AGREEMENT AND PLAN OF MERGER
AMONG
TRUSTCASH HOLDINGS, INC.
TCHH ACQUISITION CORP.
AND
PAIVIS, CORP.
DATED AS OF DECEMBER 20, 2007
|
ARTICLE
I - THE MERGER
|
|
| |
|
|
Section
1.01
The Merger
|
7
|
|
Section
1.02
Closing
|
8
|
|
Section
1.03
Effective Time
|
8
|
|
Section
1.04
Effect of the Merger
|
8
|
|
Section
1.05
Certificate of Incorporation and Bylaws; Directors and
Officers
|
8
|
|
Section
1.06
Further Actions
|
8
|
|
Section
1.07
Conversion
|
9
|
|
Section
1.08
Restrictions on Resale
|
9
|
|
Section
1.09
Exchange of Certificates
|
10
|
|
Section
1.10
Registration of Issuable Shares
|
10
|
|
Section
1.11
Listing of Issuable Shares for Trading
|
11
|
|
Section
1.12
Financing
|
11
|
| |
|
|
ARTICLE
II - REPRESENTATIONS AND WARRANTIES OF PARENT
|
|
| |
|
|
Section
2.01
Organization, Standing and Power
|
11
|
|
Section
2.02
Capitalization
|
11
|
|
Section
2.03
Authority for Agreement
|
12
|
|
Section
2.04
Issuance of Common Stock
|
12
|
|
Section
2.05
Status of SUB and PARENT; Financial Statements
|
12
|
|
Section
2.06
Governmental Consent
|
13
|
|
Section
2.07
Litigation
|
13
|
|
Section
2.08
Interested Party Transactions
|
13
|
|
Section
2.09
Compliance with Applicable Laws
|
13
|
|
Section
2.10
No Undisclosed Liabilities
|
13
|
|
Section
2.11
Tax-Free Reorganization
|
13
|
|
Section
2.12
Tax Returns and Payment
|
13
|
|
Section
2.13
Board Approval
|
14
|
|
Section
2.14
Full Disclosure
|
14
|
|
Section
2.15
Brokers and Finders Fees
|
14
|
|
Section
2.16
PARENT SEC Reports
|
14
|
| |
|
|
ARTICLE
III - REPRESENTATIONS AND WARRANTIES OF TARGET
|
|
| |
|
|
Section
3.01
Organization, Standing and Power
|
15
|
|
Section
3.02
Capitalization
|
15
|
|
Section
3.03
Authority for Agreement
|
15
|
|
Section
3.04
Subsidiaries
|
15
|
|
Section
3.05
Stockholders
|
15
|
|
Section
3.06
Governmental Consent
|
15
|
|
Section
3.07
Status of TARGET, Financial Statements
|
16
|
|
Section
3.08
Litigation
|
16
|
|
Section
3.09
Restrictions on Business Activities
|
16
|
|
Section
3.10
Interested Party Transactions
|
16
|
|
Section
3.11
Compliance with Applicable Laws
|
16
|
|
Section
3.12
Governmental Authorization
|
17
|
|
Section
3.13
Absence of Changes
|
17
|
|
Section
3.14
Operations Since Financial Statements Date
|
17
|
|
Section
3.15
No Undisclosed Liabilities
|
18
|
|
Section
3.16
Accounts Receivable
|
18
|
|
Section
3.17
Insurance
|
18
|
|
Section
3.18
Title to Properties; Liens
|
18
|
|
Section
3.19
Material Contracts
|
18
|
|
Section
3.20
Non-Contravention
|
19
|
|
Section
3.21
Labor relations
|
19
|
|
Section
3.22
Tax Returns and Payment
|
19
|
|
Section
3.23
Intellectual Property
|
19
|
|
Section
3.24
Environmental Matters
|
19
|
|
Section
3.25
Employment Agreements
|
20
|
|
Section
3.26
Warranty claims
|
20
|
|
Section
3.27
Brokers’ and Finders’ Fees
|
20
|
|
Section
3.28
Board Approval
|
20
|
|
Section
3.29
Full Disclosure
|
20
|
|
Section
3.30
TARGET SEC Reports
|
20
|
| |
|
|
ARTICLE
IV - CERTAIN COVENANTS AND AGREEMENTS
|
|
| |
|
|
Section
4.01
Covenants of TARGET
|
21
|
|
Section
4.02
Covenants of SUB and PARENT
|
22
|
|
Section
4.03
Covenants of the Parties
|
23
|
| |
|
|
ARTICLE
V - CONDITIONS PRECEDENT
|
|
| |
|
|
Section
5.01
Conditions Precedent to the Parties' Obligations
|
24
|
|
Section
5.02
Conditions Precedent to the Obligations of SUB and
PARENT
|
25
|
|
Section
5.03
Conditions Precedent to the Obligations of TARGET
|
25
|
| |
|
|
ARTICLE
VI - TERMINATION, AMENDMENT AND WAIVER
|
|
| |
|
|
Section
6.01
Termination
|
26
|
|
Section
6.02
Effect of Termination
|
26
|
| |
|
|
ARTICLE
VII - CONFIDENTIALITY; NON-SOLICITATION;
EXCLUSIVITY
|
|
| |
|
|
Section
7.01
Confidentiality
|
27
|
|
Section
7.02
Non-Solicitation
|
27
|
|
Section
7.03
Exclusivity
|
27
|
| |
|
|
ARTICLE
VIII - INDEMNIFICATION
|
|
| |
|
|
Section
8.01
Indemnification by SUB and PARENT
|
27
|
|
Section
8.02
Indemnification by TARGET
|
28
|
|
Section
8.03
Survival of Indemnification
|
28
|
| |
|
|
ARTICLE
IX - MISCELLANEOUS
|
|
| |
|
|
Section
9.01
Non-survival of Representations and Warranties
|
28
|
|
Section
9.02
Expenses
|
28
|
|
Section
9.03
Applicable Law
|
28
|
|
Section
9.04
Notices
|
|
|
Section
9.05
Entire Agreement
|
29
|
|
Section
9.06
Assignment
|
29
|
|
Section
9.07
Headings; References
|
30
|
|
Section
9.08
Counterparts
|
30
|
|
Section
9.09
No Third Party Beneficiaries
|
30
|
|
Section
9.10
Severability; Enforcement
|
30
|
| |
30
|
|
List
of Schedules
|
|
|
PARENT
Disclosure Schedule
|
|
|
SUB
Disclosure Schedule
|
|
| |
|
|
EXHIBITS
|
|
|
Preferred
Designation
|
32
|
|
Merger
Certificate
|
|
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF
MERGER dated as of December 20, 2007 (the
“Agreement”) by and among TRUSTCASH HOLDINGS,
INC., a Delaware corporation (“ PARENT
”), TCHH ACQUISITION CORP., a Nevada corporation
(“ SUB
”) and PAIVIS, CORP., a Nevada corporation (“
TARGET
”). PARENT, SUB and TARGET are each referred
to herein individually as a “ Party
” and collectively as the “ Parties
.”
PREAMBLE
WHEREAS , the respective Boards of Directors of each of
PARENT, SUB and TARGET deem it advisable and in the best interests
of each corporation and its respective shareholders, that SUB and
TARGET combine in order to advance the long-term business
strategies of PARENT and TARGET;
WHEREAS , the Board of Directors of TARGET has unanimously
determined that the merger of SUB with and into TARGET (the
“Merger”) and this Agreement are fair to, and in the
best interests of, TARGET and the holders of all the common stock
of TARGET, par value $0.0002 per share (the “TARGET Common
Stock”);
WHEREAS , the Board of Directors of PARENT has unanimously
determined that the Merger and this Agreement are fair to, and in
the best interests of, PARENT and the holders of the common stock
of Parent, par value $0.001 per share (the “PARENT Common
Stock”);
WHEREAS , the respective Boards of Directors of each of
PARENT, SUB and TARGET have approved this Agreement and the Merger
on the terms and conditions contained in this Agreement and in so
doing, have recommended approval of the Merger to the shareholders
of the respective corporations;
WHEREAS , PARENT, as the sole stockholder of SUB, has
approved this Agreement, the Merger and the transactions
contemplated by this Agreement pursuant to action taken by
unanimous written consent in accordance with the requirements of
the Nevada Revised Statutes;
WHEREAS , for federal income tax purposes, it is intended by
the parties hereto that the Merger shall qualify as a tax-free
“reorganization” within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the
“Code”).
NOW, THEREFORE , in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
contained in this Agreement and intending to be legally bound
hereby, the parties hereto agree as follows:
CERTAIN DEFINITIONS
As used in this Agreement,
the following terms shall have the meanings set forth
below:
“Applicable
Law” means any domestic or foreign law, statute,
regulation, rule, policy, guideline or ordinance applicable to
the businesses of the Parties, the Merger and/or the
Parties.
“Common
Stock” means the common stock of PARENT, par value
$0.001 per share.
“Commission”
means the United States Securities and Exchange
Commission.
“Dollar”
and “$” means lawful money of the United States of
America.
“Exchange
Act” means the Securities Exchange Act of 1934, as
amended.
“GAAP”
means generally accepted accounting principles in the United
States of America as promulgated by the American Institute of
Certified Public Accountants and the Financial Accounting
Standards Board or any successor Institutes concerning the
treatment of any accounting matter, and applied in a
consistent manner.
“Knowledge”
means the knowledge, which either is obtained after reasonable
inquiry, or which would have been obtained if one made a
reasonable inquiry.
“Lien”
means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other
adverse claim of any kind in respect of such property or
asset.
“Material
Adverse Effect” with respect to any entity or group of
entities means any event, change or effect that has or would
have a materially adverse effect on the financial condition,
business or results of operations of such entity or group of
entities, taken as a whole.
“Parent”
means Trustcash Holdings, Inc. , a Delaware
corporation.
“Parent
Disclosure Schedule” means the disclosure schedule
delivered by Parent to Target concurrently with the execution
and delivery of this Agreement, as the same may be amended or
supplemented by Parent.
“Parent
SEC Reports” means all filings required to be made by
Parent with, or submitted by Parent to, the Commission under
the Securities Act and the Exchange Act.
“Person”
means any individual, corporation, partnership, limited
liability company, trust or unincorporated organization or a
government or any agency or political subdivision
thereof.
“Preferred
Share: means the Series B Preferred Stock of
PARENT.
“Securities
Act” means the Securities Act of 1933, as
amended.
“Target
SEC Reports” means all filings required to be made by
Target with, or submitted by Target to, the Commission under
the Securities Act and the Exchange Act.
“Tax”
(and, with correlative meaning, “Taxes” and
“Taxable”) means:
(i) any net income,
alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll employment, excise,
severance, stamp, occupation, property, environmental or
windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever
together with any interest or any penalty, addition to tax or
additional amount imposed by any governmental entity (a
“Tax Authority”) responsible for the imposition
of any such tax (domestic or foreign), and
(ii) any liability for the
payment of any amounts of the type described in clause (i)
above as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable
period, and
(iii) any liability for the
payment of any amounts of the type described in clauses (i)
or (ii) above as a result of any express or implied
obligation to indemnify any other person.
“Tax
Return” means any return, statement, report or form,
including, without limitation, estimated Tax Returns and
reports, withholding Tax Returns and reports and information
reports and returns required to be filed with respect to
Taxes.
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER
Upon the terms and subject
to the conditions set forth in this Agreement and in
accordance with the statutes of the State of Nevada, at the
Effective Time (as defined herein), SUB shall be merged with
and into TARGET, the separate existence of SUB shall cease
and TARGET shall continue as the surviving entity of the
Merger (where appropriate, the
“Surviving Entity”).
SECTION 1.02 CLOSING
The closing of the Merger
(the “Closing”) will take place at the offices of
the PARENT AND SUB , at 400 Park Avenue Suite 1420 NY, NY
10022, on the day immediately following the satisfaction or
waiver of the conditions precedent set forth in Article V or
at such other date as SUB and TARGET shall agree; provided,
however , that (a) the Parties shall use their best
efforts to effect the Closing on or before January 31, 2008,
or as soon thereafter as is practicable, and (b) the Closing
may take place by facsimile or other means as may be mutually
agreed upon in advance by the Parties. The date on which the
Closing is held is referred to in this Agreement as the
“ Closing
Date .” Unless extended in writing by
each of the PARENT and TARGET in the event the Closing shall
not occur by February 28, 2008 (the “ Outside Closing
Date ”) then either PARENT or TARGET may
terminate this Agreement without any further liability to the
other.
SECTION 1.03 EFFECTIVE TIME
On the Closing Date, the
Parties shall cause the Merger to be effective by the filing
of articles or a certificate of merger, and the Merger shall
become effective immediately upon the acceptance of such
filings, (the “ Merger
Certificate ”) with the Secretary of State of
the State of Nevada in substantially the form attached hereto
as Exhibit
A executed in accordance with the relevant provisions
of the statutes of the Nevada Revised Statutes. The Merger
shall become effective at the time such Merger Certificate is
duly accepted for filing or at such other time as may be
specified as the date and time of effectiveness in the Merger
Certificate, (the “ Effective
Time ”). The date on which the Effective Time
occurs is referred to as the “ Effective
Date .”
SECTION 1.04 EFFECT OF THE MERGER
At and after the Effective
Time, the Merger shall be effective as provided in the
applicable provisions of the Nevada Revised
Statutes. The existence of TARGET, as the
Surviving Entity, with all of its purposes and powers, shall
continue unaffected and unimpaired by the Merger, and, as the
Surviving Entity, it shall be governed by the laws of the
State of Nevada and succeed to all rights, assets,
liabilities and obligations of SUB in accordance with the
Nevada Revised Statutes. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time,
except as otherwise provided herein, all the property,
rights, privileges, powers and franchises of SUB shall vest
in the Surviving Entity, and all debts, liabilities and
duties of SUB shall become the debts, liabilities and duties
of the Surviving Entity. The separate existence and corporate
organization of SUB shall cease at the Effective Time and
thereafter SUB and TARGET shall be a single entity, to wit,
the Surviving Entity.
SECTION 1.05 CERTIFICATE OF INCORPORATION AND BYLAWS;
DIRECTORS AND OFFICERS
Pursuant
to the Merger:
(i)
The Certificate of Incorporation and Bylaws of TARGET as in
effect immediately prior to the Effective Time shall be the
Certificate of Incorporation and Bylaws of the Surviving
Entity following the Merger, until thereafter changed or
amended as provided therein or by applicable
law.
(ii)
The officers and directors of the Parent following the Merger
shall be those persons listed on Schedule
1.05(a) , until the earlier of their death,
resignation or removal or until their respective successors
are duly appointed and qualified.
SECTION 1.06 FURTHER ACTIONS
If at any time after the
Effective Time, SUB and TARGET shall consider or be advised
that any further assignment or assurances or any other things
that are necessary or desirable to vest, perfect or confirm,
of record or otherwise, in the Surviving Entity, the title to
any property or right of SUB acquired or to be acquired by
reason of or as a result of the Merger, then SUB and TARGET
and their respective officers and directors in office shall
use all reasonable efforts to execute and deliver, or cause
to be executed and delivered, all such proper deeds,
assignments and assurances and do all things reasonably
necessary and proper to vest, perfect or confirm title to
such property or rights in the
Surviving Entity and otherwise carry out the purpose of this
Agreement, and the officers of SUB and the Surviving Entity
are fully authorized in the name of TARGET or otherwise to
take any and all such action with the same effect as if such
persons were officers of TARGET.
SECTION 1.07 CONVERSION
As of the Effective Time,
by virtue of the Merger and without any action on the part of
SUB or TARGET:
CONVERSION OF THE COMMON STOCK OF TARGET .
|
(i)
|
Conversion
Ratio. The PARENT will exchange one (1) TRUSTCASH Preferred Share
(the “Issuable Shares”) for every five (5) shares of
PAIVIS Common Stock issued and outstanding immediately prior to the
Effective Time (the “Conversion Ratio”).
|
|
(ii)
|
Purchase
Price. The PARENT is paying the equivalent of $0.65 in TRUSTCASH
Preferred Shares currency for each PAIVIS Common Share. (the
“Purchase Price”)
|
|
(iii)
|
Conversion
Ratio Calculation. The Conversion ratio of 1 for 5 is based on the
Purchase Price divided by the price/share of the TRUSTCASH
Preferred Shares. Each TRUSTCASH Preferred Share has a fixed stated
value of $3.25/share as per the Preferred Shares rights and
preferences listed in Exhibit A.
|
|
(iv)
|
Fractional
Shares. In calculating the number of Issuable Shares to issue to
each TARGET shareholder, general rounding principles should control
the actual calculation, which shall result in no issuance of any
fractional shares to the TARGET shareholders.
|
|
(v)
|
Misc.
Upon such issuance of the Preferred Shares, all shares of Common
Stock of TARGET exchanged for shares of Preferred Shares shall
automatically be canceled and retired and shall cease to exist.
Each holder of a certificate representing any such TARGET Common
Stock shall, to the extent such certificate represents such TARGET
Common Stock , cease to have any rights with respect to such TARGET
Common Stock, except the right to receive the Issuable Shares
allocable to the shares represented by such certificate upon
surrender of such certificate in accordance with Section
1.09.
|
SECTION 1.08 RESTRICTIONS ON RESALE
All series of the issuable
Preferred Shares of the PARENT will not be
registered under the Securities Act, or the securities laws
of any state, and absent an exemption from registration
contained in such laws, cannot be transferred, hypothecated,
sold or otherwise disposed of until; (i) a registration
statement with respect to such securities is declared
effective under the Securities Act, or (ii) PARENT receives
an opinion of counsel for PARENT that an exemption from the
registration requirements of the Securities Act is
available.
The certificates
representing the number of Issuable Shares into which the
TARGET Common Stock shall have been converted pursuant to
this Agreement shall contain legends substantially as
follows:
“THE
SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH RESPECT
THERETO IS DECLARED EFFECTIVE UNDER SUCH ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL FOR THE COMPANY THAT AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.”
SECTION 1.09 EXCHANGE OF CERTIFICATES
(i)
EXCHANGE OF CERTIFICATES. After the Effective Time and
pursuant to a customary letter of transmittal or other
instructional form provided by the Exchange Agent (hereafter
defined) to each of the Shareholders (as appropriate, the
“Stockholders”) of the TARGET Common Stock, the
Stockholders shall be required to surrender all the TARGET
Common Stock to the stock transfer agent of the Parent
(Signature Stock Transfer, Inc., 2301 Ohio Drive, Suite 100,
Plano, Texas, 75093) upon such surrender to receive in
exchange therefor certificates representing the number of
Issuable Shares into which the TARGET Common Stock
theretofore represented by the certificate or certificates so
surrendered shall have been converted pursuant to this
Agreement. Until so surrendered, each such
outstanding certificate which, prior to the Effective Time,
represented TARGET Common Stock shall be deemed for all
corporate purpose, subject to the further provisions of this
Article I to evidence the ownership of the number of whole
Issuable Shares into which such TARGET Common Stock have been
so converted. No dividend payable to holders of
Issuable Shares of record as of any date subsequent to the
Effective Time shall be paid to the Stockholders as the owner
of any certificate which, prior to the Effective Time,
represented TARGET Common Stock, until such certificate or
certificates are surrendered as provided in this Article I or
pursuant to letters of transmittal or other instructions with
respect to lost certificates provided by the Exchange
Agent.
(ii)
SUB shares of Common Stock. Each share of Common Stock of SUB
issued and outstanding immediately prior to the Effective Time
shall be converted into one fully paid and nonassessable share
of common stock of the Surviving Corporation.
(iii)
FRACTIONAL SHARES. No certificate or scrip representing
fractional Issuable Shares shall be issued upon the surrender
of certificates representing TARGET Common Stock pursuant to
this Agreement, and no dividend declaration by the Board of
Directors of PARENT shall relate to any such fractional
share. Fractional shares shall be rounded up to the nearest
whole share.
(iv)
FULL SATISFACTION OF RIGHTS. All Issuable Shares into which
the TARGET Common Stock shall have been converted pursuant to
this Article 1 shall be deemed to have been issued in full
satisfaction of all rights pertaining to the TARGET Common
Stock.
(v)
CANCELLATION OF CERTIFICATES. All certificates representing
TARGET Common Stock converted into Issuable Shares pursuant
to this Article I shall be canceled upon delivery thereof to
the Exchange Agent pursuant to this Agreement.
(vi)
CLOSING OF TRANSFER BOOKS. On the Effective Date, the stock
transfer book of TARGET shall be deemed to be closed and no
transfer of Private Shares shall thereafter be recorded
thereon.
SECTION 1.10 REGISTRATION OF ISSUABLE SHARES
The
Parent shall file a registration statement with the Securities
and Exchange Commission (the “Commission”) to
register the Issuable Shares within ninety (90) days after
issuance of the Issuable Shares.
The
Parent shall use best efforts to effect, as soon as
practicable, such registration under the applicable Securities
Act (the “Act”) (including, without limitation,
filing post-effective amendments, appropriate qualifications
under applicable blue sky or other state securities laws, and
appropriate compliance with the Act) as would permit or
facilitate the sale and distribution of all or such portion of
the Series B Stock.
Although
stated under this paragraph that the holders of Series B Stock
have the right to have their Series B shares registered for
resale with the Commission there can be no assurance given by
the Parent on the time period it may take to approve the
registration of such shares, or that the Commission will
ultimately declare the proposed registration statement
covering those shares to be effective.
SECTION 1.11 LISTING OF ISSUABLE SHARES FOR TRADING
The
Parent will make application for the listing of the Series B
Stock for trading on the exchange or quotation system that the
Parent’s common stock is then listed on or other senior
exchange or quotation system that the Parent plans to make
application to list its common stock within ninety (90) days
of the effectiveness of the registration of the Series B
Stock.
Upon
making application for listing the Parent will use best
efforts to list the Series B Stock on the American Stock
Exchange, or to cause the Series B Stock to be authorized for
quotation on the NASDAQ Small Cap or National Market System,
as soon as practicable (it being understood that the Parent
will not be in violation of this provision if it is unable to
obtain such listing or quotation primarily as a result of its
failure to satisfy the quantitative listing requirements of
the American Stock Exchange or NASDAQ Small Cap or National
Market).
SECTION 1.12 FINANCING
The Parties
agree that Closing is subject to the execution by Parent of an
agreement for an equity or debt financing to the Parent of up
to Ten Million Dollars ($10,000,000) but no less than Seven
Million Dollars ($7,000,000) on terms agreeable to both Parent
and Target for the purposes of completing the acquisition of
Detroit Phone Cards Inc. (“DPC”), AAAA Media
Services Ltd. (“A4”) by the Target and working
capital for the Parent (“the Financing”).
The
Closing is further subject to the Financing being advanced to
the Parent.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SUB AND PARENT
Except as set forth in the
PARENT SEC Reports or the PARENT Disclosure Schedule or the
SUB Disclosure Schedule, disclosure in any one of which shall
apply to any and all representations and warranties made in
this Agreement, and except as otherwise disclosed in writing
by PARENT and/or SUB to TARGET, PARENT and SUB hereby
represent and warrant to TARGET, as of the date of this
Agreement and as of the Effective Time, as
follows:
SECTION 2.01 ORGANIZATION, STANDING AND POWER
SUB is a Nevada company and
PARENT is a Nevada corporation. Both SUB and
PARENT are duly incorporated, validly existing and in good
standing under the laws of the State of Nevada, and have
corporate power and authority to conduct their business as
presently conducted by it and to enter into and perform this
Agreement and to carry out the transactions contemplated by
this Agreement. SUB and PARENT are duly qualified to do
business as a foreign limited liability company and
corporation, respectively, doing business in each state in
which they own or lease real property and where the failure
to be so qualified and in good standing would have a Material
Adverse Effect on SUB and PARENT or their business. Except as
disclosed on Schedule
2.01 hereto, neither SUB nor PARENT have any material
ownership interest in any corporation, partnership (general
or limited), limited liability company or other entity,
whether foreign or domestic (collectively such ownership
interests including capital stock).
SECTION 2.02 CAPITALIZATION
Subject to modification by
the PARENT prior to the Closing for purposes of effectuating
the terms of this Agreement, the authorized capital stock of
PARENT consists of 350,000,000 shares of common stock, $0.001
par value per share, and 50,000,000 of preferred stock. As of
the date of this Agreement, there were 77,549,138 shares of
common stock issued and outstanding. Except as disclosed on
Schedule
2.02(a) hereto, no shares have been reserved for
issuance to any person, and there are no other outstanding
rights, warrants, options or agreements for the purchase of
capital stock from PARENT except as provided in this
Agreement. Except as disclosed on Schedule
2.02(b) hereto, no Person is entitled to any rights
with respect to the issuance or transfer of the Issuable
Shares. The outstanding shares are validly issued, fully
paid, non-assessable, and have been issued in compliance with
all state and federal securities laws or other Applicable
Law.
The
authorized capital stock of SUB consists of 1,000 shares of
common stock, $0.0001 par value per share, and no authorized
shares of preferred stock. As of the date of this Agreement,
there were 10 shares of common stock
issued and outstanding. Except as disclosed on
Schedule
2.02(b) hereto, no shares have been reserved for
issuance to any person, and there are no other outstanding
rights, warrants, options or agreements for the purchase of
capital stock from SUB except as provided in this Agreement.
Except as disclosed on Schedule
2.02(b) hereto, no Person is entitled to any rights
with respect to the issuance or transfer of the Issuable
Shares. The outstanding shares are validly issued, fully paid,
non-assessable, and have been issued in compliance with all
state and federal securities laws or other Applicable Law. As
of the Effective Time, SUB shall not have filed a registration
statement as to any of its shares.
SECTION 2.03 AUTHORITY FOR AGREEMENT
The execution, delivery,
and performance of this Agreement by SUB and PARENT have been
duly authorized by all necessary corporate action, except for
the approval of SUB's Stockholders (the “SUB
Stockholders”), and this Agreement, upon its execution
by the Parties, will constitute the valid and binding
obligation of SUB and PARENT enforceable against it in
accordance with and subject to its terms, except as
enforceability may be affected by bankruptcy, insolvency or
other laws of general application affecting the enforcement
of creditors' rights, provided, that no such obligation shall
arise or be binding unless the SUB Stockholders approve this
Agreement. Except as set forth above or in Schedule
2.03 attached hereto, the execution and consummation
of the transactions contemplated by this Agreement and
compliance with its provisions by SUB and PARENT will not
violate any provision of Applicable Law and will not conflict
with or result in any breach of any of the terms, conditions,
or provisions of, or constitute a default under, SUB's
Certificate of Incorporation or Bylaws or PARENT’s
Certificate of Incorporation or Bylaws, as the case may be
and in each case as amended, or, in any material respect, any
indenture, lease, loan agreement or other agreement or
instrument to which SUB and PARENT are a party or by which
they or any of their properties are bound, or any decree,
judgment, order, statute, rule or regulation applicable to
SUB and PARENT except to the extent that any breach or
violation of any of the foregoing would not constitute or
result in a Material Adverse Effect on SUB or PARENT taken as
a whole.
SECTION 2.04 ISSUANCE OF PARENT COMMON STOCK
The Issuable Shares
issuable to the Stockholders as the holders of the TARGET
Common Stock will when issued pursuant to this Agreement be
duly and validly authorized and issued, fully paid and
non-assessable.
SECTION 2.05 STATUS OF PARENT AND SUB; FINANCIAL
STATEMENTS
(i)
Currently
the shares of common stock of PARENT are traded on the Electronic
Bulletin Board in the over-the-counter market
(“OTCBB”). Currently the shares of common
stock of SUB are not traded.
|
(ii)
|
SUB
is a non-reporting company.
|
|
(iii)
|
PARENT
is a reporting company.
|
|
(iv)
|
SUB
does not have any material liabilities, except as provided in
Schedule 2.05.
|
|
(v)
|
PARENT
has made available to TARGET copies of its audited financial
statements at December 31, 2004, 2005 and 2006 for the three fiscal
years then ended (collectively, “ PARENT Financial
Statements ”).
|
|
(vi)
|
The
PARENT Financial Statements (i) are consistent in all material
respects with the books and records of PARENT; (ii) have been or
will be prepared in accordance with GAAP consistently applied;
(iii) reflect and provide adequate reserves and disclosures in
respect of all liabilities of PARENT, including all contingent
liabilities, as of the respective dates of the Financial
Statements, and (iv) present fairly in all material respects the
financial position of PARENT at such dates and the results of
operations and cash flows of PARENT for the periods then
ended.
|
|
(vii)
|
Except
as otherwise disclosed in the PARENT Disclosure Schedule or in the
PARENT Financial Statements, PARENT does not have any liabilities
or obligations that would be required to be set forth in PARENT
Financial Statements in accordance with GAAP.
|
SECTION 2.06 GOVERNMENTAL CONSENT
No consent, waiver,
approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency
or commission or other federal, state, county, local or other
foreign governmental authority, instrumentality, agency or
commission or any third party (other than the approval of the
SUB Stockholders), including a party to any agreement with
SUB or PARENT, is required by or with respect to SUB or
PARENT in connection with the execution and delivery of this
Agreement or the consummation of the transactions
contemplated hereby, except for (i) such consents, waivers,
approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable
securities laws thereby, and (ii) the filing of the
Certificate of Merger with the Secretary of State of the
State of Nevada.
Except as disclosed on
Schedule
2.07 hereof, there is no action, suit, investigation,
audit or proceeding pending against, or to the best knowledge
of SUB and PARENT threatened against or affecting, SUB and
PARENT or any of their assets or properties before any court
or arbitrator or any governmental body, agency or
official.
SECTION 2.08 INTERESTED PARTY TRANSACTIONS
Intentionally
omitted.
SECTION 2.09 COMPLIANCE WITH APPLICABLE
LAWS
To the Knowledge of SUB and
PARENT, the business of SUB and PARENT has not been, and is
not being, conducted in violation of any Applicable Law,
except for possible violations which individually or in the
aggregate have not had and are not reasonably likely to have
a Material Adverse Effect. No investigation or review by any
governmental entity with respect to SUB and PARENT is pending
or, to the Knowledge of SUB and PARENT, threatened, nor has
any governmental entity indicated an intention to conduct the
same, except for investigations or reviews which individually
or in the aggregate would not have, nor be reasonably likely
to have, a Material Adverse Effect.
SECTION 2.10 NO UNDISCLOSED LIABILITIES
Except as set forth on
Schedule
2.10 hereto, there are no liabilities, debts or other
obligations of SUB and PARENT of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or
set of circumstances which could reasonably be expected to
result in such a liability or debt.
SECTION 2.11 TAX FREE REORGANIZATION
Neither SUB nor PARENT (i)
has undertaken the obligation to investigate as to whether
SUB or any entity affiliated therewith has taken or agreed to
take any action that would prevent the Merger from qualifying
as a reorganization within the meaning of Section 368 of the
Code; or (ii) made any representation or warranty as to the
qualification of the Merger as a reorganization within the
meaning of Section 368 of the Code. Based on the foregoing,
to the knowledge of SUB and PARENT, nether SUB nor PARENT nor
any entity affiliated therewith has taken or agreed to take
any action or is aware of any fact or circumstance that would
prevent the Merger from qualifying as a reorganization within
the meaning of Section 368 of the Code.
SECTION 2.12 TAX RETURNS AND PAYMENT
SUB and PARENT have
filed all material Tax Returns required by it and have paid all
Taxes shown thereon to be due, except for Taxes being contested in
good faith. There is no material claim for Taxes
that is a lien against the property of SUB and PARENT other than
liens for taxes not yet due and payable. Neither SUB nor
PARENT have received notification of any audit of any Tax Return of
SUB and PARENT being conducted or pending by a Tax
Authority where an adverse determination could have a Material
Adverse Effect, no extension or waiver of the statute of
limitations on the assessment of any taxes has been granted by SUB
and PARENT which is currently in effect, and SUB and PARENT are not
a party to any agreement, contract or arrangement with any Tax
Authority, which may result in the payment of any material
amount. Neither SUB nor PARENT are a party
to any tax-sharing or allocation agreement, nor does they owe any
amount under any tax-sharing or allocation agreement. Neither SUB
nor PARENT have been (nor does it have any liability for unpaid
Taxes because it once was) a member of an “affiliated
group” within the meaning of Code Section
1502.
SECTION 2.13 BOARD APPROVAL AND SHAREHOLDER
APPROVAL .
The Board of Directors of
SUB and PARENT have approved this Agreement and the
transactions contemplated hereby and SUB will submit it to
the sole Stockholder for its approval. To the extent that
shareholder approval of PARENT, SUB and/or TARGET is required
by state corporate law, such shareholders have approved this
Agreement and the transactions contemplated
hereby.
SECTION 2.14 FULL DISCLOSURE
The representations and
warranties of SUB and PARENT contained in Article II of this
Agreement or to be furnished in or in connection with
documents mailed or delivered to the SUB Stockholders in
connection with soliciting their consent to this Agreement,
do not contain or will not contain, any untrue statement of a
material fact, or omit to state a material fact required to
be stated herein or therein or necessary to make the
statements herein or therein, in the light of the
circumstances under which they were made, not
misleading.
SECTION 2.15 BROKERS’ AND FINDERS’
FEES
Neither SUB nor PARENT has
incurred, nor will they incur, directly or indirectly, any
liability for brokers’ or finders’ fees or
agents’ commissions or investment bankers’ fees
or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
SECTION 2.16 PARENT SEC REPORTS
Except
as disclosed in the PARENT Schedules, PARENT has filed all
forms, statements, reports and documents required to be filed
or, if permissible, furnished by it with the Commission since
such reports were required. The PARENT SEC Reports (i) were
prepared in accordance with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder, and (ii) did not, at the
time they were filed, or, if amended, as of the date of such
amendment, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading. As of its filing date, each PARENT SEC
Report complied as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange
Act, as the case may be. There has not occurred any
material adverse change, or any development constituting a
prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or
operations of PARENT since its latest report on Form
10-QSB. Neither the offer or sale of the PARENT
Stock pursuant hereto nor the consummation of the transactions
as contemplated by this Agreement give rise to any rights for
or relating to the registration of shares of PARENT Common
Stock or other securities of PARENT except as set forth on the
PARENT Disclosure Schedule. PARENT is not required
to prepare and deliver to its shareholders and file with the
Commission any proxy, information statement or similar report
in advance of the consummation of the transactions
contemplated hereby, except for such reports as may need be
filed in accordance with Form 8-K and Schedule
14F-1.
In
the event that PARENT is not current in filing all PARENT SEC
Reports when due, or in the event that PARENT is no longer
eligible to have its securities quoted on the Electronic
Bulletin Board maintained by the Nasdaq Stock Market, Inc. on
the Closing Date, TARGET may elect to terminate this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Except as set forth in the
TARGET SEC Reports or the TARGET Disclosure Schedule,
disclosure in any one of which shall apply to any and all
representations and warranties made in this Agreement, and
except as otherwise disclosed in writing by TARGET to PARENT,
TARGET hereby represents and warrants to PARENT, as of the
date of this Agreement and as of the Effective Time, as
follows:
SECTION 3.01 ORGANIZATION, STANDING AND
POWER
(i)
TARGET is a Nevada corporation duly formed, validly existing
and in good standing under the laws of the State of Nevada
and has full corporate power and authority to conduct its
business as presently conducted by it and to enter into and
perform this Agreement and to carry out the transactions
contemplated by this Agreement. TARGET is duly qualified to
do business in each state or other jurisdiction it owns or
leases real property and where the failure to be so qualified
and in good standing would have a Material Adverse Effect. A
schedule of TARGET’S subsidiaries is attached hereto as
Schedule 3.04, which discloses TARGET’S interests in
any corporation, partnership (general or limited), limited
liability company or other entity, whether foreign or
domestic (collectively such ownership interests including
capital stock).
SECTION 3.02 CAPITALIZATION
The authorized capital
stock of TARGET consists of 125,000,000 shares of common
stock, $0.0002 par value per share, and 15,000,000 shares of
preferred stock, $.0001 par value per share. As of the date
of this Agreement, there were approximately 93,004,647 shares
of common stock issued and outstanding, and there were
3,350,750 shares of preferred stock issued and outstanding.
Except as disclosed on Schedule
3.02(a) hereto, no shares have been reserved for
issuance to any person, and there are no other outstanding
rights, warrants, options or agreements for the purchase of
capital stock from TARGET except as provided in this
Agreement. Except as disclosed on Schedule
3.02(b) hereto, no Person is entitled to any rights
with respect to the issuance or transfer of the Issuable
Shares. The outstanding shares are validly issued, fully
paid, non-assessable, and have been issued in compliance with
all state and federal securities laws or other Applicable
Law.
SECTION 3.03 AUTHORITY FOR AGREEMENT
The execution, delivery and
performance of this Agreement by TARGET has been duly
authorized by all necessary corporate or company action, as
the case may be, and this Agreement constitutes the valid and
binding obligation of TARGET, enforceable against it in
accordance with its terms, except as enforceability may be
affected by bankruptcy, insolvency or other laws of general
application affecting the enforcement of creditors' rights.
The execution and consummation of the transactions
contemplated by this Agreement and compliance with its
provisions by TARGET will not violate any provision of
Applicable Law and will not conflict with or result in any
breach of any of the terms, conditions, or provisions of, or
constitute a default under, its certificate of incorporation
or bylaws, or, in any material respect, any indenture, lease,
loan agreement or other agreement instrument to which TARGET
is a party or by which it or any of its properties are bound,
or any decree, judgment, order, statute, rule or regulation
applicable to TARGET except to the extent that any breach or
violation of any of the foregoing would not constitute or
result in a Material Adverse Effect.
SECTION 3.04 SUBSIDIARIES
Except as disclosed on
Schedule
3.04 hereof, TARGET has no other
subsidiaries.
SECTION 3.05 STOCKHOLDERS
Except as disclosed on
Schedule
3.05 , there are no other holders of the TARGET Common
Stock.
SECTION 3.06 GOVERNMENTAL CONSENT
No consent, waiver,
approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency
or commission or other federal, state, county, local or other
foreign governmental authority, instrumentality,
agency or commission or any third party, including a party to
any agreement with TARGET, is required by or with respect to
TARGET in connection with the execution and delivery of this
Agreement or the consummation of the transactions
contemplated hereby, except for (i) such consents, waivers,
approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable
securities laws thereby, and (ii) the filing of the
Certificate of Merger with the Secretary of State of the
State of Nevada.
SECTION 3.07 STATUS OF TARGET; FINANCIAL
STATEMENTS
(i) Currently
the shares of common stock of TARGET are quoted on the
OTC:BB.
(ii)
Target
is a reporting company.
(iii)
TARGET
has made available to PARENT copies of its audited financial
statements as of December 31, 2003, 2004 and 2005 for the three
fiscal years then ended (collectively, “ TARGET Financial
Statements ”).
(iv)
The
TARGET Financial Statements (i) are consistent in all material
respects with the books and records of TARGET; (ii) have been or
will be prepared in accordance with GAAP consistently applied;
(iii) reflect and provide adequate reserves and disclosures in
respect of all liabilities of TARGET, including all contingent
liabilities, as of the respective dates of the Financial
Statements, and (iv) present fairly in all material respects the
financial position of TARGET at such dates and the results of
operations and cash flows of TARGET for the periods then
ended.
(v)
Except
as otherwise disclosed in the TARGET Disclosure Schedule or in the
TARGET Financial Statements, TARGET does not have any liabilities
or obligations that would be required to be set forth in TARGET
Financial Statements in accordance with GAAP.
Except as otherwise
disclosed in the TARGET Disclosure Schedule there is no
action, suit, investigation, audit or proceeding pending
against, or to the best knowledge of TARGET, threatened
against or affecting, TARGET or any of its assets or
properties before any court or arbitrator or any governmental
body, agency or official.
SECTION 3.09 RESTRICTIONS ON BUSINESS
ACTIVITIES
There is no agreement
(non-compete or otherwise), commitment, judgment, injunction,
order or decree to which TARGET is a party or otherwise
binding upon TARGET which has or may have the effect of
prohibiting or impairing any business practice of TARGET, any
acquisition of property (tangible or intangible) by TARGET or
the conduct of business by TARGET. Without
limiting the foregoing, TARGET has not entered into any
agreement under which TARGET is restricted from selling,
licensing or otherwise distributing any of its technology or
products to or providing services to, customers or potential
customers or any class of customers, in any geographic area,
during any period of time or in any segment of the
market.
SECTION 3.10 INTERESTED PARTY TRANSACTIONS
Intentionally
omitted.
SECTION 3.11 COMPLIANCE WITH APPLICABLE
LAWS
To the Knowledge of TARGET,
the business of TARGET has not been, and is not being,
conducted in violation of any Applicable Law, except for
possible violations which individually or in the aggregate
have not had and are not reasonably likely to have a Material
Adverse Effect. No investigation or review by any
governmental entity with respect to TARGET is pending or, to
the Knowledge of TARGET, threatened, nor has any governmental
entity indicated an intention to conduct the same, except for
investigations or reviews which individually or in the
aggregate
would not have, nor be reasonably likely to have, a Material
Adverse Effect.
SECTION 3.12 GOVERNMENTAL AUTHORIZATION
Schedule
3.12 accurate
|
