MERGER AND RECAPITALIZATION AGREEMENT
MERGER AND RECAPITALIZATION
AGREEMENT
This
Agreement made and entered into as of this 19th day of
October, 2009 (the “Agreement”), by and
among ▇▇▇ Consulting, Inc., a Florida corporation with its principal place of
business located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(“▇▇▇”); the
undersigned shareholder of ▇▇▇ which represents a majority of the issued and
outstanding common stock of ▇▇▇ (the “▇▇▇ Shareholder”);
Liberator, Inc., a Nevada Corporation, with its registered office at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (“Liberator”) and the
undersigned shareholders of Liberator which represents a majority vote of the
issued and outstanding equity of Liberator (the “Liberator
Shareholders”).
RECITALS
A. The
respective Boards of Directors and shareholders representing a majority of the
issued and outstanding common stock of each of Liberator and ▇▇▇ have approved
and declared advisable the merger of Liberator with and into ▇▇▇ (the “Merger”) and approved
the Merger upon the terms and subject to the conditions set forth in this
Agreement, whereby each issued and outstanding share of the common stock of
Liberator (a “Liberator Common
Share” or, collectively, the “Liberator Common
Shares”), will be converted into one share of common stock, $0.01 par
value, of ▇▇▇ (“▇▇▇
Common Stock”) which, after giving effect to the Merger, shall equal, in
the aggregate, 98.4% of the total issued and outstanding common stock of
▇▇▇. At the Approval Time (as defined herein), each Series A
Preferred Share of Liberator (a “Liberator Preferred
Share” or, collectively, the “Liberator Preferred
Shares”) will be converted into one share of preferred stock of ▇▇▇ (the
“▇▇▇ Preferred
Stock”). Liberator Common Shares and Liberator Preferred
Shares are referred to herein, collectively, as the “Liberator
Shares.” The ▇▇▇ Common Stock owned by Liberator will be
cancelled upon the consummation of the transactions contemplated by this
Agreement.
B. The
respective Boards of Directors and shareholders representing a majority of the
issued and outstanding common stock of each of Liberator and ▇▇▇ have determined
that the Merger is in furtherance of and consistent with their respective
long-term business strategies and is fair to and in the best interests of their
respective stockholders.
C. It
is intended that, for federal income tax purposes, the Merger shall qualify as a
reorganization under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
(the “Code”);
D. For
financial accounting purposes, it is intended that the Merger will be accounted
for as a “purchase”;
NOW, THEREFORE, in
consideration of the premises, and of the representations, warranties, covenants
and agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE
I
THE
MERGER; CLOSING; EFFECT OF MERGER
SECTION
1.1 The
Merger. Upon the terms
and subject to the conditions set forth in this Agreement and in accordance with
the laws of the state of Florida (“Florida Law”) and the
laws of the State of Nevada (“Nevada
Law”) at the Effective Time, Liberator shall be merged with
and into ▇▇▇ and the separate corporate existence of Liberator shall thereupon
cease. ▇▇▇ shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the “Surviving
Corporation”), and the separate corporate existence of ▇▇▇ with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the merger, except as set forth herein. The Merger shall have the
effects specified in the Florida Law.
SECTION
1.2 Closing. Subject to the
terms and conditions of this Agreement, the closing of the Merger and the
consummation of the other transactions contemplated hereby (the “Closing”) shall take
place at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇ not later than October 19, 2009 and at such other date, time and place
as the parties hereto shall agree.
SECTION
1.3 Effective
Time. On the date of
Closing, Liberator and ▇▇▇ will cause a Certificate of Merger (the “Florida Certificate of
Merger”) to be executed, acknowledged and filed with the Secretary of
State of the State of Florida. On the date of Closing, Liberator and ▇▇▇ will
cause a Certificate of Merger (the "“Nevada Certificate of
Merger”) to be executed, acknowledged and filed with the Secretary of
State of the State of Nevada. The Merger shall become effective at the time when
the Florida Certificate of Merger has been filed with the Secretary of State of
the State of Florida, or, as otherwise agreed by Liberator and ▇▇▇ (the “Effective
Time”).
SECTION
1.4 Certificate
of Incorporation. The certificate
of incorporation of ▇▇▇ as in effect immediately prior to the Effective Time
shall be the certificate of incorporation of the Surviving Corporation (the
“Certificate of
Incorporation”), until duly amended as provided therein or by applicable
law.
SECTION
1.5 By-Laws. The by-laws of
▇▇▇ in effect immediately prior to the Effective Time shall be the by-laws of
the Surviving Corporation (the “By-Laws”), until thereafter amended as provided
therein or by applicable law.
SECTION
1.6 Directors. As of the
Effective Time, the authorized number of directors comprising the Board of
Directors of ▇▇▇ shall consist of not less than two (2) and not more than five
(5) individuals. The following individuals shall be elected to the
Board Directors of ▇▇▇ at the Effective Time: (i) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (Chairman of
the Board); and (ii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
SECTION
1.7 Officers. As of the
Effective Time, the officers of ▇▇▇ shall be (i) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (Chief
Executive Officer, President), (ii) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (Chief Financial Officer and
Secretary) and (iii) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Treasurer), until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Certificate of Incorporation and
the By-Laws.
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SECTION
1.8 Effect on
Capital Stock. As a result of
the Merger and without any action on the part of the holder of any capital stock
of ▇▇▇:
(a) Merger
Consideration.
(i) At
the Effective Time, each Liberator Common Share issued and outstanding
immediately prior to the Effective Time shall be converted into, and become
exchangeable for one (1) validly issued, fully paid and non-assessable share of
▇▇▇ Common Stock (the “▇▇▇ Common
Shares”).
(ii) At
the Approval Time, each Liberator Preferred Share issued and outstanding
immediately prior to the Effective Time shall be converted into and become
exchangeable for one (1) share of ▇▇▇ Preferred Stock.
(iii) ▇▇▇
Common Shares and ▇▇▇ Preferred Stock, collectively, are referred to herein as
the “▇▇▇ Merger
Stock,” and the conversion of Liberator Shares into ▇▇▇ Merger Stock is
referred to as the “Merger Purchase
Price”);
(b) At
the Effective Time, all Liberator Shares shall be canceled and Liberator shall
cease to exist, and each certificate (a “Certificate”)
formerly representing:
(i)
any Liberator Common Shares
shall thereafter represent only the right to receive the shares of ▇▇▇ Common
Stock into which such Liberator Common Shares have been converted;
and
(ii) any
Liberator Preferred Shares shall thereafter represent only the right to receive,
at the Approval Time, the shares of ▇▇▇ Preferred Stock into which such
Liberator Preferred Shares have been converted.
(c) At
the Effective Time, all ▇▇▇ Common Stock owned by Liberator shall be immediately
cancelled and returned to the treasury of ▇▇▇.
SECTION
1.9 Exchange of Certificates for
Shares.
(a) Exchange.
(i) At
the Effective Time, ▇▇▇ shall deliver or cause to be delivered to each
respective owner of the Liberator Common Shares and in each of their respective
names certificates representing ▇▇▇ Common Stock into which Liberator Common
Shares that such shareholders owns are to be converted as set forth on Schedule 1 attached
hereto.
(ii) At
the Approval Time, ▇▇▇ shall deliver or cause to be delivered to each respective
owner of the Liberator Preferred Shares and in each of their respective names
certificates representing ▇▇▇ Preferred Stock into which Liberator Preferred
Shares that such shareholders owns are to be converted as set forth on Schedule
1 attached hereto.
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(b) Fractional
Shares. No certificates or scrip representing fractional
shares of ▇▇▇ Common Stock or ▇▇▇ Preferred Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this Article I; no dividend
or other distribution by ▇▇▇ and no stock split, combination or reclassification
shall relate to any such fractional share; and no such fractional share shall
entitle the record or beneficial owner thereof to vote or to any other rights of
a stockholder of ▇▇▇. In lieu of any such factional share, each holder of
Liberator Shares who would otherwise have been entitled thereto upon the
surrender of Certificate(s) for exchange pursuant to this Article I will be paid
an additional share of ▇▇▇ Common Stock or ▇▇▇ Preferred Stock.
(c) Adjustments of Conversion
Number. In the event that ▇▇▇ changes the number of shares of
▇▇▇ Common Stock or ▇▇▇ Preferred Stock , issued and outstanding prior to the
Effective Time as a result of a reclassification, stock split (including a
reverse split), dividend or distribution, recapitalization, merger (other than
the Merger, Stock Purchase or the cancellation of options previously granted by
Liberator), subdivision, or other similar transaction with a dilutive effect, or
if a record date with respect to any of the foregoing shall occur prior to the
Effective Time, the conversion number shall be equitably adjusted.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF LIBERATOR
Liberator
represents, warrants and covenants to ▇▇▇ as follows and acknowledges that ▇▇▇
is relying upon such representations and warranties in connection with the
Contemplated Transactions (as hereinafter defined):
SECTION
2.1 Capitalization. The outstanding
and issued capital stock of Liberator consists of 60,932,981 shares of common
stock and 4,300,000 shares of Series A Preferred Shares. Schedule 1 sets
forth the name of each record and beneficial shareholder of Liberator (each a
“Shareholder”
and collectively the “Shareholders”) and
the number of Liberator Shares held by each such person. One Up Innovations,
Inc., a Georgia corporation is wholly owned by Liberator (“OneUp”); Foam Labs,
Inc., a Georgia corporation is wholly owned by OneUp (together with OneUp,
jointly and severally, the “Subsidiaries”), is
wholly owned by Liberator and are its only subsidiaries. Except as
set forth on Schedule
1, Liberator and Subsidiaries do not and, at the Closing, Liberator and
Subsidiaries will not, have outstanding any capital stock or other securities or
any rights, warrants or options to acquire securities of Liberator or the
Subsidiaries, or any convertible or exchangeable securities and, other than ▇▇▇
pursuant to this Agreement, no person has or, at Closing will have, any right to
purchase or otherwise acquire any securities of Liberator or the
Subsidiaries. There are, and at Closing there will be, no outstanding
obligations of Liberator or the Subsidiaries to repurchase, redeem or otherwise
acquire any securities of Liberator or the Subsidiaries. All of
Liberator Shares are, and at Closing will be, duly authorized, duly and validly
issued, fully paid and non-assessable, and none were issued in violation of any
preemptive rights, rights of first refusal or any other contractual or legal
restrictions of any kind except as otherwise disclosed.
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SECTION
2.2 Title to
the Shares. The Shareholders
are the beneficial owner and holds good and valid title to its Liberator Shares
free and clear of any Lien. At the Closing, each Shareholder of
Liberator will deliver Liberator Shares to ▇▇▇ free and clear of any Lien, other
than restrictions imposed by the Securities Act and applicable securities
Laws including the laws of the State of Florida.
SECTION
2.3 Authority
Relative to this Agreement. At the Closing,
Liberator will have full power, capacity and authority to execute and deliver
each Transaction Document to which it is or, at Closing, will be, a party and to
consummate the transactions contemplated hereby and thereby (the “Contemplated
Transactions”). The execution, delivery and performance by
Liberator of each Transaction Document and the consummation of the Contemplated
Transactions to which Liberator is, or at Closing, will be, a party will have
been duly and validly authorized by Liberator and no other acts by or on behalf
of Liberator will be necessary or required to authorize the execution, delivery
and performance by each of Liberator of each Transaction Document and the
consummation of the Contemplated Transactions to which it is or, at Closing,
will be, a party. This Agreement and the other Transaction Documents
to which Liberator is a party have been duly and validly executed and delivered
by Liberator and (assuming the valid execution and delivery thereof by the other
parties thereto) will constitute the legal, valid and binding agreements of
Liberator enforceable against Liberator in accordance with their respective
terms, except as such obligations and their enforceability may be limited by
applicable bankruptcy and other similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought (whether at law or in equity).
SECTION
2.4 No
Conflicts; Consents. The execution,
delivery and performance by Liberator of each Transaction Document to which it
is a party and the consummation of the Contemplated Transactions to which
Liberator is a party, upon approval of the Shareholders will not:
(i) violate any provision of the certificate of incorporation or by-laws of
Liberator; (ii) require Liberator to obtain any consent, approval or action
of or waiver from, or make any filing with, or give any notice to, any
Governmental Body or any other person, except as otherwise disclosed (the “Liberator Required
Consents”); (iii) violate, conflict with or result in a breach or default
under (with or without the giving of notice or the passage of time or both), or
permit the suspension or termination of, any material Contract (including any
Real Property Lease) to which Liberator is a party or by which it or any of its
assets is bound or subject, or to the best of Liberator’s knowledge and
information result in the creation of any Lien upon any of Liberator Shares or
upon any of the Assets of Liberator; (iv) violate any Order, any Law, of
any Governmental Body against, or binding upon, Liberator or upon any of their
respective assets or the Business; or (v) violate or result in the
revocation or suspension of any Permit.
SECTION
2.5 Corporate
Existence and Power. Liberator is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and has all requisite powers, authority and all Permits
required to own and/or operate its Assets and to carry on the Business as now
conducted, including all qualifications under any statute in effect in any state
or foreign jurisdiction in which Liberator operates its
Business. Liberator is duly qualified to do business and is in good
standing in each state of the United States and in each other jurisdiction where
the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary.
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SECTION
2.6 Charter
Documents and Corporate Records. Liberator has
heretofore delivered to ▇▇▇ true and complete copies of the Articles of
Incorporation, By-Laws and minute books, or comparable instruments, of Liberator
as in effect on the date hereof. The stock transfer books of
Liberator have been made available to ▇▇▇ for its inspection and are true and
complete in all respects.
SECTION
2.7 Financial
Statements.
(a) Schedule 2.7A
sets forth true, complete and correct copies of: Liberator's audited financial
statements as of and for the fiscal years ended June 30, 2009 and June 30, 2008
(the “Annual
Statements”) and all management letters, management representation
letters and attorney response letters issued in connection with the Annual
Statements. The Annual Statements present fairly and accurately in all material
respects the financial position of Liberator and the Subsidiaries as of its
date, and the earnings, changes in stockholders' equity and cash flows thereof
for the periods then ended in accordance with GAAP, consistently
applied. Each balance sheet contained therein or delivered pursuant
hereto fully sets forth all consolidated Assets and Liabilities of Liberator
existing as of its date which, under GAAP, should be set forth therein, and each
statement of earnings contained therein or delivered pursuant hereto sets forth
the items of income and expense of Liberator which should be set forth therein
in accordance with GAAP.
(b) All
financial, business and accounting books, ledgers, accounts and official and
other records relating to Liberator have been properly and accurately kept and
completed, and Liberator has no knowledge, notice belief or information there
are any material inaccuracies or discrepancies contained or reflected
therein.
SECTION
2.8 Liabilities. Liberator has not incurred
any Liabilities since June 30, 2009 (the “Latest Balance Sheet
Date”) except (i) current Liabilities for trade or business
obligations incurred in connection with the purchase of goods or services in the
ordinary course of the Business and consistent with past practice, and
(ii) Liabilities reflected on any balance sheet referred to in
Section 2.7(a).
SECTION
2.9 Liberator
Receivables. Except to the
extent of the amount of the allowance for doubtful accounts reflected in the
Annual Statements and the Interim Statements, all the Receivables of Liberator
reflected therein, and all Receivables that have arisen since the Latest Balance
Sheet Date (except Receivables that have been collected since such date), are
valid and enforceable Claims subject to no known defenses, offsets, returns,
allowances or credits of any kind, and constitute bona fide Receivables
collectible in the ordinary course of the Business except as enforceability may
be limited by applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance or similar laws or principles of equity affecting the
enforcement of creditors rights generally.
SECTION
2.10 Absence
of Certain Changes. (a) Since
June 30, 2009, Liberator has conducted the Business in the ordinary course
consistent with past practice, except as otherwise disclosed hereof, and there
has not been:
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(i) Any
material adverse change in the Condition of the Business;
(ii) Any
material damage, destruction or other casualty loss (whether or not covered by
insurance), condemnation or other taking affecting the Business or the Assets of
Liberator;
(iii) Any
change in any method of accounting or accounting practice by
Liberator;
(iv) Except
for normal increases granted in the ordinary course of business, any increase in
the compensation, commission, bonus or other direct or indirect remuneration
paid, payable or to become payable to any officer, stockholder, director,
consultant, agent or employee of Liberator, or any alteration in the benefits
payable or provided to any thereof;
(v)
Any material adverse change in the relationship of
Liberator with its employees, customers, suppliers or vendors;
(vi)
Except for any changes
made in the ordinary course of Business, any material change in any of
Liberator's business policies, including advertising, marketing, selling,
pricing, purchasing, personnel, returns or budget policies;
(vii)
Any agreement or
arrangement whether written or oral to do any of the foregoing.
SECTION
2.11 Leased
Real Property. (a) Liberator
has no fee interest, purchase options or rights of first refusal in any real
property and Liberator has no leasehold or other interest in any real property,
except for the real property lease between Bedford Realty Company, LLC and OneUp
Innovations, Inc. dated September 26, 2005 covering approximately 140,000 square
feet of floor space known as ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(the “Leased Real
Property”), and all leases including all amendments, modifications,
extensions, renewals and/or supplements thereto (collectively, “Real Property
Leases”).
SECTION
2.12 Personal
Property; Assets. Liberator has
good and valid title to (or valid leasehold interest in) all of its personal
property and Assets, free and clear of all Liens, except the Liabilities
reflected on any balance sheet referred to in
Section 2.7(a). The machinery, equipment, computer software and
other tangible personal property constituting part of the Assets and all other
Assets (whether owned or leased) are in good condition and repair (subject to
normal wear and tear) and are reasonably sufficient and adequate in quantity and
quality for the operation of the Business as previously and presently conducted.
The Assets constitute all of the assets, which are necessary to operate the
Business of Liberator as currently conducted.
SECTION
2.13 Contracts. (a) Except
as disclosed in the financial statements referred to in Section 2.7(a),
Liberator is not a party or by which it or its Assets are bound or subject to
Contracts that: (i) cannot be canceled upon thirty (30) days' notice without the
payment or penalty of less than one thousand dollars ($1,000); or (ii) involve
aggregate annual future payments by or to any person of more than five thousand
dollars ($5,000). True and complete copies of all written Contracts (including
all amendments thereto and waivers in respect thereof) and summaries of the
material provisions of all oral Contracts so listed have been made available to
▇▇▇.
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(b) All
Contracts to which Liberator is a party are valid, subsisting, in full force and
effect and binding upon Liberator and the other parties thereto, in accordance
with their terms, except that no representation or warranty is given as to the
enforceability of any oral Contracts. Liberator is not in default (or
alleged default) under any such Contract.
SECTION
2.14 Patents
and Intellectual Property Rights. (a) The disclosures in
the SEC Documents sets forth each patent, trademark, trade name, service ▇▇▇▇,
brand ▇▇▇▇, brand name, and registered copyright as well as all registrations
thereof and pending applications therefor, and each license or other contract
relating thereto (collectively, the “Intellectual
Property”) owned or used in connection with the Business by Liberator and
indicates, with respect to each item of Liberator's Intellectual Property that
is licensed by Liberator, the name of the licensor thereof and, with respect to
oral Contracts, the terms of such license relating thereto. The use
of the foregoing by Liberator does not conflict with, infringe upon, violate or
interfere with or constitute an appropriation of any right, title, interest or
goodwill, including, without limitation, any intellectual property right,
patent, trademark, trade name, service ▇▇▇▇, brand name, computer program,
database, industrial design, trade secret, copyright or any pending application
thereto of any other person and there have been no claims made and Liberator has
not received any notice or otherwise know that any of the foregoing is invalid
or conflicts with the asserted rights of other Persons or have not been used or
enforced or have been failed to be used or enforced in a manner that would
result in the abandonment, cancellation or unenforceability of the Intellectual
Property, except as otherwise disclosed.
(b) Liberator
owns or has rights to use all Intellectual Property, know-how, formulae and
other proprietary and trade rights necessary to conduct the Business as it is
now conducted. Liberator has not forfeited or otherwise relinquished
any such Intellectual Property, know-how, formulae or other proprietary right
used in the conduct of the Business as now conducted.
(c) To
the extent used in the conduct of the Business by Liberator, each of the
licenses or other contracts relating to Liberator's Intellectual Property
(collectively, the “Intellectual Property
Licenses”) is in full force and effect and is valid and enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity), and there is no notice or claim of default under any Intellectual
Property License either by Liberator or, to Liberator's knowledge, by any other
party thereto, and to Liberator’s knowledge, no event has occurred that with the
lapse of time or the giving of notice or both would constitute a default by
Liberator thereunder.
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SECTION
2.15 Claims
and Proceedings.
There are no outstanding Orders of any Governmental Body against or involving
Liberator, its Assets, the Business, or Liberator Shares. There are no actions,
suits, claims or counterclaims, examinations, Liberator Required Consents or
legal, administrative, governmental or arbitral proceedings or investigations
(collectively, “Claims”) (whether or
not the defense thereof or Liabilities in respect thereof are covered by
insurance), pending or, to the best of Liberator's knowledge, threatened on the
date hereof, against or involving Liberator, its Assets, the Business or
Liberator Shares.
SECTION
2.16 Taxes. (a) Except
as otherwise disclosed in the SEC Documents:
(i) Liberator
has timely filed or, if not yet due but due before Closing, will timely file all
Tax Returns required to be filed by it for all taxable periods ending on or
before the date of Closing and all such Tax Returns are or, if not yet filed,
will be, upon filing, true, correct and complete in all material
respects;
(ii) Liberator
has paid, or if payment is not yet due but due before Closing, will promptly pay
when due to each appropriate Tax Authority, all Taxes of Liberator shown as due
on the Tax Returns required to be filed by it for all taxable periods ending on
or before the date of Closing;
(iii) the
accruals for Taxes currently payable as well as for deferred Taxes shown on the
financial statements of Liberator as of the date of the Annual Statements, the
Interim Statements or the date of any financial statements delivered hereunder:
(A) adequately provide for all contingent Tax Liabilities of Liberator as
of the date thereof; and (B) accurately reflect, as of the date thereof,
all unpaid Taxes of Liberator whether or not disputed, in each case as required
to be reflected thereon in order for such statements to be in accordance with
GAAP;
(iv) no
extension of time has been requested or granted for Liberator to file any Tax
Return that has not yet been filed or to pay any Tax that has not yet been paid
and Liberator has not granted a power of attorney that remains outstanding with
regard to any Tax matter;
(v) Liberator
has not received notice of a determination by a Tax Authority that Taxes are
currently owed by Liberator (such determination to be referred to as a “Tax Deficiency”) and,
to Liberator's knowledge, no Tax Deficiency is proposed or
threatened;
(vi) all
Tax Deficiencies have been paid or finally settled and all amounts determined by
settlement to be owed have been paid;
(vii) there
are no Tax Liens on or pending against Liberator or any of the Assets, other
than those which constitute Permitted Liens;
(viii) there
are no presently outstanding waivers or extensions or requests for a waiver or
extension of the time within which a Tax Deficiency may be asserted or
assessed;
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(ix) no
issue has been raised in any examination, investigation, Liberator Required
Consents, suit, action, claim or proceeding relating to Taxes (a “Tax Liberator Required
Consents”) which, by application of similar principles to any past,
present or future period, would result in a Tax Deficiency for such
period;
(x) there
are no pending or threatened Tax audits of Liberator;
(xi) Liberator
has no deferred inter-company gains or losses that have not been fully taken
into income for income Tax purposes;
(xii)
there are no transfer or other taxes (other
than income taxes) imposed by any state on Liberator by virtue of the
Contemplated Transactions; and
(xiii) no
claim has been made by any Tax Authority that Liberator is subject to Tax in a
jurisdiction in which Liberator is not then paying Tax of the type
asserted.
Each
reference to a provision of the Code in this Section 2.16 shall be treated
for state and local Tax purposes as a reference to analogous or similar
provisions of state and local law.
(b) To
Liberator’s knowledge, Liberator has collected and remitted to the appropriate
Tax Authority all sales and use or similar Taxes required to be collected on or
prior to the date of Closing and has been furnished properly completed exemption
certificates for all exempt transactions and has no information otherwise or
notice of any claim by any government or jurisdiction with regards
thereto. Liberator has maintained and has in its possession all
records, supporting documents and exemption certificates required by applicable
sales and use Tax statutes and regulations to be retained in connection with the
collection and remittance of sales and use Taxes for all periods up to and
including the date of Closing. With respect to sales made by
Liberator prior to the date of Closing for which sales and use Taxes are not yet
due as of the date of Closing, all applicable sales and use Taxes payable with
respect to such sales will have been collected or billed by Liberator and will
be included in the Assets of Liberator as of the date of Closing.
SECTION
2.17 Compliance
with Laws. Liberator is not
in violation of any order, judgment, injunction, award, citation, decree,
consent decree or writ (collectively, “Orders”) and to the
best of Liberator’s knowledge, belief and information, any Laws of any
Governmental Bodies affecting Liberator, Liberator Shares or the
Business.
SECTION
2.18 Permits. Liberator has
obtained all licenses, permits, certificates, certificates of occupancy, orders,
authorizations and approvals (collectively, “Permits”), and has
made all required registrations and filings with all Governmental Bodies, that
are necessary to the ownership of the Assets, the use and occupancy of the
Leased Real Property, as presently used and operated, and the conduct of the
Business or otherwise required to be obtained by Liberator. All
Permits required to be obtained or maintained by Liberator have been provided
and disclosed and are in full force and effect; no violations are or have been
recorded, nor have any notices or violations thereof been received, in respect
of any Permit; and no proceeding is pending or threatened to revoke or limit any
Permit; and the consummation of the Contemplated Transactions will not (or with
the giving of notice or the passage of time or both will not) cause any Permit
to be revoked or limited.
10
SECTION
2.19 Environmental
Matters. To the
best of Liberator’s knowledge, belief and information, Liberator is,
and at all times has been, in full compliance with, and has not been and is not
in violation of or liable under, any Environmental Law.
SECTION
2.20 SEC
Filings. As of their
respective dates, the SEC Documents were prepared in accordance with the
Exchange Act and the Securities Act and did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated in those
documents or necessary to make the statements in those documents not misleading,
in light of the circumstances under which they were made. As of
their respective dates, these reports and statements will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in them or necessary to make the statements in them not misleading, in
light of the circumstances under which they are made and these reports and
statements will comply in all material respects with all applicable requirements
of the Exchange Act and the Securities Act.
SECTION 2.21 Finders’
Fees. There is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of Liberator who might be entitled to any
fee or commission from Liberator in connection with the consummation of the
Contemplated Transactions.
SECTION
2.22 Disclosure. Neither this
Agreement, the Schedules hereto, nor any reviewed or unaudited financial
statements, documents or certificates furnished or to be furnished to ▇▇▇ or by
or on behalf of Liberator o pursuant to this Agreement contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. Except for general current economic
conditions effecting the entire economy or Liberator’s entire industry and not
specific to the Business, there are no events, transactions or other facts known
by Liberator, which, either individually or in the aggregate, may give rise to
circumstances or conditions which would have a material adverse effect on the
general affairs or Condition of the Business.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF ▇▇▇
▇▇▇
represents, warrants and covenants to Liberator as follows and acknowledges that
Liberator is relying upon such representations and warranties in connection with
the Contemplated Transactions:
11
SECTION
3.1 Authority
Relative to this Agreement. ▇▇▇ has full
power and authority to execute and deliver each Transaction Document to which
they are or, at Closing, will be, a party and to consummate the Contemplated
Transactions. Following the approval of the boards of directors of
▇▇▇ and the shareholders of ▇▇▇ with respect to the Contemplated Transactions,
the execution, delivery and performance by ▇▇▇ of each Transaction Document and
the consummation of the Contemplated Transactions to which it is or, at Closing,
will be, a party have been duly and validly authorized and approved by ▇▇▇ and
no other acts by or on behalf of ▇▇▇ are necessary or required to authorize the
execution, delivery and performance by ▇▇▇ of each Transaction Document and the
consummation of the Contemplated Transactions to which it is or, at Closing,
will be a party. This Agreement and the other Transaction Documents
to which ▇▇▇ is a party have been, duly and validly executed and delivered by
▇▇▇ and (assuming the valid execution and delivery thereof by the other parties
thereto) constitutes, or will, at the Closing, constitute, as the case may be,
the legal, valid and binding agreements of ▇▇▇ enforceable against it in
accordance with their respective terms, except as such obligations and their
enforceability may be limited by applicable bankruptcy and other similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought (whether at law or in
equity).
SECTION
3.2 No
Conflicts; Consents. The execution,
delivery and performance by ▇▇▇ of each Transaction Document to which it is a
party and the consummation of the Contemplated Transactions to which ▇▇▇ is a
party does not and will not: (i) violate any provision of the certificate
of incorporation or by-laws of ▇▇▇; (ii) require ▇▇▇ to obtain any consent,
approval or action of or waiver from, or make any filing with, or give any
notice to, any Governmental Body or any other person, except as set forth on
Schedule 3.2
(the “▇▇▇ Required
Consents”); (iii) except as set forth in Schedule 3.2,
violate, conflict with or result in the breach or default under (with or without
the giving of notice or the passage of time), or permit the suspension or
termination of, any material Contract to which ▇▇▇ is a party or any of its
assets is bound or subject or result in the creation or any Lien upon any of ▇▇▇
Merger Stock or upon any assets of ▇▇▇ or ▇▇▇; or (iv) violate any Order
or, to WES’s knowledge, any Law of any Governmental Body against, or binding
upon, ▇▇▇ or ▇▇▇, or upon any of their respective assets or
businesses.
SECTION
3.3 Corporate
Existence and Power of ▇▇▇. ▇▇▇ is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, and has all requisite corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. Other than the execution of this
Agreement, ▇▇▇ has not conducted any business of any nature.
SECTION
3.4 ▇▇▇
Merger Stock. At the closing,
▇▇▇ Merger Stock will have been duly authorized by ▇▇▇ and, when issued to
Shareholders pursuant to this Agreement, will be duly issued, fully paid and
non-assessable shares of ▇▇▇ Merger Stock. ▇▇▇ Merger Stock, when
issued pursuant hereto: (i) will not be issued in violation of or subject
to any preemptive rights, rights of first refusal or, other than as set forth in
this Agreement, contractual restrictions of any kind; and (ii) will vest in
Shareholders, respectively, good title to ▇▇▇ Merger Stock free and clear of all
Liens.
12
SECTION
3.5 Capitalization. At the closing,
the authorized capital stock of ▇▇▇ consists of 175,000,000 shares of common
stock, $0.01 par value. ▇▇▇ has [1,205,000] shares of common stock issued and
outstanding. Except as set forth on Schedule 3.5, to the
knowledge of ▇▇▇, ▇▇▇ will not have outstanding any capital stock or other
securities or any rights, warrants or options to acquire securities of ▇▇▇ or
any convertible or exchangeable securities and, other than ▇▇▇ pursuant to this
Agreement, to the knowledge of ▇▇▇, no person has or at Closing will have, any
right to purchase or otherwise acquire any securities of ▇▇▇. There
are, and at Closing there will be, to the knowledge of ▇▇▇, no outstanding
obligations of ▇▇▇ to repurchase, redeem or otherwise acquire any securities of
▇▇▇. All of ▇▇▇ Merger Stock is, and at Closing will be, duly
authorized, duly and validly issued, fully paid and non-assessable, and to the
knowledge of ▇▇▇, none were issued in violation of any preemptive rights, rights
of first refusal or any other contractual or legal restrictions of any
kind.
SECTION
3.6 Disclosure
of Information. ▇▇▇ has been
given the opportunity: (i) to ask questions of, and to receive answers from,
persons acting on behalf of Liberator concerning the terms and conditions of the
Contemplated Transactions and the business, properties, prospects and financial
conditions of Liberator; and (ii) to obtain any additional information (to the
extent Liberator or any of the Shareholders possesses such information or is
able to acquire it without unreasonable effort or expense and without breach of
confidentiality obligations) necessary to verify the accuracy of information
provided about Liberator.
SECTION
3.7 Charter
Documents and Corporate Records. ▇▇▇ has
heretofore delivered to Liberator true and complete copies of the certificate of
incorporation, by-laws and minute books, or comparable instruments, of ▇▇▇ as in
effect on the date hereof. The stock transfer books of ▇▇▇ have been
made available to Liberator for its inspection and are true and complete in all
respects.
SECTION
3.8 Financial
Statements.
(a) Schedule 3.8
sets forth true, complete and correct copies of: WES's audited financial
statements as of and for the fiscal years ended December 31, 2008 and December
31, 2007 (the “▇▇▇
Annual Statements”) and the unaudited financial statements as of and for
the fiscal period ended June 30, 2009 (the “▇▇▇ Interim
Statements”) and all management letters, management representation
letters and attorney response letters issued in connection with the ▇▇▇ Annual
Statements and the ▇▇▇ Interim Statements. The ▇▇▇ Annual Statements and the ▇▇▇
Interim Statements present fairly and accurately in all material respects the
financial position of ▇▇▇ as of its date, and the earnings, changes in
stockholders' equity and cash flows thereof for the periods then ended in
accordance with GAAP, consistently applied. Each balance sheet
contained therein or delivered pursuant hereto fully sets forth all consolidated
Assets and Liabilities of ▇▇▇ existing as of its date which, under GAAP, should
be set forth therein, and each statement of earnings contained therein or
delivered pursuant hereto sets forth the items of income and expense of ▇▇▇
which should be set forth therein in accordance with GAAP.
(b) All
financial, business and accounting books, ledgers, accounts and official and
other records relating to ▇▇▇ have been properly and accurately kept and
completed, and ▇▇▇ has no knowledge, notice belief or information there are any
material inaccuracies or discrepancies contained or reflected
therein.
13
SECTION
3.9 Liabilities. ▇▇▇ has not incurred any
Liabilities since June 30, 2009 (the “Latest Balance Sheet
Date”) except (i) current Liabilities for trade or business
obligations incurred in connection with the purchase of goods or services in the
ordinary course of the business of ▇▇▇ and consistent with past practice, and
(ii) Liabilities reflected on any balance sheet referred to in
Section 3.8(a).
SECTION
3.10 Absence
of Certain Changes. Since December
31, 2008, ▇▇▇ has conducted its business in the ordinary course consistent with
past practice there has not been:
(a) Any
change in any method of accounting or accounting practice by ▇▇▇;
(b) Any
increase in the compensation, commission, bonus or other direct or indirect
remuneration paid, payable or to become payable to any officer, stockholder,
director, consultant, agent or employee of ▇▇▇, or any alteration in the
benefits payable or provided to any thereof;
(c) Any
material adverse change in the relationship of ▇▇▇ with its employees,
customers, suppliers or vendors;
(d) Except
for any changes made in the ordinary course of business, any material change in
any of WES's business policies, including advertising, marketing, selling,
pricing, purchasing, personnel, returns or budget policies;
(e) Any
agreement or arrangement whether written or oral to do any of the foregoing;
and
(f) ▇▇▇
has no Liability that is past due.
SECTION
3.11 Contracts.
(a) To
the knowledge of ▇▇▇, there are no Contracts to which ▇▇▇ is a party or by which
it or its assets are bound or subject that: (i) cannot be canceled upon 30 days'
notice without the payment or penalty of less than one thousand dollars
($1,000); or (ii) involve aggregate annual future payments by or to any person
of more than five thousand dollars ($5,000). True and complete copies of all
written Contracts (including all amendments thereto and waivers in respect
thereof) and summaries of the material provisions of all oral Contracts so
listed have been made available to Liberator.
(b) All
Contracts to which ▇▇▇ is a party, to the knowledge of ▇▇▇, are valid,
subsisting, in full force and effect and binding upon ▇▇▇ and the other parties
thereto, in accordance with their terms, except that no representation or
warranty is given as to the enforceability of any oral Contracts. To
the best of WES’s knowledge and belief, ▇▇▇ is not in default (or alleged
default) under any such Contract.
14
SECTION
3.12 Claims
and Proceedings.
To the knowledge of ▇▇▇, there are no outstanding Orders of any Governmental
Body against or involving ▇▇▇, its assets or its business. To the knowledge of
▇▇▇, there are no Claims (whether or not the defense thereof or Liabilities in
respect thereof are covered by insurance), pending or, to the best of WES's
knowledge, threatened on the date hereof, against or involving ▇▇▇, its assets
or its business.
SECTION
3.13 Compliance
with Laws. ▇▇▇ is not in
violation of any Orders or any Laws related to or promulgated under the
Securities Act or the Exchange Act (15 USC § 78a et seq.) and to the best of
WES’s knowledge, belief and information, any Laws of any Governmental Bodies
affecting ▇▇▇ or ▇▇▇ Merger Stock.
SECTION
3.14 Environmental
Matters. To the
best of WES’s knowledge, belief and information, ▇▇▇ is, and at all
times has been, in full compliance with, and has not been and is not in
violation of or liable under, any Environmental Law.
SECTION
3.15 SEC
Filings. ▇▇▇ has filed
with the SEC all forms, reports, schedules, and statements that were required to
be filed by it with the SEC within the period beginning on the date of inception
of ▇▇▇ and ending on the Effective Time, and previously has furnished or made
available to the Company accurate and complete copies of all the SEC
Documents. As of their respective dates, the SEC Documents were
prepared in accordance with the Exchange and the Securities Act and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in those documents or necessary to make the statements in
those documents not misleading, in light of the circumstances under which they
were made. As of their respective dates, these reports and
statements will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated in them or necessary to make the
statements in them not misleading, in light of the circumstances under which
they are made and these reports and statements will comply in all material
respects with all applicable requirements of the Exchange Act and the Securities
Act.
SECTION
3.16 Finders’
Fees. There is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of ▇▇▇ who might be entitled to any fee or
commission from ▇▇▇ in connection with the consummation of the Contemplated
Transactions.
ARTICLE
IV
COVENANTS
AND AGREEMENTS
Liberator
covenants to ▇▇▇ and ▇▇▇ covenants to Liberator that:
SECTION
4.1 Filings
and Authorizations. The parties
hereto shall cooperate and use their respective best efforts to make, or cause
to be made, all registrations, filings, applications and submissions, to give
all notices and to obtain all governmental or other third party consents,
transfers, approvals, Orders and waivers necessary or desirable for the
consummation of the Contemplated Transactions in accordance with the terms of
this Agreement; and shall furnish copies thereof to each other party prior to
such filing and shall not make any such registration, filing, application or
submission to which ▇▇▇ or Liberator, as the case may be, reasonably objects in
writing. All such filings shall comply in form and content in all
material respects with applicable Law. The parties hereto also agree
to furnish each other with copies of such filings and any correspondence
received from any Governmental Body in connection therewith.
15
SECTION
4.2 Confidentiality. Each Party (the
“Receiving
Party”) shall, and shall cause its respective Affiliates and
Representatives to (each such Affiliate or Representative of either Liberator or
▇▇▇, as the case may be, a “Receiving Party
Representative”) to, maintain in confidence all information received from
the other Party or a Liberator (the “Disclosing Party”)
(other than disclosure to that Person’s Representatives in connection with the
evaluation and consummation of the Transactions), and such Disclosing Party’s
Affiliates or Representatives (as the case may be, a “Disclosing Party
Representative”) in connection with this Agreement or the transactions
contemplated by the Transaction Documents (including the existence and terms of
this Agreement and the such transactions) and use such information solely to
evaluate such transactions, unless i) such information can be shown to be
already known to the Receiving Party or a Receiving Party Representative before
the time of disclosure to such Person, ii) such information can be shown to be
subsequently disclosed to the Receiving Party or a Receiving Party
Representative by a third party that, to the knowledge of the Receiving Party or
such Receiving Party Representative, is not bound by a duty of confidentiality
to the Disclosing Party or any Disclosing Party Representative, iii) such
information is or becomes publicly available through no breach of this Agreement
by, or other fault of, the Receiving Party or any Receiving Party Representative
or iv) the Receiving Party or Receiving Party Representative in good faith
believes that the furnishing or use of such information is required by, or
necessary in connection with, any proceeding, Law or any listing or trading
agreement concerning its publicly traded securities (in which case the Receiving
Party or such Receiving Party Representative shall, as promptly as practicable,
advise the Disclosing Party in writing before making the disclosure and
cooperate with the Disclosing Party to limit the scope of such
disclosure).
SECTION
4.3 Expenses. Liberator and ▇▇▇
shall bear their respective expenses, in each case, incurred in connection with
the preparation, execution and performance of the Transaction Documents and the
Contemplated Transactions, including, without limitation, all fees and expenses
of their respective Representatives.
SECTION
4.4 Tax
Matters.
Liberator and ▇▇▇ shall reasonably cooperate, and shall cause their respective
Representatives reasonably to cooperate, in preparing and filing all Tax
Returns, including maintaining and making available to each other all records
necessary in connection with the preparation and filing of Tax Returns, the
payment of Taxes and the resolution of Tax audits and Tax Deficiencies with
respect to all taxable periods. Refunds or credits of Taxes that were
paid by Liberator with respect to any periods shall be for the account of
Liberator.
SECTION
4.5 Further
Assurances. At any time and
from time to time after the date of Closing, upon the reasonable request of any
party hereto, the other party(ies), shall do, execute, acknowledge and deliver,
or cause to be done, executed, acknowledged or delivered, all such further
documents, instruments or assurances, as may be necessary, desirable or proper
to carry out the intent and accomplish the purposes of this
Agreement.
16
SECTION
4.6 Restricted
Securities. The parties
acknowledge and agree that Liberator Shares and ▇▇▇ Merger Stock being issued or
transferred pursuant to the Contemplated Transactions are being issued or
transferred pursuant to the exemption from the registration requirements of the
Securities Act and constitute “restricted securities” within the meaning of the
Securities Act. Such securities may not be transferred absent
compliance with the provisions of the Securities Act, other applicable Laws, and
all stock certificates evidencing such securities shall bear a legend to such
effect and to the effect that such shares are subject to the terms and
provisions of this Agreement; provided, however, that it is anticipated that for
purposes of Rule 144 of the Securities Act, that the holding period of ▇▇▇
Merger Stock for each shareholder of Liberator shall be determined to commence
on the date of acquisition of Liberator Shares (as converted pursuant to this
Agreement) for each such respective holder.
SECTION
4.7 Due
Diligence. Prior to Closing,
▇▇▇ agrees that Liberator shall be entitled, through its Representatives, to
make such investigation of the properties, businesses and operations of ▇▇▇, and
such examination of the books, records and financial condition of ▇▇▇, as
Liberator reasonably deems necessary. Any such investigation and
examination shall be conducted at reasonable times, under reasonable
circumstances and upon reasonable notice.
SECTION
4.8 Amendments
to the Articles of Incorporation. No later
than the tenth business day after Closing, ▇▇▇ will file an amendment to its
Articles of Incorporation authorizing the issuance of the ▇▇▇ Preferred Stock,
and upon approval from the ▇▇▇ Shareholder, the ▇▇▇ Preferred Stock will be
exchanged pursuant to the terms of this Agreement (the “Approval
Time”).
ARTICLE
V
CONDITIONS
TO CLOSING
SECTION
5.1 Conditions
to the Obligations of the Parties. The obligations
of the Parties to consummate the Contemplated Transactions are subject to the
satisfaction of the following conditions:
(a) No
Injunction. No provision of any applicable Law and no Order
shall prohibit the consummation of the Contemplated Transactions.
(b) No Proceedings or
Litigation. No Claim instituted by any person (other than ▇▇▇,
Liberator or their respective Affiliates) shall have been commenced or pending
against any Liberator, ▇▇▇ or any of their respective Affiliates, officers or
directors, which Claim seeks to restrain, prevent, change or delay in any
respect the Contemplated Transactions or seeks to challenge any of the terms or
provisions of this Agreement or seeks damages in connection with any of such
transactions.
SECTION
5.2 Conditions
to the Obligations of Liberator and ▇▇▇ Shareholder. The obligations
of Liberator and ▇▇▇ hereunder to consummate the Contemplated Transactions are
subject, at the option of Liberator, to the fulfillment prior to or at the
Closing of each of the following further conditions:
(a) Performance. ▇▇▇
shall have performed and complied in all material respects with all agreements,
obligations and covenants required by this Agreement to be performed or complied
with by it at or prior to the the Closing.
17
(b) Representations and
Warranties. The representations and warranties of ▇▇▇
contained in this Agreement and in any certificate or other writing delivered by
▇▇▇ pursuant hereto shall be true in all material respects at and as of the
Closing, as if made at and as of such time (except for those representations and
warranties made as of a specific date which shall be true in all material
respects as of the date made).
(c) No Material Adverse
Change. From the date hereof through the Closing, there shall
not have occurred any event or condition that has had or could have a material
adverse effect on ▇▇▇.
(d) Documentation. There
shall have been delivered to Liberator the following:
(i) A
certificate, dated at Closing, of the Chairman of the Board and the President of
▇▇▇ and ▇▇▇ confirming the matters set forth in Section 5.2(a) (b) and (c)
hereof;
(ii) ▇▇▇
Merger Stock certificates, registered in the name of each Shareholder as set
forth on Schedule
1 attached hereto, (with the appropriate restrictive legends as
applicable), evidencing satisfaction of the Merger Purchase Price in accordance
with Section 1.8;
(iii) ▇▇▇
shareholder approval of the contemplated transactions including but not limited
to the proper delivery and notice period of an information statement pursuant to
Florida laws and the Exchange Act;
(iv) Nevada
Certificate of Merger; and
(v) Florida
Certificate of Merger.
SECTION
5.3 Conditions
to the Obligations of ▇▇▇. All obligations
of ▇▇▇ to consummate the Contemplated Transactions hereunder are subject, at the
option of ▇▇▇, to the fulfillment prior to or at the Closing of each of the
following further conditions:
(a) Performance. Liberator
shall have performed and complied in all material respects with all agreements,
obligations and covenants required by this Agreement to be performed or complied
with by them at or prior to the Closing.
(b) Representations and
Warranties. The representations and warranties of Liberator,
contained in this Agreement and in any certificate or other writing delivered by
Liberator pursuant hereto shall be true in all material respects at and as of
the Closing, as if made at and as of such time (except for those representations
and warranties made as of a specific date which shall be true in all material
respects as of the date made).
(c) No Material Adverse
Change. From the date hereof through the Closing, there shall
not have occurred any event or condition that has had or could have a material
adverse effect on Liberator.
18
(d) Documentation. There
shall have been delivered to ▇▇▇ the following:
(i) A
certificate, dated at Closing, of the Chairman of the Board, the President or
Chief Financial Officer of Liberator confirming the matters set forth in
Section 5.3(a) (b) and (c) hereof;
(ii) A
certificate, dated at Closing, of the Secretary of Liberator certifying, among
other things, that attached or appended to such certificate: (i) is a true
and correct copy of Liberator's certificate of incorporation and all amendments
thereto, if any, as of the date thereof certified by the Secretary of State of
the State of Nevada; and (ii) is a true and correct copy of Liberator's
memorandum of association as of the date thereof;
(iii) Nevada
Certificate of Merger;
(iv) Florida
Certificate of Merger; and
(v) Liberator
Share certificates representing the number of Liberator Shares duly endorsed in
blank or accompanied by stock powers duly endorsed in blank and in suitable form
for transfer to ▇▇▇ by delivery.
ARTICLE
VI
INDEMNIFICATION
SECTION
6.1 Survival
of Representations, Warranties and Covenants. Notwithstanding
any right of ▇▇▇ fully to investigate the affairs of Liberator and the rights of
Liberator to fully investigate the affairs of ▇▇▇, and notwithstanding any
knowledge of facts determined or determinable by ▇▇▇ or Liberator, pursuant to
such investigation or right of investigation, ▇▇▇ and Liberator, have the right
to rely fully upon the representations, warranties, covenants and agreements of
Liberator and ▇▇▇ respectively, contained in this Agreement, or listed or
disclosed on any Schedule hereto or in any instrument delivered in connection
with or pursuant to any of the foregoing. All such representations,
warranties, covenants and agreements shall survive the execution and delivery of
this Agreement and the Closing hereunder. Notwithstanding the
foregoing, all representations and warranties of Liberator and ▇▇▇ respectively,
contained in this Agreement, on any Schedule hereto or in any instrument
delivered in connection with or pursuant to this Agreement shall terminate and
expire twelve (12) months after the date of Closing; provided, however, that
liability any party shall not terminate as to any specific claim or claims which
arise or result from or are related to a Claim for fraud.
SECTION
6.2 Obligation
of Liberator to Indemnify. Liberator agrees
to indemnify, defend and hold harmless ▇▇▇ (and its respective directors,
officers, employees, Affiliates, successors and assigns) from and against
all Claims, losses, Liabilities, Regulatory Actions, damages, deficiencies,
judgments, settlements, costs of investigation or other expenses (including
Taxes, interest, penalties and reasonable attorneys' fees and fees of other
experts and disbursements and expenses incurred in enforcing this
indemnification) (collectively, the “Losses”) suffered
or incurred by ▇▇▇, or any of the foregoing persons arising out of any breach of
the representations and warranties of Liberator contained in this Agreement, or
of the covenants and agreements of Liberator contained in this Agreement or in
the Schedules or any other Transaction Document.
19
SECTION
6.3 Obligation
of ▇▇▇ to Indemnify. ▇▇▇ agrees to
indemnify, defend and hold harmless Liberator (and its respective directors,
officers, employees, Affiliates, successors, heirs and assigns) from and
against any Losses suffered or incurred by Liberator or any of the foregoing
persons arising out of any breach of the representations and warranties of ▇▇▇,
or of the covenants and agreements of ▇▇▇ contained in this Agreement or in the
Schedules or any other Transaction Document.
SECTION
6.4 Notice and Opportunity to
Defend Third Party Claims.
(a)
Within ten (10) days following receipt by any party hereto (the “Indemnitee”) of
notice of any demand, claim, circumstance or Tax audit which would or might give
rise to a claim, or the commencement (or threatened commencement) of any action,
proceeding or investigation that may result in a Loss (an “Asserted Liability”),
the Indemnitee shall give notice thereof (the “Claims Notice”) to
the party or parties obligated to provide indemnification pursuant to Sections
6.2, or 6.3 (collectively, the “Indemnifying
Party”). The Claims Notice shall describe the Asserted
Liability in reasonable detail and shall indicate the amount (estimated, if
necessary, and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee.
(b) The
Indemnifying Party may elect to defend, at its own expense and with its own
counsel, any Asserted Liability unless: (i) the Asserted Liability includes
a Claim seeking an Order for injunction or other equitable or declaratory relief
against the Indemnitee, in which case the Indemnitee may at its own cost and
expense and at its option defend the portion of the Asserted Liability seeking
equitable or declaratory relief against the Indemnitee, or (ii) the
Indemnitee shall have reasonably, and in good faith, after consultation with the
Indemnifying Party, concluded that: (x) there is a conflict of interest
between the Indemnitee and the Indemnifying Party which could prevent or
negatively influence the Indemnifying Party from impartially or adequately
conducting such defense; or (y) the Indemnitee shall have one or more
defenses not available to the Indemnifying Party but only to the extent such
defense cannot legally be asserted by the Indemnifying Party on behalf of the
Indemnitee. If the Indemnifying Party elects to defend such Asserted
Liability, it shall within ten (10) days (or sooner, if the nature of the
Asserted Liability so requires) notify the Indemnitee of its intent to do
so, and the Indemnitee shall cooperate, at the expense of the Indemnifying
Party, in the defense of such Asserted Liability. If the Indemnifying
Party elects not to defend the Asserted Liability, is not permitted to defend
the Asserted Liability by reason of the first sentence of this
Section 6.4(b), fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement with
respect to such Asserted Liability, the Indemnitee may pay, compromise or defend
such Asserted Liability at the sole cost and expense of the Indemnifying
Party. Notwithstanding the foregoing, neither the Indemnifying Party
nor the Indemnitee may settle or compromise any claim over the reasonable
written objection of the other, provided that the Indemnitee may settle or
compromise any claim as to which the Indemnifying Party has failed to notify the
Indemnitee of its election under this Section 6.4(b) or as to which
the Indemnifying Party is contesting its indemnification obligations
hereunder. If the Indemnifying Party desires to accept a reasonable,
final and complete settlement of an Asserted Liability so that such Indemnitee’s
Loss is paid in full and the Indemnitee refuses to consent to such settlement,
then the Indemnifying Party’s liability to the Indemnitee shall be limited to
the amount offered in the settlement. The Indemnifying Party will
exercise good faith in accepting any reasonable, final and complete settlement
of an Asserted Liability. In the event the Indemnifying Party elects
to defend any Asserted Liability, the Indemnitee may participate, at its own
expense, in the defense of such Asserted Liability. In the event the
Indemnifying Party is not permitted by the Indemnitee to defend the Asserted
Liability, it may nevertheless participate at its own expense in the defense of
such Asserted Liability. If the Indemnifying Party chooses to defend
any Asserted Liability, the Indemnitee shall make available to the Indemnifying
Party any books, records or other documents within its control that are
necessary or appropriate for such defense. Any Losses of any
Indemnitee for which an Indemnifying Party is liable for indemnification
hereunder shall be paid upon written demand therefor.
20
SECTION
6.5 Limits on
Indemnification.
(a) Notwithstanding
the foregoing or the limitations set forth in Section 6.5(b) below, in the event
such Losses arise out of any fraud related matter on the part of any
Indemnifying Party, then such Indemnifying Party shall be obligated to indemnify
the Indemnitee in respect of all such Losses.
(b) Liberator
shall not be liable to indemnify WES pursuant to Section 6.2 above and WES
shall not be liable to indemnify Liberator pursuant to Section 6.3 above:
(i) unless a Claims Notice describing the loss is delivered to the Indemnifying
Party within 12 months after the Closing (except for Losses arising out of an
Indemnifying Party’s fraud); (ii) with respect to special, consequential or
punitive damages; and (iii) in respect of any individual Loss of less than
twenty five thousand dollars ($25,000).
SECTION 6.6
Exclusive
Remedy. The parties agree
that the indemnification provisions of this Article VI shall constitute the sole
or exclusive remedy of any party in seeking damages or other monetary relief
with respect to this Agreement and the Contemplated Transactions, provided that,
nothing herein shall be construed to limit the right of any party to seek:
(i) injunctive relief for a breach of this Agreement; or (ii) legal or
equitable relief for a Claim for fraud.
ARTICLE
VII
SPECIFIC
PERFORMANCE; TERMINATION
SECTION
7.1 Specific
Performance. Liberator and WES
acknowledges and agrees that, if any of Liberator or WES fails to proceed with
the Closing in any circumstance other than those described in clauses (a),
(b), (c) or (d) of Section 7.2 below, the others will not have
adequate remedies at law with respect to such breach. In such event,
and in addition to each party's right to terminate this Agreement, each party
shall be entitled, without the necessity or obligation of posting a bond or
other security, to seek injunctive relief, by commencing a suit in equity to
obtain specific performance of the obligations under this Agreement or to ▇▇▇
for damages, in each case, without first terminating this Agreement. Liberator
or WES specifically affirms the appropriateness of such injunctive, other
equitable relief or damages in any such action.
21
SECTION
7.2 Termination. This Agreement
may be terminated and the Contemplated Transactions may be abandoned at any time
prior to the Closing:
(a) By
mutual written consent of Liberator and ▇▇▇;
(b) By
Liberator if: (i) there has been a misrepresentation or breach of warranty
on the part of WES in the representations and warranties contained herein and
such misrepresentation or breach of warranty, if curable, is not cured within
thirty days after written notice thereof from Liberator, respectively;
(ii) WES has committed a breach of any covenant imposed upon it hereunder
and fails to cure such breach within thirty days after written notice thereof
from Liberator; or (iii) any condition to Liberator's obligations under
Section 5.2 becomes incapable of fulfillment through no fault of Liberator,
and is not waived by WES;
(c) By
WES if: (i) there has been a misrepresentation or breach of warranty on the
part of Liberator in the representations and warranties contained herein and
such misrepresentation or breach of warranty, if curable, is not cured within
thirty days after written notice thereof from WES; (ii) Liberator has committed
a breach of any covenant imposed upon it hereunder and fails to cure such breach
within thirty days after written notice thereof from WES; or (iii) any
condition to WES’s obligations under Section 5.3 becomes incapable of
fulfillment through no fault of WES and is not waived by Liberator;
and
(d) By
Liberator or WES, if any condition under Section 5.1 becomes incapable of
fulfillment through no fault of the party seeking termination and is not waived
by the party seeking termination.
SECTION
7.3 Effect of
Termination; Right to Proceed. Subject to the provisions of
Section 7.1 hereof, in the event that this Agreement shall be terminated
pursuant to Section 7.2, all further obligations of the parties under this
Agreement shall terminate without further liability of any party hereunder
except that: (i) the agreements contained in Section 4.2 shall survive the
termination hereof; and (ii) termination shall not preclude any party from
seeking relief against any other party for breach of Section 4.2. In
the event that a condition precedent to its obligation is not met, nothing
contained herein shall be deemed to require any party to terminate this
Agreement, rather than to waive such condition precedent and proceed with the
Contemplated Transactions.
ARTICLE
VIII
MISCELLANEOUS
SECTION
8.1 Representations and Warranties for Purposes
of this Agreement Only. The representations and warranties in this
Agreement were made for the purposes of allocated contractual risk between the
parties and not as a means of establishing facts. This Agreement may
have different standards of materiality than standards of materiality under
applicable securities laws. Only parties to this Agreement and
specified third-party beneficiaries (if any) have a right to enforce this
Agreement
22
SECTION
8.2 Notices. (a) Any
notice or other communication required or permitted hereunder shall be in
writing and shall be delivered personally by hand or by recognized overnight
courier, or mailed (by registered or certified mail, postage prepaid return
receipt requested) as follows:
If to
WES, one copy to:
▇▇▇
CONSULTING, INC.
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
If to
Liberator, one copy to:
LIBERATOR,
INC.
Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
With a
copy to (which shall not constitute notice):
▇▇▇▇▇▇
and ▇▇▇▇▇▇, LLP
Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
(b) Each
such notice or other communication shall be effective when delivered at the
address specified in Section 8.1(a). Any party by notice given
in accordance with this Section 8.1 to the other parties may designate
another address or person for receipt of notices hereunder. Notices
by a party may be given by counsel to such party.
SECTION 8.3
Entire
Agreement. This Agreement
(including the Schedules and Exhibits hereto) and the collateral agreements
executed in connection with the consummation of the Contemplated Transactions
contain the entire agreement among the parties with respect to the subject
matter hereof and related transactions and supersede all prior agreements,
written or oral, with respect thereto.
SECTION
8.4 Waivers
and Amendments; Non-Contractual Remedies; Preservation of Remedies. This Agreement
may be amended, superseded, cancelled, renewed or extended only by a written
instrument signed by Liberator and WES. The provisions hereof may be
waived in writing by Liberator or WES, as the case may be. Any such
waiver shall be effective only to the extent specifically set forth in such
writing. No failure or delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver
thereof. Nor shall any waiver on the part of any party of any such
right, power or privilege, nor any single or partial exercise of any such right,
power or privilege, preclude any other or further exercise thereof or the
exercise of any other such right, power or privilege. Except as
otherwise provided herein, the rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity.
23
SECTION
8.5 Governing
Law. This Agreement
shall be governed and construed in accordance with the laws of the State of
Georgia applicable to agreements made and to be performed entirely within such
State without regard to the conflict of laws rules thereof.
SECTION
8.6 Binding
Effect; No Assignment. This Agreement
and all of its provisions, rights and obligations shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, heirs and legal representatives. This Agreement may not
be assigned (including by operation of Law) by any party hereto without the
express written consent of WES (in the case of assignment by Liberator) or
Liberator (in the case of assignment by WES) and any purported assignment,
unless so consented to, shall be void and without effect.
SECTION
8.7 Exhibits. All Exhibits and
Schedules attached hereto are hereby incorporated by reference into, and made a
part of, this Agreement.
SECTION
8.8 Severability. If any provision
of this Agreement for any reason shall be held to be illegal, invalid or
unenforceable, such illegality shall not affect any other provision of this
Agreement, this Agreement shall be amended so as to enforce the illegal, invalid
or unenforceable provision to the maximum extent permitted by applicable law,
and the parties shall cooperate in good faith to further modify this Agreement
so as to preserve to the maximum extent possible the intended benefits to be
received by the parties.
SECTION
8.9 Counterparts. The Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original as against any party whose signature appears thereon, and all of
which shall together constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories.
SECTION
8.10 Third
Parties. Except as
specifically set forth or referred to herein, nothing herein express or implied
is intended or shall be construed to confer upon or give to any person other
than the parties hereto and their permitted heirs, successors, assigns and legal
representatives, any rights or remedies under or by reason of this Agreement or
the Contemplated Transactions.
ARTICLE
IX
DEFINITIONS
SECTION
9.1 Definitions. The following
terms, as used herein, have the following meanings:
24
“Affiliate” of any
person means any other person directly or indirectly through one or more
intermediary persons, controlling, controlled by or under common control with
such person.
“Agreement” or “this Agreement” shall
mean, and the words “herein”, “hereof” and “hereunder” and words
of similar import shall refer to, this agreement as it from time to time may be
amended.
“Assets” shall mean
all cash, instruments, properties, rights, interests and assets of every kind,
real, personal or mixed, tangible and intangible, used or usable in the
Business.
The term
“audit” or
“audited” when
used in regard to financial statements shall mean an examination of the
financial statements by a firm of independent certified public accountants in
accordance with generally accepted auditing standards for the purpose of
expressing an opinion thereon.
“Business” shall mean
the ownership and operation of the business of Liberator.
“Condition of the
Business” shall mean the financial condition, prospects or the results of
operations of the Business, the Assets or Liberator.
“Contract” shall mean
any contract, agreement, indenture, note, bond, lease, conditional sale
contract, mortgage, license, franchise, instrument, commitment or other binding
arrangement, whether written or oral.
The term
“control,” with
respect to any person, shall mean the power to direct the management and
policies of such person, directly or indirectly, by or through stock ownership,
agency or otherwise, or pursuant to or in connection with an agreement,
arrangement or understanding (written or oral) with one or more other
persons by or through stock ownership, agency or otherwise; and the terms “controlling” and
“controlled”
shall have meanings correlative to the foregoing.
“GAAP” shall mean
generally accepted accounting principles in effect on the date
hereof (or, in the case of any opinion rendered in connection with an
audit, as of the date of the opinion) as set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession of the
United States.
“Governmental Bodies”
shall mean any government, municipality or political subdivision thereof,
whether federal, state, local or foreign, or any governmental or
quasi-governmental agency, authority, board, bureau, commission, department,
instrumentality or public body, or any court, arbitrator, administrative
tribunal or public utility.
“knowledge” with
respect to: (a) any individual shall mean actual knowledge of such
individual; and (b) any corporation shall mean the actual knowledge of the
directors and executive officers of such corporation; and “knows” and “known” has a
correlative meaning. The terms “any Shareholder's knowledge,” and
“Shareholder's knowledge,” including any correlative meanings, shall mean the
knowledge of any Shareholder.
25
“Laws” shall mean any
law, statute, code, ordinance, rule, regulation or other requirement of any
Governmental Bodies.
“Liability” shall mean
any direct or indirect indebtedness, liability, assessment, claim, loss, damage,
deficiency, obligation or responsibility, fixed or unfixed, ▇▇▇▇▇▇ or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute, actual or
potential, contingent or otherwise (including any liability under any
guaranties, letters of credit, performance credits or with respect to insurance
loss accruals).
“Lien” shall mean any
mortgage, lien (including mechanics, warehousemen, laborers and landlords
liens), claim, pledge, charge, security interest, preemptive right, right of
first refusal, option, judgment, title defect, covenant, restriction, easement
or encumbrance of any kind.
“person” shall mean an
individual, corporation, partnership, joint venture, limited liability
Liberator, association, trust, unincorporated organization or other entity,
including a government or political subdivision or an agency or instrumentality
thereof.
“Receivables” shall
mean as of any date any trade accounts receivable, notes receivable, sales
representative advances and other miscellaneous receivables of
Liberator.
“Representative”
means, with respect to a particular Person, any director, officer, employee,
agent, consultant, advisor or other representative of such Person, including
legal counsel, accountants and financial advisors.
“SEC” means the
United States Securities and Exchange Commission.
“SEC Documents” means
all forms, notices, reports, schedules, statements, and other documents filed by
Parent with the SEC, whether or not constituting a “filed” document, and
includes all proxy statements, registration statements, amendments to
registration statements, periodic reports on Forms 10-KSB, 10-QSB, and 8-K, and
annual and quarterly reports to shareholders.
“Tax” (including, with
correlative meaning, the terms “Taxes” and “Taxable”) shall
mean: (i)(A) any net income, gross income, gross receipts, sales, use, ad
valorem, transfer, transfer gains, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, rent, recording, occupation,
premium, real or personal property, intangibles, environmental or windfall
profits tax, alternative or add-on minimum tax, customs duty or other tax, fee,
duty, levy, impost, assessment or charge of any kind whatsoever (including but
not limited to taxes assessed to real property and water and sewer rents
relating thereto), together with; (B) any interest and any penalty,
addition to tax or additional amount imposed by any Governmental Body (domestic
or foreign) (a “Tax
Authority”) responsible for the imposition of any such tax and
interest on such penalties, additions to tax, fines or additional amounts, in
each case, with respect to any party hereto, the Business or the Assets (or the
transfer thereof); (ii) any liability for the payment of any amount of the
type described in the immediately preceding clause (i) as a result of a
party hereto being a member of an affiliated or combined group with any other
person at any time on or prior to the date of Closing; and (iii) any
liability of a party hereto for the payment of any amounts of the type described
in the immediately preceding clause (i) as a result of a contractual
obligation to indemnify any other person.
26
“Tax Return” shall
mean any return or report (including elections, declarations, disclosures,
schedules, estimates and information returns) required to be supplied to
any Tax Authority.
“Transaction
Documents” shall mean, collectively, this Agreement, and each of the
other agreements and instruments to be executed and delivered by all or some of
the parties hereto in connection with the consummation of the transactions
contemplated hereby.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
27
IN WITNESS WHEREOF, the
undersigned have executed this MERGER and Recapitalization Agreement as of the
date set forth above.
|
WES:
|
|
▇▇▇
CONSULTING, INC.
|
|
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|
Title:
Chief Executive Officer
|
|
LIBERATOR:
|
|
LIBERATOR,
INC.
|
|
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|
Title:
Chief Executive Officer
|
|
WES
SHAREHOLDERS:
|
|
LIBERATOR,
INC.
|
|
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|
Title:
Chief Executive Officer
|
|
LIBERATOR
SHAREHOLDER:
|
|
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
28