AGREEMENTAND PLAN OF MERGER BYAND AMONG CHARLESTONBASICS, INC., PANELTECHPRODUCTS, INC. AND PANELTECHINTERNATIONAL, L.L.C. DECEMBER23, 2009 AGREEMENTAND PLAN OF MERGER

 

 

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THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of December 23, 2009, by and among CHARLESTON BASICS, INC, a Delaware corporation (“Pubco”), PANELTECH PRODUCTS, INC., a Delaware corporation and a wholly-owned subsidiary of Pubco (the “Merger Sub”), and PANELTECH INTERNATIONAL, L.L.C. a Washington limited liability company (the “Company”).  Pubco, Merger Sub and the Company each, individually, a “Party” or, collectively, the “Parties.”

 

 

WHEREAS, the Parties desire to set forth the terms and conditions pursuant to which Pubco shall combine with the Company pursuant to a merger (the “Merger”) in accordance with the Delaware General Corporation Law (the “DGCL”), the Washington Limited Liability Company Act (the “Washington LLC Act”) and the terms of this Agreement whereby the Company will merge with and into Merger Sub, with Merger Sub continuing as the surviving corporation in the Merger and a wholly-owned subsidiary of Pubco (the “Surviving Corporation”);

WHEREAS, is intended that the Merger qualify, for federal income tax purposes, as a reverse triangular merger under Section 368(a)(2)(E) of the Code (as defined below);

 

WHEREAS, the respective boards of directors of Pubco, Merger Sub and the Company have approved the Parties’ entry into this Agreement; and

 

WHEREAS, this Agreement, the Merger and the other matters contemplated hereby have been approved by the sole stockholder of Merger Sub and Members (as defined below) of the Company, as required pursuant to the requirements of the DGCL, the Washington LLC Act and the Operating Agreement (as defined below); and

 

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, agreements and covenants herein contained, and for good and other valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:

 

The following terms, undefined in the text of this Agreement, shall have the following meanings:

“Affiliate” shall mean, with respect to any Person, any other Person, directly or indirectly, controlling, controlled by or under common control with such Person.  For purposes of this definition a Person is deemed to “control” an Entity if such Person, directly or indirectly, (i) has the power to direct the management or policies of such Entity; or (ii) owns, beneficially or of record (a) an amount of voting securities or other interests in such Entity that is sufficient to enable such Person to elect at least a majority of the members of such Entity’s board of directors or other governing body or (b) at least fifty percent (50%) of the outstanding equity or financial interests of such Entity.

“Business Day” shall mean means any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Closing Documents” shall mean documents, certificates or other instruments delivered or to be delivered by or on behalf of the Company, the Merger Sub and Pubco at the Closing pursuant to Article V, the Schedules and Exhibits of this Agreement.

 

“Code” shall mean United States Internal Revenue Code of 1986, as amended.

 

“Commission” shall mean the United States Securities and Exchange Commission.

 

“Company Contract” shall mean any agreement, contract, obligation, arrangement or understanding, whether oral or written, including any amendment, supplement, restatement, renewal or replacement thereto: (i) to which the Company is a party; (ii) by which the Company or any of its assets is or may become bound or under which the Company has, or may become subject to, any obligation; or (iii) under which the Company has or may acquire any right or interest.

 

 “Consent” shall mean any approval, consent, ratification, permission, waiver or authorization of any third party (including any Governmental Body).

 

 “Employee Benefit Plan” shall mean any “employee pension benefit plan” (as defined in Section 3(2) of ERISA, any “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), and any other written or oral plan, agreement or arrangement involving direct or indirect compensation, including, without limitation, insurance coverage, severance benefits, disability benefits, deferred compensation, bonuses, options, or other forms of incentive compensation or post-retirement compensation.

 

“Entity” shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, limited liability company, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.

 

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate” shall mean any Entity which is a member of (i) a controlled group of corporations (as defined in Section 414(b) of the Code), (ii) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (iii) an affiliated service group (as defined under Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes the Company.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“GAAP” shall mean generally accepted accounting principles applicable in the United States of America.

 

“Governmental Body” shall mean any: (i) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign, supranational or other government (including the European Union); or (iii) governmental, self-regulatory or quasi-governmental authority of any nature, including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or Entity and any court or other tribunal.

 

 “including”, “include”, “includes”, shall be construed as if followed by the phrase “without limitation”.

 

“Intellectual Property” shall mean all intellectual property owned or used in the conduct of the business of any Party, as it is currently conducted, including, but not limited to, (i) all United States and foreign patents (both issued and applied for) listed on the Company Disclosure Schedule or Pubco Disclosure Schedule, as applicable, (ii) all trademarks, trade names, service marks, copyrights, and all applications for such trademarks, trade names, service marks and copyrights, and all patent rights in each case listed on the Company Disclosure Schedule or Pubco Disclosure Schedule, as applicable, and (iii) all trade secrets, schematics, technology, know-how, computer software programs or applications and tangible or intangible proprietary information or material, and all Third Party Intellectual Property Rights including, without limitation, issued United States and foreign patents, patent rights and patent applications (excluding packaged commercially available licensed software programs sold to the public) owned by or for which any Party has acquired the rights to use whether by license or otherwise.

 

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.11.

 

“Knowledge” shall mean, (a) when made with reference to the Company, the actual knowledge of the executive officers of the Company, and (b) when made with reference to Pubco, the actual knowledge of the executive officers of the Pubco.

“Legal Proceeding” shall mean any ongoing or threatened action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.

 

“Legal Requirements” shall mean any federal, state, local, municipal, foreign, international, multinational or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body.

“Liabilities” shall mean any debt, obligation, duty or liability of any nature (including unknown, undisclosed, unmatured, unaccrued, contingent, or indirect) regardless of whether such debt, obligation, duty or liability would be required to be disclosed on a balance sheet prepared in accordance with GAAP and regardless of whether such debt, obligation, duty or liability is immediately due and payable.

“Lien” shall mean any mortgage, pledge, security interest, encumbrance, charge, or other lien (whether arising by contract or by operation of law), other than (i) mechanic’s, materialmen’s, and similar liens, (ii) liens arising under worker’s compensation, unemployment insurance, social security, retirement, and similar legislation, (iii) liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the ordinary course of business of the Company and not material to the Company, and (iv) liens for current Taxes that are being contested in good faith.

 

“Manager” shall mean each individual appointed as a manager of the Company, as provided for in Article IV of the Washington LLC Act, whether or not such position is referred to as a manager or a director of the Company.

“Material Adverse Effect” when used in connection with a Party means any change, event, circumstance or effect whether or not such change, event, circumstance or effect is caused by or arises in connection with a breach of a representation, warranty, covenant or agreement of such Party in this Agreement that is or is reasonably likely to be materially adverse to the business, assets (including intangible assets), capitalization, financial condition, operations or results of operations or employees of such Party taken as a whole with its subsidiaries, except to the extent that any such change, event, circumstance or effect results from (i) changes in general economic conditions, (ii) changes affecting the industry generally in which such Party operates (provided that such changes do not affect such Party in a substantially disproportionate manner), or (iii) changes in the trading prices for such Party’s capital stock.

 

“Material Contract” shall mean a contract, series of contracts or a commitment requiring payments or other consideration by or from the Company in excess of Fifty Thousand Dollars ($50,000) during the term of the Contract.

“Members” shall mean the holders of the Membership Interests immediately prior to the Effective Time.

 

“Membership Interests” shall mean all of the issued and outstanding membership interests of the Company immediately prior to the Effective Time.

 

“Merger Shares” shall mean Pubco Common Stock issued to the Members in consideration for the conversion of the Membership Interests as a result of the Merger, pursuant to the provisions of Article II hereafter.

“Merger Sub Common Stock” shall mean the common stock, par value $0.0001 per share, of Merger Sub.

“Operating Agreement” shall mean the Company’s Amended and Restated Operating Agreement, dated February 24, 1999, as amended.

“Order” shall mean any writ, decree, permanent injunction, order or similar action used in a Legal Proceeding.

“Permits” shall mean all permits, licenses, registrations, certificates, Orders or approvals received from any Governmental Body (including, without limitation, those issued or required under applicable export laws or regulations).

 

“Person” shall mean any individual, partnership, joint venture, corporation, limited liability company, limited liability partnership, trust or incorporated organization.

 

“Private Placement” shall mean a private placement offering pursuant to which Pubco intends to raise a minimum of $1,500,000 and up to a maximum of $3,000,000, pursuant to the sale of the Pubco Securities, and which the initial closing of such offering is to be consummated immediately after the closing of the Merger in accordance with the Securities Purchase Agreement.  The consummation of the Merger is one of the conditions to the initial closing of the Private Placement.

 

“Private Placement Documents” shall mean the Securities Purchase Agreement, along with the Certificate of Designations, the Warrants, the Escrow Agreement, the Management Lock-Up Agreements, and the Investor Rights Agreement (as each of such terms are defined in the Securities Purchase Agreement and each of which is attached as an exhibit to the Securities Purchase Agreement), as well any other documents or agreements executed and/or delivered in connection with the transactions contemplated under the Securities Purchase Agreement.

“Pubco Common Stock” shall mean the common stock, par value $0.0001 of Pubco.

 

“Pubco Contract” shall mean any agreement, contract, obligation, arrangement or understanding, whether oral or written, including any amendment, supplement, restatement, renewal or replacement thereto: (i) to which Pubco is a party; (ii) by which Pubco or any of its assets is or may become bound or under which Pubco has, or may become subject to, any obligation; or (iii) under which Pubco has or may acquire any right or interest.

“Pubco Securities” shall mean the Pubco Preferred Stock and the Warrants to be issued in accordance with the terms of the Private Placement Documents.

 

“Pubco Common Stock” shall mean common stock, par value $0.0001 per share, of Pubco.

 

“Sarbanes–Oxley Act” shall mean the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Securities Laws” shall mean the Securities Act, the Exchange Act, the Sarbanes-Oxley Act, the Investment Company Act of 1940, the Investment Advisors Act of 1940, the Trust Indenture Act of 1939, each as amended, and the rules and regulations of any Governmental Body promulgated thereunder.

"Securities Purchase Agreement" shall mean that certain Securities Purchase Agreement, in the form attached hereto as Exhibit A, to be entered into in connection with the Private Placement.

 

 “Tax” or “Taxes” shall mean all taxes, charges, fees, levies or other similar assessments or liabilities, including, without limitation, income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment, payroll and franchise taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof and any amounts of Taxes of another person that the Company, Pubco, Merger Sub, or any subsidiary of any of the foregoing, as applicable, is liable to pay by law or otherwise.

 

“Tax Returns” shall mean all reports, returns, declarations, statements or other information supplied or required to be supplied to a taxing authority in connection with Taxes including, without limitation, any schedules, attachments or amendments thereto.

 

“Third Party Intellectual Property Rights” shall mean all material written licenses, sublicenses and other agreements as to which the Company, Pubco or Merger Sub, as applicable, is a party and pursuant to which any of them is authorized to use any third party patents, patent rights, trademarks, service marks, trade secrets or copyrights, including software which is used in

 

 

“Transaction Documents” shall mean this Agreement, including all schedules and exhibits hereto, along with any and all other documents entered into by the Parties in connection with the transactions contemplated hereunder.

 

 

 

Upon and subject to the terms and conditions of this Agreement, the Company shall merge with and into Merger Sub (such merger is referred to herein as the “Merger”) at the Effective Time.  From and after the Effective Time (as such term is defined in Section 2.2 hereafter), the separate corporate existence of the Company shall cease and Merger Sub shall continue as the surviving corporation in the Merger (the “Surviving Corporation”).  Following the Effective Time, the Surviving Corporation shall be operated as a wholly-owned subsidiary of Pubco.  Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all of the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

 

 

The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Feldman LLP, 420 Lexington Avenue, Suite 2620, New York, New York, or such other location mutually agreed upon by the Parties, concurrently with the execution of this Agreement by the Parties, provided that such shall occur on or prior to December 31, 2009 (the “Closing Date”).  Contemporaneously with the Closing, a properly executed certificate of merger conforming to the requirements of the DGCL (the “Delaware Certificate of Merger”) shall be filed with the office of the Secretary of State of Delaware and a properly executed articles of merger conforming to the requirements of the Washington LLC Act (the “Washington Articles of Merger”) also shall be filed with the office of the Secretary of State of Washington.  The Merger shall become effective only upon the acceptance of the Delaware Certificate of Merger and the Washington Articles of Merger by the Secretary of State of Delaware and the Secretary of State of Washington, respectively (the “Effective Time”).  The Merger shall have the effects specified in this Agreement, the Delaware Certificate of Merger, the Washington Articles of Merger and the applicable provisions of the DGCL and the Washington LLC Act.

 

 

2.3  Corporate Structure of the Surviving Corporation; Appointment of New Directors and Resignation of Existing Directors and Officers of the Surviving Corporation.

Unless otherwise mutually determined by the Parties hereto prior to the Effective Time: (i) the certificate of incorporation of Merger Sub immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation upon and after the Effective Time, until hereafter amended pursuant to the DGCL and (ii) the bylaws of Merger Sub immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation upon and after the Effective Time.  In addition, upon the Closing of the Merger the officers and directors of Merger Sub shall become the officers and directors of the Surviving Corporation.  At the Effective Time, and in accordance with the provisions of Section 6.3 hereafter, the sole director of the Surviving Corporation shall appoint the individuals set forth on Exhibit B attached as new directors of the Surviving Corporation, to serve until such time as their successors are duly elected and qualified, and the existing director immediately thereafter shall resign as a director of the Surviving Corporation.  Furthermore, at the Effective Time, and in accordance with the provisions of Section 6.3 hereafter, the sole officer of the Surviving Corporation also shall resign from all positions held by him in the Surviving Corporation.  The remaining directors of the Surviving Corporation, in accordance with the provisions of Section 6.3 hereafter, shall thereafter appoint the individuals listed on Exhibit B as the new officers of the Surviving Corporation, to hold such offices also set forth on Exhibit B until such time as their successors are duly elected and qualified.

(a)           As a result of the Merger, Pubco shall issue to all of the Members an aggregate of 61,759,852 Merger Shares as determined pursuant to provisions of Section 2.4(b) hereafter.

 

(b)           At the Effective Time and without any further action on the part of Pubco, the Company, the Surviving Corporation or any other Person, each of the Membership Interests outstanding, immediately prior to the Effective Time (other than any Membership Interests that are Dissenting Interests) shall be converted into the right to receive ­­­approximately 4,597.53254 Merger Shares, subject to nominal rounding adjustments.

 

(c)           Within ten (10) days after the Closing Date, Pubco shall deliver to the Members in connection with the Merger and in consideration for the conversion of the Membership Interests, stock certificates representing the Merger Shares issued in the names of such Members and in the amounts set forth in Schedule 2.4(c) of the Company Disclosure Schedule (as such term is defined in Article III hereafter).

 

(d)           If any of the stock certificates issuable with respect to the Merger Shares are to be issued in the name of a person other than a Member of record of the Company, it shall be a condition to the issuance of such Merger Shares that (A) the request shall be in writing and properly documented (e.g., assigned, endorsed or accompanied by appropriate transfer powers, (B) such transfer shall otherwise be proper and in accordance with all applicable federal and state

 

 

 (e)           In the event any certificate or other instrument representing Membership Interests shall have been lost, stolen or destroyed, the Board of Directors of Pubco may, in its sole discretion and as condition precedent to the issuance of the Merger Shares in consideration therefor pursuant to this Agreement, require the owner of such lost, stolen or destroyed certificate or other instrument representing Membership Interests to submit to Pubco an affidavit stating that such certificate or other instrument representing Membership Interests was lost, stolen or destroyed and to give Pubco an indemnity in customary form against any claim that may be made against Pubco with respect to the certificate or other instrument representing Membership Interests alleged to have been lost, stolen or destroyed.

 

2.5   Closing of Transfer Books.

 

At the Effective Time, each of the Members shall cease to have any rights as a Member of the Company and shall not have any rights as a stockholder or otherwise with respect to the Surviving Corporation (except as set forth in this Agreement with respect to the Merger Shares), and the transfer books of the Company shall be closed with respect to all Membership Interests outstanding immediately prior to the Effective Time.  No further transfer of any such Membership Interests shall be made on such transfer books after the Effective Time.  If, after the Effective Time, a valid certificate or other instrument previously representing any Membership Interests is presented to Pubco, such certificate or other instrument shall be canceled and exchanged as provided in this Article II.

 

2.6   Actions at the Closing.

 

(a)           The Company shall deliver the following to Pubco at the Closing:  (i) certificates or any other instruments representing the Membership Interests, accompanied by appropriate transfer powers duly executed in blank or duly executed instruments of transfer and any other documents that are necessary to transfer to Pubco good and valid title to the Membership Interests free and clear of all liens; and (ii) the various certificates, instruments and documents referred to in Section 6.2 to be delivered by the Company.  All certificates or other instruments representing the Membership Interests surrendered to the Pubco shall be canceled after such delivery.  Until surrendered as contemplated by this Section 2.6, each such certificate or other instrument representing Membership Interests (other than any certificate or other instrument representing Dissenting Interests, as defined below) shall be deemed, from and after the Effective Time, to represent only the right to receive the applicable Merger Shares in accordance with this Agreement.

 

(b)           Pubco shall deliver to the Company, at the Closing, the various certificates, instruments and documents referred to in Section 6.2 hereafter.  In addition, Pubco shall deliver to each Person entitled to be issued Merger Shares, certificates representing the applicable number of Merger Shares issuable to such Person in accordance with Section 2.4 hereof.

 

 

(a)           At the Effective Time, the Membership Interests shall, except for with respect to any Dissenting Interests, by virtue of the Merger and without any action on the part of any Party or the holder thereof, automatically be canceled and extinguished and converted into the right to receive the Merger Shares.

 

(b)           At the Effective Time, each Membership Interest issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for approximately 4,597.53254 (subject to nominal rounding adjustments) validly issued, fully paid and nonassessable shares of Pubco Common Stock.

 

(c)           Notwithstanding the foregoing, no fractional shares of Pubco Common Stock shall be issued as part of the Merger Shares.  In lieu of issuance of any fractional shares of Pubco Common Stock that would otherwise be issuable, such fractional shares shall be rounded up to the nearest whole number.

 

 (d)           Notwithstanding the foregoing, no amounts shall be payable at or after the Effective Time with respect to any Dissenting Interests or any Membership Interests with respect to which dissenters’ rights have not terminated.  In the case of Dissenting  Interests, payment shall be made in accordance with the provisions of Section 2.11 hereafter.  In the case of any Membership Interests with respect to which dissenters’ rights have not terminated as of the Effective Time, if such Membership Interests become Dissenting Interests, payment shall be made in accordance with Section 2.11 hereafter and if, instead, the dissenters’ rights with respect to such Membership Interests irrevocably terminate after the Effective Time, such Membership Interests shall only entitle the holders thereof to receive the applicable Merger Shares upon delivery of the certificate(s) or other instrument(s) representing the applicable Membership Interests.

 

2.8Certificate Legends.

 

The Merger Shares to be issued pursuant to this Article II shall not have been registered and shall be characterized as “restricted securities” under the federal securities laws, and under any applicable state securities laws.  As a result, the Merger Shares may be resold without registration under the Securities Act and any applicable state securities laws only in certain limited circumstances.  Each certificate evidencing Merger Shares to be issued pursuant to this Article II shall bear the following legend:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

For federal income tax purposes, the Merger is intended to constitute a reorganization within the meaning of Section 368 of the Code, and the Parties shall report the transactions contemplated by the Transaction Documents consistent with such intent and shall take no position in any Tax filing or Legal Proceeding inconsistent therewith.  The Parties to this Agreement hereby adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.  None of Pubco, Merger Sub or the Company has taken or failed to take, and after the Effective Time, Pubco and the Surviving Corporation shall not take or fail to take, any action which reasonably could be expected to cause the Merger to fail to qualify as a reorganization within the meaning of Section 368(a) of the Code.

 

 

If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub, the Surviving Corporation and the officers and directors of the Company and Merger Sub are fully authorized in the name of their respective corporations or otherwise to take, and will take, all such lawful and necessary action, so long as such action is not inconsistent with this Agreement.

 

 Membership Interests that have not been voted for approval of this Agreement and the Merger contemplated hereunder, or consented thereto in writing, and with respect to which a demand for payment of “fair value” (as such term is defined in Section 25.15.425 of the Washington LLC Act) for such Membership Interests have been properly made in accordance

 

Except as set forth in the Company Disclosure Schedule attached to this Agreement (the “Company Disclosure Schedule”), the Company hereby represents and warrants to Pubco and Merger Sub as follows:

The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Washington.  The Company has all necessary power and authority:  (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own and use its assets in the manner in which its assets are currently owned and used; and (iii) to perform its obligations under all Company Contracts.  Except as set forth on Schedule 3.1 of the Company Disclosure Schedule, the Company, together with its predecessors, has not conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or other name, other than the name “Paneltech International, L.L.C.” The Company is not and has not been required to be qualified, authorized, registered or licensed to do business as a foreign corporation in any jurisdiction other than any

 

 

The Company has delivered to Pubco accurate and complete (through the date hereof) copies of: (i) the Company’s certificate of formation including all amendments thereto (hereinafter the “Company Charter”); (ii) the Company’s Operating Agreement and all amendments thereto (the “Operating Agreement”); (iii) the records of the Members and Membership Interests of the Company; and (iv) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the Members, the Managers of the Company and any committees established by the Managers of the Company (the items described in the foregoing clauses “(i)”, “(ii)”, “(iii)” and “(iv)” of this Section 3.2 being collectively referred to herein as the “Company Documents”).  There have been no formal meetings held of, or material corporate actions taken by, the Members of the Company, the Managers of the Company or any committee that are not fully reflected in the Company Documents.  There has not been any violation of any of the Company Documents, and at no time has the Company taken any action that is inconsistent in any material respect with the Company Documents.  The books of account, membership interest records, minute books and other records of the Company are accurate, up-to-date and complete in all material respects, and have been maintained in accordance with prudent business practices.

 

3.3Capitalization.

 

(a)           There are currently 13,433.26 Membership Interests issued and outstanding.  Schedule 3.3(a) of the Company Disclosure Schedule sets forth a complete and accurate list of all Members of the Company, indicating the number of Membership Interests held by each Member and their respective addresses.  Each Membership Interest represents an equity interest in the Company equal to approximately 0.0074% of the total outstanding equity interests of the Company.  All issued and outstanding Membership Interests prior to the Effective Time have been duly authorized and validly issued, and are fully paid and nonassessable.  All of the outstanding Membership Interests of the Company have been duly and validly issued in compliance with the Company Documents and all applicable federal and state securities laws including, without limitation, applicable exemptions from any requirements for registration or qualification. The Membership Interests are free and clear of any liens, pledges, encumbrances, charges, agreements adversely effecting title to such Membership Interests or claims (other than those created by virtue of this Agreement or by Pubco), and the certificates or other instruments evidencing the ownership of such Membership Interests are in proper form for the enforcement of the rights and limitations of rights pertaining to said Membership Interests which are set forth in the Company Charter and the Operating Agreement.

 

(b)           Except as set forth on Schedule 3.3(b) of the Company Disclosure Schedule, there are no: (i) outstanding subscriptions, options, calls, warrants, rights or agreements (whether or not currently exercisable) to acquire any Membership Interests of the Company; (ii) outstanding notes, instruments or obligations that are or may become convertible into or exchangeable for any Membership Interests of the Company; (iii) Company Contracts (other than this Agreement) under which the Company is or may become obligated to sell, transfer, exchange or issue any Membership Interests of the Company; (iv) agreements, voting trusts, proxies or understandings with respect to the voting, or registration under the Securities Act, or any Membership Interests of the Company; or (v) conditions or circumstances that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any Membership Interests of the Company.

 

The Company has all necessary corporate power and authority to enter into and to perform its obligations under the Transaction Documents, and the execution, delivery and performance by the Company of the Transaction Documents have been duly authorized by all necessary action on the part of the Company, its Managers and its Members.  Each of the Transaction Documents to which the Company is a party constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

 

3.5Noncontravention.

 

Neither the execution, delivery or performance of the Transaction Documents, nor the consummation of any of the transactions contemplated thereby, will directly or indirectly (with or without notice or lapse of time): (i) result in a violation of any of the provisions of the Company Documents; (ii) to the Company’s Knowledge, result in a violation of, or give any Governmental Body or other Person the right to challenge any of the transactions contemplated by the Transaction Documents or to exercise any remedy or obtain any relief under any, Legal Requirement or any Order to which the Company, or any of the assets owned, used or controlled by the Company, is subject; or (iii) result in a violation or breach of, or result in a default under, with or without notice or lapse of time, any provision of any Material Contract of the Company, except for any violations or breaches which may be caused by the Company’s failure to secure a consent to assign such Company Contract; provided, however, that any such violation or breach  would not have a Material Adverse Effect on the Company or the ability of the Parties to consummate the transactions contemplated by this Agreement.

 

3.6Financial Statements.

 

The audited financial statements of the Company for the years ended December 31, 2007 and 2008 and the unaudited interim financial statements for the nine (9) month period ended September 30, 2009 (the “Balance Sheet Date”) are attached hereto on Schedule 3.6 of the Company Disclosure Schedule (the “Company Financial Statements”), which Company Financial Statements are in final draft form and have been prepared in connection with the Merger.  Such financial statements have been prepared in accordance with GAAP, except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal year-end audit adjustments.

 

3.7Absence of Certain Changes.

 

Since the Balance Sheet Date, the Company has conducted its business as ordinarily conducted consistent with past practice and there has not occurred any change, event or condition (whether or not covered by insurance) that has resulted in, or would reasonably be expected to result in any Material Adverse Effect on the Company.

 

3.8Undisclosed Liabilities.

 

Except as set forth in Schedule 3.8 of the Company Disclosure Schedule, the Company has no Liabilities (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) Liabilities accrued, reflected, or reserved against in the Company Financial Statements, (b) Liabilities which have arisen since the Balance Sheet Date, in the ordinary course of business, (c) contractual or statutory Liabilities incurred in the ordinary course of business, none of which are material in nature or exceed $25,000, in the aggregate (d) Liabilities incurred in connection with the negotiation of the Transaction Documents and the transactions contemplated thereby and (e) Liabilities which would not have a Material Adverse Effect on the Company.

 

3.9Tax Matters. 

 

All Tax Returns required to be filed by or on behalf of the Company with any Governmental Body before the Closing Date (the “Company Returns”): (i) have been or will be filed on or before the applicable due date (including any extensions of such due date); (ii) have been, or will be when filed, accurately and completely prepared in all material respects in compliance with all applicable Legal Requirements; and (iii) have been provided or made available to Pubco and Merger Sub.  All Taxes owed by the Company have been paid when due, whether or not such amounts are shown on any Company Returns.  The Company Financial Statements fully accrue all actual and contingent Liabilities for unpaid Taxes with respect to all periods through the date thereof and the Company has made adequate provision for unpaid Taxes after that date in its books and records.  No Company Return is currently under examination or

 

 

 

(ii)           the Company is not in breach or default under any such lease or sublease and, to the Company’s Knowledge, no other party to the lease or sublease is in breach or default, and, no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification, or acceleration thereunder;

 

(iv)           there are no oral agreements or forbearance programs in effect as to the lease or sublease;

 

(v)           the Company has not received any written notice of any dispute with regards to any lease or sublease; and

 

(vi)           the Company has not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold.

(d)           The Company is not in violation of any zoning, building, safety or environmental ordinance, regulation or requirement or other law or rule applicable to the operation of the owned or leased assets (the violation of which would have a Material Adverse Effect on its business), nor has the Company received any written notice of violation with which it has not complied.

 

3.11Intellectual Property.

 

Schedule 3.11 of the Company Disclosure Schedule is a true and complete list of (i) all Intellectual Property presently owned or held by the Company and (ii) any license agreements under which Company has access to any confidential information used by the Company in its business (such licenses and agreements, collectively, the “Intellectual Property Rights”) necessary for the conduct of the Company’s business as conducted and as currently proposed to be conducted by the Company.  The Company owns, or has the right to use, free and clear of all Liens, all of the Intellectual Property and the Intellectual Property Rights.  There are no outstanding options, licenses or agreements of any kind relating to the Intellectual Property and the Intellectual Property Rights, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to any of the Intellectual Property, the Intellectual Property Rights and the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of “off the shelf” or standard products.  The Company has not received any communications alleging that the Company has violated or, by conducting its business as conducted and as currently proposed to be conducted by the Company, violates any Third Party Intellectual Property Rights and to the Company’s Knowledge, the business as conducted and as currently proposed to be conducted by the Company will not cause the Company to infringe or violate any Third Party Intellectual Property Rights.  There is no defect in the title to any of the Intellectual Property or, to the extent that the Company has title to Intellectual Property Rights to any Intellectual Property Rights.  To the Company’s Knowledge, no officer, employee or Manager is obligated under any contract (including any license, covenant or commitment of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would conflict or interfere with the performance of such person’s duties as an officer, employee or Manager of the

 

 

3.12Contracts.

 

Schedule 3.12 of the Company Disclosure Schedule identifies each Material Contract and provides an accurate description of the terms of each Material Contract that is not in written form.  The Company has delivered to Pubco accurate and complete copies of all written Material Contracts.  Each Material Contract is valid, binding and enforceable by the Company in accordance with its terms subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.  Except as set forth in Schedule 3.12 to the Company Disclosure Schedule, the Company has not violated or breached, or committed any default under, any Material Contract, and, to the Company’s Knowledge, no other Person has violated or breached, or committed any default under, any Material Contract.  Schedule 3.12 of the Company Disclosure Schedule provides an accurate and complete list of all Consents required under any Material Contract to consummate the transactions contemplated by the Transaction Documents.

 

3.13     Finder’s Fee.

 

Except as set forth on Schedule 3.13 of the Company Disclosure Schedule, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger or any of the other transactions contemplated by the Transaction Documents based upon any arrangements or agreements made by or on behalf of the Company.

 

3.14Insurance. 

 

(a)           Schedule 3.14(a) of the Company Disclosure Schedule lists each insurance policy (including fire, theft, casualty, general liability, director and officer, workers compensation, business interruption, environmental, product liability and automobile insurance policies and bond and surety arrangements) to which the Company is a party, a named insured, or otherwise the beneficiary of coverage at any time within the past year.  Schedule 3.14(a) of the Company Disclosure Schedule lists each person or entity required to be listed as an additional insured under each such policy.  Each such policy is in full force and effect and by its terms and with the payment of the requisite premiums thereon will continue to be in full force and effect following the Closing.

 

 

(b)           The Company is not in breach or default, and does not anticipate being in breach or default after Closing (including with respect to the payment of premiums or the giving of notices) under any such policy, and no event has occurred which, with notice or the lapse of time, would constitute such a breach or default or permit termination, modification or acceleration, under such policy; except for any breach, default, event, termination, modification or acceleration that would not have a Material Adverse Effect on the Company; and the Company has not received any written notice or to the Company’s Knowledge, oral notice, from the insurer disclaiming coverage or reserving rights with respect to a particular claim or such policy in general.  The Company has not incurred any material loss, damage, expense or liability covered by any such insurance policy for which it has not properly asserted a claim under such policy.

 

3.15Litigation.

 

(a)           Except as set forth in Schedule 3.15(a) of the Company Disclosure Schedule, there is no pending Legal Proceeding, and to the Company’s Knowledge, no Person has threatened to commence any Legal Proceeding, that (i) involves or affects the Company or any of the assets owned or used by the Company, or (ii) that challenges the Merger or any of the other transactions contemplated by the Transaction Documents.  Except as set forth on Schedule 3.15 of the Company Disclosure Schedule, no Legal Proceeding currently exists that involves or affects the Company or the assets owned by the Company.  There is no Order in which the Company is named or to which any of the assets of the Company is subject.

 

(b)           Except as set forth in Schedule 3.15(b) of the Company Disclosure Schedule, there are no material agreements or other documents or instruments settling any Legal Proceeding.

 

3.16Legal Compliance; Restrictions on Business Activities.

 

Except as set forth in Schedule 3.16 of the Company Disclosure Schedule, the Company is, and has at all times been, in compliance with all applicable Legal Requirements, except to the extent that failure to comply would not be likely to have a Material Adverse Effect on the Company.  Except as set forth on Schedule 3.16 of the Company Disclosure Schedule, the Company has never received any notice or other communication from any Person regarding any actual or possible violation of, or failure to comply with, any Legal Requirement.  The Company has obtained all material Permits, certificates and licenses required by any Legal Requirement for the conduct of its business and the ownership of its assets.  The Company is not in violation of any such Permit, certificate or license, and no Legal Proceedings are pending or, to the Knowledge of the Company, threatened to revoke or limit any such Permit, certificate or license.

 

3.17Employees.

 

(a)           To the Company’s Knowledge, no employee has any plans to terminate employment with the Company within six months of the date hereof.  The Company is not a party to or bound by any collective bargaining agreement, nor has it experienced any material strikes, grievances, claims of unfair labor practices or other collective bargaining disputes.  The

 

 

(b)           Schedule 3.17 of the Company Disclosure Schedule contains a list of employees whose employment has been terminated by the Company in the ninety (90) days prior to Closing; including the name, address, date and reason for such termination.

 

3.18Employee Benefits. 

 

(a)           Schedule 3.18(a) of the Company Disclosure Schedule contains a complete and accurate list of all Employee Benefit Plans maintained, or contributed to, by the Company, or any ERISA Affiliate.  Complete and accurate copies of (i) all such Employee Benefit Plans which have been reduced to writing, (ii) written summaries of all such unwritten Employee Benefit Plans, (iii) all related trust agreements, insurance contracts and summary plan descriptions and (iv) all annual reports filed on IRS Form 5500, 5500C or 5500R for the last three plan years (or such shorter period with respect to which the Company or any ERISA Affiliate has an obligation file Form 5500) for each Employee Benefit Plan, have been delivered or made available to Pubco.  Each Employee Benefit Plan has been administered in all material respects in accordance with its terms and each of the Company, and the ERISA Affiliates has met its obligations in all material respects with respect to such Employee Benefit Plan and has made all required contributions thereto within the time frames as prescribed by ERISA and the Code.  The Company and all Employee Benefit Plans are in material compliance with the currently applicable provisions of ERISA and the Code and the regulations thereunder.

 

(b)           To the Company’s Knowledge, there are no investigations by any Governmental Body, termination proceedings or other claims (except claims for benefits payable in the normal operation of the Employee Benefit Plans and proceedings with respect to qualified domestic relations orders), suits or proceedings against or involving any Employee Benefit Plan or asserting any rights or claims to benefits under any Employee Benefit Plan that could give rise to any material liability.

 

(c)           All the Employee Benefit Plans that are intended to be qualified under Section 401(a) of the Code have received determination letters from the Internal Revenue Service to the effect that such Employee Benefit Plans are qualified and the plans and the trusts related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, or the remedial amendment period for requesting such determination has not yet expired,

 

 

no such determination letter has been revoked and revocation has not been threatened, and no such Employee Benefit Plan has been amended since the date of its most recent determination letter or application therefor in any respect, and no act or omission has occurred, that would adversely affect its qualification.

(d)           Neither the Company nor any ERISA Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.

 

(e)           At no time has the Company or any ERISA Affiliate been obligated to contribute to any “multi-employer plan” (as defined in Section 4001(a)(3) of ERISA).

 

(f)           There are no unfunded obligations under any Employee Benefit Plan providing benefits after termination of employment to any employee of the Company (or to any beneficiary of any such employee), including but not limited to retiree health coverage and deferred compensation, but excluding continuation of health coverage required to be continued under Section 4980B of the Code and insurance conversion privileges under federal or state law.

 

(g)           No act or omission has occurred and no condition exists with respect to any Employee Benefit Plan maintained by the Company or any ERISA Affiliate that would subject the Company or any ERISA Affiliate to any material fine, penalty, tax or liability of any kind imposed under ERISA or the Code.

 

(h)           No Employee Benefit Plan is funded by, associated with, or related to a “voluntary employee’s beneficiary association” within the meaning of Section 501(c)(9) of the Code.

 

(i)           No Employee Benefit Plan, plan documentation or agreement, summary plan description or other written communication distributed generally to employees by its terms prohibits the Company from amending or terminating any such Employee Benefit Plan.

 

(j)           Schedule 3.18(j) of the Company Disclosure Schedule discloses each: (i) agreement with any Manager, Director, executive officer or other key employee of the Company (A) the benefits of which are contingent, or the terms of which are altered, upon the occurrence of a transaction involving the Company of the nature of any of the transactions contemplated by this Agreement, (B) providing any term of employment or compensation guarantee, or (C) providing severance benefits or other benefits after the termination of employment of such Manager, executive officer or key employee; (ii) agreement, plan or arrangement under which any person may receive payments from the Company that may be subject to the tax imposed by Section 4999 of the Code or included in the determination of such person’s “parachute payment” under Section 280G of the Code; and (iii) agreement or plan binding the Company, including, without limitation, any option plan, equity appreciation right plan, restricted equity plan, equity purchase plan, severance benefit plan, or any Employee Benefit Plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement.

 

 

Schedule 3.19 of the Company Disclosure Schedule sets forth a list of all material Permits issued to or held by the Company.  Such listed Permits are the only Permits that are required for the Company to conduct its business as presently conducted, except for those the absence of which would not have a Material Adverse Effect on the Company.  Each such Permit is in full force and effect and to the Company’s Knowledge, no suspension or cancellation of such Permit is threatened and there is no basis for believing that such Permit will not be renewable upon expiration.  Except as set forth on Schedule 3.19 of the Company Disclosure Schedule, each such Permit will continue in full force and effect following the Closing.

 

3.20Books and Records.

 

The minute books and other similar records of the Company contain true and complete records of all material actions taken at any meetings of the Managers or any committee thereof and of all written consents executed in lieu of the holding of any such meetings.

 

3.21Banking Relationships and Investments.

 

Schedule 3.21 of the Company Disclosure Schedule sets forth an accurate, correct and complete list of all banks and financial institutions in which the Company has an account, deposit, safe-deposit box or borrowing relationship, factoring arrangement or other loan facility or relationship, including the names of all persons authorized to draw on those accounts or deposits, or to borrow under loan facilities, or to obtain access to such boxes.  The Company Disclosure Schedule sets forth an accurate, correct and complete list of all certificates of deposit, debt or equity securities and other investments owned, beneficially or of record, by the Company (the “Investments”).  The Company has good and legal title to all Investments.

 

3.22   Environmental Protection.

 

(a)  Except as set forth on Schedule 3.22 of the Company Disclosure Schedule, to the Company’s Knowledge no substances that are defined by any Governmental Body of the United States of America concerning the environment as toxic materials, hazardous wastes or hazardous substances (including without limitation any asbestos, oils, petroleum-derived compound or pesticides) (collectively, “Hazardous Materials”) are or have been located in, on or about any of the Company’s Leased Real Property in contravention of applicable Legal Requirements.

 

(b) Except as set forth on Schedule 3.22 of the Company Disclosure Schedule, to the Company’s Knowledge: (i) the Company’s Leased Real Property has not been used for the storage, manufacture or disposal of Hazardous Materials; (ii) the Company has not used, or provided permission to others to use, its Leased Real Property for the storage, manufacture or disposal of Hazardous Materials; (iii) there are and have been no storage tanks located on any of the Company’s Leased Real Property; and (iv) no Hazardous Materials have been transported off site from the Company’s leased real property, in contravention of applicable Legal Requirements

 

 

3.23Dissenting Interests.

 

No holder of Membership Interests who has the right to dissent to the Merger and demand payment for such Membership Interests has dissented and demanded payment for the “fair value” of such Membership Interests in accordance with the Washington LLC Act in connection with the Merger, including any such holder that subsequently has withdrawn, failed to perfect or otherwise lost such holder’s right to such payment.

 

 

 Except as set forth on Schedule 3.24 of the Company Disclosure Schedule, the Company Contracts do not include any agreement with or any other commitment to (a) any officer or Manager of the Company; (b) any individual related by blood or marriage to any such officer or Manager; (c) any Entity in which the Company or any such officer, Manager or related person has an equity or participating interest or (d) any other Affiliate of the Company.

 

3.25    Officer and Manager Information.  

(ii)           Engaging in any type of business practice; or

 

 

 

 

 

Each of Pubco and Merger Sub, jointly and severally, represents and warrants to the Company that, as of the date hereof, the statements contained in this Article IV are true and correct, except as set forth in the schedule provided by Pubco and Merger Sub to the Company and attached hereto (the “Pubco Disclosure Schedule”) or in the SEC Reports (defined hereafter):

 

4.1Organization, Qualification and Corporate Power.

 

Pubco is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.   Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  Each of Pubco and Merger Sub has all necessary power and authority:  (i) to conduct its business in the manner in which its business is currently being conducted and proposed to be conducted after the Merger, as applicable; (ii) to own and use its assets in the manner in which its assets are currently owned and used and as proposed after the Merger as applicable; and (iii) to perform its obligations under all Pubco Contracts.  Except as set forth in SEC Reports, Pubco, together with its predecessors, has not conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or other name, other than the name “Charleston Basics, Inc.” Neither Pubco nor Merger Sub is and has not been required to be qualified, authorized, registered or licensed to do business as a foreign corporation in any jurisdiction other than any jurisdictions identified in the SEC Reports.  Except for Merger Sub and as otherwise set forth in the SEC Reports, Pubco has no subsidiaries, does not own any controlling interest in any Entity and has never owned, beneficially or otherwise, any shares or other securities of, or any direct or indirect equity or other financial interest in, any Entity.  Except as set forth in the SEC Reports, neither Pubco nor Merger Sub has agreed and is not obligated to make any future investment in or capital contribution to any Entity.

   Pubco has delivered to the Company accurate and complete (through the date hereof) copies of the certificate of incorporation and bylaws, including all amendments thereto, of Pubco and (ii) the certificate of incorporation and bylaws, including all amendments thereto, of Merger Sub (collectively, the “Pubco Documents”).  There has not been any violation of any of the Pubco Documents, and at no time has Pubco taken any action that is inconsistent in any material respect with the Pubco Documents.  The books of account, stock records, minute books and other records of Pubco and Merger Sub are accurate, up-to-date and complete in all material respects, and have been maintained in accordance with Legal Requirements and prudent business practices.

4.3Capitalization.

       (a)     The authorized capital stock of Pubco consists of: (i) 700,000,000 shares of Pubco Common Stock, of which 6,543,720 shares are issued outstanding immediately prior to the Closing Date; and (ii) 20,000,000 shares of preferred stock, par value $0.0001 of which no shares are issued and outstanding immediately prior to the Closing Date.  The authorized capital stock of Merger Sub consists of 10,000 shares of Merger Sub Common Stock, of which 1,000 shares are issued and outstanding, all of which are owned by Pubco.  All of the outstanding shares of Pubco capital stock and Merger Sub capital stock have been duly authorized and validly issued and are fully paid and nonassessable.  All of the outstanding shares of Pubco capital stock and Merger Sub capital stock have been issued in compliance with the Pubco Documents and all applicable federal and state securities laws and other applicable Legal Requirements and all requirements set forth in the applicable Pubco Documents, and are owned, beneficially and of record, by those stockholders set forth on the most recent stockholders list held by Pubco’s transfer agent.

 

 

Each of Pubco and Merger Sub has all necessary corporate power and authority to enter into and to perform its obligations under the Transaction Documents, and the execution, delivery and performance by Pubco and Merger Sub of the Transaction Documents have been duly authorized by all necessary action on the part of Pubco and Merger Sub and their respective board of directors and Managers and, in the case of Merger Sub, the sole stockholder, Pubco.  For each of Pubco and Merger Sub, the Transaction Documents to which each is a party constitutes the legal, valid and binding obligation of it, enforceable against it in accordance with its terms, subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

 

4.5Noncontravention.

 

Neither the execution, delivery or performance of the Transaction Documents, nor the consummation of any of the transactions contemplated thereby, will directly or indirectly (with or without notice or lapse of time): (i) result in a violation of any of the provisions of the Pubco Documents; (ii) to Pubco’s or Merger Sub’s Knowledge, result in a violation of, or give any Governmental Body or other Person the right to challenge any of the transactions contemplated by the Transaction Documents or to exercise any remedy or obtain any relief under any, Legal Requirement or any Order to which Pubco or Merger Sub, or any of the assets owned, used or controlled by Pubco or Merger Sub, is subject; or (iii) result in a violation or breach of, or result in a default under, with or without notice or lapse of time, any provision of any material Pubco Contract.

 

4.6   SEC Reports; Pubco Financial Statements.

 

       (a)     Pubco has filed all reports required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, since inception (the foregoing materials, together with all documents or reports filed by the Company under the Exchange Act that were not required to be filed, being collectively referred to herein as the “SEC Reports” and, together with this Agreement and the Schedules to this Agreement, the “Disclosure Materials”).   The SEC Reports filed since September 30, 2009, (i) at the time filed, complied in all material respects with the applicable requirements of the Securities Laws and other applicable Legal Requirements 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 amended or subsequent filing or, in the case of registration statements, at the effective date thereof) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such SEC Reports or necessary in order to make the statements in such SEC Reports, in light of the circumstances under which they were made, not misleading. Since September 30, 2009, Pubco’s principal executive officer and principal financial officer have made the certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act and the rules and regulations of the Exchange Act thereunder with respect to SEC Reports filed by Pubco under the Exchange Act (the “Exchange Act Reports”) to the extent such rules or regulations applied at the time of the filing.  For purposes of the preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes–Oxley Act.  Such certifications contain no qualifications or exceptions to the matters certified therein and have not been modified or withdrawn; and neither Pubco nor any of its officers has received notice from any Governmental Body questioning or challenging the accuracy, completeness, content, form or manner of filing or submission of such certifications. Pubco is not a “Business Combination Shell Company” as such term is defined under Rule 405 of the Securities Act.

 

       (b)     The financial statements of Pubco included in the SEC Reports (the “Pubco Financial Statements”) comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.  The Pubco Financial Statements have been prepared in accordance with GAAP, except as may be otherwise specified in the Pubco Financial Statements or the notes thereto, and fairly

 

 

4.8     Undisclosed Liabilities.

 

Except as set forth in Schedule 4.7 of the Pubco Disclosure Schedule, neither Pubco nor Merger Sub has any Liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) Liabilities

 

 

4.9      Tax Matters

 

       (a)     All Tax Returns required to be filed by or on behalf of Pubco with any Governmental Body before the Closing Date (the “Pubco Returns”): (i) have been or will be filed on or before the applicable due date (including any extensions of such due date); (ii) have been, or will be when filed, accurately and completely prepared in all material respects in compliance with all applicable Legal Requirements; and (iii) have been provided or made available to the Company.  All Taxes owed by Pubco have been paid when due, whether or not such amounts are shown on any Pubco Returns.  The Pubco Financial Statements fully accrue all actual and contingent Liabilities for unpaid Taxes with respect to all periods through the date thereof and Pubco has made adequate provision for unpaid Taxes after that date in its books and records.  No Pubco Return is currently under examination or audit by any Governmental Body.  No claim or Legal Proceeding is pending or has been threatened against or with respect to Pubco in respect of any Tax.  There are no unsatisfied Liabilities for Taxes, including Liabilities for interest, additions to tax and penalties thereon and related expenses, with respect to which any notice of deficiency or similar document has been received by Pubco (other than Liabilities for Taxes asserted under any such notice of deficiency or similar document which are being contested in good faith by Pubco and with respect to which adequate reserves for payment have been established).  There are no Liens for Taxes upon any of the assets of Pubco except Liens for current Taxes not yet due and payable.

 

        (b)     Merger Sub is a newly-formed corporation and does not (nor has it ever had) more than nominal assets.

 

Pubco currently does not own or lease any real property.  Except for approximately $50,000 in assets consisting of inventory receivables and cash, Pubco does not currently have any other assets. Merger Sub is a newly-formed corporation and does not (nor has it ever had) more than nominal assets nor has it ever owned or leased any real property.

4.11     Intellectual Property.

 

 

 

4.12Finder’s Fees.

No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger or any of the other transactions contemplated by the Transaction Documents based upon any arrangements or agreements made by or on behalf of Pubco or Merger Sub.

 

4.13Litigation.

 

       (a)           Except as disclosed in the SEC Reports, there is no pending Legal Proceeding, and to Pubco’s Knowledge, no Person has threatened to commence any Legal Proceeding, that (i) involves or affects Pubco or Merger Sub or any of the assets owned or used by either of them, or (ii) that challenges the Merger or any of the other transactions contemplated by the Transaction Documents.  No Legal Proceeding has ever been commenced that involves or affects Pubco or Merger Sub or the assets owned by either of them.  There is no Order in which Pubco or Merger Sub is named or to which any of their assets is subject.

 

        (b)           Except as disclosed in the SEC Reports, there are no material agreements or other documents or instruments settling any Legal Proceeding.

 

4.14Merger Shares.

 

The Merger Shares have been duly authorized and, when issued in consideration for the conversion of the Membership Interests, as a result of the Merger and pursuant to the terms hereof, will be validly issued, fully paid and non-assessable, and not subject to any Liens, restrictions of any kind, preemptive rights or any other rights or interests of third parties or any other encumbrances, except for applicable securities law restrictions on transfer, including those imposed by Regulation D under the Securities Act (“Regulation D”) or Section 4(2) of the Securities Act and Rule 144 promulgated under the Securities Act and under applicable “blue sky” state securities laws.  Assuming that all of the holders of Membership Interests are “accredited investors,” as such term is defined in Regulation D, and that all such Persons have complied with all of the terms and conditions of this Agreement, and subject to the completion of applicable state notice filings and the filing of a Form D with the Commission following the Effective Time, the offer and sale of the Merger Shares under this Agreement will be exempt from the registration requirements of the Securities Act and in compliance with all federal and state securities laws.

 

4.15Business of Merger Sub.

 

Merger Sub is not and has never been a party to any material agreements and has not conducted any activities other than in connection with the organization of Merger Sub, the issuance of Merger Sub Common Stock, the negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby.  Merger Sub has not incurred or assumed any expenses or liabilities prior to the Closing.

 

 

Since September 30, 2009, Pubco has not extended or maintained credit, arranged for the extension of credit, or renewed an extension of credit, in the form of a personal loan to any director or executive officer of Pubco in violation of Section 402 of the Sarbanes-Oxley Act.

 

 

 

5.1Conditions to Each Party’s Obligations.

 

The respective obligations of each Party to consummate the Merger and the other transactions contemplated hereby are subject to the satisfaction of the following conditions unless any such condition is waived, in writing, by the other Party:

 

(a)           Pubco shall have received, on or before the Closing Date, the Private Placement Documents, in connection with the Private Placement, executed by investors identified therein, including the Lead Investor (as such term is defined in the Securities Purchase Agreement), along with good and cleared funds, in escrow, representing subscriptions in an aggregate amount of at least $1,500,000, the closing of which shall be subject only to the Closing of the Merger, and the initial closing of the Private Placement shall be held immediately after the Closing of the Merger;

 

(b)            Pubco shall have received, on or before the Closing Date, all documents relating to the Collins Repurchase (as such term is defined in the Securities Purchase Agreement), executed by Collins Timber Company LLC;

 

 (c)           Pubco, Merger Sub and the Company shall be satisfied that the issuances of the Merger Shares in the transaction shall be exempt from registration with the Commission under Regulation D of the Securities Act and Section 4(2) of the Securities Act;

 

(d)           no temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger shall have been issued, nor shall any proceeding brought by any Governmental Body, seeking any of the foregoing be pending; nor shall there be any action taken, or any statute, rule, regulation or Order enacted, entered, enforced or deemed applicable to the Merger which makes the consummation of the Merger illegal; and

 

(e)           no proceeding in which the Company, Pubco or Merger Sub shall be a debtor, defendant or party seeking an Order for its own relief or reorganization shall have been brought or be pending by or against the Company, Pubco or Merger Sub under any United States or state bankruptcy or insolvency law.

 

5.2Conditions to Obligations of Pubco and Merger Sub.  

 

The obligation of each of Pubco and Merger Sub to consummate the Merger is subject to the satisfaction of the following additional conditions, unless any such condition is waived, in writing, by Pubco:

 

(a)           this Agreement and the Merger shall have been approved and adopted by (i) the Managers of the Company and (ii) the Members in accordance with the Company’s Operating Agreement and the Washington LLC Act;

 

(b)           the Company shall have obtained all of the waivers, Permits, Consents, assignments, approvals or other authorizations, and effected all of the registrations, filings and notices, referred to in the Company Disclosure Schedule, except for any which if not obtained or effected would not have a Material Adverse Effect on the Company or on the ability of the Parties to consummate the transactions contemplated by this Agreement;

(c)           the representations and warranties of the Company set forth in Article III shall be true and correct as of the Closing Date, except for representations and warranties made as of a specified date, which shall be true and correct as of such date;

(d)           the Company shall have performed or complied with, in all material respects, its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Effective Time;

(e)           Pubco and Merger Sub shall have received from the Secretary of the Company a certificate (i) certifying the Company Charter, (ii) certifying the Operating Agreement, (iii) certifying the resolutions of the Managers of the Company, (vi) certifying the resolutions of the Members of the Company, and (v) attesting to the incumbency of the officers of the Company;

(f)           Pubco and Merger Sub shall have received from the President of the Company a certificate certifying (i) the Company has satisfied and complied with all of its obligations under this Agreement which are required to consummate the Merger; and (ii) all of the Company’s representations and warranties set forth in this Agreement are true and accurate as of the Closing Date;

(g)           the Company shall have delivered the certificates or other instruments representing the Membership Interests, in the manner described in Section 2.6(a) hereof, as well as all other documents required to be delivered to Pubco on or before the Closing Date;

(h)           the Company shall have delivered an opinion from its counsel, in the form of opinion annexed hereto as Exhibit C; and

(j)           all actions to be taken by the Company in connection with the consummation of the transactions contemplated hereby, and all certificates, opinions, instruments and other

 

 

documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to the Pubco and Merger Sub and their legal counsel.

 

5.3Conditions to Obligations of the Company.

 

The obligation of the Company to consummate the Merger is subject to the satisfaction of the following additional conditions, unless any such condition is waived, in writing, by the Company:

 

(a)           this Agreement and the Merger shall have been approved and adopted by (i) the respective boards of directors of Pubco and Merger Sub and (ii) Pubco, the sole stockholder of Merger Sub in accordance with the DGCL;

(b)           Pubco and Merger Sub shall have obtained all of the waivers, Permits, Consents, approvals or other authorizations, and effected all of the registrations, filings and notices (including, but not limited to any filings that are required pursuant to applicable federal and state securities laws), except for any which if not obtained or effected would not have a Material Adverse Effect on Pubco or Merger Sub or on the ability of the Parties to consummate the transactions contemplated by this Agreement;

 

(c)           each of Pubco and Merger Sub shall have performed or complied with in all material respects its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Effective Time;

 

(d)           the representations and warranties of Pubco and Merger Sub set forth in Article IV shall be true and correct as of the Closing Date, except for representations and warranties made as of a specified date, which shall be true and correct as of such date;

(e)           the Company shall have received from the Secretary of Pubco a certificate (i) certifying the Certificate of Incorporation of Pubco; (ii) certifying the Bylaws of Pubco; (iii) certifying the resolutions of the Board of Directors of Pubco, and (iii) attesting to the incumbency of the officers of Pubco;

 

(f)           the Company shall have received from the Secretary of Merger Sub a certificate (i) certifying the Certificate of Incorporation of Merger Sub, (ii) certifying the Bylaws of Merger Sub, (iii) certifying the resolutions of the Board of Directors and the sole stockholder of Merger Sub, and (iv) attesting to the incumbency of the officers of Merger Sub;

(g)           the Company shall have received from the President of Pubco a certificate certifying (i) Pubco has satisfied and complied with all of its obligations under this Agreement which are required to consummate the Merger; and (ii) all of the Pubco’s representations and warranties set forth in this Agreement are true and accurate as of the Closing Date;

(h)           the Company shall have received from the President of Merger Sub a certificate certifying (i) Merger Sub has satisfied and complied with all of its obligations under this Agreement which are required to consummate the Merger; and (ii) all of the Merger Sub’s

 

 

(i)           Pubco shall have delivered all other documents required to be delivered to the Company on or before the Closing Date; and

 

(j)           all actions to be taken by the Pubco and the Merger Sub in connection with the consummation of the transactions contemplated hereby, and all certificates, instruments and other documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to the Company.

 

 

6.1     Closing of the Private Placement.

Immediately after the Closing of the Merger, Pubco shall consummate the initial closing of the Private Placement in accordance with the terms and conditions described in the Private Placement Documents.

6.2      Closing of Collins Repurchase.

Concurrently with or immediately following the closing of the Private Placement, Pubco shall consummate the closing of the Collins Repurchase in accordance with the terms applicable thereto.

6.3       Appointment of New Directors of Pubco and the Surviving Corporation; Resignation of Sole Director and Officer of Pubco and the Surviving Corporation.

Immediately after the Closing of the Merger and prior to the initial closing of the Private Placement and the closing of the Collins Repurchase, the sole director of Pubco and the Surviving Corporation shall appoint the individuals set forth on Exhibit B attached as new directors of Pubco and the Surviving Corporation, respectively, to serve until such time as their successors are duly elected and qualified, and the existing director immediately thereafter shall resign as a director of Pubco and the Surviving Corporation.  Furthermore, at such time, the sole officer of Pubco and the Surviving Corporation also shall resign from all positions held by him in Pubco and the Surviving Corporation, respectively.  The remaining directors of Pubco and the Surviving Corporation shall thereafter appoint the individuals listed on Exhibit B as the new officers of Pubco and the Surviving Corporation, respectively, to hold such offices also set forth on Exhibit B until such time as their successors are duly elected and qualified.

 

6.4   Indemnification of Officers and Directors.

 

All rights to indemnification and advancement of expenses existing in favor of those Persons who are or were directors, officers, agents or employees of the Company (the “Indemnified Persons”) for acts and omissions occurring prior to the Closing Date, as provided in the Company Charter and the Operating Agreement (in each case as in effect as of the date of this Agreement), shall survive the Merger, be assumed by the Surviving Corporation, and shall be fully complied with by Pubco and the Surviving Corporation, to the fullest extent permitted by the laws of the State Delaware, as applicable.

 

 6.5   Securities Laws Disclosure.

 

Pubco shall, within four (4) Business Days after the Closing Date, file a Current Report on Form 8-K (the “Form 8-K”) with the Commission which shall summarize the transactions consummated pursuant to the Transaction Documents. Additionally, as soon as possible, but in any event not more than seventy-five (75) days after the Closing Date, Pubco shall file an amendment to the Form 8-K (the “Form 8-K Amendment”) for the purpose of filing with the Commission the Company Financial Statements, along with any applicable pro forma financial information. In addition, Pubco shall use its best efforts to include in the Form 8-K (i) any material information about the Company and its business that has been provided to management and/or stockholders of Pubco prior to the Merger, or to investors, in connection with the Private Placement and (ii) any other material non-public information provided to such Persons; provided, however, that if Pubco is unable to include all of such information in the Form 8-K, for any reason, it shall publicly file such information no later than its filing of the Form 8-K Amendment.

 

 6.6   Name Change.

 

Promptly after the Closing, Pubco shall merge with Paneltech International Holdings, Inc., a newly formed Delaware corporation and a wholly owned subsidiary of Pubco, with Pubco being the surviving corporation, and Pubco shall change its name to Paneltech International Holdings, Inc. as a result of such merger.

 

6.7     Securing of Consents for Assignment of Material Contracts.

Promptly after the Closing, and to the extent that such has not been secured on or prior to the Closing Date, Pubco and/or its applicable subsidiary of the Company shall use its best efforts to secure the consents of the applicable parties to all Material Contracts, as required, in order to comply with the assignment provisions of such Material Contracts.

 

 6.8   Best Efforts and Further Assurances.

 

 

(a)           All representations and warranties of the parties contained in this Agreement will remain operative and in full force and effect, regardless of any investigation made by or on behalf of the other Parties to this Agreement, until two (2) years after the Closing Date (the “Survival Period”), whereupon such representations, warranties and covenants will expire (except for covenants that by their terms survive for a longer period). The Parties post-closing remedies for a breach are not limited by the pre-closing discovery of a breach.

(b)           All covenants of the parties contained in this Agreement shall remain operative for such periods of time as necessary for the applicable Party to fulfill such covenant, unless otherwise agreed in writing by the other Parties.

Subject to any limitations set forth in this Article VII, from and after the Closing Date until the expiration of the Survival Period, the Company shall reimburse and hold harmless Pubco and the following persons existing immediately prior to the Effective Time: (i) Pubco’s officers, directors, stockholders, agents and employees and (ii) each person, if any, who controlled Pubco within the meaning of the Securities Act (each such Person and its heirs, executors, administrators, agents, successors and assigns is referred to herein as a “Pubco Indemnified Party”) from and against any and all losses, costs, damages, liabilities and expenses arising from claims, demands, actions, causes of action, including, without limitation, reasonable legal fees, (collectively, “Damages”) arising out of (i) any breach of representation or warranty made by the Company in this Agreement, and in any certificate delivered by the Company pursuant to this Agreement, (ii) any breach by the Company of any covenant, obligation or other agreement made the Company in this Agreement, and (iii) a third-party claim based on any acts or omissions by the Company.  The foregoing are collectively referred to as the “Pubco Indemnity Claims.”

 

7.3        Indemnification of the Company.

 

Subject to any limitations set forth in this Article VII, from and after the Closing Date until the expiration of the Survival Period, Pubco shall reimburse and hold harmless the Company and the following persons existing prior to the Effective Time: (i) the Company’s officers, Managers, Members, agents and employees and (ii) each person, if any, who controlled the Company within the meaning of the Securities Act (each such Person and its heirs, executors, administrators, agents, successors and assigns is referred to herein as a “Company Indemnified Party”) from and against any and all Damages arising out of (i) any breach of representation or

 

 

7.4        General Notice and Procedural Requirements for Indemnity Claims.

 

Notwithstanding the foregoing, the party or person having the indemnity obligation under this Article VII (the “Indemnifying Party”), shall be obligated to indemnify and hold harmless the party or person entitled to indemnity under this Article VII (the “Indemnified Party”), only with respect to any Indemnity Claims of which the Indemnified Party notifies with specificity the Indemnifying Party in accordance with Section 8.8 of this Agreement and, if applicable, within the following time period: (i) with regard to any representation or warranty under this Agreement, prior to the end of the Survival Period of such representation or warranty (unless such Indemnity Claim relates to a claim arising prior to the termination of the Survival Period, in which case the time period shall be extended to thirty (30) days after such Indemnity Claim is first received by an Indemnified Party); or (ii) with regard to any covenant under this Agreement which by its terms expires, prior to the end of the survival period relating to such covenant (unless such Indemnity Claim relates to a claim arising prior to the termination of the applicable survival period, in which case the time period shall be extended to thirty (30) days after such Indemnity Claim is first received by an Indemnified Party).

 

7.5        Notice and Procedural Requirements for Third Party Claims.

 

If a complaint, claim or legal action is brought by a third party (a “Third Party Claim”) as to which an Indemnified Party is entitled to indemnification, the Indemnified Party shall give written notice of such Third Party Claim to the Indemnifying Party in accordance with Section 8.8 of this Agreement promptly after the Indemnified Party receives notice thereof, which notice shall include a copy of any letter, complaint or similar writing received by the Indemnified Party; provided however, that any failure to provide or delay in providing such information shall not constitute a bar or defense to indemnification except to the extent the Indemnifying Party has been prejudiced thereby.

The Indemnifying Party shall have the right to assume the defense of such Third Party Claim with counsel reasonably satisfactory to the Indemnified Party.  After notice from the Indemnifying Party to the Indemnified Party of the Indemnifying Party’s election so to assume the defense of such Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense of such Third Party Claim except as hereinafter provided.  If the Indemnifying Party elects to assume such defense and select counsel, the Indemnified Party may participate in such defense through its own separate counsel, but the fees and expenses of such counsel shall be borne by the Indemnified Party unless: (i) otherwise specifically agreed by the Indemnifying Party; or  (ii) counsel selected by the Indemnifying Party determines that because

 

 

The failure of the Indemnifying Party to notify an Indemnified Party of its election to defend such Third Party Claim within thirty (30) days after notice thereof was given to the Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its rights to defend such Third Party Claim.

 

If the Indemnifying Party assumes the defense of a Third Party Claim, the obligations of the Indemnifying Party shall include taking all steps necessary in the defense of such Third Party Claim and holding the Indemnified Party harmless from and against any and all Damages caused or arising out of any settlement approved by the Indemnified Party or any judgment in connection with the claim or litigation.

 

If the Indemnifying Party does not assume the defense of such Third Party Claim in accordance with this Section 7.5, the Indemnified Party may defend against such claim or litigation in such manner as it deems appropriate; provided, however, that the Indemnified Party may not settle such Third Party Claim without the prior written consent of the Indemnifying Party; provided that the Indemnifying Party may not withhold such consent unless it has provided security of a type and in an amount reasonably acceptable to the Indemnified Party for the payment of its indemnification obligations with respect to such Third Party Claim.  The Indemnifying Party shall promptly reimburse the Indemnified Party for the amount of Damages caused or arising out of any judgment rendered with respect to such Third Party Claim, and for all costs and expenses incurred by the Indemnified Party in the defense of such claim.

 

The Indemnifying Party may settle any Third Party Claim in its sole discretion without the prior written consent of the Indemnified Party, provided that such settlement involves only the payment of cash by the Indemnifying Party to the claimant and does not impose any other obligation on the Indemnifying Party or any liability or obligation on the Indemnified Party.

 

7.6       Notice and Procedural Requirements for Direct Claims.

 

Any claim for indemnification by an Indemnified Party on account of Damages which do not result from a Third Party Claim (a “Direct Claim”) shall be asserted by giving the Indemnifying Party reasonably prompt notice thereof in accordance with Section 8.8 of this Agreement; provided, however, that any failure to provide, or delay in providing, such notification shall not constitute a bar or defense to indemnification except to the extent the Indemnifying Party has been prejudiced thereby.  After receiving notice of a Direct Claim, the Indemnifying Party will have a period of thirty (30) days within which to respond in writing to such Direct Claim.  If the Indemnifying Party rejects such claim or does not respond within such

 

 

 

 

 

Except as may otherwise be specifically provided in this Agreement, this Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns.

 

 

This Agreement, the Company Disclosure Schedule, the Pubco Disclosure Schedule, along with all other schedules and exhibits hereto, constitute the entire agreement among the Parties and supersede any prior understandings, agreements or representations by or among the Parties, written or oral, with respect to the subject matter hereof.

 

8.3Succession and Assignment.   

 

This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors, heirs, legal representatives and permitted assigns.  No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Parties.

 

8.4     Public Announcement.

 

Promptly after the Closing of the Merger, Pubco and the Surviving Corporation will issue a press release announcing the Merger.  Thereafter, Pubco and the Surviving Corporation may issue such press releases, and make such other disclosures regarding the Merger, as each determines are required under applicable securities laws or regulatory rules.  Any press releases by Pubco will be filed under a Current Report on Form 8-K with the Commission.

 

8.5Confidentiality.  

 

Pubco and the Company each recognize that they have received confidential information concerning the other during the course of the Merger negotiations and preparations.  Accordingly, Pubco and the Company each agrees (a) to use its respective best efforts to prevent the unauthorized disclosure of any confidential information concerning the other that was or is disclosed during the course of such negotiations and preparations, and is clearly designated in writing as confidential at the time of disclosure, and (b) to not make use of or permit to be used any such confidential information other than for the purpose of effectuating the Merger and

 

 

8.6Counterparts, Facsimile Signatures.  

 

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.  The exchange of copies of this Agreement or amendments thereto and of signature pages by facsimile transmission or by email transmission in portable digital format, or similar format, shall constitute effective execution and delivery of such instrument(s) as to the parties and may be used in lieu of the original Agreement or amendment for all purposes.  Signatures of the parties transmitted by facsimile or by email transmission in portable digital format, or similar format, shall be deemed to be their original signatures for all purposes.

 

8.7Headings.  

 

The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

 

8.8Notices.  

 

All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given:  (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next Business Day; (iii) three (3) Business Days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) Business Day after deposit with a nationally recognized overnight courier, specifying next-day delivery, with written verification of receipt.  All communications shall be sent to the respective Parties at the following addresses (or at such other addresses as shall be specified by notice given in accordance with this Section 8.8):

 

 

	If to the Company
		Paneltech International, L.L.C.
		2999 John Stevens Way
		Hoquiam, WA 98550
		Facsimile: (360) 532-0295
		Attn:  Scott Olmstead

 

	Copy to:
		Olshan Grundman Frome Rosenzweig & Wolosky LLP
		Park Avenue Tower
		65 East 55th Street
		New York, NY 10022
		Facsimile: (212) 451-2222
		Attn: Robert Frome, Esq.
		Kenneth A. Schlesinger, Esq.

 

	If to the Pubco or Merger Sub:
		Charleston Basics, Inc.
		c/o Paragon Capital, LP
		110 East 59th Street
		29th Floor
		New York, NY 10022
		Facsimile: (212) 202-5022
		Attn: Alan P. Donenfeld

	Copy to:
		Feldman LLP
		420 Lexington Avenue, Suite 2620
		New York, NY 10170
		Facsimile: (212) 997-4242
		Attention:  David N. Feldman, Esq.
		Scott M. Miller, Esq.

 

8.9Governing Law; Jurisdiction.  

 

All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each Party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, Managers, officers, shareholders, Members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not

 

 

 8.10Severability. 

 

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the maximum extent possible.

 

8.11Expenses; Attorney’s Fees.

 

The Company shall pay all federal and state regulatory and transfer agent fees of Pubco and Merger Sub in connection with the Merger.  In addition, with respect to all other costs and expenses relating to the Merger, each of Pubco and the Company shall be responsible for and bear all of their own costs and expenses; provided, however, at the Closing, the Company shall pay to the Lead Investor a non-accountable sum of $50,000 for its legal fees and expenses relating to the Merger. Notwithstanding the foregoing, if any Party hereto initiates any legal action arising out of or in connection with this Agreement, the prevailing party in such legal action shall be entitled to recover from the other Party all reasonable attorneys’ fees, expert witness fees and expenses incurred by the prevailing party in connection therewith.

 

8.12Construction.

 

The Parties agree that they have been represented by counsel during the negotiation, preparation and execution of this Agreement and the other Transaction Documents and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the Party drafting such agreement or document.  Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.

 

8.13Incorporation of Exhibits and Schedules.

 

The Exhibits, the Schedules, the Pubco Disclosure Schedule and the Company Disclosure Schedule identified in this Agreement are incorporated herein by reference and made a part hereof.

 

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.

PUBCO:	CHARLESTON BASICS, INC.
	By:	/s/  Alan P. Donenfeld
		Name:  Alan P. Donenfeld
		Title:  President

MERGER SUB:	PANELTECH PRODUCTS, INC.
	By:	/s/  Alan P. Donenfeld
		Name:  Alan P. Donenfeld
		Title:  President

COMPANY:	PANELTECH INTERNATIONAL, L.L.C.
	By:	/s/ Leroy Nott
		Name:  Leroy Nott
		Title:  President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Directors

Leroy Nott

Scott Olmstead

Lead Investor Designee

Sidney Staunton

Trent Gunter

Wade Mosby

 

Officers

Name	Office
Leroy Nott	President and Chief Executive Officer
Scott Olmstead	Secretary and Chief Financial Officer

Directors

 

Leroy Nott

Scott Olmstead

Lead Investor Designee

Sidney Staunton

Trent Gunter

Wade Mosby

 

 

 

Officers