AGREEMENT
AND PLAN OF MERGER
by
and among
YP
CORP., a Nevada corporation,
LD
ACQUISITION CO., a California corporation,
LIVEDEAL,
INC., a California corporation,
RAJESH
NAVAR AND ARATI NAVAR, TRUSTEES OF THE RAJESH & ARATI NAVAR LIVING TRUST
DATED 9/23/2002, in its capacity as the Principal Shareholder of LiveDeal,
Inc.
and
MR.
RAJESH NAVAR, in his capacity as the Shareholders’
Representative
Dated
as of June 6, 2007
MERGER
AGREEMENT
This
MERGER AGREEMENT (the “Agreement”)
is
made as of June 6, 2007 by and among YP Corp., a Nevada corporation
(“YP”);
LD
Acquisition Co., a California corporation wholly owned by YP (“Merger
Sub”);
LiveDeal, Inc., a California corporation (“LiveDeal”);
Rajesh Navar and Arati Navar, Trustees of the Rajesh & Arati Navar Living
Trust dated 9/23/2002, (the “Principal
Shareholder”
and
collectively with all other LiveDeal Shareholders, the “LiveDeal
Shareholders”);
and
Rajesh Navar, in his capacity as the Shareholders’ Representative (as defined in
Section
1.12).
RECITALS
A. YP
wishes
to acquire the LiveDeal business from the LiveDeal Shareholders.
B. YP
has
caused the formation of Merger Sub for the purpose of accomplishing a reverse
triangular merger with LiveDeal.
C. The
parties have determined that it is in their respective best interests to
merge
Merger Sub with and into LiveDeal (the “Merger”)
and to
undertake such other actions described herein, all on the terms and subject
to
the conditions set forth in this Agreement.
D. For
federal income tax purposes, the parties intend, by executing this Agreement,
to
adopt a plan of reorganization and to cause the Merger to qualify as a
reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the “Code”),
and
the Treasury Regulations promulgated thereunder.
E. The
Board
of Directors of LiveDeal has approved this Agreement and the Merger.
F. The
Boards of Directors of each of YP and Merger Sub have (i) determined that
the Merger is consistent with and in furtherance of the long-term business
strategy of YP and fair to, and in the best interests of, YP, Merger Sub
and
their respective shareholders, and (ii) approved and adopted this
Agreement, the Merger, and the other transactions contemplated by this
Agreement.
STATEMENT
OF AGREEMENT
NOW,
THEREFORE, for good and valuable consideration, the sufficiency and receipt
of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE
1
THE
MERGER
1.1 The
Merger.
At the
Effective Time (as defined in Section
1.3),
in
accordance with this Agreement and the California Corporations Code
(“California
Law”),
Merger Sub shall be merged with and into LiveDeal, the separate existence
of
Merger Sub (except as such existence may be continued by operation of law)
shall
cease, and LiveDeal shall continue as the surviving corporation under the
corporate name it possesses immediately prior to the Effective Time. LiveDeal,
in its capacity as the corporation
surviving the Merger, sometimes is referred to herein as the “Surviving
Corporation.”
1.2 Effect
of the Merger.
The
Surviving Corporation shall possess all the rights, privileges, immunities
and
franchises, of a public as well as of a private nature, of each of Merger
Sub
and LiveDeal (collectively, the “Constituent
Corporations”);
all
property, real, personal and mixed, and all accounts payable arising in the
ordinary course of business and accrued expenses due on whatever account,
and
all debts, liabilities and duties due to each of the Constituent Corporations
shall be transferred to and vested in the Surviving Corporation without further
act or deed; and the Surviving Corporation shall be responsible and liable
for
all liabilities and obligations of each of the Constituent Corporations,
in each
case in accordance with California Law, but subject, as between the parties,
to
this Agreement.
1.3 Closing
and Consummation of the Merger.
The
closing of the transactions contemplated by this Agreement (the “Closing”)
shall
take place contemporaneously with the execution of this Agreement and the
delivery of the documents required pursuant to Section 6. Contemporaneous
with
the execution of this Agreement, the parties hereto will cause an agreement
of
merger (the “Agreement
of Merger”)
in the
form of Exhibit
A,
along
with officers’ certificates for each of the Constituent Corporations, to be
filed with the Secretary of State of the State of California in accordance
with
California Law. The Merger shall be effective at such time as the Agreement
of
Merger is duly filed. The date and time when the Merger shall become effective
is referred to as the “Effective
Time.”
1.4 Articles
of Incorporation and Bylaws; Directors and Officers.
The
Articles of Incorporation of the Surviving Corporation, as in effect immediately
prior to the Effective Time, shall be amended and restated to read as attached
hereto as Exhibit
B.
The
Bylaws of LiveDeal as the Surviving Corporation shall be amended and restated
as
attached as Exhibit
C
to read
the same as the Bylaws of Merger Sub as in effect immediately prior to the
Effective Time, except that all references to Merger Sub in the Bylaws of
the
Surviving Corporation shall be changed to refer to LiveDeal, Inc. The directors
of Merger Sub holding office immediately prior to the Effective Time shall
be
the directors of the Surviving Corporation immediately after the Effective
Time.
1.5 Conversion
of Securities.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
Merger Sub, LiveDeal or the holders of any of the following
securities:
(a) Each
share of common stock, no par value per share, of LiveDeal (the “LiveDeal
Common Stock”)
issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares as defined in Article 5) shall automatically be cancelled and
extinguished and converted into the right to receive, upon surrender of the
certificate representing such share of LiveDeal Common Stock in accordance
with
the terms of Section
1.9
hereof,
and subject to the conditions set forth in this Agreement, including the
indemnification and escrow provisions set forth in Article 7 and Section
1.8,
respectively, 0.072842 (the “Common
Exchange Ratio”)
fully
paid and nonassessable shares of common stock, $0.001 par value per share,
of YP
(the “YP
Common Stock”).
(b) Each
share of Series A Preferred Stock, no par value per share, of LiveDeal (the
“LiveDeal
Series A Preferred Stock”)
issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares as defined in Article 5) shall automatically be cancelled and
extinguished and converted into the right to receive, upon surrender of the
certificate representing such share of LiveDeal Series A Preferred Stock
in
accordance with the terms of Section
1.9
hereof,
and subject to the conditions set forth in this Agreement, including the
indemnification and escrow provisions set forth in Article 7 and Section
1.8,
respectively, 0.122986 (the “Series
A Exchange Ratio”)
fully
paid and nonassessable shares of YP Common Stock, which takes into account
the
liquidation preference and right of participation of each share of LiveDeal
Series A Preferred Stock as set forth in the LiveDeal Articles of
Incorporation.
(c) Each
share of Series A-2 Preferred Stock, no par value per share, of LiveDeal
(the
“LiveDeal
Series A-2 Preferred Stock”)
issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares as defined in Article 5) shall automatically be cancelled and
extinguished and converted into the right to receive, upon surrender of the
certificate representing such share of LiveDeal Series A-2 Preferred Stock
in
accordance with the terms of Section
1.9
hereof,
and subject to the conditions set forth in this Agreement, including the
indemnification and escrow provisions set forth in Article 7 and Section
1.8,
respectively, 0.287742 (the “Series
A-2 Exchange Ratio”)
fully
paid and nonassessable shares of YP Common Stock, which takes into account
the
liquidation preference and right of participation of each share of LiveDeal
Series A-2 Preferred Stock as set forth in the LiveDeal Articles of
Incorporation.
(d) Each
share of Series A-3 Preferred Stock, no par value per share, of LiveDeal
(the
“LiveDeal
Series A-3 Preferred Stock”)
issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares as defined in Article 5) shall automatically be cancelled and
extinguished and converted into the right to receive, upon surrender of the
certificate representing such share of LiveDeal Series A-3 Preferred Stock
in
accordance with the terms of Section
1.9
hereof,
and subject to the conditions set forth in this Agreement, including the
indemnification and escrow provisions set forth in Article 7 and Section
1.8,
respectively, 0.549920 (the “Series
A-3 Exchange Ratio”)
fully
paid and nonassessable shares of YP Common Stock, which takes into account
the
liquidation preference and right of participation of each share of LiveDeal
Series A-3 Preferred Stock as set forth in the LiveDeal Articles of
Incorporation.
(e) Each
share of Series B Preferred Stock, no par value per share, of LiveDeal (the
“LiveDeal
Series B Preferred Stock”)
issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares as defined in Article 5) shall automatically be cancelled and
extinguished and converted into the right to receive, upon surrender of the
certificate representing such share of LiveDeal Series B Preferred Stock
in
accordance with the terms of Section
1.9
hereof,
and subject to the conditions set forth in this Agreement, including the
indemnification and escrow provisions set forth in Article 7 and Section
1.8,
respectively, 0.754647 (the “Series
B Exchange Ratio”)
fully
paid and nonassessable shares of YP Common Stock, which takes into account
the
liquidation preference and right of participation of each share of LiveDeal
Series B Preferred Stock as set forth in the LiveDeal Articles of
Incorporation.
(f) The
shares of YP Common Stock to be issued to the holders of the LiveDeal Common
Stock, Series A Preferred Stock, Series A-2 Preferred Stock, Series A-3
Preferred Stock and Series B Preferred Stock (collectively, the “LiveDeal
Capital Stock”)
pursuant to this Section
1.5
are
referred to as the “Merger
Shares.”
(g) At
the
time of issuance, the Merger Shares shall not be registered under the Securities
Act of 1933, as amended (“Securities
Act”),
will
constitute restricted securities within the meaning of the Securities Act
and
will contain restrictive legends reciting prohibitions on the transfer of
such
shares to the extent required by the Securities Act and applicable state
law.
All shares of LiveDeal Capital Stock when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and each holder
of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive, as applicable, the Merger
Shares.
(h) No
fraction of a share of YP Common Stock will be issued. All such fractions
will
be rounded to the nearest whole share.
(i)
Each
share of common stock, par value $.001 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall automatically be
converted into and become one validly issued, fully paid and nonassessable
share
of common stock, no par value per share, of the Surviving
Corporation.
1.6 Company
Stock Options and Warrants.
(a) At
the
Effective Time, each then outstanding and unexercised option to acquire LiveDeal
Common Stock, whether or not exercisable at the Effective Time, (collectively,
the “LiveDeal
Options”)
will
be assumed by YP. Each LiveDeal Option so assumed by YP under this Agreement
will continue to have, and be subject to, the same terms and conditions to
which
the applicable LiveDeal Option is subject (including the terms and conditions
set forth in any applicable stock option agreement or other document evidencing
such LiveDeal Option) immediately prior to the Effective Time (including
any
repurchase rights or vesting provisions), except that (i) each LiveDeal
Option will be exercisable (or will become exercisable in accordance with
its
terms) for that number of whole shares of YP Common Stock equal to the product
of the number of shares of LiveDeal Common Stock that were issuable upon
exercise of such LiveDeal Option immediately prior to the Effective Time
(disregarding any vesting schedule applicable to such option) multiplied
by the
Common Exchange Ratio, rounded down to the nearest whole number of shares
of YP
Common Stock and (ii) the per share exercise price for the shares of YP
Common Stock issuable upon exercise of such assumed LiveDeal Option will
be
equal to the quotient determined by dividing the exercise price per share
of
LiveDeal Common Stock of such LiveDeal Option by the Common Exchange Ratio,
rounded up to the nearest whole cent; provided,
however,
that in
the case of any LiveDeal Option to which Section 421 of the Code applies
by
reason of its qualification under Section 422 of the Code, the option price,
the
number of shares subject to such option, and the terms and conditions of
exercise of such option shall be determined in a manner consistent with the
requirements of Section 424(a) of the Code. Each assumed LiveDeal Option
shall
be vested immediately following the Effective Time as to the same percentage
of
the total number of shares subject thereto as it was vested as to immediately
prior to the Effective Time, except to the extent such LiveDeal Option (either
by its terms or by the terms of another agreement) provides for acceleration
of
vesting in which case such LiveDeal Option shall be vested immediately following
the Effective Time as to the total number of shares in accordance with such
terms and provisions. As soon as reasonably practicable, YP will issue to
each
holder of an assumed LiveDeal Option a document evidencing the foregoing
assumption of such LiveDeal Option by YP and setting forth the holder’s rights
under the LiveDeal Options after giving effect to the adjustment required
by
this Section 1.6(a).
(b) At
the
Effective Time, each then outstanding and unexercised warrant to acquire
LiveDeal Common Stock, whether or not exercisable at the Effective Time,
(collectively, the “LiveDeal
Warrants”)
will
be assumed by YP. Each LiveDeal Warrant shall be subject to adjustment in
the
same manner as the LiveDeal Options, as set forth in subsection (a)
above.
(c) YP
has
taken all corporate action necessary to reserve for issuance a sufficient
number
of shares of YP Common Stock for delivery upon exercise of the LiveDeal Options
and LiveDeal Warrants in accordance with this Section
1.6.
1.7 Dissenting
Shares. As
more
fully set forth in Article 5, holders of shares of Company Common Stock who
have
complied with all requirements for perfecting shareholders’ rights of appraisal,
as set forth in Section 1300 of the California Law, shall be entitled to
their rights under the California Law with respect to such shares.
1.8 Escrow.
(a) At
Closing, YP, the Shareholders’ Representative and Thomas Title & Escrow, LLC
(the “Escrow
Agent”)
shall
have entered into an escrow agreement in substantially the form attached
hereto
as Exhibit
D
(the
“Escrow
Agreement”).
Twenty percent of the combined total of the Merger Shares and the shares
issuable upon conversion of debt provided in Section
4.5
(the
“Escrow
Shares”)
will
be deposited by YP and held by the Escrow Agent in escrow (the “Escrow
Fund”)
as
security to cover potential losses or other claims for which YP is entitled
to
indemnification or recovery pursuant to Article 7. At the Closing, the LiveDeal
Shareholders will be deemed to have received and deposited with the Escrow
Agent
the Escrow Shares, without any act of any LiveDeal Shareholders. Subject
to any
claims made by YP and pursuant to the terms of the Escrow Agreement, the
Escrow
Shares will be released to the LiveDeal Shareholders on the first anniversary
of
the Closing.
(b) The
approval of this Agreement by the LiveDeal Shareholders shall constitute
approval of the Escrow Agreement and of all of the arrangements relating
thereto, including without limitation the placement of the Escrow Shares
in
escrow and the appointment of the Shareholders’ Representative (as defined in
Section
1.12 below).
1.9 Exchange;
Delivery of Certificates.
(a) At
the
Closing, YP shall serve as the “Exchange Agent” and as soon as practicable and
in any event within 10 days after the Effective Time, will mail to each record
holder (including nominee holders for distribution to beneficial holders)
of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of LiveDeal Capital Stock (the “Certificates”)
a
letter of transmittal in the form attached as Exhibit
E
(“Letter
of Transmittal”).
Upon
surrender for cancellation to the Exchange Agent of one or more Certificates
held by any record holder of a Certificate, together with such Letter of
Transmittal, duly executed, the holder of such Certificate shall be entitled
to
receive in exchange therefor that number of Merger Shares to which such holder
is entitled in respect of the shares represented by such Certificate or
Certificates pursuant to this Article 1 and any Certificate so surrendered
shall
forthwith be cancelled. YP, in its capacity as Exchange Agent, upon receipt
of a
completed and duly executed Letter of Transmittal and applicable Certificate(s)
in accordance with the instructions set forth in the Letter of Transmittal
will
promptly cause its transfer agent, Registrar & Transfer Company to issue
such replacement certificates. No interest will be paid or accrued on the
Merger
Shares or cash in lieu of fractional shares payable to the holder of the
Certificates.
(b) If
any
Merger Shares are to be issued in a name other than that in which the
Certificate surrendered is registered, it shall be a condition of such issuance
that the Certificate so surrendered shall be properly endorsed and otherwise
in
proper form for transfer and that the party requesting such payment shall
pay to
the Exchange Agent any taxes required by reason of payment or shall establish
to
the satisfaction of the Exchange Agent that such tax has been paid or is
not
applicable. YP shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of LiveDeal
Capital Stock such amounts as YP is required to deduct and withhold with
respect
to the making of such payment under the Code, or under any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by YP,
such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of LiveDeal Capital Stock in respect
of
which such deduction and withholding was made by YP.
1.10
Lost
Stock Certificate.
In the
event any certificate representing shares of the LiveDeal Capital Stock shall
have been lost, stolen or destroyed, upon the making of an affidavit in form
and
substance acceptable to YP of that fact by the person claiming such certificate
to be lost, stolen or destroyed, YP shall deliver in exchange for such lost,
stolen or destroyed certificate a certificate for the Merger Shares in exchange
therefor pursuant to the provisions of Sections 1.5
and
1.9.
YP may,
in its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate to provide to YP
an
indemnity agreement and/or post a bond to cover any claim that may be made
against YP with respect to the certificate alleged to have been lost, stolen
or
destroyed.
1.11
Further
Action.
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 possession of all the rights, privileges, immunities
and
franchises of the Constituent Corporations, or fully subject the Surviving
Corporation to all debts and obligations of the Constituent Corporations,
the
officers and directors of the Surviving Corporation are fully authorized
in the
name of the Constituent Corporations or otherwise to take, and shall take,
all
such actions.
1.12
Shareholders’
Representative.
(a) By
approval and adoption of this Agreement by the LiveDeal Shareholders, Rajesh
Navar (the “Shareholders’
Representative”)
is
hereby irrevocably appointed to act as the LiveDeal Shareholders true and
lawful
attorney-in-fact and agent, with full power of substitution for him and in
his
name, place and stead, in any and all capacities, to execute any and all
agreements and documents required or contemplated by this Agreement, including
any amendments or waivers hereto, on behalf of the LiveDeal Shareholders,
and to
deal with all claims under this Agreement, including any claims for
indemnification, and settlements in respect thereto and to notify, negotiate
and
resolve any and all other issues concerning the Agreement with YP. If for
any
reason, Rajesh Navar believes that a conflict of interest exists that prohibits
him from properly performing his duties as Shareholders’ Representative, he
reserves the right to appoint a representative of Torstar Corporation as
Shareholders’ Representative. YP shall be entitled to send all notices to, and
to rely upon all consents and approvals given, and all other actions taken
by
the incumbent Shareholders’ Representative until such time as YP receives actual
notice of such Shareholders’ Representative’s death or incapacity. YP shall be
entitled to rely upon the response of the Shareholders’ Representative in all
matters pertaining to the subject matter hereof, including, without limitation,
any consent or approval provided or contemplated hereunder to be given by
or on
behalf of, or obtained from, the LiveDeal Shareholders. Notice to or service
upon the Shareholders’ Representative shall be deemed to constitute good and
sufficient notice or service upon all of the LiveDeal Shareholders for all
matters, including without limitation, all notices of or demands for legal
processes.
(b) The
following represents an agreement solely among the LiveDeal Shareholders
and the
Shareholders’ Representative, and none of YP, Merger Sub or LiveDeal is a party
hereto. Neither the Shareholders’ Representative nor any of LiveDeal’s
directors, officers, agents or employees, if any, shall be liable to any
LiveDeal Shareholder for any error of judgment, or any action taken, suffered
or
omitted to be taken under this Agreement or the Escrow Agreement, except
in the
case of its gross negligence, bad faith or willful misconduct. The Shareholders’
Representative may consult with legal counsel, independent public accountants
and other experts selected by him. The Shareholders’ Representative shall not
have any duty to ascertain or to inquire as to the performance or observance
of
any of the terms, covenants or conditions of this Agreement or the Escrow
Agreement. As to any matters not expressly provided for in this Agreement
or the
Escrow Agreement, the Shareholders’ Representative shall not exercise any
discretion or take any action. Each LiveDeal Shareholder shall indemnify
and
hold harmless and reimburse the Shareholders’ Representative from and against
such LiveDeal Shareholder’s Pro Rata Portion (as defined in Section 7.2) of any
and all liabilities, losses, damages, claims, costs or expenses suffered
or
incurred by the Shareholders’ Representative arising out of or resulting from
any action taken or omitted to be taken by the Shareholders’ Representative
under this Agreement or the Escrow Agreement, other than such liabilities,
losses, damages, claims, costs or expenses arising out of or resulting from
the
Shareholders’ Representative’s gross negligence, bad faith or willful
misconduct.
1.13
Tax
Consequences. Except
as
specifically provided in Section
2.8
and in
the last sentence of Section
4.6,
YP
makes no representations, warranties or covenants to LiveDeal or to any LiveDeal
Shareholder or other holder of LiveDeal securities regarding the tax treatment
of the Merger, or any of the tax consequences to LiveDeal or to any LiveDeal
Shareholder or other holder of LiveDeal securities of this Agreement, the
Merger
or any of the other transactions or agreements contemplated hereby, and
LiveDeal, Principal Shareholder, and the Shareholder Representative acknowledges
that LiveDeal and the LiveDeal Shareholders are relying solely on their own
tax
advisors in connection with this Agreement, the Merger and the other
transactions contemplated by this Agreement. For
federal income tax purposes, the Merger is intended to constitute a
reorganization within the meaning of Section 368(a) of the Code and the Treasury
Regulations promulgated thereunder. The parties to this Agreement adopt this
Agreement as a plan of reorganization within the meaning of Treasury Regulations
Section 1.368-2(g) and Proposed Treasury Regulations Section
1.368-3(a).
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES OF YP AND MERGER SUB
YP
and
Merger Sub hereby represent and warrant to LiveDeal and the Principal
Shareholder as of the date hereof as follows. For
purposes of this Agreement, “knowledge of YP” or “knowledge of Merger Sub” (or
similar phrases) means the actual knowledge of the Chief Executive Officer
and
the Chief Financial Officer of YP provided that each of them shall have made
reasonable inquiry with the employees of the company who report directly
to them
of such facts and matters represented.
2.1 Organization
and Qualification.
YP is a
corporation duly organized, validly existing and in good standing under the
laws
of the State of Nevada and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of California,
and
each has the requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted in every jurisdiction
where the failure to do so would cause a YP Material Adverse Effect. The
term
“YP
Material Adverse Effect”,
as
used in this Agreement, means any change in or effect on YP or any of its
subsidiaries that is materially adverse to the business, operations, condition
(financial or otherwise), customers, employees or suppliers, assets (tangible
or
intangible), liabilities or results of operations of YP and its subsidiaries
taken as a whole, except for any such changes or effects principally resulting
from or principally arising in connection with (i) any occurrence or condition
affecting YP’s industry generally that does not disproportionately affect YP and
its subsidiaries, taken as a whole; or (ii) any changes in general economic
conditions that does not disproportionately affect YP and its subsidiaries,
taken as a whole.
2.2 Authority
Relative to This Agreement.
Each of
YP and Merger Sub has the requisite corporate power and authority to enter
into
this Agreement and to carry out its obligations hereunder. The execution
and
delivery of this Agreement by YP and Merger Sub and the consummation by YP
and
Merger Sub of the transactions contemplated hereby, including the issuance
of
the Merger Shares, and the shares to be issued upon conversion of outstanding
indebtedness pursuant to Section
4.5
below
have been duly authorized by YP and Merger Sub, and no other corporate
proceedings (including any vote of YP’s stockholders) on the part of YP or
Merger Sub are necessary to authorize this Agreement and such transactions.
YP
has taken all corporate action necessary to reserve for issuance a sufficient
number of shares of YP Common Stock for delivery upon exercise of the LiveDeal
Options and LiveDeal Warrants. This Agreement has been duly executed and
delivered by YP and Merger Sub and constitutes a valid and binding obligation
of
each, enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or other
similar laws relating to the enforcement of creditors’ rights generally and by
general principles of equity. Neither YP nor Merger Sub is subject to, or
obligated under, any provision of (a) its Articles of Incorporation or its
Bylaws; (b) any agreement, arrangement or understanding; (c) any license,
franchise or permit; or (d) any law, regulation, order, judgment or decree,
that
would be breached, or violated, or in respect of which a right of termination
or
acceleration would arise or any encumbrance on any of its or any of its
subsidiaries’ assets would be created, by its execution, delivery and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby.
2.3 Validity
of Stock.
The
Merger Shares shall be, when issued: (a) duly authorized, validly issued,
fully
paid and nonassessable; and (b) free of preemptive rights or other liens
and
encumbrances created by any person or entity (other than the LiveDeal
Shareholders), except for restrictions on transfer under applicable federal
securities laws, including Rule 144 promulgated under the Securities
Act.
2.4 Consents.
No
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any third party or federal, state
or
local governmental authority on the part of YP or Merger Sub is required
in
connection with the execution of this Agreement or the consummation of the
transactions contemplated by this Agreement, except the filing of the Agreement
of Merger under California Law and filings to be made pursuant to federal
and
state securities laws, all of which shall be timely made.
2.5 SEC
Documents.
Since
January 1, 2005, YP has filed on a timely basis with the Securities and Exchange
Commission (the “SEC”)
and
made publicly available Reports on Form 8-K, 10-Q and 10-K and a definitive
proxy statement for its 2006 and 2007 Annual Meeting of Stockholders required
to
be filed under the Securities Exchange Act of 1934 (the “Exchange
Act”)
(such
documents, as amended, the “YP
SEC
Documents”).
As of
their respective dates, the YP SEC Documents complied in all material respects
with the requirements of the Securities Act, the Exchange Act and the rules
and
regulations of the SEC applicable thereto, and none of YP SEC Documents
contained, at the time they were filed or as of the date hereof, any untrue
statement of a material fact or omitted to state a material fact required
to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.6 OTCBB.
The YP
Common Stock is quoted on the Nasdaq Over-the-Counter Bulletin Board (the
“OTCBB”).
Neither YP nor Merger Sub has knowledge of any events, facts or circumstances
currently in existence that will result in a delisting of the YP Common Stock
from the OTCBB.
2.7 Financial
Statements.
The
financial statements included in the YP SEC Documents complied as to form
in all
material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP, and fairly and
accurately present in all material respects in accordance with applicable
requirements of GAAP the consolidated financial position of YP and its
consolidated subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of YP and its consolidated
subsidiaries for the periods presented therein (except as may be indicated
in
the notes thereto or, in the case of unaudited statements, as permitted by
Rule
10-01 of SEC Regulation S-X and subject, in the case of unaudited statements,
to
normal recurring adjustments, none of which were or are expected, individually
or in the aggregate, to be material in amount, and except as may be disclosed
in
any filing made by YP with the SEC prior to the Effective Time). Except as
set
forth in the unaudited consolidated balance sheet of YP and its subsidiaries
as
of March 31, 2007 as set forth in the Quarterly Report on Form 10-Q filed
by YP
with the SEC on May 15, 2007, YP has no liabilities or obligations (whether
accrued, absolute, contingent, unliquidated, known, unknown or otherwise),
other
than (i) liabilities incurred in the ordinary course of business, and
(ii) obligations under contracts and commitments incurred in the ordinary
course of business, which, in the case of both subsection (i)
and
(ii),
individually or in the aggregate, are not material to the financial condition
or
operating results of YP.
2.8 Reorganization
Treatment.
(a) Intention
Regarding the Surviving Corporation.
Except
for transfers of stock and assets described in Treasury Regulations Section
1.368-2(k) or transfers of the stock of the Surviving Corporation to another
subsidiary controlled by YP within the meaning of Section 368(c) of the Code,
to
the knowledge of YP, YP has no current plan or intention: (i) to liquidate
the
Surviving Corporation; (ii) to merge the Surviving Corporation with or into
another corporation; (iii) to sell or otherwise dispose of the stock of the
Surviving Corporation; or, (iv) except for dispositions made in the ordinary
course of business, to cause the Surviving Corporation to sell or otherwise
dispose of all or substantially all of its assets.
(b) Intention
Regarding YP Stock.
Except
with respect to (i) open-market purchases of YP’s stock pursuant to a general
stock repurchase program of YP that has not been created or modified in
connection with the Merger (and, for purposes of clarification, the repurchase
program of YP, approved on May 25, 2007, which will not, and is not intended
to,
favor participation by former LiveDeal Shareholders, shall not be considered
as
being created or modified in connection with the Merger), (ii) repurchases
in
the ordinary course of business and unvested shares, if any, acquired from
terminated employees, (iii) payments of cash in lieu of the issuance of
fractional shares, or (iv) transactions contemplated in this Agreement, to
the
knowledge of YP, YP does not have any current plans or intentions to, redeem
or
otherwise acquire any of the stock of YP issued to the LiveDeal Shareholders
pursuant to this Agreement immediately following the Merger.
(c) Control.
Prior
to the Merger, YP will be in control of Merger Sub within the meaning of
Section
368(c) of the Code. To the knowledge of YP, YP has no current plan or intention
to cause the Surviving Corporation, after the Merger, to issue additional
shares
of stock of the Surviving Corporation that would result in YP losing control
of
the Surviving Corporation within the meaning of Section 368(c) of the
Code.
(d) Assuming
the accuracy of LiveDeal’s representation contained in Section 3.24(b), to the
knowledge of YP, YP has no current plan or intention to cause the Surviving
Corporation or a member of its qualified group of corporations (as defined
in
Treasury Regulations Section 1.368-1(d)(4)(ii)) to discontinue LiveDeal’s online
classified business or not use a significant portion of LiveDeal’s business
assets from the online classified business in a business following the Merger.
For purposes of this representation, YP will be deemed to satisfy the foregoing
representation if YP intends that (a) the members of YP’s qualified group (as
defined in Treasury Regulations Section 1.368-1(d)(4)(ii)), in the aggregate,
will continue the historic business of LiveDeal or use a significant portion
of
LiveDeal’s historic business assets in a business, or (b) the foregoing
activities be undertaken by a partnership as contemplated in Treasury
Regulations Section 1.368-1(d)(4) (provided, however, that in the event that
Section
3.24(b)
is or
has been breached, this Section
2.8(d)
shall
not be considered to be or have been breached).
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF PRINCIPAL SHAREHOLDER AND LIVEDEAL
Principal
Shareholder and LiveDeal hereby represent and warrant to YP and Merger Sub
as of
the date hereof as follows, except as otherwise set forth in the written
disclosure schedules delivered to YP (the “LiveDeal
Schedules”).
The
LiveDeal Schedules are numbered to correspond to the various sections and
subsections of this Article 3 setting forth certain exceptions to the
representations and warranties contained in this Article 3 and certain other
information called for by this Agreement. No disclosure made in any particular
LiveDeal Schedule shall be deemed made in any other LiveDeal Schedule unless
(i)
expressly made therein (by cross-reference or otherwise), or (ii) it is
reasonably apparent on the face of such disclosure (without reference to
the
documents referenced therein) that such disclosure applies to such other
representations and warranties). For purposes of this Agreement, “knowledge of
LiveDeal” (or similar phrases) means the actual knowledge of the Chief Executive
Officer and the Director of Human Resources, Finance & Administration of
LiveDeal, provided that each of them shall have made reasonable inquiry with
the
employees of the company who report directly to them of such facts and matters
represented.
3.1 Organization
and Qualification.
LiveDeal is a corporation duly organized, validly existing and in good standing
under the laws of the State of California, and has the requisite corporate
power
and authority to own and operate its properties and to carry on its business
as
now conducted, except where the failure to be so organized, existing or in
good
standing or to have such corporate power and authority, individually or in
the
aggregate, has not resulted in an LiveDeal Material Adverse Effect. LiveDeal
is
duly qualified to do business in every jurisdiction except where the failure
to
do so would not cause a LiveDeal Material Adverse Effect. The copies of
LiveDeal’s Articles of Incorporation and Bylaws that have been furnished by
LiveDeal to YP prior to the date of this Agreement reflect all amendments
made
thereto and are correct and complete. The term “LiveDeal
Material Adverse Effect”
as
used
in this Agreement means any change in or effect on LiveDeal or any of its
subsidiaries that is materially adverse to the business, operations, condition
(financial or otherwise), customers, employees or suppliers, assets (tangible
or
intangible), liabilities or results of operations of LiveDeal and its
subsidiaries taken as a whole, except for any such changes or effects
principally resulting from or principally arising in connection with (i)
any
occurrence or condition affecting LiveDeal’s industry generally that does not
disproportionately affect LiveDeal and its subsidiaries, taken as a whole;
or
(ii) any changes in general economic conditions that does not disproportionately
affect YP and its subsidiaries, taken as a whole.
3.2 Authority
Relative to this Agreement.
LiveDeal has the requisite corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by LiveDeal and the consummation by LiveDeal of the
transactions contemplated hereby have been duly authorized by the board of
directors of LiveDeal and have been duly approved by the LiveDeal Shareholders,
and no other corporate proceedings on the part of LiveDeal are necessary
to
authorize this Agreement and such transactions. This Agreement has been duly
executed and delivered by LiveDeal and, assuming the due authorization,
execution, and delivery by YP and Merger Sub, constitutes a valid and binding
obligation of LiveDeal, enforceable in accordance with its terms, except
as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws relating to the enforcement of creditors’ rights generally
and by general principles of equity. LiveDeal is not subject to, or obligated
under, any provision of (a) its Articles of Incorporation or Bylaws; (b)
any
agreement, arrangement or understanding; (c) any license, franchise or permit;
or (d) any law, regulation, order, judgment or decree, that would be breached
or
violated, or in respect of which a right of termination or acceleration would
arise or any encumbrance on any of its assets would be created, by its
execution, delivery and performance of this Agreement and the consummation
by it
of the transactions contemplated hereby.
3.3 Capitalization
and Voting Rights.
(a) The
authorized capital stock of LiveDeal consists of 48,500,000 shares of LiveDeal
Common Stock, of which 11,081,835 will be issued and outstanding immediately
prior to the Effective Time, and 30,562,374 shares of LiveDeal Preferred
Stock,
of which 4,000,000 shares have been designated Series A Preferred Stock,
all of
which shares are issued and outstanding immediately prior to the Effective
Time,
13,333,333 shares have been designated Series A-2 Preferred Stock, all of
which
shares are issued and outstanding immediately prior to the Effective Time,
3,000,000 shares have been designated Series A-3 Preferred Stock, all of
which
shares are issued and outstanding immediately prior to the Effective Time,
and
10,229,041 shares have been designated Series B Preferred Stock, all of which
shares are issued and outstanding immediately prior to the Effective
Time.
(b) The
outstanding shares of LiveDeal Capital Stock are owned of record by the LiveDeal
Shareholders in the amounts as set forth on Schedule
3.3,
and, to
the knowledge of LiveDeal, are free and clear of all liens, encumbrances
and
security interests.
(c) All
of
the outstanding shares of LiveDeal Capital Stock are duly and validly authorized
and issued, fully paid and nonassessable, and were issued in accordance with
the
registration or qualification provisions of the Securities Act and any relevant
state securities laws, or pursuant to valid exemptions therefrom and are
not
subject to any preemptive right, right of first refusal, right of first offer
or
right of rescission.
(d) Schedule 3.3
lists
for each person who holds LiveDeal Options, the name of the holder of each
such
LiveDeal Option, the exercise price for each such LiveDeal Option and the
number
of shares of LiveDeal Common Stock covered by each such LiveDeal Option.
True
and complete copies of the standard option agreement under the 2003 LiveDeal
Stock Option Plan (the “LiveDeal
Plan”)
and
each agreement for each LiveDeal Option that does not conform to the standard
option agreement under the LiveDeal Plan have been delivered by LiveDeal
to YP.
No LiveDeal Options have been granted or are outstanding except under and
pursuant to the LiveDeal Plan. All LiveDeal Options were granted in accordance
with the registration or qualification provisions of the Securities Act and
any
relevant state securities laws, or pursuant to exemptions therefrom. Except
as
set forth on Schedule
3.3,
there
are no outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from LiveDeal of any
shares of its capital stock.
(e) Except
as
set forth on Schedule
3.3,
LiveDeal is not a party or subject to any agreement or understanding, and,
to
LiveDeal’s knowledge, there is no agreement or understanding between any persons
or entities and LiveDeal that affects or relates to the voting or giving
of
written consents with respect to any security of LiveDeal. LiveDeal is not
under
any obligation to register under the Securities Act any of its presently
outstanding shares of stock or other securities or any stock or other securities
that may be subsequently issued.
3.4 Consents.
No
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any third party or federal, state
or
local governmental authority on the part of LiveDeal is required in connection
with the consummation of the transactions contemplated by this Agreement,
except
the filing of the Agreement of Merger under California Law. Consents, approvals,
orders, authorizations, registrations, declarations and filings required
to be
obtained by LiveDeal in connection with the Merger are hereinafter referred
to
as “Required
Consents.”
3.5 Balance
Sheet, Financial Statements, and Projections.
LiveDeal has provided YP with audited consolidated balance sheets of LiveDeal
and its Subsidiaries as of, and the related audited consolidated statements
of
income and retained earnings, stockholders’ equity and cash flow, for each of
the years ended December 31, 2004 and 2005 (the “2004
and 2005 Historical Financial Statements”)
and
unaudited consolidated balance sheet of LiveDeal and its Subsidiaries as
of, and
the related audited consolidated statement of income, for the year ended
December 31, 2006 (the “2006
Historical Financial Statements”
and
together with the 2004 and 2005 Historical Financial Statements, the
“Historical
Financial Statements”),
and
the unaudited consolidated balance sheet of LiveDeal and its Subsidiaries
as of
March 31, 2007 (the “March
Balance Sheet”),
and
the related unaudited consolidated statements of income for the three-month
period ended March 31, 2007 (the “Balance
Sheet Date”)
(the
“Interim
Financial Statements”
and
together with the Historical Financial Statements, the “Financial
Statements”).
The
Financial Statements were prepared in accordance with GAAP and present fairly
in
all material respects the information purported to be presented therein,
subject
(in the case of the 2006 Historical Financial Statements and the Interim
Financial Statements) to normal year-end accounting adjustments, the absence
of
footnote disclosure and the absence of consolidated statements of stockholders’
equity and cash flow. Except as set forth in the March Balance Sheet, LiveDeal
has no liabilities or obligations (whether accrued, absolute, contingent,
unliquidated, known, unknown or otherwise), other than (i) liabilities
incurred in the ordinary course of business, and (ii) obligations under
contracts and commitments incurred in the ordinary course of business, which,
in
the case of both subsection (i)
and
(ii),
individually or in the aggregate, are not material to the financial condition
or
operating results of LiveDeal.
3.6 No
LiveDeal Material Adverse Effects.
Except
as set forth on Schedule
3.6,
since
the Balance Sheet Date, there has not been a LiveDeal Material Adverse Effect.
Without limiting the foregoing, since the Balance Sheet Date there has not
been:
(a) any
change in the assets, liabilities, financial condition, or operating results
of
LiveDeal from that reflected in the March Balance Sheet, except changes in
the
ordinary course of business that have not been, in the aggregate, materially
adverse;
(b) any
material damage, destruction or loss, whether or not covered by insurance,
adversely affecting the assets, properties, financial condition, operating
results or business of LiveDeal;
(c) any
waiver by LiveDeal of a material right or of a debt or payable owed to
it;
(d) any
satisfaction or discharge of any material lien, claim, or encumbrance in
favor
of LiveDeal, except in the ordinary course of business and not material in
amount or scope;
(e) any
termination of or material amendment to a material contract or arrangement
by
which LiveDeal or any of its assets or properties is bound;
(f)
any
material change in any compensation arrangement or agreement with any employee,
except changes made in the ordinary course of business or not material in
amount
or scope;
(g) any
sale,
assignment or transfer of any patents, trademarks, copyrights, trade secrets
or
other intangible assets other than nonexclusive licenses under its standard
license terms in the ordinary course of business;
(h) any
resignation or termination of employment of any Key Employee (as defined
in
Section 3.16) or officer of LiveDeal;
(i)
any
loss
of, material change in relationship with, or order cancellation by, any major
customer of LiveDeal;
(j)
any
borrowing, or any mortgage, pledge, security interest, or lien with respect
to
any material property or asset, except liens for taxes not yet due or
payable;
(k) any
sale
or transfer of material intangible assets or properties, except for inventory
in
the ordinary course of business;
(l)
any
loans
or guarantees made by LiveDeal to or for the benefit of any person or entity,
including its employees, officers or directors, any members of their immediate
families, or any business in which any of them have an interest, other than
travel and other advances to employees made in the ordinary course of its
business;
(m) established,
entered into, adopted, amended in any material respect or terminated any
benefit
plan or other material contract or arrangement with or for the benefit or
welfare of any director, officer or employee of LiveDeal or any Subsidiary,
except for the issuance and sale of shares pursuant to any vested and
outstanding options or warrants to purchase LiveDeal capital stock;
(n) any
declaration, setting aside or payment or other distribution in respect of
any of
LiveDeal’s capital stock, or any direct or indirect redemption, purchase or
other acquisition of any of such stock by LiveDeal;
(o) any
agreement or commitment by LiveDeal to do any of the things described in
this
Section
3.6;
or
(p) any
other
event or condition of any character that might be reasonably expected at
the
time of such event or condition to cause a LiveDeal Material Adverse
Effect.
3.7 Litigation.
There
are no actions, suits, proceedings, orders or investigations pending or,
to the
knowledge of LiveDeal, threatened against LiveDeal, at law or in equity,
or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign
(a
“Legal
Proceeding”),
and,
to the knowledge of LiveDeal, no event has occurred, and no claim, dispute
or
other condition or circumstance exists, that could be reasonably expected
to
give rise to or serve as a basis of the commencement of any Legal Proceeding
that will result in any material losses to LiveDeal.
3.8 Subsidiaries.
Schedule
3.8
sets
forth the name of any entity of which a majority of the outstanding voting
securities or other voting equity interests are owned, directly or indirectly,
by LiveDeal (each a “Subsidiary”),
and,
with respect to each Subsidiary, the jurisdiction in which it is incorporated
or
organized, the jurisdictions, if any, in which it is qualified to do business,
the number of shares of its authorized capital stock, the number and class
of
shares thereof duly issued and outstanding, the names of all stockholders
or
other equity owners and the number of shares of stock owned by each stockholder
or the amount of equity owned by each equity owner. Each Subsidiary is a
duly
organized and validly existing corporation or other entity in good standing
under the laws of the jurisdiction of its incorporation or organization and
is
duly qualified or authorized to do business as a foreign corporation or entity
and is in good standing under the laws of each jurisdiction in which the
conduct
of its business or the ownership of its properties requires such qualification
or authorization. Each Subsidiary has all requisite corporate or entity power
and authority to own its properties and carry on its business as presently
conducted. The outstanding shares of capital stock or equity interests of
each
Subsidiary are validly issued, fully paid and non-assessable, and all such
shares or other equity interests represented as being owned by LiveDeal are
owned by it free and clear of any and all encumbrances or liens. No shares
of
capital stock are held by any Subsidiary as treasury stock. There is no existing
option, warrant, call, right or contract to which any Subsidiary is a party
requiring, and there are no convertible securities of any Subsidiary outstanding
which, upon conversion, would require the issuance of any shares of capital
stock or other equity interests of any Subsidiary or other securities
convertible into shares of capital stock or other equity interests of any
Subsidiary.
3.9 Intellectual
Property.
Schedule
3.9
sets
forth a true and complete list of all domestic and foreign registered patents
and patent applications, registered marks (including trademarks, service
marks,
and other registrable identifiers) and mark registration applications, material
unregistered marks, registered trade names, registered domain names, registered
copyrights, copyright applications, and registered designs that are owned
or
used by LiveDeal or any Subsidiary (collectively, the “Registered
Intellectual Property”).
With
regard to the material Registered Intellectual Property, all material
application, maintenance, renewal or other similar fees have been properly
paid
and are current, and all registrations, applications and filings are valid
and
remain in full force and effect. To
the
knowledge of LiveDeal, LiveDeal has sufficient ownership or rights, free
and
clear of any encumbrances, to the Registered Intellectual Property and to
all
unregistered marks and source identifiers, trade secrets, copyrights, computer
software programs and applications (whether in source or object code forms)
and
related documentation, know-how, information, proprietary rights and processes
necessary for its business as now conducted (collectively with the Registered
Intellectual Property, the “Intellectual
Property”).
To
the knowledge of LiveDeal, none of the Intellectual Property infringes upon
the
proprietary rights of others. Except as set forth in Schedule
3.9,
LiveDeal has not licensed Intellectual Property owned by LiveDeal to any
third
party (except for nonexclusive licenses under its standard license terms
in the
ordinary course of business), does not have any shared ownership interest
with a
third party in any Intellectual Property owned by LiveDeal, nor has it licensed
or purchased any Intellectual Property from any third party under any
arrangement requiring continuing royalty, license or other payments. LiveDeal
has taken commercially reasonable action necessary to protect its Intellectual
Property. Except as set forth in Schedule
3.9,
no
contractor, former employee, or third party other than LiveDeal possesses
any
current or contingent rights to any source code that is part of the Intellectual
Property owned by LiveDeal, and the transactions contemplated by this Agreement
will not result in any third party gaining a right to access the source code
included in the Intellectual Property owned by LiveDeal (as the result of
an
escrow release or otherwise). To the knowledge of LiveDeal, LiveDeal has
not
infringed the Intellectual Property of any other person or entity, and has
not
received any written communication alleging such violation. To the knowledge
of
LiveDeal, no contractor, former employee, or other third party has
misappropriated or infringed, or is infringing, any of the Intellectual Property
owned by LiveDeal, or has asserted any claim or challenged the validity,
enforceability, continuity or ownership of the Intellectual Property of
LiveDeal. To the knowledge of LiveDeal, LiveDeal’s employees are not obligated
under any contract (including licenses, covenants or commitments of any nature),
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to LiveDeal or that would
conflict with LiveDeal’s business as now conducted. Each employee and consultant
of LiveDeal who has made material contributions to the creation or development
of the Intellectual Property owned by LiveDeal (or otherwise has made
contributions to the creation or development of the Intellectual Property
owned
by LiveDeal such that without such contributions any aspect of such Intellectual
Property would not function or operate, or could not be used as currently
intended) has executed a customary confidentiality, non-compete, and assignment
of inventions agreement, all of which have been provided to YP’s legal counsel
or has otherwise assigned to LiveDeal all rights, title and interest in any
Intellectual Property developed by such employee or consultant during and
within
the scope of his employment or consultancy with LiveDeal. To the knowledge
of
LiveDeal, no employees or consultants are in violation thereof.
3.10
Compliance
with Charter Documents and Instruments.
LiveDeal is not in material violation or default of any provision of its
(i)
Articles of Incorporation or
Bylaws, in either case as amended; (ii) any instrument, judgment, order,
writ,
or decree to which it is a party or by which it is bound; or (iii) any material
provision of any federal or state statute, rule or regulation applicable
to
LiveDeal.
3.11
Permits.
LiveDeal has all franchises, permits, licenses, and any similar authority
necessary for the conduct of its business as now being conducted by it, the
lack
of which could result in a LiveDeal Material Adverse Effect. LiveDeal is
not in
default under any of such franchises, permits, licenses, or other similar
authority.
3.12
Material
Contracts.
(a)
Schedule
3.12
lists
each of the following contracts and agreements (including oral agreements)
of
LiveDeal (such contracts and agreements, together with all of LiveDeal’s
intellectual property agreements listed or otherwise set forth on Schedule
3.9,
all
contracts, agreements, leases and subleases concerning the use, occupancy,
management or operation of any real property (including all contracts,
agreements, leases and subleases) set forth on Schedule
3.18,
and all
contracts, agreements, leases and subleases relating to LiveDeal’s tangible
personal property set forth in Schedule
3.18,
being
referred to herein as “Material
Contracts”):
(i)
each
contract, agreement, invoice, purchase order other arrangement for the purchase
of materials or personal property with any supplier or for the furnishing
of
services to LiveDeal or otherwise related to LiveDeal’s business under the terms
of which LiveDeal: (A) is likely to pay or otherwise give consideration of
more
than $50,000 in the aggregate over the remaining term of such contract or
(B)
cannot be cancelled by LiveDeal without penalty or further payment and without
more than 30 days’ notice;
(ii) each
contract, agreement, invoice, sales order and other arrangement, for the
furnishing of services by LiveDeal, or the sale of any property, which: (A)
is
likely to involve consideration of more than $50,000 in the aggregate over
the
remaining term of the contract or (B) cannot be cancelled by LiveDeal without
penalty or further payment and without more than 30 days’ notice;
(iii) all
broker, distributor, dealer, manufacturer’s representative, franchise, agency,
sales promotion, market research, strategic relationship, marketing, consulting
and advertising contracts and agreements to which LiveDeal or any subsidiary
is
a party;
(iv) all
management contracts and contracts with independent contractors or consultants
(or similar arrangements) to which LiveDeal is a party and which are not
cancelable without penalty or further payment and without more than 30 days’
notice;
(v) all
contracts and agreements relating to indebtedness of LiveDeal involving an
amount borrowed greater than $50,000;
(vi) all
contracts and agreements with any governmental agency to which LiveDeal is
a
party;
(vii)
all
contracts and agreements that limit or purport to limit the ability of LiveDeal
to compete in any line of business or with any person or in any geographic
area
or during any period of time;
(viii)
all
contracts and agreements providing for benefits under any employee benefit
plan
or other compensatory arrangement;
(ix) all
contracts and agreements providing for indemnity or warranty coverage relating
to the products or services provided by LiveDeal or any Subsidiary;
and
(x) all
other
contracts and agreements, whether or not made in the ordinary course of
business, that are material to LiveDeal, or the conduct of LiveDeal’s business,
or the absence of which would result in an LiveDeal Material Adverse
Effect.
(b) Each
Material Contract: (i) is valid and binding on the parties thereto and is
in
full force and effect; and (ii) upon consummation of the transactions
contemplated by this Agreement, shall continue in full force and effect without
penalty or other adverse consequence. LiveDeal is not in material breach
of, or
in default under, any Material Contract. LiveDeal’s relationships with its
vendors and strategic partners are good, and to the knowledge of LiveDeal
there
is nothing that would lead it to conclude that any such relationship may
be in
jeopardy.
(c) To
the
knowledge of LiveDeal, no other party to any Material Contract is in material
breach thereof or default thereunder. Neither LiveDeal nor the Principal
Shareholder has received any notice of termination, cancellation, breach
or
default under any Material Contract.
(d) LiveDeal
and the Principal Shareholder have made available to YP and Merger Sub true
and
complete copies of all Material Contracts.
(e) There
is
no contract, agreement or other arrangement granting any person any preferential
right to purchase, other than in the ordinary course of business consistent
with
past practice, any of LiveDeal’s products or services nor requiring LiveDeal or
any Subsidiary to provide to the other parties thereto “most favored nations”
pricing, nor is LiveDeal or any Subsidiary a party to any sales contract
or
purchase order that is expected to result in a negative gross
profit.
3.13
Related
Party Transactions.
Except
as set forth on Schedule
3.13,
no
employee, officer, or director of LiveDeal or any Subsidiary or member of
his or
her immediate family is indebted to LiveDeal, nor is LiveDeal indebted (or
committed to make loans or extend or guarantee credit) to any of them. To
the
knowledge of LiveDeal, none of such persons has any direct or indirect ownership
interest in any firm or corporation with which LiveDeal is affiliated or
with
which LiveDeal has a business relationship, or any firm or corporation that
competes or deals with LiveDeal, except that employees, officers, or directors
of LiveDeal and members of their immediate families may own up to 1% of the
stock in any publicly traded company that may compete with LiveDeal. No member
of the immediate family of any officer or director of LiveDeal is directly
or
indirectly interested in any Material Contract with LiveDeal.
3.14
Employee
Benefit Plans.
(a) Employee
Benefit Plans.
Except
as set forth on Schedule
3.14,
LiveDeal does not have, has not maintained and has no liability with respect
to,
(a) any Employee Benefit Plan (as defined below) intended to qualify under
Section 401(a) or 403(a)(i) of the Code; (b) any multi-employer plan, as
defined
in Section 3(37) of the Employee Retirement Income Security Act of 1974
(“ERISA”);
or
(c) any employee pension benefit plan, as defined in Section 3(2) of ERISA.
Schedule
3.14
contains
a list setting forth each employee benefit plan or arrangement of LiveDeal
including, but not limited to, employee welfare benefit plans, deferred
compensation plans, stock option plans, bonus plans, stock purchase plans,
hospitalization, disability and other insurance plans, severance or termination
pay plans and policies, whether or not described in Section 3(3) of ERISA,
in
which employees of LiveDeal, or their spouses or dependents, participate
(“Employee
Benefit Plans”)
(true
and accurate copies of which, together with the most recent annual reports
on
Form 5500, copies of the latest determination letters, and summary plan
descriptions with respect thereto, if applicable, have been furnished to
YP).
With respect to each Employee Benefit Plan (i) each has been administered
in
compliance in all material respects with its terms and with all applicable
laws,
including, but not limited to, ERISA and the Code, and each Employee Benefit
Plan intended to qualify under Sections 401(a) or 403(a) of the Code has
received a favorable determination letter from the Internal Revenue Service;
(ii) no actions, suits, claims (other than benefit claims in the ordinary
course
of business) or disputes are, to the knowledge of LiveDeal, pending or
threatened; (iii) no audits, inquiries, reviews, proceedings, claims, or
demands
are, to the knowledge of LiveDeal, pending with any governmental or regulatory
agency; (iv) there are no facts which are reasonably likely to give rise
to any
material liability in the event of any such investigation, claim, action,
suit,
audit, review, or other proceeding; (v) all material reports, returns, and
similar documents required to be filed with any governmental agency or
distributed to any plan participant have been duly or timely filed or
distributed; and (vi) to the knowledge of LiveDeal, no “prohibited transaction”
for which no exemption exists under ERISA or the Code or breach of fiduciary
duty has occurred within the meaning of the applicable provisions of ERISA
or
the Code that is reasonably likely to give rise to a material
liability.
(b) Welfare
Plans.
(i)
LiveDeal is not obligated under any employee welfare benefit plan as described
in Section (3)(1) of ERISA (“Welfare
Plan”)
to
provide medical or death benefits with respect to any employee or former
employee of LiveDeal or its predecessors after termination of employment,
except
as required by the Consolidated Omnibus Budget Reconciliation Act of 1985,
as
amended (“COBRA”)
and
any other applicable statute; (ii) LiveDeal has complied in all material
respects with the notice and continuation coverage requirements of Section
4980B
of the Code and the regulations thereunder with respect to each Welfare Plan
that is, or was during any taxable year for which the statute of limitations
on
the assessment of federal income taxes remains open, by consent or otherwise,
a
group health plan within the meaning of Section 5000(b)(1) of the Code; (iii)
there are no reserves, assets, surplus or prepaid premiums under any Welfare
Plan that is an Employee Benefit Plan; and (iv) LiveDeal has complied in
all
material respects with all applicable HIPAA portability and privacy rules.
The
consummation of the transactions contemplated by this Agreement will not
entitle
any individual to severance pay, and will not accelerate the time of payment
or
vesting, or increase the amount of compensation, due to any
individual.
(c) Other
Liabilities.
(i)
None of the Employee Benefit Plans obligates LiveDeal to pay separation,
severance, termination or similar benefits solely as a result of any transaction
contemplated by this Agreement or solely as a result of a “change of control”
(as such term is defined in Section 280G of the Code); (ii) all required
or
discretionary (in accordance with historical practices) payments, premiums,
contributions, reimbursements or accruals for all periods ending prior to
or as
of the Effective Time shall have been made known to YP in writing immediately
prior to the Effective Time; and (iii) none of the Employee Benefit Plans
has
any unfunded liabilities that are not reflected on the March Balance Sheet
or
the books and records of LiveDeal.
3.15
Taxes.
(a) LiveDeal
and
each
Subsidiary has timely filed all Tax
Returns
required to be filed (taking into account any extensions of time within which
to
file such Tax Returns) and such Tax
Returns
are
complete and correct in all material respects. LiveDeal and
each
Subsidiary have paid all Taxes
that were shown to be due and payable on such Tax Returns.
(b) Any
unpaid Taxes of LiveDeal and each Subsidiary relating to the periods up to
and
including the Effective Time (whether or not such Taxes are due or owing
as of
the Effective Time) have been properly accrued and reserved on the March
Balance
Sheet
as
properly adjusted for operations through the Effective Time in accordance
with
past custom and practice of LiveDeal; provided,
however,
that
since
the
Balance Sheet Date, neither LiveDeal nor any Subsidiary has incurred any
liability for Taxes arising from any transactions outside the ordinary course
of
business.
The
unpaid aggregate Taxes of LiveDeal and each Subsidiary relating to the periods
up to and including the Effective Time (whether or not such Taxes are due
or
owing as of the Effective Time) do not exceed the reserve for Tax liabilities
on
the March Balance Sheet (rather than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) as properly adjusted
for operations through the Effective Time in accordance with past custom
and
practice of LiveDeal; provided,
however,
that
since
the
Balance Sheet Date, neither LiveDeal nor any Subsidiary has incurred any
liability for Taxes arising from any transactions outside the ordinary course
of
business.
(c) Neither
LiveDeal nor any Subsidiary has requested or been granted an extension of
the
time for filing any Tax Return that has not yet been filed with respect to
Taxes
payable by or attributable to LiveDeal
or any
Subsidiary.
(d) Neither
LiveDeal nor any Subsidiary is currently or has ever been an S corporation
pursuant to Section 1362(a) of the Code.
(e) There
is
no Tax deficiency assessed or, to the knowledge of Principal Shareholder,
the
Shareholders’ Representative, LiveDeal, or any Subsidiary, proposed against
LiveDeal or any Subsidiary
and
neither
LiveDeal
nor any Subsidiary has executed any waiver of any statute of limitations
on the
assessment or collection of any Tax or governmental charge, nor have any
of
LiveDeal’s or any Subsidiary’s
Tax
Returns ever
been
audited by governmental authorities nor, to the knowledge of Principal
Shareholder, the Shareholders’ Representative, LiveDeal, or any Subsidiary, are
any such audits proposed.
(f)
LiveDeal
and
each
Subsidiary have withheld or collected from each payment where withholding
is
required
by
law,
the
amount of all Taxes
required
to be withheld or collected therefrom, and have paid such amounts to the
proper
Tax authorities.
(g) No
written claim has ever been made by an authority in a jurisdiction where
LiveDeal or any Subsidiary does not file Tax Returns that LiveDeal or any
Subsidiary is or may be subject to Tax by that jurisdiction.
(h) There
are
no liens for Taxes (other than Taxes not yet due and payable) upon any assets
of
LiveDeal or any Subsidiary.
(i)
Neither
LiveDeal nor any Subsidiary is or has been a United States real property
holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(j)
Neither
LiveDeal nor any Subsidiary has consummated, participated in, or served as
either a “tax shelter organizer” or a “tax shelter promoter” in respect of any
“tax shelter transaction” as such terms are defined in Sections 6011, 6111, and
6662 of the Code prior to the amendment of the American Jobs Creation Act
of
2004;
(k) Neither
LiveDeal nor any Subsidiary (A) has consummated, (B) has “participated” or is
currently “participating” in, or (C) is or was a “material advisor” in respect
of (x) a “tax shelter transaction”, (y) a “listed transaction” or (z) a
“reportable transaction”, as such terms are defined in Sections 6011, 6012,
6111, 6662, 6662A, or 6707A of the Code;
(l)
Schedule
3.15
sets
forth with respect to LiveDeal and each Subsidiary as of the most recent
practicable date the amount of any net operating loss, net capital loss,
unused
investment or other credit, unused foreign tax, or excess charitable
contribution allocable to LiveDeal and/or each Subsidiary.
(m) Neither
LiveDeal nor any Subsidiary
is a
party to or bound by any Tax allocation or Tax sharing agreement.
(n) Neither
LiveDeal nor any Subsidiary
is or
has ever been a member of an affiliated group filing a consolidated, unitary,
or
combined Tax Return.
(o) Neither
LiveDeal nor any Subsidiary
has
distributed stock of another person or entity, or has had its stock distributed
by another person or entity within three years prior to the date of this
Agreement, in a transaction that was purported or intended to be governed
in
whole or in part by Sections 355 or 361 of the Code.
(p) Neither
LiveDeal nor any Subsidiary
has
received
a written ruling from any taxing authority, nor entered into any closing
agreement pursuant to Section 7121
of the
Code
(or
similar provision of state, local or foreign law).
(q) Neither
LiveDeal nor any Subsidiary is a party to any agreement, contract, arrangement
or plan that has resulted or could result, separately or in the aggregate,
in
the payment of (i) any “excess parachute payment” within the meaning of Section
280G
of the
Code
(or any
corresponding provision of state, local or foreign Tax law), or (ii) any
amount
that will not be fully deductible as a result of Section 162(m)
of the
Code
(or any
corresponding provision of state, local or foreign Tax law).
(r) There
are
no pending or, threatened actions in writing for the assessment or collection
of
Taxes against LiveDeal or any Subsidiary or (insofar as either relates to
the
activities or income of LiveDeal or any Subsidiary or could result in liability
of LiveDeal or any Subsidiary on the basis of joint and/or several liability)
any person that was included in the filing of a Tax Return with LiveDeal
on a
consolidated, combined or unitary basis;
(s) There
are
no outstanding waivers or agreements extending the statute of limitations
for
any period with respect to any Tax to which LiveDeal or any Subsidiary may
be
subject.
(t)
Neither
LiveDeal nor any Subsidiary has participated in or cooperated with an
international boycott within the meaning of Section 999 of the
Code.
(u) Neither
LiveDeal nor any Subsidiary has:
(1) any
income reportable after the Effective Time but attributable to a transaction
(e.g., an installment sale) occurring in, or a change in accounting method
made
for, on or prior to the Effective Time that resulted in a deferred reporting
of
income from such transaction or from such change in accounting method (other
than a deferred intercompany transaction); or
(2) agreed
to
make or required to make any adjustment under Section 481(a) of the
Code.
(v) For
the
purpose of this Agreement:
(i) “Tax
Return” means any returns, declarations, reports, bills, claims for refund,
information returns (including where permitted or required, any consolidated,
combined or unitary returns) or other documents (including any related or
supporting schedules, statements or information) filed or required to be
filed
in connection with the determination, assessment or collection of any Taxes
or
in connection with the administration of any statutes, laws, rules, regulations,
orders or awards of any governmental authority relating to any
Taxes.
(ii) “Tax”
or
“Taxes” means any (a) federal, state, local or foreign income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer,
title, registration, value added, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental, customs, duties, property
(including but not limited to real property and personal property), capital
stock, social security, unemployment, disability, employment payroll, license,
employee or withholding, or other tax, duty, charge, levy, tariff, assessment,
or fee of any kind whatsoever, whether computed on a separate or consolidated,
unitary or combined basis or in any other manner, including any interest,
penalties additions to tax or additional amounts in respect of the foregoing;
(b) liability for the payment of any amounts of the type described in clause
(a)
arising as a result of being (or ceasing to be) a member of any affiliated
group
(or being included (or required to be included) in any Tax Return relating
thereto); and (c) liability for the payment of any amounts of the type described
in clause (a) as a result of any express or implied obligation, by contract
or
pursuant to law, to indemnify or otherwise assume or succeed to the liability
of
any other person.
3.16
Labor
Agreements and Actions; Employee Compensation.
LiveDeal is not bound by or subject to (and none of its assets or properties
is
bound by or subject to) any contract, commitment or arrangement with any
labor
union, and no labor union has requested or, to the knowledge of LiveDeal,
has
sought to represent any of the employees, representatives or agents of LiveDeal.
There is no strike or other labor dispute involving LiveDeal pending, or
to the
knowledge of LiveDeal, threatened, nor is LiveDeal aware of any labor
organization activity involving its employees. Set forth on Schedule
3.16(a)
is the
name, job title or description, date of hire and current salary of each current
employee of LiveDeal. Set forth on Schedule
3.16(b)
is are
the names of the key employees of LiveDeal (each, a “Key
Employee”).
LiveDeal is not aware that any officer or Key Employee, or that any group
of Key
Employees, intends to terminate their employment with LiveDeal, nor does
LiveDeal have a present intention to terminate the employment of any such
individual. Except as set forth on Schedule
3.16,
the
employment of each officer and employee of LiveDeal is terminable at the
will of
LiveDeal and without the obligation to pay any severance. LiveDeal has complied
in all material respects with all applicable state and federal equal employment
opportunity and other laws related to employment. Except as set forth on
Schedule
3.14
or
Schedule
3.16,
LiveDeal is not a party to or bound by any currently effective employment
contract, deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement, or other employee compensation
agreement.
3.17
Environmental.
LiveDeal is not in material violation of any law or legal requirement relating
to the environment. No material expenditures are or will be required in order
to
comply with any such law or legal requirement. No Hazardous Materials (as
defined below) are used or have been used, stored, or disposed of by LiveDeal
or, to the knowledge of LiveDeal, by any other person or entity on any property
owned, leased or used by LiveDeal. “Hazardous
Materials”
shall
include: (a) any petroleum, waste oil, crude oil, asbestos, urea formaldehyde
or
polychlorinated biphenyl; (b) any waste, gas or other substance or material
that
is explosive or radioactive; (c) any “hazardous substance,” or “toxic chemical”
as designated, listed or defined (whether expressly or by reference) in any
statute, regulation or other legal requirement (including the Comprehensive
Environmental Response, Compensation and Liability Act) and any other so-called
“superfund” or “superlien” law and the respective regulations promulgated
thereunder); (d) any other substance or material (regardless of physical
form)
or form of energy that is subject to any legal requirement which regulates
or
establishes standards of conduct in connection with, or which otherwise relates
to, the protection of human health, plant life, animal life, natural resources,
property or the enjoyment of life or property from the presence in the
environment of any solid, liquid, gas, odor, noise or form of energy; and
(e)
any compound, mixture, solution, product or other substance or material that
contains any substance or material referred to in clause “(a)”, “(b)”, “(c)” or
“(d)” above.
3.18
Title
to Property and Assets.
(a) LiveDeal
owns good and marketable title to its properties and assets reflected on
the
March Balance Sheet or acquired since the date thereof, free and clear of
all
liens and encumbrances, except for (i) liens for current taxes not yet due
and
payable and assets disposed of since the Balance Sheet Date in the ordinary
course of business, and (ii) liens and encumbrances that secure debt reflected
on the March Balance Sheet.
(b) Schedule
3.18
sets
forth a brief description of each real property lease to which LiveDeal or
any
of its Subsidiaries is a party, and the properties subject to the real property
leases set forth on Schedule
3.18,
together
with the Owned Real Property, constitute all of the real estate used or occupied
by LiveDeal and its Subsidiaries (the “LiveDeal
Real Estate”).
The
LiveDeal Real Estate has access, sufficient for the conduct of LiveDeal’s
business, to public roads and to all utilities, including electricity, sanitary
and storm sewer, potable water, natural gas and other utilities, used in
the
operations of LiveDeal.
(c) The
real
property leases described on Schedule
3.18
are in
full force and effect, and LiveDeal has a valid and existing leasehold interest
under each such lease for the term set forth therein. LiveDeal has delivered
to
YP complete and accurate copies of each of the leases and none of such leases
has been modified in any material respect, except to the extent that such
modifications are disclosed by the copies delivered to YP. LiveDeal is not
in
default, and no circumstances exist that could result in such default, under
any
of such leases, nor, to the knowledge of LiveDeal, is any other party to
any of
such leases in default.
(d) LiveDeal
owns, or leases under valid leases, all buildings, machinery, equipment and
other tangible assets necessary for the conduct of its business. Schedule
3.18
sets
forth a list of all equipment leases pursuant to which LiveDeal or any of
its
Subsidiaries leases buildings, machinery, equipment and other tangible assets
necessary for the conduct of LiveDeal’s business, copies of which have been
delivered to YP. None of such equipment leases has been modified in any material
respect, except to the extent that such modifications are disclosed by the
copies delivered to YP. LiveDeal is not in default, and no circumstances
exist
that could result in such default, under any of such equipment leases, nor,
to
the knowledge of LiveDeal, is any other party to any of such equipment leases
in
default. All of the buildings, machinery, equipment and other tangible assets
necessary for the conduct of LiveDeal’s business are in good condition and
repair, ordinary wear and tear excepted, and are usable in the ordinary course
of business.
(e) LiveDeal
is not in material violation of any applicable zoning ordinance or other
law,
regulation or requirement relating to the operation of any properties used
in
the operation of its business, and has not received any notice of any such
violation, or of the existence of any condemnation proceeding with respect
to
any properties owned or leased by LiveDeal.
3.19
Insurance.
LiveDeal maintains with third parties policies of fire and casualty, liability
and other forms of insurance in such amounts, with such deductibles and retained
amounts, and against such risks and losses, as are customarily carried by
persons conducting businesses or owning assets similar in type and size to
those
of LiveDeal, including without limitation all legally required workers’
compensation insurance and casualty, fire and general liability insurance.
There
is no claim pending under any of such policies or bonds as to which coverage
has
been questioned, denied or disputed by the underwriters of such policies
or
bonds. All premiums due and payable under all such policies and bonds have
been
timely paid, and LiveDeal is otherwise in compliance in all material respects
with the terms of such policies and bonds and all such policies are in full
force and effect. LiveDeal does not have any knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
3.20
Books and Records. The
books, records and accounts of LiveDeal: (a) are in all material respects
true, complete and correct; (b) have been maintained in accordance with
good business practices on a basis consistent with prior years; (c) are
stated in reasonable detail and accurately and fairly reflect the transactions
and dispositions of LiveDeal’s assets; and (d) accurately and fairly
reflect the basis for the Historical Financial Statements.
3.21
Brokers.
Except
as set forth on Schedule
3.21,
neither
LiveDeal nor any Principal Shareholder has engaged, contracted or dealt with
any
person that is or would be entitled to a broker’s commission, finder’s fee,
investment banker’s fee, expense reimbursement or similar payment from YP or
Merger Sub for brokering or otherwise arranging this Agreement.
3.22
Disclosure.
Neither
this Agreement nor any of the exhibits or Schedules hereto contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in
which
they were made, not misleading, and there is no fact that has not been disclosed
to YP that causes, or could reasonably be anticipated to cause, a LiveDeal
Material Adverse Effect.
3.23
Prior
Option Grants.
With
respect to options to purchase Common Stock of LiveDeal either (i) granted
or
materially modified after October 3, 2004, or (ii) unvested as of January
1, 2005, the exercise price per share was set at the date of grant at the
fair
market value of the shares on the date of grant in good faith compliance
with
any then existing guidance issued by the U.S. Internal Revenue Service under
Section 409A of the Code in order to avoid the relevant option being treated
as
deferred compensation under Section 409A of the Code; and LiveDeal has otherwise
endeavored to satisfy the requirements of Prop. Treas. Reg. Section
1.409A-1(b)(5), to the extent required as explained in Notice 2006-4, such
that
the options granted after the issuance of such regulations were otherwise
exempt
from the application of Code Section 409A.
3.24
Reorganization
Treatment.
(a) Reorganization.
Neither
LiveDeal nor any Subsidiary has taken or failed to take any action, or has
any
knowledge of any fact or circumstance, that could reasonably be expected
to
prevent the Merger from qualifying as a reorganization within the meaning
of
Section 368(a) of the Code.
(b) Business.
The
business currently conducted by LiveDeal is LiveDeal’s “historic business”
within the meaning of Treasury Regulations Section 1.368-1(d), and no assets
of
LiveDeal have been sold, transferred, or otherwise disposed of that would
prevent YP, LiveDeal or another member of YP’s qualified group within the
meaning of Treasury Regulations Section 1.368-1(d)(4)(ii) from continuing
the
“historic business” of LiveDeal or from using a “significant portion” of
LiveDeal’s “historic business assets” in a business following the Merger, as
such terms are used in Treasury Regulations Section 1.368-1(d).
(c) Control.
In the
Merger, stock of LiveDeal representing “control” of LiveDeal (within the meaning
of Section 368(c) of the Code) will be exchanged solely for “voting stock” of YP
(within the meaning of Sections 368(a)(1)(B) and (2)(E) of the Code). For
purposes of the preceding sentence, any shares of LiveDeal Common Stock to
be
exchanged for cash or other property provided, directly or indirectly, by
YP is
treated as constituting outstanding shares of LiveDeal Common Stock at the
Effective Time.
ARTICLE
4
ADDITIONAL
AGREEMENTS
4.1 Expenses.
YP and
LiveDeal shall each bear its own expenses in connection with this Agreement
and
the transactions contemplated herein; provided,
however,
that if
the Merger is consummated YP shall pay LiveDeal’s expenses incurred in
connection with this Agreement and the transactions contemplated
herein.
4.2 Confidentiality.
Each
party agrees to honor the existing Confidentiality Agreement dated March
26,
2007 between YP and LiveDeal.
4.3 Form
S-8.
In the
event that any LiveDeal Options remain issued and outstanding within 45 days
of
the Effective Time, YP will file a registration under the Securities Act
on Form
S-8 or another appropriate form (and use its commercially reasonable efforts
to
maintain the effectiveness thereof and maintain the current status of the
prospectuses contained therein) with respect to the LiveDeal Options assumed
by
YP pursuant hereto, and shall cause such registration statement to remain
in
effect for so long as any such assumed LiveDeal Option remains
outstanding.
4.4 Piggyback
Registration Rights.
If at
any time during the two-year period commencing following the Effective Time,
YP
determines to register for its own account or the account of others under
the
Securities Act, any of its equity securities, other than on Form S-4 or Form
S-8
or their then equivalents relating to equity securities to be issued solely
in
connection with any acquisition of any entity or business, or equity securities
issuable in connection with stock option or other employee benefit plans,
then
YP shall send to the LiveDeal Shareholders written notice of such determination
and, if within 20 days after receipt of such notice, a LiveDeal Shareholder
shall so request in writing, YP shall include in such registration statement
all
or any part of the Merger Shares or shares issuable under Section
4.5
below
(the “Registrable
Shares”)
owned
by such LiveDeal Shareholder that such LiveDeal Shareholder requests to be
registered. In the event that the managing underwriter for said offering
advises
YP that market factors require limitation of the number of shares to be
underwritten, then YP shall so advise all LiveDeal Shareholders requesting
registration and the number of Registrable Shares that may be included in
the
registration and underwriting shall be allocated pro rata among such the
LiveDeal Shareholders requesting registration and other parties selling shares
thereunder.
4.5 Conversion
of Debt.
Immediately following the Effective Time, YP shall contribute to LiveDeal
1,463,706 duly
authorized, validly issued, fully paid and nonassessable shares of YP Common
Stock (the “YP/RN
Note Common Stock”).
As soon as practicable thereafter, LiveDeal shall deliver to Rajesh Navar
or his
affiliate a certificate or certificates representing the YP/RN Note Common
Stock
in exchange for, and in cancellation of, $1,021,666.68 in
principal and interest owed by LiveDeal to Rajesh Navar, which is the current
outstanding balance of the debt owed by LiveDeal to Rajesh Navar. The
delivery of the YP/RN Note Common Stock to Rajesh Navar shall extinguish
any
further obligation owed with respect to such obligation by YP, LiveDeal or
their
affiliates. Rajesh Navar will or will cause his affiliate to execute a
payoff certificate or such other documentation reasonably requested by YP
in
connection with the transaction described in this Section
4.5.
4.6 Tax-Free
Reorganization.
(a) The
parties intend the Merger to qualify together as a reorganization under
Section 368(a) of the Code. Except as specifically provided in Sections
2.8
and
3.24,
neither
YP, Merger Sub nor LiveDeal makes any representation or warranty to any
securityholder of either entity regarding the tax treatment of the Merger
or
whether the Merger will qualify together as a reorganization under
Section 368(a) of the Code. Each of the parties hereto acknowledges that it
is relying on its own advisors in connection with the tax treatment of the
Merger and the other transactions contemplated by this Agreement. YP and
LiveDeal shall each use all commercially reasonable good faith efforts to
cause
the Merger to qualify together as a reorganization within the meaning of
Section 368 of the Code.
(b) Each
of
YP, Merger Sub and LiveDeal shall report the Merger as a reorganization within
the meaning of Section 368(a) of the Code, unless otherwise required
pursuant to a “determination” within the meaning of Section 1313(a) of the
Code.
ARTICLE
5
APPRAISAL
RIGHTS
5.1 Appraisal
Rights.
Holders
of LiveDeal Capital Stock are entitled to appraisal rights pursuant to the
California Law in connection with the Merger, any shares held by LiveDeal
Shareholders who exercise and perfect such appraisal rights (“Dissenting
Shares”)
will
not be converted into a right to receive Merger Shares, but shall be converted
into the right to receive such consideration as may be determined to be due
with
respect to such Dissenting Shares pursuant to the California Law. YP shall
have
the right to control all negotiations and proceedings with respect to such
demand. In the event that any LiveDeal Shareholder fails to make an effective
demand for payment or otherwise loses his, her, or its status as a holder
of
Dissenting Shares, YP shall, as of the later of the Effective Time or ten
business days from the occurrence of such event, upon surrender by such
shareholder of its certificate(s) representing LiveDeal Capital Stock, delivery
of the Transmittal Letter and compliance with Section
1.9,
issue
and deliver the Merger Shares, in each case without interest thereon, to
which
such LiveDeal Shareholder would have been entitled to under Section 1.5.
ARTICLE
6
DOCUMENTS
DELIVERED AT CLOSING
6.1 Documents
to be Delivered by YP.
YP is
delivering the following documents concurrently herewith:
(a) (i)
a
copy of the text of the resolutions by which the corporate action on the
part of
YP and Merger Sub necessary to approve the Merger, the material terms of
this
Agreement and the issuance of the Merger Shares, the shares issuable under
Section
4.5
and the
reservation of shares issuable upon exercise of LiveDeal Options and LiveDeal
Warrants were taken, and (ii) certificates executed on behalf of YP certifying,
in each case, that such copy is a true, correct and complete copy of such
resolutions and that such resolutions were duly adopted and have not been
amended or rescinded;
(b) The
Escrow Agreement, executed by YP and the Escrow Agent;
(c) A
Noncompetition, Nondisclosure and Nonsolicitation Agreement executed by YP
in
the form attached as Exhibit
F
hereto;
and
(d) An
Employment Agreement executed by YP in the form attached as Exhibit
G
hereto.
6.2 Documents
to be Delivered by LiveDeal.
LiveDeal is delivering the following documents concurrently
herewith:
(a) (i)
a
copy of the text of the resolutions by which the board of directors of LiveDeal
approved this Agreement (including, without limitation, the plan of merger
contained herein) and the Merger; (ii) a certified copy of LiveDeal’s Articles
of Incorporation and Bylaws; and (iii) a certificate executed on behalf of
LiveDeal by its corporate secretary certifying to YP that such resolutions
are
true, correct and complete, were duly adopted and have not been amended or
rescinded, and that prior to the Effective Time, the Articles of Incorporation
and Bylaws of LiveDeal have not been amended or rescinded;
(b) The
Required Consents set forth on Schedule
6.2(b);
(c) A
Noncompetition, Nondisclosure and Nonsolicitation Agreement executed by Rajesh
Navar in the form attached as Exhibit
F
hereto;
(d) An
Employment Agreement executed by Rajesh Navar in the form attached as
Exhibit
G
hereto;
(e) A
certificate or certificates in form and substance reasonable acceptable to
YP
conforming to the requirements of Treasury Regulations 1.445-2(c)(3) and
1.897-2(h), certifying that shares of capital stock of LiveDeal do not
constitute “United States real property interests” under 897(c) of the Code,
together with a form of notice to the Internal revenue Service conforming
with
the requirements of Income Tax Regulations Section 1.897-2(h)(2), together
with
written authorization for YP to deliver such notice to the Internal Revenue
Service on behalf of LiveDeal following the Effective Time;
(f) The
Escrow Agreement, executed by the Shareholders’ Representative;
(g) Evidence
reasonably satisfactory to YP that the Investor Rights Agreement, dated as
of
October 13, 2005, by and among LiveDeal and the holders of LiveDeal Preferred
Stock has been terminated in its entirety;
(h) A
copy of
the resolutions adopted by the LiveDeal board of directors, terminating
LiveDeal’s 401(k) plan;
(i) The
written unconditional resignations of all officers and directors of LiveDeal
and
its subsidiaries;
(j) A
payoff
certificate or other documentation reasonably requested by YP in connection
with
and in furtherance of the conversion of debt described in Section
4.5;
(k) The
Resolutions or written consents of all holders (100%) of LiveDeal Series
A
Preferred Stock, Series A-2 Preferred Stock, and Series A-3 Preferred Stock,
and
the holders of 90% of the combined total of Series B Preferred Stock and
LiveDeal Common Stock outstanding immediately prior to the Effective Time
approving the Merger and this Merger Agreement pursuant to Section 602(b)
of the
California Corporate Code; and
(l) Evidence
reasonably satisfactory to YP that LiveDeal has a minimum of $800,000 in
cash in
its bank account of the Effective Time.
ARTICLE
7
INDEMNITIES
7.1 Survival
of Representations and Warranties.
All
representations and warranties made by YP, Merger Sub, LiveDeal and the
Principal Shareholder in this Agreement shall survive for one year from the
Effective Time. Notwithstanding the foregoing, the representation, warranty,
covenant or obligation that is the subject matter of a timely notice given
pursuant to Section 7.3
shall
not so expire with respect to such notice, but rather shall remain in full
force
and effect until such time as each and every claim that is based upon the
subject matter of such notice has been fully and finally resolved.
7.2 Shareholders’
Agreement to Indemnify.
(a) Subject
to the limitations in this Article 7, by approval of this Agreement, each
of the
LiveDeal Shareholders (other than holders of Dissenting Shares) agree to
severally, and not jointly, in accordance with their respective pro rata
share
of the aggregate of the total number of Merger Shares payable to the LiveDeal
Shareholders hereunder, plus the number of shares of YP Common Stock issuable
pursuant to Section
4.5
(the
“Pro
Rata Portion”),
indemnify and hold harmless YP and Merger Sub and their respective directors,
officers, employees and agents (“Indemnified
Persons”)
from
and against all proceedings, judgments, decrees, demands, claims, actions,
losses, damages, liabilities, costs and expenses, including, without limitation,
reasonable attorneys’ fees and costs (individually referred to as a
“Loss”,
and
collectively referred to as “Losses”)
incurred by YP, Merger Sub or their respective directors, officers, employees
or
agents resulting from (i) a breach by LiveDeal or the Principal Shareholder
of
any representation or warranty set forth in Article
3
or the
exhibits or schedules hereto; (ii) a breach of any covenant or agreement
of
LiveDeal or Principal Shareholder contained in this Agreement; (iii) any
claim
or cost incurred relating to the indemnification of current or former directors
or officers of LiveDeal; or (iv) any claim related to Dissenting Shares,
dissenting LiveDeal Shareholders or compliance or failure to comply with
applicable California Law relating to dissenters’ rights or appraisal rights in
excess of $500,000.
(b) Except
for remedies that cannot be waived as a matter of law or statute, claims
of
fraud or willful misconduct and injunctive and provisional relief,
the
remedies provided in this Article 7
shall be
the exclusive remedy available to YP and the other Indemnified Persons for
matters arising under the Agreement.
(c) For
purposes of determining whether any inaccuracy of a representation or warranty
has occurred and whether any indemnified party has suffered, sustained or
become
subject to any Losses as a result thereof, the representations and warranties
contained in this Agreement shall apply without giving effect to any “material,”
“materially” or “Material Adverse Effect,” any knowledge qualifiers or similar
qualifications contained therein, except knowledge qualifiers with respect
to
“threatened” matters.
(d) The
indemnity obligations set forth in this Section
7.2
will not
apply for any Loss arising from Section
7.2(a)
until
such Loss, alone or when aggregated with all other Losses arising from
Section
7.2(a),
exceeds
$30,000, and then only for the amount by which such Losses exceed $30,000
(the
“Indemnity
Basket”).
The
total liability of any LiveDeal Shareholder for matters arising under the
indemnity obligations set forth in Section
7.2(a)
shall be
limited in the aggregate to such LiveDeal Shareholder’s Pro Rata Portion of the
value of the Escrow Shares remaining in the Escrow Fund (the “Indemnity
Cap”),
as
such value is determined by the last sale price of the YP Common Stock as
quoted
on the OTC Bulletin Board for the last trading day immediately prior to the
date
of Closing (the “Closing
Price”),
and
recourse to the Escrow Fund shall be the sole and exclusive remedy of the
Indemnified Persons against the LiveDeal Shareholders for matters arising
under
the Agreement. Notwithstanding the foregoing, any claim for Losses by any
Indemnified Person pursuant to Section
7.2(a)
arising
as a result of a breach by LiveDeal or the Principal Shareholder of any
representation or warranty set forth in Section
3.15
shall
first be reduced by any Tax benefit attributable to any and all net operating
losses, net capital losses, and net operating or capital loss carryforwards
attributable to LiveDeal and its Subsidiaries for any Taxable period ending
on
or prior to the Effective Time (“Pre-Closing
LiveDeal NOLs”)
that
are actually utilized in the Taxable period of such claim for Losses to offset
any net Taxable income or gain (including any penalties, interest or other
additions to Tax) arising from such claim for Losses. If the Indemnified
Person has other Taxable income or gain in the same Taxable period in which
the
net Taxable income or gain arising from such claim for Losses arises, the
Pre-Closing LiveDeal NOLs shall, for purposes of this Section
7.2(d),
first
be utilized to offset the net Taxable income or gain arising from such claim
for
Losses.
7.3 Notice
of Claim.
An
Indemnified Person who has a claim which would give rise to liability pursuant
to this Article 7 shall give prompt notice to the Shareholder Representative
of
such claim, together with a reasonable description thereof. Except as otherwise
provided in Section 8.3 with respect to Tax Proceedings, with respect to
any
claim by a third party, which is covered by the indemnifications contained
hereunder, the party obligated to indemnify shall be afforded the opportunity,
at its expense, to defend or settle such claim if, within 10 days of notice
thereof, it acknowledges in writing its indemnification obligation hereunder,
utilizes counsel reasonably satisfactory to the indemnified party, commences
such defense promptly and pursues such defense with diligence; provided,
however,
that
such indemnifying party shall secure the consent of the indemnified party
to any
settlement, which consent shall not be unreasonably withheld, unless the
amount
of the settlement (together with other settlements) is below the Indemnity
Basket. If an indemnified party defends any claim hereunder, such party shall
use reasonable efforts in such defense to mitigate Losses arising thereunder,
and shall not settle any claim without the consent of the indemnifying party,
which shall not be unreasonably withheld. Notwithstanding the foregoing,
(i) if a claim seeks relief other than the payment of monetary damages;
(ii) if the subject matter of a claim relates to the ongoing business of
the indemnified party (including with out limitation, any relationship with
continuing suppliers, customers or other persons or entities with whom the
indemnified party does business), which claim, if decided against the
indemnified party, could materially adversely affect the ongoing business
or
reputation of the indemnified party or its relationship to such other party;
or
(iii) the indemnified party may not be fully indemnified with respect to
such claim, then, in each such case, the indemnified party alone shall be
entitled to contest and defend such claim in the first instance, but may
not
settle such claim without the consent of the indemnifying party, which consent
will not be unreasonably withheld, and, if the indemnified party does not
contest, defend or settle such claim, the indemnifying party shall then have
the
right to contest and defend such claim, but not settle such claim without
the
consent of the indemnified party, which consent will not be unreasonably
withheld. To the extent there is any inconsistency between the provisions
of
this Section
7.3
and the
provisions of Section
8.3
with
respect to Tax Proceedings, the provisions of Section
8.3
shall
govern.
7.4 Satisfaction
of Obligations.
If an
indemnifying party becomes obligated to indemnify another party with respect
to
any claim for indemnification hereunder and the amount of liability with
respect
thereto shall have been finally determined, the indemnified party shall deliver
a notice to the indemnifying party and the Escrow Agent demanding payment
pursuant to the Escrow Agreement. Additional provisions regarding the procedures
for indemnification are as set forth in the Escrow Agreement.
ARTICLE
8
TAX
MATTERS
The
following provisions shall govern the allocation of responsibility as between
YP
and the Principal Shareholder for certain tax matters following the Effective
Time:
8.1 Responsibility
for Filing Tax Returns.
(a) The
Shareholders’ Representative shall prepare and file or otherwise furnish in
proper form to the appropriate governmental authority (or cause to be prepared
and filed or so furnished) in a timely manner all Tax Returns relating to
LiveDeal and any Subsidiary that are required to be filed on or prior to
the
Effective Time; provided,
however,
that
(1)
Principal Shareholder will bear all costs and expenses associated with the
preparation and filing of any such Tax Returns, including all accountants’ and
auditors’ fees, and (2) the
Shareholders’ Representative
shall
cause such Tax Returns to be prepared and filed, in a manner consistent with
past practice of the Company (subject to any departure required to comply
with
any applicable law). YP shall cause to be prepared and filed all Tax Returns
of
LiveDeal and any Subsidiary required to be filed after the Effective Time.
(b) With
respect to any such Tax Return relating to LiveDeal and any Subsidiary that
includes any taxable period ending on or prior to the Effective Time or
beginning before the Effective Time and ending after the Effective Time,
the
filing party shall provide the other party and its authorized representatives
with a copy of such completed Tax Return, together with appropriate supporting
information and schedules, as soon as reasonably practicable prior to the
due
date (including any extension hereof) for the filing of such Tax Return,
and
such other party and its authorized representatives shall have the right
to
review, comment, and consent in writing (which written consent may not be
unreasonably withheld, conditioned, or delayed) on such Tax Return and statement
prior to the filing of such Tax Return.
8.2 Tax
Cooperation and Exchange of Information.
YP,
Principal Shareholder, and the Shareholders’ Representative
shall
provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Tax Return, amended Tax
Return, or claim for refund, determining a liability for Taxes or a right
to a
refund of Taxes or participating in or conducting any audit or other proceeding
in respect of Taxes or making representations to or furnishing information
to
parties subsequently desiring to purchase any part of the assets of LiveDeal
or
any Subsidiary, the equity of LiveDeal, or the equity of any Subsidiary.
Such
cooperation and information shall include providing copies of relevant Tax
Returns or portions thereof, together with related work papers and documents
relating to rulings or other determinations by governmental authorities.
YP,
Principal
Shareholder, and the Shareholders’ Representative
shall
make themselves (and their respective employees or independent contractors)
reasonably available on a mutually convenient basis to provide explanations
of
any documents or information provided under this Section
8.2.
Any
information obtained under this Section 8.2
shall be
kept confidential, except as may be otherwise necessary in connection with
the
filing of Tax Returns or claims for refund or in conducting an audit or other
proceeding.
8.3 Control
of Tax Proceedings.
If,
subsequent to the Effective Time, YP, the Surviving Corporation, Principal
Shareholder, or the Shareholders’ Representative
receives
notice of a claim, suit or proceeding by any taxing authority that, if
successful, could give rise to an indemnification obligation under this
Agreement related to Taxes or an additional payment of Taxes (a “Tax
Proceeding”),
then
within 15 calendar days after receipt of such notice, YP, the Surviving
Corporation,
Principal Shareholder, or the Shareholders’ Representative,
as the
case may be, shall give written notice of such Tax Proceeding to the other
parties. The Shareholders’ Representative shall have the right to control any
Tax Proceeding relating to a taxable period ending on or prior to the Effective
Time; provided,
however,
that
with respect to any such Tax Proceeding which may affect the Tax liability
of
YP, LiveDeal, the Surviving Corporation, or any Subsidiary, YP may participate
at its own cost and expense and the Shareholders’ Representative shall keep YP
informed of all material developments on a timely basis, consult with YP
with
respect to the resolution of such Tax Proceeding, and not resolve such Tax
Proceeding without the prior written consent of YP, which consent shall not
be
unreasonably withheld, conditioned or delayed. The Shareholders’ Representative
and YP shall jointly control any Tax Proceeding relating to a taxable period
beginning before the Effective Time and ending after the Effective Time.
YP
shall control (i) any Tax Proceeding relating to a taxable period beginning
after the Effective Time and (ii) any Tax Proceeding that the Shareholders’
Representative has the right to control but elects in writing not to control;
provided,
however,
that
with respect to any Tax Proceeding described in clause (ii), YP shall keep
the
Shareholders’ Representative informed of all material developments on a timely
basis and YP shall not resolve such Tax Proceeding in a manner that could
reasonably be expected to have an adverse impact on the LiveDeal Shareholders’
indemnification obligations under this Agreement without the Shareholders’
Representative’s prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed. Each party shall bear its own costs for
participating in any Tax Proceeding.
8.4. Other
Tax Matters.
(a) Termination
of Tax Sharing Agreements.
If
applicable, any and all Tax sharing agreements or similar agreements with
respect to or involving LiveDeal or any Subsidiary shall be terminated as
of the
Effective Time and, after the Effective Time, YP, the Surviving Corporation,
or
any Subsidiary shall not be bound by such agreements or have any liability
thereunder.
(b) Principal
Shareholder’s Conduct.
Except
as otherwise required by law, or with the consent of YP, Principal
Shareholder and the Shareholders’ Representative covenant
and agree that neither them nor their affiliates shall file or amend any
Tax
Return, file any claim for refund, change any method of Tax accounting, settle
or compromise any federal, state, local or foreign Tax liability regarding
LiveDeal, the Surviving Corporation, or any Subsidiary, or make or change
any
Tax election with respect to any Tax period, in each case that may result
in any
increased tax liability of, or loss of Tax benefits by, YP, the Surviving
Corporation, or any Subsidiary.
ARTICLE
9
GENERAL
PROVISIONS
9.1 Public
Statements.
Except
as required by applicable law, rule or regulation, including of the SEC,
prior
to the Effective Time, no party shall make any public announcement or statement
with respect to the Merger, this Agreement or any related transaction without
the approval of the other parties, which approval will not be unreasonably
withheld. Each party agrees to consult with the other parties prior to issuing
any such public announcement or statement.
9.2 Notices.
All
notices and other communications hereunder shall be in writing and shall
be
sufficiently given if made by hand delivery, by facsimile, by recognized
overnight courier service, or by registered or certified mail (postage prepaid
and return receipt requested) to the parties at the following addresses (or
at
such other address for a party as shall be specified by it by like
notice):
|
If
to YP or Merger Sub:
|
YP
Corp.
|
| |
4840
East Jasmine Street, Suite 105
Mesa,
Arizona 85205
FAX:
(480) 654-9727
Attn.:
Daniel L. Coury, Sr.
|
|
With
a copy to:
|
Snell
& Wilmer L.L.P.
|
| |
One
Arizona Center
Phoenix,
Arizona 85004
FAX:
(602) 382-6070
Attn.:
Daniel M. Mahoney
|
| |
|
|
If
to LiveDeal or
Shareholders’
Representative:
|
LiveDeal
Inc.
|
| |
2550
Walsh Ave, Suite 100
Santa
Clara, CA 95051
FAX:
(408) 855-9998
Attn.:
Rajesh Navar
|
| |
|
|
With
a copy to:
|
Latham
& Watkins LLP
|
| |
140
Scott Drive,
Menlo
Park, CA 94025
FAX:
(650) 463-2600
Attn:
Ora T. Fisher
|
All
such
notices and other communications shall be deemed to have been duly given:
when
delivered by hand, if personally delivered; three business days after being
deposited in the mail, postage prepaid, if delivered by mail; the next business
day, if by recognized overnight courier service; and when receipt acknowledged,
if faxed; provided,
however,
notice
to a party’s attorney shall not constitute notice to such party.
9.3 Dispute
Resolution.
All
claims, disputes and other matters in controversy (herein called a “Dispute”)
arising directly or indirectly out of or related to this Agreement or the
Escrow
Agreement, or the breach thereof, whether contractual or noncontractual,
and
whether during the term or after the termination of this Agreement, will
be
resolved exclusively according to the procedures set forth in this Section
9.3.
(a) Negotiation.
The
parties will attempt to settle Disputes arising out of or relating to this
Agreement, or the breach thereof, by a meeting of two designated representatives
of each party within five days after a request by either of the parties to
the
other party asking for the same.
(b) Mediation.
If such
Dispute cannot be settled at such meeting, either party within five days
of such
meeting may give a written notice (a “Dispute
Notice”)
to the
other party setting forth the nature of the Dispute. The parties will attempt
in
good faith to resolve the Dispute by mediation in Phoenix, Arizona (if such
Dispute is asserted by LiveDeal or the Shareholder Representative) or in
Santa
Clara, California (if such Dispute is asserted by YP) under the Commercial
Mediation Rules of AAA in effect on the date of the Dispute Notice. The parties
will select a person who will act as the mediator under this subsection
(b)
within
60 days of the date of this Agreement. If the Dispute has not been resolved
by
mediation as provided above within 30 days after delivery of the Dispute
Notice,
then the Dispute will be determined by arbitration in accordance with the
provisions of subsection (c)
below.
(c) Arbitration.
Any
Dispute that is not settled through mediation as provided in subsection
(b)
above
will be resolved by arbitration in Phoenix, Arizona (if such Dispute is asserted
by LiveDeal or the Shareholder Representative) or in Santa Clara, California
(if
such Dispute is asserted by YP), governed by the Federal Arbitration Act,
9
U.S.C. § 1 et seq., and administered by the AAA under its Commercial
Arbitration Rules in effect on the date of the Dispute Notice, as modified
by
the provisions of this subsection (c),
by a
single arbitrator. The arbitrator selected, in order to be eligible to serve,
will be a lawyer with at least 15 years experience specializing in business
matters. In the event the parties cannot agree on a mutually acceptable single
arbitrator from the list submitted by the AAA, AAA will appoint the arbitrator
who will meet the foregoing criteria. The arbitrator will base the award
on
applicable law and judicial precedent and, unless both parties agree otherwise,
will include in such award the findings of fact and conclusions of law upon
which the award is based. Judgment on the award rendered by the arbitrator
may
be entered in any court having jurisdiction thereof.
(d) Notwithstanding
the foregoing or anything in this Agreement to the contrary:
(i) Upon
the
application by either party to a court for an order confirming, modifying
or
vacating the award, the court will have the power to review whether, as a
matter
of law based on the findings of fact determined by the arbitrator, the award
should be confirmed, modified or vacated in order to correct any errors of
law
made by the arbitrator. In order to effectuate such judicial review limited
to
issues of law, the parties agree (and will stipulate to the court) that the
findings of fact made by the arbitrator will be final and binding on the
parties
and will serve as the facts to be submitted to and relied on by the court
in
determining the extent to which the award should be confirmed, modified or
vacated; and
(ii) Either
party will have the right to apply to any court for an order to specifically
enforce their rights under this Agreement and the other agreements contemplated
by this Agreement, including but not limited to a party’s obligation to close
the transaction and the confidentiality provisions contained in this
Agreement.
(e) Costs
and Attorneys’ Fees.
If
either party fails to proceed with mediation or arbitration as provided herein
or unsuccessfully seeks to stay such mediation or arbitration, or fails to
comply with any arbitration award, or is unsuccessful in vacating or modifying
the award pursuant to a petition or application for judicial review, the
other
party will be entitled to be awarded costs, including reasonable attorneys’
fees, paid or incurred by such other party in successfully compelling such
arbitration or defending against the attempt to stay, vacate or modify such
arbitration award and/or successfully defending or enforcing the
award.
(f) Tolling
of Statute of Limitations.
All
applicable statutes of limitations and defenses based upon the passage of
time
will be tolled while the procedures specified in this Section
9.3
are
pending. The parties will take such action, if any, required to effectuate
such
tolling.
9.4 Interpretation.
The
headings contained in this Agreement are for reference purposes only and
shall
not affect in any way the meaning or interpretation of this Agreement.
References to Sections and Articles refer to sections and articles of this
Agreement unless otherwise stated. Words such as “herein,” “hereinafter,”
“hereof,” “hereto,” “hereby” and “hereunder,” and words of like import, unless
the context requires otherwise, refer to this Agreement (including the exhibits
and attachments hereto). As used in this Agreement, the masculine, feminine
and
neuter genders shall be deemed to include the others if the context requires.
The term “Agreement”
means
collectively this Agreement and the agreements, certificates and other documents
delivered hereunder. For purposes of this Agreement, LiveDeal means LiveDeal
and
its subsidiaries, where appropriate.
9.5 Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, void or unenforceable, the remainder
of
the terms, provisions, covenants and restrictions of this Agreement shall
remain
in full force and effect and shall in no way be affected, impaired or
invalidated and the parties shall negotiate in good faith to modify this
Agreement to preserve each party’s anticipated benefits under this
Agreement.
9.6 Governing
Law.
This
Agreement and the transactions contemplated hereby, and all disputes between
the
parties under or relating to this Agreement or the fact and circumstances
leading to its execution, whether in contract, tort or otherwise, shall be
governed by the laws of the State of Arizona, without reference to conflict
of
laws principles that would require the application of any other law.
9.7 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which will
be
an original as regards any party whose signature appears thereon and all
of
which together will constitute one and the same instrument. This Agreement
will
become binding when one or more counterparts hereof, individually or taken
together, will bear the signatures of all parties reflected hereon as
signatories.
9.8 Miscellaneous.
This
Agreement (together with all other exhibits, appendices, documents and
instruments referred to herein): (a) constitutes the entire agreement, and
supersedes all other prior agreements, representations, warranties and
undertakings, both written and oral, among the parties, with respect to the
subject matter hereof; (b) except as set forth in Article 7, is not intended
to
confer upon any other person any rights or remedies hereunder; and (c) shall
not
be assigned by operation of law or otherwise, except that YP and Merger Sub
may
assign all or any portion of their rights under this Agreement to any
wholly-owned subsidiary, but no such assignment shall relieve YP and Merger
Sub
of their obligations hereunder, and except that this Agreement may be assigned
by operation of law to any corporation with or into which YP may be merged
or
otherwise sold, including through sale of assets or stock.
[SIGNATURE
PAGE FOLLOWS]
MERGER
AGREEMENT
SIGNATURE
PAGE
IN
WITNESS WHEREOF, YP, Merger Sub, LiveDeal, and the Principal
Shareholder
have
caused this Agreement to be executed on the date first written
above.
| |
YP
CORP., a Nevada corporation
|
| |
|
| |
/s/
Daniel L. Coury, Sr. |
| |
By:
Daniel L. Coury, Sr.
Title:
Chief Executive Officer
|
| |
|
| |
|
| |
LD
ACQUISITION CO., a California corporation
|
| |
|
| |
/s/
Daniel L. Coury, Sr. |
| |
By:
Daniel
L. Coury, Sr.
Title:
President
|
| |
|
| |
|
| |
LIVEDEAL,
INC., a California corporation
|
| |
|
| |
/s/
Rajesh Navar |
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By:
Rajesh Navar
Title:
Chief Executive Officer and President
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PRINCIPAL
SHAREHOLDER:
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Rajesh
& Arati Navar Living Trust dated 9/23/2002
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/s/
Rajesh Navar |
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Rajesh
Navar, Co-Trustee
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/s/
Arati Navar |
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Arati
Navar, Co-Trustee
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SHAREHOLDERS’
REPRESENTATIVE:
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/s/
Rajesh Navar |
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Rajesh
Navar
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Exhibit
A
Agreement
of Merger
Exhibit
B
Articles
of Incorporation of Surviving Corporation
Exhibit
C
Bylaws
of
Surviving Corporation
Exhibit
D
Escrow
Agreement
Exhibit
E
Letter
of
Transmittal
Exhibit
F
Form
of
Noncompetition, Nondisclosure and Nonsolicitation Agreement
Exhibit
G
Rajesh
Navar Employment Agreement