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AGREEMENT AND PLAN OF
MERGER
among
ACTIVECARE, INC.,
ACTIVECARE NEVADA,
INC.,
HG PARTNERS, INC.,
HARBORVIEW
MASTER FUND ,
L.P.
and
GEMINI MASTER FUND,
LTD.
Dated as of September 4,
2009
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Table of Contents
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Page
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ARTICLE I
DEFINITIONS
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1
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Definitions
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1
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ARTICLE II The
Merger
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4
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The
Merger
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4
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Closing and
Effective Time
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5
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Articles of
Incorporation; By-Laws
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5
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Directors and
Officers
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5
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ARTICLE III
CONVERSION OF SHARES
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5
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Conversion of
Shares
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5
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Cancellation of
HG Shares Owned by HG
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6
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Fractional
Shares
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6
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Conversion of
Merger Sub Shares
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6
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Surrender of
Certificates
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6
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Registration
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7
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HG
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8
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Organization
and Good Standing
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8
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Authorization,
Validity, and Effect of Agreement
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8
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Capitalization
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9
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No Conflicts;
Consents.
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9
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No Other
Agreements to Sell the Shares
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9
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Legal
Compliance
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9
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Financial
Statements
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9
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Employees
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10
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Employee
Benefits
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10
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Litigation
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10
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Taxes
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11
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Powers of
Attorney
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11
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No
Brokers
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11
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACTIVECARE
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11
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Organization
,Good Standing and Power
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11
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Authority and
Enforceability
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11
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Capitalization
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12
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No
Conflicts
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12
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Commission
Documents, Financial Statements
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13
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Subsidiaries
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14
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No Material
Adverse Change
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14
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No Undisclosed
Liabilities
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14
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No Undisclosed
Events or Circumstances
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14
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Indebtedness
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14
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Title to
Assets
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14
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Actions
Pending
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15
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Compliance with
Law
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15
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Taxes
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15
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Certain
Fees
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15
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Disclosure
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16
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Intellectual
Property
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16
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Environmental
Compliance
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16
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Books and
Record Internal Accounting Controls
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17
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Material
Agreements
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17
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Transactions
with Affiliates
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17
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Employees
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18
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Absence of
Certain Developments
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18
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Investment
Company Act Status
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19
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ERISA
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19
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Sarbanes-Oxley
Act
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19
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DTC
Status
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19
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Insurance
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20
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Foreign Corrupt
Practices
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20
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Off-Balance
Sheet Arrangements
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20
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No
Disagreements with Accountants
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20
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Material
Non-Public Information
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20
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Solvency
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20
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
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21
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Organization,
Good Standing and Power
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21
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No Business
Conducted
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21
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Authority and
Enforceability
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21
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ARTICLE VII
COVENANTS OF THE PARTIES
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21
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Regulatory
Approvals
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21
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Public
Announcements
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21
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Tax-Free
Reorganization
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22
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Further Action;
Further Assurances
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22
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ARTICLE VIII
SURVIVAL AND RELATED MATTERS
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22
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Survival;
Effect of Closing on Representations, Warranties and
Covenants
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22
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Indemnification
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22
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Limitations on
Recoverable Losses
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23
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ARTICLE IX
CONDITIONS TO THE MERGER
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24
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Conditions to
Obligations of Each Party to Effect the Merger
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24
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ARTICLE X
ANTI-DILUTION PROTECTION
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24
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Anti-dilution
Protection
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24
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Certain Defined
Terms
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25
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ARTICLE XI
GENERAL
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25
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Usage
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25
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Costs and
Expenses
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25
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Governing
Law
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26
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Successors and
Assigns
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26
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Notice
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26
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Severability
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27
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Representation
by Counsel; No Inferences
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28
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Divisions and
Headings
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28
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No Third-Party
Beneficiaries
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28
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Amendment and
Waiver
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28
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Schedules
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28
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Counterparts
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28
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Entire
Agreement
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29
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Remedies Not
Exclusive
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29
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AGREEMENT AND PLAN OF
MERGER
THIS AGREEMENT AND PLAN OF MERGER (this “
Agreement ”) dated as of September 4, 2009 is made by
and among ActiveCare, Inc., a Delaware corporation (“
ActiveCare ”), ActiveCare Nevada, Inc., a Nevada
corporation wholly-owned by ActiveCare (“ Merger Sub
”), HG Partners, Inc., a Nevada corporation (“
HG ”), Harborview Master Fund, L.P., a British Virgin
Islands limited partnership (“ Harborview ”) and
Gemini Master Fund, Ltd., a Cayman Islands corporation (“
Gemini ” and together with Harborview, the “
HG Shareholders ”). ActiveCare, Merger Sub, and HG are
sometimes collectively referred to herein as the “
Parties ” and individually as a “ Party
.”
RECITALS
A. The
Boards of Directors of ActiveCare, Merger Sub and HG each have
determined that the acquisition of HG by ActiveCare through the
merger of Merger Sub with and into HG pursuant to the terms and
subject to the conditions set forth herein is in the best interests
of their respective companies and shareholders.
B. ActiveCare
owns one-hundred percent (100%) of the capital stock of Merger
Sub.
C. Pursuant
to the Merger, each outstanding share of capital stock of HG
(“ HG Shares ”) shall be converted into common
shares of ActiveCare, at the rate set forth herein.
D. HG
and ActiveCare desire to make certain representations, warranties,
covenants and other agreements in connection with the
Merger.
E. The
Parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the “ Code ”),
and to cause the Merger to qualify as a reorganization under the
provisions of Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the
foregoing, the representations, warranties and covenants contained
herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section
1.1
Definitions . When used in this Agreement, the
following terms shall have the meanings assigned to them in this
Section 1.1 .
“ Action ” means any action,
complaint, petition, investigation, suit or other proceeding,
whether civil or criminal, in law or in equity, before any
arbitrator or Governmental Entity.
“ ActiveCare ” has the
meaning set forth in the Preamble to this Agreement.
“ ActiveCare Common Stock ”
means ActiveCare’s common stock, $.00001 par value per
share.
“ Affiliate ” means, with
respect to any Person, any other Person that, directly or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with the first mentioned
Person; and the term “control” (including the terms
“controlled by” and “under common control
with”) means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock or
other securities, as trustee or executor, by contract or
otherwise.
“ Agreement ” means this
Agreement as amended or supplemented together with all Schedules
attached or delivered with respect hereto or expressly incorporated
herein by reference.
“ Approval ” means any
approval, authorization, consent, notice, qualification or
registration, or any extension, modification, amendment or waiver
of any of the foregoing, of or from, or any notice, statement,
filing or other communication to be filed with or delivered to, any
Governmental Entity.
“ Certificates ” has the
meaning set forth in Section 3.5(a).
“ Claim Notice ” has the
meaning set forth in Section 8.2(c).
“ Closing ” means the closing
of the Merger.
“ Closing Date ” means the
date of this Agreement.
“ Code ” means the Internal
Revenue Code of 1986, as amended.
“ Commission Documents ” has
the meaning set forth in Section 5.5.
“Plan” means any stock incentive plan or employee stock
purchase plan.
“ Commission ” means the
United Stated Securities and Exchange Commission.
“ Contract ” means any
written or oral (to the extent legally binding) agreement,
contract, commitment, arrangement, indenture, note, bond, lease,
understanding or other legally binding agreement.
“ Dispute Period ” means the
period ending thirty (30) calendar days following receipt of a
Claim Notice or an Indemnity Notice from an Indemnified
Party.
“ Effective Time ” has the
meaning set forth in Section 2.2.
“ Environmental Laws ” has
the meaning set forth in Section 5.18.
“ ERISA ” means the Employee
Retirement Income Security Act of 1974, as amended.
“ Exchange Act ” means the
Securities Exchange Act of 1934, as amended.
“ GAAP ” has the meaning set
forth in Section 5.5.
“ Governmental Entity ” means
any government or any agency, bureau, board, directorate,
commission, court, department, official, political subdivision,
tribunal or other instrumentality of federal, state or local
government, with jurisdiction over the Parties.
“ HG ” has the meaning set
forth in the Preamble to this Agreement.
“ HG Indemnitees ” has the
meaning set forth in Section 8.2(a).
“ HG Shares ”
means the common stock, $0.001 par value per share, of
HG.
“ Indebtedness ” has the
meaning set forth in Section 5.10.
“ Indemnified Party ” has the
meaning set forth in Section 8.2(c).
“ Indemnifying Party ” has
the meaning set forth in Section 8.2(c).
“ Intellectual Property ” has
the meaning set forth in Section 5.17.
“ Knowledge ” and words of
similar import mean the actual knowledge after reasonable
investigation.
“ Law ” means any
constitutional provision, statute, ordinance or other law, duly
enacted and enforceable rule or regulation, or any binding
interpretation or Order of any Governmental Entity.
“ Liability ” means any
direct or indirect liability, indebtedness, obligation, expense,
claim, fine, loss, damage, deficiency, guarantee or endorsement of
a Person, whether absolute or contingent, known or unknown, accrued
or unaccrued, liquidated or unliquidated, fixed or otherwise, and
whether due or to become due and regardless of when
asserted.
“ Lien ” means, with respect
to any property or asset, any mortgage, lien, pledge, charge,
security interest or other encumbrance in respect of such property
or asset.
“ Loss ” or
“ Losses ” has the meaning set forth in Section
8.2(a).
“ Material Adverse Effect ”
means changes, developments or occurrences which, individually or
in the aggregate, have materially and adversely affected or would
have a material adverse effect on the condition, business,
financial position, assets, Liabilities or results of operations of
the entity concerned, taken as a whole with such entity’s
consolidated subsidiaries or on the ability of such entity to
consummate the transactions contemplated hereby or to perform any
of its respective material obligations under this
Agreement.
“ Merger ” has the meaning
set forth in Section 2.1.
“ Merger Sub ” has the
meaning set forth in the Preamble to this Agreement.
“ NRS ” has the meaning set
forth in Section 2.1.
“ Order ” means any binding
and enforceable decree, injunction, judgment, order, ruling,
assessment or writ issued by a Governmental Entity.
“ Organizational Documents ”
means, with respect to any Party, its articles or certificate of
incorporation articles or certificate of formation, bylaws,
operating agreement, limited liability company agreement,
partnership agreement or other similar formation and/or governing
documents.
“ Party ” or “
Parties ” has the meaning set forth in the Preamble to
this Agreement.
“ Person ” means any
individual, general partnership, limited partnership, limited
liability partnership, corporation, joint venture, limited
liability company, trust, cooperative association, unincorporated
organization, benefit plan, governmental or quasi-governmental,
judicial or regulatory entity, or any other entity or any
department, agency or subdivision thereof, and the heirs, legal
representatives, successors and assigns of any of the foregoing
where the context so admits.
“ Sarbanes-Oxley Act ” has
the meaning set forth in Section 5.26.
“ Securities Act ” means the
Securities Act of 1933, as amended.
“ Subsidiary ” or “
Subsidiaries ” means any corporation or other entity
of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently)
for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by
ActiveCare or HG, as the case may be, and/or any of their other
Subsidiaries.
“ Surviving Corporation ” has
the meaning set forth in Section 2.1.
“ Third-Party Claim ” has the
meaning set forth in Section 8.2(c).
“ Transfer Taxes ” means
sales, use, transfer, real property transfer, recording,
documentary, stamp, registration and stock transfer taxes and fees
and any similar taxes.
ARTICLE II
THE MERGER
Section
2.1
The Merger . On the terms and subject to the
conditions contained in this Agreement, as of the Effective Time,
Merger Sub shall be merged with and into HG in accordance with this
Agreement and the separate existence of Merger Sub shall thereupon
cease (the “ Merger ”). HG shall be
the surviving corporation in the Merger (HG, after the Effective
Time, is sometimes hereinafter referred to as the “
Surviving Corporation ”). From and after
the Effective Time, all the rights, property, privileges, powers,
and franchises of each of the merging companies shall vest in the
Surviving Corporation, and the Surviving Corporation shall be
subject to all the debts and liabilities of HG and Merger
Sub. The Merger shall have the effects provided in this
Agreement and the applicable provisions of the Nevada Revised
Statutes (the “ NRS ”).
Section
2.2
Closing and Effective Time . The consummation of
the Merger will take place as of the Closing Date or as promptly as
practicable hereafter and will take place at the offices of Durham
Jones & Pinegar, 111 East Broadway, Suite 900, Salt Lake City,
Utah 84111, or such other location as may be agreed to in writing
by the parties hereto (the “ Closing
”). Concurrent with the execution of this
Agreement, the Parties shall cause Articles of Merger in the form
attached hereto as Exhibit A , satisfying the requirements
of Section 92A.200 of the NRS to be properly executed, verified and
delivered for filing in accordance with the NRS. The
Merger shall become effective upon the acceptance for record of the
Articles of Merger by the Secretary of State of the State of Nevada
in accordance with the NRS or at such later time which the parties
hereto shall have agreed upon and designated in such filing in
accordance with applicable Law as the effective time of the Merger
(the “ Effective Time ”). At the
Closing, in addition to this fully executed Agreement and the other
transaction documents contemplated hereby, the following items
shall be delivered to ActiveCare and HG, as applicable:
(i) The
Articles of Merger, duly executed by Merger Sub and HG;
(ii) Resignations
of the officers and directors of HG who were serving in such
capacity prior to the Merger;
Section
2.3
Articles of Incorporation; By-Laws . The Articles
of Incorporation of HG in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving
Corporation, until duly amended in accordance with applicable
Law. The By-laws of HG in effect immediately prior to
the Effective Time shall be the By-laws of the Surviving
Corporation, until duly amended in accordance with their terms or
the Articles of Incorporation of the Surviving Corporation and as
provided by applicable Law.
Section
2.4
Directors and Officers . The directors of Merger
Sub immediately prior to the Effective Time shall, from and after
the Effective Time, be the directors of the Surviving Corporation
until their successors shall have been duly elected and appointed
or qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation’s Articles of
Incorporation and By-laws or as otherwise provided. The
officers of Merger Sub immediately prior to the Effective Time
shall, from and after the Effective Time, be the officers of the
Surviving Corporation until their earlier death, resignation or
removal in accordance with the Surviving Corporation’s
Articles of Incorporation and By-laws or as otherwise
provided.
ARTICLE III
CONVERSION OF
SHARES
Section
3.1
Conversion of Shares . At the Effective Time, by
virtue of the Merger and without any action on the part of the
Parties, each HG Share issued and outstanding immediately prior to
the Effective Time shall be canceled and extinguished and shall be
converted automatically into the right to receive 0.084 of one
share of ActiveCare Common Stock (all such shares of ActiveCare
Common Stock, together with any shares of ActiveCare Common Stock
issuable pursuant to ARTICLE X below are referred to herein
collectively as the “ Merger Shares ”). No
adjustment shall be made in the number of shares of ActiveCare
Common Stock issued in the Merger as a result of any increase or
decrease in the market price of ActiveCare Common Stock prior to
the Effective Time.
Section
3.2
Cancellation of HG Shares Owned by HG . At the
Effective Time, all HG Shares that are owned by HG as treasury
stock shall be cancelled and extinguished without any conversion
thereof.
Section
3.3
Fractional Shares . No fraction of a share of
ActiveCare Common Stock will be issued, but in lieu thereof the
number of shares of ActiveCare Common Stock each holder of HG
Shares who would otherwise be entitled to a fraction of a share of
ActiveCare Common Stock (after aggregating all fractional shares of
ActiveCare Common Stock to be received by such holder) shall be
rounded up to the nearest whole number of ActiveCare Common
Stock.
Section
3.4
Conversion of Merger Sub Shares . At the
Effective Time, each share of common stock, no par value, of Merger
Sub issued and outstanding immediately prior to the Effective Time
will become one fully paid and nonassessable share of common stock,
$.001 par value per share, of the Surviving Corporation, and such
shares will be the only shares of capital stock of the Surviving
Corporation that are issued and outstanding immediately after the
Effective Time. From and after the Effective Time, each
certificate theretofore representing shares of common stock of
Merger Sub will be deemed for all purposes to evidence ownership
and to represent the same number of shares of common stock of the
Surviving Corporation.
Section
3.5
Surrender of Certificates .
(a)
Exchange Procedures . As soon as reasonably practicable
after the Effective Time, ActiveCare will deliver to each holder of
record of a certificate or certificates (the “
Certificates ”) that immediately prior to the
Effective Time represented outstanding HG Shares, whose shares were
converted into the right to receive shares of ActiveCare Common
Stock pursuant to Section 3.1, (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 receipt of the
Certificates by ActiveCare, and shall be in such form and have such
other provisions as ActiveCare may reasonably specify), and (ii)
instructions for use in effecting the surrender of the Certificates
in exchange for certificates representing shares of ActiveCare
Common Stock. Upon surrender of a Certificate for
cancellation to ActiveCare or to such other agent or agents as may
be appointed by ActiveCare, together with such letter of
transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing
the number of whole shares of ActiveCare Common Stock that such
holder has the right to receive pursuant to Section 3.1, and the
Certificate so surrendered shall forthwith be
canceled. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares
of HG Shares will be deemed from and after the Effective Time, for
all corporate purposes to evidence the ownership of the number of
full shares of ActiveCare Common Stock into which such shares of HG
shall have been so converted.
(b)
Distributions with Respect to Unexchanged Shares
No dividends or other distributions declared or made
after the Effective Time, with respect to ActiveCare Common Stock
with a record date after the Effective Time, shall be paid to the
holder of any unsurrendered Certificates until the holder of such
Certificates shall surrender such Certificates. Subject to
applicable law, following surrender of any such Certificates, there
shall be paid to the record holder of the certificates representing
whole shares of ActiveCare Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the
amount of dividends or other distributions with a record date after
the Effective Time theretofore paid with respect to such whole
shares of ActiveCare Common Stock.
(c)
Transfers of Ownership . If any certificate for
shares of ActiveCare Common Stock is to be issued in a name other
than that in which the Certificate surrendered in exchange therefor
is registered, it will be a condition of the issuance thereof that
the Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the person
requesting such exchange will have paid to ActiveCare or any person
designated by it any transfer or other taxes required by reason of
the issuance of a certificate for shares of ActiveCare Common Stock
in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of
ActiveCare or any agent designated by it that such tax has been
paid or is not payable.
(d) No
Liability . Notwithstanding anything to the contrary in this
Section 3.5, neither ActiveCare nor Merger Sub shall be liable to
any holder of HG Shares or options or warrants to purchase HG
Shares at the Effective Time for shares of ActiveCare Common Stock
(or dividends or distributions with respect thereto) delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
Section
3.6
Registration . As soon as practicable, but in no
event later than thirty (30) calendar days after the Closing Date,
ActiveCare shall prepare and file a registration statement on Form
S-1 to register all of the Merger Shares. Such registration
statement shall cover to the extent allowable under the Securities
Act and the rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of ActiveCare Common
Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Merger Shares. The Company shall
(i) not permit any securities other than the Merger Shares and any
securities issuable pursuant to that certain Series A Convertible
Preferred Stock Purchase Agreement, of even date herewith, between
ActiveCare and the purchasers thereunder, to be included in the
registration statement and (ii) use its best efforts to cause the
registration statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof,
but in any event prior to ninety (90) calendar days after the
Closing Date, and to keep such registration statement continuously
effective under the Securities Act until such date as is the
earlier of (x) the date when all Merger Shares covered by such
registration statement have been sold or (y) the date on which all
Merger Shares may be sold without the requirement to be in
compliance with Rule 144(c)(1) and otherwise without restriction or
limitation pursuant to Rule 144 as determined by the counsel to the
Company pursuant to a written opinion letter, addressed to the
Company’s transfer agent to such effect. If at any
time and for any reason, an additional registration statement is
required to be filed because at such time the actual number of
Merger Shares outstanding exceeds the number of Merger Shares
remaining under the registration statement, the Company shall have
twenty (20) calendar days to file an additional registration
statement, and the Company shall use its best efforts to cause such
additional registration statement to be declared effective by the
Commission as soon as possible, but in no event later than ninety
(90) days after filing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
HG
HG hereby represents and warrants to ActiveCare
and Merger Sub that the statements contained in this Article
IV are true and correct as of the Closing Date, except as
expressly set forth in the disclosure schedule delivered by HG to
ActiveCare on or before the date of this Agreement.
Section
4.1
Organization and Good Standing . HG is a
corporation, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its formation, has all
requisite corporate power and authority and all licenses, permits
and authorizations necessary to own, lease and operate its
properties and to carry on its business as now being conducted, and
is duly qualified to transact business and is in good standing as a
foreign corporation in each jurisdiction in which the conduct or
nature of its activities or the ownership, leasing or holding of
its properties makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse
Effect. HG has delivered to ActiveCare correct and
complete copies of its Organizational Documents as of the date
hereof. HG is not in default under or in violation of
any provision of its Organizational Documents. All of
the outstanding shares of capital stock of HG have been duly
authorized, validly issued, and are fully paid and
nonassessable. HG is not nor has been an
“investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940.
Section
4.2
Authorization, Validity, and Effect of Agreement
. HG has the requisite capacity, power, and authority to
execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated
hereby. The Board of Directors and shareholders of HG
have approved this Agreement, the Merger, and the transactions
contemplated by this Agreement, and no other approval of HG is
required in order to consummate the Agreement, the Merger, or the
transactions contemplated hereby. This Agreement has
been duly executed and delivered by HG, and assuming the due
execution hereof by ActiveCare and Merger Sub, constitutes the
valid and legally binding obligation of HG, enforceable against HG
in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to
creditors’ rights and general principles of
equity.
Section
4.3
Capitalization . The entire authorized capital
stock of HG consists of 75,000,000 shares of stock, of which
74,000,000 shares are designated as common stock and 1,000,000
shares are designated as preferred stock. There are
10,000,000 shares of common stock issued and outstanding and held
of record by Harborview and Gemini, and no HG Shares are held in
treasury. No shares of preferred stock are issued and
outstanding. All of the outstanding capital stock of HG
is duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. There are no outstanding
securities convertible into, exchangeable for, or carrying the
right to acquire, equity securities of HG, and no subscriptions,
warrants, options, calls, rights (pre-emptive or other) or other
contracts, arrangements, understandings or commitments obligating
HG to issue or dispose of any of its equity securities or any
ownership interest therein. All outstanding HG Shares
have been issued in compliance with all federal and state
securities and blue sky laws.
Section
4.4
No Conflicts; Consents .
(a) Neither
the execution and delivery by HG of this Agreement nor the
consummation by HG of the transactions contemplated by this
Agreement in accordance with its terms will: (i) conflict with or
result in a breach of any provisions of the Organizational
Documents of HG; (ii) to the Knowledge of HG, violate, result in a
breach of any provision of, or constitute a default under, or
require any approval or consent under, or result in the termination
or in a right of termination or cancellation of, or accelerate the
performance required by, or result in a material adverse change to,
or result in the creation of any Lien upon any of the properties
owned or leased by HG under any Contract to which HG is a party, or
by which HG or any of its properties are bound, except for any of
the foregoing matters in this clause which, individually or in the
aggregate, would not have a Material Adverse Effect; or (iii)
assuming compliance with the matters set forth in
9Section 4.4(b) , contravene or conflict with or
constitute a violation of any provision of any Law, rule,
regulation, judgment, injunction, order or decree binding upon or
applicable to HG.
(b) Other
than filings required to be made with the Secretary of State of the
State of Nevada to consummate the Merger, no consent, authorization
or approval of, or filing with, any Governmental Entity is required
by HG in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated
hereby.
Section
4.5
No Other Agreements to Sell the Shares . HG does
not have any legal obligation, absolute or contingent, to any other
Person to sell the HG Shares, to sell any assets of HG (other than
that certain Agreement of Conveyance, Transfer and Assignment of
Assets and Assumption of Obligations between HG and Jeffrey
Thompson dated effective as of August 28, 2009), or to effect any
merger, consolidation or other reorganization or to enter into any
agreement related thereto.
Section
4.6
Legal Compliance . The actions of HG in the
operation of HG, have been in compliance with all applicable Laws,
except for violations of applicable Laws that would not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect.
Section
4.7
Financial Statements . HG has filed reports under
the Exchange Act on Form 10-Q for the fiscal quarters ended March
31, 2009 and June 30, 2009, and an Annual Report on Form 10-K for
the fiscal year ended December 31, 2008. HG became subject to the
reporting requirements of the Exchange Act on May 11, 2007. HG is
currently a voluntary filer under the Exchange Act and has timely
filed all reports it has filed under the Exchange Act as though it
was subject to the reporting requirements of the Exchange Act. The
financial statements included in or incorporated by reference into
these documents (including the related notes and schedules) have
been prepared in accordance with GAAP throughout the periods
covered thereby, and present fairly the financial condition of HG
as of the indicated dates and the results of operations of HG for
the indicated periods; provided , however , that any
interim statements are subject to normal year-end
adjustments.
Section
4.8
Employees . HG is not party to any agreement
which could require it to pay any additional compensation, bonuses
(including, without limitation, any retention bonuses) or other
amounts as a result, in whole or in part, of the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby, to any employee of HG or former employee of
HG.
Section
4.9
Employee Benefits . With respect to each employee benefit
plan maintained by HG, including, without limitation, any
“employee benefit plan,” as defined in Section 3(3) of
ERISA, any multiemployer plan within the meaning of ERISA Section
3(37)) and each stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective
bargaining, bonus, incentive or deferred compensation plan,
agreement, program, policy or other arrangement, whether or not
subject to ERISA (all the foregoing being herein called an “
HG Benefit Plan ”), no event has occurred and, to the
Knowledge of HG, there exists no condition or set of circumstances
in connection with which HG could be subject to any liability that
would reasonably be expected to have a Material Adverse Effect on
HG under ERISA, the Code or any other applicable law. No HG Benefit
Plan exists that could result in the payment to any person of any
money or other property or accelerate or provide any other rights
or benefits to any person as a result of the transactions
contemplated by this Agreement, whether alone or in connection with
any other event, and whether or not such payment would constitute a
parachute payment within the meaning of Code Section
280G.
Section
4.10
Litigation . There is no Action pending against
HG or, to HG’s Knowledge after due inquiry, threatened
against HG which would have a Material Adverse
Effect. HG is in compliance with each Order entered,
issued or rendered by any Governmental Entity related to its
business to which HG is subject, except where such failure to
comply would not have a Material Adverse Effect.
Section
4.11
Taxes . HG has accurately prepared and filed all
federal, state, foreign and other tax returns required by Law to be
filed by it, has paid or made provisions for the payment of all
taxes shown to be due and all additional assessments, and adequate
provisions have been and are reflected in the financial statements
of HG for all current taxes and other charges to which HG is
subject and that are not currently due and payable. None of the
federal income tax returns of HG have been audited by the Internal
Revenue Service. HG has no Knowledge of any additional assessments,
adjustments or contingent tax liability (whether federal or state)
of any nature whatsoever, whether pending or threatened against HG
for any completed tax period, nor of any basis for any such
assessment, adjustment or contingency.
Section
4.12
Powers of Attorney . HG has not granted to any
Person any powers of attorney or similar authorization with respect
to HG.
Section
4.13
No Brokers . HG has not employed any broker or
finder or incurred any liability for any broker’s fees,
commissions or finder’s fees in connection with the Merger or
the transactions contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
ACTIVECARE
As a material inducement to HG and the HG
Shareholders to enter into this Agreement, ActiveCare represents
and warrants to HG and the HG Shareholders as of the date hereof
and the Closing Date (except as set forth on the Schedule of
Exceptions attached hereto with each numbered Schedule
corresponding to the section number herein), as follows:
Section
5.1
Organization ,Good Standing and Power
. ActiveCare 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 to own, lease and
operate its properties and assets and to conduct its business as it
is now being conducted. ActiveCare does not have any Subsidiaries
except as set forth in ActiveCare’s registration statement on
Form S-1 filed with the Commission on September 30, 2008, including
the accompanying financial statements, or in ActiveCare’s
Form 10-Q for the fiscal quarter ended June 30, 2009, or on
Schedule 5.1 hereto. ActiveCare and of its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification
necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a
Material Adverse Effect.
Section
5.2
Authority and Enforceability . ActiveCare has the
requisite corporate power and authority to enter into and perform
this Agreement and otherwise carry out its obligations thereunder.
The execution, delivery and performance of this Agreement by
ActiveCare and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action, and no further consent or authorization
of ActiveCare or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by
ActiveCare. This Agreement constitutes, or shall constitute when
executed and delivered, a valid and binding obligation of
ActiveCare enforceable against ActiveCare in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and
remedies or by other equitable principles of general
application.
Section
5.3
Capitalization The authorized capital stock of
ActiveCare, the number of shares of such capital stock issued and
outstanding, and the number of shares of capital stock reserved for
issuance upon the exercise or conversion of all outstanding
warrants, stock options, and other securities issued by ActiveCare,
as of the date hereof, are set forth on Schedule 5.3 hereto. Except
as set forth in this Agreement and as set forth on
Schedule
