AGREEMENT AND PLAN OF MERGER by and among GILDER ENTERPRISES, INC., MEDASORB ACQUISITION, INC. and MEDASORB CORPORATION June 29, 2006
AGREEMENT
AND PLAN OF MERGER
by
and
among
XXXXXX
ENTERPRISES, INC.,
MEDASORB
ACQUISITION, INC.
and
MEDASORB
CORPORATION
June
29,
2006
Page
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ARTICLE
I DEFINITIONS
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1
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ARTICLE
II THE MERGER
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5
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SECTION
2.1
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MERGER
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5
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SECTION
2.2
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EFFECTIVE
TIME
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5
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SECTION
2.3
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CERTIFICATE
OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS
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5
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SECTION
2.4
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EFFECTS
OF THE MERGER
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6
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SECTION
2.5
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CLOSING
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6
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| ARTICLE III MERGER CONSIDERATION; CONVERSION OF SECURITIES |
6
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SECTION
3.1
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MANNER
AND BASIS OF CONVERTING CAPITAL STOCK
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6
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SECTION
3.2
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ISSUANCE
OF CERTIFICATES
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7
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SECTION
3.3
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OPTIONS,
WARRANTS
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8
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SECTION
3.4
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PARENT
COMMON STOCK
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8
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| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
9
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SECTION
4.1
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ORGANIZATION
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9
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SECTION
4.2
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AUTHORIZATION;
VALIDITY OF AGREEMENT
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9
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SECTION
4.3
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CAPITALIZATION
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9
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SECTION
4.4
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CONSENTS
AND APPROVALS; NO VIOLATIONS
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9
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SECTION
4.5
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FINANCIAL
STATEMENTS
|
10
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SECTION
4.6
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NO
UNDISCLOSED LIABILITIES
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10
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SECTION
4.7
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LITIGATION
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10
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SECTION
4.8
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NO
DEFAULT; COMPLIANCE WITH APPLICABLE LAWS
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10
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SECTION
4.9
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BROKER’S
AND FINDER’S FEES
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10
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SECTION
4.10
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ASSETS
AND CONTRACTS
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11
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SECTION
4.11
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TAX
RETURNS AND AUDITS
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11
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SECTION
4.12
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PATENTS
AND OTHER INTANGIBLE ASSETS
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12
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SECTION
4.13
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EMPLOYEE
BENEFIT PLANS; ERISA
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12
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SECTION
4.14
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TITLE
TO PROPERTY AND ENCUMBRANCES
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12
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SECTION
4.15
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CONDITION
OF PROPERTIES
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13
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SECTION
4.16
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INSURANCE
COVERAGE
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13
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SECTION
4.17
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INTERESTED
PARTY TRANSACTIONS
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13
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SECTION
4.18
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ENVIRONMENTAL
MATTERS
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13
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SECTION
4.19
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DISCLOSURE
|
14
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| ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION |
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CORP.
|
14
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SECTION
5.1
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ORGANIZATION
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14
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SECTION
5.2
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AUTHORIZATION;
VALIDITY OF AGREEMENT
|
14
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SECTION
5.3
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CONSENTS
AND APPROVALS; NO VIOLATIONS
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15
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ii
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SECTION
5.4
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LITIGATION
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15
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SECTION
5.5
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NO
DEFAULT; COMPLIANCE WITH APPLICABLE LAWS
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15
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SECTION
5.6
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BROKER’S
AND FINDER’S FEES; BROKER/DEALER OWNERSHIP
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15
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SECTION
5.7
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CAPITALIZATION
OF PARENT
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15
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SECTION
5.8
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ACQUISITION
CORP
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16
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SECTION
5.9
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VALIDITY
OF SHARES
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16
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SECTION
5.10
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SEC
REPORTING AND COMPLIANCE
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16
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SECTION
5.11
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FINANCIAL
STATEMENTS
|
17
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SECTION
5.12
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NO
GENERAL SOLICITATION
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17
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SECTION
5.13
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ABSENCE
OF UNDISCLOSED LIABILITIES
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17
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SECTION
5.14
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CHANGES
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17
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SECTION
5.15
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TAX
RETURNS AND AUDITS
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18
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SECTION
5.16
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EMPLOYEE
BENEFIT PLANS; LABOR
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18
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SECTION
5.17
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INTERESTED
PARTY TRANSACTIONS
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19
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SECTION
5.18
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QUESTIONABLE
PAYMENTS
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19
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SECTION
5.19
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OBLIGATIONS
TO OR BY STOCKHOLDERS
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19
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SECTION
5.20
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ASSETS
AND CONTRACTS
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19
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SECTION
5.21
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ENVIRONMENTAL
MATTERS
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20
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SECTION
5.22
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DISCLOSURE
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21
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| ARTICLE VI CONDUCT OF BUSINESSES PENDING THE MERGER |
21
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SECTION
6.1
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CONDUCT
OF BUSINESS BY THE COMPANY PENDING THE MERGER
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21
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SECTION
6.2
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CONDUCT
OF BUSINESS BY PARENT AND ACQUISITION CORP. PENDING THE
MERGER
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22
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| ARTICLE VII ADDITIONAL AGREEMENTS |
22
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SECTION
7.1
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ACCESS
AND INFORMATION
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22
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SECTION
7.2
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ADDITIONAL
AGREEMENTS
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23
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SECTION
7.3
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PUBLICITY
|
23
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SECTION
7.4
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APPOINTMENT
OF DIRECTORS
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24
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SECTION
7.5
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STOCKHOLDER
CONSENT
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24
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| ARTICLE VIII CONDITIONS OF PARTIES’ OBLIGATIONS |
24
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SECTION
8.1
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COMPANY
OBLIGATIONS
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24
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SECTION
8.2
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PARENT
AND ACQUISITION CORP. OBLIGATIONS
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25
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| ARTICLE IX TERMINATION PRIOR TO CLOSING |
27
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SECTION
9.1
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TERMINATION
OF AGREEMENT
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27
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SECTION
9.2
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TERMINATION
OF OBLIGATIONS
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28
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| ARTICLE X MISCELLANEOUS |
28
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SECTION
10.1
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AMENDMENTS.
|
28
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SECTION
10.2
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NOTICES
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28
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SECTION
10.3
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ENTIRE
AGREEMENT
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29
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SECTION
10.4
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EXPENSES
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29
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SECTION
10.5
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SEVERABILITY
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29
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SECTION
10.6
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SUCCESSORS
AND ASSIGNS; ASSIGNMENT
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30
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iii
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SECTION
10.7
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NO
THIRD PARTY BENEFICIARIES
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30
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SECTION
10.8
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COUNTERPARTS;
DELIVERY BY FACSIMILE
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30
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SECTION
10.9
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WAIVER
|
30
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SECTION
10.10
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NO
CONSTRUCTIVE WAIVERS
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30
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SECTION
10.11
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FURTHER
ASSURANCES
|
31
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SECTION
10.12
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HEADINGS
|
31
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SECTION
10.13
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GOVERNING
LAW
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31
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SECTION
10.14
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DISPUTE
RESOLUTION
|
31
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SECTION
10.15
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INTERPRETATION
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31
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LIST
OF SCHEDULES AND EXHIBITS
|
Company
Disclosure Schedules
Schedule
3.3 -
Company Stock Options
Schedule
4.3 -
Stockholders
Schedule
4.7 -
Litigation
Schedule
4.10 - Contracts
Schedule
4.11 -
Taxes
Schedule
4.16 - Insurance
Parent
Disclosure Schedules
Schedule
5.7 - Capitalization
Exhibits
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Exhibit
A Post-Closing
Directors and Officers of
Parent
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iv
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER is entered into as of June
29, 2006
by and among XXXXXX
ENTERPRISES,
INC. a
Nevada corporation (“Parent”),
MEDASORB ACQUISITION, INC., a Delaware corporation and a wholly-owned subsidiary
of Parent (“Acquisition
Corp.”),
and
MEDASORB CORPORATION., a Delaware corporation (the “Company”).
WITNESSETH:
WHEREAS,
the Company is primarily engaged in the business of commercializing
hemoperfusion devices, initially for the treatment of sepsis;
WHEREAS,
the Board of Directors of each of Parent, Acquisition Corp. and the Company
has
approved, and deems it advisable and in the best interests of their respective
stockholders to consummate, the acquisition of the Company by Parent, which
acquisition is to be effected by the merger of Acquisition Corp. with and into
the Company, with the Company being the surviving entity (the “Merger”),
upon
the terms and subject to the conditions set forth in this Agreement (as defined
herein); and
WHEREAS,
the parties hereto intend that the Merger shall qualify as a reorganization
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of
1986,
as amended (the “Code”),
by
reason of Section 368(a)(2)(E) of the Code.
NOW,
THEREFORE, in consideration of the mutual agreements and covenants hereinafter
set forth, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
Capitalized
terms used in this Agreement shall have the following meanings:
“Acquisition
Corp.”
shall
have the meaning given to such term in the preamble to this
Agreement.
“Acquisition
Proposal”
shall
have the meaning given to such term in Section
6.2
hereof.
“Action”
shall
mean any claim, action, suit, proceeding, investigation or order.
“Affiliate”
shall
mean, with respect to any Person, any Person directly or indirectly controlling,
controlled by or under common control with, such Person. For the purposes of
this definition, “control”
(including, with correlative meaning, the terms “controlling,”
“controlled
by”
and
“under
common control with”)
means
the possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of such Person through the ownership of
voting securities, by contract or otherwise.
“Agreement”
shall
mean this Agreement and Plan of Merger, including the schedules and exhibits
attached hereto or referred to herein, as the same may be amended or modified
from time to time in accordance with the provisions hereof.
“Balance
Sheet”
shall
have the meaning given to such term in Section
4.5
hereof.
“Balance
Sheet Date”
shall
have the meaning given to such term in Section
4.5
hereof.
“By-laws”
shall
have the meaning given to such term in Section
2.3(b)
hereof.
“Certificate
of Incorporation”
shall
have the meaning given to such term in Section
2.3(a)
hereof.
“Closing”
shall
have the meaning given to such term in Section
2.5
hereof.
“Closing
Date”
shall
have the meaning given to such term in Section
2.5
hereof.
“Code”
shall
have the meaning given to such term in the third recital to this
Agreement.
“Commission”
shall
mean the United States Securities and Exchange Commission.
“Common
Stock Options”
shall
have the meaning given to such term in Section
3.3(a)
hereof.
“Company”
shall
have the meaning given to such term in the preamble to this
Agreement.
“Company
Common Stock”
shall
mean the common stock, par value $.001 per share, of the Company.
“Company
Material Adverse Effect”
shall
mean any change, effect or circumstance that by itself, or together with other
changes, effects and circumstances is materially adverse or is reasonably likely
to be materially adverse to the business, assets, liabilities, condition
(financial or otherwise) or operations of the Company.
“Contract”
shall
have the meaning given to such term in Section
4.4
hereof.
“Consents”
shall
mean any permits, filings, notices, licenses, consents, authorizations,
accreditation, waivers, approvals and the like of, to, with or by any
Person.
“DGCL”
shall
mean the General Corporation Law of the State of Delaware, as
amended.
“Dissenting
Shares”
shall
have the meaning given to such term in Section
3.2(b)
hereof.
“Effective
Time”
shall
have the meaning given to such term in Section
2.2 hereof.
“Employee
Benefit Plans”
shall
have the meaning assigned to it in Section
4.13
hereof.
“Environmental
Law”
shall
mean the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. §§ 9601 et seq.; the Emergency Planning and Community Right-to-Know
Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Resource Conservation and Recovery
Act, 42 U.S.C. §§ 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.
§§ 136 et seq. and comparable state statutes dealing with the registration,
labeling and use of pesticides and herbicides; the Clean Air Act, 42 U.S.C.
§§
7401 et seq.; the Clean Water Act (Federal Water Pollution Control Act), 33
U.S.C. §§ 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq.;
and the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801 et seq., as
any of the above referenced statutes have been amended as of the date hereof,
all rules, regulations and policies promulgated pursuant to any of the above
referenced statutes, and any other foreign, federal, state or local law,
statute, ordinance, rule, regulation or policy governing environmental matters,
as the same have been amended as of the date hereof.
2
“ERISA”
shall
mean the Employee Retirement Income Securities Act of 1974, as amended, and
the
regulations issued thereunder.
“Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations issued thereunder.
“GAAP”
shall
mean generally accepted accounting principles as in effect from time to time
in
the United States consistently applied.
“Hazardous
Material”
means
any substance or material meeting any one or more of the following criteria:
(a)
it is or contains a substance designated as or meeting the characteristics
of a
hazardous waste, hazardous substance, hazardous material, pollutant, chemical
substance or mixture, contaminant or toxic substance under any Environmental
Law; (b) its presence at some quantity requires investigation, notification
or
remediation under any Environmental Law; or (c) it contains, without limiting
the foregoing, asbestos, polychlorinated biphenyls, petroleum hydrocarbons,
petroleum derived substances or waste, pesticides, herbicides, crude oil or
any
fraction thereof, nuclear fuel, natural gas or synthetic gas.
“Indebtedness”
shall
mean any obligation of the Company that under GAAP is required to be shown
on
the Balance Sheet of the Company as a Liability. Any obligation secured by
a
Lien on, or payable out of the proceeds of production from, property of the
Company shall be deemed to be Indebtedness even though such obligation is not
assumed by the Company.
“Indebtedness
for Borrowed Money”
shall
mean (a) all Indebtedness in respect of money borrowed including, without
limitation, Indebtedness which represents the unpaid amount of the purchase
price of any property and is incurred in lieu of borrowing money or using
available funds to pay such amounts and not constituting an account payable
or
expense accrual incurred or assumed in the ordinary course of business of the
Company, (b) all Indebtedness evidenced by a promissory note, bond or similar
written obligation to pay money, or (c) all such Indebtedness guaranteed by
the
Company or for which the Company is otherwise contingently liable.
“Investment
Company Act”
shall
mean the Investment Company Act of 1940, as amended.
“Liability”
shall
mean any liability, debt, obligation, deficiency, Tax, penalty, fine, claim,
cause of action or other loss, cost or expense of any kind or nature whatsoever,
whether asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, and whether due or to become due and regardless
of
when asserted.
“Lien”
shall
mean any mortgage, pledge, security interest, encumbrance, lien or charge of
any
kind, including, without limitation, any conditional sale or other title
retention agreement, any lease in the nature thereof and the filing of or
agreement to give any financing statement under the Uniform Commercial Code
of
any jurisdiction and including any lien or charge arising by statute or other
law.
2
“Merger”
shall
have the meaning given to such term in the second recital to this
Agreement.
“Parent”
shall
have the meaning given to such term in the preamble to this
Agreement.
“Parent
Balance Sheet”
shall
have the meaning assigned to such term in Section
5.13
hereof.
“Parent
Balance Sheet Date”
shall
have the meaning assigned to it in Section
5.14
hereof.
“Parent
Common Stock”
shall
mean the common stock, par value $.001 per share, of the Parent.
“Parent
Financial Statements”
shall
have the meaning assigned to such term in Section
5.11
hereof.
“Parent
Material Adverse Effect”
means
any change, effect or circumstance that by itself, or together with other
changes, effects and circumstances is materially adverse or is reasonably likely
to be materially adverse to the business, assets, liabilities, condition
(financial or otherwise) or operations of Parent and its subsidiaries, taken
as
a whole.
“Parent
SEC Documents”
shall
have the meaning assigned to such term in Section
5.10(b)
hereof.
“Permitted
Liens”
shall
mean (a) Liens for taxes and assessments or governmental charges or levies
not
at the time due or in respect of which the validity thereof shall currently
be
contested in good faith by appropriate proceedings; (b) Liens in respect of
pledges or deposits under workmen’s compensation laws or similar legislation,
carriers’, warehousemen’s, mechanics’, laborers’ and materialmens’ and similar
Liens, if the obligations secured by such Liens are not then delinquent or
are
being contested in good faith by appropriate proceedings; and (c) Liens
incidental to the conduct of the business of the Company that were not incurred
in connection with the borrowing of money or the obtaining of advances or
credits and which do not in the aggregate materially detract from the value
of
its property or materially impair the use made thereof by the Company in its
business.
“Person”
shall
mean any individual, corporation, limited liability company, partnership, joint
venture, trust or other entity or organization, including any government or
political subdivision or an agency or instrumentality thereof.
“Securities
Act”
shall
mean the Securities Act of 1933, as amended, and the rules and regulations
issued thereunder.
“Stock
Option Plan”
shall
mean the 2006 Long-Term Incentive Option Plan of Parent, approved by the Board
of Directors of Parent on or before the Closing and providing for 2,500,000
shares of Parent Common Stock to be reserved for issuance upon exercise of
stock
options and other stock-based awards to be issued thereunder to directors,
officers, employees and consultants of Parent and the Surviving Corporation.
3
“Stockholder”
shall
mean any record holder of Company Common Stock.
“Surviving
Corporation”
shall
have the meaning given to such term in Section
2.1
hereof.
“Tax”
or
“Taxes”
shall
mean (a) any and all taxes, assessments, customs, duties, levies, fees, tariffs,
imposts, deficiencies and other governmental charges of any kind whatsoever
(including, but not limited to, taxes on or with respect to net or gross income,
franchise, profits, gross receipts, capital, sales, use, ad valorem, value
added, transfer, real property transfer, transfer gains, transfer taxes,
inventory, capital stock, license, payroll, employment, social security,
unemployment, severance, occupation, real or personal property, estimated taxes,
rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative
minimum, doing business, withholding and stamp), together with any interest
thereon, penalties, fines, damages costs, fees, additions to tax or additional
amounts with respect thereto, imposed by the United States (federal, state
or
local) or other applicable jurisdiction; (b) any liability for the payment
of
any amounts described in clause (a) as a result of being a member of an
affiliated, consolidated, combined, unitary or similar group or as a result
of
transferor or successor liability, including, without limitation, by reason
of
Code Section 1.1502-6; and (c) any liability for the payments of any amounts
as
a result of being a party to any tax sharing agreement or as a result of any
express or implied obligation to indemnify any other Person with respect to
the
payment of any amounts of the type described in either clauses (a) or
(b).
“Tax
Return”
shall
include all returns and reports (including elections, declarations, disclosures,
schedules, estimates and information returns (including Form 1099 and
partnership returns filed on Form 1065)) required to be supplied to a Tax
authority relating to Taxes.
ARTICLE
II
THE
MERGER
Section
2.1 Merger.
Upon
the terms and subject to the conditions of this Agreement, at the Effective
Time, the Company shall be merged with and into Acquisition Corp. in accordance
with Section 251 of the DGCL. Following the Effective Time, the separate
corporate existence of the Company shall cease, and Acquisition Corp. shall
continue as the corporation surviving the Merger (sometimes hereinafter referred
to as the “Surviving
Corporation”).
Section
2.2 Effective
Time.
The
Company and Acquisition Corp. shall cause a certificate of merger to be filed
on
the Closing Date (or on such other date as the Company and Parent may agree
in
writing) with the Secretary of State of Delaware as provided in Section 251
of
the DGCL, and shall make all other filings or recordings required by the DGCL
in
connection with the Merger. The Merger shall become effective at such time
as
the certificate of merger is duly filed in accordance with Section 251 of the
DGCL with the Secretary of State of the State of Delaware or such later time
as
specified in the certificate of merger, and such time is hereinafter referred
to
as the “Effective
Time.”
Section
2.3 Certificate
of Incorporation; By-laws; Directors and Officers.
4
(a) The
certificate of incorporation of Acquisition Corp. as in effect immediately
prior
to the Effective Time, shall be the certificate of incorporation of the
Surviving Corporation (the “Certificate
of Incorporation”)
from
and after the Effective Time until thereafter changed or amended as provided
therein or in accordance with applicable law, except that Article First of
the
Certificate of Incorporation shall be amended and restated to read as follows:
“FIRST:
The
name
of the corporation is MedaSorb Corporation (hereinafter referred to as the
“Corporation”).”
(b) The
by-laws of Acquisition as in effect immediately prior to the Effective Time,
shall be the by-laws of the Surviving Corporation (the “By-laws”)
from
and after the Effective Time until thereafter changed or amended as provided
therein or in accordance with applicable law.
(c) The
officers and directors of the Company immediately prior to the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Certificate of Incorporation and By-laws of the Surviving Corporation.
The individuals identified on Exhibit
A
shall,
following the Effective Time, be the officers and directors of the Parent until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Certificate
of Incorporation and By-laws of Parent.
Section
2.4 Effects
of the Merger.
The
Merger shall have the effects set forth in Section 259 of the DGCL. Without
limiting the generality of the foregoing, at the Effective Time, except as
otherwise provided herein, all of the property, rights, privileges, powers
and
franchises of the Company and Acquisition Corp. shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and
Acquisition Corp. shall become the debts, liabilities and duties of the
Surviving Corporation. The Company acknowledges that, upon the effectiveness
of
the Merger, Parent shall have the absolute and unqualified right to deal with
the assets and business of the Surviving Corporation as its own property without
limitation on the disposition or use of such assets or the conduct of such
business.
Section
2.5 Closing.
The
consummation of the transactions contemplated by this Agreement, including
the
Merger (the “Closing”),
shall
take place: (a) at the offices of Kronish Xxxx Xxxxxx & Xxxxxxx LLP, 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m. local time on the
date
on which all of the conditions to the Closing set forth in Article
VIII
hereof
shall be fulfilled or waived in accordance with this Agreement (other than
conditions that can be satisfied only at the Closing, but subject to the
fulfillment or waiver of those conditions at the Closing); or (b) at such other
place, time and date as the Company and Parent may agree in writing (the
“Closing
Date”).
ARTICLE
III
MERGER
CONSIDERATION; CONVERSION OF SECURITIES
Section
3.1 Manner
and Basis of Converting Capital
Stock.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
the Company, Parent or Acquisition Corp. or the holders of any outstanding
shares of capital stock or other securities of the Company, Parent or
Acquisition Corp.:
5
(a) Acquisition
Corp. Stock.
Each
share of common stock, par value $.001 per share, of Acquisition Corp. issued
and outstanding immediately prior to the Effective Time shall be converted
into
and become one fully paid and nonassessable share of capital stock, par value
$.001 per share, of the Surviving Corporation, such that Parent shall be the
holder of all of the issued and outstanding shares of capital stock of the
Surviving Corporation following the Merger.
(b) Company
Common Stock.
Except
as provided in Section
3.1(c)
and
Section
3.2(d)
hereof,
each share of Company Common Stock issued and outstanding immediately prior
to
the Effective Time shall be converted into the right to receive one (1) share
of
Parent Common Stock.
(c) Treasury
Stock.
Notwithstanding any provision of this Agreement to the contrary, each share
of
Company Common Stock held in the treasury of the Company immediately prior
to
the Effective Time shall be canceled in the Merger and shall not be converted
into the right to receive any shares of capital stock or other securities of
Parent.
(d) No
Fractional Shares.
No
fractional shares of Parent Common Stock shall be issued in, or as a result
of,
the Merger. Any fractional share of Parent Common Stock that a holder of record
of Company Common Stock would otherwise be entitled to receive as a result
of
the Merger shall be aggregated. If a fractional share of Parent Common Stock
results from such aggregation, the number of shares required to be issued to
such record holder shall be rounded up to the nearest whole number of shares
of
Parent Common Stock.
Section
3.2 Issuance
of Certificates.
(a) Certificates.
Within
a reasonable time after the Effective Time, Parent shall cause to be mailed
and
issued to each former holder of record of Company Common Stock (as set forth
on
Schedule
4.3)
that
was converted into the right to receive Parent Common Stock pursuant to
Section
3.1
hereof,
a
certificate or certificates registered in the name of such former record holder
representing the number of shares of Parent Common Stock that such former record
holder is entitled to receive in accordance with Section
3.1
hereof.
(b) Dissenting
Shares.
Notwithstanding any provision of this Agreement to the contrary, shares of
Company Common Stock issued and outstanding immediately prior to the Effective
Time and held by a Stockholder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such shares
of
Company Common Stock in accordance with Section 262 of the DGCL (“Dissenting
Shares”)
shall
not be entitled to vote for any purpose or receive dividends, shall not be
converted into the right to receive Parent Common Stock in accordance with
Section
3.1
hereof,
and shall only be entitled to receive such consideration as shall be determined
pursuant to Section 262 of the DGCL; provided,
however,
that
if, after the Effective Time, such Stockholder fails to perfect or withdraws
or
loses his or her right to appraisal or otherwise fails to establish the right
to
be paid the value of such Stockholder’s shares of Company Common Stock under the
DGCL, such shares of Company Common Stock shall be treated as if they had
converted as of the Effective Time into the right to receive Parent Common
Stock
in accordance with Section
3.1
hereof,
and such shares of Company Common Stock shall no longer be Dissenting
Shares.
6
(c) Stock
Transfer Books.
At the
Effective Time, the stock transfer books of the Company will be closed and
there
will be no further registration of transfers of shares of Company Common Stock
thereafter on the records of the Company.
Section
3.3 Options,
Warrants.
(a) Common
Stock Options.
The
Company has issued and outstanding warrants and options to purchase shares
of
Company Common Stock (collectively, the “Common
Stock Options”).
At
the Effective Time, by virtue of the Merger and without any action on the part
of the Company, Parent or Acquisition Corp. or the holders of any outstanding
Common Stock Options, the right to acquire a share of Company Common Stock
under
each Common Stock Option shall be converted into the right to acquire one (1)
share of Parent Common Stock at an exercise price equal to the exercise price
stated in the Common Stock Option, subject in all respects to all other terms
and conditions of the Common Stock Option, provided,
however,
that
with respect to Common Stock Options issued to employees, directors and
consultants of the Company prior to the Merger, as set forth on Schedule
3.3,
the
right to acquire shares of Parent Common Stock under this Section 3.3 by virtue
of the Merger shall be subject to and issued under Parent’s Stock Option Plan.
Except for the change in security underlying the Common Stock Options from
Company Common Stock to Parent Common Stock, it is the intent of the parties
hereto that the Common Stock Options shall continue after the Effective Time,
and that the terms and conditions of the Common Stock Options shall otherwise
remain unchanged.
(b) No
Fractional Shares.
Notwithstanding anything to the contrary in this Section
3.3,
no
fractional shares of the Parent Common Stock shall be issued in, or as a result
of, the Merger. Any fractional share of the Parent Common Stock that a Person
would otherwise be entitled to receive as a result of the transactions
referenced in this Section
3.3
shall be
rounded up to the nearest whole number of shares of Parent Common
Stock.
Section
3.4 Parent
Common Stock.
Parent
shall reserve a sufficient number of shares of Parent Common Stock to complete
the conversion and exchange of Company Common Stock into Parent Common Stock
contemplated by Sections
3.1
and
3.2
hereof
and the issuance of any Parent Common Stock in accordance with Section
3.3.
Parent
covenants and agrees that immediately prior to the Effective Time there will
be
no more than 7,855,000 shares of Parent Common Stock issued and outstanding,
of
which 4,105,000 shares will be cancelled immediately following the Effective
Time, and that no other common or preferred stock or equity securities of the
Parent, or any options, warrants, rights or other agreements or instruments
convertible, exchangeable or exercisable into common or preferred stock or
equity securities of the Parent, shall be issued or outstanding at the Effective
Time.
7
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants to Parent as follows:
Section
4.1 Organization.
The
Company (i) is duly organized, validly existing and in good standing (or its
equivalent) under the laws of the State of Delaware, (ii) has all licenses,
permits, authorizations and other Consents necessary to own, lease and operate
its properties and assets and to carry on its business as it is now being
conducted, except where such failure would not have, or be reasonably likely
to
have, a Company Material Adverse Effect, and (iii) has all requisite corporate
or other applicable power and authority to own, lease and operate its properties
and assets and to carry on its business as it is now being conducted, except
where such failure would not have, or be reasonably likely to have, a Company
Material Adverse Effect. The Company is duly qualified or authorized to conduct
business and is in good standing (or its equivalent) as a foreign corporation
or
other entity in all jurisdictions in which the ownership or use of its assets
or
nature of the business conducted by it makes such qualification or authorization
necessary, except where the failure to be so duly qualified, authorized and
in
good standing would not have a Company Material Adverse Effect. The Company
has
no subsidiaries.
Section
4.2 Authorization;
Validity of Agreement.
The
Company has all requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby, have been duly authorized
by the Board of Directors of the Company and no other action (except the
approval of the Stockholders solely with respect to consummation of the Merger)
on the part of the Company or any of its Stockholders or subsidiaries is
necessary to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company (and assuming due and valid
authorization, execution and delivery hereof by Parent and Acquisition Corp.)
is
a valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except as such enforcement is limited by
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity.
Section
4.3 Capitalization.
As
of the
date hereof, the authorized capital stock of the Company consists of 300,000,000
shares of Company Common Stock. As of the date hereof, there are 20,340,929
shares of Company Common Stock issued and outstanding. Schedule
4.3
sets
forth (i) the name of each Person owning shares of Company Common Stock and
(ii)
the number of shares of Company Common Stock owned by each such Person. All
the
outstanding shares of Company Common Stock are duly authorized, validly issued,
fully paid and non-assessable. There are issued and outstanding Company Stock
Options to purchase 1,697,648 shares of Company Common Stock. In
addition, certain providers of legal services to the Company had the right
to be
issued approximately 997,000 shares
of
Company Common Stock as payment for accrued legal fees.
Section
4.4 Consents
and Approvals; No Violations.
Except
for (a) approval of the Merger by the Stockholders and (b) filing of the
certificate of merger with the Secretary of State of the State of Delaware,
neither the execution, delivery or performance of this Agreement by the Company
nor the consummation of the transactions contemplated hereby will (i) violate
any provision of its certificate of incorporation or by-laws; (ii) violate,
conflict with or result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would constitute
a
default) under, require the consent of or result in the creation of any
encumbrance upon any of the properties of the Company under, any material note,
bond, mortgage, indenture, deed of trust, license, franchise, permit, lease,
contract, agreement or other instrument (collectively, “Contract”)
to
which the Company or any of its properties may be bound; (iii) require any
Consent, approval or authorization of, or notice to, or declaration, filing
or
registration with, any governmental entity by or with respect to the Company;
or
(iv) violate any order, writ, judgment, injunction, decree, law, statute, rule
or regulation applicable to the Company or any of its properties or
assets.
8
Section
4.5 Financial
Statements.
The
Company has delivered or made available as of the date hereof or shall, prior
to
the Closing Date, deliver or make available to Parent the balance sheet (the
“Balance
Sheet”)
of the
Company as at March 31, 2006 and the related statements of income, stockholders’
equity and cash flows of the Company for the three months ended March 31, 2006
(the “Balance
Sheet Date”).
The
foregoing financial statements (i) have been prepared based upon the books
and
records of the Company, (ii) have been prepared in accordance with GAAP (except
as otherwise noted therein), and (iii) present fairly, in all material respects,
the financial position, results of operations and cash flows of the Company
as
at their respective dates and for the periods then ended subject to normal
year-end adjustments.
Section
4.6 No
Undisclosed Liabilities.
Except
(a) for Liabilities described on or reflected on the face of the Balance Sheet
and (b) Liabilities of the same type, magnitude and scope as those reflected
on
the Balance Sheet which have arisen since the date of the Balance Sheet in
the
ordinary course of business, and which would not, individually or in the
aggregate, result in a Company Material Adverse Effect, the Company does not
have any Liability.
Section
4.7 Litigation.
Except
as set forth on Schedule
4.7,
there
is no Action pending or, to the knowledge of the Company, threatened, involving
the Company with respect to the Company’s business by or before any governmental
entity or by any third party and the Company has not received notice that any
such Action is threatened. The Company is not in default under any judgment,
order or decree of any governmental entity applicable to its
business.
Section
4.8 No
Default; Compliance with Applicable Laws.
The
Company is not in default or violation of any material term, condition or
provision of (i) its certificate of incorporation or by-laws or (ii) any law
applicable to the Company or its property and assets, except where such default
or violation would not have, or be reasonably likely to have, a Company Material
Adverse Effect, and the Company has not received notice of any violation of
or
Liability under any of the foregoing (whether material or not).
Section
4.9 Broker’s
and Finder’s Fees.
No
Person has, or as a result of the transactions contemplated or described herein
will have, any right or valid claim against the Company, Parent, Acquisition
Corp. or any Stockholder for any commission, fee or other compensation as a
finder or broker, or in any similar capacity, with respect to the consummation
of the Merger.
9
Section
4.10 Assets
and Contracts.
Except
for this Agreement and except as described in Schedule
4.10,
the
Company is not a party to any Contract not made in the ordinary course of
business that is material to the Company, (a) with a labor union, (b) for the
purchase of fixed assets or for the purchase of materials, supplies or equipment
in excess of $100,000, (c) for the employment of any officer, individual
employee or other Person on a full-time basis, (d) with respect to bonus,
pension, profit sharing, retirement, stock purchase, deferred compensation,
medical, hospitalization or life insurance or similar plan, contract or
understanding for any or all of the employees of the Company or any other
Person, (e) relating to or evidencing Indebtedness for Borrowed Money or
subjecting any asset or property of the Company to any Lien or evidencing any
Indebtedness, (f) guaranteeing any Indebtedness, (g) under which the Company
is
lessee of or holds or operates any property, real or personal, owned by any
other Person under which payments to such Person exceed $100,000 per year and
with an unexpired term (including any period covered by an option to renew
exercisable by any other party) of more than 60 days, (h) under which the
Company is lessor or permits any Person to hold or operate any property, real
or
personal, owned or controlled by the Company, (i) granting any preemptive right,
right of first refusal or similar right to any Person, (j) obligating the
Company to pay any royalty or similar charge for the use or exploitation of
any
tangible or intangible property, (k) containing a covenant not to compete or
other restriction on the Company’s ability to conduct a business or engage in
any other activity, (l) with respect to any distributor, dealer, manufacturer’s
representative, sales agency, franchise or advertising contract or commitment
in
excess of $100,000 per year, (m) regarding registration of securities under
the
Securities Act, (n) characterized as a collective bargaining agreement, or
(o)
with any Person continuing for a period of more than three months from the
Closing Date which involves an expenditure or receipt by the Company in excess
of $100,000. The
Company has made available to Parent and Acquisition Corp. true and complete
copies of all Contracts and other documents requested by Parent or Acquisition
Corp.
Section
4.11 Tax
Returns and Audits.
Except
as set forth on Schedule
4.11
or as
would not have a Material Adverse Effect, all required federal, state and local
Tax Returns of the Company have been accurately prepared and duly filed, and
all
federal, state and local Taxes required to be paid with respect to the periods
covered by such returns have been paid. The Company is not and has not been
delinquent in the payment of any Tax. The Company has not had a Tax deficiency
proposed or assessed against it and has not executed a waiver of any statute
of
limitations on the assessment or collection of any Tax. None of the Company’s
federal income Tax Returns nor any state or local income or franchise Tax
Returns has been audited by governmental authorities. The reserves for Taxes
reflected on the Balance Sheet (if any) are and will be sufficient for the
payment of all unpaid Taxes payable by the Company as of the Balance Sheet
Date.
Since the Balance Sheet Date, the Company has made adequate provisions on its
books of account for all Taxes with respect to its business, properties and
operations for such period. The Company has withheld or collected from each
payment made to each of its employees the amount of all Taxes (including, but
not limited to, federal, state and local income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes) required to
be
withheld or collected therefrom, and has paid the same to the proper Tax
receiving officers or authorized depositaries. Except as set forth on
Schedule
4.11,
there
are no federal, state, local or foreign audits, actions, suits, proceedings,
investigations, claims or administrative proceedings relating to Taxes or any
Tax Returns of the Company now pending, and the Company has not received any
notice of any proposed audits, investigations, claims or administrative
proceedings relating to Taxes or any Tax Returns.
10
Section
4.12 Patents
and Other Intangible Assets.
Except
as
set forth in Schedule
4.7,
the
Company (i) owns or has the right to use, free and clear of all Liens, all
patents, trademarks, service marks, trade names, copyrights, licenses and rights
with respect to the foregoing used in or necessary for the conduct of its
business without infringing upon or otherwise acting adversely to the right
or
claimed right of any Person under or with respect to any of the foregoing and
(ii) is not obligated or under any obligation to make any payments by way of
royalties, fees or otherwise to any owner or licensor of, or other claimant
to,
any patent, trademark, service xxxx, trade name, copyright or other intangible
asset, with respect to the use thereof or in connection with the conduct of
its
business or otherwise.
Section
4.13 Employee
Benefit Plans; ERISA.
(a) All
employee benefit plans, within the meaning of Section 3(3) of the ERISA, of
the
Company (“Employee Benefit Plans”) and other employee benefit or fringe benefit
arrangements, practices, contracts, policies or programs of every type, other
than programs merely involving the regular payment of wages, commissions, or
bonuses established, maintained or contributed to by the Company, whether
written or unwritten and whether or not funded, are
in
material compliance with the applicable requirements of ERISA, the Code and
any
other applicable state, federal or foreign law.
(b) There
are
no pending claims or lawsuits that have been asserted or instituted against
any
Employee Benefit Plan, the assets of any of the trusts or funds under the
Employee Benefit Plans, the plan sponsor or the plan administrator of any of
the
Employee Benefit Plans or against any fiduciary of an Employee Benefit Plan
with
respect to the operation of such plan, nor does the Company have any knowledge
of any incident, transaction, occurrence or circumstance which might reasonably
be expected to form the basis of any such claim or lawsuit.
(c) There
is
no pending or, to the knowledge of the Company, contemplated investigation,
or
pending or possible enforcement action by the Pension Benefit Guaranty
Corporation, the Department of Labor, the Internal Revenue Service or any other
government agency with respect to any Employee Benefit Plan and the Company
has
no knowledge of any incident, transaction, occurrence or circumstance which
might reasonably be expected to trigger such an investigation or enforcement
action.
(d) No
actual
or, to the knowledge of the Company, contingent Liability exists with respect
to
the funding of any Employee Benefit Plan or for any other expense or obligation
of any Employee Benefit Plan, except as disclosed on the Balance Sheet, and
no
contingent Liability exists under ERISA with respect to any “multi-employer
plan,” as defined in Section 3(37) or Section 4001(a)(3) of ERISA.
(e) No
events
have occurred or are reasonably expected to occur with respect to any Employee
Benefit Plan that would cause a material change in the costs of providing
benefits under such Employee Benefit Plan or would cause a material change
in
the cost of providing such Employee Benefit Plan.
Section
4.14 Title
to
Property and Encumbrances.
The
Company has good and valid title to all properties and assets used in the
conduct of its business (except for property held under valid and subsisting
leases which are in full force and effect and which are not in default) free
of
all Liens except Permitted Liens and such ordinary and customary imperfections
of title, restrictions and encumbrances as do not, individually or in the
aggregate, constitute a Company Material Adverse Effect.
11
Section
4.15 Condition
of Properties.
All
facilities, machinery, equipment, fixtures and other properties owned, leased
or
used by the Company are in operating condition, subject to ordinary wear and
tear, and are adequate and sufficient for the Company’s existing
business.
Section
4.16 Insurance
Coverage.
Schedule
4.16
sets
forth a true, correct and complete list of all material insurance policies
maintained by or on behalf of the
Company and
relating to its business and/or assets, indicating the type of coverage, name
of
insurance carrier or underwriter, premium thereon, policy limits and expiration
date of each policy. All such insurance policies are in full force and effect,
and the
Company is
not in
default with respect to its obligations under any such insurance policy, except
with respect to any such default which would not have a Company Material Adverse
Effect, and no notice of cancellation or termination has been received with
respect to any such policy.
Section
4.17 Interested
Party Transactions.
Except
as disclosed in Schedule
4.10,
the
Company is
not a
party to any contract, lease, license, commitment or arrangement, written or
oral, which, were the Company a “Registrant” under the Exchange Act, would be
required to be disclosed pursuant to Item 404(a) or (d) of Regulation S-B
promulgated by the Commission, and there are no loans outstanding to or from
any
Person specified in Item 404(a) of Regulation S-B from or to the
Company.
Section
4.18 Environmental
Matters.
(a) To
the
knowledge of the Company, the Company has never generated, used, handled,
treated, released, stored or disposed of any Hazardous Materials on any real
property on which it now has or previously had any leasehold or ownership
interest, except in compliance with all applicable Environmental
Laws.
(b) To
the
knowledge of the Company, the historical and present operations of the business
of the Company are in compliance with all applicable Environmental Laws, except
where any non-compliance has not had and would not reasonably be expected to
have a Company Material Adverse Effect.
(c) There
are
no pending or, to the knowledge of the Company, threatened, material demands,
claims, information requests or notices of noncompliance or violation against
or
to the Company relating to any Environmental Law; and, to the knowledge of
the
Company, there are no conditions or occurrences on any of the real property
used
by the Company in connection with its business that would reasonably be expected
to lead to any such demands, claims or notices against or to the Company, except
such as have not had, and would not reasonably be expected to have, a Company
Material Adverse Effect.
12
(d) To
the
knowledge of the Company, (i) the Company has not, sent or disposed of,
otherwise had taken or transported, arranged for the taking or disposal of
(on
behalf of itself, a customer or any other party) or in any other manner
participated or been involved in the taking of or disposal or release of a
Hazardous Material to or at a site that is contaminated by any Hazardous
Material or that, pursuant to any Environmental Law, (A) has been placed on
the
“National Priorities List”, the “CERCLIS” list, or any similar state or federal
list, or (B) is subject to or the source of a claim, an administrative order
or
other request to take “removal”, “remedial”, “corrective” or any other
“response” action, as defined in any Environmental Law, or to pay for the costs
of any such action at the site; (ii) the Company is not involved in (and has
no
basis to reasonably expect to be involved in) any suit or proceeding and has
not
received (and has no basis to reasonably expect to receive) any notice, request
for information or other communication from any governmental authority or other
third party with respect to a release or threatened release of any Hazardous
Material or a violation or alleged violation of any Environmental Law, and
has
not received (and has no basis to reasonably expect to receive) notice of any
claims from any Person relating to property damage, natural resource damage
or
to personal injuries from exposure to any Hazardous Material; and (iii) the
Company has timely filed every report required to be filed, acquired all
necessary certificates, approvals and permits, and generated and maintained
all
required data, documentation and records under all Environmental Laws, in all
such instances except where the failure to do so would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
Section
4.19 Disclosure.
No
representation or warranty by the Company herein and no information disclosed
in
the schedules hereto by the Company contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF PARENT AND ACQUISITION CORP.
Parent
and Acquisition Corp. hereby represent and warrant to the Company as
follows:
Section
5.1 Organization.
Each of
Parent and Acquisition Corp. is duly organized, validly existing and in good
standing under the laws of its State of incorporation or organization. Since
the
date of its formation, except as disclosed in the SEC Documents, Parent has
not
(i) engaged in any business activities or conducted any operations other than
in
connection with its organization and the transactions contemplated by this
Agreement, or (ii) owned any assets or property (other than cash and cash
equivalents).
Section
5.2 Authorization;
Validity of Agreement.
Each of
Parent and Acquisition Corp. has all requisite corporate power and authority
to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by each of Parent
and Acquisition Corp. of this Agreement and all other agreements and instruments
to be executed pursuant to this Agreement, and the consummation of the
transactions contemplated hereby, have been duly authorized by the Board of
Directors of each of Parent and Acquisition Corp. and the stockholders of
Acquisition Corp., and no other action on the part of either of Parent and
Acquisition Corp. is necessary to authorize the execution and delivery of this
Agreement and the consummation by either of Parent or Acquisition Corp. of
the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Parent and Acquisition Corp. (and assuming due and valid
authorization, execution and delivery hereof by the Company) is a valid and
binding obligation of each of Parent and Acquisition Corp., enforceable against
each of them in accordance with its terms, except as such enforcement is limited
by bankruptcy, insolvency and other similar laws affecting the enforcement
of
creditors’ rights generally and by general principles of equity.
13
Section
5.3 Consents
and Approvals; No Violations.
Except
for filing of the certificate of merger with the Secretary of State of the
State
of Delaware, neither the execution, delivery or performance of this Agreement
by
either of Parent and Acquisition Corp. nor the consummation of the transactions
contemplated hereby will (i) violate any provision of the certificate of
incorporation or by-laws of Parent or Acquisition Corp.; (ii) violate, conflict
with or result in a breach of any provision of, or constitute a default (or
an
event which, with notice or lapse of time or both, would constitute a default)
under, require the consent of or result in the creation of any Lien upon any
of
the properties of Parent or Acquisition Corp. under, any Contract to which
Parent or Acquisition Corp. or any of their properties may be bound; (iii)
require any Consent, approval or authorization of, or notice to, or declaration,
filing or registration with, any governmental entity by or with respect to
Parent or any subsidiary of Parent, or (iv) violate any law applicable to any
of
Parent or Acquisition Corp. or any of their respective properties or
assets.
Section
5.4 Litigation.
There
is no Action pending or, to the knowledge of the Parent, threatened, involving
Parent and Acquisition Corp. or any subsidiary of Parent with respect to
Parent’s and Acquisition Corp.’s, or any of Parent’s subsidiaries, business by
or before any governmental entity or by any third party and neither Parent
or
Acquisition Corp. nor any subsidiary of Parent has received notice that any
such
Action is threatened. Neither Parent or Acquisition Corp. nor any subsidiary
of
Parent is in default under any judgment, order or decree of any governmental
entity applicable to its business.
Section
5.5 No
Default; Compliance with Applicable Laws.
Neither
Parent nor any of Parent’s subsidiaries is in default or violation of any
material term, condition or provision of (i) their respective certificate of
incorporation, by-laws or similar organizational documents or (ii) any law
applicable to Parent or any of Parent’s subsidiaries or its property and assets
and neither Parent nor any of Parent’s subsidiaries has received notice of any
violation of or Liability under any of the foregoing (whether material or
not).
Section
5.6 Broker’s
and Finder’s Fees; Broker/Dealer Ownership.
Except
as set forth on Schedule
4.9,
no
person, firm, corporation or other entity is entitled by reason of any act
or
omission of Parent or Acquisition Corp. to any broker’s or finder’s fees,
commission or other similar compensation with respect to the execution and
delivery of this Agreement or with respect to the consummation of the
transactions contemplated hereby.
Section
5.7 Capitalization
of Parent.
The
authorized capital stock of Parent consists of (a) 100,000,000 shares of Parent
Common Stock, of which not more than 3,750,000 shares will be, immediately
following the Effective Time, issued and outstanding without taking into
consideration the issuance of Parent Common Stock in the Merger, (but taking
into consideration the cancellation of 4,105,000 shares of Parent Common Stock
as set forth in Section 3.4) and (b) 100,000,000 shares of preferred stock,
none of which shall have been designated or issued immediately following the
Effective Time. Schedule
5.7
sets
forth a true and complete list of the stockholders of Parent and the number
of
shares of Parent Common Stock owned by each such stockholder on the date shown.
Parent has no outstanding options, rights or commitments to issue shares of
Parent Common Stock or any capital stock or other securities of Parent or
Acquisition Corp., and there are no outstanding securities convertible or
exercisable into or exchangeable for shares of Parent Common Stock or any
capital stock or other securities of Parent or Acquisition Corp. There is no
voting trust, agreement or arrangement among any of the beneficial holders
of
Parent Common Stock affecting the nomination or election of directors or the
exercise of the voting rights of Parent Common Stock. All outstanding shares
of
the capital stock of Parent are validly issued and outstanding, fully paid
and
nonassessable, and none of such shares have been issued in violation of the
preemptive rights of any person.
14
Section
5.8 Acquisition
Corp.
Acquisition Corp. is a Delaware corporation and a wholly-owned subsidiary of
Parent, was formed specifically for the purpose of the Merger and has not
conducted any business or acquired any property, and will not conduct any
business or acquire any property prior to the Closing Date, except in
preparation for and otherwise in connection with the transactions contemplated
by this Agreement. Parent owns all of the issued and outstanding capital stock
of Acquisition Corp. free and clear of all Liens, and Acquisition Corp. has
no
outstanding options, warrants or rights to purchase capital stock or other
securities of the Acquisition Corp., other than the capital stock of Acquisition
Corp. owned by Parent. Except for Acquisition Corp., the Parent has no
subsidiaries.
Section
5.9 Validity
of Shares.
The
shares of Parent Common Stock to be issued in accordance with Article
III
hereof,
when issued and delivered in accordance with the terms hereof, shall be duly
and
validly issued, fully paid and nonassessable.
Section
5.10 SEC
Reporting and Compliance.
(a) Parent
has filed with the Commission all registration statements, proxy statements,
information statements and reports required to be filed pursuant to the Exchange
Act. Parent has not filed with the Commission a certificate on Form 15 pursuant
to Rule 12h-3 of the Exchange Act.
(b) Parent
has delivered to the Company true and complete copies of the registration
statements, information statements and other reports (collectively, the
“Parent
SEC Documents”)
filed
by the Parent with the Commission. None of the Parent SEC Documents, as of
their
respective dates, contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements contained
therein not misleading.
(c) Parent
has not filed, and nothing has occurred with respect to which Parent would
be
required to file, any report on Form 8-K since February 28, 2006. Prior to
and
until the Closing, Parent will provide to the Company copies of any and all
amendments or supplements to the Parent SEC Documents filed with the Commission
since February 28, 2006 and all subsequent registration statements and reports
filed by Parent subsequent to the filing of the Parent SEC Documents with the
Commission and any and all subsequent information statements, proxy statements,
reports or notices filed by the Parent with the Commission or delivered to
the
stockholders of Parent.
(d) Parent
is
not an “investment company” within the meaning of Section 3 of the Investment
Company Act.
15
(e) Between
the date hereof and the Closing Date, Parent shall continue to satisfy the
filing requirements of the Exchange Act and all other requirements of applicable
securities laws.
(f) To
the
best knowledge of the Parent, the Parent has complied with the Securities Act,
Exchange Act and all other applicable federal and state securities
laws.
Section
5.11 Financial
Statements.
The
balance sheets, and statements of income, stockholders’ equity and cash flows
contained in the Parent SEC Documents (the “Parent
Financial Statements”)
(i)
have been prepared in accordance with GAAP, (ii) are in accordance with the
books and records of the Parent, and (iii) present fairly in all material
respects the financial condition of the Parent at the dates therein specified
and the results of its operations and changes in financial position for the
periods therein specified. During
the two most recent fiscal years of the Parent and the subsequent interim period
through February 28, 2006, there were no disagreements between Xxxxxx the Parent
and its independent auditors as to any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which
disagreements, if not resolved to the satisfaction of those independent
auditors, would have caused those independent auditors to make reference in
their reports on the financial statements for such years to the subject matter
of the disagreement.
Section
5.12 No
General Solicitation.
In
issuing Parent Common Stock in the Merger hereunder, neither Parent nor anyone
acting on its behalf has offered to sell Parent Common Stock by any form of
general solicitation or advertising.
Section
5.13 Absence
of Undisclosed Liabilities.
Neither
Parent nor Acquisition Corp. has any Liability arising out of any transaction
entered into at or prior to the Closing, except (a) as disclosed in the Parent
SEC Documents, (b) to the extent set forth on or reserved against in the balance
sheet of Parent as at February 28, 2006 (the “Parent
Balance Sheet”)
or the
notes to the Parent Financial Statements, and (c) by the specific terms of
any
written agreement, document or arrangement attached as an exhibit to the Parent
SEC Documents.
Section
5.14 Changes.
Since
February 28, 2006 (the “Parent
Balance Sheet Date”),
except as disclosed in the Parent SEC Documents, the Parent has not (a) incurred
any debts, obligations or Liabilities, absolute, accrued or, to the Parent’s
knowledge, contingent, whether due or to become due, except for current
Liabilities incurred in the usual and ordinary course of business, (b)
discharged or satisfied any Liens other than those securing, or paid any
obligation or Liability other than, current liabilities shown on the Parent
Balance Sheet and current Liabilities incurred since the Parent Balance Sheet
Date, in each case in the usual and ordinary course of business, (c) mortgaged,
pledged or subjected to Lien any of its assets, tangible or intangible, other
than in the usual and ordinary course of business, (d) sold, transferred or
leased any of its assets, except in the usual and ordinary course of business,
(e) cancelled or compromised any debt or claim, or waived or released any right
of material value, (f) suffered any physical damage, destruction or loss
(whether or not covered by insurance) that could reasonably be expected to
have
a Parent Material Adverse Effect, (g) entered into any transaction other than
in
the usual and ordinary course of business, (h) encountered any labor union
difficulties, (i) made or granted any wage or salary increase or made any
increase in the amounts payable under any profit sharing, bonus, deferred
compensation, severance pay, insurance, pension, retirement or other employee
benefit plan, agreement or arrangement, other than in the ordinary course of
business consistent with past practice, or entered into any employment
agreement, (j) except as set forth on Schedule
5.7,
issued
or sold any shares of capital stock, bonds, notes, debentures or other
securities or granted any options (including employee stock options), warrants
or other rights with respect thereto, (k) declared or paid any dividends on
or
made any other distributions with respect to, or purchased or redeemed, any
of
its outstanding capital stock, (l) suffered or experienced any change in, or
condition affecting, the financial condition of the Parent other than changes,
events or conditions in the usual and ordinary course of its business, none
of
which (either by itself or in conjunction with all such other changes, events
and conditions) could reasonably be expected to have a Parent Material Adverse
Effect, (m) made any change in the accounting principles, methods or practices
followed by it or depreciation or amortization policies or rates theretofore
adopted, (n) made or permitted any amendment or termination of any material
Contract, agreement or license to which it is a party, (o) suffered any material
loss not reflected in the Parent Balance Sheet or its statement of income for
the year ended on the Parent Balance Sheet Date, (p) paid, or made any accrual
or arrangement for payment of, bonuses or special compensation of any kind
or
any severance or termination pay to any present or former officer, director,
employee, stockholder or consultant, (q) made or agreed to make any charitable
contributions or incurred any non-business expenses in excess of $1,000 in
the
aggregate, or (r) entered into any Contract, agreement or license, or otherwise
obligated itself, to do any of the foregoing.
16
Section
5.15 Tax
Returns and Audits.
All
required federal, state and local Tax Returns of the Parent have been accurately
prepared in all material respects and duly filed, and all federal, state and
local Taxes required to be paid with respect to the periods covered by such
returns have been paid to the extent that the same are material and have become
due, except where the failure so to file or pay could not reasonably be expected
to have a Parent Material Adverse Effect. The Parent is not and has not been
delinquent in the payment of any Tax. The Parent has not had a Tax deficiency
assessed against it. None of the Parent’s federal income Tax Returns nor any
state or local income or franchise Tax Returns has been audited by governmental
authorities. The reserves for Taxes reflected on the Parent Balance Sheet are
sufficient for the payment of all unpaid Taxes payable by the Parent with
respect to the period ended on the Parent Balance Sheet Date. There are no
federal, state, local or foreign audits, actions, suits, proceedings,
investigations, claims or administrative proceedings relating to Taxes or any
Tax Returns of the Parent now pending, and the Parent has not received any
notice of any proposed audits, investigations, claims or administrative
proceedings relating to Taxes or any Tax Returns.
Section
5.16 Employee
Benefit Plans; Labor.
(a) Parent
has no “employee benefit plans” (within the meaning of Section 3(3) of ERISA)
nor any other employee benefit or fringe benefit arrangements, practices,
contracts, policies or programs other than programs merely involving the regular
payment of wages, commissions, or bonuses established, maintained or contributed
to by the Parent.
(b) Parent
has no employees, and except as disclosed in the SEC Documents, and is
not a party to any employment or consulting agreements, compensation plans,
bonus plans, or other similar agreement or arrangement. Parent is not under
any
obligation or liability to any current or former officer, director, employee
or
Affiliate of Parent.
17
(c) Neither
the execution and delivery of this Agreement nor the consummation of the Merger
will entitle any current or former employee of Parent or any of its Affiliates
to severance pay or other similar payment, or accelerate the time of payment
or
increase the amount of compensation due to any such employee or former
employee.
Section
5.17 Interested
Party Transactions.
Except
as disclosed in the Parent SEC Documents, Parent is
not a
party to any contract, lease, license, commitment or arrangement, written or
oral, which would be required to be disclosed pursuant to Item 404(a) or (d)
of
Regulation S-B promulgated by the Commission, and there are no loans outstanding
to or from any Person specified in Item 404(a) of Regulation S-B from or to
the
Parent.
Section
5.18 Questionable
Payments.
Neither
the Parent, Acquisition Corp. nor to the knowledge of the Parent, any director,
officer, agent, employee or other Person associated with or acting on behalf
of
the Parent or Acquisition Corp., has a used any corporate funds for (a) unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (b) made any direct or indirect unlawful payments to
government officials or employees from corporate funds, (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets,
(d) made any false or fictitious entries on the books of record of any such
corporations, or (e) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.
Section
5.19 Obligations
to or by Stockholders.
Except
as disclosed in the Parent SEC Documents, the Parent has no Liability or
obligation or commitment to any stockholder of Parent or any Affiliate or
“associate” (as such term is defined in Rule 405 under the Securities Act) of
any stockholder of Parent, nor does any stockholder of Parent or any such
Affiliate or associate have any Liability, obligation or commitment to the
Parent.
Section
5.20 Assets
and Contracts.
Except
as expressly set forth in this Agreement, the Parent Balance Sheet or the notes
thereto, the Parent is not a party to any Contract, including, without
limitation, (a) with any labor union, (b) for the purchase of fixed assets
or
for the purchase of materials, supplies or equipment in excess of normal
operating requirements, (c) for the employment of any officer, individual
employee or other Person on a full-time basis or any contract with any Person
for consulting services, (d) with respect to bonus, pension, profit sharing,
retirement, stock purchase, stock option, deferred compensation, medical,
hospitalization or life insurance or similar plan, contract or understanding
with any or all of the employees of Parent or any other Person, (e) relating
to
or evidencing Indebtedness for Borrowed Money or subjecting any asset or
property of Parent to any Lien or evidencing any Indebtedness, (f) guaranteeing
of any Indebtedness, (g) under which Parent is lessee of or holds or operates
any property, real or personal, owned by any other Person, (h) under which
Parent is lessor or permits any Person to hold or operate any property, real
or
personal, owned or controlled by Parent, (i) granting any preemptive right,
right of first refusal or similar right to any Person, (j) with any Affiliate
of
Parent or any present or former officer, director or stockholder of Parent,
(k)
obligating Parent to pay any royalty or similar charge for the use or
exploitation of any tangible or intangible property, (1) containing a covenant
not to compete or other restriction on the parent’s ability to conduct a
business or engage in any other activity, (m) with respect to any distributor,
dealer, manufacturer’s representative, sales agency, franchise or advertising
contract or commitment, (n) regarding the registration of securities under
the
Securities Act, (o) characterized as a collective bargaining agreement, or
(p)
with any Person continuing for a period of more than three months from the
Closing Date that involves an expenditure or receipt by Parent in excess of
$1,000. Parent does not own any real property. The Parent maintains no insurance
policies and insurance coverage of any kind with respect to Parent, its
business, premises, properties, assets, employees and agents. Parent has
furnished to the Company true and complete copies of all agreements and other
documents requested by the Company.
18
Section
5.21 Environmental
Matters.
(a) The
Parent has never generated, used, handled, treated, released, stored or disposed
of any Hazardous Materials on any real property on which it now has or
previously had any leasehold or ownership interest, except in compliance with
all applicable Environmental Laws.
(b) The
historical and present operations of the business of the Parent comply with
all
applicable Environmental Laws, except where any non-compliance has not had
and
would not reasonably be expected to have a Parent Material Adverse
Effect.
(c) There
are
no pending or, to the knowledge of Parent, threatened, demands, claims,
information requests or notices of noncompliance or violation against or to
the
Parent relating to any Environmental Law; and, to the knowledge of the Parent,
there are no conditions or occurrences on any of the real property used by
the
Parent that would reasonably be expected to lead to any such demands, claims
or
notices against or to the Parent, except such as have not had, and would not
reasonably be expected to have, a Parent Material Adverse Effect.
(d) (i)
The
Parent has not, sent or disposed of, otherwise had taken or transported,
arranged for the taking or disposal of (on behalf of itself, a customer or
any
other party) or in any other manner participated or been involved in the taking
of or disposal or release of a Hazardous Material to or at a site that is
contaminated by any Hazardous Material or that, pursuant to any Environmental
Law, (A) has been placed on the “National Priorities List”, the “CERCLIS” list,
or any similar state or federal list, or (B) is subject to or the source of
a
claim, an administrative order or other request to take “removal”, “remedial”,
“corrective” or any other “response” action, as defined in any Environmental
Law, or to pay for the costs of any such action at the site; (ii) the Parent
is
not involved in (and has no basis to reasonably expect to be involved in) any
suit or proceeding and has not received (and has no basis to reasonably expect
to receive) any notice, request for information or other communication from
any
governmental authority or other third party with respect to a release or
threatened release of any Hazardous Material or a violation or alleged violation
of any Environmental Law, and has not received (and has no basis to reasonably
expect to receive) notice of any claims from any Person relating to property
damage, natural resource damage or to personal injuries from exposure to any
Hazardous Material; and (iii) the Parent has timely filed every report required
to be filed, acquired all necessary certificates, approvals and permits, and
generated and maintained all required data, documentation and records under
all
Environmental Laws, in all such instances except where the failure to do so
would not reasonably be expected to have, individually or in the aggregate,
a
Parent Material Adverse Effect.
19
Section
5.22 Disclosure.
No
representation or warranty by Parent or Acquisition Corp. herein and no
information disclosed in the schedules hereto by Parent or Acquisition Corp.
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein
misleading.
ARTICLE
VI
CONDUCT
OF BUSINESSES PENDING THE MERGER
Section
6.1 Conduct
of Business by the Company Pending the Merger.
Prior
to the Effective Time, unless Parent or Acquisition Corp. shall otherwise agree
in writing or as otherwise contemplated by this Agreement:
(i) the
business of the Company shall be conducted only in the ordinary course
consistent with the past practice;
(ii) the
Company shall not (A) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem, purchase or otherwise acquire any shares
Company
Capital Stock; (B) amend its certificate of incorporation or by-laws except
to
effectuate the transactions contemplated in this Agreement; or (C) split,
combine or reclassify the outstanding Company Common Stock or declare, set
aside
or pay any dividend payable in cash, stock or property or make any distribution
with respect to any such stock;
(iii) the
Company shall not (A) issue any additional shares of, or options, warrants
or
rights of any kind to acquire any shares of, Company Capital Stock, except
to
issue shares of Company Common Stock in connection with the exercise of Common
Stock Options; (B) acquire or dispose of any fixed assets or acquire or dispose
of any other substantial assets other than in the ordinary course of business;
(C) incur additional Indebtedness or any other Liabilities or enter into any
other transaction other than in the ordinary course of business; (D) enter
into
any Contract, agreement, commitment or arrangement with respect to any of the
foregoing except this Agreement; or (E) except as contemplated by this
Agreement, enter into any Contract, agreement, commitment or arrangement to
dissolve, merge, consolidate or enter into any other material business
combination;
(iv) the
Company shall use its reasonable best efforts to preserve intact the business
of
the Company, to keep available the service of its present officers and key
employees, and to preserve the good will of those having business relationships
with it; and
(v) the
Company will not enter into any new employment agreements with any of its
officers or employees or grant any increases in the compensation or benefits
of
its officers and employees or amend any employee benefit plan or arrangement
other than in the ordinary course of business and consistent with past
practice.
20
Section
6.2 Conduct
of Business by Parent and Acquisition Corp. Pending the Merger.
Prior
to the Effective Time, unless the Company shall otherwise agree in writing
or as
otherwise contemplated expressly permitted by this Agreement:
(i) neither
the Parent nor Acquisition Corp. shall conduct any business other than in
connection with effecting the transactions contemplated hereby;
(ii) neither
Parent nor Acquisition Corp. shall (A) directly or indirectly redeem, purchase
or otherwise acquire or agree to redeem, purchase or otherwise acquire any
shares of its capital stock; (B) amend its certificate of incorporation or
by-laws; or (C) split, combine or reclassify its capital stock or declare,
set
aside or pay any dividend payable in cash, stock or property or make any
distribution with respect to such stock; and
(iii) neither
Parent nor Acquisition Corp. shall (A) issue or agree to issue any additional
shares of, or options, warrants or rights of any kind to acquire shares of,
its
capital stock; (B) acquire or dispose of any assets other than in the ordinary
course of business; (C) incur additional Indebtedness or any other Liabilities
or enter into any other transaction except in the ordinary course of business;
(D) enter into any Contract, agreement, commitment or arrangement with respect
to any of the foregoing except this Agreement, or (E) except as contemplated
by
this Agreement, enter into any Contract, agreement, commitment or arrangement
to
dissolve, merge; consolidate or enter into any other material business contract
or enter into any negotiations in connection therewith.
(iv) neither
Parent nor Acquisition Corp. will, nor will they authorize any director or
authorize or permit any officer or employee or any attorney, accountant or
other
representative retained by them to, make, solicit, encourage any inquiries
with
respect to, or engage in any negotiations concerning, any Acquisition Proposal
(as defined below). Parent will promptly advise the Company in writing of any
such inquiries or Acquisition Proposal (or requests for information) and the
substance thereof. As used in this paragraph, “Acquisition
Proposal”
shall
mean any proposal for a merger or other business combination involving the
Parent or Acquisition Corp. or for the acquisition of a substantial equity
interest in either of them or any material assets of either of them other than
as contemplated by this Agreement. Parent will immediately cease and cause
to be
terminated any existing activities, discussions or negotiations with any Person
conducted heretofore with respect to any of the foregoing; and
(v) neither
Parent nor Acquisition Corp. will enter into any employment agreements with
any
Person or grant any increases in the compensation or benefits of their officers
and employees.
21
ARTICLE
VII
ADDITIONAL
AGREEMENTS
Section
7.1 Access
and Information.
The
Company, Parent and Acquisition Corp. shall each afford to the other and to
the
other’s accountants, counsel and other representatives reasonable access during
normal business hours throughout the period prior to the Effective Time of
all
of its properties, books, contracts, commitments and records (including but
not
limited to Tax Returns) and during such period, each shall furnish promptly
to
the other all information concerning its business, properties and personnel
as
such other party may reasonably request, provided that no investigation pursuant
to this Section
7.1
shall
affect any representations or warranties made herein. Each party shall hold,
and
shall cause its employees and agents to hold, in confidence all such information
(other than such information that (i) becomes generally available to the public
other than as a result of a disclosure by such party or its directors, officers,
managers, employees, agents or advisors, or (ii) becomes available to such
party
on a non-confidential basis from a source other than a party hereto or its
advisors, provided that such source is not known by such party to be bound
by a
confidentiality agreement with or other obligation of secrecy to a party hereto
or another party until such time as such information is otherwise publicly
available; provided,
however,
that:
(A) any such information may be disclosed to such party’s directors, officers,
employees and representatives of such party’s advisors who need to know such
information for the purpose of evaluating the transactions contemplated hereby
(it being understood that such directors, officers, employees and
representatives shall be informed by such party of the confidential nature
of
such information); (B) any disclosure of such information may be made as to
which the party hereto furnishing such information has consented in writing;
and
(C) any such information may be disclosed pursuant to a judicial, administrative
or governmental order or request provided,
that
the requested party will promptly so notify the other party so that the other
party may seek a protective order or appropriate remedy and/or waive compliance
with this Agreement and if such protective order or other remedy is not obtained
or the other party waives compliance with this provision, the requested party
will furnish only that portion of such information which is legally required
and
will exercise its best efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the information
furnished. If this Agreement is terminated, each party will deliver to the
other
all documents and other materials (including copies) obtained by such party
or
on its behalf from the other party as a result of this Agreement or in
connection herewith, whether so obtained before or after the execution
hereof.
Section
7.2 Additional
Agreements.
Subject
to the terms and conditions herein provided, each of the parties hereto agrees
to use its commercially reasonable best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including using its
commercially reasonable best efforts to satisfy the conditions precedent to
the
obligations of any of the parties hereto to obtain all necessary waivers, and
to
lift any injunction or other legal bar to the Merger (and, in such case, to
proceed with the Merger as expeditiously as possible). In order to obtain any
necessary governmental or regulatory action or non-action, waiver, Consent,
extension or approval, each of Parent, Acquisition Corp. and the Company agrees
to take all reasonable actions and to enter into all reasonable agreements
as
may be necessary to obtain timely governmental or regulatory approvals and
to
take such further action in connection therewith as may be necessary. In case
at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and/or
directors of Parent, Acquisition Corp. and the Company shall take all such
necessary action.
22
Section
7.3 Publicity.
No
party shall issue any press release or public announcement pertaining to the
Merger that has not been agreed upon in advance by Parent and the Company,
except as Parent reasonably determines to be necessary in order to comply with
the rules of the Commission; provided
that in
such case Parent will use its best efforts to allow Company to review and
reasonably approve any same prior to its release.
Section
7.4 Appointment
of Directors.
Immediately upon the Effective Time, Parent shall accept the resignations of
the
current officers and directors of Parent as provided by Section
8.2(e)(5)
hereof,
and the persons listed as directors in Exhibit
A
hereto
shall be elected to the Board of Directors of Parent.
Section
7.5 Stockholder
Consent.
(a) So
long
as the Board of Directors of the Company shall not have withdrawn, modified
or
changed its recommendation in accordance with the provisions of Section
7.5(b)
hereof,
the Company, acting through its Board of Directors, shall, in accordance with
the DGCL and its certificate of incorporation and by-laws, take all actions
reasonably necessary to obtain the requisite approval and adoption of this
Agreement and the transactions contemplated hereby by the Stockholders as
required by the DGCL and otherwise.
(b) The
Board
of Directors of the Company shall recommend such approval and shall use all
reasonable efforts to solicit and obtain such approval; provided,
however,
that
the Board of Directors of the Company may at any time prior to approval of
the
Stockholders (i) decline to make, withdraw, modify or change any recommendation
or declaration regarding this Agreement or the Merger or (ii) recommend and
declare advisable any other offer or proposal, to the extent the Board of
Directors of the Company determines in good faith, based upon advice of legal
counsel, that withdrawing, modifying, changing or declining to make its
recommendation regarding this Agreement or the Merger or recommending and
declaring advisable any other offer or proposal is necessary to comply with
its
fiduciary duties under applicable law (which declinations, withdrawal,
modification or change shall not constitute a breach by the Company of this
Agreement). The Company shall provide written notice to Parent promptly upon
the
Company taking any action referred to in the foregoing proviso.
(c) Pursuant
to Section 251(d) of the DGCL, at any time before the certificate of merger
is
filed with the Secretary of State of the State of Delaware, including any time
after the Merger is authorized by the Stockholders, the Merger may be abandoned
and this Agreement may be terminated in accordance with the terms hereof,
without further action by the Stockholders.
ARTICLE
VIII
CONDITIONS
OF PARTIES’ OBLIGATIONS
Section
8.1 Company
Obligations.
The
obligations of Parent and Acquisition Corp. under this Agreement are subject
to
the fulfillment at or prior to the Closing of the following conditions, any
of
which may be waived in whole or in part by Parent.
(a) Representations
And Warranties.
The
representations and warranties of the Company under this Agreement shall be
deemed to have been made again on the Closing Date and shall then be true and
correct in all material respects.
23
(b) Compliance
with Agreement.
The
Company shall have performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed or complied
with by it on or before the Closing Date.
(c) No
Company Material Adverse Effect.
Since
the date hereof, there shall not have been any event or circumstance that has
resulted in, or would reasonably be expected to result in, a Company Material
Adverse Effect.
(d) Certificate
of Officers.
The
Company shall have delivered to Parent and Acquisition Corp. a certificate
dated
the Closing Date, executed on its behalf by the Chief Executive Officer of
the
Company, certifying the satisfaction of the conditions specified in paragraphs
(a), (b) and (c) of this Section 8.1.
(e) No
Restraining Action.
No
Action or proceeding before any court, governmental body or agency shall have
been threatened, asserted or instituted to restrain or prohibit, or to obtain
substantial damages in respect of, this Agreement or the carrying out of the
transactions contemplated by this Agreement.
(f) Supporting
Documents.
Parent
and Acquisition Corp. shall have received the following:
(1) Copies
of
resolutions of the Board of Directors and the stockholders of the Company,
certified by the Secretary of the Company, authorizing and approving the Merger
and the execution, delivery and performance of this Agreement and all other
documents and instruments to be delivered pursuant hereto and
thereto.
(2) A
certificate of incumbency executed by the Secretary of the Company certifying
the names, titles and signatures of the officers authorized to execute any
documents referred to in this Agreement and further certifying that the
certificate of incorporation and by-laws of the Company delivered to Parent
and
Acquisition Corp. at the time of the execution of this Agreement have been
validly adopted and have not been amended or modified since the date
hereof.
(3) Evidence
as of a recent date of the good standing and corporate existence of the Company
issued by the Secretary of State of the State of Delaware.
Section
8.2 Parent
and Acquisition Corp. Obligations.
The
obligations of the Company under this Agreement are subject to the fulfillment
at or prior to the Closing of the following conditions any of which may be
waived in whole or in part by the Company:
(a) Representations
And Warranties.
The
representations and warranties of Parent and Acquisition Corp. under this
Agreement shall be deemed to have been made again on the Closing Date and shall
then be true and correct in all material respects.
(b) Compliance
with Agreement.
Parent
and Acquisition Corp. shall have performed and complied in all material respects
with all agreements and conditions required by this Agreement to be performed
or
complied with by them on or before the Closing Date.
24
(c) No
Parent Material Adverse Effect.
Since
the date hereof, there shall not have been any event or circumstance that has
resulted in, or would reasonably be expected to result in, a Parent Material
Adverse Effect.
(d) Certificate
of Officers.
Parent
and Acquisition Corp. shall have delivered to the Company a certificate dated
the Closing Date, executed on their behalf by their respective Presidents,
certifying the satisfaction of the conditions specified in paragraphs (a),
(b),
and (c) of this Section
8.2.
(e) Supporting
Documents.
The
Company shall have received the following:
(1) Copies
of
resolutions of Parent’s and Acquisition Corp.’s respective board of directors
and the sole stockholder of Acquisition Corp., certified by their respective
Secretaries, authorizing and approving the Merger and the execution, delivery
and performance of this Agreement and all other documents and instruments to
be
delivered by them pursuant hereto.
(2) A
certificate of incumbency executed by the respective Secretaries of Parent
and
Acquisition Corp. certifying the names, titles and signatures of the officers
authorized to execute the documents referred to in paragraph (1) above and
further certifying that the certificates of incorporation and by-laws of Parent
and Acquisition Corp. appended thereto have not been amended or
modified.
(3) A
certificate, dated the Closing Date, executed by the Secretary of each of the
Parent and Acquisition Corp., certifying that, except for the filing of the
certificate of merger with the Secretary of State of the State of Delaware:
(i)
all consents, authorizations, orders and approvals of, and filings and
registrations with, any court, governmental body or instrumentality that are
required to be obtained by Parent or Acquisition Corp. for the execution and
delivery of this Agreement and the consummation of the Merger shall have been
duly made or obtained; and (ii) no action or proceeding before any court,
governmental body or agency has been threatened, asserted or instituted against
Parent or Acquisition Corp. to restrain or prohibit, or to obtain substantial
damages in respect of, this Agreement or the carrying out of the transactions
contemplated by this Agreement.
(4) (i)
The
executed resignations of all directors and officers of Parent, with the director
resignations to take effect at the Effective Time, together with certified
resolutions of Parent’s board of directors appointing the directors identified
on Exhibit
A
to serve
as their successors following such resignation and (ii) executed releases from
each such director and officer in the form and substance acceptable to the
Company in its sole discretion.
25
(5) Evidence
as of a recent date of the good standing and corporate existence of each of
the
Parent and Acquisition Corp. issued by the Secretary of State of their
respective states of incorporation.
(6) Such
additional supporting documentation and other information with respect to the
transactions contemplated hereby as the Company may reasonably
request.
(f) Due
Diligence.
The
Company shall have been and shall continue to be satisfied in its sole
discretion (regardless of (1) the satisfaction of any or all of the other
closing conditions, (2) any knowledge of such matters on or prior to the Closing
Date or (3) any indication previously given by, or on behalf of, Company with
respect to the satisfaction of any such matter) with the results of its and
its
representatives’ due diligence investigation and evaluation of the Parent and
Acquisition Corp. and each of the transactions contemplated hereby.
(g) Limitation
on Dissenting Shares.
The
holders of not more than one percent (1.0%) of the outstanding shares of Company
Common Stock shall have exercised and not withdrawn such holder’s right to
appraisal and payment under Section 262 of the DGCL.
(h) Stock
Option Plan.
Parent’s Board of Directors shall
have adopted and approved the Stock Option Plan.
ARTICLE
IX
TERMINATION
PRIOR TO CLOSING
Section
9.1 Termination
of Agreement.
This
Agreement may be terminated at any time prior to the Closing:
(a) by
the
mutual written consent of the Company, Acquisition Corp. and
Parent;
(b) by
the
Company, if Parent or Acquisition Corp. (i) fails to perform in any material
respect any of its agreements contained herein required to be performed by
it on
or prior to the Closing Date, (ii) materially breaches any of its
representations, warranties or covenants contained herein, which failure or
breach is not cured within thirty (30) days after the Company has notified
Parent and Acquisition Corp. of its intent to terminate this Agreement pursuant
to this paragraph (b);
(c) by
Parent
and Acquisition Corp., if the Company (i) fails to perform in any material
respect any of its agreements contained herein required to be performed by
it on
or prior to the Closing Date, (ii) materially breaches any of its
representations, warranties or covenants contained herein, which failure or
breach is not cured within thirty (30) days after Parent or Acquisition Corp.
has notified the Company of its intent to terminate this Agreement pursuant
to
this paragraph (c);
26
(d) by
either
the Company, on the one hand, or Parent and Acquisition Corp., on the other
hand, if there shall be any order, writ, injunction or decree of any court
or
governmental or regulatory agency binding on Parent, Acquisition Corp. or the
Company, which prohibits or materially restrains any of them from consummating
the transactions contemplated hereby; provided
that the
parties hereto shall have used their best efforts to have any such order, writ,
injunction or decree lifted and the same shall not have been lifted within
ninety (90) days after entry, by any such court or governmental or regulatory
agency;
(e) by
either
the Company, on the one hand, or Parent and Acquisition Corp., on the other
hand, if the Closing has not occurred on or prior to July 15, 2006, for any
reason other than delay or nonperformance of the party seeking such termination;
or
(f) by
the
Company if the Board of Directors of the Company determines in good faith,
based
upon advice of legal counsel, that termination pursuant to this Section
9.1(f)
is
necessary to comply with its fiduciary duties under applicable law as provided
in Section
7.5(b)
hereof.
Section
9.2 Termination
of Obligations.
Termination of this Agreement pursuant to Section 9.1 hereof shall terminate
all
obligations of the parties hereunder, except for the obligations under
Article
IX,
and
Sections 7.1,
10.4,
10.7,
10.14
and
10.15
hereof.
ARTICLE
X
MISCELLANEOUS
Section
10.1 Amendments.
Subject
to applicable law, this Agreement may be amended or modified by the parties
hereto by written agreement executed by each party to be bound thereby and
delivered by duly authorized officers of the parties hereto at any time prior
to
the Effective Time; provided,
however,
that
after the approval of the Merger by the Stockholders, no amendment or
modification of this Agreement shall be made that by law requires further
approval from the Stockholders without such further approval.
Section
10.2 Notices.
Any
notice, request, instruction, other document or communications to be given
hereunder by any party hereto to any other party hereto shall be in writing
and
shall be deemed to have been duly given (a) when delivered personally, (b)
upon
receipt of a transmission confirmation (with a confirming copy delivered
personally or sent by overnight courier) if sent by facsimile or like
transmission, or (c) on the next business day when sent by Federal Express,
United Parcel Service, U.S. Express Mail or other reputable overnight courier
for guaranteed next day delivery, as follows:
|
If
to Parent or Acquisition Corp., to:
|
Xxxxxx
Enterprises,
Inc.
Attention:
Xxxxxx Xxxxx
0000
Xxxxxxxxx Xx.
Xxxxx
Xxxxxxxxx, XX XXXXXX X0X0X
Telephone:
(000) 000-0000
Facsimile:
|
|
|
27
|
If
to the Company, to:
|
MedaSorb
Corporation
Attention:
Xx Xxxxx, President
0
Xxxx Xxxx Xxxxx, Xxxxx X, Xxxxxxxx Xxxxxxxx, Xxx Xxxxxx 00000
Telephone:
(000)
000-0000
Facsimile:
(000)
000-0000
|
|
with
a copy to:
|
|
|
Kronish
Xxxx Xxxxxx & Xxxxxxx LLP
Attention:
Xxxxxx Xxxxxx, Esq.
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
|
|
or
to
such other persons or addresses as may be designated in writing by the party
to
receive such notice. Nothing in this Section
10.2
shall be
deemed to constitute consent to the manner and address for service of process
in
connection with any legal proceeding (including arbitration arising in
connection with this Agreement), which service shall be effected as required
by
applicable law.
Section
10.3 Entire
Agreement.
This
Agreement, together with the schedules and the exhibits attached hereto or
referred to herein, constitute the entire agreement of the parties hereto,
and
supersede all prior agreements and undertakings, both written and oral, among
the parties hereto, with respect to the subject matter hereof and
thereof.
Section
10.4 Expenses.
Except
as otherwise expressly provided herein, whether or not the Merger occurs, all
expenses and fees incurred by Parent on one hand, and the Company on the other,
shall be borne solely and entirely by the party that has incurred the same;
provided,
that if
the Merger occurs, Parent agrees to pay, and shall cause the Surviving
Corporation to pay, any unpaid fees and expenses of the Company (including
fees
and expenses of its counsel and other advisors) in connection with the
consummation of the transactions contemplated by this Agreement.
Section
10.5 Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement will nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto will negotiate in good faith to amend
or
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
28
Section
10.6 Successors
and Assigns; Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Neither this Agreement nor any
of
the rights, interests or obligations hereunder shall be assigned or delegated
by
any of the parties hereto without, in the case of Parent, the prior written
approval of the Company and, in the case of the Company, the prior written
approval of Parent.
Section
10.7 No
Third
Party Beneficiaries.
Except
as set forth in Section
10.6,
nothing
herein expressed or implied shall be construed to give any person other than
the
parties hereto (and their successors and assigns as permitted herein) any legal
or equitable rights hereunder.
Section
10.8 Counterparts;
Delivery by Facsimile.
This
Agreement may be executed in multiple counterparts, and by the different parties
hereto in separate counterparts, each of which when executed will be deemed
to
be an original but all of which taken together will constitute one and the
same
agreement. This Agreement and each other agreement or instrument entered into
in
connection herewith or therewith or contemplated hereby or thereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of
a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person.
At
the request of any party hereto or to any such agreement or instrument, each
other party hereto or thereto shall re-execute original forms thereof and
deliver them to all other parties. No party hereto or to any such agreement
or
instrument shall raise the use of a facsimile machine to deliver a signature
or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation or enforceability of a contract and each such party forever waives
any
such defense.
Section
10.9 Waiver.
At any
time prior to the Effective Time, any party hereto may (a) extend the time
for
the performance of any of the obligations or other acts of the other party
hereto; (b) waive any inaccuracies in the representations and breaches of the
warranties of the other party contained herein or in any document delivered
pursuant hereto; and (c) waive compliance by the other party with any of the
agreements or conditions contained herein. Any such extension or waiver will
be
valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
Section
10.10 No
Constructive Waivers.
No
failure or delay on the part of any party hereto in the exercise of any right
hereunder will impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, agreement or
covenant herein, nor will any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. No waiver
by
any party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior
or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
29
Section
10.11 Further
Assurances.
The
parties hereto shall use their commercially reasonable efforts to do and perform
or cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments or
documents as any other party hereto may reasonably request in order to carry
out
fully the intent and purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section
10.12 Headings.
The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
Section
10.13 Governing
Law.
This
Agreement and the agreements, instruments and documents contemplated hereby
shall be governed by and construed and enforced in accordance with the laws
of
the State of Delaware without regard to its conflicts of law
principles.
Section
10.14 Dispute
Resolution.
The
parties hereto shall initially attempt to resolve all claims, disputes or
controversies arising under, out of or in connection with this Agreement by
conducting good faith negotiations amongst themselves. If the parties hereto
are
unable to resolve the matter following good faith negotiations, the matter
shall
thereafter be resolved by binding arbitration and each party hereto hereby
waives any right it may otherwise have to the resolution of such matter by
any
means other than binding arbitration pursuant to this Section
10.14.
Whenever a party shall decide to institute arbitration proceedings, it shall
provide written notice to that effect to the other parties hereto. The party
giving such notice shall, however, refrain from instituting the arbitration
proceedings for a period of sixty (60) days following such notice. During this
period, the parties shall make good faith efforts to amicably resolve the claim,
dispute or controversy without arbitration. Any arbitration hereunder shall
be
conducted under the commercial arbitration rules of the American Arbitration
Association. Any such arbitration shall be conducted in New York, New York
by a
panel of three arbitrators: one arbitrator shall be appointed by each of Parent
and Company; and the third shall be appointed by the American Arbitration
Association. The panel of arbitrators shall have the authority to grant specific
performance. Judgment upon the award so rendered may be entered in any court
having jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be. In
no
event shall a demand for arbitration be made after the date when institution
of
a legal or equitable proceeding based on the claim, dispute or controversy
in
question would be barred under this Agreement or by the applicable statute
of
limitations. The prevailing party in any arbitration in accordance with this
Section
10.15
shall be
entitled to recover from the other party, in addition to any other remedies
specified in the award, all reasonable costs, attorneys’ fees and other expenses
incurred by such prevailing party to arbitrate the claim, dispute or
controversy.
Section
10.15 Interpretation.
(a) When
a
reference is made in this Agreement to a section or article, such reference
shall be to a section or article of this Agreement unless otherwise clearly
indicated to the contrary.
(b) Whenever
the words “include”,
“includes”
or
“including”
are
used in this Agreement, they shall be deemed to be followed by the words
“without limitation.”
30
(c) The
words
“hereof”,
“hereby”,
“herein”
and
“herewith”
and
words of similar import shall, unless otherwise stated, be construed to refer
to
this Agreement as a whole and not to any particular provision of this Agreement,
and article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement unless
otherwise specified.
(d) The
words
“knowledge,”
or
“known
to,”
or
similar terms, when used in this Agreement to qualify any representation or
warranty, refers to the knowledge or awareness of certain specific facts or
circumstances related to such representation or warranty of the persons in
the
Applicable Knowledge Group (as defined herein) which a prudent business person
would have obtained after reasonable investigation or due diligence on the
part
of any such person. For the purposes hereof, the “Applicable
Knowledge Group”
with
respect to the Company shall be Xx Xxxxx. For the purposes hereof, the
“Applicable
Knowledge Group”
with
respect to Parent and the Acquisition Corp. shall be Xxxxxx X.
Xxxxx.
(e) The
word
“subsidiary”
shall
mean any entity of which at least a majority of the outstanding shares or other
equity interests having ordinary voting power for the election of directors
or
comparable managers of such entity is owned, directly or indirectly by another
entity or person.
(f) For
purposes of this Agreement, “ordinary
course of business”
means
the ordinary course of business consistent with past custom and practice
(including with respect to quantity and frequency).
(g) The
plural of any defined term shall have a meaning correlative to such defined
term, and words denoting any gender shall include all genders. Where a word
or
phrase is defined herein, each of its other grammatical forms shall have a
corresponding meaning.
(h) A
reference to any legislation or to any provision of any legislation shall
include any modification or re-enactment thereof, any legislative provision
substituted therefor and all regulations and statutory instruments issued
thereunder or pursuant thereto, unless the context requires
otherwise.
(i) The
parties hereto have participated jointly in the negotiation and drafting of
this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this
Agreement.
31
IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first above written by their respective officers
thereunto duly authorized.
|
COMPANY:
|
||||
|
MEDASORB
CORPORATION
|
||||
|
By:
|
_______________________________ | |||
| Name: | Xx Xxxxx | |||
| Title: | Chief Executive Officer and President | |||
|
PARENT:
|
||||
|
XXXXXX
ENTERPRISES, INC.
|
||||
|
By:
|
_______________________________ | |||
|
Name:
|
Xxxxxx
X. Xxxxx
|
|||
|
Title:
|
President
|
|||
|
ACQUISITION
CORP.:
|
||||
|
MEDASORB
ACQUISITION, INC.
|
||||
|
By:
|
_______________________________ | |||
|
Name:
|
Xxxxxx
X. Xxxxx
|
|||
|
Title:
|
President
|
|||
EXHIBIT
A
Directors
and Officers of Surviving Corporation
Directors:
Xx
Xxxxx
Xxxxxx
Xxxxx, Esq.
Xxxx
Xxxx
Officers:
|
Xx
Xxxxx
|
-
President and Chief Executive Officer
|
|
Xxxxxxx
Xxxxxxx
|
-
Chief Operating Officer
|
|
Xxxxx
Xxxxxxxx
|
-
Chief Financial Officer, Treasurer and Secretary
|
|
Xxxxx
Xxxxxxxxxx, MD
|
-
Chief Medical Officer
|
