(2) The outstanding principal balance of the Company's 12%
Convertible Subordinated Debentures and the Company's 24%
Convertible Subordinated Debentures (collectively, the
"Company Debentures") and a portion of the accrued and unpaid
interest thereon, shall be converted into the right to
receive a total of 2,108,000 shares of COSVA Common Stock, as
set forth on Exhibit "B" attached hereto. All such Company
Debentures shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each
Company Debenture shall thereafter represent the right to
receive, upon the surrender of such Company Debenture in
accordance with the provisions of Section 3 hereof,
certificates evidencing such number of shares of COSVA Common
Stock, respectively, into which such Company Debentures were
converted. No fraction of any share of COVSA Common Stock
will be issued to any former holder of Company Debentures;
rather, the number of shares of COVSA Common Stock otherwise
issuable, if other than a whole number, shall be rounded to
the nearest whole number. The holders of the Company
Debentures immediately prior to the Effective Time of the
Merger shall cease to have any rights with respect to such
Company Debentures other than the right to receive accrued
but unpaid interest thereon taking into consideration that a
portion of such accrued interest shall have been converted
into shares of COSVA Common Stock.
(3) Any shares of the Company capital stoc held in the treasury
of the Company immediately prior to the Effective Time of the
Merger shall automatically be canceled and extinguished
without any conversion thereof and no payment shall be made
with respect thereto. At the Effective Time of the Merger,
the stock transfer books of the Company shall be closed and
thereafter, there shall be no further registration of
transfers on the stock transfer books of the Surviving
Corporation of any shares of capital stock of the Company
which were outstanding immediately prior to the Effective
Time.
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(4) Each holder of an option (a "Company Option") to purchase
Company Common Stock granted prior to the Effective Time of
the Merger pursuant to the Company's Amended and Restated
2000 Stock Option Plan (the "Company Option Plan") shall
receive from COVSA at the Closing, in exchange for a written
instrument executed by him canceling by its terms all of the
Company Options held by him at the Closing, a duly executed
Option Agreement (a "COVSA Option Agreement") evidencing the
grant to said holder, pursuant to the COVSA Stock Incentive
Plan (as defined herein), of an option (each, a "COVSA
Option") to acquire one (1) share of COVSA Common Stock for
every one (1) share of Company Common Stock for which the
Company Option is exercisable at any time, on economic and
contractual terms substantially and materially similar to the
terms and conditions of said Company Option prior to such
conversion, and substantially in the form of Exhibit "C"
attached hereto.
(5) As of the date of this Agreement, the Company has issued and
outstanding warrants to purchase 891,218 shares of Company
Common Stock (the "Company Warrants"). Upon the Effective
Time of the Merger, each outstanding warrant to purchase
Company Common Stock, whether or not then exercisable, shall
be converted into a warrant (a "COVSA Warrant") to purchase
(in substitution for each share of Company Common Stock
subject to a Company Warrant) one (1) share of COVSA Common
Stock for every one (1) share of Company Common Stock for
which said warrant was exercisable, on economic and
contractual terms substantially and materially similar to the
terms and conditions of said Company Warrant prior to such
conversion, and substantially in the form of Exhibit "D"
attached hereto.
(6) Each share of capital stock of Merger Sub issued and
outstanding immediately prior to the Effective Time of the
Merger shall remain in existence as one share of common stock
of the Surviving Corporation, which shall be owned by COVSA.
(7) The 2,500,000 shares of COVSA Common Stock issued and
outstanding immediately prior to the Merger (such number of
outstanding shares reflecting the Reverse Stock Split, as
defined in Section 7(C) below) will remain issued and
outstanding after the Effective Time of the Merger.
(C) Restricted Securities
(1) None of (i) the shares of COVSA Common Stock into which the
shares of capital stock of the Company and the Company
Debentures are to be converted, (ii) the COVSA Options or
(iii) the COVSA Warrants shall, at the Effective Time of the
Merger, be registered under the Securities Act of 1933, as
amended (the "Securities Act") but, rather, shall be deemed
to have been issued pursuant to an exemption therefrom
(subject to the satisfaction of certain other terms and
conditions hereof) and shall be considered "restricted
securities" within the meaning of Rule 144 promulgated under
the Securities Act. All shares of COVSA Common Stock shall
bear a legend worded substantially as follows:
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"The shares represented by this certificate
have not been registered under the
Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is
defined in Rule 144 under the Act. The
shares may not be offered for sale, sold or
otherwise transferred except pursuant to an
exemption from registration under the Act,
the availability of which is to be
established to the satisfaction of the
Company."
(2) At the Closing, COVSA shall direct its transfer agent to
record, as soon as practicable after the Closing, the
issuance of COVSA Common Stock to the holders of the
Company's capital stock and the Company Debentures, pursuant
to the provisions set forth above. The transfer agent shall
annotate its records to reflect the restrictions on transfer
embodied in the legend set forth above. There shall be no
requirement of COVSA to register the COVSA Common Stock under
the Securities Act in connection with the Merger.
(D) Other Matters.
(1) Immediately prior to the Effective Xxx of the Merger, the
Company shall have no more than 6,509,564 shares of Company
Common Stock, 3,565,800 shares of Company A Preferred Stock,
1,641,307 shares of Company B Preferred Stock, 622,500 shares
of Company C Preferred Stock, and 419,300 shares of Company D
Preferred Stock issued and outstanding. Immediately prior to
the Effective Time of the Merger, after giving consideration
to the transactions described in Section 7(C) hereof, COVSA
shall have no more than 2,500,000 shares of COVSA Common
Stock and no other series of capital stock issued and
outstanding.
(2) From and after the Closing and with a view to making
available to holders of COVSA Common Stock the benefits of
Rule 144 of the Securities Act or any other similar rule or
regulation of the Securities and Exchange Commission ("SEC"),
COVSA shall
(a) take all action as may be required as a condition to the
availability of Rule 144 under the Securities Act (or
any successor exemptive rule hereinafter in effect) with
respect to COVSA Common Stock; and
(b) furnish to any holder of COVS Common Stock forthwith
upon request
(i) a written statement COVSA as to its compliance with
the reporting requirements of Rule 144;
(ii) a copy of the most recent annual or quarterly
report of COVSA as filed with the SEC; and
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(iii)such other reports an documents as a holder may
reasonably request in availing itself of any rule
or regulation of the SEC allowing a holder to sell
any such COVSA Common Stock without registration.
COVSA agrees to facilitate and expedite transfers of the
shares of COVSA Common Stock pursuant to Rule 144 under the
Securities Act, which efforts shall include timely notice to
its transfer agent to expedite such transfers of such shares.
(3) At the Closing, the then existing directors of COVSA shall
nominate and elect to the Board of Directors of COVSA the
persons designated in writing by the Company, and COVSA shall
cause all of the persons then serving as directors and
officers of COVSA immediately prior to the Closing to resign
from all of their respective positions with COVSA, effective
immediately upon the Closing.
(4) If, at any time after the Closing, any further action is
necessary or desirable to carry out the purposes of this
Agreement, the officers and directors of COVSA are hereby
fully authorized to take, and will use their reasonable
efforts to take, all such lawful and necessary action.
(5) At the Closing, the Company shall caus the amount of $400,000
(the "Cash Payment") to be deposited into the trust account
of Xxxxxxx X. Xxxxxxx, P.C., by wire transfer of immediately
available funds for the account of COVSA, in accordance with
wire transfer instructions delivered to the Company prior to
the Closing.
3. Delivery of Shares and Debentures.
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On or as soon as practicable after the Effective Time of the Merger,
the Company will use reasonable efforts to cause all holders of the
Company's capital stock (the "Company Stockholders") and all holders of
the Company Debentures to surrender to COVSA's transfer agent for
cancellation certificates representing their shares of the Company's
capital stock and Company Debentures convertible into the Company's
capital stock, against delivery of certificates representing the shares
of COVSA Common Stock for which the Company's capital stock and Company
Debentures are to be converted in the Merger pursuant to Section 2
hereof. Until surrendered and exchanged as herein provided, each
outstanding certificate which, prior to the Effective Time of the
Merger, represented Company capital stock, and each outstanding Company
Debenture convertible into Company capital stock, shall be deemed for
all corporate purposes to evidence ownership of the same number of
shares of COVSA Common Stock into which the shares of the Company
capital stock represented by such Company certificate and Company
Debenture shall have been so converted.
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4. Representations and Warranties of the Company.
----------------------------------------------
The Company hereby represents and warrants to COVSA and Merger Sub as
follows, which warranties and representations shall also be true as of
the Effective Time of the Merger:
(A) As of the date hereof, excluding the Company Options, Company
Warrants and Company Debentures, the total number of shares of
Company Common Stock issued and outstanding is 6,509,564, the
total number of shares of Company A Preferred Stock issued and
outstanding is 3,565,800, the total number of shares of Company B
Preferred Stock issued and outstanding is 1,641,307, the total
number of shares of Company C Preferred Stock issued and
outstanding is 622,500 and the total number of shares of Company D
Preferred Stock issued and outstanding is 419,300. As of the date
hereof, the total number of Company Options issued and outstanding
is 158,500, the total number of Company Warrants issued and
outstanding is 891,218 and the aggregate principal amount of
Debentures issued and outstanding is $1,050,000.
(B) The Company Common Stock, Company A Preferred Stock, Company B
Preferred Stock, Company C Preferred Stock, and Company D
Preferred Stock constitute duly authorized, validly issued shares
of capital stock of the Company. All shares are fully paid and
nonassessable.
(C) The audited financial statements of the Company as of and for the
year ended December 31, 2003, and unaudited interim financial
statements of the Company for the quarter ended March 31, 2004,
which have been delivered to COVSA, or will be delivered to COVSA
prior to the Closing (hereinafter referred to as the "Company
Financial Statements"), fairly present the financial condition of
the Company as of the dates thereof and the results of its
operations for the periods covered thereby. Other than as set
forth in any schedule or exhibit attached hereto, and except as
may otherwise be set forth or referenced herein, there are no
material liabilities or obligations, either fixed or contingent,
not disclosed or referenced in the Company Financial Statements or
in any exhibit thereto or notes thereto other than contracts or
obligations occurring in the ordinary course of business since
March 31, 2004; and no such contracts or obligations occurring in
the ordinary course of business constitute liens or other
liabilities which materially alter the financial condition of the
Company as reflected in the Company Financial Statements. The
Company has, or will have at the Closing, good title to all assets
shown on the Company Financial Statements subject only to
dispositions and other transactions in the ordinary course of
business, the disclosures set forth therein and liens and
encumbrances of record. The Company agrees to provide updated
unaudited financial statements for the quarterly and six- month
period ended June 30, 2004, prior to the Closing, if the Closing
occurs on or after August 14, 2004.
(D) Except as disclosed in writing to COVSA, since March 31, 2004,
there have not been any material adverse changes in the financial
position of the Company except changes arising in the ordinary
course of business, which changes will not materially and
adversely affect the financial position of the Company.
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(E) The Company is not a party to any material pending litigation or,
to the knowledge of its executive officers (herein, the "Company's
Knowledge"), any governmental investigation or proceeding, not
reflected in the Company Financial Statements, and, to the
Company's Knowledge, no material litigation, claims, assessments
or any governmental proceedings are threatened in writing against
the Company.
(F) The Company is in good standing in its state of incorporation, and
is in good standing and duly qualified to do business in each
state where required to be so qualified except where the failure
to so qualify would have no material adverse effect on the
business, financial condition or results of operations of the
Company.
(G) The Company has, or by the Effective Time of th Merger will have,
filed all material tax, governmental and/or related forms and
reports (or extensions thereof) due or required to be filed in the
ordinary course of business and has (or will have) paid or made
adequate provisions for all taxes or assessments which have become
due as of the Effective Time of the Merger.
(H) The Company has not materially breached any material agreement to
which it is a party. The Company has previously given COVSA copies
of or access to all material contracts, commitments and/or
agreements to which the Company is a party.
(I) The Company has the requisite corporate power and authority to
enter into this Agreement and the other Transaction Documents (as
defined herein) to which it is a party and to perform its
obligations hereunder and thereunder. The execution and delivery
of this Agreement and the other Transaction Documents to which it
is a party and the consummation of the transactions contemplated
hereby and thereby have been or will prior to the Closing and the
Effective Time of the Merger be duly authorized by the Board of
Directors of the Company and by the stockholders of the Company
(if approved). The execution of this Agreement and the other
Transaction Documents does not materially violate or breach any
material agreement or contract to which the Company is a party,
and the Company, to the extent required, has (or will have by
Closing) obtained all necessary approvals or consents required by
any agreement to which the Company is a party. The execution and
performance of this Agreement and the other Transaction Documents
will not violate or conflict with any provision of the Third
Amended and Restated Certificate of Incorporation, as amended and
in effect as of the date hereof, or Bylaws of the Company. As used
herein, "Transaction Document" means this Merger Agreement and
each of the agreements, instruments or documents referred to in
Sections 8(O), (P), Q) and (R) hereof.
(J) Information regarding the Company, which has been delivered by the
Company to COVSA for use in connection with the Merger, is, to the
Company's Knowledge, true and accurate in all material respects.
(K) To the Company's Knowledge, the Company has (an at the Closing
will have) disclosed in writing to COVSA all events, conditions
and facts materially affecting the business, financial conditions
(including any liabilities, contingent or otherwise) or results of
operations of the Company.
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(L) All information regarding the Company which has been provided to
COVSA by the Company or set forth in any document or other
communication, disseminated to any former, existing or potential
Company Stockholders or holders of the Company Debentures or to
the public or filed with any state securities regulators or
authorities is, to the Company's Knowledge, true, complete,
accurate in all material respects.
(M) To the Company's Knowledge the Company is and has been in
compliance with, and the Company has conducted any business
previously owned or operated by it in compliance with, all
applicable laws, orders, rules and regulations of all governmental
bodies and agencies, including applicable securities laws and
regulations and environmental laws and regulations, except where
such noncompliance has and will have, in the aggregate, no
material adverse effect. The Company has not received notice of
any noncompliance with the foregoing, nor is it aware of any
claims or threatened claims in connection therewith.
(N) To the Company's Knowledge without limiting the foregoing, (i) the
Company and any other person or entity for whose conduct the
Company is legally held responsible are and have been in material
compliance with all applicable federal, state, regional, local
laws, statutes, ordinances, judgments, rulings and regulations
relating to any matters of pollution, protection of the
environment, health or safety, or environmental regulation or
control, and (ii) neither the Company nor any other person for
whose conduct the Company is legally held responsible has
manufactured, generated, treated, stored, handled, processed,
released, transported or disposed of any hazardous substance on,
under, from or at any of the Company's properties or in connection
with the Company's operations.
(O) Except as and to the extent specifically disclosed in this
Agreement and as may be specifically disclosed or reserved against
as to amount in the latest balance sheet contained in the Company
Financial Statements, there is no basis for any assertion against
the Company of any material liabilities or obligations of any
nature, whether absolute, accrued, contingent or otherwise and
whether due or to become due, including, without limitation, any
liability for taxes (including e-commerce sales or other taxes),
interest, penalties and other charges payable with respect
thereto. Neither the execution and delivery of this Agreement or
the other Transaction Documents to which it is a party, nor the
consummation of the transactions contemplated hereby or thereby
will
(1) result in any payment (whether severance pay, unemployment
compensation or otherwise) becoming due from the Company to
any person or entity, including without limitation any
employee, director, officer or affiliate or former employee,
director, officer or affiliate of the Company;
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(2) increase any benefits otherwise payabl to any person or
entity, including without limitation any employee, director,
officer or affiliate or former employee, director, officer or
affiliate of the Company; or
(3) result in the acceleration of the time of payment or vesting
of any such benefits.
(P) To the Company's Knowledge no aspect of the Company's past or
present business, operations or assets is of such a character as
would restrict or otherwise hinder or impair the Company from
carrying on the business of the Company as it is presently being
conducted by the Company.
(Q) Except as disclosed to COVSA in writing, to the Company's
Knowledge the Company has no material contracts, commitments,
arrangements, or understandings relating to its business,
operations, financial condition, prospects, or otherwise. For
purposes of this Section 4, "material" means payment or
performance of a contract, commitment, arrangement or
understanding in the ordinary course of business, which is
expected to involve payments from the Company to any third party
in excess of $100,000.
(R) To the Company's Knowledge no representation or warranty by the
Company contained in this Agreement and no statement contained in
any certificate, schedule or other communication furnished
pursuant to, or in connection with, the provisions hereof contains
or shall contain any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements
therein not misleading. To the Company's Knowledge, there is no
current or prior event or condition of any kind or character
pertaining to the Company that may reasonably be expected to have
a material adverse effect on the business, financial condition or
results of operations of the Company. Except as specifically
indicated elsewhere in this Agreement, all documents delivered by
the Company in connection herewith have been and will be complete
originals, or exact copies thereof.
(S) To the Company's Knowledge, all information to be supplied by it
in writing, specifically for inclusion or incorporation by
reference in the definitive Information Statement to be filed by
COVSA with the SEC and disseminated by COVSA to its stockholders
(the "Information Statement"), will not, at the time the
Information Statement is so disseminated, or at any time it is
amended or supplemented thereafter, contain any untrue statement
of a material fact or omit to state any 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.
5. Representations of COVSA and Merger Sub.
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COVSA and Merger Sub hereby jointly and severally represent and warrant
to the Company as follows, each of which representations and warranties
shall continue to be true as of the Effective Time of the Merger:
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(A) As of the date hereof and the Effective Time of the Merger, the
shares of COVSA Common Stock to be issued and delivered to the
security holders of the Company hereunder and in connection
herewith will, when so issued and delivered, constitute duly
authorized, validly and legally issued, fully-paid, nonassessable
shares of COVSA capital stock, free of all liens and encumbrances.
(B) Each of COVSA and Merger Sub has the requisite corporate power to
enter into this Agreement and to perform its respective
obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby (i) have been or will prior to the Closing and the
Effective Time of the Merger be duly authorized by the respective
Boards of Directors of COVSA and Merger Sub and by COVSA as the
sole stockholder of Merger Sub, and (ii) except as otherwise set
forth herein, do not have to be approved or authorized by the
stockholders of COVSA. The execution and performance of this
Agreement will not constitute a material breach of any agreement,
indenture, mortgage, license or other instrument or document to
which COVSA or Merger Sub is a party or to which it is otherwise
subject and will not violate any judgment, decree, order, writ,
law, rule, statute, or regulation applicable to COVSA, Merger Sub
or their properties. The execution and performance of this
Agreement will not violate or conflict with any provision of the
respective Certificates of Incorporation or Bylaws of either COVSA
or Merger Sub.
(C) COVSA has delivered to the Company a true and complete copy of its
audited financial statements for the fiscal years ended 2001,
2002, and 2003, and the unaudited interim financial statements for
the quarter ended March 31, 2004 (the "COVSA Financial
Statements"). The COVSA Financial Statements are complete,
accurate and fairly present the financial condition of COVSA as of
the dates thereof and the results of its operations for the
periods then ended. There are no material liabilities or
obligations either fixed or contingent not reflected therein. The
COVSA Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto)
and fairly present the financial position of COVSA as of the dates
thereof and the results of its operations and changes in financial
position for the periods then ended. COVSA agrees to provide
updated quarterly financial statements if required by governmental
agency. Merger Sub has no financial statements because it was
recently formed solely for the purpose of effectuating the Merger
and it has been, is and will remain inactive except for purposes
of the Merger, and it has no assets, liabilities, contracts or
obligations of any kind other than as incurred in the ordinary
course in connection with its incorporation in Delaware. COVSA has
no subsidiaries or affiliates except for Merger Sub, and Merger
Sub has no subsidiaries or affiliates.
(D) Since March 31, 2004, there have not been any material adverse
changes in the business, financial condition or results of
operation of COVSA. At the Closing, neither COVSA nor Merger Sub
shall have any material assets and neither such corporation now
has, nor shall it have, any liabilities of any kind other than
those reflected in the most recent balance sheet set forth in the
COVSA Financial Statements and any costs or liabilities incurred
in connection with the Merger (which costs and liabilities,
including those liabilities reflected in the most recent balance
sheet set forth in the COVSA Financial Statements, collectively
shall be paid in full by COVSA prior to or at the Closing).
13
(E) Neither COVSA nor Merger Sub is a party to, or the subject of, any
material pending litigation, claims, or governmental investigation
or proceeding not reflected in the COVSA Financial Statements, and
to the knowledge of the executive officers of COVSA (herein
"COVSA's Knowledge"), there are no material lawsuits, claims,
assessments, investigations, or similar matters, threatened in
writing against Merger Sub, COVSA, or the management or properties
of COVSA or Merger Sub.
(F) COVSA and Merger Sub are each duly organized, validly existing and
in good standing under the laws of the jurisdiction of their
respective incorporation; each has the corporate power to own its
property and to carry on its business as now being conducted and
is duly qualified to do business in any jurisdiction where so
required except where the failure to so qualify would have no
material negative impact. Neither corporation is required to be
qualified to do business in any state other than the State of
Delaware.
(G) To COVSA's Knowledge, COVSA and Merger Sub have filed all federal,
state, county and local income, excise, property and other tax,
governmental and/or other returns, forms, filings, or reports,
which are due or required to be filed by it prior to the date
hereof and have paid or made adequate provision in the COVSA
Financial Statements for the payment of all taxes, fees, or
assessments which have or may become due pursuant to such returns,
filings or reports or pursuant to any assessments received.
Neither COVSA nor Merger Sub is delinquent or obligated for any
tax, penalty, interest, delinquency or charge and there are no tax
liens or encumbrances applicable to either corporation.
(H) As of the date of this Agreement, COVSA's authorized capital stock
consists solely of 20,000,000 shares of COVSA Common Stock, $.01
par value, of which 7,499,480 shares are presently issued and
outstanding. Immediately prior to the Closing, and as a result of
(i) COVSA effecting the Reverse Stock Split described in Section
7(C) hereof and (ii) the filing of the Restated Certificate, as
defined in Section 7(E) hereof, COVSA's authorized capital stock
shall consist solely of 95,000,000 shares of COVSA Common Stock,
$.01 par value, of which COVSA shall have outstanding not more
than 2,500,000 shares of COVSA Common Stock, 5,000,000 shares of
preferred stock, par value $.01 per share, of which no shares
shall be issued and outstanding, and no other shares of its
capital stock. Merger Sub's capitalization consists solely of
1,000 authorized shares of $0.001 par value common stock ("Merger
Sub's Common Stock"), of which 1,000 shares are outstanding, all
of which are owned by COVSA, free and clear of all liens, claims
and encumbrances. All outstanding shares of capital stock of COVSA
and Merger Sub are, and shall be at the Closing, duly authorized,
validly issued, fully paid and nonassessable. There are no
existing options, calls, claims, warrants, preemptive rights,
registration rights or commitments of any character relating to
the issued or unissued capital stock or other securities of either
COVSA or Merger Sub.
14
(I) The financial records, minute books, and other documents and
records of COVSA and Merger Sub have been made available to the
Company prior to the Closing. The records and documents of COVSA
and Merger Sub that have been delivered to the Company constitute
all of the material records and documents of COVSA and Merger Sub
that they are aware of or that are in their possession or in the
possession of COVSA or Merger Sub.
(J) Neither COVSA nor Merger Sub has materially breached any material
agreement to which it is a party. Prior to the Closing, COVSA
shall have given to the Company copies or access to all material
contracts, commitments and/or agreements to which COVSA is a
party. There are no currently existing agreements with any
affiliates, related or controlling persons or entities.
(K) COVSA has complied with all of the provisions relating to the
issuance of shares, and for the registration thereof, under the
Securities Act. To the best of COVSA's Knowledge there are no
outstanding, pending or threatened stop orders or other actions or
investigations relating thereto involving federal and state
securities laws.
(L) COVSA currently has no employees, consultants o independent
contractors other than its attorneys and accountants and transfer
agent. Xxxxx Xxxxxxxx, X. Xxxxxxxx Xxxxx and Xxxxxx Xxxxxx are, or
will be, the sole directors and sole executive officers of COVSA,
and Xxxxx Xxxxxxxx and X. Xxxxxxxx Xxxxx are the sole directors
and sole executive officers of Merger Sub.
(M) COVSA and Merger Sub have (and at the Closing will have) disclosed
in writing to the Company all events, conditions and facts
materially affecting the business, financial conditions (including
any liabilities, contingent or otherwise) or results of operations
of either COVSA or Merger Sub, since January 1, 2002.
(N) To COVSA's Knowledge, COVSA was originally organized for the
purposes of, and with a specific plan for researching, developing
and manufacturing custom- built batteries. Subsequently, COVSA
revised its business to seeking potential operating businesses and
business opportunities with the intent to acquire or merge with
such businesses.
(O) To COVSA's Knowledge all information regarding COVSA which has
been provided to the Company by COVSA or set forth in any document
or other communication, disseminated to any former, existing or
potential stockholders of COVSA or to the public or filed with the
SEC or any state securities regulators or authorities is true,
complete, accurate in all material respects, not misleading, and
was and is in full compliance with all securities laws and
regulations. Without limiting the generality of the foregoing,
COVSA has filed all required reports, schedules, forms, statements
and other documents with the SEC since the filing of its
registration statement on Form 10-SB on November 10, 2001
(including all filed reports, schedules, forms, statements and
other documents whether or not required, the "SEC Documents"). As
of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act or
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as the case may be, and the rules and regulations of the
15
SEC promulgated thereunder applicable to the SEC Documents, and
none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading. Except to the extent that information contained in
any SEC Document has been revised or superseded by a later filed
SEC Document, none of the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company
included in the SEC Documents are true and complete and comply as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto.
(P) To COVSA's Knowledge COVSA is and has been in compliance with, and
COVSA has conducted any business owned or operated by it in
compliance with, all applicable laws, orders, rules and
regulations of all governmental bodies and agencies, including
applicable securities laws and regulations (including, but not
limited to, the Xxxxxxxx-Xxxxx Act of 2002) and environmental laws
and regulations, except where such noncompliance has and will
have, in the aggregate, no material adverse effect. COVSA has not
received notice of any noncompliance with the foregoing, nor is it
aware of any claims or threatened claims in connection therewith.
To its Knowledge COVSA has never conducted any operations or
engaged in any business transactions of a material nature other
than as set forth in the reports COVSA has previously filed with
the SEC.
(Q) The certificates of the Chief Executive Officer and Chief
Financial Officer of COVSA required by Rules 13a-14 and 15d-14 of
the Exchange Act or Section 906 of the Xxxxxxxx-Xxxxx Act of 2002
with respect to the SEC Documents, as applicable, are true and
correct as of the date of this Agreement as they relate to a
particular SEC Document, as though made as of the date of this
Agreement. The Company has established and maintains disclosure
controls and procedures, has conducted the procedures in
accordance with their terms and has otherwise operated in
compliance with the requirements under Rules 13a-15 and 15d-15 of
the Exchange Act.
(R) Except as and to the extent specifically disclosed in this
Agreement and as may be specifically disclosed or reserved against
as to amount in the latest balance sheet contained in the COVSA
Financial Statements, there is no basis for any assertion against
COVSA of any material liabilities or obligations of any nature,
whether absolute, accrued, contingent or otherwise and whether due
or to become due, including, without limitation, any liability for
taxes (including e-commerce sales or other taxes), interest,
penalties and other charges payable with respect thereto. Neither
the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will
(1) result in any payment (whether severance pay, unemployment
compensation or otherwise) becoming due from COVSA to any
person or entity, including without limitation any employee,
director, officer;
16
(2) increase any benefits otherwise payabl to any person or
entity, including without limitation any employee, director,
officer or affiliate; or
(3) result in the acceleration of the time of payment or vesting
of any such benefits.
(S) To COVSA's Knowledge no aspect of COVSA's business, operations or
assets is of such a character as would restrict or otherwise
hinder or impair COVSA from carrying on the business of COVSA as
it is presently being conducted by COVSA.
(T) To COVSA's Knowledge, other than retention of accountants,
attorney, and transfer agent, COVSA has no other contracts,
commitments, arrangements, or understandings relating to its
business, operations, financial condition, prospects or otherwise.
(U) None of COVSA, Merger Sub or any other affiliat thereof has or
maintains any employee benefit, bonus, incentive compensation
profit-sharing, equity, stock bonus, stock option, stock
appreciation rights, restricted stock, other stock-based
incentive, executive compensation agreement, employment agreement,
deferred compensation, pension, stock purchase, employee stock
ownership, savings, pension, retirement, supplemental retirement,
employment related change-in- control, severance, salary
continuation, layoff welfare (including, without limitation,
health, medical, prescription, dental, disability, salary
continuation, life, accidental death, travel accident, and other
insurance), vacation, holiday, sick leave, fringe benefit, or
other benefit plan, program, or policy, whether qualified or
nonqualified and any trust, escrow, or other agreement related
thereto, covering any present or former employees, directors, or
their respective dependents ("Employee Programs").
(V) To COVSA's Knowledge no representation or warranty by COVSA or
Merger Sub contained in this Agreement and no statement contained
in any certificate, schedule or other communication furnished
pursuant to or in connection with the provisions hereof contains
or shall contain any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements
therein not misleading. There is no event or condition of any kind
or character pertaining to COVSA that may reasonably be expected
to have a material adverse effect on COVSA or its subsidiaries.
Except as specifically indicated elsewhere in this Agreement, all
documents delivered by COVSA in connection herewith have been and
will be complete originals, or exact copies thereof.
6. Closing.
--------
The Closing of the transactions contemplated herein shall take place on
such date (the "Closing") as mutually determined by the parties hereto,
but no later than five (5) days after all conditions precedent have
been satisfied or waived and all required documents have been
delivered. The parties shall use their reasonable commercial efforts to
cause the Closing to occur on or before August 15, 2004. The "Effective
Time of the Merger" shall be that date and time specified in the
Certificate of Merger as the date on which the Merger shall become
effective.
17
7. Actions Prior to Closing.
-------------------------
(A) Prior to the Closing, the Company on the one hand, and COVSA and
Merger Sub on the other hand, shall be entitled to make such
investigations of the assets, properties, business and operations
of the other party, and to examine the books, records, tax
returns, financial statements and other materials of the other
party as such investigating party deems necessary in connection
with this Agreement and the transactions contemplated hereby. Any
such investigation and examination shall be conducted at
reasonable times and under reasonable circumstances, and the
parties hereto shall cooperate fully therein. The representations
and warranties contained in this Agreement shall not be affected
or deemed waived by reason of the fact that either party hereto
discovered or should have discovered any representation or
warranty is or might be inaccurate in any respect. Until the
Closing, the parties hereto and their respective affiliates shall
keep confidential and shall not use in any manner inconsistent
with the transactions contemplated by this Agreement any
information or documents obtained from the other concerning its
assets, properties, business or operations; if the Closing shall
not occur for any reason (including, without limitation, pursuant
to a termination of this Agreement), the parties hereto and their
respective affiliates shall not disclose, nor use for their own
benefit, any such information or documents obtained from the
other, in either case, unless and to the extent (i) readily
ascertainable from public or published information, or trade
sources, (ii) received from a third party not under an obligation
to such the Company or COVSA, as the case may be, to keep such
information confidential or (iii) required by any applicable law,
rule, regulation or court order. If the Closing does not occur for
any reason each of the parties and their respective affiliates
shall promptly return or destroy all such confidential information
and compilations thereof as is practicable, and shall certify such
destruction or return to the other party.
(B) Prior to the Closing, any written news releases or public
disclosure by either party pertaining to this Agreement shall be
submitted to the other party for its review and approval prior to
such release or disclosure, provided, however, that
(1) such approval shall not be unreasonabl withheld, and
(2) such review and approval shall not be required of disclosures
required to comply, in the judgment of counsel, with federal
or state securities or corporate laws or policies.
(C) Immediately prior to the Effective Time of the Merger, COVSA will
effect a one- for-three reverse stock split (the "Reverse Stock
Split"), in which each three (3) outstanding shares of COVSA
Common Stock will be merged and combined into one (1) share of
COVSA Common Stock, the effect of which, in each case, shall be to
decrease the issued and outstanding number of shares of COVSA
Common Stock. In connection with the Reverse Stock Split, no
fraction of any share of COVSA Common Stock will be issued;
rather, the number of shares of COVSA Common Stock otherwise
issuable, if other than a whole number, shall be rounded to the
next whole number.
18
(D) Except as contemplated by this Agreement, there shall be no stock
dividend, stock split, recapitalization, or exchange of shares
with respect to or rights issued in respect of COVSA Common Stock
after the date hereof and there shall be no dividends or other
distributions paid on COVSA's Common Stock after the date hereof,
in each case through and including the Effective Time of the
Merger. COVSA and Merger Sub shall conduct no business, prior to
the Closing, other than in the ordinary course of business or as
may be necessary in order to consummate the transactions
contemplated hereby.
(E) COVSA, acting through its Board of Directors, shall, in accordance
with applicable law: (i) give notice of and submit for action by
written consent of its stockholders (A) the Amended and Restated
Certificate of Incorporation of COVSA, in the form attached hereto
as Exhibit "E" (the "Restated Certificate"); (B) the Reverse Stock
Split; (C) a new stock option plan in the form attached hereto as
Exhibit "F" reserving no less than 5,000,000 shares of COVSA
Common Stock for issuance thereunder (the "COVSA Stock Incentive
Plan"); and (D) the ratification of Xxxxx CPA Group as independent
accountants of COVSA; and COVSA shall use its reasonable best
efforts to obtain such written consent as soon as practicable
after the date on which the Information Statement is cleared by
the SEC; (ii) as promptly as practicable, prepare and file with
the SEC a preliminary information statement relating to the
matters stated above; and (iii) use its reasonable best efforts to
(A) obtain and furnish the information required to be included by
the SEC in the definitive Information Statement and, after
consultation with the Company, respond promptly to any comments
made by the SEC with respect to the preliminary information
statement and cause the Information Statement to be mailed to its
stockholders as promptly as practicable following clearance from
the SEC, and (B) obtain the necessary approval of the matters
stated above by its stockholders.
(F) The Company shall provide to COVSA any information for inclusion
in the Information Statement which may be required under
applicable law and which is reasonably requested by COVSA. Each of
the Company, on the one hand, and COVSA and Merger Sub, on the
other hand, agree promptly to correct any information provided by
any of them for use in the Information Statement if, and to the
extent that, such information shall have become false or
misleading in any material respect, and COVSA further agrees to
take all necessary steps to cause the Information Statement as so
corrected to be filed with the SEC and to be disseminated to the
stockholders of the Company, in each case, as and to the extent
required by applicable federal securities laws.
(G) COVSA hereby represents and warrants that the information supplied
or to be supplied by COVSA for inclusion or incorporation by
reference in (i) the Information Statement or (ii) the Other
Filings (as defined below), will, at the respective times filed
with the SEC and, in addition, in the case of the Information
Statement, as of the date it or any amendment or supplement
thereto is mailed to stockholders, not contain any untrue
statement of a material fact or omit to state any material fact
19
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
are made, not misleading. The Information Statement will comply as
to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder.
The Company hereby represents and warrants that the information
supplied or to be supplied by the Company for inclusion or
incorporation by reference in (i) the Information Statement or
(ii) the Other Filings (as defined below), will, at the respective
times filed with the SEC and, in addition, in the case of the
Information Statement, as of the date it or any amendment or
supplement thereto is mailed to stockholders, not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they are made, not misleading.
(H) As soon as practicable following the date hereo and following the
Effective Time of the Merger, each of COVSA and the Company each
shall properly prepare and file any other filings required under
the Exchange Act or any other federal, state or foreign law
relating to the Merger (collectively, the "Other Filings").
(I) Except as required by law, COVSA and Merger Sub shall not
voluntarily take any action that would, or that is reasonably
likely to, result in any of the conditions to the Merger not being
satisfied. Without limiting the generality of the foregoing COVSA
and Merger Sub shall not take any action that would result in (i)
any of its representations and warranties set forth in this
Agreement that are qualified as to materiality becoming untrue or
(ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect.
(J) The COVSA Common Stock shall continue to be approved for quotation
on the OTC Bulletin Board. COVSA shall have continued to satisfy
throughout the period from the date hereof through the Closing
Date (i) its filing requirements under Section 13 of the Exchange
Act and (ii) the requirements of Rule 15c2-11 as promulgated by
the SEC under the Exchange Act.
8. Conditions Precedent to the Obligations of the Company.
-------------------------------------------------------
All obligations of the Company under this Agreement to effect the
Merger and the other transactions contemplated hereby are subject to
the fulfillment, prior to or as of the Closing and/or the Effective
Time of the Merger, as indicated below, of each of the following
conditions:
(A) The representations and warranties by or on behalf of COVSA and
Merger Sub contained in this Agreement or in any certificate or
document delivered pursuant to the provisions hereof or in
connection herewith shall be true at and as of the Closing and
Effective Time of the Merger as though such representations and
warranties were made at and as of such time.
(B) COVSA and Merger Sub shall have performed and complied with, in
all material respects, all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by
them prior to or at the Closing. No preliminary or permanent
20
injunction or other order, decree or ruling issued by a court or
other governmental authority of competent jurisdiction nor any
statute, rule, regulation or executive order promulgated or
enacted by any governmental authority of competent jurisdiction
shall be in effect which would have the effect of (i) making the
consummation of the Merger illegal, or (ii) otherwise prohibiting
the consummation of the Merger.
(C) On or before the Closing, the directors of COVS and Merger Sub,
and COVSA as sole stockholder of Merger Sub, shall have approved
in accordance with applicable provisions of the DGCL the execution
and delivery of this Agreement and the consummation of the
transactions contemplated herein, and shall have approved the
Restated Certificate and the COVSA Stock Incentive Plan and
submitted the same for approval by the stockholders of COVSA.
(D) On or before the Closing, COVSA and Merger Sub shall have
delivered certified copies of resolutions of the sole stockholder
and directors of Merger Sub and of the directors of COVSA
approving and authorizing (i) the execution, delivery and
performance of this Agreement and all of the necessary and proper
action to enable COVSA and Merger Sub to comply with the terms of
this Agreement, (ii) the election of the Company's nominees to the
Board of Directors of COVSA and all matters outlined or
contemplated herein, (iii) the submission of the Restated
Certificate and the COVSA Stock Incentive Plan to the stockholders
of COVSA and the filing of the Restated Certificate upon approval
thereof.
(E) Each of the Company Stockholders and holders of the Company
Debentures shall have delivered to COVSA a letter commonly known
as an "investment letter" agreeing that the shares of COVSA Common
Stock to be issued in the Merger are, among other things, being
acquired for investment purposes and not with a view to public
resale, are being acquired for the investor's own account, that
the investor is an "accredited investor" as defined under
Regulation D of the Securities Act, and that the shares of COVSA
Common Stock are restricted and may not be resold, except in
reliance of an exemption under the Act.
(F) The Merger shall be permitted by applicable state law and
otherwise and COVSA shall have sufficient shares of its capital
stock authorized to complete the Merger and the transactions
contemplated hereby.
(G) The Restated Certificate, Reverse Stock Split and COVSA Stock
Incentive Plan shall have been approved by the requisite vote of
the stockholders of COVSA, acting by written consent in lieu of a
special meeting thereof, and the Restated Certificate shall have
been filed in accordance with the applicable requirements of the
DGCL.
(H) At the Closing, all of the directors and officers of COVSA and
Merger Sub shall have resigned in writing from their positions as
directors and officers of COVSA and Merger Sub, respectively,
effective upon the election and appointment of the Company
nominees, and the directors of COVSA shall have taken such action
as may be deemed necessary or desirable by the Company regarding
such election and appointment of the Company nominees.
21
(I) At the Closing, all instruments and documents delivered by COVSA
or Merger Sub, including to the Company Stockholders and holders
of the Company Debentures pursuant to the provisions hereof shall
be reasonably satisfactory to legal counsel for the Company.
(J) The capitalization of COVSA and Merger Sub shal be the same as
described in Section 5(H), except that the number of outstanding
shares of COVSA Common Stock shall have been decreased by the
Reverse Stock Split, and the Reverse Stock Split shall have been
effected.
(K) The shares of COVSA Common Stock to be issued t the Company
Stockholders and holders of the Company Debentures at Closing will
be validly issued, nonassessable and fully paid under the
applicable provisions of the DGCL and will be issued in a
nonpublic offering in compliance with all federal, state and
applicable securities laws.
(L) The Company shall have received all necessary and required
approvals and consents from required parties and from its
stockholders.
(M) At the Closing, COVSA and Merger Sub shall have delivered to the
Company an opinion of COVSA's legal counsel dated as of the
Closing to the effect that:
(1) Each of COVSA and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation;
(2) This Agreement has been duly authorized, executed and
delivered by COVSA and Merger Sub and is a valid and binding
obligation of COVSA and Merger Sub enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors'
rights and general principles of equity;
(3) COVSA and Merger Sub each through its Board of Directors and
stockholders have taken all corporate action necessary for
performance under this Agreement;
(4) The documents executed and delivered t the Company and the
Company Stockholders hereunder are valid and binding in
accordance with their terms and vest in the Company
Stockholders all right, title and interest in and to the
shares of COVSA's Common Stock to be issued pursuant to
Section 2 hereof, and the shares of COVSA Common Stock when
issued will be duly and validly issued, fully paid and
nonassessable; and
(5) COVSA and Merger Sub each has the corporate power to execute,
deliver and perform its respective obligations under this
Agreement;
22
(N) The Company shall have completed its financial and legal due
diligence investigation of COVSA with results thereof satisfactory
to the Company in its sole discretion.
(O) The Company and, upon the reasonable request of the Company, COVSA
and Merger Sub shall have entered into a definitive agreement
providing for the consummation, at the Effective Time of the
Merger, of a private placement, in accordance with all applicable
federal, state and foreign securities laws, of authorized but
unissued shares of COVSA Common Stock or other securities in the
aggregate amount of not less than $2,000,000.
(P) The Company and, upon the reasonable request of the Company, COVSA
and Merger Sub shall have entered into the Contribution,
Assignment and Escrow Agreement, dated as of the date hereof, with
Kollage, LLC, Xxxxxx Capital Group, LLC and Xxxxxxx & Eager, PLLC
(the "Contribution Agreement") and the Contribution Agreement
shall be in force and effect as of the Effective Time of the
Merger.
(Q) The Company shall have entered into a Voting Agreement with each
of H. Xxxxxxx Xxxxxxxx and Xxxxxx X. Xxxxx (the "Voting
Agreements"), and the Voting Agreements shall be in force and
effect as of the Effective Time of the Merger.
(R) The Company shall have entered into Debenture Conversion
Agreements (the "Conversion Agreements") executed by holders of
the Company Debentures, and the Conversion Agreements shall be in
force and effect as of the Effective Time of the Merger.
9. Conditions Precedent to the Obligations of COVSA and Merger Sub.
----------------------------------------------------------------
All obligations of COVSA and Merger Sub under this Agreement are
subject to the fulfillment, prior to or at the Closing and/or the
Effective Time of the Merger, of each of the following conditions:
(A) The representations and warranties by the Company contained in
this Agreement or in any certificate or document delivered
pursuant to the provisions hereof shall be true at and as of the
Closing and the Effective Time of the Merger as though such
representations and warranties were made at and as of such times.
(B) The Company shall have performed and complied with, in all
material respects, all covenants, agreements, and conditions
required by this Agreement to be performed or complied with by it
prior to or at the Closing.
(C) On or before the Closing, the directors of the Company shall have
approved in accordance with applicable state corporation law the
execution and delivery of this Agreement and the consummation of
the transactions contemplated herein, and shall have submitted the
same to the stockholders of the Company.
23
(D) On or before the Closing Date, the Company shal have delivered
certified copies of resolutions of the stockholders and directors
of the Company approving and authorizing the execution, delivery
and performance of this Agreement and the other Transaction
Documents and authorizing all of the necessary and proper action
to enable the Company to comply with the terms of this Agreement.
(E) The Merger shall be permitted by applicable state law and
otherwise.
(F) At the Closing, all instruments and documents delivered by the
Company pursuant to the provisions hereof shall be reasonably
satisfactory to legal counsel for COVSA.
(G) The capitalization of the Company shall be the same as described
in Section 4(A) hereof.
(H) COVSA shall have received all necessary and required approvals and
consents from required parties and from its stockholders, and this
Agreement and the Merger shall have been adopted and approved by
the requisite vote of the Company Stockholders.
(I) At the Closing, the Company shall have delivere to COVSA an
opinion of the Company's legal counsel dated as of the Closing to
the effect that:
(1) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of
its incorporation;
(2) This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding
obligation of the Company enforceable in accordance with its
terms;
(3) The Company, through its Board of Directors and stockholders
has taken all corporate action necessary for performance
under this Agreement; and
(4) The Company has the corporate power to execute, deliver and
perform under this Agreement.
(J) COVSA shall have an exemption from registration under the
Securities Act and the securities laws of the state of Delaware
and the various states of residence of the Company Stockholders
and the holders of the Company Debentures for issuance of the
shares of COVSA Common Stock to be issued to the Company
Stockholders and holders of Company Debentures in the Merger.
(K) COVSA shall have received from the Company Stockholders and
holders of the Company Debentures the investment letters described
in Section 8(E) hereof.
(L) COVSA shall have received the Cash Payment.
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10. Survival.
---------
The representations and warranties contained in this Agreement and any
other document or certificate relating hereto shall not survive the
Effective Time of the Merger.
11. Nature of Representations.
--------------------------
All of the parties hereto are executing and carrying out the provisions
of this Agreement in reliance solely on the representations,
warranties, covenants and agreements contained in this Agreement and
the other documents delivered at the Closing and not upon any
representation, warranty, agreement, promise or information, written or
oral, made by the other party or any other person other than as
specifically set forth herein.
12. Documents at Closing.
---------------------
At the Closing, the following documents shall be delivered:
(A) The Company will deliver, or will cause to be delivered, to COVSA
the following:
(1) a certificate executed by the Presiden of the Company to the
effect that all representations and warranties made by the
Company under this Agreement are true and correct as of the
Closing and as of the Effective Time of the Merger, the same
as though originally given to COVSA or Merger Sub on said
date and that the Company has performed or complied in all
material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on
or prior to the Effective Time of the Merger;
(2) a certificate from the state of the Company's incorporation
dated within five business days of the Closing to the effect
that the Company is in good standing under the laws of said
state;
(3) such other instruments, documents and certificates, if any,
as are required to be delivered pursuant to the provisions of
this Agreement and the other Transaction Documents;
(4) executed copy of the Certificate of Merger for filing in
Delaware;
(5) certified copies of resolutions adopte by the Company
Stockholders and the directors of the Company approving the
Merger Agreement and other Transaction Documents and
authorizing the Merger;
(6) the opinion of the Company's counsel as described in Section
9(I) above; and
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(7) all other items, the delivery of which is a condition
precedent to the obligations of COVSA and Merger Sub, as set
forth herein.
(B) COVSA and Merger Sub will deliver or cause to be delivered to the
Company:
(1) stock certificates representing those securities of COVSA to
be issued as a part of the Merger as described in Section 2
hereof;
(2) a certificate of the President of COVS and Merger Sub,
respectively, to the effect that all representations and
warranties of COVSA and Merger Sub made under this Agreement
are true and correct as of the Closing, the same as though
originally given to the Company on said date; and that each
of COVSA and Merger Sub has performed or complied in all
material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on
or prior to the Effective Time of the Merger;
(3) certified copies of resolutions adopte by COVSA's and Merger
Sub's Board of Directors and Merger Sub's sole stockholder
approving the Merger Agreement and authorizing the Merger and
all related matters; and certified copies of resolutions
adopted by the stockholders of COVSA approving the matters
described in Section 7(E) above;
(4) certificates from the jurisdiction of incorporation of COVSA
and Merger Sub dated within five business days of the Closing
Date that each of said corporations is in good standing under
the laws of said state;
(5) executed copy of the Certificate of Merger for filing in
Delaware;
(6) opinion of COVSA's counsel as described in Section 8(M)
above;
(7) such other instruments and documents a are required to be
delivered pursuant to the provisions of this Agreement;
(8) written resignation of all of the officers and directors of
COVSA and Merger Sub; and
(9) all other items, the delivery of which is a condition
precedent to the obligations of the Company, as set forth in
Section 8 hereof.
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13. Finder's Fees.
--------------
COVSA and Merger Sub, jointly and severally, represent and warrant to
the Company, and the Company represents and warrants to COVSA and
Merger Sub, that none of them, or any party acting on their behalf, has
incurred any liabilities, either express or implied, to any "broker" or
"finder" or similar person in connection with this Agreement or any of
the transactions contemplated hereby.
14. Additional Covenants.
---------------------
Between the date hereof and the Closing, except with prior written
consent of the other party:
(A) COVSA, Merger Sub and the Company shall conduct their business
only in the usual and ordinary course and the character of such
business shall not be changed nor shall any different business be
undertaken;
(B) No change shall be made in the Certificate of Incorporation or
Bylaws of COVSA, Merger Sub or the Company except as described
herein;
(C) No change shall be made in the authorized or issued shares of
COVSA except as set forth herein;
(D) Neither COVSA nor the Company shall discharge o satisfy any lien
or encumbrance or obligation or liability, other than current
liabilities shown on the financial statements heretofore delivered
and current liabilities incurred since that date in the ordinary
course of business; and
(E) COVSA shall not make any payment or distributio to its
stockholders or purchase or redeem any shares or capital stock
except as set forth herein.
15. Post-Closing Covenants.
-----------------------
After the Closing, the Company shall cause COVSA to timely file a
current report on Form 8-K to report the Merger. In addition, for a
period of 12 months following the Closing, the Company shall cause
COVSA to use its commercially reasonable efforts to timely file all
reports and other documents required to be filed by COVSA under the
Securities Exchange Act of 1934.
16. Termination.
------------
This Agreement may be terminated at any time prior to the Effective
Time of the Merger, by action taken or authorized by the Board of
Directors of the terminating party or parties, and except as provided
below, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of COVSA or the Company:
(A) By mutual written consent of COVSA and the Company;
27
(B) By either COVSA or the Company, if the Effectiv Time of the Merger
shall not have occurred on or before October 31, 2004 (the
"Termination Date"); provided, however, that the right to
terminate this Agreement under this Section 16(B) shall not be
available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in, the
failure of the Effective Time of the Merger to occur on or before
the Termination Date;
(C) By either COVSA or the Company, if any governmental entity (i)
shall have issued an order, decree or ruling or taken any other
action (which the parties shall use their reasonable best efforts
to resist, resolve or lift, as applicable, permanently
restraining, enjoining or otherwise prohibiting the transaction
contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable or (ii)
shall have failed to issue an order, decree or ruling or to take
any other action, and such denial of a request to issue such
order, decree, ruling or take such other action shall have become
final and nonappealable (which order, decree, ruling or other
action the parties shall have used their reasonable best efforts
to obtain, in the case of each of (i) and (ii) which is necessary
to fulfill the conditions set forth in Sections 8 and 9, as
applicable;
(D) By either COVSA or the Company, if the approval of the respective
stockholders of either COVSA or the Company contemplated by this
Agreement shall not have been obtained by reason of the failure to
obtain the required vote of stockholders or consent to the
respective matters as to which such approval was sought;
(E) By COVSA, if the Company shall have breached or failed to perform
any of its representations, warranties, covenants or other
agreements contained in this Agreement, such that the conditions
set forth in Section 9 are not capable of being satisfied on or
before the Termination Date; or
(F) By the Company, if COVSA shall have breached or failed to perform
any of its representations, warranties, covenants or other
agreements contained in this Agreement, such that the conditions
set forth in Section 8 are not capable of being satisfied on or
before the Termination Date.
17. Effect of Termination.
----------------------
In the event of termination of this Agreement by either COVSA or the
Company as provided in Section 16 (other than Sections 16(E) or (F)),
this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of any of the parties or their
respective officers or directors.
28
18. Miscellaneous.
--------------
(A) Further Assurances. At any time, and from time to time, after the
Effective Time of the Merger, each party will execute such
additional instruments and take such action as may be reasonably
requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the
intent and purposes of this Agreement.
(B) Waiver. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be
waived in writing by the party (in its sole discretion) to whom
such compliance is owed.
(C) Amendment. This Agreement may be amended only i writing as agreed
to by all parties hereto.
(D) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered in
person or sent by prepaid first class registered or certified
mail, return receipt requested to the last known address of the
noticed party.
(E) Headings. The section and subsection headings i this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(F) Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
(G) Binding Effect. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective
heirs, administrators, executors, successors and assigns.
(H) Entire Agreement. This Agreement and the attached Exhibits,
including the Certificate of Merger is the entire agreement of the
parties covering everything agreed upon or understood in the
transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any
kind as conditions or inducements to the execution hereof.
(I) Severability. If any part of this Agreement is deemed to be
unenforceable, the balance of the Agreement shall remain in full
force and effect.
(J) Responsibility and Costs. Whether the Merger is consummated or
not, all fees, expenses and out-of-pocket costs, including,
without limitation, fees and disbursements of counsel, financial
advisors and accountants, incurred by the parties hereto shall be
borne solely and entirely by the party that has incurred such
costs and expenses, unless the failure to consummate the Merger
constitutes a breach of the terms hereof, in which event the
breaching party shall be responsible for all costs of all parties
hereto.
29
(K) Governing Law. This Agreement shall be governe and construed in
accordance with the laws of the State of Delaware without regard
to principles of conflicts of law.
(L) Arbitration. Any dispute between the parties relating in any way
to this Agreement or any of its terms and provisions shall be
submitted to binding arbitration before a single arbitrator in New
Castle County, Delaware, before JAMS and the prevailing party in
such arbitration shall have the right to have any award made by
arbitrators confirmed by a court of competent jurisdiction. The
provisions of the Federal Rules of Civil Procedure, authorizing
and taking of depositions and obtaining discovery are incorporated
herein by this reference and shall be applicable to any such
arbitration. Any such arbitration shall be conducted in an
expeditious manner. Any such arbitration shall be governed by the
JAMS complex arbitration rules and the JAMS optional arbitration
appeal procedure.
30
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
KNOBIAS HOLDINGS, INC.
By /s/ E. Key Xxxxxx
-------------------------------
E. Key Xxxxxx
President
CONSOLIDATED TRAVEL SYSTEMS, INC.
By /s/ Xxxxx Xxxxxxxx
--------------------------------
Xxxxx Xxxxxxxx
President
KHI ACQUISITION, INC.
By /s/ Xxxxx Xxxxxxxx
--------------------------------
Xxxxx Xxxxxxxx
President
31
