|
AGREEMENT
AND PLAN OF MERGER
by
and among
UTILITY
INVESTMEN RECOVERY, INC.
GAS
ACQUISITION CORP.
and
GLOBAL
AUTOMOTIVE SUPPLY, INC.
February
21, 2008
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TABLE OF CONTENTS
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Page
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ARTICLE
I DEFINITIONS
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1
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Section
1.1
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Definitions.
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1
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| ARTICLE
II THE MERGER 6 |
6
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Section
2.1
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Merger
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6
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Section
2.2
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Effective
Time
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6
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Section
2.3
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Certificate
of Incorporation
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6
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Section
2.4
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Effects
of the Merger
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7
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Section
2.5
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Closing
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7
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Section
2.6
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Tax-Free
Merger
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7
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| ARTICLE
III MERGER CONSIDERATION; CONVERSION AND EXCHANGE OF
SECURITIES |
8
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Section
3.1
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Manner
and Basis of Converting and Exchanging Capital
Stock
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8
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Section
3.2
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Surrender
and Exchange of Certificates
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8
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Section
3.3
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Options,
Warrants
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10
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Section
3.4
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Parent
Common Stock
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11
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| ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
11
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Section
4.1
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Organization
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11
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Section
4.2
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Authorization;
Validity of Agreement
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11
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Section
4.3
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Capitalization
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11
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Section
4.4
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Consents
and Approvals; No Violations
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11
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Section
4.5
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Financial
Statements
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12
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Section
4.6
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No
Undisclosed Liabilities
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12
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Section
4.7
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Litigation
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13
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Section
4.8
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No
Default; Compliance with Applicable Laws
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13
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Section
4.9
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Broker’s
and Finder’s Fees
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13
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Section
4.10
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Contracts
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13
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Section
4.11
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Tax
Returns and Audits
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13
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Section
4.12
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Patents
and Other Intangible Assets
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14
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Section
4.13
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Employee
Benefit Plans; ERISA
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14
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Section
4.14
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Title
to Property and Encumbrances
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15
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Section
4.15
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Condition
of Properties
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15
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Section
4.16
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Insurance
Coverage
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15
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Section
4.17
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Environmental
Matters
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16
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Section
4.18
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Disclosure
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17
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| ARTICLE
V REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
CORP |
17
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Section
5.1
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Organization
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17
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Section
5.2
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Authorization;
Validity of Agreement
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17
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Section
5.3
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Consents
and Approvals; No Violations
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18
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Section
5.4
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Litigation
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18
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Section
5.5
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No
Default; Compliance with Applicable Laws
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18
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Section
5.6
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Broker’s
and Finder’s Fees; Broker/Dealer Ownership
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18
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Section
5.7
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Capitalization
of Parent
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18
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Section
5.8
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Acquisition
Corp
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18
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Section
5.9
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Validity
of Shares
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19
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Section
5.10
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SEC
Reporting and Compliance
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19
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Section
5.11
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Financial
Statements
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20
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Section
5.12
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No
General Solicitation
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20
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Section
5.13
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Absence
of Undisclosed Liabilities
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20
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Section
5.14
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Changes
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21
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Section
5.15
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Tax
Returns and Audits
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21
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Section
5.16
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Employee
Benefit Plans; ERISA
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22
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Section
5.17
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Interested
Party Transaction
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22
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Section
5.18
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Questionable
Payments
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23
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Section
5.19
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Obligations
to or by Stockholders
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23
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Section
5.20
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Schedule
of Assets and Contracts
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23
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Section
5.21
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Environmental
Matters
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24
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Section
5.22
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Employees
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24
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Section
5.23
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Title
to Property and Encumbrances
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24
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Section
5.24
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Condition
of Properties
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25
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Section
5.25
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Insurance
Coverage
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25
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Section
5.26
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Disclosure
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25
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Section
5.27
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No
Liabilities
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25
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| ARTICLE
VI CONDUCT OF BUSINESSES PENDING THE MERGER |
25
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Section
6.1
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Conduct
of Business by the Company Pending the Merger
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25
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Section
6.2
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Conduct
of Business by Parent and Acquisition Corp
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26
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| ARTICLE
VII ADDITIONAL AGREEMENTS |
27
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Section
7.1
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Access
and Information
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27
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Section
7.2
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Additional
Agreements
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28
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Section
7.3
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Publicity
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28
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Section
7.4
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Appointment
of Directors
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28
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Section
7.5
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Name
Changes
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28
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Section
7.6
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Stockholder
Consent
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28
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| ARTICLE
VIII CONDITIONS OF PARTIES’ OBLIGATIONS |
29
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Section
8.1
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Company
Obligations
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29
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Section
8.2
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Parent
and Acquisition Corp. Obligations
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31
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| ARTICLE
IX INDEMNIFICATION AND RELATED MATTERS |
32
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Section
9.1
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Indemnification
by Parent
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32
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Section
9.2
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Survival
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33
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Section
9.3
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Time
Limitations
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33
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Section
9.4
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Limitation
on Liability
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33
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Section
9.5
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Notice
of Claims
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33
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ARTICLE
X TERMINATION PRIOR TO CLOSING
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34
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Section
10.1
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Termination
of Agreement
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34
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Section
10.2
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Termination
of Obligations
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34
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| ARTICLE
XI MISCELLANEOUS |
35
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Section
11.1
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Amendments
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35
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Section
11.2
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Notices
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35
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Section
11.3
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Entire
Agreement
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35
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Section
11.4
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Expenses
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36
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Section
11.5
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Severability
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36
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Section
11.6
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Successors
and Assigns; Assignment.
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36
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Section
11.7
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No
Third Party Beneficiaries
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36
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Section
11.8
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Counterparts;
Delivery by Facsimile
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36
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Section
11.9
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Waiver
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36
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Section
11.10
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No
Constructive Waivers
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37
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Section
11.11
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Further
Assurances.
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37
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Section
11.12
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Recitals
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37
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Section
11.13
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Headings
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37
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Section
11.14
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Governing
Law
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37
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Section
11.15
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Dispute
Resolution
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37
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Section
11.16
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Interpretation
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38
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LIST OF EXHIBITS
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Exhibit
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Description
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Exhibit A
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Certificate
of Incorporation of Surviving Corporation
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Exhibit B
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By-laws
of Surviving Corporation
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Exhibit C
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Directors
of Parent Pre-Effective Time and Post-Effective
Time
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Exhibit D
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Certificate
of Incorporation of Parent
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Exhibit E
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Bylaws
of Parent
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AGREEMENT AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER is entered into as of February
21, 2008 by and among UTILITY INVESTMENT RECOVERY, INC., a
Nevada corporation (“ Parent
”), GAS ACQUISITION CORP., a Nevada corporation and a
wholly-owned subsidiary of Parent (“ Acquisition
Corp. ”), and GLOBAL AUTOMOTIVE SUPPLY, INC., a
Nevada corporation (the “ Company
”).
W I T N E S S E T H :
WHEREAS,
the respective Boards of Directors of each of Parent,
Acquisition Corp. and the Company have approved, and deem it
advisable and in the best interests of their respective
stockholders to consummate, the acquisition of the Company by
Parent, which acquisition is to be effected by the merger of
the Company with and into the Acquisition Corp., with the
Acquisition Corp. being the surviving entity (the “
Merger
”), upon the terms and subject to the conditions set
forth in this Agreement (as defined herein);
WHEREAS,
the parties hereto intend that the Merger shall qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code of 1986, as amended (the “
Code
”), by reason of Section 368(a)(2)(E) of the Code;
and
NOW,
THEREFORE, in consideration of the mutual agreements and
covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE
I
DEFINITIONS
Section
1.1
Definitions . Capitalized terms used in this
Agreement shall have the following meanings:
“
Acquisition
Corp. ” shall have the meaning given to such term
in the preamble to this Agreement.
“
Acquisition
Proposal ” shall have the meaning given to such
term in Section
6.2 hereof.
“
Action
” shall mean any claim, action, suit, proceeding,
investigation or order.
“
Affiliate
” shall mean, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under
common control with, such Person. For the purposes
of this definition, “ control
” (including, with correlative meaning, the terms
“ controlling
,” “ controlled
by ” and “ under common
control with ”) means the possession, directly or
indirectly, of the power to direct or cause the direction of
management and policies of such Person through the ownership
of voting securities, by contract or otherwise.
“
Agreement
” shall mean this Agreement and Plan of Merger,
including the exhibits attached hereto or referred
to herein, as the same may be amended or modified from time to
time in accordance with the provisions hereof.
“
Balance
Sheet ” shall have the meaning given to such term
in Section
4.5 hereof.
“
Balance Sheet
Date ” shall have the meaning given to such term
in Section
4.5 hereof.
“
By-laws
” shall have the meaning given to such term in
Section
2.3(b) hereof.
“
Certificate of
Incorporation ” shall have the meaning given to
such term in Section
2.3(a) hereof.
“
Closing
” shall have the meaning given to such term in
Section
2.5 hereof.
“
Closing
Date ” shall have the meaning given to such term
in Section
2.5 hereof.
“
Code
” shall have the meaning given to such term in the
second recital to this Agreement.
“
Commission
” shall mean the United States Securities and Exchange
Commission.
“
Company
” shall have the meaning given to such term in the
preamble to this Agreement.
“
Company Capital
Stock ” shall mean, collectively, the Company
Common Stock and the Company Preferred Stock, if
any.
“
Company Common
Stock ” shall mean the common stock, par value
$0.01, of the Company.
“
Company Material
Adverse Effect ” shall mean any change, effect or
circumstance that is materially adverse or is reasonably
likely to be materially adverse to the business, assets,
liabilities, condition (financial or otherwise) or operations
of the Company and its subsidiaries, taken as a whole, other
than any such change, effect or circumstance relating to
general economic, regulatory or political conditions, except
to the extent such change, effect or circumstance
disproportionately affects the Company and its subsidiaries,
taken as a whole.
“
Company
Preferred Stock ” shall mean, collectively, all
Preferred Stock, if any, issued or issuable by the
Company.
“
Company Stock
Options ” shall have the meaning given to such
term in Section
3.3(a) hereof.
“
Contract
” shall have the meaning given to such term in
Section
4.4 hereof.
“
Consents
” shall mean any permits, filings, notices, licenses,
consents, authorizations, accreditation, waivers, approvals
and the like of, to, with or by any Person.
“
Determination
Date ” shall have the meaning given to such
term in Section
9.6
hereof.
“
Dissenting
Shares ” shall have the meaning given to such
term in Section
3.2(d) hereof.
“
Effective
Time ” shall have the meaning given to such term
in Section
2.2 hereof.
“
Employee Benefit
Plans ” shall have the meaning assigned to it in
Section
4.13 hereof.
“
Environmental
Law ” shall mean the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C.
§§ 9601 et seq.; the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. §§
11001 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. §§ 6901 et seq.; the Toxic Substances Control
Act, 15 U.S.C. §§ 2601 et seq.; the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.
§§ 136 et seq. and comparable state statutes dealing
with the registration, labeling and use of pesticides and
herbicides; the Clean Air Act, 42 U.S.C. §§ 7401 et
seq.; the Clean Water Act (Federal Water Pollution Control
Act), 33 U.S.C. §§ 1251 et seq.; the Safe Drinking
Water Act, 42 U.S.C. §§ 300f et seq.; and the
Hazardous Materials Transportation Act, 49 U.S.C. §§
1801 et seq., as any of the above referenced statutes have
been amended as of the date hereof, all rules, regulations and
policies promulgated pursuant to any of the above referenced
statutes, and any other foreign, federal, state or local law,
statute, ordinance, rule, regulation or policy governing
environmental matters, as the same have been amended as of the
date hereof.
“
ERISA
” shall mean the Employee Retirement Income Securities
Act of 1974, as amended, and the regulations issued
thereunder.
“
Exchange
Act ” shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations issued
thereunder.
“
Fair
Market Value ” shall mean, with respect to a
share of Common Stock on any Determination Date, the average
of the daily closing prices for the 10 consecutive business
days prior to such date. The closing price for each
day shall be the last sales price or in case no sale takes
place on such day, the average of the closing high bid and low
asked prices, in either case (a) as officially quoted on the
OTC Bulletin Board, the NASDAQ Stock Market or such other
market on which the Common Stock is then listed for trading or
quoted, or (b) if, in the reasonable judgment of the Board of
Directors of Parent, the OTC Bulletin Board or the NASDAQ
Stock Market is no longer the principal United States market
for the Common Stock, then as quoted on the principal United
States market for the Common Stock as determined by the Board
of Directors of Parent, or (c) if, in the reasonable judgment
of the Board of Directors of the Parent, there exists no
principal United States market for the Common Stock, then as
reasonably determined in good faith by the Board of Directors
of Parent.
“
Federal
Securities Laws ” means the Securities Act, the
Exchange Act and the rules and regulations promulgated
thereunder.
“
GAAP
” shall mean generally accepted accounting principles as
in effect from time to time in the United States consistently
applied.
“
Hazardous
Material ” means any substance or material
meeting any one or more of the following
criteria: (a) it is or contains a substance
designated as or meeting the characteristics of a hazardous
waste, hazardous substance, hazardous material, pollutant,
chemical substance or mixture, contaminant or toxic substance
under any Environmental Law; (b) its presence at some quantity
requires investigation, notification or remediation under any
Environmental Law; (c) it contains, without limiting the
foregoing, asbestos, polychlorinated biphenyls, petroleum
hydrocarbons, petroleum derived substances or waste,
pesticides, herbicides, crude oil or any fraction thereof,
nuclear fuel, natural gas or synthetic gas; or (d)
mold.
“
Incentive
Plans ” shall have the meaning given to such term
in Section
3.3(d) hereof.
“
Indebtedness
” shall mean any obligation of the Company that under
GAAP is required to be shown on the Balance Sheet of the
Company as a Liability. Any obligation secured by a Lien on,
or payable out of the proceeds of production from, property of
the Company shall be deemed to be Indebtedness even though
such obligation is not assumed by the Company.
“
Indebtedness for
Borrowed Money ” shall mean (a) all Indebtedness
in respect of money borrowed including, without limitation,
Indebtedness which represents the unpaid amount of the
purchase price of any property and is incurred in lieu of
borrowing money or using available funds to pay such amounts
and not constituting an account payable or expense accrual
incurred or assumed in the ordinary course of business of the
Company, (b) all Indebtedness evidenced by a promissory note,
bond or similar written obligation to pay money, or (c) all
such Indebtedness guaranteed by the Company or for which the
Company is otherwise contingently liable.
“
Information
Statement ” shall have the meaning given to such
term in Section
7.7 hereof.
“
Intellectual
Property ” shall have the meaning given to such
term in Section
4.12(b) hereof.
“
Investment
Company Act ” shall mean the Investment Company
Act of 1940, as amended.
“
Letter of
Transmittal ” shall have the meaning assigned to
it in Section
3.2 hereof.
“
Liability
” shall mean any and all liability, debt, obligation,
deficiency, Tax, penalty, fine, claim, cause of action or
other loss, cost or expense of any kind or nature whatsoever,
whether asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, and whether
due or to become due and regardless of when
asserted.
“
Lien
” shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, including, without
limitation, any conditional sale or other title retention
agreement, any lease in the nature thereof and the filing of
or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction and including any lien or
charge arising by statute or other law.
“
Merger
” shall have the meaning given to such term in the
second recital to this Agreement.
“
NRS
” shall mean the Nevada Revised Statutes, as
amended.
“
Parent
” shall have the meaning given to such term in the
preamble to this Agreement.
“
Parent Balance
Sheet ” shall have the meaning assigned to such
term in Section
5.13 hereof.
“
Parent Balance
Sheet Date ” shall have the meaning assigned to
it in Section
5.13 hereof.
“
Parent Common
Stock ” shall mean the common stock, par value
$0.001 per share, of Parent.
“
Parent Employee
Benefit Plans ” shall have the meaning assigned
to such term in Section
5.16 hereof.
“
Parent Financial
Statements ” shall have the meaning assigned to
such term in Section
5.1 0
hereof.
“ Parent Material
Adverse Effect ” means any change, effect or
circumstance that is materially adverse or is reasonably likely to
be materially adverse to the business, assets, liabilities,
condition (financial or otherwise) or operations of Parent and its
subsidiaries, taken as a whole, other than any such change, effect
or circumstance relating to general economic, regulatory or
political conditions, except to the extent such change, effect or
circumstance disproportionately affects Parent and its
subsidiaries, taken as a whole.
“
Parent Preferred
Stock ” shall mean the preferred stock, par value
$0.001 per share, of Parent.
“
Parent SEC
Documents ” shall have the meaning assigned to
such term in Section
5. 9
hereof.
“
Permitted
Liens ” shall mean (a) Liens for taxes and
assessments or governmental charges or levies not at the time
due or in respect of which the validity thereof shall
currently be contested in good faith by appropriate
proceedings; (b) Liens in respect of pledges or deposits under
workmen’s compensation laws or similar legislation,
carriers’, warehousemen’s, mechanics’,
laborers’ and materialmens’ and similar Liens, if
the obligations secured by such Liens are not then delinquent
or are being contested in good faith by appropriate
proceedings; and (c) Liens incidental to the conduct of the
business of the Company that were not incurred in connection
with the borrowing of money or the obtaining of advances or
credits and which do not in the aggregate materially detract
from the value of its property or materially impair the use
made thereof by the Company in its business.
“
Parent
Stockholder Consent ” shall have the meaning
assigned to such term in Section 7.6 hereof.
“
Person
” shall mean any individual, corporation, limited
liability company, partnership, joint venture, trust or other
entity or organization, including any government or political
subdivision or an agency or instrumentality
thereof.
“
Securities
Act ” shall mean the Securities Act of 1933, as
amended, and the rules and regulations issued
thereunder.
“
Stockholder
” shall mean any record holder of Company Capital
Stock.
“
Surviving
Corporation ” shall have the meaning given to
such term in Section
2.1 hereof.
“
Tax
” or “ Taxes
” shall mean (a) any and all taxes, assessments,
customs, duties, levies, fees, tariffs, imposts, deficiencies
and other governmental charges of any kind
whatsoever
(including,
but not limited to, taxes on or with respect to net or gross
income, franchise, profits, gross receipts, capital, sales, use, ad
valorem, value added, transfer, real property transfer, transfer
gains, transfer taxes, inventory, capital stock, license, payroll,
employment, social security, unemployment, severance, occupation,
real or personal property, estimated taxes, rent, excise,
occupancy, recordation, bulk transfer, intangibles, alternative
minimum, doing business, withholding and stamp), together with any
interest thereon, penalties, fines, damages costs, fees, additions
to tax or additional amounts with respect thereto, imposed by the
United States (federal, state or local) or other applicable
jurisdiction; (b) any liability for the payment of any amounts
described in clause (a) as a result of being a member of an
affiliated, consolidated, combined, unitary or similar group or as
a result of transferor or successor liability, including, without
limitation, by reason of Code Section 1.1502-6; and (c) any
liability for the payments of any amounts as a result of being a
party to any Tax Sharing Agreement or as a result of any express or
implied obligation to indemnify any other Person with respect to
the payment of any amounts of the type described in either clauses
(a) or (b).
“
Tax
Return ” shall include all returns and reports
(including elections, declarations, disclosures, schedules,
estimates and information returns (including Form 1099 and
partnership returns filed on Form 1065)) required to be
supplied to a Tax authority relating to Taxes.
“
Tax
Sharing Agreements ” shall have the meaning given
to such term in Section
4.15 hereof.
ARTICLE
II
THE MERGER
Section
2.1
Merger . Upon the terms and subject to the
conditions of this Agreement, at the Effective Time, the Company
shall be merged with and into Acquisition Corp. in accordance
with the Nevada Revised Statutes (“ NRS
”). Following the Effective Time, the separate
corporate existence of the Company shall cease, and Acquisition
Corp. shall continue as the corporation surviving the Merger
(sometimes hereinafter referred to as the “ Surviving
Corporation ”).
Section
2.2
Effective Time . The Parent, the Company and
Acquisition Corp. shall cause a certificate of merger to be filed
on the Closing Date (or on such other date as the Company and
Parent may agree in writing) with the Secretary of State of the
State of Nevada as provided in the NRS, and shall make all other
filings or recordings required by the NRS in connection with the
Merger. The Merger shall become effective at such time
as the certificate of merger is duly filed in accordance with the
NRS and the Secretary of State of Nevada or such later time as
specified in the certificate of merger, and such time is
hereinafter referred to as the “ Effective Time
.”
Section
2.3
Certificate of Incorporation; By-laws; Directors and
Officers .
(a)
The
certificate of incorporation of Acquisition Corp. as in effect
immediately prior to the Effective Time, a copy of which is
attached as Exhibit A
hereto, shall be the certificate of incorporation of the Surviving
Corporation (the “ Certificate of
Incorporation ”) from and after the Effective Time
until thereafter changed or amended as provide therein or in
accordance with applicable law.
(b)
The
by-laws of Acquisition Corp. as in effect immediately prior to the
Effective Time, a copy of which is attached as Exhibit B
hereto, shall be the by-laws of the Surviving Corporation (the
“ By-laws
”) from and after the Effective Time until thereafter changed
or amended as provided therein or in accordance with applicable
law.
(c)
One
or more of the directors of the Company immediately prior to the
Effective Time shall be the initial directors of the Surviving
Corporation and shall hold office from the Effective Time until
their respective successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and
By-laws. The officers of the Company immediately prior
to the Effective Time shall be the initial officers of the
Surviving Corporation and shall hold office from the Effective Time
until their respective successors have been duly elected or
appointed and qualified or until their earlier death, resignation
or removal in accordance with the Certificate of Incorporation and
By-laws.
(d)
At
the Effective Time as contemplated by Section 2.2 hereof, the
officers and directors of the Parent designated on Exhibit C
hereto shall resign, to be replaced by the officers and directors
designated on Exhibit C
hereto, who shall immediately take such offices or who shall take
such offices upon compliance with the Federal Securities Laws, as
the case may be. The appointment of new directors in
accordance with the terms of this Section 2.3(d) shall be
accomplished through the filling of vacancies in the Board of
Directors of the Parent in compliance with the applicable
provisions of the NRS and the by-laws of the Parent and without the
vote (by written consent or otherwise) of the shareholders of the
Parent.
Section
2.4
Effects of the Merger . The Merger shall have the
effects set forth in the NRS. Without limiting the
generality of the foregoing, at the Effective Time, except as
otherwise provided herein, all of the property, rights, privileges,
powers and franchises of the Company and Acquisition Corp. shall
vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Acquisition Corp. shall become the debts,
liabilities and duties of the Surviving Corporation. The Company
acknowledges that, from and after the Effective Time, Parent shall
have the absolute and unqualified right to deal with the assets and
business of the Surviving Corporation as its own property without
limitation on the disposition or use of such assets or the conduct
of such business.
Section
2.5
Closing . The consummation of the transactions
contemplated by this Agreement, including the Merger (the “
Closing
”), shall take place: (a) at the offices of Cane Clark LLP,
3273 E. Warm Springs Rd., Las Vegas, NV at 10:00 a.m. local time on
the date on which all of the conditions to the Closing set forth in
Article
VIII hereof shall be fulfilled or waived in accordance with
this Agreement (other than conditions that can be satisfied only at
the Closing, but subject to the fulfillment or waiver of those
conditions at the Closing); or (b) at such other place, time and
date as the Company and Parent may agree in writing (the “
Closing
Date ”).
Section
2.6
Tax-Free Merger . The parties hereto intend that
the Merger will be treated as a tax-free reorganization under
Section 368 of the Code.
ARTICLE
III
MERGER CONSIDERATION; CONVERSION AND EXCHANGE OF
SECURITIES
Section
3.1
Manner and Basis of Converting and
Exchanging Capital
Stock . At the Effective Time, by virtue of the
Merger and without any action on the part of the Company, Parent or
Acquisition Corp. or the holders of any outstanding shares of
capital stock or other securities of the Company, Parent or
Acquisition Corp.:
(a)
Acquisition Corp. Stock . Each share of common
stock, par value $0.001 per share, of Acquisition Corp. issued and
outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and
non-assessable share of capital stock, no par value per share, of
the Surviving Corporation, such that Parent shall be the holder of
all of the issued and outstanding shares of capital stock of the
Surviving Corporation following the Merger.
(b)
Company Common Stock . Shares of Company Common Stock issued
and outstanding immediately prior to the Effective Time (including
all shares of Company Common Stock issued upon conversion of all
Company Preferred Stock immediately prior to the Effective Time)
shall be exchanged for the right to receive shares of Parent
Common Stock at the ratio of 2:91, or two shares of Parent Common
Stock per every ninety-one shares of Company Common
Stock.
(c)
Treasury Stock . Notwithstanding any provision of this
Agreement to the contrary, each share of Company Capital Stock held
in the treasury of the Company and each share of Company Capital
Stock, if any, owned by Parent or any direct or indirect
wholly-owned subsidiary of Parent immediately prior to the
Effective Time shall be canceled in the Merger and shall not be
converted or exchanged into the right to receive any shares of
capital stock or other securities of Parent.
(d)
No Fractional Shares . No fractional shares of
Parent Common Stock shall be issued in, or as a result of, the
Merger. Any fractional shares of Parent Common Stock
that a holder of record of Company Capital Stock would otherwise be
entitled to receive as a result of the Merger shall be
aggregated. If a fractional share of Parent Common Stock
results from such aggregation, the number of shares required to be
issued to such record holder shall be rounded up to the nearest
whole number of shares of Parent Common Stock.
Section
3.2
Surrender and Exchange of Certificates
.
(a)
Letter of Transmittal . Promptly after the
Effective Time, Parent shall mail, or cause to be mailed, to each
record holder of certificate(s) formerly representing ownership of
Company Capital Stock that was converted into the right to receive
Parent Common Stock pursuant to Section 3.1
hereof (i) a letter of transmittal (“ Letter of
Transmittal ”) for delivery of such certificate(s) to
Parent and (ii) instruction for use in effecting the surrender of
certificate(s), in each case in form and substance mutually
agreeable to the Company and Parent. Delivery shall be
effected, and risk of loss and title to the Parent Common Stock
shall pass, only upon delivery to the Parent (or a duly authorized
agent of Parent) of certificate(s) formerly representing ownership
of Company Capital Stock (or an affidavit of lost certificate and
indemnification or surety bond) and a properly completed and duly
executed Letter of
Transmittal,
as described in Section 3.2(b)
hereof. Notwithstanding the foregoing, Parent shall not
be required to mail, or cause to be mailed, a Letter of Transmittal
to any record holder of certificate(s) formerly representing
ownership of Company Capital Stock if such holder has previously
agreed or consented to the exchange of certificates that are held
in custody by the Company for the benefit of such
holder.
(b)
Exchange Procedures . Parent shall issue to each
former record holder of Company Capital Stock, upon delivery to
Parent (or a duly authorized agent of Parent) of (i) certificate(s)
formerly representing ownership of Company Capital Stock endorsed
in blank or accompanied by duly executed stock powers (or an
affidavit of lost certificate and indemnification in form and
substance reasonably acceptable to Parent stating that, among other
things, the former record holder has lost his or her certificate(s)
or that such certificate(s) have been destroyed) and (ii) a
properly completed and duly executed Letter of Transmittal in form
and substance reasonably satisfactory to Parent, a certificate or
certificates registered in the name of such former record holder
representing the number of shares of Parent Common Stock that such
former record holder is entitled to receive in accordance with
Section
3.1 hereof. Subject to Section 3.2(d)
hereof, until the certificate(s) (or affidavit) is delivered
together with the Letter of Transmittal in the manner contemplated
by this Section 3.2(b)
, each certificate (or affidavit) previously representing ownership
of Company Capital Stock shall be deemed at and after the Effective
Time to represent only the right to receive Parent Common Stock and
the former record holders thereof shall cease to have any other
rights with respect to his or her Company Capital
Stock.
(c)
Termination of Exchange Process . Any Parent
Common Stock that remains unclaimed by a former record holder of
Company Capital Stock at the first anniversary of the Effective
Time may be deemed “abandoned property” subject to
applicable abandoned property, escheat and other similar laws in
the State in which the former record holder
resides. None of the Company, Parent, Acquisition Corp.
or the Surviving Corporation shall be liable to any person in
respect of any Parent Company Stock delivered to a public official
pursuant to any applicable abandoned property, escheat or similar
law.
(d)
Dissenting Shares . Notwithstanding any provision
of this Agreement to the contrary, shares of Company Capital Stock
issued and outstanding immediately prior to the Effective Time and
held by a Stockholder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for
such shares of Company Capital Stock in accordance with the NRS
(“ Dissenting
Shares ”) shall not be entitled to vote for any
purpose or receive dividends, shall not be converted into the right
to receive Parent Common Stock in accordance with Section 3.1
hereof, and shall only be entitled to receive such consideration as
shall be determined pursuant to the NRS; provided ,
however , that
if, after the Effective Time, such Stockholder fails to perfect or
withdraws or loses his or her right to appraisal or otherwise fails
to establish the right to be paid the value of such
Stockholder’s shares of Company Capital Stock under the NRS,
such shares of Company Capital Stock shall be treated as if they
had converted as of the Effective Time into the right to receive
Parent Common Stock in accordance with Section 3.1
hereof, and such shares of Company Capital Stock shall no longer be
Dissenting Shares. All negotiations with respect to
payment for Dissenting Shares shall be handled jointly by Parent
and the Company prior to the Closing and exclusively by Parent
thereafter. In the event that one percent (1%) or more
of the outstanding shares of the Company are Dissenting Shares, the
Parent has the sole discretion to terminate this Agreement, which
shall forthwith
become
void and of no further force and effect and the parties hereto
shall be released from any and all obligations hereunder; provided,
however, that nothing herein shall relieve any party hereto from
liability for the breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
(e)
Stock Transfer Books . At the Effective Time, the
stock transfer books of the Company will be closed and there will
be no further registration of transfers of shares of Company
Capital Stock thereafter on the records of the
Company. If, after the Effective Time, certificates
formerly representing Company Capital Stock are presented to the
Surviving Corporation, these certificates shall be canceled and
exchanged for the number of shares of Parent Common Stock to which
the former record holder may be entitled pursuant to Section 3.1
hereof.
(f)
F u r t h er
R
i
g
h
t
s
i
n
C
o
m
pan
y
Stoc
k
. All shares of Parent Common Stock issued upon exchange
of shares of Company Capital Stock in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Capital
Stock.
Section
3.3
Options, Warrants .
(a)
As
of the Effective Time, the Company warrants that no options to
purchase Company Common Stock issued by the Company, shall
exist, and that further, with the sole exception of the warrants
described in subsection (b) hereto, no convertible securities or
other rights to purchase the Company Common Stock shall
exist,
(b)
As
of the Effective Time, warrants to purchase 2,730,000 shares of
Company Common Stock shall be issued and outstanding by the
Company. Those warrants, whether vested or unvested,
(the “ Old Warrant
” or the “ Old Securities
”) shall be automatically converted to become warrants to
purchase shares of Parent Common Stock (“ Parent
Warrant
”) without further action by the holder thereof, all in
accordance with the applicable provisions of the Old Warrant.
The Parent Warrant shall constitute a warrant to acquire the
same number of shares of Parent Common Stock as is equal to
the number of Company Common Stock subject to the unexercised
portion of the Old Warrant (with any fraction resulting from such
multiplication to be rounded down to the nearest whole number),
adjusted for the exchange ratio set forth in section 3.1(b).
The strike price per share of each Parent Warrant shall be the same
as the current strike price of such Old Warrant, adjusted for the
exchange ratio set forth in section 3.1(b). The
expiration date on each Parent Warrant shall be the same as the
current expiration date of such Old Warrant.
(c)
As
soon as practicable after the Effective Time, the Parent or the
Surviving Corporation shall take appropriate actions to collect the
Old Securities and the agreements evidencing the Old Securities,
which shall be deemed to be canceled and shall entitle the holder
to exchange the Old Securities for Parent Options and Parent
Warrants in the Parent.
(d)
The
Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of the Parent Options and Parent Warrants to
be issued for Old Securities in accordance with this
Section 3.3.
Section
3.4
Parent Common Stock . Parent shall reserve a
sufficient number of shares of Parent Common Stock to complete the
conversion and exchange of Company Capital Stock into Parent Common
Stock contemplated by Sections 3.1
and 3.2 hereof,
and the issuance of any Parent Common Stock underlying options and
warrants, notes or other rights to acquire Parent Common Stock in
accordance with Section 3.3
hereof. Parent covenants and agrees that immediately
prior to the Effective Time there will be 3,892,857 shares of
Parent Common Stock issued and outstanding, and that no other
common or preferred stock or equity securities of the Parent, or
any options, warrants, rights or other agreements or instruments
convertible, exchangeable or exercisable into common or preferred
stock or equity securities of the Parent, shall be issued or
outstanding immediately prior to the Effective Time, except as
disclosed herein.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants to Parent as
follows:
Section
4.1
Organization . The Company (i) is duly organized,
validly existing and in good standing (or its equivalent) under the
laws of the State of Nevada, (ii) has all licenses, permits,
authorizations and other Consents necessary to own, lease and
operate its properties and assets and to carry on its business as
it is now being conducted and (iii) has all requisite corporate or
other applicable power and authority to own, lease and operate its
properties and assets and to carry on its business as it is now
being conducted and presently proposed to be conducted, except
where such failure would not have, or be reasonably likely to have,
a Company Material Adverse Effect. The Company is duly
qualified or authorized to conduct business and is in good standing
(or its equivalent) as a foreign corporation or other entity in all
jurisdictions in which the ownership or use of its assets or nature
of the business conducted by it makes such qualification or
authorization necessary, except where the failure to be so duly
qualified, authorized and in good standing would not have a Company
Material Adverse Effect.
Section
4.2
Authorization; Validity of Agreement . The
Company has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and
performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized
by the Board of Directors of the Company and no other action
(except the approval of the requisite Stockholders solely with
respect to consummation of the Merger) on the part of the Company
or any of its Stockholders or subsidiaries is necessary to
authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated
hereby. This Agreement has been duly executed and
delivered by the Company and (assuming due and valid authorization,
execution and delivery hereof by Parent and Acquisition Corp.) is a
valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such
enforcement is limited by bankruptcy, insolvency and other similar
laws affecting the enforcement of creditors’ rights generally
and by general principles of equity.
Section
4.3
Capitalization . As of the Effective Date the
authorized and issued capital stock of the Company shall consist of
355,637,175 shares of Company Common Stock and 0 shares of the
Company Preferred Stock. All the outstanding shares of
Company Capital Stock are duly authorized, validly issued, fully
paid and non-assessable. As of the Effective
Time,
there
shall be no rights in favor of any person to purchase any Company
Preferred Stock and the only existing right to purchase the Company
Common Stock shall be the “Old Warrant” to purchase
1,778,186 shares of Company Common Stock, which Old Warrant shall
be converted into the Parent Warrant at Closing, with corresponding
adjustments to the strike price and number of underlying shares as
set forth in the exchange ratio described in section
3.1(b).
Section
4.4
Consents and Approvals; No Violations . Except
for (a) approval of the Merger by the requisite Stockholders and
(b) filing of the certificate of merger with the Secretary of State
of the State of Nevada, neither the execution, delivery or
performance of this Agreement by the Company nor the consummation
of the transactions contemplated hereby will (i) violate any
provision of its certificate of incorporation or by-laws; (ii)
violate, conflict with or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, require the
consent of or result in the creation of any encumbrance upon any of
the properties of the Company or any of its subsidiaries under any
material note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, lease, contract, agreement or other instrument
(collectively, “ Contract
”) to which the Company or any its subsidiaries or any of
their respective properties may be bound; (iii) require any
Consent, approval or authorization of, or notice to, or
declaration, filing or registration with, any governmental entity
by or with respect to the Company or any of its subsidiaries; or
(iv) violate any order, writ, judgment, injunction, decree, law,
statute, rule or regulation applicable to the Company or any of its
subsidiaries or any of their respective properties or assets;
except, in the cases of clauses (ii), (iii) and (iv), any such
violations, conflicts, breaches, defaults or encumbrances, or any
failure to receive any such Consent, approval or authorization, or
to make any such notice, declaration, filing or registration as
will not result in, or could reasonably be expected to result in, a
Company Material Adverse Effect.
Section
4.5
Financial Statements . The Company has delivered
or made available as of the date hereof or shall, prior to the
Closing Date, deliver or make available to Parent the audited
comparative balance sheets of the Company for the fiscal years
ended December 31, 2006 and December 31, 2007 (hereinafter,
December 31, 2007 shall be referred to as the “ Balance Sheet
Date ”) and the related consolidated and consolidating
statements of income, stockholders’ equity and cash flows of
the Company for the fiscal years ended December 31, 2006 and
December 31, 2007. The foregoing financial statements
(including any notes thereto) (i) have been prepared based upon the
books and records of the Company, (ii) have been prepared in
accordance with GAAP (except as otherwise noted therein), and (iii)
present fairly, in all material respects, the financial position,
results of operations and cash flows of the Company as at their
respective dates and for the periods then ended. To the
knowledge of the Company, since the Balance Sheet Date, no fact or
condition exists that has not been disclosed to Parent that has had
or could reasonably be expected to have a Company Material Adverse
Effect.
Section
4.6
No Undisclosed Liabilities . As of the date
hereof, except (a) for Liabilities reflected on the face of the
balance sheet dated December 31, 2007 (the “ Balance Sheet
”) and (b) Liabilities of the same type, magnitude and scope
as those reflected on the Balance Sheet which have arisen since the
Balance Sheet Date in the ordinary course of business, and which
would not, in the aggregate, result in a Company Material Adverse
Effect, the Company does not have any Liability.
Section
4.7
Litigation . There is no Action pending or, to
the knowledge of the Company, threatened, involving the Company or
its subsidiaries or affecting any of the officers, directors or
employees of the Company or its subsidiaries with respect to the
Company’s or any subsidiary’s business by or before any
governmental entity or by any third party that has had or could
reasonably be expected to have a Company Material Adverse Effect
and neither the Company nor any of its subsidiaries have received
written notice that any such Action is
threatened. Neither the Company nor any of its
subsidiaries is in default under any judgment, order or decree of
any governmental entity applicable to its business, which default
could reasonably be expected to have a Company Material Adverse
Effect.
Section
4.8
No Default; Compliance with Applicable Laws . The
Company is not in default or violation of any material term,
condition or provision of (i) its certificate of incorporation or
by-laws or (ii) to the Company’s knowledge, any law
applicable to the Company or its property and assets, and the
Company has not received written notice of any violation of or
Liability under any of the foregoing (whether material or
not).
Section
4.9
Broker’s and Finder’s Fees . To the
knowledge of the Company, no Person has, or as a result of the
transactions contemplated or described herein will have, any right
or valid claim against the Company for any commission, fee or other
compensation as a finder or broker, or in any similar
capacity.
Section
4.10
Contracts .
(a)
The
Company is not in violation or breach of any material contract,
except such violations that, in the aggregate, would not result in,
or would not reasonably be expected to result in, a Company
Material Adverse Effect. There does not exist any event
or condition that, after notice or lapse of time or both, would
constitute an event of default or breach under any material
Contract on the part of the Company or, to the knowledge of the
Company, any other party thereto or would permit the
modification, cancellation or termination of any material Contract
or result in the creation of any lien upon, or any
person acquiring any right to acquire, any assets of the
Company, other than any events or conditions that, in the aggregate
would not result in, or would not reasonably be expected to result
in, a Company Material Adverse Effect. The Company has not received
in writing any claim or threat that the Company has breached any of
the terms and conditions of any material Contract, other than any
material Contracts the breach of which, in the aggregate, would not
result in, or would not reasonably be expected to result in, a
Company Material Adverse Effect.
(b)
The consent
of, or the delivery of notice to or filing with, any party to a
material Contract is not required for the execution and delivery by
the Company of this Agreement or the consummation of the
transactions contemplated under the Agreement.. The
Company has made available to Parent and Acquisition Corp. true and
complete copies of all Contracts and other documents requested by
Parent or Acquisition Corp.
Section
4.11
Tax Returns and Audits . All required federal,
state and local Tax Returns of the Company have been accurately
prepared and duly and timely filed, and all federal, state and
local Taxes required to be paid with respect to the periods covered
by such returns have been paid. The Company is not and
has not been delinquent in the payment of any Tax. The
Company has not had a Tax deficiency proposed or assessed against
it and has not executed a
waiver
of any statute of limitations on the assessment or collection of
any Tax. None of the Company’s federal income Tax
Returns nor any state or local income or franchise Tax Returns has
been audited by governmental authorities. The reserves
for Taxes reflected on the Balance Sheet are and will be sufficient
for the payment of all unpaid Taxes payable by the Company as of
the Balance Sheet Date. Since the Balance Sheet Date,
the Company has made adequate provisions on its books of account
for all Taxes with respect to its business, properties and
operations for such period. The Company has withheld or
collected from each payment made to each of its employees the
amount of all Taxes (including, but not limited to, federal, state
and local income taxes, Federal Insurance Contribution Act taxes
and Federal Unemployment Tax Act taxes) required to be withheld or
collected therefrom, and has paid the same to the proper Tax
receiving officers or authorized depositaries. There are
no federal, state, local or foreign audits, actions, suits,
proceedings, investigations, claims or administrative proceedings
relating to Taxes or any Tax Returns of the Company now pending,
and the Company has not received any notice of any proposed audits,
investigations, claims or administrative proceedings relating to
Taxes or any Tax Returns. The Company is not obligated
to make a payment, nor is it a party to any agreement that under
certain circumstances could obligate it to make a payment, that
would not be deductible under Section 280G of the
Code. The Company has not agreed nor is required to make
any adjustments under Section 481(a) of the Code (or any similar
provision of state, local and foreign law) by reason of a change in
accounting method or otherwise for any Tax period for which the
applicable statute of limitations has not yet
expired. The Company is not a party to, is not bound by
and does not have any obligation under, any Tax sharing agreement,
Tax indemnification agreement or similar contract or arrangement,
whether written or unwritten (collectively, “ Tax Sharing
Agreements ”), nor does it have any potential
liability or obligation to any Person as a result of, or pursuant
to, any Tax Sharing Agreements.
Section
4.12
Patents and Other Intangible Assets
.
(a)
To
the knowledge of the Company, the Company (i) owns or has the right
to use, pursuant to a valid license, sublicense, agreement, or
permission, free and clear of all Liens, all patents, trademarks,
service marks, trade names, copyrights, licenses and rights with
respect to the foregoing used in or necessary for the conduct of
its business as now conducted or proposed to be conducted without
infringing upon or otherwise acting adversely to the right or
claimed right of any Person under or with respect to any of the
foregoing.
(b)
To
the knowledge of the Company, the Company owns and has the right to
use all trade secrets, if any, including know-how, negative
know-how, formulas, patterns, programs, devices, methods,
techniques, inventions, designs, processes, computer programs and
technical data and all information that derives independent
economic value, actual or potential, from not being generally known
or known by competitors (collectively, “ Intellectual
Property ”) required for or incident to the
development, operation and sale of all products and services sold
by the Company, free and clear of any right, Lien or claim of
others. All Intellectual Property can and will be
transferred by the Company to the Surviving Corporation as a result
of the Merger and without the consent of any Person other than the
Company.
Section
4.13
Employee Benefit Plans; ERISA .
(a)
All
“employee benefit plans” (within the meaning of Section
3(3) of the ERISA) of the Company and other employee benefit or
fringe benefit arrangements, practices,
contracts,
policies or programs of every type, other than programs merely
involving the regular payment of wages, commissions, or bonuses
established, maintained or contributed to by the Company, whether
written or unwritten and whether or not funded, are in material
compliance with the applicable requirements of ERISA, the Code and
any other applicable state, federal or foreign law.
(b)
There
are no pending claims or lawsuits that have been asserted or
instituted against any Employee Benefit Plan, the assets of any of
the trusts or funds under the Employee Benefit Plans, the plan
sponsor or the plan administrator of any of the Employee Benefit
Plans or against any fiduciary of an Employee Benefit Plan with
respect to the operation of such plan, nor does the Company have
any knowledge of any incident, transaction, occurrence or
circumstance which might reasonably be expected to form the basis
of any such claim or lawsuit.
(c)
There
is no pending or, to the knowledge of the Company, threatened
investigation, or pending or possible enforcement action by the
Pension Benefit Guaranty Corporation, the Department of Labor, the
Internal Revenue Service or any other government agency with
respect to any Employee Benefit Plan and the Company has no
knowledge of any incident, transaction, occurrence or circumstance
which might reasonably be expected to trigger such an investigation
or enforcement action.
(d)
No
actual or, to the knowledge of the Company, contingent Liability
exists with respect to the funding of any Employee Benefit Plan or
for any other expense or obligation of any Employee Benefit Plan,
except as disclosed on the Balance Sheet, and no contingent
Liability exists under ERISA with respect to any
“multi-employer plan,” as defined in Section 3(37) or
Section 4001(a)(3) of ERISA.
(e)
No
events have occurred or are reasonably expected to occur with
respect to any Employee Benefit Plan that would cause a material
change in the costs of providing benefits under such Employee
Benefit Plan or would cause a material change in the cost of
providing such Employee Benefit Plan.
Section
4.14
Title to Property and Encumbrances . The Company
has good and valid title to all properties and assets used in the
conduct of its business (except for property held under valid and
subsisting leases which are in full force and effect and which are
not in default) free of all Liens except Permitted Liens and such
ordinary and customary imperfections of title, restrictions and
encumbrances as do not in the aggregate constitute a Company
Material Adverse Effect.
Section
4.15
Condition of Properties . All facilities,
machinery, equipment, fixtures and other properties owned, leased
or used by the Company are in operating condition, subject to
ordinary wear and tear, and are adequate and sufficient for the
Company’s existing business.
Sec
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