AGREEMENT AND PLAN OF
MERGER
BY AND AMONG
VISTA.COM, INC.,
VISTA ACQUISITION
CORP.
AND
SOURCE ENERGY
CORPORATION
October 21, 2005
AGREEMENT AND PLAN OF
MERGER
THIS AGREEMENT AND PLAN OF MERGER
(this “ Agreement ”) is dated as of October 21,
2005, by and among Source Energy Corporation, a Utah corporation (
“Parent” ), Vista Acquisition Corp., a
Washington corporation and wholly-owned subsidiary of Parent (
“Merger Subsidiary” ), and Vista.com, Inc., a
Washington corporation (the “Company”
).
WHEREAS, the Company is in the
business of operating a small business interchange via the Internet
(the “Business” ); and
WHEREAS, the Boards of Directors of
Parent and Merger Subsidiary, and the shareholders of the Company,
have approved (or will have approved prior to the Closing) the
merger of the Merger Subsidiary with and into the Company (the
“Merger” ) upon the terms and subject to the
conditions set forth herein; and
WHEREAS, for federal income tax
purposes, it is intended that the Merger will qualify as a
reorganization within the meaning of Section 368(a)(1)(A) and
(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
“Code” ); and
WHEREAS, the parties hereto desire
to make certain representations, warranties, and agreements in
connection with the Merger and also to prescribe various conditions
to the Merger;
NOW, THEREFORE, in consideration of
the foregoing premises and the mutual representations, warranties,
covenants, and agreements contained herein, the parties hereto
agree as follows:
ARTICLE 1
THE MERGER; CONVERSION OF
SHARES
1.1
The Merger . Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2
hereof), the Merger Subsidiary will be merged with and into the
Company in accordance with the provisions of the Washington
Business Corporation Act (the “Washington Act”
), whereupon the separate corporate existence of the Merger
Subsidiary will cease, and the Company will continue as the
surviving corporation (the “Surviving
Corporation” ). From and after the Effective Time, the
Surviving Corporation will possess all the rights, privileges,
powers, and franchises and be subject to all the restrictions,
disabilities, and duties of the Company and Merger Subsidiary, all
as more fully described in the Washington Act and the Articles of
Merger.
1.2
Effective Time . As soon as practicable after each of the
conditions set forth in Article 5 and Article 6 has
been satisfied or waived, the Company and Merger Subsidiary will
file, or cause to be filed, with the Secretary of State of the
State of Washington, Articles of Merger for the Merger, in
substantially the form attached as Exhibit 1.2 (the
“Articles of Merger” ). The Merger will become
effective at the time such filing is made or, if agreed to by
Parent and the Company, such later time or date set forth in the
Articles of Merger (the “Effective Time”
).
(a) Unless
this Agreement has been terminated and the transactions
contemplated herein have been abandoned pursuant to Article
7 hereof, the closing of the Merger (the
“Closing” ) will take place at a time and on a
date (the “Closing Date” ) to be specified by
the parties, which will be no later than November 30, 2005
(the “ Termination Date ”); provided,
however, that all of the conditions provided for in Article
5 and Article 6 hereof shall have been satisfied or
waived by such date. The Closing will be held at the offices of DLA
Piper Rudnick Gray Cary US LLP, located at
701 Fifth Avenue, Suite 7000,
Seattle, WA 98104-7044, or at such other place as the parties may
agree, at which time and place the documents and instruments
necessary or appropriate to effect the transactions contemplated
herein will be exchanged by the parties. Except as otherwise
provided herein, all actions taken at the Closing will be deemed to
be taken simultaneously.
(b) Subject
to and effective immediately prior to the Closing, the Company
shall (i) pay Jenson Services, Inc., a Utah corporation (
“Jenson Services” ), and Craig Carpenter,
Parent’s President (“Carpenter” ), the sum
of $300,000 (according to the distribution schedule attached as
Schedule 1.3(b) ), $25,000 of which has already been paid by
the Company, and (ii) issue 500,000 shares of Company Common Stock
(as defined below), of which (A) 280,000 will be issued to Jenson
Services and 150,000 will be issued to Carpenter, in consideration
of Jenson Services’ and Carpenter's payment of, and
indemnification of Parent and the Company with respect to, any and
all past liabilities of any type or nature of Parent existing at or
based upon acts, omissions, conditions or occurrences prior to
Closing, pursuant to the terms of the “Indemnification
Agreement” attached hereto as Exhibit 1.3(b) , and
(B) 70,000 shares will be issued to Leonard W. Burningham, as
directed by Jenson Services ( “Burningham”
).
(c) Subject
to and effective as of Closing, Parent and Carpenter will execute
and deliver at Closing the “Lease Option
Agreement” attached hereto as Exhibit 1.3(c) ,
pursuant to which Parent will have the option after the Closing to
transfer and sell to Carpenter a certain oil and gas lease and
related equipment and licenses in consideration of the full
satisfaction of Carpenter’s $75,000 judgment outstanding
against Parent, among other considerations set forth
therein.
1.4
Conversion of Interests . Subject to the terms and
conditions of this Agreement, at the Effective Time, by virtue of
the Merger and without any action on the part of the Company and/or
the Merger Subsidiary:
(a) All
of the shares of the common stock (“ Company Common
Stock ”) and preferred stock (“ Company
Preferred Stock ”), if any, of the Company (together,
“ Company Capital Stock ”) issued and
outstanding immediately prior to the Effective Time (except for
shares of Company Capital Stock referred to in Section
1.4(b) hereof) will be converted into the right to receive an
aggregate of 15,966,838 shares of common stock of the Parent, par value
$.00025 per share (“ Parent Common Stock ”),
based on the exchange ratio (the “ Exchange Ratio
”), equaling 1.00 share of Parent Common Stock for each share
of Company Capital Stock outstanding at the Effective
Time.
(b) Each
share of Company Capital Stock issued and outstanding immediately
prior to the Effective Time that is then owned beneficially or of
record by Parent, Merger Subsidiary, or any direct or indirect
subsidiary of Parent or Merger Subsidiary will be canceled without
payment of any consideration therefor and without any conversion
thereof. Furthermore, at the Effective Time, one (1) share of
Company Common Stock shall be issued to Parent.
(c) Each
option, warrant and convertible promissory note of the Company
outstanding immediately prior to the Effective Time that is
convertible into, or exercisable for, shares of Company Capital
Stock shall be assumed by Parent, in accordance with Section
1.5(f) and Section 4.7 . In the event that there are
additional shares of Company Capital Stock issued and outstanding,
or additional options, warrants or convertible securities
convertible into or exercisable for shares of Company Capital Stock
due to compensatory grants made in the ordinary course of business
or pursuant to financing and/or acquisition transactions completed
by the Company prior to the Closing of the Merger, such securities
shall be exchanged for, or convertible into or exercised for,
shares of Parent Common Stock at the Exchange Ratio.
(d) The
amount of Parent Common Stock, into which shares of Company Capital
Stock, options, warrants or convertible securities convertible into
or exercisable for shares of Company Capital Stock, is converted
(including the assumption of all Assumed Options, Assumed Warrants,
and Assumed Notes assumed pursuant hereto), is referred to herein
as the “ Merger Consideration .”
(e) Each
share of common stock of Merger Subsidiary, no par value per share
( “Merger Subsidiary Common Stock” ), issued and
outstanding immediately prior to the Effective Time will be
canceled as of the Effective Time.
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1.5
|
Exchange of Company Capital Stock
.
|
(a) Promptly
following the Closing, the Company will arrange for each holder of
record (a “ Shareholder ”) of Company
Capital Stock outstanding immediately prior to the Effective Time
to deliver to Parent, or to an exchange agent, transfer agent or
other agent designated by Parent (“ Parent’s
Agent ”), appropriate evidence of such holder's interest
in shares of Company Capital Stock ( “Company
Certificates” ), together with a transmittal letter and
an appropriate assignment signed by such holder, in exchange for
the number of whole shares of Parent Common Stock into which such
interest has been converted as provided in Section 1.4(a) ,
and the Company Certificate(s) so surrendered will be
canceled.
(b) All
shares of Parent Common Stock issued upon the surrender for
exchange of shares of Company Capital Stock in accordance with the
terms hereof will be deemed to have been issued in full
satisfaction of all rights pertaining to such surrendered shares of
Company Capital Stock.
(c) As
of the Effective Time, the record holders of Company Certificates
representing shares of Company Capital Stock will cease to have any
rights as
shareholders of the Company, except
such rights, if any, as they may have pursuant to the Washington
Act. Except as provided above, until such Company Certificates are
surrendered to Parent’s Agent for exchange, each such Company
Certificate will, after the Effective Time, represent for all
purposes only the right to receive certificates representing the
number of shares of Parent Common Stock into which shares of
Company Capital Stock shall have been converted pursuant to the
Merger as provided in Section 1.4(a) hereof.
(d) No
fractional shares of Parent Common Stock will be issued upon the
surrender for exchange of Company Certificates or upon exercise or
conversion of Assumed Options, Assumed Warrants or Assumed Notes;
no dividend or other distribution of Parent will relate to any such
fractional share; and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a shareholder
of Parent. All fractional shares of Parent Common Stock to which a
holder of Company Capital Stock (including each holder of an
Assumed Option, Assumed Warrant and Assumed Note) immediately prior
to the Effective Time would otherwise be entitled (including as a
result of the exercise or conversion of an Assumed Option, Assumed
Warrant or Assumed Note), at the Effective Time, will be aggregated
if and to the extent multiple Company Certificates (or agreements,
instruments or certificates representing such Assumed Options,
Assumed Warrants and Assumed Notes) of such holder are submitted
together to Parent. If a fractional share still results after such
aggregation (including in the case of the exercise or conversion of
an Assumed Option, Assumed Warrant or Assumed Note), then such
fractional share will be rounded up to the nearest whole share and
each holder of shares of Company Capital Stock who otherwise would
be entitled to receive such fractional share of Parent Common Stock
will receive one whole share in lieu of such fractional
share.
(e) In
the event any Company Certificates shall have been lost, stolen or
destroyed, Parent’s Agent shall issue in exchange for such
lost, stolen or destroyed Company Certificates, upon the making of
an affidavit of that fact by the holder thereof, such shares of
Parent Common Stock as may be required pursuant to Section
1.4 ; provided, however, that Parent may, in its discretion and
as a condition precedent to the issuance thereof, require the owner
of such lost, stolen or destroyed Certificates to deliver an
indemnity agreement against any claim that may be made against
Parent, the Surviving Corporation or Parent’s Agent with
respect to the Company Certificates alleged to have been lost,
stolen or destroyed.
(f) At
Closing, Parent will assume the Company’s existing stock
option plans (the “Company Stock Option Plans”
).
(g) Immediately
prior to the Closing, Parent will have outstanding no more than
405,000 shares of Parent Common Stock, and no other options,
warrants or other securities exercisable for a convertible into
shares of Parent Common Stock.
1.6
Articles of Incorporation of the Surviving Corporation . The
Articles of Incorporation of the Company (the “Company
Articles” ) as in effect immediately prior to
the
Effective Time will be the Articles
of Incorporation of the Surviving Corporation, until thereafter
amended in accordance with the Washington Act and the Company
Articles.
1.7
Bylaws of the Surviving Corporation . The Bylaws of the
Company, as in effect immediately prior to the Effective Time, will
be the Bylaws of the Surviving Corporation until thereafter amended
in accordance with applicable law.
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1.8
|
Directors and Officers of the Surviving
Corporation and Parent.
|
(a)
Directors and Officers of the Surviving Corporation . The
directors and officers of the Company, as of the Effective Time,
shall continue as the directors of the Surviving
Corporation.
(b)
Directors of the Parent . Effective as of the Effective
Time, John Dennis, Harold Kawaguchi, Marvin Mall, Keith Cannon,
Greg Stevenson, and John Wall shall be appointed to serve as
directors of Parent (the “New Directors” ), and
the director or directors of Parent immediately prior to the
Effective Time shall resign effective as of the Effective Time,
unless otherwise provided herein. The officers of the Surviving
Corporation shall be appointed as the officers of Parent by the New
Directors.
1.9
Dissenting Interests . Notwithstanding any provision of this
Agreement to the contrary, each outstanding share of Company
Capital Stock, the holder of which has demanded and perfected such
holder's right to dissent from the Merger and to be paid the fair
value of such shares in accordance with Section 23B.13 of the
Washington Act and, as of the Effective Time, has not effectively
withdrawn or lost such dissenters' rights ( “Dissenting
Interests” ), will not be converted into or represent a
right to receive Parent Common Stock into which Company Capital
Stock are converted pursuant to Section 1.4 hereof, but the
holder thereof will be entitled only to such rights as are granted
by the Washington Act. Parent will cause the Company to make all
payments to holders of Company Capital Stock with respect to such
demands in accordance with the Washington Act. The Company will
give Parent (i) prompt written notice of any notice of intent to
demand fair value for any Company Capital Stock, withdrawals of
such notices, and any other instruments served pursuant to the
Washington Act and received by the Company, and (ii) after Closing
the opportunity to conduct jointly all negotiations and proceedings
with respect to demands for fair value for Company Capital Stock
under the Washington Act. The Company will not, except with the
prior written consent of Parent or as otherwise required by law,
voluntarily make any payment with respect to any demands for fair
value for Company Capital Stock or settle or offer to settle any
such demands.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company hereby represents and
warrants to Parent as follows:
2.1
Disclosure Schedule . The disclosure schedule of the Company
(the “Company Disclosure Schedule” ) is
divided into sections that correspond to the sections of this
Article 2 . The Company Disclosure Schedule comprises a list
of all exceptions to the truth and accuracy of,
and of all disclosures or
descriptions required by, the representations and warranties set
forth in the remaining sections of this Article 2
.
2.2
Corporate Organization, etc . The Company is a corporation
duly organized and validly existing under the laws of the State of
Washington with the requisite corporate power and authority to
carry on its business as it is now being conducted and to own,
operate and lease its properties and assets, is duly qualified or
licensed to do business as a foreign corporation in good standing
in every other jurisdiction in which the character or location of
the properties and assets owned, leased or operated by it or the
conduct of its business requires such qualification or licensing,
except in such jurisdictions in which the failure to be so
qualified or licensed and in good standing would not, individually
or in the aggregate, have a Material Adverse Effect (as defined
below) on the Company. The Company Disclosure Schedule contains a
list of all jurisdictions in which the Company is qualified or
licensed to do business and includes complete and correct copies of
the Company articles of incorporation and bylaws. The Company does
not own or control any capital stock of any corporation or any
interest in any partnership, joint venture or other
entity.
2.3
Capitalization . The authorized capital securities of the
Company is set forth in the Company Disclosure Schedule. The number
of shares of Company Common Stock and Company Preferred Stock
outstanding, as of the date of this Agreement and as set forth in
the Company Disclosure Schedule, represent all of the issued and
outstanding capital securities of the Company. All issued and
outstanding shares of Company Capital Stock are duly authorized,
validly issued, fully paid and nonassessable and are without, and
were not issued in violation of, preemptive rights. There are no
shares of Company Capital Stock or other equity securities of the
Company outstanding or any securities convertible into or
exchangeable for such interests, securities or rights. Other than
as set forth on the Company Disclosure Schedule and pursuant to
this Agreement, there is no subscription, option, warrant, call,
right, contract, agreement, commitment, understanding or
arrangement to which the Company is a party, or by which it is
bound, with respect to the issuance, sale, delivery or transfer of
the capital securities of the Company, including any right of
conversion or exchange under any security or other
instrument.
2.4
Authorization, etc . The Company has all requisite corporate
power and authority to enter into, execute, deliver, and perform
its obligations under this Agreement and each other agreement to be
entered into by the Company in connection with this Agreement. This
Agreement has been duly and validly executed and delivered by the
Company and is the valid and binding legal obligation of the
Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws that affect
creditors’ rights generally.
2.5
Non-Contravention . Neither the execution, delivery and
performance of this Agreement, and each other agreement to be
entered into in connection with this Agreement, nor the
consummation of the transactions contemplated herein
will:
(a) violate,
contravene or be in conflict with any provision of articles of
incorporation or bylaws of the Company;
(b) be
in conflict with, or constitute a default, however defined (or an
event which, with the giving of due notice or lapse of time, or
both, would constitute such a default), under, or cause or permit
the acceleration of the maturity of, or give rise to any right of
termination, cancellation, imposition of fees or penalties under
any debt, note, bond, lease, mortgage, indenture, license,
obligation, contract, commitment, franchise, permit, instrument or
other agreement or obligation to which the Company is a party or by
which the Company or any of the Company's properties or assets is
or may be bound;
(c) result
in the creation or imposition of any pledge, lien, security
interest, restriction, option, claim or charge of any kind
whatsoever (“ Encumbrances ”) upon any property
or assets of the Company under any debt, obligation, contract,
agreement or commitment to which the Company is a party or by which
the Company or any of the Company's assets or properties are bound;
or
(d) materially
violate any statute, treaty, law, judgment, writ, injunction,
decision, decree, order, regulation, ordinance or other similar
authoritative matters (referred to herein individually as a
“Law” and collectively as
“Laws” ) of any foreign, federal, state or local
governmental or quasi-governmental, administrative, regulatory or
judicial court, department, commission, agency, board, bureau,
instrumentality or other authority (referred to herein individually
as an “Authority” and collectively as
“Authorities” ).
2.6
Consents and Approvals . No consent, approval, order or
authorization of or from, or registration, notification,
declaration or filing with ( “Consent” ) any
individual or entity, including without limitation any Authority,
is required in connection with the execution, delivery or
performance of this Agreement by the Company or the consummation by
the Company of the transactions contemplated herein.
2.7
Financial Statements . The Company Disclosure Schedule
contains a copy of the unaudited financial statements of the
Company as of June 30, 2005 (the “Financial
Statements” ). Except as disclosed therein or in the
Company Disclosure Schedule, the aforesaid Financial Statements:
(i) are in accordance with the books and records of the
Company and have been prepared in conformity with generally
accepted accounting principles (except as stated therein or in the
notes thereto); and (ii) are true, complete and accurate in
all material respects and fairly present the financial position of
the Company as of the date thereof, and the income or loss for the
period then ended.
2.8
Absence of Undisclosed Liabilities . The Company does not
have any material liabilities, obligations or claims of any kind
whatsoever, whether secured or unsecured, accrued or unaccrued,
fixed or contingent, matured or unmatured, known or unknown, direct
or indirect, contingent or otherwise and whether due or to become
due (referred to herein individually as a
“Liability” and collectively as
“Liabilities” ), other than:
(a) Liabilities that are fully reflected or reserved for in
the balance sheet set forth in the Financial Statements (the
“Balance Sheet” ); (b) Liabilities that are
set forth on the Company Disclosure Schedule; (c) Liabilities
incurred by the Company in the ordinary course of business after
the date of the Balance Sheet and consistent with past practice;
(d) Liabilities in an amount not to exceed $50,000 individually or
in the aggregate unless such amounts are disclosed on the Company
Disclosure Schedule; or
(e) Liabilities for express
executory obligations to be performed after the Closing under the
contracts described in Section 2.14 of the Company
Disclosure Schedule.
2.9
Absence of Certain Changes . Since the date of the Financial
Statements, the Company has owned and operated its assets,
properties and business in the ordinary course of business and
consistent with past practice. Without limiting the generality of
the foregoing, subject to the aforesaid exceptions:
(a) the
Company has not experienced any change that has had or could
reasonably be expected to have a Material Adverse Effect on the
Company; and
(b) the
Company has not suffered (i) any loss, damage, destruction or other
property or casualty (whether or not covered by insurance) or (ii)
any loss of officers, employees, dealers, distributors, independent
contractors, customers or suppliers, which had or may reasonably be
expected to result in a Material Adverse Effect on the
Company.
2.10
Assets . The Company has good and marketable title to all of
its material assets and properties, whether or not reflected in the
Balance Sheet or acquired after the date thereof (except for
properties sold or otherwise disposed of since the date thereof in
the ordinary course of business and consistent with past
practices), that relate to or are necessary for the Company to
conduct its business and operations as currently conducted
(collectively, the “Assets” ), free and clear of
any mortgage, pledge, lien, security interest, conditional or
installment sales agreement, encumbrance, claim, easement, right of
way, tenancy, covenant, encroachment, restriction or charge of any
kind or nature (whether or not of record) (a
“Lien” ), other than (i) liens securing
specific Liabilities shown on the Balance Sheet with respect to
which no breach, violation or default exists; (ii) mechanics',
carriers', workers' or other like liens arising in the ordinary
course of business; (iii) minor imperfections of title that do
not individually or in the aggregate, impair the continued use and
operation of the Assets to which they relate in the operation of
the Company as currently conducted; and (iv) liens for current
taxes not yet due and payable or being contested in good faith by
appropriate proceedings ( “Permitted Liens”
).
2.11
Receivables and Payables . All accounts receivable of the
Company represent sales in the ordinary course of business and, to
the Company’s knowledge, are current and collectible net of
any reserves shown on the Balance Sheet and none of such
receivables is subject to any Lien other than a Permitted Lien. All
payables by the Company arose in bona fide transactions in the
ordinary course of business and no such payable is delinquent by
more than sixty (60) days beyond the due date in its
payment.
2.12
Intellectual Property Rights . To its knowledge, the Company
owns or has the unrestricted right to use all patents, patent
applications, patent rights, registered and unregistered
trademarks, trademark applications, tradenames, service marks,
service mark applications, copyrights, internet domain names,
computer programs and other computer software, inventions,
know-how, trade secrets, technology, proprietary processes, trade
dress, software and formulae (collectively, “Intellectual
Property Rights” ) used in, or necessary for, the
operation of its Business as currently conducted. The Company
Disclosure Schedule contains a listing of all issued patents and
pending patent applications, registered trademarks and trademark
applications,
registered copyrights and internet
domain names owned or licensed by the Company. To the
Company’s knowledge, the use of all Intellectual Property
Rights necessary or required for the conduct of the Business of the
Company as presently conducted does not infringe or violate the
Intellectual Property Rights of any person or entity. To the
Company’s knowledge: (a) the Company does not own or use
any Intellectual Property Rights pursuant to any written license
agreement, other than licensed software that is generally
commercially available on similar terms to all commercial
licensees; (b) the Company has not granted any person or
entity any rights, pursuant to a written license agreement or
otherwise, to use the Intellectual Property Rights, other pursuant
to licenses that are generally commercially available on similar
terms to all commercial licensees; and (c) the Company owns,
has unrestricted right to use and has sole and exclusive possession
of and has good and valid title to, all of the Intellectual
Property Rights, free and clear of all Liens and Encumbrances. All
license agreements relating to Intellectual Property Rights are
binding and there is not, under any of such licenses, any existing
default or event of default (or event which with notice or lapse of
time, or both, would constitute a default, or would constitute a
basis for a claim on non-performance) on the part of the Company
or, to the knowledge of the Company, any other party
thereto.
2.13
Litigation . There is no legal, administrative, arbitration,
or other proceeding, suit, claim or action of any nature or
investigation, review or audit of any kind, or any judgment,
decree, decision, injunction, writ or order pending, noticed,
scheduled, or, to the knowledge of the Company, threatened or
contemplated by or against or involving the Company, its assets,
properties or business or its directors, officers, agents or
employees (but only in their capacity as such), whether at law or
in equity, before or by any person or entity or Authority, or which
questions or challenges the validity of this Agreement or any
action taken or to be taken by the parties hereto pursuant to this
Agreement or in connection with the transactions contemplated
herein.
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2.14
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Contracts and Commitments; No Default
.
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(a) The
Company is not a party to, nor are any of the Assets bound by, any
written or oral:
(i) employment
agreement in which the Company may be obligated to provide
severance, collective bargaining agreement, or pension,
profit-sharing, deferred compensation, group insurance, severance
pay or retirement plan or agreement;
(ii) indenture,
mortgage, note, installment obligation, agreement or other
instrument relating to the borrowing of money by the
Company;
(iii) contract,
agreement, lease (real or personal property) or arrangement not in
ordinary course of business that (A) is not terminable on less
than 90 days' notice without penalty, or (B) involves an
obligation of more than $100,000 over its term;
(iv) obligation
or requirement to provide funds to or make any investment (in the
form of a loan, capital contribution or otherwise) in any person or
entity; or
(v) outstanding
sales or purchase contracts, commitments or proposals that will
result in any material loss upon completion or performance thereof
after allowance for direct distribution expenses, or bound by any
outstanding contracts, bids, sales or service proposals quoting
prices that are not reasonably expected to result in a normal
profit.
(b) True
and complete copies (or summaries, in the case of oral items) of
all agreements disclosed pursuant to this Section 2.14 (the
“Company Contracts” ) have been provided to
Parent. All of the Company Contracts are valid and enforceable by
and against the Company in accordance with their terms, and are in
full force and effect. The Company is not in breach, violation or
default, however defined, in the performance of any of its
obligations under any of the Company Contracts, and no facts and
circumstances exist which, whether with the giving of due notice,
lapse of time, or both, would constitute such breach, violation or
default thereunder or thereof, and, to the knowledge of the
Company, no other parties thereto are in a breach, violation or
default, however defined, thereunder or thereof, and no facts or
circumstances exist which, whether with the giving of due notice,
lapse of time, or both, would constitute such a breach, violation
or default thereunder or thereof.
2.15
Compliance with Law; Permits and Other Operating Rights .
The Assets, properties, business and operations of the Company are
and have been in compliance in all respects with all Laws
applicable to the Company's assets, properties, business and
operations, except where the failure to comply would not have a
Material Adverse Effect. The Company possesses all material
permits, licenses and other authorizations from all Authorities
necessary to permit it to operate its business in the manner in
which it presently is conducted and the consummation of the
transactions contemplated by this Agreement will not prevent the
Company from being able to continue to use such permits and
operating rights. The Company has not received notice of any
violation of any such applicable Law, and is not in default with
respect to any order, writ, judgment, award, injunction or decree
of any Authority.
2.16
Brokers . Neither the Company nor, to the knowledge of the
Company, any of the its directors, officers or employees, has
employed any broker, finder, investment banker or financial advisor
or incurred any liability for any brokerage fee or commission,
finder's fee or financial advisory fee, in connection with the
transactions contemplated hereby, nor is there any basis known to
the Company for any such fee or commission to be claimed by any
person or entity.
2.17
Issuance of Parent Common Stock . To the Company's
knowledge, as of the date of this Agreement and as of the Effective
Time, no facts or circumstances exist that would result in the
issuance of Parent Common Stock pursuant to the Merger to fail to
meet the exemption from the registration requirements of the
Securities Act set forth in Rule 506 of Regulation D under the
Securities Act; provided , however , the Company
makes no representation or warranty
of any kind whatsoever with respect
to the adequacy of the disclosures made by the Parent (whether
pursuant to its SEC filings or otherwise).
2.18
Books and Records . The books of account, minute books,
stock record books, and other material records of the Company, all
of which have been made available to Parent, are complete and
correct in all material respects and have been maintained in
accordance with reasonable business practices. The minute books of
the Company contain accurate and complete records of all formal
meetings held of, and corporate action taken by, the directors and
officers, the managers and committees of the managers of the
Company. At the Closing, all of those books and records will be in
the possession of the Company.
2.19
Business Generally; Accuracy of Information . No
representation or warranty made by the Company in this Agreement,
the Company Disclosure Schedule, or in any document, agreement or
certificate furnished or to be furnished to Parent at the Closing
by or on behalf of the Company in connection with any of the
transactions contemplated by this Agreement contains or will
contain any untrue statement of material fact or omit or will omit
to state any material fact necessary in order to make the
statements herein or therein not misleading in light of the
circumstances in which they are made, and all of the foregoing
completely and correctly present the information required or
purported to be set forth herein or therein.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
THE PARENT
AND THE MERGER
SUBSIDIARY
Parent and the Merger Subsidiary
represent and warrant to the Company as follows:
3.1
Disclosure Schedule . The disclosure schedule of Parent
(the “Parent Disclosure Schedule” ) is
divided into sections that correspond to the sections of this
Article 3 . The Parent Disclosure Schedule comprises a list
of all exceptions to the truth and accuracy of, and of all
disclosures or descriptions required by, the representations and
warranties set forth in the remaining sections of this Article
3 .
3.2
Corporate Organization, Standing and Power . Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Utah; and Merger Subsidiary is a
corporation duly organized and validly existing under the laws of
the State of Washington. Each of Parent and Merger Subsidiary has
all corporate power and authority to own its properties and to
carry on its business as now being conducted and is duly qualified
to do business and is in good standing in each jurisdiction in
which the failure to be so qualified would have a Material Adverse
Effect on Parent and Merger Subsidiary. The Parent Disclosure
Schedule contains a list of all jurisdictions in which the Parent
is qualified or licensed to do business and includes complete and
correct copies of the Parent’s articles of incorporation and
bylaws. The Parent owns all of the outstanding capital stock of
Merger Subsidiary. Parent does not own or control any capital stock
of any corporation or any interest in any partnership, joint
venture or other entity, other than Merger Subsidiary.
3.3
Authorization . Each of Parent and the Merger Subsidiary has
all the requisite corporate power and authority to enter into,
execute, delivery and perform their respective
obligations under this Agreement,
and each other agreement to be entered into in connection with this
Agreement and to carry out the transactions contemplated herein and
therein. The Board of Directors of Parent and the Merger
Subsidiary, and Parent as the sole shareholder of the Merger
Subsidiary, have taken all action required by law, their respective
articles of incorporation and bylaws or otherwise to authorize the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein. This
Agreement is the valid and binding legal obligation of Parent and
the Merger Subsidiary enforceable against each of them in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or
similar laws that affect creditors' rights generally. Parent is not
required to obtain approval of its shareholders to this Agreement
or the transactions contemplated hereunder.
3.4
Capitalization . The authorized capital securities of the
Parent and Merger Subsidiary are set forth in the Parent Disclosure
Schedule. The number of shares of Parent Common Stock, as of the
date of this Agreement and as set forth in the Parent Disclosure
Schedule, represent all of the issued and outstanding capital
securities of the Parent. All issued and outstanding shares of
Parent Common Stock are duly authorized, validly issued, fully paid
and nonassessable and are without, and were not issued in violation
of, preemptive rights. There are no shares of Parent Common Stock
or other equity securities of Parent outstanding or any securities
convertible into or exchangeable for such interests, securities or
rights. Other than as set forth on the Parent Disclosure Schedule
and pursuant to this Agreement, there is no subscription, option,
warrant, call, right, contract, agreement, commitment,
understanding or arrangement to which Parent is a party, or by
which it is bound, with respect to the issuance, sale, delivery or
transfer of the capital securities of Parent, including any right
of conversion or exchange under any security or other
instrument.
3.5
Non-Contravention . Neither the execution, delivery and
performan
