AGREEMENT AND PLAN OF MERGER
PURSUANT TO IRC ss.368(a)
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), is made and
entered into as of April 27, 2005, by and among MARKETSHARE RECOVERY, INC., a
Delaware corporation (the "Parent"), MARKETSHARE MERGER SUB INC., a Delaware
corporation to be formed as a wholly owned subsidiary of Parent (the "Merger
Sub"), and BIOMETRX TECHNOLOGIES, INC., a Delaware corporation (the "Company")
and the "Stockholder Representative", defined below (the "Parties"), with
reference to the following facts:
RECITALS
A. WHEREAS, the respective Boards of Directors of the Company, the
Parent and Merger Sub have each determined that it is advisable and in the best
interests of their respective stockholders that the Parent acquire the Company
pursuant to the terms and conditions of this Agreement, and, in furtherance of
such acquisition, such Boards of Directors have approved the merger of Merger
Sub with and into the Company (the "Merger") in accordance with the terms of
this Agreement and the applicable provisions of the Delaware General Corporation
Law (the "Delaware Corporation Law");
B. WHEREAS, Parent will form Merger Sub for the purposes of effecting
the Merger prior to the Effective Time (defined below);
C. WHEREAS, for United States federal income tax purposes, it is
intended that the Merger shall qualify as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and that this Agreement shall be, and is hereby, adopted as a "plan of
reorganization" for purposes of Section 368(a) of the Code;
D. WHEREAS, pursuant to the Merger, (i) each outstanding share of the
Company's Common Stock, $0.001 par value ("Company Common Stock") shall be
converted into the right to receive shares of common stock of the Parent, $.0001
par value per share ("Parent Common Stock"), and (ii) each outstanding option or
warrant to purchase shares of Company Common Stock shall be exchanged for an
option or warrant to purchase a corresponding number of shares of Parent Common
Stock, at the exchange ratio set forth herein;
E. WHEREAS, the Parties have determined it to be in their best interest
for the Parent to issue its Parent Common Stock under the exemption made
available pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") and Rule 506 of Regulation D, thereunder; and
F. WHEREAS, the Parties desire to make certain representations,
warranties, covenants, and agreements in connection with, and establish certain
conditions precedent to, the Merger.
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G. WHEREAS, the Parent's Common Stock is quoted on the OTC Bulletin
board and trades under the symbol MKSH.OB.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the Parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger; The Merger Consideration.
(a) As of the date of this Agreement, the Parent has
outstanding 3,808,521 shares of Parent Common Stock. After giving effect to the
surrender of 2,208,251 shares of outstanding Parent Common Stock for
cancellation in the manner contemplated by Section 7.9(b) hereof, immediately
prior to the Effective Time there will be 1,600,000 shares of Parent Common
Stock outstanding.
(b) In connection with the Merger, (i) each holder of shares
of Company Common Stock will receive a number of shares of Parent Common Stock
based upon the exchange ratio of one share of Company Common Stock becoming
1.1306 shares of Parent Common Stock, subject to adjustment as set forth on
Schedule 1.1 hereto (the "Exchange Ratio"), (ii) each holder of warrants or
options of the Company will receive corresponding instruments in the Parent
having substantially the same rights, preferences and privileges as the original
Company instrument, adjusted as to exercise price and number of underlying
shares of Parent Common Stock based upon the Exchange Ratio, and (iii) the
Company will be operated as a wholly owned subsidiary of the Parent, which shall
own all of the issued and outstanding capital stock of the Company. All debts,
liabilities, obligations, contracts and assets of the Merger Sub will, by
operation of law as of the Effective Time, become the debts, obligations,
contracts, liabilities and assets of the Company and Merger Sub shall cease to
exist.
1.2 Certificate of Merger. A certificate of merger (the "Certificate of
Merger"), together with all appropriate and necessary filing fees, shall be
prepared, executed and delivered to the Secretary of State of the State of
Delaware (the "Delaware Secretary") for filing on the Closing Date, as defined
in Section 3, in accordance with the Delaware Corporation Law.
1.3 Effective Time. The Merger shall become effective upon the filing
of the Certificate of Merger with the Delaware Secretary in accordance with the
provisions of the Delaware Corporation Law. The date and time of the filing with
the Delaware Secretary is referred to herein as the "Effective Time."
1.4 Tax-Free Merger. The Parties intend that the Merger will be treated
as a tax-free reorganization under Section 368 of the Code.
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ARTICLE II
EFFECT OF THE MERGER
2.1 General. Subject to the terms and conditions of this Agreement, at
the Effective Time, Merger Sub shall merge with and into the Company in
accordance with the Delaware Corporation Law, the separate corporate existence
of Merger Sub shall cease, and the Company shall continue as the surviving
corporation in the Merger. The Company, in its capacity as the corporation
surviving the Merger, is sometimes referred to herein as the "Surviving
Corporation." The Surviving Corporation shall possess all the rights,
privileges, powers, immunities and franchises, of Merger Sub (sometimes referred
to hereinafter as the "Disappearing Corporation"); all property, real, personal
and mixed, and all debts due on whatever account, including subscriptions for
shares, stock options and warrants, and all choses in action, and all and every
interest, of or belonging to or due the Disappearing Corporation shall be taken
and deemed to be transferred to and vested in the Surviving Corporation without
further act or deed; and the title to any real estate, or any interest therein,
vested in the Disappearing Corporation shall not revert or be in any way
impaired by reason of the Merger. The Surviving Corporation shall have all the
rights, privileges, immunities and powers and shall be subject to all the duties
and liabilities of a corporation organized under the Delaware Corporation Law.
2.2 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of any Party or the holder of any of
the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and owned beneficially or of record by
Company stockholders shall be converted into and become the number of validly
issued, fully paid and non-assessable shares of Parent Common Stock determined
by the Exchange Ratio.
(b) Each option, warrant and security convertible by its terms
into Company Common Stock that is outstanding immediately prior to the Effective
Time shall be assumed by the Parent and shall be deemed to constitute an option,
warrant or convertible security, as the case may be, to acquire, on the terms
and conditions as were applicable under such option, warrant or convertible
security, the same number of shares of Parent Common Stock as the holder of such
option, warrant or convertible security would have been entitled to receive
pursuant to the Merger had such holder exercised such option or warrant, or
converted such convertible security, in full immediately prior to the Effective
Time (not taking into account whether such option, warrant or convertible
security was in fact exercisable or convertible at such time), and the exercise
or conversion price thereof shall be proportionately adjusted. As soon as
practicable after the Effective Time, the Parent shall deliver to each holder of
a Company option, warrant and convertible security an option, warrant or
convertible security, as the case may be, in the Parent, having substantially
identical terms as the original Company option, warrant or convertible security,
as the case may be.
2.3 Dissenting Shares. Notwithstanding any provision of this Agreement
to the contrary, dissenting shares of the Company as defined in the Delaware
Corporation Law ("Dissenting Shares") shall not be converted into the right to
receive shares of Parent Common Stock at or after the Effective Time unless and
until the holder of such Dissenting Shares withdraws his or her demand for
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payment of the fair value of such shares in accordance with the provisions of
the Delaware Corporation Law or becomes ineligible for such payment. If a holder
of Dissenting Shares shall withdraw his or her demand for payment of the fair
value of such shares in accordance with the Delaware Corporation Law or shall
become ineligible to receive such payment, then, as of the later of the
Effective Time or the occurrence of such event, such holder's Dissenting Shares
shall be automatically converted into a corresponding number of shares of Parent
Common Stock in accordance with the terms of this Agreement. The Company shall
give the Parent prompt notice of any notices of intent to assert dissenters'
rights and to demand payment or withdrawals of notices of intent to assert
dissenters' rights and will not, except with the prior written consent of the
Parent, settle or compromise or offer to settle or compromise any such notices,
voluntarily make any payment with respect to any notice of intent to demand
payment for shares of Company Common Stock or approve any withdrawal of any such
notice. Each holder of Dissenting Shares shall have only such rights and
remedies as are granted to such holder under the Delaware Corporation Law. This
Section notwithstanding, in the event that one percent (1%) or more of the
outstanding shares of the Company are Dissenting Shares, the Company may, in its
sole discretion, terminate this Agreement, in which event, this Agreement shall
forthwith become void and of no further force and effect and the Parties shall
be released from any and all obligations hereunder; provided, however, that
nothing herein shall relieve any Party from liability for the breach of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
2.4 Exchange of Certificates.
(a) Prior to the Closing Date, the Parent shall appoint its
transfer agent or such other person or entity as the Company may reasonably
request to act as exchange agent (the "Exchange Agent") in the Merger.
(b) At least five (5) but not more than ten (10) Business Days
after the Effective Time, the Parent, at its cost and expense, shall cause the
Exchange Agent to deliver to each holder of record of shares of Parent Common
Stock to be exchanged for the Company's outstanding shares ("Outstanding
Shares"), a letter of transmittal in the form annexed hereto as Exhibit A (the
"Letter of Transmittal") for use in effecting the surrender of the stock
certificates representing the Outstanding Shares (the "Certificates"). For
purposes of this Agreement, "Business Day" shall mean a day other than a
Saturday, Sunday or day when commercial banks are not generally open to the
public in New York, New York. To the extent that holders of Outstanding Shares
(each a "Holder") deliver Certificates along with a duly executed and completed
Letter of Transmittal to the Parent or Exchange Agent, then the Parent shall
promptly deliver (or cause and instruct the Exchange Agent to deliver) to such
each Holder, a certificate(s) representing the number of shares of Parent Common
Stock to which the Holder is entitled pursuant to Section 2.2 above. The Parent
or Exchange Agent shall effect delivery of the certificate for Parent Common
Stock within three (3) Business Days after due receipt of the Holder's
Certificate and duly completed and executed Letter of Transmittal. Each
Certificate surrendered shall immediately be canceled. At the Effective Time, no
Holder of a Certificate shall have any rights with respect to shares of Company
Common Stock other than to surrender such Certificate pursuant to this Section
2.4 or, if the Holder holds Dissenting Shares, to demand payment of the fair
value thereof pursuant to the Delaware Corporation Law or to exercise any other
rights under the Delaware Corporation Law.
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(c) The Parent and Exchange Agent shall follow the same
procedure with respect to lost, stolen or mutilated Certificates as the Company
followed with respect to lost, stolen or mutilated certificates prior to the
Effective Time which procedures shall include, at a minimum, receipt of an
affidavit and indemnity of lost certificate in customary form (but without the
requirement of any bond or security for such indemnity).
2.5 Distributions With Respect To Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock evidenced thereby, until the holder of such Certificate shall
surrender such Certificate. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificates evidencing shares of Parent Common Stock issued in exchange
therefor, (i) promptly, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
shares of Parent Common Stock and (ii) at the appropriate payment date, the
amount of dividends or other distributions, with a record date after the
Effective Time but prior to surrender and a payment date occurring after
surrender, payable with respect to such shares of Parent Common Stock. No
interest shall be paid on any amounts payable under this Section 2.5.
2.6 No Further Rights in Company Stock. All shares of Parent Common
Stock issued upon exchange of the shares of Company Common Stock in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such shares of Company Common Stock.
2.7 No Fractional Shares. No certificates or scrip evidencing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of the Parent. In
lieu of fractional shares of Parent Common Stock, any fractional share will be
rounded up to the nearest whole share of Parent Common Stock.
2.8 No Transfers of Stock After Effective Time. After the Effective
Time, there shall be no transfers of any shares of Company Common Stock on the
stock transfer books of the Surviving Corporation. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be forwarded
to the Parent or Exchange Agent and exchanged in accordance with Section 2.4(b),
subject to applicable law in the case of Dissenting Shares.
2.9 Restrictions on Transfer of New Parent Shares. The shares of Parent
Common Stock that are being issued in connection with the Merger (the "New
Parent Shares"), and any shares of Parent Common Stock issuable upon exercise or
conversion of options or warrants issued pursuant to Section 2.2(b),
(collectively with the New Parent Shares, the "New Parent Securities") are being
issued pursuant to an exemption from registration provided for in Section 4(2)
of the Securities Act and Rule 506 of Regulation D thereunder. Each certificate
representing any New Parent Securities shall be subject to stop transfer
instructions and shall bear all legends required under all applicable federal
and state securities laws.
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2.10 Certificate of Incorporation and Bylaws of Surviving Corporation.
(a) The Certificate of Incorporation of the Company in effect
at the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation.
(b) The Bylaws of the Company in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation.
2.11 Management of Surviving Corporation and Parent.
(a) One or more of the directors of the Company immediately
prior to the Effective Time shall be the initial directors of Surviving
Corporation and shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualified in the manner provided in
the Certificate of Incorporation or Bylaws of the Surviving Corporation or as
otherwise provided by applicable law.
(b) The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation and
shall hold office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation or Bylaws of the Surviving Corporation or as
otherwise provided by applicable law.
(c) At the Closing, the officers and directors of the Parent
shall resign, to be replaced by the officers and directors of the Company
immediately prior to the Effective Time, provided that at least one current
director of the Parent shall remain in office until at least ten (10) days after
the Company makes the filing with the SEC required by Rule 14f-1 (the "Rule")
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and mails the statement required by said Rule to the Parent's shareholders
of record. The new management shall also cause the Parent to make such filings
as may be required or indicated under the Exchange Act; provided, however, the
resignation of the directors of the Parent and the appointment of new directors
in accordance with the terms of this Section 2.11(c) shall accomplished through
the filling of vacancies in the Board of Directors of the Parent in compliance
with the applicable provisions of the Delaware Corporation Law and the Bylaws of
the Parent and without the vote (by written consent or otherwise) of the
shareholders of the Parent.
2.12 Solicitation of Consents by Company.
(a) Promptly following the execution of this Agreement, the
Parent will cooperate with the Company in the preparation and distribution of an
information statement/ offering memorandum (the "Information Statement") which
will be used by the Company to solicit consents in favor of the Merger.
(b) The Information Statement will incorporate information
concerning the Parent by including but not limited to its most recent filings
made by Parent under Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and such information required of the Company
necessary in the opinion of Parent's counsel to comply with informational
requirements of Rule 502(b) of Regulation D.
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(c) The Company will bear all costs and expenses in connection
with the preparation, printing and mailing of the Information Statement,
including without limitation, fees and expenses of its counsel, its auditors,
(but exclusing the fees and expenses of Parent's counsel and auditors in
connection with preparing and reviewing the definitive Information Statement and
related documents nor such fees and expenses incurred in the negotiation and
documentation of this Agreement and the completion of the transactions
contemplated hereunder).
2.13 Taking of Necessary Action, Further Assurances. Each of the
Company, the Parent and Merger Sub shall use its or their commercially
reasonable efforts to take all such action as may be necessary or appropriate to
effectuate the Merger in accordance with this Agreement as promptly as possible
and at the time contemplated by this Agreement. If, at any time after the
Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company, the Parent and Merger Sub immediately prior to the Effective Time are
fully authorized in the name of their respective corporations or otherwise to
take, and will take, all such lawful and necessary action.
2.14 Stockholder Representative. The holders of the outstanding shares
of the capital stock of the Company, by virtue of the approval of this Agreement
and the Merger, will be deemed to have irrevocably constituted and appointed,
effective as of the Effective Time, Xxxx Xxxxxx (together with his permitted
successors, the "Stockholder Representative"), as their true and lawful agent
and attorney-in-fact, and the Stockholder Representative, by his execution of
this Agreement shall be deemed to have accepted such appointment, to enter into
any agreement in connection with the transactions contemplated by this
Agreement, to exercise all or any of the powers, authority and discretion
conferred on him under any such agreement, to waive any terms and conditions of
any such agreement (other than the Merger Consideration), to give and receive
notices on their behalf, and to be their exclusive representative with respect
to any matter, suit, claim, action or proceeding arising with respect to any
transaction contemplated by any such agreement, including, without limitation,
the assertion, prosecution, defense, settlement or compromise of any claim,
action or proceeding for which any Company Stockholder, Parent or the Merger Sub
may be entitled to indemnification and the Stockholder Representative agrees to
act as, and to undertake the duties and responsibilities of, such agent and
attorney-in-fact. This power of attorney is coupled with an interest and is
irrevocable. The Stockholder Representative shall not be liable for any action
taken or not taken by him or her in his or her capacity as Stockholder
Representative (i) with the consent of stockholders who, as of the date of this
Agreement, own a majority in number of the outstanding shares of Company Stock,
or (ii) in the absence of his own willful misconduct. If the Stockholder
Representative shall be unable or unwilling to serve in such capacity, his
successor shall be named by those persons holding a majority of the shares of
Company Stock outstanding immediately prior to the Effective Time who shall
serve and exercise the powers of Stockholder Representative hereunder. Solely
with respect to any actions taken by the Stockholder Representative in his
capacity as such, the Stockholder Representative shall have no liability to
Parent or any of its affiliates except for claims based upon fraud.
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2.15 Company Warrants. At or prior to the Effective Time, Parent,
Company and Merger Sub shall take all action necessary to cause the assumption
by Parent as of the Effective Time of the warrants to purchase Company Common
Stock (the "Outstanding Company Warrants"). Each of the Outstanding Company
Warrants shall be converted without any action on the part of the holder thereof
into a warrant to purchase shares of Parent Common Stock as of the Effective
Time. The holder of the Outstanding Company Warrant shall be entitled to receive
upon the exercise thereof 1.1306 shares of Parent's Common Stock for each share
of Company Common Stock subject to such warrant determined immediately before
the Effective Time. The exercise price of each share of Parent's Common Stock
subject to an Outstanding Company Warrant shall be the exercise price per share
of Company common stock at which such warrant is exercisable immediately before
the Effective Time. The assumption and substitution of the Outstanding Company
Warrants as provided herein shall not give the holders of such warrants
additional benefits which they did not have immediately prior to the Effective
Time or relieve the holders of any obligations or restrictions applicable to
their warrants. Parent shall reserve out of its authorized but unissued shares
of Parents Common Stock sufficient shares to provide for the exercise of the
Outstanding Company Warrants.
2.16 Exchange Ratio. The aggregate number of shares of Parent Common
Stock (i) to be issued in the Merger in exchange for all outstanding shares of
Company Common Stock, and (ii) to be reserved for issuance by Parent upon the
exercise of all Outstanding Company Warrants is 14,400,000 shares. The number of
shares of Parent Common Stock to be issued and reserved for issuance in the
Merger will represent 90% of the issued and outstanding shares of Parent Common
Stock immediately after the Effective Time. The number of shares of Parent
Common Stock to be issued and/or reserved in the Merger may not be increased in
the event the Company issues additional securities prior to the Effective Time.
In such event the Exchange Ratio defined in Section 1.1(b) will be decreased
accordingly.
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ARTICLE III
CLOSING
3.1 Closing. Subject to the provisions of this Agreement, the closing
of the transactions contemplated by this Agreement (the "Closing") shall take
place at the offices of Xxxxxx & Xxxxxxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxx Xxxx, Xxx Xxxx, within two (2) Business Days after the date on which the
last of the conditions to Closing set forth in Article VIII shall have been
satisfied or waived, or at such other place and on such other date as is
mutually agreeable to Parent and the Company (the "Closing Date"). The Closing
will be effective as of the Effective Time.
3.2 Closing Deliveries. At the Closing, each of the Parties shall make
the Closing deliveries required of it pursuant to Article VIII of this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule attached hereto as
Exhibit B (the "Company Disclosure Schedule"), the Company represents and
warrants to the Parent that the statements contained in this Article IV are
true, correct and complete as of the date of this Agreement (or if made as of a
specified date, as of such date) and will be true, correct and complete as of
the Closing Date (or, if made as of a specified date, as of such date).
4.1 Organization and Qualification.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to carry on its business as it is
now being conducted. There is no pending or threatened proceeding for the
dissolution or liquidation of the Company.
(b) Except as set forth in the Company Disclosure Schedule,
the Company (i) does not, directly or indirectly, own any interest in any
corporation, partnership, joint venture, limited liability company, or other
Person and (ii) is not subject to any obligation or requirement to provide funds
to or to make any investment (in the form of a loan, capital contribution or
otherwise) in or to any Person. For purposes of this Agreement, "Person" shall
mean any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, institution, government,
entity or government or any group comprised of one or more of the foregoing.
(c) The Company is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its business
or the properties owned or leased by it makes such qualification or licensing
necessary, except for any such jurisdiction where the failure to so qualify or
be licensed, individually and in the aggregate for all such jurisdictions, would
not reasonably be expected to have a Material Adverse Effect. For purposes of
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this Agreement, as to the Company, "Material Adverse Effect" means an action,
event or occurrence if it has, or could reasonably be expected to have, a
material adverse effect on the capitalization, financial condition or results of
operations of the Company. Any item or event susceptible of measurement in
monetary terms which, when considered together with similar items or events,
does not exceed the amount of $10,000, shall not be considered a Material
Adverse Effect.
(d) The Company has provided to the Parent complete and
accurate copies of the Certificate of Incorporation and Bylaws of the Company,
as currently in effect, and minutes and other records of the meetings and other
proceedings of the Board of Directors and stockholders of the Company. The
Company is not violation of any provisions of its Certificate of Incorporation
or Bylaws.
4.2 Capitalization. The authorized capital stock of Company consists of
20,000,000 shares of Company Common Stock, and no shares of Preferred Stock (the
"Company Preferred Stock"), of which 12,575,599 common shares are or will be
outstanding at the time of Closing. All issued and outstanding shares of Company
Common Stock are validly issued and outstanding, fully paid and non-assessable
and free of preemptive rights. Other than as set forth in the Company Disclosure
Schedule, (i) there are no shares of capital stock or other equity securities of
Company outstanding and (ii) except for 161,000 warrants exercisable at prices
between $0.75 and $1.00 per share there are other outstanding options, warrants,
subscription rights (including any preemptive rights), calls, or commitments, or
convertible securities of any character whatsoever to which the Company is a
party or is bound, requiring or which could require the issuance, sale or
transfer by the Company of any shares of capital stock of the Company or any
securities convertible into or exchangeable or exercisable for, or rights to
purchase or otherwise acquire, any shares of capital stock of the Company. There
are no stock appreciation rights or similar rights relating to the Company.
4.3 Authority.
(a) The Company has the requisite corporate power and
authority to enter into this Agreement, to perform its obligations hereunder,
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to approval by its
stockholders. On the date of the execution of this Agreement, the holders of a
majority of the outstanding shares of Company Common Stock have approved this
Agreement and the merger, in writing. This Agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company, enforceable against it in accordance with its terms.
(b) The execution and delivery by the Company of this
Agreement does not, and the consummation of the transactions contemplated
thereby will not, (i) conflict with, or result in a violation of, any provision
of bylaws or other charter documents of the Company, (ii) constitute or result
in a breach of or default (or an event which with notice or lapse of time, or
both, would constitute a default) under, or result in the termination or
suspension of, or accelerate the performance required by, or result in a right
of termination, cancellation or acceleration of any obligation or a loss of a
benefit under, any note, bond, mortgage, indenture, deed of trust, lease,
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permit, concession, franchise, license, agreement or other instrument or
obligation to which the Company is a party or to which the properties or assets
of the Company are subject, (iii) create any lien upon any of the properties or
assets of the Company, or (iv) constitute, or result in, a violation of any law
applicable to the Company or any of the properties or assets of the Company.
(c) No consent, approval, order or authorization of, notice
to, registration or filing with any governmental authority or other Person is
required to be obtained or made by the Company in connection with the execution
and delivery of this Agreement by the Company or the consummation by the Company
of the transactions contemplated by this Agreement, except for (i) filing of the
Certificate of Merger with the Delaware Secretary, and (ii) the filing of a Form
D and related state securities law notices in connection with the issuance of
the Excluded Securities.
4.4 Financial Statements.
(a) The Company Disclosure Schedule sets forth copies of the
audited balance sheets of the Company as of December 31, 2003 and December 31,
2004 (the "Company December Balance Sheet"), and the audited statements of
operations, redeemable preferred stock and stockholders' deficit and cash flows
for each of the years ended December 31, 2004 and December 31, 2003, and The
Company Financial Statements (including the related notes) have been prepared in
accordance with United States generally accepted accounting principles
consistently applied ("GAAP") during the periods involved (except as may be
indicated therein or in the notes thereto), and present fairly the financial
position of the Company as of the respective dates set forth therein, and the
results of the Company's operations and its cash flows for the respective
periods set forth therein in accordance with GAAP (subject, in case of any
unaudited interim financial statements, to normal year-end adjustments).
(b) The Company maintains accurate books and records
reflecting its assets and liabilities and maintains proper and adequate internal
accounting controls which provide assurance that (i) transactions are executed
with management v authorization; (ii) transactions are recorded as necessary to
permit preparation of the consolidated financial statements of the Parent and to
maintain accountability for the Parent's assets; (iii,) access to the Parent's
assets is permitted only in accordance with management's authorization; (iv) the
reporting of the Parent's assets is compared with existing assets at regular
intervals; and (v) account notes and other receivables and inventory are
recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis.
(c) Except as and to the extent reflected, disclosed or
reserved against in the Company Financial Statements (including the notes
thereto) or in the Company Disclosure Schedule, the Company had no liabilities,
whether absolute, accrued, contingent or otherwise, material to the business,
operations, assets, financial condition or prospects of the Company which were
required by GAAP (consistently applied) to be disclosed in the Company's
financial statements as of December 31, 2004, or the notes thereto. The Company
has not incurred any liabilities except in the ordinary course of business and
consistent with past practice, except as related to the transactions
contemplated by this Agreement or in the Company Disclosure Schedule. Except as
listed in the Company's Disclosure Schedule, the Company has not entered into or
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effected a securitization transaction or "off balance sheet arrangement" (as
defined in Item 203 of SEC's Regulation SD) since January 1, 2003. [Name of
Auditor] "Company Auditor"), which has expressed its opinion with respect to the
Company and financial statements (including the related notes), is and has been
throughout the periods covered by such financial statements" (x) a registered
public accounting firm (as defined in Section 2(a)(12) of the Xxxxxxxx-Xxxxx Act
of 2002), (y) "independent" with respect to the Company within the meaning of
Regulation S-X and, with respect to the Company, and (z) in compliance with
subsections (g) through (l) of Section 10A of the Exchange Act and the related
Rules of the SEC and the Public Company Accounting Oversight Board. The Company
Disclosure Schedule lists all non-audit services performed by the Company's
Auditor for the Company and its subsidiaries since January 1, 2003.
(d) Except as set forth in the Company Disclosure Schedule,
the Company has no loans or extensions of credit in the form of personal loans
outstanding from or for the benefit of, directly or indirectly, any executive
officer or director of the Company (or someone in an equivalent capacity).
4.5 Absence of Certain Changes or Events. Except as disclosed in the
Company Disclosure Schedule, there has not been any material adverse change in
the business, operations, assets or financial condition of the Company since
December 31, 2004 and, to the best of the Company's knowledge, no facts or
condition exists which the Company believes will cause such a material adverse
change in the future.
4.6 Litigation. There are no legal actions (i) pending or, to the
knowledge of the Company, threatened against the Company or the transactions
contemplated by this Agreement or (ii) pending or, to the knowledge of the
Company, threatened against any current employee, officer or director of the
Company that, in any way relates to the Company. The Company is not subject to
any order, judgment, writ, injunction or decree of any governmental authority.
4.7 Taxes. The Company has timely filed all material tax returns and
reports required to be filed by it (after giving effect to any filing extension
properly granted by a governmental entity having authority to do so) ("Company
Tax Return"). Each such Company Tax Return is true, correct and complete in all
material respects. The Company has paid, within the time and manner prescribed
by law, all material taxes that are due and payable. To the Knowledge of the
Company, no Company Tax Return is the subject of any investigation, audit or
other proceeding by any federal, state or local tax authority.
4.8 Contracts.
(a) The Company is not in violation or breach of any material
contract. There does not exist any event or condition that, after notice or
lapse of time or both, would constitute an event of default or breach under any
material contract on the part of the Company or, to the knowledge of the
Company, any other party thereto or would permit the modification, cancellation
or termination of any material contract or result in the creation of any lien
upon, or any person acquiring any right to acquire, any assets of the Company.
The Company has not received in writing any claim or threat that the Company has
breached any of the terms and conditions of any material contract.
12
(b) The consent of, or the delivery of notice to or filing
with, any party to a material contract is not required for the execution and
delivery by the Company of this Agreement or the consummation of the
transactions contemplated under the Agreement.
4.9 Employee Benefit Plans. Except as set forth in the Company
Disclosure Schedule, the Company does not maintain or contribute to any
"employee pension benefit plan" (the "Company Pension Plans"), as such term is
defined in Section 3 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), "employee welfare benefit plan," as such term is defined in
Section 3 of ERISA, stock option plan, stock purchase plan, deferred
compensation plan, cafeteria plan, severance plan, bonus plan, employment
agreement or other similar plan, program or arrangement. The Company has not
contributed to, or been required to contribute to, any "Multiemployer Plan", as
such term is defined in Section 3(37) of ERISA.
4.10 Compliance With Applicable Law. To the Company's knowledge, the
Company has complied in all material respects with all applicable federal, state
and local laws and regulations to which it or its business may be subject,
except where the failure to so comply did not have and would not be a Material
Adverse Effect, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced against or, to
the Company's knowledge, has been threatened against the Company alleging any
failure to so comply.
4.11 Intellectual Property.
(a) The Company owns, or has the right to use pursuant to
valid license, sublicense, agreement, or permission, all intellectual property
rights used in or necessary for the operation of the Company's business as
presently conducted. Except as set forth in the Company Disclosure Schedule, (i)
such intellectual property rights are owned free and clear of royalty
obligations, liens and encumbrances, (ii) the execution and delivery of this
Agreement and the closing of the transaction contemplated hereby will not alter
or impair any such rights, (iii) the use of all such intellectual property the
Company does not infringe or violate the intellectual property rights of any
person or entity, and (iv) the Company has not granted any person or entity any
rights, pursuant to written license agreement or otherwise, to use such
intellectual property. The Company has taken, and shall continue to take through
the Closing Date, all necessary action to maintain and protect each item of
intellectual property that it owns or uses.
(b) The Company Disclosure Schedule identifies (i) each
patent, trademark, trade name, service name or copyright with respect to any of
the Company's intellectual property, all applications and registration
statements therefor and renewals thereof (and sets forth correct and complete
copies of all such patents, registrations and applications (as amended to date))
and (ii) all intellectual property that the Company uses pursuant to license,
sublicense, agreement, or permission, all of which are valid and in full force
and effect, and the execution and delivery of this Agreement and the closing of
the transaction contemplated hereby will not alter or impair any such rights.
(c) The Company has at all times used reasonable efforts to
protect all trade secrets related to its intellectual property.
13
4.12 Properties. Except as set forth in the Company Disclosure
Schedule, the Company has good and marketable title to all material assets and
properties, whether real or personal, tangible or intangible, listed on the
Company December Balance Sheet or the Company Disclosure Schedule, subject to no
encumbrances, liens, mortgages, security interests or pledges, except (i) those
items that secure liabilities that are reflected in said Balance Sheet or the
note thereto or that secure liabilities incurred in the ordinary course of
business after the date of the Company December Balance Sheet, (ii) statutory
liens for amounts not yet delinquent or which are being contested in good faith
and (iii) such title imperfections that are not in the aggregate material to the
business, operations, assets, financial condition or prospects of the Company.
Except as affected by the transactions contemplated hereby, the Company as
lessee has the right under valid and subsisting leases to occupy, use, possess
and control all real property listed on the Company Disclosure Schedule in all
material respects as presently occupied, used, possessed and controlled by the
Company.
4.13 Insurance. The business operations and all insurable properties
and assets of the Company are insured for their benefit against all risks which,
in the reasonable judgment of the management of the Company, should be insured
against (including, without limitation, products liability for human clinical
trials, professional liability for insureds and employees and professional
liability for clinical sites and clinical investigators), in each case under
policies or bonds issued by insurers of recognized responsibility, in such
amounts with such deductibles and against such risks and losses as are in the
opinion of the management of the Company adequate for the business engaged in by
the Company. The Company has not received any notice of cancellation or notice
of a material amendment of any such insurance policy or bond.
4.14 Information Statement/Offering Memorandum. The information
contained in the information statement/offering memorandum (as amended or
supplemented, the "Information Statement"), together with the exhibits and
attachments thereto relating to the Company and the Company shareholders, sent
to the stockholders of the Company in connection with the Company Stockholder
Consent to approve the Merger, which information included the recommendation of
the Board of Directors of the Company in favor of the Merger, did not, on the
date the Information Statement (or any amendment thereof or supplement thereto)
was first mailed or otherwise delivered to any Company Stockholder or at the
time of effectiveness of the Company Stockholder Consent, contain any statement
that, at such time and in light of the circumstances under which it shall be
made, is false or misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements made therein not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
consents for the Company Stockholder Consent which has become false or
misleading. The Company makes no other representation or warranty with respect
to the information included in the Information Statement.
4.15 Disclosure. The representations and warranties of the Company
herein, or in any document, exhibit, statement, certificate or schedule
furnished by or on behalf of Company to the Parent as required by this
Agreement, do not contain and will not contain any untrue statement of a
material fact and do not omit and will not omit to state any material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT
Except as set forth in the disclosure schedule attached hereto as
Exhibit C (the "Parent Disclosure Schedule"), the Parent represents and warrants
to the Company that the statements contained in this Article V are true, correct
and complete as of the date of this Agreement (or if made as of a specified
date, as of such date) and will be true, correct and complete as of the Closing
Date (or, if made as of a specified date, as of such date). Unless the context
otherwise requires, all references to the Parent contained in this Article V
will be read to include the Parent together with any of its direct or indirect
subsidiaries (including Merger Sub).
5.1 Organization and Qualification.
(a) The Parent is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware and has
the requisite corporate power and authority to carry on its business as it is
now being conducted.
(b) Merger Sub will be a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Merger
Sub will be formed solely for the purpose of the Merger and has no business,
assets, liabilities, contracts or commitments other than as set forth in this
Agreement. There is no pending or threatened proceeding for the dissolution or
liquidation of Merger Sub.
(c) Except for Merger Sub and MarketShare Recovery, Inc., a
New York corporation, the Parent (i) does not, directly or indirectly, own any
interest in any corporation, partnership, joint venture, limited liability
company, or other Person except for two subsidiaries described in the Parent
Disclosure Schedule that were formed for the sole purpose of a transaction that
did not materialized and are in the process of being dissolved, and (ii) is not
subject to any obligation or requirement to provide funds to or to make any
investment (in the form of a loan, capital contribution or otherwise) in or to
any Person.
(d) The Parent is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its business
or the properties owned or leased by it makes such qualification or licensing
necessary, except for any such jurisdiction where the failure to so qualify or
be licensed, individually and in the aggregate for all such jurisdictions, would
not reasonably be expected to have a Material Adverse Effect.
(e) The Parent will provide to the Company complete and
accurate copies of the Certificate of Incorporation and Bylaws of the Parent and
Merger Sub, as currently in effect on the Effective Date, and minutes and other
records of the meetings and other proceedings of the Board of Directors and
shareholders of the Parent. Neither the Parent nor Merger Sub is or will be in
violation of any provisions of its Certificate of Incorporation or Bylaws.
5.2 Capitalization.
(a) The authorized capital stock of the Parent consists of (i)
50,000,000 shares of Parent Common Stock, and (ii) 10,000,000 shares of Parent
Preferred Stock. The issued and outstanding capital stock of the Parent consists
15
entirely of (i) 3,808,521 shares of Parent Common Stock and (ii) no shares of
Parent Preferred Stock. All issued and outstanding shares of Parent Common Stock
are validly issued and outstanding, fully paid and nonassessable and free of
preemptive rights. There are no shares of capital stock or other equity
securities of the Parent outstanding and no outstanding options, warrants,
subscription rights (including any preemptive rights), calls, or commitments, or
convertible notes or instruments of any character whatsoever to which the Parent
is a party or is bound, requiring or which could require the issuance, sale or
transfer by the Parent of any shares of capital stock of the Parent or any
securities convertible into or exchangeable or exercisable for, or rights to
purchase or otherwise acquire, any shares of capital stock of the Parent. There
are no stock appreciation rights or similar rights relating to the Parent.
(b) The authorized capital of Merger Sub will consist of 1,000
shares of common stock, $.01 par value per share, of which all 1,000 shares will
be issued and outstanding and held by the Parent. Other than such outstanding
shares, there will be no shares of capital stock or other equity securities of
Merger Sub outstanding and no outstanding options, warrants, subscription rights
(including any preemptive rights), calls, or commitments, or convertible notes
or instruments of any character whatsoever to which the Parent or Merger Sub is
a party or is bound, requiring or which could require the issuance, sale or
transfer by the Parent or Merger Sub of any shares of capital stock of Merger
Sub, any securities convertible into or exchangeable or exercisable for, or
rights to purchase or otherwise acquire, any shares of capital stock of Merger
Sub. There are no stock appreciation rights or similar rights relating to Merger
Sub.
(c) Upon completion of the Merger and the "Cancellation"
defined in Section 7.9(b), below, the outstanding shares of Parent Common Stock
shall be held as follows (excluding (X) any shares of Parent Common Stock issued
to holders of Company Common Stock and exchanged for Parent Common Stock as a
result of the Merger and [(X) shares of Parent common stock issuable upon the
exercise of options to purchase Company shares assumed by Parent, plus (Y) any
shares of Parent Common Stock issued or issuable to placement agents or other
advisers retained by the Company in connection with the Merger or the offering
contemplated by the PPM)]:
(i) 1,600,000 held by the pre-existing shareholders
of the Parent (including 300,000 shares subject to the "Escrow" defined in
Section 7.9(b)), below; and
(ii) 14,400,000 shares (issued in the Merger to
Company Shareholders).
(b) Upon completion of the Merger, none of the Parent's
Preferred Stock shall be have been issued nor shall any such shares be
outstanding.
(c) Upon completion of the Merger, and other than any
outstanding options, warrants or convertible securities issued by the Company
and converted into options, warrants or convertible securities of the Parent as
a result of the Merger, there are no outstanding options, warrants, subscription
rights (including any preemptive rights), calls, or commitments, or convertible
notes or instruments of any character whatsoever to which the Parent is a party
or is bound, requiring or which could require the issuance, sale or transfer by
the Parent of any shares of capital stock of the Parent or any securities
16
convertible into or exchangeable or exercisable for, or rights to purchase or
otherwise acquire, any shares of capital stock of the Parent.
(d) All of the shares of Parent Common Stock issued and
outstanding immediately prior to the Effective Time, relying upon the
representations of the Company herein and the representation of the Company's
Stockholders contained in the Letter of Transmittal annexed hereto as Exhibit A,
(i) have been issued in compliance with Securities Act and applicable state
securities laws in reliance on exemptions from registration or qualification
thereunder and (ii) were issued and are currently held by persons who are not
deemed "underwriters" under applicable federal securities laws.
(e) The list of all record holders of Parent Common Stock,
Parent Preferred Stock included in the Parent Disclosure Schedule is complete
and correct.
5.3 Authority.
(a) Each of the Parent and Merger Sub has or will have the
requisite corporate power and authority to enter into this Agreement, to perform
its obligations thereunder, and to consummate the transactions contemplated
thereby. The execution and delivery of this Agreement by the Parent and Merger
Sub and the consummation by the Parent and Merger Sub of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of the Parent and Merger Sub. This Agreement has been duly executed
and delivered by the Parent and by Parent on behalf of Merger Sub and
constitutes a legal, valid and binding obligation of the Parent and Merger Sub,
enforceable against each of them in accordance with its terms. No vote or
approval of the shareholders of the Parent is required in connection with the
Merger.
(b) The execution and delivery by the Parent and Merger Sub of
this Agreement does not, and the consummation of the transactions contemplated
thereby will not, (i) conflict with, or result in a violation of, any provision
of bylaws or other charter documents of the Parent or Merger Sub, (ii)
constitute or result in a breach of or default (or an event which with notice or
lapse of time, or both, would constitute a default) under, or result in the
termination or suspension of, or accelerate the performance required by, or
result in a right of termination, cancellation or acceleration of any obligation
or a loss of a benefit under, any note, bond, mortgage, indenture, deed of
trust, lease, permit, concession, franchise, license, agreement or other
instrument or obligation to which the Parent is a party or to which the
properties or assets of the Parent or Merger Sub are subject, (iii) create any
lien upon any of the properties or assets of the Parent or Merger Sub, or (iv)
constitute, or result in, a violation of any law applicable to the Parent or
Merger Sub or any of the properties or assets of either of them.
(c) No consent, approval, order or authorization of, notice
to, registration or filing with any governmental authority or other Person is
necessary in connection with the execution and delivery of this Agreement by the
Parent and Merger Sub or the consummation by the Parent and Merger Sub of the
transactions contemplated by this Agreement, except for (i) filing of the
Certificate of Merger with the Delaware Secretary, (ii) the filing of a Form D
and related state securities law notices in connection with the issuance of
Parent Common Stock in connection with the Merger and (iii) the filing of a
17
current report on Form 8-K with the Securities and Exchange Commission (the
"SEC") announcing completion of the Merger.
5.4 SEC Filings; Financial Statements.
(a) The Parent has filed (and shall continue to file) and made
available to Company all forms, reports, schedules, statements and other
documents required to be filed by the Parent with the SEC (collectively, the
"Parent SEC Reports"). The Parent SEC Reports (i) at the time filed, complied in
all material respects with the applicable requirements of the Securities Act and
the Exchange Act, as the case may be, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Parent SEC Reports or necessary in order to make the statements in such Parent
SEC Reports, in light of the circumstances under which they were made, not
misleading. None of the Parent's subsidiaries is required to file any forms,
reports, schedules, statements or other documents with the SEC. The financial
records of the Parent have been prepared in compliance with SEC rules on
internal financial controls.
(b) Each of the financial statements (including, in each case,
any related notes), contained in the Parent SEC Reports, including any Parent
SEC Reports filed after the date of this Agreement until the Closing, complied,
as of its respective filing date, in all material respects with all applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved and fairly presented the consolidated
financial position of the Parent as at the respective dates and the results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount and comply in all material respects with the applicable rules and
regulations of the SEC.
(c) Between December 31, 2004 and the date hereof, except as
disclosed in the Parent SEC Reports, there has not been any change in the
business, operations or financial condition of the Parent that has had or
reasonably would be expected to have a material adverse effect on the Parent.
(d) The Parent and Merger Sub do not have any liability or
obligation (absolute, accrued, contingent or otherwise) other than those arising
under this Agreement and those set forth in the Parent Disclosure Schedule.
5.5 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the other transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Parent, Merger Sub or any shareholder of the Parent.
5.6 Ownership of Merger Sub, No Prior Activities. As of the date hereof
and as of the Effective Time, except for obligations or liabilities incurred in
connection with its incorporation or organization and the transactions
contemplated by this Agreement and except for this Agreement and any other
18
agreements or arrangements contemplated hereby or thereby, Merger Sub has not
and will not have incurred, directly or indirectly, any obligations or
liabilities or engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any person.
5.7 Litigation. Except as set forth on the Parent Disclosure Schedule,
there are no legal actions (i) pending or, to the knowledge of the Parent,
threatened against the Parent, Merger Sub or the transactions contemplated by
this Agreement or (ii) pending or, to the knowledge of the Parent, threatened
against any current employee, officer or director of the Parent that, in any way
relates to the Parent. The Parent is not subject to any order, judgment, writ,
injunction or decree of any governmental authority.
5.8 Taxes. The Parent has timely filed all material tax returns and
reports required to be filed by it (after giving effect to any filing extension
properly granted by a governmental entity having authority to do so) ("Parent
Tax Return"). Each such Parent Tax Return is true, correct and complete in all
material respects. The Parent has paid, within the time and manner prescribed by
law, all material taxes that are due and payable. No Parent Tax Return is the
subject of any investigation, audit or other proceeding by any federal, state or
local tax authority.
5.9 No Employees; Labor Matters. Neither the Parent nor Merger Sub has
any employees or consultants. No unfair labor practice, or race, sex, age,
disability or other discrimination, complaint is pending, nor is any such
complaint, to the knowledge of the Parent, threatened against the Parent before
the National Labor Relations Board, Equal Employment Opportunity Commission or
any other governmental authority, and no grievance is pending, nor is any
grievance, to the knowledge of the Parent, threatened against the Parent or
Merger Sub.
5.10 Benefit Plans. Neither the Parent nor the Merger Sub has not
adopted nor is it party to any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other employee benefit plan, arrangement or
understanding (whether or not legally binding) providing benefits to any current
or former employee, officer or director of the Parent or any person affiliated
with the Parent under Section 414(b), (c), (m) or (o) of the Code; provided
except to the extent permitted in Section 6.1(b)(i) hereof.
5.11 Contracts and Commitments.
(a) Except for this Agreement and the agreements and
transactions specifically contemplated by this Agreement, neither the Parent nor
Merger Sub is a party to or subject to, nor plans to enter into:
(i) any agreement or other commitments requiring any
payments or performance of services by the Parent or Merger Sub;
(ii) any agreement or other commitments containing
covenants limiting the freedom of the Parent or Merger Sub to compete in any
line of business or with any Person or in any geographic location or to use or
disclose any information in their possession;
19
(iii) any license agreement (as licensor or licensee)
or royalty agreement;
(iv) any agreement of indemnification, other than
indemnification rights granted in the Bylaws of the Parent;
(v) any agreement or undertaking pursuant to which
the Parent is: (A) borrowing or is entitled to borrow any money; (B) lending or
has committed itself to lend any money; or (C) a guarantor or surety with
respect to the obligations of any Person;
(vi) any powers of attorney granted by the Parent;
(vii) any leases of real or personal property; and
(viii) any agreement or other obligation to sell,
transfer, assign, hypothecate or exchange any or all of the assets of the Parent
or the Merger Sub.
(b) Except as set forth in the Parent Disclosure Schedule, the
Parent is not in violation or breach of any contract. There does not exist any
event or condition that, after notice or lapse of time or both, would constitute
an event of default or breach under any contract on the part of the Parent or,
to the knowledge of the Parent, any other party thereto or would permit the
modification, cancellation or termination of any contract or result in the
creation of any lien upon, or any person acquiring any right to acquire, any
assets of the Parent or Merger Sub. The Parent has not received in writing any
claim or threat that Parent or Merger Sub has breached any of the terms and
conditions of any contract.
(c) The consent of, or the delivery of notice to or filing
with, any party to a contract is not required for the execution and delivery by
the Parent of this Agreement or the consummation of the transactions
contemplated under the Agreement.
5.12 Books and Records. The books and records of the Parent have been
maintained and preserved in accordance with applicable regulations and business
practices. The corporate minutes books of the Parent and Merger Sub are complete
and correct and the minutes and consents contained therein accurately reflect
actions taken at a duly called and held meeting or by sufficient consent without
a meeting. All actions by the Parent and Merger Sub which required director or
shareholder approval are reflected on the respective corporate minute books.
5.13 Assets. The Parent has no fixtures, furniture, equipment,
inventory, intellectual property, accounts receivable or other assets other than
cash and its interest in this Agreement.
5.14 Compliance. To the Parent's knowledge, the Parent has complied in
all material respects with all applicable federal, state and local laws and
regulations to which it or its business may be subject, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been filed or commenced against or, to the Parent's knowledge, has been
threatened against the Parent alleging any failure to so comply.
5.15 Disclosure. The representations and warranties of the Parent and
Merger Sub herein, or in any document, exhibit, statement, certificate or
schedule furnished by or on behalf of the Parent or Merger Sub to Company as
20
required by this Agreement, do not contain and will not contain any untrue
statement of a material fact and do not omit and will not omit to state any
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE VI
PRE-CLOSING COVENANTS
6.1 Operation of the Parent.
(a) Except as specifically provided in this Agreement between
the date of this Agreement and the Effective Time, the Parent shall:
(i) maintain its books of account and records in the
usual and ordinary manner, and in conformity with its past practices;
(ii) other than making settlement agreements with its
auditors and former counsel, pay accounts payable and other obligations when
they become due and payable in the ordinary course of business consistent with
past practices except to the extent disputed in good faith;
(iii) conduct its business, if any, in the ordinary
course consistent with past practices, or as required by this Agreement;
(iv) pay all taxes when due and file all Parent Tax
Returns on or before the due date therefor except to the extent disputed in good
faith;
(v) make appropriate provisions in its books of
account and records for taxes relating to its operations during such period
(regardless of whether such taxes are required to be reflected in a tax return
having a due date on or prior to the Closing Date);
(vi) withhold all taxes required to be withheld and
remitted by or on behalf of the Parent in connection with amounts paid or owing
to any Parent personnel or other person, and pay such taxes to the proper
governmental authority or set aside such taxes in accounts for such purpose;
(vii) make all required filings on a timely basis
with the SEC or any other state, federal or local regulatory body, including,
without limitation, making all filings under the Securities Act and the Exchange
Act, on a timely basis so as to maintain the Parent's status as a reporting
company in good standing under the Exchange Act;
(viii) comply with the listing requirements of, and
take all steps reasonably necessary to maintain Parent's listing on, the OTC
Bulletin Board; and
(ix) pay all fees and expenses due to the Parent's
Transfer Agent.
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(b) Without the prior written consent of the Company, between
the date of this Agreement and the Effective Time (or termination of this
Agreement), neither the Parent nor Merger Sub shall:
(i) issue any capital stock (except for the issuance
of Parent Common Stock or common stock of Merger Sub specifically contemplated
by this Agreement) or any options, warrants or other rights to subscribe for or
purchase any capital stock or any securities convertible into or exchangeable or
exercisable for, or rights to purchase or otherwise acquire, any shares of the
capital stock of the Parent or Merger Sub;
(ii) directly or indirectly redeem, purchase, sell or
otherwise acquire any capital stock of the Parent, except as specifically
contemplated by this Agreement;
(iii) hire any employee or retain any consultant;
(iv) borrow or agree to borrow any funds, incur any
indebtedness or directly or indirectly guarantee or agree to guarantee the
obligations of others, or draw or borrow on any lines of credit that may be
available to the Parent or Parent Sub;
(v) except as specifically contemplated by this
Agreement, enter into any oral or written agreement, contract, lease or other
commitment;
(vi) place or allow to be placed a lien on any of the
assets of the Parent or Merger Sub;
(vii) except as specifically contemplated by this
Agreement, cancel, discount or otherwise compromise any indebtedness owing to
the Parent or any claims which the Parent may possess or waive any rights of
material value;
(viii) sell or otherwise dispose of any assets of the
Parent, except in the ordinary course of business consistent with past
practices;
(ix) commit any act or omit to do any act which will
cause a breach of this Agreement or any other material agreement, contract,
lease or commitment;
(x) violate any law or governmental approval,
including, without limitation any federal or state securities laws;
(xi) make any loan, advance, distribution or payment
of any type or to any Person other than as specifically contemplated by this
Agreement;
(xii) amend its Certificate of Incorporation or
Bylaws;
(xiii) merge or consolidate with, or agree to merge
or consolidate with, or purchase substantially all of the assets of, or
otherwise acquire any business or any Person or division thereof;
22
(xiv) make any tax election or settle or compromise
any tax liability other than in the ordinary course of business consistent with
past practices;
(xv) lease or purchase or agree to lease or purchase
any assets or properties;
(xvi) take any action or series of actions that
results in or is likely to result in (i) the delisting of the Parent Common
Stock from trading on the OTC Bulletin Board, or (ii) the Parent losing its
status as a reporting company in good standing under the Exchange Act; or
(xvii) enter into any negotiations, commitments or
agreements that would result in undertaking any of the actions specified in this
Subsection 6.1(b).
6.2 Operation of Company.
(a) Except as specifically provided in this Agreement, between
the date of this Agreement and the Effective Time, the Company shall:
(i) maintain its books of account and records in the
usual and ordinary manner, and in conformity with its past practices;
(ii) pay accounts payable and other obligations when
they become due and payable in the ordinary course of business consistent with
past practices except to the extent disputed in good faith;
(iii) conduct its business, if any, in the ordinary
course consistent with past practices[, or as required by this Agreement;
(iv) pay all taxes when due and file all Company Tax
Returns on or before the due date therefor except to the extent disputed in good
faith;
(v) make appropriate provisions in its books of
account and records for taxes relating to its operations during such period
(regardless of whether such taxes are required to be reflected in a tax return
having a due date on or prior to the Closing Date); and
(vi) withhold all taxes required to be withheld and
remitted by or on behalf of the Company in connection with amounts paid or owing
to any Company personnel or other person, and pay such taxes to the proper
governmental authority or set aside such taxes in accounts for such purpose.
(b) Without the prior written consent of the Parent, between
the date of this Agreement and the Effective Time (or termination of this
Agreement), the Company shall not:
(i) except as contemplated by this Agreement, issue
any capital stock or any options, warrants or other rights to subscribe for or
purchase any capital stock or any securities convertible into or exchangeable or
exercisable for, or rights to purchase or otherwise acquire, any shares of the
capital stock of the Company;
23
(ii) directly or indirectly redeem, purchase, sell or
otherwise acquire any capital stock of the Company, except as specifically
contemplated by this Agreement;
(iii) grant any increase in the compensation payable,
or to become payable, to any Company personnel or enter into any bonus,
insurance, pension, severance, change-in-control or other benefit plan, payment,
agreement or arrangement for or with any Company personnel, except as consistent
with past practices in the ordinary course of business or in accordance with
prior recommendations of the Compensation Committee of the Company;
(iv) except as may be required or reasonably
necessary in order to complete the transactions contemplated by this Agreement,
agree to borrow any funds, incur any indebtedness or directly or indirectly
guarantee or agree to guarantee the obligations of others, or draw or borrow on
any lines of credit that may be available to Company;
(v) place or allow to be placed a lien on any of the
assets of the Company;
(vi) sell or otherwise dispose of any assets of the
Company, except in the ordinary course of business consistent with past
practices;
(vii) commit any act or omit to do any act which will
cause a breach of this Agreement or any other material agreement, contract,
lease or commitment to which the Company is party;
(viii) violate any law or governmental approval,
including, without limitation any federal or state securities laws;
(ix) make any loan, advance, distribution or payment
of any type or to any Person other than as contemplated by this Agreement;
(x) amend its Certificate of Incorporation or Bylaws;
(xi) except as contemplated by this Agreement,
consolidate with, or agree to merge or consolidate with, or purchase
substantially all of the assets of, or otherwise acquire any business or any
Person or division thereof;
(xii) make any tax election or settle or compromise
any tax liability other than in the ordinary course of business consistent with
past practices;
(xiii) lease or purchase or agree to lease or
purchase any assets or properties; or
(xiv) enter into any negotiations, commitments or
agreements that would result in undertaking any of the actions specified in this
Subsection 6.2(b).
24
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access to Information.
(a) From the date hereof to the Effective Time, the Company
shall afford, and shall cause its officers, directors, employees,
representatives and agents to afford, to the Parent and to the officers,
employees and agents of the Parent reasonable access during normal business
hours to the Company's officers, employees, agents, representatives, properties,
books, records and contracts, and shall furnish to the Parent all financial,
operating and other data and information as the Parent, through its agents,
officers, employees or other representatives, may reasonably request.
(b) From the date hereof to the Effective Time, the Parent
shall afford, and shall cause its officers, directors, employees,
representatives and agents to afford, to the Company and to the officers,
employees and agents of the Company reasonable access during normal business
hours to the Parent's officers, employees, agents, representatives, properties,
books, records and contracts, and shall furnish to the Company all financial,
operating and other data and information as the Company, through its agents,
officers, employees or other representatives, may reasonably request.
(c) No investigation pursuant to Section 7.1(a) shall affect
any representations or warranties of the Parties herein or the conditions to the
obligations of the Parties.
7.2 Expenses and Taxes. Except to the extent otherwise set forth
herein, each of the Parties shall pay its respective costs incurred in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, the fees of the attorneys, accountants and
advisors.
7.3 News Releases. Except as required by applicable law, any news
releases or other public disclosure pertaining to the transactions contemplated
hereby shall be delivered to the other Party for review and approval in writing
at least two (2) Business Days prior to the dissemination thereof.
7.4 Additional Agreements. Subject to the terms and conditions of this
Agreement, each Party agrees to use all reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable law to consummate and make effective the
transactions contemplated by this Agreement. If at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either of
the constituent corporations, the proper officers and directors of each such
corporation shall take all such necessary or desirable action.
25
7.5 Notification of Certain Matters.
(a) The Company shall give prompt notice to the Parent of any
material inaccuracy in any representation or warranty made by it herein, or any
material failure of the Company to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by the Company under
this Agreement; provided, however, that no such notification shall affect the
representations or warranties or covenants or agreements of the Company or the
conditions to the obligations of the Parent hereunder.
(b) The Parent shall give prompt notice to the Company of any
material inaccuracy in any representation or warranty made by it herein, or any
material failure of the Parent to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement;
provided, however, that no such notification shall affect the representations or
warranties or covenants or agreements of the Parent or the conditions to the
obligations of the Company hereunder.
(c) The Company and the Parent shall each promptly advise the
other orally and in writing of any change or event having, or which, insofar as
can reasonably be foreseen, in the future would have, a Material Adverse Effect
or any adverse effect on the right or ability of any Party to enter into and
complete the Merger and other transactions contemplated hereby.
7.6 Confidentiality.
(a) Each Party shall hold, and shall cause its officers,
employees, agents and representatives, including, without limitation, attorneys,
accountants, consultants and financial advisors who obtain such information to
hold, in confidence, and not use for any purpose other than evaluating the
transactions contemplated by this Agreement, any confidential information of
another Party obtained through the investigations permitted hereunder, which for
the purposes hereof shall not include any information which (i) is or becomes
generally available to the public other than as a result of disclosure by a
Party or one of its affiliates in violation of its obligations under this
Subsection, (ii) becomes available to a Party on a non-confidential basis from a
source, other than the Party which alleges the information is confidential or
its affiliates, which has represented that such source is entitled to disclose
it, or (iii) was known to a Party on a non-confidential basis prior to its
disclosure to such Party hereunder. If this Agreement is terminated, at the
request of a Party, the other Party shall deliver, and cause its officers,
employees, agents, and representatives, including, without limitation,
attorneys, accountants, consultants and financial advisors who obtain
confidential information of the requesting Party pursuant to investigations
permitted hereunder, to deliver to the requesting Party all such confidential
information that is written (including copies or extracts thereof).
(b) If a Party or a Person to whom a Party transmits
confidential information of another Party is requested or becomes legally
compelled (by oral questions, interrogatories, requests for information or
documents, subpoena, criminal or civil investigative demand or similar process)
to disclose any of such confidential information, such Party or other Person
will provide the other Party with prompt written notice so that such Party may
seek a protective order or other appropriate remedy or waive compliance with
Section 7.6(a). If such protective order or other remedy is not obtained, or if
the applicable Party waives compliance with Section 7.6(a), the Party or Person
26
subject to the request will furnish only that portion of such confidential
information which is legally required and will exercise reasonable efforts to
obtain reliable assurance that confidential treatment will be accorded such
confidential information.
7.7 Consents and Filings.
(a) The Parties shall, promptly after execution of this
Agreement, make all required filings and submissions with respect to the Merger
and the Placement. Each Party will take all reasonable actions to obtain any
other consent, authorization, order or approval of, or any exemption by, any
Person required to be obtained or made in connection with the Merger, the
Placement, and the other transactions contemplated by this Agreement. Each Party
will cooperate with and promptly furnish information to the other Party in
connection with obtaining such consents or making any such filings and will
promptly furnish to the other Party a copy of all filings made with a
governmental authority.
(b) Without limiting the severability of Section 7.7(a) of
this Agreement, the Company will prepare and distribute to the Company's
shareholders an Information Statement/Offering Memorandum which, in the
reasonable opinion of the Parent and its counsel, complies with the
informational requirements applicable to the Company's solicitation of consent
for the Merger or notify its non-consenting shareholders of their rights under
Delaware Law and the Parent's offer of shares of its common stock as the
consideration for the Merger under an exemption from registration pursuant to
Rule 506 of the Securities Act. The Parent will take reasonable action necessary
to permit the Company to incorporate Parent SEC filings into the Information
Statement/Offering Memorandum.
7.8 Parent SEC Filings. Between the date hereof and the Closing Date,
the Company shall cooperate with the Parent in connection with the preparation
and filing of, and provide to the Parent for inclusion or incorporation by
reference in, any reports, filings, schedules or registration statements
(including any prospectus contained in any such registration statement) to be
filed by the Parent with the SEC (the "Parent Filings"). Without limiting the
foregoing, the Company shall take all commercially reasonable actions requested
by the Parent to enable the Parent to include or incorporate by reference in the
Parent Filings any Financial Statement of Company, including, without
limitation, and any auditors' report thereon. The Parent agrees that (i) at
least three (3) Business Days prior to filing, the Parent shall furnish the
Company copies of all proposed Parent Filings relating to, disclosing or
describing the transactions contemplated by this Agreement or the Placement, and
(ii) it shall not make any Parent Filing described in the immediately preceding
clause (i) without the prior consent of the Company, which shall not be
unreasonably withheld, conditioned or delayed.
7.9 Escrow Agreement and Cancellation. Simultaneously with the
execution of this Agreement:
(a) The Parent and the Company will enter into an Escrow
Agreement in the form annexed hereto as Exhibit D (the "Escrow Agreement") with
Xxxxxx X. Xxxxx Esq., pursuant to which current shareholders of Parent Company
Common Stock will place (i) 300,000 shares of Common Stock (the "Escrow
Shares"), and (ii) the Company at or before Closing, will deposit $150,000 (of
which $15,000 is presently held by Xxxxxx & Xxxxxxxxx LLP representing the
27
remaining funds of a deposit of $115,000 made by the Company simultaneously with
the execution of this Agreement and $135,000 will be doposited by Company on the
Effective Date). On or after the Effective Date, $15,000 will be held and
applied to pay the remaining balance of a $115,000 note payable within 30 days
of closing; $95,000 will be held for a period of one year and used during that
period to pay any claims or contingent liabilities of the Parent during the year
and the balance of $40,000 will be used to pay legal fees related to the Merger,
including $15,000 to the Escrow Agent. The remaining shares and funds will be
paid to the manager as a fee at the end of the year.
(b) The Holders of 2,208,521 shares of outstanding Parent
Company Common Stock will surrender the certificates representing such shares
with Medallion Guaranteed powers and instructions to cancel the shares and
return them to the status of authorized and unissued shares (the "Cancelled
Shares").
ARTICLE VIII
CLOSING DELIVERIES AND CONDITIONS TO CLOSING
8.1 Documents to be Delivered by Parent. At the Closing, the Parent
shall deliver to the Company the following:
(a) A certificate, executed by an officer of the Parent in
such detail as the Company shall reasonably request, certifying that all
representations, warranties and covenants of the Parent and Merger Sub herein
are true and correct as of the Effective Time. The delivery of such certificate
shall constitute a representation and warranty of the Parent as to the
statements set forth therein.
(b) A copy of the resolutions adopted by (i) the shareholders
and Board of Directors of Merger Sub, and (ii) the Board of Directors of the
Parent, approving this Agreement, the Merger and the transactions contemplated
hereby, certified by their respective Secretaries.
(c) The Certificate of Merger, duly executed by the Parent and
Merger Sub.
(d) Factual certificates, in a form and substance reasonably
satisfactory to the Company and its counsel, confirming and supporting the
representations of the Parent contained in Section 5.2 hereof.
(e) An opinion of counsel, dated as of the Closing Date, in a
form reasonably acceptable to Company, with respect to the matters of set forth
in Exhibit E to this Agreement.
(f) The Escrow Agreement, Escrow Shares and the Cancelled
Shares.
(g) Such other customary certificates or documents as may be
reasonably required by the Company.
28
8.2 Documents to be Delivered by the Company. At the Closing, the
Company shall deliver to the Parent the following:
(a) A certificate, executed by the President of the Company,
in such detail as the Parent shall reasonably request, certifying that all
representations, warranties and covenants of the Company herein are true and
correct as of the Effective Time. The delivery of such certificate shall
constitute a representation and warranty of the Company as to the statements set
forth therein.
(b) A copy of the resolutions adopted by the stockholders and
Board of Directors of the Company approving this Agreement, the Merger, and the
transactions contemplated hereby, certified by the Secretary of the Company.
(c) An opinion of counsel, dated as of the Closing Date, in
form reasonably acceptable to the Parent, with respect to the matters set forth
in Exhibit F to this Agreement.
(d) The $150,000 escrow deposit; and
(e) Such other customary certificates or documents as may be
reasonably required by Parent.
8.3 Conditions to Obligations of Each Party. Each Party's obligations
to consummate the transactions contemplated by this Agreement is subject to the
satisfaction or waiver at or prior to the Closing, of each of the following
conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order issued by any governmental authority or other material
legal restraint or prohibition issued or promulgated by a governmental authority
preventing the consummation of the transactions contemplated by this Agreement
shall be in effect or shall be threatened, and there shall not be any law or
regulation enacted or deemed applicable to the transactions contemplated by this
Agreement that makes consummation of such transactions illegal.
(b) The Certificate of Merger shall have been filed
simultaneously with the Closing.
8.4 Conditions to Obligations of the Parent and Merger Sub. The
obligation of Parent and Merger Sub to consummate the transactions contemplated
by this Agreement are subject to the satisfaction or waiver, at or prior to the
Closing, of each of the following conditions:
(a) Each of the representations and warranties of the Company
set forth in this Agreement (i) that are not qualified by materiality must have
been true and correct in all material respects as of the Closing Date, and (ii)
that are qualified by materiality must have been true and correct as of the
Closing Date; except, in each case, for inaccuracies that would not individually
or in the aggregate have a Material Adverse Effect on the Company.
(b) All of the obligations, covenants and agreements with
which the Company is required to comply or that the Company is required to
perform under this Agreement at or prior to the Closing shall have been complied
with and performed in all material respects.
29
(c) The documents required to be delivered by the Company
pursuant to Section 8.2 above shall have been delivered simultaneously with the
Closing.
8.5 Conditions to Obligations of the Company. The obligation of the
Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction or waiver, at or prior to the Closing, of each of
the following conditions:
(a) Each of the representations and warranties of the Parent
and Merger Sub set forth in this Agreement (i) that are not qualified by
materiality must have been true and correct in all material respects as of the
Closing Date, and (ii) that are qualified by materiality must have been true and
correct as of the Closing Date; except, in each case, for inaccuracies that
would not individually or in the aggregate have a material adverse effect on the
Parent.
(b) All of the obligations, covenants and agreements with
which the Parent or Merger Sub is required to comply or that the Parent or
Merger Sub is required to perform under this Agreement at or prior to the
Closing shall have been complied with and performed in all material respects.
(c) The documents required to be delivered by the Parent
pursuant to Section 8.1 hereof shall have been delivered simultaneously with the
Closing.
ARTICLE IX
NO SOLICITATION; TERMINATION
9.1 No Solicitation. Unless and until this Agreement shall have been
terminated prior to the Closing Time pursuant to and in compliance with Section
9.2 hereof, neither the Parent nor the Company shall (whether directly or
indirectly through its respective advisors, agents or other intermediaries), nor
shall the Company or the Parent authorize or permit any of its respective
officers, directors, agents, employees, representatives or advisors to (i)
solicit, initiate, encourage (including by way of furnishing information) or
take any action to facilitate the submission of any inquiries, proposals or
offers (whether or not in writing) from any person (other than the Parent or the
Company, as the case may be, and its respective affiliates) relating to (A) any
acquisition or purchase of any of the assets of the Company or the Parent, as
the case may be, or of any class of equity securities of the Company or Parent,
as the case may be (other than the securities as contemplated in the Placement),
B) any tender offer (including a self tender offer) or exchange offer, (C) any
merger, consolidation, business combination, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or Parent, as the case may be, or (D) any other transaction the
consummation of which would or would reasonably be expected to impede, interfere
with, prevent or materially delay the Merger or which would or would reasonably
be expected to materially dilute the benefits to the other Party hereto of the
transactions contemplated by this Agreement (collectively, "Acquisition
Proposals"), or agree to, recommend or endorse any Acquisition Proposals, (ii)
enter into or execute any agreement with respect to any of the foregoing or
(iii) enter into or participate in any discussions or negotiations regarding any
of the foregoing, or furnish to any other person any information with respect to
its business, properties or assets in connection with the foregoing, or
otherwise cooperate in any way with, or participate in or assist, facilitate, or
30
encourage, any effect or attempt by any other person (other than the Company or
the Parent, as the case may be, and its respective affiliates) to do or seek any
of the foregoing. If either the Parent or the Company is contacted by a third
party with respect to an Acquisition Proposal, it shall immediately notify the
other Party hereto of the identity of the third party and the nature of the
Acquisition Proposal. Nothing herein contained however, shall prevent the
Company from acquiring assets or the business interests of third parties,
consistent with its business plans, for cash, stock or a combination thereof,
except to the extent such transaction (i) increases the number of shares of the
Corporation's common stock and common stock equivalents beyond the number set
forth in Section 4.2, above, or (ii) would result in any person or group of
person owning more than 5% of the outstanding securities of the Parent, assuming
the Merger had been completed on the day immediately following such transaction.
9.2 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual written consent of each of the Parties hereto at
any time prior to the Closing;
(b) by the Parent in the event of a material breach by the
Company of any provision of this Agreement for which written notice has been
given to the Company and which breach has not been cured prior to 60 days from
the date hereof (the "Termination Date"); provided, however that the right to
terminate this Agreement under this Section 9.2(b) shall not be available to the
Parent if the Parent or Merger Sub have materially breached or failed to perform
any provision of this Agreement and such breach or failure remains uncured;
(c) by the Company in the event of a material breach by Parent
or Merger Sub of any provision of this Agreement which breach has not been cured
prior to the Termination Date; provided, however, that the right to terminate
this Agreement under this Section 9.2(c) shall not be available to the Company
if the Company has materially breached or failed to perform any provision of
this Agreement and such breach or failure remains uncured;
(d) by either the Parent or the Company if the Closing shall
not have occurred the Termination Date; provided, however, the right to
terminate this Agreement under this Section 9.2(d) shall not be available (i) to
any Party whose failure to fulfill any obligation hereunder has been the cause
of, or results in, the failure of the Closing to have occurred on or before the
Termination Date, or (ii) any failure by the Parent or Merger Sub to deliver (or
have available for immediately delivery) all documents required to be delivered
by Parent pursuant to Section 8.1 of this Agreement, or (iii) any failure by
Parent or Merger Sub to comply with all pre-closing covenants of the Parent or
Merger Sub contained in Article VII or Section 6.1 of this Agreement; or
(e) by the Parent or the Company if the other Party pursues or
otherwise enters into negotiations with respect to an Acquisition Proposal or
enters into any agreement or understanding with respect to an Acquisition
Proposal.
9.3 Effect of Termination. Except for the provisions of Sections 7.2,
7.3, 7.6, 9.4 and the provisions of Article X hereof, each of which shall
31
survive any termination of this Agreement, in the event of termination of this
Agreement pursuant to Section 9.2, this Agreement shall forthwith become void
and of no further force and effect and the Parties shall be released from any
and all obligations hereunder; provided, however, that, except as specifically
provided in Section 9.4 below, nothing herein shall relieve any Party from
liability for the breach of any of its obligations under this Agreement.
9.4 Damages Fee; Repayment of Certain Advances..
(a) (i) In the event of any valid termination of this
Agreement by the Parent in accordance with the provisions of Section 9.2(b) or
(e) above, the Parent shall be entitled to a lump sum payment from the Company
equal to $25,000 plus Parent's documented transaction-related legal expenses in
an amount not to exceed $25,000 (collectively, the "Damages Fee") in addition to
retaining all non-refundable deposits heretofore made by Company. In such event
the Parent may deduct the Damages Fee from the $115,000 advance made to Parent
by the Company and the balance will be due six months from the date of such
termination.
(ii) In the event of any valid termination of this
Agreement by the Company in accordance with the provisions of Section 9.2(c), or
(e) above, the Company shall be entitled to a lump sum payment from the Parent
equal to the Damages Fee and the sum of $115,000 advanced to the Parent on the
date this Agreement was executed shall be due to the Company six months from the
date of such termination..
(b) The Parties to this Agreement agree that it may be
difficult, if not impossible, to accurately determine the amount of damages that
may be incurred by the Parent and Merger Sub, on one hand, or the Company, on
the other hand, as a result of any failure to close the transactions
contemplated by this Agreement. Accordingly, the Parties hereto agree that the
Damages Fee payable by a Party under the circumstances described in Section
9.4(a) above is reasonable and shall be the sole and exclusive remedy of the
Parent and Merger Sub against the Company or the Company against the Parent and
Merger Sub (or any of its respective stockholders, officers, directors, agents,
employees or direct or indirect affiliates) in the event of any termination of
this Agreement prior to Closing which gives rise to a claim for the Damages fee.
Any dispute concerning payment of the Damages Fee or the termination of this
Agreement by the Parent shall be settled by binding arbitration in accordance
with the provisions of Section 10.8 hereof; provided, however, that the
arbitrator shall have no authority to change the amount of the Damages Fee from
$50,000; however, the arbitrator may assess costs, including reasonable counsel
fees.
ARTICLE X
GENERAL PROVISIONS
10.1 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the Parties.
10.2 Waiver. At any time prior to the Effective Time, whether before or
after approval of this Agreement and the Merger by the Company's stockholders,
any Party may (i) extend the time for the performance of any of the obligations
or other acts of any other Party hereto or (ii) waive compliance with any of the
32
agreements of any other Party or with any conditions to its own obligations. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of the Party making the waiver or granting the
extension by a duly authorized officer. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
10.3 Assignment and Binding Effect. Neither this Agreement nor any of
the rights or obligations hereunder may be assigned by the Company without the
prior written consent of the Parent or assigned by Parent without the prior
written consent of Company. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the Parties and their respective
successors, transferees and assigns, and no other Person shall have any right,
benefit or obligation hereunder.
10.4 Governing Law. Except as to matters relating to the internal laws
of a jurisdiction, this Agreement shall be governed by, and construed in
accordance with, the law of the State of Delaware, without regard to the
conflicts of law principles thereof.
10.5 Entire Agreement. This Agreement constitutes the entire agreement
between the Parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties with respect to the subject matter hereof.
10.6 Severability. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
10.7 Titles. The titles, captions or headings of the Articles and
Sections herein are for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
10.8 Attorneys' Fees. Should any Party institute any Action to enforce
any provision of this Agreement, including, without limitation, an Action for
declaratory relief, damages by reason of an alleged breach of any provision of
this Agreement, equitable relief or otherwise in connection with this Agreement,
or any provision hereof, the prevailing Party shall be entitled to recover from
the losing Party or Parties reasonable attorneys' fees and costs for services
rendered to the prevailing Party in such Action.
10.9 Multiple Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
10.10 Notices. Unless applicable law requires a different method of
giving notice, any and all notices, demands or other communications required or
desired to be given hereunder by any Party shall be in writing. Assuming that
the contents of a notice meet the requirements of the specific Section of this
Agreement which mandates the giving of that notice, a notice shall be validly
given or made to another Party if served either personally or if deposited in
33
the United States mail, certified or registered, postage prepaid, or if
transmitted by telegraph, telecopy or other electronic written transmission
device or if sent by overnight courier service, and if addressed to the
applicable Party as set forth below. If such notice, demand or other
communication is served personally, service shall be conclusively deemed given
at the time of such personal service. If such notice, demand or other
communication is given by mail, service shall be conclusively deemed given two
(2) Business Days hours after the deposit thereof in the United States mail. If
such notice, demand or other communication is given by overnight courier, or
electronic transmission, service shall be conclusively deemed given at the time
of confirmation of delivery. The addresses for the Parties are as follows:
If to the Company: bioMETRX Technologies, Inc.
00 Xxxxx Xxxxxxx Xxxx, Xxxxx #000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx, Chief Executive
Officer
Fax: (000) 000-0000
with a copy to: Xxxxx & Xxxxxx LLP
0000 Xxxxxxx Xxxxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx, Esq.
Fax: (000) 000-0000
If to the Parent or Merger Sub: MarketShare Recovery, Inc.
00 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, Chief
Executive Officer
Fax: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Any Party may change such Party's address for the purpose of receiving notices,
demands and other communications as herein provided, by a written notice given
in the aforesaid manner to the other Parties.
10.11 Joint Drafting. This Agreement shall be deemed to have been
drafted jointly by the Parties hereto, and no inference or interpretation
against a Party shall be made solely by virtue of such Party allegedly having
been the draftsperson of this Agreement.
10.12 Incorporation by Reference. All Exhibits and Schedules attached
hereto or to be delivered in connection herewith are incorporated herein by this
reference.
34
[SIGNATURES CONTINUED ON NEXT PAGE]
35
IN WITNESS WHEREOF, each of Parent, Merger Sub and Company has caused
this Agreement to be executed as of the date first written above by its officer
thereunto duly authorized.
BIOMETRX TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxxx
------------------------------------
Xxxx Xxxxxx, Chief Executive Officer
MARKETSHARE RECOVERY, INC.
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx, Chief Executive Officer
MARKETSHARE MERGER SUB INC.
(a corporation to be formed)
By: MARKETSHARE RECOVERY, INC.
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx, Chief Executive Officer
36
EXHIBIT A
Letter of Transmittal
B-1
EXHIBIT B
Company Disclosure Schedule
4.2 Shareholder List
Common Stock - See Attached
4.4 Financial Statements
Audit by Xxxxx & Xxxxxxxx, C.P.A's - See Attached
4.11 Intellectual Property
Patent Application S.N. 10/818,655 - Xxxxxxx & Xxx, P.C. Company Counsel
B-1
EXHIBIT C
Parent Disclosure Schedule
5.2 (e) List of Holders:
Common Stock - See attached list
5.7 Litigation
Xxxxxx Xxxxxxx - Xx. Xxxxxxx is a former officer, director and
principal shareholder. He has made numerous threats to xxx the Company and its
management, as well as threatening to contact various state and federal
agencies. Copies of all correspondence has be furnished to the Company and its
counsel.
C-1
EXHIBIT D
Escrow Agreement
To Come
E-1
EXHIBIT E
Form of Legal Opinions of Counsel to the Parent
To Come
E-1
EXHIBIT F
Form of Legal Opinion of Counsel to the Company
To Come
F-1
