AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
EXECUTION
COPY
AGREEMENT
OF MERGER AND
PLAN
OF REORGANIZATION
BY
AND AMONG
RXELITE
ACQUISITION CORP.
and
RXELITE
HOLDINGS INC
Dated
as
of July 13, 2007
THIS
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION (this “Agreement”)
is
made and entered into on July 13, 2007, by and among SOUTHRIDGE TECHNOLOGY
GROUP, INC., a Delaware corporation (“Parent”),
RXELITE ACQUISITION CORP., a Delaware corporation (“Acquisition
Corp.”),
which
is a wholly-owned subsidiary of Parent, and RXELITE HOLDINGS INC., a Delaware
corporation (the “Company”).
WITNESSETH
:
WHEREAS,
the Board of Directors of each of Acquisition Corp., Parent and the Company
have
each determined that it is fair to and in the best interests of their respective
corporations and stockholders for Acquisition Corp. to be merged with and into
the Company (the “Merger”)
upon
the terms and subject to the conditions set forth herein;
WHEREAS,
the Board of Directors of each of Parent, Acquisition Corp. and the Company
have
approved the Merger in accordance with the General Corporation Law of the State
of Delaware (the “DGCL”),
and
upon the terms and subject to the conditions set forth herein and in the
Certificate of Merger attached as Exhibit
A
hereto
(the “Certificate
of Merger”);
and
WHEREAS,
the requisite stockholders of the Company (the “Stockholders”)
have
approved by written consent pursuant to Section 228 of the DGCL this Agreement
and the Certificate of Merger and the transactions contemplated and described
hereby and thereby, including, without limitation, the Merger, and Parent,
as
the sole stockholder of Acquisition Corp., has approved this Agreement, the
Certificate of Merger and the transactions contemplated and described hereby
and
thereby, including, without limitation, the Merger; and
WHEREAS,
immediately following the Closing (as such term is defined herein), Parent
(as
it will exist as of the closing of the Merger) will sell up to a maximum of
$10,750,000 of its Units with each “Unit” consisting of (i) 0.090606 of one
share of its common stock and (ii) one half of a detachable transferable warrant
to purchase 0.090606 of one share of its common stock at $9.38 per share, at
$6.62 per Unit, in a private placement offering to accredited investors (the
“Private
Placement”)
for
the purpose of financing the ongoing business and operations of the Surviving
Corporation (as defined below) following the Merger; and
WHEREAS,
the parties hereto intend that the Merger contemplated herein shall qualify
as a
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the “Code”),
by
reason of Section 368(a)(2)(E) of the Code.
NOW,
THEREFORE, in consideration of the mutual agreements and covenants hereinafter
set forth, the parties hereto agree as follows:
ARTICLE
I.
THE
MERGER
Section
1.01 Merger.
Subject
to the terms and conditions of this Agreement and the Certificate of Merger,
Acquisition Corp. shall be merged with and into the Company in accordance with
Section 252 of the DGCL. At the Effective Time (as hereinafter defined), the
separate legal existence of Acquisition Corp. shall cease, and the Company
shall
be the surviving corporation in the Merger (sometimes hereinafter referred
to as
the “Surviving
Corporation”)
and
shall continue its corporate existence under the laws of the State of Delaware
under the name “RxElite Holdings Inc.”
Section
1.02 Effective
Time.
The
Merger shall become effective upon the filing of the Certificate of Merger
with
the Secretary of State of the State of Delaware in accordance with Section
252
of the DGCL. The time at which the Merger shall become effective as aforesaid
is
referred to hereinafter as the “Effective
Time.”
Section
1.03 Closing.
The
closing of the Merger (the “Closing”)
shall
occur concurrently with the Effective Time (the “Closing
Date”).
The
Closing shall occur at the offices of Xxxxxxxx & Xxxxxxxx LLP referred to in
Section 10.01 hereof. At the Closing, all of the documents, certificates,
agreements, opinions and instruments referenced in Article VII will be executed
and delivered as described therein. At the Effective Time, all actions to be
taken at the Closing shall be deemed to be taken simultaneously.
Section
1.04 Certificate
of Incorporation, By-laws, Directors and Officers.
(a) The
Certificate of Incorporation of the Company, as in effect immediately prior
to
the Effective Time, attached as Exhibit
B
hereto,
shall be the Certificate of Incorporation of the Surviving Corporation from
and
after the Effective Time until amended in accordance with applicable law and
such Certificate of Incorporation.
(b) The
By-laws of the Company, as in effect immediately prior to the Effective Time,
attached as Exhibit
C
hereto,
shall be the By-laws of the Surviving Corporation from and after the Effective
Time until amended in accordance with applicable law, the Certificate of
Incorporation and such By-laws.
(c) The
directors and officers listed in Exhibit
D
hereto
shall be the directors and officers of the Surviving Corporation, and each
shall
hold his respective office or offices from and after the Effective Time until
his successor shall have been elected and shall have qualified in accordance
with applicable law, or as otherwise provided in the Certificate of
Incorporation or By-laws of the Surviving Corporation.
Section
1.05 Assets
and Liabilities.
At the
Effective Time, the Surviving Corporation shall possess all the rights,
privileges, powers and franchises of a public as well as of a private nature,
and be subject to all the restrictions, disabilities and duties of each of
Acquisition Corp. and the Company (collectively, the “Constituent
Corporations”);
and
all the rights, privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and all debts due
to
any of the Constituent Corporations on whatever account, as well for stock
subscriptions as all other things in action or belonging to each of the
Constituent Corporations, shall be vested in the Surviving Corporation; and
all
property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectively the property of the Surviving
Corporation as they were of the several and respective Constituent Corporations,
and the title to any real estate vested by deed or otherwise in either of such
Constituent Corporations shall not revert or be in any way impaired by the
Merger; but all rights of creditors and all liens upon any property of any
of
the Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth attach
to the Surviving Corporation, and may be enforced against it to the same extent
as if said debts, liabilities and duties had been incurred or contracted by
it.
-2-
Section
1.06 Manner
and Basis of Converting Shares.
(a) At
the
Effective Time:
(i) each
share of common stock, par value $0.001 per share, of Acquisition Corp. that
shall be outstanding immediately prior to the Effective Time shall, by virtue
of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive one (1) share of common stock, par value
$0.00237 per share, of the Surviving Corporation, so that at the Effective
Time,
Parent shall be the holder of all of the issued and outstanding shares of the
Surviving Corporation;
(ii) the
shares of common stock, par value $0.001 per share, of the Company (the
“Company
Stock”)
beneficially owned by the Stockholders listed in Schedule 1.06 (other than
shares of Company Stock as to which appraisal rights are perfected pursuant
to
the applicable provisions of the DGCL and not withdrawn or otherwise forfeited
and shares of Company Stock set forth in Section 1.06(a)(iii) hereof), shall,
by
virtue of the Merger and without any action on the part of the holders thereof,
be converted into the right to receive the number of shares of common stock,
par
value $0.001 per share of Parent (the “Parent
Common Stock”)
specified in Schedule 1.06 for each of the Stockholders, which shall be equal
to
.090606 of one share of Parent Common Stock for each share of Company
Stock;
(iii) each
share of Company Stock held in the treasury of the Company immediately prior
to
the Effective Time shall be cancelled in the Merger and cease to
exist.
(b) After
the
Effective Time, there shall be no further registration of transfers on the
stock
transfer books of the Surviving Corporation of the shares of Company Stock
that
were outstanding immediately prior to the Effective Time.
Section
1.07 Surrender
and Exchange of Certificates.
Promptly after the Effective Time and upon (a) surrender of a certificate or
certificates representing shares of Company Stock that were outstanding
immediately prior to the Effective Time or an affidavit and indemnification
in
form reasonably acceptable to counsel for Parent stating that such Stockholder
has lost its certificate or certificates or that such have been destroyed and
(ii) delivery of a Letter of Transmittal (as described in Article IV hereof),
Parent shall issue to each record holder of Company Stock surrendering such
certificate or certificates and Letter of Transmittal, a certificate or
certificates registered in the name of such Stockholder representing the number
of shares of Parent Common Stock that such Stockholder shall be entitled to
receive as set forth in Section 1.06(a)(ii) hereof. Until the certificate,
certificates or affidavit is or are surrendered together with the Letter of
Transmittal as contemplated by this Section 1.07 and Article IV hereof, each
certificate or affidavit that immediately prior to the Effective Time
represented any outstanding shares of Company Stock shall be deemed at and
after
the Effective Time to represent only the right to receive upon surrender as
aforesaid the Parent Common Stock specified in Schedule 1.06 hereof for the
holder thereof or to perfect any rights of appraisal that such holder may have
pursuant to the applicable provisions of the DGCL.
-3-
Section
1.08 Parent
Common Stock.
Parent
agrees that it will cause the Parent Common Stock into which the Company Stock
is converted at the Effective Time pursuant to Section 1.06(a)(ii) to be
available for such purposes. Parent further covenants that immediately following
the Effective Time, Parent will effect cancellations of its outstanding shares
of Parent Common Stock and that there will be no more than 1,495,000 shares
of
Parent Common Stock issued and outstanding, and that no other common or
preferred stock or equity securities or any options, warrants, rights or other
agreements or instruments convertible, exchangeable or exercisable into common
or preferred stock or other equity securities shall be issued or outstanding,
except as described herein.
Section
1.09 Stock
Options.
At the
Effective Time, each outstanding purchase right under the RxElite Holdings
Inc.
2007 Incentive Stock Plan (the “Plan”),
as
amended to date and any addendums thereto (each, a “Company
Option”)
shall
be assumed by Parent in such manner that Parent is a corporation “issuing or
assuming a stock option in a transaction to which Section 424(a) applies” within
the meaning of the Code, and shall be converted into a right to purchase Parent
Common Stock in accordance with this Section 1.09. Each Company Option so
converted shall continue to have, and be subject to, the same terms and
conditions (including vesting schedule) as set forth in the Plan and any
agreements thereunder immediately prior to the Effective Time, except that,
as
of the Effective Time, (i) each Company Option shall be exercisable (or shall
become exercisable in accordance with its terms) for that number of whole shares
of Parent Common Stock equal to the product of the number of shares that were
issuable upon exercise of such Company Option immediately prior to the Effective
Time multiplied by .090606 (the “Option
Exchange Ratio”),
rounded down to the nearest whole number of shares of Parent Common Stock,
(ii)
the per share exercise price for the shares of Parent Common Stock issuable
upon
exercise of such Company Option so converted shall be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock
at
which such Company Option was exercisable immediately prior to the Effective
Time by the Option Exchange Ratio, rounded up to the nearest whole cent.
Notwithstanding the foregoing, the conversion of any Company Options which
are
“incentive stock options,” within the meaning of Section 422 of the Code, into
options to purchase Parent Common Stock shall be made so as not to constitute
a
“modification” of such Company Options within the meaning of Section 424 of the
Code.
Section
1.10 Operation
of Surviving Corporation.
The
Company acknowledges that upon the effectiveness of the Merger, and the material
compliance by Parent and Acquisition Corp. with their respective duties and
obligations hereunder, Parent shall have the absolute and unqualified right
to
deal with the assets and business of the Surviving Corporation as its own
property without limitation on the disposition or use of such assets or the
conduct of such business.
Section
1.11 Further
Assurances.
From
time to time, from and after the Effective Time, as and when reasonably
requested by Parent, the proper officers and directors of the Company as of
the
Effective Time shall, for and on behalf and in the name of the Company or
otherwise, execute and deliver all such deeds, bills of sale, assignments and
other instruments and shall take or cause to be taken such further actions
as
Parent, Acquisition Corp. or their respective successors or assigns reasonably
may deem necessary or desirable in order to confirm or record or otherwise
transfer to the Surviving Corporation title to and possession of all of the
properties, rights, privileges, powers, franchises and immunities of the Company
or otherwise to carry out fully the provisions and purposes of this Agreement
and the Certificate of Merger.
-4-
ARTICLE
II.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants to Parent and Acquisition Corp. as
follows. Notwithstanding anything to the contrary contained herein, disclosure
of items in the draft Current Report on Form 8-K of Parent with respect to
the
Merger and the Private Placement, and all exhibits thereto, a copy of which
is
attached hereto as Exhibit
E
(collectively, the “Disclosures”)
shall
be deemed to be disclosure of such items for all purposes under this Agreement,
including, without limitation, for all applicable representations and warranties
of the Company:
Section
2.01 Organization,
Standing, Subsidiaries, Etc.
(a) The
Company is a corporation duly organized and existing in good standing under
the
laws of the State of Delaware and has all requisite power and authority
(corporate and other) to carry on its business, to own or lease its properties
and assets, to enter into this Agreement and the Certificate of Merger and
to
carry out the terms hereof and thereof. Copies of the Certificate of
Incorporation and By-laws of the Company that have been delivered to Parent
and
Acquisition Corp. prior to the execution of this Agreement are true and complete
and have not since been amended or repealed.
(b) Except
as
set forth in Schedule 2.01(b), the Company has no subsidiaries or direct or
indirect interest (by way of stock ownership or otherwise) in any firm,
corporation, limited liability company, partnership, association or business.
Section
2.02 Qualification.
The
Company is duly qualified to conduct business as a foreign corporation and
is in
good standing in each jurisdiction wherein the nature of its activities or
its
properties owned or leased makes such qualification necessary, except where
the
failure to be so qualified would not have a material adverse effect on the
condition (financial or otherwise), properties, assets, liabilities, business
operations, results of operations or prospects of the Company taken as a whole
(the “Condition
of the Company”).
Section
2.03 Capitalization
of the Company.
The
authorized capital stock of the Company consists of 100,000,000 shares of
Company Stock, of which there are 45,756,417 shares of Company Stock issued
and
outstanding, all of such shares are duly authorized, validly issued, fully
paid
and non-assessable and none of such shares have been issued in violation of
the
preemptive rights of any natural person, corporation, business trust,
association, limited liability company, partnership, joint venture, other
entity, government, agency or political subdivision (each, a “Person”).
The
offer, issuance and sale of such shares of Company Stock were (a) exempt from
the registration and prospectus delivery requirements of the Securities Act
of
1933, as amended (the “Securities
Act”),
(b)
registered or qualified (or were exempt from registration or qualification)
under the registration or qualification requirements of all applicable state
securities laws and (c) accomplished in conformity with all other applicable
securities laws. None of such shares of Company Stock are subject to a right
of
withdrawal or a right of rescission under any federal or state securities or
blue-sky law. Except as otherwise set forth in this Agreement or the
Disclosures, the Company has no outstanding options, rights or commitments
to
issue Company Stock or other securities of the Company, and there are no
outstanding securities convertible or exercisable into or exchangeable for
Company Stock or other securities of the Company.
-5-
Section
2.04 Indebtedness.
The
Company has no Indebtedness for Borrowed Money, except as otherwise set forth
in
this Agreement or disclosed on the Balance Sheet. For purposes of this
Agreement, (a) “Indebtedness
for Borrowed Money”
shall
mean (i) all Indebtedness in respect of money borrowed including, without
limitation, Indebtedness which represents the unpaid amount of the purchase
price of any property and is incurred in lieu of borrowing money or using
available funds to pay such amounts and not constituting an account payable
or
expense accrual incurred or assumed in the ordinary course of business of the
Company, (ii) all Indebtedness evidenced by a promissory note, bond or similar
written obligation to pay money, or (iii) all such Indebtedness guaranteed
by
the Company or for which the Company is otherwise contingently liable.
Furthermore, for purposes of this Agreement, “Indebtedness”
shall
mean any obligation of the Company which, under generally accepted accounting
principles in the United Stated (“GAAP”),
is
required to be shown on the balance sheet of the Company as a liability. Any
obligation secured by a mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (a “Lien”),
shall
be deemed to be Indebtedness, even though such obligation is not assumed by
the
Company.
Section
2.05 Company
Stockholders.
Schedule 1.06 hereto contains a true and complete list of the names of the
record owners of all of the outstanding shares of Company Stock, together with
the number of securities held or to which such Person has rights to acquire.
To
the knowledge of the Company, there is no voting trust, agreement or arrangement
among any of the beneficial holders of Company Stock affecting the nomination
or
election of directors or the exercise of the voting rights of Company
Stock.
Section
2.06 Corporate
Acts and Proceedings.
The
execution, delivery and performance of this Agreement and the Certificate of
Merger (together, the “Merger
Documents”)
have
been duly authorized by the Board of Directors of the Company and have been
approved by the requisite vote of the Stockholders, and all of the corporate
acts and other proceedings required for the due and valid authorization,
execution, delivery and performance of the Merger Documents and the consummation
of the Merger have been validly and appropriately taken, except for the filings
referred to in Section 1.02.
Section
2.07 Compliance
with Laws and Instruments.
The
business, products and operations of the Company have been and are being
conducted in compliance in all material respects with all applicable laws,
rules
and regulations, except for such violations thereof for which the penalties,
in
the aggregate, would not have a material adverse effect on the Condition of
the
Company. The execution, delivery and performance by the Company of the Merger
Documents and the consummation by the Company of the transactions contemplated
by this Agreement: (a) will not require any authorization, consent or approval
of, or filing or registration with, any court or governmental agency or
instrumentality, except such as shall have been obtained prior to the Closing,
(b) will not cause the Company to violate or contravene (i) any provision of
law, (ii) any rule or regulation of any agency or government, (iii) any order,
judgment or decree of any court, or (iv) any provision of the Certificate of
Incorporation or By-laws of the Company, (c) will not violate or be in conflict
with, result in a breach of or constitute (with or without notice or lapse
of
time, or both) a default under, any indenture, loan or credit agreement, deed
of
trust, mortgage, security agreement or other contract, agreement or instrument
to which the Company is a party or by which the Company or any of its properties
is bound or affected, except as would not have a material adverse effect on
the
Condition of the Company, and (d) will not result in the creation or imposition
of any Lien upon any property or asset of the Company. The Company is not in
violation of, or (with or without notice or lapse of time, or both) in default
under, any term or provision of its Certificate of Incorporation or By-laws or
of any indenture, loan or credit agreement, deed of trust, mortgage, security
agreement or, except as would not materially and adversely affect the Condition
of the Company, any other material agreement or instrument to which the Company
is a party or by which the Company or any of its properties is bound or
affected.
-6-
Section
2.08 Binding
Obligations.
The
Merger Documents constitute the legal, valid and binding obligations of the
Company and are enforceable against the Company in accordance with their
respective terms, except as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors’ rights
generally and by general principles of equity.
Section
2.09 Broker’s
and Finder’s Fees.
Except
for fees paid to the placement agents as set forth in the Disclosures, no Person
has, or as a result of the transactions contemplated or described herein will
have, any right or valid claim against the Company, Parent, Acquisition Corp.
or
any Stockholder for any commission, fee or other compensation as a finder or
broker, or in any similar capacity. Parent and Acquisition Corp., on the one
hand, and the Company, on the other hand, hereby indemnify and hold each other
harmless from and against any and all claims, losses or liabilities for any
such
commission, fee or other compensation as a result of the claim by any other
Person that the indemnifying party or parties introduced or assisted them in
connection with the transactions contemplated or described here.
Section
2.10 Financial
Statements.
Parent
has previously been provided with the Company’s audited balance sheet (the
“Balance
Sheet”)
as of
December 31, 2006 (the “Balance
Sheet Date”)
and
December 31, 2005 and the audited statements of operations and accumulated
deficits and cash flows for the years ended December 31, 2006 and December
31,
2005. Such financial statements are collectively referred to as the
“Financial
Statements”.
Such
financial statements (i) are in accordance with the books and records of the
Company, (ii) present fairly in all material respects the financial condition
of
the Company at the dates therein specified and the results of its operations
and
changes in financial position for the periods therein specified and (iii) have
been prepared in accordance with GAAP applied on a basis consistent with prior
accounting periods.
Section
2.11 Absence
of Undisclosed Liabilities.
The
Company has no material obligation or liability (whether accrued, absolute,
contingent, liquidated or otherwise, whether due or to become due), arising
out
of any transaction entered into at or prior to the Closing, except (a) as
disclosed in the Balance Sheet, (b) to the extent set forth on or reserved
against in the Balance Sheet or the notes to the Financial Statements, (c)
current liabilities incurred and obligations under agreements entered into
in
the usual and ordinary course of business since the Balance Sheet Date, none
of
which (individually or in the aggregate) has had or will have a material adverse
effect on the Condition of the Company, and (d) by the specific terms of any
written agreement, document or arrangement identified in the
Disclosures.
-7-
Section
2.12 Changes.
Since
the Balance Sheet Date, the Company has not (a) incurred any debts, obligations
or liabilities, absolute, accrued, contingent or otherwise, whether due or
to
become due, except for fees, expenses and liabilities incurred in connection
with the Merger and related transactions and current liabilities incurred in
the
usual and ordinary course of business, (b) discharged or satisfied any Liens
other than those securing, or paid any obligation or liability other than,
current liabilities shown on the Balance Sheet and current liabilities incurred
since the Balance Sheet Date, in each case in the usual and ordinary course
of
business, (c) mortgaged, pledged or subjected to Lien any of its assets,
tangible or intangible other than in the usual and ordinary course of business,
(d) sold, transferred or leased any of its assets, except in the usual and
ordinary course of business, (e) cancelled or compromised any debt or claim,
or
waived or released any right, of material value, (f) suffered any physical
damage, destruction or loss (whether or not covered by insurance) materially
and
adversely affecting the Condition of the Company, (g) entered into any
transaction other than in the usual and ordinary course of business, (h)
encountered any labor union difficulties, (i) made or granted any wage or salary
increase or made any increase in the amounts payable under any profit sharing,
bonus, deferred compensation, severance pay, insurance, pension, retirement
or
other employee benefit plan, agreement or arrangement, other than in the
ordinary course of business consistent with past practice or as described in
the
Disclosures, or entered into any employment agreement, (j) issued or sold any
shares of capital stock, bonds, notes, debentures or other securities or granted
any options (including employee stock options), warrants or other rights with
respect thereto, (k) declared or paid any dividends on or made any other
distributions with respect to, or purchased or redeemed, any of its outstanding
capital stock, (l) suffered or experienced any change in, or condition
affecting, the Condition of the Company other than changes, events or conditions
in the usual and ordinary course of its business, none of which (either by
itself or in conjunction with all such other changes, events and conditions)
has
been materially adverse, (m) made any change in the accounting principles,
methods or practices followed by it or depreciation or amortization policies
or
rates theretofore adopted, (n) made or permitted any amendment or termination
of
any material contract, agreement or license to which it is a party, (o) suffered
any material loss not reflected in the Balance Sheet or its statement of income
for the period ended on the Balance Sheet Date, (p) paid, or made any accrual
or
arrangement for payment of, bonuses or special compensation of any kind or
any
severance or termination pay to any present or former officer, director,
employee, stockholder or consultant, (q) made or agreed to make any charitable
contributions or incurred any non-business expenses in excess of $50,000 in
the
aggregate, or (r) entered into any agreement, or otherwise obligated itself,
to
do any of the foregoing. For purposes of this Agreement, an “Affiliate”
shall
mean any Person that directly or indirectly controls, is controlled by, or
is
under common control with, the indicated Person.
Section
2.13 Assets
and Contracts.
(a) The
Disclosures contain a true and complete list of all real property leased by
the
Company, including a brief description of each item thereof and of the nature
of
the Company’s interest therein, and of all tangible personal property owned or
leased by the Company having a cost or fair market value of greater than
$200,000, including a brief description of each item and of the nature of the
interest of the Company therein. All the real property listed in the Disclosures
is leased by the Company under valid and enforceable leases having the rental
terms, termination dates and renewal and purchase options described in the
Disclosures; such leases are enforceable in accordance with their terms, and
there is not, under any such lease, any existing default or event of default
or
event which with notice or lapse of time, or both, would constitute a default
by
the Company, and the Company has not received any notice or claim of any such
default. The Company does not own any real property.
-8-
(b) Except
as
expressly set forth in this Agreement, the Balance Sheet or the notes thereto,
the Company is not a party to any written or oral agreement not made in the
ordinary course of business that is material to the Company. Except as set
forth
in the Disclosures, the Company is not a party to or otherwise bound by any
written or oral (a) agreement with any labor union, (b) agreement for the
purchase of fixed assets or for the purchase of materials, supplies or equipment
in excess of normal operating requirements, (c) agreement for the employment
of
any officer, individual employee or other Person on a full-time basis or any
agreement with any Person for consulting services, (d) bonus, pension, profit
sharing, retirement, stock purchase, stock option, deferred compensation,
medical, hospitalization or life insurance or similar plan, contract or
understanding with respect to any or all of the employees of the Company or
any
other Person, (e) indenture, loan or credit agreement, note agreement, deed
of
trust, mortgage, security agreement, promissory note or other agreement or
instrument relating to or evidencing Indebtedness for Borrowed Money or
subjecting any asset or property of the Company to any Lien or evidencing any
Indebtedness, (f) guaranty of any Indebtedness, (g) lease or agreement under
which the Company is a lessee of or holds or operates any property, real or
personal, owned by any other Person under which payments to such Person exceed
$200,000 per year or with an unexpired term (including any period covered by
an
option to renew exercisable by any other party) of more than 60 days, (h) lease
or agreement under which the Company is a lessor or permits any Person to hold
or operate any property, real or personal, owned or controlled by the Company,
(i) agreement granting any preemptive right, right of first refusal or similar
right to any Person, (j) agreement or arrangement with any Affiliate or any
“associate” (as such term is defined in Rule 405 under the Securities Act) of
the Company or any present or former officer, director or stockholder of the
Company, (k) agreement obligating the Company to pay any royalty or similar
charge for the use or exploitation of any tangible or intangible property,
(1)
covenant not to compete or other restriction on its ability to conduct a
business or engage in any other activity, (m) material distributor, dealer,
manufacturer’s representative, sales agency, franchise or advertising contract
or commitment, (n) agreement to register securities under the Securities Act,
(o) collective bargaining agreement, or (p) agreement or other commitment or
arrangement with any Person continuing for a period of more than three months
from the Closing Date that involves an expenditure or receipt by the Company
in
excess of $200,000. None of the agreements, contracts, leases, instruments
or
other documents or arrangements described in the Disclosures requires the
consent of any of the parties thereto other than the Company to permit the
contract, agreement, lease, instrument or other document or arrangement to
remain effective following consummation of the Merger and the transactions
contemplated hereby.
-9-
(c) The
Disclosures contain a true and complete list of all patents, patent
applications, trade names, trademarks, trademark registrations and applications,
copyrights, copyright registrations and applications, and grants of licenses,
both domestic and foreign, presently owned, possessed, used or held by the
Company; and the Company owns the entire right, title and interest in and to
the
same, free and clear of all Liens and restrictions. The Disclosures also contain
a true and complete list of all licenses granted to or by the Company with
respect to the foregoing. All patents, patent applications, trade names,
trademarks, trademark registrations and applications, copyrights, copyright
registrations and applications and grants of licenses set forth (i) are subject
to no pending or, to the Company’s knowledge, threatened challenge, and (ii) can
and will be transferred by the Company to the Surviving Corporation as a result
of the Merger and without the consent of any Person other than the Company.
Neither the execution nor delivery of the Merger Documents, nor the consummation
of the transactions contemplated thereby will give any licensor or licensee
of
the Company any right to change the terms or provisions of, terminate or cancel,
any license to which the Company is a party.
(d) The
Company has made available to Parent and Acquisition Corp. true and complete
copies of all agreements and other documents and a description of all applicable
oral agreements disclosed or referred to in the Disclosures, as well as any
additional agreements or documents, requested by Parent or Acquisition Corp.
The
Company has in all material respects performed all obligations required to
be
performed by it to date and is not in default in any respect under any of the
contracts, agreements, leases, documents, commitments or other arrangements
to
which it is a party or by which it or any of its property is otherwise bound
or
affected. To the knowledge of the Company, all parties having material
contractual arrangements with the Company are in substantial compliance
therewith and none are in material default thereunder. The Company does not
have
outstanding any power of attorney.
Section
2.14 Employees.
The
Company has complied in all material respects with all laws relating to the
employment of labor, and the Company has encountered no material labor union
difficulties. Other than pursuant to ordinary arrangements of employment
compensation, the Company is not under any obligation or liability to any
officer, director or employee of the Company.
Section
2.15 Tax
Returns and Audits.
(a) All
required federal, state and local Tax Returns of the Company have been
accurately prepared and duly and timely filed, and all federal, state and local
Taxes required to be paid with respect to the periods covered by such returns
have been paid. The Company is not and has not been delinquent in the payment
of
any Tax. The Company has not had a Tax deficiency proposed or assessed against
it and has not executed a waiver of any statute of limitations on the assessment
or collection of any Tax. None of the Company’s federal income tax returns has
been audited by any governmental authority; and none of the Company’s state or
local income or franchise tax returns has been audited by any governmental
authority. The reserves for Taxes reflected on the Balance Sheet are and will
be
sufficient for the payment of all unpaid Taxes payable by the Company as of
the
Balance Sheet Date. Since the Balance Sheet Date, the Company has made adequate
provisions on its books of account for all Taxes with respect to its business,
properties and operations for such period. The Company has withheld or collected
from each payment made to each of its employees the amount of all taxes
(including, but not limited to, federal, state and local income taxes, Federal
Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and has paid the same to the
proper Tax receiving officers or authorized depositaries. There are no federal,
state, local or foreign audits, actions, suits, proceedings, investigations,
claims or administrative proceedings relating to Taxes or any Tax Returns of
the
Company now pending, and the Company has not received any notice of any proposed
audits, investigations, claims or administrative proceedings relating to Taxes
or any Tax Returns. The Company is not obligated to make a payment, nor is
it a
party to any agreement that under certain circumstances could obligate it to
make a payment that would not be deductible under Section 280G of the Code.
The
Company has not agreed, nor is it required, to make any adjustments under
Section 481(a) of the Code (or any similar provision of state, local and foreign
law), whether by reason of a change in accounting method or otherwise, for
any
Tax period for which the applicable statute of limitations has not yet expired.
The Company (i) is not a party to, nor is it bound by or obligated under, any
Tax sharing agreement, Tax indemnification agreement or similar contract or
arrangement, whether written or unwritten (collectively, “Tax
Sharing Agreements”),
and
(ii) does not have any potential liability or obligation to any Person as a
result of, or pursuant to, any such Tax Sharing Agreements.
-10-
(b) For
purposes of this Agreement, the following terms shall have the meanings provided
below:
(i) “Tax”
or
“Taxes”
shall
mean (a) any and all taxes, assessments, customs, duties, levies, fees, tariffs,
imposts, deficiencies and other governmental charges of any kind whatsoever
(including, but not limited to, taxes on or with respect to net or gross income,
franchise, profits, gross receipts, capital, sales, use, ad valorem, value
added, transfer, real property transfer, transfer gains, transfer taxes,
inventory, capital stock, license, payroll, employment, social security,
unemployment, severance, occupation, real or personal property, estimated taxes,
rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative
minimum, doing business, withholding and stamp), together with any interest
thereon, penalties, fines, damages costs, fees, additions to tax or additional
amounts with respect thereto, imposed by the United States (Federal, state
or
local) or other applicable jurisdiction; (b) any liability for the payment
of
any amounts described in clause (a) as a result of being a member of an
affiliated, consolidated, combined, unitary or similar group or as a result
of
transferor or successor liability, including, without limitation, by reason
of
Regulation section 1.1502-6; and (c) any liability for the payments of any
amounts as a result of being a party to any Tax Sharing Agreement or as a result
of any express or implied obligation to indemnify any other Person with respect
to the payment of any amounts of the type described in clause (a) or
(b).
(ii) “Tax
Return”
shall
include all returns and reports (including elections, declarations, disclosures,
schedules, estimates and information returns (including Form 1099 and
partnership returns filed on Form 1065) required to be supplied to a Tax
authority relating to Taxes.
Section
2.16 Patents
and Other Intangible Assets.
(a) The
Company (i) owns or has the right to use, free and clear of all Liens, claims
and restrictions, all patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect to the foregoing used in or
necessary for the conduct of its business as now conducted or proposed to be
conducted without infringing upon or otherwise acting adversely to the right
or
claimed right of any Person under or with respect to any of the foregoing and
(ii) is not obligated or under any liability to make any payments by way of
royalties, fees or otherwise to any owner or licensor of, or other claimant
to,
any patent, trademark, service xxxx, trade name, copyright or other intangible
asset, with respect to the use thereof or in connection with the conduct of
its
business or otherwise.
-11-
(b) To
the
best knowledge of the Company, the Company owns and has the unrestricted right
to use all trade secrets, if any, including know-how, negative know-how,
formulas, patterns, programs, devices, methods, techniques, inventions, designs,
processes, computer programs and technical data and all information that derives
independent economic value, actual or potential, from not being generally known
or known by competitors (collectively, “Intellectual
Property”)
required for or incident to the development, operation and sale of all products
and services sold by the Company, free and clear of any right, Lien or claim
of
others; provided,
however,
that
the possibility exists that other Persons, completely independently of the
Company or its employees or agents, could have developed Intellectual Property
similar or identical to that of the Company. The Company is not aware of any
such development of substantially identical trade secrets or technical
information by others. All Intellectual Property can and will be transferred
by
the Company to the Surviving Corporation as a result of the Merger and without
the consent of any Person other than the Company.
Section
2.17 Employee
Benefit Plans; ERISA.
(a) There
are
no “employee benefit plans” (within the meaning of Section 3(3) of the Employee
Retirement Income Securities Act of 1974, as amended (“ERISA”))
nor
any other employee benefit or fringe benefit arrangements, practices, contracts,
policies or programs of every type other than programs merely involving the
regular payment of wages, commissions, or bonuses established, maintained or
contributed to by the Company, whether written or unwritten and whether or
not
funded. The plans listed in the Disclosures hereto are hereinafter referred
to
as the “Employee
Benefit Plans.”
(b) All
current and prior material documents, including all amendments thereto, with
respect to each Employee Benefit Plan have been made available to Parent and
Acquisition Corp. or their advisors.
(c) To
the
knowledge of the Company, all Employee Benefit Plans are in material compliance
with the applicable requirements of ERISA, the Code and any other applicable
state, federal or foreign law.
(d) There
are
no pending claims or lawsuits that have been asserted or instituted against
any
Employee Benefit Plan, the assets of any of the trusts or funds under the
Employee Benefit Plans, the plan sponsor or the plan administrator of any of
the
Employee Benefit Plans or against any fiduciary of an Employee Benefit Plan
with
respect to the operation of such plan, nor does the Company have any knowledge
of any incident, transaction, occurrence or circumstance that might reasonably
be expected to form the basis of any such claim or lawsuit.
-12-
(e) There
is
no pending or, to the knowledge of the Company, contemplated investigation,
or
pending or possible enforcement action by the Pension Benefit Guaranty
Corporation, the Department of Labor, the Internal Revenue Service or any other
government agency with respect to any Employee Benefit Plan and the Company
has
no knowledge of any incident, transaction, occurrence or circumstance which
might reasonably be expected to trigger such an investigation or enforcement
action.
(f) No
actual
or, to the knowledge of the Company, contingent liability exists with respect
to
the funding of any Employee Benefit Plan or for any other expense or obligation
of any Employee Benefit Plan, except as disclosed on the financial statements
of
the Company, and no contingent liability exists under ERISA with respect to
any
“multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of
ERISA.
(g) No
events
have occurred or are expected to occur with respect to any Employee Benefit
Plan
that would cause a material change in the costs of providing benefits under
such
Employee Benefit Plan or would cause a material change in the cost of providing
for other liabilities of such Employee Benefit Plan.
Section
2.18 Title
to Property and Encumbrances.
The
Company has good, valid and indefeasible marketable title to all properties
and
assets used in the conduct of its business (except for property held under
valid
and subsisting leases that are in full force and effect and which are not in
default) free of all Liens and other encumbrances, except Permitted Liens and
such ordinary and customary imperfections of title, restrictions and
encumbrances as do not, individually or in the aggregate, materially detract
from the value of the property or assets or materially impair the use made
thereof by the Company in its business. Without limiting the generality of
the
foregoing, the Company has good and indefeasible title to all of its properties
and assets reflected in the Balance Sheet, except for property disposed of
in
the usual and ordinary course of business since the Balance Sheet Date and
for
property held under valid and subsisting leases that are in full force and
effect and that are not in default. For purposes of this Agreement,
“Permitted
Liens”
shall
mean (a) Liens for taxes and assessments or governmental charges or levies
not
at the time due or in respect of which the validity thereof shall currently
be
contested in good faith by appropriate proceedings; (b) Liens in respect of
pledges or deposits under workmen’s compensation laws or similar legislation,
carriers’, warehousemen’s, mechanics’, laborers’ and materialmens’ and similar
Liens, if the obligations secured by such Liens are not then delinquent or
are
being contested in good faith by appropriate proceedings and (c) Liens
incidental to the conduct of the business of the Company that were not incurred
in connection with the borrowing of money or the obtaining of advances or
credits and which do not in the aggregate materially detract from the value
of
its property or materially impair the use made thereof by the Company in its
business.
Section
2.19 Condition
of Properties.
All
facilities, machinery, equipment, fixtures and other properties owned, leased
or
used by the Company are in reasonably good operating condition and repair,
subject to ordinary wear and tear, and are adequate and sufficient for the
Company’s business.
-13-
Section
2.20 Insurance
Coverage.
There
is in full force and effect one or more policies of insurance issued by insurers
of recognized responsibility, insuring the Company and its properties, products
and business against such losses and risks, and in such amounts, as are
customary for corporations of established reputation engaged in the same or
similar business and similarly situated. The Company has not been refused any
insurance coverage sought or applied for, and the Company has no reason to
believe that it will be unable to renew its existing insurance coverage as
and
when the same shall expire upon terms at least as favorable to those currently
in effect, other than possible increases in premiums that do not result from
any
act or omission of the Company. No suit, proceeding or action or, to the best
current actual knowledge of the Company, threat of suit, proceeding or action
has been asserted or made against the Company within the last five years due
to
alleged bodily injury, disease, medical condition, death or property damage
arising out of the function or malfunction of a product, procedure or service
designed, manufactured, sold or distributed by the Company.
Section
2.21 Litigation.
There
is no legal action, suit, arbitration or other legal, administrative or other
governmental proceeding pending or, to the best knowledge of the Company,
threatened against or affecting the Company or its properties, assets or
business, and after reasonable investigation, the Company is not aware of any
incident, transaction, occurrence or circumstance that might reasonably be
expected to result in or form the basis for any such action, suit, arbitration
or other proceeding. The Company is not in default with respect to any order,
writ, judgment, injunction, decree, determination or award of any court or
any
governmental agency or instrumentality or arbitration authority.
Section
2.22 Licenses.
The
Company possesses from all appropriate governmental authorities all licenses,
permits, authorizations, approvals, franchises and rights necessary for the
Company to engage in the business currently conducted by it, all of which are
in
full force and effect.
Section
2.23 Interested
Party Transactions.
No
officer, director or stockholder of the Company or any Affiliate or “associate”
(as such term is defined in Rule 405 under the Securities Act) of any such
Person or the Company has or has had, either directly or indirectly, (a) an
interest in any Person that (i) furnishes or sells services or products that
are
furnished or sold or are proposed to be furnished or sold by the Company or
(ii)
purchases from or sells or furnishes to the Company any goods or services,
or
(b) a beneficial interest in any contract or agreement to which the Company
is a
party or by which it may be bound or affected.
Section
2.24 Environmental
Matters.
(a) To
the
knowledge of the Company, the Company has never generated, used, handled,
treated, released, stored or disposed of any Hazardous Materials on any real
property on which it now has or previously had any leasehold or ownership
interest, except in compliance with all applicable Environmental
Laws.
(b) To
the
knowledge of the Company, the historical and present operations of the business
of the Company are in compliance with all applicable Environmental Laws, except
where any non-compliance has not had and would not reasonably be expected to
have a material adverse effect on the Condition of the Company.
-14-
(c) There
are
no material pending or, to the knowledge of the Company, threatened, demands,
claims, information requests or notices of noncompliance or violation against
or
to the Company relating to any Environmental Law; and, to the knowledge of
the
Company, there are no conditions or occurrences on any of the real property
used
by the Company in connection with its business that would reasonably be expected
to lead to any such demands, claims or notices against or to the Company, except
such as have not had, and would not reasonably be expected to have, a material
adverse effect on the Condition of the Company.
(d) To
the
knowledge of the Company, (i) the Company has not sent or disposed of, otherwise
had taken or transported, arranged for the taking or disposal of (on behalf
of
itself, a customer or any other party) or in any other manner participated
or
been involved in the taking of or disposal or release of a Hazardous Material
to
or at a site that is contaminated by any Hazardous Material or that, pursuant
to
any Environmental Law, (A) has been placed on the “National Priorities List”,
the “CERCLIS” list, or any similar state or federal list, or (B) is subject to
or the source of a claim, an administrative order or other request to take
“removal”, “remedial”, “corrective” or any other “response” action, as defined
in any Environmental Law, or to pay for the costs of any such action at the
site; (ii) the Company is not involved in (and has no basis to reasonably expect
to be involved in) any suit or proceeding and has not received (and has no
basis
to reasonably expect to receive) any notice, request for information or other
communication from any governmental authority or other third party with respect
to a release or threatened release of any Hazardous Material or a violation
or
alleged violation of any Environmental Law, and has not received (and has no
basis to reasonably expect to receive) notice of any claims from any Person
relating to property damage, natural resource damage or to personal injuries
from exposure to any Hazardous Material; and (iii) the Company has timely filed
every report required to be filed, acquired all necessary certificates,
approvals and permits, and generated and maintained all required data,
documentation and records under all Environmental Laws, in all such instances
except where the failure to do so would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the Condition
of
the Company.
(e) For
purposes of this Agreement, the following terms shall have the meanings provided
below:
(i) “Environmental
Laws”
shall
mean the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. §§ 9601, et seq.; the Emergency Planning and Community Right-to-Know
Act of 1986, 42 U.S.C. §§ 11001, et seq.; the Resource Conservation and Recovery
Act, 42 U.S.C. §§ 6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. §§
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.
§§ 136, et seq. and comparable state statutes dealing with the registration,
labeling and use of pesticides and herbicides; the Clean Air Act, 42 U.S.C.
§§
7401 et seq.; the Clean Water Act (Federal Water Pollution Control Act), 33
U.S.C. §§ 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f, et seq.;
the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801, et seq.; as any
of the above statutes have been amended as of the date hereof, all rules,
regulations and policies promulgated pursuant to any of the above statutes,
and
any other foreign, federal, state or local law, statute, ordinance, rule,
regulation or policy governing environmental matters, as the same have been
amended as of the date hereof.
-15-
(ii) “Hazardous
Material”
shall
mean any substance or material meeting any one or more of the following
criteria: (a) it is or contains a substance designated as or meeting the
characteristics of a hazardous waste, hazardous substance, hazardous material,
pollutant, contaminant or toxic substance under any Environmental Law; (b)
its
presence at some quantity requires investigation, notification or remediation
under any Environmental Law; or (c) it contains, without limiting the foregoing,
asbestos, polychlorinated biphenyls, petroleum hydrocarbons, petroleum derived
substances or waste, pesticides, herbicides, crude oil or any fraction thereof,
nuclear fuel, natural gas or synthetic gas.
Section
2.25 Questionable
Payments.
Neither
the Company nor any director, officer or, to the best knowledge of the Company,
agent, employee or other Person associated with or acting on behalf of the
Company, has used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payments to government officials or employees
from corporate funds; established or maintained any unlawful or unrecorded
fund
of corporate monies or other assets; made any false or fictitious entries on
the
books of record of any such corporations; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.
Section
2.26 Obligations
to or by Stockholders.
The
Company has no liability or obligation or commitment to any Stockholder or
any
Affiliate or “associate” (as such term is defined in Rule 405 under the
Securities Act) of any Stockholder, nor does any Stockholder or any such
Affiliate or associate have any liability, obligation or commitment to the
Company.
Section
2.27 Duty
to Make Inquiry.
To the
extent that any of the representations or warranties in this Article II are
qualified by “knowledge” or “belief,” the Company represents and warrants that
it has made due and reasonable inquiry and investigation concerning the matters
to which such representations and warranties relate, including, but not limited
to, diligent inquiry of its directors, officers and key personnel.
Section
2.28 Disclosure.
There
is no fact relating to the Company that the Company has not disclosed to Parent
and Acquisition Corp. in writing that has had or is currently having a material
and adverse effect or, insofar as the Company can now foresee, will materially
and adversely affect the Condition of the Company. No representation or warranty
by the Company herein and no information disclosed in the schedules or exhibits
hereto by the Company contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein
or
therein not misleading.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES OF PARENT AND ACQUISITION CORP.
Parent
and Acquisition Corp. represent and warrant to the Company and the Placement
Agent as follows. Notwithstanding anything to the contrary contained herein,
disclosure of items in the Parent SEC Documents (as defined below) shall be
deemed to be disclosure of such items for all purposes under this Agreement,
including, without limitation, for all applicable representations and warranties
of Parent and Acquisition Corp.:
-16-
Section
3.01 Organization
and Standing.
Parent
is a corporation duly organized and existing in good standing under the laws
of
the State of Delaware. Acquisition Corp. is a corporation duly organized and
existing in good standing under the laws of the State of Delaware. Parent and
Acquisition Corp. have heretofore delivered to the Company complete and correct
copies of their respective Certificates of Incorporation and By-laws as now
in
effect. Parent and Acquisition Corp. have full corporate power and authority
to
carry on their respective businesses as they are now being conducted and as
now
proposed to be conducted and to own or lease their respective properties and
assets. Neither Parent nor Acquisition Corp. has any subsidiaries (except
Parent’s ownership of Acquisition Corp.) or direct or indirect interest (by way
of stock ownership or otherwise) in any firm, corporation, limited liability
company, partnership, association or business. Parent owns all of the issued
and
outstanding capital stock of Acquisition Corp. free and clear of all Liens,
and
Acquisition Corp. has no outstanding options, warrants or rights to purchase
capital stock or other securities of Acquisition Corp., other than the capital
stock owned by Parent. Unless the context otherwise requires, all references
in
this Article III to “Parent” shall be treated as being a reference to Parent and
Acquisition Corp. taken together as one enterprise.
Section
3.02 Corporate
Authority.
Each of
Parent and/or Acquisition Corp. (as the case may be) has full corporate power
and authority to enter into the Merger Documents and the other agreements to
be
made pursuant to the Merger Documents, and to carry out the transactions
contemplated hereby and thereby. All corporate acts and proceedings required
for
the authorization, execution, delivery and performance of the Merger Documents
and such other agreements and documents by Parent and/or Acquisition Corp.
(as
the case may be) have been duly and validly taken or will have been so taken
prior to the Closing. Each of the Merger Documents constitutes a legal, valid
and binding obligation of Parent and/or Acquisition Corp. (as the case may
be),
each is enforceable against it and/or them in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency, reorganization
or
other similar laws affecting creditors’ rights generally and by general
principles of equity.
Section
3.03 Broker’s
and Finder’s Fees.
No
Person is entitled by reason of any act or omission of Parent or Acquisition
Corp. to any broker’s or finder’s fees, commission or other similar compensation
with respect to the execution and delivery of this Agreement or the Certificate
of Merger, or with respect to the consummation of the transactions contemplated
hereby or thereby, except as set forth in the Disclosures. Parent and
Acquisition Corp. jointly and severally indemnify and hold the Company harmless
from and against any and all loss, claim or liability arising out of any such
claim from any other Person who claims to have introduced Parent or Acquisition
Corp. to the Company, or assisted either or both of them with the transactions
contemplated by or described herein.
Section
3.04 Capitalization
of Parent.
The
authorized capital stock of Parent consists of (a) 99,000,000 shares of common
stock, par value $0.001 per share (the “Parent
Common Stock”),
of
which not more than 10,545,000 shares will be issued and outstanding immediately
prior to the Effective Time, and (b) 1,000,000 shares of preferred stock, par
value $0.001 per share, none of which will be issued and outstanding immediately
prior to the Effective Time. Parent has no outstanding options, rights or
commitments to issue shares of Parent Common Stock or any other security of
Parent or Acquisition Corp., and there are no outstanding securities convertible
or exercisable into or exchangeable for shares of Parent Common Stock or any
other security of Parent or Acquisition Corp. There is no voting trust,
agreement or arrangement among any of the beneficial holders of Parent Common
Stock affecting the nomination or election of directors or the exercise of
the
voting rights of Parent Common Stock. All outstanding shares of the capital
stock of Parent are validly issued and outstanding, fully paid and
non-assessable, and none of such shares have been issued in violation of the
preemptive rights of any Person.
-17-
Section
3.05 Acquisition
Corp.
Acquisition Corp. is a wholly-owned Delaware subsidiary of Parent that was
formed specifically for the purpose of the Merger and that has not conducted
any
business or acquired any property, and will not conduct any business or acquire
any property prior to the Closing Date, except in preparation for and otherwise
in connection with the transactions contemplated by this Agreement, the
Certificate of Merger and the other agreements to be made pursuant to or in
connection with this Agreement and the Certificate of Merger.
Section
3.06 Validity
of Shares.
The
shares of Parent Common Stock to be issued at the Closing pursuant to Section
1.06(a)(ii) hereof, when issued and delivered in accordance with the terms
hereof and of the Certificate of Merger, shall be duly and validly issued,
fully
paid and non-assessable. Based in part on the representations and warranties
of
the Stockholders as contemplated by Article IV hereof and assuming the accuracy
thereof, the issuance of the Parent Common Stock upon consummation of the Merger
pursuant to Section 1.06(a)(ii) will be exempt from the registration and
prospectus delivery requirements of the Securities Act and from the
qualification or registration requirements of any applicable state “Blue Sky” or
securities laws.
Section
3.07 SEC
Reporting and Compliance.
(a) Parent
filed a registration statement on Form SB-2 under the Securities Act, which
became effective on or about July 31, 2006. Since that date, Parent has timely
filed with the U.S. Securities and Exchange Commission (the “Commission”)
all
registration statements, proxy statements, information statements and reports
required to be filed pursuant to the Securities Exchange Act of 1934, as amended
(the “Exchange
Act”).
Parent has not filed with the Commission a certificate on Form 15 pursuant
to
Rule 12h-3 of the Exchange Act.
(b) Parent
has made available to the Company true and complete copies of the registration
statements, information statements and other reports (collectively, the
“Parent
SEC Documents”)
filed
by Parent with the Commission. None of the Parent SEC Documents, as of their
respective dates, contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements contained
therein not misleading.
(c) Prior
to
and until the Closing, Parent will provide to the Company copies of any and
all
amendments or supplements to the Parent SEC Documents filed with the Commission
and all subsequent registration statements and reports filed by Parent
subsequent to the filing of the Parent SEC Documents with the Commission and
any
and all subsequent information statements, proxy statements, reports or notices
filed by Parent with the Commission or delivered to the stockholders of
Parent.
-18-
(d) Parent
is
not an investment company within the meaning of Section 3 of the Investment
Company Act of 1940, as amended.
(e) Between
the date hereof and the Closing Date, Parent shall continue to satisfy the
filing requirements of the Exchange Act and all other requirements of applicable
securities laws and of the OTC Bulletin Board maintained by the National
Association of Securities Dealers, Inc.
(f) To
the
best knowledge of Parent, Parent has otherwise complied with the Securities
Act,
Exchange Act and all other applicable federal and state securities
laws.
Section
3.08 Financial
Statements.
The
balance sheets and statements of operations, stockholders’ equity and cash flows
contained in the Parent SEC Documents (the “Parent
Financial Statements”)
(i)
have been prepared in accordance with GAAP applied on a basis consistent with
prior periods (and, in the case of unaudited financial information, on a basis
consistent with year-end audits), (ii) are in accordance with the books and
records of Parent, and (iii) present fairly in all material respects the
financial condition of Parent at the dates therein specified and the results
of
its operations and changes in financial position for the periods therein
specified. The financial statements included in Parent’s Form 10-KSB for the
year ended September 30, 2006 were audited by Li & Company, PC, Parent’s
independent registered public accounting firm. The financial information
included in the Quarterly Reports on Form 10-QSB for the quarters ended December
31, 2006 and March 31, 2007 are unaudited, but reflect all adjustments
(including normally recurring accounts) that Parent considers necessary for
a
fair presentation of such information and has been prepared in accordance with
GAAP, consistently applied.
Section
3.09 Governmental
Consents.
All
material consents, approvals, orders, or authorizations of, or registrations,
qualifications, designations, declarations, or filings with any federal or
state
governmental authority on the part of Parent or Acquisition Corp. required
in
connection with the consummation of the Merger shall have been obtained prior
to, and be effective as of, the Closing.
Section
3.10 Compliance
with Laws and Other Instruments.
The
execution, delivery and performance by Parent and/or Acquisition Corp. of this
Agreement, the Certificate of Merger and the other agreements to be made by
Parent or Acquisition Corp. pursuant to or in connection with this Agreement
or
the Certificate of Merger and the consummation by Parent and/or Acquisition
Corp. of the transactions contemplated by the Merger Documents will not cause
Parent and/or Acquisition Corp. to violate or contravene (a) any provision of
law, (b) any rule or regulation of any agency or government, (c) any order,
judgment or decree of any court or (d) any provision of their respective
charters or By-laws as amended and in effect on and as of the Closing Date
and
will not violate or be in conflict with, result in a breach of or constitute
(with or without notice or lapse of time, or both) a default under any material
indenture, loan or credit agreement, deed of trust, mortgage, security agreement
or other agreement or contract to which Parent or Acquisition Corp. is a party
or by which Parent and/or Acquisition Corp. or any of their respective
properties is bound.
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Section
3.11 No
General Solicitation.
In
issuing Parent Common Stock in the Merger hereunder, neither Parent nor anyone
acting on its behalf has offered to sell the Parent Common Stock by any form
of
general solicitation or advertising.
Section
3.12 Binding
Obligations.
The
Merger Documents constitute the legal, valid and binding obligations of Parent
and Acquisition Corp., and are enforceable against Parent and Acquisition Corp.,
in accordance with their respective terms, except as such enforcement is limited
by bankruptcy, insolvency and other similar laws affecting the enforcement
of
creditors’ rights generally and by general principles of equity.
Section
3.13 Absence
of Undisclosed Liabilities.
Neither
Parent nor Acquisition Corp. has any material obligation or liability (whether
accrued, absolute, contingent, liquidated or otherwise, whether due or to become
due), arising out of any transaction entered into at or prior to the Closing,
except (a) as disclosed in the Parent SEC Documents, (b) to the extent set
forth
on or reserved against in the balance sheet of Parent in the most recent Parent
SEC Document filed by Parent (the “Parent
Balance Sheet”)
or the
notes to the Parent Financial Statements, (c) current liabilities incurred
and
obligations under agreements entered into in the usual and ordinary course
of
business since the date of the Parent Balance Sheet (the “Parent
Balance Sheet Date”),
none
of which (individually or in the aggregate) materially and adversely affects
the
condition (financial or otherwise), properties, assets, liabilities, business
operations, results of operations or prospects of Parent or Acquisition Corp.
taken as a whole (the “Condition
of the Parent”)
and
(d) by the specific terms of any written agreement, document or arrangement
attached as an exhibit to the Parent SEC Documents.
Section
3.14 Changes.
Since
the Parent Balance Sheet Date, except as disclosed in the Parent SEC Documents,
Parent has not (a) incurred any debts, obligations or liabilities, absolute,
accrued or, to Parent’s knowledge, contingent, whether due or to become due,
except for current liabilities incurred in the usual and ordinary course of
business, (b) discharged or satisfied any Liens other than those securing,
or
paid any obligation or liability other than, current liabilities shown on the
Parent Balance Sheet and current liabilities incurred since the Parent Balance
Sheet Date, in each case in the usual and ordinary course of business, (c)
mortgaged, pledged or subjected to Lien any of its assets, tangible or
intangible, other than in the usual and ordinary course of business, (d) sold,
transferred or leased any of its assets, except in the usual and ordinary course
of business, (e) cancelled or compromised any debt or claim, or waived or
released any right of material value, (f) suffered any physical damage,
destruction or loss (whether or not covered by insurance) that could reasonably
be expected to have a material adverse effect on the Condition of the Parent,
(g) entered into any transaction other than in the usual and ordinary course
of
business, (h) encountered any labor union difficulties, (i) made or granted
any
wage or salary increase or made any increase in the amounts payable under any
profit sharing, bonus, deferred compensation, severance pay, insurance, pension,
retirement or other employee benefit plan, agreement or arrangement, other
than
in the ordinary course of business consistent with past practice, or entered
into any employment agreement, (j) issued or sold any shares of capital stock,
bonds, notes, debentures or other securities or granted any options (including
employee stock options), warrants or other rights with respect thereto, (k)
declared or paid any dividends on or made any other distributions with respect
to, or purchased or redeemed, any of its outstanding capital stock, (l) suffered
or experienced any change in, or condition affecting, the Condition of the
Parent other than changes, events or conditions in the usual and ordinary course
of its business, none of which (either by itself or in conjunction with all
such
other changes, events and conditions) could reasonably be expected to have
a
material adverse effect on the Condition of the Parent, (m) made any change
in
the accounting principles, methods or practices followed by it or depreciation
or amortization policies or rates theretofore adopted, (n) made or permitted
any
amendment or termination of any material contract, agreement or license to
which
it is a party, (o) suffered any material loss not reflected in the Parent
Balance Sheet or its statement of income for the year ended on the Parent
Balance Sheet Date, (p) paid, or made any accrual or arrangement for payment
of,
bonuses or special compensation of any kind or any severance or termination
pay
to any present or former officer, director, employee, stockholder or consultant,
(q) made or agreed to make any charitable contributions or incurred any
non-business expenses in excess of $5,000 in the aggregate or (r) entered into
any agreement, or otherwise obligated itself, to do any of the
foregoing.
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Section
3.15 Tax
Returns and Audits.
All
required federal, state and local Tax Returns of Parent have been accurately
prepared in all material respects and duly and timely filed, and all federal,
state and local Taxes required to be paid with respect to the periods covered
by
such returns have been paid to the extent that the same are material and have
become due, except where the failure so to file or pay could not reasonably
be
expected to have a material adverse effect upon the Condition of the Parent.
Parent is not and has not been delinquent in the payment of any Tax. Parent
has
not had a Tax deficiency assessed against it. None of Parent’s federal income,
state and local income and franchise tax returns has been audited by any
governmental authority. The reserves for Taxes reflected on the Parent Balance
Sheet are sufficient for the payment of all unpaid Taxes payable by Parent
with
respect to the period ended on the Parent Balance Sheet Date. There are no
federal, state, local or foreign audits, actions, suits, proceedings,
investigations, claims or administrative proceedings relating to Taxes or any
Tax Returns of Parent now pending, and Parent has not received any notice of
any
proposed audits, investigations, claims or administrative proceedings relating
to Taxes or any Tax Returns.
Section
3.16 Employee
Benefit Plans; ERISA.
(a) Except
as
disclosed in the Parent SEC Documents, there are no “employee benefit plans”
(within the meaning of Section 3(3) of ERISA) nor any other employee benefit
or
fringe benefit arrangements, practices, contracts, policies or programs other
than programs merely involving the regular payment of wages, commissions, or
bonuses established, maintained or contributed to by the Parent. Any plans
listed in the Parent SEC Documents are hereinafter referred to as the
“Parent
Employee Benefit Plans.”
(b) Any
current and prior material documents, including all amendments thereto, with
respect to each Parent Employee Benefit Plan have been given to the Company
or
its advisors.
(c) All
Parent Employee Benefit Plans are in material compliance with the applicable
requirements of ERISA, the Code and any other applicable state, federal or
foreign law.
(d) There
are
no pending, or to the knowledge of Parent, threatened, claims or lawsuits which
have been asserted or instituted against any Parent Employee Benefit Plan,
the
assets of any of the trusts or funds under the Parent Employee Benefit Plans,
the plan sponsor or the plan administrator of any of the Parent Employee Benefit
Plans or against any fiduciary of a Parent Employee Benefit Plan with respect
to
the operation of such plan.
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(e) There
is
no pending, or to the knowledge of Parent, threatened, investigation or pending
or possible enforcement action by the Pension Benefit Guaranty Corporation,
the
Department of Labor, the Internal Revenue Service or any other government agency
with respect to any Parent Employee Benefit Plan.
(f) No
actual
or, to the knowledge of Parent, contingent liability exists with respect to
the
funding of any Parent Employee Benefit Plan or for any other expense or
obligation of any Parent Employee Benefit Plan, except as disclosed on the
financial statements of Parent or the Parent SEC Documents, and to the knowledge
of Parent, no contingent liability exists under ERISA with respect to any
“multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of
ERISA.
Section
3.17 Litigation.
There
is no legal action, suit, arbitration or other legal, administrative or other
governmental proceeding pending or, to the knowledge of Parent, threatened
against or affecting Parent or Acquisition Corp. or any of their respective
properties, assets or businesses. To the knowledge of Parent, neither Parent
nor
Acquisition Corp. is in default with respect to any order, writ, judgment,
injunction, decree, determination or award of any court or any governmental
agency or instrumentality or arbitration authority.
Section
3.18 Interested
Party Transactions.
Except
as disclosed in the Parent SEC Documents, no officer, director or stockholder
of
Parent or any Affiliate or “associate” (as such term is defined in Rule 405
under the Securities Act) of any such Person or of Parent has or has had, either
directly or indirectly, (a) an interest in any Person that (i) furnishes or
sells services or products that are furnished or sold or are proposed to be
furnished or sold by Parent or (ii) purchases from or sells or furnishes to
Parent any goods or services, or (b) a beneficial interest in any contract
or
agreement to which Parent is a party or by which it or any of its assets may
be
bound or affected.
Section
3.19 Questionable
Payments.
Neither
Parent, Acquisition Corp. nor, to the knowledge of Parent, any director,
officer, agent, employee or other Person associated with or acting on behalf
of
Parent or Acquisition Corp. has used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payments to government
officials or employees from corporate funds; established or maintained any
unlawful or unrecorded fund of corporate monies or other assets; made any false
or fictitious entries on the books of record of any such corporations; or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
Section
3.20 Obligations
to or by Stockholders.
Except
as disclosed in the Parent SEC Documents, Parent has no liability or obligation
or commitment to any stockholder of Parent or any Affiliate or “associate” (as
such term is defined in Rule 405 under the Securities Act) of any stockholder
of
Parent, nor does any stockholder of Parent or any such Affiliate or associate
have any liability, obligation or commitment to Parent.
-22-
Section
3.21 Assets
and Contracts.
Except
as expressly set forth in this Agreement, the Parent Balance Sheet or the notes
thereto, or the Parent SEC Documents, Parent is not a party to any written
or
oral agreement not made in the ordinary course of business that is material
to
Parent. Parent does not own any real property. Except as expressly set forth
in
this Agreement, the Parent Balance Sheet or the notes thereto, or the Parent
SEC
Documents, Parent is not a party to or otherwise barred by any written or oral
(a) agreement with any labor union, (b) agreement for the purchase of fixed
assets or for the purchase of materials, supplies or equipment in excess of
normal operating requirements, (c) agreement for the employment of any officer,
individual employee or other Person on a full-time basis or any agreement with
any Person for consulting services, (d) bonus, pension, profit sharing,
retirement, stock purchase, stock option, deferred compensation, medical,
hospitalization or life insurance or similar plan, contract or understanding
with respect to any or all of the employees of Parent or any other Person,
(e)
indenture, loan or credit agreement, note agreement, deed of trust, mortgage,
security agreement, promissory note or other agreement or instrument relating
to
or evidencing Indebtedness for Borrowed Money or subjecting any asset or
property of Parent to any Lien or evidencing any Indebtedness, (f) guaranty
of
any Indebtedness, (g) lease or agreement under which Parent is lessee of or
holds or operates any property, real or personal, owned by any other Person,
(h)
lease or agreement under which Parent is lessor or permits any Person to hold
or
operate any property, real or personal, owned or controlled by Parent, (i)
agreement granting any preemptive right, right of first refusal or similar
right
to any Person, (j) agreement or arrangement with any Affiliate or any
“associate” (as such term is defined in Rule 405 under the Securities Act) of
Parent or any present or former officer, director or stockholder of Parent,
(k)
agreement obligating Parent to pay any royalty or similar charge for the use
or
exploitation of any tangible or intangible property, (1) covenant not to compete
or other restriction on its ability to conduct a business or engage in any
other
activity, (m) distributor, dealer, manufacturer’s representative, sales agency,
franchise or advertising contract or commitment, (n) agreement to register
securities under the Securities Act, (o) collective bargaining agreement, or
(p)
agreement or other commitment or arrangement with any Person continuing for
a
period of more than three months from the Closing Date that involves an
expenditure or receipt by Parent in excess of $1,000. Parent maintains no
insurance policies or insurance coverage of any kind with respect to Parent,
its
business, premises, properties, assets, employees and agents. No consent of
any
bank or other depository is required to maintain any bank account, other deposit
relationship or safety deposit box of Parent in effect following the
consummation of the Merger and the transactions contemplated hereby.
Section
3.22 Employees.
Other
than pursuant to ordinary arrangements of employment compensation, Parent is
not
under any obligation or liability to any officer, director, employee or
Affiliate of Parent.
Section
3.23 Disclosure.
There
is no fact relating to Parent that Parent has not disclosed to the Company
in
writing that materially and adversely affects nor, insofar as Parent can now
foresee, will materially and adversely affect, the condition (financial or
otherwise), properties, assets, liabilities, business operations, results of
operations or prospects of Parent. No representation or warranty by Parent
herein and no information disclosed in the schedules or exhibits hereto by
Parent contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein
not
misleading.
-23-
ARTICLE
IV.
ADDITIONAL
REPRESENTATIONS, WARRANTIES AND
COVENANTS
OF THE STOCKHOLDERS
Promptly
after the Effective Time, Parent shall cause to be mailed to each holder of
record of Company Stock that was converted pursuant to Section 1.06 hereof
into
the right to receive Parent Common Stock a letter of transmittal (“Letter
of Transmittal”)
that
shall contain additional representations, warranties and covenants of such
Stockholder, including without limitation, that (i) such Stockholder has full
right, power and authority to deliver such Company Stock and Letter of
Transmittal, (ii) the delivery of such Company Stock will not violate or be
in
conflict with, result in a breach of or constitute a default under, any
indenture, loan or credit agreement, deed of trust, mortgage, security agreement
or other agreement or instrument to which such Stockholder is bound or affected,
(iii) such Stockholder has good, valid and marketable title to all shares of
Company Stock indicated in such Letter of Transmittal and that such Stockholder
is not affected by any voting trust, agreement or arrangement affecting the
voting rights of such Company Stock, (iv) whether such Stockholder is an
“accredited investor,” as such term is defined in Regulation D under the
Securities Act and that such Stockholder is acquiring Parent Common Stock for
investment purposes, and not with a view to selling or otherwise distributing
such Parent Common Stock in violation of the Securities Act or the securities
laws of any state and (v) such Stockholder has had an opportunity to ask and
receive answers to any questions such Stockholder may have had concerning the
terms and conditions of the Merger and the Parent Common Stock and has obtained
any additional information that such Stockholder has requested. Delivery shall
be effected, and risk of loss and title to the Company Stock shall pass, only
upon delivery to Parent (or an agent of Parent) of (x) certificates evidencing
ownership thereof as contemplated by Section 1.07 hereof (or affidavit of lost
certificate), and (y) the Letter of Transmittal containing the representations,
warranties and covenants contemplated by this Article IV.
ARTICLE
V.
CONDUCT
OF BUSINESSES PENDING THE MERGER.
Section
5.01 Conduct
of Business by the Company Pending the Merger.
Prior
to the Effective Time, unless Parent or Acquisition Corp. shall otherwise agree
in writing or as otherwise contemplated by this Agreement:
(a) the
business of the Company shall be conducted only in the ordinary
course;
(b) the
Company shall not (i) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem, purchase or otherwise acquire any shares of its
capital stock; (ii) amend its Certificate of Incorporation or By-laws except
to
effectuate the transactions contemplated in the Disclosures or (iii) split,
combine or reclassify the outstanding Company Stock or declare, set aside or
pay
any dividend payable in cash, stock or property or make any distribution with
respect to any such stock;
(c) the
Company shall not (i) issue or agree to issue any additional shares of, or
options, warrants or rights of any kind to acquire any shares of, Company Stock,
except to issue shares of Company Stock in connection with any matter relating
to the Disclosures (ii) acquire or dispose of any fixed assets or acquire or
dispose of any other substantial assets other than in the ordinary course of
business; (ii) incur additional Indebtedness or any other liabilities or enter
into any other transaction other than in the ordinary course of business; (iv)
enter into any contract, agreement, commitment or arrangement with respect
to
any of the foregoing; or (v) except as contemplated by this Agreement, enter
into any contract, agreement, commitment or arrangement to dissolve, merge,
consolidate or enter into any other material business combination;
-24-
(d) the
Company shall use its best efforts to preserve intact the business organization
of the Company, to keep available the service of its present officers and key
employees, and to preserve the good will of those having business relationships
with it;
(e) the
Company will not, nor will it authorize any director or authorize or permit
any
officer or employee or any attorney, accountant or other representative retained
by it to, make, solicit, encourage any inquiries with respect to, or engage
in
any negotiations concerning, any Acquisition Proposal (as defined below for
purposes of this paragraph). The Company will promptly advise Parent orally
and
in writing of any such inquiries or proposals (or requests for information)
and
the substance thereof. As used in this paragraph, “Acquisition
Proposal”
shall
mean any proposal for a merger or other business combination involving the
Company or for the acquisition of a substantial equity interest in it or any
material assets of it other than as contemplated by this Agreement. The Company
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Person conducted heretofore with respect
to
any of the foregoing; and
(f) the
Company will not enter into any new employment agreements with any of its
officers or employees or grant any increases in the compensation or benefits
of
its officers and employees or amend any employee benefit plan or
arrangement.
Section
5.02 Conduct
of Business by Parent and Acquisition Corp.
Pending
the Merger. Prior to the Effective Time, unless the Company shall otherwise
agree in writing or as otherwise contemplated by this Agreement:
(a) the
business of Parent and Acquisition Corp. shall be conducted only in the ordinary
course; provided,
however,
that
Parent shall take the steps necessary to have discontinued its existing business
without liability to Parent or Acquisition Corp. immediately following the
Effective Time;
(b) neither
Parent nor Acquisition Corp. shall (i) directly or indirectly redeem, purchase
or otherwise acquire or agree to redeem, purchase or otherwise acquire any
shares of its capital stock; (ii) amend its charter or by-laws other than to
effectuate the transactions contemplated hereby; or (iii) split, combine or
reclassify its capital stock or declare, set aside or pay any dividend payable
in cash, stock or property or make any distribution with respect to such stock;
(c) neither
Parent nor Acquisition Corp. shall (i) issue or agree to issue any additional
shares of, or options, warrants or rights of any kind to acquire shares of,
its
capital stock; (ii) acquire or dispose of any assets other than in the ordinary
course of business (except for dispositions in connection with Section 5.02(a)
hereof); (iii) incur additional Indebtedness or any other liabilities or enter
into any other transaction except in the ordinary course of business; (iv)
enter
into any contract, agreement, commitment or arrangement with respect to any
of
the foregoing or (v) except as contemplated by this Agreement, enter into any
contract, agreement, commitment or arrangement to dissolve, merge, consolidate
or enter into any other material business contract or enter into any
negotiations in connection therewith;
-25-
(d) neither
the Parent nor Acquisition Corp. will, nor will they authorize any director
or
authorize or permit any officer or employee or any attorney, accountant or
other
representative retained by them to, make, solicit, encourage any inquiries
with
respect to, or engage in any negotiations concerning, any Acquisition Proposal
(as defined below for purposes of this paragraph). Parent will promptly advise
the Company orally and in writing of any such inquiries or proposals (or
requests for information) and the substance thereof. As used in this paragraph,
“Acquisition
Proposal”
shall
mean any proposal for a merger or other business combination involving the
Parent or Acquisition Corp. or for the acquisition of a substantial equity
interest in either of them or any material assets of either of them other than
as contemplated by this Agreement. Parent will immediately cease and cause
to be
terminated any existing activities, discussions or negotiations with any Person
conducted heretofore with respect to any of the foregoing; and
(e) neither
Parent nor Acquisition Corp. will enter into any new employment agreements
with
any of their officers or employees or grant any increases in the compensation
or
benefits of their officers and employees.
ARTICLE
VI.
ADDITIONAL
AGREEMENTS
Section
6.01 Access
and Information.
The
Company, on the one hand, and Parent and Acquisition Corp., on the other hand,
shall each afford to the other and to the other’s accountants, counsel and other
representatives full access during normal business hours throughout the period
prior to the Effective Time to all of its properties, books, contracts,
commitments and records (including but not limited to tax returns) and during
such period, each shall furnish promptly to the other all information concerning
its business, properties and personnel as such other party may reasonably
request, provided that no investigation pursuant to this Section 6.01 shall
affect any representations or warranties made herein. Each party shall hold,
and
shall cause its employees and agents to hold, in confidence all such information
(other than such information that (a) is already in such party’s possession or
(b) becomes generally available to the public other than as a result of a
disclosure by such party or its directors, officers, managers, employees, agents
or advisors, or (c) becomes available to such party on a non-confidential basis
from a source other than a party hereto or its advisors, provided that such
source is not known by such party to be bound by a confidentiality agreement
with or other obligation of secrecy to a party hereto or another party until
such time as such information is otherwise publicly available; provided,
however,
that
(i) any such information may be disclosed to such party’s directors, officers,
employees and representatives of such party’s advisors who need to know such
information for the purpose of evaluating the transactions contemplated hereby
(it being understood that such directors, officers, employees and
representatives shall be informed by such party of the confidential nature
of
such information), (ii) any disclosure of such information may be made as to
which the party hereto furnishing such information has consented in writing,
and
(iii) any such information may be disclosed pursuant to a judicial,
administrative or governmental order or request; provided,
however,
that
the requested party will promptly so notify the other party so that the other
party may seek a protective order or appropriate remedy and/or waive compliance
with this Agreement and if such protective order or other remedy is not obtained
or the other party waives compliance with this provision, the requested party
will furnish only that portion of such information that is legally required
and
will exercise its best efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the information
furnished. If this Agreement is terminated, each party will deliver to the
other
all documents and other materials (including copies) obtained by such party
or
on its behalf from the other party as a result of this Agreement or in
connection herewith, whether so obtained before or after the execution
hereof.
-26-
Section
6.02 Additional
Agreements.
Subject
to the terms and conditions herein provided, each of the parties hereto agrees
to use its commercially reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including using its commercially
reasonable efforts to satisfy the conditions precedent to the obligations of
any
of the parties hereto, to obtain all necessary waivers, and to lift any
injunction or other legal bar to the Merger (and, in such case, to proceed
with
the Merger as expeditiously as possible). In order to obtain any necessary
governmental or regulatory action or non-action, waiver, consent, extension
or
approval, each of Parent, Acquisition Corp. and the Company agrees to take
all
reasonable actions and to enter into all reasonable agreements as may be
necessary to obtain timely governmental or regulatory approvals and to take
such
further action in connection therewith as may be necessary. In case at any
time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and/or directors of
Parent, Acquisition Corp. and the Company shall take all such necessary
action.
Section
6.03 Publicity.
No
party shall issue any press release or public announcement pertaining to the
Merger that has not been agreed upon in advance by Parent and the Company,
except as Parent reasonably determines to be necessary in order to comply with
the rules of the Commission or of the principal trading exchange or market
for
the Parent Common Stock, provided, that in such case Parent will use its best
efforts to allow the Company to review and reasonably approve any such press
release or public announcement prior to its release.
Section
6.04 Appointment
of Directors and Officers.
Immediately at the Effective Time, Parent shall accept the resignations of
the
current officers and directors of Parent, and shall cause the persons listed
as
directors in Exhibit
D
hereto
to be elected to the Board of Directors of Parent. At the first annual meeting
of Parent stockholders and thereafter, the election of members of Parent’s Board
of Directors shall be accomplished in accordance with the By-laws of Parent
and
the rules of the Commission.
Section
6.05 Parent
Name Change and Exchange Listing.
At the
Effective Time, Parent shall take all required legal actions to change its
corporate name to “RxElite Inc.” Promptly following the Effective Time, Parent
shall take all required actions, upon satisfaction of the original listing
requirements, to list the Parent Common Stock for trading on the American Stock
Exchange or the NASDAQ Stock Market.
-27-
Section
6.06 Assumption
of Agreements.
At the
Effective Time, Parent shall affirmatively assume any all liabilities and
obligations of the Company with respect to the Private Placement and the
Merger.
Section
6.07 Resale
Registration Statement.
Parent
shall execute the registration rights agreement in the form annexed to hereto
as
Exhibit
F.
Section
6.08 Stock
Dividend.
As soon
as practicable following the Effective Time, Parent shall declare a stock
dividend of 10.036789 shares for each outstanding share of Parent Common
Stock.
ARTICLE
VII.
CONDITIONS
TO PARTIES’ OBLIGATIONS
Section
7.01 Conditions
to Parent and Acquisition Corp. Obligations.
The
obligations of Parent and Acquisition Corp. under this Agreement and the
Certificate of Merger are subject to the fulfillment, at or prior to the
Closing, of the following conditions, any of which may be waived in whole or
in
part by Parent.
(a) The
representations and warranties of the Company under this Agreement shall be
deemed to have been made again on the Closing Date and shall then be true and
correct in all material respects.
(b) The
Company shall have performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed or complied
with by it on or before the Closing Date.
(c) There
shall not exist on the Closing Date any Default or Event of Default or any
event
or condition that, with the giving of notice or lapse of time or both, would
constitute a Default or Event of Default and, since the Balance Sheet Date,
there shall have been no material adverse change in the Condition of the
Company. For purposes of this Agreement, “Default”
shall
mean a default or failure in the due observance or performance of any covenant,
condition or agreement on the part of a party to be observed or performed under
the terms of this Agreement or the Certificate of Merger, if such default or
failure in performance shall remain un-remedied for five (5) days. Furthermore,
for purposes of this Agreement, “Event
of Default”
shall
mean (i) the failure of the Company to pay any Indebtedness for Borrowed Money,
or any interest or premium thereon, within five (5) days after the same shall
become due, whether such Indebtedness shall become due by scheduled maturity,
by
required prepayment, by acceleration, by demand or otherwise, (ii) an event
of
default under any agreement or instrument evidencing or securing or relating
to
any such Indebtedness or (iii) the failure of the Company to perform or observe
any material term, covenant, agreement or condition on its part to be performed
or observed under any agreement or instrument evidencing or securing or relating
to any such Indebtedness when such term, covenant or agreement is required
to be
performed or observed.
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(d) No
action
or proceeding before any court, governmental body or agency shall have been
threatened, asserted or instituted to restrain or prohibit, or to obtain
substantial damages in respect of, this Agreement or the Certificate of Merger
or the carrying out of the transactions contemplated by the Merger
Documents.
(e) Parent
and Acquisition Corp. shall have received the following:
(i) Copies
of
resolutions of the Board of Directors and the Stockholders of the Company,
certified by the Secretary of the Company, authorizing and approving the
execution, delivery and performance of the Merger Documents and all other
documents and instruments to be delivered pursuant hereto and
thereto.
(ii) A
certificate of incumbency executed by the Secretary of the Company certifying
the names, titles and signatures of the officers authorized to execute any
documents referred to in this Agreement and further certifying that the
Certificate of Incorporation and By-laws of the Company delivered to Parent
and
Acquisition Corp. at the time of the execution of this Agreement have been
validly adopted and have not been amended or modified.
(iii) A
certificate, dated the Closing Date, executed by the President and Chief
Executive Officer of the Company certifying that the undersigned officers have
no knowledge of any plan to issue any securities of the Company, and the Company
has not entered into any agreement, written or oral, to issue any securities
of
the Company except as described in the Disclosures or this
Agreement.
(iv) Evidence
as of a recent date of the good standing and corporate existence of the Company
issued by the Secretary of State of the State of Delaware and evidence that
the
Company is qualified to transact business as a foreign corporation and is in
good standing in each state of the United States and in each other jurisdiction
where the character of the property owned or leased by it or the nature of
its
activities makes such qualification necessary.
(v) Such
additional supporting documentation and other information with respect to the
transactions contemplated hereby as Parent and Acquisition Corp. may reasonably
request.
(f) All
corporate and other proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates, opinions, agreements,
instruments and documents mentioned herein or incident to any such transactions
shall be reasonably satisfactory in form and substance to Parent and Acquisition
Corp. The Company shall furnish to Parent and Acquisition Corp. such supporting
documentation and evidence of the satisfaction of any or all of the conditions
precedent specified in this Section 7.01 as Parent or its counsel may reasonably
request.
Section
7.02 Conditions
to the Company’s Obligations.
The
obligations of the Company under this Agreement and the Certificate of Merger
are subject to the fulfillment, at or prior to the Closing, of the following
conditions, any of which may be waived in whole or in part by the
Company:
(a) The
representations and warranties of Parent and Acquisition Corp. under this
Agreement shall be deemed to have been made again on the Closing Date and shall
then be true and correct in all material respects.
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(b) Parent
and Acquisition Corp. shall have performed and complied in all material respects
with all agreements and conditions required by this Agreement and the
Certificate of Merger to be performed or complied with by them on or before
the
Closing Date.
(c) There
shall not exist on the Closing Date any Default or Event of Default or any
event
or condition that, with the giving of notice or lapse of time or both, would
constitute a Default or Event of Default and, since the Parent Balance Sheet
Date, there shall have been no material adverse change in the Condition of
the
Parent.
(d) The
Company shall have received the following:
(i) Copies
of
resolutions of Parent’s and Acquisition Corp.’s respective boards of directors
and the sole stockholder of Acquisition Corp., certified by their respective
Secretaries, authorizing and approving, to the extent applicable, the execution,
delivery and performance of this Agreement, the Certificate of Merger and all
other documents and instruments to be delivered by them pursuant hereto and
thereto.
(ii) A
certificate of incumbency executed by the respective Secretaries of Parent
and
Acquisition Corp. certifying the names, titles and signatures of the officers
authorized to execute the documents referred to in this Agreement and further
certifying that the Certificates of Incorporation and By-laws of Parent and
Acquisition Corp. appended thereto have not been amended or
modified.
(iii) A
certificate, dated the Closing Date, executed by the President and Chief
Financial Officer of each of the Parent and Acquisition Corp., certifying that
(a) except for the filing of the Certificate of Merger, all consents,
authorizations, orders and approvals of, and filings and registrations with,
any
court, governmental body or instrumentality that are required for the execution
and delivery of this Agreement and the Certificate of Merger and the
consummation of the Merger shall have been duly made or obtained, and all
material consents by third parties required for the Merger have been obtained
and (b) no action or proceeding before any court, governmental body or agency
has been threatened, asserted or instituted to restrain or prohibit, or to
obtain substantial damages in respect of, this Agreement or the Certificate
of
Merger or the carrying out of the transactions contemplated by any of the Merger
Documents.
(iv) A
certificate of Island Stock Transfer, Parent’s transfer agent and registrar,
certifying, as of the business day prior to the Closing Date, a true and
complete list of the names and addresses of the record owners of all of the
outstanding shares of Parent Common Stock, together with the number of shares
of
Parent Common Stock held by each record owner and the total number of shares
of
Parent Common Stock then outstanding.
(v) The
executed resignations of all directors and officers of Parent, with the director
resignations to take effect at the Closing Date.
-30-
(vi) Evidence
as of a recent date and within five (5) days of the Effective Date of the good
standing and corporate existence of each of Parent and Acquisition Corp. issued
by the Secretary of State of the State of Delaware and evidence that Parent
and
Acquisition Corp. are qualified to transact business as foreign corporations
and
are in good standing in each state of the United States and in each other
jurisdiction where the character of the property owned or leased by them or
the
nature of their activities makes such qualification necessary.
(vii) Such
additional supporting documentation and other information with respect to the
transactions contemplated hereby as the Company may reasonably
request.
(e) All
corporate and other proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates, opinions, agreements,
instruments and documents mentioned herein or incident to any such transactions
shall be satisfactory in form and substance to the Company. Parent and
Acquisition Corp. shall furnish to the Company such supporting documentation
and
evidence of satisfaction of any or all of the conditions specified in this
Section 7.02 as the Company may reasonably request.
(f) No
action
or proceeding before any court, governmental body or agency shall have been
threatened, asserted or instituted to restrain or prohibit, or to obtain
substantial damages in respect of, this Agreement or the Certificate of Merger
or the carrying out of the transactions contemplated by the Merger
Documents.
ARTICLE
VIII.
NON-SURVIVAL
OF REPRESENTATIONS AND WARRANTIES
The
representations and warranties of the parties made in Articles II and III of
this Agreement (including the Schedules to this Agreement, which are hereby
incorporated by reference) shall not survive beyond the Effective Time. This
Article VIII shall not limit any claim in any way based upon any certificate,
opinion, covenant, or agreement which by its terms is relied upon by a party
or
contemplates performance after the Effective Time or pursuant to any other
certificate, statement or agreement or any claim for fraud.
ARTICLE
IX.
TERMINATION
PRIOR TO CLOSING
Section
9.01 Termination
of Agreement.
This
Agreement may be terminated at any time prior to the Closing:
(a) By
the
mutual written consent of the Company, Acquisition Corp. and
Parent;
(b) By
the
Company, if Parent or Acquisition Corp. (i) fails to perform in any material
respect any of its agreements contained herein required to be performed by
it on
or prior to the Closing Date, or (ii) materially breach any of their
representations, warranties or covenants contained herein, which failure or
breach is not cured within thirty (30) days after the Company has notified
Parent and Acquisition Corp. of its intent to terminate this Agreement pursuant
to this paragraph (b);
-31-
(c) By
Parent
and Acquisition Corp. if the Company (i) fails to perform in any material
respect any of its agreements contained herein required to be performed by
it on
or prior to the Closing Date or (ii) materially breaches any of its
representations, warranties or covenants contained herein, which failure or
breach is not cured within thirty (30) days after Parent or Acquisition Corp.
has notified the Company of its intent to terminate this Agreement pursuant
to
this paragraph (c);
(d) By
either
the Company, on the one hand, or Parent and Acquisition Corp., on the other
hand, if there shall be any order, writ, injunction or decree of any court
or
governmental or regulatory agency binding on Parent, Acquisition Corp. or the
Company that prohibits or materially restrains any of them from consummating
the
transactions contemplated hereby, provided that the parties hereto shall have
used their best efforts to have any such order, writ, injunction or decree
lifted and the same shall not have been lifted within ninety (90) days after
entry by any such court or governmental or regulatory agency; or
(e) By
either
the Company, on the one hand, or Parent and Acquisition Corp., on the other
hand, if the Closing has not occurred on or prior to July 31, 2007 for any
reason other than delay or nonperformance of the party seeking such
termination.
Section
9.02 Termination
of Obligations.
Termination of this Agreement pursuant to this Article IX shall terminate all
obligations of the parties hereunder, except for the obligations under Sections
6.1, 10.03 and 10.11; provided, however, that termination pursuant to paragraphs
(b) or (c) of Section 9.01 shall not relieve the defaulting or breaching party
or parties from any liability to the other parties hereto.
ARTICLE
X.
MISCELLANEOUS
Section
10.01 Notices.
Any
notice, request or other communication hereunder shall be given in writing
and
shall be served either personally, by overnight delivery or delivered by mail,
certified return receipt and addressed to the following addresses:
| (a) |
If
to Parent or Acquisition Corp.:
0000
Xxxxxxxxx Xxxx
Xxxxxxxx
Xxxx, Xxxxxxxx 00000
Attention:
Xxxxxx Xxxxx
With
a copy to:
Xxxx
X. Xxxxx, Esq.
Xxxx
X. Xxxxx, P.C.
000
Xxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
|
| (b) |
If
to the Company:
RxElite
Holdings, Inc.
0000
X. Xxxx Xxxxxx, Xxx 000
Xxxxxxxx,
Xxxxx 00000
Attention:
Xxxxxx Xxxx
|
-32-
|
With
a copy to:
Xxxxxxxx
& Xxxxxxxx LLP
00000
Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxx
Xxxxx, Xxxxxxxxxx 00000
Attention:
Xxx xx Xxxxx, Esq.
and
Xxxxxx
and Xxxxx, LLP
000
Xxxx 00xx Xxxxxx
Xxxxx
0000
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx X. Xxxxxx, Esq.
|
Notices
shall be deemed received at the earlier of actual receipt or three (3) business
days following mailing. Counsel for a party (or any authorized representative)
shall have authority to accept delivery of any notice on behalf of such
party.
Section
10.02 Entire
Agreement.
This
Agreement, including the schedules and exhibits attached hereto and other
documents referred to herein, contains the entire understanding of the parties
hereto with respect to the subject matter hereof. This Agreement supersedes
all
prior agreements and undertakings between the parties with respect to such
subject matter.
Section
10.03 Expenses.
Each
party shall bear and pay all of the legal, accounting and other expenses
incurred by it in connection with the transactions contemplated by this
Agreement.
Section
10.04 Time.
Time is
of the essence in the performance of the parties’ respective obligations herein
contained.
Section
10.05 Severability.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any
other jurisdiction.
Section
10.06 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns and heirs; provided, however, that
neither party shall directly or indirectly transfer or assign any of its rights
hereunder in whole or in part without the written consent of the others, which
may be withheld in its sole discretion, and any such transfer or assignment
without said consent shall be void.
-33-
Section
10.07 No
Third Parties Benefited.
This
Agreement is made and entered into for the sole protection and benefit of the
parties hereto, their successors, assigns and heirs, and no other Person shall
have any right or action under this Agreement.
Section
10.08 Counterparts.
This
Agreement may be executed in one or more counterparts, with the same effect
as
if all parties had signed the same document. Each such counterpart shall be
an
original, but all such counterparts together shall constitute a single
agreement.
Section
10.09 Recitals,
Schedules and Exhibits.
The
Recitals, Schedules and Exhibits to this Agreement are incorporated herein
and,
by this reference, made a part hereof as if fully set forth herein.
Section
10.10 Section
Headings and Gender.
The
Section headings used herein are inserted for reference purposes only and shall
not in any way affect the meaning or interpretation of this Agreement. All
personal pronouns used in this Agreement shall include the other genders,
whether used in the masculine, feminine or neuter gender, and the singular
shall
include the plural, and vice versa, whenever and as often as may be
appropriate.
Section
10.11 Governing
Law.
This
Agreement shall be governed by and construed and enforced in accordance with
the
internal laws of the State of New York without regard to principles of conflicts
of laws, except that the applicable terms of Section 1 shall be governed by
the
DGCL.
[Signature
Page Follows]
-34-
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement to be binding
and effective as of the day and year first above written.
|
PARENT:
|
||
| |
|
|
| By: | /s/ Xxxxxx Xxxxx | |
|
Name:
Xxxxxx Xxxxx
Title:
President
|
||
|
ACQUISITION
CORP:
RXELITE
ACQUISITION CORP.
|
||
| |
|
|
| By: | /s/ Xxxxxx Xxxxx | |
|
Name:
Xxxxxx Xxxxx
Title:
President
|
||
|
THE
COMPANY:
RXELITE
HOLDINGS INC.
|
||
| |
|
|
| By: | /s/ Xxxxxx Xxxx | |
|
Name:
Xxxxxx Xxxx
Title:
Chief Executive Officer
|
||
[SIGNATURE
PAGE TO AGREEMENT OF MERGER AND PLAN OF REORGANIZATION]
