Exhibit 10.48
PLAN AND AGREEMENT OF MERGER
This Plan and Agreement of Merger entered into as of March 21,
1997 by and among International Cryogenic Systems Corporation, a Nevada
corporation (the "Buyer"), Power Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of the Buyer (the "Transitory Subsidiary"), and Rotary
Power International, Inc., a Delaware corporation (the "Company"). The Buyer,
the Transitory Subsidiary and the Company are referred to collectively in this
Agreement as the "Parties".
R E C I T A L S:
WHEREAS, pursuant to a memorandum of agreement dated December
24, 1996, a copy of which is attached hereto as Exhibit A and incorporated
herein and made a part hereof, the Buyer acquired from the Company two million
(2,000,000) shares of the Company's authorized but unissued common stock for an
aggregate purchase price of One Million Dollars ($1,000,000) (the "Stock
Purchase");
WHEREAS, in connection with the Stock Purchase, as reflected
in Exhibit A, the Boards of Directors of the Buyer and the Company agreed,
subject to the negotiation and execution of this Agreement and certain other
conditions set forth herein, to the acquisition of the Company by Buyer pursuant
to a merger in which each share of the Company's common stock will be exchanged
for 0.363 shares of Buyer's common stock, resulting in the issuance of not more
than 1,516,196 shares of the Buyer's common stock (plus any additional shares of
Buyer's common stock that may become issuable (i) as a result of the exercise of
options or warrants to purchase common stock of the Company outstanding as of
December 24, 1996 or (ii) in respect of warrants to purchase 150,000 shares of
the Company's common stock that may become issuable to Xxxxxx & Associates,
Inc.);
WHEREAS, this Agreement is not intended to constitute, be a
part of, or be adopted pursuant to any "plan of reorganization," as such term is
used in Section 354 of the Code, and the Merger is also not intended to
constitute a "reorganization," as such term is used in Sections 354 and 368 of
the Code. The Parties intend that the Merger be treated for federal income tax
purposes as a sale of Company Shares to the Buyer.
WHEREAS, the Boards of Directors of the Buyer and the Company
have respectively concluded that Buyer's acquisition of the Company by means of
the merger of the Transitory Subsidiary into
the Company pursuant to this Agreement is in the best interests of Buyer and the
Company, respectively.
NOW, THEREFORE, in consideration of the representations,
warranties and covenants contained in this Agreement, the Parties agree as
follows.
ARTICLE I - THE MERGER
1.1 THE MERGER. Upon and subject to the terms and conditions
of this Agreement, the Transitory Subsidiary shall merge with and into the
Company (with such merger referred to in this Agreement as the "Merger") at the
Effective Time (as defined below). From and after the Effective Time, the
separate corporate existence of the Transitory Subsidiary shall cease and the
Company shall continue as the surviving corporation in the Merger (the
"Surviving Corporation"). The "Effective Time" shall be the time at which the
Company and the Transitory Subsidiary file the certificate of merger or other
appropriate documents prepared and executed in accordance with the relevant
provisions of the Delaware General Corporation Law (the "Certificate of Merger")
with the Secretary of State of the State of Delaware. The Merger shall have the
effects set forth in Section 259 of the Delaware General Corporation Law.
1.2 THE CLOSING. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at a mutually agreed upon
location, commencing at 9:00 a.m. local time on a mutually agreeable date as
soon as practicable after the date on which all of the conditions to the
obligations of the Parties to consummate the transactions contemplated by this
Agreement have been satisfied or waived (the "Closing Date"), but in no event
later than 120 days from the date hereof.
1.3 ACTIONS AT THE CLOSING. At the Closing, (a) the Company
shall deliver to the Buyer and the Transitory Subsidiary the various
certificates, instruments and documents referred to in Section 5.2, (b) the
Buyer and the Transitory Subsidiary shall deliver to the Company the various
certificates, instruments and documents referred to in Section 5.3, (c) the
Company and the Transitory Subsidiary shall file with the Secretary of State of
the State of Delaware the Certificate of Merger, and (d) the Buyer shall deliver
a certificate for the Merger Shares (as defined below) to a bank, trust company
or other entity reasonably satisfactory to the Company appointed by the Buyer to
act as the exchange agent (the "Exchange Agent") in accordance with Section 1.7.
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1.4 ADDITIONAL ACTION. The Surviving Corporation may, at any
time after the Effective Time, take any action, including executing and
delivering any document, in the name and on behalf of either the Company or the
Transitory Subsidiary, in order to consummate the transactions contemplated by
this Agreement.
1.5 CONVERSION OF SHARES. 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 common stock, $0.01 par value per share, of
the Company ("Company Shares") issued and outstanding immediately prior to the
Effective Time (other than Company Shares owned beneficially by the Buyer or the
Transitory Subsidiary, Dissenting Shares (as defined below) and Company Shares
held in the Company's treasury) shall be converted into and represent the right
to receive (subject to the provisions of Section 1.9) 0.363 share of common
stock, $0.001 par value per share, of the Buyer ("Buyer Common Stock").
Stockholders of record of the Company ("Company Stockholders") shall be entitled
to receive immediately all of the shares of Buyer Common Stock into which their
Company Shares were converted pursuant to this Section 1.5(a) (the "Merger
Shares").
(b) Each Company Share held in the Company's treasury
immediately prior to the Effective Time and each Company Share owned
beneficially by the Buyer or the Transitory Subsidiary shall be cancelled and
retired without payment of any consideration therefor.
(c) Each share of common stock, no par value per share, of the
Transitory Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted into and thereafter evidence one share of common stock,
no par value per share, of the Surviving Corporation.
1.6 DISSENTING SHARES.
(a) For purposes of this Agreement, "Dissenting Shares" means
Company Shares held as of the Effective Time by a Company Stockholder who has
not voted such Company Shares in favor of the adoption of this Agreement and the
Merger and with respect to which appraisal shall have been duly demanded and
perfected in accordance with Section 262 of the Delaware General Corporation Law
and not effectively withdrawn or forfeited prior to the Effective Time.
Dissenting Shares shall not be converted into or represent the right to receive
Merger Shares, unless such Company Stockholder shall have forfeited his right to
appraisal under the Delaware General Corporation Law or withdrawn, with the
consent of the
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Company, his demand for appraisal. If such Company Stockholder has so forfeited
or withdrawn his right to appraisal of Dissenting Shares, then (i) as of the
occurrence of such event, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the Merger Shares issuable in respect of such Company Shares pursuant to Section
1.5(a), and (ii) promptly following the occurrence of such event, the Buyer
shall deliver to the Exchange Agent a certificate representing the Merger Shares
to which such holder is entitled pursuant to Section 1.5(a).
(b) The Company shall give the Buyer (i) prompt notice of any
written demands for appraisal of any Company Shares, withdrawals of such
demands, and any other instruments that relate to such demands received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the Delaware General Corporation Law. The
Company shall not, except with the prior written consent of the Buyer, make any
payment with respect to any demands for appraisal of Company Shares or offer to
settle or settle any such demands.
1.7 EXCHANGE OF SHARES.
(a) Prior to the Effective Time, the Buyer shall appoint the
Exchange Agent to effect the exchange for the Merger Shares of certificates
that, immediately prior to the Effective Time, represented Company Shares
converted into Merger Shares pursuant to Section 1.5 (including any Company
Shares referred to in the last sentence of Section 1.6(a)) ("Certificates"). On
the Closing Date, the Buyer shall deliver to the Exchange Agent, in trust for
the benefit of holders of Certificates, a stock certificate (issued in the name
of the Exchange Agent or its nominee) representing the Merger Shares, as
described in Section 1.5(a). As soon as practicable after the Effective Time,
the Buyer shall cause the Exchange Agent to send a notice and a transmittal form
to each holder of a Certificate (other than those surrendered and paid for at
the Closing) advising such holder of the effectiveness of the Merger and the
procedure for surrendering to the Exchange Agent such Certificate in exchange
for the Merger Shares issuable pursuant to Section 1.5(a). Each holder of a
Certificate, upon proper surrender thereof to the Exchange Agent in accordance
with the instructions in such notice, shall be entitled to receive in exchange
therefor (subject to any taxes required to be withheld) the Merger Shares
issuable pursuant to Section 1.5(a). Until properly surrendered, each such
Certificate shall be deemed for all purposes to evidence only the right to
receive the Merger Shares issuable pursuant to Section 1.5(a). Holders of
Certificates shall not be entitled to receive certificates for the Merger Shares
to
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which they would otherwise be entitled until such Certificates are properly
surrendered.
(b) If any Merger Shares are to be issued in the name of a
person other than the person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition to the issuance of such
Merger Shares that (i) the Certificate so surrendered shall be transferable, and
shall be properly assigned, endorsed or accompanied by appropriate stock powers,
(ii) such transfer shall otherwise be proper and (iii) the person requesting
such transfer shall pay to the Exchange Agent any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of the
Exchange Agent that such taxes have been paid or are not required to be paid.
Notwithstanding the foregoing, neither the Exchange Agent nor
any Party shall be liable to a holder of Company Shares for any Merger Shares
issuable to such holder pursuant to Section 1.5(a) that are delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(c) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, the Buyer shall issue
in exchange for such lost, stolen or destroyed Certificate the Merger Shares
issuable in exchange therefor pursuant to Section 1.5(a). The Buyer may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to give the Buyer a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against the Buyer with respect to the Certificate alleged to have been
lost, stolen or destroyed.
(d) Promptly following the date which is six months after the
Closing Date, the Exchange Agent shall return to the Buyer all Merger Shares in
its possession, and the Exchange Agent's duties shall terminate. Thereafter,
each holder of a Certificate may surrender such Certificate to the Buyer and,
subject to applicable abandoned property, escheat and similar laws, receive in
exchange there for the Merger Shares issuable with respect thereto pursuant to
Section 1.5(a).
1.8 DIVIDENDS. No dividends or other distributions that are
payable to the holders of record of Buyer Common Stock as of a date on or after
the Closing Date shall be paid to former Company Stockholders entitled by reason
of the Merger to receive Merger Shares until such holders surrender their
Certificates in
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accordance with Section 1.7. Upon such surrender, the Buyer shall pay or deliver
to the persons in whose name the certificates representing such Merger Shares
are issued any dividends or other distributions that are payable to the holders
of record of Buyer Common Stock as of a date on or after the Closing Date and
which were paid or delivered between the Effective Time and the time of such
surrender; provided that no such person shall be entitled to receive any
interest on such dividends or other distributions.
1.9 FRACTIONAL SHARES. No certificates or scrip representing
fractional Merger Shares shall be issued to former Company Stockholders upon the
surrender for exchange of Certificates, and such former Company Stockholders
shall not be entitled to any voting rights, rights to receive any dividends or
distributions or other rights as a stockholder of the Buyer with respect to any
fractional Merger Shares that would otherwise be issued to such former Company
Stockholders. In lieu of any fractional Merger Shares that would otherwise be
issued, each former Company Stockholder that would have been entitled to receive
a fractional Merger Share shall, upon proper surrender of such person's
Certificates, receive a cash payment equal to the average of the closing bid and
asked prices per share of the Buyer Common Stock in the over-the-counter market,
on the business day immediately preceding the business day prior to the Closing
Date, multiplied by the fraction of a share that such Company Stockholder would
otherwise be entitled to receive. The fractional share interests of each Company
Stockholder will be aggregated, and no Company Stockholder will receive cash in
an amount equal to or greater than the value of one full share of Buyer Common
Stock.
1.10 OPTIONS AND RIGHTS.
(a) As of the Effective Time, all obligations of the Company
with respect to warrants and options to purchase Company Shares issued by the
Company listed on Schedule 1.10 ("Options"), whether vested or unvested, shall
be assumed by the Buyer.
(b) Immediately after the Effective Time, each Option
outstanding immediately prior to the Effective Time shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Option at the Effective Time, such number of shares of
Buyer Common Stock as is equal to the number of Company Shares subject to the
unexercised portion of such Option multiplied by the Conversion Ratio (with any
fraction resulting from such multiplication to be rounded up or down to the
nearest whole number or, in the case of .5, to the nearest odd number). The
exercise price per share of each such Option shall be equal to the exercise
price of such Option immediately prior to the
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Effective Time, divided by the Conversion Ratio. The term, exercisability,
vesting schedule and all of the other terms of the Options shall otherwise
remain unchanged.
(c) Promptly following the Effective Time, the Buyer or the
Surviving Corporation shall deliver to the holders of Options appropriate
notices setting forth such holders' rights pursuant to such Options, as amended
by this Section 1.10, and the agreements evidencing such Options shall continue
in effect on the same terms and conditions (subject to the amendments provided
for in this Section 1.10 and such notice).
(d) The Buyer shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Buyer Common Stock for
delivery upon exercise of the Options.
1.11 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Surviving Corporation shall be the same as the
Certificate of Incorporation of the Transitory Subsidiary immediately prior to
the Effective Time, except that the name of the corporation set forth therein
shall be changed to the name of the Company.
1.12 BY-LAWS. The By-laws of the Surviving Corporation shall
be the same as the By-laws of the Company immediately prior to the Effective
Time.
1.13 DIRECTORS AND OFFICERS. The directors of the Transitory
Subsidiary shall become the directors of the Surviving Corporation as of the
Effective Time. The officers of the Company shall remain as officers of the
Surviving Corporation after the Effective Time, retaining their respective
positions, except as specified by the Buyer pursuant to Section 5.2(d).
1.14 NO FURTHER RIGHTS. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of Certificates
shall cease to have any rights with respect thereto, except as provided in this
Agreement or by law.
1.15 CLOSING OF TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Company
Shares shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Exchange Agent, they shall be
cancelled and exchanged for Merger Shares in accordance with Section 1.5(a),
subject to applicable law in the case of Dissenting Shares.
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1.16 TAX TREATMENT. This Agreement is not intended to
constitute, be a part of, or be adopted pursuant to any "plan of
reorganization," as such term is used in Section 354 of the Code, and the Merger
is also not intended to constitute a "reorganization," as such term is used in
Sections 354 and 368 of the Code. The Parties intend that the Merger be treated
for federal income tax purposes as a sale of Company Shares to the Buyer.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that the
statements contained in this Article II are true and correct, except as set
forth in the disclosure schedule attached hereto (the "Disclosure Schedule").
The Disclosure Schedule shall be initialed by the Parties and shall be arranged
in paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article II, and the disclosures in any paragraph of the Disclosure Schedule
shall qualify only the corresponding paragraph in this Article II.
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation. The Company is duly qualified
to conduct business and in good standing under the laws of each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
requires such qualification except where the failure to be so qualified would
not have a material adverse effect on the Company and its sole subsidiary,
Rotary Power Marine, Inc. (the "Subsidiary"), taken as a whole. The Company has
all requisite corporate power and authority to carry on its business in and to
own and use the properties owned and used by it in its business. The Company has
furnished to the Buyer true and complete copies of its Certificate of
Incorporation and By-laws, each as amended and as in effect on the date hereof.
The Company is not in violation of any provision of its Certificate of
Incorporation or By-laws.
2.2 CAPITALIZATION. The authorized capital stock of the
Company consists of 10,500,000 shares, comprised of 10,000,000 shares of common
stock, $0.01 par value per share, of which 6,641,432 shares are issued and
outstanding and no shares are held in the treasury of the Company, and 500,000
shares of preferred stock, $0.01 par value per share, of which no shares are
designated or outstanding. Section 2.2 of the Disclosure Schedule sets forth a
complete and accurate list, of all holders of Options (as defined below),
indicating the number of Company Shares subject to Options held by such holders.
All of the issued and outstanding Company
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Shares are, and all Company Shares that may be issued upon exercise of Options
in accordance with the terms thereof will be, duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. There are no
outstanding or authorized options, warrants, rights, agreements or commitments
(collectively "Options") to which the Company is a party or which are binding
upon the Company providing for the issuance, disposition or acquisition of any
of its capital stock, other than as listed in Section 2.2 of the Disclosure
Schedule. There are no outstanding or authorized stock appreciation, phantom
stock or similar rights with respect to the Company. There are no agreements,
voting trusts, proxies, or understandings with respect to the voting, or
registration under the Securities Act, of any Company Shares other than as set
forth in Section 2.2 of the Disclosure Schedule.
2.3 AUTHORIZATION OF TRANSACTION. The Company has all
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
and, subject to the adoption of this Agreement and the approval of the Merger by
both (i) a majority of the votes represented by the outstanding Company Shares
entitled to vote on this Agreement and the Merger and (ii) a majority of the
votes represented by the outstanding Company Shares entitled to vote on this
Agreement and the Merger that are not owned by Buyer (the "Requisite Stockholder
Approval"), the performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated by this Agreement
have been duly and validly authorized by all necessary corporate action on the
part of the Company. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
2.4 NONCONTRAVENTION. Subject to compliance with the
applicable requirements of the Securities Act of 1933 as amended (the
"Securities Act"), any applicable state securities laws and the Securities
Exchange Act of 1934, amended (the "Exchange Act") and the filing of the
Certificate of Merger as required by the Delaware General Corporation Law,
neither the execution and delivery of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated by this Agreement
will (a) conflict with or violate any provision of the charter or By-laws of the
Company, (b) require on the part of the Company or its Subsidiary any filing
with, or any permit, authorization, consent or approval of, any court,
arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (a "Governmental Entity"), other
than any filing, permit, authorization, consent or approval which if not
obtained or made
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would not have a material adverse effect on the assets, business, financial
condition, results of operations or future prospects of the Company and its
Subsidiary taken as a whole or on the ability of the Parties to consummate the
transactions contemplated by this Agreement, (c) except as set forth in Section
2.4 to the Disclosure Schedule, conflict with, result in a breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any contract,
lease, sublease, license, sublicense, franchise, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest (as
defined below) or other arrangement to which the Company or its Subsidiary is a
party or by which the Company or its Subsidiary is bound or to which any of
their assets is subject, other than any conflict, breach, default, acceleration,
termination, modification or cancellation that individually or in the aggregate
would not have a material adverse effect on the assets, business, financial
condition, results of operations or future prospects of the Company and its
Subsidiary taken as a whole or on the ability of the Parties to consummate the
transactions contemplated by this Agreement, (d) result in the imposition of any
Security Interest upon any assets of the Company or its Subsidiary or (e)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, its Subsidiary or any of their properties or assets.
For purposes of this Agreement, "Security Interest" means any mortgage, pledge,
security interest, encumbrance, charge, or other lien (whether arising by
contract or by operation of law), other than (i) mechanic's, materialmen's, and
similar liens, (ii) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation, and (iii) liens
on goods in transit incurred pursuant to documentary letters of credit, in each
case arising in the ordinary course of business consistent with past custom and
practice (including with respect to frequency and amount) ("Ordinary Course of
Business") of the Company and not material to the Company.
2.5 SUBSIDIARIES. Except as listed in Section 2.5 of the
Disclosure Schedule, the Company owns no interest in any corporation,
partnership or other entity other than the Subsidiary. The Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and is duly qualified to conduct
business and in good standing under the laws of each jurisdiction in which the
nature of its businesses or the ownership or leasing of its properties requires
such qualification except where the failure to be so qualified would not have a
material adverse effect on the Company
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and its Subsidiary taken as a whole. The Subsidiary has all requisite corporate
power and authority to carry on its business and to own and use the properties
owned and used by it. The Company has delivered or made available to the Buyer
correct and complete copies of the charter and By-laws of the Subsidiary, as
amended to date. The Subsidiary is not in violation of any provision of its
charter or By-laws. All of the issued and outstanding shares of capital stock of
the Subsidiary are owned of record and beneficially by the Company and are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights.
2.6 REPORTS AND FINANCIAL STATEMENTS. The Company has
previously furnished or made available to the Buyer complete and accurate
copies, as amended or supplemented, of its (a) Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1995, as filed with the Securities and
Exchange Commission (the "SEC"), (b) proxy statements relating to all meetings
of its stockholders (whether annual or special) since December 31, 1995, and (c)
all other reports or registration statements filed by the Company with the SEC
since December 31, 1995 (such annual reports, proxy statements, registration
statements and other filings, together with any amendments or supplements
thereto, are collectively referred to in this Agreement as the "Company
Reports"). The Company Reports constitute all of the documents filed or required
to be filed by the Company with the SEC since December 31, 1995. As of their
respective dates, the Company Reports filed since December 31, 1995, did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. The audited
financial statements and unaudited interim financial statements of the Company
included in the Company Reports filed since December 31, 1995 (together, the
"Financial Statements"), (i) comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, (ii) have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods covered thereby (except as may be indicated therein
or in the notes thereto, and in the case of quarterly financial statements, as
permitted by Form 10-QSB under the Exchange Act), (iii) fairly present the
consolidated financial condition, results of operations and cash flows of the
Company and its Subsidiary as of the respective dates thereof and for the
periods referred to therein, and (iv) are consistent with the books and records
of the Company and its Subsidiary.
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2.7 UNDISCLOSED LIABILITY. As of the date hereof, neither the
Company nor its Subsidiary has any material liability (whether known or unknown,
whether absolute or contingent, whether liquidated or unliquidated and whether
due or to become due), except for (a) liabilities shown on the balance sheet
included in the Company's most recent Quarterly Report on Form 10-QSB for the
period ended September 30, 1996 (the "Most Recent Balance Sheet"), (b)
liabilities which have arisen since September 30, 1996, in the Ordinary Course
of Business, (c) contractual liabilities incurred in the Ordinary Course of
Business which are not required by GAAP to be reflected on a balance sheet and
(d) liabilities disclosed in Section 2.18 of the Disclosure Schedule.
2.8 TAX MATTERS. Each of the Company and its Subsidiary has
filed all material Tax Returns (as defined below) that it was required to file
(taking into account extensions) and to the knowledge of the Company no material
position is reflected in a Tax Return for which there was not substantial
authority (as defined in Section 6662 of the Code) or comparable foreign,
federal, state or local law. Each of the Company and its Subsidiary has paid all
Taxes (as defined below) that are shown to be due on any such Tax Returns. The
unpaid Taxes of the Company and its Subsidiary for tax periods through the date
of the Most Recent Balance Sheet are appropriately accrued or reserved for on
the Most Recent Balance Sheet. Neither the Company nor its Subsidiary has any
actual or potential liability for any Tax obligation of any taxpayer (including
without limitation any affiliated group of corporations or other entities that
included the Company or its Subsidiary during a prior period) other than the
Company and its Subsidiary. All material Taxes that the Company or its
Subsidiary is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Entity. For purposes of this Agreement, "Taxes" means all taxes,
charges, fees, levies or other similar assessments or liabilities, including
without limitation income, gross receipts, ad valorem, premium, value-added,
excise, real property, personal property, sales, use, transfer, withholding,
employment, payroll and franchise taxes imposed by the United States of America
or any state, local or foreign government, or any agency thereof, or other
political subdivision of the United States or any such government, and any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or any contest or dispute
thereof. For purposes of this Agreement, "Tax Returns" means all reports,
returns, declarations, statements or other information required to be supplied
to a taxing authority in connection with Taxes.
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2.9 ASSETS. Each of the Company and its Subsidiary owns or
leases all tangible assets necessary for the conduct of its business as
presently conducted. Except as set forth in Section 2.9 of the Disclosure
Schedule or in Exhibit A, no material asset of the Company or its Subsidiary
(tangible or intangible) is subject to any Security Interest.
2.10 OWNED REAL PROPERTY. Neither the Company nor its
Subsidiary owns any real property.
2.11 INTELLECTUAL PROPERTY.
(a) Each of the Company and its Subsidiary owns, or is
licensed or otherwise possesses legally enforceable rights under all patents and
patent applications listed in Section 2.11 of the Disclosure Schedule and the
right to use all trademarks, trade names, service marks, copyrights, and any
applications for such trademarks, trade names, service marks and copyrights,
schematics, technology, know-how, computer software programs or applications and
tangible or intangible proprietary information or material listed in Section
2.11 of the Disclosure Schedule that are used to conduct its business
(collectively, "Intellectual Property") and, except as qualified by or disclosed
in Section 2.11 of the Disclosure Schedule, is aware of no intellectual property
right of any third party that may prevent the Company or its Subsidiary from
conducting its business as currently conducted or as planned by the Company to
be conducted. Section 2.11 of the Disclosure Schedule lists (i) all patents and
patent applications and all trademarks, registered copyrights, trade names and
service marks which are both owned by and used in the business of the Company
and its Subsidiary (ii) all material written licenses, sublicenses and other
agreements to which the Company or its Subsidiary is a party and pursuant to
which any person is authorized to use any Intellectual Property rights, and
(iii) all material written licenses, sublicenses and other agreements as to
which the Company or its Subsidiary is a party and pursuant to which the Company
or its Subsidiary is authorized to use any third party patents, trademarks or
copyrights, including software . Neither the Company nor its Subsidiary is a
party to any oral license, sublicense or agreement which, if reduced to written
form, would be required to be listed in Section 2.11 of the Disclosure Schedule
under the terms of this Section 2.11.
(b) Except as set forth in Section 2.11 of the Disclosure
Schedule, neither the Company nor its Subsidiary has been named in any suit,
action or proceeding which involves a claim of infringement of any Intellectual
Property right of any third party. Except as qualified by or disclosed in
Section 2.11 of the
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Disclosure Schedule, the manufacturing, marketing, licensing or sale of the
products or performance of the service offerings of the Company and its
Subsidiary do not, to the knowledge of the Company, infringe any Intellectual
Property right of any third party; and, to the knowledge of the Company, the
Intellectual Property rights of the Company and its Subsidiary are not being
infringed by activities, products or services of any third party.
2.12 INVENTORY. All inventory of the Company and its
Subsidiary, whether or not reflected on the Most Recent Balance Sheet, consists
of a quality and quantity usable and saleable in the Ordinary Course of
Business, except for obsolete items and items of below-standard quality, all of
which were, as of the date of the Most Recent Balance Sheet, written-off or
written-down to net realizable value or for which reserves were established and
set forth on the Most Recent Balance Sheet or which became such in the Ordinary
Course of Business after the date of the Most Recent Balance Sheet.
2.13 REAL PROPERTY LEASES. Section 2.13 of the Disclosure
Schedule lists all real property leased or subleased to the Company or its
Subsidiary. The Company has delivered or made available to the Buyer correct and
complete copies of the leases and subleases (as amended to the date hereof)
listed in Section 2.13 of the Disclosure Schedule.
2.14 CONTRACTS. Section 2.14 of the Disclosure Schedule lists
the following written arrangements (including without limitation written
agreements) to which the Company or its Subsidiary is a party:
(a) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $50,000.00 per annum;
(b) any written arrangement (or group of related written
arrangements) for the purchase or sale of raw materials, commodities, supplies,
products or other personal property or for the furnishing or receipt of services
(i) which calls for performance over a period of more than one year, (ii) which
involves more than the sum of $10,000.00, to be paid from and after the date
hereof or (iii) in which the Company or its Subsidiary has granted manufacturing
rights, "most favored nation" pricing provisions or marketing or distribution
rights or has agreed to purchase a minimum quantity of goods or services or has
agreed to purchase goods or services exclusively from a certain party;
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(c) any written arrangement establishing a partnership
or joint venture;
(d) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed (or
may create, incur, assume, or guarantee) indebtedness (including capitalized
lease obligations) involving more than $10,000.00 or under which it has imposed
(or may impose) a Security Interest on any of its assets, tangible or intangible
and
(e) any other written arrangement (or group of related
arrangements) involving more than $10,000.00 per annum to be paid from and after
the date hereof.
The Company has delivered or made available to the Buyer a
correct and complete copy of each written arrangement (as amended to the date
hereof) listed in Section 2.14 of the Disclosure Schedule.
2.15 ACCOUNTS RECEIVABLE. All accounts receivable of the
Company and its Subsidiary reflected on the Most Recent Balance Sheet arose in
the Ordinary Course of Business.
2.16 POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Company or its Subsidiary.
2.17 INSURANCE. Each of the Company and its Subsidiary is
covered by insurance in scope and amount customary and reasonable for their
business. Section 2.17 of the Disclosure Schedule lists each policy of insurance
covering the Company or its Subsidiary.
2.18 LITIGATION. Section 2.18 of the Disclosure Schedule
identifies, and contains a brief description of, (a) any unsatisfied judgement,
order, decree, stipulation or injunction and (b) any claim, complaint, action,
suit, proceeding, hearing, notice os violation or investigation by or in any
Governmental Entity or before any arbitrator to which the Company or its
Subsidiary is a party or, to the knowledge of the Company or its Subsidiary, is
threatened to be made a party.
2.19 PRODUCT WARRANTY. No product manufactured, sold,
leased, licensed or delivered by the Company or its Subsidiary is subject to
any guaranty, warranty, right of return or other indemnity beyond in any
material respect the applicable standard
-15-
terms and conditions of sale or lease, which are set forth in Section 2.19 of
the Disclosure Schedule.
2.20 EMPLOYEES. Section 2.20 of the Disclosure Schedule
contains a list of all employees of the Company and its Subsidiary who are
employed at an annual salary in excess of $50,000, along with their positions
and salaries. Neither the Company nor its Subsidiary is a party to or bound by
any collective bargaining agreement, nor has any of them experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes within the last two years. The Company and its Subsidiary
have no knowledge of any organizational effort made or threatened, either
currently or within the past two years, by or on behalf of any labor union with
respect to employees of the Company or its Subsidiary.
2.21 EMPLOYEE BENEFITS. Section 2.21 (a) of the Disclosure
Schedule contains a complete and accurate list of all Employee Benefit Plans (as
defined below). For purposes of this Agreement, "Employee Benefit Plan" means
any "employee pension benefit plan" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), any "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA), and any other
written plan, agreement or arrangement involving direct or indirect severance
benefits, disability benefits, deferred compensation, bonuses, stock options,
stock purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation maintained or contributed by the
Company, its Subsidiary or any ERISA Affiliate (as defined below). For purposes
of this Agreement, "ERISA Affiliate" means any entity which is a member of (i) a
controlled group of corporations (as defined in Section 414(b) of the Code),
(ii) a group of trades or businesses under common control (as defined in Section
414(c) of the Code), or (iii) an affiliated service group (as defined under
Section 414(m) of the Code or the regulations under Section 414(o) of the Code),
any of which includes the Company or its Subsidiary. Complete and accurate
copies of all written Employee Benefit Plans and related documents made
available to the Buyer. The Company and all Employee Benefit Plans are in
compliance in all material respects with the currently applicable provisions of
ERISA and the Code and the regulations thereunder.
2.22 ENVIRONMENTAL MATTERS. The building and property on
which the Company conducts its business and manufacturing operations is leased
from the Xxxxxx-Xxxxxx Corporation pursuant to a lease (January 1, 1992) as
amended, a copy of which has been furnished to the Buyer and which expires on
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December 31, 1997. Said lease speaks for itself concerning all environmental
matters which are the responsibility of Xxxxxx-Xxxxxx except as may have been
caused by the Company or its Subsidiary. The Company represents to the Buyer
that the use, maintenance and operation of said leased property during the term
of the aforesaid lease by it, and its sub-lessee, Xxxxxxxx Plastics Industries,
do not violate applicable, federal, state or local environmental laws,
regulations or ordinances and are not subject to any existing, pending or, to
the knowledge of the Company or its Subsidiary, threatened investigation,
inquiry or proceeding by any governmental authority. No notice of any violation
of any Environmental laws has been received by the Company or its Subsidiary
concerning real properties of or used by the Company or its Subsidiary and there
are no existing or pending requirements of any governmental authority relating
to environmental matters requiring any remedial action or other work, repairs,
construction or capital expenditures with respect to the real properties.
Neither the Company nor its Subsidiary nor, to the Company's knowledge, its
sub-lessee (in respect of the subleased property), has been named as a
"potentially responsible party" in connection with any litigation, investigation
or similar matter, and neither the Company nor its Subsidiary knows of any
matter in which it may be so named.
2.23 LEGAL COMPLIANCE. Each of the Company and its Subsidiary,
and the conduct and operations of their respective businesses, are in compliance
with each law (including rules and regulations thereunder) of any federal,
state, local or foreign government, or any Governmental Entity, which (a)
affects or relates to this Agreement or the transactions contemplated by this
Agreement or (b) is applicable to the Company or its Subsidiary or such
business, except for any violation of or default under a law referred to in
clause (b) above which reasonably may be expected not to have a material adverse
effect on the assets, business, financial condition, results of operations or
future prospects of the Company and its Subsidiary taken as a whole.
2.24 PERMITS. Section 2.24 of the Disclosure Schedule sets
forth a list of all permits, licenses, registrations, certificates, orders or
approvals from any Governmental Entity ("Permits") issued to or held by the
Company or its Subsidiary. Such listed Permits are the only Permits that are
required for the Company and its Subsidiary to conduct their business as
presently conducted, except for those the absence of which would not have any
material adverse effect on the assets, business, financial condition, results of
operations or future prospects of the Company and its Subsidiary taken as a
whole. Each such Permit is in full force and effect and, to the best of the
knowledge of the Company, no suspension or cancellation of such Permit is
threatened and
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there is no basis for believing that such Permit will not be renewable upon
expiration. Each such Permit will continue in full force and effect following
the Closing.
2.25 BROKERS' FEES. Neither the Company nor its Subsidiary
has any liability or obligation to pay any fees or commissions to any broker,
finder or agent with respect to the transactions contemplated by this Agreement.
2.26 BOOKS AND RECORDS. The minute books and other similar
records of the Company and its Subsidiary contain true and complete records of
all actions taken at any meetings of the Company's or its Subsidiary's
stockholders, Board of Directors or any committee thereof and of all written
consents executed in lieu of the holding of any such meeting. The books and
records of the Company and its Subsidiary accurately reflect in all material
respects the assets, liabilities, business, financial condition and results of
operations of the Company or its Subsidiary.
2.27 COMPANY ACTION. The Board of Directors of the Company, at
a meeting duly called and held, has by the requisite vote of the directors (i)
determined that the Merger is fair and in the best interests of the Company and
its stockholders, (ii) adopted this Agreement in accordance with the provisions
of the Delaware General Corporation Law, and (iii) directed that this Agreement
and the Merger be submitted to the Company Stockholders for their adoption and
approval and resolved to recommend that Company Stockholders vote in favor of
the adoption of this Agreement and the approval of the Merger.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF THE BUYER AND THE TRANSITORY SUBSIDIARY
The Buyer and the Transitory Subsidiary, jointly and
severally, represent and warrant to the Company as follows:
3.1 ORGANIZATION. Each of the Buyer and the Transitory
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation.
3.2 CAPITALIZATION. The authorized capital stock of the Buyer
consists of 200,000,000 shares of Buyer Common Stock, of which 5,838,219 shares
are issued and outstanding and no shares were held in the treasury of the Buyer.
All of the issued and outstanding shares of Buyer Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of all preemptive
rights. All of the Merger Shares will be, when issued
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in accordance with this Agreement, duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights.
3.3 AUTHORIZATION OF TRANSACTION. Both the Buyer and the
Transitory Subsidiary have all requisite power and authority to execute and
deliver this Agreement and to perform their obligations hereunder. The execution
and delivery of this Agreement by the Buyer and the Transitory Subsidiary and
the performance of this Agreement and the consummation of the transactions
contemplated by this Agreement by the Buyer and the Transitory Subsidiary have
been duly and validly authorized by all necessary corporate action on the part
of the Buyer and Transitory Subsidiary. This Agreement has been duly and validly
executed and delivered by the Buyer and the Transitory Subsidiary and
constitutes a valid and binding obligation of the Buyer and the Transitory
Subsidiary, enforceable against them in accordance with its terms.
3.4 NONCONTRAVENTION. Subject to compliance with the
applicable requirements of the Securities Act any applicable state securities
laws and the Exchange Act, and the filing of the Certificate of Merger as
required by the Delaware General Corporation Law, neither the execution and
delivery of this Agreement by the Buyer or the Transitory Subsidiary, nor the
consummation by the Buyer or the Transitory Subsidiary of the transactions
contemplated by this Agreement, will (a) conflict or violate any provision of
the charter or By-laws of the Buyer or the Transitory Subsidiary, (b) require on
the part of the Buyer or the Transitory Subsidiary any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, other than any
filing, permit, authorization, consent or approval which if not obtained or made
would not have a material adverse effect on the assets, business, financial
condition, results of operations or future prospects of the Buyer or on the
ability of the Parties to consummate the transactions contemplated by this
Agreement, (c) conflict with, result in breach of, constitute (with or without
due notice or lapse of time or both) a default under, result in the acceleration
of, create in any party any right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest or other
arrangement to which the Buyer or Transitory Subsidiary is a party or by which
either is bound or to which any of their assets are subject, other than any
conflict, breach, default, acceleration, termination, modification or
cancellation which individually or in the aggregate would not have a material
adverse effect on the assets, business, financial condition, results of
operations or future prospects of the Buyer or on the ability of the Parties to
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consummate the transactions contemplated by this Agreement, or (d) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Buyer or the Transitory Subsidiary or any of their properties or assets.
3.5 REPORTS AND FINANCIAL STATEMENTS. The Buyer has previously
furnished to the Company complete and accurate copies, as amended or
supplemented, of its (a) Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as filed with the SEC, and (b) all other reports or
statements filed by the Buyer under Section 13 or 14 of the Exchange Act with
the SEC since December 31, 1995 (such reports are collectively referred to in
this Agreement as the "Buyer Reports"). The Buyer Reports constitute all of the
documents required to be filed by the Buyer under Section 13 or 14 of the
Exchange Act with the SEC since December 31, 1995. As of their respective dates,
the Buyer Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited financial statements and unaudited interim
financial statements of the Buyer included in the Buyer Reports (i) comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (ii) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby (except as may be indicated therein or in the notes
thereto, and in the case of quarterly financial statements, as permitted by Form
10-Q under the Exchange Act), (iii) fairly present the consolidated financial
condition, results of operations and cash flows of the Buyer as of the
respective dates thereof and for the periods referred to therein, and (iv) are
consistent with the books and records of the Buyer.
3.6 BROKERS' FEES. Neither the Buyer nor the Transitory
Subsidiary has any liability or obligation to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
ARTICLE IV - COVENANTS
4.1 BEST EFFORTS. Subject to the Company Board Fiduciary
Duties (as defined below), each of the Parties shall use its best efforts to
take all actions and to do all things necessary, proper or advisable to
consummate the transactions contemplated by this Agreement.
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4.2 NOTICES AND CONSENTS. Each of the Parties shall use its
best efforts to obtain, at its expense, all such waivers, permits, consents,
approvals or other authorizations from third parties and Governmental Entities,
and to effect all such registrations, filings and notices with or to third
parties and Governmental Entities, as may be required by or with respect to such
Party in connection with the transactions contemplated by this Agreement.
4.3 SPECIAL MEETING, PROSPECTUS/PROXY STATEMENT AND
REGISTRATION STATEMENT.
(a) The Buyer and the Company shall jointly prepare, and the
Company shall file with the SEC under the Exchange Act, preliminary proxy
materials for the purpose of soliciting proxies from Company Stockholders to
vote in favor of the adoption of this Agreement at a special meeting of Company
Stockholders to be called and held for such purpose (the "Special Meeting").
Such proxy materials shall be in the form of a prospectus/proxy statement to be
used for the purpose of offering the Merger Shares to Company Stockholders and
soliciting such proxies from Company Stockholders (such prospectus/proxy
statement, together with any accompanying letter to stockholders, notice of
meeting and form of proxy, shall be referred to in this Agreement as the
"Prospectus/ Proxy Statement"). The Company, with the assistance of the Buyer,
shall promptly respond to any SEC comments on the Prospectus/Proxy Statement and
shall otherwise use its best efforts to resolve as promptly as practicable all
SEC comments to the satisfaction of the SEC.
(b) The Company shall comply with all applicable provisions of
and rules under the Exchange Act and all applicable provisions of the Delaware
General Corporation Law in the preparation, filing and distribution of the
Prospectus/Proxy Statement, the solicitation of proxies thereunder, and the
calling and holding of the Special Meeting.
(c) The Buyer shall comply with all applicable provisions of
and rules under the Securities Act and state securities laws in the preparation
and filing of the Registration Statement and the offering and issuance of the
Merger Shares.
(d) Subject to the Company Board Fiduciary Duties (as defined
below), the Company, acting through its Board of Directors, shall include in the
Prospectus/Proxy Statement the recommendation of its Board of Directors that the
Company Stockholders vote in favor of the adoption of this Agreement and the
approval of the
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Merger, and shall otherwise use its best efforts to obtain the Requisite
Stockholder Approval.
4.4 OPERATION OF BUSINESS. Except as contemplated by this
Agreement or as set forth in Section 4.4 of the Disclosure Schedule, during the
period from the date of this Agreement to the Effective Time, the Company shall
(and shall cause its Subsidiary to) conduct its operations in the Ordinary
Course of Business and in compliance with all applicable laws and regulations
and, to the extent consistent therewith, use all reasonable efforts (i) to
preserve intact its current business organization, (ii) keep its physical assets
in good working condition, (iii) keep available the services of its current
employees and (iv) preserve its relationships with customers, suppliers and
others having business dealings with it to the end that its goodwill and ongoing
business shall not be impaired in any material respect. Without limiting the
generality of the foregoing, prior to the Effective Time, neither the Company
nor its Subsidiary shall, without the written consent of the Buyer (except as
contemplated by this Agreement or as set forth in Section 4.4 of the Disclosure
Schedule), which consent shall not be unreasonably withheld:
(a) issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) or authorize the
issuance, sale or delivery of, or redeem or repurchase, any stock of any class
or any other securities or any rights, warrants or options to acquire any such
stock or other securities (except pursuant to the conversion or exercise of
convertible securities or Options outstanding on the date hereof), or amend any
of the terms of any such convertible securities or Options (other than in
connection with a sale, liquidation or transfer referred to and in accordance
with clause (e) below);
(b) split, combine or reclassify any shares of its capital
stock; declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock;
(c) except in the Ordinary Course of Business create, incur or
assume any debt not currently outstanding; or become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person or entity; or make any loans, advances or capital contributions to, or
investments in, any other person or entity.
-22-
(d) enter into, adopt or amend any Employee Benefit Plan or
any employment or severance agreement or arrangement or materially increase in
any manner the compensation or fringe benefits of, or materially modify the
employment terms of, its directors, officers or employees, generally or
individually;
(e) acquire, sell, lease, encumber or dispose of any assets or
property other than purchases and sales of assets in the Ordinary Course of
Business;
(f) amend its charter or By-laws;
(g) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP or by the SEC;
(h) discharge or satisfy any Security Interest or pay
any material obligation or liability other than in the Ordinary
Course of Business;
(i) mortgage or pledge any of its property or assets or take
any action that subjects any such assets to any Security
Interest;
(j) sell, assign, transfer or license any Intellectual
Property other than sales of tangible products through resellers in the Ordinary
Course of Business;
(k) enter into, amend, terminate, take or omit to take any
action that would constitute a violation of or default under, or waive any
rights under, any material contract or agreement if such action would have a
material adverse effect on its business;
(l) make or commit to make any capital expenditure in excess
of $50,000.00 in the aggregate;
(m) take any action or fail to take any action permitted by
this Agreement with the knowledge that such action or failure to take action
would result in (i) any of the representations and warranties of the Company
contained in this Agreement becoming inaccurate or incomplete in any material
respect or (ii) any of the conditions of the Merger set forth in Article V not
being satisfied; or
(n) agree in writing or otherwise to take any of the
foregoing actions.
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4.5 FULL ACCESS. The Company shall (and shall cause each
Subsidiary to) permit representatives of the Buyer to have full access (at all
reasonable times, upon prior notice and in a manner so as not to interfere with
the normal business operations of the Company and its Subsidiary) to all
premises, properties, financial and accounting records, contracts, other records
and documents, and personnel, of or pertaining to the Company and its Subsidiary
other than contracts, records and documents that the Company reasonably and in
good faith determines is of a confidential and competitive nature.
4.6 NOTICE OF BREACHES. The Company shall promptly deliver to
the Buyer written notice of any event or development that would (a) render any
representation or warranty of the Company contained in this Agreement inaccurate
or incomplete in any material respect, or (b) constitute or result in a breach
by the Company of, or a failure by the Company to comply with, any agreement or
covenant in this Agreement applicable to such party. The Buyer or the Transitory
Subsidiary shall promptly deliver to the Company written notice of any event or
development that would (i) render any statement, representation or warranty of
the Buyer or the Transitory Subsidiary in this Agreement inaccurate or
incomplete in any material respect, or (ii) constitute or result in a breach by
the Buyer or the Transitory Subsidiary of, or a failure by the Buyer or the
Transitory Subsidiary to comply with, any agreement or covenant in this
Agreement applicable to such party. No such disclosure shall be deemed to avoid
or cure any such misrepresentation or breach.
4.7 EXCLUSIVITY. The Company shall not, and the Company shall
use its best efforts to cause each of its officers, directors, employees,
representatives and agents not to, directly or indirectly, (a) encourage,
solicit, initiate, engage or participate in discussions or negotiations with any
person or entity (other than the Buyer) concerning any merger, consolidation,
sale or license of material assets or property tender offer, recapitalization,
proxy solicitation or other business combination involving the Company or its
Subsidiary, or (b) provide any non-public information concerning the business,
properties or assets of the Company or any to any person or entity (other than
(i) to the Buyer, (ii) as contemplated by this Agreement, or (iii) as required
by law or court order) except to the extent that the Board of Directors of the
Company determines in good faith, based as to legal matters on the advice of
counsel, that such action is required for the Board of Directors to comply with
its fiduciary duties to stockholders imposed by law (the "Company Board
Fiduciary Duties").
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4.8 CERTAIN COVENANTS OF BUYER. From the date of this
Agreement to the Effective Time, the Company shall not split, combine or
reclassify any shares of its capital stock; declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock; or issue any shares of its
capital stock for inadequate consideration.
4.9 INDEMNIFICATION; RELEASE.
(a) The Buyer agrees that all rights to indemnification
existing in favor of the directors or officers of the Company or its Subsidiary
as provided in the Company's or its Subsidiary's respective charter or By-Laws,
as in effect as of the date hereof, with respect to matters occurring through
the Effective Time, shall survive the Merger and shall continue in full force
and effect following the Effective Time for a period at least equal to the
largest applicable period of limitations in respect of possible claims against
such directors and officers.
(b) The Buyer hereby remises and releases the directors and
officers of the Company and its Subsidiary from any and all claims it may have
against them, other than claims based solely on fraud, including claims for
fraudulent misrepresentation or fraudulent non-disclosure of material facts in
connection with the transactions contemplated by this Agreement.
(c) The Company hereby remises and releases the directors and
officers of the Buyer from any and all claims it may have against them, other
than claims based solely on fraud, including claims for fraudulent
misrepresentation or fraudulent non-disclosure of material facts in connection
with the transactions contemplated by this Agreement.
4.10 EMPLOYEE MATTERS. With respect to benefit plans available
to employees (other than officers and directors) of the Company or its
Subsidiary as set forth in Schedule 2.21, for at least one year from and after
the Effective Time, the Buyer shall use its best efforts, depending on the
financial status of the Surviving Corporation and the Subsidiary, as determined
by Buyer, to cause the Surviving Corporation to provide benefits to employees of
the Surviving Corporation and the Subsidiary that are, taken as a whole,
substantially equivalent to the benefits offered to such persons by the Company
or its Subsidiary, as the case may be, immediately prior to the Effective Time.
4.11 VOTE OF COMPANY SHARES. The Buyer covenants and
agrees to vote all Company Shares held or controlled by it in
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favor of approval of this Agreement and the Merger, and the transactions
contemplated hereby at the Special Meeting.
ARTICLE V - CONDITIONS TO CONSUMMATION OF MERGER
5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The
respective obligations of each Party to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have received
the Requisite Stockholder Approval;
(b) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and remain in effect; and
(c) no Party hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the consummation
of the transactions contemplated by this Agreement. In the event any such order
or injunction shall have been issued, each Party agrees to use its best efforts
to have any such order or injunction lifted.
5.2 CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE TRANSITORY
SUBSIDIARY. The obligation of each of the Buyer and the Transitory Subsidiary to
consummate the Merger is subject to the satisfaction of the following additional
conditions:
(a) the Company and its Subsidiary shall have obtained all of
the waivers, permits, consents, approvals or other authorizations, and effected
all of the registrations, filings and notices, referred to in Section 4.2,
except for any which if not obtained or effected would not have a material
adverse effect on the assets, business, financial condition, results of
operations or future prospects of the Company and its Subsidiary taken as a
whole or on the ability of the Parties to consummate the transactions
contemplated by this Agreement;
(b) the representations and warranties of the Company set
forth in Article II shall be true and correct when made on the date hereof and,
solely as to those contained in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.7, 2.8,
2.10, 2.16 and 2.25, shall be true and correct in all material respects as of
the Effective Time as if made as of the Effective Time;
-26-
(c) the Company shall have performed or complied with in all
material respects its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Effective Time; and
(d) the Buyer and the Transitory Subsidiary shall have
received the resignations, effective as of the Effective Time, of each director
and officer of the Company and its Subsidiary specified by the Buyer in writing
on or prior to the Closing.
5.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to consummate the Merger is subject to the satisfaction of the
following additional conditions:
(a) the Buyer and the Transitory Subsidiary shall have
obtained all of the waivers, permits, consents, approvals or other
authorizations, and effected all of the registrations, filings and notices,
referred to in Section 4.2, except for any which if not obtained or effected
would not have a material adverse affect on the assets, business, financial
condition, results of operations or future prospects of the Buyer or on the
ability of the Parties to consummate the transactions contemplated by this
Agreement.
(b) the representations and warranties of the Buyer and the
Transitory Subsidiary set forth in Article III shall be true and correct when
made on the date hereof and shall be true and correct in all material respects
as of the Effective Time as if made as of the Effective Time, except for
representations and warranties made as of a specific date, which shall be true
and correct as of such date;
(c) each of the Buyer and the Transitory Subsidiary shall have
performed or complied with in all material respects its agreements and covenants
required to be performed or complied with under this Agreement as of or prior to
the Effective Time.
ARTICLE VI - TERMINATION
6.1 TERMINATION OF AGREEMENT. The Parties may terminate
this Agreement prior to the Effective Time (whether before or after Requisite
Stockholder Approval) by mutual written consent.
6.2 EFFECT OF TERMINATION. If this Agreement is
terminated pursuant to Section 6.1, all obligations of the Parties hereunder
shall terminate without any liability of any Party to any
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other Party (except for any liability of any Party for willful breach of this
Agreement).
ARTICLE VII - MISCELLANEOUS
7.1 PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any
press release or public disclosure relating to the subject matter of this
Agreement without the prior written approval of the other Parties, which
approval shall not be unreasonably withheld; provided, however, that any Party
may make any public disclosure it believes in good faith is required by law or
regulation (in which case the disclosing Party shall advise the other Parties
and provide them with a copy of the proposed disclosure prior to making the
disclosure)
7.2 NO THIRD PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns; provided, however, the provisions
in Article I concerning issuance of the Merger Shares and the provisions of
Section 1.16 are intended for the benefit of the Company stockholders; (ii) the
provisions of Section 4.9 are intended for the benefit of the officers and
directors of the Company and its Subsidiary and of the Buyer; and (iii) the
provisions of Section 4.10 are intended for the benefit of the employees of the
Company and its Subsidiary.
7.3 ENTIRE AGREEMENT. This Agreement (including the documents
referred to in this Agreement and Exhibit A hereto) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral, with respect to the
subject matter hereof.
7.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Parties named in this Agreement
and their respective successors and assigns.
7.5 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Agreement, once
executed, may be delivered to either party through the use of facsimile
transmission. In this regard, any and all signatures of the parties appearing on
any facsimile copies of this Agreement shall be deemed, unless otherwise proved,
the lawful and valid signature of the executing party.
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7.6 HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
If to the Company:
Rotary Power International Inc.
X.X. Xxx 000
Xxx Xxxxxxx Xxxxxx
Xxxx-Xxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxxxx X.X. Xxxxxxxx
Copy to:
C. Xxxxxxx Xxxxx Esq.
Wilentz, Xxxxxxx & Xxxxxxx
00 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxx 000 Box 10
Woodbridge, New Jersey 07095-0958
If to the Buyer or its Transitory Subsidiary:
International Cryogenic System Corporation
P. O. Box 1022
000 Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Copy to:
Xxxxxx X. Xxxxxx, Esq.
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Any Party may give any notice, request, demand, claim, or
other communication hereunder using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary mail,
or electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any Party may change
the address to which notices, requests, demands, claims, and other
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communications hereunder are to be delivered by giving the other Parties notice
in the manner in this Agreement set forth.
7.8 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws (and not the law of
conflicts) of the State of Delaware.
7.9 AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time; provided,
however, that any amendment effected subsequent to the Requisite Stockholder
Approval shall be subject to the restrictions contained in the Delaware General
Corporation Law. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by all of the Parties. No waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
7.10 SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
7.11 EXPENSES. The Buyer and the Company shall each bear its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated by this
Agreement. The fees and expenses of the Transitory Subsidiary shall be borne by
the Buyer.
7.12 CONSTRUCTION. The language used in this Agreement shall
be deemed to be the language chosen by the Parties hereto to express their
mutual intent, and no rule of strict construction
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shall be applied against any Party. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
7.13 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits
and Schedules identified in this Agreement are incorporated in this Agreement
by reference and made a part hereof.
7.14 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Representations and warranties of the Parties contained in this Agreement shall
not survive the Closing.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
THE BUYER:
INTERNATIONAL CRYOGENIC SYSTEMS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Title: President and CEO
THE TRANSITORY SUBSIDIARY:
POWER ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Title: President
THE COMPANY:
ROTARY POWER INTERNATIONAL, INC.
By: /s/ Xxxxxxx X.X. Xxxxxxxx
------------------------------------
Title: President
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