AMENDED AND RESTATED MERGER AGREEMENT
EXHIBIT
2.1
AMENDED
AND RESTATED MERGER AGREEMENT
Amended
and Restated MERGER AGREEMENT dated as of August 25, 2006 by and among NUTRITION
21 INC., a New York corporation having an office at 0 Xxxxxxxxxxxxxx Xxxx,
Xxxxxxxx, XX 00000-0000 (“N21”), N21 ACQUISITION I LLC, a New York limited
liability company that is a wholly owned subsidiary of N21 (“NewCo”), and
ICELAND HEALTH, INC., a New York corporation having an office at 000 Xxxxxxxx
Xxxxxx, 0xx
xxxxx,
Xxxxxxxx Xxxxx 00000 (“Iceland Health” or the “Company”), and XXXX X. XXXXXXXX
(“Xxxxxxxx”) and XXXXXX XXXXX (“Xxxxx”), each having an office c/o the Company
and together owing all of the capital stock of the Company. Xxxxxxxx and Xxxxx
are sometimes hereinafter referred to individually as a “Stockholder” and
collectively as the “Stockholders.” This Amended and Restated Agreement (this
“Agreement”) amends and restates the Agreement dated as of August 15, 2006 by
and among N21, the Company, the Stockholders and N21 Acquisition Corp., and
among other things, substitutes NewCo as a party in place of N21 Acquisition
Corp.
W
I T N E
S S E T H:
IN
CONSIDERATION of the mutual covenants and agreements hereinafter set forth,
the
parties hereby agree as follows:
| 1. |
The
Merger.
|
| (a) |
The
Merger. Upon the terms and subject to the conditions hereof, and in
accordance with the New York Limited Liability Company Law (“NYLLC”), on
the Closing Date (as hereinafter defined), Iceland Health shall be
merged
with and into NewCo and the separate existence of Iceland Health shall
thereupon cease (the “Merger”), and NewCo, as the limited liability
company surviving the Merger, shall by virtue of the Merger continue
its
separate existence under the laws of the State of New
York.
|
| (b) |
Merger
Consideration. Subject to the terms and conditions of this Agreement
and
in consideration of the transactions contemplated hereby, if the Merger
is
effected, then all shares of capital stock of Iceland Health issued
and
outstanding immediately prior to the Closing Date (collectively, the
“Iceland Health Shares”), shall entitle the holders thereof in the
aggregate to:
|
| (1) |
The
following consideration payable or deliverable at the
Closing:
|
| (a) |
8,000,000
shares (the “Initial Merger Shares”) of N21’s common stock (the “Common
Stock”);
|
| (b) |
$1,000,000
in cash; and
|
| (c) |
Promissory
notes of N21 in the form of Exhibit A and in the aggregate principal
amount of $2.5 million (the “Notes”). The Notes will be secured as
contemplated in Section 3(e)
|
| (2) |
The
additional consideration that is payable after the Closing as set forth
in
Section 5.
|
| (3) |
The
downside protection that is contingently deliverable after the Closing
as
set forth in Section 6.
|
| (c) |
Each
item of consideration referred to in clause (1), (2) and (3) of Section
(b)(1) shall be paid or delivered 50% to Xxxxxxxx and 50% to
Xxxxx.
|
| (d) |
Xxxxxxxx
and Xxxxx hereby irrevocably waive any and all appraisal rights in
respect
of the Merger.
|
| (e) |
Effective
Time of the Merger. The Merger shall become effective at the date and
time
when a Certificate of Merger meeting the requirements of the NYLLC
shall
have been duly executed and filed in accordance with such Section.
The
Certificate of Merger shall be filed concurrently with the
Closing.
|
| (f) |
Upon
effectiveness of the Merger:
|
| (i) |
by
virtue of the Merger and without any action on the part of X00, XxxXx,
Xxxxxxx Health or any stockholder of Iceland Health, all outstanding
Iceland Health Shares will be ipso facto revoked and
canceled.
|
| (ii) |
The
name of NewCo will be changed to “Iceland Health,
LLC”
|
| (iii) |
The
articles of organization of NewCo as in effect immediately prior to
the
effectiveness of the Merger shall continue to be the articles of
organization of NewCo as the surviving entity, until thereafter changed
or
amended in accordance with its terms and as provided by law and this
Agreement, except that the name of the entity in such articles of
organization shall be amended to read “Iceland Health,
LLC”
|
| (iv) |
The
Operating Agreement of NewCo in effect immediately prior to the to
the
effectiveness of the Merger shall continue to be the Operating Agreement
of NewCo as the surviving entity, until thereafter changed or amended
in
accordance with their terms and as provided by law and this Agreement,
except that the name of the limited liability company in such Operating
Agreement shall be amended to read “Iceland Health,
LLC”
|
| (v) |
Board
of Directors and Officers. The managers of NewCo and the officers of
NewCo
in office immediately prior to the to the effectiveness of the Merger
shall, from and after the effectiveness of the Merger, continue to
be the
managers and officers, respectively, of NewCo as the surviving entity,
in
each case until their respective successors have been duly elected
or
appointed and qualified or until their earlier death, resignation or
removal, in accordance with the articles of organization and Operating
Agreement of NewCo as the surviving
entity.
|
| (vi) |
The
Merger shall have such other effects as are set forth in this Agreement
and in the NYLLC.
|
| (g) |
Each
Stockholder agrees to vote all of his Iceland Health Shares in favor
of
the Merger.
|
| (h) |
Following
the signing of the Agreement and until the earlier to occur of (i)
the
Closing (as defined below) or (ii) the termination of the Agreement,
neither Stockholder will sell any Iceland Health Shares or Security
Rights
(as defined in Section 9(g).
|
| (i) |
The
parties intend that the Merger qualify as a tax free reorganization
pursuant to Section 368 of the Internal Revenue Code of 1986, as amended,
and mutually agree to file their respective tax returns consistently,
one
with the other, and with a view for qualifying for such
treatment.
|
| (j) |
So
long as the Stockholders own in the aggregate not less than 4,000,000
shares of Common Stock (as such number is appropriately adjusted to
reflect stock splits, combinations or similar events), they shall be
entitled to notice of all meetings of the Board of Directors of N21
and to
attend such meetings as non-voting
observers.
|
| 2. |
Closing.
|
| (a) |
The
closing of the Merger (the “Closing”) shall take place at 10:00 A.M.,
local time at the offices of counsel to N21,
on September 15, 2006, or such other day as the parties shall mutually
agree but not later than the fifth business day after satisfaction
or
waiver of the conditions set forth in Sections 12 and 13
hereof.
|
2
| (b) |
Should
any conditions set forth in Section 12
and/or 13
not be satisfied on or before September
15, 2006
or
such other date as the parties shall mutually agree as set forth in
clause
(a) above, this Agreement shall terminate
unless mutually extended by the parties, except that the parties shall
continue to be liable for any breach by them of this Agreement prior
to
such termination, including, without limitation, the breach of any
covenant herein to use designated efforts to cause any one or more
of such
conditions to be satisfied.
|
| (c) |
The
day on which the Closing actually takes place is herein sometimes referred
to as the “Closing Date.”
|
| 3. |
Other
Transactions Relating to Closing; Further
Assurances.
|
| (a) |
At
the Closing, Iceland Health will deliver to NewCo:
|
| (i) |
copies
of the certificate of incorporation and by laws of Iceland
Health, certified
by an officer of Iceland Health as a true and correct copy thereof
as of
the Closing Date;
|
| (ii) |
all
consents of third parties required hereunder as a condition to Closing
by
either party;
|
| (iii) |
an
opinion of Iceland Health’s counsel containing such opinions as are
customarily given in transactions of the type contemplated
hereby;
|
| (iv) |
an
opinion of Iceland Health’s tax counsel, reasonably satisfactory to the
Stockholders, containing such opinions as are customarily given in
transactions of the type contemplated hereby (the “Tax
Opinion”);
|
| (v) |
letters
of resignation of all directors of Iceland Health serving immediately
prior to the Effective Time;
|
| (vi) |
a
copy of the resolutions of the Board of Directors of Iceland Health,
together with resolutions of the stockholders of Iceland Health, approving
the execution and delivery of this Agreement and the consummation of
all
of the transactions contemplated hereby, duly certified by an officer
of
Iceland Health; and
|
| (vii) |
such
other
documents
and agreements as may be required pursuant to this Agreement or as
may
reasonably be requested by N21 and its
counsel.
|
| (b) |
On
the Closing Date, N21 and/or NewCo shall deliver or cause to be delivered
to Iceland Health the following:
|
| (i) |
a
copy of the resolutions of the Board of Directors of N21 approving
the
execution and delivery of this Agreement and the consummation of all
of
the transactions contemplated hereby, duly certified by an officer
of
N21;
|
| (ii) |
a
copy of a resolution of the Board of Manager and member of NewCo,
approving the execution and delivery of this Agreement and the
consummation of all of the transactions contemplated hereby, duly
certified by an officer of NewCo;
|
| (iii) |
opinions
of counsel from each of N21’s and NewCo’s counsel containing such opinions
as are customarily given in transactions of the type contemplated
hereby;
|
| (iv) |
stock
certificates of N21 evidencing the issuance of the Initial Merger Shares;
and
|
3
| (v) |
such
other documents and agreements as may be required pursuant to this
Agreement or as may reasonably be requested by Iceland Health and its
counsel.
|
| (c) |
On
the Closing Date, N21 shall deliver or cause to be paid or delivered
to
the Stockholders the consideration that is payable or deliverable to
the
Stockholders at the Closing under the provisions of Section 1.
|
| (d) |
On
the Closing Date, N21 will execute and deliver with each Stockholder
an
employment agreement in the form of Exhibit 3(d)(i)
and a confidentiality and non-compete agreement in the form of Exhibit
3(d)(ii).
|
| (e) |
On
the Closing Date, N21 will, by way of a security agreement in form
and
substance reasonably satisfactory to Stockholders and their counsel,
grant
to the Stockholders a security interest in the Iceland Health trade
name
and trademark to secure the obligations of N21 under the
Notes.
|
| (f) |
At
the Closing, each Stockholder will deliver to
NewCo
|
| (i) |
a
general release in favor of Iceland
Health;
|
| (ii) |
his
share certificates in Iceland Health for cancellation;
and
|
| (iii) |
notes
aggregating $170,000 (the “$170,000 Notes”) payable by the Stockholders to
the Company, representing amounts owed by them to the Company as of
the
Closing Date. The $170,000 Notes shall be in form similar to the Notes,
shall bear interest at the rate set forth in the Notes and shall be
payable by crediting the principal and interest owed thereunder against
amounts owed by N21 to the Stockholders under the Notes upon maturity
or
accelerated maturity.
|
| (g) |
Effective
as of the Closing Date, the Stockholders shall cause Iceland Health,
Inc.,
a Delaware corporation (“Iceland Delaware”), to change its name to a name
that does not include “Iceland,” ” and to have entered into a service
agreement with the Company in form and substance reasonably satisfactory
to N21. The Stockholders jointly and severally represent and warrant
to
N21 that Iceland Delaware has had no assets since its inception, except
that it has opened certain bank accounts in which revenues have been
deposited on behalf of the Company.
|
|
4.
|
Working
Capital Adjustment
|
|
(a)
|
The
term “Working Capital” as used herein means working capital as determined
in accordance with generally accepted accounting principles, as
such
principles have to date been applied by
N21.
|
|
(b)
|
Within
60 days after the Closing, N21 shall pay in cash to the Stockholders
(allocated equally between them) the amount if any by which the
Working
Capital of the Company as of the Closing shall have exceeded
$100,000.
|
|
(c)
|
Within
60 days after the Closing, the Stockholders shall jointly and severally
pay in cash to the Company the amount, if any, by which the Working
Capital of the Company as of the Closing shall have been less than
$100,000.
|
|
(d)
|
Working
Capital shall be computed on an accrual basis in accordance with
GAAP as
applied by N21, except that there shall also be taken into account
as
accounts receivable all credit card and “E-check” sales to customers that
have been submitted to a credit card processing company or “E-check”
processing company for payment approval through and including the
date of
Closing, less any such submissions for which approval for payment
is
subsequently declined. Any disagreements with respect to the calculation
and determination of Working Capital shall be decided by an independent
accountant mutually acceptable to the parties (failing agreement
on which,
each shall designate accountants of their own selection which shall
themselves appoint accountants for such purpose), whose decision
shall be
binding and conclusive.
|
4
|
(e)
|
The
$170,000 Notes, and receivables from related parties, shall not
be
considered receivables or assets for the purposes of the calculation
of
Working Capital
|
|
(f)
|
For
clarity, the obligations of the parties under this Section 4 shall
not be
subject to limitations under Section
14.
|
|
5.
|
Additional
Consideration.
|
|
(a)
|
Certain
Definitions.
|
|
(i)
|
The
term “Eligible Product” means any product that is sold under the Iceland
Health trademark or that contains fish oil or omega
3.
|
|
(ii)
|
The
term “Net Sales” means gross sales by X00, XxxXx or any Affiliate thereof
(as defined below), collectively referred to herein as the “Sellers”, of
Eligible Products, and/or or its direct or indirect assignees,
licensees
or sublicensees, less allowances, returns, volume discounts, pricing
discounts, guaranteed returns, freight, taxes, returns, cash discounts,
and other sales deductions. Except as aforesaid, Net Sales are
computed on
an accrual basis in accordance with GAAP as applied by N21. Any
disagreements with respect to the calculation and determination
of Net
Sales shall be decided by an independent accountant mutually acceptable
to
the parties (failing agreement on which, each shall designate accountants
of their own selection which shall themselves appoint accountants
for such
purpose), whose decision shall be binding and conclusive. For the
purposes
of this Paragraph, the term “Affiliate” shall mean any person or entity
that directly, or indirectly through one or more intermediaries,
controls
or is controlled by, or is under common control with, N21 or NewCo.
|
|
(iii)
|
The
term “Payment
Date” means August 31 in each year commencing 2007 until additional
consideration under this Section 5
aggregates $2,500,000. The term Eligible Period means each of the
successive years beginning with the Closing
Date.
|
|
(b)
|
On
each Payment Date, N21 shall pay to the Stockholders (allocated
equally
between them) an amount equal to 3% of the amount by which Net
Sales
during the then most recently elapsed Eligible Period exceeds $10,000,000,
provided that the total amount payable by N21 under this Section
5
shall in no event exceed an aggregate of $2,500,000. At the request
of the
Stockholders, N21 will quarterly during each Eligible Period make
advances
against additional consideration that the parties mutually expect
to
accrue under this Section for the Eligible Period, provided that
on the
Payment Date for the Eligible Period the Stockholders refund to
N21 any
excess advances they may have received towards additional consideration
for the Eligible Period, and N21 shall pay to the Stockholders
any
shortfall in payments it may have made towards additional consideration
for the Eligible Period.
|
|
(i)
|
Each
such payment by N21 shall be accompanied by a report that sets
forth Net
Sales for the relevant period and that is certified as to its accuracy
by
the chief financial officer of N21.
|
|
(ii)
|
N21
shall from time to time at the request of Stockholders give to
Stockholders and their representatives access to the records of
the
Sellers relating to Net Sales for Eligible Periods
hereunder.
|
|
(iii)
|
N21
shall provide adequate facilities and equipment and qualified technical
and marketing personnel, and otherwise use reasonable commercial
efforts,
for the sale of Eligible Products.
|
|
6.
|
Additional
Common Stock
|
|
(a)
|
The
“then Per Share Market Value” means the average volume weighted closing
price of the common stock of N21 during the 30 trading days immediately
preceding the first anniversary of the
Closing.
|
5
|
(b)
|
The
“Aggregate First Anniversary Value” means 8,000,000 times the then Per
Share Market Value.
|
|
(c)
|
The
“Aggregate Value Shortfall” means the amount if any by which the Aggregate
First Anniversary Value is less than
$16,000,000.
|
|
(d)
|
N21
shall within 30 days after the first anniversary of the Closing
issue to
the Stockholders (allocated equally between them) a number of shares
of
Common Stock (the “Additional Merger Shares”) that has an aggregate value
(with each share being valued at the then Per Share Market Value)
equal to
the Aggregate Value Shortfall. However, the number of Additional
Merger
Shares shall in no event exceed 1,500,000. Certificates for the
Additional
Merger Shares shall have the same legends as are provided herein
for the
Initial Merger Shares.
|
|
(e)
|
All
calculations under this Section shall be appropriately adjusted
for stock
splits, reverse stock splits and stock combinations and similar
matters.
|
|
7.
|
Registration.
|
|
(a)
|
On
or before the 90th
day after the Closing, N21 will file a registration statement on
Form S-3
(or on such other form as may be available) with the Securities
and
Exchange Commission (the “SEC”) for the public sale by the Stockholders
and by Xxxxxxx Xxxxxx, Xxxx Xxxxxxxx and Bathgate Capital Partners,
LLC
(as permitted transferees pursuant to Section 8(c))
of the Initial Merger Shares and the Additional Merger Shares
(collectively, the “Merger Shares”), provided that any sale by the
Stockholders shall in any event be subject to the lock-up provided
in
Section 8.
The registration statement documents shall include provisions for
mutual
indemnification by the Company and the Stockholders for any
misrepresentation or omission in the registration statement by
it or them,
respectively.
|
|
(b)
|
N21
shall use its best efforts to cause the registration statement
referred to
in this Section to become effective as promptly as possible after
the date
of filing, and to remain effective thereafter during the Effectiveness
Period as defined in and to the extent provided in the Registration
Schedule attached hereto. If the Registration Statement does not
become
effective, ceases to be effective or, once effective, is withdrawn
by N21,
then the Stockholders shall have the right to demand for their
Merger
Shares and for the shares of the transferees (permitted under Section
8(c)),
registration pursuant to the terms and conditions set forth in
the
Registration Schedule attached hereto. N21 shall use its best efforts
to
comply with all requirements and rules promulgated by the SEC in
order to
maintain the effectiveness of the registration statement as aforesaid,
including compliance with Rule 144 and Sections 12(g) and 15(d)
of the
Securities Exchange Act of 1934, as
amended.
|
|
(c)
|
All
expenses incident to N21's performance of or compliance with the
undertakings in this Section 7,
including but not limited to, all registration and filing fees,
fees and
expenses of compliance with securities or blue sky laws, printing
expenses, messenger expenses, telephone and delivery expenses,
fees and
disbursements of counsel to N21 and of independent certified public
accountants of N21 will be borne by N21, as well as up to $15,000
in fees
and disbursements of counsel to the Stockholders that accrue at
such
counsel’s standard hourly rates.
|
|
(d)
|
If
the registration statement referred to in clause (a) above has
not been
declared effective by the first anniversary of the Closing Date
and if no
other registration statement pursuant to clause (a) above shall
then be
effective, then, for each full 30-day period thereafter until a
registration statement is declared effective or, if earlier, until
the
Stockholders are permitted to sell all of their Merger Shares under
Rule
144, the Company shall pay $25,000 to the Stockholders ($12,500
to each
Stockholder) as liquidated damages.
|
|
(e)
|
N21
shall prepare and promptly file a listing application with NASDAQ
that
covers the Initial Merger Shares and any Additional Merger
Shares.
|
6
|
8.
|
Lockup
and Disposal Schedule.
|
|
(a)
|
Whether
or not the securities constituting the Merger Shares have been
registered
under Section 7,
but without limiting N21's obligation to effect such registration
pursuant
to Section 7,
each Stockholder agrees that he will not at any time sell, transfer
or
otherwise dispose of (“Transfer”) any Merger Shares except to the extent
that the same has theretofore been released from this lock-up.
Of each
Stockholder’s Merger Shares, 1/3 shall be released from this lock-up on
the first anniversary of the Closing, another 1/3 shall be released
from
this lock-up on the second anniversary of the Closing, and the
final 1/3
shall be released from this lock-up on the third anniversary of
the
Closing.
|
|
(b)
|
Each
Stockholder shall also be released from the lock-up upon (i) the
consummation of a sale by the Company of all or substantially all
of its
assets, (ii) the consummation of any other transaction as a result
of
which 35% or more of the then outstanding Common Stock is acquired
by any
person or entity and its affiliates, (iii) a Final Determination (as
hereinafter defined) that (1) the Company terminated such Stockholder’s
employment other than For Cause as defined in the employment agreement
referred to in Section 3(c),
or (2) such Stockholder resigned from N21 for Good Reason, as defined
in
such employment agreement. A
“Final Determination” on a matter occurs when the parties hereto agree in
writing on such matter or a court, or any other tribunal acceptable
to the
parties, makes a final and unappealable determination on such
matter.
|
|
(c)
|
The
Stockholders are permitted to transfer an aggregate of up to 920,000
shares of Initial Merger Shares to Xxxxxxx Xxxxxx, Xxxx Xxxxxxxx
and
Bathgate Capital Partners, LLC subject to the making by such persons
of
representations to N21 that are commonly requested for such transfers.
Such transferred shares shall be free of the lock-up
hereunder.
|
|
(d)
|
Certificates
for the Merger Shares shall be legended to reflect the
foregoing.
|
|
9.
|
Representations
and Warranties by the Stockholders. The
Stockholders (as to themselves severally) and, until the Closing
Date, the
Company, jointly and severally represent and warrant
to
N21 and NewCo as follows, it being understood that all Schedules
referred
to in this Section shall be set forth on a separate Disclosure
Schedule
initialed by the Stockholders on the date
hereof.
|
|
(a)
|
Organization
Qualification. Except
as set forth in Schedule 9(a), Iceland Health is a corporation
duly
organized, validly existing and in good standing under the laws
of New
York, and it has all requisite corporate power and authority and
is
entitled to carry on its business as now being conducted and to
own, lease
or operate its properties as and in the places where such business
is now
conducted and such properties are now owned, leased or
operated.
|
|
(b)
|
Subsidiaries.
Iceland Health has no subsidiaries.
Iceland Health has and, throughout its existence and the existence
of any
of its predecessors has had, no interest, direct or indirect, and
has no
commitment to purchase any interest, direct or indirect, in any
other
corporation or in any partnership, joint venture or other business
enterprise or entity other than as set forth on Schedule
|
|
(c)
|
Transactions
with Certain Persons.
|
|
(i)
|
Except
as set forth on Schedule
|
7
|
(ii)
|
Except
as set forth on Schedule 9
|
|
(iii)
|
No
part of the property or assets of any Stockholder
is used by Iceland Health.
|
|
(d)
|
Authorization
and Approval of Agreement. All proceedings or corporate action
required to
be taken by Iceland Health relating to the execution and delivery
of this
Agreement and the consummation of the transactions contemplated
hereby
shall have been taken at or prior to the
Closing.
|
|
(e)
|
Execution,
Delivery and Performance of Agreement; Authority. Subject to the
obtainment of the consents required to be received by Iceland Health
by
Closing, neither the execution, delivery nor performance of this
Agreement
by Iceland Health will, with or without the giving of notice or
the
passage of time, or both, conflict with, result in a default, right
to
accelerate or loss of rights under, or result in the creation of
any lien,
charge or encumbrance pursuant to, any provision of Iceland Health’s
certificate of incorporation or bylaws or any franchise, mortgage,
deed of
trust, lease, license, agreement, understanding, law, rule or regulation
or any order, judgment or decree to which Iceland Health is a party
or by
which it may be bound or affected. Iceland Health has the full
power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby, and this Agreement constitutes a valid and
binding
obligation of Iceland Health, enforceable in accordance with its
terms,
except (A) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application
affecting enforcement of creditors’ rights, and (B) as limited by laws
relating to the availability of specific performance, injunctive
relief,
or other equitable remedies.
|
|
(f)
|
Capitalization
etc.
|
|
(i)
|
The
presently authorized, issued and outstanding shares of each of
Iceland
Health and the names of the record owners thereof as of immediately
prior
to the Closing Date are as set forth on Schedule
|
|
(ii)
|
Each
Stockholder owns the entire record and beneficial interest in his
or its
shares as set forth in Schedule 9(f)
to the Agreement, and such shares are free and clear of all liens,
charges, mortgages, pledges, security interests, claims, assessments,
options, warrants, rights and encumbrances
whatsoever.
|
|
(g)
|
Except
as set forth in Schedule 9(g)
to the Agreement, there are no outstanding subscriptions, options,
warrants, calls, commitments, convertible securities or other agreements
or arrangements of any character or nature whatsoever (“Security Rights”)
under which such Stockholder is or may become obligated to, assign
or
transfer any shares of Iceland Health, and there are no rights
of first
refusal, preemptive rights or similar rights with respect to any
such
shares.
|
|
(h)
|
Except
as set forth in Schedule 9(h),
there are no outstanding subscriptions, options, warrants, calls,
contracts, demands, commitments, convertible securities or other
agreements or arrangements of any character or nature whatever
under which
Iceland
Health or any shareholder of Iceland Health is or may become obligated
to
issue, assign or transfer any shares of Iceland Health, and there
are no
rights
of first refusal, preemptive rights or similar rights with respect
to any
such shares.
|
8
|
(i)
|
Financial
Statements.
|
|
(i)
|
The
term “Financial Statements” means the unaudited consolidated financial
statements of Iceland Health that have been delivered by Iceland
Health to
N21 (i) as of June 30, 2006 and for the six months then ended,
and (ii) as
of December 31, 2004 and 2005 for the years then
ended.
|
|
(ii)
|
The
Financial Statements are complete, have been prepared from the
books and
records of Iceland Health in accordance with U.S. generally accepted
accounting principles consistently applied (subject to the absence
of
footnotes and year-end accruals) and maintained throughout the
period
indicated and fairly present the financial condition of Iceland
Health as
at the date thereof and the results of its operations for the period
covered thereby. The “Balance Sheet” means the balance sheet of Iceland
Health as of June 30, 2006 that is included in the Financial Statements,
and the “Balance Sheet Date” is June 30,
2006.
|
|
(iii)
|
The
statements of earnings included in the Financial Statements do
not contain
any items of special or nonrecurring income or any other income
not earned
in the ordinary course of business except as expressly specified
therein
or in a Schedule to this Agreement that refers to this Section
(iii)
|
|
(j)
|
Absence
of Undisclosed Liabilities. Except as and to the extent to be reflected
or
reserved against on the Balance Sheet and
except as set forth on Schedule 9(j),
as of the Balance Sheet Date Iceland Health had no debts, liabilities
or
obligations (whether absolute, accrued, contingent or otherwise)
of any
nature whatsoever, including, without limitation, any foreign or
domestic
tax liabilities or deferred tax liabilities incurred in respect
of or
measured by Iceland Health's income, or its property or authorized
or
outstanding capital stock
on
the Balance Sheet Date or any other debts, liabilities or obligations
relating to or arising out of any act, transaction, circumstance
or state
of facts which occurred or existed on the
Balance Sheet Date, whether or not then known, due or payable.
None of
Iceland Health's employees is now or, will by the passage of time
hereafter become, entitled to receive any vacation time, vacation
pay or
severance pay attributable to services rendered prior to the Balance
Sheet
Date except as disclosed on the face of the Balance Sheet
or
in Schedule 9(j).
|
|
(k)
|
Taxes.
Except as set forth in Schedule 9(k),
|
|
(i)
|
all
taxes, including, without limitation, income, property, sales,
use,
franchise, value added, employees' or other third party income
tax
withholding and social security taxes, imposed by the United States
or any
State or any other foreign country or by any municipality, subdivision
or
instrumentality of the United States or any State or of any other
country,
or by any other taxing authority, which are due and
payable by Iceland Health, and all interest and penalties thereon,
whether
disputed or not, have been paid in
full;
|
|
(ii)
|
all
tax returns required to be filed by Iceland Health have been duly
and
timely filed and are complete and correct in all material
respects;
|
|
(iii)
|
all
taxes or deposits in respect thereof required by applicable law
to be
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, stockholder or other third party
have
been so withheld and paid, and all Forms W-2 and 1099 required
with
respect to such amounts paid or owing have been properly completed
and
timely filed;
|
|
(iv)
|
Iceland
Health has not been delinquent in the payment of any foreign or
domestic
tax, assessment or governmental charge or deposit and has no tax
deficiency or claim outstanding, proposed or assessed against it,
and
there is no basis for any such deficiency or
claim;
|
|
(v)
|
Iceland
Health’s corporate income tax returns have not
been
audited by
any
income tax authority,
or any state or municipality for
its
prior six
fiscal years through the year ended
(and to the knowledge of Stockholders, there is no audit which
is pending
or contemplated to commence),
and there is not now in force any extension of time with respect
to the
date on which any tax return was or is due to be filed by Iceland
Health,
or any waiver or agreement by it for the extension of time for
the
assessment of any tax;
and
|
9
|
(vi)
|
Iceland
Health and each predecessor of Iceland Health, if any, has been,
effective
January 1, 2005, a validly electing S corporation within the meaning
of
sections 1361 and 1362 of the Internal Revenue Code of 1986, as
amended,
and has been treated as such for federal income tax purposes up
to and
including the Closing.
|
|
(l)
|
Absence
of Changes or Events. Except as set forth on Schedule 9(l)
and except in connection with the transaction contemplated by this
Agreement,
since the Balance Sheet Date:
|
|
(i)
|
the
business of Iceland Health has been conducted in the ordinary course
and
consistent with past practice;
|
|
(ii)
|
there
has not been:
|
|
(1)
|
any
material adverse change in the relationships of Iceland Health
with its
licensees, customers, suppliers, payors, reimbursers, and/or persons
or
organizations that refer business to
it;
|
|
(2)
|
any
material damage, destruction or casualty loss (whether or not covered
by
insurance) suffered by Iceland
Health;
|
|
(3)
|
any
transaction material to the business or the assets of Iceland Health,
except in the ordinary course of
business;
|
|
(4)
|
any
employment agreement or deferred compensation agreement entered
into
between Iceland Health and any of its
employees;
|
|
(5)
|
any
issuances or grants of shares, subscriptions, options, warrants,
calls,
contracts, demands, commitments, convertible securities or other
agreements or arrangements of any character or nature whatever
under which
Iceland Health is or may become obligated to issue, assign or transfer
any
shares of the capital stock of Iceland
Health;
|
|
(6)
|
any
increase, not in the ordinary course of business, in the compensation
payable or to become payable by Iceland Health or the adoption
of any new
(or amendment to or alteration of any existing) bonus, incentive,
compensation, pension, stock, matching gift, profit sharing, retirement,
death benefit or other fringe benefit
plan;
|
|
(7)
|
any
increase in the aggregate indebtedness for borrowed money or any
increase
in purchase commitments or other liabilities or obligations (whether
absolute, accrued, contingent or otherwise) incurred by Iceland
Health,
except for liabilities, commitments and obligations incurred in
the
ordinary course of business consistent with past
practice;
|
|
(8)
|
any
lien created on any of the assets of Iceland Health, other than
(i) liens
for taxes not yet due and payable and (ii) liens other than for
borrowed
money that are created in the ordinary course of business consistent
with
past practice as reflected in the Financial
Statements;
|
|
(9)
|
any
material labor dispute involving the employees of Iceland
Health;
|
|
(10)
|
any
sale, assignment, transfer or other disposition or license of any
material
tangible or intangible assets of Iceland Health, in excess of $25,000
per
transaction, other than the sale of inventory in the ordinary course
of
business consistent with past
practice;
|
10
|
(11)
|
any
amendment, termination or waiver by Iceland Health of any right
of
substantial value belonging to it;
|
|
(12)
|
any
amendment of the Certificate of Incorporation or bylaws of Iceland
Health;
|
|
(13)
|
inventory
purchases or sales, in excess of $10,000, out of the ordinary course
of
business;
|
|
(14)
|
any
one or more capital expenditures or commitments by Iceland Health
not
fully paid for in excess of $25,000 in the aggregate;
or
|
|
(15)
|
any
change, event or condition which, in any case or in the aggregate,
has had
or is reasonably expected to have a materially adverse affect on
Iceland
Health's condition (financial or otherwise), properties, assets,
liabilities, operations or
prospects,
taken
as a whole;
|
|
(16)
|
any
transaction, contract or commitment other than in the ordinary
course of
business; or
|
|
(17)
|
any
agreement or any commitment to take any of the foregoing
actions.
|
|
(m)
|
Litigation.
Except
as set forth in Schedule 9
|
|
(n)
|
Compliance
with Laws and Other Instruments.
|
|
(i)
|
Except
as set forth in Schedule 9
|
|
(ii)
|
Iceland
Health is and has been in compliance in all material respects with
legal
requirements applicable to Iceland Health. Iceland Health is not
in
default under, or in violation of, any statute, law, order, requirement
or
regulation of any governmental authority. Iceland Health has not
received
or entered into any citations, complaints, consent orders, compliance
schedules, or other similar enforcement orders or received any
written
notice from any governmental authority or any other written notice
that
would indicate that it is not currently in compliance with all
such legal
requirements.
|
|
(o)
|
Title
to Properties.
|
|
(i)
|
Except
as set forth in Schedule 9(o)(i),
Iceland Health has good
title to all the properties and assets reflected in the Balance
Sheet
(except for inventory
sold
after the Balance Sheet Date in the ordinary course of
business).
|
11
|
(ii)
|
Except
as set forth in Schedule 9(o)(ii),
none of such properties and assets are subject to any mortgage,
pledge,
lien, charge, security interest, encumbrance, restriction, lease,
license,
easement, liability or adverse claim of any nature whatsoever,
whether
accrued, absolute, contingent or otherwise, except as expressly
set forth
in the Balance Sheet as securing specific liabilities or as otherwise
expressly permitted by the terms hereof or those imperfections
of title
and encumbrances, if any, which
|
|
(1)
|
are
not substantial in character, amount or extent and do not materially
detract from the value of the properties subject
thereto,
|
|
(2)
|
do
not interfere with either the present and continued use of such
property
or the conduct of Iceland Health's normal operations
and
|
|
(3)
|
have
arisen only in the ordinary course of
business.
|
|
(iii)
|
All
of the properties and assets owned, leased or used by Iceland Health
are
in operating
condition,
are suitable for the purposes used, are adequate for the current
operations of Iceland Health.
|
|
(p)
|
Schedule
|
|
(i)
|
All
real property owned by Iceland Health or in which Iceland Health
has a
leasehold or other interest or which is used by Iceland Health
in
connection with the operation of its
business,
|
|
(ii)
|
Any
material lease or other agreement that is terminable on a change
of
control of Iceland Health or on the sale of its
assets;
|
|
(iii)
|
As
of a date no earlier than the Balance Sheet Date, all of Iceland
Health's
receivables (which shall include accounts receivable, loans receivable
and
any advances), together with information as to each such listed
receivable
which has been outstanding for more than 90
days, to the extent such receivables are not included as bad debts
or
otherwise reflected in the Financial
Statements.
|
|
(iv)
|
All
machinery, tools, equipment, motor vehicles, rolling stock and
other
tangible personal property (other than inventory and supplies),
owned,
leased or used by Iceland Health except for items having a value
of less
than $5,000
which do not, in the aggregate, have a total value of more than
$25,000.
|
|
(v)
|
All
fire, theft, casualty, liability and other insurance policies insuring
Iceland Health.
|
|
(vi)
|
All
sales agency or route distributorship agreements or franchises
or
agreements providing for the services of an independent contractor
to
which Iceland Health is a party or by which it is
bound.
|
|
(vii)
|
All
material contracts, agreements, commitments or licenses relating
to
patents, trademarks, trade names, copyrights, inventions, processes,
know-how, formulae or trade secrets to which Iceland Health is
a party or
by which it is bound.
|
|
(viii)
|
All
loan agreements, indentures, mortgages, pledges, conditional sale
or title
retention agreements, security agreements, equipment obligations,
guaranties, leases or lease purchase agreements to which Iceland
Health is
a party or by which it is bound.
|
|
(ix)
|
All
material contracts, agreements and commitments, whether or not
fully
performed, in respect of the issuance, sale or transfer of the
capital
stock, bonds or other securities of Iceland Health to which Iceland
Health
is a party or pursuant to which Iceland Health has acquired any
substantial portion of its business or
assets.
|
12
|
(x)
|
All
material contracts, agreements, commitments or other understandings
or
arrangements to which Iceland Health is a party or by which it
or any of
its property is bound but excluding purchase and sales orders and
commitments made in the ordinary course of
business.
|
|
(xi)
|
employment
and consulting agreements, employee stock options plans to which
Iceland
Health is a party or is bound.
|
|
(xii)
|
The
names and current monthly salary rates of all persons who are employed
or
retained by Iceland
Health as of the date of this Agreement, showing separately for
each such
person the amounts paid or payable as salary, bonus payments and
any
indirect compensation in 2005 and to date in
2006.
|
|
(xiii)
|
The
names of all of Iceland Health's directors and officers; the name
of each
bank in which Iceland Health has an account or safe deposit box,
and the
names of all persons, if any, holding tax or other powers of attorney
from
Iceland Health.
|
|
(xiv)
|
All
of the contracts, agreements, leases, licenses and commitments
required to
be listed on any Schedule to this Agreement (other than those which
have
been fully performed) are valid and binding, enforceable in accordance
with their respective terms, except (A) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws
of
general application affecting enforcement of creditors’ rights, and (B) as
limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and in full force
and
effect. Except as disclosed in the relevant Schedule, there is
not under
any such contract, agreement, lease, license or commitment any
existing
default by Iceland Health or any other party thereto, or event
which,
after notice or lapse of time, or both, would constitute a default
or
result in a right to accelerate or loss of
rights.
|
|
(q)
|
Intangible
Property.
|
|
(i)
|
Schedule
|
|
(1)
|
all
trademarks, service marks, trade names, patents, copyrights, royalty
rights, logos, applications therefor and registrations thereof
and
inventions (collectively, “Proprietary Rights”) that are owned by Iceland
Health or are applicable to the business of Iceland Health (the
“Iceland
Health Proprietary Rights”), and the jurisdictions in which the Iceland
Health Proprietary Rights have been registered, filed or issued,
if any,
and all licenses to use any Proprietary Rights of others that are
applicable to the business of Iceland
Health;
|
|
(2)
|
contracts,
agreements or understandings pursuant to which Iceland Health has
authorized any person to use any of the Iceland Health Proprietary
Rights
(other than such license rights as may be ancillary to sales distribution
agreements for its products); and
|
For
the
purpose of this Section 9(q),
the
term “Iceland Health Trade Secrets” shall mean the research and development
results, records of experiments, scientific, technical, engineering and
marketing data and literature and other know-how, formulae and techniques,
recorded or available in any form whatsoever that were developed by Iceland
Health, are owned by Iceland Health and are applicable to the business of
Iceland Health.
|
(ii)
|
The
Iceland Health Proprietary Rights have been properly registered,
filed or
issued in the offices and jurisdictions set forth in Schedule 9(q),
and all applicable fees due and payable in connection with such
registrations have been paid. Except as otherwise indicated in
Xxxxxxxx
|
|
(iii)
|
Except
as set forth in Xxxxxxxx
|
13
|
(iv)
|
Except
as disclosed in Schedule
|
|
(v)
|
The
Iceland Health Trade Secrets have not been, and will not be, disclosed
by
Iceland Health to any person other than under standard non disclosure
agreements.
|
|
(vi)
|
Without
limiting the generality of the foregoing, the Iceland Health Proprietary
Rights also include all rights to the name and xxxx “Iceland Health,” and
neither Stockholder shall hereafter directly or indirectly use
such name
or xxxx or any similar name or xxxx except on behalf of N21 in
connection
with their employment by N21 or in accordance with rights granted
to them
under the security agreement referred to in Section 3(e).
|
|
(r)
|
No
Guaranties. Except as indicated on Schedule
|
|
(s)
|
Inventory.
Except as indicated on Schedule
|
|
(t)
|
Receivables.
Except
as indicated on Schedule 9(t),
all
receivables of Iceland Health (including accounts receivable, loans
receivable and advances) which are reflected in the Balance Sheet,
and all
such receivables which will have arisen since the date thereof,
shall have
arisen only from bona fide transactions in the ordinary course
of Iceland
Health's business
and shall be collected in full, without resort to litigation, within
90
days after they arose.
|
|
(u)
|
Labor
Matters. Except as set forth in Xxxxxxxx
|
|
(v)
|
Securities
Related Representations
|
|
(i)
|
Each
Stockholder will acquire his Merger Shares for
investment solely for the Stockholder’s own account and not with a view to
or for the resale or distribution
thereof.
|
14
|
(ii)
|
Each
Stockholder has reviewed the risk factors for N21 that are set
forth in
the SEC Documents.
|
|
(iii)
|
Each
Stockholder understands that the Stockholder may sell or otherwise
transfer the Restricted Securities only if such transaction is
duly
registered under the Securities Act of 1933, as amended (the “Act”), under
a registration statement or otherwise, or if Stockholder shall
have
received the opinion of counsel to the holder, which opinion shall
be
reasonably satisfactory to counsel to N21, to the effect that such
sale or
other transfer may be made in the absence of registration under
the Act
and in the absence of registration or qualification in each applicable
state where the Restricted Securities are proposed to be sold or
transferred. The Stockholder agrees to the imprinting of the following
legend on certificates representing the Merger
Shares issued or issuable to it:
|
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED, DIRECTLY
OR INDIRECTLY, WITHOUT A REGISTRATION STATEMENT IN EFFECT OR AN EXEMPTION
FROM
REGISTRATION.”
|
(iv)
|
Each
Stockholder realizes that the Merger Shares are not a liquid
investment.
|
|
(v)
|
Each
Stockholder has not relied upon the advice of a “Purchaser Representative”
(as defined in Regulation D of the Act) in evaluating the risks
and merits
of the investment in the equity securities of the N21, and that
it has the
knowledge and experience to evaluate N21 and the risks and merits
relating
thereto.
|
|
(vi)
|
Each
Stockholder is either (i) an accredited investor as such term is
defined
in Rule 501 of Regulation D promulgated pursuant to the Act or
(ii) a
person who is a non-United States person who is not and has not
been a US
citizen or US resident within the meaning of Regulation S of the
Act, and
shall be such on the date any securities are issued to the
holder.
|
|
(vii)
|
Each
Stockholder is able to bear the economic risk of losing Stockholder’s
entire investment in the securities and understands that an investment
in
the N21 involves substantial risks.
|
|
(w)
|
Records.
The books of account, minute books, stock certificate books and
stock
transfer ledgers of Iceland Health are complete and correct in
all
material respects, and there have been no transactions involving
the
business of Iceland Health which properly should have been set
forth
therein and which have not been accurately so set
forth.
|
|
(x)
|
Absence
of Certain Business Practices. Neither Iceland Health nor any officer,
employee or agent of Iceland Health, nor any other person acting
on its
behalf, has, directly or indirectly, within the past five years
given or
agreed to give any gift or similar benefit to any customer (except
as made
generally available to customers), supplier, governmental employee
or
other person who is or may be in a position to help or hinder the
business
of Iceland Health (or assist Iceland Health in connection with
any actual
or proposed transaction) which might subject Iceland Health to
any damage
or penalty in any civil, criminal or governmental litigation or
proceeding.
|
|
(y)
|
Suppliers
and Customers.
Schedule 9(y)
sets forth (i) the names of the 10 principal suppliers of Iceland
Health
collectively during each of the years ended December 31, 2004 and
December
31, 2005 and the six months ended June 30, 2006, together with
the dollar
amount of goods purchased by Iceland Health from each such supplier
during
each such period, and (ii) the names of the 10 principal customers
of
Iceland Health during each such period, together with the dollar
amount of
net sales to each such customer during each such period. Except
as
otherwise set forth in Schedule 9(y),
Iceland Health maintains good business relations with all suppliers
and
customers listed or required to be listed in the Schedule 9(y)
as well as with governments, partners, financing sources and other
parties
with whom Iceland Health has significant relations, and no such
party has
canceled, terminated or has given to Iceland Health notice that
it intends
to cancel or otherwise terminate its relationship with Iceland
Health or
to materially decrease its services or supplies to Iceland Health
or its
direct or indirect purchase or usage of the products of Iceland
Health or
to otherwise materially adversely modify its relations with Iceland
Health.
|
15
|
(z)
|
Outstanding
Purchase Orders.
Schedule 9(z)
sets forth as of July 31, 2006 Iceland Health's outstanding purchase
orders received from customers and Iceland Health's purchase orders
that
were delivered by Iceland Health to its
suppliers.
|
|
(aa)
|
Products,
Services and Authorizations.
|
|
(i)
|
Since
January 1, 2005, each product sold by Iceland Health has been manufactured
and distributed in accordance with (i) the specifications under
which the
product is normally and has normally been manufactured, and (ii)
the
provisions of all applicable laws, policies, guidelines and any
other
governmental requirements.
|
|
(ii)
|
There
have been no recalls of any products since January 1,
2005.
|
|
(iii)
|
Iceland
Health has received no notice of any claims existing under or pursuant
to
any warranty, whether express or implied, on products sold by Iceland
Health.
|
|
(iv)
|
Iceland
Health maintains product liability insurance in such amounts, with
such
deductibles and against such risks and loss as are
reasonable.
|
|
(bb)
|
Iceland
Health has had an opportunity to discuss the business, management
and
financial affairs of N21 and has had access to the management of
N21 and
has had the opportunity to review all information requested by
Iceland
Health. Iceland Health has had the opportunity to review the SEC
Documents
(as such term is defined below) and the risk factors set forth
therein.
|
|
(cc)
|
Iceland
Health does not maintain, and since January 1, 2003 has not maintained,
any plan or benefit that is governed by
ERISA.
|
|
10.
|
Representations
and Warranties by N21 and XxxXx. X00
and NewCo represent and warrant to Iceland Health and the Stockholders
as
follows, it being understood that all Schedules referred to in
this
Section shall be set forth on a separate Disclosure
Schedule:
|
|
(a)
|
Organization,
Standing and Qualification. N21 is a corporation duly organized,
validly
existing and in good standing under the laws of New York; it has
all
requisite corporate power and authority and is entitled to carry
on its
business as now being conducted and to own, lease or operate its
properties as and in the places where such business is now conducted
and
such properties are now owned, leased or operated; and it is duly
qualified, licensed or domesticated and in good standing as a foreign
corporation authorized to do business in the states disclosed in
its SEC
Documents or as disclosed and listed on Schedule 10(a),
which,
except as disclosed in its SEC Documents or as disclosed and set
forth on
Schedule 10(a),
are the only states where the nature of the activities conducted
by it or
the character of the properties owned, leased or operated by it
require
such qualification, licensing or
domestication.
|
NewCo
is
a newly formed New York limited liability company. Except in connection with
this Agreement, NewCo has not conducted and will not conduct prior to the
Effective Time any operations, enter into any agreements and has no and will
not
have prior to the Effective Time or the earlier termination of this Agreement
any obligations or liabilities, either accrued, absolute, contingent or
otherwise.
|
(b)
|
Authorization
and Approval of Agreement. All proceedings or corporate action
required to
be taken by N21 and by NewCo relating to the execution and delivery
of
this Agreement and the consummation of the transactions contemplated
hereby shall have been taken at or prior to the
Closing.
|
16
|
(c)
|
Execution,
Delivery and Performance of Agreement; Authority. Neither the execution,
delivery nor performance of this Agreement by N21 or by NewCo will,
with
or without the giving of notice or the passage of time, or both,
conflict
with, result in a default, right to accelerate or loss of rights
under, or
result in the creation of any lien, charge or encumbrance pursuant
to, any
provision of N21’s or NewCo's certificate of incorporation, articles of
organization or by-laws or operating agreement or any franchise,
mortgage,
deed of trust, lease, license, agreement, understanding, law, rule
or
regulation or any order, judgment or decree to which N21 and/or
NewCo is a
party or by which either of them is bound or affected. Both N21
and NewCo
have the full power and authority to enter into this Agreement
and to
carry out the transactions contemplated hereby and this Agreement
constitutes a valid and binding obligation of N21 and NewCo, enforceable
in accordance with its terms, except (A) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws
of
general application affecting enforcement of creditors’ rights, and (B) as
limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable
remedies..
|
|
(d)
|
Issuance
of Shares. The issuance and delivery of the Merger Shares in accordance
with this Agreement shall be, at or prior to the Closing Date,
duly
authorized by all necessary corporate action on the part of N21,
and, when
issued on the Closing Date as contemplated hereby, such shares
of equity
securities will be duly and validly issued, fully paid and nonassessable
and issued in compliance with all applicable laws including United
States
federal and state securities laws. Such equity securities, when
so issued
and delivered in accordance with the provisions of this Agreement,
shall
be free and clear of all liens and encumbrances and adverse claims,
other
than restrictions on transfer created by applicable securities
laws and
will not have been issued in violation of their respective properties
or
any preemptive rights or rights of first refusal or similar
rights.
|
|
(e)
|
SEC
Documents; Financial Statements. N21 has filed all reports, schedules,
forms, statements and other documents required to be filed by it
with the
Securities and Exchange Commission (“SEC”) pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed prior
to the
date hereof since January 1, 2004
(including all exhibits included therein and financial statements
and
schedules thereto and documents incorporated by reference therein)
being
referred to hereinafter as the “Filed SEC Documents.” None of the Filed
SEC Documents, at the time they were filed with the SEC, 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. As of their respective dates, the consolidated financial
statements of N21 included in the Filed SEC Documents complied
as to form
in all material respects with applicable accounting requirements
and the
published rules and regulations of the SEC with respect thereto.
For
purposes of this Agreement, SEC Documents shall mean the Filed
SEC
Documents together with any report, schedule, form, statement and
other
document filed by N21 with the SEC from the date
hereof.
|
|
(f)
|
Financial
Statements.
|
|
(i)
|
The
unaudited consolidated financial statements of N21 for the nine
months
ended March 31, 2006 that are included in the Filed SEC Documents
have
been prepared from the books and records of N21 in accordance with
U.S.
generally accepted accounting principles consistently applied (subject
to
the absence of footnotes and year-end accruals) and maintained
throughout
the period indicated and fairly present the financial condition
of N21 as
at the date thereof and the results of its operations for the period
covered thereby.
|
|
(ii)
|
The
statements of earnings included in the Financial Statements do
not contain
any items of special or nonrecurring income or any other income
not earned
in the ordinary course of business except as expressly specified
therein
or in the Filed SEC Documents.
|
17
|
(g)
|
Taxes.
|
|
(i)
|
all
taxes, including, without limitation, income, property, sales,
use,
franchise, value added, employees' or other third party income
tax
withholding and social security taxes, imposed by the United States
or any
State or any other foreign country or by any municipality, subdivision
or
instrumentality of the United States or any State or of any other
country,
or by any other taxing authority, which are due and
payable by N21, and all interest and penalties thereon, whether
disputed
or not, have been paid in full;
|
|
(ii)
|
all
tax returns required to be filed by N21 have been duly and timely
filed
and are complete and correct in all material
respects;
|
|
(iii)
|
all
taxes or deposits in respect thereof required by applicable law
to be
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, stockholder or other third party
have
been so withheld and paid, and all Forms W-2 and 1099 required
with
respect to such amounts paid or owing have been properly completed
and
timely filed; and
|
|
(iv)
|
N21
has not been delinquent in the payment of any foreign or domestic
tax,
assessment or governmental charge or deposit and has no tax deficiency
or
claim outstanding, proposed or assessed against it, and there is
no basis
for any such deficiency or claim;
|
|
(h)
|
N21
has had an opportunity to discuss the business, management and
financial
affairs of Iceland Health and has had access to, the management
of Iceland
Health and has had the opportunity to review all information requested
by
N21.
|
|
11.
|
Conduct
of Business Prior to Closing.
|
|
(a)
|
Prior
to the Closing, the Stockholders shall cause Iceland Health to
conduct its
business and affairs only in the ordinary course of business in
consultation with N21 on all material matters, to maintain, keep
and
preserve its assets and
properties in good condition and repair and maintain insurance
thereon in
accordance with present practices, and to use reasonable commercial
efforts to preserve the business and organization of Iceland Health
intact, to keep available the services of Iceland Health’s present
officers and employees, to preserve the goodwill of Iceland Health’s
suppliers and customers and others having business relations with
it.
Without
limiting the generality of the foregoing, prior to the Closing,
Stockholders will not suffer or permit Iceland Health to:
|
|
(i)
|
change
its certificate of incorporation or merge or consolidate or obligate
itself to do so with or into any other
entity;
|
|
(ii)
|
enter
into any material contract, agreement, commitment or other understanding
or arrangement except in the ordinary course of business or those
of the
type which would not have to be listed and described under Section
9,
except as required hereunder;
|
|
(iii)
|
perform,
take any action or incur or permit to exist any of the acts, transactions,
events or occurrences of the type described in Section
|
|
(iv)
|
repay
any indebtedness to any person or entity, except for repayments
due to any
bank and payments to be made in the ordinary course of
business;
|
|
(v)
|
make
any distributions to Iceland Health’s shareholders other than dividends or
distributions for the payment of taxes or as compensation for services
rendered;
|
|
(vi)
|
issue
any shares of Iceland Health or any options or warrants;
or
|
|
(vii)
|
expend
any cash other than for Iceland Health’s normal operating activities and
in connection with the transactions contemplated
hereunder.
|
18
|
(b)
|
Subject
to standard confidentiality undertakings, Iceland Health shall
give to
X00, XxxXx and their attorneys, accountants and other representatives,
upon reasonable notice to Iceland Health, full access (so long
as it does
not interfere with Iceland Health's operations), during Iceland
Health’s
regular business hours, to Iceland Health’s personnel and all properties,
documents, contracts, books and records of Iceland Health and will
furnish
N21 and NewCo with copies of such documents (certified by Iceland
Health’s
officers if so requested) and with such information with respect
to the
affairs of Iceland Health as N21 and/or NewCo may from time to
time
reasonably request. Any such furnishing of such information to
N21 and/or
NewCo or any investigation by N21 and/or NewCo shall not affect
N21’s and
NewCo’s right to rely on any representations and warranties made in this
Agreement.
|
|
(c)
|
Public
Disclosure. Prior to the consummation of the Merger and subject
to the
provisions of this Section 11(c),
the parties hereto shall not issue any statement or communication
to the
public or press concerning this Agreement, the Merger or any of
the other
transactions contemplated by this Agreement, except as provided
hereunder.
Before a party releases any information concerning this Agreement,
the
Merger or any of the other transactions contemplated by this Agreement
which is intended for or may result in public dissemination thereof,
such
party shall cooperate with the other parties, shall furnish drafts
of all
documents or proposed oral statements to the other parties for
comments,
and shall not release any such information without the written
consent of
the other parties. Nothing contained herein shall prevent a party
hereto
from releasing any information if required to do so by law in the
opinion
of its counsel.
|
|
(d)
|
Best
Efforts; Regulatory Filings. Subject to the terms and conditions
set forth
in this Agreement, each of the parties hereto shall use commercially
reasonable best efforts to take, or cause to be taken, all actions,
and to
do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to
consummate
and make effective, in the most expeditious manner practicable,
the Merger
and the other transactions contemplated by this Agreement, including
using
commercially reasonable efforts to cause the conditions set forth
in
Sections 12
and 13
to
be satisfied.
|
|
(e)
|
Iceland
Health will not, prior to Closing, make or change any tax election;
change
any tax accounting period or tax accounting method; settle any
tax
dispute; or extend any statute of limitations for the assessment
or
collection of any tax without the consent of N21, which consent
N21 shall
not unreasonably withhold.
|
|
(f)
|
The
provisions of that certain Non-Disclosure Agreement signed by N21
(the
“NDA”) shall apply
to any disclosure of confidential information made by Iceland Health
hereunder and N21 shall continue to comply and shall ensure compliance
by
NewCo with the provisions of the NDA. A breach of the NDA shall
be deemed
a breach hereunder, for all intents and
purposes.
|
|
(g)
|
So
long as this Agreement is in effect neither Iceland Health nor
either
Stockholder shall entertain, negotiate or deal with, or provide
any
Confidential Information (as defined in Exhibit 3(d)(ii)) to, any
person
or entity who or which proposes to purchase all or any substantial
part of
the assets of Iceland Health other than in the ordinary course
of
business, or to purchase from Iceland Health or any Stockholders
any
equity interest in Iceland Health.
|
|
12.
|
Conditions
Precedent to N21’s and NewCo's Obligations. All obligations of N21 and
NewCo hereunder are subject, at the option of N21 and NewCo, to
the
fulfillment of each of the following conditions at or prior to
the
Closing:
|
|
(a)
|
All
representations and warranties of the Stockholders contained herein
shall
be true and correct in all material respects when made and shall
be deemed
to have been made again at and as of the date of the Closing, and
shall
then be true and correct in all material
respects.
|
19
|
(b)
|
All
covenants, agreements and obligations required by the terms of
this
Agreement to be performed by Iceland Health and the Stockholders
at or
before the Closing shall have been duly and properly performed
in all
material respects.
|
|
(c)
|
Since
the date of this Agreement there shall not have occurred any material
adverse change in the condition (financial or otherwise), business,
properties or assets of Iceland
Health.
|
|
(d)
|
There
shall be delivered to N21 and NewCo a certificate executed by an
authorized officer of Iceland Health on behalf of Iceland Health,
dated
the date of the Closing, certifying that the conditions set forth
in
paragraphs
|
|
(e)
|
All
documents required under this Agreement to be delivered by Iceland
Health
and the Stockholders to N21 and NewCo at or prior to the Closing
shall
have been so delivered.
|
|
(f)
|
There
shall not be outstanding any debt or other obligation by Iceland
Health to
any Stockholder or any affiliate of any
Stockholder.
|
|
(g)
|
N21
and NewCo
|
|
(i)
|
shall
have completed their due diligence review of the books and records
and
business and operations of Iceland Health, which N21 and NewCo
undertake
to continue promptly after the execution of this Agreement and
for which
Iceland Health agrees to furnish such materials for inspection
as N21 and
NewCo and their agents shall reasonably request and to make available
members of management of the Company, and
|
|
(ii)
|
shall
have no material objection as to any matters disclosed to them
in such
review.
|
|
13.
|
Conditions
Precedent to Iceland Health’s and Stockholders Obligations. All
obligations of Iceland Health and Stockholders at the Closing are
subject,
at the option of Iceland Health, to the fulfillment of each of
the
following conditions at or prior to the
Closing:
|
|
(a)
|
All
representations and warranties of N21 and NewCo contained herein
shall be
true and correct in all material respects when made and shall be
deemed to
have been made again at and as of the date of the Closing, and
shall then
be true and correct in all material
respects.
|
|
(b)
|
All
covenants, agreements and obligations required by the terms of
this
Agreement to be performed by N21 and NewCo at or before the Closing
shall
have been duly and properly performed in all material
respects.
|
|
(c)
|
Since
the date of this Agreement there shall not have occurred any material
adverse change in the condition (financial or otherwise), business,
properties or assets of N21.
|
|
(d)
|
There
shall be delivered to Iceland Health a certificate executed by
an
authorized officer of N21 and NewCo, dated the date of the Closing,
certifying that the conditions set forth in paragraphs
|
|
(e)
|
All
documents required under this Agreement to be delivered to Iceland
Health
and/or the Stockholders by N21 and NewCo at or prior to the Closing
shall
have been so delivered.
|
|
(f)
|
There
shall have been approved by NASDAQ an additional listing application
with
respect to the Initial Merger Shares and any Additional Merger
Shares.
|
|
(g)
|
Stockholders
|
20
|
(i)
|
shall
have completed their due diligence review of the books and records
and
business and operations of N21 and NewCo, which Stockholders undertake
to
continue promptly after the execution of this Agreement and for
which N21
and NewCo agree to furnish such materials for inspection as Stockholders
and their agents shall reasonably request, and to make available
members
of management, and
|
|
(ii)
|
shall
have no material objection as to any matters disclosed to them
in such
review.
|
|
(iii)
|
shall
have received the opinion referenced in Section 3(a)(iv).
|
|
14.
|
Indemnification.
|
|
(a)
|
Subject
to the provisions of Section 14(e), each Stockholder and, if there
is no
Closing, Iceland Health (each, a “Seller Indemnifying Party”) jointly and
severally undertake and agree to indemnify N21 against and in respect
of
any and all direct losses, damages, costs and expenses (including
reasonable legal fees and expenses) and
shall on demand reimburse N21 for:
|
|
(i)
|
any
and all loss, liability or damage suffered or incurred by N21 and/or
NewCo
(the “N21 Indemnified Party”) by reason of (i) any untrue representation,
breach of warranty or non-fulfillment of any covenant by Iceland
Health or
any Stockholder contained herein or (ii) any liability or obligation
(a
“Non-Assumed Liability”) that is not listed as an “Assumed Liability” in
the Stockholder’s Disclosure
Schedule;
|
|
(ii)
|
the
amount of any receivables that are not paid within 90 days after
they are
due;
|
|
(iii)
|
any
and all loss, liability or damage suffered or incurred by the N21
Indemnified Party by reason of or in connection with any claim
for
finder's fee or brokerage or other commission arising by reason
of any
services alleged to have been rendered to or at the instance of
the Seller
Indemnifying Party with respect to this Agreement or any of the
transactions contemplated hereby;
|
|
(iv)
|
any
and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs, and expenses, including, without limitation,
reasonable
legal fees and expenses, incident to any of the foregoing or incurred
in
investigating or attempting to avoid the same or to oppose the
imposition
thereof, or in enforcing this
indemnity.
|
|
(b)
|
Subject
to the provisions of Section 14(e), N21 (the “N21 Indemnifying Party”)
hereby undertakes and agrees to indemnify each Stockholder and
Iceland
Health against and in respect of any and all direct losses, damages,
costs
and expenses (including reasonable legal fees and expenses) and
shall on
demand reimburse each Stockholder
for
|
|
(i)
|
any
and all loss, liability or damage suffered or incurred by such
Stockholder
or Iceland Health (each, a “Seller Indemnified Party”) by reason of any
untrue representation, breach of warranty or non-fulfillment of
any
covenant by N21 and/or NewCo contained
herein;
|
|
(ii)
|
any
and all loss, liability or damage suffered or incurred by the Seller
Indemnified Party by reason of or in connection with any claim
for
finder's fee or brokerage or other commission arising by reason
of any
services alleged to have been rendered to or at the instance of
the N21
Indemnifying Party with respect to this Agreement or any of the
transactions contemplated hereby;
|
|
(iii)
|
any
and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs, and expenses, including, without limitation,
reasonable
legal fees and expenses, incident to any of the foregoing or incurred
in
investigating or attempting to avoid the same or to oppose the
imposition
thereof, or in enforcing this
indemnity.
|
21
|
(c)
|
The
right of any Indemnified Party to recover a loss under this Section
14
is
subject to the condition that a claim therefor from such Indemnified
Party
is received by the Indemnifying Party within 24 months from the
Closing
Date.
|
|
(d)
|
The
indemnity obligations of N21 and NewCo, on the one hand, and of
Iceland
Health or the Stockholders, on the other hand, shall in no event
exceed
the value of the purchase price hereunder, with each Initial Merger
Share
being valued for this purpose at the greater of the per share closing
price on the Closing Date or $2.00, and each Additional Merger
Share being
valued at the then Per Share Market Value for this
purpose.
|
|
(e)
|
Carve
out
|
|
(i)
|
The
Stockholders shall have no indemnification obligation hereunder
for the
first $200,000 of claims for which indemnification would otherwise
be
required by them hereunder.
|
|
(ii)
|
N21
shall have no indemnification obligation hereunder for the first
$200,000
of claims for which indemnification by it would otherwise be required
hereunder.
|
|
(iii)
|
No
indemnification shall in any event be required for any individual
claim
for less than $30,000, except to the extent that the aggregate
of all such
individual claims that are less than $30,000 exceeds $100,000.
|
|
(f)
|
The
Indemnification obligations of the Stockholders shall be satisfied
as
follows:
|
|
(i)
|
First
by deeming the principal amount of the Notes to be satisfied in
an amount
equal to the required indemnification; all such offsets and reductions
in
principal amounts to be applied equally against the Notes respectively
issued to the Stockholders
respectively;
|
|
(ii)
|
Second,
by offsets against payments relating to sales of Eligible Products
that
have theretofore accrued for a Payment Period that has
elapsed;
|
|
(iii)
|
Third,
by cancellation of Additional Merger Shares (allocated equally
against
Merger Shares respectively owned by the Stockholders) that then
remain
subject to the lock-up in Section 8,
with each such share being valued at the Per Share Market Value
(adjusted
for stock splits, combinations and similar matters) for this
purpose;
it
being understood that all Additional Merger Shares shall be legended
to
reflect this potential offset;
|
|
(iv)
|
Fourth,
by cancellation of Initial Merger Shares (allocated equally against
Merger
Shares respectively owned by the Stockholders) that then remain
subject to
the lock-up in Section 8,
with each such share being valued at the per share closing price
on the
Closing Date;
it
being understood that all Initial Merger Shares shall be legended
to
reflect this potential offset; and
|
|
(v)
|
Fifth,
by the Stockholders personally and jointly and
severally.
|
|
(g)
|
Indemnity
Procedure.
|
|
(i)
|
In
the event a party seeks indemnification pursuant to this Section
14,
the Indemnified Party shall give prompt notice to the party or
parties
from whom such indemnification is sought of the assertion of any
claim, or
the commencement of any action or proceeding, in respect of which
indemnity may be sought hereunder.
|
|
(ii)
|
The
Indemnifying Party shall have the right to assume the defense of
any such
action or proceeding at its own
expense.
|
22
|
(iii)
|
In
any such action or proceeding, the Indemnified Parties collectively
shall
have the right to retain one counsel; but the fees and expenses
of such
counsel shall be the expense of the Indemnified Parties unless
(i) the
Indemnifying Party and the Indemnified Party shall have mutually
agreed to
the retention of such counsel or (ii) the named parties to any
suit,
action or proceeding (including any impleaded parties) include
both the
Indemnifying Party and the Indemnified Party and representation
of all
parties by the same counsel would be inappropriate due to actual
or
potential conflict of interests between
them.
|
|
(iv)
|
An
Indemnifying Party shall not be liable under this Agreement for
any
settlement effected without its consent (which shall not be unreasonably
withheld) of any claim, litigation or proceeding in respect of
which
indemnity may be sought hereunder.
|
|
(v)
|
The
Indemnifying Party may settle any claim without the consent of
the
Indemnified Party, but only if the sole relief awarded is monetary
damages
that are paid in full by the Indemnifying Party. In all other cases
consent of the Indemnifying Party shall be required and shall not
be
unreasonably withheld.
|
|
15.
|
Survival
of Representations, Warranties, Covenants and
Obligations.
|
|
(a)
|
Notwithstanding
any right of N21 and NewCo to fully investigate the affairs of
Iceland
Health and notwithstanding any knowledge of facts determined or
determinable by N21 and NewCo pursuant to such investigation or
right of
investigation, N21 and NewCo has the right to rely fully upon the
representations and warranties of Iceland Health contained in this
Agreement.
|
|
(b)
|
Notwithstanding
any right of Iceland Health to fully investigate the affairs of
N21 and
NewCo and notwithstanding any knowledge of facts determined or
determinable by Iceland Health pursuant to such investigation or
right of
investigation, Iceland Health has the right to rely fully upon
the
representations and warranties of N21 and NewCo contained in this
Agreement.
|
|
(c)
|
Except
for the representations and warranties set forth in Section 9(k),
above,
which shall survive until the appropriate statute of limitations
for
assessment of tax has expired, and except that registration rights
and
other covenants which survive pursuant to their terms shall survive
in
accordance with such terms, the representations, warranties, covenants
and
obligations of each party shall survive the execution and delivery
of this
Agreement and the Closing hereunder and shall thereafter continue
in full
force for 24 full calendar months after the Closing Date. If
any claim for indemnification hereunder that has been previously
asserted
by a party to this Agreement in accordance with Section
|
|
(d)
|
Each
party shall at the request of any other party reasonably
cooperate in the filing of tax returns, the defense of tax audits,
and the
prosecution and settlement of any tax litigation or other tax
proceedings.
|
|
16.
|
Notices.
Any and all notices or other communications required or permitted
to be
given under any of the provisions of this Agreement shall be in
writing
and shall be deemed to have been duly given when personally delivered
or
forty-eight (48) hours after being forwarded for priority delivery
by
Federal Express or other recognized courier, addressed, if to Iceland
Health or N21 to it at its then headquarters address, and, if to
any
Stockholder, to it
c/o the Company (or at such other address as any party may specify
by
notice to all other parties given as
aforesaid).
|
|
17.
|
Miscellaneous.
|
|
(a)
|
This
writing, the Schedules hereto and all other written agreements
executed
and delivered on this date or hereafter, together constitute the
entire
agreement of the parties with respect to the subject matter hereof
and may
not be modified, amended or terminated except by a written agreement
specifically referring to this Agreement signed by all of the parties
hereto. Such entire agreement supersedes all prior agreements or
understandings, whether written, oral or otherwise, which may have
been
previously made, discussed or addressed by the parties, including
the
agreement dated as of August 15, 2006 (the “prior agreement”) by and among
N21, the Company, the Stockholders and N21 Acquisition Corp. Among
other
things, this Agreement substitutes NewCo as a party in place of
N21
Acquisition Corp.
|
23
|
(b)
|
No
waiver of any breach or default hereunder shall be considered valid
unless
in writing and signed by the party giving such waiver, and no such
waiver
shall be deemed a waiver of any subsequent breach or default of
the same
or similar nature.
|
|
(c)
|
This
Agreement shall be binding upon and inure to the benefit of each
corporate
party hereto, its successors and assigns, and each individual party
hereto
and his heirs, personal representatives, successors and
assigns.
|
|
(d)
|
The
paragraph headings contained herein are for the purposes of convenience
only and are not intended to define or limit the contents of said
paragraphs.
|
|
(e)
|
Each
party hereto shall cooperate, shall take such further action and
shall
execute and deliver such further documents as may be reasonably
requested
by any other party in order to carry out the provisions and purposes
of
this Agreement.
|
|
(f)
|
This
Agreement may be executed in one or more counterparts, all of which
taken
together shall be deemed one original. This Agreement may be signed
by
facsimile.
|
|
(g)
|
This
Agreement and all amendments thereof shall be governed by and construed
in
accordance with the law of the State of New York applicable to
contracts
made and to be performed therein.
|
|
(h)
|
The
parties consent to the exclusive jurisdiction of the state and
federal
courts in New York City in any action arising out of or connected
in any
way with this Agreement, and the parties hereto further agree that
the
service of process or of any other papers upon them or any of them
in the
manner provided for notices hereunder shall be deemed good, proper
and
effective service upon them. Trial
by jury is waived.
|
|
(i)
|
X00,
XxxXx and Iceland Health shall each be responsible for their own
fees and
expenses (including attorneys fees) with respect to the transactions
set
forth in this Agreement, except that N21 shall pay $50,000 towards
the
fees of Xxxxxxxx, Kill et al. for such transaction and $10,000
towards the
fees of Xxxxx & Xxxxxxx for the Tax Opinion.
All fees and expense that are paid by Iceland Health will be taken
into
account in computing Working Capital under Section
4.
|
24
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
ICELAND
HEALTH, INC.
By: /s/
Xxxx X. Xxxxxxxx
Name: Xxxx
X.
Xxxxxxxx
Title: Chief
Executive Officer
/s/
Xxxx X. Xxxxxxxx
Xxxx
X.
Xxxxxxxx
/s/
Xxxxxx Xxxxx
Xxxxxx
Xxxxx
By:
/s/
Xxxx Xxxxxxxxxx
Name:
Xxxx Xxxxxxxxxx
Title:
Chief Executive Officer
N21
ACQUISITION I LLC
By:
/s/
Xxxx Xxxxxxxxxx
Name:
Xxxx Xxxxxxxxxx
Title:
Chief Executive Officer
N21
Acquisition Corp. confirms that the prior agreement has been amended and
superseded by this Agreement.
N21
ACQUISITION CORP.
By:
/s/
Xxxx Xxxxxxxxxx
Name:
Xxxx Xxxxxxxxxx
Title:
Chief Executive Officer
25
