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Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of September 4, 2007, by and among CaminoSoft Corp., a California corporation (“Parent”), CC Merger Corp., a Nevada corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and Shea Development Corp., a Nevada corporation (the “Company”). Parent, Merger Sub and the Company are collectively referred to herein as the “Parties,” and each is a “Party”. Capitalized terms used and not otherwise defined herein have the meanings set forth in Article 1.
RECITALS
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have deemed it advisable and in the best interests of their respective corporations and shareholders that Parent, Merger Sub and the Company enter into a business combination transaction;
WHEREAS, in furtherance thereof, the respective Boards of Directors of Parent, Merger Sub and the Company each have approved and declared advisable this Agreement and the merger of Merger Sub with and into the Company (the “Merger”), upon the terms and subject to the conditions set forth in this Agreement and in accordance with the provisions of the Nevada Revised Statutes (the “NRS”);
WHEREAS, the respective Boards of Directors of Parent and the Company have determined to recommend to their respective shareholders the approval and adoption of this Agreement and the Merger; and
WHEREAS, in connection with the Merger, the parties desire to make certain representations, warranties, covenants and agreements and also to prescribe various conditions to the Merger, upon the terms and subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the covenants, promises, representations and warranties set forth herein, and for other good and valuable consideration, intending to be legally bound hereby the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. The following terms shall, when used in this Agreement, have the following meanings:
“Affiliate” means, with respect to any Person: (i) any Person directly or indirectly owning, controlling or holding with power to vote ten percent (10%) or more of the outstanding voting securities of such other Person (other than passive or institutional investors); (ii) any Person ten percent (10%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; and (iv) any officer, director or partner of such other Person. “Control” for the foregoing
purposes shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or voting interests, by contract or otherwise;
“Agreement” shall have the meaning set forth in the Recitals of this Agreement;
“Business Day” means any day other than Saturday, Sunday or a day on which banking institutions in Los Angeles, California, are required or authorized to be closed;
“Alternative Acquisition” shall have the meaning set forth in Section 5.12 of this Agreement;
“Capital Increase” shall have the meaning set forth in Section 5.4 of this Agreement;
“Certificates” shall have the meaning set forth in Section 2.9 of this Agreement;
“Change of Control,” with respect to any Person, means (i) a liquidation or dissolution of such Person; (ii) a merger or consolidation of such Person with or into another corporation or entity in which such Person is not the surviving corporation or other business entity (other than a merger with a wholly owned subsidiary); (iii) a merger or consolidation of such Person (or a triangular merger involving a subsidiary of the Company) where such Person is the surviving corporation but with respect to which the shareholders of such Person immediately prior to the merger or consolidation hold less than 50% of the outstanding Common Stock of such Person immediately following the merger or consolidation; or (iv) an underwritten initial public offering by such Person of its common stock;
“Closing” shall have the meaning set forth in Section 2.2 of this Agreement;
“Closing Date” shall have the meaning set forth in Section 2.2 of this Agreement;
“Collateral Documents” means the Confidential Disclosure Schedules to this Agreement;
“Company” shall have the meaning set forth in the preamble of this Agreement;
“Company Common Stock” shall have the meaning ascribed to it in Section 2.7 of this Agreement;
“Company Option Plan” shall have the meaning ascribed to it in Section 2.7 of this Agreement;
“Company Preferred Stock” shall mean, collectively, the Company Series A Preferred Stock and Company Series B Preferred Stock;
“Company Series A Preferred Stock” shall mean the 3,800,000 shares of the Company’s Series A Preferred Stock issued and outstanding;
“Company Series B Preferred Stock” shall mean the 4,600,000 shares of the Company’s Series B Preferred Stock issued and outstanding;
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“Company Financial Statement Date” shall have the meaning set forth in Section 3.8 of this Agreement;
“Continuing Employees” shall have the meaning set forth in Section 5.2 of this Agreement;
“Contracts” shall have the meaning set forth in Section 3.16 of this Agreement;
“Dissenting Shares” shall have the meaning set forth in Section 2.15 of this Agreement;
“Effective Time” shall have the meaning set forth in Section 2.3 of this Agreement;
“Effective Date” shall have the meaning set forth in Section 2.3 of this Agreement;
“Eligible Warrant” shall have the meaning set forth in Section 2.7(b) of this Agreement;
“Eligible Warrant Agreements” shall have the meaning set forth in Section 2.9 of this Agreement;
“Encumbrance” means any material mortgage, pledge, lien, encumbrance, charge, security interest, security agreement, conditional sale or other title retention agreement, limitation, option, assessment, restrictive agreement, restriction, adverse interest, restriction on transfer or exception to or material defect in title or other ownership interest (including but not limited to restrictive covenants, leases and licenses);
“Equity Equivalents” shall have the meaning set forth in Section 3.3(b) of this Agreement;
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended;
“Exchange Act” means the Securities Exchange Act of 1934, as amended;
“Exchange Ratio” shall have the meaning set forth in Section 2.7(c) of this Agreement;
“GAAP” means U.S. generally accepted accounting principles consistently applied, as in effect from time to time;
“Indemnified Party” shall have the meaning set forth in Section 7.3 of this Agreement;
“Indemnifying Party” shall have the meaning set forth in Section 7.3 of this Agreement;
“Intellectual Property” means all trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, patents and patent rights, utility models and utility model rights, copyrights, mask work rights, brand names, trade dress, product designs, product packaging, business and product names, logos, slogans, rights of publicity, trade secrets, inventions (whether patentable or not), invention disclosures, improvements, processes, formulae, industrial models, processes, designs, specifications, technology, methodologies, computer software (including all source code and
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object code), firmware, development tools, flow charts, annotations, all Web addresses, sites and domain names, all data bases and data collections and all rights therein, any other confidential and proprietary right or information, whether or not subject to statutory registration, and all related technical information, the information set forth in manufacturing, engineering and technical drawings, know-how and all pending applications for and registrations of patents, utility models, trademarks, service marks and copyrights, and the right to sue for past infringement, if any, in connection with any of the foregoing;
“Joint Proxy-Registration Statement” shall have the meaning set forth in Section 5.4 of this Agreement;
“Key Employees” shall have the meaning set forth in Section 5.1 of this Agreement;
“Key Employee Agreements” shall have the meaning set forth in Section 5.1 of this Agreement;
“Legal Requirements” means any statute, ordinance, law, rule, regulation, code, injunction, judgment, order, decree, ruling, or other requirement enacted, adopted or applied by any Regulatory Authority, including judicial decisions applying common law or interpreting any other Legal Requirement;
“Losses” shall mean all damages, awards, judgments, assessments, fines, sanctions, penalties, charges, costs, expenses, payments, diminutions in value and other losses, however suffered or characterized, all interest thereon, all costs and expenses of investigating any claim, lawsuit or arbitration and any appeal there from, all actual attorneys’, accountants’ investment bankers’ and expert witness’ fees incurred in connection therewith, whether or not such claim, lawsuit or arbitration is ultimately defeated and, subject to Section 7.4, all amounts paid incident to any compromise or settlement of any such claim, lawsuit or arbitration;
“Material Adverse Effect” means a material adverse effect on (i) the assets, liabilities, properties or business of the Parties, (ii) the validity, binding effect or enforceability of this Agreement or the Collateral Documents or (iii) the ability of any Party to perform its obligations under this Agreement and the Collateral Documents; provided, however, that none of the following shall constitute a Material Adverse Effect on the Company: (i) the filing, initiation and subsequent prosecution, by or on behalf of shareholders of any Party, of litigation that challenges or otherwise seeks damages with respect to the Merger, this Agreement and/or transactions contemplated thereby or hereby, (ii) occurrences due to a disruption of a Party’s business as a result of the announcement of the execution of this Agreement or changes caused by the taking of action required by this Agreement, (iii) general economic conditions, or (iv) any changes generally affecting the industries in which a Party operates;
“Merger” shall have the meaning set forth in the Recitals of this Agreement;
“Merger Consideration” shall have the meaning set forth in Section 2.7 (b) of this Agreement;
“Merger Options” shall have the meaning set forth in Section 2.7 (b) of this Agreement;
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“Merger Sub” shall have the meaning set forth in the preamble to this Agreement;
“New Parent Warrants” shall have the meaning set forth in Section 2.8 of this Agreement;
“NRS” shall have the meaning set forth in the preamble of this Agreement;
“Order” means any writ, judgment, decree, ruling, injunction or similar order of any Regulatory Authority (in each such case whether preliminary or final);
“Parent” shall have the meaning set forth in the preamble to this Agreement;
“Parent Common Stock” means the shares of common stock of Parent, no par value per share;
“Parent Financial Statements” shall have the meaning set forth in Section 4.8 of this Agreement;
“Parent Financial Statement Date” shall have the meaning set forth in Section 4.8 of this Agreement;
“Parent Preferred Stock” shall have the meaning set forth in Section 2.7(b) of this Agreement;
“Parent Series A Preferred Stock” shall have the meaning set forth in Section 2.7(b) of this Agreement;
“Parent Series B Preferred Stock” shall have the meaning set forth in Section 2.7(b) of this Agreement;
“Parent Warrants” shall have the meaning set forth in Section 2.7(e) of this Agreement;
“Participating Company Shares” means all issued and outstanding shares of Company Common Stock and Company Preferred Stock immediately prior to the Effective Time plus all shares of Company Common Stock deemed to be issued upon exercise of all Company options granted under the Company Option Plan and Eligible Warrants;
“Party” or “Parties” shall have the meaning set forth in the preamble to this Agreement;
“Permit” means any license, franchise, certificate, declaration, waiver, exemption, variance, permit, consent, approval, registration, authorization, qualification or similar right granted by a Regulatory Authority;
“Person” means any natural person, individual, firm, corporation, including a non-profit corporation, partnership, trust, unincorporated organization, association, limited liability company, labor union, Regulatory Authority or other entity;
“Regulatory Authority” means: any (i) federal, state, local, municipal or foreign government; (ii) governmental or quasi-governmental authority of any nature (including without
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limitation any governmental agency, branch, department, official, instrumentality or entity and any court or other tribunal; (iii) multi-national organization or body; or (iv) body exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulation or taxing authority or power of any nature;
“Representatives” shall have the meaning set forth in Section 5.12 of this Agreement;
“Reverse Split” shall have the meaning set forth in Section 2.5 of this Agreement;
“SEC” means the United States Securities and Exchange Commission;
“Securities Act” means the Securities Act of 1933, as amended;
“SEC Reports” with respect to each of Parent and the Company, means such Party’s Annual Report on Form 10-KSB and all interim reports filed with the SEC under the Exchange Act after the date of the Form 10-KSB filing.
“Securities Filings” means the filings with the SEC of a Party.
“Subsidiary” of a specified Person means (a) any Person if securities having ordinary voting power (at the time in question and without regard to the happening of any contingency) to elect a majority of the directors, trustees, managers or other governing body of such Person are held or controlled by the specified Person or a Subsidiary of the specified Person; (b) any Person in which the specified Person and its subsidiaries collectively hold a fifty percent (50%) or greater equity interest; (c) any partnership or similar organization in which the specified Person or subsidiary of the specified Person is a general partner; or (d) any Person the management of which is directly or indirectly controlled by the specified Person and its Subsidiaries through the exercise of voting power, by contract or otherwise;
“Surviving Corporation” shall have the meaning set forth in Section 2.1 of this Agreement;
“Taxes” means any U.S. or non U.S. federal, state, provincial, local or foreign (i) income, corporation gross income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, intangible property, recording, occupancy, sales, use, transfer, registration, value added minimum, ad valorem or excise tax, estimated or other tax of any kind whatsoever, including any interest, additions to tax, penalties, fees, deficiencies, assessments, additions or other charges of any nature with respect thereto, whether disputed or not; and (ii) any liability for the payment of any amount of the type described in (i) above;
“Tax Returns” means all federal, state, local, provincial and foreign tax returns, declarations, reports, claims, schedules and forms for refund or credit or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof;
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“Terminated Employees” shall have the meaning set forth in Section 5.3 of this Agreement; and
“Transmittal Letter” shall have the meaning set forth in Section 2.9.
ARTICLE 2
THE MERGER
2.1 Merger. Upon the terms and conditions set forth in this Agreement, and in accordance with the provisions of the NRS, at the Effective Time (as defined below), Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall cease and the Company will continue as the surviving corporation following the Merger, succeeding to all of the property, rights, privileges, powers and franchises of Merger Sub, and shall become a wholly-owned Subsidiary of Parent. The Company, as the surviving corporation after the Merger, is sometimes referred to herein as the “Surviving Corporation.”
2.2 Closing. Subject to the terms and conditions of this Agreement, the closing of the Merger (the “Closing”) will take place at the offices of Troy & Gould located at 1801 Century Park East, 16th Floor, Los Angeles, California 90067, or at such other place as Parent and the Company mutually agree, at 10:00 a.m. local time on the later to occur of (a) November 15, 2007, or (b) the second Business Day after the day on which the last of the closing conditions set forth in Article 6 below has been satisfied or waived, or such other date as Parent and the Company mutually agree upon in writing (the “Closing Date”).
2.3 Effective Time. Upon the terms of and subject to the conditions of this Agreement, as soon as practicable on the Closing Date: (a) the parties hereto will cause the Merger to be consummated by filing with the Secretary of State of the State of Nevada a certificate of merger and any required related documents, in such form or forms as are required by, and executed in accordance with, applicable law (the date and time of such filing being the “Effective Time” and the date upon which the Effective Time occurs, being the “Effective Date”); and (b) Parent will deliver the Merger Consideration to the shareholders of the Company in accordance with Section 2.7 hereof; and (c) Parent, Merger Sub and the Company will cross-deliver the certificates and other documents and instruments to be cross-delivered pursuant to Article 6 below.
2.4 Effect of the Merger. At the Effective Time, in accordance with the NRS, the separate existence of Merger Sub will cease and the Surviving Corporation shall succeed, without further action, to all the property, assets, rights, privileges, powers and franchises of every kind of the nature and description of Merger Sub and the Company. All debts, liabilities and duties of Merger Sub and the Company will become the debts, liabilities and duties of the Surviving Corporation. As of the Effective Time, the Surviving Corporation will be a wholly owned subsidiary of the Parent.
2.5 Effect of Merger on Common Stock of the Parent. Subject to a reverse split to be determined by the Parties after the date hereof (the “Reverse Split”) to occur prior to Closing, each share of Common Stock of Parent issued and outstanding immediately prior to the Effective Time, including, without limitation, Parent Common Stock, shall remain issued and outstanding
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from and after the Effective Time. Notwithstanding anything herein to the contrary, the number of shares of Parent Common Stock to be held by the shareholders of Parent immediately prior to the Closing shall equal 4.99% of the fully diluted capital stock of the Parent as of the Closing after giving effect to the shares of Parent Common Stock (i) to be issued to the holders of Company Common Stock pursuant to Section 2.7(a); (ii) issuable upon conversion of the Parent Preferred Stock to be issued pursuant to Section 2.7(b); (iii) issuable upon exercise of the Merger Options to be issued pursuant to Section 2.7(c) and the Parent Warrants to be issued pursuant to Section 2.7(e); and (iv) without duplication, the capital stock (including any shares of common stock issuable upon conversion on exercise of any derivative securities) issuable or deemed to be issued (if not in fact issued) in connection with an equity financing or financings to be undertaken by Parent or the Company pursuant to which Parent or the Company shall raise at least $6,000,000 in gross proceeds at a per share price of not less than $0.50 per share (on a pre-Reverse Split basis).
2.6 Effect of Merger on Common Stock of Merger Sub. At the Effective Time, each share of common stock, par value $.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holders thereof, be converted into and become one validly issued, fully paid and non-assessable share of common stock, par value $.001 per share, of the Surviving Corporation.
2.7 Effect of Merger on Capital Stock of Company.
(a) Company Common Stock. At the Effective Time, all issued and outstanding shares of the Company’s common stock (the “Company Common Stock”) shall, by virtue of the Merger and without any action on the part of the holders thereof, be converted into the right to receive a such number of shares of Parent Common Stock equal to 95.01% of Parent Common Stock outstanding immediately prior to Closing (after giving effect to the Reverse Split) less the shares of Parent Common Stock issuable upon Conversion of the Parent Preferred Stock and the exercise of the Parent Warrants and the Merger Options.
(b) Company Series A Preferred Stock and Series B Preferred Stock. At the Effective Time, (i) all of the issued and outstanding shares of the Company’s Series A Preferred Stock, par value $0.001 per share, (the “Company Series A Preferred Stock”) shall by virtue of the Merger and without any action on the part of the holders thereof, be converted into the right to receive a pro rata share of 3,800,000 shares of Parent’s Series A Preferred Stock (the “Parent Series A Preferred Stock”); and (ii) all of the issued and outstanding shares of the Company’s Series B Preferred Stock, par value $0.001 per share, (the “Company Series B Preferred Stock”) shall by virtue of the Merger and without any action on the part of the holders thereof, be converted into the right to receive a pro rata share of 4,600,000 shares of Parent’s Series B Preferred Stock (the “Parent Series B Preferred Stock”, together with Parent Series A Preferred Stock, the “Parent Preferred Stock”), as set forth in Schedule 2.7 hereto, subject to the terms and conditions of this Agreement. The shares of Parent Common Stock and Parent Preferred Stock issuable pursuant to Sections 2.7(a) and this Section 2.7(b) are collectively referred to herein as the “Merger Consideration.” The terms of the respective series of the Parent Preferred Stock shall have substantially the same terms as the series of Company preferred stock that are being converted except for the conversion rate which shall be based on the Exchange Ratio.
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(c) Outstanding Company Options. At the Effective Time, each outstanding option to purchase Company Common Stock granted under the Company’s 2007 Stock Option and Performance Awards Plan (the “Company Option Plan”), which has not previously expired or been exercised in full, whether or not vested or exercisable on the Closing Date, shall be assumed by Parent. Pursuant to such assumption, holders of such assumed options shall be entitled to receive in respect of each share of Company Common Stock subject to such assumed options, after the Effective Time, options (“Merger Options”) to purchase that number of shares of Parent Common stock obtained by multiplying (x) the number of shares of Company Common Stock issuable under such assumed option by (y) the Exchange Ratio (defined below), at an exercise price equal to the exercise price of such assumed option divided by the Exchange Ratio and otherwise on the same terms and conditions as those contained in such assumed option. For the avoidance of doubt, and notwithstanding anything to the contrary contained herein, under no circumstances shall any such assumed options accelerate with respect to the vesting thereof by virtue of, in anticipation of or otherwise in connection with the Merger or the transactions contemplated by this Agreement. For purposes of this Agreement, “Exchange Ratio” shall mean the ratio obtained by dividing (x) the number of shares equal to the Merger Consideration by (y) the sum of the number shares of the Company Common Stock and the Company Preferred Stock issued and outstanding immediately prior to the Effective Time and the number of shares of Company Common Stock issuable upon exercise of all such Merger Options and Parent Warrants.
(d) Company Option Plan. At the Effective Time, Parent shall assume the Company Option Plan pursuant to which 9,500,000 shares of Company Common Stock are reserved for issuance.
(e) Outstanding Company Warrants. At the Effective Time, each outstanding warrant to purchase Company Common Stock, which has not previously expired or been exercised in full (each such warrant, an “Eligible Warrant”), shall be assumed by Parent (thereafter, the “Parent Warrants”).
(f) As a result of the Merger and without any action on the part of the holders thereof, at the Effective Time, all shares of Company Common Stock, all shares of Company Series A Preferred Stock, and all shares of Company Series B Preferred Stock shall be cancelled and retired and shall cease to be outstanding. Each holder of shares of the Company Common Stock, Company Series A Preferred Stock, and Company Series B Preferred Stock shall thereafter cease to have any rights with respect to such shares, except that the issued and outstanding shares of Company Common Stock, Company Series A Preferred Stock and Company Series B Preferred Stock immediately prior to the Effective Time, and the respective holders thereof, shall have the right to receive the Merger Consideration in accordance with this Section 2.7 upon the surrender of the certificate or certificates representing such shares.
(g) Each share of Company Common Stock held in the Company’s treasury at the Effective Time, if any, shall, by virtue of the Merger and without any action on the part of the Company, cease to be outstanding and shall be cancelled and retired without payment of any Merger Consideration or any other consideration therefor.
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2.8 Effect of Merger on Existing Common Stock of Parent. At the Effective Time, holders of Parent Common Stock shall be entitled to receive in respect of each share of Parent Common Stock, five-year warrants (the “New Parent Warrants”) to purchase 0.333 shares of Parent Common Stock following the consummation of the Merger and other transactions contemplated herein at an exercise price of 110% per share of the most recent private placement of the Company from the date hereof and ending six months from the Closing Date, which such New Parent Warrants shall expire five (5) years from the date of issuance. At and after the Effective Time, Parent will deliver to each holder of a Parent Common Stock a certificate, evidencing the New Parent Warrants. Pursuant to Article 5 hereof, such New Parent Warrants and the shares of Parent Common Stock issuable pursuant to the exercise thereof shall be registered with the SEC under the Joint Proxy-Registration Statement to be filed with the SEC following the execution of this Agreement in respect of the Merger, this Agreement and the transactions contemplated hereby.
2.9 Delivery of Certificates and Eligible Warrant Agreements. At and after the Effective Time, Parent will make available, and each holder of an issued and outstanding share of Company Common Stock and Company Preferred Stock, and each holder of an Eligible Warrant, will be entitled to receive, (i) upon surrender to Parent or its representatives of any certificates evidencing Company Common Stock and Company Preferred Stock (the “Certificates”) for cancellation and a letter of transmittal or assignment separate from certificate in customary form (which will be in such form and have such other provisions as Parent will reasonably specify) (the “Transmittal Letter”); or (ii) upon delivery to Parent or its representatives of agreements evidencing the Eligible Warrants (the “Eligible Warrant Agreements”) and/or other certificates or instruments evidencing the Eligible Warrants, if any, the pro-rata share of the Merger Consideration, Merger Options and Merger Warrants, as applicable, into which such Company Common Stock or Eligible Warrant have been converted into pursuant to the Merger, and upon such surrender of each Certificate and/or the agreements or certificates representing the Eligible Warrants, and delivery by Parent of the aggregate Merger Consideration in exchange therefor, the Participating Company Shares will forthwith be cancelled. Until surrendered or delivered as contemplated by this Section 2.9, each Certificate, Eligible Warrant Agreement or certificates representing the Eligible Warrants, as applicable, will be deemed at any time after the Effective Time for all purposes to evidence only the right to receive upon such surrender the corresponding pro rata portion of the Merger Consideration and Merger Warrants, as applicable.
2.10 Stock Transfer Books. From and after the Effective Time, the stock transfer books of the Company will be closed, and there will be no further registration or transfers of Company Common Stock and Company Preferred Stock thereafter on the records of the Company.
2.11 No Further Ownership Rights. The Merger Consideration and Merger Warrants delivered upon the surrender for exchange of the Certificates, or the delivery of the agreements or certificates representing Eligible Warrants, in accordance with the terms hereof will be deemed to have been issued in full satisfaction of all rights pertaining to such Participating Company Shares, and there will be no further registration of transfers of such shares which were outstanding immediately prior to the Effective Time on the records of the Surviving Corporation. If, after the Effective Time, Certificates, or agreements or certificates representing the Eligible
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Warrants, are presented to the Surviving Corporation, they will be cancelled, assumed and/or adjusted, as applicable, pursuant to Section 2.7 hereof.
2.12 Lost, Stolen or Destroyed Certificates. In the event any Certificates are lost, stolen or destroyed, Parent will issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof and the other deliveries required above, the applicable Merger Consideration; provided, however, that the Surviving Corporation 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 an indemnity or bond in such sum as it may reasonably direct as indemnity against any claim that may be made against it with respect to the Certificates alleged to have been lost, stolen or destroyed.
2.13 Charter Documents; Directors and Officers. Unless otherwise agreed by the Company and Parent prior to the Closing, at and as of the Effective Time, without any further action on the part of Parent, Merger Sub or the Company: (i) the Articles of Incorporation and the Bylaws of the Company as in effect immediately prior to the Effective Time will be the Articles of Incorporation and Bylaws of the Surviving Corporation at and after the Effective Time until thereafter amended as provided by applicable law and such Articles of Incorporation and Bylaws, as applicable; (ii) the directors of the Company immediately prior to the Effective Time will be the initial directors of the Surviving Corporation from and after the Effective Time, until their successors are elected and qualified or until their resignation or removal; (iii) the officers of the Company immediately prior to the Effective Time shall serve in their respective offices of the Surviving Corporation from and after the Effective Time, until their successors are elected or appointed and qualified or until their resignation or removal.
2.14 Taking of Necessary Action; Further Action. Each of Parent, Merger Sub and the Company will take all such reasonable lawful action as may be necessary or appropriate in order to effect the Merger in accordance with this Agreement as promptly as practicable. If, at any time after the Effective Time, any such further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all the property, rights, privileges, power and franchises of the Company and Merger Sub, the officers and directors of the Company and Merger Sub immediately prior to the Effective Time are fully authorized in the name of their respective corporations or otherwise to take, and will take, all such lawful and necessary action
2.15 Company Dissenting Shares. Shares of Company Common Stock which are issued and outstanding immediately prior to the Effective Time and which are held by persons who are entitled to and have properly exercised, and not withdrawn or waived, appraisal rights with respect thereto in accordance with the NRS (the “Dissenting Shares”), will not be converted into the right to receive the Merger Consideration, and holders of such shares of Company Common Stock will be entitled, in lieu thereof, to receive payment of the appraised value of such shares of Company Common Stock in accordance with the provisions of the NRS unless and until such holders fail to perfect or effectively withdraw or lose their rights to appraisal and payment under the NRS. If, after the Effective Time, any such holder fails to perfect or effectively withdraws or loses such right, such shares of Company Common Stock will thereupon be treated as if they had been converted at the Effective Time into the right to receive the Merger Consideration, without any interest thereon. The Company will give Parent prompt
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notice of any demands received by the Company for appraisal of shares of Company Common Stock. Prior to the Effective Time, the Company will not, except with the prior written consent of Parent make any payment with respect to, or settle or offer to settle, any such demands.
2.16 Parent Dissenting Shares. Shares of Parent Common Stock which are issued and outstanding immediately prior to the Effective Time and which are held by persons who are entitled to and who have properly exercised, and not withdrawn or waived, appraisal rights with respect thereto in accordance with the California General Corporation Law (“CGCL”) (the “Dissenting Shares”), will be entitled to receive payment of the appraised value of such shares of Parent Common Stock in accordance with the provisions of the CGCL unless and until such holders fail to perfect or effectively withdraw or lose their rights to appraisal and payment under the CGCL. The Parent will give Company prompt notice of any demands received by the Parent for appraisal of shares of Parent Common Stock. Prior to the Effective Time, the Parent will not, except with the prior written consent of Company make any payment with respect to, or settle or offer to settle, any such demands.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
The Company hereby represents and warrants to Parent that (subject to such exceptions as are disclosed in the corresponding Schedules with respect to specific sections of this Article 3) the statements contained in this Article 3 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 Article 3, except in the case of representations and warranties stated to be made as of the date of this Agreement or as of another date and except for changes contemplated or permitted by this Agreement):
3.1 Organization, Standing and Qualification. (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. The Company has all requisite corporate power and authority to own, lease and use its assets as they are currently owned, leased and used and to conduct its business as it is currently conducted. The Company is duly qualified or licensed to do business in and is in good standing in each jurisdiction in which the character of the properties owned, leased or used by it or the nature of the activities conducted by it make such qualification necessary, except any such jurisdiction where the failure to be so qualified or licensed would not have a Material Adverse Effect on the Company or a Material Adverse Effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents or the ability of the Company to perform its obligations under this Agreement or any of the Collateral Documents. (b) The Company’s wholly-owned subsidiaries Information Intellect, Inc., Riptide Software, Inc. and Bravera, Inc. are corporations duly organized, validly existing and in good standing under the laws of the State of Georgia, State of Florida and State of Florida respectively. Each has all requisite corporate power and authority to own, lease and use its assets as they are currently owned, leased and used and to conduct its business as it is currently conducted. Each subsidiary is duly qualified or licensed to do business in and is in good standing in each jurisdiction in which the character of its properties owned, leased or used by it or the nature of the activities conducted by it make such qualification
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necessary, except any such jurisdiction where the failure to be so qualified or licensed would not have a Material Adverse Effect on the Company and its subsidiaries as a whole.
3.2 Due Authorization. The Company has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby, and the performance by the Company of its obligations hereunder, have been duly and validly authorized by all necessary action by the Board of Directors of the Company, and no other action on the part of the Board of Directors of the Company is required to authorize the execution, delivery and performance of this Agreement and the consummation by the Company of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws relating to the enforcement of creditors’ rights generally and by general principles of equity.
3.3 Capitalization.
(a) The authorized common stock and other ownership interests of the Company consist of 800,000,000 shares of Common Stock, par value $0.001 per share and 60,000,000 shares of Preferred Stock, par value $0.001 per share, of which 10,000,000 shares have been designated as Series A Preferred Stock and 20,000,000 shares have been designated as Series B Preferred Stock. There are 63,446,676 shares of Common Stock, 3,800,000 shares of Series A Preferred Stock and 4,600,000 shares of Series B Preferred Stock issued and outstanding as of the date hereof. All of the issued and outstanding shares of the Company Common Stock, Company Series A Preferred Stock and Company Series B Preferred Stock have been duly authorized and are validly issued and outstanding, fully paid and nonassessable and have been issued in compliance with applicable securities laws and other applicable Legal Requirements or transfer restrictions under applicable securities laws.
(b) Schedule 3.3(b) hereto lists all outstanding or authorized options, warrants, purchase rights, preemptive rights or other contracts or commitments that could require the Company to issue, sell, or otherwise cause to become outstanding any of its common stock or other ownership interests (collectively “Equity Equivalents”), including, without limitation, all Eligible Warrants. Except as disclosed in Schedule 3.3(b) hereto, there are no other Equity Equivalents, commitments or agreements of any character (whether created by statute, the Articles of Incorporation or Bylaws of the Company, or any agreement or otherwise) to which the Company is a party or by which it is bound, obligating the Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of common stock of the Company or obligating the Company to grant, extend, accelerate the vesting of, change the price or otherwise amend or enter into any such option, warrant, call, right, commitment or agreement.
3.4 No Conflicts. Except as set forth on Schedule 3.4 hereto, the execution, delivery and performance by the Company of this Agreement and the Collateral Documents to which it is
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a party, and the consummation of the transactions contemplated hereby and thereby in accordance with the terms and conditions hereof and thereof, do not and will not conflict with, constitute a violation or breach of, constitute a default or give rise to any right of termination or acceleration of any right or obligation of the Company under, or result in the creation or imposition of any Encumbrance upon the Company, its business, assets, properties or the Company Common Stock by reason of the terms of (i) the Articles of Incorporation, Bylaws or other charter or organizational document of the Company or any Subsidiary of the Company, (ii) any material contract, agreement, lease, indenture or other instrument to which the Company is a party or by or to which the Company, or its assets may be bound or subject and a violation of which would result in a Material Adverse Effect on the Company, (iii) any order, judgment, injunction, award or decree of any arbitrator or Regulatory Authority or any statute, law, rule or regulation applicable to the Company or (iv) any Permit of the Company, which in the case of (ii), (iii) or (iv) above would have a Material Adverse Effect on the Company or a material adverse effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents or the ability of the Company to perform its obligations under this Agreement or any of the Collateral Documents.
3.5 Consents and Approvals. Except as set forth on Schedule 3.5 hereto, no consent, approval, authorization or order of, registration or filing with, or notice to, any Regulatory Authority or any other Person is necessary to be obtained, made or given by the Company in connection with the execution, delivery and performance by the Company of this Agreement or any Collateral Document or for the consummation by the Company of the transactions contemplated hereby or thereby, except to the extent the failure to obtain any such consent, approval, authorization or order or to make any such registration or filing would not have a Material Adverse Effect on the Company or a material adverse effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents or the ability of the Company to perform its obligations under this Agreement or any of the Collateral Documents.
3.6 Intellectual Property. Except as set forth on Schedule 3.6 hereto, the Company and each of the Company’s subsidiaries own, or is licensed or otherwise possesses legally enforceable rights to use, all Intellectual Property that is used or currently proposed to be used in the business of the Company as currently conducted or as presently proposed by the Company to be conducted in the immediate future.
3.7 Compliance with Legal Requirements. The Company has operated its business in compliance with all Legal Requirements applicable to the Company except to the extent the failure to operate in compliance with all material Legal Requirements would not have a Material Adverse Effect on the Company on the validity, binding effect or enforceability of this Agreement or the Collateral Documents.
3.8 Financial Statements. The Company has provided Parent with copies of the unaudited Consolidated Balance Sheets of the Company as of June 30, 2007 (the “Company Financial Statement Date”), and the unaudited Consolidated Statements of Operations for the period then ended and the audited Consolidated Balance Sheet of the Company as of December 31, 2006 and the audited Consolidated Statement of Operations for the period then ended (collectively, the “Company Financial Statements”). The Company Financial Statements have been prepared in accordance with GAAP applied on a basis consistent throughout all periods
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presented, present fairly in all material respects the financial condition of the Company and its results of operations as of the date and for the periods indicated therein. The accounting and other financial records of the Company have been maintained in accordance with good business practices.
3.9 Litigation. Except as set forth on Schedule 3.9 hereto, there are no outstanding judgments or orders against or otherwise affecting or related to the Company, its business, assets or properties, and there is no action, arbitration, audit, hearing, suit, complaint, proceeding or investigation, judicial, administrative or otherwise, that is pending or, to the Company’s knowledge, threatened that, if adversely determined, would have a Material Adverse Effect on the Company or a Material Adverse Effect on the validity, binding effect or enforceability of this Agreement or the Collateral Documents.
3.10 Taxes. Except as set forth on Schedule 3.10 hereto, the Company has duly and timely filed in proper form all Tax Returns for all Taxes required to be filed with the appropriate Regulatory Authority, and has paid all taxes required to be paid in respect thereof except where such failure would not have a Material Adverse Effect on the Company.
3.11 Books and Records. The books and records of the Company accurately and fairly represent the Company’s business and its results of operations in all material respects.
3.12 Brokers or Finders. Except as set forth on Schedule 3.12 hereto, all negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by the Company or its Affiliates in connection with the transactions contemplated by this Agreement, and neither the Company, or Affiliates has incurred any obligation to pay any brokerage or finder’s fee or other commission in connection with the transaction contemplated by this Agreement.
3.13 Disclosure. No representation or warranty of the Company in this Agreement or in the Collateral Documents and no statement in any certificate furnished or to be furnished by the Company pursuant to this Agreement contained, contains or will contain on the date such agreement or certificate was or is delivered, or on the Closing Date, any untrue statement of a material fact, or omitted, omits or will omit on such date to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.
3.14 No Undisclosed Liabilities. Except as set forth in Schedule 3.14 hereto, the Company has no obligations or liabilities of any nature (matured or unmatured, fixed or contingent) other than (i) those set forth or reserved against in the Company Financial Statements or if subsequent to the date of the Company Financial Statements, as otherwise disclosed in filings made with the SEC, (ii) those incurred in connection with this Agreement or the transactions contemplated hereby, (iii) those incurred in the ordinary course of business consistent with the Company’s past practice.
3.15 Absence of Certain Changes. Except as set forth on Schedule 3.15 hereto, since the Financial Statement Date or otherwise disclosed in filings made with the SEC, the Company has not: (a) suffered any material adverse change in its financial condition, assets, liabilities or
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business; (b) contracted for or paid any capital expenditures; (c) except as otherwise disclosed in SEC filings, incurred any indebtedness or borrowed money, issued or sold any debt or equity securities, declared any dividends or discharged or incurred any liabilities or obligations except in the ordinary course of business as heretofore conducted; (d) except as otherwise disclosed in SEC filings mortgaged, pledged or subjected to any lien, lease, security interest or other charge or encumbrance any of its properties or assets; (e) except as otherwise disclosed in SEC filings paid any material amount on any indebtedness prior to the due date, forgiven or cancelled any material amount on any indebtedness prior to the due date, forgiven or cancelled any material debts or claims or released or waived any material rights or claims; (f) suffered any damage or destruction to or loss of any assets (whether or not covered by insurance); (g) except as otherwise disclosed in SEC filings acquired or disposed of any assets or incurred any liabilities or obligations; (h) except as otherwise disclosed in SEC filings made any payments to its Affiliates or associates or loaned any money to any person or entity; (i) except as otherwise disclosed in SEC filings acquired or disposed of any interest in any corporation, partnership, limited liability company, joint venture or other entity; (j) except as otherwise disclosed in SEC filings entered into any employment, compensation, consulting or collective bargaining agreement or any other agreement of any kind or nature with any person or group, or modified or amended in any respect the terms of any such existing agreement; (k) except as otherwise disclosed in SEC filings entered into any other commitment or transaction or experienced any other event that relates to or affect in any way this Agreement or to the transactions contemplated hereby, or that has affected, or may adversely affect the Company’s business, operations, assets, liabilities or financial condition; or (1) except as otherwise disclosed in SEC filings amended its Articles of Incorporation or By-laws, except as otherwise contemplated herein.
3.16 Contracts. Schedule 3.16(a) hereto sets forth a true and complete list of all contracts, agreements, leases, commitments or other understandings or arrangements, written or oral, express or implied, to which the Company is a party or by which it or any of its property is bound or affected requiring payments to or from, or incurring of liabilities by, the Company in excess of $250,000 (the “Contracts”). Except as set forth on Schedule 3.16(b) hereto, the Company has complied with and performed, in all material respects, all of its obligations required to be performed under and is not in default with respect to any of the Contracts, as of the date hereof, nor has any event occurred which has not been cured which, with or without the giving of notice,
