Exhibit 2.1
AGREEMENT AND PLAN OF
MERGER
BY AND AMONG
LIBERTY ALLIANCE,
INC.,
A Delaware
Corporation,
SINOHUB ACQUISITION
CORP.,
a Delaware
Corporation
SINOHUB, INC.,
a Delaware
Corporation,
and
STEVEN L. WHITE, as the
PRINCIPAL STOCKHOLDER
DATED AS OF MAY 12,
2008
AGREEMENT AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER , dated as of May 12, 2008, is
entered into by and among Liberty Alliance, Inc., a Delaware
corporation (“ Parent ”), SinoHub Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of
Parent (“ Merger Sub ”), SinoHub, Inc., a
Delaware corporation (the “ Company ”), and
Steven L. White, the principal shareholder of Parent (the “
Principal Stockholder ”). Certain capitalized
terms used in this Agreement have the meanings assigned to them in
Article I. Parent, Merger Sub and the Company are referred to
collectively herein as the “ Parties .”
RECITALS
WHEREAS , the Board
of Directors of each of Parent and the Company have determined that
it is in the best interests of each corporation and their
respective stockholders to enter into a business combination
transaction whereby Parent shall acquire all of the outstanding
capital stock and equity interests of the Company by means of the
merger of Merger Sub with and into the Company (the “
Merger ”) on the terms and conditions set forth
herein.
WHEREAS , for Federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the “ Code ”); and that this Agreement
shall be, and hereby is, adopted as a “plan of
reorganization” for purposes of Section 368(a) of the Code;
and
WHEREAS , the
Parties desire to make certain representations, warranties,
covenants and agreements in connection with the Merger;
NOW, THEREFORE , in
consideration of the mutual representations, warranties, covenants
and agreements set forth herein, the Parties hereby agree as
follows:
ARTICLE I
Definitions
1.1
Definitions . For all purposes of this Agreement,
except as otherwise expressly provided or unless the context
clearly requires otherwise:
“
Company Common ” or “ Company Common
Stock ” shall mean the Company’s common stock,
$.001 par value per share.
“
Company Conversion Shares ” shall have the meaning set
forth in Section 5.1.
“
Company Option ” shall have the meaning set forth in
Section 5.3.
“
Company Preferred ” shall mean the Company’s
Series A Preferred, Series B Preferred and Series C Preferred.
“
Company Series A Preferred ” shall mean the
Company’s Series A Preferred Stock, $.001 par value per
share.
“
Company Series B Preferred ” shall mean the
Company’s Series B Preferred Stock, $.001 par value per
share.
“
Company Series C Preferred ” shall mean the
Company’s Series C Preferred Stock, $.001 par value per
share.
“
Company Shares ” shall mean the Company Common and the
Company Preferred.
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“ Company Stock Plan ” shall mean the
Company’s 2000 Stock Plan.
“
Common Exchange Ratio ” shall have the meaning set
forth in Section 5.1(a).
“
Conversion Exchange Ratio ” shall have the meaning set
forth in Section 5.1(b).
“
Documents ” shall mean the Parent Disclosure Schedule,
the Company Disclosure Schedule and any documents, agreements or
certificates contemplated by the Transactions.
“
Encumbrances ” shall mean any and all liens, charges,
security interests, options, restrictions on use, tenancies or
rights of possession of third parties, claims, mortgages, pledges,
proxies, voting trusts or agreements, obligations, understandings
or arrangements or other restrictions on title or transfer of any
nature whatsoever.
“ ERISA ” means the Employment Retirement Income
Security Act of 1974, as amended.
“
Governmental Authorization ” shall mean any approval,
consent, license, permit, waiver or other authorization issued,
granted, given, or otherwise made available by or under the
authority of any Governmental Entity or pursuant to applicable
Legal Requirements.
“
Governmental Entity ” shall mean (i) a court, arbitral
tribunal, administrative agency or commission, (ii) a nation,
state, county, city town, village, district or other jurisdiction
of any nature, (iii) any federal, state, local, municipal, foreign
or other government, or (iv) any other governmental or other
regulatory authority or agency.
“ Knowledge ” with respect to a Party hereto
shall mean the actual knowledge of any of the executive officers or
directors of such Party.
“
Liabilities ” shall mean liabilities and obligations,
secured or unsecured, whether absolute, accrued, contingent, fixed
or otherwise, whether known or unknown and whether or not due,
including liabilities for Taxes and all off-balance sheet
liabilities and obligations.
“
Material Adverse Effect ” shall mean any adverse
change in the properties, financial condition, business or results
of operations of Parent on the one hand or the Company on the other
hand, which is material to Parent on the one hand or the Company on
the other hand.
“
Organizational Documents ” shall mean (a) the articles
or certificate of incorporation and the bylaws of a corporation;
(b) the partnership agreement and any statement of partnership of a
general partnership; (c) the limited partnership agreement and the
certificate of limited partnership of a limited partnership; (d)
the articles of organization, operating agreement and limited
liability company agreement of a limited liability company; (e) any
charter or similar document adopted or filed in connection with the
creation, formation, or organization of a Person; and (f) any
amendment to any of the foregoing.
“
Parent Common ” or “ Parent Common Stock
” shall mean shares of Parent’s Common Stock, $.001 par
value per share.
“
Permitted Encumbrances ” shall mean (a) mortgages,
security interests or other liens shown on the Company Balance
Sheet as securing specified liabilities or obligations, with
respect to which no default (or event that, with notice or lapse of
time or both, would constitute a default) exists, (b) with respect
to real property, (i) current taxes, assessments, easements, rights
of way, covenants, conditions, restrictions and similar matters
that appear of record, none of which, individually or in the
aggregate, materially detracts from the value or impairs the use of
the property subject thereto, or materially impairs the operations
of the Company or any Subsidiary as presently conducted or as
proposed to be conducted, and (ii) zoning laws, ordinances,
governmental regulations or public utilities easements that do not,
individually or in the aggregate, materially impair or interfere
with the present or anticipated use of the property subject
thereto, and (c) any other Encumbrance that does not have a
Material Adverse Effect.
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“ Person ” shall mean a natural person,
partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Entity or other entity or
organization.
“
Requisite Stockholder Approval ” shall mean (i) with
respect to matters to be approved by the stockholders of the
Company, the approval of the matters set forth on Exhibit A by the
holders of a majority of the outstanding shares of Company Common
and Company Preferred Shares, voting together as a class on an
as-converted basis, and the holders of a majority of the
outstanding Company Preferred Shares voting as a separate
class.
“
Rule ” shall mean any federal, state, local,
municipal, foreign, international, multinational, or other
administrative order, constitution, law, ordinance, principle of
common law, regulation, statute, or treaty.
“
Tax” or “Taxes ” refers to any and all
Federal, state, local and foreign, taxes, assessments and other
governmental charges, duties, impositions and liabilities relating
to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, together with all interest,
penalties and additions imposed with respect to such amounts and
including any liability for taxes of a predecessor entity.
“
Tax Authority ” shall mean the Internal Revenue
Service and any other national, regional, state, municipal, foreign
or other governmental or regulatory authority or administrative
body responsible for the administration of any Taxes.
“
Tax Return ” shall mean all Federal, state, local and
foreign tax returns, declarations, statements, reports, schedules,
forms and information returns or other documents and any amendments
thereto or required to be filed with a Tax Authority.
“
Transactions ” shall mean all the transactions
provided for or contemplated by this Agreement and the other
Documents.
ARTICLE II
The
Merger; Effective Time; Closing
2.1.
The Merger . Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the applicable
provisions of the Delaware General Corporation Law (the “
DGCL ”), at the Effective Time (as defined in Section
2.2), Merger Sub shall be merged with and into the Company, the
separate corporate existence of Merger Sub shall thereupon cease
and the Company shall be the successor or surviving corporation.
The Company, as the surviving corporation after the consummation of
the Merger, is sometimes hereinafter referred to as the “
Surviving Corporation .”
2.2.
Effective Time . Subject to the provisions of this
Agreement, the Parties shall cause the Merger to be consummated by
filing a Certificate of Merger of Merger Sub and the Company (the
“ Certificate of Merger ”) with the Secretary of
State of the State of Delaware in such form as required by, and
executed in accordance with, the relevant provisions of the DGCL,
as soon as practicable on or before the Closing Date (as defined in
Section 2.3). The Merger shall become effective upon such filing or
at such time thereafter as is provided in the Certificate of Merger
(the “ Effective Time ”).
2.3.
Closing . Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned
pursuant to Article IX, the closing of the Merger (the “
Closing ”) shall take place at 10:00 a.m., local time,
at the offices of counsel for the Company, on the second business
day after the receipt of Requisite Stockholder Approval, provided
that on or prior thereto, all of the conditions to the obligations
of the Parties to consummate the Merger as set forth in Article
VIII have been satisfied or waived, or such other date, time or
place as is agreed to in writing by the Parties (the “
Closing Date ”).
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2.4.
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. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, the
separate existence of Merger Sub shall cease and the Surviving
Corporation shall succeed, without other transfer, to all the
rights and property of Merger Sub and shall be subject to all the
debts and liabilities of Merger Sub in the same manner as if the
Surviving Corporation had itself incurred them.
ARTICLE III
Certificate of Incorporation and Bylaws of the Surviving
Corporation
3.1.
Certificate of Incorporation; Name . The Certificate of
Incorporation of the Company, as in effect at the Effective Time,
shall continue in full force and effect, and shall be the
Certificate of Incorporation of the Surviving Corporation.
3.3.
Bylaws . The Bylaws of the Company, as in effect at the
Effective Time, shall continue in full force and effect, and shall
be the Bylaws of the Surviving Corporation.
ARTICLE IV
Directors and Officers of the Surviving Corporation
4.1.
Directors and Officers . The directors of the Company
immediately prior to the Effective Time shall be the directors of
the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving
Corporation, and the officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are
duly elected or appointed and qualified or until their earlier
death, resignation or removal.
ARTICLE V
Merger Consideration; Conversion or Cancellation of Shares in
the Merger
5.1.
Share Consideration for the Merger: Conversion or Cancellation
of Shares in the Merger . At the Effective Time, the manner of
converting or canceling shares of the Company shall be as
follows:
(a)
Except
as provided in Section 5.6, each share of Company Common issued and
outstanding immediately prior to the Effective Time, shall, by
virtue of the Merger and without any action on the part of the
holder thereof, be converted automatically into the right to
receive 3.718425 share(s) of Parent Common (the “ Common
Exchange Ratio ”). All shares of Company Common to
be converted into shares of Parent Common pursuant to this Section
5.1(a) shall, by virtue of the Merger and without any action on the
part of the holders thereof, cease to be outstanding, be canceled
and retired and cease to exist, and each holder of a certificate
representing any such shares of Company Common shall thereafter
cease to have any rights with respect to such shares of Company
Common, except the right to receive for each of his/her shares of
Company Common, upon the surrender of the certificate therefor in
accordance with Section 5.4, the number of shares of Parent Common
specified above.
(b)
In
accordance with the terms of Company Preferred as set forth in the
Company’s Certificate of Incorporation, the holders of the
Company Preferred shall have consented to the conversion of all of
the issued and outstanding shares of Company Preferred into shares
of Company Common at the then effective conversion ratio (the
“ Company Conversion Shares ”) and thereafter,
except as provided in Section 5.6, by virtue of the Merger and
without any action on the part of the holder thereof, each Company
Conversion Share, will be converted automatically into the right to
receive 3.718425 share(s) of Parent Common (the “
Conversion Exchange Ratio ”). All the Company
Conversion Shares to be converted into shares of Parent Common
pursuant to this Section 5.1(b) shall, by virtue of the Merger and
without any action on the part of the holders thereof, cease to be
outstanding, be canceled and retired and cease to exist, and each
holder of a certificate representing any such Company Conversion
Shares shall thereafter cease to have any rights with respect to
such Company Conversion Shares, except the right to receive for
each of his/her Company Conversion Shares, upon the surrender of
the certificate therefor in accordance with Section 5.4, the number
of shares of Parent Common specified above.
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5.2
No
Fractional Shares; Treasury Stock and Parent-Owned Company
Stock .
(a)
Notwithstanding any other provision of this Agreement, no fraction
of a share of Parent Common Stock will be issued by virtue of the
Merger, but in lieu thereof each holder of shares of Company Common
Stock who would otherwise be entitled to receive a fraction of a
share of Parent Common Stock (after aggregating all fractional
shares of Parent Common Stock that otherwise would be received by
such holder) shall, upon surrender of such holder’s
Certificates(s) (as defined in Section 5.4(b)) receive from Parent
one share of the Parent’s Common Stock. (after taking into
account all shares of Company Shares owned by such holder at the
Effective Time).
(b)
Notwithstanding any other provision of this Agreement, all shares
of Company Shares that are (i) held by the Company as treasury
shares or (ii) owned by Parent, in each case immediately prior to
the Effective Time, shall be cancelled and retired and shall cease
to exist, and no securities of Parent or other consideration shall
be delivered in exchange therefor.
5.3
Stock
Plan .
(a)
At the
Effective Time, Parent shall assume the Company Stock Plan as well
as the rights, duties and obligations of the Company with respect
to the administration of such Plan.
(b)
At the
Effective Time, each option granted by the Company to purchase
shares of Company Common Stock pursuant to the Company Stock Plan
(each, a “ Company Option ”) which is
outstanding and unexercised immediately prior thereto, whether
vested or unvested, shall cease to represent a right to acquire
shares of Company Common Stock and shall be assumed and shall be
converted into an option to acquire, on the same terms and
conditions as were applicable to the original Company Option, that
number of shares of Parent Common Stock determined by multiplying
the number of shares of Company Common Stock subject to such
Company Option immediately prior to the Effective Time by the
Common Exchange Ratio, rounded down to the nearest whole share of
Company Common Stock, at a price per share (rounded up the nearest
one-hundredth of a cent) equal to the per share exercise price
specified in such Company Option divided by the Common Exchange
Ratio; provided, however, that in the case of any Company Option to
which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code, the option price, the
number of shares subject to such option and the terms and
conditions of exercise of such option shall be determined in a
manner consistent with the requirements of Section 424(a) of the
Code. The parties will make good faith efforts to make equitable
adjustments to ensure that the conversions of Company Options
contemplated by this Section 5.3(b) comply with Section 409A of the
Code. Prior to the Effective Time, Parent shall reserve for
issuance the number of shares of Parent Common Stock necessary to
satisfy its obligations under this Section 5.3.
5.4.
Payment for Shares in the Merger . The manner of making
payment for Company Shares in the Merger shall be as follows:
(a)
On or prior to the Closing Date, Parent shall make available to
Interwest Stock Transfer (the “ Exchange Agent
”) for the benefit of the holders of Company Shares, a
sufficient number of shares of Parent Common required to effect the
delivery of the aggregate consideration in Parent Common required
to be issued pursuant to this Section 5 and cash in an amount
sufficient for payment of any dividends or distributions to which
holders of Company Shares may be entitled pursuant to Section
5.4(c) (“ Merger Consideration ”).
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(b)
Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record (as of the Effective Time) of a certificate
or certificates, which immediately prior to the Effective Time
represented outstanding Company Shares (the “
Certificates ”) (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery of
the Certificates to the Exchange Agent) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for
certificates representing shares of Parent Common Stock pursuant to
Section 5.1, and any dividends or other distributions pursuant
to Section 5.4. Upon surrender of Certificates for
cancellation to the Exchange Agent or to such other agent or agents
as may be appointed by Parent, together with such letter of
transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holders of such Certificates shall be
entitled to receive, in exchange therefor, certificates
representing the number of whole shares of Parent Common Stock into
which their shares of Company Shares were converted pursuant to
Section 5.1, a share of Parent Common Stock in lieu of
fractional shares which such holders have the right to receive
pursuant to Section 5.2 and any dividends or other
distributions payable pursuant to Section 5.4(c), and the
Certificates so surrendered shall forthwith be canceled. Until so
surrendered, outstanding Certificates will be deemed, from and
after the Effective Time, to evidence only the ownership of the
number of whole shares of Parent Common into which such shares of
Company Shares shall have been so converted (including any voting,
notice or other rights associated with the ownership of such shares
of Parent Common under the Certificate of Incorporation or Bylaws
of Parent or under Delaware Law) and the right to receive one share
of Parent Common in lieu of the issuance of any fractional shares
in accordance with Section 5.2 and any dividends or other
distributions payable pursuant to Section 5.4(c).
(c)
No
dividends or other distributions that are declared after the
Effective Time on Parent Common and payable to the holders of
record thereof after the Effective Time will be paid to persons
entitled by reason of the Merger to receive Parent Common until
such persons surrender their Certificates as provided above.
Upon such surrender, there shall be paid to the person in whose
name the Parent Common are issued any dividends or other
distributions having a record date after the Effective Time and
payable with respect to such Parent Common between the Effective
Time and the time of such surrender. After such surrender there
shall be paid to the person in whose name the Parent Common are
issued any dividends or other distributions on such Parent Common
which shall have a record date after the Effective Time. In no
event shall the persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or
other distributions.
(d)
If
any certificate representing Parent Common is to be issued in a
name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such
exchange that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the
person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of
certificates for such Parent Common in a name other than that of
the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable.
(e)
Notwithstanding the foregoing, neither the Exchange Agent nor any
of the Parties shall be liable to a holder of Company Shares for
any Parent Common or dividends thereon delivered to a public
official pursuant to applicable escheat law. The Exchange Agent
shall not be entitled to vote or exercise any rights of
ownership with respect to the Parent Common held by it from time to
time hereunder, except that it shall receive and hold all dividends
or other distributions paid or distributed with respect to such
Parent Common for the account of the persons entitled thereto.
(f)
Subject to applicable law, any portion of the Merger Consideration
which remains unclaimed by the former stockholders of the Company
for one (1) year after the Effective Time shall be delivered to
Parent, upon demand of Parent, and any former stockholder of the
Company shall thereafter look only to Parent for payment of their
applicable claim for the Share Consideration for their Company
Shares.
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5.5.
Dissenting Shares . Notwithstanding anything in this
Agreement to the contrary, in the event that the applicable
requirements of Section 262 of the DGCL have been satisfied, shares
of the Company which were outstanding on the date for the
determination of stockholders entitled to vote on the Merger and
(i) which were not voted in favor of the Merger or consented
thereto in writing (if such action is taken by written consent),
(ii) the holders of which have demanded that the Company purchase
such shares at their fair market value in accordance with Section
262 of the DGCL and (iii) have not otherwise failed to perfect or
shall not have effectively withdrawn or lost their rights to
purchase for cash under the DGCL (the " Company Dissenting
Shares ") shall not be converted into Parent Common Shares,
but, instead, the holders thereof shall be entitled to have their
shares purchased by the Company for cash at the fair market value
of such Company Dissenting Shares as agreed upon or determined in
accordance with the provisions of Section 262 of the DGCL;
provided, however, that if any such holder shall have failed to
perfect or shall have effectively withdrawn or lost his, her or its
right to payment under the DGCL, such holder's shares of Company
Stock shall thereupon be deemed to have been converted, at the
Effective Time of the Merger, into the Parent Common Shares as set
forth in Section 5.1 hereof, without any interest thereon. The
Company shall give Parent prompt notice of any demands pursuant to
Section 262 of the DGCL received by the Company, withdrawals of
such demands and any other instruments served pursuant to the DGCL
and received by the Company.
5.6.
Transfer of Shares Prior to the Effective Time . No
transfers of Company Shares shall be made on the stock transfer
books of the Company after the close of business on the day
immediately prior to the date of the Effective Time.
5.7.
Tax
Treatment . The parties intend that the Merger qualify as
a reorganization under Section 368(a) of the Code and agree to
report the Merger consistent with that intent.
Notwithstanding the foregoing, the parties agree and
acknowledge that none of the Company, Merger Sub or Parent has made
any representation, warranty or covenant regarding the status of
the Merger as a reorganization.
ARTICLE VI
Representations and Warranties
6.1.
Representations and Warranties of Parent, Merger Sub and
Principal Stockholder . Except as otherwise provided in the
disclosure schedule delivered by Parent to the Company (the “
Parent Disclosure Schedule ”) herewith or as set forth
in the Parent SEC Documents, Parent, Merger Sub and the Principal
Stockholder represent and warrant to the Company that all of the
statements contained in this Section 6.1 are true and complete as
of the date of this Agreement (or, if made as of a specified date,
as of such date). Each exception set forth in the Parent
Disclosure Schedule and each other response to this Agreement set
forth in the Parent Disclosure Schedule is identified by reference
to, or has been grouped under a heading referring to, a specific
individual section of this Agreement and relates only to such
section, provided, however, that any information disclosed in
response to a specific individual section of this Agreement shall
be deemed to be disclosed in response to any other section number
under this Agreement where it is clear that such disclosure is
applicable.
(a)
Organization, Authorization and Validity . Each of Parent
and Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the state of its
incorporation and has all necessary power, legal capacity and
authority (i) to conduct its business in the manner in which its
business is currently being conducted and to own and use its assets
in the manner in which its assets are currently being utilized,
(ii) is duly qualified or licensed to do business as a foreign
corporation, in good standing in every jurisdiction in which the
ownership and use of its property or the conduct of its business
requires such qualification, except where the failure to so qualify
could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect; and (iii) has all requisite
power and authority to execute and deliver this Agreement and the
other Documents to which Parent and Merger Sub is a party and
perform its obligations hereunder and thereunder, and has taken all
necessary action to authorize the execution, delivery and
performance of this Agreement and the other Documents to which
Parent is a party. Parent has heretofore delivered to the Company
complete and correct copies of the Organizational Documents of
Parent and Merger Sub as presently in effect. The execution and
delivery of this Agreement and the consummation of the Transactions
have been duly and validly authorized by the Board of Directors of
each of Parent and Merger Sub.
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(b)
Binding Agreement; Consents and Approvals; No Conflict, Default
or Violation . Each of this Agreement and the other Documents
to which Parent and Merger Sub is a party has been duly executed
and delivered by Parent and Merger Sub and constitutes a legal,
valid and binding obligation of Parent and Merger Sub enforceable
against Parent and Merger Sub in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors’ rights generally and by general
principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law). Neither the execution,
delivery or performance of this Agreement or any other Document by
Parent and Merger Sub, nor the consummation by Parent and Merger
Sub of any of the Transactions will, directly or indirectly (with
or without notice of lapse of time or both):
(i)
contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Parent and Merger
Sub, or (B) any resolution adopted by the board of directors or
stockholders of the Parent and Merger Sub;
(ii)
contravene, conflict with, or result in a violation of, or give any
Governmental Entity or other Person the right to challenge any of
the Transactions or to exercise any remedy or obtain any relief
under, any Rule to which, Parent and Merger Sub, or any of the
assets owned or used by the Parent and Merger Sub, may be subject;
or
(iii)
contravene, conflict with, or result in a violation of any of the
terms or requirements of, or give any Governmental Entity the right
to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the Parent and Merger
Sub or that otherwise relates to the business of, or any of the
assets owned or used by, the Parent and Merger Sub.
Neither
Parent nor Merger Sub is or will be required to give any notice to
or obtain any consent from any Person in connection with the
execution, delivery or performance of this Agreement or the other
Documents or the consummation of any of the Transactions. On
or prior to the date hereof, the Board of Directors of Parent and
Merger Sub has (i) adopted resolutions approving this Agreement and
the Transactions, including the Merger, and (ii) determined that
this Agreement and the Transactions, including the Merger, are
advisable and fair to and in the best interests of the stockholders
of Parent and Merger Sub. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required with respect to Parent and Merger
Sub in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except
for (i) such reports and information under the Securities Act or
Exchange Act and the rules and regulations promulgated by the SEC
thereunder, as may be required in connection with this Agreement
and the Transactions; (ii) such filings, authorizations, orders and
approvals as may be required under state “control share
acquisition,” “anti-takeover” or other similar
statutes and regulations (collectively, “ State Takeover
Laws ”); (iii) such filings, authorizations, order and
approvals as may be required under foreign laws, state securities
laws, the Bylaws of the National Association of Securities Dealers,
Inc. or the rules and requirements of The Financial Industry
Regulatory Authority (“ FINRA ”); (iv) filings
with the Secretary of State of Delaware; and (v) such other
consents, authorizations, filings, approvals and registrations
which, if not obtained or made, would not prevent, materially alter
or delay any of the transactions contemplated by this
Agreement.
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(c)
Capitalization.
(i)
The
authorized capital stock of Parent consists of 100,000,000 shares
of Common Stock, $.001 par value per share, 22,413,675 shares of
which are issued and outstanding, and 5,000,000 shares of Preferred
Stock, $.001 par value per share, no shares of which are issued and
outstanding. Except as set forth herein, (i) there are no equity
securities of Parent authorized, issued or outstanding, (ii) there
are no existing options, warrants, calls, pre-emptive rights,
subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued
equity securities of Parent, obligating Parent to issue, transfer
or sell or cause to be issued, transferred or sold any equity
securities of, Parent or securities convertible into or
exchangeable or exercisable for such equity securities, or
obligating Parent to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement
or commitment and (iii) there are no outstanding contractual
obligations of Parent to repurchase, redeem or otherwise acquire
any equity securities of Parent or any Person or to provide funds
to make any investment (in the form of a loan, capital contribution
or otherwise) in any other Person. All outstanding Parent Common
have been duly authorized, validly issued and are fully paid and
nonassessable. To the Knowledge of Parent, Merger Sub, and
Principal Stockholder, all securities of Parent have been issued in
compliance with state and federal securities laws. There are no
voting trusts or other agreements or understandings with respect to
the voting of the equity securities of Parent. No legend or other
reference to any purported Encumbrances appears upon any
certificate representing equity securities of Parent, other than
those imposed by the Securities Act and the state securities or
“Blue Sky” laws. Parent’s assets do not include
any capital stock of, or any other equity interest in, or
securities convertible into or exchangeable for any capital stock
or other equity interest in, any Person, or any direct or indirect
equity or ownership interest in any other business, except for the
shares of Merger Sub owned by the Parent.
(ii)
The
authorized capital stock of Merger Sub consists of 100 shares of
Common Stock, $0.001 par value per share, 100 shares of which are
issued and outstanding, all of which outstanding shares are owned
by the Parent, free and clear of any Encumbrance and free of any
other limitation or restriction (including any limitation or
restriction on the right to vote, sell, transfer or otherwise
dispose of the stock or other ownership interests, other than those
imposed by the Securities Act and the state securities or
“Blue Sky” laws). There are no existing options,
warrants, calls, pre-emptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating
to the issued or unissued equity securities of Merger Sub,
obligating Merger Sub to issue, transfer or sell or cause to be
issued, transferred or sold any equity securities of, Merger Sub or
securities convertible into or exchangeable or exercisable for such
equity securities, or obligating Merger Sub to grant, extend or
enter into any such option, warrant, call, subscription or other
right, agreement, arrangement or commitment and there are no
outstanding contractual obligations of Merger Sub to repurchase,
redeem or otherwise acquire any equity securities of Merger Sub or
any Person or to provide funds to make any investment (in the form
of a loan, capital contribution or otherwise) in any other Person.
All outstanding capital stock, securities, or other equity
interests of Merger Sub have been duly authorized, validly issued
and are fully paid and nonassessable. All such securities of
Merger Sub have been issued in compliance with state and federal
securities laws. There are no voting trusts or other
agreements or understandings with respect to the voting of the
equity securities of Merger Sub.
(d)
SEC Filings; Financial Statements. Parent has filed or
furnished, as applicable, with the Securities and Exchange
Commission (the “ SEC ”) each report,
registration statement and definitive proxy statement required to
be filed by Parent with the SEC between August 1, 2007 and the date
of this Agreement (collectively, the “ Parent SEC
Documents ”). Each of Parent SEC Documents complied in
all material respects with the applicable requirements of the
Securities Act or the Exchange Act (as the case may be); and (ii)
none of Parent SEC Documents at the time of filing contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements contained
in Parent SEC Documents: (i) complied as to form in all material
respects with the then applicable accounting requirements and with
the published rules and regulations of the SEC applicable thereto;
(ii) were prepared in accordance with GAAP throughout the periods
covered, except as may be indicated in the notes to such financial
statements and (in the case of unaudited statements) as permitted
by Form 10-Q or Form 10-QSB, as applicable, and except that
unaudited financial statements may not contain footnotes and are
subject to year-end audit adjustments; and (iii) fairly presented
the financial position of Parent as of the respective dates thereof
and the results of operations of Parent for the period covered
thereby.
9
(e)
No Undisclosed Liabilities. Neither Parent nor Merger Sub
has any Liabilities, except (a) as reflected on the most recent
balance sheet included in the most recent Form 10-KSB or Form 10-Q,
as applicable, filed by Parent and (b) current liabilities incurred
since the date of the most recent balance sheet included in the
most recent Form 10-KSB or Form 10-Q, as applicable, filed by
Parent in the ordinary course of business, which will as of the
Closing be zero.
(f)
Books and Records. Since August 1, 2007, the books and
records of Parent and Merger Sub are complete and correct in all
material respects and have been maintained in accordance with sound
business practices, including the maintenance of an adequate system
of internal controls. True and complete copies of all available
minute books and all stock record books of Parent and Merger Sub
requested by the Company have heretofore been made available to the
Company.
(g)
Trading of Securities . Parent’s common stock has been
approved by FINRA for quotation on the Over-the-Counter Bulletin
Board and there has not been any stop order suspending the trading
of Parent’s common stock or the initiation of any proceedings
for that purpose.
(h)
Absence of Certain Changes . Since August 1, 2007,
except as disclosed in the Parent SEC Documents, Parent has
conducted its business only in the normal and ordinary course in a
manner consistent with past practice and there has not been
any:
(i)
change in Parent’s authorized or issued equity securities;
grant of any option or right to purchase equity securities of
Parent; issuance of any security convertible into or exchangeable
or exercisable for such equity securities; grant of any
registration rights; purchase, redemption, retirement, or other
acquisition by Parent of any equity securities; or declaration or
payment of any dividend or other distribution or payment in respect
of equity securities;
(ii)
amendment to Parent’s certificate of incorporation and
bylaws;
(iii)
adoption of any bonus, deferred compensation, incentive
compensation, stock purchase, stock option, stock appreciation or
other stock-based incentive, employment (including offer letters),
consulting, severance, change in control or termination pay,
hospitalization or other medical, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program, agreement or arrangement, or any other
“employee benefit plan” (within the meaning of Section
3(3) of ERISA), whether formal or informal, written or oral and
whether legally binding or not;
(iv)
change in the accounting methods or practices used by Parent; or
any new election or change in any existing election relating to any
taxes, settlement of any claim or assessment relating to any taxes,
consent to any claim or assessment relating to any taxes, or waiver
of the statute of limitations for any such claim or assessment;
(v)
write-down or write-off as uncollectible any notes or accounts
receivable;
(vi)
disposal or lapse of any Intellectual Property or the rights to use
any Intellectual Property, or disposal of or disclosure to any
Person other than employees of Parent and representatives of Parent
of any trade secret;
(vii)
granting of any general increase in the compensation of officers or
employees (including any such increase pursuant to any bonus,
pension, profit sharing or other plan or commitment) or any
increase in the compensation payable or to become payable to any
officer or employee; or
(viii)
agreement, whether oral or written, by Parent to do any of the
foregoing.
10
(i)
Required Government Consents, Filings, etc. Except as have
been or, prior to the Closing, will be obtained, no approval,
authorization, certification, consent, variance, permission,
license, or permit to or from, or notice, filing, or recording to
or with, any U.S. Federal, state, or local governmental authorities
is necessary for the execution and delivery of this Agreement and
the other agreements and instruments to be executed and delivered
by Parent in connection with the transactions contemplated hereby,
or the consummation by Parent of the transactions contemplated
hereby.
(j)
Valid Issuance . The Parent Common to be issued
hereunder will, when issued in accordance with the provisions of
this Agreement, be validly issued, fully paid and
nonassessable.
(k)
Information Supplied . None of the information to be
supplied by Parent specifically for inclusion in the information
statement regarding the Merger will, at the date it is first mailed
to the stockholders of the Company, contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading, except that no representation or warranty is made
by Parent with respect to statements made based on information
supplied by or on behalf of the Company.
(l)
Title to Assets . Parent has good and marketable title to
all of its assets, free and clear of any claims or
Encumbrances.
(m)
Intellectual Property . Parent has no Intellectual Property.
The term “Intellectual Property” includes patents and
patent applications, trademarks, service marks, and trademark or
service mark registrations and applications, trade names, logos,
designs, domain names, web sites, slogans and general intangibles
of like nature, together with all goodwill relating to the
foregoing, copyrights, copyright registrations, renewals and
applications, software, databases, technology, trade secrets and
other confidential information, know-how, proprietary processes,
formulae, algorithms, models and methodologies, drawings,
specifications, plans, proposals, financing and marketing plans,
advertiser, customer and supplier lists and all other information
relating to advertisers, customers and suppliers (whether or not
reduced to writing), licenses, agreements and all other proprietary
rights.
(n)
Compliance with Rules . Parent and Merger Sub have complied
in a timely manner and in all material respects with all Rules that
affect Parent and Merger Sub or their respective properties or
assets, and, no notice, charge, claim, action or assertion has been
received by Parent or Merger Sub or has been filed or commenced
against Parent or Merger Sub alleging any violation of any
Rules.
(o)
Tax
Matters .
(i)
All Tax
Returns required to be filed by the Parent or Merger Sub have been
timely filed and all such returns are true, complete, and correct
in all material respects. All Taxes that are due from the
Parent or Merger Sub have been timely paid, whether or not shown to
be due on such Tax Returns.
(ii)
There
are no Encumbrances for Taxes upon any assets or properties of the
Parent or Merger Sub, other than Encumbrances for Taxes not yet due
and payable.
(iii)
No
Audits are presently pending with regard to any Taxes or Tax
Returns of the Parent or Merger Sub, and neither the Parent nor
Merger Sub has received notification that any such Audit is
threatened, contemplated, or may be initiated. Schedule
6.1(o) of the Parent Disclosure Schedule contains a list of Audits,
if any, that were concluded with respect to any Taxes or Tax
Returns of the Parent or Merger Sub.
(iv)
No
deficiency or adjustment for any Taxes has been proposed, asserted,
threatened, or assessed against the Parent or Merger Sub. No
issue has been raised by any Tax Authority in any Audit of the
Parent or Merger Sub that, if raised with respect to any other
period not so audited, could reasonably be expected to result in a
material proposed deficiency or adjustment for any period not so
audited.
(v)
There
are no outstanding requests or waivers to extend the statutory
period of limitations applicable to the assessment of any
Taxes.
11
(vi)
Neither
the Parent nor Merger Sub has received written notice of, and no
factual basis exists that would support, any claim made by a Tax
Authority in a jurisdiction where it does not file Tax Returns that
it is or may be subject to Taxation by that jurisdiction.
(vii)
No
power of attorney has been granted by or with respect to the Parent
or Merger Sub that currently continues in effect with respect to
any matter relating to Taxes.
(viii)
Neither
the Parent nor Merger Sub is a party to, is bound by or has any
obligation under any Tax sharing agreement, Tax indemnification
agreement or similar contract or arrangement.
(ix)
Neither
the Parent nor Merger Sub will be required to include any income or
gain or exclude any deduction or loss from Taxable income as a
result of any (a) change in method of accounting under Section
481(c) of the Code; (b) closing agreement under Section 7121 of the
Code; (c) deferred intercompany gain or excess loss account under
Treasury Regulations under Section 1502 of the Code (or in the case
of each of items (a), (b) or (c), under any similar provision of
applicable law); (d) installment sale or open transaction
disposition or (e) prepaid amount.
(x)
The
Parent has delivered or made available to the Company complete and
accurate copies of each of all audit reports, letter rulings,
technical advice memoranda, closing agreements and similar
documents issued to the Parent or Merger Sub by a Tax
Authority.
(xi)
The
Parent and each Parent Subsidiary has complied with all applicable
Rules relating to the payment and withholding of Taxes and is not
liable for any Taxes for failure to comply with such laws, rules
and regulations.
(xii)
Neither
the Parent nor Merger Sub has (i) ever been a member of an
affiliated group filing a consolidated federal Tax Return (or
similar state or local filing group), other than a group the common
parent of which was the Parent; (ii) any Liability for Taxes of any
Person under Sections 1.1502-6 of the Treasury Regulations
promulgated under the Code (or similar provisions of federal,
state, local or foreign law) as transferee or successor, by
contract or otherwise or (iii) ever been a party to any joint
venture, partnership or other agreement that could be treated as a
partnership for Tax purposes.
(xiii)
Neither
the Parent nor Merger Sub is currently or has been a United States
real property holding corporation (within the meaning of Section
897(c)(2) of the Code) during the applicable periods specified in
Section 897(c)(1)(A)(ii) of the Code.
(xiv)
Neither
the Parent nor Merger Sub has been either a “distributing
corporation” or a “controlled corporation” in a
distribution of stock intended to qualify for tax-free treatment
under Section 355 of the Code within the three (3) year period
ending as of the date of this Agreement.
(xv)
Neither
the Parent nor Merger Sub has engaged in a “reportable
transaction,” as set forth in Treas. Reg. § 1.6011-4(b),
or any transaction that is the same
