AGREEMENT AND PLAN OF MERGER
BY AND AMONG
FUN CITY POPCORN, INC.
LEV PHARMACEUTICALS, INC.
AND
LEV ACQUISITION CORP.
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of November 5, 2004, among Fun City Popcorn, Inc., a Nevada corporation
("Parent"), LEV Pharmaceuticals, Inc., a Delaware corporation ("Lev") and LEV
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Lev Merger Sub").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law ("Delaware Law") and the
Nevada Corporation Law ("NCL"), Parent, Lev and Lev Merger Sub intend to enter
into a business combination transaction.
B. The Board of Directors of Lev (i) has determined that the Merger (as
defined in Section 1.2 below) is consistent with and in furtherance of the
long-term business strategy of Lev and fair to, and in the best interests of,
Lev and its stockholders, (ii) has approved this Agreement, the Merger and the
other transactions contemplated by this Agreement, (iii) has adopted a
resolution declaring the Merger advisable and (iv) has determined to recommend
that the stockholders of Lev adopt this Agreement.
C. The Board of Directors of Parent (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and fair to, and in the best interests of, Parent and its stockholders, (ii) has
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement, (iii) has adopted a resolution declaring the Merger advisable
and (iv) has approved the issuance of shares of Parent Common Stock (as defined
below) and Parent Convertible Preferred Stock pursuant to the Merger (the "Share
Issuance").
D. The Board of Directors of Lev Merger Sub (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of Lev Merger Sub, respectively, and fair to and in the best interests of, Lev
Merger Sub and its stockholders, (ii) has approved this Agreement, the Merger
and the other transactions contemplated by this Agreement; and (iii) has adopted
a resolution declaring the Merger advisable.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
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1.1 The Merger. At the Effective Time (as defined in Section 1.2 hereof)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
Lev Merger Sub shall be merged with and into Lev (the "Merger"), the separate
corporate existence of Lev Merger Sub shall cease and Lev shall continue as the
surviving corporation and shall become a wholly-owned subsidiary of Parent. The
surviving corporation after the Lev Merger is sometimes referred to hereinafter
as the "Lev Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant to
Article VII hereof, the closing of the Merger and the other transactions
contemplated by this Agreement (the "Closing") will take place at the offices of
Lev, at a time and date to be specified by the parties, but in no event later
than two (2) business days following satisfaction or waiver of the conditions
set forth in Article VI hereof. The date upon which the Closing actually occurs
is herein referred to as the "Closing Date." On the Closing Date, the parties
hereto shall cause the Merger to be consummated by filing a Certificate of
Merger (or like instrument) (a "Certificate of Merger") with the Secretary of
State of the State of Delaware, in accordance with the relevant provisions of
Delaware Law (the times at which the Merger has become fully effective (or such
later time as may be agreed in writing by Lev and specified in the Certificate
of Merger) is referred to herein as the "Effective Time").
1.3 Effect of the Merger. (a) At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as provided herein, all the property, rights, privileges,
powers and franchises of Lev and Lev Merger Sub shall vest in the Lev Surviving
Corporation, and all debts, liabilities and duties of Lev and Lev Merger Sub
shall become the debts, liabilities and duties of the Lev Surviving Corporation.
(b) Prior to or at the Effective Time, the properties and assets of
Parent and its Subsidiaries (as defined in Section 2.1) will be free and clear
of any and all encumbrances, charges, claims equitable interests, liens,
options, pledges, security interests, mortgages, rights of first refusal or
restrictions of any kind and nature (collectively, the "Encumbrances"), except
for such liabilities, accounts payable, debts, adverse claims, duties,
responsibilities and obligations of every kind or nature, whether accrued or
unaccrued, known or unknown, direct or indirect, absolute, contingent,
liquidated or unliquidated and whether arising under, pursuant to or in
connection with any contract, tort, strict liability or otherwise (collectively
the "Liabilities") of Parent which shall be set forth in Schedule 3.5 .
(c) Promptly following the Effective Time, subject to stockholder
approval, it is expected that Parent will file an Amendment to its Articles of
Incorporation changing its name to "Lev Pharmaceuticals, Inc." (the "Amendment
Articles").
1.4 Certificates of Incorporation; Bylaws. (a) Unless otherwise determined
by Lev prior to the Effective Time, at the Effective Time, the Certificate of
Incorporation of Lev Merger Sub as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Lev Surviving Corporation
at and after the Effective Time until thereafter amended in accordance with the
Delaware Law and the terms of such Certificate of Incorporation; provided,
however, that at the Effective Time, Article I of the Certificate of
Incorporation of the Lev Surviving Corporation shall be amended and restated in
its entirety to read as follows: "The name of the corporation is Lev
Pharmaceuticals, Inc." The Certificate of Incorporation of the Lev Surviving
Corporation shall be approved by Parent's counsel and Lev's counsel and shall be
attached as Exhibit C to this Agreement.
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(b) Unless otherwise determined by Lev prior to the Effective Time, (i)
the Bylaws of Lev Merger Sub as in effect immediately prior to the Effective
Time shall be the Bylaws of the Lev Surviving Corporation at and after the
Effective Time, until thereafter amended in accordance with Delaware Law and the
terms of Certificate of Incorporation of the Lev Surviving Corporation and such
By Laws.
1.5 Lev Directors and Officers. (a) Unless otherwise determined by Lev
prior to the Effective Time, the directors of Lev Merger Sub immediately prior
to the Effective Time shall be the directors of the Lev Surviving Corporation
and at and after the Effective Time, each to hold the office of a director of
the Lev Surviving Corporation in accordance with the provisions of Delaware Law
and the Certificate of Incorporation and Bylaws of the Lev Surviving Corporation
until their successors are duly elected and qualified.
(b) Unless otherwise determined by Lev prior to the Effective Time, the
officers of Lev Merger Sub immediately prior to the Effective Time shall be the
officers of the Lev Surviving Corporation at and after the Effective Time, each
to hold office in accordance with the provisions of the Bylaws of the Lev
Surviving Corporation.
1.6 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Parent, Lev and Lev Merger Sub or the holders of any of the
following securities, the following shall occur:
(a) Conversion of Lev Common Stock. Each share of Common Stock, par
value $0.00001 per share of Lev (the "Lev Common Stock") issued and outstanding
immediately prior to the Effective Time (excluding any share of Lev Common Stock
to be canceled and extinguished pursuant to Section 1.6(b) will be automatically
converted (subject to Sections 1.6(e)) into (i) one-fifth of a share of Common
Stock, par value $0.01 per share, of Parent (the "Parent Common Stock") and (ii)
..1904425 shares of Convertible Preferred Stock, par value $0.01 per share, of
Parent (the "Parent Preferred Stock"), such that the holders of Lev Common Stock
will, in the aggregate, receive 5,250,928 shares of Parent Common Stock and
5,000,000 shares of Parent Preferred Stock (such aggregate shares of Parent
Common Stock and Parent Preferred Stock being referred to in this Agreement as
the "Lev Merger Consideration"). Each share of Parent Preferred Stock shall be
automatically convertible into 13.940688 shares of Parent Common Stock upon
approval by the stockholders of Parent of a Certificate of Amendment of Parent's
Articles of Incorporation which increases the authorized Parent Common Stock to
150,000,000 shares. Upon conversion of the Parent Preferred Stock, the holders
of Lev Common Stock, outstanding Lev Stock Options and outstanding Lev Warrants
will own or be exercisable for, as the case may be, an aggregate 74,954,368
shares of Parent Common Stock on a fully diluted basis. If any shares of Lev
Common Stock outstanding immediately prior to the Effective Time are unvested or
are subject to a repurchase option, risk of forfeiture or other condition under
any applicable restricted stock purchase agreement or other agreement with Lev,
then the shares of Parent Common Stock and Parent Preferred Stock issued in
exchange for such shares of Lev Common Stock will also be unvested and subject
to the same repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Common Stock and Parent
Preferred Stock may accordingly be marked with appropriate legends.
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(b) Cancellation of Lev Stock. Each share of Lev Common Stock held by
Lev or any direct or indirect wholly-owned subsidiary of Lev immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Lev Stock Options. At the Effective Time, all options to purchase
Lev Common Stock then outstanding under Lev's 2004 Omnibus Incentive
Compensation Plan, as amended as of the date hereof (the "Lev Option Plan"), the
Lev Option Plan itself, shall be assumed by Parent in accordance with Section
5.4.
(d) Lev Warrants. At the Effective Time, all warrants to purchase Lev
Common Stock then outstanding shall be assumed by Parent in accordance with
Section 5.4.
(e) Adjustments to Lev Merger Consideration. Except as described in
Section 1.8, the Lev Merger Consideration shall be adjusted to reflect
appropriately the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into or
exercisable or exchangeable for Parent Common Stock, Parent Preferred Stock or
Lev Common Stock), reorganization, recapitalization, reclassification,
combination, exchange of shares or other like change with respect to Parent
Common Stock, Parent Preferred Stock or Lev Common Stock occurring or having a
record date on or after the date hereof and prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common Stock or
Parent Preferred Stock will be issued by virtue of the Merger. In lieu thereof
any fractional share will be rounded to the nearest whole share of Parent Common
Stock or Parent Preferred Stock, as the case maybe (with .5 being rounded up).
1.7 Surrender of Certificates. (a) Parent to Provide Common Stock. Promptly
after the Effective Time, Parent shall make available in accordance with this
Article I, the shares of Parent Common Stock and Parent Preferred Stock issuable
pursuant to Section 1.6(a) in exchange for outstanding shares of Lev Common
Stock.
(b) Exchange Procedures. Promptly after the Effective Time, Parent
shall mail to each holder of record (as of the Effective Time) of a certificate
or certificates, which immediately prior to the Effective Time represented
outstanding shares of Lev Common Stock (the "Certificates") (i) a letter of
transmittal in customary form (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Parent and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock and shares of Parent Preferred Stock
pursuant to Section 1.6(a). Upon surrender of Certificates for cancellation to
the Parent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holders of such
Certificates shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of Parent Common Stock and Parent
Preferred Stock into which their shares of Lev Common Stock were converted
pursuant to Section 1.6(a), and the Certificates so surrendered shall forthwith
be canceled. Until so surrendered, outstanding Certificates will be deemed, from
and after the Effective Time, to evidence only the ownership of the number of
whole shares of Parent Common Stock and Parent Preferred Stock into which such
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shares of Lev Common Stock shall have been so converted (including any voting,
notice or other rights associated with the ownership of such shares of Parent
Common Stock and Parent Preferred Stock under the Certificate of Incorporation
or Bylaws of Parent or under the NCL).
(c) Transfers of Ownership. If certificates representing shares of
Parent Common Stock and Parent Preferred Stock are to be issued in a name other
than that in which the Certificates surrendered in exchange therefor are
registered, it will be a condition of the issuance thereof that the Certificates
so surrendered will be properly endorsed and otherwise in proper form for
transfer and that the persons requesting such exchange will have (i) paid to
Parent or any agent designated by it any transfer or other taxes required by
reason of the issuance of certificates representing shares of Parent Common
Stock and Parent Preferred Stock in any name other than that of the registered
holder of the Certificates surrendered, or (ii) established to the satisfaction
of Parent or any agent designated by it that such tax has been paid or is not
payable.
(d) Required Withholding. Each of the Parent and Lev Surviving
Corporation shall be entitled to deduct and withhold from any consideration
payable or otherwise deliverable pursuant to this Agreement to any holder or
former holder of Lev Common Stock such amounts as may be required to be deducted
or withheld therefrom under the United States Internal Revenue Code of 1986, as
amended, (the "Code") or state, local or foreign tax law. To the extent such
amounts are so deducted or withheld, such amounts shall be treated for all
purposes under this Agreement as having been paid to the person to whom such
amounts would otherwise have been paid.
(e) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, neither the Parent nor the Lev Surviving Corporation nor any party
hereto shall be liable to a holder of shares of Parent Common Stock, Parent
Preferred Stock or Lev Common Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Lev Common Stock. All shares of Parent
Common Stock and Parent Preferred Stock issued in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Lev Common Stock. After the Effective Time, there
shall be no further registration of transfers on the records of Lev Surviving
Corporation of shares of Lev Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to Lev Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Parent shall issue
and pay in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock and Parent Preferred Stock into
which the shares of Lev Common Stock represented by such Certificates were
converted pursuant to Section 1.6(a); provided, however, that the Parent may, in
its discretion and as a condition precedent to the issuance of such certificates
representing shares of Parent Common Stock and Parent Preferred Stock require
the owner of such lost, stolen or destroyed Certificates to deliver a bond in
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such sum as it may reasonably direct as indemnity against any claim that may be
made against Parent or Lev Surviving Corporation with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.10 Tax Treatment. It is intended by the parties hereto that the Merger
shall constitute a reorganization within the meaning of Section 368(a) of the
Code. Each of the parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations (the "Regulations"). Both prior to and after
the Closing, each party's books and records shall be maintained, and all
federal, state and local income tax returns and schedules thereto shall be filed
in a manner consistent with the Merger being qualified as a reverse triangular
merger under Section 368(a)(2)(E) of the Code (and comparable provisions of any
applicable state or local laws).
1.11 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Lev Surviving Corporation (and/or its
successor in interest) with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of Lev and Lev Merger Sub,
the officers and directors of Parent and the Lev Surviving Corporation shall be
fully authorized (in the name of Lev Merger Sub, Lev and otherwise) to take all
such necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LEV
-------------------------------------
Except as set forth in the corresponding sections or subsections of the
disclosure letter delivered to Parent by Lev on or prior to entering into this
Agreement a copy of which is attached hereto as Exhibit A and incorporated
herein by this reference (the "Lev Schedule"), Lev each hereby represents and
warrants to Parent and Lev Merger Sub that:
2.1 Organization of Lev. (a) Lev is a corporation duly organized, validly
existing and in good standing under the laws of Delaware; has the corporate
power and authority to own, lease and operate its assets and property and to
carry on its business as now being conducted; and is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have a Lev Material Adverse Effect.
As used in this Agreement, the term (i) "Subsidiary" means the subsidiaries of
Lev set forth in Schedule 2.1 of the Lev Schedule and (ii) "Lev Material Adverse
Effect" means a material adverse effect on the condition (financial or
otherwise), business, assets or results of operations of Lev and its
Subsidiaries as a whole, or on the ability of the Lev to consummate the
transactions contemplated by this Agreement; it being understood, however, that
Lev's continuing incurrence of losses, as long as such losses are in the
ordinary course of business and are comparable to those incurred by Lev prior to
the date hereof, shall not, alone, be deemed to be a Lev Material Adverse
Effect.
(b) Lev has delivered to Parent a true and complete list of all of
Lev's Subsidiaries, indicating the jurisdiction of incorporation of each
Subsidiary and Lev's equity interest therein.
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(c) Lev has delivered or made available to Parent a true and correct
copy of the Certificate of Incorporation and Bylaws of Lev and similar governing
instruments of each of its Subsidiaries, each as amended to date, and each such
instrument is in full force and effect. Neither Lev nor any of its Subsidiaries
is in violation of any of the provisions of its Certificate of Incorporation or
Bylaws or equivalent governing instruments.
2.2 Lev Capital Structure. The authorized capital stock of Lev consists of
100,000,000 shares of Common Stock, par value $.00001 per share, of which there
were 25,148,973 shares issued and outstanding as of September 30, 2004 and
5,000,000 shares of Preferred Stock, par value $.00001 per share, of which none
are outstanding as of September 30, 2004. All outstanding shares of Lev Common
Stock are duly authorized, validly issued, fully paid and non-assessable and are
not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Lev, or any agreement or document to which Lev is a
party or by which it is bound. As of September 30, 2004, Lev had reserved an
aggregate of 3,500,000 shares of Lev Common Stock, net of exercises, for
issuance to employees, consultants and non-employee directors pursuant to the
Lev Option Plan, under which options are outstanding for 1,000,000 shares. As of
September 30, 2004, Lev had reserved an aggregate of 105,667 shares of Lev
Common Stock for issuance to holders of warrants to purchase shares of Lev
Common Stock. All shares of Lev Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable. Schedule 2.2 lists (i) each outstanding option to acquire
shares of Lev Common Stock as of September 30, 2004, the name of the holder of
such option, the number of shares subject to such option, the exercise price of
such option, the number of shares as to which such option will have vested at
such date, the vesting schedule for such option and whether the exercisability
of such option will be accelerated in any way by the transactions contemplated
by this Agreement or for any other reason and indicates the extent of
acceleration, if any, and (ii) each outstanding Lev Warrant as of September 30,
2004, the name of the holder of such Lev Warrant and the exercise price
therefor.
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.2, there are no equity securities, partnership interests or similar
ownership interests of any class of Lev, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests issued, reserved for issuance or
outstanding. Except for securities Lev owns, directly or indirectly through one
or more Subsidiaries, there are no equity securities, partnership interests or
similar ownership interests of any class of any Subsidiary of Lev, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests issued,
reserved for issuance or outstanding. Except as set forth in Section 2.2, there
are no options, warrants, equity securities, partnership interests or similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Lev or any of its Subsidiaries is a party
or by which it is bound obligating Lev or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition, of any
shares of capital stock of Lev or any of its Subsidiaries or obligating Lev or
any of its Subsidiaries to grant, extend, accelerate the vesting of or enter
into any such option, warrant, equity security, partnership interest or similar
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ownership interest, call, right, commitment or agreement. Except as set forth in
Schedule 2.3, there are no registration rights and, to the knowledge of Lev
there are no voting trusts, proxies or other agreements or understandings with
respect to any equity security of any class of Lev or with respect to any equity
security, partnership interest or similar ownership interest of any class of any
of its Subsidiaries.
2.4 Authority. (a) Lev has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, have been duly authorized by all
necessary corporate action on the part of Lev, subject only to the adoption of
this Agreement by Lev's stockholders and the filing and recordation of the
Certificate of Merger pursuant to Delaware Law. A vote of the holders of at
least a majority of the outstanding shares of the Lev Common Stock is required
for Lev's stockholders to approve and adopt this Agreement and approve the
Merger. This Agreement has been duly executed and delivered by Lev and, assuming
the due authorization, execution and delivery by Parent and Lev Merger Sub,
constitutes the valid and binding obligations of Lev, enforceable in accordance
with its respective terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws and general principles of equity. The execution and delivery
of this Agreement by Lev does not, and the performance of this Agreement by Lev
will not, (i) conflict with or violate the Certificate of Incorporation or
Bylaws of Lev (the "Lev Charter Documents") or the equivalent organizational
documents of any of its Subsidiaries, (ii) subject to compliance with the
requirements set forth in Section 2.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Lev or any of its
Subsidiaries or by which its or any of its respective properties is bound or
affected, or (iii) except as set forth in Schedule 2.4, result in any breach of,
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Lev's rights or alter the rights or
obligations of any third party under, or to Lev's knowledge, give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of Lev
or any of its Subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Lev or any of its Subsidiaries is a party or by which Lev or
any of its Subsidiaries or its or any of its respective properties are bound or
affected, except to the extent such conflict, violation, breach, default,
impairment or other effect would not, in the case of clause (ii) or (iii),
individually or in the aggregate, reasonably be expected to have a Lev Material
Adverse Effect.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality (a "Governmental Entity") is
required by or with respect to Lev in connection with the execution and delivery
of this Agreement, or the consummation of the transactions contemplated hereby,
except for (i) the filing of the Certificate of Merger with the Secretary of
State of Delaware, (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and (iii) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made,
individually or in the aggregate, would not be reasonably likely to have a Lev
Material Adverse Effect.
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2.5 Lev Financial Statements. Attached to Schedule 2.5 of the Lev Schedule
are the audited consolidated balance sheets of Lev and its Subsidiaries as of
December 31, 2003 together with the related consolidated statements of income
and cash flows for the fiscal year of Lev then ended December 31, 2003, all
certified by PricewaterhouseCoopers LLP, Lev's independent public accountants
whose audit reports thereon are included therewith (the "Year-End Financial
Statements"). Prior to the Effective Time, Lev shall provide to Parent, an
unaudited consolidated balance sheet of Lev and its Subsidiaries as of September
30, 2004 (the "Lev Balance Sheet"), together with the related statements of
income and cash flows for the 9 month period then ended September 30, 2004 (the
"Interim Financial Statements," and collectively with the Year-End Financial
Statements, the "Lev Financial Statements"). Each of the Lev Financial
Statements (including, in each case, any related notes thereto) was and will be
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved, and each fairly
presents and will fairly present the consolidated financial position of Lev and
its Subsidiaries as of the respective dates thereof and the consolidated results
of its operations and cash flows and stockholder equity for the periods
indicated. Except as disclosed in the Lev Financial Statements, Lev does not
have any liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to the
consolidated financial statements prepared in accordance with GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Lev, except liabilities incurred since the
date of the Year-End Financial Statements in the ordinary course of business
consistent with past practices and which would not reasonably be expected to
have a Lev Material Adverse Effect. Lev hereby represents that the Interim
Financial Statements will reflect cash of approximately $6.6 million and
stockholders' equity of approximately $6 million.
2.6 Absence of Certain Changes or Events. Except as contemplated by this
Agreement, since the date of the Lev Balance Sheet, Lev and its Subsidiaries
have conducted their respective businesses only in, and have not engaged in any
material transaction other than according to, the ordinary and usual course of
such businesses and there has not been (i) any change that, individually or in
the aggregate, has had or is reasonably likely to have a Lev Material Adverse
Effect; (ii) any material damage, destruction or other casualty loss with
respect to any material asset or property owned, leased or otherwise used by Lev
or any of its Subsidiaries, whether or not covered by insurance; (iii) any
declaration, setting aside or payment of any dividend or other distribution in
cash, stock or property in respect of the capital stock of Lev, except for
dividends or other distributions on its capital stock publicly announced prior
to the date hereof and except as expressly permitted hereby; (iv) any event that
would constitute a violation of Section 4.1 hereof if such event occurred after
the date of this Agreement and prior to the Effective Time; or (v) any change by
Lev in accounting principles, practices or methods. Since the date of the Lev
Balance Sheet, except as set forth in Schedule 2.6, there has not been any
increase in the compensation payable or that could become payable by Lev to
officers or key employees or any amendment of the Lev Option Plan other than
increases or amendments in the ordinary course of business consistent with past
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practice or (y) as required by any relevant employment agreement, option
agreement or (z) which, individually or in the aggregate, would not reasonably
be expected to have a Lev Material Adverse Effect.
2.7 Taxes. (a) For purposes of this Agreement, (i) "Taxes" shall mean all
Federal, state, local, foreign, provincial, territorial or other taxes, imports,
tariffs, fees, levies or other similar assessments or liabilities and other
charges of any kind, including income taxes, profits taxes, franchise taxes, ad
valorem taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or
with respect to gross receipts, premiums, real property, personal property,
windfall profits, sales, use, transfers, licensing, employment, social security,
workers' compensation, unemployment, payroll and franchises imposed by or under
any law (meaning all laws, statutes, ordinances and regulations of any
governmental authority including all decisions of any court having the effect of
law); and any other taxes, duties or assessments, together with all interest,
penalties and additions imposed with respect to such amounts; (ii) "Tax Returns"
shall mean any declaration, return, report, schedule, certificate, statement or
other similar document (including relating or supporting information) required
to be filed with any Taxing Authority (as defined below), or where none is
required to be filed with a Taxing Authority, the statement or other document
issued by the applicable Taxing Authority in connection with any Tax, including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax; and (iii) "Taxing Authority" shall mean any
domestic, foreign, Federal, national, provincial, state, county or municipal or
other local government or court, any subdivision, agency, commission or
authority thereof, or any quasi-governmental body exercising tax regulatory
authority.
(b) Lev and each of its Subsidiaries, (i) have timely filed all Tax
Returns that are required to have been filed by it with all appropriate Taxing
Authorities (and all such returns are true and correct and fairly reflect in all
material respects its operations for tax purposes); and (ii) have timely paid
all Taxes shown as owing on such Tax Returns or assessed by any Taxing Authority
(other than Taxes the validity of which are being contested in good faith by
appropriate proceedings). Between July 23, 2003 and the Closing Date, neither
Lev nor any of its Subsidiaries has incurred (or will incur) a Tax liability
other than a Tax liability in the ordinary course of business and in accordance
with past custom and practice. The assessment of any additional Taxes for
periods for which Tax Returns have been filed is not expected to exceed reserves
made in accordance with GAAP and reflected in the Lev Financial Statements and
the Lev Balance Sheet and, to Lev's knowledge, there are no material unresolved
questions or claims concerning Lev's or any Subsidiaries' tax liability. Neither
Lev's nor any Subsidiaries' Tax Returns have been reviewed or audited by any
Taxing Authority and no deficiencies for any Taxes have been proposed, asserted
or assessed either orally or in writing against Lev or any of its Subsidiaries
that are not adequately reserved for in accordance with GAAP. No liens exist for
Taxes (other than liens for Taxes not yet due and payable) with respect to any
of the assets or properties of Lev or any Subsidiary.
(c) Neither Lev nor any Subsidiary has outstanding any agreements or
waivers extending, or having the effect of extending, the statute of limitations
with respect to the assessment or collection of any Tax or the filing of any Tax
Return.
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(d) Neither Lev nor any Subsidiary is a party to or bound by any
tax-sharing agreement, tax indemnity obligation or similar agreement,
arrangement or practice with respect to Taxes (including any advance pricing
agreement, closing agreement or other agreement relating to Taxes with any
Taxing Authority).
(e) Except as set forth on Schedule 2.7, Lev shall not be required to
include in a taxable period ending after the Closing Date any taxable income
attributable to income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the installment method of
accounting, the long-term contract method of accounting, the cash method of
accounting or Section 481 of the Code or any comparable provision of state,
local or foreign Tax law, or for any other reason.
(f) Except as set forth on Schedule 2.7, neither Lev, nor any of its
Subsidiaries or affiliates, has made with respect to Lev any consent under
Section 341 of the Code, no property of Lev is "tax exempt use property" within
the meaning of Section 168(h) of the Code, and none of the assets of Lev is
subject to a lease under Section 7701(h) of the Code or under any predecessor
section thereof.
(g) Lev has complied in all material respects with all applicable laws
relating to the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441, 1442, 3121, 3402 and 3406 of the
Code or any comparable provision of any state, local or foreign laws) and has,
within the time and in the manner prescribed by applicable law, withheld from
and paid over to the proper Taxing Authorities all amounts required to be so
withheld and paid over under applicable laws.
(h) The net operating losses ("NOL") of Lev or any of its Subsidiaries
are not, as of the date hereof, subject to Section 382 or 269 of the Code,
Regulation Section 1.1502-21(c), or any similar provisions or Regulations
otherwise limiting the use of the NOLs of Lev or its Subsidiaries.
(i) Lev is not, and has not been for the five years preceding the
Closing, a "United States real property holding company" (as such term is
defined in Section 897(c)(2) of the Code).
(j) As of the date hereof, to the knowledge of Lev, neither Lev nor any
of its Subsidiaries or affiliates has taken or agreed to take any action or
failed to take any action that would prevent the Merger from constituting a
reorganization within the meaning of Section 368(a) of the Code.
(k) Any deficiency resulting from any audit or examination relating to
Taxes of Lev by any Taxing Authority has been timely paid.
(l) Except as set forth on Schedule 2.7, no power of attorney with
respect to any Taxes has been executed or filed with any Taxing Authority by or
on behalf of Lev.
2.8 Patents and Trademarks. As used in this Agreement, "Intellectual
Property" means (i) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
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patent applications and patent disclosures, together with all reissuances,
continuations, divisionals, substitutions, continuations-in-part, provisionals,
revisions, extensions and re-examinations thereof, (ii) all trademarks, service
marks, trade names, logos, corporate names and Internet domain names, including
all goodwill associated therewith, and all applications, registrations and
renewals in connection therewith, (iii) all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all trade secrets and
confidential business information (including ideas, research and development,
copyrights, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information and business and
marketing plans and proposals), (v) all computer programs and software
(including data and related documents), (vi) all know-how, research information,
research data and notebooks and (vii) all other proprietary rights. Schedule 2.8
contains a complete list of all Intellectual Property registered in Lev's name
and material to Lev's business as conducted as of the date hereof (collectively,
the "Lev Registered Intellectual Property"), which registrations are valid.
Lev's use of Intellectual Property does not constitute an infringement of any
third party's rights that could reasonably be expected to result in a Lev
Material Adverse Effect. Except as set forth on Schedule 2.8, Lev owns, free and
clear of any Liens, all right, title and interest to the Lev Registered
Intellectual Property. With respect to Intellectual Property, other than the Lev
Registered Intellectual Property, used or held for use by Lev in its business as
conducted as of the date hereof (the "Other Intellectual Property"), Lev owns,
controls or has a right to use, to the extent necessary to conduct its business
in a manner generally consistent with its past practice, such Other Intellectual
Property which is material to Lev's business. Except as set forth on Schedule
2.8, Lev is not a party to any outstanding options, licenses or agreements of
any kind relating to (i) any Other Intellectual Property owned by any other
person or entity or (ii) the Lev Registered Intellectual Property. Lev has not
during the preceding three years received any communications or claims nor, to
Lev's knowledge, is there any threatened claim, alleging that Lev has infringed
upon, or, by conducting its business as proposed, would infringe upon the
intellectual property rights of any other person which such infringement would
have a Lev Material Adverse Effect. Except as set forth on Schedule 2.8, to the
knowledge of Lev, no third party has interfered with, infringed upon or
misappropriated any of Lev's rights to the Lev Registered Intellectual Property
or Other Intellectual Property which such interference, infringement or
misappropriation would constitute a Lev Material Adverse Effect.
2.9 Compliance; Permits; Restrictions. (a) Except as disclosed on Schedule
2.9 neither Lev nor any of its Subsidiaries is in conflict with, or in default
or violation of (i) any law, rule, regulation, order, judgment or decree
applicable to Lev or any of its Subsidiaries or by which its or any of their
respective properties is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Lev or any of its Subsidiaries is a party or
by which Lev or any of its Subsidiaries or its or any of their respective
properties is bound or affected except for those conflicts, defaults or
violations which would not be reasonably expected to have a Lev Material Adverse
Effect. Except as disclosed on Schedule 2.9 to the knowledge of Lev, no
investigation or review by any Governmental Entity is pending or threatened
against Lev or its Subsidiaries, nor has any Governmental Entity indicated in
writing an intention to conduct the same other than those which would not
reasonably be expected to have a Lev Material Adverse Effect. There is no
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agreement, judgment, injunction, order or decree binding upon Lev or any of its
Subsidiaries which has or would reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of Lev or any of its
Subsidiaries, any acquisition of material property by Lev or any of its
Subsidiaries or the conduct of business by Lev as currently conducted.
(b) Lev and its Subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from Governmental Entities which would
necessary to the conduct of the business of Lev except those the absence of
which would not, individually or in the aggregate, reasonably be likely to have
a Lev Material Adverse Effect (collectively, the "Lev Permits"). Lev and its
Subsidiaries are in compliance in all material respects with the terms of the
Lev Permits.
2.10 Litigation. Except as set forth on Schedule 2.10, as of the date of
this Agreement, there is no action, suit, proceeding, claim, arbitration or
investigation pending, including derivative suits brought by or on behalf of Lev
or as to which Lev or any of its Subsidiaries has received any notice of
assertion nor, to Lev's knowledge, is there a threatened action, suit,
proceeding, claim, arbitration or investigation against Lev or any of its
Subsidiaries seeking to delay, limit or enjoin the transactions contemplated by
this Agreement or which might reasonably be expected to have a Lev Material
Adverse Effect.
2.11 Brokers' and Finders' Fees. Lev has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.12 Labor Agreements and Actions; Employee Benefit Plans. (a) Lev is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
knowledge of Lev, has sought to represent any of the employees, representatives,
or agents of Lev. There is no strike or other labor dispute involving the Lev
pending or, to the knowledge of Lev, threatened, nor is Lev aware of any labor
organization activity involving its employees.
(b) Schedule 2.12(b) contains a complete list of each pension,
profit-sharing or other retirement, bonus, deferred compensation, employment
agreement, severance agreement, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, long- or short-term disability, fringe benefit, sick pay, or
vacation pay, or other employee benefit plan, program, agreement, or arrangement
or policy, whether formal or informal, funded or unfunded, written or unwritten,
and whether legally binding or not, sponsored, maintained, contributed to or
required to be contributed to by (i) Lev with respect to current or former
employees or any current or former director or consultant of Lev, and/or (ii)
any trade or business, whether or not incorporated, that together with Lev would
be deemed a "single employer" that includes Lev within the meaning of Section
4001(a)(14) of ERISA, and the rules and regulations promulgated thereunder
(collectively, "Lev Benefit Plans"); provided that each informal or unwritten
Lev Benefit Plan is described in summary form in Schedule 2.12(b). Schedule
2.12(b) identifies each Lev Benefit Plan that is a "pension benefit plan" under
Section 3(2) of ERISA ("Lev Pension Plan"). Schedule 2.12(b) discloses whether
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each Lev Benefit Plan that is an "employee welfare benefit plan" under Section
3(1) of ERISA ("Lev Welfare Plan") is (i) unfunded, (ii) insured, or (iii)
funded through a "welfare benefit fund" within the meaning of Section 419(e) of
the Code or another funding mechanism.
(c) True and complete copies of all (i) Lev Benefit Plans, including
but not limited to, any trust instruments and insurance contracts forming a part
of any Lev Plans, and all amendments thereto and summaries of unwritten Lev
Benefit Plans; (ii) the three (3) most recent actuarial valuations, if any,
prepared for each Lev Plan; (iii) the three (3) most recent reports (Series 5500
and all schedules thereto), if any, required under ERISA or the Code in
connection with each Lev Plan or related trust; (iv) the most recent
determination letters received from the Internal Revenue Service, if any, for
each Lev Plan and related trust which is intended to satisfy the requirements of
Section 401(a) of the Code; (v) the most recent summary plan description,
together with the most recent summary of material modifications, if any,
required under ERISA with respect to each Lev Plan; and (vi) all material
communications to any Lev Employees relating to each Lev Plan have been provided
or made available to Parent.
(d) All "employee benefit plans" within the meaning of Section 3(3) of
ERISA, other than "multiemployer plans" within the meaning of Section 3(37) of
ERISA, covering Lev Employees (the "Lev Plans"), to the extent subject to ERISA,
are in substantial compliance with ERISA, the Code, and all other applicable
law. Each Lev Pension Plan which is intended to be qualified under Section
401(a) of the Code, has received a favorable determination letter from the
Internal Revenue Service with respect to TRA or a timely application for such
determination is now pending or a request for such determination filed within
the remedial amendment period of Section 401(b) of the Code is pending, and the
Lev is not aware of any circumstances likely to result in revocation of any such
favorable determination letter. As of the date hereof, other than claims for
benefits submitted in the ordinary course by participants or beneficiaries under
the Lev Benefit Plans, no material claim against any Lev Benefit Plan, and no
legal or regulatory proceeding (including any audit or voluntary compliance
resolution or closing agreement program proceeding) involving, any Lev Benefit
Plan, is pending, or to the knowledge of Lev, threatened.
(e) Neither Lev nor any of its Subsidiaries has engaged in a
transaction with respect to any Lev Plan that, assuming the taxable period of
such transaction expired as of the date hereof, could subject Lev or any
Subsidiary to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount which would be material.
(f) No current or former Lev Pension Plan or pension plan of any of
its Subsidiaries, or any entity which is considered one employer with Lev under
Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate"), is or
has ever been subject to Title IV of ERISA or Section 412 of the Code. No Lev
Benefit Plan constitutes a multiemployer plan within the meaning of Section
3(37) of ERISA.
(g) All contributions required to be made under the terms of any Lev
Plan have been timely made or have been reflected on the audited financial
statements of the Lev.
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(h) Neither Lev nor any of its Subsidiaries has any obligations for
retiree health and life benefits under any Lev Plan or has ever represented,
promised or contracted (whether in oral or written form) to any employee(s) that
such employee(s) would be provided with retiree health or life benefits which
would have a material impact on Lev, except as required under Section 601 of
ERISA.
(i) Except as set forth in Schedule 2.12, the consummation of the
transactions contemplated by this Agreement will not (x) entitle any employees
of Lev or any of its Subsidiaries to severance pay, (y) accelerate the time of
payment or vesting or trigger any payment or funding (through a grantor trust
other otherwise) of compensation or benefits under, increase the amount payable
or trigger any other material obligation pursuant to, any of the Lev Benefit
Plans or (z) result in any breach or violation of, or a default under, any of
the Lev Benefit Plans.
(j) Any amount that could be received (whether in cash, property, or
vesting of property) as a result of the transaction contemplated by this
Agreement by any officer, director, employee or independent contractor of Lev or
any of its Subsidiaries, who is a "disqualified individual" (as defined in
proposed Treasury Regulation Section 1.280G-1), under any employment arrangement
or Lev Benefit Plan would not be characterized as an "excess parachute payment"
(as defined in Section 280G of the Code).
(k) All Lev Benefit Plans covering current or former non-U.S.
Employees complies in all material respects with applicable law, and no unfunded
liabilities exist with respect to any Lev Benefit Plan that covers such non-U.S.
Employees.
(l) Schedule 2.12(l) contains a complete and correct list of
employment agreements for senior officers of Lev; copies of each such agreement
have been provided or made available to Parent or Parent's counsel.
2.13 Absence of Liens and Encumbrances. Lev and each of its Subsidiaries
has good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used in its business, free and clear of any Liens and
Encumbrances except (i) as reflected in the Lev Financial Statements, (ii) for
liens or taxes not yet due and payable and (iii) for such imperfections of title
and encumbrances, if any, which would not be reasonably expected to have a Lev
Material Adverse Effect.
2.14 Environmental Matters. (a) Hazardous Materials Activities. Except as
would not reasonably be likely to result in a material liability to Lev (in any
individual case or in the aggregate), (i) neither Lev nor any of its
Subsidiaries has transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to pollutants, contaminants, wastes, any
toxic, radioactive or otherwise hazardous materials ("Hazardous Materials") in
violation of any law in effect on or before the Closing Date, and (ii) neither
Lev nor any of its Subsidiaries has disposed of, transported, sold, used,
released, exposed its employees or others t or manufactured any product
containing a Hazardous Material (collectively, "Hazardous Materials Activities")
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in violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(b) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
Lev's knowledge, threatened concerning any Lev Permit relating to any
environmental matter, Hazardous Material or any Hazardous Materials Activity of
Lev or any of its Subsidiaries. Lev is not aware of any fact or circumstance
which could involve Lev or any of its Subsidiaries in any environmental
litigation or impose upon Lev or any of its Subsidiaries any environmental
liability.
2.15 Agreements. (a) Except as set forth in Schedule 2.15(a), there are no
written agreements between Lev and any of its officers, directors, employees or
shareholders or any affiliate thereof.
(b) Except as set forth in Schedule 2.15(b), there are no written
agreements, to which Lev is a party or by which it is bound which (i) involve
obligations (contingent or otherwise) of, or payments to, Lev in excess of
$100,000, (ii) are material to the conduct and operations of Lev's business or
properties (including, without limitation, the license of any Intellectual
Property to or from Lev), (iii) restrict or materially adversely affect the
development, manufacture, sale, marketing or distribution of Lev's products or
services, (iv) relating to the employment or compensation of any employee or
consultant, (v) of duration of six months or more and not cancelable without
penalty by Lev on 30 days or less notice or (vi) relating to the sale, lease,
pledge or other disposition of any material assets of or to Lev.
(c) Except as set forth in Schedule 2.15(c), neither Lev nor any of
its Subsidiaries, nor to Lev's knowledge any other party to a Lev Contract (as
defined below), is in breach, violation or default under, and neither Lev nor
any of its Subsidiaries has been notified that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which Lev or any of its Subsidiaries is
a party or by which it is bound that are required to be disclosed in Schedules
3.15(a) or 3.15(b) (any such agreement, contract or commitment, a "Lev
Contract") in such a manner as would permit any other party to cancel or
terminate any such Lev Contract, or would permit any other party to seek
material damages or other remedies (for any or all of such breaches, violations
or defaults, in the aggregate).
(d) Each of the Lev Contracts are legal, valid, binding and
enforceable and in full force and effect with respect to the Lev and any of its
Subsidiaries with respect to each other party thereto, in either case subject to
the effect of bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity; and the Lev
Contracts will continue to be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect prior to the Closing subject to the effect of bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and except as the availability of equitable remedies
may be limited by general principles of equity.
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(e) Neither Lev nor any of its Subsidiaries have been notified that
any party to any of the Lev Contracts intends to cancel, terminate, proposes to
amend, not renew or exercise an option under any of Lev Contracts, whether in
connection with the transactions contemplated hereby or otherwise nor is Lev or
any Subsidiary aware of any intention by any party to any Lev Contract to effect
any of the foregoing.
2.16 Board Approval. The Board of Directors of Lev has, as of the date of
this Agreement, (i) determined that the Merger is fair to and in the best
interests of Lev and its stockholders, (ii) determined to recommend that the
stockholders of Lev adopt this Agreement and (iii) duly approved the Merger,
this Agreement and the transactions contemplated hereby.
2.17 Disclosure. No representation or warranty of the parties to this
Agreement and no statement in the Schedules omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND LEV MERGER SUB
-----------------------------------------------------------
Except as set forth in the corresponding sections or subsections of the
disclosure letter delivered to Lev by Parent on or prior to entering into this
Agreement a copy of which is attached hereto as Exhibit B and incorporated
herein by this reference (the "Parent Schedule"), each of Parent and Lev Sub
hereby represents and warrants to Lev that:
3.1 Organization of Parent and Lev Merger Sub. (a) Each of Parent and Lev
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; has the
corporate power and authority to own, lease and operate its assets and property
and to carry on its business as now being conducted; and is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have a Parent Material Adverse
Effect. As used in this Agreement, the term (i) "Subsidiary" means the Lev
Merger Sub and (ii) "Parent Material Adverse Effect" means a material adverse
effect on the condition (financial or otherwise), business, assets or results of
operations of Parent and its Subsidiaries as a whole or on the ability of Parent
to consummate the transactions contemplated by this Agreement; it being
understood, however, that Parent's continuing incurrence of losses, as long as
such losses are in the ordinary course of business and are comparable to those
incurred by Parent prior to the date hereof, shall not, alone, be deemed to be a
Parent Material Adverse Effect.
(b) Parent has delivered to Lev a true and complete list of all of
Parent's Subsidiaries, indicating the jurisdiction of each Subsidiary and
Parent's equity interest therein.
(c) Parent has delivered or made available to Lev a true and correct
copy of the Certificate of Incorporation and Bylaws of each of Parent and Lev
Merger Sub and similar governing instruments of each of Parent's Subsidiaries,
each as amended to date, and each such instrument is in full force and effect.
Neither Parent, Lev Merger Sub or any of Parent's Subsidiaries is in violation
of any of the provisions of its Certificate of Incorporation or Bylaws or
equivalent governing instruments.
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3.2 Capital Structure. The authorized capital stock of Parent consists of
10,000,000 shares of Common Stock, par value $.01 per share, of which there were
4,505,530 shares issued and outstanding as of November 4, 2004 and 5,000,000
shares of Preferred Stock, par value $.01 per share, of which there were no
shares issued and outstanding as of November 4, 2004. The authorized capital
stock of Lev Merger Sub consists of 100 shares of Common Stock, par value $.0001
per share, of which there were 100 shares issued and outstanding as of November
4, 2004. All outstanding shares of Parent and Lev Merger Sub Common Stock are
duly authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Parent and Lev Merger Sub or any agreement or
document to which Parent or Lev Merger Sub is a party or by which it is bound.
As of November 4, 2004, Parent did not have any warrants to purchase common
stock outstanding.
3.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 3.2, there are no equity securities, partnership interests or similar
ownership interests of any class of Parent or Lev Merger Sub, or any securities
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests issued, reserved for
issuance or outstanding. Except for securities Parent owns, directly or
indirectly through one or more Subsidiaries, there are no equity securities,
partnership interests or similar ownership interests of any class of any
Subsidiary of Parent, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests issued, reserved for issuance or outstanding. Except as set
forth in Section 3.2, there are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which Parent
or any of its Subsidiaries is a party or by which it is bound obligating Parent
or any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition, of any shares of capital stock of Parent
or any of its Subsidiaries or obligating Parent or any of its Subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option, warrant,
equity security, partnership interest or similar ownership interest, call,
right, commitment or agreement. Except as set forth on Section 3.2, there are no
registration rights and, to the knowledge of Parent there are no voting trusts,
proxies or other agreements or understandings with respect to any equity
security of any class of Parent or with respect to any equity security
partnership interest or similar ownership interest of any class of any of its
Subsidiaries.
3.4 Authority. (a) Each of Parent and Lev Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of each of Parent and
Lev Merger Sub, subject only to the adoption of this Agreement by Parent's
stockholders and the filing and recordation of the Certificate of Merger
pursuant to Delaware Law. This Agreement has been duly executed and delivered by
each of Parent and Lev Merger Sub and, assuming the due authorization, execution
and delivery by Lev, constitutes the valid and binding obligations of each of
Parent and Lev Merger Sub, enforceable in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws and
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general principles of equity. The execution and delivery of this Agreement by
each of Parent and Lev Merger Sub, do not, and the performance of this Agreement
by each of Parent and Lev Merger Sub, will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws of Parent, or Lev Merger Sub,
respectively, (collectively, the "Parent Charter Documents") or (ii) subject to
compliance with the requirements set forth in Section 3.4(b) below, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to Parent, Lev Merger Sub or any of Parent's Subsidiaries, respectively, or by
which its or any of their respective properties is bound or affected, result in
any breach of, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or impair any of, Parent's or Lev
Merger Sub's rights or alter the rights or obligations of any third party under,
or to Parent's knowledge, give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Parent, Lev Merger Sub or any
of Parent's Subsidiaries, respectively, pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which any of Parent, Lev Merger Sub or any of
Parent's Subsidiaries is a party or by which Parent, Lev Merger Sub or any of
Parent's Subsidiaries, or any of their respective properties are bound or
affected, except to the extent such conflict, violation, breach, default,
impairment or other effect would not, in the case of clause (ii) or (iii),
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to any of Parent or Lev Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Certificate of Merger with the
Secretary of State of Delaware, (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and (iii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, individually or in the aggregate, would not be reasonably likely to have a
Parent Material Adverse Effect.
3.5 Parent SEC Filings; Parent Financial Statements. (a) The Parent has
filed all forms, reports and documents required to be filed with the SEC since
the initial filing date of the registration statement for the Parent's initial
public offering. All such required forms, reports and documents (including the
financial statements, exhibits and schedules thereto and those documents that
the Parent may file subsequent to the date hereof) are collectively referred to
herein as the "Parent SEC Reports." As of their respective dates, the Parent SEC
Reports (i) were prepared in accordance with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations of
the SEC thereunder applicable to such Parent SEC Reports, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
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(b) Each of the financial statements (including, in each case, any
related notes thereto) contained in the Parent SEC Reports (the "Parent
Financials"), including any Parent SEC Reports filed after the date hereof until
the Closing, as of their respective dates, (i) complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, (ii) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-QSB under the Exchange Act) and (iii)
fairly presented the financial position of the Parent at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not, or
are not expected to be, material in amount. The balance sheet of the Parent as
of June 30, 2004 is hereinafter referred to as the "Parent Balance Sheet."
Except as disclosed in the Parent Financials, the Parent does not have any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of the Parent, except liabilities (i) provided for in the Parent
Balance Sheet, or (ii) incurred since the date of the Parent Balance Sheet in
the ordinary course of business consistent with past practices and which would
not reasonably be expected to have a Parent Material Adverse Effect.
(c) Parent has heretofore furnished to Lev a complete and correct copy
of any amendments or modifications to the Parent SEC Reports, if any, which have
not yet been filed with the SEC but which will be required to be filed, to
agreements, documents or other instruments which previously had been filed by
the Parent with the SEC pursuant to the Securities Act or the Exchange Act.
(d) Attached to Schedule 3.5 of the Parent Schedule are the audited
consolidated balance sheets of Parent and its Subsidiaries as of December 31,
2003 together with the related consolidated statements of income and cash flows
for the fiscal years of Parent then ended December 31, 2002, all certified by
Xxxxx & Company, Parent's independent public accountants whose audit reports
thereon are included therewith (the "Parent Financial Statements"). Each of the
Parent Statements (including, in each case, any related notes thereto) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved, and each fairly presents the consolidated financial position
of Parent and its Subsidiaries as of the respective dates thereof and the
consolidated results of its operations and cash flows and stockholder equity for
the periods indicated. Except as disclosed in the Parent Financial Statements,
Parent does not have any liabilities (absolute, accrued, contingent or
otherwise) of a nature required to be disclosed on a balance sheet or in the
related notes to the consolidated financial statements prepared in accordance
with GAAP which are, individually or in the aggregate, material to the business,
results of operations or financial condition of Parent, except liabilities
incurred since the date of the Parent Financial Statements in the ordinary
course of business consistent with past practices and which would not reasonably
be expected to have a Parent Material Adverse Effect.
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3.6 Absence of Certain Changes or Events. Except as disclosed in the Parent
SEC Reports filed prior to the date hereof or as contemplated by this Agreement,
since the date of the Parent Balance Sheet, Parent and its Subsidiaries have
conducted their respective businesses only in, and have not engaged in any
material transaction other than according to, the ordinary and usual course of
such businesses and there has not been (i) any change that individually or in
the aggregate, has had or is reasonably likely to have a Parent Material Adverse
Effect; (ii) any material damage, destruction or other casualty loss with
respect to any material asset or property owned, leased or otherwise used by
Parent or any of its Subsidiaries, whether or not covered by insurance; (iii)
any declaration, setting aside or payment of any dividend or other distribution
in cash, stock or property in respect of the capital stock of Parent, except for
dividends or other distributions on its capital stock publicly announced prior
to the date hereof and except as expressly permitted hereby; (iv) any event that
would constitute a violation of Section 4.2 hereof if such event occurred after
the date of this Agreement and prior to the Effective Time; or (v) any change by
Parent in accounting principles, practices or methods.
3.7 Tax Matters. (a) Parent and each of its Subsidiaries (i) have timely
filed all Tax Returns that are required to have been filed by it with all
appropriate Taxing Authorities (and all such returns are true and correct and
fairly reflect in all material respects its operations for tax purposes); and
(ii) have timely paid all Taxes shown as owing on such Tax Returns or assessed
by any Taxing Authority (other than Taxes the validity of which are being
contested in good faith by appropriate proceedings). Between December 31, 2002
and the Closing Date, neither Parent nor any of its Subsidiaries has incurred
(or will incur) a Tax liability other than a Tax liability in the ordinary
course of business and in accordance with past custom and practice. The
assessment of any additional Taxes for periods for which Tax Returns have been
filed is not expected to exceed reserves made in accordance with GAAP and
reflected in the Parent Financial Statements and the Parent Balance Sheet and,
to Parent's knowledge, there are no material unresolved questions or claims
concerning Parent's tax liability. Neither Parent's nor any Subsidiaries' Tax
Returns have been reviewed or audited by any Taxing Authority and no
deficiencies for any Taxes have been proposed, asserted or assessed either
orally or in writing against Parent or any of its Subsidiaries that are not
adequately reserved for in accordance with GAAP. No liens exist for Taxes (other
than liens for Taxes not yet due and payable) with respect to any of the assets
or properties of Parent or any Subsidiary.
(b) Neither Parent nor any Subsidiary has outstanding any agreements or
waivers extending, or having the effect of extending, the statute of limitations
with respect to the assessment or collection of any Tax or the filing of any Tax
Return.
(c) Neither Parent nor any Subsidiary is a party to or bound by any
tax-sharing agreement, tax indemnity obligation or similar agreement,
arrangement or practice with respect to Taxes (including any advance pricing
agreement, closing agreement or other agreement relating to Taxes with any
Taxing Authority).
(d) Parent shall not be required to include in a taxable period ending
after the Closing Date any taxable income attributable to income that accrued in
a prior taxable period but was not recognized in any prior taxable period as a
result of the installment method of accounting, the long-term contract method of
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accounting, the cash method of accounting or Section 481 of the Code or any
comparable provision of state, local or foreign Tax law, or for any other
reason.
(e) Except as set forth on Schedule 3.7, neither Parent, nor any of its
Subsidiaries or affiliates, has made with respect to Parent, any consent under
Section 341 of the Code, no property of Parent is "tax exempt use property"
within the meaning of Section 168(h) of the Code, and none of the assets of
Parent is subject to a lease under Section 7701(h) of the Code or under any
predecessor section thereof.
(f) Parent has complied in all material respects with all applicable
laws relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441, 1442, 3121, 3402 and
3406 of the Code or any comparable provision of any state, local or foreign
laws) and has, within the time and in the manner prescribed by applicable law,
withheld from and paid over to the proper Taxing Authorities all amounts
required to be so withheld and paid over under applicable laws.
(g) The net operating losses ("NOL") of Parent or any of its
Subsidiaries are not, as of the date hereof, subject to Section 382 or 269 of
the Code, Regulation Section 1.1502-21(c), or any similar provisions or
Regulations otherwise limiting the use of the NOLs of Parent or its
Subsidiaries.
(h) Parent is not, and has not been for the five years preceding the
Closing, a "United States real property holding company" (as such term is
defined in Section 897(c)(2) of the Code).
(i) As of the date hereof, to the knowledge of Parent, neither Parent
nor any of its Subsidiaries has taken or agreed to take any action or failed to
take any action that would prevent the Merger from constituting a reorganization
within the meaning of Section 368(a) of the Code.
(j) Any deficiency resulting from any audit or examination relating to
Taxes of Parent by any Taxing Authority has been timely paid.
(k) Except as set forth on Schedule 3.7, no power of attorney with
respect to any Taxes has been executed or filed with any Taxing Authority by or
on behalf of Parent.
(l) The total adjusted tax basis of the assets of Parent equal or
exceed the sum of any liabilities of Parent.
3.8 Patents and Trademarks. Schedule 3.8 contains a complete list of all
Intellectual Property registered in Parent's name and material to Parent's
business as conducted as of the date hereof (collectively, the "Registered
Intellectual Property"), which registrations are valid. Parent's use of
Intellectual Property does not constitute an infringement of any third party's
rights that could reasonably be expected to result in a Parent Material Adverse
Effect. Except as set forth on Schedule 3.8, Parent owns, free and clear of any
liens, claims, encumbrances, security interests and rights of redemption
(collectively, the "Liens"), all right, title and interest to the Registered
Intellectual Property. With respect to Intellectual Property, other than the
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Registered Intellectual Property, used or held for use by Parent in its business
as conducted as of the date hereof (the "Other Intellectual Property"), Parent
owns, controls or has a right to use, to the extent necessary to conduct its
business in a manner generally consistent with its past practice, such Other
Intellectual Property which is material to Parent's business. Except as set
forth on Schedule 3.8, Parent is not a party to any outstanding options,
licenses or agreements of any kind relating to (i) any Other Intellectual
Property owned by any other person or entity, or (ii) the Registered
Intellectual Property. Parent has not during the preceding three years received
any communications or claims nor, to Parent's knowledge, is there any threatened
claim, alleging that Parent has infringed upon, or, by conducting its business
as proposed, would infringe upon the intellectual property rights of any other
person which such infringement would have a Parent Material Adverse Effect.
Except as set forth on Schedule 3.8, to the knowledge of Parent, no third party
has interfered with, infringed upon or misappropriated any of Parent's rights to
the Registered Intellectual Property or Other Intellectual Property which such
interference, infringement or misappropriation would constitute a Parent
Material Adverse Effect.
3.9 Compliance; Permits; Restrictions. Except as disclosed on Schedule 3.9,
(a) Neither Parent nor any of its Subsidiaries is in conflict with, or
in default or violation of (i) any law, rule, regulation, order, judgment or
decree applicable to Parent or any of its Subsidiaries or by which its or any of
their respective properties is bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent or any of its Subsidiaries or its or any of their
respective properties is bound or affected except for those conflicts, defaults
or violations which would not be reasonably expected to have a Parent Material
Adverse Effect. Except as disclosed on Schedule 3.9 to the knowledge of Parent,
no investigation or review by any Governmental Entity is pending or threatened
against Parent or any of its Subsidiaries, nor has any Governmental Entity
indicated in writing an intention to conduct the same; other than those which
would not reasonably be expected to have a Parent Material Adverse Effect. There
is no agreement, judgment, injunction, order or decree binding upon Parent or
any of its Subsidiaries which has or would reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of Parent or
any of its Subsidiaries, any acquisition of material property by Parent or any
of its Subsidiaries or the conduct of business by Parent as currently conducted.
(b) Parent and its Subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from Governmental Entities which are necessary
to the conduct of the business of Parent except those the absence of which would
not, individually or in the aggregate, be reasonably likely to have a Parent
Material Adverse Effect, (collectively, the "Parent Permits"). Parent and its
Subsidiaries are in compliance in all material respects with the terms of the
Parent Permits.
3.10 Litigation. As of the date of this Agreement, there is no action,
suit, proceeding, claim, arbitration or investigation pending, including
derivative suits brought by or on behalf of Parent, or as to which Parent or any
of its Subsidiaries has received any written notice of assertion nor, to
Parent's knowledge, is there a threatened action, suit, proceeding, claim,
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23
arbitration or investigation against Parent or any of its Subsidiaries seeking
to delay, limit or enjoin the transactions contemplated by this Agreement or
which might reasonably be expected to have a Parent Material Adverse Effect.
3.11 Brokers' and Finders' Fees. Parent has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby except as disclosed on Schedule 3.11.
3.12 Labor Agreements and Actions, Employee Benefit Plans. (a) Parent is
not bound by or subject to (and none of its assets or properties is bound by or
subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
knowledge of Parent, has sought to represent any of the employees,
representatives, or agents of Parent. There is no strike or other labor dispute
involving Parent pending or, to the knowledge of Parent, threatened, nor is
Parent aware of any labor organization activity involving its employees.
(b) Parent has no pension, profit-sharing or other retirement, bonus,
deferred compensation, employment agreement, severance agreement, compensation,
stock purchase, stock option, severance or termination pay, hospitalization or
other medical, life or other insurance, long- or short-term disability, fringe
benefit, sick pay, or vacation pay, or other employee benefit plan, program,
agreement, or arrangement or policy, whether formal or informal, funded or
unfunded, written or unwritten, and whether legally binding or not, sponsored,
maintained, contributed to or required to be contributed to by (i) Parent with
respect to current or former employees or any current or former director or
consultant of Parent, and/or (ii) any trade or business, whether or not
incorporated, that together with Parent would be deemed a "single employer" that
includes Parent within the meaning of Section 4001(a)(14) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA "), and the rules and
regulations promulgated thereunder (collectively, "Parent Benefit Plans").
Parent has no Benefit Plan that is a "pension benefit plan" under Section 3(2)
of ERISA ("Parent Pension Plan"). Parent also has no Parent Benefit Plan that is
an "employee welfare benefit plan" under Section 3(1) of ERISA ("Parent Welfare
Plan") which is (i) unfunded, (ii) insured, or (iii) funded through a "welfare
benefit fund" within the meaning of Section 419(e) of the Code or another
funding mechanism.
(c) True and complete copies of all (i) Parent Benefit Plans,
including, but not limited to, any trust instruments and insurance contracts
forming a part of any Parent Benefit Plans, and all amendments thereto and
summaries of unwritten Parent Benefit Plans; (ii) the three (3) most recent
actuarial valuations, if any, prepared for each Parent Benefit Plan; (iii) the
three (3) most recent reports (Series 5500 and all schedules thereto), if any,
required under ERISA or the Code in connection with each Parent Benefit Plan or
related trust; (iv) the most recent determination letters received from the
Internal Revenue Service, if any, for each Parent Benefit Plan and related trust
which is intended to satisfy the requirements of Section 401(a) of the Code; (v)
the most recent summary plan description together with the most recent summary
of material modifications, if any, required under ERISA with respect to each
Parent Benefit Plan; and (vi) all material communications to any Employees
relating to each Parent Benefit Plan have been provided or made available to
Lev.
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(d) All "employee benefit plans" within the meaning of Section 3(3) of
ERISA, other than "multiemployer plans" within the meaning of Section 3(37) of
ERISA, covering Parent Employees (the "Parent ERISA Plans"), to the extent
subject to ERISA, are in substantial compliance with ERISA, the Code, and all
other applicable law. Each Parent Pension Plan which is intended to be qualified
under Section 401(a) of the Code, has received a favorable determination letter
from the Internal Revenue Service with respect to "TRA" (as defined in Section 1
of Rev. Proc. 93-39) or a timely application for such determination is now
pending or a request for such determination filed within the remedial amendment
period of Section 401(b) of the Code is pending, and Parent is not aware of any
circumstances likely to result in revocation of any such favorable determination
letter. As of the date hereof, other than claims for benefits submitted in the
ordinary course by participants or beneficiaries under the Parent Benefit Plans,
no material claim against any Parent Benefit Plan, and no legal or regulatory
proceeding (including any audit or voluntary compliance resolution or closing
agreement program proceeding) involving any Parent Benefit Plan, is pending, or
to the knowledge of Parent, threatened.
(e) Neither Parent nor any of its Subsidiaries has engaged in a
transaction with respect to any Parent Plan that, assuming the taxable period of
such transaction expired as of the date hereof, could subject Parent or any
Subsidiary to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount which would be material.
(f) No current or former Parent Pension Plan of Parent or any of its
Subsidiaries, or any ERISA Affiliate, is or has ever been subject to Title IV of
ERISA or Section 412 of the Code. No Parent Benefit Plan constitutes a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(g) All contributions required to be made under the terms of any
Parent Plan have been timely made or have been reflected on the audited
financial statements of Parent. (h) Neither Parent nor any of its Subsidiaries
has any obligations for retiree health and life benefits under any Parent Plan
or has ever represented, promised or contracted (whether in oral or written
form) to any employee(s) that such employee(s) would be provided with retiree
health or life benefits which would have a material impact on Parent, except as
required under ss. 601 of ERISA.
(i) The consummation of the transactions contemplated by this
Agreement will not (x) entitle any employees of Parent any of its Subsidiaries
to severance pay, (y) accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Parent Benefit Plans or (z) result in any
breach or violation of, or a default under, any of the Parent Benefit Plans.
(j) Any amount that could be received (whether in cash, property, or
vesting of property) as a result of the transaction contemplated by this
Agreement by any officer, director, employee or independent contractor of Parent
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or any of its Subsidiaries, who is a "disqualified individual" (as defined in
proposed Treasury Regulation Section 1.280G-1), under any employment arrangement
or Parent Benefit Plan would not be characterized as an "excess parachute
payment" (as defined in Section 280G of the Code).
(k) All Parent Benefit Plans covering current or former non-U.S.
Employees complies in all material respects with applicable law. No unfunded
liabilities exist with respect to any Parent Benefit Plan that covers such
non-U.S. Employees.
(l) Schedule 3.12(l) contains a complete and correct list of
employment agreements for senior officers of Parent; copies of each such
agreement have been provided or made available to Lev or Lev's counsel.
3.13 Absence of Liens and Encumbrances. Parent and each of its Subsidiaries
has good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used in its business, free and clear of any Liens and
Encumbrances except (i) as reflected in the Parent Financial Statements, (ii)
for liens for taxes not yet due and payable and (iii) for such imperfections of
title and encumbrances, if any, which would not be reasonably expected to have a
Parent Material Adverse Effect.
3.14 Environmental Matters. (a) Hazardous Materials Activities. Except as
would not reasonably be likely to result in a material liability to Parent (in
any individual case or in the aggregate), (i) neither Parent nor any of its
Subsidiaries has transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials in violation of any
law in effect on or before the Closing Date, and (ii) neither Parent nor any of
its Subsidiaries has engaged in, Hazardous Materials Activities in violation of
any rule, regulation, treaty or statute promulgated by any Governmental Entity
in effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(b) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
Parent's knowledge, threatened concerning any Parent Permit relating to any
environmental matter, Hazardous Material or any Hazardous Materials Activity of
Parent or any of its Subsidiaries. Parent is not aware of any fact or
circumstance which could involve Parent or any of its Subsidiaries in any
environmental litigation or impose upon Parent or any of its Subsidiaries any
environmental liability.
3.15 Agreements. (a) There are no written agreements between Parent and any
of its officers, directors, employees or shareholders or any affiliate thereof.
(b) There are no written agreements to which Parent is a party or by
which it is bound which (i) involve obligations (contingent or otherwise) of, or
payments to, Parent in excess of $25,000, (ii) are material to the conduct and
operations of Parent's business or properties (including, without limitation,
the license of any Intellectual Property to or from Parent), (iii) restrict or
materially adversely affect the development, manufacture, sale, marketing or
distribution of Parent's products or services, (iv) relating to the employment
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26
or compensation of any employee or consultant, (v) of duration of six months or
more and not cancelable without penalty by Parent on 30 days or less notice or
(vi) relating to the sale, lease, pledge or other disposition of any material
assets of or to Parent.
(c) Parent nor any of its Subsidiaries, nor to Parent's knowledge any
other party to a Parent Contract (as defined below), is in breach, violation or
default under, and neither Parent nor any of its Subsidiaries has been notified
that it has breached, violated or defaulted under, any of the material terms or
conditions of any of the agreements, contracts or commitments to which Parent or
any of its Subsidiaries is a party or by which it is bound that are required to
be disclosed in Schedules 3.15(a) or 3.15(b) (any such agreement, contract or
commitment, a "Parent Contract") in such a manner as would permit any other
party to cancel or terminate any such Parent Contract, or would permit any other
party to seek material damages or other remedies (for any or all of such
breaches, violations or defaults, in the aggregate).
(d) Each of the Parent Contracts are legal, valid, binding and
enforceable and in full force and effect with respect to Parent and any of its
Subsidiaries with respect to each other party thereto, in either case subject to
the effect of bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity; and the
Parent Contracts will continue to be legal, valid, binding and enforceable and
in full force and effect immediately following the Closing in accordance with
the terms thereof as in effect prior to the Closing subject to the effect of
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity.
(e) Neither Parent nor any of its Subsidiaries have been notified that
any party to any of the Parent Contracts intends to cancel, terminate, proposes
to amend, not renew or exercise an option under any of the Parent Contracts,
whether in connection with the transactions contemplated hereby or otherwise nor
is Parent or any Subsidiary aware of any intention by any party to any Parent
Contract to effect any of the foregoing.
3.16 Board Approval. The Board of Directors of Parent has, as of the date
of this Agreement, (i) determined that the Merger is fair to, advisable and in
the best interests of Parent and its stockholders, (ii) has approved the Share
Issuance and (iii) duly approved the Merger, this Agreement and the transactions
contemplated hereby.
3.17 Interim Operations of Lev Merger Sub. Lev Merger Sub was formed solely
for the purpose of engaging in the transactions contemplated hereby and has
engaged in no other business other than incident to its creation and this
Agreement and the transactions contemplated hereby.
3.18 Disclosure. No representation or warranty of the parties to this
Agreement and no statement in the Schedules omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
-----------------------------------
4.1 Conduct of Business by the Parties. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, each of Lev and its
Subsidiaries and Parent and its Subsidiaries shall carry on their respective
business in the ordinary course in substantially the same manner as heretofore
conducted and in substantial compliance with all applicable laws and
regulations, pay their respective debts and taxes when due subject to good faith
disputes over such debts or taxes, pay or perform other material obligations
when due subject to good faith disputes over such obligations, and use their
commercially reasonable efforts consistent with past practices and policies to
(i) preserve intact their present business organization, (ii) keep available the
services of each of their present officers and employees, respectively, and
(iii) preserve their relationships with customers, suppliers, distributors,
licensors, licensees and others with which each party has business dealings
material to their respective business.
4.2 Covenants of Parent. Except as permitted by the terms of this
Agreement, without the prior written consent of Lev, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Effective Time, Parent shall not do
any of the following and shall not permit its Subsidiaries to do any of the
following:
(a) Except as required by law or pursuant to the terms of the Parent
Option Plan in effect as of the date hereof, waive any stock repurchase rights,
accelerate, amend or change the period of exercisability of options or
restricted stock, or reprise options granted under any employee, consultant,
director or other stock plans or authorize cash payments in exchange for any
options granted under any of such plans;
(b) Except as required by applicable law, grant any severance or
termination pay to any officer or employee except pursuant to written agreements
outstanding, or policies existing, on the date hereof and as previously
disclosed in writing or made available to Lev, or adopt any new severance plan,
or amend or modify or alter in any manner any severance plan, agreement or
arrangement existing on the date hereof;
(c) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(d) Except as provided under Section 6.2(f) below, purchase, redeem or
otherwise acquire, directly or indirectly, any shares of capital stock of Parent
or its Subsidiaries, except (i) repurchases of unvested shares at cost in
connection with the termination of the employment relationship with any employee
pursuant to stock option or purchase agreements in effect on the date hereof (or
any such agreements entered into in the ordinary course of business consistent
with past practice by Parent with employees hired after the date hereof), (ii)
for the purpose of funding or providing benefits under any stock option and
incentive compensation plans, directors plans, and stock purchase and dividend
reinvestment plans in accordance with past practice;
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(e) Issue, deliver, sell, authorize, pledge or otherwise encumber or
propose any of the foregoing with respect to any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions, rights,
warrants or options to acquire any shares of capital stock or any securities
convertible into shares of capital stock, or enter into other agreements or
commitments of any character obligating it to issue any such shares or
convertible securities, or any equity-based awards (whether payable in shares,
cash or otherwise) other than the issuance, delivery and/or sale of shares of
Parent Common Stock (as appropriately adjusted for stock splits and the like)
pursuant to the exercise of stock options or warrants outstanding as of the date
of this Agreement.
(f) Cause, permit or submit to a vote of Parent's stockholders any
amendments to the Parent Charter Documents (or similar governing instruments of
any of its Subsidiaries);
(g) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
enter into any joint ventures, strategic partnerships or strategic investments;
(h) Sell, lease, license, encumber or otherwise dispose of any
properties or assets except in the ordinary course of business consistent with
past practice, except for the sale, lease, licensing, encumbering or disposition
(other than through licensing permitted by clause (c)) of property or assets
which are not material, individually or in the aggregate, to the business of
Parent and its Subsidiaries;
(i) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Parent, enter
into any "keep well" or other agreement to maintain any financial statement
condition or enter into any arrangement having the economic effect of any of the
foregoing other than in connection with the financing of working capital
consistent with past practice;
(j) Adopt or amend employee stock purchase or employee stock option
plan; or enter into any employment contract or collective bargaining agreement
(other than offer letters and letter agreements entered into in the ordinary
course of business consistent with past practice with employees who are
terminable "at will"); pay any special bonus or special remuneration to any
director or employee; or increase the salaries, wage rates, compensation or
other fringe benefits (including rights to severance or indemnification) of its
directors, officers, employees or consultants except, in each case, as may be
required by law and except for (i) salary increases in the ordinary course of
business consistent with past practice for non-officer employees, (ii) salary
increases for officers in an amount not exceeding 5% of such officer's salary on
the date hereof and (iii) as set forth on Schedule 4.2(j);
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(k) Pay, discharge, settle or satisfy any litigation (whether or not
commenced prior to the date of this Agreement) or any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities recognized or disclosed in the
Parent Balance Sheet or incurred since the date of such financial statements, or
(ii) waive the benefits of, agree to modify in any manner, terminate, release
any person from or knowingly fail to enforce the confidentiality or
nondisclosure provisions of any agreement to which Parent or any of its
Subsidiaries is a party or of which Parent or any of its Subsidiaries is a
beneficiary, in the case of both (i) and (ii) of this Section 4.1(l);
(l) Except in the ordinary course of business consistent with past
practice, and except as provided under Section 6.2(f) below, materially modify,
amend or terminate any Parent Contracts disclosed in Schedule 3.15 of the Parent
Schedule or waive, delay the exercise of, release or assign any material rights
or claims thereunder without providing prior notice to Parent;
(m) Except as required by GAAP, revalue any of its assets or make any
change in accounting methods, principles or practices;
(n) Make any Tax election or accounting method change (except as
required by GAAP) inconsistent with past practice that, individually or in the
aggregate, is reasonably likely to adversely affect in any material respect the
Tax liability or Tax attributes of Parent or any of its Subsidiaries, settle or
compromise any material Tax liability or consent to any extension or waiver of
any limitation period with respect to Taxes; or
(o) Agree in writing or otherwise to take any of the actions described
in Section 4.1 (a) through (o) above.
4.3 Covenants of Lev. Except as disclosed on Schedule 4.3 of the Lev
Schedule, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Lev and each of its Subsidiaries shall not (i) amend the Lev
Charter Documents (other than to change its name); (ii) split, combine or
reclassify its outstanding shares of capital stock; or (iii) declare, set aside
or pay any dividend payable in cash, stock or property in respect of any capital
stock other than dividends from its wholly-owned Subsidiaries.
ARTICLE V
ADDITIONAL AGREEMENTS
---------------------
5.1 Public Disclosure. Parent and Lev will consult with each other, and to
the extent practicable, agree, before issuing any press release or otherwise
making any public statement with respect to the Merger or this Agreement and
will not issue any such press release or make any such public statement prior to
such consultation, except as may be required by law or any listing agreement
with a national securities exchange or Nasdaq, in which case reasonable efforts
to consult with the other party will be made prior to such release or public
statement. The parties will agree to the text of the joint press release
announcing the signing of this Agreement.
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5.2 Commercially Reasonable Efforts; Notification. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use commercially reasonable 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 to accomplish
the following: (i) causing the conditions precedent set forth in Article VI to
be satisfied; (ii) obtaining all necessary actions or nonactions, waivers,
consents, approvals, orders and authorizations from Governmental Entities; (iii)
making all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any);
(iv) avoiding any suit, claim, action, investigation or proceeding by any
Governmental Entity challenging the Merger or any other transaction contemplated
by this Agreement; (v) obtaining all consents, approvals or waivers from third
parties required as a result of the transactions contemplated in this Agreement;
(vi) defending any suits, claims, actions, investigations or proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; and (vii) executing or delivering any
additional instruments reasonably necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement.
(b) Parent shall give prompt notice to Lev upon becoming aware that any
representation or warranty made by it or Lev Merger Sub contained in this
Agreement has become untrue or inaccurate, or of any failure of Parent or Lev
Merger Sub to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case, where the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as a result thereof; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
(c) Lev shall give prompt notice to Parent upon becoming aware that any
representation or warranty made by it contained in this Agreement has become
untrue or inaccurate, or of any failure of Lev to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, where the conditions set
forth in Section 6.3(a) or Section 6.3(b) would not be satisfied as a result
thereof; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.3 Third Party Consents. On or before the Closing Date, Parent and Lev
will each use its commercially reasonable efforts to obtain any consents,
waivers and approvals under any of its or its Subsidiaries' respective
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby.
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5.4 Lev Stock Options. (a) At the Effective Time, each outstanding option
to purchase shares of Lev Common Stock (each, a "Lev Stock Option") under the
Lev Option Plan or otherwise, whether or not vested, shall, by virtue of the
Merger, be assumed by Parent. Each Lev Stock Option so assumed by Parent under
this Agreement will continue to have, and be subject to, the same terms and
conditions of such options or warrants immediately prior to the Effective Time
(including, without limitation, any repurchase rights or vesting provisions and
provisions regarding the acceleration of vesting and exercisability on certain
transactions), except that (i) each Lev Stock Option will be exercisable (or
will become exercisable in accordance with its terms) for that number of whole
shares of Parent Common Stock and Parent Preferred Stock as determined pursuant
to Section 1.6(a), (ii) the per share exercise price for the shares of Parent
Common Stock issuable upon exercise of such assumed Lev Stock Option will be
equal to the exercise price per share of Lev Common Stock at which such Lev
Stock Option was exercisable immediately prior to the Effective Time and (iii)
all vesting period with respect thereto shall, to the extent provided by the
terms thereof, accelerate, and be subject to any other rights which arise under
the Lev Option Plan or the option agreements evidencing awards thereunder as a
result of the transactions contemplated by this Agreement. At the Effective
Time, (x) all references in the related stock option agreements to Lev shall be
deemed to refer to Parent and (ii) Parent shall assume all of Lev 's obligations
with respect to Lev 's options as so amended. As promptly as reasonably
practicable after the Effective Time, Parent shall issue to each holder of an
outstanding Lev option a document evidencing the foregoing assumption by Parent.
(b) At the Effective Time, each outstanding warrant to purchase shares
of Lev Common Stock (each, a "Lev Warrant"), whether or not vested, shall, by
virtue of the Merger, be assumed by Parent. Each Lev Warrant so assumed by
Parent under this Agreement will continue to have, and be subject to, the same
terms and conditions of such options or warrants immediately prior to the
Effective Time (including, without limitation, any repurchase rights or vesting
provisions and provisions regarding the acceleration of vesting and
exercisability on certain transactions), except that (i) each Lev Warrant will
be exercisable (or will become exercisable in accordance with its terms) for
that number of whole shares of Parent Common Stock and Parent Preferred Stock as
determined pursuant to Section 1.6(a), (ii) the per share exercise price for the
shares of Parent Common Stock issuable upon exercise of such assumed Lev Warrant
will be equal to the exercise price per share of Lev Common Stock at which such
Lev Stock Warrant was exercisable immediately prior to the Effective Time and
(iii) all vesting period with respect thereto shall, to the extent provided by
the terms thereof, accelerate, and be subject to any other rights which arise
under the warrant agreements related thereto. At the Effective Time, (x) all
references in the related stock warrant agreements to Lev shall be deemed to
refer to Parent and (ii) Parent shall assume all of Lev 's obligations with
respect to Lev 's warrants as so amended. As promptly as reasonably practicable
after the Effective Time, Parent shall issue to each holder of an outstanding
Lev Warrant a document evidencing the foregoing assumption by Parent.
(c) It is intended that the Lev Stock Options assumed by Parent shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent the Lev Stock Options qualified as
incentive stock options immediately prior to the Effective Time and the
provisions of this Section 5.4 shall be applied consistently with such intent.
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5.5 Parent Stock Options and Warrants. At the Effective Time, each
outstanding option to purchase shares of Parent Common Stock (each, a "Parent
Stock Option") under the Parent Option Plan or otherwise, whether or not vested,
and each outstanding Parent Warrant, whether or not then exercisable, shall, by
virtue of the Merger, be canceled.
5.6 Parent Board of Directors. Prior to the Effective Time, the Board of
Directors of Parent, in accordance with applicable law and the Parent Charter
Documents, shall take all necessary action (which action may include the
resignation of existing directors) to cause the Board of Directors of Parent, as
of the Effective Time, to appoint each of Xxxxxx Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxx
Xxxxx, Xxxx Xxxxxxx and Xxxxxx Xxxxxx as directors of Parent.
5.7 Parent Management. Prior to the Effective Time, the Board of Directors
of Parent, in accordance with applicable law and the Parent Charter Documents
shall take all necessary action to appoint Xxxxxx Xxxxxx as Chairman of the
Board of Parent and Xxxxxx X. Xxxxxx as Chief Executive Officer.
5.8 Conveyance Taxes. Parent, Lev and Lev Merger Sub shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications,
or other documents regarding (i) any real property transfer gains, sales, use,
transfer, value-added, stock transfer and stamp Taxes, (ii) any recording,
registration and other fees, and (iii) any similar Taxes or fees that become
payable in connection with the transactions contemplated hereby. The Taxes
described in clause (i) shall be paid equally by Parent and Lev.
5.9 No Negotiation. Until the Effective Date, or such time, if any, as this
Agreement is terminated pursuant to Article VI below, neither Parent nor Lev
shall, nor shall they permit any of their respective affiliates, directors,
officers, employees, investment bankers, attorneys or other agents, advisors or
representatives to, directly or indirectly, (a) sell, offer or agree to sell its
business, by sale of shares or assets, merger or otherwise (each an "Acquisition
Transaction") other than pursuant to this Agreement, (b) solicit or initiate the
submission of any proposal for an Acquisition Transaction, or (c) participate in
any discussions or negotiations with, or furnish any information concerning its
business to, any corporation, person or other entity in connection with a
possible Acquisition Transaction other than pursuant to this Agreement.
5.10 Certificate of Designations of Parent Preferred Stock. Prior to or at
the Effective Time, Parent shall have filed a Certificate of Designations for
the Parent Preferred Stock with the State of Nevada in the form set forth in
Exhibit D to this Agreement.
5.11 Audited Financial Statements of Parent. Prior to or at the Effective
Time, Parent shall have provided to Lev audited financial statements of Parent
and its Subsidiaries for the fiscal years ended September 30, 2004 and 2003.
5.12 Survival after Closing. All of the covenants and obligations of the
parties to this Agreement, which by their terms are to be performed or will
become effective after the Closing, including without limitation, those
contained in Sections 1.6, 1.12, 5.4, 5.5, 5.7, 5.8, 5.9, 5.10 and 5.11 shall
survive the Closing.
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ARTICLE VI
CONDITIONS TO THE MERGER
------------------------
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Mergers
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions, any of which may be waived if waived in writing by both
Parent and Lev:
(a) Stockholder Approval. This Agreement shall have been adopted and
the Merger shall have been duly approved by the requisite vote under applicable
law and the Lev Charter Documents by the stockholders of Lev.
(b) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(c) Schedules. Each of the parties hereto shall have delivered to each
other complete and accurate Schedules to this Agreement and such Schedules shall
have been approved by the recipient.
(d) Exhibits. The parties shall mutually agree upon the form and
substance of all the agreements attached as Exhibits to this Agreement, which
agreements shall be executed and delivered to each other at the Closing Date.
6.2 Additional Conditions to Obligations of Lev. The obligation of Lev to
effect the Merger shall be subject to the satisfaction at or prior to the
Closing Date of each of the following conditions, any of which may be waived, in
writing, exclusively by Lev:
(a) Representations and Warranties. The representations and warranties
of Parent and Lev Merger Sub set forth in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing Date as if made
on and as of the Closing Date (except to the extent any such representation and
warranty expressly speaks as of an earlier date) and Lev shall have received a
certificate signed on behalf of Parent by the Chief Executive Officer of Parent
to such effect; provided, however, that notwithstanding anything herein to the
contrary, this Section 6.2(a) shall be deemed to have been satisfied even if
such representations or warranties are not so true and correct unless the
failure of such representations or warranties to be so true and correct,
individually or in the aggregate, has had, or is reasonably likely to have, a
Parent Material Adverse Effect.
(b) Agreements and Covenants. Each of Parent and Lev Merger Sub shall
have performed or complied with, in all material respects, all agreements and
covenants required by this Agreement to be performed or complied with by them on
or prior to the Closing Date, and Lev shall have received a certificate to such
effect signed on behalf of each of Parent and Lev Merger Sub by an authorized
officer of Lev.
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(c) Board of Directors Receivable. Immediately prior to the Effective
Time, the Board of Directors of the Parent shall pay the receivable of $68,471
to the Parent.
(d) OTC Bulletin Board. At the Effective Time, the shares of Parent
shall be quoted on the OTC Bulletin Board.
(e) Audited Financial Statements of Parent. Prior to or at the
Effective Time, Parent shall have provided to Lev audited financial statements
of Parent for the fiscal years ended September 30, 2004 and 2003.
(f) PWC Review. Prior to the Effective Time, PricewaterhouseCoopers
LLP, Lev's independent accountants, shall have completed its review of the
current and certain past officers, directors and principal stockholders of
Parent, which results of such review shall be satisfactory to Lev.
(g) No Closing Material Adverse Effect. Since the date hereof, there
has not occurred a Parent Material Adverse Effect. For purposes of the preceding
sentence and Section 6.2(a), the occurrence of any of the following events or
circumstances, in and of themselves and in combination with any of the others,
shall not constitute a Parent Material Adverse Effect:
(1) any litigation or threat of litigation filed or made after the date
hereof challenging any of the transactions contemplated herein or any
shareholder litigation or threat of shareholder litigation filed or
made after the date hereof resulting from this Agreement or the
transactions contemplated herein;
(2) any adverse change, event or effect that is demonstrated to be
caused primarily by conditions generally affecting the United States
economy; and
(3) any adverse change, event or effect that is demonstrated to be
caused primarily by conditions generally affecting the healthcare,
biotechnology, or services industries.
6.3 Additional Conditions to the Obligations of Parent and Lev Merger Sub.
The obligations of Parent and Lev Merger Sub to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. The representations and warranties
of Lev set forth in this Agreement shall be true and correct as of the date of
this Agreement and as of the Closing Date as if made on and as of the Closing
Date (except to the extent any such representation and warranty expressly speaks
as of an earlier date) and Parent shall have received a certificate signed on
behalf of Lev by the Chief Executive Officer of Lev to such effect; provided,
however, that notwithstanding anything herein to the contrary, this Section
6.3(a) shall be deemed to have been satisfied even if such representations or
warranties are not so true and correct unless the failure of such
representations or warranties to be so true and correct, individually or in the
aggregate, has had, or is reasonably likely to have, a Lev Material Adverse
Effect.
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(b) Agreements and Covenants. Lev shall have performed or complied
with, in all material respects, all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Lev by an authorized officer of Lev.
(c) Assumption of Debt of Certain Stockholders of Parent. At the
Effective Time, Lev shall assume an aggregate $350,000 of liabilities from
certain stockholders of Parent.
(d) Financial Statements of Lev. Prior to the Effective Time, Lev shall
provide to Parent, an unaudited consolidated balance sheet of Lev and its
Subsidiaries the Interim Financial Statements, which will reflect cash of
approximately $6.6 million and stockholders' equity of approximately $6 million
(e) No Closing Material Adverse Effect. Since the date hereof, there
has not occurred a Lev Material Adverse Effect. For purposes of the preceding
sentence and Section 6.3(a), the occurrence of any of the following events or
circumstances, in and of themselves and in combination with any of the others,
shall not constitute a Lev Material Adverse Effect:
(1) any litigation or threat of litigation filed or made after the date
hereof challenging any of the transactions contemplated herein or any
shareholder litigation or threat of shareholder litigation filed or
made after the date hereof resulting from this Agreement or the
transactions contemplated herein;
(2) any adverse change, event or effect that is demonstrated to be
caused primarily by conditions generally affecting the United States
economy; and
(3) any adverse change, event or effect that is demonstrated to be
caused primarily by conditions generally affecting the healthcare,
biotechnology, or services industries.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approval of the
stockholders of Lev:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and Lev; or
(b) by either Parent or Lev if the Merger shall not have been
consummated by January 15, 2005, which date shall be automatically extended for
an additional period of up to two (2) weeks, as it may be necessary to obtain
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the requisite stockholder approval by the stockholders of Lev (such date, or
such other date that may be agreed by mutual written consent, being the "Outside
Date") for any reason; provided, however, that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party whose
action or failure to act has been a principal cause of, or resulted in the
failure of, the Merger to occur on or before such date if such action or failure
to act constitutes a breach of this Agreement; or
(c) by either Parent or Lev if a Governmental Entity shall have issued
an order, decree or ruling or taken any other action, in any case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action shall have become final and
nonappealable or any law, order, rule or regulation is in effect or is adopted
or issued, which has the effect of prohibiting the Merger.
7.2 Fees and Expenses. All Expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such Expenses whether or not the Merger is consummated, except that in
the event the Merger is consummated, accounting fees and expenses related to the
preparation of the audited financial statements of Parent for the fiscal years
ended September 30, 2004 and 2003 shall be split equally between Lev and the
principals of Parent. As used in this Agreement, "Expenses" shall include all
reasonable out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement and all other matters relating to the closing of
the Merger and the other transactions contemplated hereby.
7.3 Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that, after the approval and
adoption of this Agreement by the stockholders of Lev, there shall not be any
amendment that by law requires further approval by the stockholders of Lev
without the further approval of such stockholders. This Agreement may not be
amended by the parties hereto except by execution of an instrument in writing
signed on behalf of each of Parent, Lev and Lev Merger Sub.
7.4 Extension; Waiver. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
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ARTICLE VIII
GENERAL PROVISIONS
------------------
8.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given on the day of delivery if delivered personally
or sent via telecopy (receipt confirmed) or on the second business day after
being sent if delivered by commercial delivery service, to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent or Lev Merger Sub:
Xxxxx X. Xxxxx
0000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telecopier:
(b) if to Lev, to
Lev Pharmaceuticals, Inc.
000 X. 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
Telecopier:
8.2 Interpretation. (a) When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. When a reference is made in this Agreement to a Section,
such reference shall be to a Section of this Agreement. Unless otherwise
indicated the words "include," "includes" and "including" when used herein shall
be deemed in each case to be followed by the words "without limitation." The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "the business of" an entity,
such reference shall be deemed to include the business of all direct and
indirect subsidiaries of such entity. Reference to the subsidiaries of an entity
shall be deemed to include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "knowledge" means with
respect to a party hereto, with respect to any matter in question, that any of
the officers of such party has actual knowledge of such matter.
(c) For purposes of this Agreement, the term "person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
(d) For purposes of this Agreement, an "agreement," "arrangement,"
"contract," "commitment" or "plan" shall mean a legally binding, written
agreement, arrangement, contract, commitment or plan, as the case may be.
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38
8.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.4 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Parent Schedule and the Lev
Schedule constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof.
8.5 Severability. In the event that any provision of this Agreement, or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
8.6 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which t they are entitled at law or in
equity. In any action at law or suit in equity to enforce this Agreement or the
rights of any of the parties hereunder, the prevailing party in such action or
suit shall be entitled to receive a reasonable sum for its attorneys' fees and
all other reasonable costs and expenses incurred in such action or suit.
8.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
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39
8.9 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.10 Waiver of Jury Trial. EACH OF PARENT, LEV AND LEV MERGER SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, LEV AND LEV MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
[Remainder of page is blank; signatures appear on next page.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
Fun City Popcorn, Inc.
By: /s/ Xxxxx Xxxxx
-------------------------------
Name: Xxxxx Xxxxx
Title: Chief Executive Officer
Lev Pharmaceuticals, Inc.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
Lev Acquisition Corp.
By: /s/ Xxxx X. Agron
-------------------------------
Name: Xxxx X. Agron
Title:
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