AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THUNDERBALL ENTERTAINMENT, INC.,
PHILADELPHIA MORTGAGE NEWCO, INC.
AND
PHILADELPHIA MORTGAGE CORPORATION
April 26, 2005
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is dated as of ______, 2005, by and among Philadelphia
Mortgage Corporation, a Nevada corporation ("Parent"), Philadelphia Mortgage
Newco, Inc., a Minnesota corporation and wholly-owned subsidiary of Parent
("Merger Subsidiary"), and Thunderball Entertainment, Inc., a Minnesota
company (the "Company").
WHEREAS, the Company is in the business of developing and distributing
products in the redemption game industry (the "Business"); and
WHEREAS, the Boards of Directors of Parent and Merger Subsidiary, and the
shareholders of the Company, have approved the merger of the Company with and
into Merger Subsidiary (the "Merger") upon the terms and subject to the
conditions set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization within the meaning of Section 368(a)(1)(A)
and (a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, the parties hereto desire to make certain representations,
warranties, and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants, and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER; CONVERSION OF SHARES
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.2 hereof), the Merger
Subsidiary will be merged with and into the Company in accordance with the
provisions of the Minnesota Business Corporation Act (the "Minnesota Act"),
whereupon the separate corporate existence of the Merger Subsidiary will
cease, and the Company will continue as the surviving corporation (the
"Surviving Corporation"). From and after the Effective Time, the Surviving
Corporation will possess all the rights, privileges, powers, and franchises
and be subject to all the restrictions, disabilities, and duties of the
Company and Merger Subsidiary, all as more fully described in the Minnesota
Act.
1.2 Effective Time. As soon as practicable after each of the
conditions set forth in Article 5 and Article 6 has been satisfied or waived,
the Company and Merger Subsidiary will file, or cause to be filed, with the
Secretary of State of the State of Minnesota, Articles of Merger for the
Merger, which Articles will be in the form required by and executed in
accordance with the applicable provisions of the Minnesota Act. The Merger
will become effective at the time such filing is made or, if agreed to by
Parent and the Company, such later time or date set forth in the Articles of
Merger (the "Effective Time").
1.3 Closing.
(a) Unless this Agreement has been terminated and the transactions
contemplated herein have been abandoned pursuant to Article 7 hereof, the
closing of the Merger (the "Closing") will take place at a time and on a date
(the "Closing Date") to be specified by the parties, which will be no later
than May 10, 2005 (the "Termination Date"); provided, however, that all of the
conditions provided for in Articles 5 and 6 hereof shall have been satisfied
or waived by such date. The Closing will be held at the offices of Xxxxxx
Xxxxxxx Xxxxxx & Brand, LLP, located at 3300 Xxxxx Fargo Center, 00 Xxxxx
Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, or such other place as the
parties may agree, at which time and place the documents and instruments
necessary or appropriate to effect the transactions contemplated herein will
be exchanged by the parties. Except as otherwise provided herein, all actions
taken at the Closing will be deemed to be taken simultaneously.
(b) At Closing, the Company shall pay Xxxxxx Services, Inc., a Utah
corporation ("Xxxxxx Services"), the sum of $175,000, $25,000 of which has
already been paid to Xxxxxx Services by the Company, in consideration of
Xxxxxx Services' payment of, and indemnification of Parent and the Company
with respect to, any and all past liabilities of any type or nature of Parent
existing at Closing. The "Indemnification Agreement" is attached hereto as
Exhibit 1.3(b).
1.4 Conversion of Interests. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of the Company and/or the Merger Subsidiary:
(a) All of the shares of the Company ("Company Common Stock")
issued and outstanding immediately prior to the Effective Time (except for
Company Common Stock referred to in Section 1.4(b) hereof) will be converted
into the right to receive an aggregate of 8,000,000 shares common stock of the
Parent, par value $.001 per share ("Parent Common Stock"), and Parent adopts,
ratifies and approves the Company written compensation agreements pursuant to
which any of Company Common Stock was issued under Rule 701 of the Securities
and Exchange Commission. The amount of Parent Common Stock into which shares
of Company Common Stock is converted is referred to herein as the "Merger
Consideration".
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is then owned beneficially or of
record by Parent, Merger Subsidiary, or any direct or indirect subsidiary of
Parent or the Company will be canceled without payment of any consideration
therefor and without any conversion thereof. Furthermore, at the Effective
Time, one (1) share of Company Common Stock shall be issued to Parent.
(c) Except as expressly set forth herein, each share of any other
equity interest of the Company (other than Company Common Stock) will be
canceled without payment of any consideration therefor and without any
conversion thereof.
(d) Each share of common stock of Merger Subsidiary, par value
$.001 per share ("Merger Subsidiary Common Stock"), issued and outstanding
immediately prior to the Effective Time will be canceled as of the Effective
Time.
1.5 Exchange of Company Common Stock.
(a) At the Closing, the Company will arrange for each holder of
record (a "Shareholder") of Company Common Stock outstanding immediately prior
to the Effective Time to deliver to the Parent appropriate evidence of such
holder's Company Common Stock ("Company Certificates"), together with an
appropriate assignment signed by such holders, in exchange for the number of
whole shares of Parent Common Stock into which such interests have been
converted as provided in Section 1.4(a), and the Company Certificate(s) so
surrendered will be canceled.
(b) All shares of Parent Common Stock issued upon the surrender for
exchange of shares of Company Common Stock in accordance with the terms hereof
will be deemed to have been issued in full satisfaction of all rights
pertaining to such Company Common Stock.
(c) As of the Effective Time, the holders of Company Certificates
representing shares of Company Common Stock will cease to have any rights as
Shareholders of the Company, except such rights, if any, as they may have
pursuant to the Minnesota Act. Except as provided above, until such Company
Certificates are surrendered for exchange, each such Company Certificate will,
after the Effective Time, represent for all purposes only the right to receive
certificates representing the number of whole shares of Parent Common Stock
into which Company Common Stock shall have been converted pursuant to the
Merger as provided in Section 1.4(a).
(d) No fractional shares of Parent Common Stock will be issued upon
the surrender for exchange of Company Certificates; no dividend or other
distribution of Parent will relate to any fractional share; and such
fractional share interests will not entitle the owner thereof to vote or to
any rights of a shareholder of Parent. All fractional shares of Parent Common
Stock to which a holder of Company Common Stock immediately prior to the
Effective Time would otherwise be entitled, at the Effective Time, will be
aggregated if and to the extent multiple Company Certificates of such holder
are submitted together to Parent. If a fractional share results from such
aggregation, then such fractional share will be rounded up to the nearest
whole share and each holder of shares of Company Common Stock Interests who
otherwise would be entitled to receive such fractional share of Parent Common
Stock will receive one whole share in lieu of such fractional share.
(e) At Closing, Parent will cancel 133,334 shares of Parent Common
Stock issued and outstanding immediately prior to Closing and issue 459,141
shares of new restricted Parent Common Stock as set forth on Exhibit 1.5(e)
attached hereto, and, as a result of such transactions, Parent will have
outstanding no more than 600,000 shares of Parent Common Stock at Closing.
1.6 Articles of Incorporation of the Surviving Corporation. The
Articles of Incorporation of the Company as in effect immediately prior to the
Effective Time will be the Articles of Incorporation of the Surviving
Corporation.
1.7 Bylaws of the Surviving Corporation. The Bylaws of the Company, as
in effect immediately prior to the Effective Time, will be the Bylaws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
1.8 Directors and Officers of the Surviving Corporation and Parent.
(a) Directors and Officers of the Surviving Corporation. The
directors and officers of the Company, as of the Effective Time, shall
continue as the directors of the Surviving Corporation.
(b) Directors of the Parent. The directors of the Parent
immediately prior to the Effective Time shall appoint Xxxxxx X. Xxxxxxxxxxxx
and Xxxxx Xxxxxx to the Parent's Board of Directors, and thereafter resign
effective as of the Effective Time. The officers of the Surviving Corporation
shall be appointed by the new directors.
Within six (6) months from the Effective Time, the board of directors of the
Surviving Corporation will form an independent compensation committee to
review and determine long-term compensation for the Surviving Corporation's
officers.
1.9 Dissenting Interests. Notwithstanding any provision of this
Agreement to the contrary, each outstanding Company Common Stock, the holder
of which has demanded and perfected such holder's right to dissent from the
Merger and to be paid the fair value of such shares in accordance with Section
302A.471 of the Minnesota Act and, as of the Effective Time, has not
effectively withdrawn or lost such dissenters' rights ("Dissenting
Interests"), will not be converted into or represent a right to receive Parent
Common Stock into which Company Common Stock are converted pursuant to Section
1.4 hereof, but the holder thereof will be entitled only to such rights as are
granted by the Minnesota Act. Parent will cause the Company to make all
payments to holders of Company Common Stock with respect to such demands in
accordance with the Minnesota Act. The Company will give Parent (i) prompt
written notice of any notice of intent to demand fair value for any Company
Common Stock, withdrawals of such notices, and any other instruments served
pursuant to the Minnesota Act and received by the Company, and (ii) the
opportunity to conduct jointly all negotiations and proceedings with respect
to demands for fair value for Company Common Stock under the Minnesota Act.
The Company will not, except with the prior written consent of Parent or as
otherwise required by law, voluntarily make any payment with respect to any
demands for fair value for Company Common Stock or settle or offer to settle
any such demands.
1.10 Reverse Split/Combination of Parent Common Stock. The Company
hereby covenants that for a two-year (2-year) period following the Effective
Time, it shall not cause Parent to effect any reverse stock split of Parent
Common Stock without the prior written consent of Parent's current directors.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent as follows:
2.1 Disclosure Schedule. The disclosure schedule attached hereto as
Exhibit 2.1 (the "Company Disclosure Schedule") is divided into sections that
correspond to the sections of this Article 2. The Company Disclosure Schedule
comprises a list of all exceptions to the truth and accuracy of, and of all
disclosures or descriptions required by, the representations and warranties
set forth in the remaining sections of this Article 2.
2.2 Corporate Organization, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Minnesota with the requisite corporate power and authority to carry on its
business as it is now being conducted and to own, operate and lease its
properties and assets, is duly qualified or licensed to do business as a
foreign corporation in good standing in every other jurisdiction in which the
character or location of the properties and assets owned, leased or operated
by it or the conduct of its business requires such qualification or licensing,
except in such jurisdictions in which the failure to be so qualified or
licensed and in good standing would not, individually or in the aggregate,
have a Material Adverse Effect (as defined below) on the Company. The Company
Disclosure Schedule contains a list of all jurisdictions in which the Company
is qualified or licensed to do business and includes complete and correct
copies of the Company's articles of incorporation and bylaws. The Company
does not own or control any capital stock of any corporation or any interest
in any partnership, joint venture or other entity.
2.3 Capitalization. The authorized capital securities of the Company
is set forth in the Company Disclosure Schedule. The number of shares of
Company Common Stock outstanding, as of the date of this Agreement and as set
forth in the Company Disclosure Schedule, represent all of the issued and
outstanding capital securities of the Company. All issued and outstanding
shares of Company Common Stock are duly authorized, validly issued, fully paid
and nonassessable and are without, and were not issued in violation of,
preemptive rights. There are no shares of Company Common Stock or other
equity securities of the Company outstanding or any securities convertible
into or exchangeable for such interests, securities or rights. Other than as
set forth on the Company Disclosure Schedule and pursuant to this Agreement,
there is no subscription, option, warrant, call, right, contract, agreement,
commitment, understanding or arrangement to which the Company is a party, or
by which it is bound, with respect to the issuance, sale, delivery or transfer
of the capital securities of the Company, including any right of conversion or
exchange under any security or other instrument. The Company has no
subsidiaries.
2.4 Authorization, etc. The Company has all requisite corporate power
and authority to enter into, execute, deliver, and perform its obligations
under this Agreement. This Agreement has been duly and validly executed and
delivered by the Company and is the valid and binding legal obligation of the
Company enforceable against the Company in accordance with its terms, subject
to bankruptcy, moratorium, principles of equity and other limitations limiting
the rights of creditors generally.
2.5 Non-Contravention. Except as set forth in the Company Disclosure
Schedule, neither the execution, delivery and performance of this Agreement,
and each other agreement to be entered into in connection with this Agreement,
nor the consummation of the transactions contemplated herein will:
(a) violate, contravene or be in conflict with any provision of the
articles of incorporation or bylaws of the Company;
(b) be in conflict with, or constitute a default, however defined
(or an event which, with the giving of due notice or lapse of time, or both,
would constitute such a default), under, or cause or permit the acceleration
of the maturity of, or give rise to any right of termination, cancellation,
imposition of fees or penalties under any debt, note, bond, lease, mortgage,
indenture, license, obligation, contract, commitment, franchise, permit,
instrument or other agreement or obligation to which the Company is a party or
by which the Company or any of the Company's properties or assets is or may be
bound;
(c) result in the creation or imposition of any pledge, lien,
security interest, restriction, option, claim or charge of any kind whatsoever
("Encumbrances") upon any property or assets of the Company under any debt,
obligation, contract, agreement or commitment to which the Company is a party
or by which the Company or any of the Company's assets or properties are
bound; or
(d) materially violate any statute, treaty, law, judgment, writ,
injunction, decision, decree, order, regulation, ordinance or other similar
authoritative matters (referred to herein individually as a "Law" and
collectively as "Laws") of any foreign, federal, state or local governmental
or quasi-governmental, administrative, regulatory or judicial court,
department, commission, agency, board, bureau, instrumentality or other
authority (referred to herein individually as an "Authority" and collectively
as "Authorities").
2.6 Consents and Approvals. Except as set forth in the Company
Disclosure Schedule, with respect to the Company, no consent, approval, order
or authorization of or from, or registration, notification, declaration or
filing with ("Consent") any individual or entity, including without limitation
any Authority, is required in connection with the execution, delivery or
performance of this Agreement by the Company or the consummation by the
Company of the transactions contemplated herein.
2.7 Financial Statements. The Company Disclosure Schedule contains a
copy of the draft financial statements of the Company as of December 31, 2004
(the "Financial Statements"). Except as disclosed therein or in the Company
Disclosure Schedule, the aforesaid Financial Statements: (i) are in accordance
with the books and records of the Company and have been prepared in conformity
with good accounting practices (except as stated therein or in the notes
thereto); and (ii) are true, complete and accurate in all material respects
and fairly present the financial position of the Company as of the date
thereof, and the income or loss for the period then ended. The Company will
deliver audited Financial Statements to legal counsel for the pre-Merger
Shareholders of Parent upon or prior to the filing of a Current Report on Form
8-K following and with respect to the Merger contemplated hereby.
2.8 Absence of Undisclosed Liabilities. The Company does not have any
material liabilities, obligations or claims of any kind whatsoever, whether
secured or unsecured, accrued or unaccrued, fixed or contingent, matured or
unmatured, known or unknown, direct or indirect, contingent or otherwise and
whether due or to become due (referred to herein individually as a "Liability"
and collectively as "Liabilities"), other than: (a) Liabilities that are fully
reflected or reserved for in the Balance Sheet; (b) Liabilities that are set
forth on the Company Disclosure Schedule; (c) Liabilities incurred by the
Company in the ordinary course of business after the date of the Balance Sheet
and consistent with past practice; (d) Liabilities in an amount not to exceed
$50,000 individually or in the aggregate unless such amounts are disclosed on
the Company Disclosure Schedule; or (e) Liabilities for express executory
obligations to be performed after the Closing under the contracts described in
Section 2.14 of the Company Disclosure Schedule.
2.9 Absence of Certain Changes. Except as set forth in the Company
Disclosure Schedule, since December 31, 2004, the Company has owned and
operated its assets, properties and business in the ordinary course of
business and consistent with past practice. Without limiting the generality
of the foregoing, subject to the aforesaid exceptions:
(a) the Company has not experienced any change that has had or
could reasonably be expected to have a Material Adverse Effect on the Company;
and
(b) the Company has not suffered (i) any loss, damage, destruction
or other property or casualty (whether or not covered by insurance) or (ii)
any loss of officers, employees, dealers, distributors, independent
contractors, customers or suppliers, which had or may reasonably be expected
to result in a Material Adverse Effect on the Company.
2.10 Assets. Except as set forth in the Company Disclosure Schedule,
the Company has good and marketable title to all of its assets and properties,
whether or not reflected in the Balance Sheet or acquired after the date
thereof (except for properties sold or otherwise disposed of since the date
thereof in the ordinary course of business and consistent with past
practices), that relate to or are necessary for the Company to conduct its
business and operations as currently conducted (collectively, the "Assets"),
free and clear of any mortgage, pledge, lien, security interest, conditional
or installment sales agreement, encumbrance, claim, easement, right of way,
tenancy, covenant, encroachment, restriction or charge of any kind or nature
(whether or not of record) (a "Lien"), other than (i) liens securing specific
Liabilities shown on the Balance Sheet with respect to which no breach,
violation or default exists; (ii) mechanics', carriers', workers' or other
like liens arising in the ordinary course of business; (iii) minor
imperfections of title that do not individually or in the aggregate, impair
the continued use and operation of the Assets to which they relate in the
operation of the Company as currently conducted; and (iv) liens for current
taxes not yet due and payable or being contested in good faith by appropriate
proceedings ("Permitted Liens").
2.11 Receivables and Payables.
(a) Except as set forth on the Company Disclosure Schedule, all
accounts receivable of the Company represent sales in the ordinary course of
business and, to the Company's knowledge, are current and collectible net of
any reserves shown on the Balance Sheet and none of such receivables is
subject to any Lien other than a Permitted Lien.
(b) Except as set forth on the Company Disclosure Schedule, all
payables by the Company arose in bona fide transactions in the ordinary course
of business and no such payable is delinquent by more than sixty (60) days
beyond the due date in its payment.
2.12 Intellectual Property Rights. The Company owns or has the
unrestricted right to use, and the Company Disclosure Schedule contains a
detailed listing of, all patents, patent applications, patent rights,
registered and unregistered trademarks, trademark applications, tradenames,
service marks, service xxxx applications, copyrights, internet domain names,
computer programs and other computer software, inventions, know-how, trade
secrets, technology, proprietary processes, trade dress, software and formulae
(collectively, "Intellectual Property Rights") used in, or necessary for, the
operation of its Business as currently conducted or proposed to be conducted.
Except as set forth on the Company Disclosure Schedule, to the Company's
knowledge, the use of all Intellectual Property Rights necessary or required
for the conduct of the Business of the Company as presently conducted and as
proposed to be conducted does not infringe or violate the Intellectual
Property Rights of any person or entity. Except as described on the Company
Disclosure Schedule, to the Company's knowledge: (a) the Company does not own
or use any Intellectual Property Rights pursuant to any written license
agreement; (b) the Company has not granted any person or entity any rights,
pursuant to a written license agreement or otherwise, to use the Intellectual
Property Rights; and (c) the Company owns, has unrestricted right to use and
has sole and exclusive possession of and has good and valid title to, all of
the Intellectual Property Rights, free and clear of all Liens and
Encumbrances. All license agreements relating to Intellectual Property Rights
are binding and there is not, under any of such licenses, any existing default
or event of default (or event which with notice or lapse of time, or both,
would constitute a default, or would constitute a basis for a claim on
non-performance) on the part of the Company or, to the knowledge of the
Company, any other party thereto.
2.13 Litigation. Except as set forth in the Company Disclosure
Schedule, there is no legal, administrative, arbitration, or other proceeding,
suit, claim or action of any nature or investigation, review or audit of any
kind, or any judgment, decree, decision, injunction, writ or order pending,
noticed, scheduled, or, to the knowledge of the Company, threatened or
contemplated by or against or involving the Company, its assets, properties or
business or its directors, officers, agents or employees (but only in their
capacity as such), whether at law or in equity, before or by any person or
entity or Authority, or which questions or challenges the validity of this
Agreement or any action taken or to be taken by the parties hereto pursuant to
this Agreement or in connection with the transactions contemplated herein.
2.14 Contracts and Commitments; No Default.
(a) Except as set forth in the Company Disclosure Schedule, the
Company is not a party to, nor are any of the Assets bound by, any written or
oral:
(i) employment, non-competition, consulting or severance agreement,
collective bargaining agreement, or pension, profit-sharing, incentive
compensation, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay or retirement plan or
agreement;
(ii) indenture, mortgage, note, installment obligation, agreement
or other instrument relating to the borrowing of money by the Company;
(iii) contract, agreement, lease (real or personal property) or
arrangement that (A) is not terminable on less than 30 days' notice without
penalty, (B) is not over one year in length of obligation of the Company, or
(C) involves an obligation of more than $50,000 over its term;
(iv) contract, agreement, commitment or license relating to
Intellectual Property Rights or contract, agreement or commitment of any other
type, whether or not fully performed, not otherwise disclosed pursuant to this
Section 2.14;
(v) obligation or requirement to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
person or entity; or
(vi) outstanding sales or purchase contracts, commitments or
proposals that will result in any material loss upon completion or performance
thereof after allowance for direct distribution expenses, or bound by any
outstanding contracts, bids, sales or service proposals quoting prices that
are not reasonably expected to result in a normal profit.
(b) True and complete copies (or summaries, in the case of oral items)
of all agreements disclosed pursuant to this Section 2.14 (the "Company
Contracts") have been provided to Parent for review. Except as set forth in
the Company Disclosure Schedule, all of the Company Contracts items are valid
and enforceable by and against the Company in accordance with their terms, and
are in full force and effect. The Company is not in breach, violation or
default, however defined, in the performance of any of its obligations under
any of the Company Contracts, and no facts and circumstances exist which,
whether with the giving of due notice, lapse of time, or both, would
constitute such breach, violation or default thereunder or thereof, and, to
the knowledge of the Company, no other parties thereto are in a breach,
violation or default, however defined, thereunder or thereof, and no facts or
circumstances exist which, whether with the giving of due notice, lapse of
time, or both, would constitute such a breach, violation or default thereunder
or thereof.
2.15 Compliance with Law; Permits and Other Operating Rights. Except
as set forth in the Company Disclosure Schedule, the Assets, properties,
business and operations of the Company are and have been in compliance in all
respects with all Laws applicable to the Company's assets, properties,
business and operations, except where the failure to comply would not have a
Material Adverse Effect. The Company possesses all material permits, licenses
and other authorizations from all Authorities necessary to permit it to
operate its business in the manner in which it presently is conducted and the
consummation of the transactions contemplated by this Agreement will not
prevent the Company from being able to continue to use such permits and
operating rights. The Company has not received notice of any violation of any
such applicable Law, and is not in default with respect to any order, writ,
judgment, award, injunction or decree of any Authority.
2.16 Brokers. Neither the Company nor, to the knowledge of the
Company, any of the its directors, officers or employees, has employed any
broker, finder, investment banker or financial advisor or incurred any
liability for any brokerage fee or commission, finder's fee or financial
advisory fee, in connection with the transactions contemplated hereby, nor is
there any basis known to the Company for any such fee or commission to be
claimed by any person or entity.
2.17 Issuance of Parent Common Stock. To the Company's knowledge, as
of the date of this Agreement and as of the Effective Time, no facts or
circumstances exist or will exist that could cause the issuance of Parent
Common Stock pursuant to the Merger to fail to meet the exemption from the
registration requirements of the Securities Act set forth in Rule 506 of
Regulation D under of the Securities Act.
2.18 Books and Records. The books of account, minute books, stock
record books, and other material records of the Company, all of which have
been made available to Parent, are complete and correct in all material
respects and have been maintained in accordance with reasonable business
practices. The minute books of the Company contain accurate and complete
records of all formal meetings held of, and corporate action taken by, the
directors and officers, the managers and committees of the managers of the
Company. At the Closing, all of those books and records will be in the
possession of the Company.
2.19 Business Generally; Accuracy of Information. No representation or
warranty made by the Company in this Agreement, the Company Disclosure
Schedule, or in any document, agreement or certificate furnished or to be
furnished to Parent at the Closing by or on behalf of the Company in
connection with any of the transactions contemplated by this Agreement
contains or will contain any untrue statement of material fact or omit or will
omit to state any material fact necessary in order to make the statements
herein or therein not misleading in light of the circumstances in which they
are made, and all of the foregoing completely and correctly present the
information required or purported to be set forth herein or therein.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PARENT
AND THE MERGER SUBSIDIARY
Parent and the Merger Subsidiary represent and warrant to the Company as
follows:
3.1 Disclosure Schedule. The disclosure schedule attached hereto as
Exhibit 3.1 (the "Parent Disclosure Schedule") is divided into sections that
correspond to the sections of this Article 3. The Parent Disclosure Schedule
comprises a list of all exceptions to the truth and accuracy of, and of all
disclosures or descriptions required by, the representations and warranties
set forth in the remaining sections of this Article 3.
3.2 Corporate Organization, Standing and Power. Parent is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada; and Merger Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Minnesota. Each of Parent and Merger Subsidiary has all corporate power
and authority to own its properties and to carry on its business as now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent and Merger Subsidiary. Parent owns all of the
outstanding capital stock of Merger Subsidiary. Parent does not own or
control any capital stock of any corporation or any interest in any
partnership, joint venture or other entity, other than Merger Subsidiary.
3.3 Authorization. Each of Parent and the Merger Subsidiary has all
the requisite corporate power and authority to enter into this Agreement and
to carry out the transactions contemplated herein. The Board of Directors of
Parent and the Merger Subsidiary, and Parent as the sole shareholder of the
Merger Subsidiary, have taken all action required by law, their respective
articles of incorporation and bylaws or otherwise to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein. This Agreement is the valid and binding
legal obligation of Parent and the Merger Subsidiary enforceable against each
of them in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
that affect creditors' rights generally.
3.4 Capitalization. The authorized capital securities of the Parent
and Merger Subsidiary are set forth in the Parent Disclosure Schedule. The
number of shares of Parent Common Stock, as of the date of this Agreement and
as set forth in the Parent Disclosure Schedule, represent all of the issued
and outstanding capital securities of the Parent. All issued and outstanding
shares of Parent Common Stock are duly authorized, validly issued, fully paid
and nonassessable and are without, and were not issued in violation of,
preemptive rights. There are no shares of Parent Common Stock or other equity
securities of Parent outstanding or any securities convertible into or
exchangeable for such interests, securities or rights. Other than as set
forth on the Parent Disclosure Schedule and pursuant to this Agreement, there
is no subscription, option, warrant, call, right, contract, agreement,
commitment, understanding or arrangement to which Parent is a party, or by
which it is bound, with respect to the issuance, sale, delivery or transfer of
the capital securities of Parent, including any right of conversion or
exchange under any security or other instrument.
3.5 Non-Contravention. Neither the execution, delivery and performance
of this Agreement nor the consummation of the transactions contemplated herein
will:
(a) violate any provision of the articles of incorporation or
bylaws of Parent or the Merger Subsidiary; or
(b) be in conflict with, or constitute a default, however defined
(or an event which, with the giving of due notice or lapse of time, or both,
would constitute such a default), under, or cause or permit the acceleration
of the maturity of, or give rise to, any right of termination, cancellation,
imposition of fees or penalties under, any debt, note, bond, lease, mortgage,
indenture, license, obligation, contract, commitment, franchise, permit,
instrument or other agreement or obligation to which Parent or the Merger
Subsidiary is a party or by which Parent or the Merger Subsidiary or any of
their respective properties or assets is or may be bound;
(c) result in the creation or imposition of any Encumbrance upon
any property or assets of Parent or the Merger Subsidiary under any debt,
obligation, contract, agreement or commitment to which Parent or the Merger
Subsidiary is a party or by which Parent or the Merger Subsidiary or any of
their respective assets or properties is or may be bound; or
(d) violate any Law of any Authority.
3.6 Consents and Approvals. No Consent is required by any person or
entity, including without limitation any Authority, in connection with the
execution, delivery and performance by Parent or Merger Subsidiary of this
Agreement, or the consummation of the transactions contemplated herein, other
than any Consent which, if not made or obtained, will not, individually or in
the aggregate, have a Material Adverse Effect on the business of Parent or
Merger Subsidiary.
3.7 Valid Issuance. The Parent Common Stock to be issued in connection
with the Merger will be duly authorized and, when issued, delivered and paid
for as provided in this Agreement, will be validly issued, fully paid and
non-assessable.
3.8 SEC Filings; Financial Statements.
(a) Parent has delivered or made available to the Company accurate
and complete copies (excluding copies of exhibits) of each report,
registration statement and definitive proxy and information statements filed
by Parent with the SEC (collectively, with all information incorporated by
reference therein or deemed to be incorporated by reference therein, the
"Parent SEC Documents"). All statements, reports, schedules, forms and other
documents required to have been filed by Parent with the SEC have been so
filed on a timely basis. As of the time it was filed with the SEC (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing): (i) each of the Parent SEC Documents complied in all
material respects with the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act") or the Securities Exchange Act of
1934, as amended (the "Exchange Act"); and (ii) none of the Parent SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(b) The consolidated financial statements contained in the Parent
SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered (except as may be indicated in the notes to such financial
statements and, in the case of unaudited statements, as permitted by Form
10-QSB of the SEC); and (iii) fairly present, in all material respects, the
consolidated financial position of Parent and its consolidated subsidiaries as
of the respective dates thereof and the consolidated results of operations of
Parent and its consolidated subsidiaries for the periods covered thereby. All
adjustments considered necessary for a fair presentation of the financial
statements have been included.
3.9 No Liabilities. Parent does not have any Liabilities, except for
(i) Liabilities expressly stated in the most recent balance sheet included in
the Parent SEC Documents or the notes thereto, or (ii) Liabilities which do
not exceed $1,000 in the aggregate.
3.10 No Assets. As of the Closing, Parent will not have any assets or
operations of any kind, except as identified in the most recent balance sheet
and notes thereto included in the Parent SEC Documents or the Parent
Disclosure Schedule.
3.11 Absence of Certain Changes. Except as set forth in the Parent SEC
Documents, Parent has owned and operated its assets, properties and business
in the ordinary course of business and consistent with past practice. Without
limiting the generality of the foregoing, subject to the aforesaid exceptions,
Parent has not experienced any change that has had or could reasonably be
expected to have a Material Adverse Effect on the Parent.
3.12 Litigation. Except as disclosed in the Parent SEC Documents,
there is no legal, administrative, arbitration, or other proceeding, suit,
claim or action of any nature or investigation, review or audit of any kind,
or any judgment, decree, decision, injunction, writ or order pending, noticed,
scheduled, or, to the knowledge of the Parent or the Merger Subsidiary,
threatened or contemplated by or against or involving the Parent, its assets,
properties or business or its directors, officers, agents or employees (but
only in their capacity as such), whether at law or in equity, before or by any
person or entity or Authority, or which questions or challenges the validity
of this Agreement or any action taken or to be taken by the parties hereto
pursuant to this Agreement or in connection with the transactions contemplated
herein.
3.13 Contracts and Commitments; No Default. The Parent is not a party
to, nor are any of its Assets bound by, any contract (a "Parent Contract")
that is not disclosed in the Parent SEC Documents. Except as disclosed in the
Parent SEC Documents, none of the Parent Contracts contains a provision
requiring the consent of any party with respect to the consummation of the
transactions contemplated by this Agreement. The Parent is not in breach,
violation or default, however defined, in the performance of any of its
obligations under any of the Parent Contracts, and no facts and circumstances
exist which, whether with the giving of due notice, lapse of time, or both,
would constitute such breach, violation or default thereunder or thereof, and,
to the knowledge of the Parent, no other parties thereto are in a breach,
violation or default, however defined, thereunder or thereof, and no facts or
circumstances exist which, whether with the giving of due notice, lapse of
time, or both, would constitute such a breach, violation or default thereunder
or thereof.
3.14 No Broker or Finder. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or any of the other transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Parent.
3.15 Intercompany And Affiliate Transactions; Insider Interests.
Except as expressly identified in the Parent SEC Documents or in the Consent
of Directors of Parent approving the Merger which has been executed and
provided to the Company prior to execution, there are, and during the last two
years there have been, no transactions, agreements or arrangements of any
kind, direct or indirect, between the Parent, on the one hand, and any
director, officer, employee, stockholder, or affiliate of the Parent, on the
other hand, including, without limitation, loans, guarantees or pledges to, by
or for the Parent or from, to, by or for any of such persons, that are
currently in effect.
3.16 Reverse Split. Parent's 1:3 reverse stock split effected in July
2004 was properly and legally effected with all corporate consents and
approvals necessary under controlling law, and Parent's then-existing articles
of incorporation, bylaws and any other documents and/or agreements binding
upon Parent and/or its Shareholders, having been obtained prior thereto
ARTICLE 4
COVENANTS OF THE PARTIES
4.1 Conduct of Business. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Closing Date, the
Company and Parent will each conduct its business and operations according to
its ordinary and usual course of business consistent with past practices.
Without limiting the generality of the foregoing, and, except as otherwise
expressly provided in this Agreement or as otherwise disclosed on the Parent
Disclosure Schedule or Company Disclosure Schedule, respectively, prior to the
Closing Date, without the prior written consent of the other party, not to be
unreasonably delayed, Parent and the Company will not:
(a) amend its articles of incorporation or bylaws;
(b) issue, reissue, sell, deliver or pledge or authorize or propose
the issuance, reissuance, sale, delivery or pledge of shares of capital stock
of any class, or securities convertible into capital stock of any class, or
any rights, warrants or options to acquire any convertible securities or
capital stock;
(c) adjust, split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or otherwise
acquire, any shares of its capital stock, or any of its other securities;
(d) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, redeem or otherwise acquire any shares of its capital stock
or other securities, alter any term of any of its outstanding securities;
(e) (i) except as required under any employment agreement, increase
in any manner the compensation of any of its directors, officers or other
employees; (ii) pay or agree to pay any pension, retirement allowance or other
employee benefit not required or permitted by any existing plan, agreement or
arrangement to any such director, officer or employee, whether past or
present; or (iii) commit itself to any additional pension, profit-sharing,
bonus, incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or other
employee benefit plan, agreement or arrangement, or to any employment
agreement or consulting agreement (arising out of prior employment ) with or
for the benefit of any person, or, except to the extent required to comply
with applicable law, amend any of such plans or any of such agreements in
existence on the date of this Agreement;
(f) hire any additional personnel;
(g) incur, assume, suffer or become subject to, whether directly or
by way of guarantee or otherwise, any Liabilities which, individually or in
the aggregate, exceed $10,000 in the case of Parent or $50,000 in the case of
the Company;
(h) make or enter into any commitment for capital expenditures in
excess of $10,000 in the case of Parent or $50,000 in the case of the Company;
(i) pay, lend or advance any amount to, or sell, transfer or lease
any properties or assets (real, personal or mixed, tangible or intangible) to,
or enter into any agreement or arrangement with, any of its officers or
directors or any affiliate or associate of any of its officers or directors;
(j) terminate, enter into or amend in any material respect any
contract, agreement, lease, license or commitment, or take any action or omit
to take any action which will cause a breach, violation or default (however
defined) under any contract, except in the ordinary course of business and
consistent with past practice;
(k) acquire any of the business or assets of any other person or
entity;
(l) permit any of its current insurance (or reinsurance) policies
to be cancelled or terminated or any of the coverage thereunder to lapse,
unless simultaneously with such termination, cancellation or lapse,
replacement policies providing coverage equal to or greater than coverage
remaining under those cancelled, terminated or lapsed are in full force and
effect;
(m) enter into other material agreements, commitments or contracts
not in the ordinary course of business or in excess of current requirements;
(n) settle or compromise any suit, claim or dispute, or threatened
suit, claim or dispute (other than any settlement or compromise having no
effect upon the Company, its assets, operations or financial position); or
(o) agree in writing or otherwise to take any of the foregoing
actions or any action which would make any representation or warranty in this
Agreement untrue or incorrect in any material respect.
Nothing herein shall prevent the Company from operating its business in the
ordinary course and consistent with past practice.
4.2 Full Access. Throughout the period prior to Closing, each party
will afford to the other and its directors, officers, employees, counsel,
accountants, investment advisors and other authorized representatives and
agents, reasonable access to the facilities, properties, books and records of
the party in order that the other may have full opportunity to make such
investigations as it will desire to make of the affairs of the disclosing
party. Each party will furnish such additional financial and operating data
and other information as the other will, from time to time, reasonably
request, including without limitation access to the working papers of its
independent certified public accountants; provided, however, that any such
investigation will not affect or otherwise diminish or obviate in any respect
any of the representations and warranties of the disclosing party.
4.3 Confidentiality. Each of the parties hereto agrees that it will
not use, or permit the use of, any of the information relating to any other
party hereto furnished to it in connection with the transactions contemplated
herein ("Information") in a manner or for a purpose detrimental to such other
party or otherwise than in connection with the transaction, and that they will
not disclose, divulge, provide or make accessible (collectively, "Disclose"),
or permit the Disclosure of, any of the Information to any person or entity,
other than their respective directors, officers, employees, investment
advisors, accountants, counsel and other authorized representatives and
agents, except as may be required by judicial or administrative process or, in
the opinion of such party's counsel, by other requirements of Law; provided,
however, that prior to any Disclosure of any Information permitted hereunder,
the disclosing party will first obtain the recipients' undertaking to comply
with the provisions of this Section with respect to such information. The
term "Information" as used herein will not include any information relating to
a party that the party disclosing such information can show: (i) to have been
in its possession prior to its receipt from another party hereto; (ii) to be
now or to later become generally available to the public through no fault of
the disclosing party; (iii) to have been available to the public at the time
of its receipt by the disclosing party; (iv) to have been received separately
by the disclosing party in an unrestricted manner from a person entitled to
disclose such information; or (v) to have been developed independently by the
disclosing party without regard to any information received in connection with
this transaction. Each party hereto also agrees to promptly return to the
party from whom it originally received such information all original and
duplicate copies of written materials containing Information should the
transactions contemplated herein not occur. A party hereto will be deemed to
have satisfied its obligations to hold the Information confidential if it
exercises the same care as it takes with respect to its own similar
information.
4.4 Filings; Consents; Removal of Objections. Subject to the terms and
conditions herein provided, the parties hereto will use their best efforts to
take or cause to be taken all actions and do or cause to be done all things
necessary, proper or advisable under applicable Laws to consummate and make
effective, as soon as reasonably practicable, the transactions contemplated
hereby, including without limitation obtaining all Consents of any person or
entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance, and not
in limitation of the foregoing, it is the intent of the parties to consummate
the transactions contemplated herein at the earliest practicable time, and
they respectively agree to exert commercially reasonable efforts to that end,
including without limitation: (i) the removal or satisfaction, if possible, of
any objections to the validity or legality of the transactions contemplated
herein; and (ii) the satisfaction of the conditions to consummation of the
transactions contemplated hereby.
4.5 Further Assurances; Cooperation; Notification.
(a) Each party hereto will, before, at and after Closing, execute
and deliver such instruments and take such other actions as the other party or
parties, as the case may be, may reasonably require in order to carry out the
intent of this Agreement. Without limiting the generality of the foregoing,
at any time after the Closing, at the reasonable request of Parent and without
further consideration, the Company will execute and deliver such instruments
of sale, transfer, conveyance, assignment and confirmation and take such
action as Parent may reasonably deem necessary or desirable in order to more
effectively consummate the transactions contemplated hereby.
(b) At all times from the date hereof until the Closing, each party
will promptly notify the other in writing of the occurrence of any event which
it reasonably believes will or may result in a failure by such party to
satisfy the conditions specified in this Article 4.
4.6 Supplements to Disclosure Schedule. Prior to the Closing, each
party will supplement or amend its respective Disclosure Schedule with respect
to any event or development which, if existing or occurring at or prior to the
date of this Agreement, would have been required to be set forth or described
in the Disclosure Schedule or which is necessary to correct any information in
the Disclosure Schedule or in any representation and warranty of the Company
which has been rendered inaccurate by reason of such event or development.
For purposes of determining the accuracy as of the date hereof of the
representations and warranties of the Company contained in Article 2 hereof or
Parent in Article 3 hereof in order to determine the fulfillment of the
conditions set forth herein, the Disclosure Schedule of each party will be
deemed to exclude any information contained in any supplement or amendment
hereto delivered after the delivery of the Disclosure Schedule.
4.7 Public Announcements. None of the parties hereto will make any
public announcement with respect to the transactions contemplated herein
without the prior written consent of the other parties, which consent will not
be unreasonably withheld or delayed; provided, however, that any of the
parties hereto may at any time make any announcements that are required by
applicable Law so long as the party so required to make an announcement
promptly upon learning of such requirement notifies the other parties of such
requirement and discusses with the other parties in good faith the exact
proposed wording of any such announcement.
4.8 Satisfaction of Conditions Precedent. Each party will use
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent that are applicable to them, and to cause the
transactions contemplated by this Agreement to be consummated, and, without
limiting the generality of the foregoing, to obtain all material consents and
authorizations of third parties and to make filings with, and give all notices
to, third parties that may be necessary or reasonably required on its part in
order to effect the transactions contemplated hereby.
4.9 Resignation of Officers And Directors. At the Closing, the
pre-Closing officers and directors of Parent shall submit their written
resignations from such offices effective as of the Closing.. Prior to their
resignations, the pre-Closing directors of Parent shall appoint to the board
of directors of Parent those persons indicated in Section 1.8(b), effective as
of the Closing.
4.10 14f-1 Notices. Parent shall file with the SEC at least ten (10)
days prior to the Closing the appropriate notice under Rule 14f-1 of Exchange
Act concerning the intended change in control of the board of directors of
Parent.
4.11 Waiver of Dissenters Rights. The Company shall use its best
efforts to obtain from all holders of Company Common Stock a written consent
to the Merger for purposes of effecting such holders' waiver of their rights
to dissent from the Merger and to be paid the fair value of their Company
Common Stock in accordance with Section 302A-471 of the Minnesota Act.
ARTICLE 5
CONDITIONS TO THE OBLIGATIONS OF THE PARENT
AND MERGER SUBSIDIARY
Notwithstanding any other provision of this Agreement to the contrary, the
obligation of Parent and Merger Subsidiary to effect the transactions
contemplated herein will be subject to the satisfaction at or prior to the
Closing, or waiver by Parent, of each of the following conditions:
5.1 Representations and Warranties True. The representations and
warranties of the Company contained in this Agreement, including without
limitation in the Company Disclosure Schedule initially delivered to Parent as
Exhibit 2.1 (and not including any changes or additions delivered to Parent
pursuant to Section 4.6), will be true, complete and accurate in all material
respects as of the date when made and at and as of the Closing Date as though
such representations and warranties were made at and as of such time, except
for changes specifically permitted or contemplated by this Agreement, and
except insofar as the representations and warranties relate expressly and
solely to a particular date or period, in which case they will be true and
correct at the Closing with respect to such date or period.
5.2 Performance. The Company will have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by the Company on
or prior to the Closing.
5.3 Required Approvals and Consents.
(a) All action required by law and otherwise to be taken by the
shareholders of the Company to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will have been duly and validly taken.
(b) All Consents of or from all Authorities required hereunder to
consummate the transactions contemplated herein, will have been delivered,
made or obtained, and Parent will have received copies thereof.
5.4 Agreements and Documents. Parent and Merger Subsidiary will have
received the following agreements and documents, each of which will be in full
force and effect:
(a) a certificate executed on behalf of the Company by its Chief
Executive Officer confirming that the conditions set forth in Sections 5.1,
5.2, 5.3, 5.5, 5.6 and 5.7 have been duly satisfied; and
(b) a Merger written consent and investment representations letter
in the form of Exhibit 5.4(b) executed by a majority of the holders of the
outstanding shares of Company Common Stock.
5.5 Adverse Changes. No material adverse change will have occurred in
the business, financial condition, prospects, assets or operations of the
Company since December 31, 2004, except as set forth on Schedule 5.5 attached
hereto.
5.6 No Proceeding or Litigation. No suit, action, investigation,
inquiry or other proceeding by any Authority or other person or entity will
have been instituted or threatened which delays or questions the validity or
legality of the transactions contemplated hereby or which, if successfully
asserted, would, in the reasonable judgment of Parent, individually or in the
aggregate, otherwise have a Material Adverse Effect on the Company's business,
financial condition, prospects, assets or operations or prevent or delay the
consummation of the transactions contemplated by this Agreement.
5.7 Legislation. No Law will have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated hereby
or any of the conditions to the consummation of such transaction.
5.8 Appropriate Documentation. The Parent will have received, in a
form and substance reasonably satisfactory to Parent, dated the Closing Date,
all certificates and other documents, instruments and writings to evidence the
fulfillment of the conditions set forth in this Article 5 as Parent may
reasonably request.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF THE COMPANY
Notwithstanding anything in this Agreement to the contrary, the
obligation of the Company to effect the transactions contemplated herein will
be subject to the satisfaction at or prior to the Closing of each of the
following conditions:
6.1 Representations and Warranties True. The representations and
warranties of Parent contained in this Agreement will be true, complete and
accurate in all material respects as of the date when made and at and as of
the Closing, as though such representations and warranties were made at and as
of such time, except for changes permitted or contemplated in this Agreement,
and except insofar as the representations and warranties relate expressly and
solely to a particular date or period, in which case they will be true and
correct at the Closing with respect to such date or period.
6.2 Performance. The Parent will have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by Parent at or
prior to the Closing, including the obligations of the pre-Close officers and
directors of Parent set forth in Section 4.9.
6.3 Required Approvals and Consents.
(a) All action required by law and otherwise to be taken by the
directors and stockholders of the Parent to authorize the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will have been duly and validly taken.
(b) All Consents of or from all Authorities required hereunder to
consummate the transactions contemplated herein, will have been delivered,
made or obtained, and the Company will have received copies thereof.
6.4 Agreements and Documents. The Company will have received the
following agreements and documents, each of which will be in full force and
effect:
(a) a certificate executed on behalf of Parent by its Chief
Executive Officer confirming that the conditions set forth in Sections 6.1,
6.2, 6.3, 6.5, 6.6 and 6.7 have been duly satisfied;
(b) an investor representation and Merger consent letter in the
form of Exhibit 5.4(b) executed by holders of at least 95% of the outstanding
Company Common Stock; and
(c) resolutions of the board of directors of Parent and the board
of directors and sole stockholder of Merger Subsidiary, certified by the
secretary of Parent, approving the transactions contemplated by this
Agreement, including the Merger, the issuance of the Merger Consideration and
the matters referred to in Sections 1.9 and 4.10 of this Agreement.
6.5 Adverse Changes. No material adverse change will have occurred in
the business, financial condition, prospects, assets or operations of Parent
since January 31, 2005.
6.6 No Proceeding or Litigation. No suit, action, investigation,
inquiry or other proceeding by any Authority or other person or entity will
have been instituted or threatened which delays or questions the validity or
legality of the transactions contemplated hereby or which, if successfully
asserted, would, in the reasonable judgment of the Company, individually or in
the aggregate, otherwise have a Material Adverse Effect on Parent's business,
financial condition, prospects, assets or operations or prevent or delay the
consummation of the transactions contemplated by this Agreement.
6.7 Legislation. No Law will have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated hereby
or any of the conditions to the consummation of such transaction.
6.8 Appropriate Documentation. The Company will have received, in a
form and substance reasonably satisfactory to Company, dated the Closing Date,
all certificates and other documents, instruments and writings to evidence the
fulfillment of the conditions set forth in this Article 6 as the Company may
reasonably request.
ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 Termination by Mutual Consent. This Agreement may be terminated at
any time prior to the Closing by the written consent of the Company and
Parent.
7.2 Termination by Either the Company or Parent. This Agreement may be
terminated by either the Company or Parent if the Closing is not consummated
by the Termination Date (provided that the right to terminate this Agreement
under this Section 7.2 will 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 Closing to occur on or before such date).
7.3 Termination by Parent. This Agreement may be terminated at any
time prior to the Closing by Parent if any of the conditions provided for in
Article 5 have not been met or waived by Parent in writing prior to the
Closing.
7.4 Termination by the Company. This Agreement may be terminated prior
to the Closing by action of the Company if any of the conditions provided for
in Article 6 have not been met or waived by the Company in writing prior to
the Closing.
7.5 Procedure and Effect of Termination. In the event of termination
of this Agreement and abandonment of the transactions contemplated hereby by
the Company or Parent pursuant to this Article 7, written notice thereof will
be given to all other parties and this Agreement will terminate and the
transactions contemplated hereby will be abandoned, without further action by
any of the parties hereto. If this Agreement is terminated as provided
herein:
(a) Each of the parties will, upon request, redeliver all
documents, work papers and other material of the other parties relating to the
transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same;
(b) No party will have any liability for a breach of any
representation, warranty, agreement, covenant or the provision of this
Agreement, unless such breach was due to a willful or bad faith action or
omission of such party or any representative, agent, employee or independent
contractor thereof; and
(c) All filings, applications and other submissions made pursuant
to the terms of this Agreement will, to the extent practicable, be withdrawn
from the agency or other person to which made.
ARTICLE 8
MISCELLANEOUS PROVISIONS
8.1 Expenses. The Parent and the Company will each bear their own
costs and expenses relating to the transactions contemplated hereby, including
without limitation, fees and expenses of legal counsel, accountants,
investment bankers, brokers or finders, printers, copiers, consultants or
other representatives for the services used, hired or connected with the
transactions contemplated hereby.
8.2 Survival. The representations and warranties of the parties shall
survive the Closing for a period of one (1) year.
8.3 Amendment and Modification. Subject to applicable Law, this
Agreement may be amended or modified by the parties hereto at any time with
respect to any of the terms contained herein; provided, however, that all such
amendments and modifications must be in writing duly executed by all of the
parties hereto.
8.4 Waiver of Compliance; Consents. Any failure of a party to comply
with any obligation, covenant, agreement or condition herein may be expressly
waived in writing by the party entitled hereby to such compliance, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition will not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No single or partial
exercise of a right or remedy will preclude any other or further exercise
thereof or of any other right or remedy hereunder. Whenever this Agreement
requires or permits the consent by or on behalf of a party, such consent will
be given in writing in the same manner as for waivers of compliance.
8.5 No Third Party Beneficiaries. Nothing in this Agreement will
entitle any person or entity (other than a party hereto and his, her or its
respective successors and assigns permitted hereby) to any claim, cause of
action, remedy or right of any kind.
8.6 Notices. All notices, requests, demands and other communications
required or permitted hereunder will be made in writing and will be deemed to
have been duly given and effective: (i) on the date of delivery, if delivered
personally; (ii) on the earlier of the fourth (4th) day after mailing or the
date of the return receipt acknowledgement, if mailed, postage prepaid, by
certified or registered mail, return receipt requested; or (iii) on the date
of transmission, if sent by facsimile, telecopy, telegraph, telex or other
similar telegraphic communications equipment, or to such other person or
address as the Company will furnish to the other parties hereto in writing in
accordance with this subsection.
If to the Company prior to the Merger: With a copy to:
Thunderball Entertainment, Inc. Xxxxxx xxxxxxx Xxxxxx & Brand, LLP
000 Xxxxxxxx Xxxx, #0000 0000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xx 00000 00 Xxxxx Xxxxxxx Xxxxxx
Attn: Xxxxxx X. Xxxxxxxxxxxx, President Xxxxxxxxxxx, XX 00000
Fax: 000-000-0000 Attn: Xxxxxxx X. Xxxxx, Esq.
Fax: 000-000-0000
or to such other person or address as either the Company or the Shareholders
will furnish to the other parties hereto in writing in accordance with this
subsection.
If to any Shareholder of the Company following the Merger, to the address set
forth in the representation letter executed and delivered by such shareholder
pursuant to Section 5.4(b) hereto.
If to the Parent or Merger Subsidiary With a copy to:
prior to the Merger:
Philadelphia Mortgage Corporation Xxxxxxx X. Xxxxxxxxxx, Esq.
0000 X. Xxxxx Xxxxxxx Xxx 455 East 000 Xxxxx, #000
Xxxx Xxxx Xxxx, Xxxx 00000 Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxxx Xxxxxxxx Fax: 000-000-0000
Fax: 000- 000-000-0000
or to such other person or address as Parent will furnish to the other parties
hereto in writing in accordance with this subsection.
8.7 Assignment. This Agreement and all of the provisions hereof will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder will be assigned
(whether voluntarily, involuntarily, by operation of law or otherwise) by any
of the parties hereto without the prior written consent of the other parties.
8.8 Governing Law. This Agreement and the legal relations among the
parties hereto will be governed by and construed in accordance with the
internal substantive laws of the State of Minnesota (without regard to the
laws of conflict that might otherwise apply) as to all matters, including
without limitation matters of validity, construction, effect, performance and
remedies.
8.9 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
8.10 Headings. The table of contents and the headings of the sections
and subsections of this Agreement are inserted for convenience only and will
not constitute a part hereof.
8.11 Entire Agreement. This Agreement, the Disclosure Schedule and the
exhibits and other writings referred to in this Agreement or in the Disclosure
Schedule or any such exhibit or other writing are part of this Agreement,
together they embody the entire agreement and understanding of the parties
hereto in respect of the transactions contemplated by this Agreement and
together they are referred to as this "Agreement" or the "Agreement." There
are no restrictions, promises, warranties, agreements, covenants or
undertakings, other than those expressly set forth or referred to in this
Agreement. This Agreement supersedes all prior agreements and understandings
between the parties with respect to the transaction or transactions
contemplated by this Agreement. Provisions of this Agreement will be
interpreted to be valid and enforceable under applicable Law to the extent
that such interpretation does not materially alter this Agreement; provided,
however, that if any such provision becomes invalid or unenforceable under
applicable Law such provision will be stricken to the extent necessary and the
remainder of such provisions and the remainder of this Agreement will continue
in full force and effect.
8.12 Definition of Material Adverse Effect. "Material Adverse Effect"
with respect to a party means a material adverse change in or effect on the
business, operations, financial condition, properties or liabilities of that
party taken as a whole; provided, however, that a Material Adverse Effect will
not be deemed to include (i) changes as a result of the announcement of this
transaction, (ii) events or conditions arising from changes in general
business or economic conditions or (iii) changes in generally accepted
accounting principles.
Signature Page Follows
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PHILADELPHIA MORTGAGE THUNDERBALL ENTERTAINMENT, INC.
CORPORATION
By:/s/ Xxxxxxx Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxxxxxx
Xxxxxxx Xxxxxxxx, President By: Xxxxxx X. Xxxxxxxxxxxx
Its: Chief Executive Officer
PHILADELPHIA MORTGAGE NEWCO,
INC.
By:/s/ Xxxxxxx Hamilton__________________________
Xxxxxxx Xxxxxxxx, President
Signature Page - Merger Agreement
EXHIBIT 1.3(b)
Xxxxxx Services Indemnification Agreement
EXHIBIT 1.5(e)
Issuance of new restricted Parent Common Stock
Shareholder Shares of Parent Common Shares of Restricted Parent
Stock Cancelled Pursuant Common Stock Issued
to the Agreement Pursuant to the Agreement
Xxxxxx Services, 50,000
Inc.
Xxxx Xxxxxx 41,667 41,499
Xxxxxx Xxxx 41,667 44,141
Xxxxxx X. Xxxxxx 141,076
Xxxxxx X. Xxxxxxx 141,075
Xxxxxxx X. Xxxxxxxxxx 60,000
Xxxxx X. Xxxxxx 31,350
Total 133,334 456,141
EXHIBIT 2.1
Company disclosure Schedule
EXHIBIT 3.1
Parent Disclosure Schedule
EXHIBIT 5.4(b)
Written Consent and Investment Representations Letter
