EXHIBIT 10.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
among
EARTHSHELL CORPORATION,
EARTHSHELL TRIANGLE, INC.,
RENEWABLE PRODUCTS, INC.
and
RENEWABLE PRODUCTS LLC
Dated as of June 17, 2005
TABLE OF CONTENTS
1. The Merger.................................................1
(a) General..............................................1
(b) Effect of Merger.....................................1
(c) Consummation of the Merger...........................2
(d) Certificate of Incorporation.........................2
(e) By-Laws..............................................2
(f) Directors and Officers...............................2
2. Conversion of Securities...................................2
(a) Mergerco Common Stock................................2
(b) Target Common Stock..................................2
3. Closing....................................................3
(a) Time and Place of Closing............................3
(b) Closing Deliveries...................................3
4. Representations and Warranties of Stockholder..............3
(a) Corporate Organization, Qualification................3
(b) Power and Authority..................................3
(c) Consents.............................................4
(d) Capitalization.......................................4
(e) Constituent Documents; Directors and Officers........4
(f) Financial............................................5
(g) Title to Assets......................................5
(h) Related Party Transactions...........................5
(i) Conduct of Business..................................6
(j) Material Adverse Changes.............................6
(k) Contracts............................................6
(l) Permits..............................................7
(m) Employee Benefits....................................7
(n) Employee Relations...................................7
(o) Taxes................................................7
(p) Litigation...........................................8
(q) Laws.................................................8
(r) Environmental........................................9
(s) Real Estate..........................................9
(t) Intellectual Property................................9
(u) Capital Commitments..................................9
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5. Representations and Warranties of Parent and Mergerco.....10
(a) Corporate Organization, Qualification...............10
(b) Power and Authority.................................10
(c) Consents............................................11
(d) Capitalization......................................11
(e) Constituent Documents...............................11
(f) SEC Reports and Financial...........................12
(g) Litigation..........................................13
(h) Contracts...........................................13
(i) Intellectual Property...............................13
(j) Environmental.......................................13
(k) Employee Benefits...................................13
(l) Laws................................................14
(m) Conduct of Business.................................14
(n) Title to Assets.....................................14
(o) Related Party Transactions..........................15
(p) Permits.............................................15
(q) Material Adverse Changes............................15
(r) Taxes...............................................15
(s) Employee Relations..................................16
6. Conduct Prior to the Closing..............................16
(a) Access..............................................16
(b) Provision of Information by Parent to Target........16
(c) Consents............................................16
(d) Conduct of Business.................................16
(e) No Intentional Acts.................................17
(f) Certificate of Designation..........................18
7. Conditions to Target's Obligations........................18
8. Conditions to Parent's Obligations........................18
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9. Right to Terminate........................................19
10. Remedies..................................................19
11. Post Closing Agreements...................................20
(a) Further Assurances..................................20
(b) Management of Surviving Corporation.................20
(c) Net Operating Losses................................20
12. Disclosure of Confidential Information....................20
(a) Obligation to Maintain Confidentiality..............20
(b) Injunctive Relief...................................21
13. Indemnification Obligations of Parent.....................21
14. Indemnification Obligations of Stockholder................22
15. Arbitration...............................................22
16. Miscellaneous.............................................23
(a) Publicity...........................................23
(b) Notices.............................................23
(c) Fees and Expenses...................................23
(d) Entire Agreement....................................23
(e) Survival; Non-Waiver................................23
(f) Applicable Law......................................24
(g) Consent to Jurisdiction.............................24
(h) Binding Effect......................................24
(i) Assignment..........................................24
(j) Amendments..........................................24
(k) Headings............................................24
(l) Severability........................................24
(m) Counterparts........................................25
(n) No Strict Construction..............................25
(o) Gender..............................................25
(p) Interpretation......................................25
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INDEX OF TERMS
Affiliate....................................................................6
Agreement....................................................................1
Business.....................................................................1
Certificate of Merger........................................................2
Claims.......................................................................4
Closing......................................................................3
Closing Date.................................................................3
Code.........................................................................1
Confidential................................................................21
Confidential Information....................................................21
Consents....................................................................16
Constituent Corporations.....................................................1
control......................................................................6
Damages.....................................................................22
DGCL.........................................................................1
Effective Time...............................................................2
Environmental Laws...........................................................9
Environmental Permits........................................................9
ERISA........................................................................7
Exchange Act................................................................12
GAAP.........................................................................5
Liabilities..................................................................5
Material Contracts...........................................................7
Merger.......................................................................1
Mergerco.....................................................................1
Parent.......................................................................1
Parent Common Stock.........................................................11
Parent Financial Statements.................................................12
Parent Interim Financial Statements.........................................12
Parent Series B Preferred Stock.............................................11
Parent Series C Preferred Stock.............................................11
Parent Stock................................................................11
Parent's and Mergerco'sAncillary Documents..................................10
Per Share Merger Consideration...............................................2
Permits......................................................................7
Returns......................................................................8
SEC Documents...............................................................12
Stockholder..................................................................1
Surviving Corporation........................................................1
Target.......................................................................1
Target Leased Premises.......................................................9
Target Share.................................................................2
Target's Ancillary Documents.................................................4
Target's Interim Financial Statements........................................5
Taxes........................................................................8
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of June 17,
2005, by and among EarthShell Corporation, a Delaware corporation ("Parent"),
EarthShell Triangle, Inc., a Delaware corporation and a wholly-owned subsidiary
of Parent ("Mergerco"), ReNewable Products, Inc., a Delaware corporation
("Target"), and ReNewable Products LLC, a Delaware limited liability company and
sole stockholder of Target ("Stockholder").
R E C I T A L S
A. Target is engaged in the business of manufacturing, marketing and
distributing biodegradable plates and bowls (the "Business").
B. The Board of Directors of Parent deems it advisable and in the best
interests of Parent and its stockholders for Parent to enter the Business
through the acquisition of Target.
C. The Board of Directors of each of Parent, Mergerco and Target has
approved, and deems it advisable and in the best interests of its respective
stockholders to consummate, Parent's acquisition of Target by means of a reverse
merger of Mergerco with and into Target, upon the terms and subject to the
conditions set forth herein;
D. In furtherance thereof, the respective Boards of Directors of
Mergerco and Target have approved this Agreement in accordance with the Delaware
General Corporation Law, as amended ("DGCL"); and
E. The parties hereto intend that the Merger (as defined herein) shall
qualify for U.S. federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended
(together with the rules and regulations promulgated thereunder, the "Code").
A G R E E M E N T S
Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The Merger.
(a) General. Upon the terms and subject to the conditions contained
in this Agreement, at the Effective Time (as herein defined) and in
accordance with the DGCL, Mergerco shall be merged with and into Target
(the "Merger"), the separate corporate existence of Mergerco shall cease
and Target shall continue as the surviving corporation under the corporate
name "ReNewable Products, Inc." (the "Surviving Corporation"). Mergerco
and Target are sometimes referred to in this Agreement as the "Constituent
Corporations".
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(b) Effect of Merger. Immediately following the Merger, the
Surviving Corporation shall (i) possess all rights, privileges, immunities
and franchises, both public and private, of the Constituent Corporations,
(ii) be vested with all property, whether real, personal or mixed, and all
debts due on whatever account, and all other causes of action, and all and
every other interest belonging to or due to each of the Constituent
Corporations, and (iii) be responsible and liable for all the obligations
and liabilities of each of the Constituent Corporations, all with the
effect set forth in the DGCL.
(c) Consummation of the Merger. At the Closing (as herein defined),
the parties shall cause to be filed with the Secretary of State of the
State of Delaware a certificate of merger and other appropriate documents
(such certificates and other documents being hereinafter collectively
referred to as the "Certificate of Merger") executed in accordance with
the relevant provisions of the DGCL and shall make all other filings,
recordings or publications required by the DGCL in connection with the
Merger. The Merger shall become effective (i) at the time at which the
Certificate of Merger is duly filed with the Secretary of State of the
State of Delaware or (ii) at such other time specified in the Certificate
of Merger (the "Effective Time").
(d) Certificate of Incorporation. The Certificate of Incorporation
of Target, as in effect immediately prior to the Effective Time, shall be,
from and after the Effective Time, the Certificate of Incorporation of the
Surviving Corporation, until thereafter altered, amended or repealed in
accordance with applicable law.
(e) By-Laws. The By-Laws of Target, as in effect immediately prior
to the Effective Time, shall be, from and after the Effective Time, the
By-Laws of the Surviving Corporation, until thereafter altered, amended or
repealed as provided therein and in accordance with applicable law.
(f) Directors and Officers. The directors and officers of Target in
office immediately prior to the Effective Time shall be, from and after
the Effective Time, the directors and officers, respectively, of the
Surviving Corporation until the earlier of their death, resignation or
removal or until their respective successors are duly elected or appointed
or qualified, as the case may be.
2. Conversion of Securities. As of the Effective Time, by virtue of the
Merger and without any action on the part of Target or Mergerco or their
respective stockholders:
(a) Mergerco Common Stock. Each issued and outstanding share of
capital stock of Mergerco shall be converted into and become one fully
paid and non-assessable share of common stock, par value $0.01 per share,
of the Surviving Corporation.
(b) Target Common Stock. Each share of capital stock of Target (a
"Target Share") issued and outstanding immediately prior to the Effective
Time (other than any such shares owned by Target, which shall be
cancelled) shall be converted into such number of fully paid and
non-assessable shares of Series C Convertible Preferred Stock of Parent,
par value $0.01 per share, as is equal to the quotient obtained by
dividing 8,000,000 by the aggregate number of shares of capital stock of
Target outstanding at the Effective Time (the "Per Share Merger
Consideration"). From and after the Effective Time, all of the
certificates representing the outstanding Target Shares shall be deemed to
be no longer outstanding, not be transferable on the books of the
Surviving Corporation, and shall represent solely the Per Share Merger
Consideration.
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3. Closing.
(a) Time and Place of Closing. The transaction contemplated by this
Agreement shall be consummated (the "Closing") at 10:00 a.m., prevailing
business time, at the offices of Xxxxxx Xxxxxx LLP, 0000 Xxxxx Xxxxx,
Xxxxxxx, Xxxxxxxx, 00000, within three business days of the later to occur
of (i) the satisfaction of all conditions to closing as set forth in
Sections 7 and 8 hereto (other than those conditions to be satisfied at
Closing) or (ii) the delivery by Target to Parent of a written notice of
Target's intent to effect the Merger and consummate the transactions
contemplated by this Agreement, or on such other date, or at such other
place, as shall be agreed upon by Target and Parent. The date on which the
Closing shall occur in accordance with the preceding sentence is referred
to in this Agreement as the "Closing Date."
(b) Closing Deliveries. At the Closing, the parties shall execute
and deliver closing certificates, good standing certificates, third party
consents, and other documents and instruments as are reasonably required
in order to effectuate the consummation of the transaction contemplated
hereby, including the documents and instruments set forth on Exhibit A
attached hereto.
4. Representations and Warranties of Stockholder. Stockholder represents
and warrants to Parent and Mergerco that:
(a) Corporate Organization, Qualification. Target is a corporation
duly organized, existing and in good standing, under the laws of the State
of Delaware. Target has all necessary corporate power and authority to
conduct its business as its business is now being conducted. Target has
qualified as a foreign corporation, and is in good standing, under the
laws of all jurisdictions where the nature of its business or the nature
or location of its assets requires such qualification, except where the
failure to be so qualified could not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect on
Target. For purposes of this Agreement, "Material Adverse Effect" means a
material adverse effect (i) on the condition (financial or otherwise),
business, assets, liabilities, properties or results of operations of
Parent, Target, Mergerco or Stockholder, as applicable, taken as a whole,
that is not a result of general changes in the economy or the industries
in which such entities operate, or (ii) on the ability of Parent, Target,
Mergerco or Stockholder, as applicable, to perform any obligations
hereunder or under the transactions contemplated hereby such that the
conditions set forth in Sections 8 or 9 would not be satisfied.
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(b) Power and Authority. This Agreement has been approved by the
boards of directors, or managers, as applicable, of Target and Stockholder
and, upon execution and delivery hereof, by the Stockholder as the sole
stockholder of Target. No other action or approval is required by Target
to authorize and approve this Agreement and the Merger, and Target has and
will have full corporate power and authority to execute deliver and
perform this Agreement and all documents and instruments to be executed by
Target pursuant to this Agreement (collectively, the "Target's Ancillary
Documents"). This Agreement ---------------------------- and Target's
Ancillary Documents have been duly executed and delivered by duly
authorized officers of Target. Neither the execution and delivery of this
Agreement and Target's Ancillary Documents by Target, nor the consummation
by Target of the transaction contemplated hereby, will conflict with or
result in a breach of any of the terms, conditions or provisions of
Target's Certificate of Incorporation or By laws, or of any order, writ,
injunction, judgment or decree of any court or any governmental authority
or of any arbitration award binding on Target. The execution, delivery and
performance of this Agreement and the Target Ancillary Documents by the
Target and the consummation by Target of the transactions contemplated
thereby will not conflict with or constitute a default (or an event which
with notice or lapse of time or both would become a default) under or give
to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which Target is
a party, or result in a violation of any law, rule, regulation, order,
judgment or decree applicable to Target or by which any property or asset
of Target is bound or affected.
(c) Consents. No consent, authorization, order or approval of, or
filing or registration with, any governmental authority or other person is
required for the execution and delivery by Target of this Agreement and
Target's Ancillary Documents and the consummation by Target of the
transactions contemplated by this Agreement and Target's Ancillary
Documents.
(d) Capitalization. The authorized capital stock of Target prior to
the Merger consists of 1,000 shares of common stock, $0.01 par value per
share, of which 100 shares are issued and outstanding and owned of record
and beneficially by Stockholder. All of the issued and outstanding Target
Shares have been validly issued, are fully-paid and non-assessable. All of
the issued and outstanding Target Shares are free and clear of all claims,
actions, causes of action, suits, proceedings, debts, demands or
liabilities of any kind (collectively, "Claims"). There are no outstanding
subscriptions, options, warrants, rights (including preemptive rights),
calls, convertible securities or other agreements or commitments of any
character relating to the issued or unissued capital stock or other
securities of Target obligating Target to issue any securities of any
kind. The issued and outstanding Target Shares were issued in compliance
with all applicable federal and state securities laws. There are no stock
appreciation rights, phantom stock or similar rights in existence with
respect to Target. Target has no subsidiaries.
(e) Constituent Documents; Directors and Officers.
(i) True and complete copies of the Certificate of
Incorporation and all amendments thereto, the By-laws as amended and
currently in force, all stock records, and all corporate minute
books and records of Target have been furnished for inspection by
Parent. Said stock records accurately reflect all share transactions
and the current stock ownership of Target. The corporate minute
books and records of Target contain true and complete copies of all
resolutions adopted by the stockholder or the board of directors of
Target, and any other action formally taken by Target. Target is not
in violation of its Certificate of Incorporation or By-laws.
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(ii) Section 4(e) of the Disclosure Schedule lists the
directors and officers of Target.
(f) Financial.
(i) Target's books, accounts and records are, and have been,
maintained in Target's usual, regular and ordinary manner, in
accordance with generally accepted accounting practices, and all
material transactions to which Target has been a party are properly
reflected therein.
(ii) Complete and accurate copies of the unaudited
consolidated balance sheet of Target as of April 30, 2005, and the
unaudited consolidated statement of income of the Company and the
Subsidiaries for the four month period then ended are included in
Section 4(f) of the Disclosure Schedule ("Target's Interim Financial
Statements"). Target's Interim Financial Statements present
accurately and completely the financial position of Target as of the
respective dates thereof, and the results of operations and cash
flows of Target for the respective periods covered thereby, in
accordance with generally accepted accounting principles ("GAAP"),
consistently applied, except for the omission of normal footnote
disclosures required by GAAP and subject to customary year end
adjustments in the ordinary course of business.
(iii) Target has no obligation or liability of any nature
whatsoever (direct or indirect, matured or unmatured, absolute,
accrued, contingent or otherwise), whether or not required by GAAP
to be provided or reserved against on a balance sheet (all the
foregoing herein collectively being referred to as the
"Liabilities") that would have a Material Adverse Effect except for
liabilities provided for or reserved against in Target's Interim
Financial Statements or incurred in the ordinary course of business
since the date of Target's Interim Financial Statements.
(g) Title to Assets. Target owns or leases all tangible assets
necessary for the conduct of its business as presently conducted, and at
the Closing Date Target will own or lease all tangible assets necessary
for the conduct of the business as proposed to be conducted as of the
Closing Date. Target has good title to its assets, free and clear of any
Claims. No unreleased mortgage, trust deed, chattel mortgage, security
agreement, financing statement or other instrument encumbering any of
Target's assets has been recorded, filed, executed or delivered.
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(h) Related Party Transactions. Except as set forth on Section 4(h)
of the Disclosure Schedule, no Affiliate (as herein defined) of Target:
(i) owns or leases any property or right, whether tangible or intangible,
which is used by Target; (ii) has any claim or cause of action against
Target; (iii) owes any money to Target or is owed money by Target; except
future amounts owed under agreements set forth on Section 4(h) of the
Disclosure Schedule; (iv) is a party to any contract or other arrangement,
written or oral, with Target; or (v) provides services or resources to
Target or is dependent on services or resources provided by Target.
Section 4(h) of the Disclosure Schedule sets forth every business
relationship (other than normal employment relationships) between Target,
on the one hand, and Target's present or former officers, directors,
employees or shareholders or members of their families (or any entity in
which any of them has a material financial interest, directly or
indirectly), on the other hand, and attaches copies of all written
agreements relating to such relationships. Parent and Mergerco acknowledge
receipt of these agreements and their acceptance of the terms of each such
agreement. No Affiliate of Target is engaged in any business which
competes with the Business. As used herein, "Affiliate" means any person,
--------- association or organization that directly or indirectly, through
one or more intermediaries, controls or is controlled by or is under
common control with another person, association or organization, and the
term "control" means the ------- possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
person, association or organization, whether through the ownership of
voting securities or equity interests, by contract or otherwise.
(i) Conduct of Business. Except in connection with the
capitalization of Target as contemplated by Section 8(e) hereof, since the
date of Target's Interim Financial Statements, Target has not: (i) sold or
in any way transferred or otherwise disposed of any of its assets or
property, except for cash applied in payment of liabilities in the usual
and ordinary course of business; (ii) suffered any casualty, damage,
destruction or loss, or any material interruption in use, of any material
assets or property (whether or not covered by insurance), on account of
fire, flood, riot, strike or other hazard or act of God; (iii) made or
suffered any material change in the conduct or nature of any aspect of its
business; (iv) waived any right or canceled or compromised any debt or
claim, other than in the ordinary course of business; (v) increased the
compensation payable to any salaried employee except in the ordinary
course of business consistent with past practices; (vi) paid, declared or
set aside any dividend or other distribution on its securities of any
class or purchased, exchanged or redeemed any of its securities of any
class; (vii) made any change in accounting methods, principles or
practices; or (viii) without limitation by the enumeration of any of the
foregoing, except for the execution of this Agreement, entered into any
transaction other than in the usual and ordinary course of business.
(j) Material Adverse Changes. Since the date of Target's Interim
Financial Statements, Target has not suffered or, to Target's knowledge
been threatened with any material adverse change in the business,
operations, assets, liabilities, financial condition or prospects,
including, without limiting the generality of the foregoing, the existence
or threat of any labor dispute, or any material adverse change in, or
material loss of, any relationship between Target, on the one hand, and
any of its customers, suppliers, advisors, or key employees, on the other
hand.
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(k) Contracts. Except as set forth on Section 4(h) of the Disclosure
Schedule, Target is a not party to or bound by: (i) any agreement relating
to the incurrence of indebtedness (including sale leaseback and
capitalized lease transactions and similar financing transactions) proving
for payment or repayment in excess of $100,000; (ii) any "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K)
or (iii) any non-competition agreement which purports to limit in any
material respect the manner in which or the localities in which all or any
portion of its business is or would be conducted (collectively, "Material
Contracts"). All Material Contracts and all other contracts or instruments
to which Target is a party or is bound are in full force and binding upon
the parties thereto. No default by Target has occurred thereunder, Target
has performed all of its obligations thereunder on a timely basis, and, to
Target's knowledge, no default by the other contracting parties has
occurred thereunder. To Target's knowledge, no event, occurrence or
condition exists which, with the lapse of time, the giving of notice, or
both, or the happening of any further event or condition, would become a
default by Target thereunder. Complete and accurate copies of all Material
Contracts (including any amendments or supplements thereto) have
previously been made available to Parent.
(l) Permits. Target possesses all material certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct its business
("Permits"), and Target has not received any notice of proceedings
relating to revocation or modification of any such certificate,
authorization or permit.
(m) Employee Benefits.
(i) Section 4(m)(i) of the Disclosure Schedule lists all
Benefit Plans that cover any employee of Target.
(ii) Each Benefit Plan of Target subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
complies in all material respects and has been administered in
compliance in all material respects with (A) the provisions of
ERISA; (B) all provisions of the Code, applicable to secure the
intended tax consequences; (C) all applicable state and federal
securities laws; and (D) all other applicable laws, rules and
regulations.
(iii) "Benefit Plans" shall mean each incentive compensation,
stock purchase, stock option, and other equity compensation plan,
program or arrangement, each severance or termination pay, medical,
surgical, hospitalization, life and other "welfare" plan, fund or
program within the meaning of Section 3(1) of ERISA.
(n) Employee Relations. Target is not involved in any labor dispute
nor, to the knowledge of Target, is any such dispute threatened. None of
Target's employees is a member of a union.
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(o) Taxes. Target has filed all Returns (as herein defined) required
to be filed with respect to Taxes (as herein defined) and financial
results of Target. All such Returns were correct and complete in all
material respects. All Taxes payable by Target, whether or not shown on
any Return, have been paid in full, and Target has fully complied with all
applicable tax laws and agreements. The liabilities for Taxes reflected on
the Target Interim Financial Statements are in accordance with GAAP and
are sufficient for payment of all Taxes of Target that are accrued through
the date of such financial statements and not yet due and payable. Target
has and will have no accrued liability for Taxes in respect of taxable
periods or portions thereof following the date of the Target Interim
Financial Statements and ending on or before the Closing Date other than
Taxes incurred in the ordinary course of business consistent with past
practice as reflected on their Returns. Target has withheld and paid all
Taxes or other amounts required to have been withheld and paid in
connection with amounts paid or owing to any employee. Target has no
subsidiaries, is not a party to any Tax allocation or Tax sharing or Tax
indemnification agreement, has never been a member of any affiliated group
within the meaning of Section 1504(a) of the Code, or any similar
provision of state, local or foreign law. No claim has ever been made by
an authority in a jurisdiction where Target does not file Returns that
Target is or may be subject to taxation by that jurisdiction. There is no
dispute or claim concerning any liability for Taxes of Target claimed or
raised by any taxing authority, and, there is no pending or, to Target's
knowledge, threatened or anticipated audits or other investigations in
respect of Taxes of Target. During the five-year period ending on the date
of this Agreement, Target was not a distributing corporation or a
controlled corporation in a transaction intended to be governed by Section
355 of the Code. The transaction contemplated herein is not subject to the
tax withholding provisions of section 3406 of the Code, or of Subchapter A
of Chapter 3 of the Code, or of any other provision of law. For purposes
of this Agreement, "Taxes" (and, with correlative meanings, "Tax" and
"Taxable") means all Federal, state, local, foreign and other net income,
gross income, gross receipts, sales, estimated, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property (including personal property), windfall profits, customs, duties
or other taxes, fees, assessments or charges of any kind whatever,
together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, and "Returns" shall mean all
returns, declarations, reports, statements and other documents required to
be filed in respect of Taxes.
(p) Litigation. There is no (i) litigation or proceeding, in law or
in equity; (ii) proceedings or governmental investigations before any
commission or other administrative authority; or (iii) claim made by any
person or entity, in any case described in clauses (i), (ii) and (iii)
above, pending, or, to Target's knowledge, threatened, against Target, its
directors or officers, or with respect to or affecting Target's
operations, business, products, sales practices or financial condition or
related to the consummation of the transaction contemplated hereby.
(q) Laws. Target is not a party to, or bound by, any decree, order
or arbitration award (or agreement entered into in any administrative,
judicial or arbitration proceeding with any governmental authority) with
respect to its properties, assets, personnel or business activities.
Target is not in material violation of, in material noncompliance with, or
materially delinquent in respect to, any decree, order or arbitration
award or law or statute, or regulation of or agreement with, any Federal,
state or local governmental authority (or to which its properties, assets,
personnel, business activities or real estate are subject or to which it,
itself, is subject), including laws, statutes and regulations relating to
equal employment opportunities, fair employment practices, unfair labor
practices, terms of employment, occupational health and safety, wages and
hours and discrimination, and zoning ordinances and building codes.
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(r) Environmental. To the knowledge of Target, Target: (i) is in
material compliance with any and all applicable foreign, federal, state
and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) has received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct the Business ("Environmental Permits") and
(iii) is in compliance with all terms and conditions of such Environmental
Laws and Environmental Permits.
(s) Real Estate.
(i) Target does not own any real property.
(ii) Target does not lease any real property other than the
premises identified on Section 4(h) of the Disclosure Schedule as
being so leased (the "Target Leased Premises"). The Target Leased
Premises are leased to Target pursuant to a written lease, complete
copies of which, including all amendments thereto, have been
delivered to Parent. The lease for the Target Leased Premises is in
full force and effect and all rentals, royalties or other payments
accruing and due and to be paid thereunder prior to the date hereof
have been fully paid. To Target's knowledge, no event, occurrence or
condition exists which, with the lapse of time, the giving of
notice, or both, or the happening of any further event or condition,
would become a default thereunder.
(t) Intellectual Property. Subject to the last sentence of this
Section 4(t), Target owns or possesses adequate rights or licenses to use
all trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights necessary
to conduct the Business as now conducted. Subject to the last sentence of
this Section 4(t), Target does not have any knowledge of any infringement
by Target of trademark, tradename rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service
xxxx registrations, trade secret or other similar rights of others, and to
the knowledge of Target, there is no claim, action or proceeding being
made or brought against, or to the knowledge of Target, threatened against
Target regarding trademark, tradename, patents, patent rights, invention,
copyright, license, service names, service marks, service xxxx
registrations, trade secret or other infringement, and Target and its
subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing. Notwithstanding the foregoing, neither
Target nor Stockholder makes any representation or warranty relating to
any intellectual property or rights licensed to Target by Parent or any of
its Affiliates.
(u) Capital Commitments. Stockholder's investors have committed at
least Twelve Million Dollars ($12,000,000) of capital to Stockholder. As
of the date of this Agreement, Stockholder has received from its
investors, and invested in Target, Six Million Dollars ($6,000,000) of
capital. Target will receive, and will invest in Target, the balance of
its investors' capital commitments within thirty (30) days of the date
hereof.
9
5. Representations and Warranties of Parent and Mergerco. Parent and
Mergerco jointly and severally represent and warrant to Target and Stockholder
as follows:
(a) Corporate Organization, Qualification. Parent and Mergerco are
each corporations duly organized, existing and in good standing, under the
laws of the State of Delaware. Each of Parent and Mergerco has all
necessary power and authority to conduct its business as its business is
now being conducted. Each of Parent and Mergerco has qualified as a
foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of the Business or the nature or location
of its assets requires such qualification, except where the failure to be
so qualified could not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect on Parent. Except as set forth
in the SEC Documents, Parent neither owns nor controls, directly or
indirectly, any interest in any corporation, limited liability company,
partnership or other entity.
(b) Power and Authority. This Agreement has been approved by
Parent's and Mergerco's board of directors and by Parent as sole
stockholder of Mergerco. No other action or approval, including approval
by Parent's stockholders, is required by Parent to authorize and approve
this Agreement and the Merger, and each of Parent and Mergerco has and
will have full corporate power and authority to execute deliver and
perform this Agreement and all documents and instruments to be executed by
Parent or Mergerco pursuant to this Agreement (collectively, the "Parent's
and Mergerco's Ancillary Documents"). This Agreement and Parent's and
Mergerco's Ancillary Documents have been duly executed and delivered by
duly authorized officers of Parent or Mergerco, as applicable. Neither the
execution and delivery of this Agreement and Parent's and Mergerco's
Ancillary Documents by Parent and Mergerco, respectively, nor the
consummation by Parent and Mergerco of the transaction contemplated
hereby, will conflict with or result in a breach of any of the terms,
conditions or provisions of Parent's or Mergerco's Certificate of
Incorporation or By laws, or of any order, writ, injunction, judgment or
decree of any court or any governmental authority or of any arbitration
award binding on Parent or Mergerco. The execution, delivery and
performance of this Agreement and Parent's or Mergerco's Ancillary
Documents by Parent and Mergerco and the consummation by Parent and
Mergerco of the transactions contemplated thereby will not conflict with
or constitute a default (or an event which with notice or lapse of time or
both would become a default) under or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which Parent or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and
regulations of The National Association of Securities Dealers Inc.'s OTC
Bulletin Board on which the Parent Common Stock is quoted) applicable to
Parent or any of its subsidiaries or by which any property or asset of
Parent or Mergerco is bound or affected.
10
(c) Consents. No consent, authorization, order or approval of, or
filing or registration with, any governmental authority or other person is
required for the execution and delivery by Parent or Mergerco of this
Agreement and Parent's and Mergerco's Ancillary Documents and the
consummation by Parent and Mergerco of the transaction contemplated by
this Agreement and Parent's and Mergerco's Ancillary Documents.
(d) Capitalization. The authorized capital stock of Parent consists
of (i) 40,000,000 shares of common stock, $0.01 par value per share
("Parent Common Stock"), of which 18,234,615 shares are issued and
outstanding, and (ii) 10,000,000 shares of Preferred Stock, of which 100
shares are designated Series B Convertible Preferred Stock (the "Parent
Series B Preferred Stock") and 8,000,000 shares will, upon filing of the
Certificate of Designation attached hereto as Exhibit G (the "Certificate
of Designation"), be designated Series C Convertible Preferred Stock (the
"Parent Series C Preferred Stock"). One hundred shares of Parent Series B
Preferred Stock and no shares of Parent Series C Preferred Stock are
issued and outstanding. The Parent Common Stock, Parent Series B Preferred
Stock and Parent Series C Preferred Stock shall be referred to
collectively herein as the "Parent Stock". All of the issued and
outstanding shares of Parent Stock (or shares which will be issued and
outstanding as of the Effective Time) have been validly issued, are
fully-paid and non-assessable. Section 5(d) of the Disclosure Schedule
sets forth a complete and accurate list (including the number of shares of
Parent Stock issuable thereunder) of all outstanding oral or written
subscriptions, options, warrants, rights (including preemptive rights),
calls, convertible securities or other agreements or commitments of any
character relating to the issued or unissued capital stock or other
securities of Parent obligating Parent to issue any securities of any
kind, including Parent Stock. The issued and outstanding shares of Parent
Common Stock were issued in compliance with all applicable federal and
state securities laws. Except as set forth on Section 5(d) of the
Disclosure Schedule, there are no stock appreciation rights, phantom stock
or similar rights in existence with respect to Parent. Except as set forth
on Section 5(d) of the Disclosure Schedule, (x) there are no outstanding
debt securities of Parent, (y) there are no agreements or arrangements
under which Parent is obligated to register for sale any of their
securities under the Securities Act, and (z) there are no outstanding
registration statements and there are no outstanding comment letters from
the Securities Exchange Commission or other regulatory agency. Section
5(d) of the Disclosure Schedule sets forth a complete and accurate list of
any (1) written or oral agreement, security or instrument containing
anti-dilution or similar provisions or rights that prohibit the issuance
of Parent Common Stock (or securities convertible or exchangeable into
Parent Common Stock) or that prohibit such issuances at less than a
certain price or that result in the right to receive additional shares of
Parent Common Stock as a result of such issuances and (2) such agreements,
securities or instruments that have resulted, or upon consummation of the
transactions contemplated by this Agreement will result, in an increase in
the number of outstanding securities of Parent pursuant to such
provisions, and sets forth any increases in the outstanding securities of
Parent that have or will result therefrom.
11
(e) Constituent Documents. True and complete copies of the
Certificates of Incorporation and all amendments thereto, the By-laws as
amended and currently in force, all stock records, and all corporate
minute books and records of Parent and Mergerco have been furnished for
inspection by Target. Said records of Parent Stock (or securities
convertible or exchangeable into Parent Stock) and Mergerco accurately
reflect all share transactions and the current ownership of Parent Stock
(or securities convertible or exchangeable into Parent Stock) and
Mergerco. The corporate minute books and records of Parent and Mergerco
contain true and complete copies of all resolutions adopted by the
stockholder or the board of directors of Parent, and any other action
formally taken by Parent.
(f) SEC Reports and Financial.
(i) Except as set forth on Schedule 5(f) of the Disclosure
Schedule, since January 1, 2002, Parent has timely filed, all
reports, schedules, forms, statements and other documents required
to be filed by it with the SEC under Securities Exchange Act of
1934, as amended (the "Exchange Act")(all such documents to be
referred to collectively as "SEC Documents").
(ii) As of their respective dates, the SEC Documents did not
contain any untrue statement of material fact or omit to state a
material fact required to be stated therein necessary to make the
statements made therein, in light of the circumstances under which
they were made.
(iii) Parent's books, accounts and records are, and have been,
maintained in Parent's usual, regular and ordinary manner, in
accordance with generally accepted accounting practices, and all
material transactions to which Parent has been a party are properly
reflected therein.
(iv) Complete and accurate copies of the audited consolidated
balance sheet and statement of income, retained earnings, and cash
flows, and notes to financial statements (together with any
supplementary information thereto) of Parent, all as of and for the
year ended December 31, 2004, are included in the SEC Documents (the
"Parent Financial Statements"). Complete and accurate copies of the
unaudited consolidated balance sheet of Parent as of March 31, 2005,
and the unaudited consolidated statement of income of the Company
and the Subsidiaries for the three month period then ended have also
been provided to Target (the "Parent Interim Financial Statements").
The Parent Financial Statements and Parent Interim Financial
Statements, have been prepared from, and are in accordance with, the
books and records of Parent and its consolidated subsidiaries, have
been prepared in accordance with GAAP, consistently applied during
the period involved (except as may be stated in the notes thereto)
and fairly present in all material respects the consolidated
financial position and the consolidated results of operations and
cash flows (and changes in financial position, if any) of Parent and
its consolidated subsidiaries as of the times and for the periods
referred to therein.
(v) Parent has no Liabilities that would have a Material
Adverse Effect except for liabilities provided for or reserved
against in the Parent Interim Financial Statements.
12
(g) Litigation. Except as set forth on Section 5(g) of the
Disclosure Schedule or as disclosed in the SEC Documents, there is no (i)
litigation or proceeding, in law or in equity; (ii) proceedings or
governmental investigations before any commission or other administrative
authority; or (iii) claim made by any person or entity, in any case
described in clauses (i), (ii) and (iii) above, pending, or, to Parent's
knowledge, threatened, against Parent, Parent's directors or officers, or
with respect to or affecting Parent's operations, business, products,
sales practices or financial condition or related to the consummation of
the transaction contemplated hereby.
(h) Contracts. Except as set forth in Section 5(h) of the Disclosure
Schedule, or as disclosed in the SEC Documents, Parent is a not party to
or bound by any Material Contract. All Material Contracts and all other
contracts or instruments to which Parent is a party or is bound are in
full force and binding upon the parties thereto. No default by Parent has
occurred thereunder, Parent has performed all of its obligations
thereunder on a timely basis, and, to Parent's knowledge, no default by
the other contracting parties has occurred thereunder. To Parent's
knowledge, no event, occurrence or condition exists which, with the lapse
of time, the giving of notice, or both, or the happening of any further
event or condition, would become a default by Parent thereunder. Complete
and accurate copies of all Material Contracts (including any amendments or
supplements thereto) have previously been delivered to Target. Parent is
not a party to or otherwise bound by any registration rights or similar
agreements that would conflict with or otherwise affect, limit or cut-back
the terms and rights granted to Stockholder under the Registration Rights
Agreement to be entered into as of the Effective Time by Stockholder and
Parent.
(i) Intellectual Property. Parent owns or possesses adequate rights
or licenses to use all trademarks, trade names, service marks, service
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Parent does not have any knowledge of any infringement by
Parent of trademark, tradename rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service xxxx
registrations, trade secret or other similar rights of others, and to the
knowledge of Parent, there is no claim, action or proceeding being made or
brought against, or to the knowledge of Parent, threatened against Parent
regarding trademark, tradename, patents, patent rights, invention,
copyright, license, service names, service marks, service xxxx
registrations, trade secret or other infringement, and Parent is unaware
of any facts or circumstances which might give rise to any of the
foregoing.
(j) Environmental. To the knowledge of Parent, Parent (i) is in
material compliance with any and all Environmental Laws (ii) has received
all Environmental Permits and (iii) is in compliance with all terms and
conditions of such Environmental Laws and Environmental Permits.
(k) Employee Benefits. Except as set forth on Section 5(k) of the
Disclosure Schedule, all Benefit Plans that cover any employee of Parent
have been fully disclosed in the SEC Documents. Each Benefit Plan of
Parent subject to ERISA complies in all material respects and has been
administered in compliance in all material respects with (A) the
provisions of ERISA (B) all provisions of the Code, applicable to secure
the intended tax consequences (C) all applicable state and federal
securities laws and (D) all other applicable laws, rules and regulations.
13
(l) Laws. Parent is not a party to, or bound by, any decree, order
or arbitration award (or agreement entered into in any administrative,
judicial or arbitration proceeding with any governmental authority) with
respect to its properties, assets, personnel or business activities.
Parent is not in material violation of, in material noncompliance with, or
materially delinquent in respect to, any decree, order or arbitration
award or law or statute, or regulation of or agreement with, any Federal,
state or local governmental authority (or to which its properties, assets,
personnel, business activities or real estate are subject or to which it,
itself, is subject), including laws, statutes and regulations relating to
equal employment opportunities, fair employment practices, unfair labor
practices, terms of employment, occupational health and safety, wages and
hours and discrimination, zoning ordinances and building codes and food
and drug safety.
(m) Conduct of Business. Except as set forth on Section 5(m) of the
Disclosure Schedule, since the date of Parent's Interim Financial
Statements, Parent has not (i) sold or in any way transferred or otherwise
disposed of any of its assets or property, except for cash applied in
payment of liabilities in the usual and ordinary course of business; (ii)
suffered any casualty, damage, destruction or loss, or any material
interruption in use, of any material assets or property (whether or not
covered by insurance), on account of fire, flood, riot, strike or other
hazard or act of God; (iii) made or suffered any material change in the
conduct or nature of any aspect of its business; (iv) waived any right or
canceled or compromised any debt or claim, other than in the ordinary
course of business; (v) made (or committed to make) capital expenditures
in an amount which exceeds $50,000 for any item or $250,000 in the
aggregate; (vi) increased the compensation payable to any salaried
employee except in the ordinary course of business consistent with past
practices; (vii) hired or terminated any employee who has an annual salary
in excess of $50,000; (viii) borrowed any money or issued any bonds,
debentures, notes or other corporate securities evidencing money borrowed;
(ix) paid, declared or set aside any dividend or other distribution on its
securities of any class or purchased, exchanged or redeemed any of its
securities of any class; (x) made any change in accounting methods,
principles or practices; (xi) purchased any asset (whether or not in the
ordinary course of business) for a cost in excess of $50,000; or (xii)
without limitation by the enumeration of any of the foregoing, except for
the execution of this Agreement, entered into any transaction other than
in the usual and ordinary course of business.
(n) Title to Assets. Parent owns or leases all tangible assets
necessary for the conduct of its business as presently conducted and as
proposed to be conducted as of the Closing Date. Parent has good title to
its assets, free and clear of any Claims, except as set forth on Section
5(n) of the Disclosure Schedule. No unreleased mortgage, trust deed,
chattel mortgage, security agreement, financing statement or other
instrument encumbering any of Parent's assets has been recorded, filed,
executed or delivered.
14
(o) Related Party Transactions. Except as set forth on Section 5(o)
of the Disclosure Schedule or as disclosed in the SEC Documents, no
Affiliate of Parent: (i) owns any property or right, whether tangible or
intangible, which is used by Parent, (ii) has any claim or cause of action
against Parent; (iii) owes any money to Parent or is owed money by Parent;
(iv) is a party to any contract or other arrangement, written or oral,
with Parent; or (v) provides services or resources to Parent or is
dependent on services or resources provided by Parent. Section 5(o) of the
Disclosure Schedule sets forth every business relationship (other than
normal employment relationships) between Parent, on the one hand, and
Parent's (or any subsidiary of Parent's) present or former officers,
directors, employees or shareholders or members of their families (or any
entity in which any of them has a material financial interest, directly or
indirectly), on the other hand, including any agreement or arrangement
between Parent and E. Khashoggi Industries LLC ("EKI") and Affiliates of
EKI.
(p) Permits. Parent possess all material certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective
businesses and Parent has not received any notice of proceedings relating
to revocation or modification of any such certificate, authorization or
permit.
(q) Material Adverse Changes. Since December 31, 2004, Parent has
not suffered or, to Parent's knowledge, been threatened with any material
adverse change in the business, operations, assets, liabilities, financial
condition or prospects, including, without limiting the generality of the
foregoing, the existence or threat of any labor dispute, or any material
adverse change in, or material loss of, any relationship between Parent,
on the one hand, and any of its (or its licensee's) customers, suppliers,
licensors, licensees, advisors, or key employees, on the other hand.
(r) Taxes. Except as set forth in the SEC Documents or as set forth
on Section 5(r) of the Disclosure Schedule, Parent has filed all Returns
required to be filed with respect to Taxes and financial results of
Parent. All such Returns were correct and complete in all material
respects. All Taxes payable by Parent, whether or not shown on any Return,
have been paid in full, and Parent has fully complied with all applicable
tax laws and agreements. No claim has ever been made by an authority in a
jurisdiction where Parent does not file Returns that Parent is or may be
subject to taxation by that jurisdiction. Parent has withheld and paid all
Taxes or other amounts required to have been withheld and paid in
connection with amounts paid or owing to any employee. There is no dispute
or claim concerning any liability for Taxes of Parent claimed or raised by
any taxing authority, and, there is no pending or, to Parent's knowledge,
threatened or anticipated audits or other investigations in respect of
Taxes of Parent. The transaction contemplated herein is not subject to the
tax withholding provisions of section 3406 of the Code, or of Subchapter A
of Chapter 3 of the Code, or of any other provision of law. As of December
31, 2003, Parent's consolidated net operating loss carryforward for U.S.
income tax purposes and for each state to which Parent is obligated to
file tax returns is set forth in Section 5(r) of the Disclosure Schedule.
Since such date, there has been no material reduction to such net
operating loss carry forwards. The transactions contemplated by this
Agreement will not result in any reduction in Parent's consolidated
Federal net operating loss carryover under Code section 382 or under any
applicable state income tax law.
15
(s) Employee Relations. Parent is not involved in any labor dispute
nor, to the knowledge of Parent, is any such dispute threatened. None of
Parent's employees is a member of a union.
6. Conduct Prior to the Closing. Between the date hereof and the Closing
Date:
(a) Access. Each party to this Agreement shall and shall cause (as
applicable) its subsidiaries to give to the officers, employees, agents,
attorneys, consultants, accountants and lenders of the other parties
hereto reasonable access during normal business hours to all of the
properties, books, contracts, documents, records and personnel of each
such party and shall furnish to the other parties hereto and such persons
as such other parties shall designate such information as such persons may
at any time and from time to time reasonably request in order to permit
each such party to complete its respective due diligence investigation
pertaining to the transactions contemplated by this Agreement. All such
information shall be subject to the confidentiality provisions set forth
in Section 12 hereof.
(b) Provision of Information by Parent to Target. In addition to the
covenants set forth in Section 6(a) above, Parent shall also provide to
Target:
(i) All financial information pertaining to Parent as is
provided to the Board of Directors and other members of management
of Parent, including monthly financial reports, budgets, and
financial projections; and
(ii) Any information regarding EKI and the financial, business
and other agreements and arrangements in place by and between Parent
and EKI, or its Affiliates, as Target may request.
(c) Consents. Each party hereto shall use its best efforts and make
every good faith attempt and shall cooperate with each other to obtain all
consents to the consummation of the transaction contemplated hereby under
or with respect to, any contract, lease, agreement, purchase order, sales
order or other instrument, or Permit, where the consummation of the
transaction contemplated hereby would be prohibited or constitute an event
of default, or grounds for acceleration or termination, in the absence of
such consent (the "Consents").
16
(d) Conduct of Business. Each party hereto shall carry on its
business in the usual and ordinary course, consistent with past practices
and shall use its best efforts to preserve its business and the goodwill
of its customers, suppliers and others with which each such party has
business relations and to retain its business organizational capability.
Without limiting the foregoing, without the prior written consent of the
other parties hereto, and without limiting the generality of any other
provision of this Agreement, no party hereto shall: (i) amend its
Certificate of Incorporation or By-laws (except, in the case of Parent, in
connection with the Certificate of Designation and the decrease or
increase in the number of directors); (ii) make any change in its
authorized shares of stock, (iii) issue any shares of stock of any class,
or issue or become a party to any subscriptions, warrants, rights,
options, convertible securities or other agreements or commitments of any
character relating to the issued or unissued capital stock of any party
hereto or any subsidiary thereof, or to other equity securities of any
such party, or grant any stock appreciation or similar rights, except, in
the case of Parent, upon the exercise or conversion of options, warrants
or other convertible securities outstanding as of the date hereof; (iv)
make distributions of any kind to EKI other than those expressly disclosed
to Target prior to the Closing; (v) incur, assume or guarantee any
long-term or short-term indebtedness; (vi) directly or indirectly, enter
into, assume or amend any contract, agreement, obligation, lease, license
or commitment other than in the usual and ordinary course of business in
accordance with past practices; (vii) make any change to its accounting
methods or principles, or make any Tax elections; and (viii) pay, declare,
accrue or set aside any dividends or any other distributions, in cash,
property or otherwise, on its securities of any class or purchase,
exchange or redeem any of its securities of any class. Notwithstanding the
foregoing, nothing in this Section 6(d) shall prohibit (A) Target from
taking such action and entering into such agreements and other
transactions, including incurring indebtedness, as are necessary or
advisable in connection with the fit-up of the Lebanon facility, the
acquisition of 16 plate making machines and the commercial operation of
such machines and the sale of products, or negotiating, finalizing and
entering into employment agreements with certain key employees of Target,
which may include the terms set forth on Section 6(d)(A) of the Disclosure
Schedule or (B) Parent from (x) issuing additional shares of Parent Common
Stock to Cornell Capital Partners, LP pursuant to the Standby Equity
Distribution Agreement dated as of March 23, 2005 between Parent and
Cornell Capital Partners, LP, as in effect on the date of this Agreement,
or (y) issuing additional shares of Parent Common Stock to Defined
Portfolio Management, LLC in a "PIPE" transaction having the following
terms: (1) Parent may issue up to 4,000,000 shares of Parent Common Stock
at $4.00 per share or the then market price, but in no event less than
$3.00 per share; (2) in connection with such issuance, Parent may issue a
warrant exercisable for not more than three years for up to 500,000 shares
of Parent Common Stock at an exercise price of at least $5.00 per share;
(3) the proceeds of any such transaction shall be used to discharge
indebtedness of Target (including indebtedness that is convertible into
Parent Common Stock) or to redeem other securities of Parent that are
convertible into Parent Common Stock; (4) such PIPE transaction shall not
contain any terms or conditions requiring the consent of Defined Portfolio
Management, LLC or any other party to the transactions contemplated by
this Agreement; and (5) any such PIPE transaction shall not be reasonably
likely to interfere with the consummation of the transactions contemplated
by this Agreement. Parent shall provide Stockholder with copies of all
documentation relating to any proposed PIPE transaction at least fifteen
(15) days prior to entering into any definitive agreements regarding such
transaction.
(e) No Intentional Acts. No party shall intentionally perform any
act which, if performed, or omit to perform any act which, if omitted to
be performed, would prevent or excuse the performance of this Agreement by
any party hereto or which would result in any representation or warranty
herein contained of said party being untrue in any material respect as if
originally made on and as of the Closing Date.
17
(f) Certificate of Designation. Parent will file the Certificate of
Designation with the Secretary of State of the State of Delaware.
7. Conditions to Target's Obligations. The obligation of Target to close
the transactions contemplated hereby is subject to the satisfaction or waiver of
all of the following conditions on or prior to the Closing Date:
(a) Each and every representation and warranty made by Parent and
Mergerco shall have been true and correct in all material respects when
made and shall be true and correct in all material respects as if
originally made on and as of the Closing Date, except for changes
resulting from actions permitted under Section 6 hereof or as agreed to by
Stockholder.
(b) All obligations of Parent and Mergerco to be performed hereunder
through, and including on, the Closing Date (including all obligations
which Parent and would be required to perform at the Closing if the
transaction contemplated hereby was consummated) shall have been
performed.
(c) No suit, proceeding or investigation shall have been commenced
or threatened by any governmental authority or private person on any
grounds to restrain, enjoin or hinder, or to seek material damages on
account of, the consummation of the transaction contemplated hereby.
(d) Parent shall have delivered to Target the written opinion of
Xxxxxx Xxxx & Xxxxxxxx LLP, counsel for Parent, dated as of the Closing
Date, in substantially the form of Exhibit B attached hereto.
(e) All of the Consents listed on Exhibit C shall have been obtained
and delivered to Target.
8. Conditions to Parent's Obligations. The obligation of Parent and
Mergerco to close the transaction contemplated hereby is subject to the
fulfillment of all of the following conditions on or prior to the Closing Date:
(a) Each and every representation and warranty made by Stockholder
shall have been true and correct in all material respects when made and
shall be true and correct in all material respects as if originally made
on and as of the Closing Date except for changes resulting from actions
permitted under Section 6 hereof or as agreed to by Parent.
(b) All obligations of Target to be performed hereunder through, and
including on, the Closing Date (including all obligations which Target
would be required to perform at the Closing if the transaction
contemplated hereby was consummated) shall have been performed.
(c) All of the Consents listed on Exhibit D shall have been obtained
and delivered to Parent.
18
(d) No suit, proceeding or investigation shall have been commenced
or threatened by any governmental authority or private person on any
grounds to restrain, enjoin or hinder, or to seek material damages on
account of, the consummation of the transaction contemplated hereby.
(e) Target shall have provided evidence of (i) its payment under
Purchase Order Number CE-00001, which provides Target with 16 ATW/DTE
Modules installed and operational with full support equipment including
but not limited to mixing equipment to support at least 16 Modules,
conveyors and stackers for at least 9" plates and 12 oz bowls; (ii)
installed electrical, air and water systems in the Lebanon, Missouri
facility for operational support of such machines; (iii) financing in an
amount equal to $1,000,000 plus or minus any amount due or owed under the
Purchase Order for start-up costs, closing costs, initial operating losses
and working capital, plus amounts available under one or more credit
facilities, if needed, to provide additional funding to support ongoing
working capital needs; and (iv) compliance with Section 4(u) hereof.
Target shall also provide (A) confirmation that (1) the 16 plate making
machines have passed such completion tests as are set forth in the
Purchase Order and (2) royalties have been accrued or paid to Parent
pursuant to the Sublicense Agreement by and between Parent and Target, and
(B) a pro forma balance sheet as of the Closing demonstrating that
Target's equity and debt financing are adequate to operate the 16 modules
without additional funding being required from Parent.
(f) Target shall have delivered to Parent the written opinion of
Xxxxxx Xxxxxx LLP, counsel to Target, dated as of the Closing Date, in
substantially the form of Exhibit E attached hereto.
(g) To the extent the directors and officers of Target shall no
longer be the persons identified on Section 4(e) of the Disclosure
Schedule, such successor directors and officers shall be reasonably
acceptable to Parent.
9. Right to Terminate. Anything to the contrary herein notwithstanding,
this Agreement and the transaction contemplated hereby may be terminated at any
time prior to the Closing by prompt notice given in accordance with Section
15(b):
(a) By mutual consent;
(b) by Target at any time prior to the Closing for any reason; and
(c) by either Target or Parent if the Closing shall not have occurred at
or before 11:59 p.m., on March 31, 2006; provided, however, that the right to
terminate this Agreement under this Section 9(c) shall not be available to any
party whose failure to fulfill any material obligation under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or prior
to the aforesaid date.
10. Remedies. In the event of a breach of this Agreement before Closing,
the non-breaching party shall not be limited to the remedy of termination of
this Agreement, but shall be entitled to pursue all available legal and
equitable rights and remedies, and shall be entitled to recover all of its
reasonable costs and expenses incurred in pursuing them (including reasonable
attorneys' fees).
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11. Post Closing Agreements. From and after the Closing:
(a) Further Assurances. The parties shall execute such further
documents, and perform such further acts, as may be necessary to
consummate the transactions contemplated hereby, on the terms herein
contained, and to otherwise comply with the terms of this Agreement. In
furtherance of the foregoing, if, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
reasonably necessary, desirable or proper (i) to vest, perfect or confirm,
of record or otherwise, in the Surviving Corporation its right, title and
interest in, to or under any of the rights, privileges, powers, permits,
licenses, franchises, properties or assets of either of Parent or Target,
or (ii) otherwise to carry out the purposes of this Agreement, the
Surviving Corporation and its proper officers and directors or their
designees shall be authorized to execute and deliver, in the name and on
behalf of either Parent or Target, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of such
corporations, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title and interest in, to and under any of the
rights, privileges, powers, permits, franchises, properties or assets of
such corporations and otherwise to carry out the purposes of this
Agreement.
(b) Management of Surviving Corporation. Surviving Corporation shall
operate as an independent subsidiary of Parent, operating as an
independent licensee of Parent subject to the terms and conditions of the
Sublicense Agreement between Parent and Target, but shall report to the
Board of Directors of Parent for budgetary and strategic approval.
(c) Net Operating Losses. Following the Closing, Parent will make
commercially reasonable efforts not to take any action that will result in
a change of control that will trigger the limitations set forth in Section
382 of the Code.
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12. Disclosure of Confidential Information.
(a) Obligation to Maintain Confidentiality. Parent, Mergerco, Target
and Stockholder each agree that for the longest period permitted by law
following the date of this Agreement, such party shall, and shall cause
such party's Affiliates to, maintain all Confidential Information of the
other parties in confidence and shall not disclose any such Confidential
Information to anyone outside of the parties hereto, and such party shall,
and shall cause such party's Affiliates to, not use any Confidential
Information for its own benefit or the benefit of any third party. Nothing
in this Agreement, however, shall prohibit such party from using or
disclosing Confidential Information to the extent required by law. If such
party is required by applicable law to disclose any Confidential
Information, such party shall (1) provide the applicable party hereto with
prompt notice before such disclosure in order that such party may attempt
to obtain a protective order or other assurance that confidential
treatment will be accorded such information and (2) cooperate with the
applicable party hereto in attempting to obtain such order or assurance.
"Confidential Information" means -------------------------- information
regarding Parent, its subsidiaries, Target, Stockholder or the Business to
the extent it is Confidential, including the following: (1) information
regarding Parent's or Target's or the Business' operations, assets,
liabilities or financial condition; (2) information regarding Parent's,
Target's or the Business' pricing, sales, merchandising, marketing,
capital expenditures, costs, joint ventures, business alliances,
purchasing or manufacturing; (3) information regarding Parent's, Target's
or the Business' other employees or sales representatives, including their
identities, responsibilities, competence and compensation; (4) customer
lists or other information regarding Parent's, Target's or the Business'
current or prospective customers, including information regarding their
identities, contact persons and purchasing patterns; (5) information
regarding Parent's, Target's or the Business" current or prospective
vendors, suppliers, distributors or other business partners; (6)
forecasts, projections, budgets and business plans regarding Parent,
Target or the Business; (7) information regarding Parent's, Target's or
the Business' planned or pending acquisitions, divestitures or other
business combinations; (8) Parent's, Target's or the Business' trade
secrets and proprietary information; (9) technical information, patent
disclosures and applications, copyright, applications, sketches, drawings,
blueprints, models, know-how, discoveries, inventions, improvements,
techniques, processes, business methods, equipment, algorithms, software
programs, software source documents and formulae, in each case regarding
Parent's, Target's or the Business' current, future or proposed products
or services (including information concerning Target's research,
experiment work, development, design details and specifications, and
engineering); and (10) Parent's, Target's or the Business' website
designs, website content, proposed domain names, and data bases.
"Confidential" means not generally available to the public. Information
shall not be considered to be generally available to the public if it is
made public in violation of this Agreement or by a third party who has no
lawful right to disclose the information or who does so in violation of
any contractual, legal or fiduciary obligation to Target.
(b) Injunctive Relief. Parent, Mergerco, Target and Stockholder each
specifically recognizes that any breach of Section 12 hereof will cause
irreparable injury to the other parties and that actual damages may be
difficult to ascertain, and in any event, may be inadequate. Accordingly
(and without limiting the availability of legal or equitable, including
injunctive, remedies under any other provisions of this Agreement), the
parties agree that in the event of any such breach, the party alleging
damage by such breach shall be entitled to seek injunctive relief in
addition to such other legal and equitable remedies that may be available.
Parent, Mergerco, Target and Stockholder each recognize that the
territorial, time and scope limitations in Section 12 hereof are
reasonable and properly required for the protection of Parent, Mergerco,
Target and Stockholder and in the event that any of such limitation or the
absence of such time limitation, is deemed to be unreasonable by a court
of competent jurisdiction, each such party agrees and submits to the
imposition of such a limitation as said court shall deem reasonable.
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13. Indemnification Obligations of Parent. From and after the Closing,
Parent shall defend, indemnify, save and keep harmless Stockholder and its
officers, directors, shareholders, managers, members, successors and permitted
assigns against and from all Damages (as herein defined) sustained or incurred
by any of them resulting from or arising out of or by virtue of: (a) any
inaccuracy in or breach of any representation and warranty made by Parent or
Mergerco in this Agreement or in any closing document delivered to Target or
Stockholder in connection with this Agreement, for as long as such
representation and warranty survives; or (b) any breach by Parent or failure by
Parent to comply with, any of its covenants or obligations under this Agreement.
As used in this Agreement, the term "Damages" shall mean all liabilities,
demands, claims, actions or causes of action, regulatory, legislative or
judicial proceedings or investigations, assessments, levies, losses, fines,
penalties, damages, costs and expenses, including reasonable attorneys',
accountants', investigators', and experts' fees and expenses, sustained or
incurred in connection with the defense or investigation of any claim.
14. Indemnification Obligations of Stockholder. From and after the
Closing, Stockholder shall defend, indemnify, save and keep harmless Parent from
all Damages sustained or incurred by Parent resulting from or arising out of or
by virtue of: (a) any inaccuracy in or breach of any representation and warranty
made by Stockholder in this Agreement or in any closing document delivered to
Parent by Stockholder in connection with this Agreement, for as long as such
representation and warranty survives; or (b) any breach by Target of, or failure
by Target to comply with, any of its covenants or obligations under this
Agreement. For a period of two (2) years following the Closing, prior to making
any distribution of shares of Series C Convertible Preferred Stock of Parent or
Parent Common Stock to any of its members (other than a distribution in exchange
for fair consideration), Stockholder shall obtain such member's agreement to
assume a pro rata share of Stockholder's indemnification obligations under the
preceding sentence, based on the number of shares distributed to such member.
15. Arbitration. In the event that following the Closing there is any
dispute with respect to any claim made by a party seeking indemnification
hereunder, the parties shall negotiate in good faith to resolve such dispute
within fifteen (15) days of notice thereof. In the event that the parties cannot
settle such dispute within such time, either party may submit such dispute to
binding arbitration by notifying the other party, in writing, of such
submission. Each party shall have the right to be represented by counsel and
shall have the right to discovery to the full extent permitted by the rules
governing civil litigation in the state of Delaware. Such party submitting a
dispute for binding arbitration shall submit a demand which shall set forth a
statement of the nature of the dispute, the amount involved and the remedies
sought. The arbitration shall be conducted by JAMS/Endispute in either Chicago,
Illinois or New York, New York, under the arbitration rules and procedures of
JAMS/Endispute, and any judgment on the award rendered by the arbitrator(s)
shall be final and binding may be entered in any court having jurisdiction
thereof. Any such arbitration shall be conducted by a panel of three (3) neutral
and impartial arbitrators, as selected and administered by JAMS/Endispute. The
arbitrators designated hereunder shall not now or in the three years preceding
such arbitration, be an employee, consultant, officer, director or shareholder
of any party or have now or in the three (3) years preceding such arbitration,
have any business relationship with any party. Within ten (10) calendar days
after the arbitrators are appointed, the arbitrators shall schedule the
arbitration for a hearing to commence on a the earliest mutually convenient
date, but not later than fifteen (15) days after the time the hearing is
scheduled. The hearing shall commence reasonably promptly after the arbitrator
is appointed and shall continue from day to day until completed. The decision of
the arbitrator shall be final and binding on the parties and not subject to
appeal in any court of law.
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16. Miscellaneous.
(a) Publicity. Except as otherwise required by law, the parties
hereto shall refrain from, and shall cause their representatives to
refrain from, directly or indirectly, making any press release or other
public disclosure or otherwise informing any customer, supplier or other
person with which Parent or Target has a business relationship, with
respect to the transactions contemplated by this Agreement, without giving
the other party twenty-four hours prior written notice of the content of
such proposed release or disclosure.
(b) Notices. All notices required or permitted to be given hereunder
shall be in writing and may be delivered by hand, by facsimile, by
nationally recognized private courier, or by United States mail. Notices
delivered by mail shall be deemed given three (3) business days after
being deposited in the United States mail, postage prepaid, registered or
certified mail. Notices delivered by hand, by facsimile, or by nationally
recognized private carrier shall be deemed given on the first business day
following receipt; provided, however, that a notice delivered by facsimile
shall only be effective if such notice is also delivered by hand, or
deposited in the United States mail, postage prepaid, registered or
certified mail, on or before two (2) business days following its delivery
by facsimile. All notices shall be addressed as follows: (1) if to Parent,
addressed to EarthShell Corporation, 0000 Xxxxx Xxxxxx, Xxxxx Xxxxxxx,
Xxxxxxxxxx 00000, attention Xxxxx X. Xxxxxx, telecopier: (000) 000-0000,
with a copy to Xxxxxx Xxxx & Xxxxxxxx LLP, 0000 Xxxxxxx Xxxx Xxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000-0000 attention Xxxxxx X. Xxxxxxxxxx, Esq.,
telecopier: (000) 000-0000; and (2) if to Target or Stockholder, addressed
to ReNewable Products, LLC, 000 Xxxxx Xxxxxxxxx Xxxx., Xx. Xxxxx, XX
00000, telecopier: (000) 000-0000, attention: Xxxxx X. Xxxxxx with a copy
to Xxxxxx Xxxxxx LLP, 0000 Xxxxx Xxxxx, Xxxxxxx, Xxxxxxxx, 00000,
telecopier: (000) 000-0000, attention: Xxxxx X. Xxxxx, Esq.; and/or (3) to
such other respective addresses and/or addressees as may be designated by
notice given in accordance with the provisions of this Section 15(b).
(c) Fees and Expenses. Each party hereto shall bear all fees and
expenses incurred by such party in connection with, relating to or arising
out of the execution, delivery and performance of this Agreement and the
consummation of the transaction contemplated hereby, including attorneys',
accountants' and other professional fees and expenses.
(d) Entire Agreement. This Agreement and the instruments to be
delivered by the parties pursuant to the provisions hereof constitute the
entire agreement between the parties. Each exhibit, and the Disclosure
Schedule, shall be considered incorporated into this Agreement.
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(e) Survival; Non-Waiver. All representations and warranties shall
survive the Closing for a period of two (2) years, regardless of any
investigation or lack of investigation by any of the parties hereto. For
purposes of the Closing, the parties shall be deemed to have remade their
respective representations and warranties as of the Closing, except for
those representations and warranties that speak as of a particular date.
The failure in any one or more instances of a party to insist upon
performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred,
or the waiver by said party of any breach of any of the terms, covenants
or conditions of this Agreement, shall not be construed as a subsequent
waiver of any such terms, covenants, conditions, right or privileges, but
the same shall continue and remain in full force and effect as if no such
forbearance or waiver had occurred. No waiver shall be effective unless it
is in writing and signed by an authorized representative of the waiving
party.
(f) Applicable Law. This Agreement shall be governed and controlled
as to validity, enforcement, interpretation, construction, effect and in
all other respects by the internal laws of the State of Delaware
applicable to contracts made in that State, without regard to any conflict
of law principles of the State of Delaware.
(g) Consent to Jurisdiction. The parties hereto irrevocably consent
and submit to the exclusive jurisdiction of any local, state or federal
court within the County of New Castle in the State of Delaware for
enforcement of this Agreement. The parties hereto irrevocably waive any
objection they may have to venue in the defense of an inconvenient forum
to the maintenance of such actions or proceedings to enforce this
Agreement.
(h) Binding Effect. This Agreement shall inure to the benefit of and
be binding upon the parties hereto, and their successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to
confer on any person other than the parties hereto, and their respective
successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(i) Assignment. This Agreement shall not be assignable by any party
without the prior written consent of all parties.
(j) Amendments. This Agreement shall not be modified or amended
except pursuant to an instrument in writing executed and delivered on
behalf of each of the parties hereto.
(k) Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
(l) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, and this Agreement shall be reformed, construed and enforced
in such jurisdiction so as to best give effect to the intent of the
parties under this Agreement.
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(m) Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which
taken together constitute one and the same agreement.
(n) No Strict Construction. The parties hereto jointly participated
in the negotiation and drafting of this Agreement. The language used in
this Agreement shall be deemed to be the language chosen by the parties
hereto to express their collective mutual intent, this Agreement shall be
construed as if drafted jointly by the parties hereto, and no rule of
strict construction shall be applied against any Person.
(o) Gender. As used in this Agreement, the masculine, feminine or
neuter gender shall be deemed to include the others whenever the context
so indicates or requires.
(p) Interpretation. Whenever the term "include" or "including" is
used in this Agreement, it shall mean "including, without limitation,"
(whether or not such language is specifically set forth) and shall not be
deemed to limit the range of possibilities to those items specifically
enumerated. The words "hereof", "herein" and "hereunder" and words of
similar import refer to this Agreement as a whole and not to any
particular provision. "Knowledge" of Parent, or other words of similar
import such as "to Parent's knowledge," shall mean the actual conscious
knowledge of Xxxxx Xxxxxx, Xxxxx Xxxxxx and Xxxxx Xxxxxxx after reasonable
investigation. Terms defined in the singular have a comparable meaning
when used in the plural and vice versa.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
EARTHSHELL CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-----------------------
Name: Xxxxx X. Xxxxxx
Its: Chief Executive Officer
By: /s/ Xxxxx Xxxxxxx
-----------------------
Name: Xxxxx Xxxxxxx
Its: Chief Financial Officer
EARTHSHELL TRIANGLE, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------
Name: Xxxxx X. Xxxxxx
Its: Chief Executive Officer
RENEWABLE PRODUCTS, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------
Name: Xxxxx X. Xxxxxx
Its: Vice President
RENEWABLE PRODUCTS LLC
By: /s/ Xxxxx X. Xxxxxx
-----------------------
Name: Xxxxx X. Xxxxxx
Its: Vice President
26
