AGREEMENT AND PLAN OF REORGANIZATIONAgreement and Plan of Merger |
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Search Agreement and Plan of Merger by:
Exhibit
10.1
Agreement
and Plan of Reorganization
Dated
September 14, 2007
AGREEMENT
AND PLAN OF REORGANIZATION
This
AGREEMENT AND PLAN OF REORGANIZATION dated as of September 14, 2007 (the
“Agreement”), between Downside Up, Inc.,
a
Colorado corporation (“DUI”), ESP Resources Inc.
,
a
Delaware corporation (“ESP”) and DUI
Operations, Inc.,
a
wholly-owned Subsidiary of DUI in organization (“Subsidiary”) and the
shareholders of ESP, set forth on Schedule A hereto (the “ESP Shareholders”).
ESP, DUI and Subsidiary may also be referred to herein as the “Constituent
Corporations” or the “Parties.”
WHEREAS,
the Parties acknowledge and affirm the following:
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A.
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DUI
is a corporation duly organized and existing under the laws of
the State
of Colorado.
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B.
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ESP
is a corporation duly organized and existing under the laws of
the State
of Delaware.
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C.
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Subsidiary
is a corporation which is 100% owned by DUI and is duly organized
and
existing under the laws of the State of
Delaware.
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D.
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The
Colorado Business Corporation Act and the Delaware General Corporation
Law
permit the merger of ESP with and into the
Subsidiary..
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E.
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DUI
and ESP and their respective Boards of Directors declare it advisable
and
to the advantage, welfare, and best interests of said corporations
and
their respective stockholders to merge Subsidiary with and into
ESP
pursuant to the provisions of their respective state laws upon
the terms
and conditions hereinafter set
forth.
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F.
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The
respective Boards of Directors of DUI and ESP have approved this
Agreement; and the shareholders of ESP have approved the
merger.
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G.
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For
federal income tax purposes, it is intended that the merger qualify
as a
tax free reorganization under Section 368(a) of the Internal Revenue
Code
of 1986, as amended (the “IRC”).
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ARTICLE
1
THE
MERGER
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1.1
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Merger.
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In
accordance with the provisions of this Agreement and applicable provisions
of
their respective state laws, Subsidiary shall be merged with and into ESP
(the
“Merger”). Following the Merger, the separate existence of Subsidiary shall
cease and ESP shall be, and is herein sometimes referred to as, the “Surviving
Corporation.” For the purposes of this Agreement, this form of transaction may
also be referred to herein as a “reverse triangular merger.”
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1.2
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Filing
and
Effectiveness.
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The
Merger shall become effective when the following actions shall have been
completed:
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(a)
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This
Agreement and the Merger shall have been adopted and approved by
the
shareholders of ESP and DUI in accordance with the requirements
of the
Colorado Business Corporation Act and the Delaware General Corporation
Law
;
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(b)
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DUI
shall have formed a wholly-owned subsidiary for the purposes of
this
Merger in accordance with the requirements of the DGCL (the
“Subsidiary”);
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(c)
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All
of the conditions precedent to the consummation of the Merger specified
in
this Agreement shall have been satisfied or duly waived, in writing,
by
the Party entitled to satisfaction
thereof;
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(d)
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As
soon as practicable following the Closing, the Parties shall execute
a
Certificate of Merger meeting the requirements of the Colorado
Business
Corporation Act and the Delaware General Corporation Law and file
same
with the Secretaries of State of the States of Colorado and Delaware
in
substantially the form attached hereto as Exhibit A; the time the
Certificate of Merger is filed with the Secretary of State of the
State of
Colorado is the “Effective Time”;
and
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(e)
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The
closing of the transactions described in this Agreement is herein
called
the “Closing.” The Parties agree that the Closing of the transactions
identified in this Agreement shall take place at the offices of
Joseph J.
Tomasek, Esq., or at such other place as the Parties may mutually
determine, on or before October 31,
2007.
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(f)
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The
audit of the financial statements of ESP for the period ended June
30,
2007 shall have been completed with all necessary data and materials
delivered by ESP to DUI.
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1.3
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Effect
of the Merger.
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Upon
the
Effective Time, hereinafter defined, and upon the terms and subject to the
conditions of this Agreement and in accordance with applicable state laws,
the
separate existence of Subsidiary shall cease and, ESP, as the Surviving
Corporation,: (i) shall continue to possess all of the assets, rights, powers
and property of ESP and Subsidiary as constituted immediately prior to the
Effective Time, and all debts, liabilities and duties of ESP and Subsidiary
shall become the debts, liabilities and duties of the Surviving Corporation,
all
as more fully provided under the applicable provisions of the applicable
state
laws.
ARTICLE
2
CHARTER
DOCUMENTS, DIRECTORS AND OFFICERS
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2.1
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Certificate
of Incorporation: ESP.
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Attached
hereto as Exhibit B and made a part hereof is a copy of the Certificate of
Incorporation of ESP as in effect in the State of Delaware immediately prior
to
the Closing; and at the Effective Time said Certificate of Incorporation
shall
continue in full force and effect as the Certificate of Incorporation of
the
Surviving Corporation until duly amended in accordance with the provisions
thereof and applicable law.
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2.2
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Subsidiary.
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Attached
hereto as Exhibit C and made a part hereof is a copy of the Certificate of
Incorporation of Subsidiary as in effect immediately prior to the
Closing.
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2.3
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Bylaws.
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Attached
hereto as Exhibit D and made a part hereof is a copy of the Bylaws of ESP
as in
effect immediately prior to the Closing; and at the Effective Time said Bylaws
shall continue in full force and effect as the Bylaws of the Surviving
Corporation until duly amended in accordance with the provisions thereof
and
applicable law.
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2.4
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Directors
and Officers.
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The
directors and officers of ESP immediately prior to the Closing shall be the
directors and officers of the Surviving Corporation until their successors
shall
have been duly elected and qualified or until as otherwise provided by law,
the
Certificate of Incorporation of the Surviving Corporation or the Bylaws of
the
Surviving Corporation. The Board of Directors of DUI following the Merger
shall
consist of Michael Cavaleri of DUI and David Dugas and Anthony Primeaux of
ESP
until their successors shall have been duly elected and qualified.
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ARTICLE
3
TERMS
OF MERGER, PAYMENT, EXCHANGE OF STOCK AND INVESTMENT
COMMITMENTS
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3.1
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Conversion
of ESP Shares.
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(a)
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Conversion
of Subsidiary Common Stock. At the Effective Time, each outstanding
share
of the common stock no par value per share, of Subsidiary shall,
by virtue
of the Merger and without any action on the part of DUI, Subsidiary
or
ESP, be converted into one fully paid and non-assessable share
of common
stock of the Surviving Corporation.
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(b)
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Each
share of the common stock, $.0001 par value per share, of ESP
(“ESP Common
Stock”) issued and outstanding prior to the Effective Time shall by
virtue
of the Merger and without any action on the part of DUI, Subsidiary,
ESP
or any holder thereof, be converted into and be exchangeable
for the right
to receive newly issued , fully paid and non-assessable voting
common
shares, no par value, of DUI ("DUI Shares"), based upon an exchange
ratio
(“Exchange Ratio”) determined in accordance with the provisions below.
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(c)
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Amount
of DUI Shares to be Exchanged:
Upon the Closing, DUI shall issue and exchange for the ESP Common
Stock
with the ESP Shareholders newly issued DUI Shares at the conversion
rate
of .608108 DUI Shares for each share of the common stock of ESP.
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At
the Effective Time, each share of the ESP Common Stock held by
the ESP
immediately prior to the Effective Time shall, by virtue of the
Merger and
without any action on the part of Merger Sub or the Company,
be canceled,
retired and cease to exist and no payment shall be made with
respect
thereto.
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No
Further Ownership Rights in ESP Common Stock. All DUI Shares
issued and
exchanged in accordance with the terms of this Article 3 shall
be deemed
to have been issued in full satisfaction of all rights pertaining
to the
ESP Common Stock.
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(d)
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Appraisal
Rights: This executed Agreement shall constitute each of the
ESP
Stockholders' acknowledgment to decline any appraisal rights
under the
statutes and laws of the State of Delaware. By executing this
Agreement,
each ESP Stockholder acknowledges receipt of written notice of
appraisal
rights and a copy of the applicable section of the DGCL at least
20 days
prior to the date of executing this Agreement.
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3.2
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Status
of DUI Common Shares.
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(a)
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The
DUI Common Shares to be issued to the ESP Shareholders in the
reorganization will
not be registered under the Securities Act of 1933, as amended
(the "1933
Act") and may not be sold, transferred or otherwise disposed
of except in
compliance with the 1933 Act or pursuant to an exemption from
the
registration provisions thereof and the Securities Exchange
Act of 1934,
as amended (the "1934 Act").
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(b)
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Each
Certificate representing the DUI Common Shares shall bear the
following or
substantially similar legend:
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"The
Shares represented by this Certificate have not been registered
under
the
Securities Act of 1933, as amended. These Shares have been acquired
for
investment purposes and not with a view to distribution or
resale,
and
may
not be sold, assigned, pledged, hypothecated or otherwise
transferred
without
an effective Registration Statement for such Shares under the
Securities
Act of 1933, as amended, or an opinion of counsel to the
effect
that
registration
is not required under such
Act."
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ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF ESP AND THE ESP SHAREHOLDERS
ESP
and
the ESP Shareholders represent and warrant to DUI that the statements contained
in this Article 4 are correct and complete as of the date of this Agreement
and
will be correct and complete as of the Closing as though made then and as
though
the Closing were substituted for the date of this Agreement throughout this
Article 4, with respect to itself.
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4.1
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Organization
of
ESP.
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ESP
is
duly organized, validly existing, and in good standing under the laws of
Delaware.
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4.2
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Authorization
of Transaction.
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(a)
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ESP
has full corporate power and authority to execute and deliver
this
Agreement and to perform his obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of ESP,
enforceable
in accordance with its terms and conditions. Except as expressly
contemplated hereby, ESP need not give any notice to, make
any filing
with, or obtain any authorization, consent, or approval of
any government
or governmental agency in order to consummate the transactions
contemplated by this Agreement.
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(b)
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The
ESP Shareholders, individually represent and warrant to DUI
that: this
Agreement constitutes the legal, valid and binding obligation
of each of
the ESP Shareholders and is enforceable against each of them
in accordance
with the terms hereof; each of them own their respective ESP
Common Shares
free and clear of any and all liens, claims, pledges, restrictions,
obligations, security interests and encumbrances of any kind;
Attached
hereto as Schedule A is an accurate and complete list of the
ESP Common
Shares owned by each ESP Shareholder; none of the ESP Shareholders
have
issued any calls, puts, options and/or any other rights in
favor of any
third party whatsoever with respect to their ESP Common Shares,
and; none
of their respective ESP Common Shares are subject to any voting
agreements, voting trusts, stockholder agreements and/or any
other
agreements, obligations or
understandings.
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4.3
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Non-contravention.
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Neither
the execution and the delivery of this Agreement, nor the consummation of
the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other
restriction of any government, governmental agency, or court to which ESP
is
subject or any provision of its charter or bylaws; or (ii) conflict with,
result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel,
or
require any notice under any agreement, contract, lease, license, instrument,
or
other arrangement to which ESP is a party or by which it is bound or to which
any of its assets is subject, except for such notices or consents which have
been given or obtained by ESP on or prior to the Closing.
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4.4
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Capitalization.
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The
authorized capital stock of ESP consists of 100,000,000 shares of Class A
Common
Stock, $.0001 par value per share, of which 29.6 million shares are issued
and
outstanding; 5,000,000 shares of Class B Common Stock, $.0001 par value per
share, none of which are issued and outstanding, and; 20,000,000 shares of
Class
A Preferred Stock, $.0001 par value per share of which none are outstanding.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts
or
commitments that could require ESP to issue, sell, or otherwise cause to
become
outstanding any of its capital stock. There is no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights
with
respect to ESP’s Common Stock. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock
of
ESP.
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4.5
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Investment.
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The
ESP
Shareholders are not acquiring the Common Shares of DUI with a view to or
for
sale in connection with any distribution thereof within the meaning of the
Securities Act of 1933. ESP and the ESP Shareholders have had access to all
information concerning DUI and its operations which it required to make its
investment decision.
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4.6
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Brokers'
Fees.
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ESP
has
incurred no obligation to pay any commission, finder’s fee or other charge in
connection with the transactions contemplated in this Agreement for which
DUI
could become liable or obligated. ESP and the ESP Shareholders, jointly and
severally, will indemnify and hold DUI, and the Subsidiary, their respective
officers, directors, employees, accountants and lawyers harmless from and
against any and all liabilities and claims of any nature whatsoever arising
out
of or in connection with any commission, fee or charge so far as any arises
by
reason of services alleged to have been rendered to, or at the instance of,
ESP
and/or the ESP Shareholders. This
indemnification shall survive the Closing and shall be included in the terms
of
indemnification set forth in Article 4.7 of this Agreement.
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4.7
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Events
Subsequent to Fiscal Year
End.
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Since
the
most recent fiscal year end of ESP there has not been any material adverse
change in the business, financial condition, operations, results of operations,
or future prospects of ESP taken as a whole. ESP and the ESP Shareholders,
jointly and severally, shall indemnify, defend and hold DUI and Subsidiary,
their successors and assigns, harmless from and against any order, action,
cost,
claim, damage, disbursement, expense, liability, loss, deficiency, obligation,
penalty, fine, assessment or settlement of any kind or nature, whether
foreseeable or unforeseeable, including, but not limited to, any and all
attorney’s fees, costs, and other expenses, directly or indirectly, as a result
of, or upon or arising from (i) any inaccuracy or breach or non-performance
of
any of the representations, warranties, covenants or agreements made by ESP
or
the ESP Shareholders in or pursuant to this Agreement, (ii) any order, action,
cost, claim, damage, liability or lien arising out of ESP’s or ESP Shareholder’s
conduct before or after the Closing, (iii) any third party claims against
ESP or
the ESP Shareholders, before or after the Closing that arise from ESP’s or ESP
Shareholder’s conduct, or (iv) any loss or liability the proximate cause of
which is determined to be the result of ESP’s or ESP Shareholder’s negligence or
failure to comply with their respective obligations under this Agreement.
DUI
and/or Subsidiary, as the case may be, their successors and assigns, shall
notify ESP and/or the ESP Shareholders of any claim for indemnification with
reasonable promptness, and ESP’s or ESP’s legal representatives or ESP
Shareholder’s or their legal representatives shall have, at their election, the
right to compromise or defend any such matter involving such asserted liability
of ESP and/or the ESP Shareholders through counsel of their own choosing,
at the
expense of ESP and the ESP Shareholders. ESP and the ESP Shareholders shall
notify DUI and the Subsidiary, or their successors or assigns, in writing
promptly of their intention to compromise or defend any claim and DUI and/or
the
Subsidiary, or their successors or assigns, shall cooperate with ESP and
the ESP
Shareholders, their respective counsel in compromising or defending any such
claim, in accordance with Article 8 hereof. The terms of this Article 4.7
shall
survive Closing.
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4.8
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Undisclosed
Liabilities.
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ESP
has
no material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or un-accrued, whether
liquidated or un-liquidated, and whether due or to become due, including
any
liability for taxes), except for (i) liabilities set forth on the ESP Financial
Statements; and (ii) liabilities which have arisen after the date of the
ESP
Financial Statements in the ordinary course of business. As used herein,
“ESP
Financial Statements” consist of the financial statements of ESP previously
delivered to DUI in the form attached hereto as Exhibit E.
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4.9
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Legal
Compliance.
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ESP
has
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of
federal, state, local, and foreign governments (and all agencies thereof),
and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against ESP alleging any failure
so to comply, except where the failure to comply would not have a material
adverse effect on the business, financial condition, operations, results
of
operations, or future prospects of ESP.
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4.10
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Tax
Matters.
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(a)
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ESP
has filed all income tax returns that it has been required to file.
All
such income tax returns were correct and complete in all material
respects. All income taxes owed by ESP (whether or not shown on
any income
tax return) have been paid. ESP is not currently the beneficiary
of any
extension of time within which to file any income tax
return.
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(b)
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There
is no material dispute or claim concerning any income tax liability
of ESP
either (i) claimed or raised by any authority in writing; or (ii)
as to
which ESP has knowledge based upon personal contact with any agent
of such
authority.
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4.11
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Contracts.
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The
ESP
Financial Statements disclose all material contracts of ESP. Each contract
or
legal obligation of ESP which is to be assumed by DUI in connection with
the
Merger is listed on Exhibit F hereto. To the extent requested, true and correct
copies of such contracts have been delivered to DUI for due diligence
purposes.
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4.12
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Environmental,
Health and Safety
Matters.
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ESP
and
its predecessors and affiliates have complied and are in compliance, in each
case in all material respects, with all Environmental, Health, and Safety
Requirements. As used herein “Environmental, Health & Safety Requirements”
means any Environmental, Health & Safety law or regulation including air and
water quality laws and regulations and other similar requirements.
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4.13
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Disclosure.
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The
representations and warranties contained in this Article 4 do not contain
any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements and information contained in this Article
4 not
misleading.
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4.14
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Financial
Statements.
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The
ESP
Financial Statements are true and correct in all material respects, have
been
prepared on a consistent basis, and fairly represent the business, financial
condition, assets and liabilities of ESP.
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4.15
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Litigation.
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There
is
no claim, suit, action, proceeding or investigation pending or, to the knowledge
of ESP, pending against ESP or any of its subsidiaries or assets which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on ESP.
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4.16
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Materials
Required for Audit.
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To
the
best of its knowledge, ESP has maintained its records, data and materials
related to the financial accounting of the business, and have all such data
and
materials immediately available, such that an audit may be completed per
regulatory requirements.
ARTICLE
5
REPRESENTATIONS
AND WARRANTIES OF DUI
DUI
represents and warrants to ESP and to the ESP Shareholders that the statements
contained in this Article 5 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing (as though made
then and as though the Closing were substituted for the date of this Agreement
throughout this Article 5).
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5.1
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Organization
of
DUI
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DUI
is a
corporation duly organized, validly existing, and in good standing under
the
laws of Colorado. DUI has one subsidiary, DUI Operations, Inc., the
Subsidiary.
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5.2
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Authorization
of
Transaction.
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DUI
has
full corporate power and authority to execute and deliver this Agreement
and to
perform its obligations hereunder, and no approval of DUI’s shareholders is
required under the laws of Colorado to consummate the Merger and other
transactions contemplated in this Agreement. This Agreement constitutes the
valid and legally binding obligation of DUI, enforceable in accordance with
its
terms and conditions. Except as expressly contemplated hereby, DUI need not
give
any notice to, make any filing with, or obtain any authorization, consent,
or
approval of any government or governmental agency in order to consummate
the
transactions contemplated by this Agreement.
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5.3
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Non-contravention.
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Neither
the execution and the delivery of this Agreement, nor the consummation of
the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other
restriction of any government, governmental agency, or court to which DUI
is
subject or any provision of its charter or bylaws; or (ii) conflict with,
result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel,
or
require any notice under any agreement, contract, lease, license, instrument,
or
other arrangement to which DUI is a party or by which it is bound or to which
any of its assets is subject, except for such notices or consents which have
been given or obtained by DUI on or prior to the Closing.
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5.4
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Capitalization.
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The
authorized capital stock of DUI consists of 20,000,000 shares of Common
Stock,
no par value per share, and 5,000,000 shares of Preferred Stock. As of
the date
of this Agreement, no preferred shares are outstanding, 1,230,000 shares
of
Common Stock are outstanding and upon the Closing, there shall be 6,000,000
shares of its Common Stock outstanding. There are no outstanding options,
warrants, or other outstanding purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
DUI to issue, sell, or otherwise cause to become outstanding any of its
capital
stock except as may be set forth in one or more of the material agreements
identified in Exhibit I hereto.