Agreement and Plan of Reorganization Dated September 14, 2007
Exhibit
10.1
Dated
September 14, 2007
This
AGREEMENT AND PLAN OF REORGANIZATION dated as of September 14, 2007 (the
“Agreement”), between Downside Up, Inc.,
a
Colorado corporation (“DUI”), ESP Resources Inc.
,
a
Delaware corporation (“ESP”) and DUI
Operations, Inc.,
a
wholly-owned Subsidiary of DUI in organization (“Subsidiary”) and the
shareholders of ESP, set forth on Schedule A hereto (the “ESP Shareholders”).
ESP, DUI and Subsidiary may also be referred to herein as the “Constituent
Corporations” or the “Parties.”
WHEREAS,
the Parties acknowledge and affirm the following:
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A.
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DUI
is a corporation duly organized and existing under the laws of
the State
of Colorado.
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B.
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ESP
is a corporation duly organized and existing under the laws of
the State
of Delaware.
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C.
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Subsidiary
is a corporation which is 100% owned by DUI and is duly organized
and
existing under the laws of the State of
Delaware.
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D.
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The
Colorado Business Corporation Act and the Delaware General Corporation
Law
permit the merger of ESP with and into the
Subsidiary..
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E.
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DUI
and ESP and their respective Boards of Directors declare it advisable
and
to the advantage, welfare, and best interests of said corporations
and
their respective stockholders to merge Subsidiary with and into
ESP
pursuant to the provisions of their respective state laws upon
the terms
and conditions hereinafter set
forth.
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F.
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The
respective Boards of Directors of DUI and ESP have approved this
Agreement; and the shareholders of ESP have approved the
merger.
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G.
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For
federal income tax purposes, it is intended that the merger qualify
as a
tax free reorganization under Section 368(a) of the Internal Revenue
Code
of 1986, as amended (the “IRC”).
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ARTICLE
1
THE
MERGER
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1.1
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Merger.
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In
accordance with the provisions of this Agreement and applicable provisions
of
their respective state laws, Subsidiary shall be merged with and into ESP
(the
“Merger”). Following the Merger, the separate existence of Subsidiary shall
cease and ESP shall be, and is herein sometimes referred to as, the “Surviving
Corporation.” For the purposes of this Agreement, this form of transaction may
also be referred to herein as a “reverse triangular merger.”
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1.2
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Filing
and
Effectiveness.
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The
Merger shall become effective when the following actions shall have been
completed:
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(a)
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This
Agreement and the Merger shall have been adopted and approved by
the
shareholders of ESP and DUI in accordance with the requirements
of the
Colorado Business Corporation Act and the Delaware General Corporation
Law
;
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(b)
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DUI
shall have formed a wholly-owned subsidiary for the purposes of
this
Merger in accordance with the requirements of the DGCL (the
“Subsidiary”);
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(c)
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All
of the conditions precedent to the consummation of the Merger specified
in
this Agreement shall have been satisfied or duly waived, in writing,
by
the Party entitled to satisfaction
thereof;
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(d)
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As
soon as practicable following the Closing, the Parties shall execute
a
Certificate of Merger meeting the requirements of the Colorado
Business
Corporation Act and the Delaware General Corporation Law and file
same
with the Secretaries of State of the States of Colorado and Delaware
in
substantially the form attached hereto as Exhibit A; the time the
Certificate of Merger is filed with the Secretary of State of the
State of
Colorado is the “Effective Time”;
and
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(e)
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The
closing of the transactions described in this Agreement is herein
called
the “Closing.” The Parties agree that the Closing of the transactions
identified in this Agreement shall take place at the offices of
Xxxxxx X.
Xxxxxxx, Esq., or at such other place as the Parties may mutually
determine, on or before October 31,
2007.
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(f)
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The
audit of the financial statements of ESP for the period ended June
30,
2007 shall have been completed with all necessary data and materials
delivered by ESP to DUI.
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1.3
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Effect
of the Merger.
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Upon
the
Effective Time, hereinafter defined, and upon the terms and subject to the
conditions of this Agreement and in accordance with applicable state laws,
the
separate existence of Subsidiary shall cease and, ESP, as the Surviving
Corporation,: (i) shall continue to possess all of the assets, rights, powers
and property of ESP and Subsidiary as constituted immediately prior to the
Effective Time, and all debts, liabilities and duties of ESP and Subsidiary
shall become the debts, liabilities and duties of the Surviving Corporation,
all
as more fully provided under the applicable provisions of the applicable
state
laws.
ARTICLE
2
CHARTER
DOCUMENTS, DIRECTORS AND OFFICERS
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2.1
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Certificate
of Incorporation: ESP.
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Attached
hereto as Exhibit B and made a part hereof is a copy of the Certificate of
Incorporation of ESP as in effect in the State of Delaware immediately prior
to
the Closing; and at the Effective Time said Certificate of Incorporation
shall
continue in full force and effect as the Certificate of Incorporation of
the
Surviving Corporation until duly amended in accordance with the provisions
thereof and applicable law.
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2.2
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Subsidiary.
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Attached
hereto as Exhibit C and made a part hereof is a copy of the Certificate of
Incorporation of Subsidiary as in effect immediately prior to the
Closing.
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2.3
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Bylaws.
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Attached
hereto as Exhibit D and made a part hereof is a copy of the Bylaws of ESP
as in
effect immediately prior to the Closing; and at the Effective Time said Bylaws
shall continue in full force and effect as the Bylaws of the Surviving
Corporation until duly amended in accordance with the provisions thereof
and
applicable law.
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2.4
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Directors
and Officers.
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The
directors and officers of ESP immediately prior to the Closing shall be the
directors and officers of the Surviving Corporation until their successors
shall
have been duly elected and qualified or until as otherwise provided by law,
the
Certificate of Incorporation of the Surviving Corporation or the Bylaws of
the
Surviving Corporation. The Board of Directors of DUI following the Merger
shall
consist of Xxxxxxx Xxxxxxxx of DUI and Xxxxx Xxxxx and Xxxxxxx Xxxxxxxx of
ESP
until their successors shall have been duly elected and qualified.
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ARTICLE
3
TERMS
OF MERGER, PAYMENT, EXCHANGE OF STOCK AND INVESTMENT
COMMITMENTS
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3.1
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Conversion
of ESP Shares.
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(a)
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Conversion
of Subsidiary Common Stock. At the Effective Time, each outstanding
share
of the common stock no par value per share, of Subsidiary shall,
by virtue
of the Merger and without any action on the part of DUI, Subsidiary
or
ESP, be converted into one fully paid and non-assessable share
of common
stock of the Surviving Corporation.
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(b)
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Each
share of the common stock, $.0001 par value per share, of ESP
(“ESP Common
Stock”) issued and outstanding prior to the Effective Time shall by
virtue
of the Merger and without any action on the part of DUI, Subsidiary,
ESP
or any holder thereof, be converted into and be exchangeable
for the right
to receive newly issued , fully paid and non-assessable voting
common
shares, no par value, of DUI ("DUI Shares"), based upon an exchange
ratio
(“Exchange Ratio”) determined in accordance with the provisions below.
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(c)
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Amount
of DUI Shares to be Exchanged:
Upon the Closing, DUI shall issue and exchange for the ESP Common
Stock
with the ESP Shareholders newly issued DUI Shares at the conversion
rate
of .608108 DUI Shares for each share of the common stock of ESP.
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At
the Effective Time, each share of the ESP Common Stock held by
the ESP
immediately prior to the Effective Time shall, by virtue of the
Merger and
without any action on the part of Merger Sub or the Company,
be canceled,
retired and cease to exist and no payment shall be made with
respect
thereto.
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No
Further Ownership Rights in ESP Common Stock. All DUI Shares
issued and
exchanged in accordance with the terms of this Article 3 shall
be deemed
to have been issued in full satisfaction of all rights pertaining
to the
ESP Common Stock.
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(d)
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Appraisal
Rights: This executed Agreement shall constitute each of the
ESP
Stockholders' acknowledgment to decline any appraisal rights
under the
statutes and laws of the State of Delaware. By executing this
Agreement,
each ESP Stockholder acknowledges receipt of written notice of
appraisal
rights and a copy of the applicable section of the DGCL at least
20 days
prior to the date of executing this Agreement.
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3.2
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Status
of DUI Common Shares.
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(a)
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The
DUI Common Shares to be issued to the ESP Shareholders in the
reorganization will
not be registered under the Securities Act of 1933, as amended
(the "1933
Act") and may not be sold, transferred or otherwise disposed
of except in
compliance with the 1933 Act or pursuant to an exemption from
the
registration provisions thereof and the Securities Exchange
Act of 1934,
as amended (the "1934 Act").
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(b)
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Each
Certificate representing the DUI Common Shares shall bear the
following or
substantially similar legend:
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"The
Shares represented by this Certificate have not been registered
under
the
Securities Act of 1933, as amended. These Shares have been acquired
for
investment purposes and not with a view to distribution or
resale,
and
may
not be sold, assigned, pledged, hypothecated or otherwise
transferred
without
an effective Registration Statement for such Shares under the
Securities
Act of 1933, as amended, or an opinion of counsel to the
effect
that
registration
is not required under such
Act."
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ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF ESP AND THE ESP SHAREHOLDERS
ESP
and
the ESP Shareholders represent and warrant to DUI that the statements contained
in this Article 4 are correct and complete as of the date of this Agreement
and
will be correct and complete as of the Closing as though made then and as
though
the Closing were substituted for the date of this Agreement throughout this
Article 4, with respect to itself.
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4.1
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Organization
of
ESP.
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ESP
is
duly organized, validly existing, and in good standing under the laws of
Delaware.
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4.2
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Authorization
of Transaction.
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(a)
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ESP
has full corporate power and authority to execute and deliver
this
Agreement and to perform his obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of ESP,
enforceable
in accordance with its terms and conditions. Except as expressly
contemplated hereby, ESP need not give any notice to, make
any filing
with, or obtain any authorization, consent, or approval of
any government
or governmental agency in order to consummate the transactions
contemplated by this Agreement.
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(b)
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The
ESP Shareholders, individually represent and warrant to DUI
that: this
Agreement constitutes the legal, valid and binding obligation
of each of
the ESP Shareholders and is enforceable against each of them
in accordance
with the terms hereof; each of them own their respective ESP
Common Shares
free and clear of any and all liens, claims, pledges, restrictions,
obligations, security interests and encumbrances of any kind;
Attached
hereto as Schedule A is an accurate and complete list of the
ESP Common
Shares owned by each ESP Shareholder; none of the ESP Shareholders
have
issued any calls, puts, options and/or any other rights in
favor of any
third party whatsoever with respect to their ESP Common Shares,
and; none
of their respective ESP Common Shares are subject to any voting
agreements, voting trusts, stockholder agreements and/or any
other
agreements, obligations or
understandings.
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4.3
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Non-contravention.
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Neither
the execution and the delivery of this Agreement, nor the consummation of
the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other
restriction of any government, governmental agency, or court to which ESP
is
subject or any provision of its charter or bylaws; or (ii) conflict with,
result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel,
or
require any notice under any agreement, contract, lease, license, instrument,
or
other arrangement to which ESP is a party or by which it is bound or to which
any of its assets is subject, except for such notices or consents which have
been given or obtained by ESP on or prior to the Closing.
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4.4
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Capitalization.
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The
authorized capital stock of ESP consists of 100,000,000 shares of Class A
Common
Stock, $.0001 par value per share, of which 29.6 million shares are issued
and
outstanding; 5,000,000 shares of Class B Common Stock, $.0001 par value per
share, none of which are issued and outstanding, and; 20,000,000 shares of
Class
A Preferred Stock, $.0001 par value per share of which none are outstanding.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts
or
commitments that could require ESP to issue, sell, or otherwise cause to
become
outstanding any of its capital stock. There is no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights
with
respect to ESP’s Common Stock. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock
of
ESP.
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4.5
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Investment.
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The
ESP
Shareholders are not acquiring the Common Shares of DUI with a view to or
for
sale in connection with any distribution thereof within the meaning of the
Securities Act of 1933. ESP and the ESP Shareholders have had access to all
information concerning DUI and its operations which it required to make its
investment decision.
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4.6
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Brokers'
Fees.
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ESP
has
incurred no obligation to pay any commission, finder’s fee or other charge in
connection with the transactions contemplated in this Agreement for which
DUI
could become liable or obligated. ESP and the ESP Shareholders, jointly and
severally, will indemnify and hold DUI, and the Subsidiary, their respective
officers, directors, employees, accountants and lawyers harmless from and
against any and all liabilities and claims of any nature whatsoever arising
out
of or in connection with any commission, fee or charge so far as any arises
by
reason of services alleged to have been rendered to, or at the instance of,
ESP
and/or the ESP Shareholders. This
indemnification shall survive the Closing and shall be included in the terms
of
indemnification set forth in Article 4.7 of this Agreement.
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4.7
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Events
Subsequent to Fiscal Year
End.
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Since
the
most recent fiscal year end of ESP there has not been any material adverse
change in the business, financial condition, operations, results of operations,
or future prospects of ESP taken as a whole. ESP and the ESP Shareholders,
jointly and severally, shall indemnify, defend and hold DUI and Subsidiary,
their successors and assigns, harmless from and against any order, action,
cost,
claim, damage, disbursement, expense, liability, loss, deficiency, obligation,
penalty, fine, assessment or settlement of any kind or nature, whether
foreseeable or unforeseeable, including, but not limited to, any and all
attorney’s fees, costs, and other expenses, directly or indirectly, as a result
of, or upon or arising from (i) any inaccuracy or breach or non-performance
of
any of the representations, warranties, covenants or agreements made by ESP
or
the ESP Shareholders in or pursuant to this Agreement, (ii) any order, action,
cost, claim, damage, liability or lien arising out of ESP’s or ESP Shareholder’s
conduct before or after the Closing, (iii) any third party claims against
ESP or
the ESP Shareholders, before or after the Closing that arise from ESP’s or ESP
Shareholder’s conduct, or (iv) any loss or liability the proximate cause of
which is determined to be the result of ESP’s or ESP Shareholder’s negligence or
failure to comply with their respective obligations under this Agreement.
DUI
and/or Subsidiary, as the case may be, their successors and assigns, shall
notify ESP and/or the ESP Shareholders of any claim for indemnification with
reasonable promptness, and ESP’s or ESP’s legal representatives or ESP
Shareholder’s or their legal representatives shall have, at their election, the
right to compromise or defend any such matter involving such asserted liability
of ESP and/or the ESP Shareholders through counsel of their own choosing,
at the
expense of ESP and the ESP Shareholders. ESP and the ESP Shareholders shall
notify DUI and the Subsidiary, or their successors or assigns, in writing
promptly of their intention to compromise or defend any claim and DUI and/or
the
Subsidiary, or their successors or assigns, shall cooperate with ESP and
the ESP
Shareholders, their respective counsel in compromising or defending any such
claim, in accordance with Article 8 hereof. The terms of this Article 4.7
shall
survive Closing.
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4.8
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Undisclosed
Liabilities.
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ESP
has
no material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or un-accrued, whether
liquidated or un-liquidated, and whether due or to become due, including
any
liability for taxes), except for (i) liabilities set forth on the ESP Financial
Statements; and (ii) liabilities which have arisen after the date of the
ESP
Financial Statements in the ordinary course of business. As used herein,
“ESP
Financial Statements” consist of the financial statements of ESP previously
delivered to DUI in the form attached hereto as Exhibit E.
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4.9
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Legal
Compliance.
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ESP
has
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of
federal, state, local, and foreign governments (and all agencies thereof),
and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against ESP alleging any failure
so to comply, except where the failure to comply would not have a material
adverse effect on the business, financial condition, operations, results
of
operations, or future prospects of ESP.
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4.10
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Tax
Matters.
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(a)
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ESP
has filed all income tax returns that it has been required to file.
All
such income tax returns were correct and complete in all material
respects. All income taxes owed by ESP (whether or not shown on
any income
tax return) have been paid. ESP is not currently the beneficiary
of any
extension of time within which to file any income tax
return.
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(b)
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There
is no material dispute or claim concerning any income tax liability
of ESP
either (i) claimed or raised by any authority in writing; or (ii)
as to
which ESP has knowledge based upon personal contact with any agent
of such
authority.
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4.11
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Contracts.
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The
ESP
Financial Statements disclose all material contracts of ESP. Each contract
or
legal obligation of ESP which is to be assumed by DUI in connection with
the
Merger is listed on Exhibit F hereto. To the extent requested, true and correct
copies of such contracts have been delivered to DUI for due diligence
purposes.
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4.12
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Environmental,
Health and Safety
Matters.
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ESP
and
its predecessors and affiliates have complied and are in compliance, in each
case in all material respects, with all Environmental, Health, and Safety
Requirements. As used herein “Environmental, Health & Safety Requirements”
means any Environmental, Health & Safety law or regulation including air and
water quality laws and regulations and other similar requirements.
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4.13
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Disclosure.
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The
representations and warranties contained in this Article 4 do not contain
any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this Article
4 not
misleading.
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4.14
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Financial
Statements.
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The
ESP
Financial Statements are true and correct in all material respects, have
been
prepared on a consistent basis, and fairly represent the business, financial
condition, assets and liabilities of ESP.
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4.15
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Litigation.
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There
is
no claim, suit, action, proceeding or investigation pending or, to the knowledge
of ESP, pending against ESP or any of its subsidiaries or assets which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on ESP.
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4.16
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Materials
Required for Audit.
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To
the
best of its knowledge, ESP has maintained its records, data and materials
related to the financial accounting of the business, and have all such data
and
materials immediately available, such that an audit may be completed per
regulatory requirements.
ARTICLE
5
REPRESENTATIONS
AND WARRANTIES OF DUI
DUI
represents and warrants to ESP and to the ESP Shareholders that the statements
contained in this Article 5 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing (as though made
then and as though the Closing were substituted for the date of this Agreement
throughout this Article 5).
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5.1
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Organization
of
DUI
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DUI
is a
corporation duly organized, validly existing, and in good standing under
the
laws of Colorado. DUI has one subsidiary, DUI Operations, Inc., the
Subsidiary.
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5.2
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Authorization
of
Transaction.
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DUI
has
full corporate power and authority to execute and deliver this Agreement
and to
perform its obligations hereunder, and no approval of DUI’s shareholders is
required under the laws of Colorado to consummate the Merger and other
transactions contemplated in this Agreement. This Agreement constitutes the
valid and legally binding obligation of DUI, enforceable in accordance with
its
terms and conditions. Except as expressly contemplated hereby, DUI need not
give
any notice to, make any filing with, or obtain any authorization, consent,
or
approval of any government or governmental agency in order to consummate
the
transactions contemplated by this Agreement.
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5.3
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Non-contravention.
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Neither
the execution and the delivery of this Agreement, nor the consummation of
the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other
restriction of any government, governmental agency, or court to which DUI
is
subject or any provision of its charter or bylaws; or (ii) conflict with,
result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel,
or
require any notice under any agreement, contract, lease, license, instrument,
or
other arrangement to which DUI is a party or by which it is bound or to which
any of its assets is subject, except for such notices or consents which have
been given or obtained by DUI on or prior to the Closing.
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5.4
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Capitalization.
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The
authorized capital stock of DUI consists of 20,000,000 shares of Common
Stock,
no par value per share, and 5,000,000 shares of Preferred Stock. As of
the date
of this Agreement, no preferred shares are outstanding, 1,230,000 shares
of
Common Stock are outstanding and upon the Closing, there shall be 6,000,000
shares of its Common Stock outstanding. There are no outstanding options,
warrants, or other outstanding purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
DUI to issue, sell, or otherwise cause to become outstanding any of its
capital
stock except as may be set forth in one or more of the material agreements
identified in Exhibit I hereto. There are no outstanding or authorized
stock
appreciation, phantom stock, profit participation, or similar rights with
respect to DUI’s Common Stock. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital
stock of
DUI.
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5.5
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Intentionally
Omitted
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5.6
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Brokers'
Fees.
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DUI
has
incurred no obligation to pay any commission, finder’s fee or other charge in
connection with the transactions contemplated in this Agreement for which
DUI
could become liable or obligated. DUI will indemnify and hold ESP, and the
ESP
Shareholders, their respective officers, directors, employees, accountants
and
lawyers harmless from and against any and all liabilities and claims of any
nature whatsoever arising out of or in connection with any commission, fee
or
charge so far as any arises by reason of services alleged to have been rendered
to, or at the instance of, DUI or Subsidiary. This indemnification shall
survive
the Closing and shall be included in the terms of indemnification set forth
in
Article 5.7 of this Agreement.
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5.7
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Events
Subsequent to Year
End.
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Since
the
most recent calendar-fiscal year end of DUI, there has not been any material
adverse change in the business, financial condition, operations, results
of
operations, or future prospects of DUI taken as a whole.
DUI
shall
indemnify, defend and hold ESP, ESP Shareholders, their successors and assigns,
harmless from and against any order, action, cost, claim, damage, disbursement,
expense, liability, loss, deficiency, obligation, penalty, fine, assessment
or
settlement of any kid or nature, whether foreseeable or unforeseeable,
including, but not limited to, any and all attorney’s fees, costs, and other
expenses, directly or indirectly, as a result of, or upon or arising from
(i)
any inaccuracy or breach or non-performance of any of the representations,
warranties, covenants or agreements made by DUI or Subsidiary in or pursuant
to
this Agreement, (ii) any order, action, cost, claim, damage, liability or
lien
arising out of DUI’s conduct before or after the Closing, (iii) any third party
claims against DUI, Subsidiary before or after the Closing that arise from
DUI’s
conduct, or (iv) any loss or liability the proximate cause of which is
determined to be the result of DUI’s negligence or failure to comply with its
obligations under this Agreement. ESP and ESP’s Shareholders, their successors
and assigns, shall notify DUI of any claim for indemnification with reasonable
promptness, and DUI or DUI’s legal representatives shall have, at their
election, the right to compromise or defend any such matter involving such
asserted liability of DUI through counsel of their own choosing, at the expense
of DUI. DUI shall notify ESP, ESP’s Shareholders, or their successors or
assigns, in writing promptly of their intention to compromise or defend any
claim and ESP, ESP’s Shareholders, or their successors or assigns, shall
cooperate with DUI and DUI’s counsel in compromising or defending any such
claim, in accordance with Article 8 hereof. The terms of this Article 5.7
shall
survive Closing.
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5.8
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Undisclosed
Liabilities.
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DUI
has
no material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or un-accrued, whether
liquidated or un-liquidated, and whether due or to become due, including
any
liability for taxes), except for (i) liabilities set forth on the DUI Financial
Statements; and (ii) liabilities which have arisen after the date of the
DUI
Financial Statements in the ordinary course of business. As used herein,
“DUI
Financial Statements” consist of the financial statements of DUI previously
delivered to ESP in the form attached hereto as Exhibit H.
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5.9
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Legal
Compliance.
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DUI
has
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of
federal, state, local, and foreign governments (and all agencies thereof),
and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against DUI alleging any failure
so to comply, except where the failure to comply would not have a material
adverse effect on the business, financial condition, operations, results
of
operations, or future prospects of DUI.
|
5.10
|
Tax
Matters.
|
|
|
(a)
|
DUI
has filed all income tax returns that it has been required to file.
All
such income tax returns were correct and complete in all material
respects. All income taxes owed by DUI (whether or not shown on
any income
tax return) have been paid. DUI is not currently the beneficiary
of any
extension of time within which to file any income tax
return.
|
|
|
(b)
|
There
is no material dispute or claim concerning any income tax liability
of DUI
either (i) claimed or raised by any authority in writing; or (ii)
as to
which DUI has knowledge based upon personal contact with any agent
of such
authority.
|
|
5.11
|
Contracts.
|
The
DUI
Financial Statements disclose all material contracts of DUI. Each contract
or
legal obligation of DUI to which DUI shall remain subject after the Merger
is
listed on Exhibit I hereto. To the extent requested, true and correct copies
of
such contracts have been delivered to ESP for due diligence
purposes.
|
5.12
|
Environmental,
Health and Safety
Matters.
|
DUI
and
its predecessors and affiliates have complied and are in compliance, in each
case in all material respects, with all Environmental, Health, and Safety
Requirements. As used herein “Environmental, Health & Safety Requirements”
means any Environmental, Health & Safety law or regulation including air and
water quality laws and regulations and other similar requirements.
|
5.13
|
Disclosure.
|
The
representations and warranties contained in this Article 5 do not contain
any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this Article
5 not
misleading.
|
5.14
|
Financial
Statements.
|
The
DUI
Financial Statements are true and correct in all material respects, have
been
prepared on a consistent basis, and fairly represent the business, financial
condition, assets and liabilities of DUI.
|
5.15
|
Litigation.
|
There
is
no claim, suit, action, proceeding or investigation pending or, to the knowledge
of DUI, pending against DUI or any of its subsidiaries or assets which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on DUI.
|
5.16
|
Materials
Required for Audit.
|
To
the
best of its knowledge, DUI has maintained its records, data and materials
related to the financial accounting of the business, and has all such data
and
materials immediately available, such that an audit may be completed per
regulatory requirements.
9
ARTICLE
6
REPRESENTATIONS
AND WARRANTIES OF SUBSIDIARY
DUI
represents and warrants to ESP that Subsidiary has been formed solely for
the
purpose of this Merger and that no contract, liabilities or other obligations
exist in Subsidiary.
|
6.1
|
Organization
of
Subsidiary.
|
Subsidiary
is a corporation duly organized, validly existing, and in good standing under
the laws of Delaware and 100% owned by DUI.
|
6.2
|
Authorization
of Transaction.
|
DUI
has
full corporate power and authority to execute and deliver Subsidiary with
regard
to this Agreement and to perform its obligations hereunder, including
shareholder approval as may be required by the DGCL.
|
6.3
|
Non-contravention.
|
Neither
the execution and the delivery of this Agreement, nor the consummation of
the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other
restriction of any government, governmental agency, or court to which DUI
or
Subsidiary is subject or any provision of its charter or bylaws; or (ii)
conflict with, result in a breach of, constitute a default under, result
in the
acceleration of, create in any party the right to accelerate, terminate,
modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which DUI or Subsidiary is a party or
by
which it is bound or to which any of its assets is subject, except for such
notices or consents which have been given or obtained by ESP on or prior
to the
Closing.
|
6.4
|
Capitalization.
|
The
authorized capital stock of Subsidiary consists of two hundred (200) shares
of
Common Stock, $.01 par value per share, and no shares of Preferred Stock.
As of
the date of the Closing, there shall be 200 shares issued and outstanding
and
owned by DUI. There are not now nor shall there be any outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require Subsidiary
to issue, sell, or otherwise cause to become outstanding any of its capital
stock. There are no outstanding or authorized stock appreciation, phantom
stock,
profit participation, or similar rights with respect to Subsidiary’s Common
Stock. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of
Subsidiary.
10
ARTICLE
7
PRE-CLOSING
COVENANTS
The
Parties agree as follows with respect to the period between the execution
of
this Agreement and the Closing:
|
7.1
|
General.
|
Each
of
the Parties will use its reasonable best efforts to take all action and to
do
all things necessary, proper, or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Article
9
below).
|
7.2
|
Notices
and
Consents.
|
Each
of
the Parties will give any notices to, make any filings with, and use its
reasonable best efforts to obtain any and all authorizations, consents, and
approvals of governments and governmental agencies in connection with the
transactions contemplated hereby.
|
7.3
|
Operation
of
Business.
|
ESP,
DUI,
including Subsidiary, will not engage in any practice, take any action, or
enter
into any transaction outside the ordinary course of business, including,
but not
limited to declaration of dividends or distributions, redemptions, splits,
recapitalizations, or similar events respecting its capital stock prior to
Closing except, however, DUI shall prepare and file all documents necessary
to
increase its authorized common shares and enter into employment and consulting
agreements pursuant to which it may issue its securities.
|
7.4
|
Full
Access For Due
Diligence.
|
The
Parties shall permit their respective representatives to have full access
at all
reasonable times, and in a manner so as not to interfere with their respective
normal business operations, to all premises, properties, personnel, books,
records (including tax records), contracts, and documents. The Parties shall
treat and hold as such any Confidential Information they receive from ESP,
will
not use any of the Confidential Information except in connection with this
Agreement, and, if this Agreement is terminated for any reason whatsoever,
will
return to ESP all tangible embodiments (and all copies) of the Confidential
Information which are in their possession.
|
7.5
|
No
Shop
Promises.
|
Each
of
DUI, ESP and the ESP Shareholders have promised to each other that they shall
utilize their respective best efforts to undertake any and all measures and
deliver any and all documents necessary to consummate the transactions
contemplated in this Agreement. The Parties make the following covenants
to each
other:
(a)
Except in the case that it terminates this Agreement pursuant to Article
10(c)
or in the event of an automatic termination pursuant to Article 10(d), the
ESP
Shareholders shall
not
solicit or seek to acquire any assets or stock of any third party, nor shall
they accept any offer to purchase or exchange any assets or securities of
ESP
from the date of this Agreement to the Closing or through the date they
terminate this Agreement pursuant to the Articles set forth in this Article
10(a).
(b)
Except
in
the case that it terminates this Agreement pursuant to Article 10(b) or in
the
event of an automatic termination pursuant to Article 10(d), DUI
shall
not solicit or seek to acquire any assets or stock of any third party from
the
date of this Agreement to the Closing or through the date it terminates this
Agreement pursuant to the Articles set forth in this Article 10(b).
11
ARTICLE
8
POST-CLOSING
COVENANTS
The
Parties agree as follows with respect to the period following the
Closing.
|
8.1
|
General.
|
In
case
at any time after the Closing any further action is necessary to carry out
the
purposes of this Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments and documents)
as any other Party reasonably may request, all at the sole cost and expense
of
the requesting Party. ESP acknowledges and agrees that from and after the
Closing, DUI will be entitled to possession of all documents, books, records
(including tax records), agreements, and financial data of any sort relating
to
ESP.
|
8.2
|
Intentionally
Omitted
|
|
8.3
|
Litigation
Support.
|
In
the
event and for so long as DUI or ESP actively are contesting or defending
against
any action, suit, proceeding, hearing, investigation, charge, complaint,
claim,
or demand in connection with (i) any transaction contemplated under this
Agreement; or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to
act,
or transaction on or prior to the Closing Date involving ESP, then ESP and
its
affiliates will cooperate with DUI or ESP in the contest or defense, make
available their personnel, and provide such testimony and access to their
books
and records as shall be necessary in connection with the contest or defense,
all
at the sole cost and expense of the contesting or defending Party.
ARTICLE
9
CONDITIONS
TO OBLIGATION TO CLOSE
|
9.1
|
Assumption
of ESP
Liabilities by DUI.
DUI shall pay for only
such liabilities as disclosed in Exhibit J hereto.
|
|
9.2
|
Conditions
to Obligation of DUI and
Subsidiary.
|
The
obligations of DUI and Subsidiary to consummate the transactions to be performed
by them in connection with the Closing are subject to satisfaction of the
following conditions:
|
|
(a)
|
the
representations and warranties set forth in Article 4 above shall
be true
and correct in all material respects at and as of the Closing
Date;
|
|
|
(b)
|
ESP
shall have performed and complied with all of its covenants hereunder
in
all material respects through the Closing, including Article 4
hereby;
|
|
|
(c)
|
No
action, suit, or proceeding shall be pending before any court or
quasi-judicial or administrative agency of any federal, state,
local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i)
prevent
consummation of any of the transactions contemplated by this Agreement;
(ii) cause any of the transactions contemplated by this Agreement
to be
rescinded following consummation; or (iii) affect materially and
adversely
the right of ESP to own its assets and to operate its businesses
(and no
such injunction, judgment, order, decree, ruling, or charge shall
be in
effect);
|
|
|
(d)
|
ESP
shall have delivered to DUI a certificate to the effect that each
of the
conditions specified above in paragraphs 9.2 (a) through (c) is
satisfied
in all respects;
|
|
|
(e)
|
All
actions to be taken by ESP in connection with consummation of the
transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and
substance
to DUI.
|
|
|
(f)
|
ESP
shall have delivered to DUI its audited financial statements for
six month
period ended June 30, 2007.
|
12
|
9.3
|
Conditions
to Obligation of ESP and the ESP
Shareholders.
|
The
obligation of ESP and the ESP Shareholders to consummate the transactions
to be
performed by them in connection with the Closing is subject to satisfaction
of
the following conditions:
|
|
(a)
|
the
representations and
warranties set forth in Articles 5 and 6 above shall be true and
correct
in all material respects at and as of the Closing
Date;
|
|
|
(b)
|
DUI
shall have performed and complied with all of their covenants hereunder
in
all material respects through the
Closing;
|
|
|
(c)
|
No
action, suit, or proceeding shall be pending before any court or
quasi-judicial or administrative agency of any federal, state,
local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i)
prevent
consummation of any of the transactions contemplated by this Agreement;
or
(ii) cause any of the transactions contemplated by this Agreement
to be
rescinded following consummation (and no such injunction, judgment,
order,
decree, ruling, or charge shall be in
effect);
|
|
|
(d)
|
DUI
shall have delivered to ESP a certificate to the effect that each
of the
conditions specified above in paragraphs 9.3 (a) through (c) is
satisfied
in all respects;
|
|
|
(e)
|
All
actions to be taken by DUI in connection with consummation of the
transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and
substance
to ESP;
|
| (f) | The representations, warranties and covenants of the parties contained in Articles 4, 5, 6, 7 and 8 of this Agreement shall survive the Closing hereunder; |
| (g) |
DUI
shall have filed certificates of Amendment to its Articles of
Incorporation (i) increasing its authorized
common shares from 20,000,000 to 200,000,000 shares and changed
its
corporate name
to ESP Enterprises, Inc.;
|
| (h) | DUI shall have obtained the approval of its shareholders to the Merger in accordance with the Colorado Business Corporation Act and applicable securities laws. |
| (i) | ESP shall have received no less than $700,000 in loans from DUI, all of which outstanding principal balances and accrued interest shall be forgiven by DUI at the Closing. |
13
ARTICLE
10
TERMINATION
10.1
Termination
This
Agreement may be terminated:
(a)
by
the mutual written consent of DUI and ESP;
(b)
by
DUI, in the event that any of the conditions to obligation to close enumerated
in Section 9.2
have not
been satisfied or waived by DUI in writing at or prior to the
Closing;
(c)
by
ESP and the ESP Shareholders, in the event that any of the conditions to
obligation to close enumerated in Section 9.3 have not been satisfied or
waived
by ESP and the ESP Shareholders, in writing, at or prior to the
Closing;
(d)
automatically, in the event that the Closing has not occurred on or before
October 1, 2007 unless extended by mutual agreement of the
parties.
In
the
event of the termination of this Agreement in accordance with the provisions
of
this Article 10: this Agreement shall forthwith become null and void and
there
shall be no liability or obligation on the part of DUI, ESP or the ESP
Shareholders or their respective officers and directors, and; the parties
shall
cooperate to rescind any corporate filings made with the Secretaries of State,
States of Colorado and Delaware, if filed.
ARTICLE
11
MISCELLANEOUS
|
11.1
|
Further
Assurances
|
From
time
to time, as and when required by DUI, ESP and/or the ESP Shareholders shall
execute and deliver on behalf of ESP such deeds and other instruments, and
shall
take or cause to be taken by it such further and other actions, as shall
be
appropriate or necessary in order to vest or perfect in or conform of record
the
title to and possession of all the property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of ESP and to otherwise
carry out the purposes of this Agreement. The officers and directors of ESP
are
fully authorized in the name and on behalf of ESP to take any and all such
action and to execute and deliver any and all such deeds and other
instruments.
|
11.2
|
Agreement
|
Executed
copies of this Agreement will be on file at the office of DUI’s counsel at
Xxxxxx X. Xxxxxxx, Esq., 00 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000,
and copies thereof will be furnished to any stockholder of a Constituent
Corporation, upon request at such shareholder’s cost. DUI shall be responsible
for all post-closing filings with any and all state and federal
agencies.
|
11.3
|
No
Third-Party
Beneficiaries.
|
This
Agreement shall not confer any rights or remedies upon any Person other than
the
Parties and their respective successors and permitted assigns.
14
|
11.4
|
Entire
Agreement.
|
This
Agreement (including the documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements,
Letter of Intent, or representations by or among the Parties, written or
oral,
to the extent they related in any way to the subject matter hereof.
|
11.5
|
Succession
and
Assignment.
|
This
Agreement shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of the other
Parties.
|
11.6
|
Counterparts.
|
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which together will constitute one and the
same
instrument.
|
11.7
|
Headings.
|
The
section headings contained in this Agreement are inserted for convenience
only
and shall not affect in any way the meaning or interpretation of this
Agreement.
|
11.8
|
Notices.
|
All
notices, requests, demands, claims, and other communications hereunder will
be
in writing. Any notice, request, demand, claim, or other communication hereunder
shall be deemed duly given if (and then two business days after) it is sent
by
registered or certified mail, return receipt requested, postage prepaid,
and
addressed to the intended recipient as set forth below:
|
|
If
to DUI:
|
Downside
Up, Inc.
C/O
Xxxxxx X. Xxxxxxx, Esq.
00
Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx,
Xxx Xxxxxx 00000
|
|
|
|
|
|
|
To
ESP:
|
ESP
Resources, Inc.
X.X.
Xxx 00000
Xxxxxxxxx,
Xxxxxxxxx 00000
Attention:
Xxxxx Xxxxx, President
|
Any
Party
may send any notice, request, demand, claim, or other communication hereunder
to
the intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail, or electronic mail), but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given unless
and
until it actually is received by the intended recipient. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties
notice
in the manner herein set forth.
15
|
11.9
|
Governing
Law.
|
This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of Delaware without giving effect to any choice or conflict
of
law provision or rule (whether of the State of Delaware or any other
jurisdiction).
|
11.10
|
Amendments
and
Waivers.
|
No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by each of the Parties. No waiver by any Party
of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such
occurrence.
|
11.11
|
Severability.
|
Any
term
or provision of this Agreement that is invalid or unenforceable in any situation
in any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of
the
offending term or provision in any other situation or in any other
jurisdiction.
|
11.12
|
Expenses.
|
Each
of
the Parties will bear its own costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby.
|
11.13
|
Construction.
|
The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring
any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall
be
deemed also to refer to all rules and regulations promulgated thereunder,
unless
the context requires otherwise.
|
11.14
|
Status.
|
Nothing
contained in this Agreement shall cause a Party to be deemed an agent, employee,
franchisee, joint venture, partner or legal representative of any other Party,
and no Party shall purport to act in any such capacity for any other
Party.
|
11.15
|
Arbitration.
|
Any
and
all disputes arising out of or relating to this Agreement shall be resolved
by
arbitration. All arbitration hereunder will be conducted by the American
Arbitration Association (“AAA”). If the AAA is dissolved, disbanded or becomes
subject to any state or federal bankruptcy or insolvency proceeding, the
parties
will remain subject to binding arbitration which will be conducted by a mutually
agreeable arbitral forum. The parties agree that all arbitrator(s) selected
will
be attorneys with at least five (5) years securities and corporate
reorganization experience. The arbitrator(s) will decide if any inconsistency
exists between the rules of any applicable arbitral forum and the arbitration
provisions contained herein. If such inconsistency exists, the arbitration
provisions contained herein will control and supersede such rules. The site
of
all arbitration proceedings will be in the City of Princeton and State of
New
Jersey in which AAA maintains a regional office. Any arbitration award rendered
shall be final, conclusive and binding upon the Parties hereto, and a judgment
thereon may be entered in any court of competent jurisdiction.
16
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of
Merger to be signed by their respective officers thereunto duly authorized
as of
the date first written above.
|
ATTEST:
|
DOWNSIDE
UP, INC.
|
|
|
|
|
________________________
|
By:
/s/ Xxxxxxx X. Xxxxxxxx
|
|
, Secretary
ATTEST:
________________________
|
Xxxxxxx
X. Xxxxxxxx, CEO and President
DUI
OPERATIONS, INC. (In Organization)
By:
/s/
Xxxxxxx X. Xxxxxxxx
|
|
,
Secretary
|
Xxxxxxx
Xxxxxxxx, Chief Executive Officer
ESP
RESOURCES, INC.
|
|
ATTEST:
|
|
|
|
By:
/s/
Xxxxx Xxxxx
|
|
________________________
|
Xxxxx
Xxxxx, President
|
|
,
Secretary
|
17
SCHEDULE
A
LIST
OF SHAREHOLDERS AND STOCKHOLDINGS OF ESP RESOURCES, INC.
18
EXHIBIT
A
CERTIFICATE
OF MERGER
19
EXHIBIT
B
ESP
RESOURCES, INC.
CERTIFICATE
OF INCORPORATION
20
EXHIBIT
C
CERTIFICATE
OF INCORPORATION
FOR
MERGER SUB
DUI
Operations, Inc.
21
EXHIBIT
D
BYLAWS
OF ESP RESOURCES, INC.
22
EXHIBIT
E
FINANCIAL
STATEMENTS
ESP
RESOURCES, INC.
23
EXHIBIT
F
ESP
RESOURCES, INC.
MATERIAL
CONTRACTS
24
EXHIBIT
G
CERTIFICATE
OF POWERS, DESIGNATIONS,
PREFERENCES
AND RIGHTS OF THE SHARES
OF
THE
PREFERRED STOCK OF
DOWNSIDE
UP, INC.
To
Be
Designated
Series
A Senior Convertible Preferred Stock
Downside
Up, Inc.., a Colorado corporation (the “Corporation”), in accordance with
Section 0-000-000 of the Colorado Business Corporations Law of the State
of
Colorado (“CBCL”), by its President, does hereby certify that pursuant to a
unanimous written consent of all of the members of the Board of Directors
of the
Corporation, dated August 22, 2007, duly adopted the following resolutions
providing for the issuance of a series of Preferred Stock to be designated
Series A Senior Convertible Preferred Stock, par value $.001, and to consist
of
1,500,000 shares:
RESOLVED,
that the Corporation is hereby authorized to amend its
Articles
of Incorporation and to file an amendment referred to as a Certificate
of
Designations
of Preferred Stock to provide for 1,500,000 shares of Series A
Senior
Convertible Preferred Stock, $.001 par value (“Series A Senior
Preferred”),pursuant
to the terms and conditions set forth in the Certificate of
Designations;
RESOLVED,
that the rights, privileges and limitations of each share
of
Series
A Senior Preferred shall be as follows:
1.
Issuance.
The
series of Preferred Stock designated as Series A Senior Preferred shall consist
of 1,500,000 shares.
2.
Dividends.
The
holders of said shares of Series A Senior Preferred shall not be entitled
to
receive any dividends thereon.
3.
Priority.
The
Series A Senior Preferred shall with respect to liquidation rights rank prior
to
all classes and series of Common Stock and preferred stock.
4.
Voting.
Except
as required by the CBCL and as provided in Section (7) below, the holders
of
said shares of Series A Senior Preferred shall not be entitled to any voting
rights.
5.
Cancellation.
Shares
of Series A Senior Preferred which have been issued and reacquired in any
manner, including shares purchased or converted into Common Stock, exchanged
or
redeemed, shall be canceled on the books of the Corporation and shall not
be
considered outstanding for any purpose.
6.
Liquidation.
In the
event of any liquidation, dissolution, or winding up of the affairs of the
Corporation, whether voluntary or otherwise, after payment or provision for
payment of the debts and other liabilities of the Corporation, the holders
of
the Series A Senior Preferred shall be entitled to receive, out of the remaining
net assets of the Corporation, the amount of ten ($10.00) Dollars for each
share
of Series A Senior Preferred (the “Liquidation Price”) held of record by such
holder, payable in cash or in shares of stock, securities or other
consideration, the value of which stock, securities or other consideration
shall
be fixed by the Board of Directors, provided, however, that such remaining
net
assets are sufficient to cover all the before mentioned payments, before
any
distribution shall be made to the holders of Common Stock of the Corporation.
In
case such remaining net assets are insufficient to cover all such payments
to
holders of Series A Senior Preferred, the holders of this series shall receive
payments on a pro rata basis.
25
7.
Conversion.
Each
share of Series A Senior Preferred shall be convertible at any time, at the
holder’s option, into shares of Common Stock of the Corporation on the basis of
ten (10) shares of Common Stock for 1 share of Series A Senior Preferred.
The
holder of any shares of Series A Senior Preferred who elects to convert his
or
her Series A Senior Preferred into Common Stock of the Corporation shall
surrender, at the principal office of the Corporation or at such other office
or
agency maintained by the Corporation for that purpose, the certificate or
certificates representing the shares of Series A Senior Preferred to be
converted, together with a written affidavit informing the Corporation of
his or
her election to convert such shares, whereby the date of receipt by the
Corporation of such certificates and affidavit shall constitute the “Conversion
Date”. As promptly as practicable, and in any event within ten business days
after surrender of such certificates, the Corporation shall deliver or cause
to
be delivered certificates representing the number of validly issued, fully
paid
and non-assessable shares of Common Stock of the Corporation to which such
holder of Series A Senior Preferred so converted shall be entitled. Such
conversion shall be deemed to have been made at the close of business on
the
Conversion Date, so that the rights of the holders of the Series A Senior
Preferred shall thereafter cease except for the right to receive Common Stock
of
the Corporation in accordance herewith, and such converting holder of Series
A
Senior Preferred shall be treated for all purposes as having become the record
holder of such Common Stock of the Corporation at such time.
8.
Share
Adjustments.
In the
event that, prior to the conversion of the Series A Senior Preferred Stock
by
the holder thereof into Common Stock of the Corporation, there shall occur
any
change in the outstanding shares of Common Stock of the Corporation by reason
of
the declaration of stock dividends, or through a recapitalization resulting
from
stock splits or combinations, without the receipt by the Corporation of fair
consideration therefor in the form of cash, services or property, the conversion
ratio of the Series A Senior Preferred Stock into Common Stock of the
Corporation provided for in Section (7) above shall be adjusted such that
any
holder of Series A Senior Preferred Stock converting such stock into Common
Stock subsequent to such change in the outstanding shares of Common Stock
of the
Corporation shall be entitled to receive, upon such conversion, a number
of
shares of Common Stock of the Corporation representing the same percentage
of
common shares outstanding as represented by the shares that he would have
received had he converted his Series A Senior Preferred Stock to Common Stock
prior to such change in the outstanding shares of Common Stock of the
Corporation.
IN
WITNESS WHEREOF, we, the undersigned, have executed and subscribed this
certificate on August 22, 2007 .
| |
|
|
| /s/ Xxxxxxx Xxxxxxxx | ||
|
Xxxxxxx Xxxxxxxx, President |
||
ATTEST:
/s/Xxxxxx
Xxxx
Xxxxxx
Xxxx, Secretary
26
EXHIBIT
H
DOWNSIDE
UP, INC.
FINANCIAL
STATEMENTS
27
EXHIBIT
I
DOWNSIDE
UP, INC.
MATERIAL
CONTRACTS
28
EXHIBIT
J
LIABILITIES
OF ESP RESOURCES, INC.
TO
BE ASSUMED BY
DOWNSIDE
UP, INC.
29
