EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made
and entered into as of January 16, 2007, by and among HOMASSIST CORPORATION, a
Nevada corporation (the "PARENT"), TFP SUB, INC., a California corporation (the
"MERGER SUB"), THE FAMILY POST, INC., a California corporation (the "COMPANY"),
and the shareholders of the Company (each, a "SHAREHOLDER" and collectively, the
"SHAREHOLDERS) who are signatories to a certain shareholder consent dated
January 3, 2007 authorizing this transaction ("Shareholder Consent" attached
hereto as Exhibit A). Capitalized terms used in this Agreement without
definition shall have the meanings set forth or referenced in ARTICLE VIII.
W I T N E S S E T H:
WHEREAS, the Shareholders are collectively the beneficial and
record owners of all of the issued and outstanding capital stock of the Company,
comprised of 16,478,175 shares of common stock, no par value per share
(collectively, the "COMPANY SHARES"); and
WHEREAS, the respective Boards of Directors of the Parent,
Merger Sub, the Shareholders and the Company have approved the merger (the
"MERGER") of the Company into Merger Sub on the terms and subject to the
conditions set forth in this Agreement, whereby each issued Company Share not
owned by the Parent, Merger Sub, or the Company shall be converted into the
right to receive the Merger Consideration (as defined in Section 2.1 below); and
WHEREAS, the Parent, as the sole stockholder of Merger Sub,
will approve this Agreement immediately following the execution of this
Agreement; and
WHEREAS, for Federal income tax purposes it is intended that
the Merger qualify as a "reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "CODE"); and
WHEREAS, the Parent, Merger Sub, and the Company desire to
make certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
MERGER
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1.1 THE MERGER. On the terms and subject to the conditions set forth in
this Agreement, and in accordance with the California General Corporation Law
(the "CGCL"), the Company shall be merged with and into Merger Sub at the
Effective Time. At the Effective Time and as a result of the Merger, the
separate corporate existence of the Company shall cease and Merger Sub shall
continue as the surviving entity (the "SURVIVING Entity"). The Merger, the
issuance by the Parent of shares of common stock, par value $0.001 per share, of
the Parent (the "PARENT COMMON STOCK") in connection with the Merger (the "SHARE
ISSUANCE") and the other transactions contemplated by this Agreement are
referred to in this Agreement as the "TRANSACTIONS."
1.2 CLOSING. The closing (the "CLOSING") of the Merger shall take place
at the offices of Spectrum Law Group, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ at 10:00 a.m., Pacific Daylight Time, on the third (3rd) Business Day
following the satisfaction (or, to the extent permitted by Law, waiver by the
party or parties entitled to the benefits thereof) of the conditions set forth
in Sections 5.1 and 5.2 (other than those conditions that by their nature are to
be satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions), or at such other place, time and date as shall be agreed in writing
by the Parent and the Company. The date on which the Closing occurs is referred
to in this Agreement as the "CLOSING DATE."
1.3 EFFECTIVE TIME. Prior to the Closing, the Parent shall prepare, and
on the Closing Date, the Surviving Entity shall file with the Secretary of State
of the State of California, a certificate of merger or other appropriate
documents (in any such case, the "CERTIFICATE OF MERGER") executed in accordance
with the relevant provisions of the CGCL and shall make all other filings or
recordings required under the CGCL. The Merger shall become effective at such
time as the Certificate of Merger is duly filed with such Secretary of State on
the Closing Date, or at such later time as the Parent and the Company shall
agree and specify in the Certificate of Merger (the time the Merger becomes
effective being the "EFFECTIVE TIME").
1.4 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided herein and in the applicable provisions of the CGCL.
1.5 ARTICLES OF INCORPORATION AND BY-LAWS.
(a) The articles of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the articles of incorporation
of the Surviving Entity until thereafter changed or amended as provided therein
or by the CGCL or applicable Law.
(b) The by-laws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the by-laws of the Surviving Entity until
thereafter changed or amended as provided therein or by applicable Law.
1.6 DIRECTORS. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Entity, until the earlier
of their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
1.7 OFFICERS. The officers of the Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Entity, until the earlier
of their resignation or removal or until their respective successors are duly
elected or appointed and qualified, as the case may be.
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ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
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EXCHANGE OF CERTIFICATES
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2.1 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any Company Shares or
any shares of capital stock of Merger Sub:
(a) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding
share of capital stock of Merger Sub shall continue to be issued and outstanding
and shall constitute the only issued and outstanding shares of the Surviving
Entity.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK.
Each Company Share that is owned by the Company, Parent or Merger Sub (or any
direct or indirect wholly-owned subsidiary of Parent or Merger Sub) shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and no cash, Parent Common Stock or other consideration shall be
delivered or deliverable in exchange therefor.
(c) CONVERSION OF COMPANY SHARES.
(1) Subject to Sections 2.1(b) and 2.1(d), each
issued and outstanding Company Share outstanding prior to the Effective Time
shall be converted into the right to receive: pro-rata portion of Thirty Seven
Million One Hundred Seventy Three Thousand Three Hundred Eighty Five
(37,173,385) shares of Parent Common Stock (the "MERGER CONSIDERATION");
(2) As of the Effective Time, all such Company Shares
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
Company Shares shall cease to have any rights with respect thereto, except the
right to receive Merger Consideration upon surrender of such certificate in
accordance with Section 2.2.
(d) DISSENTERS RIGHTS. Notwithstanding anything in this
Agreement to the contrary, Company Shares ("DISSENTER SHARES") that are
outstanding immediately prior to the Effective Time and that are held by any
person who is entitled to demand and properly demands payment for such Dissenter
Shares pursuant to, and who complies in all respects with, Sections 1300 et.
seq. of the CGCL (the "DISSENTER RIGHTS") shall not be converted into Merger
Consideration as provided in Section 2.1(c)(1), but rather the holders of
Dissenter Shares shall be entitled to payment for such Dissenter Shares in
accordance with the Dissenter Rights; PROVIDED, HOWEVER, that if any such holder
shall fail to perfect or otherwise shall waive, withdraw or lose the right to
receive payment under the Dissenter Rights, then the right of such holder to be
paid in accordance with the Dissenter Rights shall cease and such Dissenter
Shares shall be deemed to have been converted as of the Effective Time into, and
to have become exchangeable solely for the right to receive, Merger
Consideration as provided in Section 2.1(c)(1). The Company shall serve prompt
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notice to the Parent of any written notice of intent to demand payment, or any
written demand for payment, received by the Company in respect of any Company
Shares, and the Parent shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not, without the prior written consent of the
Parent, make any payment with respect to, or settle or offer to settle, any such
demands, or agree to do any of the foregoing.
2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Spectrum Law Group shall serve as Exchange
Agent (the "EXCHANGE AGENT") for payment of Merger Consideration upon surrender
of certificates representing Company Shares. Promptly following the Effective
Time, Parent shall reserve and/or deposit with the Exchange Agent, for the
benefit of the holders of Company Shares, for exchange in accordance with this
Article II, through the Exchange Agent: certificates representing the number of
shares of Parent Common Stock issuable and pursuant to Section 2.1(c) in
exchange for outstanding Company Shares. The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the Merger Consideration contemplated to be
issued pursuant to Section 2.1.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable
after the Effective Time, each holder of record of a certificate or certificates
(the "CERTIFICATES") that, immediately prior to the Effective Time, represented
outstanding Company Shares whose shares were converted into the right to receive
Merger Consideration pursuant to Section 2.1(c) shall surrender such holder's
Certificate for cancellation to the Company and/or the Exchange Agent (or to
such other agent or agents as may be appointed by Parent) together with a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Parent and shall be in such form and have such other
provisions as Parent may reasonably specify), duly executed, and such other
documents as may reasonably be required by the Parent or the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefore
the holder's pro rata portion of the Merger Consideration, into which the
aggregate number of Company Shares previously represented by such Certificate
shall have been converted pursuant to Section 2.1(c), and the Certificate so
surrendered shall forthwith be canceled. Thereafter, such holder shall be
treated as a holder of Parent Common Stock for purposes of voting or quorum for
any meeting of the stockholders of Company. In the event of a transfer of
ownership of Company Shares that is not registered in the transfer records of
the Company, payment may be made to a person other than the person in whose name
the Certificate so surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of such Certificate
or establish to the satisfaction of Parent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration into
which the Company Shares theretofore represented by such Certificate have been
converted pursuant to Section 2.1(c). No interest shall be paid or accrue on any
cash payable upon surrender of any Certificate.
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(c) RESTRICTED SECURITIES. The shares of Parent Common Stock
(i) shall not be registered under the Securities Act or any state securities
laws, (ii) will be offered and sold in reliance upon exemptions provided in the
Securities Act and state securities laws for transactions not involving any
public offering, and (iii) therefore, shall constitute "restricted securities"
within the meaning of the Securities Act and cannot be resold or transferred
unless they are subsequently registered under the Securities Act and such
applicable state securities laws or unless an exemption from such registration
is available.
(d) INVESTMENT REPRESENTATION LETTERS. On or before the
Closing Date, each of the Shareholders shall execute and deliver an Investment
Representation Letter, in the form attached hereto as EXHIBIT B (the "INVESTOR
REPRESENTATION LETTER"), which contains certain representations designed to
confirm the availability to the Parent of the exemption from registration under
Rule 506 of the Securities Act in connection with the issuance of the Parent
Common Stock pursuant to this Agreement. Notwithstanding anything to the
contrary in this Agreement, in the event that any Shareholder (a "DEFAULTING
SHAREHOLDER") is unable or fails to execute and deliver an Investor
Representation Letter in favor of the Parent, or the Parent has a reasonable
basis to believe that the representations of such Shareholder in the Investor
Representation Letter are not true and correct in any material respects, then
the Parent may in its sole and absolute discretion refuse to issue the Merger
Consideration allocable to the Defaulting Shareholder.
(e) NO FURTHER OWNERSHIP RIGHTS IN COMPANY SHARES. The Merger
Consideration paid and/or issued in accordance with the terms of this Article II
upon conversion of any Company Shares shall be deemed to have been paid and/or
issued in full satisfaction of all rights pertaining to such Company Shares,
subject, however, to the Surviving Entity's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Time that
may have been declared or made by the Company on such Company Shares in
accordance with the terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Effective Time, and after the Effective
Time there shall be no further registration of transfers on the stock transfer
books of the Surviving Entity of Company Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, any
Certificates formerly representing Company Shares are presented to the Surviving
Entity or the Exchange Agent for any reason, they shall be canceled and
exchanged as provided in this Article II.
(f) INCOME TAX TREATMENT. It is intended by the parties hereto
that the Merger qualify as a "reorganization" within the meaning of Section
368(a) of the Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meanings of Sections 1.368-2(g) and 1.368-3(a) of the
U.S. Treasury Regulations promulgated under the Code.
2.3 COMPANY EQUITY AWARDS.
(a) At the Effective Time, each Company Stock Option then
outstanding, whether or not then exercisable, shall be assumed by Parent and
converted into an option to purchase Parent Common Stock in accordance with this
Section 2.3(a). Each Company Stock Option so converted shall continue to have,
and be subject to, the same terms and conditions as set forth in the applicable
Company Stock Option and any agreements thereunder immediately prior to the
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Effective Time. Notwithstanding the foregoing, the conversion of any Company
Stock Options which are "incentive stock options," within the meaning of Section
422 of the Code, into options to purchase Parent Common Stock shall be made so
as not to constitute a "modification" of such Company Stock Options within the
meaning of Section 424 of the Code.
(b) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise or settlement of the Company Stock Options being assumed
or settled in accordance with this Section 2.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
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3.1 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. The Company
hereby represent and warrant to the Parent as follows:
(a) AUTHORITY. The Company has the corporate power and
authority to enter into and deliver this Agreement and each of the other
agreements, certificates, instruments and documents contemplated hereby
(collectively, the "ANCILLARY DOCUMENTS") to which it is a party, to carry out
its obligations hereunder and under any Ancillary Document and to consummate the
transactions contemplated hereby and by the Ancillary Documents. All actions,
authorizations and consents required by Law for the execution, delivery, and
performance by the Company of this Agreement and each Ancillary Document to
which it is a party, and the consummation of the transactions contemplated
hereby and thereby, have been properly taken or obtained, including without
limitation, the approval of this Agreement and the transactions contemplated by
it by the Board of Directors of the Company.
(b) EXECUTION AND DELIVERY. This Agreement has been, and each
Ancillary Document to which the Company is a party will be at the Closing, duly
authorized, executed and delivered by the Company and constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with their respective terms and conditions, except as enforceability
thereof may be limited by applicable bankruptcy, reorganization, insolvency or
other similar laws affecting or relating to creditors' rights generally or by
general principles of equity.
(c) NO CONFLICTS. Except as set forth on SCHEDULE 3.1(C), the
execution, delivery and performance by the Company of this Agreement and each
Ancillary Document to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not violate,
conflict with or result in a breach of any term, condition or provision of, or
require the consent of any Person under, or result in the creation of or right
to create any Lien upon any of the assets of the Company under, (i) any Laws to
which the Company or any of its assets are subject, (ii) any permit, judgment,
order, writ, injunction, decree or award of any Governmental Authority to which
the Company or any of its assets are subject, (iii) the articles of
incorporation or bylaws of the Company, or (iv) any license, indenture,
promissory note, bond, credit or loan agreement, lease, agreement, commitment or
other instrument or document to which the Company is a party or by which the
Company or any of its assets are bound.
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(d) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority, is required to be obtained by the Company in connection with or as a
result of the execution and delivery of this Agreement or any of the Ancillary
Documents, or the performance of its obligations hereunder and thereunder.
(e) ORGANIZATION, STANDING AND QUALIFICATION. The Company is a
corporation duly incorporated, validly existing, and in good standing under the
Laws of the State of California. The Company has corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted, to use its name and is duly qualified, licensed or authorized
to do business and in good standing, in each jurisdiction where the nature of
the activities conducted by it or the character of the properties owned, leased
or operated by it require such qualification, licensing or authorization. Each
such jurisdiction is identified on SCHEDULE 3.1(E). The Company's corporate
minute books reflect all resolutions approved and other actions taken by its
shareholders or Board of Directors and any committees thereof since the date of
its incorporation. The Shareholders or the Company have previously delivered to
the Parent true, correct and complete copies of the Articles of Incorporation
and Bylaws of the Company, each as currently in effect (collectively, the
"ORGANIZATION DOCUMENTS").
(f) CAPITALIZATION. The authorized capital stock of the
Company consists solely of 27,000,000 shares of common stock, of which
16,478,175 shares are issued and outstanding. As of the date hereof, each
Shareholder owns of record such number of shares of Common Stock as is set forth
opposite such Shareholder's name on SCHEDULE 3.1(F). The Company Shares
constitute all of the issued and outstanding capital stock of the Company. All
of the issued and outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and non-assessable. No shares of Common
Stock are held in treasury. Except as disclosed in SCHEDULE 3.1(F), there are no
outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible or exchangeable securities, profits interests,
conversion rights, preemptive rights, rights of first refusal or other rights,
agreements, arrangements or commitments of any nature whatsoever under which the
Company is or may become obligated to issue, redeem, assign or transfer any
shares of capital stock or purchase or make payment in respect of any shares of
capital stock of the Company now or previously outstanding, and there are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to or any shares of its capital stock.
(g) NO SUBSIDIARIES OR OTHER EQUITY INTERESTS. The Company
does not, nor has it ever at any time since its organization, had a direct or
indirect Subsidiary or owned, directly or indirectly, any equity, investment or
other equity interest, or any right (contingent or otherwise) to acquire the
same, in any other Person.
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(h) FINANCIAL STATEMENTS; INTERNAL CONTROLS. The Company has
previously delivered to the Parent true, complete and correct copies of audited
financial statements of the Company for the fiscal year ended December 31, 2005
(the "FINANCIAL STATEMENTS"). The Financial Statements comply as to form in all
material respects with the applicable accounting requirements and the published
rules and regulations with respect thereto, were prepared in accordance with
GAAP applied on a consistent basis during the periods involved and fairly
present the financial position of the Company as of the respective dates thereof
and the results of its operations and cash flows for the respective periods then
ended. SCHEDULE 3.1(H) lists all documentation creating or governing all
"off-balance sheet arrangements" (as defined in Item 303(a)(4) of Regulation S-K
promulgated by the SEC) which the Company would be required to disclose under
Item 303(a) of Regulation S-K if the Company were subject to the periodic
reporting requirements of the Exchange Act. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(i) ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
adequately reflected on or reserved against in the Financial Statements and
except for recurring Liabilities incurred in the ordinary course of business
consistent with recent past practice, as of September 30, 2006 (the "BALANCE
SHEET DATE"), the Company had no direct or indirect Liabilities for any period
prior to such date or arising out of transactions entered into or any set of
facts existing prior thereto. Since the Balance Sheet Date, the Company has not
incurred any Liabilities except in the ordinary course of business consistent
with recent past practice, none of which are, individually or in the aggregate,
material.
(j) ORDINARY COURSE. Since the Balance Sheet Date, except as
otherwise disclosed on SCHEDULE 3.1(J), the Company has operated its business in
the ordinary course consistent with past practice and there has not occurred:
(i) any change in the condition (financial or
otherwise), properties, assets, liabilities, business, prospects, operations or
results of operations that has had or could reasonably be expected to have a
Material Adverse Effect on the Company;
(ii) any amendments or changes in any of its
Organization Documents;
(iii) any issuance or sale of any shares of or
interests in, or rights of any kind to acquire any shares of or interests in, or
receipt of any payment based on the value of, its capital stock or any
securities convertible or exchangeable into shares of its capital stock
(including, without limitation, any stock options, phantom stock or stock
appreciation rights) or any adjustment, split, combination or reclassification
of its capital stock, or any declaration or payment of any dividend or any
distribution on, or any redemption, purchase, retirement or other acquisition,
directly or indirectly, of any shares of its capital stock or any securities or
obligations convertible into or exchangeable for any shares of its capital
stock;
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(iv) any investment of a capital nature on its own
account in excess of $50,000 individually or $100,000 in the aggregate;
(v) any entering into, amendment of, modification in,
relinquishment, termination, or non-renewal by the Company of any contract,
lease, transaction, commitment or other right or obligation, except for purchase
and sale commitments entered into in the ordinary course of business consistent
with recent past practice;
(vi) any waiver, forfeiture, or failure to assert any
rights of a material value or made, whether directly or indirectly, any payment
of any material Liability before the same came due in accordance with its terms;
(vii) any material damage, destruction or loss of the
Company's assets or properties, whether covered by insurance or not;
(viii) any payment of (or any making of oral or
written commitments or representations to pay) any bonus, increased salary or
special remuneration to any director, officer, employee or consultant or any
entry into or alterations of the terms of any employment, consulting or
severance agreement with any such person; any payment of any severance or
termination pay (other than payments made in accordance with existing plans or
agreements); any grant of stock option or issuance of any restricted stock; any
entry into or modification of any agreement or Employee Benefit Plan (except as
required by law) or any similar agreement;
(ix) any modification of any term of benefits payable
under any Employee Benefit Plan;
(x) (A) any creation, incurrence or assumption of any
Liability for borrowed money except those Liabilities incurred in the ordinary
course of business consistent with recent past practice, (B) issuance or sale of
any securities convertible into or exchangeable for debt securities of the
Company; or (C) issuance or sale of options or other rights to acquire from the
Company, directly or indirectly, debt securities of the Company or any
securities convertible into or exchangeable for any such debt securities;
(xi) any material change in the amounts or scope of
coverage of insurance policies;
(xii) any merger or consolidation with any other
Person, acquisition of any capital stock or other securities of any other
Person, or acquisition of all or a significant portion of the assets of any
other Person, or acquisition of any assets or properties from any Shareholder or
its affiliate or family member;
(xiii) any assumption or guarantee of any Liability
or responsibility (whether primarily, secondarily, contingently or otherwise)
for the obligations of any other Person;
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(xiv) any loan, advance (including, without
limitation, any loan or advance to any stockholder, officer, director or
employee of such Company) or capital contribution to, or investment in, any
Person, except travel advances or advances of no more than $50,000 to employees
in the ordinary course of business consistent with recent past practice;
(xv) any sale, transfer or lease to others of, any
grant, creation or assumption of Liens against, or otherwise disposed of, any of
its material assets, whether tangible or intangible;
(xvi) any lapse, failure to take any actions to
protect, or any adverse change in respect of any of its Proprietary Rights;
(xvii) any consummation of any other transaction that
is not in the Company's ordinary course of business consistent with recent past
practice;
(xviii) any collection of the Company's accounts
receivable, or any payment of the Company's accounts payable, in each case that
is not in the Company's ordinary course of business consistent with recent past
practice; or
(xix) any agreement or commitment, in writing or
otherwise, to take any of the actions described in the foregoing subclauses (i)
through (xviii).
(k) TITLE TO ASSETS. Except as disclosed on SCHEDULE 3.1(K),
the Company has good and marketable title to all of the tangible and intangible
assets owned by it, free and clear of any Liens, and none of such assets are
owned by any Person other than the Company. The Company owns, leases, licenses
or otherwise has the contractual right to use all of the assets used in or
necessary for the conduct of its business as currently conducted. The Company
has delivered to the Parent a schedule of the fixed assets of the Company dated
within thirty (30) days prior to the date hereof. All personal property owned or
leased by the Company, taken as a whole, is in good repair and is operational
and usable in the operation of the Company, subject to ordinary wear and tear.
(l) RECEIVABLES AND PAYABLES. Except as disclosed on SCHEDULE
3.1(L), (i) the accounts and notes receivable reflected on the Financial
Statements or arising since the Balance Sheet Date (collectively, the
"RECEIVABLES"), are bona fide, represent valid obligations to the Company, and
have arisen or were acquired in the ordinary course of business and in a manner
consistent with recent past practice and with the Company's regular credit
practices; (ii) the Company's provision for doubtful accounts reflected on its
Financial Statements or reserved on its books since the Balance Sheet Date has
been determined in accordance with the generally accepted accounting principles
consistently applied; (iii) the Receivables have been collected or are
collectible in full, net of any allowance for uncollectibles recorded on the
Financial Statements or properly reserved on its books since the Balance Sheet
Date, in a manner consistent with past practice in the ordinary course of
business and without resort to litigation; (iv) none of the Receivables is or
will at the Closing Date be subject to any defense, counterclaim or setoff; (v)
since the Balance Sheet Date, the Company has not canceled, reduced, discounted,
credited or rebated or agreed to cancel, reduce, discount, credit or rebate, in
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whole or in part, any Receivables; and (vi) there has been no material adverse
change since the Balance Sheet Date in the amounts of Receivables or the
allowances with respect thereto, or accounts payable of the Company, from those
reflected in the balance sheet of the Company as of such date. The Company has
provided to the Parent a schedule of aged Receivables and payables for the
Company as of a date which is within three (3) business days of the date hereof.
(m) REAL PROPERTY.
(i) The Company does not now own, and has never
owned, any real property.
(ii) SCHEDULE 3.1(M) sets forth a true and complete
list of all real property leased or otherwise used by the Company, identifying
the lessor or other owner thereof (the "REAL PROPERTY").
(iii) There is not existing or proposed as a matter
of public record or, to the Knowledge of the Company, presently contemplated,
any condemnation or similar action, or zoning action or proceeding, with respect
to any portion of the Real Property. None of the existing buildings and
improvements which in part comprise the Real Property fails to comply fully with
all size, height, set back, use and other zoning restrictions and regulations
applicable thereto, including, without limitation, the parking space
requirements of all applicable zoning ordinances and regulations. The Company or
its landlord has obtained all licenses, permits, approvals, certificates, and
other authorizations required by applicable Laws for the use and occupancy of
the Real Property as it is currently being utilized. None of the Real Property
is subject to any encumbrance, easement, right-of-way, building or use
restriction, exception, variance, reservation, limitation or other Liens which
might in any material respect interfere with or impair the continued use thereof
as currently utilized or proposed to be utilized by the Company.
(n) PROPRIETARY RIGHTS.
(i) The Company owns or possesses licenses or other
rights to use all trademarks, trade and business names, internet domain names,
service marks, service names, copyrights, customer lists, trade secrets and
inventions (whether or not patentable) (collectively, "PROPRIETARY RIGHTS") that
are necessary to the conduct of the Company's business as currently conducted or
anticipated.
(ii) SCHEDULE 3.1(N)(II) sets forth a true and
complete list of all trademarks, trade names, service marks, service names,
internet domain names, copyrights and patents included in the Proprietary Rights
of the Company (identifying which are owned and which are licensed), including
all United States, state and foreign registrations or applications for
registration thereof and all agreements relating thereto. All filing,
registration, maintenance or similar fees payable in connection with each
registration (or application therefor) of Proprietary Rights set forth on
SCHEDULE 3.1(N)(II) have been paid and each such registration is valid and in
full force and effect.
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(iii) Except as disclosed in SCHEDULE 3.1(N)(III),
the Company is not required to pay any royalty, license fee or similar
compensation in connection with the conduct of its business as currently
conducted.
(iv) To the knowledge of the Company, the Company has
not interfered with, infringed upon, misappropriated or otherwise come into
conflict with the Proprietary Rights of any other Person or committed any acts
of unfair competition, and no claims have been asserted by any Person alleging
such interference, infringement, misappropriation, conflict or act of unfair
competition.
(v) To the knowledge of the Company, no Person is
infringing upon its Proprietary Rights.
(vi) There are no Proprietary Rights developed by any
shareholder, director, officer, consultant or employee of the Company that are
used in the Company's business and that have not been transferred to, or are not
owned free and clear of any Liens by, the Company.
(o) MATERIAL AGREEMENTS. SCHEDULE 3.1(O)(1) sets forth a true
and complete list, and the Company has provided to the Parent complete copies
(including all amendments and extensions thereof and all waivers thereunder) or,
if oral, an accurate and complete description, of each of the following, whether
written or oral, to which the Company is a party or is otherwise bound (each, a
"MATERIAL AGREEMENT"):
(i) all loan agreements, indentures, mortgages,
notes, installment obligations, capital leases or other agreements or
instruments relating to the borrowing of money (or guarantees thereof);
(ii) all continuing contracts or commitments for the
future purchase, sale or manufacture of products, materials, supplies, equipment
or services requiring payment to or from the Company in an amount in excess of
$50,000 per annum which are not terminable on 30 days' or less notice without
cost or other liability at or any time after the Closing Date, or in which the
Company has granted or received manufacturing rights, most favored nation
pricing provisions or exclusive rights relating to any product or service;
(iii) all contracts with any Governmental Authority;
(iv) all leases, subleases or any other agreements or
arrangements under which the Company has the right or license to use any
personal property, whether tangible or intangible, owned or licensed by another
Person;
(v) all agreements or arrangements under which any
other Person has the right or license to use any real property or personal
property, whether tangible or intangible, owned, leased or licensed by the
Company;
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(vi) all contracts or understandings which by their
terms restrict the ability of the Company to conduct its business or to
otherwise compete, including as to manner or place;
(vii) all joint venture or similar agreements or
understandings;
(viii) lease and other agreements pertaining to the
Real Property;
(ix) all collective bargaining, employment,
severance, consulting, nondisclosure or confidentiality agreements, and
agreements requiring a charge of control or parachute payments, or any other
type of contract or understanding with any officer, employee or consultant,
other than pursuant to Employee Benefit Plans, which is not immediately
terminable by the Company without cost or other liability to the Company;
(x) all agreements with sales agents or
representatives, wholesalers, distributors and dealers;
(xi) all agreements concerning any Hazardous
Materials; and
(xii) all other contracts, without regard to monetary
amount, which were not entered into in the ordinary course of business
consistent with past practice or which are material to the conduct of the
Company's business and not listed above.
Except as disclosed on SCHEDULE 3.1(O)(2), the
Company is not, and to the knowledge of the Company, any other party thereto is
not, in default under any Material Agreement and no event has occurred or is
reasonably expected to occur which (after notice or lapse of time or both) would
become a breach or default under, or would otherwise permit modification,
cancellation, acceleration or termination of, any Material Agreement or would
result in the creation of or right to obtain any Lien upon, or any Person
obtaining any right to acquire, any assets, rights or interests of the Company.
Except as disclosed on SCHEDULE 3.1(O)(3): (i) each Material Agreement is in
full force and effect and is a valid and binding obligation of the Company, and,
to the knowledge of the Company, the other parties thereto; (ii) there are no
unresolved disputes with respect to any Material Agreement; and (iii) the
Company has no reasonable basis to believe that any party to a Material
Agreement intends either to modify, cancel or terminate such Material Agreement.
(p) LITIGATION. Except as disclosed on SCHEDULE 3.1(P), there
is no claim, legal action, suit, arbitration, investigation or other proceeding
pending, or to the knowledge of the Company, threatened against or relating to
the Company or its assets. Neither the Company nor any of its assets are subject
to any outstanding judgment, order, writ, injunction or decree of any
Governmental Authority. There is currently no investigation or review by any
Governmental Authority with respect to the Company pending or, to the Knowledge
of the Company, threatened, nor has any Governmental Authority notified the
Company of its intention to conduct the same.
13
(q) COMPLIANCE WITH LAWS. The Company has all licenses,
permits and other authorizations from all applicable Governmental Authorities
necessary or desirable for the conduct of its business as currently conducted or
as currently expected to be conducted following the Closing Date. SCHEDULE
3.1(Q) hereto sets forth a true and complete list of all such licenses, permits
and other authorizations obtained by the Company, each of which is in full force
and effect and no violations thereunder have been recorded. The Company is in
compliance, and has complied, with all Laws applicable to it and has not
received any notice of any violation thereof.
(r) ENVIRONMENTAL MATTERS. To the knowledge of the Company,
except as disclosed in SCHEDULE 3.1(R):
(i) During the period that the Company has owned,
leased or operated any properties or facilities, neither it nor any other Person
has disposed, released, or participated in or authorized the release or
threatened release of Hazardous Materials on, from or under such properties or
facilities. There is not now nor has there ever been any presence, disposal,
release or threatened release of Hazardous Materials on, from or under any of
such properties or facilities, which may have occurred prior to the Company
having taken possession of any of such properties or facilities. For the
purposes of this Agreement, the terms "disposal," "release," and "threatened
release" shall have the definitions assigned thereto by the Comprehensive
Environmental Response Compensation and Liability Act of 1980, 42 U. S.C. ss.
9601 et seq., as amended ("CERCLA").
(ii) The operations of the Company and properties
that the Company owns, leases or operates, are in compliance with Environmental
Law. During the time that the Company has owned, leased or operated its
properties and facilities, neither the Company nor any other Person has used,
generated, manufactured or stored on, under or about such properties or
facilities or transported or arranged for disposal to or from such properties or
facilities, any Hazardous Materials which may be considered a violation of
applicable Environmental Law.
(iii) During the time that the Company has owned,
leased or operated its properties and facilities, there has been no litigation
or proceeding brought or, to the Knowledge the Company, threatened against the
Company by, or any settlement reached the Company with, any Persons alleging the
presence, disposal, release or threatened release of any Hazardous Materials, on
from or under any of such properties or facilities.
(iv) There are no facts, circumstances or conditions
relating to the properties and facilities owned, leased or operated by the
Company which could give rise to a claim under any Environmental Law or to any
material Environmental Costs and Liabilities.
(s) RELATED PARTY TRANSACTIONS. Except as disclosed on
SCHEDULE 3.1(S), no Related Party has been directly or indirectly a party to any
contract or other arrangement (whether written or oral) with the Company
providing for services (other than as an employee of the Company), products,
goods or supplies, rental of real or personal property, or other wise requiring
payments from or to the Company. For purposes hereof, the term "RELATED PARTY"
14
shall mean any Shareholder or a director or officer of the Company or any member
of his or her family or any corporation, partnership, limited liability company,
other business entity or trust in which he or she or any member of his or her
family has greater than a ten percent (10%) interest, or of which he or she or
any member of his or her family is an officer, director, general partner, member
or trustee.
(t) INSURANCE. SCHEDULE 3.1(T)(L) sets forth a list of the
Company's insurance policies (including property, casualty, liability (general,
professional and directors and officers) and workers' compensation), listing for
each policy the identity of the insurance carrier, the policy period, the limits
and retentions and any special exclusions. Except as set forth on SCHEDULE
3.1(T)(2), such insurance coverage and coverage amounts are customary for the
business engaged in by the Company. Such policies are currently in full force
and effect, all premiums have been paid in full with respect thereto and the
Company has not received any notice of termination or modification from the
insurance carriers. SCHEDULE 3.1(T)(L) also sets forth a true and complete
description of any self-insurance arrangement by or affecting the Company,
including any reserves established thereunder, if any.
(u) TAXES.
(i) The Company has timely filed with the appropriate
taxing authorities all returns and reports in respect of Taxes ("RETURNS")
required to be filed by it (taking into account any extension of time to file
granted to or on the account of the Company). The information on such Returns is
complete and accurate in all material respects. The Company has paid on a timely
basis all Taxes (whether or not shown on any Return) due and payable. There are
no Liens for Taxes (other than for current Taxes not yet due and payable) upon
the assets of the Company. As used in this SECTION 3.1(U), the Company shall
mean, individually and collectively, (i) the Company and (ii) any individual,
trust, corporation, partnership or other entity as to which the Company may be
liable for Taxes incurred by such individual or entity as a transferee or
pursuant to any provision of federal, state, local or foreign law or regulation.
(ii) No unpaid (or unreserved in accordance with
generally accepted accounting principles applied on a consistent basis)
deficiencies for Taxes have been claimed, proposed or assessed by any taxing
authority or other Governmental Authority with respect to the Company for any
Pre-Closing Period and, to the best knowledge of the Company or the Shareholder,
there are no pending audits, investigations or claims for or relating to any
liability in respect of Taxes of the Company, nor has the Company been notified
of any request for such an audit, investigation or claim. The Company has not
requested any extension of time within which to file any currently unfiled
returns in respect of any Taxes and no extension of a statute of limitations
relating to any Taxes is in effect with respect to the Company.
(iii) (1) The Company has made or will make provision
for all Taxes payable by it with respect to any Pre-Closing Period which are not
payable prior to the Closing Date; (2) the provisions for Taxes with respect to
the Company for the Pre-Closing Period are adequate to cover all Taxes with
respect to such period; (3) the Company has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or other third party;
(4) the Company has provided Parent with all relevant Tax returns; (5) the
Company is not a "consenting corporation" under Section 341(f) of the Code, or
any corresponding provision of state, local or foreign law; (6) there are no
private letter rulings in respect of any Tax pending between the Company and any
15
taxing authority; (7) the Company has never been a member of an affiliated group
within the meaning of Section 1504 of the Code, or filed or been included in a
combined, consolidated or unitary return of any Person other than the Company;
(8) the Company is not liable for Taxes of any other Person, or is currently
under any contractual obligation to indemnify any Person with respect to Taxes,
or is a party to any tax sharing agreement or any other agreement providing for
payments by the Company with respect to Taxes; (9) the Company is not, and has
not been, a real property holding corporation (as defined in Section 897(c)(2)
of the Code) during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code; (10) the Company is not a person other than a United States person
within the meaning of the Code; (11) the Company is not a party to any joint
venture, partnership, or other arrangement or contract which could be treated as
a partnership for federal income tax purposes; (12) the Company has not entered
into any sale leaseback or any leveraged lease transaction that fails to satisfy
the requirements of Revenue Procedure 75-21 (or similar provisions of foreign
law); (13) the Company has not agreed and is not required, as a result of a
change in method of accounting or otherwise, to include any adjustment under
Section 481 of the Code (or any corresponding provision of state, local or
foreign law) in taxable income; (14) the Company is not a party to any
agreement, contract, arrangement or plan that would result (taking into account
the transactions contemplated by this Agreement), separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code; (15) the Company has been a Subchapter S
corporation (as defined in Section 1361(a)(1) of the Code); (16) SCHEDULE
3.1(U)(III)(16) contains a list of all jurisdictions to which any Tax is
properly payable by the Company; (17) the Company is not a personal holding
company within the meaning of Section 542 of the Code; (18) the Company has not
made an election and is not required to treat any of its assets as owned by
another Person for federal income tax purposes or as tax-exempt bond financed
property or tax-exempt use property within the meaning of Section 168 of the
Code (or any corresponding provision of state, local or foreign law).
(v) EMPLOYEE BENEFIT PLANS.
(i) SCHEDULE 3.1(V)(I) lists all Employee Benefit
Plans which have been maintained or contributed to by the Company or to which
the Company has been obligated to contribute. Except as set forth on SCHEDULE
3.1(V)(II), neither the Company nor any of its ERISA Affiliates (as defined
below), maintains or has maintained, contributed to or been obligated to
contribute to a Pension Plan subject to Title IV of ERISA or Section 412 of the
Code. Except as set forth on SCHEDULE 3.1(V)(III), each Pension Plan and Welfare
Plan disclosed on SCHEDULE 3.1(V)(I) has been maintained in compliance with its
terms and all material provisions of ERISA and the Code, applicable thereto
(including rules and regulations thereunder).
(ii) The Company has delivered or made available to
Parent prior to the date hereof complete and correct copies of (a) any
employment agreements and any procedures and policies relating to the employment
of employees of the Company and the use of temporary employees and independent
contractors by the Company (including summaries of any procedures and policies
that are unwritten), (b) plan instruments and amendments thereto for all
Employee Benefit Plans and related trust agreements, insurance and other
contracts, summary plan descriptions, summaries of material modifications and
material communications distributed to the participants of each Employee Benefit
16
Plan (and written summaries of any unwritten Employee Benefit Plans,
modifications to Employee Benefit Plans and employee communications), (c) to the
extent annual reports on Form 5500 are required with respect to any Employee
Benefit Plan, the three most recent annual reports and attached schedules for
each Employee Benefit Plan as to which such report is required to be filed, (d)
where applicable, the most recent (A) opinion, notification and determination
letters, (B) actuarial valuation reports, and (C) nondiscrimination tests
performed under the Code (including 401(k) and 401(m) tests) for each Employee
Benefit Plan, (e) all material communications received from or sent to the
Internal Revenue Service or the Department of Labor (including a written
description of any oral communication), and (f) any Forms 5330 required to be
filed by the Company or any Affiliate, whether related to an Employee Benefit
Plan or otherwise.
(iii) Each Pension Plan identified in SCHEDULE
3.1(V)(I) hereto which is intended to be "qualified" within the meaning of
Section 401(a) of the Code has been determined by the Internal Revenue Service
(the "IRS") to be so qualified as of the date of the determination letter set
forth on SCHEDULE 3.1(V)(III), and the Company is not aware of any fact which
would indicate that the qualified status of each such Pension Plan or the tax
exempt status of each trust created thereunder has been adversely affected. None
of the Pension Plans identified in SCHEDULE 3.1(V)(I) hereto are currently the
subject of an audit or other investigation by the IRS, the Department of Labor,
the Pension Benefit Guaranty Corporation (the "PBGC") or any other Governmental
Authority nor are any the subject of any law suits, complaints, claims or legal
proceedings of any kind.
(iv) No "prohibited transaction," as such term is
defined in Section 406 of ERISA, has occurred with respect to any Pension Plan
or Welfare Plan identified in SCHEDULE 3.1(V)(I) hereto which has resulted or
may result in Liability to the Company or any of the ERISA Affiliates. No breach
of fiduciary responsibility under Part 4 of Title I of ERISA has occurred which
has resulted or may result in Liability to the Company such Pension Plan or
Welfare Plan. Except as disclosed on SCHEDULE 3.1(V)(IV), no ERISA Affiliate has
incurred any material Liability for any penalty or Tax, nor, to the Knowledge of
the Company, does any fact exist which would subject the Company to any penalty
or Tax under Sections 4971, 4972, 4975, 4976, 4977, 4978, 4979, 4980, 4980B,
4980D, 5000 of the Code or Section 502 of ERISA with respect to any such Pension
Plan or Welfare Plan.
(v) Except as disclosed in SCHEDULE 3.1(V)(V), each
Welfare Plan identified thereon has, to the extent applicable, at all times been
in compliance with the provisions of Section 4980B of the Code and Parts 6 and 7
of Title I of ERISA. Except as disclosed on SCHEDULE 3.1(V)(V) and except as
described in the immediately preceding sentence, none of the Welfare Plans
provides or promises post-retirement health or life benefits to current
employees or retirees of the Company or its ERISA Affiliates.
(vi) Except as disclosed on SCHEDULE 3.1(V)(VI), all
contributions required to be paid under the terms of each Employee Benefit Plan
identified in SCHEDULE 3.1(V)(I) hereto have been made. As of and including the
Closing Date, the Company shall have made all contributions required to be made
by it up to and including the Closing Date with respect to each Employee Benefit
Plan, or adequate accruals therefor will have been provided for and will be
reflected on an unaudited balance sheet of the Company provided to Parent by the
Company.
17
(vii) Except as disclosed in SCHEDULE 3.1(V)(VII) and
in subsection (ix) below, no Pension Plan identified in SCHEDULE 3.1(V)(I)
hereto or trust created thereunder has been terminated or partially terminated
by the Company and the Company has no knowledge of any events which would cause
a voluntary or involuntary termination of any such Pension Plan.
(viii) Neither the Company nor any of its ERISA
Affiliates has maintained or contributed to, been obligated or required to
contribute to, or withdrawn in a partial or complete withdrawal from, a
"Multiemployer Plan," as such term is defined in Section 4001(a)(3) of ERISA.
(ix) With respect to each Pension Plan identified in
SCHEDULE 3.1(V)(I) subject to Title IV of ERISA (A) neither the Company nor any
ERISA Affiliate has withdrawn from any such Plan during a plan year in which it
was a "substantial employer" (within the meaning of Section 4001 (a)(2) of
ERISA), (B) neither the Company nor any ERISA Affiliate has filed a notice of
intent to terminate any such Pension Plan or adopted any amendment to treat any
such Pension Plan as terminated, (C) the PBGC has not instituted proceedings to
terminate any such Pension Plan, and no other event or condition has occurred
which might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any such Pension Plan, (D) no
accumulated funding deficiency, whether or not waived, exists with respect to
any such Pension Plan and no condition has occurred or exists which by the
passage of time would be expected to result in an accumulated funding deficiency
as of the last day of the current plan year of any such Pension Plan, (E) all
required premium payments to the PBGC have been paid when due, (F) no reportable
event (as described in Section 4043 of ERISA) for which the notice requirements
to the PBGC have not been waived, has occurred with respect to any such Pension
Plan, (G) no amendment with respect to which security is required under Section
307 of ERISA has been made or is reasonably expected to be made to any Pension
Plan, and (H) as of the last day of the most recent prior plan year, the market
value of assets under each such Pension Plan subject to the minimum funding
standards equaled or exceeded the present value of benefit liabilities
thereunder as determined in accordance with the actuarial valuation assumptions
set forth in such Pension Plan.
(x) Except as required by law or by the terms of an
Employee Benefit Plan, the Company has not proposed or agreed to any changes to
any Employee Benefit Plan that would cause an increase in benefits under any
such Employee Benefit Plan (or the creation of new benefits or plans) nor to
change any employee coverage which would cause an increase in the expense of
maintaining any such Employee Benefit Plan.
(xi) No Employee Benefit Plan provides benefits or
payments based on or measured by the value of an equity security of or interest
in the Company or any ERISA Affiliate.
(xii) Except as disclosed on SCHEDULE 3.1(V)(II), no
Employee Benefit Plan is a plan, agreement or arrangement providing for
benefits, in the nature of severance benefits, and the Company does not have
outstanding any liabilities with respect to any severance benefits available
under any Employee Benefit Plan.
18
(w) EMPLOYEE MATTERS.
(i) The Company has provided to the Parent lists all
current employees of the Company and their hourly rates of compensation or base
salaries (as applicable), the date of last increase in such compensation or
salaries, and all other compensation paid to such employees. To the knowledge of
the Company, no employee of the Company has any plans to terminate employment
with the Company. The Company has complied with all Laws relating to the hiring
of employees and the employment of labor, including provisions thereof relating
to wages, hours, equal opportunity, collective bargaining and the withholding
and payment of social security and other Taxes.
(ii) Except as set forth on SCHEDULE 3.1(W): (A) the
Company is not delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them to date or amounts required to be reimbursed to such employees
and, upon termination of the employment of any such employees, neither the
Parent nor the Company will by reason of any event, fact or circumstance
occurring or existing prior to the Closing be liable to any of such employees
for severance pay or any other payments; (B) there is no unfair labor practice
complaint against the Company pending before the National Labor Relations Board
or any other Governmental Authority; (C) there is no labor strike, material
dispute, slowdown or stoppage actually pending or, to the Knowledge of the
Company, threatened against the Company; (D) the Company has not experienced any
significant deterioration in its relationship with its employees; and (E) no
labor union currently represents the employees of the Company and, to the
knowledge of the Company, no labor union has taken any action with respect to
organizing the employees of the Company.
(iii) Except for payment of the Merger Consideration
to the Shareholders, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will: (A) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute, bonus or otherwise) becoming due to any director or employee
of the Company, under any Employee Benefit Plan or otherwise; (B) increase any
compensation or benefits payable under any Employee Benefit Plan or otherwise;
or (C) result in the acceleration of the time of payment or vesting of any such
compensation benefits. No Employee Benefit Plan or other arrangement provides
benefits or payments contingent upon, triggered by or increased as a result of a
change in the ownership or effective control of the Company.
(x) BROKERAGE FEES. The Company has not engaged or authorized
any broker, investment banker or other Person to act on its behalf, directly or
indirectly, as a broker or finder who might be entitled to a fee, commission or
other remuneration in connection with the transactions contemplated by this
Agreement.
19
(y) BOOKS AND RECORDS. All accounts, books, ledgers and
official and other records prepared and kept by the Company are true, complete
and accurate in all material respects and have been kept in accordance with
sound business practices.
(z) DISCLOSURE. No representation or warranty made by the
Company in this Agreement, nor any information contained in any Ancillary
Document to be delivered by the Company or the Shareholder pursuant hereto, or
any information relating to the Company provided or made available to the Parent
in connection with the transactions contemplated hereby, contains any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements or facts contained herein or therein not
misleading in any material respect in light of the circumstances under which
they were made.
3.2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. The
Shareholders, severally but not jointly, represent and warrant to the Parent as
set forth in their respective Investment Representation Letters.
3.3 REPRESENTATIONS AND WARRANTIES OF THE PARENT. The Parent hereby
represents and warrants to the Company as follows:
(a) AUTHORITY. The Parent has all necessary power and
authority to enter into and deliver this Agreement and each of the Ancillary
Documents to which it is a party, to carry out its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and by the
Ancillary Documents. All actions, authorizations and consents required by Law
for the execution, delivery and performance by Parent of this Agreement and each
Ancillary Document to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, have been or prior to the Closing
will have been properly taken or obtained.
(b) EXECUTION AND DELIVERY. This Agreement has been, and each
Ancillary Document to which the Parent is a party will be at the Closing, duly
authorized, executed and delivered by the Parent and constitutes a legal, valid
and binding obligation of the Parent, enforceable against the Parent in
accordance with its terms and conditions, except as enforceability thereof may
be limited by applicable bankruptcy, reorganization, insolvency or other similar
laws affecting or relating to creditors' rights generally or by general
principles of equity.
(c) NO CONFLICTS. The execution, delivery and performance by
the Parent of this Agreement and each Ancillary Document to which it is a party,
and the consummation of the transactions contemplated hereby and thereby, do not
and will not violate, conflict with or result in a breach of any term, condition
or provision of, or require the consent of any Person under, or result in the
creation of or right to create any Lien upon any of the assets of the Parent
under, (i) any Laws to which the Parent or any of its assets are subject, (ii)
any judgment, order, writ, injunction, decree or award of any Governmental
Authority to which the Parent or any of its assets are subject, (iii) the
Certificate of Incorporation or Bylaws of the Parent, or (iv) any license,
indenture, promissory note, bond, credit or loan agreement, lease, agreement,
commitment or other instrument or document to which the Parent is a party or by
which any of its assets are bound, except where, in the case of clause (iv),
such violation, conflict, breach, etc. would not, individually or in the
aggregate, have a Material Adverse Effect on the Parent.
20
(d) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority, is required to be obtained by the Parent in connection with or as a
result of the execution and delivery of this Agreement or any of the Ancillary
Documents, or the performance of its obligations thereunder.
(e) ORGANIZATION, STANDING AND QUALIFICATION. The Parent is a
corporation duly incorporated, validly existing and in good standing under the
Laws of the State of Nevada (or such other applicable jurisdiction of
incorporation or formation). The Parent has all requisite power and authority to
own, lease and operate its properties and to carry on their businesses as now
being conducted, to use their names and are duly qualified, licensed or
authorized to do business and in good standing, in each jurisdiction where the
nature of the activities conducted by them or the character of the properties
owned, leased or operated by them require such qualification, licensing or
authorization.
(f) PARENT STOCK. The authorized capital stock of the Parent
consists solely of 500,000,000 shares of common stock, par value $.001 per share
("Parent Common Stock"), of which 72,800,000 shares are issued and outstanding.
All of the issued and outstanding shares of capital stock of the Parent have
been, and all of the shares of the Parent Common Stock issuable to the
Shareholders pursuant to this Agreement will be when issued, duly authorized,
validly issued, fully paid and non-assessable. Except as disclosed in SCHEDULE
3.3(F) or in any SEC Document, there are no outstanding subscriptions, options,
warrants, calls, contracts, demands, commitments, convertible or exchangeable
securities, profits interests, conversion rights, preemptive rights, rights of
first refusal or other rights, agreements, arrangements or commitments of any
nature whatsoever under which the Parent is or may become obligated to issue,
redeem, assign or transfer any shares of capital stock or purchase or make
payment in respect of any shares of capital stock of the Parent now or
previously outstanding, and there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to or any shares of
its capital stock. Except as set forth on SCHEDULE 3.3(F) or in any SEC
Document, none of the Parent's stock purchase agreements or stock option
documents contains a provision for acceleration of vesting (or lapse of a
repurchase right) upon the occurrence of any event or combination of events.
Except as set forth on SCHEDULE 3.3(F) or in any SEC Document, the Parent has
never adjusted or amended the exercise price of any stock options previously
awarded, whether through amendment, cancellation, replacement grant, repricing,
or any other means.
(g) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Parent has filed,
on a timely basis (except as permitted by Rule 12b-25 under the Exchange Act),
all forms, reports and documents that to its knowledge were required to be filed
by it with the SEC since February 3, 2006. The SEC Documents (i) complied in all
material respects in accordance with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations promulgated
thereunder, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) to its knowledge contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
21
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The Parent warrants that its Registration
Statement on Form SB-2 was been declared effective by the SEC. Except as set
forth on SCHEDULE 3.3(G), all material agreements to which the Parent is a party
or to which the property or assets of the Parent are subject are, to its
knowledge, included as part of or specifically identified in the SEC Documents
to the extent required by the rules and regulations of the SEC as in effect at
the time of filing. The Parent has to its knowledge prepared and filed with the
SEC all filings and reports required by the Securities Act and the Exchange Act
to make the Parent's filings and reports current in all respects. Since February
3, 2006, the financial statements included in SEC Documents filed by the Parent
(the "PARENT FINANCIAL STATEMENTS") fairly present in all material respects, and
the Parent Financial Statements included in SEC Documents filed after the date
of this Agreement will fairly present in all material respects, the consolidated
financial position of the Parent as of the dates indicated and the consolidated
income, changes in shareholders' equity and cash flows of the Parent for the
periods then ended and each such financial statement has been or will be, as the
case may be, prepared in conformity with GAAP applied on a consistent basis,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments (which individually and in the
aggregate are not material), and may not contain certain related notes as may be
permitted by the applicable rules promulgated by the SEC. The Parent Financial
Statements included in the SEC Documents comply in all material respects with
applicable accounting requirements and the rules and regulations of the SEC with
respect thereto in effect at the time of filing. All "off-balance sheet
arrangements" (as defined in Item 303(a)(4) of Regulation S-K promulgated by the
SEC) which the Parent is required to disclose under Item 303(a) of Regulation
S-K in its SEC Documents are set forth in the SEC Documents. The Parent
maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; (iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences, and (v) the Parent is otherwise in compliance with
the Securities Act, the Exchange Act and all other rules and regulations
promulgated by the SEC and applicable to the Parent, including such rules and
regulations to implement the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended. SCHEDULE
3.3(G) sets forth all liabilities of the Parent as of December 1, 2006.
(h) BROKERAGE FEES. The Parent has not engaged or authorized
any broker, investment banker or other Person to act on its behalf, directly or
indirectly, as a broker or finder who might be entitled to a fee, commission or
other remuneration in connection with the transactions contemplated by this
Agreement.
(i) DISCLOSURE. No representation or warranty made by the
Parent in this Agreement, nor any information contained in any Ancillary
Document to be delivered by the Parent pursuant hereto, or any information
relating to the Parent provided or made available to the Parent in connection
with the transactions contemplated hereby, including any SEC Document, contains
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in any material respect in light of the circumstances
under which they were made.
22
3.4 REPRESENTATIONS AND WARRANTIES OF THE MERGER SUB. The Merger Sub
hereby represents and warrants to the Company as follows:
(a) AUTHORITY. The Merger Sub has all necessary power and
authority to enter into and deliver this Agreement and each of the Ancillary
Documents to which it is a party, to carry out its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and by the
Ancillary Documents. All actions, authorizations and consents required by Law
for the execution, delivery and performance by Merger Sub of this Agreement and
each Ancillary Document to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, have been or prior to the Closing
will have been properly taken or obtained.
(b) EXECUTION AND DELIVERY. This Agreement has been, and each
Ancillary Document to which the Parent is a party will be at the Closing, duly
authorized, executed and delivered by the Merger Sub and constitutes a legal,
valid and binding obligation of the Merger Sub, enforceable against the Parent
in accordance with its terms and conditions, except as enforceability thereof
may be limited by applicable bankruptcy, reorganization, insolvency or other
similar laws affecting or relating to creditors' rights generally or by general
principles of equity.
(c) ORGANIZATION, STANDING AND QUALIFICATION. The Merger Sub
is a corporation duly incorporated, validly existing and in good standing under
the Laws of the State of California.
(d) MERGER SUB STOCK. The authorized capital stock of the
Merger Sub consists solely of 10,000 shares of common stock of which 1,000
shares are issued and outstanding and owned by Parent and 1,000 shares of
preferred stock of which no shares are issued and outstanding.
ARTICLE IV
CERTAIN COVENANTS
-----------------
4.1 CONDUCT OF BUSINESS PENDING THE CLOSING. The Company hereby
covenants and agrees that, prior to the Closing, except as contemplated by this
Agreement or as set forth in SCHEDULE 4.1, it shall (and each of the
Shareholders hereby covenants and agrees to cause the Company to comply with the
provisions of this SECTION 4.1):
(a) conduct its business in the usual, regular and ordinary
course consistent with recent past practice and use its commercially reasonable
efforts to take, or refrain from taking, as the case may be, any action which
would cause the representations and warranties made in SECTION 3.1, including,
without limitation, SECTION 3.1(J), to become untrue or inaccurate; and
23
(b) use its commercially reasonable efforts to maintain and
preserve its business organization and relationships with its customers,
vendors, suppliers and others having business dealings with it and retain the
services of its officers and employees.
4.2 TAX MATTERS; COOPERATION AND RECORDS RETENTION. The Parent and the
Company will (i) each provide the other with such assistance as may reasonably
be requested by any of them in connection with the preparation of any Tax
Return, audit or other examination by any taxing authority or judicial or
administrative proceedings relating to liability for Taxes, (ii) each retain and
provide the other with any records or other information which may be relevant to
such Tax Return, audit or examination, proceeding or determination, and (iii)
each provide the other with any final determination of such audit or
examination, proceeding or determination that affects any amount required to be
shown on any Tax Return of the other for any period. Without limiting the
generality of the foregoing, the Parent and the Company will retain, until the
applicable statutes of limitations (including all extensions) have expired,
copies of all Tax Returns, supporting work schedules and other records or
information which may be relevant to such Tax Returns for all Tax periods or
portions thereof ending on or before the Closing and will not destroy or
otherwise dispose of any such records without first providing the other party
with a reasonable opportunity to review and copy the same.
4.3 As soon as is reasonably practicable following the Closing, but in
no event later than three (3) days after closing, the HMAS Shares referred to in
Section 6.3(g) shall have been submitted to the Parent's transfer agent for
cancellation.
4.4 NO SOLICITATION. Prior to the Closing (unless the Agreement is
terminated sooner), the Company shall not, and none of the Shareholders shall,
directly or indirectly (through their respective Affiliates, employees, agents
or representatives), initiate contact with, solicit, encourage, respond to or
participate in any way in discussions or negotiations with, or provide any
information or assistance to, or take any other action intended or designed to
facilitate the efforts of (including without limitation, the execution of any
letter of intent, term sheet or definitive agreement), any Person other than the
Parent concerning any acquisition of equity interest in the Company or any
significant portion of the assets of the Company (including by merger or other
similar transaction). The Company or the Shareholders shall promptly notify the
Parent if they are contacted or approached in respect of any such transaction,
as well as the material terms of the proposed transaction and the identity of
the contacting party.
4.5 REASONABLE EFFORTS; ASSURANCES. Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto shall use all
reasonable efforts to take or cause to be taken all action, and to do or cause
to be done, and to assist and cooperate with the other parties in doing, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including using commercially reasonable efforts to (a) obtain all consents or
approvals required or desirable in connection with the transactions contemplated
hereby, (b) effect promptly all necessary or appropriate registrations or
filings with any Governmental Authorities, and (c) fulfill or cause the
fulfillment of the conditions to Closing set forth in ARTICLE V. In case at any
time after the Closing Date any further action is reasonably necessary or
desirable to carry out the purposes of this Agreement, each of the parties
hereto shall take such further action without additional consideration.
24
4.6 NOTIFICATION OF CERTAIN MATTERS. The Company and Parent shall
promptly notify each other in writing:
(a) if, subsequent to the date of this Agreement and prior to
the Closing Date, either of them becomes aware of the occurrence of any event or
the existence of any fact that would render any of the representations and
warranties made by it (and, in case of the Company, made by any Shareholder) in
SECTIONS 3.1, 3.2 or 3.3, as the case may be, if made on or as of the date of
such event or the Closing Date, inaccurate or untrue (other than with respect to
representations and warranties made as of a specified date);
(b) of any breach by either of them of any of its (and, in
case of the Company, any of the Shareholders') covenant or agreement contained
in this Agreement;
(c) of any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement;
(d) of any notice or other communication from any Governmental
Authority in connection with or relating to the transactions contemplated
hereby; or
(e) if the Company or any Shareholder become aware of any
material deterioration in the relationship with any customer, supplier or
employee of the Company.
4.7 PUBLIC ANNOUNCEMENTS. No party will issue or make or cause the
publication of, any press release or other public announcement with respect to
this Agreement or the transactions contemplated hereby without the prior written
consent of the other parties hereto; PROVIDED, HOWEVER, that nothing herein will
prohibit any party from issuing, making or causing the publication of any such
press release or public announcement to the extent that such party is advised by
its legal counsel that such action is required by Law, in which case the party
making such determination will use reasonable efforts to allow the other parties
reasonable time to review and comment on such release or announcement in
advance. For the purposes of this Section, the Company shall be entitled to give
such prior written consent on behalf of the Shareholders.
4.8 TRANSFER TAXES. All stock transfer, real estate transfer,
documentary, stamp, recording and other similar Taxes (including interest,
penalties and additions to any such Taxes) ("TRANSFER TAXES") incurred in
connection with the Transactions shall be paid by either Merger Sub or the
Surviving Entity (provided any such payments shall not be funded, directly or
indirectly, by the Company), and the Company shall cooperate with Merger Sub and
Parent in preparing, executing and filing any Tax Returns with respect to such
Transfer Taxes.
25
4.9 FORM 8-K. The Parent and the Company shall prepare a Current Report
on Form 8-K regarding the terms of the transaction under this Agreement, which
report will contain the information that would be required if the Parent were
filings a general form for registration of securities on Form 10-SB as more
particularly described under Item 2.01(f) of Form 8-K, which Form 8-K will be
filed with the Securities and Exchange Commission no later than 4 Business Days
following the Closing Date.
4.10. AMENDMENT TO ARTICLES OF INCORPORATION. As soon as is reasonably
practicable following the execution of this Agreement, the Parent shall take
such action as is necessary to obtain the Parent's stockholders' approval of an
amendment (the "AMENDMENT") to the Articles of Incorporation in the form
attached hereto as EXHIBIT C (i) changing the name of the Parent to "DigitalPost
Interactive, Inc." and (ii) providing for the authorization and issuance of
"blank check" preferred stock. One business day after receipt of approval of the
Amendment from the Parent's stockholders, the Parent shall file the Amendment
with the Secretary of State of Nevada.
ARTICLE V
CONDITIONS TO CLOSING
---------------------
5.1 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to consummate the transactions contemplated hereby shall be subject to
the satisfaction on or prior to the Closing of the following conditions (any of
which may be waived in writing by the Company):
(a) the Parent shall have performed and complied with all
obligations and agreements required to be performed and complied with by it
hereunder on or prior to the Closing (including, without limitation, those
specified in SECTION 6.3);
(b) the representations and warranties of the Parent and
Merger Sub contained in this Agreement shall be true and correct as of the
Closing Date as if made as of such date (other than those representations and
warranties that address matters only as of a particular date or only with
respect to a specific period of time, which need only be true and correct as of
such date or with respect to such period);
(c) there shall be no order, decree or ruling by any
Governmental Authority nor any action, suit, claim or proceeding by or before
any Governmental Authority shall be pending, which seeks to restrain, prevent or
materially delay or restructure the transactions contemplated hereby or by any
Ancillary Document, or which otherwise questions the validity or legality of any
such transactions;
(d) there shall be no statute, rules, regulation or order
enacted, entered or enforced or deemed applicable to the transactions
contemplated hereby which would prohibit or, render illegal the transactions
contemplated by this Agreement or the Ancillary Documents;
(e) each of the documents to be delivered by the Parent
pursuant to SECTION 6.3 shall have been so delivered by the Parent at the
Closing.
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5.2 CONDITIONS TO OBLIGATION OF THE PARENT. The obligation of the
Parent to consummate the transactions contemplated hereby shall be subject to
the satisfaction on or prior to the Closing of the following conditions (any of
which may be waived in writing by the Parent):
(a) the Shareholders and the Company shall have performed or
complied with all obligations and agreements required to be performed or
complied with by any of them hereunder on or prior to the Closing (including,
without limitation, those specified in SECTION 6.2);
(b) the representations and warranties of the Shareholders and
the Company contained in this Agreement shall be true and correct as of the
Closing Date as if made as of such date (other than those representations and
warranties that address matters only as of a particular date or only with
respect to a specific period of time, which need only be true and correct as of
such date or with respect to such period);
(c) there shall be no order, decree or ruling by any
Governmental Authority nor any action, suit, claim or proceeding by or before
any Governmental Authority shall be pending, which seeks to restrain, prevent or
materially delay or restructure the transactions contemplated hereby or any
Ancillary Document, or which otherwise questions the validity or legality of any
such transactions;
(d) there shall be no statute, rules, regulation or order
enacted, entered or enforced or deemed applicable to the transactions
contemplated hereby which would prohibit or render illegal the transactions
contemplated by this Agreement or the Ancillary Documents;
(e) the Company shall have obtained on terms and conditions
satisfactory to the Parent all consents and approvals of third parties
(including Governmental Authorities) that are required (i) for the consummation
of the transactions contemplated hereby or any Ancillary Document, or (ii) in
order to prevent a breach of, a default under or a termination, material change
in the terms or conditions or material modification of, any Material Agreement
as a result of the consummation of the transactions contemplated hereby;
(f) each of the documents to be delivered by Shareholders or
the Company pursuant to SECTION 6.2 shall have been so delivered by Shareholders
or the Company at the Closing; and
(g) no Shareholder shall have exercised Dissenter's Rights.
ARTICLE VI
CLOSING
-------
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6.1 CLOSING. The closing of the transactions contemplated hereby (the
"CLOSING") shall take place at the offices of Spectrum Law Group, ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as soon as practicable but in no
event later than 10:00 a.m., Pacific time, on the third (3rd) Business Day after
the date on which each of the conditions set forth in SECTIONS 5.1 and 5.2 have
been satisfied or waived by the party or parties entitled to the benefit of such
conditions, or at such other place, at such other time or on such other date as
the parties may mutually agree. The date on which the closing actually occurs is
referred to herein as the "CLOSING DATE".
6.2 COMPANY'S DELIVERIES AT CLOSING. At the Closing, the Company shall
deliver or cause to be delivered to the Parent all of the following:
(a) the Certificates that immediately prior to the Effective
Time represented outstanding Company Shares whose shares were converted into the
right to receive Merger Consideration pursuant to Section 2.1(c), together with
a duly executed letter of transmittal;
(b) the corporate minute book, seal, and stock ledger of the
Company;
(c) evidence that the Company has obtained on terms and
conditions reasonably satisfactory to the Company all consents and approvals of
third parties (including Governmental Authorities) that are required (i) for the
consummation of the transactions contemplated hereby or (ii) in order to prevent
a material breach of, a default under or a termination, material change in the
terms or conditions or material modification of, any Contract as a result of the
consummation of the transaction contemplated hereby;
(d) original counterparts to the Investor Representation
Letters duly executed by each Shareholder;
(f) certified consents of the Board of Directors and
Shareholders of the Company authorizing the consummation of the transactions
contemplated by this Agreement;
(g) a certificate of good standing of the Company from the
state of California as of the most recent practicable date;
(h) certificates of the Company, in form and substance
reasonably satisfactory to the Company, dated the Closing Date, certifying
compliance with the conditions set forth in SECTIONS 5.2(A) and 5.2(B);
(i) a legal opinion from the Company's legal counsel in form
and substance reasonably satisfactory to Parent; and
(j) such other documents and instruments as shall be
reasonably necessary to effect the transactions contemplated hereby.
6.3 PARENT'S DELIVERIES AT CLOSING. At the Closing, the Parent shall
deliver or cause to be delivered to the Company all of the following:
(a) certificates representing the Merger Consideration,
registered in the names of the Shareholders (as of the Closing);
28
(b) certified resolutions of the Board of Directors of the
Parent authorizing the consummation of the transactions contemplated by this
Agreement;
(c) certified resolutions of the Board of Directors and
Stockholders of the Merger Sub authorizing the consummation of the transactions
contemplated by this Agreement;
(d) written resignations of the officers of the Parent and
Merger Sub effective as of the Closing Date in form satisfactory to the Company;
(e) written resignations of the directors of the Parent and
Merger Sub to be effective as of the Closing Date in form satisfactory to the
Company;
(f) certified resolutions of the Board of Directors of the
Parent appointing the officers and directors of the Company (or their designees)
as the officers and directors of the Parent and Merger Sub;
(g) evidence, in form and substance satisfactory to the
Company, setting forth the agreement of holders of not less than 57,140,000
shares of Parent's Common Stock to submit their shares for cancellation (the
"HMAS SHARES");
(h) evidence, in form and substance satisfactory to the
Company, of satisfaction, accord, settlement and/or full release of all
Liabilities set forth on SCHEDULE 3(G) hereto;
(i) a Form D pursuant to Regulation D promulgated under the
Securities Act, the filing of which will be effected within fifteen (15) days of
Closing;
(j) a certificate of good standing of the Parent and Merger
Sub from the State of Nevada as of the most recent practicable date;
(j) a certificate of the Parent, in form and substance
reasonably satisfactory to the Company, dated the Closing Date and signed by the
President and the Chief Financial Officer of the Parent evidencing compliance
with the conditions set forth in SECTIONS 5.1(A) and 5.1(B);
(k) evidence of filing of the Amendment with the Nevada
Secretary of State;
(l) a legal opinion from Parent's counsel regarding the
legality of the issuance of the Parent Company Shares; and
(m) such other documents and instruments as shall be
reasonably necessary to effect the transactions contemplated hereby
6.4 OTHER DOCUMENTS. The parties agree to execute and deliver on or
before the Closing all other documents that are reasonably necessary or
desirable in order to consummate the transactions contemplated hereby and to
carry out the intent of this Agreement.
29
6.5 EXPENSES. Except as otherwise specifically provided herein, the
Shareholders, the Company, Merger Sub, and the Parent, shall each pay their own
expenses, including, but not limited to, attorneys', accountants', financial
advisors' and brokers' or finders' fees, incurred in connection with the
transactions contemplated hereby ("EXPENSES"). It is the express intention of
the parties that the Company shall remain responsible for all Expenses incurred
by the Company, its Affiliates or their respective agents in connection with the
transactions contemplated hereby.
ARTICLE VII
TERMINATION
-----------
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual consent of the Parent and the Company;
(b) by either the Parent or the Company if the Closing shall
not have been consummated on or before February 1, 2007 (provided that the
terminating party is not otherwise in material breach of its obligations under
this Agreement), which date may be extended by written agreement of the Parent
and the Company; or
(c) by either the Parent or the Company, if a permanent
injunction or other order by any Federal or state court which would make illegal
or otherwise restrain or prohibit the consummation of the transactions
contemplated hereby shall have been issued and shall have become final and
non-appealable.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement in accordance with this ARTICLE VII, this Agreement shall thereafter
become void and there shall be no liability on the part of any party hereto or
their respective directors, officers, stockholders or agents, except that any
such termination shall be without prejudice to the rights of any party hereto
arising out of any breach by any other party of this Agreement.
ARTICLE VIII
DEFINITIONS
-----------
For purposes of this Agreement, the following terms and phrases shall
have the following meanings:
"AFFILIATE" shall have the meaning ascribed to it in Rule 405
promulgated under the Securities Act.
"BUSINESS DAY" shall mean any Monday, Tuesday, Wednesday, Thursday or
Friday that is not a day on which banking institutions in the State of New York
are authorized by law, regulation or executive order to close.
"COMPANY STOCK OPTION" shall mean any option to purchase Company Shares
granted under the Company Stock Plan or otherwise.
30
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"EMPLOYEE BENEFIT PLAN" shall mean any "employee benefit plan" as
defined in Section 3(3) of ERISA and any other plan, policy, program, practice,
agreement, understanding or arrangement (whether written or unwritten) providing
compensation or other benefits to any current or former director, officer,
employee or consultant (or to any dependent or beneficiary thereof), of the
Company or any ERISA Affiliate, which are now, or were within the past six
years, maintained by the Company or any ERISA Affiliate, or under which the
Company or any ERISA Affiliate has or could have any obligation or liability,
whether actual or contingent (and including, without limitation, any liability
arising out of an indemnification, guarantee, hold harmless or similar
agreement), including, without limitation, all incentive, bonus, deferred
compensation, vacation, holiday, cafeteria, medical, disability, stock purchase,
stock option, stock appreciation, phantom stock, restricted stock or other
stock-based compensation plans, policies, programs, practices or arrangements.
"ENVIRONMENTAL LAW" shall mean any federal, state, local or foreign law
(including any common law), statute, code, ordinance, rule, regulation or other
requirement relating to the environment, natural resources or public or employee
health and safety, and includes, but not limited to, CERCLA, the Hazardous
Materials Transportation Act, 49 U.S.C. ss. 1801 et seq., as amended, the
Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., as amended,
the Clean Water Act, 33 U.S.C. ss. 2601 et seq., as amended, the Clean Air Act,
42 U.S.C. ss. 7401 et seq., as amended, the Toxic Substances Control Act, 15
U.S.C. ss. 6901 et seq., as amended, the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. ss. 136 et seq., as amended, the Oil Pollution Act of
1990, 33 U.S.C. ss. 2701 et seq., as amended, the New York Navigation Law, as
amended, and the Occupational Safety and Health Act, 29 U.S.C. ss. 6901 et seq.,
as amended.
"ENVIRONMENTAL COSTS AND LIABILITIES" shall mean any and all losses,
liabilities, obligations, damages, fines, penalties, judgments, actions, claims,
costs and expenses (including, without limitation, fees, disbursements and
expenses of legal counsel, experts, engineers and consultants and the costs of
investigation and feasibility studies and remedial activities) arising from or
under any Environmental Law or order or contract with any Governmental Authority
or any other Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" shall mean any entity that, together with the
Company, is or was treated as a single employer under Section 414(b), (c) or (m)
of the Code.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"GAAP" shall mean generally accepted accounting principles as in effect
in the United States.
31
"GOVERNMENTAL AUTHORITY" shall mean any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign.
"HAZARDOUS MATERIALS" shall mean any petroleum or petroleum products,
radioactive materials, asbestos-containing materials, radon gas, PCBs and any
other hazardous or toxic substance, material or waste which is or becomes prior
to the Closing regulated under, or defined as a "hazardous substance,"
"pollutant," "contaminant," "hazardous waste," "toxic chemical," "hazardous
materials," "toxic substance" or "hazardous chemical" under any Environmental
Law.
"LAWS" shall mean all applicable statutes, rules, regulations,
ordinances, orders, writs, injunctions, judgments, decrees, awards or
restrictions of any governmental entity.
"LIABILITIES" shall mean any liability or obligation, including without
limitation, any direct or indirect indebtedness, guaranty, endorsement, claim,
loss, damage, deficiency, cost, expense, obligation or responsibility, whether
known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or inchoate, liquidated or
unliquidated, secured or unsecured.
"LIENS" shall mean any security interest, mortgage, lien, charge,
claims, option and encumbrance.
"MATERIAL ADVERSE EFFECT" used in connection with a party shall mean
any event, change or effect that is or is reasonably likely to become materially
adverse to the condition (financial or otherwise), properties, assets,
liabilities, businesses, operations, results of operations or prospects of such
party and its subsidiaries, if any, on a consolidated basis.
"PENSION PLAN" shall mean any qualified or non-qualified Employee
Pension Benefit Plan (including, any Multiemployer Plan), as such term is
defined in Section 3(2) of ERISA.
"PERSON" shall mean any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, governmental entity of any kind.
"PRE-CLOSING PERIOD" shall mean all taxable periods ending on or before
the Closing Date and the portion ending on or before the Closing Date of any
taxable period that includes (but does not end on) the Closing Date.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all reports and registration statements
filed, or required to be filed, by the Parent pursuant to the Securities Laws.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITIES LAWS" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended; and the rules and
regulations of the SEC promulgated thereunder.
32
"SUBSIDIARY" shall mean, as to any Person, any corporation,
partnership, limited liability company or other entity which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors, the general managers or other persons performing similar
functions, are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company.
"TAXES" shall mean taxes, fees, levies, duties, tariffs, imposts, and
governmental impositions or charges of any kind in the nature of (or similar to)
taxes, payable to any federal, state, local or foreign taxing authority,
including (without limitation) (i) income, franchise, profits, gross receipts,
AD VALOREM, net worth, value added, sales, use, service, real or personal
property, special assessments, capital stock, license, payroll, withholding,
employment, social security, workers' compensation, unemployment compensation,
utility, severance, production, excise, stamp, occupation, premiums, windfall
profits, transfer and gains taxes, and (ii) interest, penalties, additional
taxes and additions to tax imposed with respect thereto.
"WELFARE PLAN" shall mean any Employee Welfare Benefit Plan, as such
term is defined in Section 3(1) of ERISA.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally
(including delivery by courier service), transmitted by telecopy or mailed by
registered or certified mail, postage prepaid, return receipt requested, or sent
by a nationally recognized overnight courier service, as follows:
(a) If to the Parent, to:
Homassist Corporation
▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy:
with a copy to:
Spectrum Law Group
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
33
(b) If to the Company, the Shareholders or the Shareholder
Representative, to:
The Family Post
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy:
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the Person to whom notice is to be given may have
previously furnished to the other parties in writing in accordance herewith.
Notice shall be deemed given on the date received (or, if receipt thereof is
refused, on the date of such refusal).
9.2 AMENDMENTS AND WAIVERS. This Agreement may not be amended, modified
or supplemented except by written agreement of the parties hereto. No waiver by
any party of any non-compliance, default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent non-compliance, default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
9.3 INTERPRETATION. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Exhibits and Schedules
attached to this Agreement are for convenience only and shall not be deemed part
of this Agreement or be given any effect in interpreting this Agreement. The use
of the masculine, feminine or neuter gender herein shall not limit any provision
of this Agreement. The use of the terms "including" or "include" shall in all
cases herein mean "including, without limitation" or "include, without
limitation," respectively. References to any "Article", "Section", "Exhibit" or
"Schedule" shall refer to an Article or Section of, or an Exhibit or Schedule
to, this Agreement. In any case where the concept of materiality is applied more
than once to qualify any provision of this Agreement (whether by
cross-referencing or incorporation or otherwise), such provision shall be
interpreted as if only one, but the broadest one, of such materiality
qualification applied to it. Any due diligence review, audit or other
investigation or inquiry undertaken or performed by or on behalf of a party
shall not limit, qualify, modify or amend the representations, warranties or
covenants of, or indemnities made by any other party pursuant to this Agreement,
irrespective of the knowledge and information received (or which should have
been received) therefrom by the investigating party and consummation of the
transactions contemplated herein by a party shall not be deemed a waiver of a
breach of or inaccuracy in any representation, warranty or covenant or of any
other party's rights and remedies with regard thereto.
34
9.4 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. None of the
parties hereto may assign or delegate any of its rights or obligations hereunder
without the prior written consent of the other parties hereto. This Agreement
will be binding upon and inure to the benefit of the parties hereto and their
respective successors, heirs, legatees, distributees and assigns.
9.5 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their respective successors,
permitted assigns and legal representatives, and nothing in this Agreement,
express or implied, is intended to confer upon any other Person any rights or
remedies of any nature.
9.6 COUNTERPARTS; FACSIMILES. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to constitute an original and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other parties. Counterparts may be executed
either in original, faxed form, or ".pdf" form and the parties adopt any
signatures received by a receiving fax machine or an e-mail as original
signatures of the parties; provided, however, that any party providing its
signature in such manner shall promptly forward to the other party an original
of the signed copy of this Agreement which was so faxed or e-mailed.
9.7 GOVERNING LAW; VENUE; JURISDICTION. The laws of the State of
California (irrespective of its choice of law principles) will govern the
validity of this Agreement, the construction of its terms and the interpretation
and enforcement of the rights and duties of the parties hereto. This Agreement
shall be enforceable in any court of competent jurisdiction. In furtherance of
and not in limitation of the foregoing, the parties hereto (i) agree and consent
to the personal jurisdiction and venue of the state and Federal courts sitting
in Orange County, California in any action or proceeding arising out of or
connected in any way with this Agreement, (ii) irrevocably waive, to the fullest
extent permitted by law, any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum, and (iii) agree that service of
process in any such action or proceeding will be sufficient if sent by certified
mail, return receipt requested, to applicable address set forth above, and that
such service shall constitute "personal service," and further agree to the
invocation of said jurisdiction by service of process in any other manner
authorized by law.
9.8 SEVERABILITY. If any term or provision of this Agreement shall, to
any extent, be held by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Agreement or the application of such term
or provision to Persons or circumstances other than those as to which it has
been held invalid or unenforceable, shall not be affected thereby and this
Agreement shall be deemed severable and shall be enforced otherwise to the full
extent permitted by law.
35
9.9 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits referred to herein and which form a part hereof) and the Ancillary
Documents constitute the entire agreement among the parties hereto and
supersedes all prior agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof except for a
confidentiality agreement by and among the parties hereto, if any.
9.10 SCHEDULES AND EXHIBITS. The Schedules and Exhibits attached hereto
are incorporated herein and made a part hereof for all purposes.
36
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been
duly executed and delivered by the parties hereto on the date first above
written.
PARENT:
HOMASSIST CORPORATION
By: __________________________
Name:
Title:
MERGER SUB:
TFP SUB, INC.
By: __________________________
Name:
Title:
COMPANY:
THE FAMILY POST, INC.
By: __________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
37
DISCLOSURE SCHEDULE
This Disclosure Schedule has been prepared in connection with that
certain Agreement and Plan of Merger dated as of January 16, 2007 (the
"Agreement") between Homassist Corporation, a Nevada corporation, TFP Sub, Inc.,
a California corporation and The Family Post, Inc., a California corporation.
Capitalized terms not otherwise defined in this Disclosure Schedule shall have
the same meaning as in the Agreement.
The disclosure of any matter in this Company Disclosure Schedule should
not be construed as indicating that such matter is necessarily required to be
disclosed in order for any representation or warranty in the Agreement to be
true and correct in all material respects. Any description of any document
included in this Disclosure Schedule is qualified in all respects by reference
to such document.
38
SCHEDULE 3.3(f)
None.
1
SCHEDULE 3.3(g)
Material Agreements--None.
Liabilities as of 12/1/06--to come.
2
SCHEDULE 3.1(c)
None
3
SCHEDULE 3.1(e)
California
4
SCHEDULE 3.1(f)
1. shareholder list with holdings
SHARES %
OUTSTANDING OWNERSHIP
----------- ---------
Shareholder 1 10,100,000 61.3%
Shareholder 2 1,470,588 8.9%
Shareholder 3 294,188 1.8%
Shareholder 4 1,121,026 6.8%
Shareholder 5 147,059 0.9%
Shareholder 6 147,059 0.9%
Shareholder 7 73,529 0.4%
Shareholder 8 142,947 0.9%
Shareholder 9 147,000 0.9%
Shareholder 10 147,000 0.9%
Shareholder 11 69,444 0.4%
Shareholder 12 555,556 3.4%
Shareholder 13 277,778 1.7%
Shareholder 14 277,778 1.7%
Shareholder 15 277,778 1.7%
Shareholder 16 277,778 1.7%
Shareholder 17 66,667 0.4%
Shareholder 18 200,000 1.2%
Shareholder 19 500,000 3.0%
Shareholder 20 150,000 0.9%
Shareholder 21 35,000 0.2%
--------------------------------
TOTAL 16,478,175 100.0%
--------------------------------
2. options/warrants and contracts that the Company may be obligated to issues
options/warrants
------------------- ------------------------------------------ ---------- -------------
DATE GRANTEE # OF NSO EXERCISE
COMMENCED OPTIONS PRICE
------------------- ------------------------------------------ ---------- -------------
2005
7/14/2005 Optionholder 1 2,000,000 $ 0.100
11/29/2005 Optionholder 2 450,000 $ 0.300
7/1/2005 Optionholder 3 700,000 $ 0.100
8/24/2005 Optionholder 4 350,000 $ 0.100
7/1/2005 Optionholder 5 200,000 $ 0.100
12/5/2005 Optionholder 6 125,000 $ 0.200
7/1/2005 Optionholder 7 100,000 $ 0.100
12/14/2005 Optionholder 8 300,000 $ 0.200
12/19/2005 Optionholder 9 200,000 $ 0.200
--------------
2005 grants 4,425,000
--------------
5
2006
1/13/2006 Optionholder 10 62,500 $ 0.300
3/13/2006 Optionholder 11 300,000 $ 0.200
3/15/2006 Optionholder 12 300,000 $ 0.200
3/15/2006 Optionholder 13 200,000 $ 0.200
3/15/2006 Optionholder 14 200,000 $ 0.100
3/28/2006 Optionholder 15 31,250 $ 0.200
3/30/2006 Optionholder 16 15,625 $ 0.200
4/3/2006 Optionholder 17 31,250 $ 0.200
4/3/2006 Optionholder 18 100,000 $ 0.200
4/3/2006 Optionholder 19 15,625 $ 0.200
4/4/2006 Optionholder 20 31,250 $ 0.200
4/4/2006 Optionholder 21 31,250 $ 0.200
6/14/2006 Optionholder 22 15,625 $ 0.200
6/26/2006 Optionholder 23 15,625 $ 0.300
6/1/2006 Optionholder 24 265,000 $ 0.200
7/20/2006 Optionholder 25 125,000 $ 0.300
4/10/2006 Optionholder 26 15,000 $ 0.200
4/10/2006 Optionholder 27 15,000 $ 0.200
7/1/2006 Optionholder 28 30,000 $ 0.200
8/11/2006 Optionholder 29 75,000 $ 0.200
8/23/2006 Optionholder 30 80,000 $ 0.200
11/13/2006 Optionholder 31 3,000,000 $ 0.200
11/13/2006 Optionholder 32 50,000 $ 0.200
11/13/2006 Optionholder 33 75,000 $ 0.200
11/13/2006 Optionholder 34 100,000 $ 0.200
11/13/2006 Optionholder 35 100,000 $ 0.200
11/13/2006 Optionholder 36 100,000 $ 0.200
12/1/2006 Optionholder 37 200,000 $ 0.200
12/4/2006 Optionholder 38 50,000 $ 0.300
12/4/2006 Optionholder 39 62,500 $ 0.300
12/4/2006 Optionholder 40 62,500 $ 0.300
12/4/2006 Optionholder 41 62,500 $ 0.300
12/4/2006 Optionholder 42 62,500 $ 0.300
12/18/2006 Optionholder 43 50,000 $ 0.200
12/20/2006 Optionholder 44 250,000 $ 0.200
12/20/2006 Optionholder 45 50,000 $ 0.200
12/31/2006 Optionholder 46 150,000 $ 0.200
12/31/2006 Optionholder 47 100,000 $ 0.200
--------------
2006 grants 6,480,000
--------------
1/12/06 Optionholder 48 60,000 $ 0.200
--------------
2007 grants 60,000
6
CANCELLATIONS OF OPTIONS IN CONJUNCTION #
WITH RE-PRICE 1/3/07 CANCELLED
------------------- ----------------------------------------- ---------- -----------
7/14/2005 Optionholder 1 2,000,000 $ 0.100
11/29/2005 Optionholder 2 450,000 $ 0.300
1/13/2006 Optionholder 3 62,500 $ 0.300
3/28/2006 Optionholder 4 31,250 $ 0.200
3/30/2006 Optionholder 5 15,625 $ 0.200
4/3/2006 Optionholder 6 31,250 $ 0.200
4/3/2006 Optionholder 7 100,000 $ 0.200
4/3/2006 Optionholder 8 15,625 $ 0.200
4/4/2006 Optionholder 9 31,250 $ 0.200
4/4/2006 Optionholder 10 31,250 $ 0.200
6/14/2006 Optionholder 11 15,625 $ 0.200
6/26/2006 Optionholder 12 15,625 $ 0.300
7/20/2006 Optionholder 13 125,000 $ 0.300
12/4/2006 Optionholder 14 62,500 $ 0.300
12/4/2006 Optionholder 15 62,500 $ 0.300
12/4/2006 Optionholder 16 62,500 $ 0.300
12/4/2006 Optionholder 17 62,500 $ 0.300
--------------
Total Option Cancellations 3,175,000
--------------
Caliber Media Agreement dated 9/1/06: Warrants issued only upon certain
measurements as follows:
---------------------------- ------------------------- -------------------------
Warrants Websites Exercise Price
---------------------------- ------------------------- -------------------------
30,000 5,000 $ 0.200
---------------------------- ------------------------- -------------------------
100,000 25,000 $ 0.200
---------------------------- ------------------------- -------------------------
200,000 50,000 $ 0.200
---------------------------- ------------------------- -------------------------
300,000 75,000 $ 0.200
---------------------------- ------------------------- -------------------------
500,000 100,000 $ 0.200
---------------------------- ------------------------- -------------------------
1,000,000 500,000 $ 0.200
---------------------------- ------------------------- -------------------------
However, no such measurements have been met, thus, no warrants have been issued
as of January 12, 2007. If at twelve months from date of signed agreement, less
than 5,000 met, warrant offering is null and void.
7
SCHEDULE 3.1(h)
No off-balance sheet arrangements.
8
SCHEDULE 3.1(j)
During the period from July 15, 2005 (date of inception) through December 31,
2005, the Company issued 9,200,000 shares of its restricted common stock to its
founder, sole Director, Chief Executive Officer, and President for cash in the
amount of $168,000.
During the period from July 15, 2005, the Company issued 500,000 shares
of its restricted common stock to an unrelated party for cash in the amount of
$100,000.
During the first quarter of 2006, the Company issued 1,187,500 shares
of restricted common stock for $237,500 in cash.
During the second quarter of 2006, the Company issued 1,106,500 shares
of restricted common stock for $187,500 in cash.
During the third quarter of 2006, the Company issued 500,000 shares of
restricted common stock for $100,000 in cash.
During the fourth quarter of 2006, the Company issued 1,850,000 shares
of restricted common stock for $370,000 in cash.
During January 2007, the Company re-priced all common stock investor
rounds made since July 14, 2005, the date of inception of the Company, and
cancelled related stock options issued with the investment. As a result, the
Company issued an additional 1,959,283 shares of common stock to its investors
and cancelled options to purchase 3,175,000 shares of common stock of the
Company. As part of the 1,959,283 new shares issued, 1,500,000 shares of common
stock were issued to the Chief Executive Officer, and as part of the options to
purchase 3,175,000 shares cancelled, 2,000,000 options were held by the Chief
Executive Officer, and were cancelled as part of this transaction. As part of
the 1,959,283 new shares of common stock issued, 58,824 shares were returned
back to the Company by the Consulting Chief Financial Officer, and as part of
the options to purchase 3,175,000 shares cancelled, 100,000 options were held by
the Consulting Chief Financial Officer, and were cancelled as part of the this
transaction.
9
SCHEDULE 3.1(k)
None.
10
SCHEDULE 3.1(l)
None.
11
SCHEDULE 3.1(m)
In February 2006, the Company had entered into a one year lease for its
principal offices. Monthly rent is $2,200 under this new lease and the lease
expires February 28, 2007. For the three and nine months ended September 30,
2006, principal office lease expense amounted to $6,600 and 23,074.
12
SCHEDULE 3.1(n)(ii)
1. TFP owns "Websites For Heroes"
2. TFP owns:
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
13
SCHEDULE 3.1(n)(iii)
None.
14
SCHEDULE 3.1(o)(1)
Material Agreements/Contracts
DATE CONTRACT/ # OF EXERCISE
COMMENCED GRANTEE AGREEMENT OPTIONS PRICE
----------------- --------------------- ------------- ------------- ------------
2005
7/14/2005 Optionholder 1 Employee 2,000,000 $ 0.100
7/1/2005 Optionholder 2 Employee 700,000 $ 0.100
8/24/2005 Optionholder 3 Employee 350,000 $ 0.100
7/1/2005 Optionholder 4 Consultant 200,000 $ 0.100
12/5/2005 Optionholder 5 Consultant 125,000 $ 0.200
7/1/2005 Optionholder 6 Consultant 100,000 $ 0.100
12/14/2005 Optionholder 7 Consultant 300,000 $ 0.200
12/19/2005 Optionholder 8 Consultant 200,000 $ 0.200
3/13/2006 Optionholder 9 Employee 300,000 $ 0.200
3/15/2006 Optionholder 10 Employee 300,000 $ 0.200
3/15/2006 Optionholder 11 Consultant 200,000 $ 0.200
3/15/2006 Optionholder 12 Consultant 200,000 $ 0.100
6/1/2006 Optionholder 13 Consultant 265,000 $ 0.200
4/10/2006 Optionholder 14 Consultant 15,000 $ 0.200
4/10/2006 Optionholder 15 Consultant 15,000 $ 0.200
7/1/2006 Optionholder 16 Consultant 30,000 $ 0.200
8/11/2006 Optionholder 17 Consultant 75,000 $ 0.200
8/23/2006 Optionholder 18 Investor 80,000 $ 0.200
9/1/2006 Optionholder 19 License 0 $ 0.200
11/13/2006 Optionholder 20 Employee 3,000,000 $ 0.200
11/13/2006 Optionholder 21 Employee 50,000 $ 0.200
11/13/2006 Optionholder 22 Employee 75,000 $ 0.200
11/13/2006 Optionholder 23 Employee 100,000 $ 0.200
11/13/2006 Optionholder 24 Employee 100,000 $ 0.200
11/13/2006 Optionholder 25 Consultant 100,000 $ 0.200
12/1/2006 Optionholder 26 Consultant 200,000 $ 0.200
12/4/2006 Optionholder 27 Consultant 50,000 $ 0.300
12/4/2006 Optionholder 28 Investor 62,500 $ 0.300
12/4/2006 Optionholder 29 Investor 62,500 $ 0.300
12/4/2006 Optionholder 30 Investor 62,500 $ 0.300
12/4/2006 Optionholder 31 Investor 62,500 $ 0.300
12/18/2006 Optionholder 32 Investor 50,000 $ 0.200
12/20/2006 Optionholder 33 Consultant 250,000 $ 0.200
12/20/2006 Optionholder 34 Consultant 50,000 $ 0.200
12/31/2006 Optionholder 35 Consultant 150,000 $ 0.200
12/31/2006 Optionholder 36 Consultant 100,000 $ 0.200
15
SCHEDULE 3.1(o)(2)
None.
16
SCHEDULE 3.1(o)(3)
None.
17
SCHEDULE 3.1(p)
None.
18
SCHEDULE 3.1(q)
None.
19
SCHEDULE 3.1(r)
None.
20
SCHEDULE 3.1(s)
Related Party Transactions:
On July 14, 2005, the Company granted an option to purchase 50,000 shares of
common stock of the Company to a person who is the Chief Executive Officer's
brother for consulting services rendered to the Company. The options vest every
nine months over a three year period are exercisable at .10 per share.
As of December 31, 2005, $54,845 was due to the Chief Executive Officer and
principal stockholder. The amount was partially generated from his deferred
salary. During the period from inception, July 14, 2005 through December 31,
2005, the Chief Executive Officer was not paid his salary, which amounted to
$37,500 and is recorded as due to stockholder. The Company also owes the officer
for purchases of computer equipment made on behalf of the Company in the amount
of $17,345 as of December 31, 2005. During the nine months ended September 30,
2006, no amounts were paid to the Chief Executive Officer for his deferred
salary and $10,035 was paid as reimbursement to him for computer equipment
purchased on behalf of the Company. As of September 30, 2006, the Company owed
the Chief Executive Officer $51,060 for deferred salary and purchases of
computer equipment made on behalf of the Company.
On March 15, 2006, the Company entered into an employment agreement with its
Vice President of Stategic Alliances. In April 2006, the same employee and
sister also invested an aggregate of $50,000 cash for 294,000 common shares of
the Company and options to purchase 62,500 shares. On November 29, 2006, the
employee was terminated.
A shareholder of the Company also served as a Consulting Chief Financial Officer
from March 2006 under a consulting agreement with a consulting firm owned the
shareholder. The consulting agreement paid the consulting firm an hourly rate of
$100 per hour, payable partially in stock and exercised stock options. The
consulting agreement granted the firm an option to purchase 400,000 common
shares of the Company. In November 2006, the consultant received an additional
option grant to purchase 100,000 shares of common stock. From March 2006 through
May 2006, for consulting services rendered, the consulting firm received $1,770
cash proceeds, 14,700 shares of the Company's restricted stock valued at $2,940
and 39,200 exercised options valued at $3,920. Effective July 2006, the hourly
rate was changed to $65 per hour. From July 2006 to December 2006, for
consulting services rendered, the consulting firm received $8,504 cash proceeds
and 25,951 exercised options valued at $2,950. The consulting agreement also
provides finder fees of 10% of any gross proceeds raised through an introduction
made by consultant.
During October, 2006, the Company applied for and obtained an unsecured line of
credit from a financial institution in the amount of $20,000, which incurs
interest at 14% annually. The line of credit is personally guaranteed by the
Company's Chief Executive Officer and principal stock holder and the wife of the
Chief Executive Officer. As of the date of this Report, no amount was owed under
the line of credit.
21
During November 2006, the Chief Executive Officer and principal shareholder
advanced the Company $50,000 cash and was recorded as advance due to
shareholder. As of the date of this report, the $50,000 advance had not been
repaid and remains outstanding.
During January 2007, the Company re-priced all common stock investor rounds made
since July 14, 2005, the date of inception of the Company and cancelled related
stock options issued with the investment. As a result, the Company issued an
additional 1,959,283 of common stock to its investors and cancelled options to
purchase 3,175,000 common stock of the Company. As part of the 1,959,283 new
shares issued, 1,500,000 shares of the common stock were issued to the Chief
Executive Officer and as part of the 3,175,000 options cancelled, 2,000,000 of
which were held by the Chief Executive Officer and were cancelled as part of
this transaction. As part of the 1,959,283 new shares issued, 58,824 shares were
returned back to the Company by the Consulting Chief Financial Officer and as
part of the 3,175,000 options cancelled, 100,000 options were held by the
Consulting Chief Financial Officer and were cancelled as part of the this
transaction.
22
SCHEDULE 3.1(t)(1)
Insurance policies: Hartford General Business Liability Policy
23
Schedule 3.1(t)(2)
None.
24
SCHEDULE 3.1(u)(ii)(16)
California and US federal.
25
SCHEDULE 3.1(v)(i)
None.
26
SCHEDULE 3.1(v)(ii)
None.
27
SCHEDULE 3.1(v)(iii)
None.
28
SCHEDULE 3.1(v)(iv)
None.
29
SCHEDULE 3.1(v)(v)
None.
30
SCHEDULE 3.1(v)(vi)
None.
31
SCHEDULE 3.1(v)(vii)
None.
32
SCHEDULE 3.1(w)
None.
33