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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
SOLTERRA RENEWABLE TECHNOLOGIES, INC.
a Delaware corporation,
HAGUE, CORP.
a Nevada corporation,
and
SHAREHOLDERS IDENTIFIED HEREIN
October 15, 2008
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (“ Agreement ”) is entered into as of October 15, 2008, by and among Solterra Renewable Technologies, Inc., a Delaware corporation (“Solterra ” ) located at 14220 E. Cavedale Road, Scottsdale, AZ 85262, the Shareholders of Solterra, namely Stephen B. Squires and the other stockholders identified at the foot of this Agreement (collectively the “Solterra Shareholders”) with an address c/o Solterra, 14220 E. Cavedale Road, Scottsdale, AZ 85262, Hague Corp., a Nevada corporation, (“Hague”) located at 1865 Portage Avenue, Winnipeg, Canada A2 R3J 0H2 and Stephen B. Squires as Solterra Shareholders’ Representative with an address c/o Solterra, 14220 E. Cavedale Road, Scottsdale, AZ 85262 and Gregory Chapman as “Indemnitor” pursuant to Article X with an address at c/o Solterra, 14220 E. Cavedale Road, Scottsdale, AZ 85262 .
Certain other capitalized terms used in this Agreement are defined in Article 1.
STATEMENT OF PURPOSE AND RECITALS
A. Solterra and Hague intend to effect a Stock Exchange in accordance with this Agreement and applicable state law (the “Exchange”). Upon consummation of the Exchange, Hague will own 100% of Solterra. Solterra’s principal asset is a license agreement with William Marsh Rice University.
B. It is intended that the Exchange qualify as a tax-free reorganization within and/or the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE") or as a tax-free exchange pursuant to Section 351 of the Code. For accounting purposes, it is intended that the Exchange be treated as a "pooling of interests."
C. This Agreement has been approved by the respective boards of directors of Solterra and Hague, and subject to stockholder approval of each constituent corporation to the extent required by law.
D. In the event that it is determined by Solterra prior to closing that the Exchange Transaction may not tax free to all parties without a merger taking place, then Hague Corporation shall form a Delaware merger sub into which Solterra shall be merged with Solterra as the surviving corporation. In this event, Solterra’s Certificate of Incorporation and By-Laws shall become the surviving corporation’s Certificate of Incorporation and By-Laws. In addition, closing shall occur upon the filing of an appropriate Merger Certificate in the State of Delaware.
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ARTICLE I
DEFINITIONS
“Accounts Receivable” means all trade and other accounts receivable and other Indebtedness owing to any company.
“Affiliate” means, with respect to a specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, the specified Person. The term “control” means (a) the possession, directly or indirectly, of the power to vote 10% or more of the securities or other equity interests of a Person having ordinary voting power, (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person, by contract or otherwise, or (c) being a director, officer, executor, trustee or fiduciary (or their equivalents) of a Person or a Person that controls such Person.
“Closing Balance Sheet” means a consolidated balance sheet of the Companies as of the Closing Date an prepared in accordance with GAAP (as in effect on the date hereof) and, to the extent consistent with GAAP (as in effect on the date hereof), in a manner consistent with the Interim Balance Sheet.
“COBRA” means the requirements of Part 6 of Subtitle B of Title I of ERISA and Code § 4980B.
“Code” means the Internal Revenue Code of 1986.
“Confidential Information” means information concerning the businesses or affairs of any company, including information relating to license agreements, customers, clients, suppliers, distributors, investors, lenders, consultants, independent contractors or employees, price lists and pricing policies, financial statements and information, budgets and projections, business plans, production costs, market research, marketing, sales and distribution strategies, manufacturing techniques, processes and business methods, technical information, pending projects and proposals, new business plans and initiatives, research and development projects, inventions, discoveries, ideas, technologies, trade secrets, know-how, formulae, designs, patterns, marks, names, improvements, industrial designs, mask works, works of authorship and other Intellectual Property, devices, samples, plans, drawings and specifications, photographs and digital images, computer software and programming, all other confidential information and materials relating to the businesses or affairs of such company, and all notes, analyses, compilations, studies, summaries, reports, manuals, documents and other materials prepared by or for such company containing or based in whole or in part on any of the foregoing, whether in verbal, written, graphic, electronic or any other form and whether or not conceived, developed or prepared in whole or in part by such company.
“Consent” means any consent, approval, authorization, permission or waiver.
“Contract” means any contract, obligation, understanding, commitment, lease, license, purchase order, bid or other agreement, whether written or oral and whether express or implied, together with all amendments and other modifications thereto.
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“Employee Benefit Plan” means any (a) qualified or nonqualified Employee Pension Benefit Plan (including any Multiemployer Plan) or deferred compensation or retirement plan or arrangement, (b) Employee Welfare Benefit Plan or (c) equity-based plan or arrangement (including any stock option, stock purchase, stock ownership, stock appreciation or restricted stock plan) or material fringe benefit or other retirement, severance, bonus, profit-sharing or incentive plan or arrangement.
“Encumbrance” means any lien, mortgage, pledge, encumbrance, charge, security interest, adverse or other claim, community property interest, condition, equitable interest, option, warrant, right of first refusal, easement, profit, license, servitude, right of way, covenant, zoning or other restriction of any kind or nature.
“Environmental Law” means any Law relating to the environment, health or safety, including any Law relating to the presence, use, production, generation, handling, management, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control or cleanup of any material, substance or waste limited or regulated by any Governmental Body.
“ERISA” means the Employee Retirement Income Security Act of 1974.
“Funded Debt” means all obligations of the Companies for borrowed money, all interest-bearing obligations of the Companies, and all obligations of the Companies evidenced by bonds, notes, debentures or other similar instruments, in each case as of the Closing Date.
“GAAP” means generally accepted accounting principles in the United States as set forth in pronouncements of the Financial Accounting Standards Board (and its predecessors) and the American Institute of Certified Public Accountants and, unless otherwise specified, as in effect on the date hereof or, with respect to any financial statements, the date such financial statements were prepared.
“Governmental Body” means any federal, state, local, foreign or other government or quasi-governmental authority or any department, agency, subdivision, court or other tribunal of any of the foregoing.
“Hazardous Substance” means any material, substance or waste that is limited or regulated by any Governmental Body or, even if not so limited or regulated, could pose a hazard to the health or safety of the occupants of the Real Property or adjacent properties or any property or facility formerly owned, leased or used by any company. The term includes asbestos, polychlorinated biphenyls, petroleum products and all materials, substances and wastes regulated under any Environmental Law.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
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“Indebtedness” means as to any Person at any time: (a) obligations of such Person for borrowed money; (b) obligations of such Person evidenced by bonds, notes, debentures or other similar instruments; (c) obligations of such Person to pay the deferred purchase price of property or services (including all obligations under noncompete, consulting or similar arrangements), except trade accounts payable of such Person arising in the ordinary course of business that are not past due by more than 90 days or that are being contested in good faith by appropriate proceedings diligently pursued and for which adequate reserves have been established on the financial statements of such Person; (d) capitalized lease obligations of such Person; (e) indebtedness or other obligations of others guaranteed by such Person; (f) obligations secured by an Encumbrance existing on any property or asset owned by such Person; (g) reimbursement obligations of such Person relating to letters of credit, bankers’ acceptances, surety or other bonds or similar instruments; (h) Liabilities of such Person relating to unfunded, vested benefits under any Employee Benefit Plan (excluding obligations to deliver stock pursuant to stock options or stock ownership plans); and (i) net payment obligations incurred by such Person pursuant to any hedging agreement.
“Intellectual Property” means (a) inventions (whether patentable or unpatentable and whether or not reduced to practice), improvements thereto, and patents, patent applications and patent disclosures, together with reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof; (b) trademarks, service marks, trade dress, logos, trade names and corporate names, together with translations, adaptations, derivations and combinations thereof and including goodwill associated therewith, and applications, registrations and renewals in connection therewith; (c) copyrightable works, copyrights, and applications, registrations and renewals in connection therewith; (d) mask works and applications, registrations and renewals in connection therewith; (e) trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals); (f) computer software (including data and related documentation); (g) other proprietary rights; and (h) copies and tangible embodiments (in whatever form or medium) of any of the foregoing (with the Technology being included in the meaning of items (a) and (f).
“Inventory” means all inventories of any Company wherever located, including raw materials, goods consigned to vendors or subcontractors, works in process, finished goods, spare parts, goods in transit, products under research and development, demonstration equipment and inventory on consignment.
“IRS” means the U.S. Internal Revenue Service.
“Knowledge” means (a) actual knowledge or (b) knowledge that would be expected to be obtained after a reasonably comprehensive investigation concerning the matter at issue. Each party that is not an individual will be deemed to have Knowledge of a matter if any Affiliate of such Person or any employee of such Person with responsibility for such matter has, or at any time had, Knowledge of such matter.
“Law” means any federal, state, local, foreign or other law, statute, ordinance, regulation, rule, regulatory or administrative guidance, Order, constitution, treaty, principle of common law or other restriction of any Governmental Body.
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“Liability” means any liability, obligation, Indebtedness or commitment of any kind or nature, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due.
“Loss” means any loss, claim, demand, Order, damage, penalty, fine, cost (including any opportunity cost), settlement payment, Liability, Tax, Encumbrance, diminution of value, expense, fee, court costs or reasonable attorneys’ fees and expenses.
“Material Adverse Effect” means any material adverse effect on the businesses, operations, properties, assets, Liabilities, condition (financial or otherwise) or prospects of the companies taken as a whole.
“Multiemployer Plan” has the meaning set forth in ERISA § 3(37).
“Order” means any order, award, decision, injunction, judgment, ruling, decree, charge, writ, subpoena or verdict entered, issued, made or rendered by any Governmental Body or arbitrator.
“Organizational Documents” means (a) any certificate or articles of incorporation and bylaws, (b) any documents comparable to those described in clause (a) as may be applicable pursuant to any Law and (c) any amendment or modification to any of the foregoing.
“Party” means any party to this Agreement.
“PBGC” means the Pension Benefit Guaranty Corporation.
“Permit” means any permit, license or Consent issued by any Governmental Body or pursuant to any Law.
“Person” means any individual, corporation, limited liability company, partnership, company, sole proprietorship, joint venture, trust, estate, association, organization, labor union, Governmental Body or other entity.
“Proceeding” means any proceeding, charge, complaint, claim, demand, notice, action, suit, litigation, hearing, audit, investigation, arbitration or mediation (in each case, whether civil, criminal, administrative, investigative or informal) commenced, conducted, heard or pending by or before any Governmental Body, arbitrator or mediator.
“Related Person” means (a) with respect to a specified individual, any member of such individual’s Family and any Affiliate of any member of such individual’s Family, and (b) with respect to a specified Person other than an individual, any Affiliate of such Person and any member of the Family of any such Affiliates that are individuals. The “Family” of a specified individual means the individual, such individual’s spouse and former spouses, any other individual who is related to the specified individual or such individual’s spouse or former spouse within the third degree, and any other individual who resides with the specified individual.
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“Representative” means, with respect to a particular Person, any director, officer, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants and financial advisors.
“Securities Act” means the Securities Act of 1933.
“Capital Stock” means all common stock of the applicable party of the date hereof.
“Share” means any issued and outstanding share of common stock, of the applicable party.
“Subsidiary” means any corporation or other entity with respect to which the party and its other Subsidiaries collectively own, directly or indirectly, at least 50% of the common stock or other equity or profits interests or have the power, directly or indirectly, to elect a majority of the members of the board of directors or comparable governing body.
“Tax” means any federal, state, local, foreign or other income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code § 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, general service, alternative or add-on minimum, estimated or other tax of any kind whatsoever, however denominated, and will include any interest, penalty, or addition thereto, whether disputed or not.
“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any form, schedule or attachment thereto and any amendment or supplement thereof.
“Transactions” means the transactions contemplated by the Transaction Documents.
“Transaction Documents” means this Agreement and all other written agreements, documents and certificates contemplated by any of the foregoing documents.
For good and valuable consideration, the receipt of which is hereby acknowledged, the parties to this Agreement agree as follows:
ARTICLE II
DESCRIPTION OF TRANSACTION
2.1 THE EXCHANGE. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing Date (as defined in Section 2.3), the Solterra Shareholders shall exchange (the ”Exchange”) 41,250,000 shares of common stock of Solterra, representing 100% of their Solterra common stock on a one-for-one basis for 41,250,000 shares of common stock of Hague, (the “Conversion Shares”).
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2.2 EFFECT OF THE EXCHANGE. At closing, Solterra shall become a wholly-owned subsidiary of Hague.
2.3 CLOSING; The consummation of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Morse & Morse, PLLC, commencing at 10:00 a.m. local time on the later of (i) the second Business Day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the Transactions to be performed on the Closing Date (other than conditions with respect to actions the Parties will take at the Closing) or (ii) such other date as the Parties designate in writing (the “ Closing Date ”), but in no event later than November 30, 2008. In the event that a Merger Certificate is filed pursuant to Section 2.9 on the Closing Date, the Effective Time of the merger shall be the filing date of said Merger Certificate.
2.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless otherwise determined by the Parties prior to the Closing Date:
(a) the Articles of Incorporation of Hague shall be amended to change its name and authorized capital stock as directed by Solterra.
(b) the Bylaws of Hague shall be amended, if at all, as directed by Solterra, and
(c) the directors and officers of Hague shall resign and be replaced with the designees of Solterra..
2.5 CONVERSION SHARES. The following table sets forth the ownership of Solterra’s outstanding 41,250,000 shares and number of Conversion Shares to be received by each Solterra stockholder at Closing.
Solterra has granted or intends to grant Options to its officers and directors Options in connection with entering into employment contracts and contracts for services of directors. In the event these contracts are entered into prior to closing, then each Solterra Option granted shall become an Option to purchase Hague Common Stock on the same terms and conditions specified therein.
2.6 TAX CONSEQUENCES. For federal income tax purposes, the Exchange is intended to constitute a reorganization within the meaning of Section 368 of the Code or a tax-free exchange under Section 351 of the Code. The Parties to this Agreement hereby adopt this Agreement as a "Plan of Reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
2.7 ACCOUNTING TREATMENT. For accounting purposes, the Exchange is intended to be treated as a "pooling of interests."
2.8 FINANCING. This Transaction and the Exchange contemplated herein is conditioned upon the following events being satisfied prior to closing:
(i) Hague currently has authorized 100,000,000 shares of Common Stock, $.001 par value, of which 64,400,000 shares of its Common Stock are issued and outstanding and are held by “Hague Existing Shareholders.” In connection with the closing of this Transaction, 41,250,000 shares shall be issued as Conversion Shares to the Solterra shareholders. Simultaneously with this Transaction, Hague shall complete the sale of its Convertible Debentures and it shall raise $1,500,000 (the “Initial Financing”). Hague shall also arrange for the completion of an equity financing of $3,500,000 (the “Subsequent Financing”). It is agreed that prior to or simultaneously with the Closing, the Hague Existing Shareholders shall reduce their stockholdings from 64,400,000 shares to 24,400,000 shares. It is also agreed that the conversion features of the Debentures and the number of shares to be issued in connection with the Subsequent Financing shall not exceed 9,350,000 shares in the aggregate and that prior to closing, Solterra must be satisfied with the definitive conversion and other terms of the Debentures and the terms and post closing likelihood of success of the Subsequent Financing.
(ii) Hague Existing Shareholders holding at least 20,000,000 shares of Common Stock shall execute an irrevocable proxy granting Stephen Squires the right to vote such proxy at all stockholder meetings until the shares are sold or transferred to unrelated third parties in an arms-length transaction.
(iii) The 24,400,000 shares to be retained by the Hague Existing Shareholders has been agreed to by the parties on the basis that Hague shall successfully raise $3,500,000 from the Subsequent Financing on or before January 30, 2009 (the “Subsequent Financing Termination Date”), it being understood that time is of the essence. In the event that the Subsequent Financing is not completed in its entirety, then 70% of the 24,400,000 shares held by Hague Existing Shareholders shall be subject to a pro rata forfeiture to the extent that less than $3,500,000 of the Subsequent Financing is completed. For example, if $1,750,000 is raised on or before the Subsequent Financing Termination Date, then 8,540,000 shares held by the Hague Existing Shareholders shall be submitted for and shall be cancelled. (24,400,000 x .7 = 17,080,000 x 50% = 8,540,000.). Prior to Closing, Solterra shall receive agreements satisfactory to it from Hague Existing Shareholders sufficient to implement the provisions of this paragraph.
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2.9 MERGER SUBSIDIARY. In the event that it is determined by Solterra prior to closing that the Exchange Transaction may not tax free to all parties without a merger taking place, then Hague Corporation shall form a Delaware merger sub into which Solterra shall be merged with Solterra as the surviving corporation. In this event, Solterra’s Certificate of Incorporation and By-Laws shall become the surviving corporation’s Certificate of Incorporation and By-Laws. In addition, promptly after closing, an appropriate Merger Certificate shall be filed in the State of Delaware and the Merger shall become effective upon the filing of said Merger Certificate with the Secretary of State of the State of Delaware.
ARTICLE III
REPRESENTATIONS AND WARRANTIES BY THE SOLTERRA SHAREHOLDERS
The Solterra Shareholders severally represent and warrant as follows:
3.1 Organization and Authority . If such Solterra Shareholder is not an individual, such Solterra Shareholder is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation. Such Solterra Shareholder has full power, authority and legal capacity to execute and deliver the Transaction Documents to which such Solterra Shareholder is a party and to perform such Solterra Shareholder’s obligations thereunder. If such Solterra Shareholder is not an individual, the execution and delivery by such Solterra Shareholder of each Transaction Document to which it is a party and the performance by such Solterra Shareholder of the Transactions have been duly approved by the board of directors or comparable governing body of such Solterra Shareholder and, if required by Law, the equity holders of such Solterra Shareholder. This Agreement constitutes the valid and legally binding obligation of such Solterra Shareholder, enforceable against such Solterra Shareholder in accordance with the terms of this Agreement. Upon the execution and delivery by such Solterra Shareholder of each Transaction Document to which such Solterra Shareholder is a party, such Transaction Document will constitute the valid and legally binding obligation of such Solterra Shareholder, enforceable against such Solterra Shareholder in accordance with the terms of such Transaction Document.
3.2 Share Ownership . Each Solterra Shareholder owns of record and beneficially the number of shares of outstanding common stock set forth in Section 2.5, free and clear of any Encumbrance or restriction on transfer (other than any restriction under any securities law). Each Solterra Shareholder is not a party to: (a) any convertible debt instrument, option, warrant, purchase right, right of first refusal, call, put or other Contract (other than this Agreement) that could require such Solterra Shareholder to sell, transfer or otherwise dispose of any securities of Solterra or (b) any voting trust, proxy or other Contract relating to the voting of any securities of Solterra.
3.3 No Brokers’ Fees . Each Solterra Shareholder has no Liability for any fee, commission or payment to any broker, finder, consultant or agent with respect to the Transactions to be performed on or before the Closing Date.
3.4 Investment Intent. Each Solterra Shareholder is acquiring the Conversion Shares of Hague hereunder for its own account and not with a view to distribution of such shares in violation of the Securities Act. Each Solterra Shareholder, either alone or together with its Advisors, if any, have such knowledge and experience in financial, tax, and business matters, and, in particular, investments in securities, so as to enable the Solterra Shareholders to utilize the information made available to them in connection with its due diligence of Hague to evaluate the merits and risks of an investment in the Conversion Shares of Hague and to make an informed investment decision with respect thereto.
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Each Solterra Shareholder is acquiring the Conversion Shares of Hague solely for his own account for investment and not with a view to resale or distribution thereof, in whole or in part. Each Solterra Shareholder has no agreement or arrangement, formal or informal, with any person to sell or transfer all or any of the Conversion Shares of Hague and each Solterra Shareholder has no plans to enter into any such agreement or arrangement.
3.5 Accredited Investors. EACH SOLTERRA SHAREHOLDER IS AN “ACCREDITED INVESTOR,” AS THAT TERM IS DEFINED IN RULE 501(A) OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT. IF THE SOLTERRA SHAREHOLDER IS A NATURAL PERSON, SUCH INDIVIDUAL (I) IS A CITIZEN OR RESIDENT OF THE COUNTRY SET FORTH AS HIS PERMANENT ADDRESS BELOW, (II) IS AT LEAST 21 YEARS OF AGE, (III) HAS ADEQUATE MEANS OF PROVIDING FOR HIS CURRENT NEEDS AND PERSONAL CONTINGENCIES, (IV) HAS NO NEED FOR LIQUIDITY IN HIS STOCK CONSIDERATION, AND (V) MAINTAINS HIS DOMICILE (AND IS NOT A TRANSIENT OR TEMPORARY RESIDENT) AT THE ADDRESS SHOWN HEREIN. EACH SOLTERRA SHAREHOLDER REPRESENTS AND WARRANTS TO THE COMPANY THAT, AS AN ACCREDITED INVESTOR, HE, SHE OR IT IS ONE OF THE FOLLOWING:
A. AN INDIVIDUAL WHOSE INDIVIDUAL NET WORTH, OR JOINT NET WORTH WITH THAT INDIVIDUAL’S SPOUSE, EXCEEDS $1,000,000;
B. AN INDIVIDUAL WHO HAD AN INDIVIDUAL INCOME IN EXCESS OF $200,000 IN THE LAST TWO TAX YEARS OR WHO HAD JOINT INCOME WITH THAT INDIVIDUAL’S SPOUSE IN EXCESS OF $300,000 IN EACH OF THOSE YEARS AND WHO REASONABLY EXPECTS TO HAVE THAT INCOME LEVEL IN THE CURRENT TAX YEAR;
C. A BANK AS DEFINED IN SECTION 3(A)(2) OF THE SECURITIES ACT OR A SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION AS DEFINED IN SECTION 3(A)(5)(A) OF THE SECURITIES ACT WHETHER ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY; A BROKER OR DEALER REGISTERED PURSUANT TO SECTION 15 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE “ EXCHANGE ACT ”); AN INSURANCE COMPANY AS DEFINED IN SECTION 2(13) OF THE SECURITIES ACT; AN INVESTMENT COMPANY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940 (THE “ 1940 ACT ”) OR A BUSINESS DEVELOPMENT COMPANY AS DEFINED IN SECTION 2(A)(48) OF THE 1940 ACT; A SMALL BUSINESS INVESTMENT COMPANY LICENSED BY THE U.S. SMALL BUSINESS INVESTMENT ACT OF 1958; OR AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (“ ERISA ”), WHICH IS EITHER A BANK, SAVINGS AND LOAN ASSOCIATION, INSURANCE COMPANY OR REGISTERED INVESTMENT ADVISER, OR IF THE EMPLOYEE BENEFIT PLAN HAS TOTAL ASSETS IN EXCESS OF $5,000,000; OR, IF A SELF-DIRECTED PLAN, WITH INVESTMENT DECISIONS MADE SOLELY BY PERSONS THAT ARE ACCREDITED INVESTORS;
D. A PRIVATE BUSINESS DEVELOPMENT COMPANY AS DEFINED IN SECTION 202(A)(22) OF THE INVESTMENT ADVISERS ACT OF 1940;
E. AN ORGANIZATION DESCRIBED IN SECTION 501(C)(3) OF THE INTERNAL REVENUE CODE, A CORPORATION, MASSACHUSETTS OR SIMILAR BUSINESS TRUST, OR PARTNERSHIP, NOT FORMED FOR THE SPECIFIC PURPOSE OF ACQUIRING THE SECURITIES OFFERED, WITH TOTAL ASSETS IN EXCESS OF $5,000,000;
F. A TRUST WITH TOTAL ASSETS IN EXCESS OF $5,000,000, NOT FORMED FOR THE SPECIFIC PURPOSE OF ACQUIRING THE SECURITIES OFFERED, WHOSE PURCHASE IS DIRECTED BY A SOPHISTICATED PERSON AS DESCRIBED IN RULE 506(B)(2)(II) UNDER THE SECURITIES ACT;
G. AN INDIVIDUAL WHO IS A DIRECTOR OR EXECUTIVE OFFICER OF THE COMPANY; OR
H. AN ENTITY IN WHICH ALL OF THE EQUITY OWNERS ARE ACCREDITED INVESTORS.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING HAGUE
Hague and its subsidiaries, if any, (collectively herein referred to as “Company”) represents and warrants as follows:
4.1 Organization, Qualification and Corporate Power . Schedule 4.1 sets forth each Company’s jurisdiction of incorporation, the other jurisdictions in which it is qualified to do business, and its directors and officers. Each Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. Each Company is duly qualified to do business and is in good standing under the laws of each jurisdiction where such qualification is required. Each Company has full corporate power and authority to conduct the businesses in which it is engaged, to own and use the properties and assets that it purports to own or use and to perform its obligations. Hague has delivered to Solterra correct and complete copies of the Organizational Documents of each Company. No Company is in violation of any of its Organizational Documents. The minute books, the stock certificate books and the stock ledger of each Company, in each case as delivered or made available to the Solterra, are correct and complete.
4.2 Capitalization . Prior to closing, Hague has no outstanding Common Stock options, warrants, convertible debt or preferred stock except for the securities described in Section 2.8. Schedule 4.2 accurately describes the authorized capital stock of each company, the outstanding shares of each class of stock and the ownership of each outstanding share. Copies of all minutes and agreements have been provided to Solterra demonstrating compliance with the terms contained in Section 2.8. Except as listed in Schedule 4.2, Hague has no subsidiaries, and there are no outstanding securities convertible or exchangeable into capital stock of Hague or any options, warrants, purchase rights, subscription rights, preemptive rights, conversion rights, exchange rights, calls, puts, rights of first refusal or other Contracts that could require Hague to issue, sell or otherwise cause to become outstanding or to acquire, repurchase or redeem the equity of Hague. There is no outstanding stock appreciation, phantom stock, profit participation or similar rights with respect to Hague. Hague has not violated any securities Law in connection with the offer, sale or issuance of any of its capital stock or other equity or debt securities. There are no voting trusts, proxies or other Contracts relating to the voting of the capital stock of Hague.
4.3 Authority . Hague has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement by Hague have been duly authorized by all requisite corporate action on its part. This Agreement constitutes the valid and legally binding obligation of Hague, enforceable against Hague in accordance with the terms of this Agreement.
4.4 No Conflicts . Neither the execution and delivery of this Agreement nor the performance of the Transactions will, directly or indirectly, with or without notice or lapse of time: (i) violate any Law to which any Company or any asset owned or used by any Company is subject; (ii) violate any Permit of any Company or give any Governmental Body the right to terminate, revoke, suspend or modify any Permit of any Company; (iii) violate any Organizational Document of any Company; (iv) violate, conflict with, result in a breach of, constitute a default under, result in the acceleration of or give any Person the right to accelerate the maturity or performance of, or to cancel, terminate, modify or exercise any remedy under, any Contract to which any Company is a party or by which any Company is bound or to which any asset of any Company is subject or under which any Company has any rights or the performance of which is guaranteed by any Company; (v) cause any Company to have any Liability for any Tax; or (vi) result in the imposition of any Encumbrance upon any asset owned or used by any Company. No Company needs to notify, make any filing with, or obtain any Consent of any Person in order to perform the Transactions.
4.5 Financial Statements
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(a) Attached to Schedule 4.5 are the following financial statements (collectively, the “ Financial Statements ”) including the following: (i) unaudited balance sheet of the Company as of March 31, 2008 and statements of income and changes in cash flow for the period January 1, 2008 through June 30, 2008, together with the notes thereto; and (ii) an unaudited, consolidated balance sheet (the “ Interim Balance Sheet ”) of the Company as of the most recent date practicable. The Financial Statements have been prepared in accordance with GAAP, applied on a consistent basis throughout the periods covered thereby, and present fairly the financial condition of the Company as of and for their respective dates; provided , however , that the interim financial statements above are subject to normal, recurring year-end adjustments (which will not be, individually or in the aggregate, materially adverse) and lack notes (which, if presented, would not differ materially from the notes accompanying the June 30, 2008 Balance Sheet).
(b) Each Company’s books and records (including all financial records, business records, customer lists, and records pertaining to products or services delivered to customers) (i) are complete and correct in all material respects and all transactions to which such Company is or has been a party are accurately reflected therein in all material respects on an accrual basis, (ii) reflect all discounts, returns and allowances granted by such Company with respect to the periods covered thereby, (iii) have been maintained in accordance with customary and sound business practices in such Company’s industry, (iv) form the basis for the Financial Statements and (v) reflect in all material respects the assets, liabilities, financial position, results of operations and cash flows of such Company on an accrual basis. All computer-generated reports and other computer output included in such Company’s books and records are complete and correct in all material respects and were prepared in accordance with sound business practices based upon authentic data. Such Company’s management information systems are adequate for the preservation of relevant information and the preparation of accurate reports.
4.6 Absence of Certain Changes . Except as set forth on Schedule 4.6 , since the Balance Sheet Date:
(a) no Company has sold, leased, transferred or assigned any asset, other than for fair consideration in the ordinary course of business;
(b) no Company has experienced any damage, destruction or loss (whether or not covered by insurance) to its property or assets in excess of $1,000;
(c) no Company has entered into any Contract (or series of related Contracts) involving the payment or receipt of more than $1,000 or that cannot be terminated without penalty on less than six months notice and no Person has accelerated, terminated, modified or canceled any Contract (or series of related Contracts) involving more than $1,000 to which any Company is a party or by which any of them or any of their assets is bound;
(d) no Encumbrance (other than any Permitted Encumbrance) has been imposed upon any asset of any Company;
(e) no Company has made any capital expenditure (or series of related capital expenditures) involving more than $1,000 or made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans or acquisitions) involving more than $1,000;
(f) no Company has issued, created, incurred or assumed any Indebtedness (or series of related Indebtedness) involving more than $1,000 in the aggregate or delayed or postponed the payment of accounts payable or other Liabilities beyond the original due date;
(g) no Company has canceled, compromised, waived or released any right or claim (or series of related rights or claims) or any Indebtedness (or series of related Indebtedness) owed to it, in any case involving more than $1,000;
(h) no Company has issued, sold or otherwise disposed of any of its Capital Stock, or granted any options, warrants or other rights to acquire (including upon conversion, exchange or exercise) any of its Capital Stock or declared, set aside, made or paid any dividend or distribution with respect to its Capital Stock (whether in cash or in kind) or redeemed, purchased or otherwise acquired any Capital Stock of any Company or amended any of its Organizational Documents;
(i) no Company has (i) conducted its businesses outside the ordinary course of business consistent with past practices, (ii) made any loan to, or entered into any other transaction with, any of its directors, officers or employees on terms that would not have resulted from an arms-length transaction, (iii) entered into any employment Contract or modified the terms of any existing employment Contract, (iv) granted any increase in the base compensation of any of its directors, officers or, except in the ordinary course of business, employees or (v) adopted, amended, modified or terminated any Employee Benefit Plan or other Contract for the benefit of any of its directors, officers or employees;
(j) no Company has (i) made or rescinded a material Tax election affecting any Company, (ii) settled any Tax Liability affecting any Company, (iii) filed any Tax Return of any Company, or (iv) made a material change in any fiscal or Tax method of accounting or accounting practice used by any Company except as required by law (which change in method of accounting or accounting practice is not disclosed in writing to the Solterra);
(k) there has not been any Proceeding commenced nor, to the Knowledge of any Company, threatened or anticipated relating to or affecting any Company or its businesses or any asset owned or used by it;
(l) there has not been (i) any loss of any material customer, distribution channel, sales location or source of supply of raw materials, Inventory, utilities or contract services or the receipt of any notice that such a loss may be pending, (ii) any occurrence, event or incident related to any Company outside of the ordinary course of business or (iii) any material adverse change in the businesses, operations, properties, prospects, assets, Liabilities or condition (financial or otherwise) of any Company and no event has occurred or circumstance exists that may result in any such material adverse change; and
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(m) no Company has agreed or committed to any of the foregoing.
4.7 No Undisclosed Liabilities . Except as set forth on Schedule 4.7 , no Company has any Liability (and no basis exists for any Liability), except for (i) Liabilities under executory Contracts that are either listed on Schedule 4.7 or are not required to be listed thereon, excluding Liabilities for any breach of any executory Contract, (ii) Liabilities to the extent reflected or reserved against on the Interim Balance Sheet and (iii) current Liabilities incurred in the ordinary course of business since the Interim Balance Sheet Date (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of Contract, breach of warranty, tort, infringement or violation of Law).
4.8 Title to and Sufficiency of Assets . The Companies have good and marketable title to, or a valid leasehold interest in, every property or asset used by any of them, located on any of their premises, purported to be owned by any of them, or shown on the Interim Balance Sheet or acquired by any Company after the Interim Balance Sheet Date (the “Assets”), free and clear of any Encumbrances except Permitted Encumbrances, except for properties and assets disposed of in the ordinary course of business consistent with past practices since the Interim Balance Sheet Date. The Assets include all tangible and intangible property and assets necessary for the continued conduct of the Companies’ businesses after the Closing in the same manner as conducted prior to the Closing.
4.9 Tangible Personal Property; Condition of Assets . Schedule 4.9 lists all plant property, machinery, equipment, parts, tools, fixtures, furniture, office equipment, computer hardware, supplies, motor vehicles, and other items of tangible personal property (other than Inventory) (the “Tangible Personal Property”), if any, that has a net book value in excess of $5,000. To Hague’s Knowledge, the buildings, plants, structures, Tangible Personal Property and other tangible assets that are owned or leased by any Company are structurally sound, free from material defects, in good operating condition and repair and adequate for the uses to which they are being put. To Hague’s Knowledge, none of such buildings, plants, structures, Tangible Personal Property or other tangible assets is in need of maintenance or repairs, except for ordinary, routine maintenance and repairs that are not material in nature or cost to such building, plant, structure, Tangible Personal Property or other tangible asset. All of the tangible assets owned or leased by any Company are located on the Real Property.
4.10 Accounts Receivable . All Accounts Receivable represent or will represent valid obligations arising from products and/or services actually sold by the Companies in the ordinary course of business. Unless paid prior to the Closing Date, the Accounts Receivable are and will be as of the Closing Date current and collectible in accordance with their terms net of the respective reserves shown on the Balance Sheet, the Interim Balance Sheet and the accounting records of the Companies as of the Closing Date, respectively. The foregoing reserves are or will be adequate and calculated consistent with past practices. There is no contest, claim, or right to set-off, other than returns in the ordinary course of business, under any Contract with any obligor of an Account Receivable relating to the amount or validity of such Account Receivable. Schedule 4.10 contains a list of all Accounts Receivable as of the Interim Balance Sheet Date, which list sets forth the aging of such Accounts Receivable.
4.11 Inventory . The Inventory, which includes work in progress inventory and finished goods inventory, consists of a quality and quantity usable for its intended purpose and salable in the ordinary course of business consistent with past practices, except for slow-moving and obsolete items and items of below-standard quality, all of which have been written off or written down to net realizable value on the accounting records of the Companies. All Inventory not written off has been valued at the lower of cost or market value. The quantities of each type of Inventory are reasonable in the present circumstances of each Company and are not materially more or less than normal Inventory levels necessary to conduct the businesses of each Company in the ordinary course consistent with past practices. All of the Inventory is located at the Companies’ facilities.
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4.12 Real Property .
(a) Schedule 4.12 lists all of the real property and interests therein owned by any Company (with all easements and other rights appurtenant to such property, the “ Owned Real Property ”) and, relative to each such property or interest, the Company that owns it. Except as set forth on Schedule 4.12(a) , the Companies have good and marketable fee simple title to the Owned Real Property, free and clear of any Encumbrances, except Permitted Encumbrances. No Company is a lessor of any parcel of Owned Real Property or any portion thereof or interest therein.
(b) Schedule 4.12 (b) lists all of the real property and interests therein leased, subleased or otherwise occupied or used by any Company (with all easements and other rights appurtenant to such property, the “ Leased Real Property ”). For each item of Leased Real Property, Schedule 4.12 (b) also lists the lessor, the lessee, the lease term, the lease rate, and the lease, sublease, or other Contract pursuant to which the applicable Company holds a possessory interest in the Leased Real Property and all amendments, renewals, or extensions thereto (each, a “ Lease ”). Except as set forth on Schedule 4.12 (b) , the leasehold interest of a Company with respect to each item of Leased Real Property is free and clear of any Encumbrances, except Permitted Encumbrances. No Company is a sublessor of, or has assigned any lease covering, any item of Leased Real Property. Leasing commissions or other brokerage fees due from or payable by any Company with respect to any Lease have been paid in full.
(c) The Owned Real Property and the Leased Real Property (collectively, the “ Real Property ”) constitute all interests in real property currently used in connection with the businesses of the Companies. The Real Property is not subject to any rights of way, building use restrictions, title exceptions, variances, reservations or limitations of any kind or nature, except (i) those that in the aggregate do not impair the current use, occupancy, value or marketability of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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