____________________________________________________
AGREEMENT AND PLAN OF
MERGER
AMONG
SOUVALL-PAGE AND COMPANY, INC.
a Utah Corporation
AND
ABA ACQUISITION CORP.,
an Indiana Corporation
AND
AMERICAN BASKETBALL ASSOCIATION,
INC.,
an Indiana Corporation
_______________________________________________________
AGREEMENT AND PLAN OF
MERGER
This Merger Agreement (this
“Agreement”), entered into December 18, 2006, by
and among Souvall-Page and Company, Inc., a Utah corporation
(“Parent”); ABA Acquisition Corp., Inc., an Indiana
corporation and a subsidiary of Parent (“Sub”); David
C. Merrell, an officer, director and shareholder of Parent
(“David C. Merrell”); and American Basketball
Association, Inc., an Indiana corporation (“Company”).
Parent, Sub, David C. Merrell and Company are referred to
collectively as the “Parties.”
RECITALS
A.
Parent, Sub and Company intend to effect
a Merger of Sub into Company in accordance with this Agreement and
the Indiana General Corporation Law. Upon consummation of the
Merger, the Sub will cease to exist and Company will continue as a
wholly-owned subsidiary of the Parent.
B.
This Agreement has been approved by the
respective boards of directors of Parent, singly and as sole
shareholder of Sub, Sub and Company and by shareholders owning more
than 51% of the outstanding voting stock of Company.
C.
The Parties intend that the Merger will
be treated as a tax free reorganization as described in Section 368
of the Internal Revenue Code of 1986, as amended (the
“Code”).
AGREEMENT
Now, therefore, in consideration of the
premises and the mutual promises herein made, and in consideration
of the representations, warranties, and covenants herein contained,
the Parties agree as follows:
1.
DEFINITIONS
“ Affiliate” has the
meaning set forth in Rule 12b-2 of the regulations promulgated
under the Securities Exchange Act.
“ Certificate of
Merger” has the meaning set forth in Section 2(c)
below.
“ Closing” has the
meaning set forth in Section 2(b) below.
“ Closing Date” has
the meaning set forth in Section 2(b) below.
“ Company” has the
meaning set forth in the preface above.
“ Company Share” means
any share of the common stock, no par value per share, of Company.
“ Company SPA ” has
the meaning set forth within Section 2(d) below.
“ Company Stockholder”
means any Person who or which holds any Company Shares.
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“ Confidential
Information” means any information concerning the
businesses and affairs of Company and its Subsidiaries that is not
already generally available to the public.
“ Conversion Ratio”
has the meaning set forth in Section 2(d)(iv) below.
“ Definitive Company Proxy
Materials” means the definitive proxy materials or
equivalent thereof relating to the Special Company Meeting or the
execution and delivery of written consents in lieu
thereof.
“ Indiana General Corporation
Law” means the General Corporation Law of the State of
Indiana, as amended.
“ Disclosure Schedule”
has the meaning set forth in Section 3 below.
“ Dissenting Share”
means any Company Share held of record by any stockholder who or
which has exercised his, her, or its appraisal rights, if any,
under the applicable sections of the Indiana General Corporation
Law.
“ Effective Time” has
the meaning set forth in Section 2(d)(i) below.
“ Exchange Agent” has
the meaning set forth in Section 2(e) below.
“ GAAP” means United
States generally accepted accounting principles as in effect from
time to time, consistently applied.
“ IRS” means the
Internal Revenue Service.
“ Joint Disclosure
Document” means the Company SPA including the Exhibits
and Schedules thereto and the filings made by Parent with the
United States Securities and Exchange Commission through the date
of this Agreement.
“ Knowledge” means
actual knowledge after reasonable investigation.
“ Lien” means any
mortgage, pledge, lien, encumbrance, charge, or other security
interest other than (a) liens for Taxes not yet due and
payable or for taxes that the taxpayer is contesting in good faith
through appropriate proceedings, (b) purchase money liens and liens
securing rental payments under capital lease arrangements, and (c)
other liens arising in the Ordinary Course of Business and not
incurred in connection with the borrowing of money.
“ Material Adverse
Effect” or “ Material Adverse Change”
means any effect or change that would be materially adverse to the
business, assets, condition (financial or otherwise), operating
results, operations, or business prospects of Company and its
Subsidiaries, taken as a whole, or on the ability of Company to
consummate timely the transactions contemplated hereby.
“ Merger” has the
meaning set forth in Section 2(a) below.
“ Most Recent Fiscal Quarter
End” has the meaning set forth in Section 3(f)
below.
“ Ordinary Course of
Business” means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency) and as to Company shall also include sales
and issuances of securities, contracts, purchases and
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dispositions of equipment and other
transactions referenced or contemplated by the Company
SPA.
“ Parent” has the
meaning set forth in the preface above.
“ Parent Share” means
any share of the common stock, no par value per share, of Parent.
“ Party” has the
meaning set forth in the preface above.
“Person”
means an individual, a partnership, a
corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated
organization, any other business entity, or a governmental entity
(or any department, agency, or political subdivision
thereof).
“Public Report”
has the meaning set forth in Section 3(e)
below.
“Requisite Company Stockholder
Approval” means the
affirmative vote of the holders of a majority of Company Shares in
favor of this Agreement and the Merger.
“SEC”
means the Securities and Exchange
Commission.
“Securities
Act” means the
Securities Act of 1933, as amended.
“ Securities Exchange
Act” means the Securities Exchange Act of 1934, as
amended.
“Sub”
has the meaning set forth in the preface
above.
“Subsidiary”
means, with respect to any Person, any
corporation, limited liability company, partnership, association,
or business entity of which (i) if a corporation, a majority of the
total voting power of shares of stock entitled (without regard to
the occurrence of any contingency) to vote in the election of
directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof
or (ii) if a limited liability company, partnership, association,
or other business entity (other than a corporation), a majority of
partnership or other similar ownership interest thereof is at the
time owned or controlled, directly or indirectly, by that Person or
one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons owns a majority ownership
interest in such a business entity (other than a corporation) if
such Person or Persons shall be allocated a majority of such
business entity's gains or losses or shall be or control any
managing director or general partner of such business entity (other
than a corporation). The term " Subsidiary " shall include
all Subsidiaries of such Subsidiary.
“Surviving
Corporation” has the
meaning set forth in Section 2(a) below.
2.
REORGANIZATION TRANSACTION
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(a)
The Merger . Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Indiana
General Corporation Law, the Sub shall be merged into Company.
At the Effective Time, the separate existence of the Sub
shall cease, and Company shall continue as the surviving
corporation (the “Surviving Corporation”).
(b)
The Closing . The closing of the transactions contemplated
by this Agreement (the “Closing”) shall take place at
the offices designated by Company at 9200 Sunset Boulevard, 9th
Floor, Los Angeles, California 90069 on December 19 2006 or
the second business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing
itself) or such other date as the parties may mutually determine
(the “Closing Date”).
(c)
Actions at the Closing
. At the Closing, (i) Company will
deliver to Parent and Sub the various certificates, instruments,
and documents referred to in Section 6(a) below, (ii) Parent and
Sub will deliver to Company the various certificates, instruments,
and documents referred to in Section 6(b) below, (iii) Parent, Sub
and Company will file with the Secretary of State of the State of
Indiana a Certificate of Merger in the form attached hereto as
Exhibit A (the " Certificate of Merger "), and (iv) Company
will deliver to the Exchange Agent in the manner provided below in
this Section 2 the certificate(s) evidencing the Parent Shares to
be issued in the Merger.
(d)
Effect of Merger
.
(i)
General. The Merger shall become effective at the time (the "
Effective Time ") Sub and Company file the Certificate of
Merger with the Secretary of State of the State of Indiana. The
Merger shall have the effect set forth in the Indiana General
Corporation Law. The Surviving Corporation may, at any time after
the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of either Sub or
Company in order to carry out and effectuate the transactions
contemplated by this Agreement.
(ii)
Certificate of
Incorporation. The Certificate
of Incorporation of Company in effect at and as of the Effective
Time will remain the Certificate of Incorporation of Surviving
Corporation without any modification or amendment in the Merger.
(iii)
By-laws. The By-laws of Company in effect at and as of the
Effective Time will remain the By-laws of Surviving Corporation
without any modification or amendment in the Merger.
(iv)
Conversion of Company
Shares. At and as of the
Effective Time, (A) each Company Share (other than any Dissenting
Share) shall be converted into the right to receive one Parent
Share (the ratio of one Parent Share to one Company
Share is referred to herein as the " Conversion Ratio "),
constituting up to 22,536,136
Parent Shares, (inclusive of the sale and
issuance of 1,675,000 units and 750,000 shares of
common stock (the “Unit Added Stock”) being offered
[pursuant to a Stock Purchase Agreement dated as of the date hereof
between the Company and the purchasers therein listed (the
“Company SPA”)] and 888,892
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Parent Shares issuable on conversion of
the principal of the Bridge Loans); (B) each outstanding warrant to
purchase a Company Share shall be converted into the right to
receive one warrant to purchase a Parent Share (an aggregate of
warrants to purchase up to (1) 500,000 shares at an exercise price
of $.25 per share and (2) 500,000 shares at an exercise price of
$.75 per share are outstanding); (C) each outstanding placement
warrant as described in the Company SPA shall be converted into a
warrant to purchase two Parent Shares and a warrant to purchase a
Parent Share (placement warrants to purchase 184,250 units at an
exercise price of $1.20 per unit, as described in the Company SPA
are outstanding) (collectively (A), (B) and (C) constitute the
“Merger Consideration”); and (D) each Dissenting Share,
if any, shall be converted into the right to receive payment from
Parent with respect thereto in accordance with the provisions of
the Indiana General Corporation Law; provided, however ,
that the Conversion Ratio shall be subject to equitable adjustment
in the event of any stock split, stock dividend, reverse stock
split, or other change in the number of Company Shares outstanding.
(v)
Conversion of Company Options and
Warrants. Except for Warrants
issued pursuant to the Company SPA that also include warrants to
purchase units issued to the placement agent and a finder, as
described within the Company SPA and its Schedules (collectively,
all of such warrants issued to investors, the placement agent and
the finder being referred to herein as the “SPA
Warrants”) and the warrants described in paragraph 2(d)(iv)
above (the “Extant Company Warrants”), the Merger
Consideration gives effect to all outstanding Company Options,
Warrants and other rights held by any person to acquire Company
Shares. At the Effective Time, each outstanding option to purchase
shares of Company Common Stock (each, a “Company Stock
Option”) under Company Option Plans, whether or not vested,
shall have been exercised or otherwise terminated. Other than
the SPA Warrants and the Extant Company Warrants, Parent shall
assume no Company Stock Option by virtue of the Merger. Each of the
outstanding SPA Warrants and each of the outstanding Extant Company
Warrants shall be converted into the right to acquire Parent Shares
upon the same terms and conditions as specified in the SPA Warrants
and in the Extant Company Warrants and at the same Conversion Ratio
imposed on holders of Company Shares pursuant to the transactions
contemplated hereby.
(vi)
Parent Shares . Each Parent Share issued and outstanding at and as
of the Effective Time will remain issued and
outstanding.
(e)
Conversion Procedures
.
(i)
Immediately after the Effective Time, (A)
Parent and Sub will furnish to Interwest Transfer Co., Inc., 1981
Murray-Holladay Road, Salt Lake City, Utah 84117 (the " Exchange
Agent ") a stock certificate (issued in the name of the
Exchange Agent or its nominee) representing that number of Parent
Shares equal to the product of (i) the Conversion Ratio
times (ii) the number of outstanding Company Shares (other
than any Dissenting Shares) not to exceed 22,536,136
Parent Shares after giving effect
to (x) the minimum number of units
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and Unit Added Stock that are offered
under the Company SPA (but subject to increase if more than the
minimum number of units are sold) and (y) conversion of the
principal of the Bridge Loans into Parent Shares (but subject to
increase if the holders of the Bridge Loans elect to have their
interest due payable in Parent Shares), and (B) Parent will cause
the Exchange Agent to mail a letter of transmittal (with
instructions for its use) to each record holder of outstanding
Company Shares for the holder to use in surrendering the
certificates which represented his, her, or its Company Shares in
exchange for a certificate representing the number of Parent Shares
to which he, she, or it is entitled.
(ii)
Fractional shares shall not be issued,
but cash shall be paid by the Parent for any such fraction in an
amount proportionate to the fair value of a whole share as
determined by the Board of Directors of Parent.
(iii)
Parent shall pay all charges and
expenses of the Exchange Agent.
3.
REPRESENTATIONS
AND WARRANTIES OF COMPANY
Company represents and warrants to Parent
that the statements contained in this Section 3 and the Company SPA
are, to the Company’s Knowledge, correct and complete as of
the date of this Agreement and will be correct and complete 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 Section 3), except as set forth in the Company SPA. The Parent
and Sub acknowledge that the following representations and
warranties are made by Company, to the Company’s knowledge
and belief, in conjunction with and with reference to the Company
SPA. The following representations and warranties are qualified in
their entirety by the information set forth within the Company SPA
and the Company Financial Statements defined below.
(a)
O
rganization, Good Standing and Qualification
. Company is a corporation duly
incorporated, duly organized, validly existing and in good standing
under the laws of Indiana. Company and has all requisite corporate
power and authority to own and operate its properties and assets,
to execute and deliver this Agreement and to carry on its business
as presently conducted and as presently proposed to be conducted.
Company is duly qualified and is authorized to do business
and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its
properties (both owned and leased) makes such qualification
necessary and in which failure to so qualify would have a Material
Adverse Effect.
(b)
Capitalization . The authorized capital stock of Company is
30,000,000 shares of common stock, no par value per share, of
which 22,536,136
(the “Company Shares”) are
issued and outstanding as of the Closing. All of the issued and
outstanding Company Shares have been duly authorized and are (and,
as to the SPA Warrants and the Extant Company Warrants, following
payment and proper exercise, will be) validly issued, fully paid
and nonassessable, are free of any Liens, and were (and, as to the
Company Shares issuable on exercise of the SPA Warrants and the
Extant Company Warrants, will be) issued in compliance with all
applicable laws concerning the offer,
7
sale and issuance of securities. Each of
the SPA Warrants and each of the Extant Company Warrants entitles
the holder thereof to acquire one Company Share as described within
the Company SPA. Except as may be described in the Company SPA, the
Company Shares are not subject to any pre-emptive rights or rights
of first refusal created by statute, the Certificate of
Incorporation or Bylaws of Company or any agreement to which
Company is a Party or by which it is bound.
(c)
Authorization; Binding
Obligations . Company
has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby;
provided, however, that completion of the Merger is conditioned on
the Company’s obtaining the necessary shareholder approval.
This Agreement has been duly executed and delivered by Company and
constitutes the valid and binding obligation of Company enforceable
against Company in accordance with its terms subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
other laws of general applicability relating to or affecting
creditors’ rights and to general equity
principles.
(d)
No Contravention
. Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will violate any constitution,
statute, regulation, rule to which Company is subject or any
provision of the charter or bylaws of Company. Other than in
connection with the provisions of any applicable state law, Company
does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
(e)
Financial Statements . Company delivered to Parent its
audited Statement of Income and Balance Sheets from inception
(April 2004) through the year ended December 31, 2005 (the
“Audited Financial Statements”) and its unaudited
Statement of Income and Balance Sheets as of and for the six-month
period ended September 30, 2006 (the “Interim Financial
Statements” and together with the Audited Financial
Statements, the “Company Financial Statements”). The
Company Financial Statements are in accordance with the books and
records of Company, have been derived from the books and records of
Company, (for the periods covered and at September 30, 2006 (the
“Company Statement Date”); provided that that the
Interim Financial Statements are subject to normal recurring
year-end adjustments and may not contain all Notes to Financial
Statements required under GAAP.
(f)
No Undisclosed Liabilities
. Except as may be set forth in the
Company SPA or elsewhere in this Agreement, Company to its
Knowledge has no obligations or liabilities that are material and
that are not disclosed or reflected in the Company Financial
Statements, except current liabilities incurred, and obligations
entered into, in the Ordinary Course of Business subsequent to the
Company Statement Date.
(g)
Title to Properties and Assets;
Liens .
Except as may be otherwise
described in the Company SPA, Company has good and valid right and
title to the personal property, tangible and intangible (other than
intellectual property licenses described in paragraph (h) below),
reflected in the Company Financial Statements (except
8
assets, interests in assets sold or
otherwise disposed of since the Company Statement Date in the
Ordinary Course of Business).
(h)
Intellectual Property
. Company owns, or is licensed or
otherwise possesses rights to patents, applications for patents,
licenses and other intellectual property (collectively
“Company Intellectual Property”) as set forth and
described within the Company SPA.
(i)
Litigation . Except as set forth in the Company SPA,
there is no action, suit, arbitration, audit or other proceeding or
investigation pending, threatened against Company or any of its
properties or any of its officers or directors (in their capacity
as such) before any agency, court or tribunal, foreign or domestic.
(j)
Employment Matters
.
(i)
To the Knowledge of Company, Company is
in compliance in all material respects with all currently
applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment,
alien employment and hiring, and is not engaged in any unfair labor
practice.
(ii)
Company has no collective bargaining
agreement with any of its employees. There is no labor union
organizing activity pending or, to Company’s Knowledge,
threatened with respect to Company. Except as set forth in the
Company SPA, no employee has any agreement or contract, written or
verbal, regarding such employee’s continued employment by
Company.
(k)
Registration Rights
. Except as set forth in the
Company SPA, Company is currently not under any obligation, and has
not granted any rights, to register any of Company’s
presently outstanding securities.
(l)
Compliance with Laws; Governmental
Consents; Permits . No
governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the
execution and delivery of this Agreement and the Merger, except for
(A) the filing of the Certificate of Merger, together with the
required officers’ certificates; (B) such governmental
consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state
securities laws and the securities laws of any foreign country; and
(C) such other consents, authorizations, filings, approvals
and registrations which, if not obtained or made, would not have a
Material Adverse Effect on Company and would not prevent, or
materially alter or delay any of the transactions contemplated by
this Agreement.
(m)
Information to Company
Shareholders . Company
represents and warrants that Company shareholders have been or will
be advised by Company of the following:
The Parent Shares have not been
registered under the Securities Act of 1933, as amended. The Parent
Shares will be acquired for the issuee’s own account and not
with a view to distribute them to the public. The Parent
Shares are “restricted securities” that may not be
pledged or hypothecated and may not be sold or transferred unless
they are registered under the Securities Act of 1933, or unless, in
the opinion of Parent’s counsel or counsel satisfactory to
Parent, such registration is
9
not required. A legend
confirming the foregoing shall be prominently affixed to each
certificate evidencing the Parent Shares.
4.
REPRESENTATIONS AND WARRANTIES OF PARENT
AND SUB
Parent and Sub represent and warrant to
Company, each to its Knowledge, that the statements contained in
this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete 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 Section
4), except as set forth in the various filings made by the Parent
with the Securities and Exchange Commission or except as set forth
on any schedule attached as part of Exhibit C hereto (the
“Parent/Sub Disclosure Schedule”).
(a)
Organization, Good Standing and
Qualification . Each of
Parent and Sub is a corporation duly incorporated, duly organized,
validly existing and in good standing under the laws of the State
of Utah and State of Indiana, respectively. Each of Parent
and Sub has all requisite corporate power and authority to own and
operate its properties and assets, to execute and deliver this
Agreement and to carry on its business as presently conducted and
as presently proposed to be conducted. Each of Parent and Sub
is duly qualified and is authorized to do business and is in good
standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and
leased) makes such qualification necessary and in which failure to
so qualify might reasonably be expected, individually, or in the
aggregate, to have a Materially Adverse Effect.
(b)
Capitalization .
(i)
The authorized capital stock of the
Parent, immediately prior to the Closing, is 50,000,000 shares of
common stock, no par value per share, of which [2,723,864]
(the “Parent Shares”) are issued and outstanding
(without giving effect to 300,000 shares of common stock to be
issued at Closing to David Merrell pursuant to Section 6(a)(viii)
and Section 6(b)(x) below) and (B) 10,000,000 shares of preferred
stock, no par value per share, of which none is issued and
outstanding. There are no authorized or outstanding subscriptions,
warrants, options, contracts, rights (pre-emptive or otherwise),
puts, calls, exchangeable or convertible securities, commitments or
demands of any character relating to any authorized and issued or
unissued shares of the capital stock of the Parent or other
instruments convertible into or exchangeable for such stock, or
which obligate the Parent to seek authorization to issue additional
shares of any class of stock or to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of capital stock of the Parent or obligating
the Parent to grant, extend, accelerate the vesting of, change the
price of, or otherwise amend or enter into any such option,
warrant, call, right, commitment or agreement, other than created
by virtue of this Agreement or the transactions contemplated
hereby.
(ii)
The Merger does not constitute and will
not constitute an event under any capital stock or convertible
security or any anti-dilution or similar
10
provision of any agreement to which
Parent or Sub is a Party or by which it is bound or affected, which
shall either increase the number of shares or units of capital
stock issuable upon conversion of any securities or upon exercise
of any warrant or right to subscribe to or purchase any stock or
similar security, or decrease the consideration per share or unit
of capital stock to be received by Parent or by Sub upon such
conversion or exercise.
(c)
Authorization; Binding
Obligations . Each of
the Parent and Sub has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action
on the part of each of the Parent and Sub. No ratification or
other approval by the shareholders of Parent is required to enter
into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each
of the Parent and Sub and constitutes the valid and binding
obligation of each of the Parent and Sub enforceable against the
Parent and Sub in accordance with its terms subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
other laws of general applicability relating to or affecting
creditors’ rights and to general equity
principles.
(d)
No Contravention
. Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Parent or Sub
are subject or any provision of the charter or bylaws of Parent or
Sub or (ii) conflict with, result in a breach of, constitute a
default under, result in the a
