Exhibit 10.1
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RHAPSODY ACQUISITION CORP.,
PRIMORIS CORPORATION
and
CERTAIN OF THE SHAREHOLDERS OF
PRIMORIS CORPORATION
DATED AS OF FEBRUARY 19, 2008
AGREEMENT AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER is made and entered into as of
February 19, 2008, by and among Rhapsody Acquisition Corp., a
Delaware corporation (“
Delcorp ”),
Primoris Corporation, a Nevada corporation (“
Company ”),
and each of the persons listed under the caption “Signing
Shareholders” on the signature page hereof, such persons
being certain of the shareholders of the Company (each a
“
Signing Shareholder ”
and, collectively, the “
Signing Shareholders. ”)
RECITALS
A. Upon
the terms and subject to the conditions of this Agreement (as
defined in
Section 1.2 )
and in accordance with the General Corporation Law of the State of
Delaware (the “
DGCL ”)
and the Nevada General Corporation Law (the “
NGCL ”)
and other applicable law, Delcorp and Company intend to enter into
a business combination transaction by means of a merger in which
the Company will merge with Delcorp and Delcorp will be the
surviving entity, through an exchange of all the issued and
outstanding shares of capital stock of the Company for shares of
common stock of Delcorp.
B. The
Boards of Directors of each of the Company and Delcorp have
determined that the Merger (as defined in
Section 1.1 )
is fair to, and in the best interests of, their respective
companies and their respective stockholders.
C. The
parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended (the “
Code ”).
NOW,
THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows (defined
terms used in this Agreement are listed alphabetically
in
Article IX ,
together with the Section and, if applicable, paragraph number
in which the definition of each such term is located):
ARTICLE I
THE MERGER
1.1
The Merger .
At the Effective Time (as defined in
Section 1.2 )
and subject to and upon the terms and conditions of this Agreement
and the applicable provisions of the NGCL, the Company shall be
merged with and into Delcorp (the “
Merger ”),
the separate corporate existence of the Company shall cease and
Delcorp shall continue as the surviving corporation. Delcorp as the
surviving corporation after the Merger is hereinafter sometimes
referred to as the “
Surviving Corporation. ”
1.2
Effective Time; Closing .
Subject to the conditions of this Agreement, the parties hereto
shall cause the Merger to be consummated by (a) filing
Articles of Merger (the “
Articles of Merger ”)
with the Secretary of State of the State of Nevada in accordance
with the applicable provisions of Nevada law and (b) filing with
the Secretary of State of the State of Delaware in accordance with
applicable provisions of the DGCL a Certificate of Merger (the
“Certificate of Merger”) (the time of such filing with
the Secretary of State of the State of Delaware, or such later time
as may be agreed in writing by Company and Delcorp and specified in
the Certificate of Merger, being the “
Effective Time ”)
as soon as practicable on or after the Closing Date (as herein
defined). The term “
Agreement ”
as used herein refers to this Agreement and Plan of Merger, as the
same may be amended from time to time, and all schedules hereto
(including the Company Schedule and the Delcorp Schedule, as
defined in the preambles to
Articles II and III hereof,
respectively). Unless this Agreement shall have been terminated
pursuant to
Section 8.1 ,
the closing of the Merger (the “
Closing ”)
shall take place at the offices of Graubard Miller, counsel to
Delcorp, 405 Lexington Avenue, New York, New York 10174-1901 or at
such other place as the parties mutually agree in writing at a time
and date to be specified by the parties, which shall be no later
than the second business day after the satisfaction or waiver of
the conditions set forth in
Article VI ,
or at such other time, date and location as the parties hereto
agree in writing (the “
Closing Date ”).
Closing signatures may be transmitted by facsimile.
1.3
Effect of the Merger .
At the Effective Time, the effect of the Merger shall be as
provided in this Agreement and the applicable provisions of the
DGCL and NGCL and other applicable provisions of Nevada law
(together, with the NGCL, “
Applicable Nevada Law ”).
Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the
Company shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4
Certificate of Incorporation; Bylaws
.
(a) At
the Effective Time, the Certificate of Incorporation of
Delcorp shall be amended and restated in the form of
Exhibit A ,
and which shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by
law.
(b) Also,
at the Effective Time, the Bylaws of Delcorp shall be amended
and restated in the form of
Exhibit B and
which shall be the Bylaws of the Surviving
Corporation.
1.5
Effect on Capital Stock .
Subject to the terms and conditions of this Agreement, at the
Effective Time, by virtue of the Merger and this Agreement and
without any action on the part of the Company or the holders of any
of the securities of the Company, the following shall
occur:
(a)
Conversion of Company Common Stock
.
Other than any shares to be canceled pursuant to
Section 1.5(c) ,
each share of common stock, par value $.001, of the Company
(“
Company Common Stock ”)
issued and outstanding immediately prior to the Effective Time will
be automatically converted (subject to
Section 1.5(e) )
into (i) the number of shares of common stock, par value $0.0001,
of Delcorp (“
Delcorp Common Stock ”)
equal to (A) 24,094,800 divided by (B) the Outstanding Common Stock
Number plus (ii) the right to receive that number of EBITDA Shares
(as defined in
Section 1.18(c) )
for each year with respect to which EBITDA Shares are issuable
equal to (C) the number of EBITDA Shares issuable with respect to
such year divided by (D) the Outstanding Common Stock Number as set
forth in the attached
Exhibit C .
As used herein, “
Outstanding Common Stock Number ”
means the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time plus additional shares in
the amount of eighty-one (81) shares for Roger Newnham
(“Born”) and thirteen (13) shares for Albert Morteboy
(“Morteboy”) to treat them, for purposes of calculating
the Outstanding Common Stock Number, as if they had been
shareholders prior to the Closing. Born and Morteboy are
hereinafter collectively referred to as the “Foreign
Managers”. The numbers of shares of Delcorp Common Stock that
would otherwise be issuable pursuant to this
Section 1.5(a) (including
EBITDA Shares) to Persons who hold Dissenting Shares (as defined
in
Section 1.17(b) )
and exercise their dissenters’ rights pursuant to Applicable
Nevada Law shall not be issued to such Persons and shall be
canceled.
(b)
Certificates for Shares .
Certificates representing the shares of Delcorp Common Stock
issuable pursuant to clause (i) of
Section 1.5(a) (“
Base Shares ”)
shall be issued to the holders of certificates representing the
shares of Company Common Stock (“
Company Certificates ”)
upon surrender of the Company Certificates in the manner provided
in
Section 1.6 (or
in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit (and indemnity, if required) in the manner
provided in
Section 1.8 ).
Each holder shall be issued separate certificates for such
holder’s Escrow Shares (as defined in
Section 1.11 )
and for the remaining number of shares of Delcorp Common Stock to
which such holder is entitled. Certificates for shares of Delcorp
Common Stock representing EBITDA Shares shall be issued to the
Persons who have surrendered Company Certificates within five
business days following the release of the audited financial
statements of Delcorp for the year with respect to which such
EBITDA Shares are issuable.
(c)
Cancellation of Treasury and Delcorp-Owned
Stock .
Each share of Company Common Stock held by the Company or owned by
Delcorp or any direct or indirect wholly-owned subsidiary of the
Company or of Delcorp immediately prior to the Effective Time shall
be canceled and extinguished without any conversion or payment in
respect thereof.
(d)
Adjustments to Exchange Ratios .
The numbers of shares of Delcorp Common Stock that the holders of
the Company Common Stock are entitled to receive as a result of the
Merger (including but not limited to the Base Shares and EBITDA
Shares) shall be equitably adjusted to reflect appropriately the
effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible
into Delcorp Common Stock or Company Common Stock), extraordinary
cash dividends (other than the distributions referred to in
Section 5.24 hereof),
reorganization, recapitalization, reclassification, combination,
exchange of shares or other like change with respect to Delcorp
Common Stock or Company Common Stock occurring on or after the date
hereof and prior to the Effective Time.
(e)
Fractional Shares .
No fraction of a share of Delcorp Common Stock will be issued by
virtue of the Merger, and each holder of shares of Company Common
Stock who would otherwise be entitled to a fraction of a share of
Delcorp Common Stock (after aggregating all fractional shares of
Delcorp Common Stock that otherwise would be received by such
holder) shall, upon compliance with
Section 1.6 ,
receive from Delcorp, in lieu of such fractional share, one (1)
share of Delcorp Common Stock.
1.6
Surrender of Certificates .
(a)
Exchange Procedures .
Upon surrender of Company Certificates at the Closing, the holders
of such Company Certificates shall receive in exchange therefor
certificates representing the Base Shares into which their shares
of Company Common Stock shall be converted at the Effective Time,
less the Escrow Shares, and the Company Certificates so surrendered
shall forthwith be canceled. Until so surrendered, outstanding
Company Certificates will be deemed, from and after the Effective
Time, to evidence only the right to receive the applicable number
of shares of Delcorp Common Stock issuable pursuant to
Section 1.5(a) .
(b)
Distributions With Respect to Unexchanged
Shares .
No dividends or other distributions declared or made after the date
of this Agreement with respect to Delcorp Common Stock with a
record date after the Effective Time will be paid to the holders of
any unsurrendered Company Certificates with respect to the shares
of Delcorp Common Stock to be issued upon surrender thereof until
the holders of record of such Company Certificates shall surrender
such Company Certificates. Subject to applicable law, following
surrender of any such Company Certificates with a properly
completed letter of transmittal, Delcorp shall promptly deliver to
the record holders thereof, without interest, the certificates
representing shares of Delcorp Common Stock issued in exchange
therefor and the amount of any such dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such shares of Delcorp Common
Stock.
(c)
Transfers of Ownership .
If certificates representing shares of Delcorp Common Stock are to
be issued in a name other than that in which the Company
Certificates surrendered in exchange therefor are registered, it
will be a condition of the issuance thereof that the Company
Certificates so surrendered will be properly endorsed and otherwise
in proper form for transfer and that the persons requesting such
exchange will have paid to Delcorp or any agent designated by it
any transfer or other taxes required by reason of the issuance of
certificates representing shares of Delcorp Common Stock in any
name other than that of the registered holder of the Company
Certificates surrendered, or established to the satisfaction of
Delcorp or any agent designated by it that such tax has been paid
or is not payable.
(d)
Required Withholding .
Delcorp and the Surviving Corporation shall each be entitled to
deduct and withhold from any consideration payable or otherwise
deliverable pursuant to this Agreement to any holder or former
holder of Company Common Stock such amounts as are required to be
deducted or withheld therefrom under the Code or under any
provision of state, local or foreign tax law or under any other
applicable legal requirement. To the extent such amounts are so
deducted or withheld, such amounts shall be treated for all
purposes under this Agreement as having been paid to the person to
whom such amounts would otherwise have been paid.
(e)
No Liability .
Notwithstanding anything to the contrary in this
Section 1.6 ,
neither Delcorp, the Company, the Surviving Corporation nor any
other party hereto shall be liable to a holder of shares of Delcorp
Common Stock or Company Common Stock for any amount properly paid
to a public official pursuant to any applicable abandoned property,
escheat or similar law.
1.7
No Further Ownership Rights in Company Stock
.
All shares of Delcorp Common Stock issued in accordance with the
terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to shares of Company Common
Stock and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Company
Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Company Certificates
are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this
Article I .
1.8
Lost, Stolen or Destroyed Certificates
.
In the event that any Company Certificates shall have been lost,
stolen or destroyed, Delcorp shall issue in exchange for such lost,
stolen or destroyed Company Certificates, upon the making of an
affidavit of that fact by the holder thereof, the certificates
representing the shares of Delcorp Common Stock that the shares of
Company Common Stock formerly represented by such Company
Certificates were converted into and any dividends or distributions
payable pursuant to
Section 1.6(b) ;
provided, however, that, as a condition precedent to the issuance
of such certificates representing shares of Delcorp Common Stock
and other distributions, the owner of such lost, stolen or
destroyed Company Certificates shall indemnify Delcorp against any
claim that may be made against Delcorp or the Surviving Corporation
with respect to the Company Certificates alleged to have been lost,
stolen or destroyed.
1.9
Tax Consequences .
It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Code and the regulations
thereunder. The parties hereto adopt this Agreement as a
“plan of reorganization” within the meaning of the
United States Income Tax Regulations issued with respect to
Section 368.
1.10
Taking of Necessary Action; Further Action
.
If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement
and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and
franchises of the Company, the officers and directors of the
Company will take all such lawful and necessary
action.
1.11
Escrow .
As the sole remedy for the indemnity obligations set forth
in
Article VII ,
at the Closing, the Persons receiving shares of Delcorp Common
Stock to be issued as a result of the Merger shall deposit in
escrow an aggregate of 1,807,110
of
the Base Shares received by such Persons as a result of the Merger
(the “
Escrow Shares ”),
which shares shall be allocated among the Persons entitled to
receive them in the same proportions as the shares of Delcorp
Common Stock are allocated among them, all in accordance with the
terms and conditions of the Escrow Agreement to be entered into at
the Closing between Delcorp, the Company, the Representative
appointed pursuant to
Section 1.14(b) and
Continental Stock Transfer & Trust Company (“
Continental ”),
as Escrow Agent, in the form annexed hereto as
Exhibit D (the
“
Escrow Agreement ”).
On the date (the “
Basic Escrow Termination Date ”)
that is the later of (i) thirty (30) days after the date on which
Delcorp has filed its Report on Form 10-K pursuant to the
Securities Exchange Act of 1934, as amended (“
Exchange Act ”),
for its 2008 fiscal year or (ii) one year after the Closing Date,
the Escrow Agent shall release 1,445,688 of the original number of
Escrow Shares, less that number of Escrow Shares applied in
satisfaction of or reserved with respect to indemnification claims
made prior to such date, to the shareholders of the Company in the
same proportions as originally deposited into escrow. The remaining
Escrow Shares (the “
T/E Indemnity Shares ”)
shall be available for indemnification only with respect to Tax
Indemnification Claims and Environmental Indemnification Claims
(each as hereinafter defined). On the date (the “
T/E Escrow Termination Date ”)
that is the first business day following the date that is the third
anniversary of the Closing Date, the Escrow Agent shall deliver the
T/E Indemnity Shares, less any of such shares applied in
satisfaction of a Tax Indemnification Claim or an Environmental
Indemnification Claim and any of such shares related to a Tax
Indemnification Claim or an Environmental Indemnification Claim
that is then unresolved, to each shareholder of the Company in the
same proportions as initially deposited in escrow. Any Escrow
Shares held with respect to any unresolved claim for
indemnification and not applied as indemnification with respect to
such claim upon its resolution shall be delivered to such Persons
promptly upon such resolution. “
Tax Indemnification Claim ”
means a claim for indemnification pursuant to
Article VII with
respect to (x) a breach of the representations and warranties set
forth in
Section 2.15 and
(y) the matters referred to in Schedule 2.15. “
Environmental Indemnification Claim ”
means a claim for indemnification pursuant to
Article VII with
respect to a breach of the representations and warranties set forth
in
Section 2.16 .
1.12
Rule 145 .
All shares of Delcorp Common Stock issued pursuant to this
Agreement to “affiliates” of the Company listed in
Schedule 1.12 will be subject to certain resale restrictions
under Rule 145 promulgated under the Securities Act and all
certificates representing such shares shall bear an appropriate
restrictive legend.
1.13
Signing Shareholder Matters .
(a) By
his, her or its execution of this Agreement, each Signing
Shareholder, in his, her or its capacity as a shareholder of
the Company, hereby agrees to vote in favor of the approval
and adoption of this Agreement and to authorize the Company,
its directors and officers to take all actions necessary for
the consummation of the Merger and the other transactions
contemplated by the provisions of this Agreement and its
Exhibits at a meeting of the shareholders of the Company to be
held promptly after distribution of the Proxy
Statement/Prospectus (as defined in Section 5.1(a)) to the
shareholders of the Company and the stockholders of
Delcorp.
(b) Each
Signing Shareholder, for himself, herself or itself only,
represents and warrants as follows: (i) all Delcorp Common
Stock to be acquired by such Signing Shareholder pursuant to
this Agreement will be acquired for his, her or its account
and not with a view towards distribution thereof other than,
with respect to Signing Shareholders that are entities,
transfers to its stockholders, partners or members; (ii) he,
she or it understands that he, she or it must bear the
economic risk of the investment in the Delcorp Common Stock,
which cannot be sold by he, she or it unless it is registered
under the Securities Act, or an exemption therefrom is
available thereunder; (iii) he, she or it has had both the
opportunity to ask questions and receive answers from the
officers and directors of Delcorp and all persons acting on
Delcorp’s behalf concerning the business and operations
of Delcorp and to obtain any additional information to the
extent Delcorp possesses or may possess such information or
can acquire it without unreasonable effort or expense
necessary to verify the accuracy of such information; and (iv)
he, she or it has had access to the Delcorp SEC Reports filed
prior to the date of this Agreement. Each Signing Shareholder
acknowledges, as to himself, herself or itself only, that (v)
he, she or it is either (A) an “accredited
investor” as such term is defined in Rule 501(a)
promulgated under the Securities Act or (B) a person
possessing sufficient knowledge and experience in financial
and business matters to enable it to evaluate the merits and
risks of an investment in Delcorp; and (vi) he, she or it
understands that the certificates representing the Delcorp
Common Stock to be received by he, she or it may bear legends
to the effect that the Delcorp Common Stock may not be
transferred except upon compliance with (C) the registration
requirements of the Securities Act of 1933, as amended (the
“
Securities Act ”),
or an exemption therefrom, and (D) the provisions of this
Agreement. Each Signing Shareholder that is an entity, for itself,
represents, warrants and acknowledges, with respect to each holder
of its equity interests, to the same effect as the foregoing
provisions of this
Section 1.13(b) .
(c) Each
Signing Shareholder, for himself, herself or itself,
represents and warrants that the execution and delivery of
this Agreement by such Signing Shareholder does not, and the
performance of his, her or its obligations hereunder will not,
require any consent, approval, authorization or permit of, or
filing with or notification to, any court, administrative
agency, commission, governmental or regulatory authority,
domestic or foreign (a “
Governmental Entity ”),
except (i) for applicable requirements, if any, of the Securities
Act, the Exchange Act, state securities laws (“
Blue Sky Laws ”),
and the rules and regulations thereunder, and (ii) where the
failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect (as defined in
Section 10.2(a) )
on such Signing Shareholder or the Company or, after the Closing,
the Delcorp, or prevent consummation of the Merger or otherwise
prevent the parties hereto from performing their obligations under
this Agreement.
(d) Each
Signing Shareholder, for himself, herself or itself,
represents and warrants that he, she or it owns the shares of
Company Common Stock listed on Exhibit C as being owned by
him, her or it free and clear of all Liens.
1.14
Committee and Representative for Purposes of Escrow
Agreement .
(a)
Delcorp Committee .
Prior to the Closing, the Board of Directors of Delcorp shall
appoint a committee consisting of one or more of its then members
to act on behalf of Delcorp to take all necessary actions and make
all decisions pursuant to the Escrow Agreement regarding
Delcorp’s right to indemnification pursuant to
Article VII hereof.
In the event of a vacancy in such committee, the Board of Directors
of Delcorp shall appoint as a successor a Person who was a director
of Delcorp prior to the Closing Date or some other Person who would
qualify as an “independent” director of Delcorp and who
has not had any relationship with the Company prior to the Closing.
Such committee is intended to be the “
Committee ”
referred to in
Article VII hereof
and the Escrow Agreement.
(b)
Representative .
The Signing Shareholders hereby designate Brian Pratt to represent
the interests of the Persons entitled to receive Delcorp Common
Stock as a result of the Merger for purposes of the Escrow
Agreement (such designee and any successor, the “
Representative ”).
If such Person ceases to serve in such capacity, for any reason,
the Signing Shareholders shall designate his or her successor.
Failing such designation within 10 business days after the
Representative has ceased to serve, those members of the Board of
Directors of Delcorp who were directors of the Company prior to the
Closing shall appoint as successor a Person who was a former
shareholder of the Company or such other Person as such members
shall designate. Such Person or successor is intended to be the
“Representative” referred to in
Section 1.11 and
Article VII hereof
and the Escrow Agreement.
1.15
Outstanding Company Derivative Securities
.
The Company shall arrange that the holders of all outstanding
options, warrants and other derivative securities of the Company
exercise such securities after the Special Meeting but prior to the
Effective Time without the payment of any consideration therefor by
the Company other than the issuance of shares of Company Common
Stock and cash that is owed to any of the Foreign Managers pursuant
to the Termination Agreements each of the Foreign Managers has
entered into with Delcorp, the Company and certain other Persons.
Such exercise may be made contingent upon the occurrence of the
Closing.
1.16
Intentionally Omitted .
1.17
Shares Subject to Dissenters’ Rights
.
(a) Notwithstanding
Section 1.5 hereof,
Dissenting Shares shall not be converted into a right to receive
Delcorp Common Stock and the holders thereof shall be entitled only
to such rights as are granted by Applicable Nevada Law. Each holder
of Dissenting Shares who becomes entitled to payment for such
shares pursuant to Applicable Nevada Law shall receive payment
therefor from the Surviving Corporation in accordance with
Applicable Nevada Law, provided, however, that (i) if any
shareholder of the Company who asserts dissenters’ rights in
connection with the Merger (a “
Dissenter ”)
shall have failed to establish his entitlement to such rights as
provided in Applicable Nevada Law, or (ii) if any such Dissenter
shall have effectively withdrawn his demand for payment for such
shares or waived or lost his right to payment for his shares under
the appraisal rights process under Applicable Nevada Law, the
shares of Company Common Stock held by such Dissenter shall be
treated as if they had been converted, as of the Effective Time,
into a right to receive Delcorp Common Stock and as provided
in
Section 1.5 .
The Company shall give Delcorp prompt notice of any demands for
payment received by the Company from a person asserting appraisal
rights, and Delcorp shall have the right to participate in all
negotiations and proceedings with respect to such demands. The
Company shall not, except with the prior written consent of
Delcorp, make any payment with respect to, or settle or offer to
settle, any such demands.
(b) As
used herein, “
Dissenting Shares ”
means any shares of Company Common Stock held by shareholders of
the Company who are entitled to rights to receive payment for their
shares under Chapter 92A of the Nevada Revised Statutes and who
have properly exercised, perfected and not subsequently withdrawn
or lost or waived their rights to demand payment with respect to
their shares in accordance therewith.
1.18
EBITDA Shares .
(a) If,
for the fiscal year of Delcorp ending December 31, 2008,
Delcorp has EBITDA equal to or greater than $39,300,000,
Delcorp shall issue to the holders of Company Certificates, in
the aggregate, pursuant to
Section 1.5(b) ,
2,500,000 shares of Delcorp Common Stock.
(b) Regardless
of whether Delcorp has EBITDA equal to or greater than
$39,300,000 for its fiscal year ending December 31, 2008, if
for the fiscal year of Delcorp ending December 31, 2009,
Delcorp has EBITDA equal to or greater than $46,000,000,
Delcorp shall issue to the holders of Company Certificates, in
the aggregate, pursuant to
Section 1.5(b) ,
2,500,000 shares of Delcorp Common Stock.
(c) As
used herein,
(i) “
EBITDA ”
means for the applicable fiscal year, using results taken from the
audited financial statements of the Company, subject to certain
adjustments, the following calculation: income before provision for
income taxes, plus interest expense, less interest income, plus
depreciation and amortization, plus amortization of intangible
assets, plus any expenses arising solely from the Merger charged to
income in such fiscal year, plus expense relating to the
Termination Agreements with Born and Morteboy of $1,277,340 in 2008
only, plus any GAAP expense relating to the issuance of Rhapsody
common stock to Born and Morteboy as part of the Termination
Agreements in 2008 only, plus any expense (non-cash only) relating
to the Delcorp Plan (as defined in
Section 5.1(a) ).
In addition, any Rhapsody expenses prior to the Closing that are
included in the Surviving Corporation’s 2008 income statement
will be excluded for purposes of EBITDA calculation. Attached
as
Exhibit E is
a sample calculation.
(ii) “
EBITDA Shares ”
means shares of Delcorp Common Stock issuable pursuant to
either
Section 1.18(a) or
Section 1.18(b) .
1.19
Registration of Shares .
Delcorp shall file as soon as possible after the Closing, and use
its best efforts to cause to become effective, within 12 months
after the Closing Date, a registration statement under the
Securities Act with respect to the shares of Delcorp Common Stock
issued pursuant to this Agreement prior to the expiration of such
12-month period, including EBITDA shares issued pursuant to
Section 1.18(a) ,
to those shareholders of the Company who are listed on
Schedule 1.12 .
1.20
Sale Restriction .
No public market sales of shares of Delcorp Common Stock whether or
not issued as a result of the Merger, including EBITDA Shares,
shall be made for a period of twelve months following the Closing
Date. No private sales of shares of Delcorp Common Stock issued as
a result of the Merger shall be made unless the purchaser
acknowledges and agrees to the restriction stated in the preceding
sentence by delivery to Delcorp of a written document to such
effect. Certificates representing shares of Delcorp Common Stock
issued as a result of the Merger shall bear a prominent legend to
such effect.
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE
COMPANY
Subject
to the exceptions set forth in Schedule 2 attached hereto
(the “
Company Schedule ”),
the Company and the Signing Shareholders hereby represent and
warrant to, and covenant with, Delcorp as follows (as used in
this
Article II ,
and elsewhere in this Agreement, the term “
Company ”
includes the Subsidiaries, as hereinafter defined, unless the
context clearly otherwise indicates):
2.1
Organization and Qualification .
(a) The
Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Nevada and
has the requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its
business as it is now being or currently planned by the
Company to be conducted. The Company is in possession of all
franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders
(“
Approvals ”)
necessary to own, lease and operate the properties it purports to
own, operate or lease and to carry on its business as it is now
being or currently planned by the Company to be conducted, except
where the failure to have such Approvals could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect on the Company. Complete and correct copies of the
certificate of incorporation and by-laws (or other comparable
governing instruments with different names) (collectively referred
to herein as “
Charter Documents ”)
of the Company, as amended and currently in effect, have been
heretofore made available to Delcorp or Delcorp’s counsel.
The Company is not in violation of any of the provisions of the
Company’s Charter Documents.
(b) The
Company is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each
jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good
standing that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
the Company. Each jurisdiction in which the Company is so
qualified or licensed is listed in
Schedule 2.1.
(c) The
minute books of the Company contain true, complete and
accurate records of all written minutes for meetings and
written consents in lieu of meetings of its Board of Directors
(and any committees thereof), similar governing bodies and
stockholders (“
Corporate Records ”)
since the time of the Company’s organization. Copies of such
Corporate Records of the Company have been made available to
Delcorp or Delcorp’s counsel.
(d) The
stock transfer, warrant and option transfer and ownership
records of the Company contain true, complete and accurate
records of the securities ownership as of the date of such
records and the transfers involving the capital stock and
other securities of the Company since the time of the
Company’s incorporation. Copies of such records of the
Company have been made available to Delcorp or Delcorp’s
counsel.
2.2
Subsidiaries .
(a) The
Company has no direct or indirect subsidiaries or
participations in joint ventures or other entities other than
those listed in Schedule 2.2 (the “
Subsidiaries ”).
Except as set forth in Schedule 2.2, the Company owns all of
the outstanding equity securities of the Subsidiaries, free and
clear of all Liens (as defined in
Section 10.2(e) ).
Except for the Subsidiaries, the Company does not own, directly or
indirectly, any ownership, equity, profits or voting interest in
any Person or has any agreement or commitment to purchase any such
interest, and has not agreed and is not obligated to make nor is
bound by any written, oral or other agreement, contract,
subcontract, lease, binding understanding, instrument, note,
option, warranty, purchase order, license, sublicense, insurance
policy, benefit plan, commitment or undertaking of any nature, as
of the date hereof or as may hereafter be in effect under which it
may become obligated to make, any future investment in or capital
contribution to any other entity.
(b) Each
Subsidiary that is a corporation is duly incorporated, validly
existing and in good standing under the laws of its state of
incorporation (as listed in Schedule 2.2) and has the
requisite corporate power and authority to own, lease and
operate its assets and properties and to carry on its business
as it is now being or currently planned by the Company to be
conducted. Each Subsidiary that is a limited liability company
is duly organized or formed, validly existing and in good
standing under the laws of its state of organization or
formation (as listed in Schedule 2.2) and has the
requisite power and authority to own, lease and operate its
assets and properties and to carry on its business as it is
now being or currently planned by the Company to be conducted.
Each Subsidiary is in possession of all Approvals necessary to
own, lease and operate the properties it purports to own,
operate or lease and to carry on its business as it is now
being or currently planned by the Company to be conducted,
except where the failure to have such Approvals could not,
individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company or such
Subsidiary. Complete and correct copies of the Charter
Documents of each Subsidiary, as amended and currently in
effect, have been heretofore delivered to Delcorp or
Delcorp’s counsel. No Subsidiary is in violation of any
of the provisions of its Charter Documents.
(c) Each
Subsidiary is duly qualified or licensed to do business as a
foreign corporation or foreign limited liability company and
is in good standing in each jurisdiction where the character
of the properties owned, leased or operated by it or the
nature of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or
licensed and in good standing that could not, individually or
in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company or such Subsidiary. Each
jurisdiction in which each Subsidiary is so qualified or
licensed is listed in Schedule 2.2.
(d) The
minute books of each Subsidiary contain true, complete and
accurate records of all written minutes for meetings and
written consents in lieu of meetings of its Board of Directors
(and any committees thereof), similar governing bodies and
stockholders. Copies of the Corporate Records of each
Subsidiary have been heretofore made available to Delcorp or
Delcorp’s counsel.
2.3
Capitalization .
(a) The
authorized capital stock of the Company consists of 250,000
shares of Company Common Stock, of which 4,368 shares are
issued and outstanding as of the date of this Agreement, all
of which shares of Company Common Stock are validly issued,
fully paid and nonassessable. Through Termination Agreements
with the Foreign Managers, at the time of the Closing of the
Merger, Rhapsody will issue common stock which would have
represented an equivalent of an additional 94 shares in the
aggregate to the Foreign Managers which would have resulted in
4,462 shares of Company Common Stock outstanding as of the
date of the Closing. Other than Company Common Stock, the
Company has no class or series of securities authorized by its
Charter Documents. Schedule 2.3(a) hereto contains a list
of all of the shareholders of the Company and the Foreign
Managers, the number of shares of Company Common Stock owned,
or to be owned at the time of the Closing, by each shareholder
and Foreign Manager and each shareholder’s state of
residence. Except as set forth in Schedule 2.3(a) hereto,
as of the date of this Agreement, no shares of Company Common
Stock are reserved for issuance upon the exercise of
outstanding options to purchase Company Common Stock granted
to employees of Company or other parties (“
Company Stock Options ”)
other than those issued by Rhapsody to the Foreign Managers. No
shares of Company Common Stock are reserved for issuance upon the
exercise of outstanding warrants or other rights (other than
Company Stock Options) to purchase Company Common Stock other than
to the Foreign Managers. All shares of Company Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instrument pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and
nonassessable. There are no commitments or agreements of any
character to which Company is bound obligating Company to
accelerate the vesting of any Company Stock Option as a result of
the Merger. All outstanding shares of Company Common Stock and all
outstanding Company Stock Options have been issued and granted in
compliance with (x) all applicable securities laws and (in all
material respects) other applicable laws and regulations, and (y)
all requirements set forth in any applicable Company Contracts (as
defined in
Section 2.19 ).
The Company has heretofore delivered to Delcorp or Delcorp’s
counsel true and accurate copies of the forms of documents used for
the issuance of Company Stock Options and shares to the Foreign
Managers and a true and complete list of the holders thereof,
including their names and the numbers of shares of Company Common
Stock underlying such holders’ Company Stock Options or in
the alternative the names of the Foreign Managers.
(b) Except
as set forth in Schedule 2.3(b) hereto or as set forth
in
Section 2.3(a) hereof,
there are no subscriptions, options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any
character to which the Company is a party or by which it is bound
obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership
interests of the Company or obligating the Company to grant,
extend, accelerate the vesting of or enter into any such
subscription, option, warrant, equity security, call, right,
commitment or agreement.
(c) Except
as contemplated by this Agreement and except as set forth in
Schedule 2.3(c) hereto, there are no registration rights,
and there is no voting trust, proxy, rights plan, antitakeover
plan or other agreement or understanding to which the Company
is a party or by which the Company is bound with respect to
any equity security of any class of the Company.
(d) Except
as set forth in Schedule 2.3(d), no outstanding shares of
Company Common Stock are unvested or subjected to a repurchase
option, risk of forfeiture or other condition under any
applicable agreement with the Company.
(e) The
authorized and outstanding capital stock or membership
interests of each Subsidiary are set forth in
Schedule 2.3(e) hereto. Except as set forth in
Schedule 2.3(e), the Company owns all of the outstanding
equity securities of each Subsidiary, free and clear of all
Liens, either directly or indirectly through one or more other
Subsidiaries. There are no outstanding options, warrants or
other rights to purchase securities of any
Subsidiary.
2.4
Authority Relative to this Agreement
.
The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder and, to consummate the transactions contemplated hereby
(including the Merger). The execution and delivery of this
Agreement and the consummation by the Company of the transactions
contemplated hereby (including the Merger) have been duly and
validly authorized by all necessary corporate action on the part of
the Company (including the approval by its Board of Directors and
shareholders, subject in all cases to the satisfaction of the terms
and conditions of this Agreement, including the conditions set
forth in
Article VI ),
and no other corporate proceedings on the part of the Company or
its shareholders are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby pursuant to
Applicable Nevada Law and the terms and conditions of this
Agreement. This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization,
execution and delivery thereof by the other parties hereto,
constitutes the legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors’
rights generally and by general principles of equity.
2.5
No Conflict; Required Filings and Consents
.
Except as set forth in Schedule 2.5 hereto:
(a) The
execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company
shall not, (i) conflict with or violate the Company’s
Charter Documents, (ii) subject to obtaining the adoption of
this Agreement and the Merger by the stockholders of the
Company, conflict with or violate any Legal Requirements (as
defined in
Section 10.2(b) ),
(iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default)
under, or materially impair the Company’s rights or alter the
rights or obligations of any third party under, or give to others
any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company pursuant to, any Company
Contracts or (iv) result in the triggering, acceleration or
increase of any payment to any Person pursuant to any Company
Contract, including any “change in control” or similar
provision of any Company Contract, except, with respect to clauses
(ii), (iii) or (iv), for any such conflicts, violations, breaches,
defaults, triggerings, accelerations, increases or other
occurrences that would not, individually and in the aggregate, have
a Material Adverse Effect on the Company.
(b) The
execution and delivery of this Agreement by the Company does
not, and the performance of its obligations hereunder will
not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Entity
or other third party (including, without limitation, lenders
and lessors), except (i) for applicable requirements, if any,
of the Securities Act, the Exchange Act or Blue Sky Laws, and
the rules and regulations thereunder, and appropriate
documents received from or filed with the relevant authorities
of other jurisdictions in which the Company is licensed or
qualified to do business, (ii) for the filing of any
notifications required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “
HSR Act ”),
if required upon advice of counsel, and the expiration of the
required waiting period thereunder, (iii) the consents, approvals,
authorizations and permits described in Schedule 2.5, and (iv)
where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company or, after the Closing, the Delcorp or the Surviving
Corporation, or prevent consummation of the Merger or otherwise
prevent the parties hereto from performing their obligations under
this Agreement.
2.6
Compliance .
Except as disclosed in Schedule 2.6, during the ten year period
prior to the date of the Closing the Company has complied with and
is not in violation of any Legal Requirements with respect to the
conduct of its business, or the ownership or operation of its
business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not
reasonably likely to have a Material Adverse Effect on the Company.
The businesses and activities of the Company have not been and are
not being conducted in violation of any Legal Requirements. The
Company is not in default or violation of any term, condition or
provision of any applicable Charter Documents. Except as set forth
in Schedule 2.6, during the ten year period prior to the date
of the Closing no written notice of non-compliance with any Legal
Requirements has been received by the Company (and the Company has
no knowledge of any such notice delivered to any other Person). The
Company is not in violation of any term of any Company Contract,
except for failures to comply or violations which, individually or
in the aggregate, have not had and are not reasonably likely to
have a Material Adverse Effect on the Company.
2.7
Financial Statements .
(a) The
Company has provided to Delcorp a correct and complete copy of
the audited consolidated financial statements (including any
related notes thereto) of the Company for the fiscal years
ended December 31, 2006, December 31, 2005 and
December 31, 2004 (the “
Audited Financial Statements ”).
The Audited Financial Statements were prepared in accordance with
generally accepted accounting principles of the United States
(“
U.S. GAAP ”)
applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto), and each fairly
presents in all material respects the financial position of the
Company at the respective dates thereof and the results of its
operations and cash flows for the periods indicated.
(b) The
Company has provided to Delcorp a correct and complete copy of
the unaudited consolidated financial statements of the Company
for the nine month period ended September 30, 2007
(including any notes related thereto) (the “
Unaudited Financial Statements ”).
The Unaudited Financial Statements comply as to form in all
material respects, and were prepared in accordance with U.S. GAAP
applied on a consistent basis throughout the periods involved and
in a manner consistent with the preparation of the Audited
Financial Statements, and fairly present in all material respects
the financial position of the Company at the date thereof and the
results of its operations and cash flows for the period indicated,
except that such statements are subject to normal audit adjustments
that are not expected to have a Material Adverse Effect on the
Company.
(c) The
books of account, minute books, stock certificate books and
stock transfer ledgers and other similar books and records of
the Company have been maintained in accordance with good
business practice, are complete and correct in all material
respects and there have been no material transactions that are
required to be set forth therein and which have not been so
set forth.
(d) Except
as otherwise noted in the Audited Financial Statements or the
Unaudited Financial Statements, the accounts and notes
receivable of the Company reflected on the balance sheets
included in the Audited Financial Statements and the Unaudited
Financial Statements: (i) arose from bona fide sales
transactions in the ordinary course of business and are
payable on ordinary trade terms, (ii) are legal, valid and
binding obligations of the respective debtors enforceable in
accordance with their terms, except as such may be limited by
bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors’ rights generally, and by general
equitable principles, (iii) are not subject to any valid
set-off or counterclaim except to the extent set forth in such
balance sheet contained therein other than possible back
charges which to the Company’s knowledge do not exist at
this time, which back charges, to the Company’s
knowledge, either individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect upon
the Company and its Subsidiaries taken as a whole, (iv) are
collectible in the ordinary course of business consistent with
past practice in the aggregate recorded amounts thereof, net
of any applicable reserve reflected in such balance sheet
referenced above, and (v) are not the subject of any actions
or proceedings brought by or on behalf of the Company. The
parties to this Agreement agree that the representations
contained in this
Section 2.7(d) are
not intended to imply or represent that any job or project of the
Company or its Subsidiaries under contract as of the Closing Date
will have any level of profitability or may not result in a
loss.
2.8
No Undisclosed Liabilities .
Except as set forth in Schedule 2.8 hereto, the Company and
its Subsidiaries have no liabilities (absolute, accrued, contingent
or otherwise) of a nature required to be disclosed on a balance
sheet or in the related notes to financial statements that are,
individually or in the aggregate, material to the business, results
of operations or financial condition of the Company and its
Subsidiaries, except: (i) liabilities provided for in or otherwise
disclosed in the interim balance sheet included in the Unaudited
Financial Statements or in the notes to the Audited Financial
Statements, and (ii) such liabilities arising in the ordinary
course of the Company’s business since December 31, 2006,
none of which, individually or in the aggregate, would have a
Material Adverse Effect on the Company.
2.9
Absence of Certain Changes or Events
.
Except as set forth in Schedule 2.9 hereto or in the Unaudited
Financial Statements, since December 31, 2006, there has not been:
(i) any Material Adverse Effect on the Company and its
Subsidiaries, (ii) any declaration, setting aside or payment of any
dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of the Company’s stock, or any
purchase, redemption or other acquisition by the Company of any of
the Company’s capital stock or any other securities of the
Company or any options, warrants, calls or rights to acquire any
such shares or other securities, (iii) any split, combination or
reclassification of any of the Company’s capital stock, (iv)
any granting by the Company or its Subsidiaries of any increase in
compensation or fringe benefits, except for normal increases of
cash compensation in the ordinary course of business consistent
with past practice, or any payment by the Company or any of its
Subsidiaries of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting
by the Company or any of its Subsidiaries of any increase in
severance or termination pay or any entry by the Company or any of
its Subsidiaries into any currently effective employment,
severance, termination or indemnification agreement or any
agreement the benefits of which are contingent or the terms of
which are materially altered upon the occurrence of a transaction
involving the Company of the nature contemplated hereby, (v) entry
by the Company or any of its Subsidiaries into any licensing or
other agreement with regard to the acquisition or disposition of
any Intellectual Property (as defined in
Section 2.18 hereof)
other than licenses in the ordinary course of business consistent
with past practice or any amendment or consent with respect to any
licensing agreement filed or required to be filed by the Company or
any of its Subsidiaries with respect to any Governmental Entity,
(vi) any material change by the Company or any of its Subsidiaries
in its accounting methods, principles or practices, (vii) any
change in the auditors of the Company, (viii) any issuance of
capital stock of the Company, (ix) any revaluation by the Company
of any of its assets, including, without limitation, writing down
the value of capitalized inventory or writing off notes or accounts
receivable or any sale of assets of the Company other than in the
ordinary course of business, or (x) any agreement, whether written
or oral, to do any of the foregoing.
2.10
Litigation .
Except as disclosed in Schedule 2.10 hereto, there are no
claims, suits, actions or proceedings pending or, to the knowledge
of the Company, threatened against the Company or any of its
Subsidiaries before any court, governmental department, commission,
agency, instrumentality or authority, or any arbitrator that
involve (a) a worker compensation claim in excess of $100,000 or
(a) any other claim in excess of $250,000.
2.11
Employee Benefit Plans .
(a) Schedule 2.11(a)
lists all employee compensation, incentive, fringe or benefit
plans, programs, policies, commitments or other arrangements
(whether or not set forth in a written document) covering any
active or former employee, director or consultant of the
Company or any of its Subsidiaries, or any trade or business
(whether or not incorporated) which is under common control
with the Company or any of its Subsidiaries, with respect to
which the Company has liability (individually, a
“
Plan, ”
and, collectively, the “
Plans ”).
All Plans have been maintained and administered in all material
respects in compliance with their respective terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Plans, and all liabilities
with respect to the Plans have been properly reflected in the
financial statements and records of the Company or any of its
Subsidiaries. No suit, action or other litigation (excluding claims
for benefits incurred in the ordinary course of Plan activities)
has been brought, or, to the knowledge of the Company, is
threatened, against or with respect to any Plan. There are no
audits, inquiries or proceedings pending or, to the knowledge of
the Company, threatened by any governmental agency with respect to
any Plan. All contributions, reserves or premium payments required
to be made or accrued as of the date hereof to the Plans have been
timely made or accrued. The Company or any of its Subsidiaries do
not have any plan or commitment to establish any new Plan, to
modify any Plan (except to the extent required by law or to conform
any such Plan to the requirements of any applicable law, in each
case as previously disclosed to Delcorp in writing, or as required
by this Agreement), or to enter into any new Plan. Except as
disclosed in Schedule 2.11(a), each Plan can be amended,
terminated or otherwise discontinued after the Closing in
accordance with its terms, without liability to Delcorp, the
Company or any of its Subsidiaries (other than ordinary
administration expenses and expenses for benefits accrued but not
yet paid).
(b) Except
as disclosed in Schedule 2.11(b) hereto, neither the
execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation,
golden parachute, bonus or otherwise) becoming due to any
stockholder, director or employee of the Company and its
Subsidiaries under any Plan or otherwise, (ii) materially
increase any benefits otherwise payable under any Plan, or
(iii) result in the acceleration of the time of payment or
vesting of any such benefits.
2.12
Labor Matters .
(a) Except
as set forth on Schedule 2.12, the Company and its
Subsidiaries are not a party to any collective bargaining
agreement or other labor union contract applicable to persons
employed by the Company and its Subsidiaries nor, to the
Company’s knowledge, are there any activities or
proceedings of any labor union to organize any such employees.
There are no pending grievance or similar proceedings
involving the Company and its Subsidiaries and any of its
employees subject to a collective bargaining agreement or
other labor union contract and there are no continuing
obligations of the Company and its Subsidiaries pursuant to
the resolution of any such proceeding that is no longer
pending.
(b) Except
as provided for in the collective bargaining agreements and
labor union contracts set forth on Schedule 2.12, each
employee and consultant of the Company and its Subsidiaries is
terminable “at will” subject to applicable notice
periods as set forth by law or in the employment agreement,
but in any event not more than ninety (90) days, and there are
no agreements or understandings between the Company and its
Subsidiaries and any of their employees or consultants that
their employment or services will be for any particular
period. The Company has no knowledge that any of its officers
or key employees intends to terminate his or her employment
with the Company or any of its Subsidiaries. The Company and
any of it Subsidiaries are in compliance in all material
respects and, to the Company’s knowledge, each of the
Company’s and its Subsidiaries’ employees and
consultants is in compliance in all material respects, with
the terms of the respective employment and consulting
agreements between the Company or its Subsidiaries and such
individuals. Except as otherwise disclosed in
Schedule 2.12, there are not, and there have not been,
any oral or informal arrangements, commitments or promises
between the Company or its Subsidiaries and any employees or
consultants of the Company or its Subsidiaries that have not
been documented as part of the formal written agreements
between any such individuals and the Company or its
Subsidiaries that have been made available to
Delcorp.
(c) The
Company and its Subsidiaries are in compliance in all material
respects with all Legal Requirements applicable to its
employees, respecting employment, employment practices, terms
and conditions of employment and wages and hours and is not
liable for any arrears of wages or penalties with respect
thereto. The Company’s and its Subsidiaries’
obligations to provide statutory severance pay to their
employees are fully funded or accrued on the Unaudited
Financial Statements and the Company has no knowledge of any
circumstance that could give rise to any valid claim by a
current or former employee for compensation on termination of
employment (beyond the statutory severance pay to which
employees are entitled). All amounts that the Company is
legally or contractually required either (x) to deduct from
its employees’ salaries or to transfer to such
employees’ pension or provident, life insurance,
incapacity insurance, continuing education fund or other
similar funds or (y) to withhold from its employees’
salaries and benefits and to pay to any Governmental Entity as
required by applicable Legal Requirements have, in each case,
been duly deducted, transferred, withheld and paid, and the
Company and its Subsidiaries do not have any outstanding
obligation to make any such deduction, transfer, withholding
or payment. There are no pending, or to the Company’s
knowledge, threatened or reasonably anticipated claims or
actions against the Company and its Subsidiaries by any
employee in connection with such employee’s employment
or termination of employment by the Company or any of its
Subsidiaries.
(d) No
employee or former employee of the Company and its
Subsidiaries is owed any wages, benefits or other compensation
for past services (other than wages, benefits and compensation
accrued in the ordinary course of business during the current
pay period and any accrued benefits for services, which by
their terms or under applicable law, are payable in the
future, such as accrued vacation, recreation leave and
severance pay).
2.13
Restrictions on Business Activities
.
Except as disclosed in Schedule 2.13 hereto, there is no
agreement, commitment, judgment, injunction, order or decree
binding upon the Company or its Subsidiaries or their assets or to
which the Company or its Subsidiaries is a party which has or could
reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or its
Subsidiaries, any acquisition of property by the Company or its
Subsidiaries or the conduct of business by the Company or its
Subsidiaries as currently conducted other than such effects,
individually or in the aggregate, which have not had and could not
reasonably be expected to have a Material Adverse Effect on the
Company or its Subsidiaries.
2.14
Title to Property .
(a) All
real property owned by the Company and its Subsidiaries
(including improvements and fixtures thereon, easements and
rights of way) is shown or reflected on the balance sheet of
the Company included in the Unaudited Financial Statements and
is listed on Schedule 2.14(a) hereto. The Company and its
Subsidiaries have good, valid and marketable fee simple title
to the real property respectively owned by each such entity,
and except as set forth in the Audited Financial Statements or
on Schedule 2.14(a) hereto, all of such real property is
held free and clear of (i) all leases, licenses and other
rights to occupy or use such real property and (ii) all Liens,
rights of way, easements, restrictions, exceptions, variances,
reservations, covenants or other title defects or limitations
of any kind, other than liens for taxes not yet due and
payable and such liens or other imperfections of title, if
any, as do not materially detract from the value of or
materially interfere with the present use of the property
affected thereby. Schedule 2.14(a) hereto also contains a
list of all options or other contracts under which the Company
and its Subsidiaries have a right to acquire or the obligation
to sell any interest in real property.
(b) Except
as otherwise disclosed on Schedule 2.14(b), all leases of
real property held by the Company and its Subsidiaries, and
all personal property and other property and assets of the
Company and its Subsidiaries owned, used or held for use in
connection with the business of the Company and its
Subsidiaries (the “
Personal Property ”)
are shown or reflected on the balance sheet included in the Audited
Financial Statements or the Unaudited Financial Statements, to the
extent required by U.S. GAAP, as of the dates of such Audited
Financial Statements and Unaudited Financial Statements, other than
those entered into or acquired on or after the date of the
Unaudited Financial Statements in the ordinary course of business.
Schedule 2.14(b) hereto contains a list of all leases of real
property and Personal Property held by the Company and its
Subsidiaries where the annual lease payments are greater than
$100,000 (other than leases of vehicles, office equipment, or
operating equipment made in the ordinary course of business). The
Company and its Subsidiaries have good and marketable title to the
Personal Property owned respectively by each such entity, and all
such Personal Property is in each case held free and clear of all
Liens, except for Liens disclosed in the Audited Financial
Statements or in Schedule 2.14(b) hereto, none of which Liens
is reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on such property or on the present or
contemplated use of such property in the businesses of the Company
or any of its Subsidiaries.
(c) All
leases pursuant to which the Company an/or its Subsidiaries
lease from others material real property or Personal Property
are valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any
existing material default or event of default of the Company
or its Subsidiaries or, to the Company’s knowledge, any
other party (or any event which with notice or lapse of time,
or both, would constitute a material default), except where
the lack of such validity and effectiveness or the existence
of such default or event of default could not reasonably be
expected to have a Material Adverse Effect on the Company or
its Subsidiaries.
(d) The
Company and its Subsidiaries are in possession of, or has
valid and effective rights to, all properties, assets and
rights (including Intellectual Property) required, in all
material respects for the effective conduct of its business,
as it is currently operated and expected to be operated in the
future, in the ordinary course.
2.15
Taxes .
(a)
Definition of Taxes .
For the purposes of this Agreement, “
Tax ”
or “
Taxes ”
refers to any and all federal, state, local and foreign taxes,
including, without limitation, gross receipts, income, profits,
sales, use, occupation, value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and
property taxes, assessments, governmental charges and duties
together with all interest, penalties and additions imposed with
respect to any such amounts and any obligations under any
agreements or arrangements with any other Person with respect to
any such amounts and including any liability of a predecessor
entity for any such amounts.
(b)
Tax Returns and Audits .
Except as set forth in Schedule 2.15 hereto:
(i) The
Company and its Subsidiaries have timely filed all federal,
state, local and foreign returns, estimates, information
statements and reports relating to Taxes (“
Returns ”)
required to be filed by the Company or its Subsidiaries with any
Tax authority prior to the date hereof, except such Returns that
are not material to the Company or its Subsidiaries. All such
Returns are true, correct and complete in all material respects.
The Company and its Subsidiaries have paid all Taxes shown to be
due and payable on such Returns.
(ii) All
Taxes that the Company and its Subsidiaries are required by
law to withhold or collect have been duly withheld or
collected, and have been timely paid over to the proper
governmental authorities to the extent due and
payable.
(iii) The
Company and its Subsidiaries have not been delinquent in the
payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against the
Company or its Subsidiaries, nor have the Company or its
Subsidiaries executed any unexpired waiver of any statute of
limitations on or extending the period for the assessment or
collection of any Tax. The Company and its Subsidiaries have
complied with all Legal Requirements with respect to payments
made to third parties and the withholding of any payment of
withheld Taxes and has timely withheld from employee wages and
other payments and timely paid over in full to the proper
taxing authorities all amounts required to be so withheld and
paid over for all periods.
(iv) To
the knowledge of the Company, no audit or other examination of
any Return of the Company and its Subsidiaries by any Tax
authority is presently in progress, nor has the Company or any
Subsidiary been notified of any request for such an audit or
other examination.
(v) No
adjustment relating to any Returns filed by the Company or any
Subsidiary has been proposed in writing, formally or
informally, by any Tax authority to the Company or any
Subsidiary or any representative thereof.
(vi) The
Company and its Subsidiaries have no liability for any unpaid
Taxes which have not been accrued for or reserved on the
Company’s balance sheets included in the Audited
Financial Statements or the Unaudited Financial Statements,
whether asserted or unasserted, contingent or otherwise, other
than any liability for unpaid Taxes that may have accrued
since the end of the most recent fiscal year in connection
with the operation of the business of the Company in the
ordinary course of business.
(vii) The
Company has not taken any action and does not know of any
fact, agreement, plan or other circumstance that is reasonably
likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of
the Code.
(viii) No
current shareholder of the Company is a foreign person subject
to withholding under Section 1445 of the Code and the
regulations promulgated thereunder and the Company will
provide certification to that effect from each shareholder to
Delcorp at the Closing.
2.16
Environmental Matters .
(a) Except
as disclosed in Schedule 2.16 hereto and except for such
matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect: (i) the
Company and/or its Subsidiaries have complied with all
applicable Environmental Laws (as defined below); (ii) the
properties currently operated or being constructed by the
Company or its Subsidiaries (including soils, groundwater,
surface water, air, buildings or other structures) are not
contaminated with any Hazardous Substances (as defined below)
as a result of the actions or omissions of the Company and its
Subsidiaries ; (iii) the properties formerly owned, operated
or constructed by the Company and/or its Subsidiaries were not
contaminated with Hazardous Substances by the Company and/or
its Subsidiaries during the period of ownership, operation or
construction by the Company or its Subsidiaries or, to the
Company’s knowledge, during any prior period; (iv) the
Company and/or its Subsidiaries are not subject to liability
for any Hazardous Substance disposal or contamination on any
third party or public property (whether above, on or below
ground or in the atmosphere or water); (vi) neither the
Company nor its Subsidiaries have received any notice, demand,
letter, claim or request for information alleging that the
Company and/or its Subsidiaries may be in violation of or
liable under any Environmental Law; and (vii) the Company
and/or its Subsidiaries are not subject to any orders,
decrees, injunctions or other arrangements with any
Governmental Entity or subject to any indemnity or other
agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous
Substances.
(b) As
used in this Agreement, the term “
Environmental Law ”
means any federal, state, local or foreign law, regulation, order,
decree, permit, authorization, opinion, common law or agency
requirement relating to: (A) the protection, investigation or
restoration of the environment, health and safety, or natural
resources; (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor,
wetlands, pollution, contamination or any injury or threat of
injury to persons or property.
(c) As
used in this Agreement, the term “
Hazardous Substance ”
means any substance that is: (i) listed, classified or regulated
pursuant to any Environmental Law; (ii) any petroleum product or
by-product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive materials or
radon; or (iii) any other substance which is the subject of
regulatory action by any Governmental Entity pursuant to any
Environmental Law.
(d) Schedule 2.16(d)
sets forth all environmental studies and investigations
completed within the last five (5) years or in process with
respect to the Company and/or its subsidiaries or their
respective properties, assets or operations, including to the
knowledge of the Company all phase reports. All such written
reports and material documentation relating to any such study
or investigation have been provided by the Company to
Delcorp.
2.17
Brokers; Third Party Expenses .
Except as set forth in Schedule 2.17 hereto, the Company has
not incurred, nor will it incur, directly or indirectly, any
liability for brokerage, finders’ fees, agent’s
commissions or any similar charges in connection with this
Agreement or any transactions contemplated hereby. Except pursuant
to
Section 1.5 ,
and as disclosed in Schedule 2.17 hereto, no shares of common
stock, options, warrants or other securities of either Company or
Delcorp are payable to any third party by Company as a result of
this Merger.
2.18
Intellectual Property .
(a) Schedule 2.18
hereto contains a description of all material Intellectual
Property of the Company and its Subsidiaries. For the purposes
of this Agreement, the following terms have the following
definitions:
(i) “
Intellectual Property ”
shall mean any or all of the following and all worldwide common law
and statutory rights in, arising out of, or associated therewith:
(i) patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and
continuations-in-part thereof (“
Patents ”);
(ii) inventions (whether patentable or not), invention disclosures,
improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all
documentation relating to any of the foregoing; (iii) copyrights,
copyrights registrations and applications therefor, and all other
rights corresponding thereto throughout the world (“
Copyrights ”);
(iv) software and software programs; (v) domain names, uniform
resource locators and other names and locators associated with the
Internet (vi) industrial designs and any registrations and
applications therefor; (vii) trade names, logos, common law
trademarks and service marks, trademark and service mark
registrations and applications therefor (collectively,
“
Trademarks ”);
(viii) all databases and data collections and all rights therein;
(ix) all moral and economic rights of authors and inventors,
however denominated, and (x) any similar or equivalent rights to
any of the foregoing (as applicable).
(ii) “
Company Intellectual Property ”
shall mean any Intellectual Property that is owned by, or
exclusively licensed to, the Company or any of its Subsidiaries,
including software and software programs developed by or
exclusively licensed to the Company or any of its Subsidiaries
(specifically excluding any off the shelf or shrink-wrap
software).
(iii) “
Registered Intellectual Property ”
means all Intellectual Property that is the subject of an
application, certificate, filing, registration or other document
issued, filed with, or recorded by any government or other legal
authority.
(iv) “
Company Registered Intellectual Property ”
means all of the Registered Intellectual Property owned by, or
filed in the name of, the Company or any of its
Subsidiaries
(v) “
Company Products ”
means all current versions of products or service offerings of the
Company or any of its Subsidiaries.
(b) The
Company and its Subsidiaries own or have enforceable rights to
use all Intellectual Property required for the conduct of
their respective business as presently conducted or as
presently contemplated to be conducted. Except as disclosed in
Schedule 2.18 hereto, no Company Intellectual Property or
Company Product is subject to any material proceeding or
outstanding decree, order, judgment, contract, license,
agreement or stipulation restricting in any manner the use,
transfer or licensing thereof by the Company or any of its
Subsidiaries, or which may affect the validity, use or
enforceability of such Company Intellectual Property or
Company Product, which in any such case could reasonably be
expected to have a Material Adverse Effect on the Company or
any of its Subsidiaries.
(c) Except
as disclosed in Schedule 2.18 hereto, the Company and its
Subsidiaries owns and has good and exclusive title to each
material item of Company Intellectual Property owned by it
free and clear of any Liens (excluding non-exclusive licenses
and related restrictions granted by it in the ordinary course
of business); and the Company and its Subsidiaries are the
exclusive owner of all material registered Trademarks and
Copyrights used in connection with the operation or conduct of
the business of the Company and its Subsidiaries including the
sale of any products or the provision of any services by the
Company and its Subsidiaries.
(d) The
operation of the business of the Company and its Subsidiaries
as such business currently is conducted, including the
Company’s and its Subsidiaries’ use of any
product, device or process, has not and does not infringe or
misappropriate the Intellectual Property of any third party or
constitute unfair competition or trade practices under the
laws of any jurisdiction and the Company and its Subsidiaries
have not received any claims or threats from third parties
alleging any such infringement, misappropriation or unfair
competition or trade practices.
2.19
Agreements, Contracts and Commitments
.
(a) Schedule 2.19
hereto sets forth a complete and accurate list of all Material
Company Contracts (as hereinafter defined), specifying the
parties thereto. For purposes of this Agreement, (i) the term
“
Company Contracts ”
shall mean all contracts, agreements, leases, mortgages,
indentures, notes, bonds, licenses, permits, franchises, purchase
orders, sales orders, and other understandings, commitments and
obligations (including, without limitation, outstanding offers and
proposals) of any kind, whether written or oral, to which the
Company or any of its Subsidiaries is a party or by or to which any
of the properties or assets of the Company or any of its
Subsidiaries may be bound, subject or affected (including without
limitation notes or other instruments payable to the Company or any
of its Subsidiaries) and (ii) the term “
Material Company Contracts ”
shall mean (x) each Company Contract (A) providing for payments
(present or future) to the Company or any of its Subsidiaries in
excess of $5,000,000 in the aggregate or (B) under or in respect of
which the Company or any of its Subsidiaries presently have any
liability or obligation of any nature whatsoever (absolute,
contingent or otherwise) in excess of $5,000,000, (y) each Company
Contract that otherwise is or may be material to the businesses,
operations, assets, condition (financial or otherwise) or prospects
of the Company or any of its Subsidiaries, and (z) the limitations
of subclause (x) and subclause (y) notwithstanding, each of the
following Company Contracts:
(i) any
mortgage, indenture, note, installment obligation or other
instrument, agreement or arrangement for or relating to any
borrowing of money by or from the Company or any of its
Subsidiaries and by or to any officer, director, stockholder
or holder of derivative securities of the Company or any of
its Subsidiaries (“
Insider ”);
(ii) any
mortgage, indenture, note, installment obligation or other
instrument, agreement or arrangement for or relating to any
borrowing of money from an Insider by the
Company;
(iii) any
guaranty, direct or indirect, by the Company, a Subsidiary or
any Insider of the Company of any obligation for borrowings,
or otherwise, excluding endorsements made for collection in
the ordinary course of business;
(iv) any
Company Contract of employment or management;
(v) any
Company Contract made other than in the ordinary course of
business or (x) providing for the grant of any preferential
rights to purchase or lease any asset of the Company or any of
its Subsidiaries or (y) providing for any right (exclusive or
non-exclusive) to sell or distribute, or otherwise relating to
the sale or distribution of, any product or service of the
Company or any of its Subsidiaries;
(vi) any
obligation to register any shares of the capital stock or
other securities of the Company or any of its Subsidiaries
with any Governmental Entity;
(vii) any
obligation to make payments, contingent or otherwise, arising
out of the prior acquisition of the business, assets or stock
of other Persons;
(viii) any
collective bargaining agreement with any labor
union;
(ix) any
lease or similar arrangement for the use by the Company or any
of its Subsidiaries of real property or Personal Property
where the annual lease payments are greater than $100,000
(other than any lease of vehicles, office equipment or
operating equipment made in the ordinary course of
business);
(x) any
Company Contract granting or purporting to grant, or otherwise
in any way relating to, any mineral rights or any other
interest (including, without limitation, a leasehold interest)
in real property;
(xi) any
Company Contract to which any Insider of the Company or any of
its Subsidiaries, or any entity owned or controlled by an
Insider, is a party; and
(xii) any
offer or proposal which, if accepted, would constitute any of
the foregoing.
(b) Each
Material Company Contract was entered into at arms’
length and in the ordinary course, is in full force and effect
and, to the Company’s knowledge, is valid and binding
upon and enforceable against each of the parties thereto,
except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors’ rights generally or by
principles governing the availability of equitable remedies.
To the Company’s knowledge, no other party to a Material
Company Contract is the subject of a bankruptcy or insolvency
proceeding. True, correct and complete copies of all Material
Company Contracts and all offers and proposals that, if
accepted, would constitute Material Company Contracts (or
written summaries in the case of oral Material Company
Contracts or offers or proposals) have been made available to
Delcorp or Delcorp’s counsel.
(c) Except
as set forth in Schedule 2.19, neither the Company nor,
to the best of the Company’s knowledge, any other party
thereto is in breach of or in default under, and no event has
occurred which with notice or lapse of time or both would
become a breach of or default under, any Company Contract, and
no party to any Company Contract has given any written notice
of any claim of any such breach, default or event, which,
individually or in the aggregate, are reasonably likely to
have a Material Adverse Effect on the Company and its
Subsidiaries. Each Material Company Contract that has not
expired by its terms is in full force and effect.
2.20
Insurance .
Schedule 2.20 sets forth the Company’s and its
Subsidiaries insurance policies and fidelity and surety bonds
covering the assets, business, equipment, properties, operations,
employees, officers and directors (collectively, the “
Insurance Policies ”).
The insurances provided by such Insurance Policies are adequate in
amount and scope for the Company’s and its
Subsidiaries’ business and operations, including any
insurance required to be maintained by Company
Contracts.
2.21
Governmental Actions/Filings .
(a) The
Company and its Subsidiaries have been granted and hold, and
have made, all Governmental Actions/Filings (as defined below)
(including, without limitation, Governmental Actions/Filings
required for emission or discharge of effluents and pollutants
into the air and the water) necessary to the conduct by the
Company and its Subsidiaries of their business (as presently
conducted and as presently proposed to be conducted) or used
or held for use by the Company and its Subsidiaries except for
any thereof that if not granted, held or made, would not have,
individually or in the aggregate, a Material Adverse Effect
upon the Company and its Subsidiaries taken as a whole. Each
such Governmental Action/Filing is in full force and effect
and will be renewed in the ordinary course of the
Company’s business and the Company and its Subsidiaries
are in substantial compliance with all of their obligations
with respect thereto. No event has occurred and is continuing
which requires or permits, or after notice or lapse of time or
both would require or permit, and consummation of the
transactions contemplated by this Agreement or any ancillary
documents will not require or permit (with or without notice
or lapse of time, or both), any modification or termination of
any such Governmental Actions/Filings except such events
which, either individually or in the aggregate, would not have
a Material Adverse Effect upon the Company or any of its
Subsidiaries taken as a whole. No Governmental Action/Filing
is necessary to be obtained, secured or made by the Company or
any of its Subsidiaries to enable any of them to continue to
conduct its business and operations and use its properties
after the Closing in a manner that is consistent with current
practice except for any of such that, if not obtained, secured
or made, would not, either individually or in the aggregate,
have a Material Adverse Effect upon the Company or any of its
Subsidiaries taken as a whole.
(b) Except
as set forth in Schedule 2.21(b), no contractors’
licenses are necessary to be obtained, secured or made by the
Company or any of its Subsidiaries to enable any of them to
continue to conduct its businesses and operations and use its
properties after the Closing in a manner which is consistent
with current practice. All of the contractors’ licenses
listed on Schedule 2.21(b) have been obtained, secured or made
and are in full force and effect.
(c) For
purposes of this Agreement, the term “
Governmental Action/Filing ”
shall mean any franchise, license, certificate of compliance,
authorization, consent, order, permit, approval, consent or other
action of, or any filing, registration or qualification with, any
federal, state, municipal, foreign or other governmental,
administrative or judicial body, agency or authority.
2.22
Interested Party Transactions .
Except as set forth in the Schedule 2.22 hereto, no employee,
officer, director or stockholder of the Company or any of its
Subsidiaries or a member of his or her immediate family is indebted
to the Company or any of its Subsidiaries, nor is the Company or
any of its Subsidiaries indebted (or committed to make loans or
extend or guarantee credit) to any of such Persons, other than (i)
for payment of salary for services rendered, (ii) reimbursement for
reasonable expenses incurred on behalf of the Company or any of its
Subsidiaries, and (iii) for other employee benefits made generally
available to all employees. Other than those Company shareholders
who are also shareholders in Stockdale Investment Group, Inc., and
except as set forth in Schedule 2.22, to the Company’s
knowledge, none of such individuals has any direct or indirect
ownership interest in any Person with whom the Company or any of
its Subsidiaries is affiliated or with whom the Company or any of
its Subsidiaries has a contractual relationship, or in any Person
that competes with the Company or any of its Subsidiaries, except
that each employee, stockholder, officer or director of the Company
or any of its Subsidiaries and members of their respective
immediate families may own less than 5% of the outstanding stock in
publicly traded companies that may compete with the Company or any
of its Subsidiaries. Except as set forth in Schedule 2.22, to
the knowledge of the Company, no officer, director or Signing
Shareholder or any member of their immediate families is, directly
or indirectly, interested in any Material Company Contract with the
Company or any of its Subsidiaries (other than such contracts as
relate to any such Person’s ownership of capital stock or
other securities of the Company or such Person’s employment
with the Company or any of its Subsidiaries).
2.23
Board Approval .
The board of directors of the Company (including any required
committee or subgroup thereof) has, as of the date of this
Agreement, duly approved, subject to the approval of the
Company’s shareholders, this Agreement and the transactions
contemplated hereby.
2.24
Signing Shareholder Approval .
The shares of Company Common Stock owned by the Signing
Shareholders and to which they have been granted the right to vote
with respect to the Merger by other shareholders of the Company
constitute, in the aggregate, the requisite amount of shares
necessary for the adoption of this Agreement and the approval of
the Merger by the shareholders of the Company in accordance with
Applicable Nevada Law.
2.25
No Illegal or Improper Transactions
.
Since January 1, 2002, neither the Company nor any of its
Subsidiaries nor any Signing Shareholder or any officer, director,
employee, agent or Affiliate of the Company or its Subsidiaries on
its behalf has offered, paid or agreed to pay to any person or
entity (including any governmental official) or solicited, received
or agreed to receive from any such person or entity, directly or
indirectly, any money or anything of value for the purpose or with
the intent of (a) obtaining or maintaining business for the Company
or any of its Subsidiaries, (b) facilitating the purchase or sale
of any product or service, or (c) avoiding the imposition of any
fine or penalty, in any manner which is in violation of any
applicable ordinance, regulation or law, the effect of which,
individually or in the aggregate, would reasonably be expected to
be materially adverse to the business, assets, prospects or
financial condition of the Company or any of its Subsidiaries,
taken as a whole. To the Company’s knowledge, no employee of
the Company or any of its Subsidiaries has provided or is providing
information to any law enforcement agency regarding the commission
or possible commission of any crime or the violation or possible
violation of any applicable law. Neither the Company nor any of its
Subsidiaries nor any officer, employee, contractor, subcontractor
or agent of the Company or any of its Subsidiaries has discharged,
demoted, suspended, threatened, harassed or in any other manner
discriminated against an employee of the Company or any of its
Subsidiaries in the terms and conditions of employment because of
any act of such employee described in 18 U.S.C. Sec.
1514A(a).
2.26
Representations and Warranties Complete
.
The representations and warranties of the Company and the Signing
Shareholders included in this Agreement and any list, statement,
document or information set forth in, or attached to, any
Schedule provided pursuant to this Agreement or delivered
hereunder, are true and complete in all material respects and do
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading, under the
circumstance under which they were made.
2.27
Survival of Representations and Warranties
.
The representations and warranties of the Company and the Signing
Shareholders set forth in this Agreement shall survive the Closing
as set forth in
Section 7.3(a) .
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
DELCORP
Subject
to the exceptions set forth in Schedule 3 attached hereto
(the “
Delcorp Schedule ”),
Delcorp represents and warrants to, and covenants with, the Company
and the Signing Shareholders, as follows:
3.1
Organization and Qualification .
(a) Delcorp
is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to own, lease and
operate its assets and properties and to carry on its business
as it is now being or currently planned by Delcorp to be
conducted. Delcorp is in possession of all Approvals necessary
to own, lease and operate the properties it purports to own,
operate or lease and to carry on its business as it is now
being or currently planned by Delcorp to be conducted, except
where the failure to have such Approvals could not,
individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Delcorp. Complete and
correct copies of the Charter Documents of Delcorp, as amended
and currently in effect, have been heretofore delivered to the
Company. Delcorp is not in violation of any of the provisions
of Delcorp’s Charter Documents.
(b) Delcorp
is duly qualified or licensed to do business as a foreign
corporation and is in good standing, in each jurisdiction
where the character of the properties owned, leased or
operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures
to be so duly qualified or licensed and in good standing that
could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on
Delcorp.
3.2
Subsidiaries and Other Interests
.
(a) Delcorp
has no Subsidiaries and does not own, directly or indirectly,
any ownership, equity, profits or voting interest in any
Person or have any agreement or commitment to purchase any
such interest, and Delcorp has not agreed and is not obligated
to make nor is bound by any written, oral or other agreement,
contract, subcontract, lease, binding un
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