Exhibit 2.1
[ Execution Final
]
AGREEMENT AND PLAN OF
REORGANIZATION
by and among
LONE MOOSE ADVENTURES,
INC.,
LONE MOOSE ACQUISITION
CORPORATION,
CHRISTOPHER B.GLOVER, MICHAEL C.
BROWN AND DAVID C. MERRELL
and
SOUTHWEST CASINO AND HOTEL
CORP.
dated July 14, 2004
TABLE OF CONTENTS
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ii
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AGREEMENT AND PLAN OF
REORGANIZATION
This Agreement and Plan of
Reorganization (the “ Agreement ”) is made and
entered into as of July 14, 2004, by and among Lone Moose
Adventures, Inc., a Nevada corporation (“ Parent
”); Lone Moose Acquisition Corporation, a Minnesota
corporation and a wholly-owned subsidiary of Parent (“
Acquisition Co. ”); Michael C. Brown and Christopher
B. Glover, currently the executive officers of Parent, and David C.
Merrell, a founding shareholder of Parent (Messrs. Brown, Glover
and Merrell are together referred to herein as the “
Principal Shareholders ”); and Southwest Casino and
Hotel Corp., a Minnesota corporation (“ Southwest
”).
RECITALS:
A.
Upon the terms and subject to the conditions of this Agreement and
in accordance with the Minnesota Business Corporation Act (the
“ MBCA ”), Parent, Acquisition Co. and Southwest
will enter into a business combination transaction pursuant to
which Acquisition Co. will merge with and into Southwest (the
“ Merger ”) with Southwest being the surviving
corporation.
B.
The Board of Directors of Parent (i) has determined that the Merger
is consistent with and in furtherance of the long-term business
strategy of Parent and fair to, and in the best interests of,
Parent and its shareholders, and (ii) has approved this Agreement,
the Merger and the other transactions contemplated by this
Agreement.
C.
The Board of Directors of Southwest (i) has determined that the
Merger is consistent with and in furtherance of the long-term
business strategy of Southwest and fair to, and in the best
interests of, Southwest and its shareholders, and (ii) has approved
this Agreement, the Merger and the other transactions contemplated
by this Agreement.
D.
A majority of the shareholders of Southwest must approve this
Agreement, the Merger and the other transactions contemplated by
this Agreement.
E.
The Board of Directors and sole shareholder of Acquisition Co. have
approved this Agreement, the Merger and other transactions
contemplated by this Agreement.
F.
Parent, Acquisition Co., the Principal Shareholders and Southwest
desire to make certain representations and warranties and other
agreements in connection with the Merger.
G.
Capitalized terms used in this Agreement shall have the respective
meanings ascribed to each as set forth in this Agreement, including
the meanings set forth in Article I.
H.
The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Code, and
to cause the Merger to qualify as a reorganization under the
provisions of Section 368(a) of the Code.
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NOW, THEREFORE
, in consideration of the premises
and the mutual covenants and promises contained herein, and for
other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as
follows:
1.1
Defined Terms .
In addition to
terms defined elsewhere in this Agreement, the following defined
terms have the meanings indicated below:
“ Acquisition ”
shall mean any transaction resulting in the acquisition by Parent
of another entity (including, without limitation, by means of a
stock purchase, reorganization, merger or
consolidation).
“ Acquisition Co
.” has the meaning set forth in the first paragraph of this
Agreement.
“ Actions or
Proceedings ” means any action, suit, proceeding,
arbitration, Order, inquiry, hearing, assessment with respect to
fines or penalties or litigation (whether civil, criminal,
administrative, investigative or informal) commenced, brought,
conducted or heard by or before, or otherwise involving, any
Governmental or Regulatory Authority.
“ Affiliate ”
means, with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such
Person.
“ Agreement ”
means this Agreement and Plan of Reorganization.
“ Applicable Law
” means, with respect to any Person, any federal, state or
local common law or duty, caselaw or ruling, statute, law,
ordinance, policy, guidance, rule, administrative interpretation,
regulation, code, order, writ, injunction, directive, judgment,
decree or other requirement of any governmental authority
applicable to such Person or any of its Affiliates or any of their
respective properties, assets, officers, directors, employees,
consultants or agents (in connection with such officer’s,
director’s, employee’s, consultant’s or
agent’s activities on behalf of such Person or any of its
Affiliates).
“ Assets and Properties
” and “ Assets or Properties ” of any
Person means all assets and properties of every kind, nature,
character and description (whether real, personal or mixed, whether
tangible or intangible, whether absolute, accrued, contingent,
fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person,
including, without limitation, cash, cash equivalents, accounts and
notes receivable, chattel paper, documents, instruments, general
intangibles, real estate, equipment, inventory, goods and
Intellectual Property.
“ Benefit Plan ”
means each Pension Plan, Welfare Plan and Compensation
Plan.
“ Best Knowledge
” means to the best knowledge of any officer or director of a
Person. An officer or director of a Person will have
knowledge of a particular fact or other matter if such individual
is actually aware of such fact or other matter.
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“ Books and Records
” of any Person means all files, documents, instruments,
papers, books, computer files (including but not limited to files
stored on a computer’s hard drive or on floppy disks),
electronic files and records in any other medium relating to the
business, operations or condition of such Person.
“ Breach ” means
a “Breach” of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement or any other agreement or
document will be deemed to have occurred if there is or has been
(a) any inaccuracy in a breach of, or any failure to perform or
comply with, such representation, warranty, covenant, obligation,
or other provision, or (b) any claim (by any Person) or other
occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation, or other provision,
and the term “Breach” means any such inaccuracy,
breach, failure, claim, occurrence or circumstance.
“ Bridge Financing
” means Southwest’s 8% Demand Notes, as defined below
and referenced in Section 2.7(b) hereto, in the approximate
aggregate principal amount between One Million Dollars ($1,000,000)
and Two Million Five Hundred Thousand Dollars ($2,500,000), subject
to increase by the Southwest board of directors.
“ Bridge Registration
Rights Agreement ” means the Bridge Registration Rights
Agreement that has been entered into among the Southwest and
investors in the Southwest 8% Demand Notes.
“ CCM ” means
Corporate Capital Management, LLC, a Minnesota limited liability
company.
“ Code ” means
the Internal Revenue Code of 1986, as amended.
“ Collateral Agreements
” means the Exchange Agent Agreement, the Lock-Up/Leak-Out
Agreement and the Asset Purchase Agreement.
“ Compensation Plan
” means any material benefit or arrangement that is not
either a Pension Plan or a Welfare Plan, including, without
limitation, (a) each employment or consulting agreement, (b) each
arrangement providing for insurance coverage or workers’
compensation benefits, (c) each bonus, incentive bonus or deferred
bonus arrangement, (d) each arrangement providing termination
allowance, severance or similar benefits, (e) each equity
compensation plan, (f) each current or deferred compensation
agreement, arrangement or policy, and (g) each compensation policy
and practice maintained by the applicable party or any ERISA
Affiliate of such party covering the employees, former employees,
directors and former directors of such party and the beneficiaries
of any of them.
“ Consent ” means
any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
“ Contemplated
Transactions ” means all of the transactions contemplated
by this Agreement, including: (a) the Merger; and (b) the
performance by Parent, the Principal Shareholders and Southwest of
their respective covenants and obligations under this
Agreement.
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“ Contract ”
means any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is
legally binding.
“ Copyrights ”
means copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith and mask works
and all applications, registrations and renewals in connection
therewith.
“ Dissenters’
Rights ” means the dissenters’ rights that may be
applicable to the Merger under the MBCA.
“ Encumbrances ”
means any mortgage, pledge, assessment, security interest, deed of
trust, lease, lien, adverse claim, equitable interest, levy,
charge, community property interest, right of first refusal or
other encumbrance of any kind, or any conditional sale or title
retention agreement or other agreement to give any of the foregoing
in the future.
“ ERISA ” means
the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder.
“ ERISA Affiliate
” means any “person,” within the meaning of
Section 7701(a)(1) of the Code, that together with the applicable
party is considered a single employer pursuant to Section 414(b),
(c), (m) or (o) of the Code or Section 3(5) or 4001(b)(1) of
ERISA.
“ Exchange Act ”
means the Securities Exchange Act of 1934, as amended.
“ Exchange Agent
” has the meaning set forth in Section 2.10(a) of this
Agreement.
“ Exchange Agent
Agreement ” means that certain Exchange Agent Agreement
entered into by the Parent and the Exchange Agent regarding the
exchange of certificates as described in Section 2.10 of this
Agreement.
“ FASB ” means
Financial Accounting Standards Board.
“ GAAP ” means
United States generally accepted accounting principles, as
currently defined by the FASB and other agencies permitted by law
to issue such pronouncements.
“ Gaming Authority
” means the Colorado Limited Gaming Control Commission (the
“ CLGCC ”), the South Dakota Commission on
Gaming (the “ SDCG ”), the National Indian
Gaming Commission (the “ NIGC ”), the Minnesota
Racing Commission (the “ MRC ”) and any other
state, federal and/or tribal regulatory authority having
jurisdiction over Southwest, its shareholders and/or its
securities.
“ Governmental
Authorization ” means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given or
otherwise made available by or under the authority of any
Governmental or Regulatory Authority or pursuant to any Legal
Requirement.
“ Governmental or
Regulatory Authority ” means any federal, territorial,
state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory
organization, commission, tribunal or organization or any
regulatory,
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administrative or other agency, or
any political or other subdivision, department or branch of any of
the foregoing.
“ HIPAA Privacy
Regulations ” means the regulations (Title 45, Parts 160
and 164, of the Code of Federal Regulations) issued by the U.S.
Department of Health and Human Services pursuant to the Health
Insurance Portability and Accountability Act of 1996.
“ Intellectual Property
” means (a) Patents; (b) Trademarks, (c) Copyrights; (d)
trade secrets and confidential business information (including
without limitation, product specifications, data, know how,
inventions and ideas, past, current and planned research and
development, customer lists, current and anticipated customer
requirements, price lists, market studies, business plans), however
documented; (e) proprietary computer software and programs
(including object code and source code) and other proprietary
rights and copies and tangible embodiments thereof (in whatever
form or medium); (f) database technologies, systems, structures and
architectures (and related processes, formulae, compositions,
improvements, devices, know how, inventions, discoveries, concepts,
ideas, designs, methods and information) and any other related
information, however, documented; (g) any and all information
concerning the business and affairs of a Person (which includes
historical financial statements, financial projections and budgets,
historical and projected sales, capital spending budgets and plans,
the names and backgrounds of key personnel and personnel training
and techniques and materials), however documented; (h) any and all
notes, analysis, compilations, studies, summaries, and other
material prepared by or for a Person containing or based, in whole
or in part, on any information included in the foregoing, however
documented; (i) all industrial designs and any registrations and
applications therefor; (j) all databases and data collections and
all rights therein; and (k) any similar or equivalent rights to any
of the foregoing anywhere in the world.
“ Interim Financial
Statements ” means, for Southwest, the Southwest
unaudited balance sheet and the related unaudited statement of
income and retained earnings, in each case for the three month
period ended March 31, 2004, prepared in accordance with GAAP and
accompanied by appropriate supporting schedules, and for Parent,
the unaudited balance sheet and the related unaudited statement of
income and retained earnings, in each case for the three month
period ended June 30, 2004, prepared in accordance with GAAP and
accompanied by appropriate supporting schedules.
“ Knowledge ” or
“ Known to ” means the knowledge of any officer
or director of the applicable party. An officer or director
of an applicable party will be deemed to have Knowledge of a
particular fact or other matter if: (i) such individual is actually
aware of such fact or other matter; or (ii) a prudent individual
could be expected to discover or otherwise become aware of such
fact or other matter in the course of conducting a reasonably
comprehensive investigation concerning the existence of such fact
or other matter.
“ Legal Requirement
” means any federal, state, local, municipal, foreign,
international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute or treaty.
“ Lock-Up/Leak-Out
Agreement ” has the meaning set forth in Section 2.11(d)
hereof.
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“ Material Adverse
Effect ” means, for any Person, any effect, change,
event, circumstance or condition that, individually or in the
aggregate with all similar effects, changes, events, circumstances
or conditions, is or would reasonably be expected to: (a) have a
material adverse effect on the business, operations, assets,
properties, results of operations, or financial condition of such
Person or any subsidiary of such Person, considered as a whole, or
(b) prevent or materially delay the consummation of the Merger or
otherwise prevent such Person or any subsidiary of such Person from
performing its obligations under this Agreement.
“ MBCA ” means
the Minnesota Business Corporation Act.
“ MBC Global ”
means MBC Global, LLC, an Illinois limited liability
company.
“ MBC Global Advisory
Services Agreement ” means that certain Advisory Services
Agreement dated July , 2004 between MBC Global,
LLC and Southwest Agreement as referenced in Section 2.7(f)
hereto.
“ Merger ” has
the meaning set forth in the first recital of this
Agreement.
“ Merger Consideration
” has the meaning set forth in Section 2.8 of this
Agreement.
“ Order ” means
any award, decision, writ, judgment, decree, ruling, subpoena,
verdict, injunction or similar order of any Governmental or
Regulatory Authority (in each such case whether preliminary or
final).
“ Ordinary Course of
Business ” means the action of a Person that is (a)
consistent with the past practices of such Person and is taken in
the ordinary course of the normal day to day operations of such
Person; (b) not required to be authorized by the board of
directors; and (c) similar in nature and magnitude to actions
customarily taken, without the action of the board of directors or
similar body, in the ordinary course of the normal day to day
operations of other Persons that are in the same line of
business.
“ OTCBB ” shall
mean the National Association of Securities Dealers, Inc.
Over-the-Counter Bulletin Board.
“ Outstanding Southwest
Common Stock ” has the meaning set forth in Section
2.7(a) of this Agreement.
“ Outstanding Parent
Securities ” has the meaning as set forth in Section 4.4
of this Agreement.
“ Parent ” has
the meaning set forth in the first paragraph of this
Agreement.
“ Parent Benefit Plan
” shall be the Benefit Plan of Southwest that shall become
the Parent Benefit Plan on the Effective Time.
“ Parent Common Stock
” means the shares of common stock of Parent, $0.001 par
value.
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“ Parent Disclosure
Schedule ” means the disclosure schedule attached hereto
which sets forth the exceptions to and information required under,
the representations and warranties contained in Article IV of this
Agreement.
“ Parent Financial
Statements ” means (a) the audited balance sheets of
Parent and the related unaudited statements of income and retained
earnings for the fiscal periods ended March 31, 2004 and March 31,
2003 and (b) the Interim Financial Statements of Parent.
“ Parent Material
Contracts ” has the meaning set forth in Section 3.17 of
this Agreement.
“ Parent SEC Documents
” means each form, report, schedule, registration statement
and other document required to be filed by the Parent with the SEC
from inception through the date of this Agreement under the
Exchange Act or the Securities Act or by the rules and regulations
of the OTCBB, including (a) all exhibits and information
incorporated by reference therein and (b) any amendment to any such
document, whether or not such amendment is required to be so
filed.
“ Patents ” means
inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents,
patent applications and patent disclosures, together with all
reissuances, continuations, continuations in part, revisions,
extensions and reexaminations thereof.
“ Pension Plan ”
means an “employee pension benefit plan” as such term
is defined in Section 3(2) of ERISA.
“ Permits ” means
all licenses, permits, certificates of authority, authorizations,
approvals, registrations and similar consents granted or issued by
any Governmental or Regulatory Authority.
“ Permitted Encumbrance
” means (a) any Encumbrance for taxes not yet due or
delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in
accordance with GAAP and (b) any minor imperfection of title or
similar Encumbrance which individually or in the aggregate with
other such Encumbrances does not impair the value of the property
subject to such Encumbrance or the use of such property in the
conduct of the business of Southwest.
“ Person ” means
any natural person, corporation, general partnership, limited
partnership, limited liability company, proprietorship, other
business organization, trust, union, association or Governmental or
Regulatory Authority.
“ Plan ” means
any bonus, incentive compensation, deferred compensation, pension,
profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, accident, disability, workers’
compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy or arrangement of any kind,
whether written or oral, including, but not limited to, any
“employee benefit plan” within the meaning of Section
3(3) of ERISA.
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“ Proceeding ”
means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted, or heard
by or before, or otherwise involving, any Governmental or
Regulatory Authority.
“ Qualified Plan
” means each Benefit Plan which is intended to qualify under
Section 401 of the Code.
“ Related Person
” means with respect to a particular individual:
(a)
each other member of such individual’s Family;
(b)
any Person that is directly or indirectly controlled by such
individual or one or more members of such individual’s
Family;
(c)
any Person in which such individual or members of such
individual’s Family hold (individually or in the aggregate) a
Material Interest; and
(d)
any Person with respect to which such individual or one or more
members of such individual’s Family serve as a director,
officer, partner, executor, or trustee (or in a similar
capacity).
With respect to a specified Person
other than an individual:
(e)
any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(f)
any Person that holds a Material Interest in such specified
Person;
(g)
each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar
capacity);
(h)
any Person in which such specified Person holds a Material
Interest;
(i)
any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity);
and
(j)
any Related Person of any individual described in clause (f) or
(g).
For purposes of this definition, (A)
the “Family” of an individual includes (i) the
individual, (ii) the individual’s spouse and former spouses,
(iii) any other natural person who is related to the individual or
the individual’s spouse within the second degree, and (iv)
any other natural person who resides with such individual, and (B)
“Material Interest” means direct or indirect benefit
ownership (as defined in Rule 13d3 under the Exchange Act) of
voting securities or other voting interests representing at least
10% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 10% of
the outstanding equity securities or equity interests in a
Person.
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“ Reorganized Parent
” means the Parent after the Effective Time (as defined
herein) of the Merger.
“ Reorganized Parent
Securities ” means the authorized capital stock of the
Reorganized Parent, including any option, warrant, call or other
right to acquire such securities, as set forth on Exhibit D to
this Agreement.
“ SEC ” means the
Securities and Exchange Commission.
“ Securities Act
” means the Securities Act of 1933, as amended.
“ Southwest ” has
the meaning set forth in the first paragraph of this
Agreement.
“ Southwest Common
Shareholders ” means the holders of Southwest
Shares.
“ Southwest Common
Stock ” means the shares of Common Stock of Southwest,
par value $0.01 per share.
“ Southwest Debentures
” shall mean the Outstanding Series A Convertible Debentures
of Southwest.
“ Southwest Debenture
Holders ” shall mean the holders of the Southwest
Debentures.
“ Southwest 8% Demand
Notes ” means the Southwest 8% Convertible Demand Notes
in the approximate aggregate principal amount of between One
Million Dollars ($1,000,000) and Two Million Five Hundred Thousand
Dollars ($2,500,000), subject to increase by the Southwest board of
directors, anticipated to be issued and sold by Southwest prior to
consummation of the Merger.
“ Southwest Disclosure
Schedule ” means the disclosure schedule attached hereto
which sets forth the exceptions to the representations and
warranties contained in Article III hereof and certain other
information called for by this Agreement.
“ Southwest Financial
Statements ” means (a) the audited consolidated balance
sheets of Southwest and the related Southwest consolidated income
statements, statement of changes in stockholders equity and
consolidated statements of cash flows for the fiscal periods ended
December 31, 2003 and December 31, 2002 and (b) the Interim
Financial Statements of Southwest.
“ Southwest Options and
Warrants ” shall mean any outstanding options and
warrants to acquire Southwest Shares, including options or warrants
that are the subject of any contract, agreement or other
understanding with Southwest to acquire any Southwest Securities,
amounting to an aggregate of 1,450,000 options and 1,825,000
warrants, provided, however, that there are excluded any options
and warrants that may be granted under any Southwest Benefit
Plan.
“ Southwest Option and
Warrant Holders ” shall mean the holders of Southwest
Options and Warrants.
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“ Southwest Preferred
Stock ” shall mean the outstanding shares of Series C
Convertible Preferred Stock of Southwest, par value $.01 per share
amounting to an aggregate of 16,135,012 shares.
“ Southwest
Shareholders ” means holders of Southwest
Securities.
“ Southwest Shares
” shall mean the outstanding shares of Common Stock of
Southwest, amounting to an aggregate of 10,888,571
shares.
“ Southwest
Subsidiaries ” means any corporation or other entity in
which Southwest has a majority ownership interest.
“ Southwest Securities
” means any authorized and issued or outstanding securities
of Southwest or instrument exercisable or convertible into such
securities or any contract pursuant to which such securities may be
required to be issued.
“ Tax ” (and,
with correlative meaning, “Taxes,”
“Taxable” and “Taxing”) means (a) any
federal, state, local or foreign income, alternative or add-on
minimum tax, gross income, gross) receipts, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or
other tax, governmental fee or other like assessment or charge of
any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental or
Regulatory Authority responsible for the imposition of any such tax
(domestic or foreign), (b) any liability for payment of any amounts
of the type described in (a) as a result of being a member of an
affiliated, consolidated, combined, unitary or other group for any
Taxable period and (c) any liability for the payment of any amounts
of the type described in (a) or (b) as a result of any express or
implied obligation to indemnify any other person.
“ Tax Return ”
means any return, report, information return, schedule or other
document (including any related or supporting information) filed or
required to be filed with respect to any taxing authority with
respect to any Tax.
“ Threatened ”
means a claim, Proceeding, dispute, action or other matter will be
deemed to have been “Threatened” if any demand or
statement has been made (orally or in writing) or any notice has
been given (orally or in writing), or if any other event has
occurred or any other circumstances exist that would lead a prudent
Person to conclude that such a claim, proceeding, dispute, action,
or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
“ Trademarks ”
means trademarks, service marks, trade dress, logos, trade names
and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and
renewals in connection therewith.
“ Trade Secrets and Other
Proprietary Information ” has the meaning set forth in
the definition of “Intellectual Property.”
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“ Welfare Plan ”
means an “employee welfare benefit plan” as such term
is defined in Section 3(1) of ERISA (including without limitation a
plan excluded from coverage by Section 4 of ERISA).
2.1
The Merger . At the Effective Time and
subject to and upon the terms and conditions of this Agreement and
in accordance with the applicable provisions of the MBCA,
Acquisition Co. shall be merged with and into Southwest, whereupon
the separate corporate existence of Acquisition Co. shall cease and
Southwest shall continue as the surviving corporation in the Merger
(the “ Surviving Corporation ”), under the laws
of the State of Minnesota. Southwest as the surviving
corporation after the Merger is hereinafter sometimes referred to
as the “Surviving Corporation.”
2.2
The Closing . The closing of the
Merger (the “ Closing ”) will take place at
10:00 a.m., Minneapolis local time, on a date to be specified by
the parties which will be no later than the second Business Day (as
hereinafter defined) after the satisfaction or waiver (subject to
applicable law) of the conditions (excluding conditions that, by
their nature, cannot be satisfied until the Closing Date) set forth
in Section 2.11 and Article VI, unless this Agreement has been
theretofore terminated pursuant to its terms and the transactions
contemplated herein abandoned, or unless another time or date is
agreed upon in writing by the parties hereto (the actual time and
date of the Closing being referred to herein as the “
Closing Date ”), at the offices of Oppenheimer Wolff
& Donnelly LLP, 45 South Seventh Street, Suite 3300,
Minneapolis, Minnesota 55402. Southwest will as promptly as
practicable notify the Parent, and the Parent and Acquisition Co.
will as promptly as practicable notify Southwest, when the
conditions to such party’s or parties’ obligation to
effect the Merger contained in Article VI have been
satisfied. For purposes of this Agreement, a “
Business Day ” means any day that is not a Saturday, a
Sunday or other day on which the offices of the Secretary of State
of the State of Minnesota is closed or on which commercial banks
located in New York, New York are authorized or required by law to
close.
2.3
Effective Time . At the Closing,
Southwest, the Parent and the Acquisition Co. will file, or cause
to be filed, with the Secretary of State of the State of Minnesota,
articles of merger, in substantially the form of Exhibit A
attached hereto (the “ Articles of Merger ”), in
accordance with the MBCA and consistent with the terms of this
Agreement, and executed in accordance with, the relevant provisions
of the MBCA. The parties will take such other and further
actions as may be required by law to make the Merger
effective. The Merger will become effective when the Articles
of Merger are filed with the Secretary of the State of Minnesota
or, if agreed to by the Parent and Southwest, at such later date or
time as is set forth in the Articles of Merger. The time of
effectiveness of the Merger is referred to herein as the “
Effective Time ” and the day on which the Effective
Time occurs is referred to herein as the “ Effective
Date .”
2.4
Effects of the Merger . At and after the Effective
Time, the Merger will have the effects set forth in Section
302A.641 and other relevant provisions of the MBCA. Without
limiting the generality of the foregoing, and subject thereto, at
the Effective Time, the Surviving Corporation will possess all the
rights, privileges, immunities and franchises of each
of
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Southwest and the
Acquisition Co. and will be responsible and liable for all the
liabilities and obligations of each of Southwest and the
Acquisition Co.
(a)
At the Effective Time, the Articles of Incorporation of Southwest
shall continue to be the Articles of Incorporation of the Surviving
Corporation.
(b)
At the Effective Time, the Bylaws of Southwest shall continue to be
the Bylaws of the Surviving Corporation.
(a)
Southwest. The directors of Southwest immediately
prior to the Effective Time shall be the initial directors of the
Surviving Corporation, to serve until their respective successors
are duly elected or appointed and qualified . The officers of Southwest
immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, to serve until their
successors are duly elected or appointed or qualified.
(b)
Reorganized Parent. The directors of Southwest
immediately prior to the Effective Time shall be the initial
directors of the Reorganized Parent, to serve until their
respective successors are duly elected or appointed and
qualified. The officers of Southwest immediately prior to the
Effective Time shall be the initial officers of the Reorganized
Parent, to serve until their successors are duly elected or
appointed or qualified.
(a)
Conversion of Southwest Common Stock and Southwest Preferred
Stock .
Subject to the
terms and conditions of Section 2.11, at the Effective Time, by
virtue of the Merger and without any action on the part of any
Person, (i) each share of Southwest Common Stock issued and
outstanding immediately prior to the Effective Time (the “
Outstanding Southwest Common Stock ”), shall be
canceled and automatically converted into the right to receive,
upon surrender of the certificates representing such shares and a
letter of transmittal (which shall be in such form and have such
provisions as Parent may reasonably specify), one (1) share of
Parent Common Stock for every two (2) shares of Outstanding
Southwest Common Stock of the Merger Consideration as determined in
Section 2.8 below . At the Effective Time, all
rights in respect of such Outstanding Southwest Common Stock shall
cease to exist, other than the right to receive the Merger
Consideration, and all such shares shall be cancelled and retired;
(ii) each share of Southwest Preferred Stock issued and outstanding
immediately prior to the Effective Time (the “ Southwest
Preferred Stock ”), shall be canceled and automatically
converted into the right to receive, upon surrender of the
certificates representing such shares and a letter of transmittal,
one (1) share of Parent Common Stock for every two (2) shares of
Southwest Preferred Stock of the Merger Consideration as determined
in Section 2.8 below . At the Effective Time, all
rights in respect of such Southwest Preferred Stock shall cease to
exist, other than the right to receive the Merger Consideration,
and all such shares shall be cancelled and retired.
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(b)
Automatic Conversion of Demand Notes . Subject to the
terms and conditions of Section 2.11, at the Effective Time, by
virtue of the Merger and without any action on the part of any
Person, each of the Southwest 8% Convertible Demand Notes issued
and outstanding immediately prior to the Effective Time (the
“ Demand Notes ”), shall be cancelled and
automatically converted into the right to receive, upon surrender
of such Demand Notes and a letter of transmittal, one (1) share of
Parent Common Stock for every two (2) shares of Southwest Common
Stock into which such Demand Notes are convertible at the Effective
Time pursuant to the terms of such Demand Notes.
(c)
Conversion of Acquisition Co. Common Stock . Subject
to the terms and conditions of Section 2.11, at the Effective Time,
by virtue of the Merger and without any action on the part of any
other Person, each share of common stock of the Acquisition Co.,
par value $.01 per share, issued and outstanding immediately prior
to the Effective Time shall be converted into one share of the
common stock of the Surviving Corporation.
(d)
Stock Options .
(i)
At the Effective Time, all issued and outstanding stock options
(collectively, the “ Southwest Options ”) issued
by Southwest, whether under the Southwest 2004 Stock Incentive Plan
or not under any plan, whether vested or unvested, will, by virtue
of the Merger and without any further action on the part of
Southwest, Acquisition Co., Parent or the holder thereof, be
assumed by the Parent in such manner that the Parent (i) is a
corporation “assuming a stock option in a transaction to
which Section 424(a) applied” within the meaning of Section
424 of the Code, or (ii) to the extent that Section 424 of the Code
does not apply to any such Southwest Options, would be such a
corporation were Section 424 of the Code applicable to such
Southwest Options. From and after the Effective Time, all
references to Southwest in the Southwest Options will be deemed to
refer to the Parent (other than for purposes of determining whether
there has been a change in control of Southwest). The
Southwest Options assumed by the Parent (collectively, the “
Substitute Options ”) will be exercisable upon the
same terms and conditions as under the Southwest Options (including
provisions thereof, if any, relating to the acceleration of vesting
upon a change in control of Parent) except that (i) such Southwest
Options will entitle the holder to purchase from the Parent one (1)
share of Parent Common Stock (rounded to the nearest whole number
of such shares) for every two (2) shares of Southwest Common Stock
that are issuable upon exercise of the Southwest Options as in
effect immediately prior to the Effective Time, and (ii) the option
exercise price per share of Parent Common Stock shall be an amount
(rounded to the nearest full cent) equal to the option exercise
price per share of Southwest Common Stock in effect immediately
prior to the Effective Time multiplied by two (2); provided,
however, that in the case of any Southwest Option to which Section
421 of the Code applies by reason of its qualification under
Section 422 of the Code (“incentive stock options”),
the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such options
shall be determined in order to comply with Section 424(a) of the
Code. As promptly as practicable after the Effective Time,
the Parent will issue to each holder of a Southwest Option a
written instrument informing such holder of the assumption by
Parent of such Southwest Option.
(ii)
In the event any Southwest Option duly issued (as evidenced by
board resolutions, minutes or other appropriate records) by the
Southwest has been lost, stolen or
13
destroyed, upon
the making of an affidavit of that fact by the person claiming such
Southwest Option, to be lost, stolen or destroyed, the Parent will,
in exchange for such lost, stolen or destroyed Southwest Option,
issue or cause to be issued the Substitute Options of the Parent in
the manner described in Section 2.10(i).
(iii)
The Parent will (i) on or prior to the Effective Time, reserve for
issuance the number of shares of Parent Common Stock that will
become subject to the Substitute Options pursuant to this Section
2.7 and (ii) from and after the Effective Time, upon exercise of
Substitute Options in accordance with the terms thereof, make
available for issuance all shares of Parent Common Stock covered
thereby. Following the Effective Time, no holder of a
Southwest Option will have any rights to acquire Southwest Common
Stock.
(e)
Warrants .
(i)
At the Effective Time, the obligation to honor each outstanding
warrant to purchase shares of Southwest Common Stock (collectively,
the “ Southwest Warrants ”) will be deemed
assumed by the Parent. At and after the Effective Time: (i)
each Southwest Warrant then outstanding will entitle the holder
thereof to acquire (rounded to the nearest whole number) one (1)
share of Parent Common Stock for every two (2) shares of Southwest
Common Stock subject to such Southwest Warrant immediately prior to
the Effective Time; and (ii) the exercise price per share of Parent
Common Stock subject to any such Southwest Warrant at and after the
Effective Time will be an amount (rounded to the nearest
one-hundredth of a cent) equal to the exercise price per share of
Southwest Common Stock subject to such Southwest Warrant prior to
the Effective Time multiplied by two (2) (the “ Substitute
Warrants ”). Other than as provided above, as of
and after the Effective Time, each Substitute Warrant will be
subject to the same terms and conditions of the Southwest Warrants
as in effect immediately prior to the Effective Time.
(ii)
In the event any Southwest Warrant duly issued (as evidenced by
board resolutions, minutes or other appropriate records) by the
Southwest has been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Southwest
Warrant, to be lost, stolen or destroyed, the Parent will, in
exchange for such lost, stolen or destroyed Southwest Warrant,
issue or cause to be issued the Substitute Warrants of the Parent
in the manner described in Section 2.10(i).
(iii)
The Parent will (i) on or prior to the Effective Time, reserve for
issuance the number of shares of Parent Common Stock that will
become subject to the Substitute Warrants pursuant to this Section
2.7 and (ii) from and after the Effective Time, upon exercise of
Substitute Warrants in accordance with the terms thereof, make
available for issuance all shares of Parent Common Stock covered
thereby. Following the Effective Time, no holder of a Southwest
Warrant will have any rights to acquire Southwest Common
Stock.
(f)
No Fractional Shares . In lieu of fractional shares
that would otherwise be issued to holders of Southwest Securities,
Outstanding Southwest Common Stock, the Southwest Preferred Stock
or the Southwest Options and Southwest Warrants under this
Agreement, each holder thereof that would have been entitled to
receive a fractional share shall receive such whole number of
shares of
14
Parent Common
Stock as is equal to the precise number of shares of Parent Common
Stock to which such person would be entitled rounded up or down to
the nearest whole number (with any such holder entitled to at least
0.5 share (or more) of Parent Common Stock as Merger Consideration
having such fractional share rounded up one additional whole share
and any holder entitled to less than 0.5 share of Parent Common
Stock being rounded down to the next lower whole number). No
certificate representing fractional shares will be
issued.
(g)
MBC Global Advisory Services Agreement and Bridge Registration
rights Agreement . At the Effective Time, (i) Parent shall
assume any and all liability of Southwest under the MBC Global
Advisory Services Agreement and the Bridge Registration Rights
Agreement.
(h)
Actions at the Effective Time . At the Effective
Time:
(i)
Except for the securities referred to in Section 2.6(g)(v) below,
each share of Outstanding Southwest Common Stock and each share of
Southwest Preferred Stock will automatically, by virtue of the
Merger and without any action on the part of the holder thereof, be
canceled and converted into a right to receive from Parent the
Merger Consideration in the amount as determined pursuant to this
Section 2.7(f).
(ii)
Each outstanding option evidencing the right to purchase Southwest
Common Stock, whether granted by Southwest under the 2004 Stock
Incentive Plan or not under any plan, immediately at the Effective
Time shall be cancelled and automatically converted into Substitute
Options as provided in Section 2.7 (c) above.
(iii)
The Parent shall automatically assume and adopt the Southwest 2004
Stock Incentive Plan which shall be administered in accordance with
the terms thereof by the Parent with the Parent substituted in all
respects for Southwest.
(iv)
Each outstanding warrant evidencing the right to purchase Southwest
Common Stock, immediately at the Effective Time shall be cancelled
and automatically converted into Substitute Warrants as provided in
Section 2.7(d) above.
(v)
Each of the Southwest 8% Demand Notes issued and outstanding
immediately at the Effective Time shall be cancelled and
automatically converted into the right to receive, upon surrender
of such Demand Notes and a letter of transmittal, one (1) share of
Parent Common Stock for every two (2) shares of Southwest Common
Stock into which such Demand Notes are convertible at the Effective
Time pursuant to the terms of such Demand Notes.
(vi)
The Parent shall reserve an adequate number of shares of Parent
Common Stock (presently expected to be not more than 329,545
shares) that will be available for issuance upon possible
conversion of the currently outstanding Southwest Series A
Convertible Debentures (in the current outstanding principal amount
of $362,500).
(vii)
Each share of Southwest Common Stock held in the treasury of
Southwest shall be canceled and retired without payment of any
consideration therefor.
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(viii)
Each share of common stock of Acquisition Co. (“
Acquisition Co. Common Stock ”) issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation. The stock
certificate of Acquisition Co. evidencing ownership of any such
shares shall continue to evidence ownership of such shares of
capital stock of the Surviving Corporation.
2.8
Merger Consideration . The merger consideration
(“ Merger Consideration ”) shall consist of
17,749,291 shares of Parent Common
Stock which shall be issued, pro rata, respectively, as indicated
in Section 2.7(a) to Southwest Shareholders at Closing (as defined
in Section 2.13 below). The Merger Consideration is subject
to increase in the event that some or all of Southwest’s
outstanding Convertible Subordinated Debentures in the outstanding
principal amount of $362,500 convert into shares of Southwest
Common Stock on or before the Closing Date.
2.9
Dissenter’s Rights . Notwithstanding any provision
of this Agreement to the contrary, each outstanding share of
Southwest Common Stock, the holder of which has demanded and
perfected such holder’s right to dissent from the Merger and
to be paid the fair value of such shares in accordance with
Sections 302A.471 and 302A.473 of the MBCA and, as of the Effective
Time, has not effectively withdrawn or lost such dissenters’
rights (collectively, the “ Dissenting Shares
”), will not be converted into or represent a right to
receive the Merger Consideration into which shares of Southwest
Common Stock are converted pursuant to Section 2.10 hereof, but the
holder thereof will be entitled only to such rights as are granted
by Sections 302A.471 and 302A.473 of the MBCA. The Parent
will cause the Surviving Corporation to make all payments to
holders of shares of Southwest Common Stock with respect to such
demands in accordance with the MBCA. Southwest will give the
Parent (i) prompt notice of any written demand for fair value for
any shares of Southwest Common Stock and any other instruments
served pursuant to Sections 302A.471 and 302A.473 of the MBCA and
received by Southwest, and (ii) the opportunity to conduct jointly
all negotiations and proceedings with respect to demands for fair
value for shares of Southwest Common Stock under such sections of
the MBCA. Southwest will not, except with the prior written
consent of the Parent or as otherwise required by law, voluntarily
make any payment with respect to any demands for fair value for
shares of Southwest Common Stock or offer to settle or settle any
such demands.
(a)
As of or prior to the Effective Time, as required by the Exchange
Agent and pursuant to the Exchange Agent Agreement, the Parent must
deposit with a bank or trust company designated by the Parent and
reasonably satisfactory to Southwest (the “ Exchange
Agent ”), for the benefit of the holders of shares of
Southwest Common Stock (other than Cancelled Shares and Dissenting
Shares), for exchange in accordance with this Article II through
the Exchange Agent, certificates evidencing such number of shares
of Parent Common Stock issuable to holders of Company Common Stock
in the Merger pursuant to Section 2.7 (such certificates for shares
of Parent Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to
as the “ Exchange Fund ”). The Exchange
Agent must, pursuant to irrevocable instructions, deliver the
Parent Common Stock contemplated to be
16
issued pursuant
to Section 2.7 out of the Exchange Fund. Except as
contemplated by Section 2.10(g), the Exchange Fund must not be used
for any other purpose.
(b)
As promptly as reasonably practicable after the Effective Time, the
Parent must cause the Exchange Agent to mail to each holder of
record of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares (other than
Cancelled Shares and Dissenting Shares) of Southwest Common Stock
and of Southwest Preferred Stock (the “ Certificates
”) (i) a letter of transmittal (which will be in
customary form and will specify that delivery will be effected, and
risk of loss and title to the Certificates will pass, only upon
proper delivery of the Certificates to the Exchange Agent and will
be in such form and have such other provisions as the Parent and
the Exchange Agent will reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange
for certificates evidencing shares of Parent Common Stock (to the
extent such Certificates have not already been submitted to the
Exchange Agent).
(c)
Upon surrender to the Exchange Agent of a Certificate for
cancellation, together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto,
and such other documents as may be reasonably required by the
Exchange Agent pursuant to such instructions, the holder of such
Certificate will be entitled to receive in exchange therefore a
certificate representing that number of whole shares of Parent
Common Stock, if any, which such holder has the right to receive
pursuant to this Article II and the Certificate so surrendered will
immediately be cancelled. In the event of a transfer of
ownership of shares of Southwest Common Stock which is not
registered in the transfer records of Southwest, the applicable
Merger Consideration, and any dividend, or other distributions
(other than stock dividends) to which such holder is entitled
pursuant to Section 2.10(d) may be issued to a transferee if the
Certificate representing such shares of Company Common Stock is
presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that
any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.10, each Certificate
will be deemed at all times after the Effective Time for all
purposes to represent only the right to receive upon such surrender
the applicable Merger Consideration with respect to the shares of
Southwest Common Stock formerly represented thereby and any
dividends or other distributions to which such holder is entitled
pursuant to Section 2.10(d).
(d)
No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record
date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby until the holder of such
Certificate will surrender such Certificate. Subject to the
effect of escheat, tax or other applicable laws, following
surrender of any such Certificate, there will be paid to the holder
of the stock certificates representing whole shares of Parent
Common Stock issued in exchange therefore, without interest, (i)
promptly, the amount of dividends or other distributions with a
record date after the Effective Time and theretofore paid with
respect to such whole shares of Parent Common Stock, and (ii) at
the appropriate payment date, the amount of dividends or other
distributions (other than stock dividends), with a record date
after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole
shares of Parent Common Stock.
17
(e)
All shares of Parent Common Stock issued upon conversion of the
shares of Southwest Common Stock in accordance with the terms
hereof will be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Southwest Common Stock and,
following the Effective Time, there will be no further registration
of transfers on the stock transfer books of the Surviving
Corporation of the shares of Southwest Common Stock that were
outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they will be cancelled and
exchanged as provided in this Section 2.10. From and after the
Effective Time, holders of Certificates will cease to have any
rights as stockholders of Southwest, except as provided by
law.
(f)
To the extent permitted by applicable law, any portion of the
Exchange Fund (including any shares of Parent Common Stock) which
remains undistributed to the holders of shares of Southwest Common
Stock two years after the Effective Time will be delivered to the
Parent, upon demand, and any holders of shares of Southwest Common
Stock who have not theretofore complied with this Article 2 must
thereafter look only to the Parent for the applicable Merger
Consideration, and any dividends or other distribution (other than
stock dividends) with respect to the Parent Common Stock to which
they are entitled pursuant to Section 2.10. Any portion of
the Exchange Fund remaining unclaimed by holders of shares of
Company Common Stock five years after the Effective Time (or such
earlier date, as is immediately prior to such time as such amounts
would otherwise escheat to or become property of any government
entity) will, to the extent permitted by applicable law, become the
property of the Parent free and clear of any claims or interest of
any person previously entitled thereto.
(g)
Notwithstanding any section herein to the contrary, none of the
Exchange Agent, the Parent nor the Surviving Corporation will be
liable to any holder of shares of Company Common Stock for any such
shares of Parent Common Stock (or dividends or distributions with
respect thereto), or cash delivered to a public official pursuant
to any applicable abandoned property, escheat or similar
law.
(h)
The Exchange Agent will be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any
holder of shares of Southwest Common Stock such amounts as it is
required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by the
Surviving Corporation or the Parent, as the case may be, such
withheld amounts will be treated for all purposes of this Agreement
as having been paid to the holder of the shares of Southwest Common
Stock in respect of which such deduction and withholding was made
by the Surviving Corporation or the Parent, as the case may
be.
(i)
If any Certificate will have been lost, stolen or destroyed, the
Reorganized Parent may issue a stop transfer order on the records
of the Exchange Agent, and upon delivery to the Exchange Agent of
an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed and, if required by the Surviving
Corporation, the posting by such person of a bond, in such
reasonable amount as the Parent may direct, as indemnity against
any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the applicable Merger
Consideration, and any dividends or other distributions (other than
stock dividends) to which the holders thereof are entitled pursuant
to this Agreement.
18
(j)
No transfer taxes will be payable by any Southwest Shareholder in
respect of the issuance of the Parent Common Stock under this
Article 2, except that if any Parent Common Stock is to be issued
in a name other than that in which the Certificate surrendered has
been registered, it will be a condition of such issuance that the
person requesting such issuance will pay to the Parent any transfer
taxes payable by reason thereof, or of any prior transfer of such
surrendered certificate, or establish to the reasonable
satisfaction of the Parent that such taxes have been paid or are
not payable.
(k)
At the close of business on the day of the Effective Time, the
stock transfer books of Southwest will be closed and there will be
no further registration of transfers of shares of Southwest Common
Stock thereafter on the records of Southwest .
2.11
Conditions Precedent to Closing . The Closing shall be subject
to the prior satisfaction of the following conditions:
(a)
Formation of Acquisition Co. Parent shall have
organized Acquisition Co. as a Minnesota corporation for the sole
purpose of entering into this Merger.
(b)
Exchange Agent Agreement . The Parent and Southwest
shall have executed and delivered the Exchange Agent Agreement
attached hereto as Exhibit C in favor of Parent and
Southwest.
(c)
Southwest Shareholders Approval . The approval of the
Southwest Shareholders shall have been obtained, in accordance with
the MBCA and each of the respective articles or certificates of
incorporation and bylaws.
(d)
Lock-Up/Leak-Out Agreement . The persons who acquired
Parent Common Stock as described in the Lock-Up/Leak-Out shall
execute and deliver in favor of Reorganized Parent the
Lock-Up/Leak-Out Agreements in the form attached hereto as Exhibit
B.
(e)
Resignations and Releases by Parent’s Directors, Officers
and Shareholders . Immediately following the appointment
of James B. Druck, Jeffrey S. Halpern and Thomas E. Fox to the
board of directors of Parent concurrent with the Merger, Southwest
shall have received the written resignations of each of the Parent
officers and directors from all positions with Parent, together
with full releases in favor of Parent and its directors, officers
and employees from each of the Principal Shareholders.
(f)
Purchase of Additional Restricted Stock from Parent .
In consideration of the mutual exchange of promises contained
herein, Parent shall have sold an aggregate of:
(i)
1,500,000 shares of restricted Parent Common Stock (after a planned
7.4672-for-1 forward stock split) to James B. Druck, Jeffrey S.
Halpern and Thomas E. Fox at a purchase price of $0.05 upon
mutually acceptable terms (one-third to each), and
(ii)
869,685 shares of restricted Parent Common Stock (after a planned
7.4672-for-1 forward stock split) to Jenson Services, Inc., a Utah
corporation (719,685 shares of Parent Common Stock and David C.
Merrell (150,000 shares of Parent Common Stock) at a purchase price
valuation of $0.05 per share. Such shares shall be subject to
Parent’s right to
19
repurchase all of
such shares (for the same consideration originally paid) if the
Merger is not consummated pursuant to the terms hereof
.
(g)
Employment Agreements for Southwest Senior Management
. Parent and Southwest shall have entered into employment
agreements with each of the Southwest’s three executive
officers upon terms that are mutually acceptable.
(h)
Consent of Gaming Authorities . Southwest shall have
received confirmation that any necessary consent or approval from a
Gaming Authority has been obtained.
(i)
Reorganized Parent Asset Purchase Agreement . Parent
and Christopher B. Glover shall have signed and delivered a
definitive Asset Purchase Agreement to be held in escrow subject to
Closing of the Merger providing for the sale and transfer of
substantially all assets (excluding cash in the amount of at least
$75,000, which shall remain an asset of the Reorganized Parent) and
all liabilities of the adventure tour business of Parent
immediately following consummation of the Merger, so that the
Reorganized Parent will have substantially no assets (other than as
noted above) and no liabilities, obligations or expenses of any
kind or nature whatsoever remaining that relate to Parent’s
adventure tour business and operations as conducted before the
Merger.
(a)
Time and Place . The consummation of the
Merger under this Agreement (the “ Closing ”)
shall take place at the offices of Oppenheimer Wolff & Donnelly
LLP, 45 South Center Seventh Street, 3300 Plaza VII Building,
Minneapolis, Minnesota 55402, on July 14, 2004, or at such
time and in such manner as the parties mutually agree (the “
Closing Date ”).
(b)
Closing Deliveries by Southwest . At the Closing, Southwest
shall have delivered or caused to be delivered to Parent and/or
Acquisition Co., as the case may be:
(i)
the Articles of Merger, duly executed by Southwest;
(ii)
certificates signed by an authorized officer of Southwest as
required by Section 6.2(a) and (b); and
(iii)
such other documents as Parent may reasonably request for the
purpose of facilitating the consummation of the Contemplated
Transactions.
(c)
Closing Deliveries By Parent . At the Closing, Parent and/or
Acquisition Co., as the case may be, shall have delivered or caused
to be delivered to Southwest :
(i)
the Articles of Merger, duly executed by Acquisition
Co.;
(ii)
resignation letters, and general releases, from each of the
officers and directors of the Parent and the Acquisition Co., dated
effective as of the Effective Time on the Closing Date;
20
(iii)
certificates signed by each of the Principal Shareholders on their
own behalf and as the duly authorized officers of the Parent and
Acquisition Co. as required by Section 6.1 (a) and (b);
(iv)
legal opinion from Parent’s legal counsel in form and
substance acceptable to Southwest; and
(v)
such other documents as Southwest may reasonably request for the
purpose of facilitating the consummation of the Contemplated
Transactions.
2.13
Exemption from Registration and Access to
Information . The issuance of the Parent
Common Stock issuable as Merger Consideration, along with the
Substitute Options that will be the Southwest Options and Warrants
that will be issuable as provided in Section 2.6(c) will be exempt
from registration requirements of the Securities Act pursuant to
the private placement exemption provided by Rule 505 and/or 506 of
Regulation D promulgated under the Securities Act and/or Section
4(2) of the Securities Act, and applicable state securities laws,
rules and regulations; and Southwest will provide reasonable
assurance to Parent that no more than 35 of the Southwest
Stockholders are not “accredited investors” as defined
in Rule 144 of the SEC.
2.14
Parent Name Change . Parent shall have
taken all corporate action necessary to change its name to “
Southwest Casino Corporation ”
2.15
Current Report on Form 8-K . Reorganized Parent shall file
with the SEC within 15 days of the Effective Time of the Merger a
Current Report on Form 8-K (reporting as a Section 12g-3
registrant) as a successor issuer (as defined in Rule 12g-3 of the
SEC promulgated under the Exchange Act).
2.16
Additional Actions . If, at any time after
the Effective Time, the Surviving Corporation shall consider or be
advised that consistent with the terms of this Agreement any
further assignments or assurances in law or any other acts are
necessary or desirable (a) to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation, title to and possession
of any property or right of either constituent corporation acquired
or to be acquired by reason of, or as a result of, the Merger, or
(b) otherwise to carry out the purposes of this Agreement, then,
subject to the terms and conditions of this Agreement, each such
constituent corporation and its officers and directors shall be
deemed to have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such deeds,
assignments and assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such
property or rights in the Surviving Corporation and otherwise to
carry out the purposes of this Agreement; and the officers and
directors of the Surviving Corporation are fully authorized in the
name of either constituent corporation to take any and all such
action.
As a material inducement to Parent
and Acquisition Co. to enter into this Agreement, with the
understanding that Parent and Acquisition Co. will be relying
thereon in consummating the transactions contemplated hereunder,
Southwest hereby represents and warrants to Parent and
21
Acquisition Co. that, except as set
forth in the Southwest Disclosure Schedule attached hereto, which
is divided into sections that correspond to the individual sections
of this Article III, as of the date hereof:
3.1
Organization; Authority . Southwest is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Minnesota and has all requisite
corporate power and authority to own, lease, and operate its
properties and to carry on its business as now being
conducted. Except as set forth in Section 3.1 of the
Southwest Disclosure Schedule, Southwest is duly qualified and in
good standing to do business in each jurisdiction in which the
property owned, leased, or operated by it or the nature of the
business conducted by it makes such qualification necessary and
where the failure to qualify would have a Material Adverse Effect
on Southwest.
3.2
Affiliates, Ownership
Interests .
Section
3.2 of the Southwest Disclosure Schedule sets forth a list of all
Southwest Subsidiaries and the interest of Southwest therein.
Each of the Southwest Subsidiaries is duly authorized to conduct
business in and is in good standing in each jurisdiction where such
qualification is required except for any jurisdiction where failure
so to qualify would not have a Material Adverse Effect on
Southwest. Each of the Southwest Subsidiaries has full power
and authority, and holds all Permits and authorizations necessary
to carry on its business and to own and use the Assets and
Properties owned and used by it except where the failure to have
such power and authority or to hold such Permit or authorization
would not have a Material Adverse Effect on Southwest. Except
as set forth in Section 3.2 of the Southwest Disclosure Schedule,
Southwest has no Affiliates and does not directly or indirectly,
own or control or have any capital, equity, partnership,
participation or other ownership interest in any corporation,
partnership, joint venture, or other business association or
entity.
3.3
Charter Documents
. Southwest
has heretofore furnished or made available to Parent complete and
correct copies of the Articles of Incorporation and the Bylaws, or
similar applicable charter and organization documents of Southwest
and each of the Southwest Subsidiaries, each as in full force and
effect as of the date hereof. Neither Southwest nor any of
the Southwest Subsidiaries is in violation of any of the provisions
of its Articles of Incorporation or Bylaws, or similar applicable
charter documents.
3.4
Capitalization of Southwest . The authorized capital stock
of Southwest consists of 50,000,000 shares of Common Stock, $0.01
par value per share, 10,888,571 shares of which are currently
issued and outstanding; 21,000,000 shares of Series C Preferred
Stock, $0.01 par value per share, 16,135,012 shares of which are
currently issued and outstanding; and 9,000,000 shares of
Undesignated Preferred Stock. All of the issued and
outstanding shares of Southwest capital stock are validly issued,
fully paid and nonassessable. Southwest has granted and outstanding
non-plan, non-qualified stock options to purchase 1,450,000 shares
of its Common Stock; and has issued and outstanding Warrants to
purchase an additional 1,825,000 shares of its Common Stock.
Southwest has adopted its 2004 Stock Incentive Plan under which
3,000,000 shares of Southwest Common Stock are authorized and
reserved for issuance; options to purchase 100,000 shares of
Southwest Common Stock have been granted thereunder. Except
for (i) outstanding options and warrants to purchase shares of
Southwest Common Stock as set forth on the Southwest Disclosure
Schedule; (ii) the Southwest 2004 Stock Incentive Plan;
(iii) the
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Bridge
Registration Rights Agreement; (iv) the outstanding principal
amount $362,500 of Series A Convertible Debentures of Southwest;
and (v) as set forth in the MBC Global Agreement, the Southwest 8%
Demand Notes and the related agreements as provided herein, there
are no options, warrants or other rights, agreements, arrangements
or commitments of any character relating to the issued or unissued
capital stock of Southwest or obligating Southwest to issue or sell
any shares of capital stock of, or other equity interests in,
Southwest. All securities of Southwest subject to
issuance as aforesaid, upon issuance on the terms and conditions
specified in the applicable plans and instruments pursuant to which
they are issuable, will be duly authorized, validly issued, fully
paid and nonassessable. Except with respect to
Southwest’s $362,500 outstanding principal amount of Series A
Convertible Debentures (under which a default of repayment has
occurred and is continuing without any further action), there are
no outstanding contractual obligations of Southwest to repurchase,
redeem or otherwise acquire any securities of Southwest or to
provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any of the Southwest
Subsidiaries or any other Person. Except for restrictions on
transfer arising under applicable federal and state securities laws
and other than the restrictions under applicable gaming regulations
as reflected in Southwest’s Articles of Incorporation and
Bylaws, there are no existing restrictions imposed by Southwest or
by its Affiliates on the transfer of any outstanding Southwest
Securities and, except for the Bridge Registration Rights
Agreement, there are no registration covenants with respect
thereto. None of the outstanding Southwest Securities were
issued in violation of the preemptive rights of any present or
former shareholder.
3.5
Authorization . Subject to obtaining approval
from the holders of Southwest Common Stock and Series C Preferred
Stock, Southwest has the requisite corporate power and authority to
enter into this Agreement and to consummate and carry out the
transactions contemplated hereunder. The Southwest Board of
Directors have taken all action required by Applicable Law, its
Articles of Incorporation and Bylaws, and otherwise to duly and
validly authorize and to approve the execution and delivery by
Southwest of this Agreement and the Exchange Agent Agreement, and
the consummation by Southwest of the transactions contemplated
hereby, and no other corporate proceedings on the part of
Southwest, other than approval from the holders of the Southwest
Common Stock and Series C Preferred Stock, is, or will be,
necessary to authorize this Agreement and the Exchange Agent
Agreement, or to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered
by Southwest and, assuming the due authorization, execution and
delivery by each of Parent and Acquisition Co. of this Agreement,
constitutes a legal, valid and binding obligation on the part of
Southwest, enforceable against it in accordance with its terms,
subject to laws of general application relating to bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and rules of law
governing specific performance, injunctive relief or other
equitable remedies.
3.6
Non-Contravention . Except for compliance
with any applicable requirements of state takeover, federal and
state securities laws and of all applicable regulations promulgated
by Gaming Authorities, the execution and delivery of this Agreement
and the Collateral Agreements by Southwest, and the consummation of
the transactions contemplated hereby and thereby will not: (a)
violate any provision of the respective Articles of Incorporation
or Bylaws of Southwest; (b) violate any statute, rule, regulation,
order, or decree of any federal, state, local, or foreign body or
authority by which Southwest or any of its Assets and Properties
may be bound;
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(c) require
any filing with or permit, consent, or approval of any federal,
state, local, or foreign administrative, governmental or regulatory
body or authority; or (d) result in any violation or breach of, or
constitute (with or without due notice or lapse of time or both) a
default under, result in the loss of any benefit unde
