EXHIBIT 2.1
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EXHIBIT C
MERGER AGREEMENT
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AGREEMENT AND PLAN OF MERGER
by and
among
Pacific Fuel Cell Corp.
a Nevada corporation,
PFCE Acquisition Corp.,
a Nevada corporation
and
Cellfoods Corporation,
a Nevada corporation
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LIST OF SCHEDULES AND EXHIBITS
TO
AGREEMENT AND PLAN OF MERGER
SCHEDULES
Company Disclosure Schedule
Schedule 4.2(d) PRCO Financial Statements
Schedule 4.2(i) PRCO Legal Proceedings
Schedule 4.2(g) PRCO Liabilities
Schedule 4.2(m) PRCO Absence of Certain Changes or Events
Schedule 4.2(n) PRCO Compliance with Law
EXHIBITS
Exhibit 2.2(a) Escrow Agreement
Exhibit 6.1(a) Company Certified Resolutions
Exhibit 6.1(b) Opinion of Counsel to the Company
Exhibit 6.1(c) Opinion of Special Securities Counsel to Company
re Rule 504
Exhibit 6.1(d) Company's Instruction Letter to Transfer Agent
Exhibit 6.1(e) Acquisition Certified Resolutions
Exhibit 6.1(f) Company Officer's Certificate
Exhibit 6.1(h) Acquisition Officer's Certificate
Exhibit 6.2(a) PRCO Certified Resolutions
Exhibit 6.2(b) Opinion of PRCO counsel
Exhibit 6.2(c) Opinion of Special Securities Counsel to PRCO re Rule
504
Exhibit 6.2(e) PRCO Officer's Certificate
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AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 14, 2004,
by and among Pacific Fuel Cell Corp., a Nevada corporation (the "Company"), PFCE
Acquisition Corp., a Nevada corporation ("Acquisition") and Cellfoods
Corporation, a Nevada corporation ("PRCO").
RECITALS
WHEREAS, the Company and PRCO desire to merge Acquisition with and into
PRCO whereby PRCO shall be the surviving entity pursuant to the terms and
conditions set forth herein and whereby the transaction is intended to qualify
as a tax free reorganization pursuant to Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "IRC"), to the extent permitted by applicable law;
WHEREAS, in furtherance of such combination, the Boards of Directors of the
Company, Acquisition and PRCO have each approved the merger of Acquisition with
and into PRCO (the "Merger"), upon the terms and subject to the conditions set
forth herein, in accordance with the applicable provisions of the Nevada General
Corporation Law (the "NGCL").
WHEREAS, the stockholder of PRCO desires to exchange all of its shares of
the capital stock of PRCO (the "PRCO Capital Stock") for shares of the capital
stock of the Company (the "Company Capital Stock") as a tax free reorganization
pursuant to Section 368(a) of the IRC, to the extent permitted by applicable
law;
WHERAS, just prior to the Merger, PRCO's 1% Convertible Debentures Due May
13, 2009 in the aggregate principal amount of Nine Hundred Ninety Seven Thousand
Dollars ($997,000) (the "PRCO First Debenture") and PRCO's 1% Convertible
Debenture Due May 13, 2009 in the principal amount of Three Thousand Dollars
($3,000) (the "PRCO Second Debenture" and, together with the PRCO First
Debenture, the "PRCO Debentures") are convertible into shares of PRCO common
stock, par value $.001 (the "PRCO Common Stock"), pursuant to the terms of the
PRCO Debentures and the Purchase Agreement (as defined below) and upon the
consummation of the Merger will be convertible into an equivalent number of
shares of the Company's common stock, par value $0.001 per share (the "Company
Common Stock") (the "Company Underlying Shares");
WHEREAS, upon the effectiveness of the Merger and pursuant to the terms of
this Agreement and the Purchase Agreement, the Company Underlying Shares will be
substituted for the PRCO Underlying Shares, the Company will assume the
obligations, jointly and severally, with PRCO under the PRCO Debentures and the
Company will assume the obligations of PRCO under that certain Convertible
Debenture Purchase Agreement dated even date herewith between PRCO and HEM
Mutual Assurance LLC ("HEM") (the "Purchase Agreement") and PRCO will be
released from certain of such obligations; and
WHEREAS, all defined terms used herein and not otherwise defined herein
shall have the meanings ascribed to such terms in the Purchase Agreement.
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NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as hereinafter defined) and subject
to and upon the terms and conditions of this Agreement and the NGCL, Acquisition
shall be merged with and into PRCO pursuant to the Merger. Following the Merger,
PRCO shall continue as the surviving corporation (the "Surviving Corporation")
and the separate corporate existence of Acquisition shall cease. As part of the
Merger and as more fully described in Section 2.1, (i) the One Thousand (1,000)
issued and outstanding shares of the PRCO Common Stock shall be exchanged for
Company Common Stock at the Exchange Ratio (as defined below) and (ii) each
share of Acquisition's issued and outstanding shares of common stock, par value
$.001 per share (the "Acquisition Common Stock"), shall be converted into one
validly issued, fully paid and non-assessable share of common stock, par value
$.001, of the Surviving Corporation (the "Surviving Corporation Common Stock").
1.2 Effective Time. The Merger shall be consummated as promptly as
practicable after satisfaction of all conditions to the Merger set forth herein,
by filing with the Secretary of State of the State of Nevada a certificate of
merger or similar document (the "Certificate of Merger"), and all other
appropriate documents, executed in accordance with the relevant provisions of
the NGCL. The Merger shall become effective upon the filing of the Certificate
of Merger with the Secretary of State of Nevada. The time of such filing shall
be referred to herein as the "Effective Time."
1.3 Effects of the Merger. At the Effective Time, all the rights,
privileges, immunities, powers and franchises of Acquisition and PRCO and all
property, real, personal and mixed, and every other interest of, or belonging to
or due to each of Acquisition and PRCO shall vest in the Surviving Corporation,
and all debts, liabilities, obligations and duties of Acquisition and PRCO,
including, without limitation, the performance of all obligations and duties of
PRCO pursuant to the Purchase Agreement, the PRCO Debentures and the exhibits,
schedules and all documents executed in connection therewith or any other
Transaction Document (as defined in the Purchase Agreement), shall become the
debts, liabilities, obligations and duties of the Surviving Corporation (except
as assumed by the Company) without further act or deed, all in the manner and to
the full extent provided by the NGCL. Whenever a conveyance, assignment,
transfer, deed or other instrument or act is necessary to vest any property or
right in the Surviving Corporation, the directors and officers of the respective
constituent corporations shall execute, acknowledge and deliver such instruments
and perform such acts, for which purpose the separate existence of the
constituent corporations and the authority of their respective directors and
officers shall continue, notwithstanding the Merger.
1.4 Certificate of Incorporation. The Certificate of Incorporation of PRCO,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the
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Surviving Corporation and thereafter may be amended or repealed in accordance
with its terms and applicable law.
1.5 By-Laws. At the Effective Time and without any further action on the
part of Acquisition and PRCO, the By-laws of PRCO shall be the By-laws of the
Surviving Corporation and thereafter may be amended or repealed in accordance
with their terms or the Certificate of Incorporation of the Surviving
Corporation and as provided by law.
1.6 Directors. The directors of Acquisition at the Effective Time shall be
the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
1.7 Officers. The officers of Acquisition at the Effective Time shall be
the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly appointed
and qualified, as the case may be.
1.8 Tax-Free Reorganization. The parties intend that the Merger shall be
treated as a tax-free reorganization pursuant to Section 368(a) of the IRC, to
the extent permitted by applicable law.
ARTICLE II
CONVERSION OF PRCO SHARES AND ASSUMPTION OF PRCO DEBENTURES
2.1 Conversion and Cancellation of PRCO Common Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the Company,
Acquisition or PRCO or the holders of any shares of the capital stock of
Acquisition or PRCO:
(a) Subject to the provisions of Sections 2.4 and 2.5, each share of
PRCO Common Stock (the "PRCO Common Stock Shares") issued and outstanding
immediately prior to the Effective Time (other than shares canceled in
accordance with Section 2.1(b) and other than with respect to the escrow shares
deposited by PRCO with the Escrow Agent (as defined below) in accordance with
the Purchase Agreement (the "PRCO Escrow Shares") which shall be automatically
cancelled and replaced with an equal number of Company Escrow Shares in
accordance with Section 2.2, shall be converted into 0.01 (the "Exchange Ratio")
of a validly issued, fully paid and nonassessable share of Company Common Stock
(the "Company Common Stock Shares"). As of the Effective Time, each PRCO Common
Stock Share shall no longer be outstanding and shall automatically be canceled
and cease to exist, and each holder of a certificate representing any PRCO
Common Stock Share shall cease to have any rights with respect thereto other
than the right to receive Company Common Stock Shares to be issued in
consideration therefor upon the surrender of such certificate, properly endorsed
to the Company.
(b) Each share of PRCO Capital Stock held in the treasury of the PRCO
and each share of PRCO Capital Stock owned by Acquisition or Company shall be
canceled without any conversion thereof and no payment, distribution or other
consideration shall be made with respect thereto.
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(c) Each issued and outstanding share of Acquisition Common Stock
shall be converted into one validly issued, fully paid and nonassessable share
of Surviving Corporation Common Stock.
2.2 Escrow Materials. (a) At the Post-Closing, the Company shall deposit
into escrow with Gottbetter & Partners, LLP, as escrow agent (the "Escrow
Agent") the following, which are hereinafter collectively referred to as the
"Escrow Materials," (i) the escrow agreement annexed hereto and made a part
hereof as Exhibit 2.2(a) (the "Escrow Agreement"), (ii) certificates
representing Thirty Million (30,000,000) shares of duly issued Company Common
Stock, without restriction and freely tradable pursuant to Rule 504 of
Regulation D of the Securities Act (the "Company Escrow Shares"), in share
denominations specified by the Purchaser, registered in the name of the
Purchaser and/or its assigns; and (iii) a power of attorney with respect to the
Company Underlying Shares and the Company Escrow Shares, in the form annexed to
the Escrow Agreement as Appendix I. At the Post-Closing, upon the Company
fulfilling its obligations under this Section 2.2, Escrow Agent shall release to
the Company the PRCO Escrow Shares cancelled in accordance with Section 2.1. The
Escrow Materials shall be held in escrow in accordance with the Escrow
Agreement. The Escrow Materials shall be released from escrow only in accordance
with this Section 2.2, the Purchase Agreement the PRCO Debentures and the Escrow
Agreement.
(b) Upon the effectiveness of the Merger and in accordance with
Section 2.7 hereof, the Company shall substitute the Company Underlying Shares
and the Company Escrow Shares for the PRCO Underlying Shares and the PRCO Escrow
Shares with regard to all of the rights and obligations, specifically including
the conversion rights, under the PRCO Debentures, and the PRCO Escrow Shares
shall be cancelled.
2.3 [Intentionally left blank].
2.4 Adjustment of the Exchange Ratio. In the event that, prior to the
Effective Time, any stock split, combination, reclassification or stock dividend
with respect to the Company Common Stock or PRCO Common Stock, any change or
conversion of Company Common Stock or PRCO Common Stock or into other securities
or any other dividend or distribution with respect to the Company Common Stock
or PRCO Common Stock (other than regular quarterly dividends) should occur or,
if a record date with respect to any of the foregoing should occur, appropriate
and proportionate adjustments shall be made to the Exchange Ratio, and
thereafter all references to an Exchange Ratio shall be deemed to be to such
Exchange Ratio as so adjusted.
2.5 No Fractional Shares. No certificates or scrip representing fractional
shares of Company Common Stock shall be issued upon the surrender for exchange
of certificates and such fractional share shall not entitle the record or
beneficial owner thereof to vote or to any other rights as a stockholder of the
Company. The number of shares of Company Common Stock to be issued shall be
rounded up to the nearest whole share.
2.6 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances
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or any other acts or things are necessary, desirable or proper (a) to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation, its
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of either PRCO or Acquisition or (b) otherwise
to carry out the purposes of this Agreement, the Surviving Corporation and its
proper officers and directors or their designees shall be authorized (to the
fullest extent allowed under applicable law) to execute and deliver, in the name
and on behalf of either PRCO or Acquisition , all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of PRCO or
Acquisition, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of PRCO or
Acquisition, as applicable, and otherwise to carry out the purposes of this
Agreement.
2.7 PRCO Debentures. (a) As of the Effective Time, the Company assumes,
jointly and severally with PRCO, all of the obligations and responsibilities
under the PRCO Debentures to the holder or holders of the PRCO Debentures. With
respect to the PRCO Debentures, at the Effective Time, the Company shall (i)
replace the PRCO Underlying Shares, with the Company Underlying Shares and (ii)
replace the Escrow Shares deposited by PRCO with the Escrow Agent with the
Company Escrow Shares.
(b) At the Effective Time, (i) all references in the PRCO Debentures
to Company Common Stock (as defined in the PRCO Debentures) shall be references
to Company Common Stock (as defined herein) and (ii) all references to the
Company (as defined in the PRCO Debentures) in the PRCO Debentures shall be read
as references to the Company (as defined herein) as if the PRCO Debentures were
issued on the date the PRCO Debentures were issued, by the Company (as defined
herein), specifically including all calculations in the PRCO Debentures such as
the determination of the conversion price, the Conversion Price, the Fixed
Conversion Price and the Floating Conversion Price. The Exchange Ratio (as
defined herein) shall have no effect on the PRCO Debentures or the assumption
thereof by the Company (as defined herein).
(c) At the Effective Time, PRCO shall assign and the Company shall
assume all of PRCO's obligations and covenants under the Purchase Agreement as
if the Company executed the Purchase Agreement instead of PRCO on the date
thereof. At the Effective Time, all references to the Company (as defined in the
Purchase Agreement) in the Purchase Agreement shall mean the Company (as defined
herein) and all references to dates or tolling of periods shall be read as if
the Company (as defined herein) executed the Purchase Agreement instead of the
Company (as defined in the Purchase Agreement). At the Effective Time, all of
the remedies available to the current and future holders of the PRCO Debentures
under the Purchase Agreement against the Company (as defined in the Purchase
Agreement) shall be available against the Company (as defined herein).
(d) The provisions described in this Section 2.7 shall not be amended
and shall be in effect until the earlier of (i) the date all of the PRCO
Convertible Debentures have been converted into Company Common Stock Shares and
(ii) six (6) years from the date the PRCO Debentures were issued.
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(e) The current and future holders of the PRCO Debentures shall be
third party beneficiaries of this Agreement. There shall be no other third party
beneficiaries to this Agreement or any part hereof.
ARTICLE III
CLOSING
Subject to satisfaction of the conditions to closing set forth in this
Agreement and unless this Agreement is otherwise terminated in accordance with
the provisions contained herein, the closing of the Merger and the Contemplated
Transactions (the "Post-Closing") shall take place at the offices of Gottbetter
& Partners, LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx as promptly as
practicable after satisfaction of the conditions set forth in this Agreement,
which in no event shall be more than ten days after the Closing Date under the
Purchase Agreement (except if such 10th day is not a Business Day, then the next
Business Day) (the "Post-Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company and Acquisition. Except
as disclosed in the Reports (as defined below) or in a document of even date
herewith referring to the representations and warranties in this Agreement and
delivered by Company to PRCO prior to the execution and delivery of this
Agreement (the "Company Disclosure Schedule"), Acquisition and the Company
hereby make the following representations and warranties to PRCO, all of which
shall survive the Post-Closing, subject to the limitations set forth in Section
8.1 hereof:
(a) Organization and Good Standing. Acquisition is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
owns or uses, and to perform all its obligations under this Agreement. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada, with full corporate power and authority
to conduct its business as it is now being conducted, to own or use the
properties and assets that it owns or uses, and to perform all its obligations
under this Agreement and, upon the Post-Closing the PRCO Debentures. Company has
no subsidiaries other than Acquisition and other than as set forth on the
Company Disclosure Schedule (individually, a "Subsidiary" and collectively, the
"Subsidiaries"). Acquisition has no subsidiaries. Each of the Company and
Acquisition is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which either the ownership or use of
the properties owned or used by it, or the nature of the activities conducted by
it, requires such qualification, except for such failures to be so qualified or
in good standing would not have a Material Adverse Effect.
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(b) Authority; No Conflict.
i. This Agreement and any agreement executed in connection
herewith by Company or Acquisition constitute the legal, valid and binding
obligations of the Company and Acquisition, as the case may be, enforceable
against the Company and Acquisition, as the case may be, in accordance with
their respective terms, except as such enforceability is limited by bankruptcy,
insolvency and other laws affecting the rights of creditors and by general
equitable principles. The Company has the absolute and unrestricted right,
power, authority and capacity to execute and deliver this Agreement and any
agreement executed by it in connection herewith and to perform its obligations
hereunder and thereunder.
ii. Neither the execution and delivery of this Agreement by each
of the Company and Acquisition, nor the consummation or performance by each of
any of its respective obligations contained in this Agreement or in connection
with the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time):
a. contravene, conflict with or result in a violation of (x)
any provision of the Organizational Documents of the Company or Acquisition, as
the case may be, or (y) any resolution adopted by the board of directors or the
stockholders of the Company or Acquisition, as the case may be;
b. contravene, conflict with or result in a violation of,
or give any governmental body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Company or Acquisition or any of
the assets owned or used by the Company or Acquisition may be subject;
c. contravene, conflict with or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate or modify, this Agreement, the PRCO Debentures (once
assumed by Company) or any Applicable Contract;
d. result in the imposition or creation of any material
encumbrance upon or with respect to any of the material assets owned or used by
the Company or Acquisition;
e. cause the Company or Acquisition to become subject to, or
to become liable for the payment of, any tax; or
f. cause any of the assets owned by the Company or
Acquisition to be reassessed or revalued by any taxing authority or other
governmental body, except in connection with the transfer of real estate
pursuant to this Agreement or the Contemplated Transactions, if any.
(c) Capitalization. The capitalization of the Company as of
September 30, 2003 is as set forth in the Form 10-K for the period ended
December 31, 2003, increased as set forth in the next sentence. The Company has
not issued any capital stock since that date other than pursuant to (i) employee
benefit plans disclosed in the Reports (as defined in Section 4.1(d))
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or (ii) outstanding warrants, options or other securities disclosed in the
Reports. All of the issued and outstanding shares of the Company Capital Stock
have been duly authorized and validly issued and are fully paid and
non-assessable. Except for this Agreement and as disclosed in the Reports, there
are no outstanding options, warrants, script, rights to subscribe to,
registration rights, calls or commitments of any character whatsoever relating
to, or securities, rights or obligations convertible into or exchangeable for,
or giving any Person any right to subscribe for or acquire, any shares of the
Company Common Stock, or contracts, commitments, understandings, or arrangements
by which the Company or any Subsidiary is or may become bound to issue
additional shares of the Company Common Stock, or securities or rights
convertible or exchangeable into shares of the Company Common Stock. None of the
outstanding Company Capital Stock was issued in violation of the Securities Act
or any other legal requirement.
(d) Financial Statements. The Company has delivered or made available
to PRCO copies of its Form 10-K Annual Report for the fiscal year ended December
31, 2002 and December 31, 2003, each as filed with the SEC and including, in
each case, any amendments thereto (collectively, the "Reports"). The financial
statements contained in the Reports are in all material respects in accordance
with the books and records of the Company and have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods indicated, all as
more particularly set forth in the notes to such statements. The consolidated
balance sheets contained in such Reports (the "Company Balance Sheets") present
fairly in all material respects as of their dates the consolidated financial
condition of the Company and its subsidiaries. Except as and to the extent
reflected or reserved against in the Company Balance Sheets (including the notes
thereto), the Company did not have, as of the date of any such Company Balance
Sheet, any material liabilities or obligations (absolute or contingent) of a
nature customarily reflected in a balance sheet or the notes thereto. The
consolidated statements of operations, consolidated statements of stockholders'
equity and changes in consolidated statements of cash flows present fairly in
all material respects the results of operations and changes in financial
position of the Company and its subsidiaries for the periods indicated.
(e) SEC Filings. The Company has filed all reports required to be
filed with the SEC under the rules and regulations of the SEC and all such
reports have complied in all material respects, as of their respective filing
dates and effective dates, as the case may be, with all the applicable
requirements of the Securities Exchange Act of 1934, as amended. As of the
respective filing and effective dates, none of such reports (including without
limitation, the Reports) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(f) Absence of Material Adverse Change. Since the date of the latest
Company Balance Sheets, there have been no events, changes or occurrences which
have had or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect.
(g) Issuance of Company Securities. The Company Common Stock Shares,
and when issued in accordance with this Agreement, the Purchase Agreement, the
PRCO Debentures and the Escrow Agreement, the Company Underlying Shares and the
Company Escrow Shares, shall be duly authorized, validly issued, fully-paid and
nonassessable. The
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Company currently has, and at all times while the PRCO Debentures are
outstanding will maintain, an adequate reserve of shares of the Company Common
Stock to enable it to perform its obligations under this Agreement and PRCO
Debentures. Except as set forth in the Reports, there is no equity line of
credit or convertible security or instrument outstanding of the Company.
(h) Undisclosed Liabilities. Except as disclosed in any Schedule to
this Agreement, none of the Company, Acquisition or the Subsidiaries has any
material obligations and liabilities (contingent or otherwise) except those
liabilities (i) that are reflected in the Company Balance Sheets or in the notes
thereto, or disclosed in the notes therein in accordance with GAAP or, in
accordance with GAAP, are not required to be so reflected or disclosed, or (ii)
that were incurred after the date of the Company Balance Sheets in the Ordinary
Course of Business, none of which results from, arises out of, relates to, is in
the nature of, or was caused by any breach of contract, breach of warranty,
tort, infringement, or violation of law or could reasonably be expected to have
a Material Adverse Effect.
(i) Taxes.
i. The Company has filed or caused to be filed on a timely basis
all tax returns that are or were required to be filed by it pursuant to
applicable Legal Requirements. The Company has paid, or made provision for the
payment of, all taxes that have or may have become due pursuant to those tax
returns or otherwise, or pursuant to any assessment received by the Company,
except such taxes, if any, as are listed in the Company Disclosure Schedule and
are being contested in good faith as to which adequate reserves have been
provided in the Company Balance Sheets.
ii. All tax returns filed by the Company are true, correct and
complete in all material respects.
(j) Employee Benefits. Except as disclosed in the Reports, the Company
does not sponsor or otherwise maintain a "pension plan" within the meaning of
Section 3(2) of ERISA or any other retirement plan other than the Company Profit
Sharing and 401(k) Plan and Trust that is intended to qualify under Section 401
of the Code, nor do any unfunded liabilities exist with respect to any employee
benefit plan, past or present. No employee benefit plan, any trust created
thereunder or any trustee or administrator thereof has engaged in a "prohibited
transaction," as defined in Section 4975 of the Code, which may have a Material
Adverse Effect.
(k) Governmental Authorizations. The Company, Acquisition and the
Subsidiaries have all permits that are legally required to enable them to
conduct their business in all material respects as now conducted.
(l) Legal Proceedings; Orders.
i. Except as set forth in the Reports, there is no material
pending Proceeding:
a. that has been commenced by or against the Company,
Acquisition or the Subsidiaries, or any of the assets owned or used by, the
Company, Acquisition or the Subsidiaries; or
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b. that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any
Contemplated Transaction.
ii. Except as set forth in the Reports:
a. there is no material Order to which the Company or the
Subsidiaries, or any of the assets owned or used by the Company, Acquisition or
the Subsidiaries, is subject; and
b. no officer, director, agent, or employee of the Company
or Acquisition is subject to any material Order that prohibits such offer,
director, agent or employee from engaging in or continuing any conduct, activity
or practice relating to the business of the Company or Acquisition, as the case
may be.
(m) Absence of Certain Changes and Events. Except as set forth in the
Reports, since the date of the most recent Company Balance Sheets, the Company
and the Subsidiaries and Acquisition, since the date of its inception, have
conducted their business only in the Ordinary Course of Business, and other than
as contemplated by this Agreement or the Contemplated Transactions there has not
been any:
i. change in the authorized or issued Company Capital Stock or
the authorized or issued capital stock of Acquisition and the Subsidiaries;
grant of any stock option or right to purchase shares of capital stock of the
Company; issuance of any equity lines of credit, security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
ii. amendment to the Organizational Documents of the Company,
Acquisition or the Subsidiaries;
iii. damage to or destruction or loss of any material asset or
property of the Company, Acquisition or the Subsidiaries, whether or not covered
by insurance, causing a Material Adverse Effect;
iv. receipt of notice that any of their substantial customers
have terminated or intends to terminate their relationship, which termination
would have a Material Adverse Effect;
v. entry into any transaction other than in the Ordinary Course
of Business;
vi. entry into, termination of, or receipt of written notice of
termination of any material (i) license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) contract or
transaction;
vii. sale (other than sales of inventory in the Ordinary Course
of Business), lease, or other disposition of any asset or property of the
Company, Acquisition or the
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Subsidiaries or mortgage, pledge, or imposition of any lien or other encumbrance
on any material asset or property of the Company, Acquisition or the
Subsidiaries;
viii. cancellation or waiver of any claims or rights with a value
to the Company in excess of $10,000;
ix. material change in the accounting methods used by the
Company, Acquisition or the Subsidiaries; or
x. agreement, whether oral or written, by the Company,
Acquisition or the Subsidiaries to do any of the foregoing.
(n) No Default or Violation. The Company, Acquisition and the
Subsidiaries (i) are in material compliance with all applicable material terms
and requirements of each material contract under which they have or had any
obligation or liability or by which they or any of the assets owned or used by
them is or was bound and (ii) is not in material violation of any Legal
Requirement.
(o) Certain Payments. Since the most recent date of the Company
Balance Sheets, neither the Company, Acquisition or the Subsidiaries, nor any
director, officer, agent or employee of the Company or the Subsidiaries has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback or other payment to any Person, private or public,
regardless of form, whether in money, property or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company, Acquisition or
the Subsidiaries or (iv) in violation of any Legal Requirement, or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company, Acquisition or the Subsidiaries.
(p) Brokers or Finders. Except for a finder's fee of $85,000 owed by
the Company to Dartmouth Capital Inc., the Company and Acquisition have not
incurred any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
4.2 Representations and Warranties of PRCO. PRCO hereby makes the following
representations and warranties to the Company, all of which shall survive the
Post-Closing, subject to the limitations set forth in Section 8.2 hereof:
(a) Organization, Good Standing and Purpose. PRCO is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada with full power and authority to conduct its businesses as it is
now being conducted, to own or use the properties and assets that it owns or
uses, and to perform all of its obligations under this Agreement. PRCO has no
subsidiaries. PRCO is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which either the ownership or use of
the properties owned or used by it, or the nature of the activities conducted by
it, requires such qualification, except for such failures to be so qualified or
in good standing would not have a Material Adverse Effect. PRCO was formed to
assist small communications companies with their growth strategies.
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(b) Authority; No Conflict.
i. This Agreement and any agreement executed in connection
herewith have been duly authorized by all required action of PRCO and constitute
the legal, valid and binding obligations of PRCO, enforceable against PRCO in
accordance with their respective terms. PRCO has the absolute and unrestricted
right, power and authority to execute and deliver this Agreement and any
agreements executed in connection herewith and to perform its obligations
hereunder and thereunder.
ii Neither the execution and delivery of this Agreement by PRCO,
nor the consummation or performance by it of any of its obligations contained in
this Agreement or in connection with the Contemplated Transactions by the
Company will, directly or indirectly (with or without notice or lapse of time):
a. contravene, conflict with or result in a violation of (x)
any provision of the Organizational Documents of PRCO or (y) any resolution
adopted by the board of directors or the stockholders of PRCO;
b. contravene, conflict with or result in a violation of,
or give any governmental body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which PRCO or any of the assets owned or
used by PRCO may be subject;
c. contravene, conflict with or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate or modify, this Agreement, the Purchase Agreement, the PRCO
Debentures or any Applicable Contract;
d. result in the imposition or creation of any material
encumbrance upon or with respect to any of the material assets owned or used by
PRCO;
e. cause PRCO to become subject to, or to become liable for
the payment of, any tax; or
f. cause any of the assets owned by PRCO to be reassessed
or revalued by any taxing authority or other governmental body, except in
connection with the transfer of real estate pursuant to this Agreement or the
Contemplated Transactions.
iii. PRCO is not required to obtain any consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions, other than
the requisite approval of its stockholders ( the "PRCO Stockholders"), which
approval has been obtained.
(c) Capitalization. The entire authorized PRCO Capital Stock consists
of 30,001,000 shares PRCO Common Stock, of which 1,000 shares are issued and
outstanding and held by the PRCO Stockholders and 30,000,000 of which are held
in escrow pursuant to the PRCO Escrow Agreement (as defined below). With the
exception of the PRCO Common Stock Shares and the PRCO Debentures, there are no
other outstanding equity or debt securities of the
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Company. No legend or other reference to any purported encumbrance appears upon
any certificate representing the PRCO Common Stock Shares, other than applicable
Securities Act legends. The PRCO Common Stock Shares have been duly authorized
and validly issued and are fully paid and non-assessable. Except for the PRCO
Debentures and the agreements relating thereto set forth in the Purchase
Agreement, there are no outstanding options, voting agreements or arrangements,
warrants, script, rights to subscribe to, registration rights, calls or
commitments of any character whatsoever relating to, or, securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of PRCO Capital Stock or other
securities, or contracts, commitments, understandings, or arrangements by which
PRCO is or may become bound to issue additional shares of PRCO Capital Stock or
other securities, or securities or rights convertible or exchangeable into
shares of PRCO Capital Stock or other securities. Except as set forth in this
Section 4.2(c), PRCO has no outstanding equity, debt, debt or equity equivalent
security, or debt or equity lines of credit. None of the outstanding PRCO Common
Stock Shares were issued in violation of the Securities Act or any other legal
requirement. PRCO does not own, and has no contract to acquire, any equity
securities or other securities of any Person or any direct or indirect equity or
ownership interest in any other business. The PRCO Escrow Shares have been duly
authorized, validly issued, fully paid and are nonassessable pursuant to the
escrow agreement between PRCO, HEM, and the Escrow Agent (the "PRCO Escrow
Agreement"). The PRCO Underlying Shares have been duly authorized, and when and
if issued pursuant to the terms of the Purchase Agreement, will be fully paid
and nonassessable.
(d) Financial Statements. PRCO has delivered to the Company a balance
sheet of PRCO as at December 31, 2003 (the "PRCO Balance Sheet"), and a
statement of operations for the period from inception to December 31, 2003. Such
financial statements were prepared in accordance with GAAP, are set forth in
Schedule 4.2(d) hereto and fairly present the financial condition and the
results of operations of PRCO as at December 31, 2003 of and for the period then
ended.
(e) Absence of Material Adverse Change. Since the date of the most
recent PRCO Balance Sheet provided under Section 4.2(d) hereof, there have been
no events, changes or occurrences which have had or are reasonably likely to
have, individually or in the aggregate, a material adverse effect on PRCO.
(f) Books and Records. The books of account, minute books, stock
record books, and other records of PRCO, all of which have been made available
to the Company and original copies of which will be delivered to the Company at
the Post-Closing, are complete and correct and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The minute books of PRCO contain accurate
and complete records of all meetings held of, and corporate action taken by, the
stockholders, the Board of Directors, and any committees of the Board of
Directors of PRCO.
(g) No Undisclosed Liabilities. There are no material liabilities of
PRCO, whether absolute, accrued, contingent, or otherwise, other than the PRCO
Debentures and as set forth in Schedule 4.2(g).
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(h) Title to Properties; Encumbrances. PRCO has good and marketable
title to all the properties, interest in such properties and assets, real and
personal, reflected in the PRCO Balance Sheet or acquired after the date of such
balance sheet, free and clear of all mortgages, liens, pledges, charges or
encumbrances except (i) mortgages and other encumbrances referred to in the
notes to the PRCO Balance Sheet. PRCO neither owns nor leases any real property.
(i) Legal Proceedings; Orders.
i. Except as set forth in Schedule 4.2(i) hereto, there is no
pending Proceeding:
a. that has been commenced or threatened by or against PRCO
or any of its officers, directors, agents or employees as such or that otherwise
relates to or may affect the business of, or any of the assets owned or used by,
PRCO; or
b. that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any
Contemplated Transaction.
ii. Except as set forth in Schedule 4.2(i) hereto:
a. there is no Order to which PRCO, or any of the assets
owned or used by PRCO, is subject; and
b. no officer, director, agent, or employee of PRCO is
subject to any Order that prohibits such offer, director, agent or employee from
engaging in or continuing any conduct, activity or practice relating to the
business of PRCO.
(j) Brokers or Finders. PRCO has incurred no liability, contingent
or otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement.
(k) No Default or Violation. Schedule 4.2(k) hereto lists each
contract, agreement and commitment to which PRCO is a party or otherwise bound
(each, an "PRCO Contract") or has any obligation or liability pursuant thereto.
PRCO (i) is in compliance with all terms and requirements of each PRCO Contract
and (ii) is not in violation of any Legal Requirement.
(l) Taxes.
i. PRCO has filed or caused to be filed on a timely basis all
tax returns that are or were required to be filed by it pursuant to applicable
Legal Requirements. PRCO has paid, or made provision for the payment of, all
taxes that have or may have become due pursuant to those tax returns or
otherwise, or pursuant to any assessment received by PRCO, except such taxes, if
any, as are listed in Schedule 4.2(l) hereto and are being contested in good
faith as to which adequate reserves have been provided in the PRCO Balance
Sheets.
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ii. All tax returns filed by PRCO are true, correct and complete
in all material respects and no taxes are currently owed or tax returns due by
or on behalf of PRCO.
(m) Absence of Certain Changes and Events. Except as set forth in
Schedule 4.2(m) hereto, since the date of the PRCO Balance Sheet, PRCO has
conducted its business only in the Ordinary Course of Business, there has not
been any material adverse effect on PRCO's business or operations, and there has
not been any:
i. change in the authorized or issued capital stock of PRCO;
grant of any stock option or right to purchase shares of capital stock of PRCO;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition or
payment of any dividend or other distribution or payment in respect of shares of
capital stock;
ii. amendment to the Organizational Documents of PRCO;
iii. damage to or destruction or loss of any asset or property
of PRCO, whether or not covered by insurance or any other event or circumstance,
materially and adversely affecting the properties, assets, business, financial
condition, or prospects of PRCO;
iv. receipt of notice that any of its substantial customers have
terminated or intends to terminate their relationship, which termination would
have a material adverse effect on its financial condition, results or
operations, business assets or properties of PRCO;
v. entry into any transaction other than in the Ordinary
Course of Business;
vi. entry into, termination of, or receipt of written notice of
termination of any (i) license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) contract or transaction;
vii. sale, lease, or other disposition of any asset or property
of PRCO or mortgage, pledge, or imposition of any lien or other encumbrance on
any asset or property of PRCO;
viii. cancellation or waiver of any claims or rights with a value
to PRCO in excess of $10,000;
ix. material change in the accounting methods used by PRCO;
x. accrual or payment of any salaries or other compensation,
increase in salaries, compensation or bonuses or retention or hiring of, any
consultant or employee;
xi. debt or other liability incurred, other than the PRCO
Debentures; or
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xii. agreement, whether oral or written, by PRCO to do any of
the foregoing, other than the Purchase Agreement.
(n) Compliance with Law. Except as set forth in Schedule 4.2(n)
hereto:
i. PRCO has complied in all material respects with, and is not in
violation of, in any material respect, any Law to which it or its business is
subject; and
ii. PRCO has obtained all licenses, permits, certificates or
other governmental authorizations (collectively "Authorizations") necessary for
the ownership or use of its assets and properties or the conduct of its
business; and
(iii) PRCO has not received written notice of violation of, or
knows of any material violation of, any Laws to which it or its business is
subject or any Authorization necessary for the ownership or use of its assets
and properties or the conduct of its business.
(o) Environmental Laws. PRCO has not received any notice or claim
(and is not aware of any facts that would form a reasonable basis for any
claim), or entered into any negotiations or agreements with any other Person,
and, to the best knowledge of PRCO, PRCO is not the subject of any investigation
by any governmental or regulatory authority, domestic or foreign, relating to
any material or potentially material liability or remedial action under any
Environmental Laws. There are no pending or, to the knowledge of PRCO,
threatened, actions, suits or proceedings against PRCO or any of its properties,
assets or operations asserting any such material liability or seeking any
material remedial action in connection with any Environmental Laws.
(p) Intellectual Property. (i) PRCO owns, or is validly licensed or
otherwise has the right to use, all patents, and patent rights ("Patents") and
all trademarks, trade secrets, trademark rights, trade names, trade name rights,
service marks, service xxxx rights, copyrights and other proprietary
intellectual property rights and computer programs (the "Intellectual Property
Rights"), in each case, which are material to the conduct of the business of
PRCO.
(ii) To the best knowledge of PRCO, PRCO has not interfered with,
infringed upon (without license to infringe), misappropriated or otherwise come
into conflict with any Patent of any other Person. PRCO has not interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property Rights of any other Person. PRCO has not received any
written charge, complaint, claim, demand or notice alleging any such
interference, infringement, is appropriation or violation (including any claim
that PRCO must license or refrain from using any Patents or Intellectual
Property Rights of any other Person) which has not been settled or otherwise
fully resolved. To the best knowledge of PRCO, no other Person has interfered
with, infringed upon (without license to infringe), misappropriated or otherwise
come into conflict with any Patents or Intellectual Property Rights of PRCO.
(q) Employees. (a) PRCO has no employees other than Xxxx Xxxxxx,
Xxxxxxxx Xxxxxxxx, Xxx Xxxxxx and Xxxxxxx Xxxxxx (the "PRCO Employees"); (b) the
PRCO Employees
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been fully paid for all services rendered by her to PRCO in her capacity as
President of PRCO and is owed no further salary or compensation in connection
therewith; (c) PRCO has complied in all respects with all applicable Laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours, and PRCO is not liable for any arrears of wages or
any taxes or penalties for failure to comply with any such Laws; (d) PRCO
believes that PRCO's relations with its employees is satisfactory; (e) there are
no controversies pending or, to the best knowledge of PRCO, threatened between
PRCO and any of its employees or former employees; (f) PRCO is not a party to
any collective bargaining agreement or other labor union contract applicable to
persons employed by PRCO, nor, to the best knowledge of PRCO, are there any
activities or proceedings of any labor union to organize any such employees; (g)
there are no unfair labor practice complaints pending against PRCO before the
National Labor Relations Board or any current union representation questions
involving employees of PRCO; (h) there is no strike, slowdown, work stoppage or
lockout existing, or, to the best knowledge of PRCO, threatened, by or with
respect to any employees of PRCO; (i) no charges are pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices with respect to
PRCO; (j) there are no claims pending against PRCO before any workers'
compensation board; (k) PRCO has not received notice that any Federal, state,
local or foreign agency responsible for the enforcement of labor or employment
laws intends to conduct an investigation of or relating to PRCO and, to the best
knowledge of PRCO, no such investigation is in progress; and (l) PRCO has no
consultants or independent contractors.
(r) Employee Benefit Plans. There no "employee pension benefit plans"
(as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) or "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA) maintained, or contributed to, by PRCO for the benefit of
any current or any former employees, officers or directors of PRCO.
(s) Rule 504 Securities. The PRCO Debentures (which include the
Escrow Shares for the PRCO Underlying Shares) were sold in accordance with Rule
504 of Regulation D of the Securities Act of 1933, as amended (the "Securities
Act"), and Section 80A.15.2(a)(1) of the Minnesota Statutes, 1986 (the
"Minnesota Act"), to an accredited investor residing in the State of Minnesota.
Accordingly, at the Effective Time and pursuant to Rule 504, the Minnesota Act,
and Section 3(a)(9) of the Securities Act, the PRCO Debentures (which include
the Company Escrow Shares for the Company Underlying Shares) shall continue to
be without restriction and shall be freely tradable in accordance with Rule 504.
ARTICLE V
COVENANTS
5.1 Covenants of the Company and Acquisition.
(a) Conduct of Business. Between the date hereof and up to and
including the Post-Closing Date, each of the Company and Acquisition shall:
i. conduct its business only in the Ordinary Course of Business;
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ii. use its commercially reasonable efforts to preserve intact
the current business organization of the Company and Acquisition, as the case
may be, keep available the services of the current officers, employees and
agents of the Company and Acquisition, as the case may be, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents and others having business relationships with the Company and
Acquisition, as the case may be;
iii. not pay, incur or declare any dividends or distributions
with respect to its stockholders or amend its Certificate of Incorporation or
By-Laws, without the prior written consent of the PRCO Debenture Holder;
iv. not authorize, issue, sell, purchase or redeem any
shares of its capital stock or any options or other rights to acquire ownerships
interests without the prior written consent of the PRCO Debenture Holder except
as may be required by pre-existing commitments disclosed herein or in the
Reports;
v. not incur any indebtedness for money borrowed or issue any
debt securities, or incur or suffer to be incurred any liability or obligation
of any nature whatsoever, except those incurred in the Ordinary Course of
Business, or cause or permit any material lien, encumbrance or security interest
to be created or arise on or in respect of any material portion of its
properties or assets;
vi. not make any investment of a capital nature either by
purchased stock or securities, contribution to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person;
vii. not do any other act which would cause any representation or
warranty of the Company in this Agreement to be or become untrue in any material
respect or that is not in the Ordinary Course of Business;
viii. report periodically to the PRCO Debenture Holder
concerning the status of the business and operations of the Company upon the
reasonable request of the PRCO Debenture Holder; and
ix. confer with the PRCO Debenture Holder concerning operational
matters of a material nature upon the reasonable request of the PRCO Debenture
Holder.
(b) Proposals; Other Offers. Commencing on the date of execution of
this Agreement up to and including the Post-Closing Date, each of the Company
and Acquisition shall not, directly or indirectly (whether through an employee,
a representative, an agent or otherwise), solicit or encourage any inquiries or
proposals, engage in negotiations for or consent to or enter into any agreement
providing for the acquisition of its business. Each of the Company and
Acquisition shall not, directly or indirectly (whether through an employee, a
representative, an agent or otherwise) disclose any nonpublic information
relating to the Company and Acquisition or afford access to any of the books,
records or other properties of the Company and Acquisition to any person or
entity that is considering, has considered or is making any such acquisition
inquiry or proposal relating to the Company's and Acquisition's business.
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(c) Further Assurances. Prior to the Post-Closing Date, with
the cooperation of PRCO where appropriate, each of the Company and Acquisition
shall use commercially reasonable efforts to:
i. promptly comply with all filing requirements which federal,
state or local law may impose on the Company or Acquisition, as the case may be,
with respect to the Contemplated Transactions by this Agreement; and
ii. take all actions necessary to be taken, make any filing and
obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party (including
without limitation, any landlord or lessor of the Company and any party to whom
notification is required to be delivered or from whom any form of consent is
required) which is required to be filed or obtained by the Company or
Acquisition in connection with the Contemplated Transactions by this Agreement.
(d) Access to Additional Agreements and Information. Prior to the
Post-Closing Date, the Company and Acquisition shall make available to the PRCO
Debenture Holder (as well as its counsel, accountants and other representatives)
any and all agreements, contracts, documents, other instruments and personnel
material to the Company's business, including without limitation, those
contracts to which the Company or Acquisition is a party and those by which each
of its business or any of the Company's or Acquisition's assets are bound.
5.2 Covenants of PRCO.
(a) Conduct of Business. Between the date hereof and up to and
including the Post-Closing Date, PRCO shall:
i. conduct its business only in the Ordinary Course of Business;
ii. use its commercially reasonable efforts to preserve intact
the current business organization of PRCO, keep available the services of the
current officers, employees and agents of PRCO, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents and
others having business relationships with PRCO;
iii. not pay, incur or declare any dividends or distributions
with respect to its stockholders or amend its Certificate of Incorporation or
By-Laws, without the prior written consent of the Company and PRCO Debenture
Holder;
iv. not authorize, issue, sell, purchase or redeem any shares
of its capital stock or any options or other rights to acquire ownerships
interests without the prior written consent of the Company and PRCO Debenture
Holder;
v. not incur any indebtedness for money borrowed or issue
and debt securities, or incur or suffer to be incurred any liability or
obligation of any nature whatsoever, or cause or permit any material lien,
encumbrance or security interest to be created or arise on or in respect of any
material portion of its properties or assets;
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vi. not make any investment of a capital nature either by
purchased stock or securities, contribution to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person;
vii. not do any other act which would cause representation or
warranty of PRCO in this Agreement to be or become untrue in any material
respect or that is not in the Ordinary Course of Business consistent with past
practice;
viii. report periodically to the Company and the PRCO Debenture
Holder concerning the status of the business and operations of PRCO; and
ix. confer with the Company and the PRCO Debenture Holder
concerning operational matters of a material nature.
(b) Proposals; Other Offers. Commencing on the date of execution of
this Agreement through the Post-Closing Date, PRCO shall not, directly or
indirectly (whether through an employee, a representative, an agent or
otherwise), solicit or encourage any inquiries or proposals, engage in
negotiations for or consent to or enter into any agreement providing for the
acquisition of its business. PRCO shall not, directly or indirectly (whether
through an employee, a representative, an agent or otherwise) disclose any
nonpublic information relating to PRCO or afford access to any of the books,
records or other properties of PRCO to any person or entity that is considering,
has considered or is making any such acquisition inquiry or proposal relating to
the PRCO's business.
(c) Further Assurances. Prior to the Post-Closing Date, with the
cooperation of the Company where appropriate, PRCO shall:
i. promptly comply with all filing requirements which federal,
state or local law may impose on PRCO with respect to the Contemplated
Transactions by this Agreement and cooperate with the Company regarding the
same; and
ii. take all actions necessary to be taken, make any filing and
obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party (including
without limitation, any landlord or lessor of PRCO and any party to whom
notification is required to be delivered or from whom any form of consent is
required) which is required to be filed or obtained by PRCO in connection with
the Contemplated Transactions by this Agreement.
(d) Actions by PRCO. PRCO shall take no action or enter into any
agreements or arrangements except as may be required by this Agreement.
(e) No Change in Capital Stock. Prior to the Effective Time, no change
will be made in the authorized, issued or outstanding capital stock of PRCO, and
no subscriptions, options, rights, warrants, calls, commitments or agreements
relating to the authorized, issued or outstanding capital stock of PRCO will be
entered into, issued, granted or created.
(f) Access to Additional Agreements and Information. Prior to the
Post-Closing Date, PRCO shall make available to the Company and PRCO Debenture
Holder (as well
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as its counsel, accountants and other representatives) any and all agreements,
contracts, documents, other instruments and personnel material of PRCO's
business, including without limitation, those contracts to which PRCO is a party
and those by which its business or any of PRCO's assets are bound.
(g) Further Assurances. Prior to the Post-Closing Date, with the
cooperation of the Company where appropriate, PRCO shall use commercially
reasonable efforts to:
i. promptly comply with all filing requirements which federal,
state or local law may impose on PRCO with respect to the Contemplated
Transactions by this Agreement; and
ii. take all actions necessary to be taken, make any filing and
obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party (including
without limitation, any landlord or lessor of PRCO and any party to whom
notification is required to be delivered or from whom any form of consent is
required) which is required to be filed or obtained by PRCO in connection with
the Contemplated Transactions by this Agreement.
5.3 Governmental Filings and Consents. The Company, Acquisition and PRCO
shall cooperate with one another in filing any necessary applications, reports
or other documents with any federal or state agencies, authorities or bodies
having jurisdiction with respect to the business of the Company, Acquisition or
PRCO and in seeking any necessary approval, consultation or prompt favorable
action of, with or by any of such agencies, authorities or bodies.
5.4 Publicity. Any public announcement or press release relating to this
Agreement or the Contemplated Transactions must be approved by the PRCO
Debenture Holder and the Company in writing before being made or released. The
Company shall have the right to issue a press release or make other disclosure
without the PRCO Debenture Holder's written approval if in the opinion of the
Company's counsel such a release is necessary to comply with SEC Rules and
Regulations or other Law; provided that, the PRCO Debenture Holder receives a
copy of such prepared press release or other disclosures for purposes of review
at least 24 hours before it is issued. This 24 hour period may be shortened if
in the opinion of the Company's counsel it is required by Law; provided that,
the PRCO Debenture Holder and the Company receives a copy of such release as
long as reasonably practical before it is issued.
5.5 Tax Returns. The current officers of the Company shall have the right
to prepare any tax returns of the Company with respect to any period that ends
on or before the Post-Closing Date. Such tax returns shall be timely filed by
the Company. PRCO shall cooperate with said officers in the preparation of such
tax returns.
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ARTICLE VI
CONDITIONS
6.1 Conditions to Obligations of PRCO. The obligation of PRCO to consummate
the Contemplated Transactions is subject to the fulfillment of each of the
following conditions, any of which may be waived by PRCO in its sole discretion:
(a) Copies of Resolutions. At the Post-Closing (i) the Company shall
have furnished PRCO with a certificate of its CEO or President, as the case may
be, in the form of Exhibit 6.1(a) annexed hereto, certifying that attached
thereto are copies of resolutions duly adopted by the board of directors of the
Company authorizing the execution, delivery and performance of this Agreement
and all other necessary or proper corporate action to enable the Company to
comply with the terms of this Agreement and (ii) Acquisition shall have
furnished PRCO with a certificate of its CEO or President, as the case may be,
in the form of Exhibit 6.1(e) annexed hereto, certifying that attached thereto
are copies of resolutions duly adopted by the board of directors of Acquisition
authorizing the execution, delivery and performance of this Agreement and all
other necessary or proper corporate action to enable Acquisition to comply with
the terms of this Agreement.
(b) Opinion of Company's Counsel. The Company shall have furnished to
PRCO, at the Post-Closing, an opinion of its legal counsel, dated as of the
Post-Closing Date, substantially in the form of Exhibit 6.1(b) annexed hereto.
(c) Opinion of Company's Special Securities Counsel. The Company shall
have furnished to PRCO, at the Post-Closing, with an opinion of the special
securities counsel to the Company, dated as of the Post-Closing Date,
substantially in the form of Exhibit 6.1(c) annexed hereto.
(d) Instruction Letter to Transfer Agent. The Company shall have
furnished PRCO, at the Post-Closing, with a letter to its transfer agent, to
accept the legal opinion set forth in Section 6.1(c), dated as of the
Post-Closing Date, substantially in the form of Exhibit 6.1(d) annexed hereto.
(e) Accuracy of Representations and Warranties; Performance of
Covenants. Each of the representations and warranties of the Company and
Acquisition set forth in this Agreement was true, correct and complete in all
material respects when made (except for representations and warranties that
speak as of a specific date, which representations and warranties shall be true,
correct and complete in all material respects as of such date) and shall also be
true, correct and complete in all material respects at and as of the
Post-Closing Date (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true, correct and
complete in all material respects as of such date), with the same force and
effect as if made at and as of the Post-Closing Date. The Company shall have
performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed by the Company and
Acquisition at or prior to the Post-Closing Date.
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(f) Delivery of Certificate. (A) The Company shall have delivered to
PRCO a certificate, in the form of Exhibit 6.1(f) annexed hereto, dated the
Post-Closing Date, and signed by the CEO or President of the Company affirming
that the representations and warranties as set forth in Section 4.1 were and are
true, correct and complete as required by Section 6.1(e) and (B) Acquisition
shall have delivered to PRCO a certificate, in the form of Exhibit 6.1(h)
annexed hereto, dated the Post-Closing Date, and signed by the CEO or President
of Acquisition affirming that the representations and warranties as set forth in
Section 4.1 were and are true, correct and complete as required by Section
6.1(e).
(g) Consents and Waivers. At the Post-Closing, any and all
necessary consents, authorizations, orders or approvals shall have been
obtained, except as the same shall have been waived by the PRCO Debenture
Holder.
(h) Litigation. On the Post-Closing Date, there shall be no
effective injunction, writ or preliminary restraining order or any order of any
kind whatsoever with respect to the Company issued by a court or governmental
agency (or other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the Contemplated Transactions or
making consummation thereof unduly burdensome to PRCO. On the Post-Closing Date
and immediately prior to consummation of the Contemplated Transactions, no
proceeding or lawsuit shall have been commenced, be pending or have been
threatened by any governmental or regulatory agency or authority or any other
Person restraining or prohibiting the consummation of the Contemplated
Transactions.
(i) Delivery of Documents and Other Information. Prior to the Post-
Closing Date, the Company and Acquisition shall have made available or delivered
to PRCO all of the agreements, contracts, documents and other instruments
requested by PRCO.
6.2 Conditions to Obligations of the Company and Acquisition. The
obligations of the Company and Acquisition to consummate the Contemplated
Transactions are subject to the fulfillment of each of the following conditions,
any of which may be waived by the Company and Acquisition, in their sole
discretion:
(a) Copies of Resolutions. At the Post-Closing, PRCO shall have
furnished the Company with a certificate of its President, in the form of
Exhibit 6.2(a) annexed hereto, certifying that attached thereto are copies of
resolutions duly adopted by the board of directors of PRCO authorizing the
execution, delivery and performance of the terms of this Agreement and all other
necessary or proper corporate action to enable PRCO to comply with the terms of
this Agreement.
(b) Opinion of PRCO's Counsel. PRCO shall have furnished to the
Company, at the Post-Closing, with an opinion of counsel to PRCO, dated as of
the Post-Closing Date, substantially in the form of Exhibit 6.2(b) annexed
hereto.
(c) Opinion of PRCO's Special Securities Counsel. PRCO shall have
furnished to the Company, at the Closing, with an opinion of the special
securities counsel to PRCO dated as of the Post-Closing Date, substantially in
the form of Exhibit 6.2(c) annexed hereto.
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(d) Accuracy of Representations and Warranties; Performance of
Covenants. Each of the representations and warranties of PRCO was true, correct
and complete in all material respects when made (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true, correct and complete in all material respects as of
such date) and shall also be true, correct and complete in all material respects
at and as of the Post-Closing Date (except for representations and warranties
that speak as of a specific date, which representations and warranties shall be
true, correct and complete in all material respects as of such date), with the
same force and effect as if made at and as of the Post-Closing Date. PRCO shall
have performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed by PRCO at or prior to the
Post-Closing Date.
(e) Delivery of Certificate. PRCO shall have delivered to the
Company a certificate, in the form of Exhibit 6.2(e) annexed hereto, dated the
Post-Closing Date and signed by the CEO or President of PRCO, affirming that the
representations and warranties of PRCO as set forth in Section 4.2 were and are
true, correct and complete and PRCO's agreements and covenants have been
performed as required by Section 6.2(d).
(f) Compliance with Rule 504. In connection with the issuance of
the Securities by PRCO under the Purchase Agreement, on or prior to the
Post-Closing Date PRCO shall be in full compliance with Rule 504 of Regulation D
of the Securities Act of 1933, as amended, and PRCO shall have delivered to the
Company at the Post-Closing a filed copy of the Form D required to be filed with
the SEC in connection therewith.
(g) Consents and Waivers. On or prior to the Post-Closing Date, any
and all necessary consents, authorizations, orders or approvals shall have been
obtained, except as the same shall have been waived by the Company.
(h) Litigation. On the Post-Closing Date, there shall be no
effective injunction, writ or preliminary restraining order or any order of any
kind whatsoever with respect to PRCO issued by a court or governmental agency
(or other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the Contemplated Transactions or
making the consummation thereof unduly burdensome to the Company or PRCO. On the
Post-Closing Date, no proceeding or lawsuit shall have been commenced,
threatened or be pending or by any governmental or regulatory agency or
authority or any other person with respect to the Contemplated Transactions.
(i) Delivery of Documents and Other Information. Prior to the Post-
Closing Date, PRCO shall have made available or delivered to the Company all of
the agreements, contracts, documents and other instruments required to be
delivered pursuant to the provisions of this Agreement.
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ARTICLE VII
TERMINATION
7.1 Termination by Mutual Agreement. This Agreement may be terminated at
any time by mutual consent of the parties hereto, provided that such consent to
terminate is in writing and is signed by each of the parties hereto.
7.2 Termination for Failure to Close. This Agreement shall be automatically
terminated if the Closing shall not have occurred within ten (10) days of the
date hereof (except if such 10th day is not a Business Day, then the next
Business Day).
7.3 Termination by Operation of Law. This Agreement may be terminated by
any party hereto if there shall be any statute, rule or regulation that renders
consummation of the Contemplated Transactions illegal or otherwise prohibited,
or a court of competent jurisdiction or any government (or governmental
authority) shall have issued an order, decree or ruling, or has taken any other
action restraining, enjoining or otherwise prohibiting the consummation of such
transactions and such order, decree, ruling or other action shall have become
final and nonappealable.
7.4 Termination for Failure to Perform Covenants or Conditions. This
Agreement may be terminated prior to the Post-Closing Date:
(a) by PRCO if: (i) any of the representations and warranties made in
this Agreement by the Company or Acquisition shall not be materially true and
correct, when made or at any time prior to consummation of the Contemplated
Transactions as if made at and as of such time; (ii) any of the conditions set
forth in Section 6.1 hereof have not been fulfilled in all material respects by
the Post-Closing Date; (iii) the Company or Acquisition shall have failed to
observe or perform any of its material obligations under this Agreement; or (iv)
as otherwise set forth herein; or
(b) by the Company or Acquisition if: (i) any of the representations
and warranties of PRCO or the PRCO Stockholders shall not be materially true and
correct when made or at any time prior to consummation of the Contemplated
Transactions as if made at and as of such time; (ii) any of the conditions set
forth in Section 6.2 hereof have not been fulfilled in all material respects by
the Post-Closing Date; (iii) PRCO or the PRCO Stockholders shall have failed to
observe or perform any of their material respective obligations under this
Agreement; or (iv) as otherwise set forth herein.
7.5 Effect of Termination or Default; Remedies. In the event of termination
of this Agreement as set forth above, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto, provided that
such party is a Non-Defaulting Party (as defined below). The foregoing shall not
relieve any party from liability for damages actually incurred as a result of
such party's breach of any term or provision of this Agreement.
7.6 Remedies; Specific Performance. In the event that any party shall fail
or refuse to consummate the Contemplated Transactions or if any default under or
beach of any representation, warranty, covenant or condition of this Agreement
on the part of any party (the
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"Defaulting Party") shall have occurred that results in the failure to
consummate the Contemplated Transactions, then in addition to the other remedies
provided herein, the non-defaulting party (the "Non-Defaulting Party") shall be
entitled to seek and obtain money damages from the Defaulting Party, or may seek
to obtain an order of specific performance thereof against the Defaulting Party
from a court of competent jurisdiction, provided that the Non-Defaulting Party
seeking such protection must file its request with such court within forty-five
(45) days after it becomes aware of the Defaulting Party's failure, refusal,
default or breach. In addition, the Non-Defaulting Party shall be entitled to
obtain from the Defaulting Party court costs and reasonable attorneys' fees
incurred in connection with or in pursuit of enforcing the rights and remedies
provided hereunder.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Survival of Representations and Warranties of the Company. All
representations and warranties of the Company shall survive the execution and
delivery of this Agreement and the Post-Closing hereunder and shall thereafter
survive until the earlier of (i) the fourth anniversary of the Post-Closing Date
and (ii) the date of the PRCO Debentures have been fully converted or otherwise
cease to be outstanding (the "Conversion Date") and shall then terminate except
to the extent that notice of the Company's or Acquisition liability in respect
of any inaccuracy in or breach of any representation or warranty shall have been
given on or prior to such second anniversary or Conversion Date.
8.2 Survival of Representations and Warranties of PRCO. All representations
and warranties of PRCO shall terminate upon the Closing except to the extent
that notice of PRCO's liability in respect of any inaccuracy in or breach of any
representation or warranty shall have been given on or prior to Closing.
8.3 Obligation of the Company to Indemnify. The Company agrees to
indemnify, defend and hold harmless PRCO (and its directors, officers,
employees, affiliates, stockholders, debenture holders, agents, attorneys,
successors and assigns) from and against all losses, liabilities, damages,
deficiencies, costs or expenses (including interest, penalties and reasonable
attorneys' and consultants' fees and disbursements) (collectively, "Losses")
based upon, arising out of or otherwise in respect of any (i) inaccuracy in any
representation or warranty of the Company contained in this Agreement or in the
Schedules and Exhibits hereto or (ii) breach by the Company of any covenant or
agreement contained in this Agreement.
8.4 Obligation of and PRCO to Indemnify. PRCO agrees to indemnify, defend
and hold harmless the Company (and its directors, officers, employees,
affiliates, stockholders, agents, attorneys, successors and assigns) from and
against any Losses based upon, arising out of or otherwise in respect of any (i)
inaccuracy in any representation or warranty of PRCO contained in this Agreement
or (ii) breach by PRCO of any covenant or agreement contained in this Agreement.
8.5 Notice and Opportunity to Defend. (a) Promptly after receipt by any
Person entitled to indemnity under this Agreement (an "Indemnitee") of notice of
any demand,
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claim or circumstances which, with the lapse of time, would or might give rise
to a claim or the commencement (or threatened commencement) of any action,
proceeding or investigation (an "Asserted Liability") that may result in a Loss,
the Indemnitee shall give notice thereof (the "Claims Notice") to any other
party (or parties) who is or may be obligated to provide indemnification
pursuant to Section 8.3 or 8.4 (the "Indemnifying Party"). The Claims Notice
shall describe the Asserted Liability in reasonable detail and shall indicate
the amount (estimated, if necessary and to the extent feasible) of the Loss that
has been or may be suffered by the Indemnitee.
(b) The Indemnifying Party may elect to compromise or defend, at its
own expense and by its own counsel, any Asserted Liability. If the Indemnifying
Party elects to compromise or defend such Asserted Liability, it shall within 30
days after the date the Claims Notice is given (or sooner, if the nature of the
Asserted Liability so requires) notify the Indemnitee of its intent to do so,
and the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in
the compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted Liability,
fails to notify the Indemnitee of its election as herein provided or contests
its obligation to indemnify under this Agreement, the Indemnitee may pay,
compromise or defend such Asserted Liability and all reasonable expenses
incurred by the Indemnitee in defending or compromising such Asserted Liability,
all amounts required to be paid in connection with any such Asserted Liability
pursuant to the determination of any court, governmental or regulatory body or
arbitrator, and amounts required to be paid in connection with any compromise or
settlement consented to by the Indemnitee, shall be borne by the Indemnifying
Party. Except as otherwise provided in the immediately preceding sentence, the
Indemnitee may not settle or compromise any claim over the objection of the
Indemnifying Party. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in (but the Indemnitee may not control) the
defense of such Asserted Liability. If the Indemnifying Party chooses to defend
any claim, the Indemnitee shall make available to the Indemnifying Party any
books, records or other documents within its control that are necessary or
appropriate for such defense.
ARTICLE IX
DEFINITIONS
The following terms, which are capitalized in this Agreement, shall have
the meanings set forth below for the purpose of this Agreement.
"Applicable Contract" means any Contract (a) to which the Company is a
party and under which the Company has or may acquire any material rights, (b)
under which the Company or PRCO, as the case may be, is a party and has or may
become subject to any material obligation or material liability or (c) by which
the Company or PRCO, as the case may be, or any of the material assets owned or
used by it is or may become bound.
"Contemplated Transactions" means all of the transactions contemplated by
this Agreement, including, without limitation:
(1) the Merger; and
C-29
(2) the performance by the parties of their respective covenants and
obligations under this Agreement.
"Environmental Laws" means all applicable federal, state, local or foreign
laws, rules and regulations, orders, decrees, judgments, permits, filings and
licenses relating (i) to protection and clean-up of the environment and
activities or conditions related thereto, including those relating to the
generation, handling, disposal, transportation or release of hazardous
substances and (ii) the health or safety of employees in the workplace
environment, all as amended from time to time, and shall also include any common
law theory based on nuisance, trespass, negligence or other tortious conduct.
"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to such law or any
successor law.
"GAAP" means generally accepted accounting principles in the United States,
applied on a consistent basis.
"Law" means all applicable laws, statutes, ordinances, rules, regulations,
orders, writs, injunctions, judgments or decrees entered, enacted, promulgated,
enforced or issued by any court or other governmental or regulatory authority,
domestic or foreign.
"Legal Requirement" means any federal, state, local, municipal, foreign,
international, multinational or other administrative law, ordinance, principle
of common law, regulation, statute, treaty, court or arbitrator.
"Material Adverse Effect" means a material adverse effect upon the business
or financial condition of the Company (when used in Section 4.1) or PRCO (when
used in Section 4.2), taken as a whole with any subsidiaries.
"Order" means any award, decision, injunction, judgment, order, ruling,
subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other governmental body or by any arbitrator.
"Ordinary Course of Business" means an action taken by a Person where:
(1) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(2) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(3) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"Organizational Documents" means the articles or certificate of
incorporation and the by-laws of a corporation and any amendment thereto.
C-30
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or governmental body.
"Proceeding" means any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted or heard by or before, or otherwise
involving, any governmental body or arbitrator.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
ARTICLE X
MISCELLANEOUS
10.1 Fees and Expenses. Except as otherwise provided in this Agreement,
each party hereto will bear its own legal, accounting and other fees and
expenses incident to the Contemplated Transactions herein. Any fees and expenses
required to be paid by any party hereunder shall be limited to reasonable and
necessary fees and expenses
10.2 Modification, Amendments and Waiver. The parties hereto may amend,
modify or otherwise waive any provision of this Agreement by mutual consent,
provided that such consent and any amendment, modification or waiver is in
writing and is signed by each of the parties hereto.
10.3 Assignment. Neither the Company nor PRCO shall have the authority to
assign its respective rights or obligations under this Agreement without the
prior written consent of the PRCO Debenture Holder.
10.4 Successors. This Agreement shall be binding upon and, to the extent
permitted in this Agreement, shall inure to the benefit of the parties and their
respective successors and permitted assigns.
10.5 Entire Agreement. This Agreement and the exhibits, schedules and other
documents referred to herein contain the entire agreement among the parties
hereto with respect to the Contemplated Transactions and supersede all prior
agreements with respect thereto, whether written or oral.
10.6 Governing Law. This Agreement and the exhibits hereto shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to principles of conflicts or choice of laws thereof. Any
action to enforce the terms of this Agreement or any of its exhibits shall be
brought exclusively in the state and/or federal courts situated in the County
and State of New York. Service of process in any action by either party to
enforce the terms of this Agreement may be made by serving a copy of the summons
and complaint, in addition to any other relevant documents, by commercial
overnight courier to the other party at its principal address set forth in this
Agreement.
C-31
10.7 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by facsimile upon electronic confirmation
of receipt (promptly followed by a hard-copy delivered in accordance with this
Section 10.7) or three days after being mailed by registered or certified mail
(return receipt requested), with postage and registration or certification fees
thereon prepaid, or if sent by nationally recognized overnight courier, one day
after being mailed, addressed to the party at its address set forth below:
If to PRCO prior to
Post-Closing: Cellfoods Corporation
0000 Xxxxxx Xxxxxx, Xxxxx X
Xxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to PRCO after Cellfoods Corporation
Post-Closing: 0000 Xxxxxx Xxxxxx, Xxxxx X
Xxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Acquisition: PFCE Acquisition Corp.
0000 Xxxxxx Xxxxxx, Xxxxx X
Xxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Company: Pacific Fuel Cell Corp.
000 X. Xxxxxx Xxx.
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax:
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If mailed as aforesaid, the day of mailing or
transmission shall be the date any such notice shall be deemed to have been
delivered.
10.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
C-32
10.9 Rights Cumulative. All rights, powers and privileges conferred
hereunder upon the parties, unless otherwise provided, shall be cumulative and
shall not be restricted to those given by law. Failure to exercise any power
given any party hereunder or to insist upon strict compliance by any other party
shall not constitute a waiver of any party's right to demand exact compliance
with any of the terms or provisions hereof.
10.10 Severability of Provisions. The provisions of this Agreement shall be
considered severable in the event that any of such provisions are held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable.
Such invalid, void or otherwise unenforceable provisions shall be automatically
replaced by other provisions which are valid and enforceable and which are as
similar as possible in term and intent to those provisions deemed to be invalid,
void or otherwise unenforceable and the remaining provisions hereof shall remain
enforceable to the fullest extent permitted by law.
10.11 Headings. The headings set forth in the articles and sections of this
Agreement and in the exhibits and the schedules to this Agreement are inserted
for convenience of reference only and shall not be deemed to constitute a part
hereof.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement or have
caused this Agreement to be executed and delivered on the date and year first
above written.
PACIFIC FUEL CELL CORP.
By: s/Xxxxxx Suzuki
----------------------------------
Xxxxxx Suzuki, President
CELLFOODS CORPORATION
By: s/Xxxx Xxxxxx
----------------------------------
Xxxx Xxxxxx, President
PFCE ACQUISITION CORP.
By: s/Xxxxxx Suzuki
----------------------------------
Xxxxxx Suzuki, President
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COMPANY DISCLOSURE SCHEDULE
---------------------------
C-35
The following are exceptions to the representations and warranties made by
Pacific Fuel Cell Corp. ("Company") and PFCE Acquisition Corp. ("Acquisition")
in Section 4.1 of the Agreement and Plan of Merger dated as of May 14, 2004 (
the "Agreement") by and among the Company, Acquisition and Cellfoods
Corporation, which exceptions along with any disclosure in the Reports (as
defined in the Agreement) shall be deemed to be representations and warranties
as if made under the Agreement. To the extent any exception is disclosed
pursuant to any specific section of the Agreement designated below, it shall be
deemed to be disclosed for any and all purposes under any other sections of the
Agreement where such disclosure on its face would be deemed reasonably to apply.
Where the terms of a lease, contract, agreement or other disclosure item have
been summarized or described in this Company Disclosure Schedule, such summary
or description does not purport to be a complete statement of the material terms
of such lease, contract, agreement or other item. Terms defined in the Agreement
shall have the same meanings when used herein unless otherwise defined. The
inclusion of any item hereunder shall not be deemed an admission by the Company
that such item is material to the business, assets, results of operations,
prospectus or affairs of the Company, nor shall it be deemed an admission of any
obligation or liability to any third party.
Section 4.1(a):
1. None
Section 4.1(c):
1. The term of the agreement is September 1, 2003 to August 31, 2004. The
consultant will be paid a total of $30,000 and receive a 2 year option to
purchase 100,000 shares of the Company's common stock at $0.05 per share only if
the Company is successful at obtaining a grant it has applied for. If a
successful fuel cell prototype ("prototype") is constructed the consultant will
receive an additional 2 year option to purchase 100,000 shares at $0.05 per
share and will also receive 5% of any equity funds raised by the Company after
and directly related to, the successful prototype. As of December 31, 2003, the
related prototype has not yet been developed, and accordingly, no amounts have
been expended for such consulting services and no options have been granted
pursuant to this agreement.
Section 4.1(g):
1. None
Section 4.1(h):
1. None
Section 4.1(l)
1. None
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Section 4.1 (m)
1. None
Section 4.1 (p)
1. None
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Schedule 4.2(d)
PRCO Financial Statements
BALANCE SHEET
C-51
Schedule 4.2(d) cont'd.
PRCO Financial Statements
STATEMENTS OF OPERATIONS
C-52
Schedule 4.2(i)
PRCO Legal Proceedings
None
C-53
Schedule 4.2(g)
PRCO Liabilities
None
C-54
Schedule 4.2(m)
PRCO Absence of Certain Changes or Events
None
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Schedule 4.2(n)
PRCO Compliance with Law
None
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EXHIBIT 2.2(a)
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of May 14, 2004, by and among
Pacific Fuel Cell Corp., a Nevada corporation with its principal place of
business at 000 X. Xxxxxx Xxx., Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000 (the
"Company"); Gottbetter & Partners, LLP, with its principal place of business at
000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000 (the "Escrow Agent"); and HEM Mutual
Assurance LLC, a Minnesota limited liability company with offices at 00 Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx, Xxxxxxxxx 00000 (the "Purchaser").
Recitals
A. Immediately preceding the execution of this Agreement, the Purchaser and
Cellfoods Corporation, a Nevada corporation ("PRCO") entered into a Convertible
Debenture Purchase Agreement (the "Purchase Agreement"), dated as of the date
hereof and incorporated herein by reference, pursuant to which PRCO issued and
sold and the Purchaser purchased the Debentures.
B. Simultaneous with the execution of this Agreement, the Company has
entered into an Agreement and Plan of Merger (the "Merger Agreement"),
incorporated herein by reference, with PRCO and PFCE Acquisition Corp., a Nevada
corporation ("Acquisition"), pursuant to which Acquisition will be merged with
and into PRCO (the "Merger") making PRCO the surviving corporation in the Merger
and a wholly-owned subsidiary of the Company.
C. Pursuant to the Merger, the Company has agreed to assume all of PRCO's
obligations to the Purchaser under the Purchase Agreement and the PRCO
Debentures, to issue the Company Escrow Shares (as defined in the Merger
Agreement) into escrow with the Escrow Agent in order to replace the Escrow
Shares (as defined in the Purchase Agreement) and for purposes of conversions of
the PRCO Debentures and Purchaser has agreed to such assumption and related
transactions.
D. In connection with the foregoing, the Escrow Agent has agreed to
continue to act as Escrow Agent for the PRCO Debentures (both the First
Debenture and the Second Debenture and the Company Escrow Shares) in the same
manner and to the same extent that it previously agreed to act as Escrow Agent
for the PRCO Debentures and the Escrow Shares.
E. The Company has granted the Escrow Agent a limited power of attorney
(the "Power of Attorney") with respect to the PRCO Debentures and the Company
Escrow Shares (collectively the "Securities"), in the form attached hereto as
Appendix I.
F. The Escrow Agent is willing to act as escrow agent pursuant to the terms
of this Agreement with respect to the Securities.
G. All capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Merger Agreement.
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NOW, THEREFORE, IT IS AGREED:
1. Procedure for Escrow. The procedures of the escrow shall be governed by
the provisions of Article 2 of the Purchase Agreement and Exhibit E thereto,
Section 2.2 of the Merger Agreement and Sections 2, 3, 4 and 5 of the PRCO
Debentures, all of which are incorporated herein.
2. Terms of Escrow. The terms of the escrow shall be governed by Article 4
of the Purchase Agreement, Article 2 of the Merger Agreement and Sections 2, 3,
4 and 5 of the PRCO Debentures, all of which are incorporated herein.
3. Duties and Obligations of the Escrow Agent.
(a) The parties hereto agree that the duties and obligations of the
Escrow Agent shall be only those obligations herein specifically provided and no
other. The Escrow Agent's duties are those of a depositary only, and the Escrow
Agent shall incur no liability whatsoever, except as a direct result of its
willful misconduct or gross negligence in the performance of its duties
hereunder;
(b) The Escrow Agent may consult with counsel of its choice, and shall
not be liable for any action taken, suffered or omitted to be taken by it in
good faith in accordance with the advice of such counsel;
(c) The Escrow Agent shall not be bound in any way by the terms of any
other agreement to which the Purchaser and the Company are parties, whether or
not the Escrow Agent has knowledge thereof, and the Escrow Agent shall not in
any way be required to determine whether or not any other agreement has been
complied with by the Purchaser and the Company, or any other party thereto. The
Escrow Agent shall not be bound by any modification, amendment, termination,
cancellation, rescission or supersession of this Agreement unless the same shall
be in writing and signed by the Purchaser and the Company and agreed to in
writing by the Escrow Agent;
(d) If the Escrow Agent shall be uncertain as to its duties or rights
hereunder or shall receive instructions, claims or demands which, in its
opinion, are in conflict with any of the provisions of this Agreement, the
Escrow Agent shall be entitled to refrain from taking any action other than
keeping safely the Consideration (as defined below) or take action it deems
until the Escrow Agent is directed otherwise in writing jointly by the Purchaser
and the Company or by a final judgment of a court of competent jurisdiction;
(e) The Escrow Agent shall be fully protected in relying upon any
written notice, demand, certificate or document which the Escrow Agent, in good
faith, believes to be genuine. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents or securities now or hereafter deposited hereunder or of any
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement;
C-58
(f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to defend any legal
proceedings which may be instituted against it or in respect of the
Consideration;
(g) If the Escrow Agent at any time, in its sole discretion, deems it
necessary or advisable to relinquish custody of any of the Securities (to the
extent delivered to the Escrow Agent pursuant hereto, the "Consideration"), it
may do so by delivering the same to another Person that agrees to act as escrow
agent hereunder and whose substitution for the Escrow Agent is agreed upon in
writing by the Purchaser and the Company. If no such escrow agent is selected
within ten (10) days after the Escrow Agent gives notice to the Purchaser and
the Company of the Escrow Agent's desire to so relinquish custody of the
Consideration and resign as Escrow Agent, then the Escrow Agent may do so by
delivering the Consideration to the clerk or other proper officer of a state or
federal court of competent jurisdiction situate in the state and county of New
York. The fee of any court officer shall be borne by the Company. Upon such
delivery, the Escrow Agent shall be discharged from any and all responsibility
or liability with respect to the Consideration and this Agreement and each of
the Company and the Purchaser shall promptly pay all monies it may owe to the
Escrow Agent for its services hereunder, including, but not limited to,
reimbursement of its out-of-pocket expenses;
(h) This Agreement shall not create any fiduciary duty on the Escrow
Agent's part to the Purchaser or the Company, nor disqualify the Escrow Agent
from representing either party hereto in any dispute with the other, including
any dispute with respect to the Consideration; provided, however, that in the
event of such dispute, the Escrow Agent shall have the right to commence an
interpleader action in any court of competent jurisdiction of the State of New
York or of the United States located in the county and State of New York and
deposit the Consideration with such court;
(i) The parties acknowledge and agree that the Escrow Agent is
counsel to the Purchaser. The parties agree to, and agree not to object to, the
Escrow Agent's engagement as Escrow Agent hereunder;
(j) Upon the performance of this Agreement, the Escrow Agent shall be
deemed released and discharged of any further obligations hereunder.
(k) The Escrow Agent agrees to perform its obligations hereunder in
accordance with the provisions of Sections 1 and 2 hereof.
4. Indemnification.
(a) The Purchaser hereby indemnifies and holds free and harmless the
Escrow Agent from any and all losses, expenses, liabilities and damages
(including but not limited to reasonable attorney's fees, and amounts paid in
settlement) resulting from claims asserted by the Company against the Escrow
Agent with respect to the performance of any of the provisions of this
Agreement;
(b) The Company hereby indemnifies and holds free and harmless the
Escrow Agent from any and all losses, expenses, liabilities and damages
(including but not limited to reasonable attorney's fees, and amount paid in
settlement) resulting from claims asserted by the
C-59
Purchaser against the Escrow Agent with respect to the performance of any of the
provisions of this Agreement;
(c) The Purchaser and the Company, jointly and severally, hereby
indemnify and hold the Escrow Agent harmless from and against any and all
losses, damages, taxes, (other than taxes related to the fee of the Escrow
Agent), liabilities and expenses that may be incurred by the Escrow Agent,
arising out of or in connection with its acceptance of appointment as the Escrow
Agent hereunder and/or the performance of its duties pursuant to this Agreement,
the Purchase Agreement, the Securities and the Power of Attorney, including, but
not limited to, all reasonable legal costs and expenses of the Escrow Agent
incurred defending itself against any claim or liability in connection with its
performance hereunder, provided that the Escrow Agent shall not be entitled to
any indemnity for any losses, damages, taxes, liabilities or expenses that
directly result from its willful misconduct or gross negligence in its
performance as Escrow Agent hereunder.
(d) In the event of any legal action or proceeding involving any of
the parties to this Agreement which is brought to enforce or otherwise
adjudicate any of the rights or obligations of the parties hereunder, the
non-prevailing party or parties shall pay the reasonable legal fees of the
prevailing party or parties and the reasonable legal fees, if any, of the Escrow
Agent.
5. Miscellaneous.
(a) Any notice, request, demand, waiver, consent, approval, or other
communication which is required or permitted to be given to any party hereunder
shall be in writing and shall be deemed given only if delivered to the party
personally or via courier or sent to the party by facsimile upon electronic
confirmation and receipt (promptly followed by a hard-copy delivered in
accordance with this Section 5(a)) or three days after being mailed by
registered or certified mail (return receipt requested), or if sent by
nationally recognized overnight courier, one day after being mailed, in each
case with postage and registration or certification fees thereon prepaid,
addressed to the party at its address set forth below:
(i) If to the Company: Pacific Fuel Cell Corp.
000 X. Xxxxxx Xxx.
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000 Fax:
(ii) If to the Purchaser: See Schedule 1 to the Purchase
Agreement.
With copies to Gottbetter & Partners, LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
C-60
(ii) If to the Escrow Agent: Gottbetter & Partners, LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the state of New York applicable to contracts
entered into and performed entirely within New York, without giving effect to
the principles of New York law relating to the conflict of laws.
(b) This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
(c) This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. The assignment by a
party of this Agreement or any rights hereunder shall not affect the obligations
of such party under this Agreement.
(d) Any fees and expenses required to be paid by any party hereunder
shall be limited to reasonable and necessary fees and expenses
(e) This Agreement and the other agreements and documents referenced
herein contain the entire agreement among the parties hereto with respect to the
transactions described herein and supercedes all prior agreements with respect
thereto, whether written or oral.
6. Termination of Escrow. The term of this Escrow Agreement shall begin
upon the date hereof and shall continue until the earlier to occur of (i) full
conversion of the PRCO Debentures (ii) the Maturity Date, and (iii) the written
agreement of the parties to terminate this Agreement. Upon the termination of
this Escrow Agreement, the Escrow Agent shall return any of the Consideration
then held by it to the Company or the Purchaser, as applicable pursuant to the
Merger Agreement and all other documents executed in connection therewith, the
Purchase Agreement and the other Transaction Documents.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed the day and year first above written.
Escrow Agent: The Company:
Gottbetter & Partners, LLP PACIFIC FUEL CELL CORP.
By: s/Xxxx Xxxxxxxxxx By: s/Xxxxxx Suzuki
----------------------------------- --------------------------------
Xxxx Xxxxxxxxxx, Managing Partner Xxxxxx Suzuki,
President
HEM MUTUAL ASSURANCE LLC
By: s/Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Manager
C-62
APPENDIX I
FORM 26/33-DPOA/S-97 Power of Attorney; Statutory Short Form, Revised 1/1/97 o
(with Affidavit of Effectiveness (C)
CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT -
THIS INSTRUMENT SHOULD BE USED BY LAWYERS ONLY
DURABLE GENERAL POWER OF ATTORNEY
NEW YORK STATUTORY SHORT FORM
THE POWERS YOU GRANT BELOW CONTINUE TO BE EFFECTIVE
SHOULD YOU BECOME DISABLED OR INCOMPETENT
CAUTION: THIS IS AN IMPORTANT DOCUMENT IT GIVES THE PERSON WHOM YOU DESIGNATE
(YOUR "AGENT") BROAD POWERS TO HANDLE YOUR PROPERTY DURING YOUR LIFETIME WHICH
MAY INCLUDE POWERS TO MORTGAGE, SELL, OR OTHERWISE DISPOSE OF ANY REAL OR
PERSONAL PROPERTY WITHOUT ADVANCE NOTICE TO YOU OR APPROVAL BY YOU. THESE POWERS
WILL CONTINUE TO EXIST EVEN AFTER YOU BECOME DISABLED OR INCOMPETENT. THESE
POWERS ARE EXPLAINED MORE FULLY IN NEW YORK GENERAL OBLIGATIONS LAW, ARTICLE 5,
TITLE 15, SECTION 5-1502A THROUGH 5-1503 WHICH EXPRESSLY PERMIT THE USE OF ANY
OTHER OR DIFFERENT FORM OF POWER OF ATTORNEY.
THIS DOCUMENT DOES NOT AUTHORIZE ANYONE TO MAKE MEDICAL OR OTHER HEALTH CARE
DECISIONS. YOU MAY EXECUTE A HEALTH CARE PROXY TO DO THIS.
(IF THERE IS ANYTHING ABOUT THIS FORM THAT YOU DO NOT UNDERSTAND, YOU SHOULD ASK
A LAWYER TO EXPLAIN IT TO YOU.)
THIS is intended to constitute a DURABLE GENERAL POWER OF ATTORNEY pursuant to
Article 5, Title 15 of the New York General Obligations Law:
PACIFIC FUEL CELL CORP., with an address at
000 X. Xxxxxx Xxx., Xxxxx 000, Xxxxxx, XX 00000
(insert your name and address)
does hereby appoint: Xxxx X. Xxxxxxxxxx with an address at c/o Gottbetter &
Partners, LLP, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000
(If 1 person is to be appointed agent,
insert the name and address of your agent above)
(If 2 or more persons are to be appointed agents by you insert their
names and addresses above.)
my attorney(s)-in-fact TO ACT (If more than one agent is designated, CHOOSE ONE
of the following two choices by putting your initials in ONE of the blank spaces
to the left of your choice;)
( ) Each agent may SEPARATELY act.
( ) All agents must act TOGETHER.
(If neither blank space is initialed, the agents will be required to act
TOGETHER)
IN MY NAME, PLACE AND XXXXX in any way which I myself could do, if I were
personally present, with respect to the following matters as each of them is
defined in Title 15 of Article 5 of the New York General Obligations Law to the
extent that I am permitted by law to act through an agent:
(DIRECTIONS: Initial in the blank space to the left of your choice any one or
more of the following lettered subdivisions as to which you WANT to give your
agent authority. If the blank space to the left of any particular lettered
subdivision is NOT initialed, NO AUTHORITY WILL BE GRANTED for matters that are
included in that subdivision. Alternatively, the letter corresponding to each
power you wish to grant may be written or typed on the blank line in subdivision
"(Q)", and you may then put your initials in the blank space to the left of
subdivision "(Q)" in order to grant each of the powers so indicated)
( ) (A) real estate transactions; ( ) (M) making gifts to my
( ) (B) chattel and goods transactions; spouse, children and more
(X) (C) bond, share and commodity transactions; remote descendants, and
( ) (D) banking transactions; parents, not to exceed in
( ) (E) business operating transactions; the aggregate $10,000 to
( ) (F) insurance transactions; each of such persons in
( ) (G) estate transactions; any year;
( ) (H) claims and litigation; ( ) (N) tax matters;
( ) (I) personal relationships and affairs; ( ) (O) all other matters;
( ) (J) benefits from military service; ( ) (P) full and unqualified
( ) (K) records, reports and statements; authority to my
( ) (L) retirement benefit transactions; attorney(s)-in-fact to
delegate any or all of
the foregoing powers to
any person or persons
whom my attorney(s)-in-
fact shall select;
( ) (Q) each of the matters
identified by the
following letters:
(Special provisions and limitations may be included in the statutory short form
durable power of attorney only if they conform to the requirements of Section
5-1503 of the New York General Obligations Law.)
SEE ATTACHMENT A
Special Additional Provisions: The powers granted under (A) through (C) above
shall include the sale of a cooperative housing unit and are enlarged so that
all fixtures and articles of personal property which at the time of such
transaction are or which may thereafter be attached to or used in connection
with the real or personal property may be included in the agreements or other
instruments to be executed and delivered in connection with any transactions and
which may be described in said instruments with more particularity. This Power
of Attorney is not subject to question because an instrument executed hereunder
fails to recite or recites only nominal consideration paid therefore and any
person dealing with the subject matter of such instrument may do so as if full
consideration had been expressed therein.
This durable power of attorney shall not be affected by my subsequent disability
or incompetence. If every agent named above is unable or unwilling to serve, I
appoint
residing at
(insert name and address of successor)
to be my agent for all purposes hereunder. JUD 134
C-63
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, I HEREBY AGREE THAT ANY THIRD PARTY
RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT
HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO
SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION
OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND I FOR MYSELF
AND FOR MY HEIRS, EXECUTORS, LEGAL REPRESENTATIVES AND ASSIGNS, HEREBY AGREE TO
INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL
CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY
HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
THIS DURABLE GENERAL POWER OF ATTORNEY MAY BE REVOKED BY ME AT ANY TIME.
IN WITNESS WHEREOF I have hereunto signed my name this __nd day of May, 2004.
PACIFIC FUEL CELL CORP.
(YOU SIGN HERE:) [ ] By:______________________________________,
Chief Executive Officer
(Signature of principal)
The statute requires that this instrument be acknowledged by the principal. No
express provision is made for proof by subscribing witness.
STATE OF COUNTY OF ) ss.: STATE OF COUNTY OF ) ss.:
On the day of , 2004, On the day of , 2004,
before me personally came before me personally come
to me known to be the individual to be known to be the individual
described in and who executed the described in and who executed the
foregoing instrument and acknowledged foregoing instrument and acknowledged
that he executed same. that he executed the same.
AFFIDAVIT OF EFFECTIVENESS(C)
STATE OF COUNTY OF ) ss.:
Xxxx X. Xxxxxxxxxx, residing at 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, being duly sworn does depose and say that I am the Attorney-in-Fact
under the above Power of Attorney. That said Power of Attorney is a valid and
subsisting Power which has not been revoked by the death of the principal(s) or
otherwise; that I have no actual knowledge of a revocation of the foregoing
Power; and, I warrant and represent that I have full and unqualified authority
to execute the documents relating to the release of common stock of Pacific Fuel
Cell Corp. held in escrow knowing that Computershare Trust Co., Inc. as transfer
agent and Gottbetter & Partners, LLP as escrow agent , will rely upon the
representations made herein as inducement to accept such instrument(s) and this
Power of Attorney as evidence of my authority to act.
Attorney in Fact
SWORN AND SUBSCRIBED TO BEFORE ME THIS DAY OF , 200
(Notary Affix Stamp at Right)
Durable General Power of Attorney DISTRICT
REVISED STATUTORY SHORT FORM SECTION
BLOCK
TITLE NO. LOT
COUNTY OR TOWN
RECORDED AT THE REQUEST OF
---------------------------------------
RETURN BY MAIL TO:
RESERVED FOR RECORDING OFFICE USE
C-64
DURABLE POWER OF ATTORNEY
NEW YORK STATUTORY SHORT FORM
DATED MAY 14, 2004
BY PACIFIC FUEL CELL CORP. (the "Company")
ATTACHMENT A
The attached power of attorney is limited by and subject to the terms and
conditions of the Convertible Debenture Purchase Agreement by and between
Cellfoods Corporation ("PRCO") and HEM Mutual Assurance LLC (the "Purchaser")
dated May 14, 2004 (the "Purchase Agreement"), the Escrow Agreement by and among
Pacific Fuel Cell Corp. (the "Company"), Gottbetter & Partners, LLP and the
Purchaser dated May 14, 2004 (the "Escrow Agreement"), and the Agreement and
Plan of Merger dated May 14, 2004 by and between the Company, PFCE Acquisition
Corp. and PRCO (the "Merger Agreement") and, to be issued in accordance with the
Merger Agreement, the PRCO Debentures and the Company Escrow Shares, and such
power of attorney can only be acted upon to enforce the rights of the Purchaser
and its successors and assigns under the Purchase Agreement, the Merger
Agreement and the PRCO Debentures, and to grant the appointed agent the power to
deliver the opinions of counsel in substantially the same form as the opinions
contained in Exhibits 6.1(b) and 6.1(c) to the Merger Agreement, in connection
with the issuance and delivery of shares of the Company Common Stock, removing
stop transfer orders and restrictions, and replenishing the Company Escrow
Shares under and in accordance with the aforementioned documents.
All capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Merger Agreement.
This power of attorney shall expire upon the full and complete satisfaction
of all of the Company's obligations under the Escrow Agreement and the PRCO
Debentures.
IN WITNESS WHEREOF, I have hereunto signed my name this day of May, 2004.
PACIFIC FUEL CELL CORP.
By:
-------------------------------------
Name:
Title:
Signed and sworn to before me on
, 2004
--------------------------
------------------------------------
Notary Public
C-65
EXHIBIT 6.1(a)
PACIFIC FUEL CELL CORP.
OFFICER'S CERTIFICATE
---------------------
I, Xxxxxx Suzuki, being the President of Pacific Fuel Cell Corp., a Nevada
corporation (the "Company"), pursuant to Section 6.1(a) of that certain
Agreement and Plan of Merger (the "Merger Agreement"), dated as of May 14, 2004,
by and between the Company, PFCE Acquisition Corp. and Cellfoods Corporation, do
hereby certify on behalf of the Company that attached hereto is a copy of the
resolutions duly adopted by the Board of Directors of the Company authorizing
the execution, delivery and performance of the Merger Agreement and all exhibits
and documents related thereto by the Company and all other necessary or proper
corporate action to enable the Company to comply with the terms thereunder.
IN WITNESS WHEREOF, I have executed this Officer's Certificate on behalf of
the Company this __ day of May, 2004.
PACIFIC FUEL CELL CORP.
By: _______________________________
C-66
EXHIBIT 6.1(b)
May 14, 2004
CONFIDENTIAL
------------
Cellfoods Corporation
0000 Xxxxxx Xxxxxx, Xxxxx X
Xxxxxxxx, XX 00000
Re: Agreement and Plan of Merger by and among Pacific Fuel Cell Corp.,
------------------------------------------------------------------
PFCE Acquisition Corp., and Cellfoods Corporation
-------------------------------------------------
Gentlemen:
This opinion is furnished to you pursuant to Section 6.1(b) of the
Agreement and Plan of Merger, dated May 14, 2004 (the "Merger Agreement"), by
and among (i) Pacific Fuel Cell Corp., a corporation organized under the laws of
Nevada ("Parent"), (ii) PFCE Acquisition Corp., a Nevada corporation and a
wholly owned subsidiary of Parent ("Acquisition"), and (iii) Cellfoods
Corporation, a corporation organized under the laws of Nevada ("PRCO"). We have
acted as counsel to Parent and Acquisition in connection with the preparation,
execution and delivery of the Merger Agreement and the Escrow Agreement, dated
May 14, 2004, among Parent, Gottbetter & Partners, LLP, as escrow agent, and HEM
Mutual Assurance LLC (the "Escrow Agreement") referred to in Section 2.2(a) of
the Merger Agreement. Capitalized terms used and not otherwise defined herein
have the meanings assigned to them in the Merger Agreement.
In connection with this opinion, we have examined original or reproduced or
certified copies of such records of Parent and Acquisition, certificates of
public officials, officers and representatives of Parent and Acquisition and
such other instruments and documents as we have deemed necessary to form the
basis for the opinion hereinafter expressed.
As to various matters of fact relevant to our opinion, we have relied upon
representations and warranties of representatives of Parent and Acquisition
(including representations and warranties made in or pursuant to the Merger
Agreement) and certificates and statements of public officials and officers and
other representatives of Parent and Acquisition.
Based upon the foregoing, and subject to the assumptions, exceptions and
qualifications set forth herein, we are of the opinion that:
C-67
1. Parent is a corporation validly existing in good standing under the laws of
the State of Nevada. Acquisition is corporation validly existing in good
standing under the laws of the State of Nevada. Parent is qualified to transact
business and in good standing in the States of [ ] and [other states].
2. Parent and Acquisition have all necessary corporate power and authority to
execute and deliver the Merger Agreement and Parent has all necessary corporate
power and authority to execute and deliver the Escrow Agreement. The execution
and delivery by Parent and Acquisition of the Merger Agreement have been duly
authorized by all necessary corporate action required on the part of Parent and
Acquisition. The execution and delivery by Parent of the Escrow Agreement have
been duly authorized by all necessary corporate action required on the part of
Parent. The Merger Agreement has been duly executed and delivered by Parent and
Acquisition and constitutes a valid and binding obligation of Parent and
Acquisition, enforceable against Parent and Acquisition in accordance with its
terms. The Escrow Agreement has been duly executed and delivered by Parent and
constitutes a valid and binding obligation of Parent, enforceable against Parent
in accordance with its terms.
3. As of the date hereof, immediately prior to the effective time of the Merger,
the Parent's authorized capital stock consists of (a) [ ] shares of common
stock, par value $.001 per share (the "Common Stock"), of which approximately [
] shares are issued and outstanding, and (b) [ ] shares of preferred stock, par
value $.01 per share, of which [ ] shares of [ Preferred Stock] are issued and
outstanding. No shares of the Common Stock are entitled to statutory preemptive
rights. Except as specifically disclosed in Schedule 4.1(c) to the Merger
Agreement, to our knowledge, there are no outstanding options, warrants, rights
to subscribe to, registration rights, calls or commitments relating to, or,
except as a result of the purchase and sale of the PRCO Debentures, securities,
rights or obligations convertible into or exchangeable for, or giving any person
any right to subscribe for or acquire, any shares of Common Stock, or contracts
or commitments by which Parent is bound to issue additional shares of the Common
Stock, or securities or rights convertible into or exchangeable for shares of
the Common Stock, except as otherwise provided in the Merger Agreement.
4. Parent has duly authorized and reserved for issuance such number of shares of
the Common Stock as are issuable upon conversion of the PRCO Debentures (the
"Underlying Shares") and, to the extent that the number of the Underlying Shares
may exceed the aggregate number of the Escrow Shares deposited in escrow
pursuant to the Escrow Agreement (such excess shares, if any, the "Excess
Shares"), such number of Excess Shares as are required pursuant to the PRCO
Debentures and the Merger Agreement. The Escrow Shares and the Excess Shares,
when issued pursuant to the terms of the PRCO Debentures, the Merger Agreement
and the Escrow Agreement, will be validly issued, fully paid and non-assessable.
5. The execution and delivery of the Merger Agreement by Parent and PRCO
Acquisition, and the execution and delivery of the Escrow Agreement by Parent,
and the performance by them of the terms thereof, do not conflict with or
violate any judgment, decree, order, rule or regulation known to us of any court
or governmental body of the State of Nevada or the United States of America
having jurisdiction over Parent or Acquisition.
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6. The execution and delivery of the Merger Agreement by Parent and Acquisition,
and the execution and delivery of the Escrow Agreement by Parent, and the
performance by them of the terms thereof, do not violate, to our knowledge, any
provision of any applicable law, rule or regulation of the State of Nevada or
the United States of America, which violation is reasonably expected to have a
Material Adverse Effect. To our knowledge, except as disclosed in Schedule
4.1(b) to the Merger Agreement, neither the execution, delivery and performance
of the Merger Agreement by Parent or Acquisition, nor the execution, delivery
and performance of the Escrow Agreement by Parent, have resulted in any
violation of, or constituted a default under (or an event which with the passage
of time or the giving of notice or both would constitute a default under) any
contract, agreement, instrument, judgment or decree binding upon Parent or
Acquisition known to us, which violation or default is reasonably expected to
have a Material Adverse Effect.
7. To our knowledge, no lawsuit, governmental investigation or legal,
administrative or arbitration action or proceeding is pending or threatened
against Parent or Acquisition which questions the validity of the Merger
Agreement or the Escrow Agreement or seeks to prohibit, enjoin or otherwise
challenge the consummation of the transactions contemplated thereby.
8. No consent or approval of or filing with any governmental authority of the
State or Nevada or the United States of America is required (a) for Parent or
Acquisition to execute and deliver the Merger Agreement or to perform the terms
thereof, or (b) for Parent to execute and deliver the Escrow Agreement or
perform the terms thereof, except for the filing of registration statements and
periodic reports with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended.
The opinion set forth above is subject to the following further
qualifications and limitations:
1. In rendering the opinion in paragraph 1 above, we have relied solely
on certificates of good standing of the Secretaries of State of the
State of Nevada;
2. The enforceability of the Merger Agreement and the Escrow Agreement
may be subject to or limited by bankruptcy, insolvency, moratorium,
reorganization, fraudulent conveyance or other similar laws and court
decisions affecting or relating to the enforcement of creditors'
rights generally;
3. The enforceability of the Merger Agreement and the Escrow Agreement
are subject to the application of and may be limited by general
principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing (regardless
of whether such enforceability is considered in a proceeding in equity
or at law). Such principles of equity are of general application, and
in applying such principles a court, among other things, might decline
to order Parent or Acquisition to perform certain covenants.
4. The remedies of specific performance, injunction and other forms of
equitable relief are subject to certain limitations and defenses and
the discretion of the court before which any proceeding may be
brought;
5. We express no opinion as to the validity, binding nature or
enforceability of any provision in any documents which (i) purports to
waive any procedural due process rights, (ii) relates to choice of
governing law as it may be interpreted by any court other than a court
of the State of New York, (iii) waives any rights afforded to any
party under
C-69
any statute or constitutional provision, or (iv) waives broadly or
vaguely stated rights or future rights, or waives certain rights or
defenses to obligations, in each case where such waivers are against
statutes, laws or public policy;
6. Rights to indemnity and/or contribution under the Merger Agreement or
any obligation of PRCO assumed thereby may be limited by federal or
state securities laws or the public policy underlying such laws;
7. We express no opinion with respect to (i) the securities laws of any
jurisdiction, including the securities laws of the United States of
America or of any state (ii) the anti-trust laws of the United States
of America or of any state, (iii) patent, copyright, trademark or
other intellectual property laws or regulations of the United States
of America or of any state;
8. In rendering the opinion in paragraph 3 above, we have relied solely
on the disclosures in Parent's Annual Report on Form 10-KSB for the
Annual Period ended December 31, 2003, as updated by a certificate of
the President and Chief Executive Officer of Parent; and
9. As used in this opinion letter, "our knowledge," "known to us" or like
phrases shall mean the current, actual knowledge (without independent
investigation or verification) of attorneys in our firm who have been
involved with the negotiation, execution and delivery of the Merger
Agreement and Escrow Agreement based upon our limited representation
of Parent and Acquisition. We do not purport to have made nor have we
made any review of court or other public records (other than the
certificates of good standing referred to in clause (i) above) or
proceedings, or any specific review or investigation of Parent or
Acquisition or any affiliate thereof or any special inquiry of Parent
or Acquisition, any affiliate thereof, or any other Person.
We do not express any opinion with respect to any law other than the laws
of the State of [ ] and the federal laws of the United States of America that in
our experience are generally applicable to transactions of the type contemplated
by the Merger Agreement and the Escrow Agreement ("Applicable Law"), and we
express no opinion as to laws that are applicable as a result of the particular
business of any party to the Merger Agreement or the Escrow Agreement.
We note that Parent is organized under the laws of the State of Nevada and
that Acquisition is organized under the State of Nevada. We are not members of
the Bar of the State of Nevada, and thus, with your consent, the opinion
expressed herein is understood to be rendered as if Parent were organized under
the laws of the State of Nevada.
This opinion is furnished by us solely for your benefit in connection with
the transactions referred to in and contemplated by the Merger Agreement and may
not be circulated to, or quoted or relied upon by, any other person or for any
other purpose.
Very truly yours,
C-70
EXHIBIT 6.1(c)
May __, 2004
Cellfoods Corporation
0000 Xxxxxx Xxxxxx, Xxxxx X
Xxxxxxxx, XX 00000
Re: Supporting Legal Opinion for Request to Issue Free Trading
----------------------------------------------------------
Securities Pursuant to Rule 504 for Pacific Fuel Cell Corp.
-----------------------------------------------------------
Dear Sirs:
The undersigned has been retained as special securities and acquisition
counsel to Pacific Fuel Cell Corp., a Nevada corporation, ("PFCE") and Cellfoods
Corporation, a Nevada corporation ("PRCO"). We can advise you that prior to the
transactions referred to herein, PRCO was not affiliated with PFCE.
The subject of this letter are securities to be issued by PRCO on or about
May 14, 2004, pursuant to a Convertible Debenture Purchase Agreement ("Purchase
Agreement") dated May 14, 2004 between PRCO and the Investor (as defined below),
to wit, the PRCO 1% Convertible Debenture in the aggregate principal amount of
Nine Hundred Ninety Seven Thousand Dollars ($997,000) (the "First Debenture")
and the PRCO 1% Convertible Debenture in the aggregate principal amount of Three
Thousand Dollars ($3,000) (the "Second Debenture"; and, together with the First
Debenture, the "PRCO Debentures"), together with the underlying shares of the
PRCO common stock, par value $.001 (the "PRCO Common Stock"), into which the
PRCO Debentures are convertible, from time to time. The Purchase Agreement also
requires PRCO and/or its successor in interest, to issue 30,000,000 shares of
PRCO Common Stock as a "security stock" (the "Escrow Shares") in support of the
offer and sale of the PRCO Debentures. The PRCO Debentures, the PRCO Common
Stock and the Escrow Shares may be referred to collectively herein as the "PRCO
Securities."
The PRCO Debentures are to be issued to the accredited investor listed on
Exhibit A to this opinion, an accredited Minnesota resident or domiciliary (the
"Investor"). Under and pursuant to the terms of the PRCO Debentures and the
Purchase Agreement, the Investor may elect to convert all or some of the PRCO
Debentures into the PRCO Common Stock.
Following the issuance of the PRCO Debentures on or about May 14, 2004,
PFCE Acquisition Corp., a Nevada corporation ("Acquisition"), a wholly owned
subsidiary of PFCE, will be merged with and into PRCO (the "Merger") pursuant to
the Agreement and Plan of Merger dated as of May 14, 2004 by and among PFCE,
Acquisition and PRCO (the "Merger Agreement"). Pursuant to the Merger, the PRCO
Common Stock will be canceled and PFCE shall issue 30,000,000 shares of its
common stock, par value $0.001 per share (the "PFCE Common Stock") into escrow
pursuant to the terms of the Merger Agreement and the Purchase
C-72
Agreement as a "security stock" to replace the Escrow Shares (the "Security
Shares"). Up to all of the Security Shares and up to all of any additional
shares of PFCE Common Stock that may in the future be issued and deposited into
escrow by PFCE in accordance with the Purchase Agreement (the "Additional
Security Shares") may be released from escrow from time to time to the Investor
or its assigns to satisfy PFCE's obligations upon conversion of the Debentures
by the Investor or its assigns in accordance with the terms of the Purchase
Agreement and the Debentures. This letter addresses the validity of the issuance
of the Security Shares and Additional Security Shares and the delivery of the
Security Shares and Additional Security Shares to the Investor or its assigns
from time-to-time in accordance with the Merger Agreement, Purchase Agreement
and PRCO Debentures. The PRCO Debentures, PFCE Common Stock, Security Shares and
Additional Security Shares, are referred to collectively herein as the "PFCE
Securities."
You have requested that we provide you with separate legal opinions (i)
covering the issuance of the Security Shares and any Additional Security Shares
to the effect that the PRCO Debentures and the PRCO Common Stock, and the PFCE
Securities, as the case may be, may be issued without a restrictive legend and
may be freely traded; and (ii) covering the issuance of PFCE Common Stock as
Security Shares and Additional Security Shares pursuant to the terms of the
Merger Agreement, Purchase Agreement and the PRCO Debentures to the effect that
such shares (or any part thereof) may be issued and subsequently delivered to
the Investor or its assigns upon the receipt by PFCE of any notices of
conversion issued by the Investor or its assigns pursuant to the terms of the
Purchase Agreement and the PRCO Debentures without a restrictive legend and may
be freely traded. This opinion covers any issuance of PFCE Securities and the
delivery of the same to the Investor or its assigns in accordance with the terms
of the Purchase Agreement, the Merger Agreement and the PRCO Debentures.
A. Basis for Supporting Legal Opinion. The following is the basis for our
supporting legal opinion for the requested issuance and delivery of the PRCO
Securities and the PFCE Securities free of any restrictive legend.
1. Our review and analysis of Rule 504 of Regulation D of the
Securities Act of 1933 (the "Securities Act"), as revised, effective as of April
7, 1999; Chapter 80A of the Minnesota Statutes, 1986 (the "Minnesota Act"); and
the Regulations promulgated thereunder (the "Minnesota Regulations") which are
collectively referred to herein as the "Minnesota Statutes", as they apply to
the proposed issuance of the PRCO Securities and the PFCE Securities.
2. Our review and analysis of a resolution of the Board of Directors
of PRCO dated April __, 2004.
3. Our review and analysis of a resolution of the Board of Directors
of PFCE dated April __, 2004.
4. Our review of the Merger Agreement and the Certificate of Merger to
be filed pursuant to the Merger Agreement pursuant to which Acquisition is to be
merged with and
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into PRCO, pursuant to which PRCO will survive as a wholly-owned subsidiary of
PFCE , which review was taken in connection with our analysis of Section 3(a)(9)
of the Securities Act.
5. Our review and analysis of the Purchase Agreement and the Merger
and discussions with representatives of PRCO and the Investor that:
(a) the PRCO Securities are to be purchased by the Investor from
PRCO on or about April __, 2004;
(b) at the time the PRCO Securities were purchased, and within
the contemplation of Regulation D of the Securities Act,
(i) PRCO was not a "reporting company";
(ii) PRCO was not an "investment company";
(iii) PRCO was not a development stage company that either
had no specific business plan or purpose or had indicated that its business plan
was to engage in a merger or acquisition with an unidentified company or entity;
(iv) PRCO had not utilized Rule 504 within the last twelve
calendar months;
(v) the dollar amount of the offering of the PRCO Securities
(including the PRCO Securities) would not exceed $1,000,000.00; and
(vi) the Investor of the PRCO Securities qualifies as an
"accredited investor", the Investor was a bona fide resident of the State of
Minnesota, and was not, prior to, nor would be subsequent to, the Merger, an
"affiliate" of PRCO, Acquisition or PFCE.
B. New Rule 504. On April 7, 1999, revisions to Rule 504 went into effect
which prohibit general solicitation and general advertising of the offering by
the issuer and which provide that securities issued under the Rule will be
restricted, unless certain specified conditions are met. These conditions are:
1. The transaction is registered under a state law requiring public
filing and delivery of a disclosure document prior to sale;1 or
2. The securities are issued under a state law exemption that permits
general solicitation and general advertising so long as sales are made only to
"accredited investors" as the term is defined in Regulation D.
------------------------
1 For sales to occur in a state without such a state law, the transactions must
be registered in a state with such a law and the disclosure document filed in
that state must be delivered to all purchasers before sale in both states.
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Thus, if the securities are issued under a state law exemption that
permits general solicitation and general advertising (so long as sales are made
only to accredited investors), the securities are not restricted under Rule 504.
The PRCO Securities are to be sold only to an accredited investor.
C. Application of Minnesota Statutes. The PRCO Securities are to be
purchased by a resident of Minnesota (i.e., the Investor), who is an accredited
investor. Section 80A.15.2(a)(1) of the Minnesota Act specifically exempts from
the securities registration requirements of Section 80A.08 of the Minnesota Act,
offers and sales made to not more than 10 persons in Minnesota in any twelve
month period by the same issuer, under any exception under Section 3(b) of the
Securities Act. For purposes of counting the number of purchasers, Minnesota
Rule 2A75.0150 excludes from the calculation any accredited investor. Rule 504
of Regulation D is promulgated under Section 3(b) of the Securities Act. Still
further, Section 80A.15.2(a)(1) specifically permits general solicitation and
advertising if the securities are sold under an exemption under Section 3(b) of
the Securities Act.
Since the PRCO Common Stock will be sold to an accredited investor pursuant
to Rule 504, the PRCO Common Stock may be freely traded if it is issued
"[e]xclusively according to [a] state law exemption[] from registration [i.e.,
the Minnesota Statutes consisting of Section 80A.15.2(a)(1)] that permit[s]
general solicitation and general advertising so long as sales are made only to
`accredited investors'". Therefore, the PRCO Common Stock may be issued without
a restriction and may be freely traded pursuant to Rule 504. This includes the
issuance of the Escrow Shares under the Purchase Agreement and the Security
Shares and Additional Security Shares under the Merger Agreement and the
Purchase Agreement.
D. The Merger and Section 3(a) of the Securities Act. Prior to the Merger
of Acquisition into PRCO, the PRCO Securities were issued by PRCO to the
Investor. Pursuant to the Merger, the PRCO Common Stock will be canceled and
PFCE will issue to the Escrow Agent (as defined in the Purchase Agreement)
Security Shares, and potentially in the future Additional Security Shares, to
replace the Escrow Shares and into which the PRCO Debentures may be converted
and delivered to the Investor or its assigns pursuant to the terms of the
Purchase Agreement and PRCO Debentures. By virtue of operation of law and the
Merger Agreement, PFCE will assume and be responsible for all PRCO obligations,
including those of PRCO under and with respect to the PRCO Securities.
Section 3(a)(9) exempts any security exchanged by the issuer with "its"
security holders. The Commission has interpreted this language as requiring that
both the security issued and the security surrendered in the exchange be those
of the same issuer. According to Xxxxxxxxx Xxxxx,2 Section 3(a)(9) is available
for certain intracorporate reorganizations where the exchange of securities is
NOT made by the ORIGINAL issuer, where the security issued is that of issuer B
but the security surrendered is that of what was issuer A.
There are two related No-Action Letters which are virtually perfectly on
point. Pacwest Bancorp, SEC No-Action Letter. 1979 WL 14720 [1979-1980 Transfer
Binder] Fed. Sec. L.
-------------------------
2 Xxxxx, Exempted Transactions Under the Securities Act of 1933, West Group,
1999, Volume 7. See generally, section 2.04[1], beginning at page 2-35.
C-75
Rep. (CCH) Paragraph 82, 376 (October 24, 1979), and Pacwest Bancorp, SEC
No-Action Letter 1979 WL 13112 (October 12, 1979).
At the time of the proposed merger into a wholly-owned subsidiary of
Pacwest Bancorp ("Pacwest"), First State Bank ("First State") had issued and
outstanding, debentures that were convertible into its common stock. First State
was to be the surviving company. Under the merger agreement, Pacwest, a
multibank holding company, and First State were to enter into a supplemental
indenture with the trustees providing for the substitution of Pacwest common
stock for First State common stock as the underlying security into which the
debentures were convertible. Pacwest was to assume the obligation to issue its
common stock upon conversion of the debentures, but was not to assume the
obligations of First State to pay the debentures in accordance with their terms.
In relying on Section 3(a)(9) to exempt the issuance of Pacwest common upon
conversion of the debentures, counsel to Pacwest presented two reasons why its
client should be deemed the same issuer:
1. Pacwest should be deemed the issuer of the conversion privilege
that the debenture holders of First State possessed by reason of the
supplemental indenture; and
2. Pacwest should be considered as the issuer of the debentures by
assuming the obligations of First State with respect to conversion.
The SEC staff rejected both arguments and found Section 3(a)(9)
inapplicable. However, in a supplementary request to the staff, Pacwest
announced its intention to assume First State's obligation to pay principal,
interest, and premium, if any, on the debentures. On these new facts, which the
SEC staff noted were absent from the original no-action request, the staff
stated that Section 3(a)(9) applied.
According to Xxxxxxxxx Xxxxx, the SEC staff continues to follow the Pacwest
position and allows a person who seeks Section 3(a)(9) issuer status for
obligations it did not originate but subsequently assumes primary liability. The
original issuer might be affiliated or nonaffiliated with the new issuer. Under
either circumstance, the issuance of the parent's stock upon conversion of the
subsidiary's debt securities will constitute an exempted exchange.
Since PFCE will by operation of law and the Merger Agreement, assume and be
responsible for the payment of principal and interest on the PRCO Debentures,
the issuance of the PFCE Common Stock upon conversion of the PRCO Debentures
will constitute an exempt exchange.
Therefore, the subject transaction would be exempt from registration, and
the PFCE Securities, including the issuance of the Security Shares and
Additional Security Shares and the delivery of such shares to the Investor or
its assigns upon conversion of the PRCO Debentures in accordance with the terms
thereof, the Merger Agreement and the Purchase Agreement will remain freely
tradable.
C-76
E. Supporting Legal Opinion. Accordingly, based upon the above we are of
the opinion as follows with respect to the issuance of the PRCO Securities and
the PFCE Securities, including the Escrow Shares, the Security Shares and the
Additional Security Shares:
1. Assuming that the sale of the PRCO Securities (and the PFCE
Securities) does not exceed the aggregate amount of $1,000,000 (which to
our knowledge is correct based solely on our review of the Merger
Agreement, the Purchase Agreement and the PRCO Debentures), that the facts
given to us by management of both companies are true and correct, and that
the other conditions of Rule 504 and the applicable Minnesota Statutes (as
they relate to the facts given to us) are met (which to our knowledge is
correct based solely on our review of the Merger Agreement, the Purchase
Agreement and the PRCO Debentures), the issuance of the PRCO Securities
will be exempt from registration pursuant to Rule 504 of Regulation D and
the applicable Minnesota Statutes. Consequently, when issued, the PFCE
Securities may be issued without a restrictive legend, may be delivered to
the Investor or its assigns in accordance with the Purchase Agreement and
the PRCO Debentures, and may be freely traded except by affiliates of
either company.
2. Assuming that the sale of the PRCO Securities (and the PFCE
Securities) does not exceed the aggregate amount of $1,000,000.00 (which to
our knowledge is correct based solely on our review of the Merger
Agreement, the Purchase Agreement and the PRCO Debentures), that the
representations in the Purchase Agreement given to us are true and correct,
and that the other conditions of Rule 504 and the applicable Minnesota
Statutes (as they relate to the facts given to us) are met(which to our
knowledge is correct based solely on our review of the Merger Agreement,
the Purchase Agreement and the PRCO Debentures), the issuance of the PRCO
Securities will be exempt from registration pursuant to Rule 504 of
Regulation D, the applicable Minnesota Statutes, and Section 3(a)(9) of the
Securities Act. Consequently, when issued, the PFCE Securities may be
issued without a restrictive legend and may be freely traded except by
affiliates of either company. This would also include the issuance of the
Security Shares pursuant to the Merger Agreement and of the Additional
Security Shares pursuant to the Purchase Agreement and the delivery of any
such shares to the Investor or its assigns pursuant to the Purchase
Agreement and the PRCO Debentures.
3. Accordingly, pursuant to Rule 504, the applicable Minnesota
Statutes, and Section 3(a)(9) of the Securities Act, you may issue the PRCO
Securities and, subsequently, the PFCE Securities, without a restrictive
legend, and the PRCO Securities and the PFCE Securities are, and will be,
available for immediate resale by non-affiliates of PRCO and PFCE.
4. Finally, that PRCO and PFCE, through their respective Board of
Directors, have taken all necessary and required corporate action to cause
the issuance and delivery of the Security Shares in accordance with the
Merger Agreement. Further, that the Security Shares and Additional Security
Shares when issued in accordance with the Merger Agreement, the Purchase
Agreement and this opinion, will be duly authorized, validly issued and
non-assessable.
C-77
Our above opinions are subject to the following qualifications:
1. Members of our firm are qualified to practice law in the State of
California and we express no opinion as to the laws of any jurisdictions except
for those of California, the securities laws of Minnesota referred to herein and
the United States of America referred to herein. For the purposes of rendering
this opinion, we have assumed that if a court applies the laws of a jurisdiction
(other than the Minnesota securities laws referred to herein) other than the
laws of California, the laws of such other jurisdiction are identical in all
material respects to the comparable laws of the State of California.
2. The opinions set forth herein are expressed as of the date hereof and
remain valid so long as the documents, instruments, records and certificates we
have examined and relied upon as noted above, are unchanged and the assumptions
we have made, as noted above, are valid.
This opinion is furnished by us as special securities and acquisition
counsel to PRCO and may only be relied upon by you and Acquisition and in
connection with the issue of Security Shares or Additional Security Shares, by
your transfer agent in connection with any instruction letters from you to your
transfer agent regarding their authorization to issue shares of Security Shares
or additional Security Shares without restrictive legends. It may not be used or
relied upon by you for any other purpose or by any other person, nor may copies
be delivered to any other person, without in each instance our prior written
consent.
Please have all stock certificates issued in the name of the Investor shown
on Exhibit A delivered to the office of Gottbetter & Partners, LLP, 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxx Xxxxxxxxxx, Esq., as that firm is
acting on behalf of the issuer as closing escrow agent with respect to the
transaction referred to herein.
Very truly yours,
Hand & Hand
a professional corporation
C-78
EXHIBIT A
Principal Amount of
Name of Investor Purchase Price PRCO Convertible Debenture
HEM Mutual Assurance LLC $1,000,000 $1,000,000
Stock Certificate Denominations for the Security Shares:
1 certificate each for 5,000,000 shares
5 certificates each for 1,000,000 shares
20 certificates each for 500,000 shares
24 certificates each for 250,000 shares
25 certificates each for 100,000 shares
25 certificates each for 50,000 shares
25 certificates each for 10,000 shares
C-79
EXHIBIT 6.1(d)
Instruction Letter to Transfer Agent
------------------------------------
May 14, 2004
COMPUTERSHARE Trust Co., Inc.
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
RE: Pacific Fuel Cell Corp.
Dear Sirs:
The purpose of this letter is to authorize COMPUTERSHARE Trust Co., Inc. to
rely upon the attached legal opinion of Jehu Hand, in connection with the
issuance of 30,000,000 shares of Pacific Fuel Cell Corp. common stock. Jehu Hand
is acting as special counsel to Pacific Fuel Cell Corp. on a complex business
transaction.
Please do not hesitate to contact us for additional assistance with this
matter.
Sincerely yours,
PACIFIC FUEL CELL CORP.
By: __________________________
Xxxxxx Suzuki,
President
C-80
EXHIBIT 6.1(e)
PFCE ACQUISITION CORP.
OFFICER'S CERTIFICATE
---------------------
I, Xxxxxx Suzuki, being the President of PFCE Acquisition Corp., a Nevada
corporation (the "Company"), pursuant to Section 6.1(a) of that certain
Agreement and Plan of Merger (the "Merger Agreement"), dated as of May 14, 2004,
by and between the Company, Pacific Fuel Cell Corp. and Cellfoods Corporation,
do hereby certify on behalf of the Company that attached hereto is a copy of the
resolutions duly adopted by the Board of Directors of the Company authorizing
the execution, delivery and performance of the Merger Agreement and all exhibits
and documents related thereto by the Company and all other necessary or proper
corporate action to enable the Company to comply with the terms thereunder.
IN WITNESS WHEREOF, I have executed this Officer's Certificate on behalf of
the Company this __ day of May, 2004.
PFCE ACQUISITION CORP.
By:______________________________
C-81
EXHIBIT 6.1(f)
PACIFIC FUEL CELL CORP.
OFFICER'S CERTIFICATE
---------------------
I, Xxxxxx Suzuki, being the President of Pacific Fuel Cell Corp., a Nevada
corporation (the "Company"), pursuant to Section 6.1(f) of that certain
Agreement and Plan of Merger, dated as of May 14, 2004, by and between the
Company, PFCE Acquisition Corp., and Cellfoods Corporation ("PRCO") (the "Merger
Agreement"), do hereby certify on behalf of the Company as follows:
1. The representations and warranties of the Company contained in Section
4.1 of the Merger Agreement, as supplemented by the Schedules attached thereto,
were true, correct and complete in all material respects when made (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true, correct and complete in all
material respects as of such date) and are true, correct and complete in all
material respects as at the date hereof (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true, correct and complete in all material respects as of
such date).
2. The Company has satisfied in all material respects, all covenants and
agreements required to be satisfied by it under the Merger Agreement on or prior
to the date hereof except such as may have become waived by PRCO in accordance
with the Agreement.
IN WITNESS WHEREOF, I have executed this Officer's Certificate on or behalf
of the Company this __ day of May, 2004.
PACIFIC FUEL CELL CORP.
By: _____________________________
C-82
EXHIBIT 6.1(h)
PFCE ACQUISITION CORP.
OFFICER'S CERTIFICATE
---------------------
I, Xxxxxx Suzuki, being the President of PFCE Acquisition Corp., a Nevada
corporation (the "Company"), pursuant to Section 6.1(f) of that certain
Agreement and Plan of Merger, dated as of May 14, 2004, by and between the
Company, Pacific Fuel Cell Corp. and Cellfoods Corporation ("PRCO") (the "Merger
Agreement"), do hereby certify on behalf of the Company as follows:
1. The representations and warranties of the Company contained in Section
4.1 of the Merger Agreement, as supplemented by the Schedules attached thereto,
were true, correct and complete in all material respects when made (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true, correct and complete in all
material respects as of such date) and are true, correct and complete in all
material respects as at the date hereof (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true, correct and complete in all material respects as of
such date).
2. The Company has satisfied in all material respects, all covenants and
agreements required to be satisfied by it under the Merger Agreement on or prior
to the date hereof except such as may have become waived by PRCO in accordance
with the Agreement.
IN WITNESS WHEREOF, I have executed this Officer's Certificate on or behalf
of the Company this __ day of May, 2004.
PFCE ACQUISITION CORP.
By: _______________________
Xxxxxx Suzuki,
President
C-83
EXHIBIT 6.2(a)
Cellfoods Corporation
OFFICER'S CERTIFICATE
---------------------
I, Xxxx Xxxxxx, being the President and Chief Executive Officer of
Cellfoods Corporation, a Nevada corporation (the "Company"), pursuant to Section
6.2(a) of that certain Agreement and Plan of Merger (the "Merger Agreement"),
dated as of May 14, 2004, by and between the Company, PFCE Acquisition Corp. and
Pacific Fuel Cell Corp., do hereby certify on behalf of the Company that
attached hereto is a copy of the resolutions duly adopted by the Board of
Directors of the Company authorizing the execution, delivery and performance of
the Merger Agreement and all exhibits and documents related thereto by the
Company and all other necessary or proper corporate action to enable the Company
to comply with the terms thereunder.
IN WITNESS WHEREOF, I have executed this Officer's Certificate on behalf of
the Company this __ day of May, 2004.
Cellfoods Corporation
By:_________________________________
Xxxx Xxxxxx
President and Chief Executive Officer
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EXHIBIT 6.2(b)
May __, 2004
Pacific Fuel Cell Corp.
000 X. Xxxxxx Xxx.
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Suzuki, President
Gentlemen:
We have acted as counsel to Cellfoods Corporation, a Nevada corporation
("PRCO"), in connection with the Agreement and Plan of Merger (the "Agreement")
dated as of May 14, 2004, by and between PRCO, Pacific Fuel Cell Corp. (the
"Company") and PFCE Acquisition Corp., a wholly owned subsidiary of the Company.
The Agreement and all other documents, instruments, agreements and certificates
to be delivered pursuant thereto are herewith referred to as the "Transaction
Documents."
In connection with this opinion, we have examined the Transaction Documents
and such other documents, agreements and records of PRCO as in our judgment are
necessary or appropriate to enable us to render the opinions expressed below. In
our examination of such documents, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to the original documents of all documents submitted to us as
copies, and we have relied upon the aforesaid documents with respect to the
accuracy of material factual matters contained therein. We have also assumed,
without verification, the due authorization, execution and delivery by each
party thereto other than PRCO of each of the Transaction Documents and that such
agreements constitute the legal, valid and binding obligations of such parties,
and are enforceable against such parties in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by the exercise of judicial discretion in accordance with
general principles of equity.
As to factual matters relevant to our opinion which were not independently
established, we have also relied, without independent verification, on the
representations and warranties of PRCO contained in the Transaction Documents
and in certificates furnished by officers of PRCO in connection with the related
transactions, copies of which certificates are attached hereto.
C-85
In instances where we have expressed an opinion "to our knowledge," the
term "knowledge" refers to the actual knowledge of the attorneys at our firm who
have rendered legal services in connection with the Agreement and related
transactions, and we have not undertaken any independent investigation or made
inquiries of any outside third parties with respect to such matters.
Based upon the foregoing and subject to the assumptions, limitations,
qualifications and exceptions stated herein, we are of the opinion that:
(1) PRCO has been duly incorporated and is validly existing and in good
standing under the laws of the State of Nevada.
(2) Based upon representations of PRCO, as of the date hereof and after
giving effect to the Closing (as defined in the Agreement), the number of shares
of capital stock that PRCO is authorized to issue is 11,000,000 shares of common
stock, par value $.001 (the "Common Stock") and its issued and outstanding
capital stock consists of 11,000,000 shares of Common Stock, 550,000 shares of
which are outstanding and 30,000,000 of which are held in escrow pursuant to the
Purchase Agreement and will be canceled pursuant to the terms of the Merger
Agreement. All such outstanding shares of Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable. There are no
outstanding rights, options, warrants or other securities which may be
convertible into equity securities of PRCO other than the PRCO Debenture, which
PRCO issued to HEM Mutual Assurance LLC. There are no preemptive or other rights
to subscribe for or purchase any Common Stock or other securities of PRCO.
(3) PRCO has the full legal power and authority to enter into the
Agreement. The Agreement, and the completion of the transactions contemplated
thereby have been duly and validly authorized by all necessary corporate action
by PRCO. The Agreement has been duly and validly executed and delivered by and
on behalf of PRCO, is a valid and binding Agreement of PRCO and is enforceable
against PRCO in accordance with its terms. No approval, authorization, order,
consent, registration, filing, qualification, license or permit of or with any
court, regulatory, administrative or other governmental body is required for the
execution and delivery of the Agreement by PRCO or the completion of the
transactions contemplated by the Agreement.
(4) The execution and performance of the Agreement, and the consummation of
the transactions therein contemplated, did not and will not conflict with or
violate any law, statute, judgment, decree, order, rule or regulation of any
court or governmental body (including the Securities and Exchange Commission)
having jurisdiction over PRCO.
(5) No action, suit, claim, investigation or proceeding is pending or, to
our knowledge, threatened against PRCO.
The opinions expressed herein are subject to the following additional
limitations, qualifications and exceptions:
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(a) We disclaim any opinion as to (i) any provisions in any documents which
purport to waive any procedural due process rights, and (ii) any provisions
relating to choice of governing law, which choice may depend upon factual
circumstances and the laws of other jurisdictions.
(b) We note that we are members of the bar of the State of California. To
the extent that the governing law with respect to any matters covered by this
opinion is the law of any jurisdiction other than the state of California or the
federal securities law of the United States, we have assumed that the law of
such other jurisdiction is identical to California law.
(c) We express no opinion on the validity, binding effect or enforceability
under the provisions of the Transaction Documents: (i) which waive any rights
afforded to any party thereto under any statute or constitutional provision;
(ii) which waive broadly or vaguely stated rights or future rights, or waive
certain rights or defenses to obligations, in each case where such waivers are
against statutes, laws or public policy; (iii) that provide that injunctive
relief or specific performance may be available as a remedy for breach of any of
the Transaction Documents, or (iv) the breach of which a court of competent
jurisdiction concludes is not material or does not adversely affect the
non-breaching party.
(d) Insofar as the indemnity provisions of any of the Transaction Documents
may encompass indemnification with respect to violation of law, enforcement
thereof may be limited by public policies underlying such laws.
(e) Our opinions on the binding effect and enforceability of any obligation
are subject to limitations resulting from the effects of: (i) bankruptcy,
insolvency, reorganization, receivership, moratorium, fraudulent conveyance,
arrangement and assignment for the benefit of creditors laws and similar laws or
judicially developed doctrines, and (ii) general principles of equity, whether
applied by a court of law or a court of equity.
(f) We express no opinion on federal patent, copyright or trademark, state
trademark or other federal or state intellectual property laws or regulations.
This opinion is given as of the date hereof and is necessarily limited to
the laws now in effect and the facts and circumstances known to us on the date
hereof, and we do not undertake or assume any obligations, to review update or
supplement this opinion to reflect any facts, circumstances which may hereafter
come to our attention or any changes in laws which may hereafter occur.
These opinions are limited to the matters expressly stated herein and are
rendered solely for your benefit and may not be quoted or relied upon for any
other purpose or by any other person.
Very truly yours,
Hand & Hand, a professional corporation
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EXHIBIT 6.2(c)
May __, 2004
Pacific Fuel Cell Corp.
000 X. Xxxxxx Xxx.
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Suzuki, President
Re: Supporting Legal Opinion for Request to Issue Free Trading
Securities Pursuant to Rule 504 for Pacific Fuel Cell Corp.
-----------------------------------------------------------
Dear Sirs:
The undersigned has been retained as special securities and acquisition
counsel to Pacific Fuel Cell Corp., a Nevada corporation, ("PFCE") and Cellfoods
Corporation, a Nevada corporation ("PRCO"). We can advise you that prior to the
transactions referred to herein, PRCO was not affiliated with PFCE.
The subject of this letter are securities to be issued by PRCO on or about
May 14, 2004, pursuant to a Convertible Debenture Purchase Agreement ("Purchase
Agreement") dated May 13, 2004 between PRCO and the Investor (as defined below),
to wit, the PRCO 1% Convertible Debenture in the aggregate principal amount of
Nine Hundred Ninety Seven Thousand Dollars ($997,000) (the "First Debenture")
and the PRCO 1% Convertible Debenture in the aggregate principal amount of Three
Thousand Dollars ($3,000) (the "Second Debenture"; and, together with the First
Debenture, the "PRCO Debentures"), together with the underlying shares of the
PRCO common stock, par value $.001 (the "PRCO Common Stock"), into which the
PRCO Debentures are convertible, from time to time. The Purchase Agreement also
requires PRCO and/or its successor in interest, to issue 30,000,000 shares of
PRCO Common Stock as a "security stock" (the "Escrow Shares") in support of the
offer and sale of the PRCO Debentures. The PRCO Debentures, the PRCO Common
Stock and the Escrow Shares may be referred to collectively herein as the "PRCO
Securities."
The PRCO Debentures are to be issued to the accredited investor listed on
Exhibit A to this opinion, an accredited Minnesota resident or domiciliary (the
"Investor"). Under and pursuant to the terms of the PRCO Debentures and the
Purchase Agreement, the Investor may elect to convert all or some of the PRCO
Debentures into the PRCO Common Stock.
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Following the issuance of the PRCO Debentures on or about May 14, 2004,
PFCE Acquisition Corp., a Nevada corporation ("Acquisition"), a wholly owned
subsidiary of PFCE, will be merged with and into PRCO (the "Merger") pursuant to
the Agreement and Plan of Merger dated as of May 14, 2004 by and among PFCE,
Acquisition and PRCO (the "Merger Agreement"). Pursuant to the Merger, the PRCO
Common Stock will be canceled and PFCE shall issue 30,000,000 shares of its
common stock, par value $0.001 per share (the "PFCE Common Stock") into escrow
pursuant to the terms of the Merger Agreement and the Purchase Agreement as a
"security stock" to replace the Escrow Shares (the "Security Shares"). Up to all
of the Security Shares and up to all of any additional shares of PFCE Common
Stock that may in the future be issued and deposited into escrow by PFCE in
accordance with the Purchase Agreement (the "Additional Security Shares") may be
released from escrow from time to time to the Investor or its assigns to satisfy
PFCE's obligations upon conversion of the Debentures by the Investor or its
assigns in accordance with the terms of the Purchase Agreement and the
Debentures. This letter addresses the validity of the issuance of the Security
Shares and Additional Security Shares and the delivery of the Security Shares
and Additional Security Shares to the Investor or its assigns from time-to-time
in accordance with the Merger Agreement, Purchase Agreement and PRCO Debentures.
The PRCO Debentures, PFCE Common Stock, Security Shares and Additional Security
Shares, are referred to collectively herein as the "PFCE Securities."
You have requested that we provide you with separate legal opinions (i)
covering the issuance of the Security Shares and any Additional Security Shares
to the effect that the PRCO Debentures and the PRCO Common Stock, and the PFCE
Securities, as the case may be, may be issued without a restrictive legend and
may be freely traded; and (ii) covering the issuance of PFCE Common Stock as
Security Shares and Additional Security Shares pursuant to the terms of the
Merger Agreement, Purchase Agreement and the PRCO Debentures to the effect that
such shares (or any part thereof) may be issued and subsequently delivered to
the Investor or its assigns upon the receipt by PFCE of any notices of
conversion issued by the Investor or its assigns pursuant to the terms of the
Purchase Agreement and the PRCO Debentures without a restrictive legend and may
be freely traded. This opinion covers any issuance of PFCE Securities and the
delivery of the same to the Investor or its assigns in accordance with the terms
of the Purchase Agreement, the Merger Agreement and the PRCO Debentures.
A. Basis for Supporting Legal Opinion. The following is the basis for our
supporting legal opinion for the requested issuance and delivery of the PRCO
Securities and the PFCE Securities free of any restrictive legend.
1. Our review and analysis of Rule 504 of Regulation D of the
Securities Act of 1933 (the "Securities Act"), as revised, Chapter 80A of the
Minnesota Statutes, 1986 (the "Minnesota Act"); and the Regulations contained
therein (the "Minnesota Regulations") which are collectively referred to herein
as the "Minnesota Statutes", as they apply to the proposed issuance of the PRCO
Securities and the PFCE Securities.
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2. Our review and analysis of a resolution of the Board of Directors
of PRCO dated April __, 2004.
3. Our review and analysis of a resolution of the Board of Directors
of PFCE dated April __, 2004.
4. Our review of the Merger Agreement and the Certificate of Merger
to be filed pursuant to the Merger Agreement pursuant to which Acquisition is to
be merged with and into PRCO, pursuant to which PRCO will survive as a
wholly-owned subsidiary of PFCE , which review was taken in connection with our
analysis of Section 3(a)(9) of the Securities Act.
5. Our review and analysis of the Purchase Agreement and the Merger
and discussions with representatives of PRCO and the Investor that:
(a) the PRCO Securities are to be purchased by the Investor from
PRCO on or about April __, 2004;
(b) at the time the PRCO Securities were purchased, and within
the contemplation of Regulation D of the Securities Act,
(i) PRCO was not a "reporting company";
(ii) PRCO was not an "investment company";
(iii) PRCO was not a development stage company that either
had no specific business plan or purpose or had indicated that its business plan
was to engage in a merger or acquisition with an unidentified company or entity;
(iv) PRCO had not utilized Rule 504 within the last twelve
calendar months;
(v) the dollar amount of the offering of the PRCO Securities
(including the PRCO Securities) would not exceed $1,000,000.00; and
(vi) the Investor of the PRCO Securities qualifies as an
"accredited investor", the Investor was a bona fide resident of the State of
Minnesota, and was not, prior to, nor would be subsequent to, the Merger, an
"affiliate" of PRCO, Acquisition or PFCE.
B. New Rule 504. On April 7, 1999, revisions to Rule 504 went into effect
which prohibit general solicitation and general advertising of the offering by
the issuer and which provide that securities issued under the Rule will be
restricted, unless certain specified conditions are met. These conditions are:
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1. The transaction is registered under a state law requiring public
filing and delivery of a disclosure document prior to sale;3 or
2. The securities are issued under a state law exemption that permits
general solicitation and general advertising so long as sales are made only to
"accredited investors" as the term is defined in Regulation D.
Thus, if the securities are issued under a state law exemption that
permits general solicitation and general advertising (so long as sales are made
only to accredited investors), the securities are not restricted under Rule 504.
The PRCO Securities are to be sold only to an accredited investor.
C. Application of Minnesota Statutes. The PRCO Securities are to be
purchased by a resident of Minnesota (i.e., the Investor), who is an accredited
investor. Section 80A.15.2(a)(1) of the Minnesota Act specifically exempts from
the securities registration requirements of Section 80A.08 of the Minnesota Act,
offers and sales made to not more than 10 persons in Minnesota in any twelve
month period by the same issuer, under any exception under Section 3(b) of the
Securities Act. For purposes of counting the number of purchasers, Minnesota
Rule 2A75.0150 excludes from the calculation any accredited investor. Rule 504
of Regulation D is promulgated under Section 3(b) of the Securities Act. Still
further, Section 80A.15.2(a)(1) specifically permits general solicitation and
advertising if the securities are sold under an exemption under Section 3(b) of
the Securities Act.
Since the PRCO Common Stock will be sold to an accredited investor pursuant
to Rule 504, the PRCO Common Stock may be freely traded if it is issued
"[e]xclusively according to [a] state law exemption[] from registration [i.e.,
the Minnesota Statutes consisting of Section 80A.15.2(a)(1)] that permit[s]
general solicitation and general advertising so long as sales are made only to
`accredited investors'". Therefore, the PRCO Common Stock may be issued without
a restriction and may be freely traded pursuant to Rule 504. This includes the
issuance of the Escrow Shares under the Purchase Agreement and the Security
Shares and Additional Security Shares under the Merger Agreement and the
Purchase Agreement.
D. The Merger and Section 3(a) of the Securities Act. Prior to the Merger
of Acquisition into PRCO, the PRCO Securities were issued by PRCO to the
Investor. Pursuant to the Merger, the PRCO Common Stock will be canceled and
PFCE will issue to the Escrow Agent (as defined in the Purchase Agreement)
Security Shares, and potentially in the future Additional Security Shares, to
replace the Escrow Shares and into which the PRCO Debentures may be converted
and delivered to the Investor or its assigns pursuant to the terms of the
Purchase Agreement and PRCO Debentures. By virtue of operation of law and the
Merger Agreement, PFCE will assume and be responsible for all PRCO obligations,
including those of PRCO under and with respect to the PRCO Securities.
-----------------------------
3 For sales to occur in a state without such a state law, the transactions must
be registered in a state with such a law and the disclosure document filed in
that state must be delivered to all purchasers before sale in both states.
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Section 3(a)(9) exempts any security exchanged by the issuer with "its"
security holders. The Commission has interpreted this language as requiring that
both the security issued and the security surrendered in the exchange be those
of the same issuer. According to Xxxxxxxxx Xxxxx,4 Section 3(a)(9) is available
for certain intracorporate reorganizations where the exchange of securities is
NOT made by the ORIGINAL issuer, where the security issued is that of issuer B
but the security surrendered is that of what was issuer A.
There are two related No-Action Letters which are virtually perfectly on
point. Pacwest Bancorp, SEC No-Action Letter. 1979 WL 14720 [1979-1980 Transfer
Binder] Fed. Sec. L. Rep. (CCH) Paragraph 82, 376 (October 24, 1979), and
Pacwest Bancorp, SEC No-Action Letter 1979 WL 13112 (October 12, 1979).
At the time of the proposed merger into a wholly-owned subsidiary of
Pacwest Bancorp ("Pacwest"), First State Bank ("First State") had issued and
outstanding, debentures that were convertible into its common stock. First State
was to be the surviving company. Under the merger agreement, Pacwest, a
multibank holding company, and First State were to enter into a supplemental
indenture with the trustees providing for the substitution of Pacwest common
stock for First State common stock as the underlying security into which the
debentures were convertible. Pacwest was to assume the obligation to issue its
common stock upon conversion of the debentures, but was not to assume the
obligations of First State to pay the debentures in accordance with their terms.
In relying on Section 3(a)(9) to exempt the issuance of Pacwest common upon
conversion of the debentures, counsel to Pacwest presented two reasons why its
client should be deemed the same issuer:
1. Pacwest should be deemed the issuer of the conversion privilege
that the debenture holders of First State possessed by reason of the
supplemental indenture; and
2. Pacwest should be considered as the issuer of the debentures by
assuming the obligations of First State with respect to conversion.
The SEC staff rejected both arguments and found Section 3(a)(9)
inapplicable. However, in a supplementary request to the staff, Pacwest
announced its intention to assume First State's obligation to pay principal,
interest, and premium, if any, on the debentures. On these new facts, which the
SEC staff noted were absent from the original no-action request, the staff
stated that Section 3(a)(9) applied.
According to Xxxxxxxxx Xxxxx, the SEC staff continues to follow the Pacwest
position and allows a person who seeks Section 3(a)(9) issuer status for
obligations it did not originate but subsequently assumes primary liability. The
original issuer might be affiliated or nonaffiliated with the new issuer. Under
either circumstance, the issuance of
-------------------------------
4 Xxxxx, Exempted Transactions Under the Securities Act of 1933, West Group,
1999, Volume 7. See generally, Section 2.04[1], beginning at page 2-35.
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the parent's stock upon conversion of the subsidiary's debt securities will
constitute an exempted exchange.
Since PFCE will by operation of law and the Merger Agreement, assume and be
responsible for the payment of principal and interest on the PRCO Debentures,
the issuance of the PFCE Common Stock upon conversion of the PRCO Debentures
will constitute an exempt exchange.
Therefore, the subject transaction would be exempt from registration, and
the PFCE Securities, including the issuance of the Security Shares and
Additional Security Shares and the delivery of such shares to the Investor or
its assigns upon conversion of the PRCO Debentures in accordance with the terms
thereof, the Merger Agreement and the Purchase Agreement will remain freely
tradable.
E. Supporting Legal Opinion. Accordingly, based upon the above we are of
the opinion as follows with respect to the issuance of the PRCO Securities and
the PFCE Securities, including the Escrow Shares, the Security Shares and the
Additional Security Shares:
1. Assuming that the sale of the PRCO Securities (and the PFCE
Securities) does not exceed the aggregate amount of $1,000,000 (which to
our knowledge is correct based solely on our review of the Merger
Agreement, the Purchase Agreement and the PRCO Debentures), that the facts
given to us by management of both companies are true and correct, and that
the other conditions of Rule 504 and the applicable Minnesota Statutes (as
they relate to the facts given to us) are met (which to our knowledge is
correct based solely on our review of the Merger Agreement, the Purchase
Agreement and the PRCO Debentures), the issuance of the PRCO Securities
will be exempt from registration pursuant to Rule 504 of Regulation D and
the applicable Minnesota Statutes. Consequently, when issued, the PFCE
Securities may be issued without a restrictive legend, may be delivered to
the Investor or its assigns in accordance with the Purchase Agreement and
the PRCO Debentures, and may be freely traded except by affiliates of
either company.
2. Assuming that the sale of the PRCO Securities (and the PFCE
Securities) does not exceed the aggregate amount of $1,000,000.00 (which to
our knowledge is correct based solely on our review of the Merger
Agreement, the Purchase Agreement and the PRCO Debentures), that the
representations in the Purchase Agreement given to us are true and correct,
and that the other conditions of Rule 504 and the applicable Minnesota
Statutes (as they relate to the facts given to us) are met(which to our
knowledge is correct based solely on our review of the Merger Agreement,
the Purchase Agreement and the PRCO Debentures), the issuance of the PRCO
Securities will be exempt from registration pursuant to Rule 504 of
Regulation D, the applicable Minnesota Statutes, and Section 3(a)(9) of the
Securities Act. Consequently, when issued, the PFCE Securities may be
issued without a restrictive legend and may be freely traded except by
affiliates of
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either company. This would also include the issuance of the Security Shares
pursuant to the Merger Agreement and of the Additional Security Shares
pursuant to the Purchase Agreement and the delivery of any such shares to
the Investor or its assigns pursuant to the Purchase Agreement and the PRCO
Debentures.
3. Accordingly, pursuant to Rule 504, the applicable Minnesota
Statutes, and Section 3(a)(9) of the Securities Act, you may issue the PRCO
Securities and, subsequently, the PFCE Securities, without a restrictive
legend, and the PRCO Securities and the PFCE Securities are, and will be,
available for immediate resale by non-affiliates of PRCO and PFCE.
4. Finally, that PRCO and PFCE, through their respective Board of
Directors, have taken all necessary and required corporate action to cause
the issuance and delivery of the Security Shares in accordance with the
Merger Agreement. Further, that the Security Shares and Additional Security
Shares when issued in accordance with the Merger Agreement, the Purchase
Agreement and this opinion, will be duly authorized, validly issued and
non-assessable.
Our above opinions are subject to the following qualifications:
1. Members of our firm are qualified to practice law in the State of
California and we express no opinion as to the laws of any jurisdictions except
for those of California, the securities laws of Minnesota referred to herein and
the United States of America referred to herein. For the purposes of rendering
this opinion, we have assumed that if a court applies the laws of a jurisdiction
(other than the Minnesota securities laws referred to herein) other than the
laws of California, the laws of such other jurisdiction are identical in all
material respects to the comparable laws of the State of California.
2. The opinions set forth herein are expressed as of the date hereof and
remain valid so long as the documents, instruments, records and certificates we
have examined and relied upon as noted above, are unchanged and the assumptions
we have made, as noted above, are valid.
This opinion is furnished by us as special securities and acquisition
counsel to PRCO and may only be relied upon by you and Acquisition and, in
connection with the issue of Security Shares or Additional Security Shares, by
your transfer agent in connection with any instruction letters from you to your
transfer agent regarding their authorization to issue shares of Security Shares
or Additional Security Shares without restrictive legends. It may not be used or
relied upon by you for any other purpose or by any other person, nor may copies
be delivered to any other person, without in each instance our prior written
consent.
Please have all stock certificates issued in the name of the Investor shown
on Exhibit A delivered to the office of Gottbetter & Partners, LLP, 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxx Xxxxxxxxxx, Esq., as that firm is
acting on behalf of the issuer as closing escrow agent with respect to the
transaction referred to herein.
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Very truly yours,
Hand & Hand
a professional corporation
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EXHIBIT A
Principal Amount of
Name of Investor Purchase Price PRCO Convertible Debenture
HEM Mutual Assurance LLC $1,000,000 $1,000,000
Stock Certificate Denominations for the Security Shares:
1 certificate each for 5,000,000 shares
5 certificates each for 1,000,000 shares
20 certificates each for 500,000 shares
24 certificates each for 250,000 shares
25 certificates each for 100,000 shares
25 certificates each for 50,000 shares
25 certificates each for 10,000 shares
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EXHIBIT 6.2(e)
Cellfoods Corporation
OFFICER'S CERTIFICATE
---------------------
I, Xxxx Xxxxxx, being the President and Chief Executive Officer of
Cellfoods Corporation, a Nevada corporation (the "Company"), pursuant to Section
6.2(e) of that certain Agreement and Plan of Merger, dated as of May 14, 2004,
by and between the Company, PFCE Acquisition Corp. and Pacific Fuel Cell Corp.
("PFCE") (the "Merger Agreement"), do hereby certify on behalf of the Company as
follows:
1. The representations and warranties of the Company contained in Section
4.2 of the Merger Agreement, as supplemented by the Schedules attached thereto,
were true, correct and complete in all material respects when made (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true, correct and complete in all
material respects as of such date) and are true, correct and complete in all
material respects as at the date hereof (except for representations and
warranties that speak of a specific date, which representations and warranties
shall be true, correct and complete in all material respects as of such date).
2. The Company has satisfied in all material respects, all covenants and
agreements required to be satisfied by it under the Merger Agreement on or prior
to the date hereof except such as may have become waived by PFCE in accordance
with this Agreement.
IN WITNESS WHEREOF, I have executed this Officer's Certificate on behalf of
the Company this __ day of May, 2004.
Cellfoods Corporation
By:________________________________
Xxxx Xxxxxx
President and Chief Executive
Officer
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