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AGREEMENT AND PLAN OF MERGER
AMONG
SOUVALL-PAGE AND COMPANY, INC. a Utah Corporation
AND
ABA ACQUISITION CORP., an Indiana Corporation
AND
AMERICAN BASKETBALL ASSOCIATION, INC., an Indiana Corporation
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AGREEMENT AND PLAN OF MERGER This Merger Agreement (this “Agreement”), entered into December 18, 2006, by and among Souvall-Page and Company, Inc., a Utah corporation (“Parent”); ABA Acquisition Corp., Inc., an Indiana corporation and a subsidiary of Parent (“Sub”); David C. Merrell, an officer, director and shareholder of Parent (“David C. Merrell”); and American Basketball Association, Inc., an Indiana corporation (“Company”). Parent, Sub, David C. Merrell and Company are referred to collectively as the “Parties.”
RECITALS
A. Parent, Sub and Company intend to effect a Merger of Sub into Company in accordance with this Agreement and the Indiana General Corporation Law. Upon consummation of the Merger, the Sub will cease to exist and Company will continue as a wholly-owned subsidiary of the Parent. B. This Agreement has been approved by the respective boards of directors of Parent, singly and as sole shareholder of Sub, Sub and Company and by shareholders owning more than 51% of the outstanding voting stock of Company. C. The Parties intend that the Merger will be treated as a tax free reorganization as described in Section 368 of the Internal Revenue Code of 1986, as amended (the “Code”).
AGREEMENT
Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows: 1. DEFINITIONS “Affiliate” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act. “Certificate of Merger” has the meaning set forth in Section 2(c) below. “Closing” has the meaning set forth in Section 2(b) below. “Closing Date” has the meaning set forth in Section 2(b) below. “Company” has the meaning set forth in the preface above. “Company Share” means any share of the common stock, no par value per share, of Company.
“Company SPA” has the meaning set forth within Section 2(d) below. “Company Stockholder” means any Person who or which holds any Company Shares.
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“Confidential Information” means any information concerning the businesses and affairs of Company and its Subsidiaries that is not already generally available to the public. “Conversion Ratio” has the meaning set forth in Section 2(d)(iv) below. “Definitive Company Proxy Materials” means the definitive proxy materials or equivalent thereof relating to the Special Company Meeting or the execution and delivery of written consents in lieu thereof. “Indiana General Corporation Law” means the General Corporation Law of the State of Indiana, as amended. “Disclosure Schedule” has the meaning set forth in Section 3 below. “Dissenting Share” means any Company Share held of record by any stockholder who or which has exercised his, her, or its appraisal rights, if any, under the applicable sections of the Indiana General Corporation Law. “Effective Time” has the meaning set forth in Section 2(d)(i) below. “Exchange Agent” has the meaning set forth in Section 2(e) below. “GAAP” means United States generally accepted accounting principles as in effect from time to time, consistently applied. “IRS” means the Internal Revenue Service. “Joint Disclosure Document” means the Company SPA including the Exhibits and Schedules thereto and the filings made by Parent with the United States Securities and Exchange Commission through the date of this Agreement. “Knowledge” means actual knowledge after reasonable investigation. “Lien” means any mortgage, pledge, lien, encumbrance, charge, or other security interest other than (a) liens for Taxes not yet due and payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings, (b) purchase money liens and liens securing rental payments under capital lease arrangements, and (c) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money. “Material Adverse Effect” or “Material Adverse Change” means any effect or change that would be materially adverse to the business, assets, condition (financial or otherwise), operating results, operations, or business prospects of Company and its Subsidiaries, taken as a whole, or on the ability of Company to consummate timely the transactions contemplated hereby. “Merger” has the meaning set forth in Section 2(a) below. “Most Recent Fiscal Quarter End” has the meaning set forth in Section 3(f) below.
“Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency) and as to Company shall also include sales and issuances of securities, contracts, purchases and
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dispositions of equipment and other transactions referenced or contemplated by the Company SPA. “Parent” has the meaning set forth in the preface above. “Parent Share” means any share of the common stock, no par value per share, of Parent. “Party” has the meaning set forth in the preface above. “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other business entity, or a governmental entity (or any department, agency, or political subdivision thereof). “Public Report” has the meaning set forth in Section 3(e) below. “Requisite Company Stockholder Approval” means the affirmative vote of the holders of a majority of Company Shares in favor of this Agreement and the Merger. “SEC” means the Securities and Exchange Commission. “Securities Act” means the Securities Act of 1933, as amended. “Securities Exchange Act” means the Securities Exchange Act of 1934, as amended. “Sub” has the meaning set forth in the preface above. “Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association, or business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof or (ii) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof and for this purpose, a Person or Persons owns a majority ownership interest in such a business entity (other than a corporation) if such Person or Persons shall be allocated a majority of such business entity's gains or losses or shall be or control any managing director or general partner of such business entity (other than a corporation). The term "Subsidiary" shall include all Subsidiaries of such Subsidiary. “Surviving Corporation” has the meaning set forth in Section 2(a) below.
2.
REORGANIZATION TRANSACTION
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(a) The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Indiana General Corporation Law, the Sub shall be merged into Company. At the Effective Time, the separate existence of the Sub shall cease, and Company shall continue as the surviving corporation (the “Surviving Corporation”). (b) The Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices designated by Company at 9200 Sunset Boulevard, 9th Floor, Los Angeles, California 90069 on December 19 2006 or the second business day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other date as the parties may mutually determine (the “Closing Date”). (c) Actions at the Closing. At the Closing, (i) Company will deliver to Parent and Sub the various certificates, instruments, and documents referred to in Section 6(a) below, (ii) Parent and Sub will deliver to Company the various certificates, instruments, and documents referred to in Section 6(b) below, (iii) Parent, Sub and Company will file with the Secretary of State of the State of Indiana a Certificate of Merger in the form attached hereto as Exhibit A (the "Certificate of Merger"), and (iv) Company will deliver to the Exchange Agent in the manner provided below in this Section 2 the certificate(s) evidencing the Parent Shares to be issued in the Merger. (d) Effect of Merger. (i) General. The Merger shall become effective at the time (the "Effective Time") Sub and Company file the Certificate of Merger with the Secretary of State of the State of Indiana. The Merger shall have the effect set forth in the Indiana General Corporation Law. The Surviving Corporation may, at any time after the Effective Time, take any action (including executing and delivering any document) in the name and on behalf of either Sub or Company in order to carry out and effectuate the transactions contemplated by this Agreement. (ii) Certificate of Incorporation. The Certificate of Incorporation of Company in effect at and as of the Effective Time will remain the Certificate of Incorporation of Surviving Corporation without any modification or amendment in the Merger. (iii) By-laws. The By-laws of Company in effect at and as of the Effective Time will remain the By-laws of Surviving Corporation without any modification or amendment in the Merger.
(iv) Conversion of Company Shares. At and as of the Effective Time, (A) each Company Share (other than any Dissenting Share) shall be converted into the right to receive one Parent Share (the ratio of one Parent Share to one Company Share is referred to herein as the "Conversion Ratio"), constituting up to 22,536,136 Parent Shares, (inclusive of the sale and issuance of 1,675,000 units and 750,000 shares of common stock (the “Unit Added Stock”) being offered [pursuant to a Stock Purchase Agreement dated as of the date hereof between the Company and the purchasers therein listed (the “Company SPA”)] and 888,892
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Parent Shares issuable on conversion of the principal of the Bridge Loans); (B) each outstanding warrant to purchase a Company Share shall be converted into the right to receive one warrant to purchase a Parent Share (an aggregate of warrants to purchase up to (1) 500,000 shares at an exercise price of $.25 per share and (2) 500,000 shares at an exercise price of $.75 per share are outstanding); (C) each outstanding placement warrant as described in the Company SPA shall be converted into a warrant to purchase two Parent Shares and a warrant to purchase a Parent Share (placement warrants to purchase 184,250 units at an exercise price of $1.20 per unit, as described in the Company SPA are outstanding) (collectively (A), (B) and (C) constitute the “Merger Consideration”); and (D) each Dissenting Share, if any, shall be converted into the right to receive payment from Parent with respect thereto in accordance with the provisions of the Indiana General Corporation Law; provided, however, that the Conversion Ratio shall be subject to equitable adjustment in the event of any stock split, stock dividend, reverse stock split, or other change in the number of Company Shares outstanding. (v) Conversion of Company Options and Warrants. Except for Warrants issued pursuant to the Company SPA that also include warrants to purchase units issued to the placement agent and a finder, as described within the Company SPA and its Schedules (collectively, all of such warrants issued to investors, the placement agent and the finder being referred to herein as the “SPA Warrants”) and the warrants described in paragraph 2(d)(iv) above (the “Extant Company Warrants”), the Merger Consideration gives effect to all outstanding Company Options, Warrants and other rights held by any person to acquire Company Shares. At the Effective Time, each outstanding option to purchase shares of Company Common Stock (each, a “Company Stock Option”) under Company Option Plans, whether or not vested, shall have been exercised or otherwise terminated. Other than the SPA Warrants and the Extant Company Warrants, Parent shall assume no Company Stock Option by virtue of the Merger. Each of the outstanding SPA Warrants and each of the outstanding Extant Company Warrants shall be converted into the right to acquire Parent Shares upon the same terms and conditions as specified in the SPA Warrants and in the Extant Company Warrants and at the same Conversion Ratio imposed on holders of Company Shares pursuant to the transactions contemplated hereby. (vi) Parent Shares. Each Parent Share issued and outstanding at and as of the Effective Time will remain issued and outstanding. (e) Conversion Procedures. (i) Immediately after the Effective Time, (A) Parent and Sub will furnish to Interwest Transfer Co., Inc., 1981 Murray-Holladay Road, Salt Lake City, Utah 84117 (the "Exchange Agent") a stock certificate (issued in the name of the Exchange Agent or its nominee) representing that number of Parent Shares equal to the product of (i) the
Conversion Ratio times (ii) the number of outstanding Company Shares (other than any Dissenting Shares) not to exceed 22,536,136 Parent Shares after giving effect to (x) the minimum number of units
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and Unit Added Stock that are offered under the Company SPA (but subject to increase if more than the minimum number of units are sold) and (y) conversion of the principal of the Bridge Loans into Parent Shares (but subject to increase if the holders of the Bridge Loans elect to have their interest due payable in Parent Shares), and (B) Parent will cause the Exchange Agent to mail a letter of transmittal (with instructions for its use) to each record holder of outstanding Company Shares for the holder to use in surrendering the certificates which represented his, her, or its Company Shares in exchange for a certificate representing the number of Parent Shares to which he, she, or it is entitled. (ii) Fractional shares shall not be issue