AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER

ANNEX A

AMENDED AND RESTATED

AGREEMENT AND PLAN OF MERGER

by and among

OAKMONT ACQUISITION CORP.,

BROOKE CREDIT CORPORATION,

and

BROOKE CORPORATION

Dated as of April 30, 2007

TABLE OF CONTENTS

 

 

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EXHIBITS

 

 

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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER

This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of April 30, 2007 by and among Oakmont Acquisition Corp., a Delaware corporation (“ Oakmont ”), BROOKE CREDIT CORPORATION, a Kansas corporation (the “ Company ”), and BROOKE CORPORATION, a Kansas corporation and majority stockholder of the Company (“ Parent ”).

R E C I T A L S

A. The parties entered into that certain Agreement and Plan of Merger, dated as of February 8, 2007, pursuant to which the parties agreed (i) Oakmont would merge with and into OAKMONT KANSAS, INC., a Kansas corporation and a wholly-owned subsidiary of Oakmont (“ New Oakmont ”) (the “ Previously Proposed Reincorporation Merger ”) and (ii) the Company would merge with and into New Oakmont (the “ Previously Proposed Merger ”).

B. Instead and in lieu of the Previously Proposed Reincorporation Merger and the Previously Proposed Merger, the Boards of Directors of Oakmont, Parent and the Company have each determined that it is advisable and in the best interests of Oakmont Parent and the Company, and their respective stockholders, that the Company be merged with and into Oakmont.

C. The Boards of Directors of Oakmont, Parent and the Company have each unanimously approved this Agreement and the transactions contemplated hereby.

D. The Boards of Directors of Oakmont and the Company have agreed to recommend that their respective stockholders adopt and approve this Agreement.

E. For federal income tax purposes, it is intended that these proposed transactions, individually and collectively, shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (“ Code ”), and this Agreement shall constitute a plan of reorganization pursuant to Section 368 of the Code.

F. The parties desire to amend and restate their agreement and understanding with respect to the transactions contemplated by this Agreement.

A G R E E M E N T

NOW, THEREFORE, in consideration of the foregoing recitals and the respective covenants, agreements, representations and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:

 

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MERGER.

1.1. The Merger . Upon the terms and subject to the conditions set forth herein and the applicable provisions of the DGCL and the KGCL, and on the basis of the representations, warranties, covenants and agreements contained herein, as of the

 

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Effective Time, the Company shall be merged with and into Oakmont (the “ Merger ”), the separate corporate existence of the Company shall cease and Oakmont shall continue as the surviving corporation. Oakmont, as the surviving corporation of the Merger, may be hereinafter referred to as the “ Surviving Corporation .”

1.2. Filing of Certificates of Merger . Subject to the conditions set forth herein, the Company and Oakmont shall as soon as possible on the Closing Date or such other date as Oakmont and Parent shall agree, cause the Merger to be consummated by filing with each of the Secretary of State of the State of Kansas and the Secretary of State of the State of Delaware a duly executed certificate of merger in form and substance reasonably acceptable to Oakmont and Parent.

1.3. Effect of Merger . At the Effective Time, the effect of the Merger shall be as provided herein and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, all of the properties, rights, privileges, powers and franchises of the Company and Oakmont shall vest in the Surviving Corporation and all of the debts, liabilities, duties and obligations of the Company and Oakmont shall become the debts, liabilities, duties and obligations of the Surviving Corporation.

1.4. Merger Consideration . The aggregate consideration to be paid by Oakmont to Parent and any other holder of capital stock of the Company as of immediately prior to the Effective Time (the “ Company Stockholders ”) in the Merger (the “ Merger Consideration ”) shall be the number of shares of common stock of Oakmont, $0.01 par value per share (the “ Oakmont Stock ”) equal to (a) the Closing Payment, plus (b) the Earnout Payments, if any, determined and paid as set forth in this Article 1.

1.5. Effect on Stock . Upon the terms and conditions of this Agreement, at the Effective Time, as a result of the Merger and this Agreement and without the need for any further action on the part of Oakmont, the Company or any of their respective stockholders, the following shall occur:

1.5.(a) Conversion of Company Stock . Each share of the issued and outstanding common stock of the Company immediately prior to the Effective Time shall be automatically converted into the right to receive, subject to the terms and conditions of this Agreement, the Per Share Consideration. Until properly delivered to Oakmont or the Surviving Corporation pursuant to Section 1.9, any certificate evidencing shares of common stock of the Company (a “ Certificate ”) shall be deemed for all purposes to evidence only the right to receive the consideration described in this Section 1.5(a).

1.5.(b) Conversion of Oakmont Stock . Each share of the issued and outstanding common stock of Oakmont immediately prior to the Effective Time shall be automatically converted into one (1) share of the validly issued, fully paid and non-assessable authorized common stock of the Surviving Corporation. Each stock certificate evidencing the common stock of Oakmont shall evidence ownership of such shares of common stock of the Surviving Corporation.

 

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1.6 Company Warrants and Options.

1.6(a) At the Effective Time, the Surviving Corporation shall assume and cause to be performed all obligations of the Company under the Company Warrants. Each Company Warrant so assumed by the Surviving Corporation under this Agreement will continue to have, and be subject to, the same terms and conditions set forth in the applicable warrant agreement immediately prior to the Effective Time, except that each outstanding Company Warrant will be exercisable (or will become exercisable in accordance with its terms), for that number of shares of Oakmont common stock determined by multiplying the number of shares of Company common stock subject to such Company Warrant by the Exchange Ratio (as may be adjusted upon each Earnout Payment, if any).

1.6(b) Each option (“Company Stock Option”) to purchase a share of the Company common stock that was granted pursuant to the 2007 Brooke Credit Corporation Equity Incentive Plan (the “Company Stock Option Plan”) prior to the Effective Time and which remains outstanding immediately prior to the Effective Time shall cease to represent a right to acquire shares of Company common stock and shall be converted, at the Effective Time, into an option to acquire, on the same terms and conditions as were applicable under the Company Stock Option (but taking into account any changes thereto provided for in the Company Stock Option Plan or in such option by reason of this Agreement or the transactions contemplated hereby), that number of shares of Oakmont common stock determined by multiplying the number of shares of Company common stock subject to such Company Stock Option by the Exchange Ratio (as may be adjusted upon each Earnout Payment, if any), rounded, if necessary, to the nearest whole share of Oakmont common stock, at a price per share (rounded to the nearest one-hundredth of a cent) equal to the per share exercise price specified in such Company Stock Option divided by the Exchange Ratio (as may be adjusted upon each Earnout Payment, if any).

1.7. Organizational Documents . As of the Effective Time, the Articles of Incorporation of Oakmont, as in effect immediately prior to the Effective Time, shall be amended and restated as set forth on Exhibit A and become the Articles of Incorporation of the Surviving Corporation, and the Bylaws of Oakmont, as in effect immediately prior to the Effective Time, shall be amended and restated as set forth on Exhibit B and become the Bylaws of the Surviving Corporation.

1.8. Officers and Directors . As of the Effective Time, the officers and directors of Oakmont shall become the officers and directors of the Surviving Corporation and, subject to Section 9.3(f), shall serve as such until the expiration of their term of office or their earlier death, resignation or removal.

1.9. Exchange of Certificates . Upon surrender of a Certificate for cancellation, together with a letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may reasonably be required by Oakmont, the holder of such Certificate shall be entitled to receive in exchange therefor an amount to which such holder is entitled pursuant to Section 1.5(a) and the Certificate so surrendered shall be canceled.

1.10. Earnout Payments .

1.10.(a) The Merger Consideration shall include, if earned, up to two additional payments (each, an “ Earnout Payment ”, and collectively, the “ Earnout Payments ”) based upon the Surviving Corporation’s Adjusted Earnings as follows:

(i) Fiscal Year 2007 . Subject to the Surviving Corporation’s achievement of Adjusted Earnings of at least $15,000,000 for the fiscal year ended December 31, 2007, the Merger Consideration shall include the First Earnout Shares.

(ii) Fiscal Year 2008 . Subject to the Surviving Corporation’s achievement of Adjusted Earnings of at least $19,000,000 for the fiscal year ended December 31, 2008, the Merger Consideration shall include the Second Earnout Shares.

 

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1.10.(b) The Surviving Corporation shall maintain separate books and records, including but not limited to, balance sheets and related statements of income and cash flows, so as to make calculation of Adjusted Earnings feasible and verifiable.

1.10.(c) As soon as practicable and in any event within 90 days after December 31 of 2007 and 2008, the Surviving Corporation shall provide to Parent a statement of the Adjusted Earnings of the Surviving Corporation for the applicable period (the “ Earnout Statement ”), as verified by the Surviving Corporation’s independent auditors and reasonably approved by both Oakmont Directors. The Surviving Corporation shall provide to Parent and its representatives copies of such records and work papers created in connection with preparation of the Earnout Statement as are reasonably requested to support such Earnout Statement. Parent and its representatives shall have the right to inspect the Surviving Corporation’s books and records during business hours upon reasonable prior notice and solely for purposes reasonably related to the determination of Adjusted Earnings.

1.10.(d) Upon receipt of each such Earnout Statement, Parent shall be entitled to object to the calculation of Adjusted Earnings by delivery to the Surviving Corporation of a notice of objections thereto (a “ Notice of Objection ”), in reasonable detail describing the nature of the disagreement asserted. If Parent fails to deliver a Notice of Objection to the Surviving Corporation within twenty (20) days following receipt of the Earnout Statement, the determination of Adjusted Earnings by the Surviving Corporation as set forth in the Earnout Statement shall be final and binding on the parties hereto. If Parent and the Surviving Corporation are unable to reconcile their differences in writing within twenty (20) days after a Notice of Objection is delivered by Parent, the Independent Accountants shall be selected and the items in dispute shall be submitted to the Independent Accountants within ten (10) days thereafter. The determination of Independent Accountants shall be set forth in writing and shall be conclusive and binding upon the parties, and the fees, costs and expenses of such Independent Accountants shall be paid by the non-prevailing party. The Independent Accountants shall consider only the items in dispute and shall be instructed to act within thirty (30) days (or such longer period as Parent and the Surviving Corporation may agree) to resolve all items in dispute. If Parent in its discretion gives written notification of its acceptance of an Earnout Statement prior to the end of such 30-day period, such Earnout Statement shall thereupon become binding, final and conclusive upon all the parties hereto.

1.11. No Fractional Shares . No certificates or scrip representing fractional shares of Oakmont Stock shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any rights of a stockholder of the Surviving Corporation. Notwithstanding any other provision of this Agreement, each holder of shares of the Company exchanged for shares of Oakmont Stock pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Oakmont Stock (after taking into account all Certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of Oakmont Stock multiplied by $6.00.

 

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1.12. Further Action . If at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company, the directors and officers of the Company and Oakmont are fully authorized in the name of their respective corporations or otherwise to take, and shall take, all such lawful and necessary action.

 

2.	REPRESENTATIONS AND WARRANTIES OF PARENT AND COMPANY.

Parent and the Company, jointly and severally, make the following representations and warranties to Oakmont, subject to the exceptions set forth in the disclosure schedule attached hereto (the “ Disclosure Schedule ”).

2.1. Corporate .

2.1.(a) Organization . Each of Parent and the Company is a corporation duly organized, validly existing and in good standing under the Laws of the State of Kansas.

2.1.(b) Corporate Power . The Company has all requisite power and authority to own, operate and lease its properties and to carry on its business as and where such is now being conducted. Each of Parent and the Company has all requisite power and authority to enter into this Agreement and the other documents and instruments to be executed and delivered by it pursuant hereto, to perform its obligations hereunder, and to carry out the transactions contemplated hereby and thereby.

2.1.(c) Qualification . The Company is duly licensed or qualified to do business as a foreign company, and is in good standing, in each jurisdiction wherein the character of the properties owned or leased by it, or the nature of its business, makes such licensing or qualification necessary, except for such jurisdictions in which the failure to be so qualified would not have a Company Material Adverse Effect and would not materially delay the Closing or materially and adversely affect the ability of the parties to consummate the transactions contemplated hereby.

2.1.(d) No Subsidiaries . Except as set forth in Section 2.1(d) of the Disclosure Schedule, the Company does not own, directly or indirectly, any voting securities or other equity interests in, or have the right to control, any other Person.

2.2. Authority . The execution, delivery and performance of this Agreement and the other documents and instruments to be executed and delivered by Parent and the Company pursuant hereto and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary parties. No other or further act or proceeding on the part of Parent or the Company is necessary to authorize this Agreement or the other documents and instruments to be executed and delivered by Parent or the Company pursuant hereto or the consummation of the transactions contemplated hereby and thereby. This Agreement constitutes, and when executed and delivered, the other documents and instruments to be executed and delivered by Parent and the Company pursuant hereto will constitute, legal, valid and binding agreements of Parent and the

 

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Company, enforceable in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or similar Laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

2.3. Capitalization . The authorized capital stock of the Company consists of (i) 50,000,000 shares of common stock, par value $0.01 per share, of which 5,650,000 shares are issued and outstanding and (ii) 1,000,000 shares of undesignated preferred stock of which no shares are issued and outstanding. All of the outstanding shares of common stock of the Company have been duly authorized and are validly issued, fully paid and nonassessable and were issued in compliance with all applicable Laws. Section 2.3 of the Disclosure Schedule contains a correct and complete list of each stockholder of the Company and the number of shares held by each. Except as set forth in Section 2.3 of the Disclosure Schedule, there are no outstanding subscription, option, warrant, call rights, preemptive rights or other agreements or commitments obligating the Company to issue, sell, deliver or transfer (including any rights of conversion or exchange under any outstanding security or other instrument) any economic, voting, ownership or any other type of interest or security in the Company.

2.4. No Violation . Neither the execution and delivery of this Agreement or the other documents and instruments to be executed and delivered by Parent and the Company pursuant hereto, nor the consummation by Parent and the Company of the transactions contemplated hereby and thereby (a) will violate any applicable Laws, (b) will require any authorization, consent, approval, exemption or other action by or notice to any Governmental Authority, except for applicable requirements, if any, of the Securities Act of 1933, as amended (the “ Securities Act ”), the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), state securities and “blue sky” Laws, and the rules and regulations thereunder, or (c) subject to obtaining the consents referred to in Section 2.4 of the Disclosure Schedule, will violate or conflict with, or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or will result in the termination of, or accelerate the performance required by, or result in the creation of any Encumbrance upon any of the assets of the Company under, any term or provision of the Organizational Documents of Parent or the Company or of any contract, commitment, understanding, arrangement, agreement or restriction of any kind or character to which Parent or the Company is a party or by which Parent or the Company or any of its assets or properties may be bound or affected, except, in the case of clause (c), for such violations, conflicts, breaches, losses, defaults, terminations, cancellations, accelerations or Encumbrances that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.

2.5. Financial Statements . The Company has previously made available to Oakmont true and complete copies of the financial statements of the Company consisting of (a) balance sheets of the Company as of December 31, 2003, 2004, and 2005, and the related statements of income and cash flows for the years then ended (including the notes contained therein or annexed thereto), which financial statements have been reported on, and are accompanied by, the signed, unqualified opinions of independent auditors for the Company for such years, and (b) an unaudited balance sheet of the Company as of

 

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September 30, 2006 (the “ Recent Company Balance Sheet ”), and the related unaudited statements of income for the period then ended and for the corresponding period of the prior year (including the notes and schedules contained therein or annexed thereto). All of such financial statements (including all notes and schedules contained therein or annexed thereto) are true, complete and accurate, have been prepared in accordance with GAAP (except, in the case of unaudited statements, for the absence of footnote disclosure) applied on a consistent basis, have been prepared in accordance with the books and records of the Company, and fairly present, in accordance with GAAP, the assets, liabilities and financial position, the results of operations and cash flows of the Company as of the dates and for the years and periods indicated. The books of account and other financial records of the Company are in all material respects complete and correct and do not contain or reflect any material inaccuracies or discrepancies.

2.6. Tax Matters .

2.6.(a) Provision For Taxes . The provision made for Taxes on the Recent Company Balance Sheet is sufficient for the payment of all Taxes (and any interest and penalties) and assessments, whether or not disputed at the date of the Recent Company Balance Sheet, and for all years and periods prior thereto. Since the date of the Recent Company Balance Sheet, the Company has not incurred any Taxes other than Taxes incurred in the ordinary course of business consistent in type and amount with past practices of the Company.

2.6.(b) Tax Returns Filed . All Tax Returns required to be filed by or on behalf of the Company, or the Affiliated Group for each period for which the Company was a member of the Affiliated Group, have been timely filed and when filed were true and correct in all material respects, and the Taxes due thereon were paid or adequately accrued. The Company has duly withheld and paid all Taxes which it is required to withhold and pay relating to salaries and other compensation heretofore paid to the employees of the Company.

2.6.(c) Tax Audits . No Tax Returns of the Company, or the Affiliated Group for each period for which the Company was a member of the Affiliated Group, have been audited by the Internal Revenue Service or any other Governmental Authority, and the Company or the Affiliated Group, as applicable, has not received from the Internal Revenue Service or any other Governmental Authority any notice of underpayment of Taxes or other deficiency which has not been paid nor any objection to any Tax Return filed by the Company or the Affiliated Group, as applicable, except where any such deficiency, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. There are no outstanding agreements or waivers extending the statutory period of limitations applicable to any Tax Return of the Company or the Affiliated Group.

2.6.(d) Consolidated Group . During the past ten years the Company has not been a member of an affiliated group of companies required to file consolidated Tax Returns other than the Affiliated Group. The Company has no Liability for Taxes of any Person under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or foreign Laws) other than other members of the Affiliated Group.

 

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2.6.(e) Other . Except as set forth in Section 2.6(e) of the Disclosure Schedule, the Company has not (i) applied for any tax ruling, (ii) entered into a closing agreement with any taxing authority, (iii) filed an election under Section 338(g) or Section 338(h)(10) of the Code (nor has a deemed election under Section 338(e) of the Code occurred), (iv) made any payments, or been a party to an agreement (including this Agreement) that under any circumstances could obligate it to make payments that will not be deductible because of Section 280G of the Code, or (v) been a party to any tax allocation or tax sharing agreement.

2.7. Finance Company Representations .

2.7.(a) Compliance with Anti-Money Laundering Laws . The Company has complied with all applicable anti-money laundering laws and regulations, including without limitation the USA Patriot Act of 2001 (collectively, the “ Anti-Money Laundering Laws ”) in connection with the origination and servicing of the Loans, and has established an anti-money laundering compliance program as required by the Anti-Money Laundering Laws, except where such failure would not reasonably be expected to have a Company Material Adverse Effect.

2.7.(b) Credit Reporting . The Company, in its capacity as servicer of the Loans, has complied with the Fair Credit Reporting Act and its implementing regulations in all material respects with respect to the servicing of the Loans, except where such failure would not reasonably be expected to have a Company Material Adverse Effect.

2.7.(c) Loan Documents and Loan Files . Each Loan does not violate in any material respect applicable Laws and to the Company’s Knowledge is a legal, valid and binding obligation of the related Borrower, enforceable in accordance with its terms and not subject to set off, counterclaim or defense whatsoever, except as may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally, and by general equitable principles. The Loan Documents and the related materials in the Loan Files constitute all of the documentation relating to the Loans, which documentation does not violate in any material respect applicable Laws, is enforceable and adequate for the substantial realization on the related Loan. All Loans are in substantially one of the forms attached in Section 2.7(c) of the Disclosure Schedule, except where the failure of a Loan to be in one of such forms would, individually or in the aggregate, not reasonably be expected to have a Company Material Adverse Effect. No Loan Documents were falsified by the Company, or, to the Company’s Knowledge, by any tax preparer, facilitator or any Borrower, and, in the case of the Company, and to the Company’s Knowledge, in the case of any tax preparer, facilitator or any Borrower, such Loan Documents, as of the date thereof, did not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the information and statements therein not misleading. Each Loan constitutes an “instrument” within the meaning of the UCC.

 

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2.7.(d) Loan Gain and Loss History; Allowance for Possible Loan Losses . The Company has delivered to Oakmont true and correct information as to past due loans as of December 31, 2006, a copy of which informational report is attached in Section 2.7(d) of the Disclosure Schedule.

2.7.(e) Principal Balance of Loans . The principal balance of each of the Loans set forth in Section 2.7(e) of the Disclosure Schedule reflects the existing outstanding principal balance of such Loans as of December 31, 2006, including loans made to affiliated parties, after taking into effect any settlement, offset, compromise or similar agreement with a Borrower regarding the amount of its payment obligation thereunder.

2.8. Absence of Certain Changes . Except as and to the extent set forth in Section 2.8 of the Disclosure Schedule or as discussed in any report filed by Parent with the SEC pursuant to the Exchange Act (collectively, the “ Parent Reports ”) prior to the date of this Agreement, since September 30, 2006 there has not been:

2.8.(a) Any Company Material Adverse Effect;

2.8.(b) Any loss, damage or destruction, whether covered by insurance or not, affecting the Company’s business or properties;

2.8.(c) Any increase in the compensation, salaries or wages payable or to become payable to any executive employee of the Company (except as and to the extent set forth in, any increase or change pursuant to any bonus, pension, profit sharing, retirement or other plan or commitment), or any bonus or other employee benefit granted, made or accrued to such executive;

2.8.(d) Any labor dispute or disturbance, other than routine individual grievances which are not material to the business, financial condition or results of operations of the Company;

2.8.(e) Any commitment or transaction by the Company (including, without limitation, any borrowing or capital expenditure) other than in the ordinary course of business consistent with past practice;

2.8.(f) Any declaration, setting aside, or payment of any dividend or any other distribution in respect of the Company’s capital stock; any redemption, purchase or other acquisition by the Company of any capital stock of the Company, or any security relating thereto; or any other payment to any stockholder of the Company;

2.8.(g) Any sale, lease or other transfer or disposition of any properties or assets of the Company, except for sales in the ordinary course of business;

2.8.(h) Any indebtedness for borrowed money incurred, assumed or guaranteed by the Company other than in the ordinary course of business consistent with past practice;

 

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2.8.(i) Any Encumbrance made on any of the properties or assets of the Company other than in the ordinary course of business consistent with past practice;

2.8.(j) Any entering into, amendment or termination by the Company of any contract, or any waiver of material rights there under, other than in the ordinary course of business consistent with past practice;

2.8.(k) Any loan or advance (other than advances to employees in the ordinary course of business for travel and entertainment in accordance with past practice) to any Person including, but not limited to, any officer, director or employee of the Company or any of its Affiliates;

2.8.(l) Any grant of credit to any customer on terms or in amounts materially more favorable than those which have been extended to such customer in the past, any other material change in the terms of any credit heretofore extended, or any other material change of the Company’s policies or practices with respect to the granting of credit; or

2.8.(m) To the Company’s Knowledge, any other event or condition not in the ordinary course of business of the Company.

2.9. Absence of Undisclosed Liabilities . Except as and to the extent specifically disclosed in Section 2.9 of the Disclosure Schedule or in the Recent Company Balance Sheet, the Company does not have any Liabilities other than commercial liabilities and obligations incurred since the date of the Recent Company Balance Sheet in the ordinary course of business and consistent with past practice and none of which has or will have a Company Material Adverse Effect. Except as and to the extent specifically disclosed in the Recent Company Balance Sheet, neither Parent nor the Company has Knowledge of any basis for the assertion against the Company of any Liability and there are no circumstances, conditions, happenings, events or arrangements, contractual or otherwise, which may give rise to Liabilities, except commercial liabilities and obligations incurred in the ordinary course of the Company’s business and consistent with past practice.

2.10. No Litigation . Except as set forth in Section 2.10 of the Disclosure Schedule, to the Company’s Knowledge, there is no litigation pending or threatened against the Company, its directors (in such capacity), its business or any of its assets as to which there is reasonable possibility of adverse determination and which, if adversely determined, would, individually or in the aggregate, reasonable be expected to have a Company Material Adverse Effect, nor does the Parent or the Company know, or have grounds to know, of any basis for any such litigation.

2.11. Compliance With Laws .

2.11.(a) Compliance . To the Company’s Knowledge, the Company is in compliance with all applicable Laws, including, without limitation, those applicable to discrimination in employment, trade practices, competition and pricing, zoning, building and sanitation, employment, retirement and labor relations, and Environmental Laws except where the failure to comply has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

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The Company has not received notice of any violation or alleged violation of, and is subject to no Liability for past or continuing violation of, any Laws except where such violation has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. All material reports and returns required to be filed by the Company with any Governmental Authority have been filed, and were accurate and complete in all material respects when filed, except where the failure to file or be accurate and complete in all material respects has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

2.11.(b) Licenses and Permits . To the Company’s Knowledge, the Company has all licenses, permits, approvals, authorizations and consents of all Governmental Authorities and all certification required for the conduct of the business (as presently conducted and as proposed to be conducted), except where the failure to have such licenses, permits, approvals, authorizations and consents has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. To the Company’s Knowledge, the Company (including its operations, properties and assets) is and has been in compliance with all such permits and licenses, approvals, authorizations and consents, except where the failure to comply has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

2.11.(c) Environmental Matters . The applicable Laws relating to pollution or protection of the environment, including Laws relating to emissions, discharges, generation, storage, releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic, hazardous or petroleum or petroleum-based substances or wastes (“ Waste ”) into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Waste including, without limitation, the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act, the Toxic Substances Control Act and the Comprehensive Environmental Response Compensation Liability Act (“ CERCLA ”), as amended, and their state and local counterparts are herein collectively referred to as the “ Environmental Laws ”. To the Company’s Knowledge, the Company is in compliance in all material respects with all limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws or contained in any regulations, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder.

2.12. Title to and Condition of Properties .

2.12.(a) Tangible Property . The Company has good and marketable title to, or a valid leasehold interest in, all equipment, furniture and other tangible assets used in the ordinary course of its business and operations, free and clear of any Encumbrances other than Permitted Encumbrances. All of the assets, owned or leased by the Company are in good working order, ordinary wear and tear excepted, and suitable for the purposes for which they are being used.

 

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2.12.(b) Real Property . Section 2.12(b) of the Disclosure Schedule sets forth all real property used or occupied by the Company, including a description of all land.

2.12.(c) Insurance . Section 2.12(c) of the Disclosure Schedule sets forth a true, correct and complete list of all fire, theft, casualty, general liability, workers’ compensation, business interruption, environmental impairment, product liability, automobile and other insurance policies insuring the Company and of all life insurance policies maintained for any officers or employees of the Company, specifying the type of coverage, the amount of coverage, the premium, the deductible, the insurer and the expiration date of each such policy (collectively, the “ Company Insurance Policies ”). True, correct and complete copies of all of the Company Insurance Policies have been made available by the Company to Oakmont. The Company Insurance Policies are in full force and effect and are in amounts and of a nature which are adequate and customary for businesses similar to the business of the Company. All premiums due on the Company Insurance Policies or renewals thereof have been paid and there is no default under any of the Company Insurance Policies.

2.13. Contracts and Commitments .

2.13.(a) Real Property Leases . Except as set forth in Section 2.13(a) of the Disclosure Schedule, the Company has no leases of real property.

2.13.(b) Personal Property Leases . Except as set forth in Section 2.13(b) of the Disclosure Schedule, the Company has no leases of personal property.

2.13.(c) Sales Commitments . Except as set forth in Section 2.13(c) of the Disclosure Schedule, the Company has no sales contracts or commitments to customers except those made in the ordinary course of business, at arm’s length, and no such contracts or commitments are for a sales price which would result in a loss to the Company that is not reflected on Section 2.13(c) of the Disclosure Schedule.

2.13.(d) Contracts for Services . Except as set forth in Section 2.13(d) of the Disclosure Schedule, the Company has no agreement, understanding, contract or commitment (written or oral) with any stockholder, officer, employee, agent, consultant that is not cancelable by the Company on notice of not longer than 30 days without Liability, penalty or premium of any nature or kind whatsoever.

2.13.(e) Powers of Attorney . Except as set forth in Section 2.13(e) of the Disclosure Schedule, the Company has not given any power of attorney, which is currently in effect, to any Person for any purpose whatsoever.

2.13.(f) Collective Bargaining Agreements . The Company is not a party to any collective bargaining agreements with any unions, guilds, shop committees or other collective bargaining groups.

2.13.(g) Loan Agreements . Except as set forth in Section 2.13(g) of the Disclosure Schedule, the Company is not obligated under any loan agreement, promissory note, letter of credit, or other evidence of indebtedness as a signatory, guarantor or otherwise.

 

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2.13.(h) Guarantees . Except as set forth in Section 2.13(h) of the Disclosure Schedule, the Company has not guaranteed the payment or performance of any Person, agreed to indemnify any Person or act as a surety, or otherwise agreed to be contingently or secondarily liable for the obligations of any Person.

2.13.(i) Contracts Subject to Renegotiation . The Company is not a party to any contract with any Governmental Authority which is subject to renegotiation.

2.13.(j) Other Material Contracts . The Company has no lease, license, contract or commitment of any nature involving consideration or other expenditure in excess of $250,000, or which is otherwise individually material to the operations of the Company, except as set forth in Section 2.13(j) of the Disclosure Schedule, or except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

2.13.(k) No Default . To the Company’s Knowledge, the Company is not in default under any lease, contract or commitment, nor has any event or omission occurred which through the passage of time or the giving of notice, or both, would constitute a default thereunder or cause the acceleration of any of the Company’s obligations or result in the creation of any Encumbrance on any of the assets owned, used or occupied by the Company. To the Company’s Knowledge, no third party is in default under any lease, contract or commitment to which the Company is a party, nor has any event or omission occurred which, through the passage of time or the giving of notice, or both, would constitute a default thereunder or give rise to an automatic termination, or the right of discretionary termination, thereof, other than defaults which, have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

2.14. Labor Matters . The Company has not experienced any labor disputes or any work stoppage due to labor disagreements with employees of the Company. Except to the extent set forth in Section 2.14 of the Disclosure Schedule, to the Company’s Knowledge, (a) the Company is in compliance with all applicable Laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and is not engaged in any unfair labor practice; (b) there is no unfair labor practice charge or complaint against the Company pending or threatened; (c) there is no labor strike, dispute, request for representation, slowdown or stoppage actually pending or threatened against or affecting the Company; (d) no question concerning representation has been raised or is threatened respecting the employees of the Company; (e) no grievance which might have a Company Material Adverse Effect, nor any arbitration proceeding arising out of or under collective bargaining agreements, is pending and no such claim therefore exists; and (f) there are no administrative charges or court complaints against the Company concerning alleged employment discrimination or other employment related matters pending or threatened before the U.S. Equal Employment Opportunity Commission or any other Governmental Authority.

 

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2.15. Employee Benefit Plans .

2.15.(a) Disclosure . Section 2.15(a) of the Disclosure Schedule contains a complete list of all (i) incentive, bonus, commission, or deferred compensation or severance or termination pay plans, agreements or arrangements for the benefit of employees employed in the Company, (ii) pension, profit-sharing, stock purchase, stock option, group life insurance, hospitalization insurance, disability, retirement and all other employee benefit plans, agreements or arrangements, including but not limited to any “employee benefit plan” (as defined in Section 3(3) of ERISA), for the benefit of employees employed by the Company, or (iii) fringe benefit plans, agreements and arrangements for the benefit of employees employed by the Company (the items referred to in (i), (ii) and (iii) above are hereinafter referred to collectively as the “ Plans ”).

2.15.(b) Operation . Each of the Plans set forth on Section 2.15(a) of the Disclosure Schedule that is an “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), or an “employee welfare benefit plan” (as such term is defined in Section 3(1) of ERISA), has been operated in compliance with its written terms and the applicable provisions of ERISA and the Code, except where the failure to operate in compliance has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. To the extent applicable, the Company has heretofore made available to Oakmont complete copies of (i) each Plan, including all amendments thereto, and its related trust agreement, if any, and summary plan description, if any, and (ii) each collective bargaining agreement relating to each Plan.

2.15.(c) Changes . Except as set forth in Section 2.15(c) of the Disclosure Schedule, to the Company’s Knowledge there are no agreed upon future increases of benefit levels for employees employed by the Company, and no increases in benefits have been committed to by the Company for the benefit of employees employed by the Company. With respect to each Plan, full payment has been made of all amounts that the Company is required to have paid as contributions to such Plan under its terms or under the terms of any applicable collective bargaining agreement or ERISA.

2.15.(d) Claims . There are no pending or, to the Company’s Knowledge, threatened claims against any of the Plans or related trusts other than routine claims by participants and beneficiaries for benefits due and owing under such Plans.

2.16. Employment Compensation . Section 2.16 of the Disclosure Schedule contains a true and correct list of all employees to whom the Company is paying compensation, including bonuses and incentives, at an annual rate in excess of $100,000 for services rendered or otherwise.

2.17. Intellectual Property . The Company owns or has the right to use, whether through licensing or otherwise, all Intellectual Property significant to the businesses of the Company in substantially the same manner as such businesses are conducted on the date hereof.

 

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2.18. No Brokers or Finders . Except as set forth on Section 2.18 of the Disclosure Schedule, no agent, broker, finder, investment or commercial banker or other Person, engaged by or acting on behalf of Parent or any of its Affiliates, or the Company or any of its Affiliates, in connection with the negotiation, execution or performance of this Agreement or the transactions contemplated herein, is or will be entitled to any broker’s or finder’s or similar fees or other commissions as a result of this Agreement or the transactions contemplated herein. Parent (and not the Company or Oakmont) shall pay all such broker’s or finder’s or similar fees or other commissions.

2.19. Disclosure . No representation or warranty by Parent or the Company in this Agreement, nor any statement, certificate, schedule, document or exhibit hereto furnished or to be furnished by or on behalf of Parent or the Company pursuant to this Agreement or in connection with transactions contemplated hereby, contains or shall contain any untrue statement of material fact or omits or shall omit a material fact necessary to make the statements contained therein not misleading. All statements and information contained in any certificate, instrument, Disclosure Schedule or document delivered by or on behalf of Parent and/or the Company shall be deemed representations and warranties by Parent and the Company. Without limiting the foregoing, the Company represents and warrants that the information relating to the Company supplied by the Company for inclusion in any report, registration statement or definitive proxy statement to be filed by Oakmont with the Securities and Exchange Commission (the “ SEC ”) will not, as of the date provided to Oakmont, contain any statement which is false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statement therein not false or misleading.

 

3.	REPRESENTATIONS AND WARRANTIES OF OAKMONT.

Oakmont makes the following representations and warranties to Parent and the Company, subject to the exceptions set forth in the Disclosure Schedule.

3.1. Corporate .

3.1.(a) Organization . Oakmont is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware.

3.1.(b) Corporate Power . Oakmont has all requisite power and authority to own, operate and lease its properties and to carry on its business as and where such is now being conducted. Oakmont has all requisite power and authority to enter into this Agreement and the other documents and instruments to be executed and delivered by it pursuant hereto, to perform its obligations hereunder, and to carry out the transactions contemplated hereby and thereby.

3.1.(c) Qualification . Oakmont is duly licensed or qualified to do business as a foreign company, and is in good standing, in each jurisdiction wherein the character of the properties owned or leased by it, or the nature of its business, makes such licensing or qualification necessary, except for such jurisdictions in which the failure to be so qualified would not have an Oakmont Material Adverse Effect and would not materially delay the Closing or materially and adversely affect the ability of the parties to consummate the transactions contemplated hereby.

 

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3.1.(d) No Subsidiaries . Oakmont does not own, directly or indirectly, any voting securities or other equity interests in, or have the right to control, any other Person.

3.1.(e) Oakmont Stock . Upon issuance and delivery of Oakmont Stock pursuant to this Agreement, Oakmont Stock will be duly authorized and validly issued, fully paid and non-assessable.

3.2. Authority . Subject to the Oakmont Stockholder Approval, the execution, delivery and performance of this Agreement and the other documents and instruments to be executed and delivered by Oakmont pursuant hereto and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary parties. Except for the Oakmont Stockholder Approval, no other or further act or proceeding on the part of Oakmont is necessary to authorize this Agreement or the other documents and instruments to be executed and delivered by Oakmont pursuant hereto or the consummation of the transactions contemplated hereby and thereby. This Agreement constitutes, and when executed and delivered, the other documents and instruments to be executed and delivered by Oakmont pursuant hereto will constitute, legal, valid and binding agreements of Oakmont, enforceable in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or similar Laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

3.3. Capitalization . The authorized capital stock of Oakmont consists of 35,000,000 shares of common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. As of the date of this Agreement, there are (i) 10,575,166 shares of Oakmont common stock issued and outstanding and (ii) no shares of Oakmont preferred stock issued and outstanding. All of the outstanding shares of common stock of the Oakmont have been duly authorized and are validly issued, fully paid and nonassessable and were issued in compliance with all applicable Laws. Except as described in the Oakmont Reports, there are no outstanding subscription, option, warrant, call rights, preemptive rights or other agreements or commitments obligating Oakmont to issue, sell, deliver or transfer (including any rights of conversion or exchange under any outstanding security or other instrument) any economic, voting, ownership or any other type of interest or security in Oakmont.

3.4. No Violation . Neither the execution and delivery of this Agreement or the other documents and instruments to be executed and delivered by Oakmont pursuant hereto, nor the consummation by Oakmont of the transactions contemplated hereby and thereby (a) will violate any applicable Laws, (b) will require any authorization, consent, approval, exemption or other action by or notice to any Governmental Authority, except for applicable requirements, if any, of the Securities Act, the Exchange Act, state securities and “blue sky” Laws, and the rules and regulations thereunder, or (c) will violate or conflict with, or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or will result in the termination of, or accelerate

 

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the performance required by, or result in the creation of any Encumbrance upon any of the assets of Oakmont under, any term or provision of the Organizational Documents of Oakmont or of any contract, commitment, understanding, arrangement, agreement or restriction of any kind or character to which Oakmont is a party or by which Oakmont or any of its assets or properties may be bound or affected, except, in the case of clause (c), for such violations, conflicts, breaches, losses, defaults, terminations, cancellations, accelerations or Encumbrances that, individually or in the aggregate, would not reasonably be expected to have an Oakmont Material Adverse Effect.

3.5. Reports . Oakmont has previously made available to the Parent and the Company a true, correct and complete copy of each (a) final registration statement, prospectus, report, schedule and definitive proxy statement filed since April 15, 2005 by Oakmont with the SEC pursuant to the Securities Act or the Exchange Act (collectively, the “ Oakmont Reports ”), (b) written communication between Oakmont and the SEC since April 15, 2005, and (c) communication mailed by Oakmont to its stockholders since April 15, 2005, and no such registration statement, prospectus, report, schedule, proxy statement or communication as of its date of filing contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. Oakmont has timely filed all Oakmont Reports and other documents required to be filed by it under the Securities Act and the Exchange Act, and, as of their respective dates, all Oakmont Reports complied in all material respects with the published rules and regulations of the SEC with respect thereto, including rules and regulations relating to the filing of exhibits thereto. No executive officer of Oakmont has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002 and no enforcement action has been initiated against Oakmont by the SEC relating to disclosures contained in any Oakmont Report.

3.6. Financial Statements . Oakmont has previously made available to Parent and the Company true and complete copies of the financial statements of Oakmont consisting of (a) balance sheet of Oakmont as of December 31, 2005, and the related statements of income and cash flows for the year then ended (including the notes contained therein or annexed thereto), which financial statements have been reported on, and are accompanied by, the signed, unqualified opinion of independent auditors for Oakmont for such year, and (b) an unaudited balance sheet of Oakmont as of December 31, 2006 (the “ Recent Oakmont Balance Sheet ”), and the related unaudited statements of income for the year then ended and for the corresponding period of the prior year (including the notes and schedules contained therein or annexed thereto). All of such financial statements (including all notes and schedules contained therein or annexed thereto) are true, complete and accurate, have been prepared in accordance with GAAP (except, in the case of unaudited statements, for the absence of footnote disclosure) applied on a consistent basis, have been prepared in accordance with the books and records of Oakmont, and fairly present, in accordance with GAAP, the assets, liabilities and financial position, the results of operations and cash flows of Oakmont as of the dates and for the years and periods indicated. The books of account and other financial records of Oakmont are in all material respects complete and correct and do not contain or reflect any material inaccuracies or discrepancies.

 

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3.7. Tax Matters .

3.7.(a) Provision For Taxes . The provision made for Taxes on the Recent Oakmont Balance Sheet is sufficient for the payment of all Taxes (and any interest and penalties) and assessments, whether or not disputed at the date of the Recent Oakmont Balance Sheet, and for all years and periods prior thereto. Since the date of the Recent Oakmont Balance Sheet, Oakmont has not incurred any Taxes other than Taxes incurred in the ordinary course of business consistent in type and amount with past practices of Oakmont.

3.7.(b) Tax Returns Filed . All Tax Returns required to be filed by or on behalf of Oakmont have been timely filed and when filed were true and correct in all material respects, and the Taxes due thereon were paid or adequately accrued. Oakmont has duly withheld and paid all Taxes which it is required to withhold and pay relating to salaries and other compensation heretofore paid to the employees of Oakmont.

3.7.(c) Tax Audits . No Tax Returns of Oakmont have been audited by the Internal Revenue Service or any other Governmental Authority, and Oakmont has not received from the Internal Revenue Service or any other Governmental Authority any notice of underpayment of Taxes or other deficiency which has not been paid nor any objection to any Tax Return filed by Oakmont. There no outstanding agreements or waivers extending the statutory period of limitations applicable to any Tax Return of Oakmont.

3.7.(d) Consolidated Group . Oakmont has never been a member of an affiliated group of companies that was required to file a consolidated Tax Return.

3.7.(e) Other . Oakmont has never (i) applied for any tax ruling, (ii) entered into a closing agreement with any taxing authority, (iii) filed an election unde