Exhibit 2.4
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization made this date by and
between China Voice Holding Corp., a New York Corporation ("PARENT"), DTN
Acquisition Corp., a wholly-owned subsidiary of Parent and a Texas Corporation
("MERGER SUB"), VCG Technologies Inc, doing business as DTNet Technologies, a
Florida Corporation ("VCG"), and DTNet Technologies LLC, a Florida Limited
Liability Company ("LLC"), Parent, Merger Sub, VCG, and LLC are referred to
collectively herein as the "Parties."
PREAMBLE
The respective Boards of Directors of Parent, Merger Sub and VCG are of the
opinion that the transactions described herein are in the best interests of the
parties to this Agreement and their respective stockholders. This Agreement
provides for the acquisition of VCG by Parent pursuant to the merger of Merger
Sub with and into VCG. At the effective time of such merger, the outstanding
shares of the capital stock of VCG shall be converted into the right to receive
the cash, convertible promissory note and the shares of the common stock of
Parent, as provided below. As a result, stockholder of VCG shall become a
stockholder of Parent and VCG shall continue to conduct its business and
operations of VCG as a wholly owned subsidiary of Parent. The transactions
described in this Agreement are subject to the satisfaction of certain other
conditions described in this Agreement. It is the intention of the parties to
this Agreement that the Merger for federal income tax purposes shall qualify as
a "reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code and that this Agreement shall constitute a "plan of reorganization" for the
purposes of the Internal Revenue Code.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1. TRANSACTIONS AND TERMS OF MERGER.
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement, Merger Sub shall
be merged with and into VCG (the "MERGER"). As a result of the merger, the
separate corporate existence of Merger Sub shall cease and VCG shall continue as
the surviving corporation (sometimes hereinafter referred to as the "SURVIVING
CORPORATION") of the Merger as a wholly-owned Subsidiary of Parent under the
corporate name it possesses immediately prior to the Effective Time and shall
succeed to and assume all of the rights and obligations of Merger Sub in
accordance with the laws of Florida. The Merger shall be consummated pursuant to
the terms of this Agreement and the Plan of Merger, which has been approved and
adopted by the respective Boards of Directors of Parent and VCG and by the
members of the LLC, as the sole stockholder of VCG.
1.2 CLOSING; EFFECTIVE TIME. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
Articles of Merger with the Secretary of States of Florida and Texas in
accordance with the relevant provisions of the Florida Business Corporation Act
(FBCA) and Texas Corporate Code (TCC) respectively. The time of such filing (or
such later time as may be agreed in writing by VCG and the Parent) being the
"EFFECTIVE TIME" as soon as practicable on or after the Closing Date (as herein
defined). The closing of the Merger (the "CLOSING") shall take place no later
than December 3, 2006, at the offices of CVC Communications Corp., 00000 Xxxxx
Xxxxxx Xxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, or at such time, date and
location as may be mutually agreed by the Parties (the "CLOSING DATE").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the FBCA. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time all the property, rights, privileges, powers and
franchises of VCG and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of VCG and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 ARTICLES OF INCORPORATION: BYLAWS. At the Effective Time, the
Articles of Incorporation of VCG, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until duly amended or repealed. The Bylaws of VCG, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation and thereafter shall continue to be its bylaws until duly amended or
repealed.
1.5 DIRECTORS AND OFFICERS. Unless otherwise determined by Parent and
VCG prior to the Effective Time of Merger, the directors and officers of Merger
Sub in office immediately prior to the Effective Time, together with such
additional persons as may thereafter be elected, shall serve as the initial
directors of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation.
1.6 CONVERSION OF SHARES. Subject to the provisions of this Section
1.6, at the Effective Time, by virtue of the Merger and without any action on
the part of Parent, VCG, LLC or the stockholders or members of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of capital stock of Parent issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
(b) All shares of VCG common stock (the "VCG Common Stock")
issued and outstanding immediately prior to the Effective Time, other
than any shares of VCG Common Stock to be canceled pursuant to Section
ARTICLE 1.4.1(c) below, will be canceled and extinguished and
automatically converted into the right to receive:
(i) a cash payment at Closing of Thirty
Hundred and Twenty-Five Thousand Dollars ($325,000)
("the MERGER CASH");
A Promissory Note of Parent, delivered at Closing (the "MERGER NOTE") in the
original principal amount of Six Hundred and Seventy-Five Thousand
($675,000.00), bearing interest at the rate of 8.0% per year with all principal
and accrued interest becoming due on the second anniversary of the Closing Date.
The Merger Note will be secured by all of the outstanding stock of the Surviving
Corporation held by Parent. The Merger Note shall also be convertible at the
option of the LLC at the maturity of the Merger Note into common stock of Parent
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at a conversion price of fifty cents ($.50) per share, subject to appropriate
anti-dilution adjustments in the Merger Note.
(ii) 1,000,000 shares of the restricted
common stock of Parent issued to LLC at the Closing
(the "MERGER STOCK").
(c) CANCELLATION OF VCG OWNED STOCK. Each share of VCG Common
Stock held by VCG or any direct or indirect wholly-owned subsidiary of
VCG immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(d) ADJUSTMENTS TO CONVERSION. The conversion rights of the
LLC shall be adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or distribution
of securities convertible into Parent Common Stock), reorganization,
recapitalization or other like change with respect to Parent Common
Stock occurring after the date hereof and prior to the Effective Time.
(e) FRACTIONAL SHARES. No fractional shares of Parent Common
Stock will be issued in connection with the Merger.
1.7 EARN-OUT.
(a) EARN-OUT SHARES. For each month for Forty-Two (42) months
following the Closing Date ("EARN-OUT PERIOD"), Parent shall pursuant
to the terms hereof pay additional distributions (each an "EARN-OUT"
and collectively, the "EARN-OUTS") in Parent common stock as
consideration in addition to that set forth in Section 1.6 above, to
the LLC. No Earn-Out is subject to increase to make up for any
reduction or forfeiture of any other Earn-Out. The LLC may not assign
its right to receive the Earn-Out shares pursuant to this Section
1.1(a).
(b) NUMBER OF EARN-OUT SHARES. Each Earn-out amount is equal
to one (1) share of Parent common stock for each four U.S. Dollars
($4.00) of revenue of the Surviving Corporation, as determined through
application of Generally Accepted Accounting Principles (GAAP) in a
manner consistent with Parent's policies and practices for recognizing
booked revenues for its other products and services, in excess of Five
Hundred Thousand Dollars ($500,000.) for the respective calendar month.
No shares shall be earned pursuant to the foregoing EARN-OUT provision
until an amount of 1,000,000 shares would have been earned. Thereafter,
shares shall be earned provided that the aggregate number of Earnout
shares shall in no case exceed an additional One Million (1,000,000)
shares.
(c) PROCEDURE. Within 45 days of the end of each calendar
month Parent shall provide to the Shareholder Representative a written
statement of the calculation of that month's Earnout ("EARN-OUT
DETERMINATION"). The Shareholder Representative may notify Parent in
writing within fifteen (15) Business Days of receipt of such Earn-Out
Determination whether the Shareholder Representative disputes any such
determination, setting forth in reasonable detail the basis for the
dispute (each an "EARN-OUT DISPUTE NOTICE"). If the Shareholder
Representative does not deliver an Earn-Out Dispute Notice within
fifteen (15) Business Days of receipt of an Earn-Out Determination or
if the Shareholder Representative accepts such amount in writing, such
Earn-Out Determination shall be deemed a Final Earn-Out Amount. In the
event an Earn-Out Dispute Notice is delivered, Parent and the
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Shareholder Representative shall meet within ten (10) Business Days of
the delivery of such Earn-Out Dispute Notice; to attempt to resolve
such dispute in good faith. If a final resolution of such dispute is
reached, the agreed upon amount shall be deemed to be the Final
Earn-Out Amount. If no final resolution is determined within fifteen
(15) Business Days of the delivery of such Earn-Out Dispute Notice
after good faith negotiation, the final determination of the a Final
Earn-Out Amount shall be submitted to arbitration in accordance with
the procedures set forth in Section 8.8. The determination of the
arbitrators shall be final, binding and conclusive upon each Company
Stockholder, the Shareholder Representative and Parent.
(d) SHAREHOLDER REPRESENTATIVE. The LLC, as sole shareholder
of VCG hereby appoints Xxxx Xxxxxxx ("Burbank"), his agents and
attorneys-in-fact, as the Shareholder Representative for and on behalf
of LLC, to give and receive notices and communications relative to all
matters pursuant to this Section 13(d), to authorize payment from
Parent, to object to such payments, to agree to, negotiate, enter into
settlements and compromises of, and comply with orders of courts with
respect to such claims, and to take all other actions that are either
(i) necessary or appropriate in the judgment of the Shareholder
Representative for the accomplishment of the foregoing or (ii)
specifically mandated by the terms of this Agreement. Such agency may
be changed by the Company Shareholders from time to time upon not less
than thirty (30) days prior written notice to Parent.
1.8 EXCHANGE AGENT. Parent shall act as exchange agent for the Merger
(the "EXCHANGE AGENT").
1.9 PARENT TO PROVIDE COMMON STOCK. Promptly after the Effective Time,
Parent shall supply, or shall cause to be supplied, for exchange in accordance
with this Section 1.9, certificates evidencing the Parent Common Stock issuable
pursuant to Section 1.6(b)(iii) in exchange for outstanding shares of VCG Common
Stock.
1.10 EXCHANGE PROCEDURES. In addition to delivery of the Merger Cash
and the Merger Note at the Closing, Parent shall deliver to LLC a certificate
evidencing the Merger stock upon surrender of a certificate for cancellation of
LLC's VCG common stock to Parent.
1.11 REQUIRED WITHHOLDING. The Parent 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 VCG 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 legal requirement. 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.
1.12 NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.12, neither Parent, Merger Sub, LLC nor VCG shall be liable to any
holder of shares of VCG Common Stock, Parent Common Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
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1.13 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Parent shall issue
in exchange for such lost, stolen or destroyed Certificates, upon the making of
an affidavit of that fact by the holder thereof, such shares of VCG Common Stock
as may be required pursuant to this Agreement; provided, however, that Parent
may, in its sole discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent with respect to the Certificates alleged
to have been lost, stolen or destroyed.
1.14 NO FURTHER OWNERSHIP RIGHTS IN VCG COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of VCG
Common Stock in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of VCG
Common Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of VCG Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Section 1.14.
1.15 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation or Parent shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of the VCG or otherwise to carry out the purposes
of this Agreement, the officers and directors of the Surviving Corporation shall
be authorized to execute and deliver, in the name and on behalf of the VCG, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of the VCG, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.
1.16 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Income Tax Regulations.
1.17 RESTRICTED STOCK.
(a) SECURITIES LAW COMPLIANCE; LEGENDING OF CERTIFICATES. The
shares of Parent Common Stock to be issued in connection with this
Agreement will be issued in a transaction exempt from registration
under the Securities Act by reason of Section 4(2) thereof or
Regulation D promulgated thereunder, and Parent is relying on the
representations of VCC and the stockholder of VCG with respect to such
exemption. There will be placed on the certificates for such shares, or
shares issued in substitution thereof, a legend stating in substance:
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended, and may not be offered,
sold, transferred or otherwise disposed of unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory
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authorities of applicable states or unless an exemption from such
registration is available."
The foregoing legend will also be placed on any certificate
representing securities issued subsequent to the original issuance of
the Parent Common Stock pursuant to the Merger as a result of any
transfer of such shares or any stock dividend, stock split, or other
recapitalization as long as the Parent Common Stock issued pursuant to
the Merger has not been transferred in such manner to justify the
removal of the legend therefrom.
(b) ADDITIONAL RESTRICTIONS. The LLC agrees that no securities
shall be sold in the public market for Thirty-Six (36) months after the
Closing Date, without the consent of Parent. However, to the extent
that other officers or directors, or entities controlled by other
officers or directors of Parent or Parent's subsidiaries have been
permitted to sell Parent securities, the LLC shall be permitted to sell
up to the same amount of its Parent Common Stock. Thus, for example, if
any of the officers or directors is selling 500,000 shares, LLC may
sell up to 500,000 of its shares. If the selling officer or director is
selling his shares pursuant to Rule 144, then the LLC may not sell
publicly until it first has satisfied the applicable Rule 144 holding
period and other requirements. If the shares to be sold by the other
selling officer or director are sold pursuant to a Registration
Statement filed with the Securities & Exchange Commission, LLC shall be
entitled to have its shares registered for resale under the
Registration Statement.
ARTICLE 2. VCG DELIVERIES.
2.1 ACCOUNTS RECEIVABLE, INVENTORY, ETC. Within five (5) days after the
execution of this Agreement and again on the Closing Date, VCG shall deliver to
Parent the following:
(a) a list of all VCG accounts receivable, notes receivable,
cash balances, deposits;
(b) a list of all VCG inventory;
(c) a list of all VCG fixed assets and any other real or
tangible assets;
(d) a list of all VCG intellectual property, trade names and
trademarks and any other intangible property;
(e) a list of all VCG accounts payable and other liabilities
and contingent liabilities; and
(f) a list of all VCG employees and the current compensation
of each employee, all fringe benefits provided for each employee and
all employee benefit plans.
2.2 DISCLOSURE LETTER. In each instance, the delivery of the documents
shall be accompanied by the a certification ("Disclosure Letter") of VCG that
the documents or information are true, correct and complete in all material
respects, subject to the following:
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(a) the documents and information will be subject to change
based on the ordinary course of VCG's business up and until the
Effective Time;
(b) no representations are made with respect to the
collectibility of any accounts receivable; and
(c) the Disclosure Letter will be updated prior to Closing.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF VCG
VCG hereby represents and warrants to Parent as follows:
3.1 ORGANIZATION, STANDING, AND POWER. VCG is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction in which it is organized, with full corporate power and authority
to conduct its business as it is now being conducted and to own or use the
properties and assets that it purports to own or use. VCG is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a VCG material adverse effect. The minute book and other
organizational documents for VCG have been made available to Parent for its
review and are true and complete in all material respects as in effect as of the
date of this Agreement and accurately reflect in all material respects all
amendments thereto and all proceedings of the Board of Directors and
stockholders thereof.
3.2 AUTHORITY OF VCG; NO BREACH BY AGREEMENT.
(a) VCG has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and
to consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly
and validly approved by the VCG Board of Directors, as required by
applicable law and the VCG Board of Directors has, as of the date of
this Agreement, determined (i) that the Merger is advisable and fair
to, and in the best interests of VCG and its shareholder, and (ii) to
recommend that the shareholder of VCG approve and adopt this Agreement
and approve the Merger. The LLC, as the sole shareholder of VCG has
adopted this Agreement and approved the Merger.
This Agreement is, or when executed and delivered by the VCG,
represents a legal, valid, and binding obligation of VCG, enforceable against
VCG in accordance with its terms (except in all cases as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by
VCG, nor the consummation by VCG of the transactions contemplated
hereby, nor compliance by VCG with any of the provisions hereof, will
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(i) conflict with or result in a breach of any provision of VCG'S
Articles of Incorporation or Bylaws or the certificate or articles of
incorporation or bylaws of any VCG Subsidiary or any resolution adopted
by the board of directors or the stockholders of VCG, or (ii)
constitute or result in a default under, or require any consent
pursuant to, or result in the creation of any lien on any asset of VCG
under, any contract or permit of VCG, where such default or lien, or
any failure to obtain such consent, is reasonably likely to have,
individually or in the aggregate, a VCG material adverse effect, or,
(iii) constitute or result in a default under, or require any consent
pursuant to, any law or order applicable to VCG or any of its material
assets.
(c) VCG is not or will not be required to give any notice to
or obtain any consent from any person in connection with the execution
and delivery of this Agreement or the consummation or performance of
any of the contemplated transactions.
3.3 CAPITAL STOCK.
(a) The authorized capital stock of VCG consists of (i)
3,800,000 shares of VCG Common Stock, all of which are issued and
outstanding as of the date of this Agreement. All of the issued and
outstanding shares of VCG Capital Stock are duty and validly issued and
outstanding and are fully paid and nonassessable under the FBCA. None
of the outstanding shares of VCG capital stock has been issued in
violation of any preemptive rights of the current or past stockholders
of VCG.
(b) Except as set forth in Section 3.3(a) above, there are no
shares of capital stock or other equity securities of VCG outstanding
and no outstanding equity rights relating to the capital stock or
equity securities of VCG.
3.4 VCG SUBSIDIARIES. VCG has no Subsidiaries.
3.5 DISCLOSURE LETTER. Subject to the qualifications set forth in
Section 2.2 above, the information provided in the Disclosure Letter is true and
correct in all material respects.
3.6 COMPLIANCE WITH LAWS. VCG has in effect all permits necessary for
it to own, lease, or operate its material assets and to carry on its business as
now conducted, except for those permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a VCG material adverse effect,
and there has occurred no default under any such permit, other than defaults
which are not reasonably likely to have, individually or in the aggregate, a VCG
material adverse effect. VCG:
(a) is not in default tinder any of the provisions of its
Articles of Incorporation or Bylaws (or other governing instruments);
(b) is not in default under any laws, orders, or permits
applicable to its business or employees conducting its business, except
for defaults which are not reasonably likely to have, individually or
in the aggregate, a VCG material adverse effect; or
(c) has not received any notification or communication from
any agency or department of federal, state, or local government or any
regulatory authority or the staff thereof (i) asserting that VCG is not
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in compliance with any of the laws or orders which such governmental
authority or regulatory authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a VCG
material adverse effect, (ii) threatening to revoke any permits, the
revocation of which is reasonably likely to have, individually or in
the aggregate, a VCG material adverse effect, or (iii) requiring VCG to
enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment, or memorandum of
understanding, or to adopt any Board resolution or similar undertaking.
Copies of all material reports, correspondence, notices and other
documents relating to any inspection, audit, monitoring or other form of review
or enforcement action by a regulatory authority have been made available to
Parent.
3.7 LEGAL PROCEEDINGS. There is no litigation instituted or pending,
or, to the knowledge of VCG, threatened (or unasserted but considered probable
of assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against VCG, or against any director, employee or
employee benefit plan of VCG, or against any asset, interest, or right of any of
them, that is reasonably likely to have, individually or in the aggregate, a VCG
material adverse effect, nor are there any orders of any regulatory authorities,
other governmental authorities, or arbitrators outstanding against VCG, that are
reasonably likely to have, individually or in the aggregate, a VCG material
adverse effect. VCG is not involved in or, to the knowledge of VCG, reasonably
anticipates any dispute with any of its current or former employees, agents,
brokers, distributors, vendors, customers, business consultants, representatives
or independent contractors (or any current or former employees of any of the
foregoing persons).
3.8 TAX AND REGULATORY MATTERS. Neither VCG nor any affiliate thereof
has taken or agreed to take any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any consents of regulatory
authorities referred to in Section 6.1(b) or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section 6.1(b).
3.9 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument
or other writing furnished or to be furnished by VCG pursuant to this Agreement
contains or will contain any untrue statement of material fact or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND PARENT.
Merger Sub and Parent, jointly and severally, hereby represent and
warrant to VCG and LLC as follows:
4.1 ORGANIZATION, STANDING, AND POWER. Each of Merger Sub and Parent is
a corporation duly organized, validly existing and in good standing tinder the
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laws of the jurisdiction of its incorporation, and each of Merger Sub and Parent
has all requisite corporate power and authority to own, lease and operate its
assets and to carry on its business as now being conducted. Each of Merger Sub
and Parent is duly qualified to transact business, and is in good standing, as a
foreign corporation in each jurisdiction where the character of its activities
requires such qualification, except where the failure to so qualify would not
have a material adverse effect on the assets, liabilities, results of
operations, financial condition, business or prospects of, each of Merger Sub
and Parent or it's respective subsidiaries taken as a whole.
4.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Each of Merger Sub and Parent has the corporate power and
authority necessary to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of each of Merger Sub
and Parent. This Agreement represents a legal, valid, and binding
obligation of Merger Sub and Parent, enforceable against each of Merger
Sub and Parent in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium,
or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of
specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by
each of Merger Sub and Parent, nor the consummation by each of Merger
Sub and Parent of the transactions contemplated hereby, nor compliance
by each of Merger Sub and Parent with any of the provisions hereof,
will (i) conflict with or result in a breach of any provision of each
of Merger Sub and Parent's Certificate of Incorporation or Bylaws, or
(ii) constitute or result in a default under, or require any Consent
pursuant to, or result in the creation of any Lien on any asset of any
of Merger Sub, Parent or any subsidiary or controlled entity of Parent
("Parent Entity") under, any contract or permit of any of Merger Sub,
Parent or Parent Entity, where such default or lien, or any failure to
obtain such consent, is reasonably likely to have, individually or in
the aggregate, a Merger Sub or Parent material adverse effect,
constitute or result in a default under, or require any consent
pursuant to, any law or order applicable to any Parent Entity or any of
their respective material assets.
(c) Other than such consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Merger Sub or Parent material
adverse effect, no notice to, filing with, or consent of, any public
body or authority is necessary for the consummation by each of Merger
Sub and Parent of the Merger and the other transactions contemplated in
this Agreement.
4.3 CAPITALIZATION OF MERGER SUB AND PARENT.
(a) The authorized capital stock of Parent consists of two
hundred million (200,000,000) shares of common stock, $.001 par value
per share of which eighty-two million thirty-two thousand six hundred
and twelve (82,032,612) shares were issued and outstanding as of March
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31, 2006 and ten million (10,000,000) shares of preferred stock, $.001
par value per share, of which zero (0) shares are issued and
outstanding as March 31, 2006.
(b) The authorized capital stock of Merger Sub consists of
1,000,000 shares of common stock, $.001 par value per share of which
1,000 shares will be issued and outstanding as of the Closing Date.
4.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has timely filed and made available to VCG all SEC
Documents required to be filed by Parent, if any, including any reports
or documents published on the Pink Sheets website (the "Parent SEC
Reports"). The Parent SEC Reports (i) at the time filed or published,
complied in all material respects with the applicable requirements of
the Securities Laws and other applicable Laws and (ii) did not, at the
time they were filed (or, if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material
fact required to be stated in such Parent SEC Reports or necessary in
order to make the statements in such Parent SEC Reports, in light of
the circumstances -under which they were made, not misleading. None of
Parent's subsidiaries is required to file any reports or other
documents with the SEC.
(b) Each of the Parent Financial Statements (including, in
each case, any related notes) contained in the Parent SEC Reports,
filed or published after the date of this Agreement until the Effective
Time, complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was
prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the
notes to such financial statements or, in the case of unaudited interim
statements, as permitted by Form 10-Q of the SEC), and fairly presented
in all material respects the consolidated financial position of Parent
and its Subsidiaries as at the respective dates and the consolidated
results of operations and cash flows for the periods indicated, except
that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not
expected to be material in amount or effect.
4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Parent SEC Reports filed or published prior to the date of this Agreement, there
have been no events, changes or occurrences (whether or not covered by
insurance) which have had, or are reasonably likely to have, individually or in
the aggregate, a Parent or Merger Sub material adverse effect.
4.6 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of
any of the Parent Entities have been timely filed or requests for
extensions have been timely filed, granted, and have not expired on or
before the date of the most recent fiscal year end immediately
preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a
Parent material adverse effect, and all Tax Returns filed are complete
and accurate in all material respects to the Knowledge of Parent. All
Taxes shown on filed Tax Returns have been paid. As of the date of this
Agreement, there is no audit examination, deficiency, or refund
litigation with respect to any Taxes that is reasonably likely to
result in a determination that would have, individually or in the
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aggregate, a Parent material adverse effect, except as reserved against
in the Parent Financial Statements delivered prior to the date of this
Agreement. All Taxes and other Liabilities due with respect to
completed and settled examinations or concluded litigation have been
paid.
(b) None of the Parent Entities has executed an extension or
waiver of any statute of limitations on the assessment or collection of
any tax due (excluding such statutes that relate to years currently
under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) The provision for any taxes due or to become due for any
of the Parent Entities for the period or periods through and including
the date of the respective Parent Financial Statements that has been
made and is reflected on such Parent Financial Statements is sufficient
to cover all such Taxes.
(d) Deferred Taxes of the Parent Entities have been provided
for in accordance with GAAP.
(e) None of the Parent Entities is a party to any Tax
allocation or sharing agreement and none of the Parent Entities has
been a member of an affiliated group filing a consolidated federal
income Tax Return (other than a group the common parent of which was
Parent) has any Liability for Taxes of any Person (other than Parent
and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign Law) as a transferee
or successor or by Contract or otherwise.
4.7 COMPLIANCE WITH LAWS. Each Parent Entity has in effect all permits
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, except for those permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Parent
material adverse effect, and there has occurred no default under any such
permit, other than defaults which are not reasonably likely to have,
individually or in the aggregate, a Parent material adverse effect. None of the
Parent Entities:
(a) is in default under its Certificate of incorporation or
Bylaws (or other governing instruments); or
(b) is in default under any laws, orders or permits applicable
to its business or employees conducting its business, except for
Defaults which are not reasonably likely to have, individually or in
the aggregate, a Parent material adverse effect; or
(c) has received any notification or communication from any
agency or department of federal, state, or local government or any
regulatory authority or the staff thereof (i) asserting that any Parent
Entity is not in compliance with any of the Laws or Orders which such
governmental authority or regulatory authority enforces, where such
noncompliance is reasonably likely to have, individually or in the
aggregate, a Parent material adverse effect, (ii) threatening to revoke
any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Parent material adverse effect, or
(iii) requiring any Parent Entity to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
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commitment or memorandum of understanding, or to adopt any Board
resolution or similar undertaking, which restricts materially the
conduct of its business.
4.8 LEGAL PROCEEDINGS. There is no litigation instituted or pending,
or, to the knowledge of Parent, threatened (or unasserted but considered
probable of assertion and which if asserted would have at least a reasonable
probability of an unfavorable outcome) against any Parent Entity, or against any
director, employee or employee benefit plan of any Parent Entity, or against any
Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Parent material adverse effect, nor are
there any Orders of any regulatory authorities, other governmental authorities,
or arbitrators outstanding against any Parent Entity, that are reasonably likely
to have, individually or in the aggregate, a Parent material adverse effect.
4.9 REPORTS. Since the date of organization, each Parent Entity has
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with regulatory
authorities (except, in the case of state securities authorities, failures to
file which are not reasonably likely to have, individually or in the aggregate,
a Parent material adverse effect). As of their respective dates, each of such
reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, each such report and document did not, in all
material respects, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
4.10 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument
or other writing furnished or to be furnished by any Parent Entity or any
Affiliate thereof to VCG pursuant to this Agreement contains or will contain any
untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. All documents that any Parent Entity or
any affiliate thereof is responsible for filing with any regulatory authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
4.11 AUTHORITY OF MERGER SUB. Merger Sub is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Texas as a wholly-owned Subsidiary of Parent. The authorized capital stock of
Merger Sub consists of 1,000,000 shares of Merger Sub Common Stock, of which
1,000 shares are validly issued and outstanding, fully paid and nonassessable
and is owned by Parent free and clear of any lien. Merger Sub has the corporate
power and authority necessary to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Merger Sub. This Agreement represents a legal, valid, and binding
obligation of Merger Sub, enforceable against Merger Sub in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
13
to the discretion of the court before which any proceeding may be brought).
Parent, as the sole stockholder of Merger Sub, has voted prior to the Effective
Time the shares of Merger Sub Common Stock in favor of adoption approval of this
Agreement, as and to the extent required by applicable Law.
4.12 ACCOUNTING, TAX AND REGULATORY MATTERS. No Parent Entity or any
Affiliate thereof has taken or agreed to take any action or has any Knowledge of
any fact or circumstance that is reasonably likely to (i) prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of regulatory authorities referred to in Section 6.1(b) or result in
the imposition of a condition or restriction of the type referred to in the last
sentence of such Section 6.1(b).
ARTICLE 5. CONDUCT OF BUSINESS PENDING CONSUMMATION AND OTHER
COVENANTS.
5.1 AFFIRMATIVE COVENANTS OF VCG. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written . consent of Parent shall have been obtained, and except as
otherwise expressly contemplated herein, VCG shall (a) operate its business only
in the usual, regular, and ordinary course, (b) preserve intact its business
organization and assets and maintain its rights and franchises, and (c) take no
action which would (i) materially adversely affect the ability of any Party to
obtain any consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentences of Section 6.1(b) or 6.1(c), or (ii) materially adversely affect the
ability of any Party to perform its covenants and agreements under this
Agreement.
5.2 NEGATIVE COVENANTS OF VCG. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of Parent shall have been obtained, and except as
otherwise expressly contemplated herein, VCG covenants and agrees that it will
not do or agree or commit to do any of the following:
(a) amend the Articles of Incorporation, Bylaws or other
governing instruments of VCG, or
(b) except as may be incurred in the ordinary course of
business or to fund operations, incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other Person, or impose,
or suffer the imposition, on any Asset of VCG of any Lien or permit any
such Lien to exist without prior written consent of the Parent; or
(c) except for this Agreement, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell,
pledge, encumber, or authorize the issuance of, or otherwise permit to
become outstanding, any additional shares of VCG Capital Stock or any
other equity right; or
(d) adjust, split, combine or reclassify any capital stock of
VCG or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of VCG Capital Stock, or sell,
14
lease, mortgage or otherwise dispose of or otherwise encumber any Asset
having a book value in excess of $10,000 other than in the ordinary
course of business for reasonable and adequate consideration, or
transfer or license to any Person other than VCG or otherwise extend,
amend or modify in any material respect any rights to material
Intellectual Property other than in the ordinary course of business
(including changing any domain names or failing to renew existing
domain name registrations on a timely basis), or enter into grants to
future Intellectual Property rights, other than as may be required by
applicable Law; or
(e) purchase any securities or make any material investment,
either by purchase of stock or securities, contributions to capital,
Asset transfers, or purchase of any Assets, in any Person other than a
wholly owned VCG Subsidiary, or otherwise acquire direct or indirect
control over any Person; or
(f) enter into or amend any employment contract between VCG
and any Person (except for any such amendment as is required by law)
that VCG does not have the unconditional right to terminate without
liability (other than liability for services already rendered), at any
time on or after the Effective Time; or
(g) adopt any new employee benefit plan or terminate or
withdraw from, or make any material change in or to, any existing
employee benefit plans of VCG other than any such change that is
required by law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any such plan, or
make any distributions from such employee benefit plans, except as
required by law, the terms of such plans or consistent with past
practice; or
(h) make any significant change in any tax or accounting
methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in Tax Laws or GAAP as concurred to
by Parent's independent auditors; or
(i) commence any litigation other than in accordance with past
practice, or settle any litigation involving any Liability of VCG for
money damages or restrictions upon the operations of VCG; or
(j) except in the ordinary course of business, enter into,
modify, amend or terminate any material contract or waive, release,
compromise or assign any material rights or claims.
5.3 AFFIRMATIVE COVENANTS OF PARENT. Parent covenants and agrees as
follows:
(a) Upon the execution of this Agreement, Parent shall obtain
from a third party or provide directly a loan of One Hundred Thousand
Dollars ($100,000) to VCG. The loan shall be secured by VCG's
inventory. If the loan is provided by a third party, it shall be
guaranteed by Parent and if necessary, also guaranteed by the principal
shareholder of Parent, Xxxxxx Xxxxx ("Xxxxx").
(b) Parent shall obtain new financing and/or continue existing
financing for VCG working capital in an amount sufficient for VCG to
maintain an inventory of $750,000. The financing contemplated by this
section shall include any combination of vendor terms, extension,
factoring, letters of credit, lines of credit and other means of
financing.
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Parent shall be deemed to have complied with this section if
Parent obtains for VCG a One Million Dollar ($1,000,000) line of credit having a
lending base advance rate of eighty percent (80%) for qualifying accounts
receivable and fifty percent (50/0) for qualifying inventory (the "Facility").
The Facility shall be guaranteed by Parent or a subsidiary and if necessary also
guaranteed by Xxxxx. The Facility shall be implemented and effective prior to
the Closing Date. In addition, the Facility must be maintained by Parent at all
times during the course of the EARN-OUT period provided in Section 13(a) above.
Failure to maintain the Facility or an equivalent facility shall be a breach of
the Agreement. The Facility shall remain in place under the terms of this
section even in the event that the Merger is not completed for any reason.
(c) Parent shall use its best efforts to remove Burbank as a
guarantor of the current VCG lease. Best efforts shall include
replacing Burbank with Parent or a subsidiary and/or Xxxxx as a
guarantor. If, despite their best efforts, Parent is unable to remove
Burbank as a guarantor, it shall indemnity and hold Burbank harmless
from any losses, liabilities, damages or expenses with regard to his
guarantee.
(d) Parent agrees to assume all payment and other obligations
under the promissory note dated June 20, 2006 in the principal amount
of $100,000 issued by LLC and Burbank to Xxxxxxxx X. Xxxxxxx, a copy of
which has been provided to Parent.
(e) Parent shall cause the Surviving Corporation to assume all
supplier or vendor liabilities of the LLC and these liabilities shall
be disclosed and included in the VCG Deliveries referenced in Article 2
of this Agreement. Parent agrees to hold the LLC harmless with regard
to the LLC's disclosed liabilities.
5.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a VCG material adverse effect or a Parent material adverse effect, as
applicable, or (ii) would cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and to use its
reasonable efforts to prevent or promptly to remedy the same.
5.5 REGULATORY FILINGS; REQUIRED CONSENTS. The Parties hereto shall
cooperate with each other and use their reasonable efforts to promptly prepare
and file all necessary documentation, to effect ail applications, notices,
petitions and filings, and to obtain as promptly as practicable all consents of
all regulatory authorities and other Persons which are necessary or advisable to
consummate the transactions contemplated by this Agreement (including the
Merger). Each Party shall have the right to review in advance, and to the extent
practicable each will consult the other on, in each case subject to applicable
Laws relating to the exchange of information, all the information relating to
the other Party which appears in any filing made with, or written materials
submitted to, any regulatory authority or other Person in connection with the
transactions contemplated by this Agreement and will promptly notify each other
of any communication with any regulatory authority or other Person and provide
the other Party with an opportunity to participate in any meetings with a
regulatory authority or other Person relating thereto; provided, that nothing
contained herein shall be deemed to provide either Party with a right to review
16
any information provided to any regulatory authority on a confidential basis in
connection with the transactions contemplated hereby. In exercising the
foregoing right, each of the Parties hereto shall act reasonably and as promptly
as practicable. The Parties agree that they will consult with each other with
respect to the obtaining of all Consents of all regulatory authorities and other
Persons necessary or advisable to consummate the transactions contemplated by
this Agreement and each Party will keep the other apprised of the status of
matters relating to contemplation of the transactions contemplated herein. To
the extent permitted by Law, the Parties shall deliver to each other copies of
all filings, correspondence and orders to and from all regulatory authorities in
connection with the transactions contemplated hereby. Each Party also shall
promptly advise the other upon receiving any communication from any regulatory
authority whose Consent is required for consummation of the transactions
contemplated by this Agreement which causes such Party to believe that there is
a reasonable likelihood that any requisite Consent will not be obtained or that
the receipt of any such Consent will be materially delayed.
5.6 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to 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 after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in ARTICLE 6; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use its
reasonable efforts to obtain all Consents necessary or desirable for the
consummation of the transactions contemplated by this Agreement.
5.7 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time and subject to applicable Laws
relating to the exchange of information, each Party shall keep the
other Party advised of all material developments relevant to its
business and to consummation of the Merger and shall permit the other
Party to make or cause to be made such investigation of its business
and properties and of its financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be
reasonably related to the transactions contemplated hereby and shall
not interfere unnecessarily with normal operations. No investigation by
a Party shall affect the representations and warranties of the other
Party.
(b) Each Party shall, and shall cause its advisers and agents
to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior
to the Effective Time, each Party shall promptly return or certify the
destruction of all documents and copies thereof, and all work papers
containing confidential information received from the other Party.
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(c) VCG shall use its reasonable efforts to exercise its
rights, and shall not waive any rights, under confidentiality
agreements entered into with Persons who were considering an
acquisition proposal with respect to VCG to preserve the
confidentiality of the information relating to VCG provided to such
Persons and their Affiliates and Representatives.
(d) Each Party agrees to give the other Party notice as soon
as practicable after any determination by it of any fact or occurrence
relating to the other Party which it has discovered through the course
of its investigation and which represents, or is reasonably likely to
represent, either a material breach of any representation, warranty,
covenant or agreement of the other Party or which has had or is
reasonably likely to have a VCG material adverse effect or a Parent
material adverse effect, as applicable.
5.8 PRESS RELEASES. Prior to the Effective Time, VCG and Parent shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 5.8
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
5.9 CERTAIN ACTIONS. Except with respect to this Agreement and the
transactions contemplated hereby, neither VCG nor any Affiliate thereof nor any
Representatives thereof shall directly or indirectly solicit any acquisition
proposal by any Person. Neither VCG nor any Affiliate or Representative thereof
shall furnish any non-public information that it is not legally obligated to
furnish, negotiate with respect to, or enter into any Contract with respect to,
any acquisition proposal, but VCG may communicate information about such an
acquisition proposal to its stockholders if and to the extent that it is
required to do so in order to comply with its legal obligations as advised by
outside counsel. VCG shall promptly advise Parent following the receipt of any
acquisition proposal and the details thereof, and advise Parent of any
developments with respect to such acquisition proposal promptly upon the
occurrence thereof. VCG shall (i) immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any Persons conducted
heretofore with respect to any of the foregoing, and (ii) direct and use its
reasonable efforts to cause all of its Affiliates and Representatives not to
engage in any of the foregoing.
5.10 TAX TREATMENT. Each of the Parties undertakes and agrees to use
its reasonable efforts to cause the Merger, and to take no action which would
cause the Merger not, to qualify for treatment as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code for federal income tax
purposes.
5.11 CHARTER PROVISIONS. VCG shall take all necessary action to ensure
that the entering into of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby do not and will not result in the
grant of any rights to any Person under the Articles of Incorporation, Bylaws or
other governing instruments of VCG or restrict or impair the ability of Parent
or any of its Subsidiaries to vote, or otherwise to exercise the rights of a
stockholder with respect to, shares of VCG that may be directly or indirectly
acquired or controlled by them.
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5.12 EMPLOYEE BENEFITS AND CONTRACTS. Purchaser agrees to accept all
current employees of VCG at the minimum current levels of pay and benefits and
shall provide (1) year written employment agreements to the employees except as
directed by Burbank and Xxxxxxx Xxxxxxxxxx ("Xxxxxxxxxx") (sometimes referred to
collectively as the "LLC Principals") who shall have discretion over all
employment decisions of the Surviving Corporation. In addition, without
diminishing the employees' rights and benefits, the employees shall be provided
with such other employee benefits under employment benefit and welfare plans on
the same terms and conditions provided to other substantially similar employees
of the Parent and its subsidiaries. For purposes of participation, vesting
(except in the case of Parent retirement plans) benefit accrual under Parent's
employee benefit plans, the services of employees of VCG prior to the Effective
Time shall be treated as service with a Parent Entity participating in such
employee benefit times. Parent shall also cause the Surviving Corporation and
subsidiaries to honor in accordance with their terms all employment, severance,
consulting and other compensation and Contracts of any current VCG director,
officer or employee and all provisions for vested benefits or other vested
amounts earned or accrued through the Effective Time under the VCG benefit
plans. Parent will enter into employment agreements with Burbank and Xxxxxxxxxx
and other mutually agreed to key employees of VCG on such terms and conditions
to be mutually agreed prior to the Closing. In addition, within six (6) months
of the Closing Date, Parent will adopt an Employee Stock Option Plan in which
the employees of VCG will be able to participate.
5.13 INDEMNIFICATION.
(a) Parent agrees that all rights to indemnification and
exculpation from liabilities for acts or omissions occurring at or
prior to the Effective Time now existing in favor of the current or
former directors or officers of VCG and its subsidiaries as provided in
their respective articles of organization or by-laws (or comparable
organizational documents) and any indemnification agreements of VCG (as
each is in effect on the date hereof), the existence of which does not
constitute a breach of this Agreement, shall be assumed by the
Surviving Corporation in the Merger, without further action, as of the
Effective Time and shall survive the Merger and shall continue in full
force and effect in accordance with their terms, and Parent shall cause
the Surviving Corporation to honor all such rights.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other
person and is not the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or
substantially all of' its properties and assets to any person, or
Parent otherwise dissolves the Surviving Corporation, then, and in each
such case, Parent shall cause proper provision to be made so that the
successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 5.13.
ARTICLE 6. CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 8.5:
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(a) REGULATORY APPROVALS. All Consents of, filings and
registrations with, and notifications to, all regulatory authorities
required for consummation of the Merger shall have been obtained or
made and shall be in full force and effect and all waiting periods
required by Law shall have expired. No Consent obtained from any
regulatory authority which is necessary to consummate the transactions
contemplated hereby shall be conditioned or restricted in a manner
(including requirements relating to the raising of additional capital
or the disposition of Assets) which in the reasonable judgment of the
Board of Directors of Parent would so materially adversely impact the
economic or business benefits of the transactions contemplated by this
Agreement that, had such condition or requirement been known, Parent
would not, in its reasonable judgment, have entered into this
Agreement.
(b) CONSENTS AND APPROVALS. VCG shall have obtained any and
all other Consents required for consummation of the Merger (other than
those referred to in Section 0) or for the preventing of any Default
under any Contract or Permit of such Party which, if not obtained or
made, is reasonably likely to have, individually or in the aggregate, a
VCG material adverse effect or a Parent material adverse effect. No
Consent so obtained which is necessary to consummate the transactions
contemplated hereby shall be conditioned or restricted in a manner
which in the reasonable judgment of the Board of Directors of Parent
would so materially adversely impact the economic or business benefits
of the transactions contemplated by this Agreement that, had such
condition or requirement been known, Parent would not, in its
reasonable judgment, have entered into this Agreement.
(c) LEGAL PROCEEDINGS. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits,
restricts or makes illegal consummation of the transactions
contemplated by this Agreement.
6.2 CONDITIONS TO OBLIGATIONS OF PARENT. The obligations of Parent to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Parent pursuant to Section 8.5(a):
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 6.2(a), the accuracy of the representations and warranties of
VCG set forth in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as
of the Effective Time (provided that representations and warranties
which are confined to a specified date shall speak only as of such
date). The representations and warranties of VCG shall be true and
correct in all material respects.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of
the agreements and covenants of VCG to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) CERTIFICATES. VCG shall have delivered to Parent (i) a
certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the
effect that the conditions set
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forth in Section 6.1 as relates to VCG and in Section 6.2(a) and 6.2(b)
have been satisfied, and (ii) certified copies of resolutions duly
adopted by VCG'S Board of Directors and stockholders evidencing the
taking of all corporate action necessary to authorize the execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby, all in such reasonable detail as
Parent and its counsel shall request.
(d) ADDITIONAL CONDITIONS. VCG, the LLC, and the LLC
Principals will, from and after the Closing Date:
(i) Cooperate with Parent and Merger Sub to preserve
intact VCG's personnel and to keep available the services of
all of its employees, agents, independent contractors, and
consultants commensurate with VCG's business requirements.
(ii) Cooperate with Parent and Merger Sub to preserve
intact the present customers of VCG and the goodwill of all
customers and others with respect to the business.
(iii) Agree to not, for a period of three (3) years
from the Closing Date, on their own behalf or on behalf of all
other entity, hire, solicit, or seek to hire, any employee of
Parent or its Affiliates or in any other manner attempt
directly or indirectly to influence, induce or encourage any
employee of Parent or its Affiliates to leave the employment
of Parent or its Affiliates.
(iv) Agree that after the Closing Date, they will
not, and will use their best efforts to cause their employees,
agents and Affiliates to not, except as expressly requested by
Parent or otherwise required to carry out the provisions of
this Agreement:
A) Provide technical information or
assistance relating to VCG to any person or
organization other than Parent or persons authorized
by Parent to receive such information or assistance.
B) Assist any other person or organization
in engaging in the design, development, engineering
or sale of goods competing with the business of DTNet
Technologies at any time within three years of the
date hereof.
C) Directly or indirectly reveal to anyone
or utilize in any the confidential information of
Parent except as required by this Agreement or as
expressly requested by Parent.
(e) GUARANTEE OF VCG, LLC and LLC Principals. As a guarantee
of VCG's, the LLC's and the LLC Principals covenants pursuant to
Section 6.2(d)(iii) above ("Additional Covenants"), VCG, LLC, and LLC
Principals agree to forfeit the Contingent Consideration not yet
received in the event that VCG, the LLC or the LLC Principals
materially breach the Additional Covenants. In the event that only one
of each of VCG, LLC or LLC Principals has materially breached the
Additional Covenants, only that portion of the unearned Contingent
Consideration allocatable to each of the VCG, LLC or LLC Principals
shall be forfeited.
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6.3 CONDITIONS TO OBLIGATIONS OF VCG. The obligations of VCG to perform
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by VCG pursuant to Section 8.5(b):
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 6.3(a), the accuracy of the representations and warranties of
Parent set forth in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as
of the Effective Time (provided that representations and warranties
which are confined to a specified date shall speak only as of such
date). The representations and warranties of Parent set forth in
Section 4 shall be true and correct in all material respects.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of
the agreements and covenants of Parent to be performed and complied
with pursuant to this Agreement and the other agreements contemplated
hereby prior to the Effective Time shall have been duly performed and
complied with in all material respects.
(c) CERTIFICATES. Parent shall have delivered to VCG (i) a
certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the
effect that the conditions set forth in Section 6.1 as relates to
Parent and in Sections 6.3(a) and 6.3(b) have been satisfied, and (ii)
certified copies of resolutions duly adopted by Parent's Board of
Directors and Merger Sub's Board of Directors and sole stockholder
evidencing the taking of all corporate action necessary to authorize
the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such
reasonable detail as VCG and its counsel shall request.
(d) EMPLOYMENT AGREEMENTS. Parent shall have entered into an
employment agreement with Burbank on terms satisfactory to Burbank, and
Parent shall have caused the Surviving Corporation to enter into an
employment agreement with Xxxxxxxxxx on terms satisfactory to
Xxxxxxxxxx.
ARTICLE 7. TERMINATION.
7.1 TERMINATION.
Notwithstanding any other provision of this Agreement, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) By mutual consent of Parent and VCG; or
(b) By either Party (provided that the terminating Party is
not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event of a
material breach by the other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured
within 30 days after the giving of written notice to the breaching
Party of such breach and which breach is reasonably likely, in the
opinion of the non-breaching Party, to have, individually or in the
aggregate, a VCG material adverse effect or a Parent material adverse
effect, as applicable, on the breaching Party; or
22
(c) By either Party (provided that the terminating Party is
not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event of a
material breach by the other Party of any covenant or agreement
contained in this Agreement which cannot be or has not been cured
within 30 days after the giving of written notice to the breaching
Party of such breach; or
(d) By either Party (provided that the terminating Party is
not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event any
consent of any regulatory authority required for consummation of the
Merger and the other transactions contemplated hereby shall have been
denied by final nonappealable action of such authority or if any action
taken by such authority is not appealed within the time limit for
appeal; or
(e) By either Party in the event that the Merger shall not
have been consummated by December 3, 2006, if the failure to consummate
the transactions contemplated hereby on or before such date is not
caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 7.1(e); or
(f) By either Party (provided that the terminating Party is
not then in material breach of any representation, warranty, covenant,
or other agreement contained in this Agreement) in the event that any
of the conditions precedent to the obligations of such Party to
consummate the Merger cannot be satisfied or fulfilled by the date
specified in Section 7. l (f).
7.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1 above, this Agreement
shall become void and have no effect, except that (i) the provisions of this
Section 7.2, Article 8, and Section 5.7(b) shall survive any such termination
and abandonment, and (ii) a termination pursuant to Sections 7.1(b), 7.1(c), or
7.1(f), shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination.
ARTICLE 8. GENERAL PROVISIONS.
8.1 EXPENSES.
(a) Except as otherwise provided in this Section 8.1, each of
the Parties shall bear and pay all direct costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
hereunder, including filing, registration and application fees,
printing fees, and fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel. For planning
purposes, VCG shall, within 30 days from the date hereof, provide
Parent with its estimated budget of transaction-related expenses
reasonably anticipated to be payable by VCG in connection with this
transaction, including the fees and expenses of counsel, accountants,
investment bankers and other professionals. VCG shall promptly notify
Parent if or when it determines that it will expect to exceed its
budget. Promptly after the execution of this Agreement, VCG shall ask
all of its attorneys and other professionals to render current and
correct invoices for all unbilled time and disbursements. VCG shall
accrue and/or pay all of such amounts promptly thereafter.
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(b) Nothing contained in this Section 8.1 shall constitute or
shall be deemed to constitute liquidated damages for any breach by a
Party of the terms of this Agreement or otherwise limit the rights of
the nonbreaching Party.
8.2 BROKERS AND FINDERS. Each of the Parties represents and warrants
that neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby. In the event of a claim by any broker or finder based upon his or its
representing or being retained by or allegedly representing or being retained by
VCG or any Affiliate or by Parent, each of VCG and Parent, as the case may be,
agrees to indemnify and hold the other Party harmless of and from any Liability
in respect of any such claim.
8.3 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, other than as provided in
Section 5.13.
8.4 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties, whether before or after stockholder approval of this
Agreement has been obtained; provided, that after any such approval by the
holders of VCG Capital Stock, there shall be made no amendment that reduces or
modified in any material respect the consideration to be received by holders of
VCG Capital Stock pursuant to the Florida Corporations Code requires further
approval by such stockholders without the further approval of such stockholders.
8.5 WAIVERS.
(a) Prior to or at the Effective Time, Parent, acting through
its Board of Directors, chief executive officer or other authorized
officer, shall have the right to waive any Default in the performance
of any term of this Agreement by VCG, to waive or extend the time for
the compliance or fulfillment by VCG of any and all of its obligations
under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Parent under this Agreement, except any
condition which, if not satisfied, would result in the violation of any
Law. No such waiver shall be effective unless in writing signed by a
duly authorized officer of Parent.
(b) Prior to or at the Effective Time, VCG, acting through its
Board of Directors, chief executive officer or other authorized
officer, shall have the right to waive any Default in the performance
of any term of this Agreement by Parent, to waive or extend the time
for the compliance or fulfillment by Parent of any and all of its
obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of VCG under this Agreement,
except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in
writing signed by a duly authorized officer of VCG.
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(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right
of such Party at a later time to enforce the same or any other
provision of this Agreement. No waiver of any condition or of the
breach of any term contained in this Agreement in one or more instances
shall be deemed to be or construed as a further or continuing waiver of
such condition or breach or a waiver of any other condition or of the
breach of any other term of this Agreement.
8.6 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the Parties and their respective successors and assigns.
8.7 NOTICES. All notices or other communications hereunder must be
given in writing and either (i) delivered in person, (ii) transmitted by
facsimile telecommunication, provided that any notice so given is also mailed as
provided for herein, (iii) delivered by Federal Express or similar commercial
delivery service, or (iv) mailed by certified mail, postage prepaid, return
receipt requested, as follows:
If to the LLC and the VCG: 00000 00xx Xxxxx X., Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Facsimile number (000) 000-0000
If to the Parent or Merger Sub: 00000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile number (000) 000-0000
or to such other address or facsimile number as the LLC, the VCG, the Parent or
Parent Subsidiary shall have designated to the other by like notice. Each such
notice or other communication shall be effective (i) if given by facsimile
telecommunication, when transmitted, (ii) if given by mail, five (5) business
days after such communication is deposited in the mail and addressed as
aforesaid, (iii) if given by Federal Express or similar commercial delivery
service, one (1) business day after such communication is deposited with such
service and addressed as aforesaid, and (iv) if given by any other means, when
actually delivered at such address.
8.8 DISPUTES. If a dispute arises concerning this agreement or the
sale, the LLC and Parent will try in good faith to settle it through mediation
conducted by a mediator to be mutually selected. The LLC and Parent will share
the cost of the mediator equally. The LLC and Parent will cooperate fully with
the mediator and will attempt to reach a mutually satisfactory resolution of the
dispute. If the dispute is not resolved within 60 days after it is referred to
the mediator, The LLC and Parent agree that the dispute will be arbitrated by an
arbitrator to be mutually selected. Arbitration will be conducted pursuant to
the American Arbitration Association rules for commercial disputes. Each party
shall have the right to take up to three depositions in connection with any
arbitration. The parties agree that the arbitrator shall render a written
opinion which shall include findings of fact and conclusions of law and that, on
a petition to confirm or vacate the arbitration award, the court shall vacate
the award in addition to other grounds provided by statute applicable to
arbitrations if the court determines that a question of law was determined
25
erroneously. Judgment on the arbitration award may be entered in any court that
has jurisdiction over the matter. Costs of arbitration, including lawyers' fees,
will be allocated by the arbitrator.
8.9 GOVERNING LAW; VENUE. This Agreement shall be made and entered into
in Clearwater, Pinellas County, Florida, and shall be governed by and construed
and enforced in accordance with the Laws of the State of Florida without giving
effect to any conflict of law, rule or principle of that state. Venue for any
actions in construction or enforcement of this Agreement shall be in the State
of Florida.
8.10 COUNTERPART EXECUTION. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and each of which
alone, and all of which together, shall constitute one and the same instrument.
When each party has executed and delivered a counterpart of this Agreement, the
Agreement shall be fully binding on and enforceable by the parties. In making
proof of the Agreement it shall not be necessary to produce or account for any
counterpart other than the counterpart signed by a party against whom this
Agreement is to be enforced.
8.11 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
The headings in this Agreement are inserted for convenience and identification
only and are in no way intended to describe, interpret, define or limit the
scope, extent or intent of this Agreement or any provision hereof.
8.12 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to, that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.13 SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. The
covenants, agreements, representations and warranties made by the parties in
this Agreement and in any other certificates and documents delivered in
connection herewith shall survive the Closing.
[SIGNATURES BEGIN ON THE FOLLOWING PACE]
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the day and year
first written above.
PARENT VCG
------ ---
China Voice Holding Corp. VCG Corporation
A New York Corporation A Florida Corporation
By: /s/ D. Xxx Xxxxx By: /s/ Xxxx Xxxxxxx
----------------------- --------------------------------
D. Xxx Xxxxx, President Xxxx Xxxxxxx, President
MERGER SUB LLC
---------- ---
DTN Merger Corp. DT Net Technologies LLC
A Texas Corporation A Florida Limited Liability Company
By: /s/ D. Xxx Xxxxx By: /s/ Xxxx Xxxxxxx
----------------------- --------------------------------
D. Xxx Xxxxx, President Xxxx Xxxxxxx, CEO
By: /s/ Xxxx Xxxxxxx
--------------------------------
Xxxx Xxxxxxx, individually
for Sections 6.2d and e only
By: /s/ Xxxxxxx Xxxxxxxxxx
--------------------------------
Xxxxxxx Xxxxxxxxxx, individually
for Sections 6.2 d and a only
Signature Page to the Agreement and Plan of Merger and Reorganization
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