AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is dated as of
October 1, 2007, by and among TRIMEDIA ENTERTAINMENT GROUP, INC., a Delaware
corporation ("PARENT"), TRIMEDIA ACQUISITION CORP., a Delaware corporation and
wholly owned subsidiary of Parent ("MERGER SUBSIDIARY") and VGB MEDIA, INC., a
Delaware corporation (the "COMPANY"). Merger Subsidiary and the Company are
hereinafter sometimes collectively referred to as the "CONSTITUENT CORPORATIONS"
and the Constituent Corporations and the Parent are collectively referred to as
the "PARTIES."
WHEREAS, Parent has through its subsidiaries operated a multimedia
entertainment business;
WHEREAS, Parent has entered into a Restructuring Agreement (the
"RESTRUCTURING AGREEMENT"), a copy of which is attached as Exhibit A hereto,
pursuant to which (i) certain creditors of Parent have agreed to convert their
indebtedness into equity of Parent, (ii) all the assets of Parent have been
contributed to a newly formed Delaware corporation ("NEWCO") in which (A) Parent
will have a 19% economic interest owned through a class of non-voting common
stock with an option to acquire additional interests and (B) the aforesaid
creditors will initially have a 81% economic and the full voting interest
represented by a class of voting common stock and a $4,800,000 preference
represented by a newly designated series of preferred stock and (iii) all
liabilities of Parent prior to the closing date or arising from the continuing
business will be assumed by Newco;
WHEREAS, the Company is a recently formed Delaware corporation and has
entered into arrangements to commence an entertainment business;
WHEREAS, the respective Boards of Directors of Parent, Merger
Subsidiary and the Company have determined that it is advisable and in the best
interests of the respective corporations and their shareholders that Merger
Subsidiary be merged with and into the Company in accordance with the Delaware
General Corporation Law (the "GCL") and the terms of this Agreement pursuant to
which the Company will be the surviving corporation and will be a wholly owned
subsidiary of Parent (the "MERGER");
WHEREAS, for federal income tax purposes, it is intended that the
Merger will qualify as a reorganization within the meaning of Section
368(a)(1)(A) and (a)(2)(E) of the Internal Revenue Code of 1986, as amended (the
"CODE"); and
WHEREAS, Parent, Merger Subsidiary and the Company desire to make
certain representations, warranties, covenants, and agreements in connection
with, and establish various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement, the parties hereto hereby
agree as follows:
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ARTICLE I. THE MERGER
1.1. THE MERGER. At the Effective Time (as defined in Section 1.3
hereof), subject to the terms and conditions of this Agreement, Merger
Subsidiary shall be merged with and into the Company in accordance with the
provisions of the GCL whereupon the separate corporate existence of Merger
Subsidiary shall cease, and the Company shall continue as the surviving
corporation, and in its capacity as the corporation surviving the Merger, is
hereinafter sometimes referred to as the "SURVIVING CORPORATION."
1.2. EFFECT OF MERGER. From and after the Effective Time, the Surviving
Corporation shall succeed to and possess all the properties, rights, privileges,
immunities, powers, franchises and purposes, and be subject to all the duties,
liabilities, debts, obligations, restrictions and disabilities, of the
Constituent Corporations, all without further act or deed, all as more fully
described in the GCL.
1.3. EFFECTIVE TIME. The consummation of the Merger shall be effected
as promptly as practicable, but in no event more than three business days, after
the satisfaction or waiver of all conditions set forth in Article VI of this
Agreement, and the Company and Merger Subsidiary will file, or cause to be
filed, with the Secretary of State of the State of Delaware, a certificate of
Merger in the form required by, and executed in accordance with, the applicable
provisions of the GCL (the "CERTIFICATE OF MERGER"). The Merger shall become
effective immediately upon the filing of such Certificate of Merger with the
Secretary of State of the State of Delaware. The date and time on which the
Merger shall become effective is referred to herein as the "EFFECTIVE TIME."
1.4. DIRECTORS AND OFFICERS. From and after the Effective Time, the
directors of the Surviving Corporation shall be the persons who were the
directors of Company immediately prior to the Effective Time and the officers of
the Surviving Corporation shall be the persons who were the officers of Company
immediately prior to the Effective Time. Said directors and officers of the
Surviving Corporation shall hold office for the term specified in, and subject
to the provisions contained in, the Certificate of Incorporation and Bylaws of
the Surviving Corporation and applicable law.
1.5. CERTIFICATE OF INCORPORATION; BYLAWS. From and after the Effective
Time and until further amended in accordance with applicable law, the
Certificate of Incorporation of the Company as in effect immediately prior to
the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation. From and after the Effective Time and until further amended in
accordance with law, the Bylaws of the Company as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation.
1.6. TAKING OF NECESSARY ACTION; FURTHER ACTION. Parent, Merger
Subsidiary and the Company, respectively, shall each use its best efforts to
take all such action as may be necessary or appropriate to effectuate the Merger
under the GCL at the time specified in Section 1.3. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all properties, rights, privileges, immunities,
powers and franchises of either of the Constituent Corporations, the officers of
the Surviving Corporation are fully authorized in the name of each Constituent
Corporation or otherwise to take, and shall take, all such lawful and necessary
action.
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1.7. THE CLOSING. Unless this Agreement has been terminated and the
transactions contemplated herein have been abandoned pursuant to Article VII
hereof, the closing of the Merger (the "CLOSING") will take place at a time and
on a date (the "CLOSING DATE") to be specified by the parties, which will be no
later than October 31, 2007 (the "TERMINATION DATE"); provided, however, that
all of the conditions provided for in Articles VI hereof shall have been
satisfied or waived by such date. The Closing will be held at the offices of
counsel to the Company, or such other place as the parties may agree, at which
time and place the documents and instruments necessary or appropriate to effect
the transactions contemplated herein will be exchanged by the parties. Except as
otherwise provided herein, all actions taken at the Closing will be deemed to
have been taken simultaneously.
ARTICLE II. CONVERSION OF SECURITIES
2.1. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Sub or Company or
their respective stockholders:
(a) Each share of common stock, $0.001 par value, of Merger
Sub ("Merger Sub Common Stock") issued and outstanding immediately prior to the
Effective Time shall be converted into one (1) fully paid and nonassessable
share of common stock, $0.001 par value, of the Surviving Corporation and all
shares of Merger Sub Common Stock shall be cancelled. The aforesaid newly issued
shares shall thereafter constitute all of the issued and outstanding shares of
the Company's Common Stock.
(b) Each share of Company's Common Stock issued and
outstanding immediately prior to the Effective Time shall be converted into a
total of 10,000 shares of Series A Convertible Preferred Stock of Parent
("Parent Series A Stock") and all shares of Company Common Stock shall be
cancelled. The Parent Series A Stock shall be convertible into an aggregate of
64,180,000 "restricted" shares of common stock of Parent (the "PARENT COMMON
STOCK") or 6,418 shares of Parent Common Stock for each share of Parent Series A
Stock. The aforesaid shares of Parent Series A Stock and Parent Common Stock
into which the shares of Parent Series A Stock are convertible shall sometimes
be referred to as the "Merger Consideration". Parent Series A Stock shall have
the designations, rights and preferences set forth in Exhibit "B" hereto. The
aforesaid number of shares of Parent Common Stock into which the shares of
Parent Series A Stock are convertible, represents an aggregate forty (40%)
percent ownership interest in Parent (i) after taking into account the pending
issuance of 46,000,000 shares of Parent Common Stock to certain creditors of
Parent in exchange for the cancellation of an aggregate of $460,000 of
indebtedness to these creditors, and (ii) the issuance of shares of Parent
Common Stock upon exercise of the issued and outstanding options and warrants
set forth under the column "Total Included" on the spreadsheet set forth at
Schedule 2.1(b) and (iii) the fulfillment of the assumptions set forth in such
schedule.
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(c) The shares of Parent Series A Stock shall be "restricted
securities" as defined in Rule 144 promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended. Parent
shall assume no Company debt owed to the Company Shareholders except for
advances to the Company in connection with this transaction.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger
Subsidiary that, except as set forth in the Disclosure Schedule delivered by the
Company to Parent and Merger Subsidiary on the date hereof (the "DISCLOSURE
SCHEDULE"), which Disclosure Schedule made part hereof, which, among other
things sets forth the exceptions to the representations and warranties contained
in this Article III under captions referencing the Sections to which such
exceptions apply:
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3.1. INCORPORATION AND CORPORATE POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and, subject to approval of this Agreement by the Company's
shareholders, has the requisite corporate power and authority to execute and
deliver this Agreement and the Certificate of Merger and to perform its
obligations hereunder and thereunder. The Company has the corporate power and
authority and all authorizations, licenses, permits and certifications necessary
to own and operate its properties and to carry on its business as now conducted
and presently proposed to be conducted. The copies of the Company's Certificate
of Incorporation and Bylaws which have been furnished by the Company to Parent
prior to the date hereof reflect all amendments made thereto and are correct and
complete as of the date hereof.
3.2. EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT. The execution,
delivery and performance of this Agreement and the Certificate of Merger by the
Company and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all requisite corporate action, and no
other corporate proceedings on its part are necessary to authorize the
execution, delivery and performance of this Agreement and the Certificate of
Merger, other than the approval of this Agreement by the shareholders of the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable in
accordance with its terms, and the Certificate of Merger, when executed and
delivered by the Company, will constitute the valid and binding obligation of
the Company, enforceable in accordance with its terms.
3.3. APPROVAL OF THE PLAN OF MERGER; MEETING OF SHAREHOLDERS. The
Company's Board of Directors has, by resolutions duly adopted by unanimous
written consent, approved this Agreement and the Certificate of Merger and the
transactions contemplated hereby and thereby, including the Merger, and resolved
to recommend approval of this Agreement by the Company's shareholders.
3.4. GOVERNMENTAL AUTHORITIES; CONSENTS. Except for the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, the
Company is not required to submit any notice, report or other filing with any
governmental authority in connection with the execution or delivery by it of
this Agreement or the Certificate of Merger or the consummation of the
transactions contemplated hereby or thereby. Except as set forth in the
Disclosure Schedule, no consent, approval or authorization of any governmental
or regulatory authority or any other party or person (except the approval of
this Agreement by the shareholders of the Company) is required to be obtained by
the Company in connection with its execution, delivery and performance of this
Agreement or the Certificate of Merger or the transactions contemplated hereby
or thereby.
3.5. SUBSIDIARIES. Except as otherwise set forth in the Disclosure
Schedule, the Company does not own any stock, partnership interest, joint
venture interest or any other security or ownership interest issued by any other
corporation, organization or entity. All issued and outstanding shares of
capital stock of any of the subsidiaries set forth in such Disclosure Schedule
are owned by the Company, either directly or through one or more other
subsidiaries, free and clear of all liens, charges, encumbrances, claims and
options of any nature. All of the outstanding shares of capital stock of such
subsidiaries have been duly and validly authorized and issued, and are fully
paid and nonassessable.
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3.6. CAPITAL STOCK. The authorized capital stock of the Company
consists of 3,000 shares of Common Stock of which, as of the date hereof, 100
shares are issued and outstanding. All of such outstanding shares of Company
Common Stock have been duly authorized and are validly issued, fully paid and
nonassessable. There are no Outstanding Stock Options to purchase shares of
Company Common Stock. The Company has no other equity securities or securities
containing any equity features authorized, issued or outstanding. There are no
agreements or other rights or arrangements existing which provide for the sale
or issuance of capital stock by the Company and there are no rights,
subscriptions, warrants, options, conversion rights or agreements of any kind
outstanding to purchase or otherwise acquire from the Company any shares of
capital stock or other securities of the Company of any kind. There are no
agreements or other obligations (contingent or otherwise) which may require the
Company to repurchase or otherwise acquire any shares of its capital stock.
3.7. FINANCIAL INFORMATION. The Company was recently formed, has not
engaged in any active business operations (other than to execute the agreement
referred to in Section 3.8 of the Company Disclosure Schedule) and has not
prepared any financial statements to date. Except for liabilities incurred in
connection with its organization and in connection with the transactions
contemplated hereby, the Company has no liabilities.
3.8. CONTRACTS AND COMMITMENTS. Except as set forth in Section 3.8 of
the Company Disclosure Schedule, the Company is not a party to any contract or
commitment.
3.9. LITIGATION. There is no legal, administrative, arbitration, or
other proceeding, suit, claim or action of any nature or investigation, review
or audit of any kind, or any judgment, decree, decision, injunction, writ or
order pending, noticed, scheduled, or, to the knowledge of the Company,
threatened or contemplated by or against or involving the Company, its assets,
properties or business or its directors, officers, agents or employees (but only
in their capacity as such), whether at law or in equity, before or by any person
or entity or any foreign, federal, state or local governmental
quasi-governmental, administrative, regulatory or judicial court, department,
commission, agency, board, bureau, instrumentality or other authority (referred
to herein as an "AUTHORITY"), which questions or challenges the validity of this
Agreement or any action taken or to be taken by the parties hereto pursuant to
this Agreement or in connection with the transactions contemplated herein.
3.10. BROKERAGE. No third party shall be entitled to receive any
brokerage fee or commissions, finder's fees, fees for investment banker,
financial advisory services or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Company.
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3.11. COMPLIANCE WITH LAWS. Except as set forth in the Disclosure
Schedule, the Company is and has been in compliance in all material respects
with all laws, rules, regulations, orders, judgments or decrees that are
applicable to it, the conduct of its business as presently conducted and as
proposed to be conducted, and the ownership of its property and assets related
to occupational safety, health, wage and hour, and employment discrimination)
and the Company is not aware of any state of facts, events, conditions or
occurrences which may now or hereafter constitute or result in a violation of
any of such laws, rules, regulations, orders, judgments or decrees or which may
give rise to the assertion of any such violation, except where such violation or
violations do not have a Material Adverse Effect. All required reports and
filings with governmental authorities have been properly made as and when
required, except where the failure to report or file would not, individually or
in the aggregate, have a Material Adverse Effect. As used in this Agreement,
"MATERIAL ADVERSE EFFECT" with respect to a party means a material adverse
change in or effect on the business, operations, financial condition, properties
or liabilities of that party; provided, however, that a Material Adverse Effect
will not be deemed to include (i) changes as a result of the announcement of
this transaction, (ii) events or conditions arising from changes in general
business or economic conditions or (iii) changes in generally accepted
accounting principles.
3.12. NO BREACH. The execution, delivery and performance of this
Agreement and the Certificate of Merger by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby do not conflict
with or result in any breach of any of the provisions of, constitute a default
under, result in a violation of, result in the creation of a right of
termination or acceleration or any lien, security interest, charge or
encumbrance upon any assets of the Company, or require any authorization,
consent, approval, exemption or other action by or notice to any court or other
governmental body, under the provisions of the Certificate of Incorporation or
Bylaws of either the Company or any indenture, mortgage, lease, loan agreement
or other agreement or instrument by which either the Company is bound or
affected, or any law, statute, rule or regulation or order, judgment or decree
to which either The Company is subject.
3.13. FORM 14 F INFORMATION. The information contained in the
Information Statement pursuant to Section 14(f) of the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT") and Rule 14f-1 thereunder and required
to be filed pursuant to Section 5.4 ("FORM 14 F") hereof at the time of filing
shall not, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading with respect to information relating to the Company or its
nominees.
3.14. DISCLOSURE. Neither this Agreement nor any of the Exhibits hereto
nor any of the documents delivered by or on behalf of the Company pursuant to
Article VI hereof nor the Disclosure Schedule, taken as a whole, contains any
untrue statement of a material fact regarding the Company or its business or any
of the other matters dealt with in this Article III relating to the Company or
the transactions contemplated by this Agreement. This Agreement, the Exhibits
hereto, the documents delivered to Parent and Merger Subsidiary by or on behalf
of the Company pursuant to Article VI hereof, the Disclosure Schedule, taken as
a whole, do not omit any material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not misleading.
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY
Parent and Merger Subsidiary, jointly and severally, hereby represent
and warrant to the Company that, except as set forth in the Disclosure Schedule
delivered by Parent to Company on the date hereof ("PARENT DISCLOSURE SCHEDULE")
which Parent Disclosure Schedule made part hereof, which, among other things
sets forth exceptions to the representations and warranties contained in this
Article IV under the captions referencing the Sections to which such exception
applies:
4.1. INCORPORATION AND CORPORATE POWER. Except as set forth in Schedule
4.1 of the Parent Disclosure Schedule, each of Parent and Merger Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, with the requisite corporate power and authority
to enter into this Agreement and the Certificate of Merger and perform its
obligations hereunder and thereunder. The copies of Parent's Certificate of
Incorporation and Bylaws which are attached to the SEC Filed Documents, as
hereinafter defined, reflect all amendments made thereto and are correct and
complete as of the date hereof.
4.2. EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT. The execution,
delivery and performance of this Agreement, by Parent and Merger Subsidiary, and
the Certificate of Merger, by Merger Subsidiary, and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate action, and no other corporate proceedings
on its part are necessary to authorize the execution, delivery or performance of
this Agreement or the Certificate of Merger. This Agreement has been duly
executed and delivered by Parent and Merger Subsidiary and constitutes the valid
and binding obligation of Parent and Merger Subsidiary, enforceable in
accordance with its terms, and the Certificate of Merger, when executed and
delivered by Merger Subsidiary, will constitute the valid and binding obligation
of Merger Subsidiary, enforceable in accordance with its terms.
4.3. NO BREACH. The execution, delivery and performance of this
Agreement and the Certificate of Merger by Parent and Merger Subsidiary and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby and thereby do not conflict with or result in any breach of any of the
provisions of, constitute a default under, result in a violation of, result in
the creation of a right of termination or acceleration or any lien, security
interest, charge or encumbrance upon any assets of Parent or Merger Subsidiary,
or require any authorization, consent, approval, exemption or other action by or
notice to any court or other governmental body, under the provisions of the
Certificate of Incorporation or Bylaws of either Parent or Merger Subsidiary or
any indenture, mortgage, lease, loan agreement or other agreement or instrument
by which either Parent or Merger Subsidiary is bound or affected, or any law,
statute, rule or regulation or order, judgment or decree to which either Parent
or Merger Subsidiary is subject.
4.4. MERGER SUBSIDIARY. All of the outstanding capital stock of Merger
Subsidiary is owned by Parent free and clear of any lien, claim or encumbrance
or any agreement with respect thereto. Since the date of its incorporation,
Merger Subsidiary has not engaged in any activity of any nature except in
connection with or as contemplated by this Agreement and the Certificate of
Merger.
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4.5. APPROVAL OF THE PLAN OF MERGER; MEETING OF SHAREHOLDERS. The Board
of Directors of Parent and of Merger Subsidiary have, by resolutions duly
adopted by unanimous written consent, approved this Agreement and the
Certificate of Merger and the transactions contemplated hereby and thereby,
including the Merger. No approval of the shareholders of Parent is required
under the GCL or the constituent documents of Parent to consummate the Merger.
None of the resolutions described in this Section has been amended or otherwise
modified in any respect since the date of adoption thereof and all such
resolutions remain in full force and effect.
4.6. DISCLOSURE AND FILINGS.
(a) Except as indicated in Schedule 4.6 of the Parent
Disclosure Schedule), Parent has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act (all of the foregoing, and all other
documents and registration statements heretofore filed by Parent with the SEC
being hereinafter referred to as the "SEC FILED DOCUMENTS"). None of the SEC
Filed Documents, at the time they were filed with the SEC (except those SEC
Filed Documents that were subsequently amended), contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their respective
dates, the consolidated financial statements of Parent included (or incorporated
by reference) in the SEC Filed Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC or other applicable rules and regulations with respect
thereto (except those SEC Filed Documents that were subsequently amended). Such
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (a) as may be otherwise indicated in such
consolidated financial statements or the notes thereto, or (b) in the case of
unaudited consolidated interim financial statements, to the extent they may
exclude footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company and its
Subsidiaries as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(b) Except as set forth in the SEC Filings, neither Parent nor
any Subsidiary has incurred any material liabilities of any kind, whether
accrued, absolute, contingent or otherwise or entered into any material
transactions except in the ordinary course of business. The other historical
financial and statistical information with respect to the Company included in
the SEC Filed Documents presents fairly in all material respects the information
shown therein on a basis consistent with the audited and unaudited financial
statements of the Company included in the SEC Filed Documents.
4.7. CAPITALIZATION. The authorized and outstanding capital stock of
Parent, including all options, warrants and other securities convertible into,
exercisable for, or exchangeable for, Parent Common Stock is as is set forth in
the Parent Disclosure Schedule or SEC Filed Documents. The Parent Disclosure
Schedule includes all securities or instruments of the Parent containing
anti-dilution or similar provisions that will be triggered by the Transactions
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hereunder or the Restructuring Agreement or any such securities arising as a
result of such transactions (exclusive of securities issued pursuant to these
agreements). The Parent has no other equity securities or securities containing
any equity features authorized, issued or outstanding. There are no agreements
or other rights or arrangements existing which provide for the sale or issuance
of capital stock by the Parent and, except as set forth in the aforesaid
schedule, there are no rights, subscriptions, warrants, options, conversion
rights or agreements of any kind outstanding to purchase or otherwise acquire
from the Parent any shares of capital stock or other securities of the Parent of
any kind. There are no agreements or other obligations (contingent or otherwise)
which may require the Company to repurchase or otherwise acquire any shares of
its capital stock
4.8. ABSENCE OF LIABILITIES. Except as set forth in the Parent
Disclosure Schedule and except for liabilities retained by Parent as set forth
in Schedule 4.8 or assumed and payable by a third Party pursuant to the
Restructuring Agreement at the Effective Time, neither Parent nor the Merger
Subsidiary shall have any liabilities whatsoever (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due, whether
known or unknown, and regardless of when asserted), including any liability of a
subsidiary which may be asserted against the Parent, arising out of transactions
or events heretofore entered into, or any action or inaction, or any state of
facts existing, with respect to or based upon transactions or events heretofore
occurring .
4.9. GOVERNMENTAL AUTHORITIES; CONSENTS. Except for the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and a
Schedule 14f with the Securities and Exchange Commission, neither Parent or
Merger Subsidiary is required to submit any notice, report or other filing with
any governmental authority in connection with the execution or delivery by it of
this Agreement or the Certificate of Merger or the consummation of the
transactions contemplated hereby or thereby. No consent, approval or
authorization of any governmental or regulatory authority or any other party or
person is required to be obtained by either Parent or Merger Subsidiary in
connection with its execution, delivery and performance of this Agreement or the
Certificate of Merger or the transactions contemplated hereby or thereby.
4.10. BROKERAGE. Except as set forth in the Disclosure Schedule, no
third party shall be entitled to receive any brokerage fees or commissions,
finder's fees, fees for financial advisory services or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Parent or Merger Subsidiary.
4.11. CONTRACTS. Except for Contracts set forth in the Parent
Disclosure Schedule as retained The Parent will not be a party to any Contract.
4.12. COMPLIANCE WITH LAWS. Except as set forth in the Parent
Disclosure Schedule, Parent and each of its subsidiaries is and has been in
compliance in all material respects with all laws, rules, regulations, orders,
judgments or decrees that are applicable to it, the conduct of its business as
presently conducted and as proposed to be conducted, and the ownership of its
property and assets related to occupational safety, health, wage and hour, and
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employment discrimination) and neither the Parent nor any subsidiary is aware of
any state of facts, events, conditions or occurrences which may now or hereafter
constitute or result in a violation of any of such laws, rules, regulations,
orders, judgments or decrees or which may give rise to the assertion of any such
violation, except where such violation or violations do not have a Material
Adverse Effect. All required reports and filings with governmental authorities
have been properly made as and when required, except where the failure to report
or file would not, individually or in the aggregate, have a Material Adverse
Effect.
4.13. SECURITIES LAW EXEMPTION. The prior issuance of Parent's
securities was exempt from the registration requirements of the Securities Act
and applicable state securities laws, and neither Parent nor any authorized
agent acting on its behalf has taken or will take any action hereafter that
would cause the loss of such exemption.
4.14. TAXES. Except as set forth in the Parent Disclosure Schedule,
Parent and each of its subsidiaries has timely filed all tax returns and reports
(federal, state and local) required to be filed and these returns and reports
are true and correct in all material respects. Parent and each of its
subsidiaries has paid all taxes and other assessments shown to be due on such
returns or reports. Neither the Internal Revenue Service nor any state or local
taxing authority has, during the past three (3) years, examined or informed the
Parent or any subsidiary that it is in the process of examining any such tax
returns and reports. The provision for taxes of Parent and each of its
subsidiaries as shown on the financial statements included in the most recent
SEC Filings, is adequate for taxes due or accrued as of the date thereof and
since that date each of the Parent and each of its subsidiaries has provided
adequate accruals in accordance with generally accepted accounting principals in
its financial statements for any taxes incurred that have not been paid, whether
or not shown as being due on any tax returns.
4.15. LITIGATION. There is no legal, administrative, arbitration, or
other proceeding, suit, claim or action of any nature or investigation, review
or audit of any kind, or any judgment, decree, decision, injunction, writ or
order pending, noticed, scheduled, or, to the knowledge of Parent, threatened or
contemplated by or against or involving Parent or Merger Subsidiary, their
respective assets, properties or business or its directors, officers, agents or
employees (but only in their capacity as such), whether at law or in equity,
before or by any person or entity or any foreign, federal, state or local
governmental quasi-governmental, AUTHORITY, questions or challenges the validity
of this Agreement or any action taken or to be taken by the parties hereto
pursuant to this Agreement or in connection with the transactions contemplated
herein.
4.16. SUBSIDIARIES. Upon the Effective Time, Parent will not own any
stock, partnership interest, joint venture interest or any other security or
ownership interest issued by any other corporation, organization or entity other
than as set forth in the Parent Disclosure Schedule or the Restructuring
Agreement. All issued and outstanding shares of capital stock of any of the
subsidiaries previously owned by Parent, either directly or through one or more
other subsidiaries, shall be transferred in connection with the Restructuring
Agreement.
4.17. FORM 14 F INFORMATION. The information contained in the Form 14 f
required to be filed pursuant to Section 5.4 hereof at the time of filing shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading with respect to information relating to Parent.
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4.18. DISCLOSURE. Neither this Agreement nor any of the Exhibits hereto
nor any of the documents delivered by or on behalf of the Company pursuant to
Article VI hereof nor the Parent Disclosure Schedule, taken as a whole, contains
any untrue statement of a material fact regarding Parent or its business or any
of the other matters dealt with in this Article IV relating to Parent or the
transactions contemplated by this Agreement. This Agreement, the Exhibits
hereto, the documents delivered to the Company by or on behalf of the Parent and
Merger Subsidiary pursuant to Article VI hereof, the Parent Disclosure Schedule,
taken as a whole, do not omit any material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not misleading.
ARTICLE V. COVENANTS OF THE COMPANY, PARENT AND MERGER SUBSIDIARY
5.1. CONDUCT OF THE BUSINESS. Each of the Parties shall, and Parent
shall cause Merger Subsidiary to, comply with each term set forth in this
Section 5.1 and agrees that, from the date hereof until the Effective Time,
unless otherwise consented to by the other party, no Party shall directly or
indirectly, do or permit to occur any of the following: (i) issue or sell any
additional shares of, or any options, warrants, conversion privileges or rights
of any kind to acquire any shares of, any of its capital stock except upon
exercise of issued and outstanding warrants or options, (ii) sell, pledge,
dispose of or encumber any of its assets, except in the ordinary course of
business or pursuant to the terms of the Restructuring Agreement; (iii) amend or
propose to amend its Certificate of Incorporation or Bylaws; (iv) split, combine
or reclassify any outstanding shares of Common Stock, or declare, set aside or
pay any dividend or other distribution payable in cash, stock, property or
otherwise with respect to shares of Common Stock; (v) redeem, purchase or
acquire or offer to acquire any shares of Common Stock or other securities of
the Company; (vi) acquire any interest in any other entity, business
organization or material assets thereof; or (vii) incur any indebtedness for
borrowed money or issue any debt securities in excess of amounts needed to
continue Parent's existing businesses and to comply with SEC rules and
regulations.
5.2. ACCESS TO BOOKS AND RECORDS. Between the date hereof and the
Closing Date, each Party shall afford to the other Party and its authorized
representatives (the "Representatives") full access at all reasonable times and
upon reasonable notice to the offices, properties, books, records, officers,
employees and other items of the Company, and otherwise provide such assistance
as is reasonably requested.
5.3. RESTRUCTURING AGREEMENT. Parent shall cause the transactions
contemplated by the Restructuring Agreement to occur.
5.4. FILING OF FORM 14F. The Company shall prepare and Parent shall
file a Form 14f in connection with this transaction as may be required under the
Exchange Act in a timely fashion.
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5.5. CONFIDENTIALITY. Each of the parties hereto agrees that it will
not use, or permit the use of, any of the information relating to any other
party hereto furnished to it in connection with the transactions contemplated
herein ("INFORMATION") in a manner or for a purpose detrimental to such other
party or otherwise than in connection with the transaction, and that they will
not disclose, divulge, provide or make accessible (collectively, "DISCLOSE"), or
permit the Disclosure of, any of the Information to any person or entity, other
than their respective directors, officers, employees, investment advisors,
accountants, counsel and other authorized representatives and agents, except as
may be required by judicial or administrative process or, in the opinion of such
party's counsel, by other requirements of Law; provided, however, that prior to
any Disclosure of any Information permitted hereunder, the disclosing party will
first obtain the recipients' undertaking to comply with the provisions of this
Section with respect to such information. The term "INFORMATION" as used herein
will not include any information relating to a party that can be shown: (i) to
have been in the recipient's possession prior to its receipt from another party
hereto; (ii) to be now or to later become generally available to the public
through no fault of the recipient party; (iii) to have been available to the
public at the time of its receipt by the recipient party; (iv) to have been
received separately by the recipient party in an unrestricted manner from a
person entitled to disclose such information; or (v) to have been developed
independently by the recipient party without regard to any information received
in connection with this transaction. Each party hereto also agrees to promptly
return to the party from whom it originally received such information all
original and duplicate copies of written materials containing Information should
the transactions contemplated herein not occur. A party hereto will be deemed to
have satisfied its obligations to hold the Information confidential if it
exercises the same care as it takes with respect to its own similar information.
5.6. FILINGS; CONSENTS; REMOVAL OF OBJECTIONS. Subject to the terms and
conditions herein provided, the parties hereto will use their best efforts to
take or cause to be taken all actions and do or cause to be done all things
necessary, proper or advisable under applicable laws to consummate and make
effective, as soon as reasonably practicable, the transactions contemplated
hereby, including without limitation obtaining all consents of any person or
entity, whether private or governmental, required in connection with the
consummation of the transactions contemplated herein. In furtherance, and not in
limitation of the foregoing, it is the intent of the parties to consummate the
transactions contemplated herein at the earliest practicable time, and they
respectively agree to exert commercially reasonable efforts to that end,
including without limitation: (i) the removal or satisfaction, if possible, of
any objections to the validity or legality of the transactions contemplated
herein; and (ii) the satisfaction of the conditions to consummation of the
transactions contemplated hereby.
5.7. FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
(a) Each party hereto will, before, at and after Closing,
execute and deliver such instruments and take such other actions as the other
party or parties, as the case may be, may reasonably require in order to carry
out the intent of this Agreement. Without limiting the generality of the
foregoing, at any time after the Closing, at the reasonable request of Parent
and without further consideration, the Company will execute and deliver such
instruments of sale, transfer, conveyance, assignment and confirmation and take
such action as Parent may reasonably deem necessary or desirable in order to
more effectively consummate the transactions contemplated hereby.
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(b) At all times from the date hereof until the Closing, each
party will promptly notify the other in writing of the occurrence of any event
which it reasonably believes will or may result in a failure by such party to
satisfy the conditions specified in Article VI.
5.8. PUBLIC ANNOUNCEMENTS. None of the parties hereto will make any
public announcement with respect to the transactions contemplated herein without
the prior written consent of the other parties, which consent will not be
unreasonably withheld or delayed; provided, however, that any of the parties
hereto may at any time make any announcements that are required by applicable
law so long as the party so required to make an announcement promptly upon
learning of such requirement notifies the other parties of such requirement, and
discusses with the other parties in good faith the exact proposed wording of any
such announcement and receives the prior consent of the other parties, which
consent shall not unreasonably be withheld.
5.9. SATISFACTION OF CONDITIONS PRECEDENT. Each party will use
commercially reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent that are applicable to them, and to cause the transactions
contemplated by this Agreement to be consummated, and, without limiting the
generality of the foregoing, to obtain all material consents and authorizations
of third parties and to make filings with, and give all notices to, third
parties that may be necessary or reasonably required on its part in order to
effect the transactions contemplated hereby.
5.10. WAIVER OF DISSENTERS RIGHTS. The Company shall obtain from all
holders of Company Common Stock either a written consent of shareholders
approving the Merger or a waiver of such holders' rights to dissent from the
Merger and to be paid the fair value of their Company Common Stock in accordance
with applicable provisions of the GCL.
ARTICLE VI. CONDITIONS TO CLOSING
6.1. CONDITIONS TO PARENT'S AND MERGER SUBSIDIARY'S OBLIGATIONS. The
obligation of Parent and Merger Subsidiary to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of the following
conditions at or before the Effective Time:
(a) The representations and warranties set forth in Article
III hereof shall be true, complete and accurate in all material respects as of
the date when made and at the Effective Time as though such representations and
warranties were made at and as of such time, except that any such representation
or warranty made as of a specified date (other than the date hereof) shall only
need to have been true on and as of such date.
(b) The Company shall have performed and complied in all
material respects with all of the covenants, agreements and obligations required
to be performed and complied with by it under this Agreement prior to the
Effective Time.
(c) There shall not be threatened, instituted or pending any
action or proceeding, before any court or governmental authority or agency,
domestic or foreign, (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions or (ii) otherwise relating to and materially
adversely affecting the transactions contemplated hereby.
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(d) Parent and Merger Subsidiary will have received the
following agreements and documents, each of which will be in full force and
effect:
(i) a certificate executed on behalf of the Company
by its Chief Executive Officer confirming that the conditions set forth in
Sections 6.1(a), (b) and (c) have been duly satisfied.
(ii) a unanimous written consent executed by the
Board of Directors of the Company and a unanimous written consent executed by
the Company Shareholders approving this Agreement and the transactions
contemplated herein and therein.
(e) No change will have occurred in the business, financial
condition, prospects, assets or operations of the Company since June 30, 2007,
except as set forth in the Disclosure Schedule, that has a Material Adverse
Effect.
(f) No law will have been enacted which prohibits, restricts
or delays the consummation of the transactions contemplated hereby or any of the
conditions to the consummation of such transaction.
(g) All action required by law and otherwise to be taken by
the Company Shareholders to authorize the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby will
have been duly and validly taken.
(h) All consents of or from all Authorities required hereunder
to consummate the transactions contemplated herein, will have been delivered,
made or obtained, and Parent will have received copies thereof.
(i) Parent will have received, in a form and substance
reasonably satisfactory to Parent, dated the Closing Date, all certificates and
other documents, instruments and writings to evidence the fulfillment of the
conditions set forth in this Article VI as Parent may reasonably request.
6.2. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions at or before the
Effective Time:
(a) The representations and warranties set forth in Article IV
hereof will be true and correct in all material respects at and as of the
Effective Time as though then made and as though the Effective Time had been
substituted for the date of this Agreement throughout such representations and
warranties.
(b) Parent and Merger Subsidiary shall have performed in all
material respects all the covenants and agreements required to be performed by
them under this Agreement and the Certificate of Merger prior to the Effective
Time, and Merger Subsidiary shall have executed the Certificate of Merger.
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(c) There shall not be threatened, instituted or pending any
action or proceeding, before any court or governmental authority or agency,
domestic or foreign, (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions or (ii) otherwise relating to and materially
adversely affecting the transactions contemplated hereby.
(d) The closing of the transactions contemplated by the
Restructuring Agreement shall have occurred to the satisfaction of the Company.
(e) All officers of the Parent and the entire board of
directors of the Parent shall have resigned and the vacancies created by such
resignation shall have been filled by the election of designees of the Company,
such resignation and election to be effective upon the effectiveness of the
Merger. The present designees are Jason Meyers and Salvatore Farina.
(f) The Form 14f as may be required under the Exchange Act
shall have been filed with the Securities and Exchange Commission and
distributed to the record stockholders of Parent in sufficient time prior to the
Closing Date, and not be subject to any review, so that the Parent may proceed
with the changes referred to in the proceeding paragraph.
(g) The Company or its shareholders shall receive a voting
agreement and irrevocable proxies thereunder to vote shares of Parent held by
Christopher Schwartz and the persons acquiring shares of Parent Stock pursuant
to the Restructuring Agreement to effect an amendment to the Company's
Certificate of Incorporation as required for automatic conversion of Parent
Series A Stock pursuant to Section 5 of the Certificate of Designations,
Preferences and Rights of Series A Convertible Preferred Stock set forth at
Exhibit "B" hereto.
(h) Parent shall be in good standing and shall have paid all
required taxes under the laws of the State of Delaware.
(i) The Company will have received the following agreements
and documents, each of which will be in full force and effect:
(i) a certificate executed on behalf of the Parent by
its Chief Executive Officer confirming that the conditions set forth in Sections
6.2 (a), (b) and (c) have been duly satisfied.
(ii) a unanimous written consent executed by the
Board of Directors of the Parent approving this Agreement and the Restructuring
Agreement and the transactions contemplated thereunder.
(j) No change will have occurred in the business, financial
condition, prospects, assets or operations of the Company since July 31, 2007,
except as set forth in the Disclosure Schedule or as result of the Restructuring
Agreement, that has a Material Adverse Effect.
(k) No law will have been enacted which prohibits, restricts
or delays the consummation of the transactions contemplated hereby or any of the
conditions to the consummation of such transaction.
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(l) All consents of or from all Authorities required hereunder
to consummate the transactions contemplated herein, will have been delivered,
made or obtained, and the Company will have received copies thereof.
(m) The Company shall have received the waivers and agreements
described under assumptions set forth in Schedule 2.1(b) or the Merger
Consideration shall be adjusted.
(n) The Company shall receive executed copies of Release and
Acknowledgment Agreements called for in Schedule 6.2.
(o) The Company will have received, in a form and substance
reasonably satisfactory to Parent, dated the Closing Date, all certificates and
other documents, instruments and writings to evidence the fulfillment of the
conditions set forth in this Article VI as Parent may reasonably request.
ARTICLE VII. TERMINATION
7.1. TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by the mutual consent of Parent, Merger Subsidiary, and
the Company;
(b) by either Parent or Merger Subsidiary, on the one hand, or
the Company, on the other, if there has been a material misrepresentation,
breach of warranty or breach of covenant on the part of the other in the
representations, warranties and covenants set forth in this Agreement;
(c) by either Parent or Merger Subsidiary, on the one hand, or
the Company, on the other, if the transactions contemplated by this Agreement or
the Certificate of Merger have not been consummated by the Termination Date
provided that, neither will be entitled to terminate this Agreement pursuant to
this Section 7.1(c) if such party's willful breach of this Agreement or failure
to fulfill any obligation under this Agreement has prevented the consummation of
the transactions contemplated by this Agreement or the Certificate of Merger.
(d) TERMINATION BY PARENT. This Agreement may be terminated at
any time prior to the Closing by Parent if all of the conditions set forth in
Section 6.2 shall have been satisfied and any of the conditions provided for in
Section 6.1 have not been met or waived by Parent in writing, Parent has
notified the Company that such condition has not been met and has allowed the
Company at least thirty (30) days to satisfy such condition and such condition
is not capable of being satisfied prior to the Termination Date.
(e) TERMINATION BY THE COMPANY. This Agreement may be
terminated prior to the Closing by the Company if all of the conditions set
forth in Section 6.1 shall have been satisfied and any of the conditions
provided for in Section 6.2 have not been met or waived by the Company in
writing, the Company has notified Parent that such condition has not been met
and has allowed Parent at least thirty (30) days to satisfy such condition and
such condition is not capable of being satisfied prior to the Termination Date.
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7.2. PROCEDURE AND EFFECT OF TERMINATION. In the event of termination
of this Agreement and abandonment of the transactions contemplated hereby by the
Company or Parent pursuant to this Article VII, written notice thereof will be
given to all other parties and this Agreement will terminate and the
transactions contemplated hereby will be abandoned, without further action by
any of the parties hereto. If this Agreement is terminated as provided herein:
(a) Each of the parties will, upon request, redeliver all
documents, work papers and other material of the other parties relating to the
transactions contemplated hereby, whether obtained before or after the execution
hereof, to the party furnishing the same;
(b) No party will have any liability for a breach of any
representation, warranty, agreement, covenant or the provision of this
Agreement, unless such breach was due to a willful or bad faith action or
omission of such party or any representative, agent, employee or independent
contractor thereof; and
(c) All filings, applications and other submissions made
pursuant to the terms of this Agreement will, to the extent practicable, be
withdrawn from the agency or other person to which made.
ARTICLE VIII. SURVIVAL, ADJUSTMENT
8.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
investigation made by or on behalf of any of the parties hereto or the results
of any such investigation and notwithstanding the participation of such party in
the Closing, the representations and warranties contained in Article III and
Article IV hereof shall survive the Effective Time for a period of three years
following the Closing Date, at which point such representations and warranties
and any claim for indemnification for breach thereof will terminate, except for
pending claims as of such date of termination.
8.2. INDEMNIFICATION BY PARENT. Parent will indemnify, defend and hold
harmless the shareholders of the Company (the "COMPANY SHAREHOLDERS") and their
respective successors and permitted assigns, and the officers, employees,
directors, managers, members, partners and stockholders of such Persons
(collectively, the "SELLER INDEMNITEES") from and against, and will pay to the
Seller Indemnitees the amount of, any and all out-of-pocket or other losses,
liabilities, claims, damages, penalties, fines, judgments, awards, settlements,
Taxes, costs, fees, expenses (including, but not limited to, reasonable attorney
and investigation fees) and disbursements (collectively, "LOSSES") incurred by
any of the Seller Indemnitees, including any of the foregoing arising out of a
Third Party Claim as hereinafter defined, following the Closing Date based upon,
arising out of or relating to (a) any breach of or inaccuracy in the
representations and warranties of Parent contained in this Agreement; or (b) any
breach of the covenants or agreements of Parent contained in this Agreement or
breach by Newco of its obligations in the Restructuring Agreement. Any such
payments will be made solely through the issuance of additional capital stock of
Parent to the Company Shareholders. The number of shares of Parent Common Stock
to be issued to the Company Shareholders will be calculated by dividing the
amount of Losses by the average of the closing bid prices of Parent's common
stock for the ten (10) trading days prior to the date that such Loss is
determined to exist.
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8.3. INDEMNIFICATION BY THE COMPANY AND COMPANY PRINCIPAL SHAREHOLDERS.
The Company and each of the Company Shareholders will indemnify, defend and hold
harmless, Parent, its affiliates and their respective successors and permitted
assigns, and the officers, employees, directors, managers, members, partners and
stockholders of such Persons (collectively, the "BUYER INDEMNITEES") from and
against, and will pay to the Buyer Indemnitees the amount of, any and all Losses
incurred by any of the Buyer Indemnitees following the Closing Date, including
any of the foregoing arising out of a Third Party Claim as hereinafter defined,
based upon, arising out of or relating to (a) any breach of or inaccuracy in the
representations and warranties of the Company contained in this Agreement; or
(b) any breach of the covenants or agreements of the Company contained in this
Agreement. Any such payments will be made solely through the cancellation of
shares of Parent Common Stock by the Company Shareholders. The number of shares
of Parent Common Stock to be cancelled by the Company Shareholders will be
calculated by dividing the amount of Losses by the average of the closing bid
prices of Parent's Common Stock for the ten (10) trading days prior to the date
that such liability is determined to exist. To the extent that an insufficient
number of authorized shares of Parent Common Stock exist at the time of such
claim, then an equivalent number of shares of Parent Series A Stock shall be
cancelled.
8.4. EXCLUSIVE REMEDY. The parties agree that the exclusive remedies of
the parties against each other for any Losses based upon, arising out of or
otherwise in respect of the matters set forth in this Agreement are the remedies
of the parties set forth in this Article VIII. The provisions of this Section
8.4 shall not, however, (i) prevent or limit a cause of action under Section 8.7
to obtain an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof, (ii) prevent or limit
any party's right to assert any available legal defenses, claims or cross-claims
or implead a party in any legal proceeding by any Person which has not been
fully assumed by the other party pursuant to this Article VIII or (iii) prevent
or limit any party from seeking contribution from any other party through an
action or otherwise with respect to any order that holds any two or more of the
parties hereto jointly and severally liable.
8.5. LIMITATIONS ON INDEMNIFICATION PAYMENTS. Notwithstanding anything
in this Agreement to the contrary, the right of an Indemnitee to indemnification
is limited as follows:
(a) The Buyer Indemnitees and Seller Indemnitees will be
entitled to indemnification pursuant to Sections 8.3 or 8.4 to the extent (but
only to the extent) that the aggregate amount of all Losses exceeds $15,000 and
then only to the extent of the excess.
(b) The Buyer Indemnitees' right to indemnification pursuant
to Section 8.3 and the Seller Indemnitees' right to indemnification pursuant to
Section 8.2 will be reduced by all insurance or other third party
indemnification proceeds actually received by Parent or the Surviving
Corporation with respect to such Loss. Each party shall use reasonable efforts
to cooperate with Parent or the Surviving Corporation to claim and recover any
Losses suffered by the Buyer Indemnitees or Seller Indemnitees under any such
insurance policies or other third party indemnities. The Buyer Indemnitees and
Seller Indemnitees shall remit to Parent any such insurance or other third party
proceeds which are paid to them with respect to Losses for which they have
previously compensated pursuant to Section 8.2 or 8.3, respectively.
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(c) No party will be entitled to indemnification pursuant to
Section 8.2 or Section 8.3 for punitive, consequential (including lost profits
and diminution in value), exemplary or special damages with respect to any claim
for indemnity under this Article VIII which does not involve a Third Party
Claim.
8.6. PROCEDURES. All claims for indemnification under this Agreement
shall be asserted and resolved as follows:
(a) THIRD PARTY CLAIM.
(i) OPPORTUNITY TO DEFEND THIRD PARTY CLAIMS. In the
event of any claim by a third party against a Buyer Indemnitee or Seller
Indemnitee for which indemnification is available hereunder (a "THIRD PARTY
CLAIM") the Buyer Indemnitee or the Seller Indemnitee, as applicable
("INDEMNITEE"), shall give written notice thereof (a "CLAIMS NOTICE") to the
Company and Company Shareholders, if indemnification is sought against the
Parent, or the Parent, if indemnification is sought against the Company and/or
the Company Shareholders (each an "INDEMNIFYING PARTY"). A Claims Notice must
describe the Third Party Claim in reasonable detail, and indicate the amount of
the Loss claimed by the third party. No delay in or failure to give notice of a
Third Party Claim will adversely affect any of the other rights or remedies of
an Indemnitee under this Agreement, or alter or relieve the Indemnifying Party
of its obligation to indemnify the applicable Indemnitee except to the extent
that the Indemnifying Party is materially prejudiced thereby. The Indemnifying
Party has the right, exercisable by written notice to the Indemnitee, within
sixty (60) days of receipt of a Claims Notice from the Indemnitee, to assume and
conduct the defense of such claim with counsel selected by the Indemnifying
Party. If the Indemnifying Party has assumed such defense as provided in this
Section 8.6(a)(i), the Indemnifying Party will not be liable for any legal
expenses subsequently incurred by any Indemnitee in connection with the defense
of such Claim. If the Indemnifying Party does not assume the defense of any
third party claim in accordance with this Section 8.6(a)(i), the Indemnitee may
continue to defend such claim at the sole cost of the Indemnifying Party
(subject to the limitations set forth in this Article VIII) and the Indemnifying
Party may still participate in, but not control, the defense of such third party
claim at the Indemnifying Party's sole cost and expense. The Indemnitee will not
consent to a settlement of, or the entry of any judgment arising from, any such
claim, without the prior written consent of the Indemnifying Party (such consent
not to be unreasonably withheld or delayed). Except with the prior written
consent of the Indemnitee (such consent not to be unreasonably withheld or
delayed), no Indemnifying Party, in the defense of any such claim, will consent
to the entry of any judgment or enter into any settlement that (i) provides for
injunctive or other nonmonetary relief affecting the Indemnitee or (ii) does not
include as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnitee of a release from all liability with respect to
such claim or litigation. In any such Third Party Claim, the party responsible
for the defense of such claim (the "RESPONSIBLE PARTY") shall, to the extent
reasonably requested by the other party, keep such other party informed as to
the status of such claim, including all settlement negotiations and offers. Each
Party shall use all reasonable efforts to make available to the Responsible
Party and its representatives all books and records of such Party and the
Business relating to such third party claim and shall cooperate with the
Responsible Party in the defense of the third party claim.
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(ii) SETTLEMENT. The Responsible Party shall promptly
notify the other party of each settlement offer with respect to a Third Party
Claim. Such other party shall promptly notify the Responsible Party whether or
not such party is willing to accept the proposed settlement offer. If the
Company and the Company Shareholders are willing to accept the proposed
settlement offer but Parent refuses to accept such settlement offer, then if (i)
such settlement offer requires only the payment of money damages, requires no
other actions by any Indemnitee, does not impose any restriction on Parent with
respect to the operation of the Business and provides a complete release of all
Indemnitees that are a party to such third party claim with respect to the
subject matter thereof, and (ii) the Company and the Company Shareholders agree
in writing that the entire amount of such proposed settlement constitutes Losses
that are indemnifiable (subject to the limitations set forth in this Article
VIII), then the amount payable to the Indemnitees with respect to such third
party claim will be limited to the amount of such settlement offer subject to
the limitations contained in this Article VIII. The Company and the Company
Shareholders may nevertheless propose in writing a good faith, reasonable
settlement offer (a "COMPANY PROPOSED SETTLEMENT OFFER") that requires only the
payment of money damages, requires no other actions by any Indemnitee, does not
impose any restriction on Parent with respect to the operation of the Business
and provides a complete release of all Indemnitees who are parties to such third
party claim with respect to the subject matter thereof; PROVIDED, HOWEVER, that
the Company and the Company Shareholders agree in writing that the entire amount
of such proposed settlement constitutes Losses that are indemnifiable (subject
to the limitations set forth in this Article VIII). If Parent refuses to agree
to or make a Company Proposed Settlement Offer to the claimant in the third
party claim, any amount payable to a Buyer Indemnitee with respect to such Third
Party Claim will be limited to the amount of such proposed settlement offer. If
any such settlement offer is made to any claimant and rejected by such claimant,
the amount payable to an Indemnitee with respect to such claim will not be
limited to the amount of such settlement offer but will remain subject to all
other limitations set forth in this Agreement.
(b) DIRECT CLAIM. As soon as reasonably practicable after an
Indemnitee has actual knowledge of any claim to which Indemnitee is entitled to
indemnity under Section 8.2 or Section 8.3 that does not involve a Third Party
Claim (a "DIRECT CLAIM"), the Indemnitee shall give written notice thereof (an
"INDEMNITY NOTICE") to the Indemnifying Party. An Indemnity Notice must describe
the Direct Claim in reasonable detail, and indicate the amount (estimated, as
necessary and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee. No delay in or failure to give notice of a Direct
Claim will adversely affect any of the other rights or remedies of an Indemnitee
under this Agreement, or alter or relieve the Indemnifying Party of its
obligation to indemnify the applicable Indemnitee except to the extent that the
Indemnifying Party is materially prejudiced thereby. The Indemnifying Party
shall respond to any Indemnity Notice within thirty (30) days (the "INDEMNITY
RESPONSE PERIOD") after the date that the Indemnity Notice is sent by the
Indemnitee. Any response to the Indemnity Notice (an "INDEMNITY RESPONSE") must
specify whether or not the Indemnifying Party disputes its obligations to
indemnity the Indemnitee with respect to the Direct Claim asserted in the
Indemnity Notice. If the Indemnifying Party fails to give an Indemnity Response
within the Indemnity Response Period, it will be deemed not to dispute the
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asserted Direct Claim. If the Indemnifying Party elects not to dispute the
asserted Direct Claim, whether by failing to give a timely Indemnity Response or
otherwise, then the amount of Losses alleged in such Indemnity Notice will be
conclusively deemed to be an obligation of the Indemnifying Party, and the
Indemnifying Party shall pay, in cash (or tender of shares of the Parent Common
Stock for cancellation if Parent is the Indemnitee), to the Indemnitee within
fifteen (15) days after the last day of the applicable Indemnity Response Period
the amount specified in the Indemnity Notice. If Indemnifying Party delivers to
Indemnitee an Indemnity Response within the Indemnity Response Period indicating
that it disputes one or more of the matters identified in the Indemnity Notice,
the Indemnifying Party and Indemnitee shall promptly meet and use their
reasonable efforts to settle the dispute. If the Indemnifying Party and the
Indemnitee are unable to reach agreement within thirty (30) days after the
conclusion of the Indemnity Response Period, then either the Indemnifying Party
or the Indemnitee may resort to other legal remedies subject to the limitations
set forth in this Article VIII.
8.7. SUBROGATION. Upon making any indemnity payment pursuant to Section
8.2 or Section 8.3, as applicable, the Indemnifying Party shall be subrogated to
all rights of the indemnified party against any third party in respect of the
Losses to which the payment related. The parties hereto will execute upon
request all instruments reasonably necessary to evidence and perfect the above
described subrogation rights.
ARTICLE IX. MISCELLANEOUS
9.1. EXPENSES. Except as otherwise expressly provided for herein,
Parent and Merger Subsidiary and the Company will each pay all of their own
expenses (including attorneys' and accountants' fees) in connection with the
negotiation of this Agreement, the performance of their respective obligations
under this Agreement and the Certificate of Merger and the consummation of the
transactions contemplated hereby and thereby if the transactions contemplated by
this Agreement are not consummated. In the event that the transactions
contemplated by this Agreement are consummated, any legal fees and expenses of
the Company which are unpaid by the Company on the Effective Date shall become
obligations of the Surviving Corporation or the Parent. In the event that the
transactions contemplated by this Agreement are consummated, there shall be no
outstanding liability legal fees and expenses of the Parent and Merger
Subsidiary in excess of $20,000 after assumption of any additional amounts by
Newco pursuant to the Restructuring Agreement.
9.2. AMENDMENT AND WAIVER. This Agreement may not be amended or waived
except in a writing executed by the party against which such amendment or waiver
is sought to be enforced; PROVIDED, HOWEVER, that after the approval of the Plan
of Merger by the shareholders of the Company, no amendment may be made which
reduces the Merger Consideration or which effects any changes which would
materially adversely affect the shareholders of the Company without the further
approval of the shareholders of the Company. No course of dealing between or
among any persons having any interest in this Agreement will be deemed effective
to modify or amend any part of this Agreement or any rights or obligations of
any person under or by reason of this Agreement.
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9.3. NOTICES. All notices, demands and other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered or three
days after being mailed, if mailed by first class mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices, demands and communications to
Parent, Merger Subsidiary, the Company will, unless another address is specified
in writing, be sent to the address indicated below:
Notices to Parent or Merger Subsidiary: TriMedia Entertainment Group, Inc.
333 East Lancaster Avenue, Suite 411
Wynnewood, PA 19096
Attn: Christopher Schwartz
Notices to the Company: c/o Aspatuck Holdings Ltd.
115 East 57th Street, 11th Floor
New York, NY 10022
Attn: Jason Meyers
9.4. ASSIGNMENT. This Agreement and all of the provisions hereof will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned by any
party hereto without the prior written consent of the other parties hereto.
9.5. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
9.6. COMPLETE AGREEMENT. Except as provided for in Section 9.1, this
Agreement, the Certificate of Merger and the Related Agreements and other
exhibits hereto, the Disclosure Schedule and the other documents referred to
herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way
,except any letter of the Company to Parent counsel relating to the payment of
certain legal fees .
9.7. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
9.8. GOVERNING LAW. The internal law, without regard for conflicts of
laws principles, of the State of Delaware will govern all questions concerning
the construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
TRIMEDIA ENTERTAINMENT GROUP, INC
By: /s/
---------------------------
Name: Christopher Schwartz
Title: Chief Executive Officer
TRIMEDIA ACQUISITION CORP.
By: /s/
---------------------------
Name: Christopher Schwartz
Title: Chief Executive Officer
VGB MEDIA, INC
By: /s/
---------------------------
Name: Jason M. Meyers
Title: Chief Executive Officer
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