AGREEMENT AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER, dated as of February 7, 2008 (the “Agreement”), among
Splinternet Holdings, Inc., a Delaware corporation (“Splinternet”), Splinternet
Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of
Splinternet (“Merger Sub”), and Vidiation, Inc., a Delaware corporation (the
“Company”). Splinternet, Merger Sub and the Company are collectively referred to
herein as the “Parties.” Splinternet and Merger Sub are sometimes referred to
herein collectively as the “Splinternet Parties.”
RECITALS:
WHEREAS,
the respective boards of directors of each of Splinternet, Merger Sub and the
Company have approved the merger of Merger Sub with and into the Company (the
“Merger”) upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS,
it is intended that, for federal income tax purposes, the Merger shall qualify
as a reorganization under the provisions of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder (the “Code”); and
WHEREAS,
the Company, Splinternet and Merger Sub desire to make certain representations,
warranties, covenants and agreements in connection with this
Agreement.
NOW,
THEREFORE, in consideration of the premises and mutual promises herein made,
and
in consideration of the representations, warranties, covenants and agreements
herein contained, and intending to be legally bound hereby, the Parties agree
as
follows:
ARTICLE
I
DEFINITIONS
1.1 Certain
Definitions.
In
addition to other terms defined elsewhere herein, the following terms shall,
when used in this Agreement, have the following meanings:
“Acquisition”
means the acquisition by a Person of any businesses, assets or property other
than in the ordinary course, whether by way of the purchase of assets or stock,
by merger, consolidation or otherwise.
“Affiliate”
means, with respect to any Person: (i) any Person directly or indirectly owning,
controlling, or holding with power to vote 10% or more of the outstanding voting
securities of such other Person (other than passive or institutional investors);
(ii) any Person 10% or more of whose outstanding voting securities are directly
or indirectly owned, controlled, or held with power to vote, by such other
Person; (iii) any Person directly or indirectly controlling, controlled by,
or
under common control with such other Person; and (iv) any officer, director
or
partner of such other Person. “Control” for the foregoing purposes shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities or voting interests, by contract or
otherwise.
“Business
Day” means any day other than Saturday, Sunday or a day on which banking
institutions in New York, New York, are required or authorized to be
closed.
“Code”
means the United States Internal Revenue Code of 1986, as amended.
“Collateral
Documents” mean the Exhibits and any other documents, instruments and
certificates to be executed and delivered by the Parties hereunder or
thereunder.
“Commission”
means the Securities and Exchange Commission or any Regulatory Authority that
succeeds to its functions.
“Company
Assets” mean all properties, assets, privileges, powers, rights, interests and
claims of every type and description that are owned, leased, held, used or
useful in the Company Business and in which the Company has any right, title
or
interest or in which the Company acquires any right, title or interest on or
before the Closing Date, wherever located, whether known or unknown, and whether
or not now or on the Closing Date on the books and records of the Company,
but
excluding any of the foregoing, if any, transferred prior to the Closing
pursuant to this Agreement or any Collateral Documents.
“Company
Business” means the business conducted by the Company.
“Company
Common Stock” means the common shares of the Company.
“Company
Shareholders” means, as of any particular date, the holders of Company Common
Stock on that date.
“Encumbrance”
means any material mortgage, pledge, lien, encumbrance, charge, security
interest, security agreement, conditional sale or other title retention
agreement, limitation, option, assessment, restrictive agreement, restriction,
adverse interest, restriction on transfer or exception to or material defect
in
title or other ownership interest (including restrictive covenants, leases
and
licenses).
“ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.
“Legal
Requirement” means any statute, ordinance, law, rule, regulation, code,
injunction, judgment, order, decree, ruling, or other requirement enacted,
adopted or applied by any Regulatory Authority, including judicial decisions
applying common law or interpreting any other Legal Requirement.
“Losses”
shall mean all damages, awards, judgments, assessments, fines, sanctions,
penalties, charges, costs, expenses, payments, diminutions in value and other
losses, however suffered or characterized, all interest thereon, all costs
and
expenses of investigating any claim, lawsuit or arbitration and any appeal
therefrom, all actual attorneys’, accountants’ investment bankers’ and expert
witness’ fees incurred in connection therewith, whether or not such claim,
lawsuit or arbitration is ultimately defeated and, subject to Section 9.4,
all
amounts paid incident
to
any
compromise or settlement of any such claim, lawsuit or arbitration.
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“Liability”
means any liability or obligation (whether known or unknown, whether asserted
or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
“Material
Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, properties or business of the Parties, (ii) the validity,
binding effect or enforceability of this Agreement or the Collateral Documents
or (iii) the ability of any Party to perform its obligations under this
Agreement and the Collateral Documents; provided, however, that none of the
following shall constitute a Material Adverse Effect on the Company: (a)
occurrences due to a disruption of a Party’s business as a result of the
announcement of the execution of this Agreement or changes caused by the taking
of action required by this Agreement, (b) general economic conditions, or (c)
any changes generally affecting the industries in which a Party
operates.
“Merger
Shares” means the shares of Splinternet Common Stock deliverable by Splinternet
in exchange for Company Common Stock pursuant to Section 2.5(a).
“Permit”
means any license, permit, consent, approval, registration, authorization,
qualification or similar right granted by a Regulatory Authority.
“Person”
means any natural person, corporation, partnership, trust, unincorporated
organization, association, limited liability company, Regulatory Authority
or
other entity.
“Regulatory
Authority” means: (i) the United States of America; (ii) any state,
commonwealth, territory or possession of the United States of America and any
political subdivision thereof (including counties, municipalities and the like);
(iii) Canada and any other foreign (as to the United States of America)
sovereign entity and any political subdivision thereof; or (iv) any agency,
authority or instrumentality of any of the foregoing, including any court,
tribunal, department, bureau, commission or board.
“Representative”
means any director, officer, employee, agent, consultant, advisor or other
representative of a Person, including legal counsel, accountants and financial
advisors.
“Splinternet
Common Stock” means the common shares of Splinternet.
“Splinternet
Securities Filings” means Splinternet’s Annual Report on Form 10-KSB and its
quarterly reports on Form 10-QSB, and all other reports filed and to be filed
with the Commission prior to the Effective Time.
“Subsidiary”
of a specified Person means (a) any Person if securities having ordinary voting
power (at the time in question and without regard to the happening of any
contingency) to elect a majority of the directors, trustees, managers or other
governing body of such Person are held or controlled by the specified Person
or
a Subsidiary of the specified Person; (b) any Person in which the specified
Person and its subsidiaries collectively hold a 50% or greater equity interest;
(c) any partnership or similar organization in which the specified Person or
subsidiary of the specified Person is a general partner; or (d) any Person
the
management of which is directly or indirectly controlled by the specified Person
and its Subsidiaries through the exercise of voting power, by contract or
otherwise.
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“Tax”
means any U.S. or non U.S. federal, state, provincial, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, intangible property, recording,
occupancy, sales, use, transfer, registration, value added minimum, estimated
or
other tax of any kind whatsoever, including any interest, additions to tax,
penalties, fees, deficiencies, assessments, additions or other charges of any
nature with respect thereto, whether disputed or not.
“Tax
Return” means any return, declaration, report, claim for refund or credit or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
ARTICLE
II
THE
MERGER
2.1 Merger;
Surviving Corporation.
In
accordance with and subject to the provisions of this Agreement and the General
Corporation Law of the State of Delaware (“GCL”), at the Effective Time (as
defined in Section 2.4), the Merger Sub shall be merged with and into the
Company (the “Merger”), and the Company shall be the surviving corporation in
the Merger (hereinafter sometimes called the “Surviving Corporation”) and shall
continue its corporate existence under the laws of the State of Delaware. At
the
Effective Time, the separate existence of the Merger Sub shall cease. All
properties, franchises and rights belonging to the Company and Merger Sub,
by
virtue of the Merger and without further act or deed, shall be vested in the
Surviving Corporation, which shall thenceforth be responsible for all the
liabilities and obligations of each of Merger Sub and the Company.
2.2 Articles
of Incorporation.
The
Company’s certificate of incorporation, as in effect at the Effective Time,
shall continue in full force and effect as the certificate of incorporation
of
the Surviving Corporation until altered or amended as provided therein or by
law.
2.3 By-Laws.
The
Company’s by-laws, as in effect at the Effective Time, shall be the by-laws of
the Surviving Corporation until altered, amended or repealed as provided therein
or by law.
2.4 Effective
Time.
The
Merger shall become effective at the time and date that the certificate of
merger (the “Certificate of Merger”), in form and substance acceptable to the
Parties and executed in accordance with the relevant provisions of the GCL,
is
accepted for filing by the Secretary of State of the State of Delaware in
accordance with the provisions of the GCL. The date and time when the Merger
becomes effective are referred to herein as the “Effective Time.”
2.5 Merger
Shares; Conversion and Cancellation of Securities.
(a) Conversion
of Company Common Stock.
At the
Effective Time, all shares of Company Common Stock outstanding immediately
before the Effective Time, other than shares described in Section 2.5(b) and
other than Dissenting Shares (as defined in Section 2.8), collectively, the
“Excluded Shares”, shall be converted, by virtue of the Merger, into 4,788,179
shares of Splinternet Common Stock (the “Merger Shares”), subject to the
following:
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(i) the
allocation of the Merger Shares among the Company Shareholders excluding the
holders of Dissenting Shares shall be as set forth on Exhibit 2.5 to be
delivered to Splinternet at least one business day prior to the
Closing;
(ii) if
between the date of this Agreement and the Closing Date, Splinternet shall
declare a stock split or declare a dividend on Splinternet Common Stock payable
in Splinternet Common Stock (or set a record date with respect thereto), the
number of Merger Shares be adjusted to reflect fully the appropriate effect
of
any such subdivision, combination or dividend.
At
the
Effective Time, all Company Common Stock shall no longer be outstanding and
shall be cancelled and retired and shall cease to exist, and each certificate
formerly representing any Company Common Stock (other than Excluded Shares)
shall thereafter represent only the right to the Merger Shares and any
distribution or dividend pursuant to Section 2.6(b).
(b) Treasury
Shares, Etc.
Each
share of Company Common Stock held in the treasury of the Company (and each
share of Company Common Stock, if any, held by Splinternet or any Subsidiary
of
Splinternet or of the Company immediately before the Effective Time) shall
be
cancelled and extinguished, and nothing shall be issued or paid in respect
thereof.
(c) Fractional
Shares.
No
certificates or scrip evidencing fractional shares of Splinternet Common Stock
shall be issued in exchange for Company Common Stock. All fractional share
amounts shall be rounded
up to the nearest whole share.
(d) Capital
Stock of Merger Sub.
Each
share of common stock of the Merger Sub issued and outstanding immediately
before the Effective Time shall be converted into and become, and shall
represent, one fully-paid and nonassessable share of common stock of the
Surviving Corporation, and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
2.6 Surrender
of Company Certificates.
(a) Exchange
Procedures.
Promptly after the Effective Time, Splinternet or its appointed designee shall
mail to each holder of a certificate or certificates of Company Common Stock
(“Company Certificates”) whose shares are converted into the right to receive
the Merger Shares, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass to Splinternet, only upon delivery of the Company
Certificates to Splinternet and which shall be in such form and have such other
provisions as Splinternet may reasonably specify) and (ii) instructions for
use
in effecting the surrender of the Company Certificates in exchange for the
Merger Shares and any dividends or other distributions pursuant to
Section 2.6(b). Upon surrender of Company Certificates for cancellation to
Splinternet, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, the holders of
such Company Certificates shall be entitled to receive the Merger Shares in
exchange therefor and any dividends or distributions payable pursuant to
Section 2.6(b), and the Company Certificates so surrendered shall forthwith
be canceled. Until so surrendered, outstanding Company Certificates will be
deemed from and after the Effective Time, for all corporate purposes, subject
to
Section 2.8, to evidence the ownership of the number of full shares of
Splinternet Common Stock into which such shares of the Company Common Stock
shall have been so converted and any dividends or distributions payable pursuant
to Section 2.6(b).
Notwithstanding the foregoing, if any Company Certificate is lost, stolen,
destroyed or mutilated, such holder shall provide evidence reasonably
satisfactory to Splinternet as to such loss, theft, destruction or mutilation
and an affidavit in form and substance satisfactory to Splinternet, and,
thereupon, such holder shall be entitled to receive the Merger Shares in
exchange therefore and any dividends or distributions payable pursuant to
Section 2.6(b), and the Company Certificates so surrendered shall forthwith
be canceled.
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(b) Distributions
With Respect to Unexchanged Shares.
No
dividends or other distributions declared or made after the date of this
Agreement with respect to Splinternet Common Stock with a record date after
the
Effective Time, will be paid to the holders of any unsurrendered Company
Certificates with respect to the shares of Splinternet Common Stock represented
thereby until the holders of record of such Company Certificates shall surrender
such Company Certificates or, in the case of any Company Certificate which
is
lost, stolen, destroyed or mutilated, an affidavit in form and substance
satisfactory to Splinternet. Subject to applicable law, following surrender
of
any such Company Certificates or delivery of such affidavit, Splinternet shall
deliver to the record holders thereof, without interest, the Merger Shares
hereof and the amount of any such dividends or other distributions with a record
date after the Effective Time payable with respect to such whole shares of
Splinternet Common Stock.
(c) Transfers
of Ownership.
If
certificates for shares of Splinternet Common Stock are to be issued in a name
other than that in which the Company Certificates surrendered in exchange
therefore are registered, it will be a condition of the issuance thereof that
the Company Certificates so surrendered will be properly endorsed and otherwise
in proper form for transfer and that the persons requesting such exchange will
have paid to Splinternet or any agent designated by it any transfer or other
taxes required by reason of the issuance of certificates for shares of
Splinternet Common Stock in any name other than that of the registered holder
of
the Company Certificates surrendered, or established to the satisfaction of
Splinternet or any agent designated by it that such tax has been paid or is
not
payable.
(d) Required
Withholding.
In
connection with any payment to any holder or former holder of the Company Common
Stock, each of Splinternet and the Surviving Corporation shall be entitled
to
deduct and withhold from any consideration payable or otherwise deliverable
pursuant to this Agreement to any holder or former holder of the Company Common
Stock such amounts as may be required to be deducted or withheld therefrom
under
the Code or under any provision of state, local or foreign tax law or under
any
other applicable laws. To the extent such amounts are so deducted or withheld,
such amounts shall be treated for all purposes under this Agreement as having
been paid to the person to whom such amounts would otherwise have been
paid.
(e) No
Liability.
Notwithstanding anything to the contrary in this Section 2.6, neither
Splinternet, the Surviving Corporation nor any party hereto shall be liable
to
any Person for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Company
Certificate shall not have been surrendered prior to the date immediately prior
to the date on which such property would otherwise escheat to or become the
property of any Governmental or Regulatory Authority, any such property, to
the
extent permitted by applicable law, shall become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
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(f) Termination.
Any
holders of the Company Certificates who have not complied with this ARTICLE
II
shall
look only to Splinternet or the Surviving Corporation for, and Splinternet
and
the Surviving Corporation shall remain liable for, payment of their claim for
Merger Shares and any dividends or distributions with respect to Splinternet
Common Stock, without interest thereon.
2.7 Stock
Transfer Books.
At
the
Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers of shares of Company Common
Stock thereafter on the records of the Company.
2.8 Dissenting
Shares.
Shares
of
Company Common Stock which are issued and outstanding immediately prior to
the
Effective Time and which are held by persons who have properly exercised, and
not withdrawn or waived, appraisal rights with respect thereto in accordance
with the GCL (the “Dissenting Shares”), will not be converted into the right to
receive the Merger Shares, and holders of such shares of Company Common Stock
will be entitled, in lieu thereof, to receive payment of the appraised value
of
such shares of Company Common Stock in accordance with the provisions of the
GCL
unless and until such holders fail to perfect or effectively withdraw or lose
their rights to appraisal and payment under the GCL. If, after the Effective
Time, any such holder fails to perfect or effectively withdraws or loses such
right, such shares of Company Common Stock will thereupon be treated as if
they
had been converted at the Effective Time into the right to receive the Merger
Shares, without any interest thereon. The Company will give Splinternet prompt
notice of any demands received by the Company for appraisal of shares of Company
Common Stock. Prior to the Effective Time, the Company will not, except with
the
prior written consent of Splinternet make any payment with respect to, or settle
or offer to settle, any such demands.
2.9 Restriction
on Transfer.
The
Merger Shares may not be sold, transferred, or otherwise disposed of without
registration under the Act or an exemption therefrom, and that in the absence
of
an effective registration statement covering the Merger Shares or any available
exemption from registration under the Act, the Merger Shares must be held
indefinitely. The Company Shareholders are aware that the Merger Shares may
not
be sold pursuant to Rule 144 promulgated under the Act unless all of the
conditions of that Rule are met. Among the conditions for use of Rule 144 may
be
the availability of current information to the public about
Splinternet.
2.10 Closing.
The
closing of the transactions contemplated by this Agreement and the Collateral
Documents (the “Closing”) shall take place at the offices of Splinternet, or at
such other location as the parties may agree on such date which is no
later
than five (5) business days following completion of the actions described in
ARTICLES V and VI below, or on such other date as shall be mutually agreed
upon
by the parties hereto (the actual time and date of closing being hereinafter
referred to as the “Closing Date”).
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ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to Splinternet that the statements contained
in
this ARTICLE
III
are
correct and complete as of the date of this Agreement and, except as provided
in
Section 5.1, will be correct and complete in all material respects as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this ARTICLE
III,
except
in the case of representations and warranties stated to be made as of the date
of this Agreement or as of another date and except for changes contemplated
or
permitted by this Agreement).
3.1 Organization
and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization. The Company has all
requisite power and authority to own, lease and use its assets as they are
currently owned, leased and used and to conduct its business as it is currently
conducted. The Company is duly qualified or licensed to do business in and
is in
good standing in each jurisdiction in which the character of the properties
owned, leased or used by it or the nature of the activities conducted by it
make
such qualification necessary, except any such jurisdiction where the failure
to
be so qualified or licensed would not have a Material Adverse Effect on the
Company or a material adverse effect on the validity, binding effect or
enforceability of this Agreement or the Collateral Documents or the ability
of
the Company to perform its obligations under this Agreement or any of the
Collateral Documents.
3.2 Capitalization.
(a) The
authorized, issued and outstanding capital stock and other ownership interests
of the Company consists of 10,000,000 shares of common stock, of
which 3,591,134 shares were outstanding as of the date hereof. All of the
outstanding Company capital stock has been duly authorized and are validly
issued, fully paid and nonassessable.
(b) Listed
in
Item 3.2(b) to the disclosure schedule delivered by the Company to Splinternet
(the “Company Disclosure Schedule”) are all issued and outstanding Company
Common Stock, and all outstanding or authorized options, warrants, purchase
rights, preemptive rights or other contracts or commitments that could require
the Company to issue, sell, or otherwise cause to become outstanding any of
its
capital stock or other ownership interests (collectively
“Options”).
(c) All
of
the issued and outstanding shares of Company Common Stock have been duly
authorized and are validly issued and outstanding, fully paid and nonassessable
and have been issued in compliance with applicable securities laws and other
applicable Legal Requirements or transfer restrictions under applicable
securities laws.
3.3 Authority
and Validity.
The
Company has all requisite corporate power to execute and deliver, to perform
its
obligations under, and to consummate the transactions contemplated by, this
Agreement (subject to the approval of the Company Shareholders as contemplated
by Section 9.3). The execution and delivery by the Company of, the performance
by the Company of its obligations under, and the consummation by the Company
of
the transactions contemplated by, this Agreement have been duly authorized
by
all requisite action of the Company (subject to the approval of the Company
Shareholders as contemplated by Section 9.3). This Agreement has been duly
executed and delivered by the Company and (assuming due execution and delivery
by the Splinternet Parties and approval by the Company Shareholders) is the
legal, valid, and binding obligation of the Company, enforceable against it
in
accordance with its terms, except that such enforcement may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors’ rights generally and (ii)
general equitable principles. Upon the execution and delivery of the Collateral
Documents by each Person (other than the Splinternet Parties) that is required
by this Agreement to execute, or that does execute, this Agreement or any of
the
Collateral Documents, and assuming due execution and delivery thereof by the
Splinternet Parties, the Collateral Documents will be the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors’ rights generally
and (ii) general equitable principles.
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3.4 No
Breach or Violation.
Subject
to obtaining the consents, approvals, authorizations, and orders of and making
the registrations or filings with or giving notices to Regulatory Authorities
and Persons identified herein, the execution, delivery and performance by the
Company of this Agreement and the Collateral Documents to which it is a party,
and the consummation of the transactions contemplated hereby and thereby in
accordance with the terms and conditions hereof and thereof, do not and will
not
conflict with, constitute a violation or breach of, constitute a default or
give
rise to any right of termination or acceleration of any right or obligation
of
the Company under, or result in the creation or imposition of any Encumbrance
upon the Company, the Company Assets, the Company Business or the Company Common
Stock by reason of the terms of (i) the articles of incorporation, by-laws
or
other charter or organizational document of the Company or any Subsidiary of
the
Company, (ii) any material contract, agreement, lease, indenture or other
instrument to which the Company is a party or by or to which the Company, or
the
Assets may be bound or subject and a violation of which would result in a
Material Adverse Effect on the Company, (iii) any order, judgment, injunction,
award or decree of any arbitrator or Regulatory Authority or any statute, law,
rule or regulation applicable to the Company or (iv) any Permit of the Company,
which in the case of (ii), (iii) or (iv) above would have a Material Adverse
Effect on the Company or a material adverse effect on the validity, binding
effect or enforceability of this Agreement or the Collateral Documents or the
ability of the Company to perform its obligations under this Agreement or any
of
the Collateral Documents.
3.5 Consents
and Approvals.
Except
for requirements described in Item 3.5 of the Company Disclosure Schedule,
no
consent, approval, authorization or order of, registration or filing with,
or
notice to, any Regulatory Authority or any other Person is necessary to be
obtained, made or given by the Company in connection with the execution,
delivery and performance by the Company of this Agreement or any Collateral
Document or for the consummation by the Company of the transactions contemplated
hereby or thereby, except to the extent the failure to obtain any such consent,
approval, authorization or order or to make any such registration or filing
would not have a Material Adverse Effect on the Company or a material adverse
effect on the validity, binding effect or enforceability of this Agreement
or
the Collateral Documents or the ability of the Company to perform its
obligations under this Agreement or any of the Collateral
Documents.
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3.6 Intellectual
Property.
The
Company has good title to or the right to use all material company intellectual
property rights and all material inventions, processes, designs, formulae,
trade
secrets and know-how necessary for the operation of the Company Business without
the payment of any royalty or similar payment.
Item 3.6
of the Company Disclosure Schedule lists all patents, trade names, trademarks
and service marks, all patent, trademark and service xxxx registrations or
applications, presently owned, possessed, used or held by the Company and all
copyrights and copyright applications and registrations, relating to the
business of the Company, all of which are collectively referred to as the
“Proprietary Rights”. Item 3.6 of the Company Disclosure Schedule also lists all
licenses, if any granted by or to the Company. Except as set forth in Item
3.6
of the Company Disclosure Schedule, the Company has not granted to any person,
firm or corporation, any right, license or privilege in any of the Proprietary
Rights or the know-how used in the business of the Company nor have such
Proprietary Rights or know-how been revealed to any persons other that its
employees, customers and consultants. No Proprietary Rights or applications
or
grants of licenses set forth in Item 3.6 of the Company Disclosure Schedule
are
subject to any pending or threatened challenge.
3.7 Compliance
with Legal Requirements.
The
Company has operated the Company Business in compliance with all Legal
Requirements applicable to the Company except to the extent the failure to
operate in compliance with all material Legal Requirements would not have a
Material Adverse Effect on the Company or Material Adverse Effect on the
validity, binding effect or enforceability of this Agreement or the Collateral
Documents.
3.8 Financial
Statements.
At the
earliest possible time prior to the Closing Date, the Company shall deliver
to
Splinternet the following financial statements of the Company which shall have
been audited by an independent certified public accounting firm and which shall
be presented in accordance with United States generally accepted accounting
principles applied on a basis consistent throughout the periods presented:
Balance Sheet as at a date (the “Balance Sheet Date”) no more than forty-five
(45) days prior to the Closing Date, and Statements of Income, Statements of
Cash Flows and Changes in Stockholder’s Equity for the periods then ended , and
the notes relating thereto (the “Company Audited Financial Statements”). In
addition, the Company shall deliver any other financial statements deemed
necessary by Splinternet or its advisors in order to comply with requirements
of
the Exchange Act. All of the financial statements to be delivered pursuant
hereto will be complete and accurate and present fairly the financial position
of the Company and the results of its operations and changes in its financial
positions as of the dates and for the periods indicated as being covered
thereby.
3.9 Litigation.
Except
as set forth on Item 3.9 of the Company Disclosure Schedule, there
are
no outstanding judgments or orders against or otherwise affecting or related
to
the Company, the Company Business or the Company Assets and there is no action,
suit, complaint, proceeding or investigation, judicial, administrative or
otherwise, that is pending or, to the Company’s knowledge, threatened that, if
adversely determined, would have a Material Adverse Effect on the Company or
a
material adverse effect on the validity, binding effect or enforceability of
this Agreement or the Collateral Documents.
3.10 Taxes.
The
Company has duly and timely filed in proper form all Tax Returns for all Taxes
required to be filed with the appropriate Regulatory Authority, and has paid
all
Taxes required to be paid in respect thereof except where such failure would
not
have a Material Adverse Effect on the Company.
10
3.11 Books
and Records.
The
books
and records of the Company accurately and fairly represent the Company Business
and its results of operations in all material respects. All accounts receivable
and inventory of the Company Business are reflected properly on such books
and
records in all material respects.
3.12 Brokers
or Finders.
All
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried out by the Company or any of its Affiliates in connection
with
the transactions contemplated by this Agreement, and neither the Company, nor
any of its Affiliates has incurred any obligation to pay any brokerage or
finder’s fee or other commission in connection with the transaction contemplated
by this Agreement.
3.13 Proxies.
Company
management holds, or prior to the Closing will hold, irrevocable proxies from
the Company Shareholders adequate to ensure Company Shareholder approval of
the
Merger as required by applicable law.
3.14 No
Undisclosed Liabilities.
Except
as set forth as Item 3.14 of the Company Disclosure Schedule, the Company is
not
subject to any liability (including, to Company’s knowledge, unasserted claims),
absolute or contingent, which is not shown or which is in excess of amounts
shown or reserved for in the Company Audited Financial Statements.
3.15 Absence
of Certain Changes.
Except
as set forth as Item 3.15 of the Company Disclosure Schedule hereto since the
Balance Sheet Date, the Company has not: (a) suffered any material adverse
change in its financial condition, assets, liabilities or business; (b) except
in the ordinary course of business, contracted for or paid any capital
expenditures; (c) incurred any indebtedness or borrowed money, issued or sold
any debt or equity securities, declared any dividends or discharged or incurred
any liabilities or obligations except in the ordinary course of business as
heretofore conducted; (d) mortgaged, pledged or subjected the Company to any
lien, lease, security interest or other charge or encumbrance any of its
properties or assets; (e) paid any material amount on any indebtedness prior
to
the due date, forgiven or cancelled any material amount on any indebtedness
prior to the due date, forgiven or cancelled any material debts or claims or
released or waived any material rights or claims; (f) suffered any damage or
destruction to or loss of any assets (whether or not covered by insurance);
(g)
except in the ordinary course of business, acquired or disposed of any assets
or
incurred any liabilities or obligations; (h) made any payments to its affiliates
or associates or loaned any money to any person or entity; (i) formed or
acquired or disposed of any interest in any corporation, partnership, limited
liability company, joint venture or other entity; (j) except in the ordinary
course of business, entered into any employment, compensation, consulting or
collective bargaining agreement or any other agreement of any kind or nature
with any person or group, or modified or amended in any respect the terms of any
such existing agreement; (k) entered into any other commitment or transaction
or
experience any other event that relates to or affect in any way this Agreement
or to the transactions contemplated hereby, or that has affected, or may
adversely affect the Company’s business, operations, assets, liabilities or
financial condition; or (1) amended its certificate of incorporation or By-laws,
except as otherwise contemplated herein.
11
3.16 Contracts.
Item
3.16 of the Company Disclosure Schedule is a true and complete list of all
contracts, agreements, leases, commitments or other understandings or
arrangements, written or oral, express or implied, to which the Company is
a
party or by which it or any of its property is bound or affected (the
“Contracts”). Except as set forth as Item 3.16 of the Company Disclosure
Schedule, the Company has complied with and performed, in all material respects,
all of its obligations required to be performed under and is not in default
with
respect to any of the Contracts, as of the date hereof, nor has any event
occurred which has not been cured which, with or without the giving of notice,
lapse of time, or both, would constitute a default in any respect thereunder.
To
the best knowledge of the Company, no other party has failed to comply with
or
perform, in all material respects, any of its obligations required to be
performed under or is in material default with respect to any such Contracts,
as
of the date hereof, nor has any event occurred which, with or without the giving
of notice, lapse of time or both, would constitute a material default in any
respect by such party thereunder. Except as set forth as Item 3.16 of the
Company Disclosure Schedule, the Company knows of no and has no reason to
believe that there are any facts or circumstances which would make a material
default by any party to any contract or obligation likely to occur subsequent
to
the date hereof.
3.17 Permits
and Licenses.
The
Company has all certificates of occupancy, rights, permits, certificates,
licenses, franchises, approvals and other authorizations as are reasonably
necessary to conduct its business and to own, lease, use, operate and occupy
its
assets, at the places and in the manner now conducted and operated, except
those
the absence of which would not materially adversely affect its business. The
Company has not received any written or oral notice or claim pertaining to
the
failure to obtain any material permit, certificate, license, approval or other
authorization required by any federal, state or local agency or other regulatory
body, the failure of which to obtain would materially and adversely affect
its
business.
3.18 Assets
Necessary to Business.
The
Company owns or leases all properties and assets, real, personal, and mixed,
tangible and intangible, and is a party to all licenses, permits and other
agreements necessary to permit it to carry on its business as presently
conducted. Item 3.18 of the Company Disclosure Schedule lists all of the
material properties and assets of the Company and all material contracts to
which it is a party or by which it is bound. Prior to Closing, the Company
will
make all records available to Splinternet with respect to all such material
contracts.
3.19 Labor
Agreements and Labor Relations.
The
Company has no collective bargaining or union contracts or agreements. The
Company is in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practices; to the Company’s knowledge,
there are no charges of discrimination or unfair labor practice charges or
complaints against the Company pending or threatened before any governmental
or
regulatory agency or authority; and, there is no labor strike, dispute, slowdown
or stoppage actually pending or threatened against or affecting the
Company.
3.20 Employment
Arrangements.
Except
as set forth as Item 3.20 of the Company Disclosure Schedule hereto, the Company
has no employment or consulting agreements or arrangements, written or oral,
which are not terminable at the will of the Company, or any pension,
profit-sharing, option, other incentive plan, or any other type of employment
benefit plan as defined in ERISA or otherwise, or any obligation to or customary
arrangement with employees for bonuses, incentive compensation, vacations,
severance pay, insurance or other benefits. No employee of the Company is in
violation of any employment agreement or restrictive covenant.
12
3.21 Affiliate
Transactions.
Except
as set forth in Item 3.21 of the Company Disclosure Schedule, no officer,
director or employee of the Company (or any of the relatives or affiliates
of
any of the aforementioned persons) is a party to any agreement, contract,
commitment or transaction with the Company or affecting the business of the
Company, or has any interest in any property, whether real, personal or mixed,
or tangible or intangible, used in or necessary to the Company which will
subject the Company to any liability or obligation from and after the Effective
Time.
3.22
Restrictive
Agreements.
There
is no agreement (non-compete or otherwise), commitment, judgment, injunction,
order or decree to which the Company is a party or otherwise binding upon the
Company which would have a material adverse effect on the Company’s business.
Except as set forth in Item 3.22 of the Company Disclosure Schedule, the Company
has not entered into any agreement under which the Company is restricted from
selling, licensing or otherwise distributing any of its products to or providing
services to, customers or potential customers or any class of customers, in
any
geographic areas, during any period of time or in any segment of the market.
3.23 Disclosure.
No
representation or warranty of the Company in this Agreement or in the Collateral
Documents and no statement in any certificate furnished or to be furnished
by
the Company pursuant to this Agreement contained, contains or will contain
on
the date such agreement or certificate was or is delivered, or on the Closing
Date, any untrue statement of a material fact, or omitted, omits or will omit
on
such date to state any material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not
misleading.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE SPLINTERNET
PARTIES
Each
of
the Splinternet Parties, jointly and severally, represent and warrant to the
Company that the statements contained in this ARTICLE
IV
are
correct and complete as of the date of this Agreement and, except as provided
in
Section 6.1, will be correct and complete in all material respects as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this ARTICLE
IV,
except
in the case of representations and warranties stated to be made as of the date
of this Agreement or as of another date and except for changes contemplated
or
permitted by the Agreement).
4.1 Organization
and Qualification.
Each
of
Splinternet and Merger Sub is a corporation duly organized, validly existing
and
in good standing under the laws of Delaware. Each of Splinternet and Merger
Sub
has all requisite power and authority to own, lease and use its assets as they
are currently owned, leased and used and to conduct its business as it is
currently conducted. Both Splinternet and Merger Sub are duly qualified or
licensed to do business in and are each in good standing in each jurisdiction
in
which the character of the properties owned, leased or used by it or the nature
of the activities conducted by it makes such qualification necessary, except
any
such jurisdiction where the failure to be so qualified or licensed and in good
standing would not have a Material Adverse Effect on Splinternet or a Material
Adverse Effect on the validity, binding effect or enforceability of this
Agreement or the Collateral Documents or the ability of the Company or any
of
the Splinternet Parties to perform their obligations under this Agreement or
any
of the Collateral Documents.
13
4.2 Capitalization.
(a) As
of the
date hereof, the authorized capital stock of Splinternet consists of 90,000,000
shares of common stock $0.001 par value of which there are 56,715,000 shares
outstanding, and 10,000,000 shares of Preferred Stock, $0.001 par value of
which
there are no shares outstanding. The shares of Splinternet Common Stock included
in the Merger Shares, when issued in accordance with this Agreement, will have
been duly authorized, validly issued and outstanding and will be fully paid
and
nonassessable.
(b) As
of the
date hereof, the authorized capital stock of Merger Sub consists of 100 shares
of common stock no par value of which there are 100 shares outstanding. Each
outstanding share of Merger Sub is duly authorized, validly issued and
outstanding and will be fully paid and nonassessable and is owned by
Splinternet.
(c) Listed
in
Item 4.2(c) to the disclosure schedule delivered by Splinternet to the Company
(the “Splinternet Disclosure Schedule”) are all outstanding or authorized
options, warrants, purchase rights, preemptive rights or other contracts or
commitments that could require Splinternet or any of its Subsidiaries to issue,
sell, or otherwise cause to become outstanding any of its capital stock or
other
ownership interests.
(d) All
of
the issued and outstanding shares of Splinternet Common Stock have been duly
authorized and are validly issued and outstanding, fully paid and nonassessable
and have been issued in compliance with applicable securities laws and other
applicable Legal Requirements.
4.3 Authority
and Validity.
Each
Splinternet Party has all requisite power to execute and deliver, to perform
its
obligations under, and to consummate the transactions contemplated by, this
Agreement and the Collateral Documents. The execution and delivery by each
Splinternet Party of, the performance by each Splinternet Party of its
respective obligations under, and the consummation by the Splinternet Parties
of
the transactions contemplated by, this Agreement and the Collateral Documents
have been duly authorized by all requisite action of each Splinternet Party.
This Agreement has been duly executed and delivered by each of the Splinternet
Parties and (assuming due execution and delivery by the Company) is the legal,
valid and binding obligation of each Splinternet Party, enforceable against
each
of them in accordance with its terms except that such enforcement may be subject
to (i) bankruptcy, insolvency, reorganization, moratorium or other similar
laws
affecting or relating to enforcement of creditors’ rights generally and (ii)
general equitable principles. Upon the execution and delivery by each of the
Splinternet Parties of the Collateral Documents to which each of them is a
party, and assuming due execution and delivery thereof by the other parties
thereto, the Collateral Documents will be the legal, valid and binding
obligations of each such Person, as the case may be, enforceable against each
of
them in accordance with their respective terms except that such enforcement
may
be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors’ rights generally
and (ii) general equitable principles.
14
4.4 No
Breach or Violation.
Subject
to obtaining the consents, approvals, authorizations, and orders of and making
the registrations or filings with or giving notices to Regulatory Authorities
and Persons identified herein, the execution, delivery and performance by the
Splinternet Parties of this Agreement and the Collateral Documents to which
each
is a party and the consummation of the transactions contemplated hereby and
thereby in accordance with the terms and conditions hereof and thereof, do
not
and will not conflict with, constitute a violation or breach of, constitute
a
default or give rise to any right of termination or acceleration of any right
or
obligation of any Splinternet Party under, or result in the creation or
imposition of any Encumbrance upon the property of Splinternet or Merger Sub
by
reason of the terms of (i) the articles of incorporation, by-laws or other
charter or organizational document of any Splinternet Party, (ii) any contract,
agreement, lease, indenture or other instrument to which any Splinternet Party
is a party or by or to which any Splinternet Party or their property may be
bound or subject and a violation of which would result in a Material Adverse
Effect on Splinternet taken as a whole, (iii) any order, judgment, injunction,
award or decree of any arbitrator or Regulatory Authority or any statute, law,
rule or regulation applicable to any Splinternet Party or (iv) any Permit of
Splinternet or Merger Sub, which in the case of (ii), (iii) or (iv) above would
have a Material Adverse Effect on Splinternet or a material adverse effect
on
the validity, binding effect or enforceability of this Agreement or the
Collateral Documents or the ability of any Splinternet Party to perform its
obligations hereunder or thereunder.
4.5 Consents
and Approvals.
Except
for requirements under applicable United States or state securities laws, no
consent, approval, authorization or order of, registration or filing with,
or
notice to, any Regulatory Authority or any other Person is necessary to be
obtained, made or given by any Splinternet Party in connection with the
execution, delivery and performance by them of this Agreement or any Collateral
Documents or for the consummation by them of the transactions contemplated
hereby or thereby, except to the extent the failure to obtain such consent,
approval, authorization or order or to make such registration or filings or
to
give such notice would not have a Material Adverse Effect on Splinternet or
a
material adverse effect on the validity, binding effect or enforceability of
this Agreement or the Collateral Documents or the ability of the Company or
any
of the Splinternet Parties to perform its obligations under this Agreement
or
any of the Collateral Documents.
4.6 Ordinary
Course.
Since
the date of the balance sheet included in the most recent Splinternet Securities
Filings filed through the date hereof, there has not been any occurrence, event,
incident, action, failure to act or transaction involving Splinternet or any
of
its Subsidiaries which is reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on Splinternet.
4.7 Brokers
or Finders.
No
broker or finder has acted directly or indirectly for Splinternet, any
Splinternet Party or any of their Affiliates in connection with the transactions
contemplated by this Agreement, and neither Splinternet, any Splinternet Party
nor any of their Affiliates has incurred any obligation to pay any brokerage
or
finder’s fee or other commission in connection with the transaction contemplated
by this Agreement.
The
Company shall have no liability regarding any broker or finder engaged by
Splinternet.
15
4.8 Disclosure.
No
representation or warranty of Splinternet in this Agreement or in the Collateral
Documents and no statement in any certificate furnished or to be furnished
by
Splinternet pursuant to this Agreement contained, contains or will contain
on
the date such agreement or certificate was or is delivered, or on the Closing
Date, any untrue statement of a material fact, or omitted, omits or will omit
on
such date to state any material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not
misleading.
4.9 Filings.
Splinternet has made all of the filings required by the Exchange Act required
to
be made and no such filing contains any untrue statement of a material fact
or
omits to state a material fact necessary to make the statements made, not
misleading.
ARTICLE
V
CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE SPLINTERNET PARTIES
All
obligations of the Splinternet Parties under this Agreement shall be subject
to
the fulfillment at or prior to Closing of each of the following conditions,
it
being understood that the Splinternet Parties may, in their sole discretion,
to
the extent permitted by applicable Legal Requirements, waive any or all of
such
conditions in whole or in part.
5.1 Accuracy
of Representations.
All
representations and warranties of the Company contained in this Agreement,
the
Collateral Documents and any certificate delivered by any of the Company at
or
prior to Closing shall be, if specifically qualified by materiality, true in
all
respects and, if not so qualified, shall be true in all material respects,
in
each case on and as of the Closing Date with the same effect as if made on
and
as of the Closing Date, except for representations and warranties expressly
stated to be made as of the date of this Agreement or as of another date other
than the Closing Date and except for changes contemplated or permitted by this
Agreement. The Company shall have delivered to Splinternet and Merger Sub a
certificate dated the Closing Date to the foregoing effect.
5.2 Covenants.
The
Company shall, in all material respects, have performed and complied with each
of the covenants, obligations and agreements contained in this Agreement and
the
Collateral Documents that are to be performed or complied with by them at or
prior to Closing. The Company shall have delivered to Splinternet and Merger
Sub
a certificate dated the Closing Date to the foregoing effect.
5.3 Consents
and Approvals.
All
consents, approvals, permits, authorizations and orders required to be obtained
from, and all registrations, filings and notices required to be made with or
given to, any Regulatory Authority or Person as provided herein.
5.4 Delivery
of Documents.
The
Company shall have delivered, or caused to be delivered, to Splinternet and
Merger Sub the following documents:
(i) Certified
copies of the Company articles of incorporation and by-laws and certified
resolutions of the board of directors and Shareholders of the Company
authorizing the execution of this Agreement and the Collateral Documents to
which it is a party and the consummation of the transactions contemplated hereby
and thereby.
16
(ii) Such
other documents and instruments as Splinternet may reasonably request: (A)
to
evidence the accuracy of the Company’s representations and warranties under this
Agreement, the Collateral Documents and any documents, instruments or
certificates required to be delivered thereunder; (B) to evidence the
performance by the Company of, or the compliance by the Company with, any
covenant, obligation, condition and agreement to be performed or complied with
by the Company under this Agreement and the Collateral Documents; or (C) to
otherwise facilitate the consummation or performance of any of the transactions
contemplated by this Agreement and the Collateral Documents.
5.5 No
Material Adverse Change.
Since
the
date hereof, there shall have been no material adverse change in the Company
Assets, the Company Business or the financial condition or operations of the
Company, taken as a whole.
5.6 Additional
Disclosure.
There
shall have been no disclosure in any Company Disclosure Schedule or any
supplement to the Company Disclosure Schedule or documents set forth in or
attached thereto delivered after the execution of this Agreement, which is
not
satisfactory to Splinternet in its sole discretion.
5.7 Company
Financial Statements.
The
Company Audited Financial Statements shall be satisfactory to Splinternet in
its
sole discretion.
5.8 Acquisition
of Assets from Vidiation, LLC.
The
Company shall have completed the acquisition of certain assets from Vidiation,
LLC on terms acceptable to Splinternet in its sole discretion.
5.9 Satisfaction
with Company.
Splinternet shall be fully satisfied in the exercise of its sole discretion
with
the results of the investigation and review it conducts (or has its
representatives conduct), prior to the Closing Date, of the business, properties
or affairs of the Company.
ARTICLE
VI
CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE COMPANY
All
obligations of the Company under this Agreement shall be subject to the
fulfillment at or prior to Closing of the following conditions, it being
understood that the Company may, in its sole discretion, to the extent permitted
by applicable Legal Requirements, waive any or all of such conditions in whole
or in part.
6.1 Accuracy
of Representations.
All
representations and warranties of the Splinternet Parties contained in this
Agreement and the Collateral Documents and any other document, instrument or
certificate delivered by any of the Splinternet Parties at or prior to the
Closing shall be, if specifically qualified by materiality, true and correct
in
all respects and, if not so qualified, shall be true and correct in all material
respects, in each case on and as of the Closing Date with the same effect as
if
made on and as of the Closing Date, except for representations and warranties
expressly stated to be made as of the date of this Agreement or as of another
date other than the Closing Date and except for changes contemplated or
permitted by this Agreement. The Splinternet Parties shall have delivered to
the
Company a certificate dated the Closing Date to the foregoing
effect.
17
6.2 Covenants.
The
Splinternet Parties shall, in all material respects, have performed and complied
with each obligation, agreement, covenant and condition contained in this
Agreement and the Collateral Documents and required by this Agreement and the
Collateral Documents to be performed or complied with by the Splinternet Parties
at or prior to Closing. The Splinternet Parties shall have delivered to the
Company a certificate dated the Closing Date to the foregoing
effect.
6.3 Consents
and Approvals.
All
consents, approvals, authorizations and orders required to be obtained from,
and
all registrations, filings and notices required to be made with or given to,
any
Regulatory Authority or Person as provided herein.
6.4 Delivery
of Documents.
The
Splinternet Parties, as applicable, shall have executed and delivered, or caused
to be executed and delivered, to the Company the following
documents:
(i) Certified
copies of the articles of incorporation and by-laws of Splinternet and certified
resolutions by the board of directors authorizing the execution of this
Agreement and the Collateral Documents and the consummation of the transactions
contemplated hereby.
(ii) Such
other documents and instruments as the Company may reasonably request: (A)
to
evidence the accuracy of the representations and warranties of the Splinternet
Parties under this Agreement and the Collateral Documents and any documents,
instruments or certificates required to be delivered thereunder; (B) to evidence
the performance by the Splinternet Parties of, or the compliance by the
Splinternet Parties with, any covenant, obligation, condition and agreement
to
be performed or complied with by the Splinternet Parties under this Agreement
and the Collateral Documents; or (C) to otherwise facilitate the consummation
or
performance of any of the transactions contemplated by this Agreement and the
Collateral Documents.
6.5 No
Material Adverse Change.
There
shall have been no material adverse change in the business, financial condition
or operations of Splinternet and its Subsidiaries taken as a whole.
6.6 No
Litigation.
No
action, suit or proceeding shall be pending or threatened by or before any
Regulatory Authority and no Legal Requirement shall have been enacted,
promulgated or issued or deemed applicable to any of the transactions
contemplated by this Agreement and the Collateral Documents that would: (i)
prevent consummation of any of the transactions contemplated by this Agreement
and the Collateral Documents; (ii) cause any of the transactions contemplated
by
this Agreement and the Collateral Documents to be rescinded following
consummation; or (iii) have a Material Adverse Effect on
Splinternet.
ARTICLE
VII
INDEMNIFICATION
7.1 Indemnification
by the Company.
The
Company shall indemnify, defend and hold harmless (i) Splinternet,
(ii) each of Splinternet’s assigns and successors in interest to the
Company Common Stock, and (iii) each of their respective current, former
and future shareholders, members, partners, directors, officers, managers,
employees, agents, attorneys and representatives, from and against any and
all
Losses which may be incurred or suffered by any such party and which may arise
out of or result from any inaccuracy in or breach of any material
representation, warranty, covenant or agreement of the Company contained in
this
Agreement or in any document or other writing delivered pursuant
thereto.
18
7.2 Indemnification
by the Splinternet Parties.
The
Splinternet Parties shall indemnify, defend and hold harmless (i) the Company,
(ii) each of the Company Shareholders and their respective assigns and
successors in interest to the Splinternet Common Stock, and (iii) each of their
respective current, former and future shareholders, members, partners,
directors, officers, managers, employees, agents, attorneys and representatives
from and against any and all Losses which may be incurred or suffered by any
such party hereto and which may arise out of or result from any inaccuracy
in or
any breach of any material representation, warranty, covenant or agreement
of
the Splinternet Parties contained in this Agreement
or in
any document or other writing delivered pursuant thereto.
7.3 Notice
to Indemnifying Party.
If any
party (the “Indemnified Party”) receives notice of any claim or other
commencement of any action or proceeding with respect to which any other party
(or parties) (the “Indemnifying Party”) is obligated to provide indemnification
pursuant to Sections 7.1 or 7.2, the Indemnified Party shall promptly give
the Indemnifying Party written notice thereof, which notice shall specify in
reasonable detail, if known, the amount or an estimate of the amount of the
liability arising therefrom and the basis of the claim. Such notice shall be
a
condition precedent to any liability of the Indemnifying Party for
indemnification hereunder, but the failure of the Indemnified Party to give
prompt notice of a claim shall not adversely affect the Indemnified Party’s
right to indemnification hereunder unless the defense of that claim is
materially prejudiced by such failure. The Indemnified Party shall not settle
or
compromise any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent of the Indemnifying
Party (which shall not be unreasonably withheld or delayed) unless suit shall
have been instituted against it and the Indemnifying Party shall not have taken
control of such suit after notification thereof as provided in
Section 7.4.
7.4 Defense
by Indemnifying Party.
In
connection with any claim giving rise to indemnity hereunder resulting from
or
arising out of any claim or legal proceeding by a Person who is not a party
to
this Agreement, the Indemnifying Party at its sole cost and expense may, upon
written notice to the Indemnified Party, assume the defense of any such claim
or
legal proceeding (i) if it acknowledges to the Indemnified Party in writing
its
obligations to indemnify the Indemnified Party with respect to all elements
of
such claim (subject to any limitations on such liability contained in this
Agreement) and (ii) if it provides assurances, reasonably satisfactory to the
Indemnified Party, that it will be financially able to satisfy such claims
in
full if the same are decided adversely. If the Indemnifying Party assumes the
defense of any such claim or legal proceeding, it may use counsel of its choice
to prosecute such defense, subject to the approval of such counsel by the
Indemnified Party, which approval shall not be unreasonably withheld or delayed.
The Indemnified Party shall be entitled to participate in (but not control)
the
defense of any such action, with its counsel and at its own expense;
provided,
however,
that if
the Indemnified Party, in its sole discretion, determines that there exists
a
conflict of interest between the Indemnifying Party (or any constituent party
thereof) and the Indemnified Party, the Indemnified Party (or any constituent
party thereof) shall have the right to engage separate counsel, the reasonable
costs and expenses of which shall be paid by the Indemnified Party. If the
Indemnifying Party assumes the defense of any such claim or legal proceeding,
the Indemnifying Party shall take all steps necessary to pursue the resolution
thereof in a prompt and diligent manner. The Indemnifying Party shall be
entitled to consent to a settlement of, or the stipulation of any judgment
arising from, any such claim or legal proceeding, with the consent of the
Indemnified Party, which consent shall not be unreasonably withheld or delayed;
provided, however, that no such consent shall be required from the Indemnified
Party if (i) the Indemnifying Party pays or causes to be paid all Losses arising
out of such settlement or judgment concurrently with the effectiveness thereof
(as well as all other Losses theretofore incurred by the Indemnified Party
which
then remain unpaid or unreimbursed), (ii) in the case of a settlement, the
settlement is conditioned upon a complete release by the claimant of the
Indemnified Party and (iii) such settlement or judgment does not require the
encumbrance of any asset of the Indemnified Party or impose any restriction
upon
its conduct of business.
19
ARTICLE
VIII
TERMINATION
8.1 Termination
of Agreement.
This
Agreement may be terminated prior to the Closing as follows:
(a) At
the
election of Splinternet, on or after April 30, 2008, if the Closing shall not
have occurred by the close of business on such date, provided that Splinternet
is not in default of any of its obligations hereunder;
(b)
by
mutual
consent of the Parties; or
(c) by
either
the Company or the Splinternet Parties if there shall be in effect a final
nonappealable order of a governmental body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; it being agreed that the parties hereto shall
promptly appeal any adverse determination which is not nonappealable (and pursue
such appeal with reasonable diligence).
If
this
Agreement is terminated as provided herein each party shall deliver all
documents, work papers and other material of any other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same.
In the
event this Agreement is validly terminated as provided herein, then each of
the
Parties shall be relieved of their duties and obligations arising under this
Agreement after the date of such termination and such termination shall be
without liability to any of the Parties; provided, however, that nothing in
this
Section 8.1 shall relieve any of the Parties of any liability for a breach
of
this Agreement.
ARTICLE
IX
MISCELLANEOUS
9.1 Parties
Obligated and Benefited.
This
Agreement shall be binding upon the Parties and their respective successors
by
operation of law and shall inure solely to the benefit of the Parties and their
respective successors by operation of law, and no other Person shall be entitled
to any of the benefits conferred by this Agreement, except that the Company
Shareholders shall be third party beneficiaries of this Agreement. Without
the
prior written consent of the other Party, no Party may assign this Agreement
or
the Collateral Documents or any of its rights or interests or delegate any
of
its duties under this Agreement or the Collateral Documents.
20
9.2 Access
to Books and Records.
During
the course of this transaction through Closing, each party agrees to make
available for inspection all corporate books, records and assets, and otherwise
afford to each other and their respective representatives, reasonable access
to
all documentation and other information concerning the business, financial
and
legal conditions of each other for the purpose of conducting a due diligence
investigation thereof. Such due diligence investigation shall be for the purpose
of satisfying each party as to the business, financial and legal condition
of
each other for the purpose of determining the desirability of consummating
the
proposed transaction. The parties further agree to keep confidential and not
use
for their own benefit, except in accordance with this Agreement any information
or documentation
9.3 Meeting
of the Company Shareholders. Promptly
after the date hereof, the Company will take all action necessary in accordance
with its articles of incorporation and by-laws, and in accordance with federal
and state securities laws, to convene a meeting of the Company’s shareholders to
consider the adoption and approval of this Agreement and approval of the Merger
to be held as promptly as practicable. The Company will use its reasonable
efforts to solicit from its shareholders proxies in favor of the adoption and
approval of this Agreement and the approval of the Merger and will take all
other action necessary or advisable to secure the vote or consent of its
shareholders required by the GCL to obtain such approvals. In
lieu
of such meeting, the adoption and approval of this Agreement and the Merger
may
be approved by shareholder consent.
9.4 No
Solicitations.
From
and
after the date of this Agreement until the Effective Time or termination of
this
Agreement pursuant to ARTICLE VIII, the
Company will not, nor will it permit any of its officers, directors or agents
acting on its behalf to: (a) take any action to solicit, initiate, encourage
or
assist the submission of any proposal, negotiation or offer from
any
person or entity other than Splinternet, and other person(s) or entities for
purposes of soliciting their participation as investors or co-investors with
the
Company, relating to the acquisition, sale or transfer of any of the capital
stock of the Company or any material part of the assets of the Company; (b)
offer to sell or transfer any of the capital stock of the Company or any
material part of the assets of the Company to any person other than Splinternet
and/or other person(s) or entities who participate as investors or co-investors
with Splinternet; or (c) disclose financial or other information relating
to the Company other than in the ordinary course of business to any person
or
entity other than Splinternet, Splinternet’s agents and representatives, and
other person(s) or entities for purposes of soliciting their participation
as
investors or co-investors with Splinternet, except with the written consent
of
Splinternet. The Company acknowledges and agrees that the legal remedies
available to Splinternet in the event the Company violates any of the foregoing
covenants would be inadequate and that Splinternet shall be entitled to specific
performance, injunctive relief and other equitable remedies in the event of
any
such violation. The Company will immediately notify Splinternet regarding any
contact between the Company, any of its directors, officers, employees, agents
or representatives and any other person regarding any offer, proposal or inquiry
during this exclusivity period.
9.5 Publicity.
The
initial press release shall be a joint press release and thereafter until the
termination hereof or consummation of the transactions contemplated hereby
neither party shall issue any press releases or otherwise making public
announcements with respect to the Merger and the other transactions contemplated
by this Agreement without the consent of the other, and prior to making any
filings with any third party and/or any Regulatory Authorities (including any
national securities interdealer quotation service) with respect thereto, each
party shall consult with the other, except as may be required by law or by
obligations pursuant to any listing agreement with or rules of any national
securities interdealer quotation service.
21
9.6 Disclosure
Schedules.
In the
event that either the Company Disclosure Schedule or the Splinternet Disclosure
Schedule is not delivered contemporaneously with the execution of this
Agreement, it shall be delivered as soon as practicable prior to the Closing
Date.
9.7 Notices.
All
communications, notices, requests, consents or demands given or required under
this Agreement shall be in writing and shall be deemed to have been duly given
when delivered to, or received by prepaid registered or certified mail or
recognized overnight courier addressed to, or upon receipt of a facsimile sent
to, the party for whom intended, as follows, or to such other address or
facsimile number as may be furnished by such party by notice in the manner
provided herein:
If
to Splinternet and/or Merger Sub:
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Splinternet
Holdings, Inc.
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000
Xxxxxxxxxxx Xxxxxx
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Xxxxxxx,
Xxxxxxxxxxx 00000
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Attn:
Xxxxx X. Xxxxxxx
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Facsimile:
(000) 000-0000
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With
a copy to:
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Xxxx
Xxxxxx Xxxxx Xxx & Xxxxxxxxx, LLP
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00X
Xxxxxxxx Xxxx, Xxxxx 000
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Xxxxxxx
Xxxx, Xxx Xxxxxx 00000
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Attn:
Xxxxx X. Xxxx, Esq.
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Facsimile:
(000) 000-0000
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If
to the Company:
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Vidiation,
Inc.
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000
Xxxxx Xxxxxxxx Xxxx Xxxxx
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Xxxxx
#000
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X.
Xxxxxxxxxx, Xxxxxxxx 00000
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Attn:
Xxxxx X’Xxxxxx, CEO
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|
Facsimile:
(000) 000-0000
|
9.8 Headings.
The
Article and Section headings of this Agreement are for convenience only and
shall not constitute a part of this Agreement or in any way affect the meaning
or interpretation thereof.
22
9.9 Governing
Law.
This
Agreement and the transactions contemplated hereby shall be governed and
construed by and enforced in accordance with the laws of the State of
Connecticut without regard to conflict of laws principles.
9.10
Remedies.
It is
specifically understood and agreed that certain breaches of this Agreement
will
result in irreparable injury to the parties hereto, that the remedies available
to the parties at law alone will be an inadequate remedy for such breach, and
that, in addition to any other legal or equitable remedies that the parties
may
have, a party may enforce its rights by an action for specific performance
and
the parties expressly waive the defense that a remedy in damages will be
adequate.
9.11 Further
Actions.
The
Parties shall execute and deliver to each other, from time to time at or after
Closing, for no additional consideration and at no additional cost to the
requesting party, such further assignments, certificates, instruments, records,
or other documents, assurances or things as may be reasonably necessary to
give
full effect to this Agreement and to allow each party fully to enjoy and
exercise the rights accorded and acquired by it under this
Agreement.
In
addition, each of the Parties shall use its best efforts to cause satisfaction
of conditions under its control to the other party’s obligations to close and
otherwise to cooperate to cause consummation of the transactions contemplated
hereunder.
9.12 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
9.13 Entire
Agreement.
This
Agreement (including the Exhibits, the Company Disclosure Statement, the
Splinternet Disclosure Statement and any other documents, instruments and
certificates referred to herein, which are incorporated in and constitute a
part
of this Agreement) contains the entire agreement of the Parties.
9.14 Expenses.
Each
party will be responsible for payment of its expenses in connection with the
transactions contemplated by this Agreement, except as otherwise provided
elsewhere herein.
9.15 Post-Closing
Covenants; Survival.
All
representations, warranties, covenants, agreements and indemnities contained
in
this Agreement, or in any schedule, exhibit, certificate, agreement, document
or
statement delivered pursuant hereto, are material, shall be deemed to have
been
relied upon by the parties, and shall survive the consummation of the
transactions contemplated herein regardless of any investigation conducted
by or
knowledge of any party hereto.
9.16
Amendments;
Waivers.
This
Agreement may not be amended or modified, nor may compliance with any condition
or covenant set forth herein be waived, except by a writing duly and validly
executed by Buyer and Sellers or, in the case of a waiver, the party waiving
compliance. No delay on the part of any party in exercising any right, power
or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver
on
the part of any party of any such right, power or privilege, or any single
or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or
privilege.
23
9.17
Entire
Agreement.
This
Agreement, together with the schedules and exhibits hereto, constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes and cancels any and all prior or contemporaneous arrangements,
understandings and agreements between them relating to the subject matter
hereof.
9.18 Representation
by Counsel.
Each of
the parties hereto represents, warrants and covenants that it has had ample
opportunity to consider entering into this Agreement and has had an opportunity
to consult with counsel regarding this Agreement prior to executing the same.
The parties further agree that any rule that provides that an ambiguity within
a
document will be interpreted against the party drafting such document shall
not
apply.
[remainder
of page intentionally left blank]
24
IN
WITNESS WHEREOF, the Parties hereto have duly executed this Agreement as of
the
day and year first above written.
SPLINTERNET
HOLDINGS, INC.
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By:
/s/ Xxxxx X. Xxxxxxx
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Name:
Xxxxx X. Xxxxxxx
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Title:
President
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SPLINTERNET
MERGER SUB I, INC.
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By:
/s/ Xxxxx X. Xxxxxxx
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Name:
Xxxxx X. Xxxxxxx
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Title:
President
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VIDIATION,
INC.
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By:
/s/ Xxxxx X’Xxxxxx
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Name:
Xxxxx X’Xxxxxx
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Title:
President
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25