EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CHEX SERVICES, INC.,
SEVEN VENTURES NEWCO, INC.
AND
SEVEN VENTURES, INC.
April 14, 2004
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is dated as of April 14, 2004, by and among Seven
Ventures, Inc., a Nevada corporation ("PARENT"), Seven Ventures Newco, Inc., a
Minnesota corporation and wholly-owned subsidiary of Parent ("Merger
SUBSIDIARY"), and Chex Services, Inc., a Minnesota company (the "Company").
WHEREAS, the Company is in the business of providing comprehensive cash
access services to casinos, and other gaming establishments, while also
marketing their products ala carte to other establishments in the casino,
entertainment, and hospitality industries (the "BUSINESS"); and
WHEREAS, the Boards of Directors of Parent and Merger Subsidiary, and
the sole shareholder 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
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 June , 2004 (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, Parent will consummate a bridge loan with MBC Global
and its affiliated lenders whereby such lenders will loan Parent
$400,000 pursuant to a convertible promissory note bearing five percent
(5%) interest per annum and payable three years from date of closing
(the "PROMISSORY NOTE"). The Promissory Note will be convertible into
4,000,000 shares of Parent Common Stock and will contain customary
anti-dilution and other provisions. All of the conversion terms shall
be more specifically set forth in the Promissory Note. The Promissory
Note and related "Loan Agreement" are attached hereto as Exhibit
1.3(b).
(c) At Closing, Parent shall pay Xxxxxx Services, Inc., a Utah
corporation ("XXXXXX SERVICES"), the sum of $100,000 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(c).
(d) At Closing, certain pre-Merger Shareholders of Parent shall
enter into a Lock-up/Leak-out Agreement in the form attached hereto as
Exhibit 1.3(d).
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 7,700,000 shares common stock of
the Parent, par value $.001 per share ("PARENT COMMON STOCK") along
with warrants to purchase 800,000 shares of Parent Common Stock at an
exercise price of $0.10 per share with such warrants to expire five
years from the Closing Date. The amount of Parent Common Stock and
warrants into which shares of Company Common Stock is converted is
referred to herein as the "MERGER CONSIDERATION".
2
(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
3
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 85,716 shares of Parent Common
Stock issued and outstanding immediately prior to Closing and issue
329,563 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 584,670 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 immediately prior to the
Effective Time shall resign effective as of the Effective Time and the
directors of the Surviving Corporation shall be: Xxx Xxxxxxxx, Xxxx
Xxxxx and Xxxxx Xxxxxxxx. The officers of the Surviving Corporation
shall be appointed by the new directors.
(b) DIRECTORS OF THE PARENT. The directors of the Parent immediately
prior to the Effective Time shall appoint Xxxxx Xxxx, Xxxxx Xxxxxxxx
and Xxx Xxxxxxxx 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
4
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 or combination
of Parent Common Stock.
1.11 LIMITED ANTI-DILUTION RIGHTS. If, at or after the Effective Time,
Parent issues shares of Parent Common Stock the proceeds of which are applied in
full or partial satisfaction of the debt related to the Equitex Security
Agreement by and among Whitebox Hedged High Yield Partners, L.P. ("WHITEBOX"),
Pandora Select Partners, L.P. ("PANDORA") (such agreement, the "SECURITY
AGREEMENT"), and the Company dated as of March 8, 2004 (a "TRIGGERING
ISSUANCE"), then (i) all Shareholders of Parent who were Shareholders of Parent
immediately prior to the Effective Time and (ii) MBC (if then a Shareholder)
(collectively, the "PROTECTED SHAREHOLDERS"), shall immediately be entitled to
receive additional shares of Parent Common Stock in an amount such that the
percentage of Parent's aggregate issued and outstanding shares of Parent Common
Stock held by such Protected Shareholders immediately prior to the Triggering
Issuance equals such percentage immediately after the Triggering Issuance. The
parties hereby further agree and understand that, upon any Triggering Issuance,
MBC shall receive the benefits of the anti-dilution protections in this Section
1.11 upon any partial or complete conversion of the Promissory Note occurring
subsequent to any Triggering Issuance, by assuming, on the date of MBC's
exercise of its conversion rights under the Promissory Note, that such
subsequently converted portion of the Promissory Note had been converted
immediately prior to the Triggering Issuance in order to determine the aggregate
number of shares of Parent Common Stock to which MBC shall be entitled.
1.12 RELEASE OF SECURITY INTERESTS. The parties agree that Seven
Ventures and Equitex shall use their commercially reasonable best efforts to pay
in full those convertible secured promissory notes delivered in favor of
Whitebox and Pandora on March 8, 2004 (which debt underlies the Security
Agreement referenced in Section 1.11), and cause the release of the security
interests encumbering the assets of the Company, after the Effective Time but in
any event on or prior to two hundred seventy (270) days after the Effective
Time.
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.
5
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
6
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 unaudited balance sheet of the Company as of December 31, 2003 (the
"BALANCE SHEET") and an unaudited statement of income for the Company for the
twelve (12) months ended December 31, 2003 (the "INCOME STATEMENT")
(collectively, 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
7
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, 2003, 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.
8
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;
9
(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
10
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 and Merger
Subsidiary are each a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. 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
11
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
12
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.
13
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 $10,000 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, 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,
14
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 reverse stock split effected in December
2002 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;
15
(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
16
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
17
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 NAME CHANGE OF PARENT. At or prior to Closing, the Parent shall
amend its Articles of Incorporation to change the Parent name to a name to be
determined by the Company and indicated to Parent within a reasonable time
18
prior to Closing for Parent to comply with applicable laws and the provisions of
Section 4.12 below (the "NAME CHANGE").
4.11 STOCK OPTION PLAN. At the Effective Time, the Parent shall have
adopted a Stock Option Plan allocating 2,000,000 shares of common stock to be
granted pursuant to the Stock Option Plan. Such Plan shall have been approved by
shareholders of the Parent prior to Closing.
4.12 RULE 10B-17 AND 14F-1 NOTICES AND 14C INFORMATION STATEMENT.
Parent shall file (i) with the NASD at least ten (10) days prior to the
effective date of the Name Change and the appropriate notice under Rule 10b-17
of the Exchange Act, and (ii) 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. Parent shall
file the appropriate 14C Information Statement with the SEC concerning the
Merger and items approved by the Shareholders of Parent.
4.13 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.
19
(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) an investor representation and Merger consent letter in the form
of Exhibit 5.4(b) executed by 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, 2003, except as set forth on Schedule 5.5 attached
hereto.
5.6 CONSENT FROM WHITEBOX AND PANDORA. The Company shall deliver to
Parent evidence of the express written consent of Whitebox and Pandora to the
Merger, as contemplated by Section 2.6 of the Security Agreement.
5.7 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.
5.8 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.
5.9 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.
20
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 80% 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.
21
6.5 ADVERSE CHANGES. No material adverse change will have occurred in
the business, financial condition, prospects, assets or operations of Parent
since December 31, 2003.
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
22
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
23
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:
Chex Services, Inc. Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP
00000 Xxxxxxx Xxxx., Xxxxx 000 3300 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000 00 Xxxxx Xxxxxxx Xxxxxx
Attn: Xxxx Xxxxx, Chief Financial Officer Xxxxxxxxxxx, XX 00000
Fax: 000-000-0000 Attn: Xxxxxxx X. Xxxxx, Esq.
Fax: 000-000-0000
With an additional copy to:
Xxxxx Xxxx
000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxxx, XX 00000
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:
Seven Ventures, Inc. Xxxxxx X. Xxxxxxxxx, Esq.
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000 Xxxxxxxx at Law
Xxxx Xxxx Xxxx, XX 00000 0 Xxxx Xxxxxxxx, Xxxxx 000
Attn: Xxxx X. Xxxxx, President Xxxx Xxxx Xxxx, Xxxx 00000
Fax: 000-000-0000 Fax: 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.
24
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
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SEVEN VENTURES, INC. CHEX SERVICES, INC.
By: /S/ XXXX X. XXXXX By: /S/ XXXX XXXXX
---------------------------------- ------------------------------
Xxxx X. Xxxxx, President Xxxx Xxxxx,
Chief Financial Officer
SEVEN VENTURES NEWCO, INC.
By: /S/ XXXX X. XXXXX
----------------------------------
Xxxx X. Xxxxx, President
SIGNATURE PAGE - MERGER AGREEMENT
