Exhibit 2.1
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AGREEMENT OF MERGER AND
PLAN OF REORGANIZATION
among
MEDALLION CREST MANAGEMENT, INC.,
CEPTOR ACQUISITION CORP. and
CEPTOR CORPORATION
December 8, 2004
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TABLE OF CONTENTS
PAGE
1. The Merger................................................................2
1.1 Merger.............................................................2
1.2 Effective Time.....................................................2
1.3 Certificate of Incorporation, By-laws, Directors and Officers......2
1.4 Assets and Liabilities.............................................2
1.5 Manner and Basis of Converting Shares..............................3
1.6 Surrender and Exchange of Certificates.............................4
1.7 Incentive Plan, Founders' Plan and Outstanding Indebtedness
of Company.........................................................4
1.8 Parent Common Stock................................................5
1.9 Operation of Surviving Corporation.................................5
1.10 Further Assurances................................................5
1.11 Further Agreement of Purchasers...................................5
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Acquisition Corp. as follows:.......6
2.1 Organization, Standing, Subsidiaries, Etc..........................6
2.2 Qualification......................................................6
2.3 Capitalization of the Company......................................6
2.4 Indebtedness.......................................................6
2.5 Company Stockholders...............................................7
2.6 Corporate Acts and Proceedings.....................................7
2.7 Compliance with Laws and Instruments...............................7
2.8 Binding Obligations................................................7
2.9 Broker's and Finder's Fees.........................................8
2.10 Financial Statements..............................................8
2.11 Absence of Undisclosed Liabilities................................8
2.12 Changes...........................................................8
2.13 Schedule of Assets and Contracts..................................9
2.14 Employees........................................................11
2.15 Tax Returns and Audits...........................................11
2.16 Patents and Other Intangible Assets..............................12
2.17 Employee Benefit Plans; ERISA....................................12
2.18 Title to Property and Encumbrances...............................13
2.19 Condition of Properties..........................................14
2.20 Insurance Coverage...............................................14
2.21 Litigation.......................................................14
2.22 Licenses.........................................................14
2.23 Interested Party Transactions....................................14
2.24 Environmental Matters............................................14
2.25 Questionable Payments............................................15
2.26 Obligations to or by Stockholders................................16
2.27 Duty to Make Inquiry.............................................16
2.28 Disclosure.......................................................16
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TABLE OF CONTENTS
(continued)
PAGE
3. Representations and Warranties of Parent and Acquisition Corp.
Parent and Acquisition Corp. represent and warrant to
the Company as follows:.........16
3.1 Organization and Standing.........................................16
3.2 Corporate Authority...............................................16
3.3 Broker's and Finder's Fees........................................17
3.4 Capitalization of Parent..........................................17
3.5 Acquisition Corp..................................................17
3.6 Validity of Shares................................................18
3.7 SEC Reporting and Compliance......................................18
3.8 Financial Statements..............................................19
3.9 Governmental Consents.............................................19
3.10 Compliance with Laws and Other Instruments.......................19
3.11 No General Solicitation..........................................19
3.12 Binding Obligations..............................................19
3.13 Absence of Undisclosed Liabilities...............................20
3.14 Changes..........................................................20
3.15 Tax Returns and Audits...........................................21
3.16 Employee Benefit Plans; ERISA....................................21
3.17 Litigation.......................................................22
3.18 Interested Party Transactions....................................22
3.19 Questionable Payments............................................22
3.20 Obligations to or by Stockholders................................22
3.21 Schedule of Assets and Contracts.................................22
3.22 Employees........................................................23
3.23 Disclosure.......................................................23
4. Additional Representations, Warranties and Covenants of
the Stockholders.........................................................24
5. Conduct of Businesses Pending the Merger.................................24
5.1 Conduct of Business by the Company Pending the Merger.............24
5.2 Conduct of Business by Parent and Acquisition Corp................25
6. Additional Agreements....................................................26
6.1 Access and Information............................................26
6.2 Additional Agreements.............................................27
6.3 Publicity.........................................................27
6.4 Appointment of Directors..........................................27
6.5 Parent Name Change and Exchange Listing...........................27
7. Conditions of Parties' Obligations.......................................28
7.1 Company Obligations...............................................28
7.2 Parent and Acquisition Corp.......................................29
8. Non-Survival of Representations and Warranties...........................31
9. Amendment of Agreement...................................................32
10. Definitions.............................................................32
11. Closing.................................................................36
12. Indemnification and Related Matters.....................................37
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TABLE OF CONTENTS
(continued)
PAGE
12.1 Indemnification by Parent........................................37
12.2 Survival.........................................................37
12.3 Time Limitations.................................................37
12.4 Limitation on Liability..........................................37
12.5 Notice of Claims.................................................38
12.6 Payment of Damages...............................................38
13. Termination Prior to Closing............................................39
13.1 Termination of Agreement.........................................39
13.2 Termination of Obligations.......................................39
14. Miscellaneous...........................................................39
14.1 Notices..........................................................39
14.2 Entire Agreement.................................................40
14.3 Expenses.........................................................40
14.4 Dispute Resolution...............................................40
14.5 Time.............................................................41
14.6 Severability.....................................................41
14.7 Successors and Assigns...........................................41
14.8 No Third Parties Benefited.......................................41
14.9 Counterparts.....................................................41
14.10 Recitals, Schedules and Exhibits................................41
14.11 Section Headings and Gender.....................................41
14.12 Governing Law...................................................41
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LIST OF EXHIBITS AND SCHEDULES
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EXHIBITS
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A Certificate of Merger
B Certificate of Incorporation of the Company
C By-laws of the Company
D Directors and Officers of the Surviving Corporation and Parent
E Certificate of Designation
F Form of Opinion of Company's Counsel
G Form of Opinion of Parent's Counsel
H Releases of Officers of Parent
COMPANY DISCLOSURE SCHEDULES
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1.5 Holders of Parent Common Stock Post-Merger
1.5A Holders of Parent Common Stock Post-Merger Under the Incentive Plan
1.7(a) Treatment of Options
1.7(b)(i) Treatment of Company Warrants
2.2 Jurisdictions Qualified to do Business
2.5 Company Stockholders
2.5A Company Stockholders Pursuant to Company's 8% Bridge Loans
2.5B Company Stockholders Pursuant to Founders' Plan
2.7 Compliance with Laws
2.9 Company Broker's and Finder's Fees
2.10 Financial Statements
2.11 Undisclosed Liabilities
2.12 Changes/Indebtedness
2.13(a) Schedule of Leased Real and Personal Property
2.13(b) Material Agreements
2.13(c) Schedule of Insurance
2.13(d) Schedule of Company Bank Accounts
2.13(e) Schedule of Patents and Other Intangible Assets
2.14 Obligations to Officers, Directors and Employees
2.16 Ownership of Intellectual Property
2.17 Schedule of Employee Benefit Plans
2.21 Litigation
2.23 Interested Party Transactions
2.31 Obligations to or by Stockholders
PARENT DISCLOSURE SCHEDULES
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3.3 Parent Broker's and Finder's Fees
3.4 Outstanding Options and Other Convertible Securities
3.7 SEC Reporting
3.15 Schedule of Parent Bank Accounts
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AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION is made and entered
into on November __, 2004, by and among MEDALLION CREST MANAGEMENT, INC., a
Florida corporation ("PARENT"), CEPTOR ACQUISITION CORP., a Delaware corporation
("ACQUISITION CORP."), which is a wholly-owned subsidiary of Parent, and CEPTOR
CORPORATION, a Delaware corporation (the "COMPANY").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Board of Directors of each of Acquisition Corp., Parent and
the Company have each determined that it is fair to and in the best interests of
their respective corporations and stockholders for the Company to be merged with
and into Acquisition Corp. (the "MERGER") upon the terms and subject to the
conditions set forth herein;
WHEREAS, the Board of Directors of Acquisition Corp. and the Board of
Directors of the Company have approved the Merger in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), and upon the terms and
subject to the conditions set forth herein and in the Certificate of Merger (the
"CERTIFICATE OF MERGER") attached as EXHIBIT A hereto; and the Board of
Directors of Parent also has approved this Agreement and the Certificate of
Merger;
WHEREAS, the requisite Stockholders (as such term is defined in Section 10
hereof) have approved by written consent pursuant to Section 228 of the DGCL
this Agreement and the Certificate of Merger and the transactions contemplated
and described hereby and thereby, including without limitation the Merger, and
Parent, as the sole stockholder of Acquisition Corp., has approved this
Agreement, the Certificate of Merger and the transactions contemplated and
described hereby and thereby, including without limitation the Merger;
WHEREAS, the parties hereto intend that the Merger contemplated herein
shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code of 1986, as amended (the "Code"), by reason of Section
368(a)(2)(E) of the Code; and
WHEREAS, simultaneously with the Closing (as such term is defined herein),
Parent (as it will exist as of the closing of the Merger) is selling Units
consisting of shares of its Series A Convertible Preferred Stock, par value
$0.0001 per share, and detachable warrants to purchase shares of its common
stock, par value $0.0001 per share, in a private placement (the "PRIVATE
PLACEMENT") to accredited investors, pursuant to the terms of a Confidential
Private Placement Memorandum, dated October 22, 2004, and Supplement to the
Memorandum dated November 16, 2004 ("Memorandum") for the purpose of causing the
business of the Surviving Corporation (as defined below) to include the business
of the Company following the Merger.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
hereinafter set forth, the parties hereto agree as follows:
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1. The Merger.
1.1 MERGER. Subject to the terms and conditions of this Agreement and
the Certificate of Merger, the Company shall be merged with and into Acquisition
Corp. in accordance with Section 251 of the DGCL. At the Effective Time (as
hereinafter defined), the separate legal existence of Acquisition Corp. shall
cease, and the Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "SURVIVING CORPORATION") and shall
continue its corporate existence under the laws of the State of Delaware under
the name CepTor Corporation.
1.2 EFFECTIVE TIME. The Merger shall become effective on the date and
at the time the Certificate of Merger is filed with the Secretary of State of
the State of Delaware in accordance with Section 251 of the DGCL. The time at
which the Merger shall become effective as aforesaid is referred to hereinafter
as the "Effective Time," and the filing of the Certificate of Merger as set
forth in the first sentence of this Section 1.2 shall occur concurrently with
the release of the proceeds from the Private Placement to the Parent.
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS.
(a) The Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, attached as EXHIBIT B hereto, shall be
the Certificate of Incorporation of the Surviving Corporation from and after the
Effective Time until further amended in accordance with applicable law.
(b) The By-laws of the Company, as in effect immediately prior to
the Effective Time, attached as EXHIBIT C hereto, shall be the By-laws of the
Surviving Corporation from and after the Effective Time until amended in
accordance with applicable law, the Certificate of Incorporation and such
By-laws.
(c) The directors, officers and key employees listed in EXHIBIT D
hereto shall be the directors, officers and key employees of the Surviving
Corporation, and each shall hold his respective office or offices from and after
the Effective Time until his successor shall have been elected and shall have
qualified in accordance with applicable law, or as otherwise provided in the
Certificate of Incorporation or By-laws of the Surviving Corporation.
1.4 ASSETS AND LIABILITIES. At the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of a
public as well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of Acquisition Corp and the Company
(collectively, the "Constituent Corporations"); and all the rights, privileges,
powers and franchises of each of the Constituent Corporations, and all property,
real, personal and mixed, and all debts due to any of the Constituent
Corporations on whatever account, as well for stock subscriptions as all other
things in action or belonging to each of the Constituent Corporations, shall be
vested in the Surviving Corporation; and all property, rights, privileges,
powers and franchises, and all and every other interest shall be thereafter as
effectively the property of the Surviving Corporation as they were of the
several and respective Constituent Corporations, and the title to any real
estate vested by deed or otherwise in either of the such Constituent
Corporations shall not revert or be in any way impaired by the Merger; but all
rights of creditors and all liens upon any property of any of the Constituent
Corporations shall be preserved unimpaired, and all debts, liabilities and
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duties of the Constituent Corporations shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
1.5 MANNER AND BASIS OF CONVERTING SHARES.
(a) At the Effective Time:
(i) each share of common stock, par value $0.001 per share,
of Acquisition Corp. that shall be outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive ten (10) shares of
common stock, par value $0.00001 per share, of the Surviving Corporation, so
that at the Effective Time, Parent shall be the holder of all of the issued and
outstanding shares of the Surviving Corporation;
(ii) the shares of common stock, par value $0.00001 per
share, of the Company (the "COMPANY COMMON STOCK"), beneficially owned by the
Stockholders listed in SCHEDULE 2.5 (other than shares of Company Common Stock
as to which appraisal rights are perfected pursuant to the applicable provisions
of the DGCL and not withdrawn or otherwise forfeited and shares of Company
Common Stock set forth in Section 1.5(a)(ii) hereof), shall, by virtue of the
Merger and without any action on the part of the holders thereof, be converted
into the right to receive the number of shares of Parent Common Stock specified
in SCHEDULE 1.5 for each of the Stockholders, which shall be equal to 2.165674
shares of Parent Common Stock for each share of Company Common Stock;
(iii) the shares of Company Common Stock issued to certain
purchasers and transactions involving the Company's Bridge Loans (as herein
defined) in the aggregate amount of 238,000 shares as set forth on SCHEDULE 2.5A
shall, by virtue of the Merger and without any action on the part of the holders
thereof, be converted into the right to receive the number of shares of Parent
Common Stock specified in SCHEDULE 1.5A for each of the Stockholders which shall
be equal to 2.165674 shares of Parent Common Stock for each share of Company
Common Stock provided, however, that those shares set forth on SCHEDULE 2.5A
shall be cancelled in the Merger and cease to exist and new shares of Parent
Common Stock in the maximum aggregate amount of 440,000 shares shall be issued
in replacement therefor to those holders who agree to accept, pursuant to an
Offer to Exchange, and to whom Replacement Notes (as herein defined) are issued
for each holder of such shares;
(iv) the right to receive awards under the Founders' Plan (as
hereinafter defined) of the Company shall, by virtue of the Merger and without
any action on the part of the recipients of such awards, the Company, the
Surviving Corporation, or the Parent, be converted into the right to receive the
number of shares of Parent Common Stock specified in SCHEDULE 1.5B for each of
the participants, which shall be equal to 2.165674 shares of Parent Common Stock
for each share of the Company Common Stock allocated to an awardee pursuant to
any award by the Company, subject in all respects to the terms and provisions of
the Founders' Plan of the Parent, which shall be continued by assumption of the
obligations of the Company under the Founders' Plan of the Parent;
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(v) the right to receive awards under the Incentive Plan (as
hereinafter defined) of the Company shall, by virtue of the Merger and without
any action on the part of the recipients of such awards, the Company, the
Surviving Corporation, or the Parent, be converted into the right to receive the
number of shares of Parent Common Stock specified in Memorandum for each of the
participants, subject in all respects to the terms and provisions of the
Incentive Plan of the Company, which shall be continued by assumption of the
obligations of the Company under the Incentive Plan of the Parent; and
(vi) each share of Company Common Stock held in the treasury
of the Company immediately prior to the Effective Time shall be cancelled in the
Merger and cease to exist.
(b) After the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time.
1.6 SURRENDER AND EXCHANGE OF CERTIFICATES. Promptly after the
Effective Time and upon (i) surrender of a certificate or certificates
representing shares of Company Common Stock that were outstanding immediately
prior to the Effective Time or an affidavit and indemnification in form
reasonably acceptable to counsel for the Parent stating that such Stockholder
has lost their certificate or certificates or that such have been destroyed and
(ii) delivery of a Letter of Transmittal (as described in Section 4 hereof),
Parent shall issue to each record holder of the Company Common Stock
surrendering such certificate or certificates and Letter of Transmittal, a
certificate or certificates registered in the name of such Stockholder
representing the number of shares of Parent Common Stock that such Stockholder
shall be entitled to receive as set forth in Section 1.5(a)(ii) hereof. Until
the certificate, certificates or affidavit is or are surrendered together with
the Letter of Transmittal as contemplated by this Section 1.6 and Section 4
hereof, each certificate or affidavit that immediately prior to the Effective
Time represented any outstanding shares of Company Common Stock shall be deemed
at and after the Effective Time to represent only the right to receive upon
surrender as aforesaid the Parent Common Stock specified in SCHEDULE 1.5 hereof
for the holder thereof or to perfect any rights of appraisal which such holder
may have pursuant to the applicable provisions of the DGCL.
1.7 INCENTIVE PLAN, FOUNDERS' PLAN AND OUTSTANDING INDEBTEDNESS OF
COMPANY.
(a) The Company has adopted and maintains a 2004 Incentive Stock
Plan ("Incentive Plan") and a 2004 Founders' Stock Plan ("Founders' Plan") which
plans shall continue at the Effective Time as plans of the Parent. Prior to the
Closing, there will be no options outstanding and 156,000 shares of restricted
Company Common Stock issued under the Incentive Plan, and no shares of Company
Common Stock issued under the Founders' Plan. Immediately following the Closing,
the Parent will issue an aggregate of 3,031,943 shares of Parent Common Stock
awarded under the Founders' Plan as set forth in SCHEDULE 1.5B and may make
additional awards of options or restricted Parent Common Stock under the
Incentive Plan. Following Closing the Company shall make no awards under the
Incentive Plan or Founders' Plan.
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(b) Parent shall take all action necessary and appropriate, on or
prior to the Effective Time, to authorize and reserve a number of shares of
Parent Common Stock sufficient for issuance with respect to the Incentive Plan
and the Founders' Plan.
(c) The Company has issued and outstanding $1,100,000 of 8%
Bridge Loans due October 22, 2004 (the "Bridge Loans") and $275,000 of 10% Notes
due December 31, 2005 (the "10% Notes"). Pursuant to an Offer to Exchange Bridge
Loans and 10% Notes into newly issued 8% and 10%, respectively, convertible
promissory notes of Parent due December 31, 2005, (the "Replacement Notes") the
Bridge Loans and 10% Notes will become the obligations of Parent, convertible
into newly issued shares of Parent Common Stock reserved for issuance by Parent
at a conversion price of $1.25 per share, which shall be convertible immediately
following the Merger.
1.8 PARENT COMMON STOCK. Parent agrees that it will cause the Parent
Common Stock into which the Company Common Stock is converted at the Effective
Time pursuant to Section 1.5(a)(ii) and which Parent Stock may be issued
following the Effective Time pursuant to Section 1.5(a)(iii), (a)(iv), or
(a)(v); and into which Replacement Notes are convertible pursuant to Section
1.7(c), to be available for such purpose. Parent further covenants that
immediately prior to the Effective Time there will be no more than 1,850,000
shares of Parent Common Stock issued and outstanding, not including the shares
of Parent Common Stock to be issued and surrendered to Parent for cancellation
pursuant to the Memorandum, and that no other common or preferred stock or
equity securities or any options, warrants, rights or other agreements or
instruments convertible, exchangeable or exercisable into common or preferred
stock or other equity securities shall be issued or outstanding, except as
described herein.
1.9 OPERATION OF SURVIVING CORPORATION. The Company acknowledges that
upon the effectiveness of the Merger, and the material compliance by the Parent
and Acquisition Corp. of its duties and obligations hereunder, Parent shall have
the absolute and unqualified right to deal with the assets and business of the
Surviving Corporation as its own property without limitation on the disposition
or use of such assets or the conduct of such business.
1.10 FURTHER ASSURANCES. From time to time, from and after the
Effective Time, as and when reasonably requested by Parent, the proper officers
and directors of the Company as of the Effective Time shall, for and on behalf
and in the name of the Company or otherwise, execute and deliver all such deeds,
bills of sale, assignments and other instruments and shall take or cause to be
taken such further actions as Parent, Acquisition Corp. or their respective
successors or assigns reasonably may deem necessary or desirable in order to
confirm or record or otherwise transfer to the Surviving Corporation title to
and possession of all of the properties, rights, privileges, powers, franchises
and immunities of the Company or otherwise to carry out fully the provisions and
purposes of this Agreement and the Certificate of Merger.
1.11 FURTHER AGREEMENT OF PURCHASERS. Immediately following the
Closing, Parent may request holders of Parent Common Stock set forth in Section
1.8 hereto transfer and assign at no cost 50,000 shares of Parent Common Stock
to Bluewater Partners SA, under the terms of a Settlement Agreement in form and
substance reasonably acceptable to such holders and upon the written
instructions of Parent to such Holders or their representative.
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2. Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Acquisition Corp. as follows:
2.1 ORGANIZATION, STANDING, SUBSIDIARIES, ETC.
(a) The Company is a corporation duly organized and existing in
good standing under the laws of the State of Delaware, and has all requisite
power and authority (corporate and other) to carry on its business, to own or
lease its properties and assets, to enter into this Agreement and the
Certificate of Merger and to carry out the terms hereof and thereof. Copies of
the Certificate of Incorporation and By-laws of the Company that have been
delivered to Parent and Acquisition Corp. prior to the execution of this
Agreement are true and complete and have not since been amended or repealed.
(b) The Company has no subsidiaries or direct or indirect
interest (by way of stock ownership or otherwise) in any firm, corporation,
limited liability company, partnership, association or business.
2.2 QUALIFICATION. The Company is duly qualified to conduct business
as a foreign corporation and is in good standing in each jurisdiction wherein
the nature of its activities or its properties owned or leased makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the condition (financial or otherwise),
properties, assets, liabilities, business operations, results of operations or
prospects of the Company taken as a whole (the "CONDITION OF THE COMPANY").
SCHEDULE 2.2 sets forth a list of the jurisdictions in which the Company is so
qualified to conduct business.
2.3 CAPITALIZATION OF THE COMPANY. The authorized capital stock of
the Company consists of 40,000,000 shares of Company Common Stock and 10,000,000
shares of Preferred Stock, and the Company has no authority to issue any other
capital stock. There are 2,450,000 shares of Company Common Stock issued and
outstanding and no shares of Preferred Stock issued and outstanding, and such
shares are duly authorized, validly issued, fully paid and nonassessable, and
none of such shares have been issued in violation of the preemptive rights of
any person. The offer, issuance and sale of such shares of Company Common Stock
were (a) exempt from the registration and prospectus delivery requirements of
the Securities Act, (b) registered or qualified (or were exempt from
registration or qualification) under the registration or qualification
requirements of all applicable state securities laws and (c) accomplished in
conformity with all other applicable securities laws. None of such shares of
Company Stock are subject to a right of withdrawal or a right of rescission
under any federal or state securities or blue sky law. Except as otherwise set
forth in this Agreement or any Schedule hereto, the Memorandum or disclosed in
SCHEDULE 2.5B, the Company has no outstanding options, rights or commitments to
issue Company Common Stock or other Equity Securities of the Company, and there
are no outstanding securities convertible or exercisable into or exchangeable
for Company Common Stock or other Equity Securities of the Company.
2.4 INDEBTEDNESS. The Company has no Indebtedness for Borrowed Money,
except as otherwise set forth in the Agreement or any Schedule hereto or
disclosed on the Balance Sheet.
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2.5 COMPANY STOCKHOLDERS. SCHEDULE 2.5, 2.5A AND 2.5B hereto contains
a true and complete list of the names of the record owner of all of the
outstanding shares of Company Common Stock (the "COMPANY STOCK") and other
Equity Securities of the Company, together with the number of securities held or
to which such person has rights to acquire. To the knowledge of the Company,
there is no voting trust, agreement or arrangement among any of the beneficial
holders of Company Stock affecting the nomination or election of directors or
the exercise of the voting rights of Company Stock.
2.6 CORPORATE ACTS AND PROCEEDINGS. The execution, delivery and
performance of this Agreement and the Certificate of Merger (together, the
"MERGER DOCUMENTS") have been duly authorized by the Board of Directors of the
Company and have been approved by the requisite vote of the Stockholders, and
all of the corporate acts and other proceedings required for the due and valid
authorization, execution, delivery and performance of the Merger Documents and
the consummation of the Merger have been validly and appropriately taken, except
for the filing referred to in Section 1.2.
2.7 COMPLIANCE WITH LAWS AND INSTRUMENTS. The business, products and
operations of the Company have been and are being conducted in compliance in all
material respects with all applicable laws, rules and regulations, except for
such violations thereof for which the penalties, in the aggregate, would not
have a material adverse effect on the Condition of the Company. The execution,
delivery and performance by the Company of the Merger Documents and the
consummation by the Company of the transactions contemplated by this Agreement:
(a) will not require any authorization, consent or approval of, or filing or
registration with, any court or governmental agency or instrumentality, except
such as shall have been obtained prior to the Closing or as set forth in
SCHEDULE 2.7, (b) will not cause the Company to violate or contravene (i) any
provision of law, (ii) any rule or regulation of any agency or government, (iii)
any order, judgment or decree of any court, or (iv) any provision of the
Certificate of Incorporation or By-laws of the Company, (c) will not violate or
be in conflict with, result in a breach of or constitute (with or without notice
or lapse of time, or both) a default under, any indenture, loan or credit
agreement, deed of trust, mortgage, security agreement or other contract,
agreement or instrument to which the Company is a party or by which the Company
or any of its properties is bound or affected, except as would not have a
material adverse effect on the Condition of the Company, and (d) will not result
in the creation or imposition of any Lien upon any property or asset of the
Company. The Company is not in violation of, or (with or without notice or lapse
of time, or both) in default under, any term or provision of its Certificate of
Incorporation or By-laws or of any indenture, loan or credit agreement, deed of
trust, mortgage, security agreement or, except as would not materially and
adversely affect the Condition of the Company, or any other material agreement
or instrument to which the Company is a party or by which the Company or any of
its properties is bound or affected.
2.8 BINDING OBLIGATIONS. The Merger Documents constitute the legal,
valid and binding obligations of the Company and are enforceable against the
Company in accordance with their respective terms, except as such enforcement is
limited by bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity.
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2.9 BROKER'S AND FINDER'S FEES. No Person has, or as a result of the
transactions contemplated or described herein will have, any right or valid
claim against the Company, Parent, Acquisition Corp. or any Stockholder for any
commission, fee or other compensation as a finder or broker, or in any similar
capacity, except as disclosed in a Schedule hereto as provided in any document
or agreement disclosed in any schedule hereto. Parent and Acquisition on the one
hand and the Company on the other, hereby indemnify and hold each other harmless
from and against any and all claims, losses or liabilities for any such
commission, fee or other compensation as a result of the claim by any other
Person that the indemnifying party or parties introduced or assisted them in
connection with the transactions contemplated or described here.
2.10 FINANCIAL STATEMENTS. Attached to the Memorandum are (a) the
Company's audited balance sheets as of December 31, 2003 and 2002, and the
audited statements of operations, stockholders' (deficit) equity and cash flows
for the years ended December 31, 2003 and 2002 and for the period from August
11, 1986 (inception) to December 31, 2003, and (b) the Company's unaudited
balance sheet (the "BALANCE SHEET") at September 30, 2004 (the "BALANCE SHEET
DATE") and the statements of operations, stockholders' (deficit) equity and cash
flows for the periods ended September 30, 2004. Such financial statements (i)
are in accordance with the books and records of the Company, (ii) present fairly
in all material respects the financial condition of the Company at the dates
therein specified and the results of its operations and changes in financial
position for the periods therein specified and (iii) have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
basis consistent with prior accounting periods.
2.11 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no material
obligation or liability (whether accrued, absolute, contingent, liquidated or
otherwise, whether due or to become due), arising out of any transaction entered
into at or prior to the Closing, except (a) as disclosed in the Memorandum or in
any Schedule hereto, (b) to the extent set forth on or reserved against in the
Balance Sheet or the Notes to the Financial Statements, (c) current liabilities
incurred and obligations under agreements entered into in the usual and ordinary
course of business since the Balance Sheet Date, none of which (individually or
in the aggregate) has had or will have a material adverse effect on the
Condition of the Company, and (d) by the specific terms of any written
agreement, document or arrangement identified in the Schedules.
2.12 CHANGES. Since the Balance Sheet Date, except as disclosed in the
Memorandum or in any Schedule hereto, the Company has not (a) incurred any
debts, obligations or liabilities, absolute, accrued, contingent or otherwise,
whether due or to become due, except for fees, expenses and liabilities incurred
in connection with the Private Placement, the Merger and related transactions
and current liabilities incurred in the usual and ordinary course of business,
(b) discharged or satisfied any Liens other than those securing, or paid any
obligation or liability other than, current liabilities shown on the Balance
Sheet and current liabilities incurred since the Balance Sheet Date, in each
case in the usual and ordinary course of business, (c) mortgaged, pledged or
subjected to Lien any of its assets, tangible or intangible other than in the
usual and ordinary course of business, (d) sold, transferred or leased any of
its assets, except in the usual and ordinary course of business, (e) cancelled
or compromised any debt or claim, or waived or released any right, of material
value, (f) suffered any physical damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting the Condition of the
8
Company, (g) entered into any transaction other than in the usual and ordinary
course of business, (h) encountered any labor union difficulties, (i) made or
granted any wage or salary increase or made any increase in the amounts payable
under any profit sharing, bonus, deferred compensation, severance pay,
insurance, pension, retirement or other employee benefit plan, agreement or
arrangement, other than in the ordinary course of business consistent with past
practice, or entered into any employment agreement, (j) issued or sold any
shares of capital stock, bonds, notes, debentures or other securities or granted
any options (including employee stock options), warrants or other rights with
respect thereto, (k) declared or paid any dividends on or made any other
distributions with respect to, or purchased or redeemed, any of its outstanding
capital stock, (l) suffered or experienced any change in, or condition
affecting, the Condition of the Company other than changes, events or conditions
in the usual and ordinary course of its business, none of which (either by
itself or in conjunction with all such other changes, events and conditions) has
been materially adverse, (m) made any change in the accounting principles,
methods or practices followed by it or depreciation or amortization policies or
rates theretofore adopted, (n) made or permitted any amendment or termination of
any material contract, agreement or license to which it is a party, (o) suffered
any material loss not reflected in the Balance Sheet or its statement of income
for the period ended on the Balance Sheet Date, (p) paid, or made any accrual or
arrangement for payment of, bonuses or special compensation of any kind or any
severance or termination pay to any present or former officer, director,
employee, stockholder or consultant, (q) made or agreed to make any charitable
contributions or incurred any non-business expenses in excess of $5,000 in the
aggregate, or (r) entered into any agreement, or otherwise obligated itself, to
do any of the foregoing.
2.13 SCHEDULE OF ASSETS AND CONTRACTS. Attached hereto as SCHEDULES
2.13(A) through 2.13(D) are various schedules listing assets and contracts of
the Company, as described herein.
(a) SCHEDULE 2.13(A) contains a true and complete list of all
real property leased by the Company, including a brief description of each item
thereof and of the nature of the Company's interest therein, and of all tangible
personal property owned or leased by the Company having a cost or fair market
value of greater than $100,000, including a brief description of each item and
of the nature of the interest of the Company therein. All the real property
listed in SCHEDULE 2.13(A) is leased by the Company under valid and enforceable
leases having the rental terms, termination dates and renewal and purchase
options described in SCHEDULE 2.13(A); such leases are enforceable in accordance
with their terms, and there is not, under any such lease, any existing default
or event of default or event which with notice or lapse of time, or both, would
constitute a default by the Company, and the Company has not received any notice
or claim of any such default. The Company does not own any real property.
(b) Except as expressly set forth in this Agreement, the
Memorandum, the Balance Sheet or the notes thereto, or as disclosed in SCHEDULE
2.13(B) hereto, the Company is not a party to any written or oral agreement not
made in the ordinary course of business that is material to the Company. Except
as disclosed in SCHEDULE 2.13(B) hereto, the Company is not a party to or
otherwise barred by any written or oral (a) agreement with any labor union, (b)
agreement for the purchase of fixed assets or for the purchase of materials,
supplies or equipment in excess of normal operating requirements, (c) agreement
for the employment of any officer, individual employee or other Person on a
full-time basis or any agreement with any Person for consulting services, (d)
9
bonus, pension, profit sharing, retirement, stock purchase, stock option,
deferred compensation, medical, hospitalization or life insurance or similar
plan, contract or understanding with respect to any or all of the employees of
the Company or any other Person, (e) indenture, loan or credit agreement, note
agreement, deed of trust, mortgage, security agreement, promissory note or other
agreement or instrument relating to or evidencing Indebtedness for Borrowed
Money or subjecting any asset or property of the Company to any Lien or
evidencing any Indebtedness, (f) guaranty of any Indebtedness, (g) other than as
set forth in SCHEDULE 2.13(A) hereto, lease or agreement under which the Company
is lessee of or holds or operates any property, real or personal, owned by any
other Person under which payments to such Person exceed $100,000 per year or
with an unexpired term (including any period covered by an option to renew
exercisable by any other party) of more than 60 days, (h) lease or agreement
under which the Company is lessor or permits any Person to hold or operate any
property, real or personal, owned or controlled by the Company, (i) agreement
granting any preemptive right, right of first refusal or similar right to any
Person, (j) agreement or arrangement with any Affiliate or any "associate" (as
such term is defined in Rule 405 under the Securities Act) of the Company or any
present or former officer, director or stockholder of the Company, (k) agreement
obligating the Company to pay any royalty or similar charge for the use or
exploitation of any tangible or intangible property, (1) covenant not to compete
or other restriction on its ability to conduct a business or engage in any other
activity, (m) distributor, dealer, manufacturer's representative, sales agency,
franchise or advertising contract or commitment, (n) agreement to register
securities under the Securities Act, (o) collective bargaining agreement, or (p)
agreement or other commitment or arrangement with any Person continuing for a
period of more than three months from the Closing Date which involves an
expenditure or receipt by the Company in excess of $100,000. Except as disclosed
in SCHEDULE 2.13(B), none of the agreements, contracts, leases, instruments or
other documents or arrangements listed in SCHEDULES 2.13(A) through 2.13(E)
requires the consent of any of the parties thereto other than the Company to
permit the contract, agreement, lease, instrument or other document or
arrangement to remain effective following consummation of the Merger and the
transactions contemplated hereby.
(c) SCHEDULE 2.13(C) contains a true and complete list and
description of all insurance policies and insurance coverage with respect to the
Company, its business, premises, properties, assets, employees and agents
including, without limitation, fire and casualty insurance, property and
liability insurance, product liability insurance, life insurance, medical and
hospital insurance and workers' compensation insurance; such list includes with
respect to each policy (i) a general description of the insured loss coverage,
(ii) the expiration date of coverage, (iii) the annual premium, and (iv) the
dollar limitations of coverage and a general description of each deductible
feature.
(d) SCHEDULE 2.13(D) contains a true and complete list and
description of each bank account, savings account, other deposit relationship
and safety deposit box of the Company, including the name of the bank or other
depository, the account number and the names of the individuals having signature
or other withdrawal authority with respect thereto.
(e) Included in the Memorandum is a true and complete list of all
patents, patent applications, trade names, trademarks, trademark registrations
and applications, copyrights, copyright registrations and applications, and
10
grants of licenses, both domestic and foreign, presently owned, possessed, used
or held by the Company; and, except as set forth in the Memorandum, the Company
owns the entire right, title and interest in and to the same, free and clear of
all Liens and restrictions. The Memorandum also contains a true and complete
list of all licenses granted to or by the Company with respect to the foregoing.
Except as disclosed in the Memorandum, all patents, patent applications, trade
names, trademarks, trademark registrations and applications, copyrights,
copyright registrations and applications and grants of licenses set forth (i)
are subject to no pending or, to the Company's knowledge, threatened challenge,
and (ii) can and will be transferred by the Company to the Surviving Corporation
as a result of the Merger and without the consent of any Person other than the
Company. Neither the execution nor delivery of the Merger Documents, nor the
consummation of the transactions contemplated thereby will give any licensor or
licensee of the Company any right to change the terms or provisions of,
terminate or cancel, any license to which the Company is a party.
(f) The Company has made available to Parent and Acquisition
Corp. true and complete copies of all agreements and other documents and a
description of all applicable oral agreements disclosed or referred to in the
Memorandum or SCHEDULES 2.13(A) through 2.13(D), as well as any additional
agreements or documents, requested by Parent or Acquisition Corp. The Company
has in all material respects performed all obligations required to be performed
by it to date and is not in default in any respect under any of the contracts,
agreements, leases, documents, commitments or other arrangements to which it is
a party or by which it or any of its property is otherwise bound or affected. To
the best current actual knowledge of the Company, all parties having material
contractual arrangements with the Company are in substantial compliance
therewith and none are in material default thereunder. The Company does not have
outstanding any power of attorney.
2.14 EMPLOYEES. The Company has complied in all material respects with
all laws relating to the employment of labor, and the Company has encountered no
material labor union difficulties. Other than pursuant to ordinary arrangements
of employment compensation, the Company Incentive Plan and Company Founders'
Plan or as set forth on any of the Schedules hereto, the Company is not under
any obligation or liability to any officer, director or employee of the Company.
2.15 TAX RETURNS AND AUDITS. All required federal, state and local Tax
Returns of the Company have been accurately prepared and duly and timely filed,
and all federal, state and local Taxes required to be paid with respect to the
periods covered by such returns have been paid other than fiscal year ended 2003
and the stub period of 12/1/03 to 1/27/04. The Company is not and has not been
delinquent in the payment of any Tax. The Company has not had a Tax deficiency
proposed or assessed against it and has not executed a waiver of any statute of
limitations on the assessment or collection of any Tax. None of the Company's
federal income tax returns nor any state or local income or franchise tax
returns has been audited by governmental authorities. The reserves for Taxes
reflected on the Balance Sheet are and will be sufficient for the payment of all
unpaid Taxes payable by the Company as of the Balance Sheet Date. Since the
Balance Sheet Date, the Company has made adequate provisions on its books of
account for all Taxes with respect to its business, properties and operations
for such period. The Company has withheld or collected from each payment made to
each of its employees the amount of all taxes (including, but not limited to,
federal, state and local income taxes, Federal Insurance Contribution Act taxes
and Federal Unemployment Tax Act taxes) required to be withheld or collected
11
therefrom, and has paid the same to the proper Tax receiving officers or
authorized depositaries. There are no federal, state, local or foreign audits,
actions, suits, proceedings, investigations, claims or administrative
proceedings relating to Taxes or any Tax Returns of the Company now pending, and
the Company has not received any notice of any proposed audits, investigations,
claims or administrative proceedings relating to Taxes or any Tax Returns. The
Company is not obligated to make a payment, or is a party to an agreement that
under certain circumstances could obligate it to make a payment, that would not
be deductible under Section 280G of the Code. The Company has not agreed nor is
required to make any adjustments under Section 481(a) of the Code (or any
similar provision of state, local and foreign law) by reason of a change in
accounting method or otherwise for any Tax period for which the applicable
statute of limitations has not yet expired. The Company (i) is not a party to,
is bound by or has any obligation under, any Tax sharing agreement, Tax
indemnification agreement or similar contract or arrangement, whether written or
unwritten (collectively, "TAX SHARING AGREEMENTS"), or (ii) does not have any
potential liability or obligation to any person as a result of, or pursuant to,
any such Tax Sharing Agreements.
2.16 PATENTS AND OTHER INTANGIBLE ASSETS. (a) Except as set forth in
the Memorandum or SCHEDULE 2.16, the Company (i) owns or has the right to use,
free and clear of all Liens, claims and restrictions, all patents, trademarks,
service marks, trade names, copyrights, licenses and rights with respect to the
foregoing used in or necessary for the conduct of its business as now conducted
or proposed to be conducted without infringing upon or otherwise acting
adversely to the right or claimed right of any Person under or with respect to
any of the foregoing and (ii) is not obligated or under any liability to make
any payments by way of royalties, fees or otherwise to any owner or licensor of,
or other claimant to, any patent, trademark, service xxxx, trade name, copyright
or other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise.
(b) To the best knowledge of the Company, the Company owns and
has the unrestricted right to use all trade secrets, if any, including know-how,
negative know-how, formulas, patterns, programs, devices, methods, techniques,
inventions, designs, processes, computer programs and technical data and all
information that derives independent economic value, actual or potential, from
not being generally known or known by competitors (collectively, "intellectual
property") required for or incident to the development, operation and sale of
all products and services sold by the Company, free and clear of any right, Lien
or claim of others; provided, however, the possibility exists that other
Persons, completely independent of the Company or its employees or agents, could
have developed intellectual property similar or identical to that of the
Company. The Company is not aware of any such development of substantially
identical trade secrets or technical information by others. All intellectual
property can and will be transferred by the Company to the Surviving Corporation
as a result of the Merger and without the consent of any Person other than the
Company.
2.17 EMPLOYEE BENEFIT PLANS; ERISA. (a) Except as disclosed in
SCHEDULE 2.17 hereto, there are no "employee benefit plans" (within the meaning
of Section 3(3) of the ERISA) nor any other employee benefit or fringe benefit
arrangements, practices, contracts, policies or programs of every type other
than programs merely involving the regular payment of wages, commissions, or
bonuses established, maintained or contributed to by the Company, whether
12
written or unwritten and whether or not funded. The plans listed in SCHEDULE
2.17 hereto are hereinafter referred to as the "EMPLOYEE BENEFIT PLANS."
(b) All current and prior material documents, including all
amendments thereto, with respect to each Employee Benefit Plan have been made
available to Parent and Acquisition Corp. or their advisors.
(c) To the knowledge of the Company, all Employee Benefit Plans
are in material compliance with the applicable requirements of ERISA, the
Internal Revenue Code of 1986, as amended (the "Code") and any other applicable
state, federal or foreign law.
(d) There are no pending claims or lawsuits which have been
asserted or instituted against any Employee Benefit Plan, the assets of any of
the trusts or funds under the Employee Benefit Plans, the plan sponsor or the
plan administrator of any of the Employee Benefit Plans or against any fiduciary
of an Employee Benefit Plan with respect to the operation of such plan, nor does
the Company have any knowledge of any incident, transaction, occurrence or
circumstance which might reasonably be expected to form the basis of any such
claim or lawsuit.
(e) There is no pending or, to the knowledge of the Company,
contemplated investigation, or pending or possible enforcement action by the
Pension Benefit Guaranty Corporation, the Department of Labor, the Internal
Revenue Service or any other government agency with respect to any Employee
Benefit Plan and the Company has no knowledge of any incident, transaction,
occurrence or circumstance which might reasonably be expected to trigger such an
investigation or enforcement action.
(f) No actual or, to the knowledge of the Company, contingent
liability exists with respect to the funding of any Employee Benefit Plan or for
any other expense or obligation of any Employee Benefit Plan, except as
disclosed on the financial statements of the Company or the Schedules to this
Agreement, and no contingent liability exists under ERISA with respect to any
"multi-employer plan," as defined in Section 3(37) or Section 4001(a)(3) of
ERISA.
(g) No events have occurred or are expected to occur with
respect to any Employee Benefit Plan that would cause a material change in the
costs of providing benefits under such Employee Benefit Plan or would cause a
material change in the cost of providing for other liabilities of such Employee
Benefit Plan.
2.18 TITLE TO PROPERTY AND ENCUMBRANCES. The Company has good, valid
and indefeasible marketable title to all properties and assets used in the
conduct of its business (except for property held under valid and subsisting
leases which are in full force and effect and which are not in default) free of
all Liens (except as set forth in the Memorandum or any Schedule hereto) and
other encumbrances, except Permitted Liens and such ordinary and customary
imperfections of title, restrictions and encumbrances as do not, individually or
in the aggregate, materially detract from the value of the property or assets or
materially impair the use made thereof by the Company in its business. Without
limiting the generality of the foregoing, the Company has good and indefeasible
title to all of its properties and assets reflected in the Balance Sheet, except
13
for property disposed of in the usual and ordinary course of business since the
Balance Sheet Date and for property held under valid and subsisting leases which
are in full force and effect and which are not in default.
2.19 CONDITION OF PROPERTIES. All facilities, machinery, equipment,
fixtures and other properties owned, leased or used by the Company are in
operating condition and repair, subject to ordinary wear and tear, and are
adequate and sufficient for the Company's business.
2.20 INSURANCE COVERAGE. There is in full force and effect one or more
policies of insurance issued by insurers of recognized responsibility, insuring
the Company and its properties, products and business against such losses and
risks, and in such amounts, as are customary for corporations of established
reputation engaged in the same or similar business and similarly situated. The
Company has not been refused any insurance coverage sought or applied for, and
the Company has no reason to believe that it will be unable to renew its
existing insurance coverage as and when the same shall expire upon terms at
least as favorable to those currently in effect, other than possible increases
in premiums that do not result from any act or omission of the Company. No suit,
proceeding or action or, to the best current actual knowledge of the Company,
threat of suit, proceeding or action has been asserted or made against the
Company within the last five years due to alleged bodily injury, disease,
medical condition, death or property damage arising out of the function or
malfunction of a product, procedure or service designed, manufactured, sold or
distributed by the Company.
2.21 LITIGATION. Except as disclosed in the Memorandum or any Schedule
hereto, there is no legal action, suit, arbitration or other legal,
administrative or other governmental proceeding pending or, to the best
knowledge of the Company, threatened against or affecting the Company or its
properties, assets or business, and after reasonable investigation, the Company
is not aware of any incident, transaction, occurrence or circumstance that might
reasonably be expected to result in or form the basis for any such action, suit,
arbitration or other proceeding. The Company is not in default with respect to
any order, writ, judgment, injunction, decree, determination or award of any
court or any governmental agency or instrumentality or arbitration authority.
2.22 LICENSES. The Company possesses from all appropriate governmental
authorities all licenses, permits, authorizations, approvals, franchises and
rights necessary for the Company to engage in the business currently conducted
by it, all of which are in full force and effect.
2.23 INTERESTED PARTY TRANSACTIONS. Except as disclosed in the
Memorandum or any Schedule hereto, no officer, director or stockholder of the
Company or any Affiliate or "associate" (as such term is defined in Rule 405
under the Securities Act) of any such Person or the Company has or has had,
either directly or indirectly, (a) an interest in any Person that (i) furnishes
or sells services or products that are furnished or sold or are proposed to be
furnished or sold by the Company or (ii) purchases from or sells or furnishes to
the Company any goods or services, or (b) a beneficial interest in any contract
or agreement to which the Company is a party or by which it may be bound or
affected.
2.24 ENVIRONMENTAL MATTERS.
14
(a) To the knowledge of the Company, the Company has never
generated, used, handled, treated, released, stored or disposed of any Hazardous
Materials on any real property on which it now has or previously had any
leasehold or ownership interest, except in compliance with all applicable
Environmental Laws.
(b) To the knowledge of the Company, the historical and present
operations of the business of the Company are in compliance with all applicable
Environmental Laws, except where any non-compliance has not had and would not
reasonably be expected to have a material adverse effect on the Condition of the
Company.
(c) There are no material pending or, to the knowledge of the
Company, threatened, demands, claims, information requests or notices of
noncompliance or violation against or to the Company relating to any
Environmental Law; and, to the knowledge of the Company, there are no conditions
or occurrences on any of the real property used by the Company in connection
with its business that would reasonably be expected to lead to any such demands,
claims or notices against or to the Company, except such as have not had, and
would not reasonably be expected to have, a material adverse effect on the
Condition of the Company.
(d) To the knowledge of the Company, (i) the Company has not,
sent or disposed of, otherwise had taken or transported, arranged for the taking
or disposal of (on behalf of itself, a customer or any other party) or in any
other manner participated or been involved in the taking of or disposal or
release of a Hazardous Material to or at a site that is contaminated by any
Hazardous Material or that, pursuant to any Environmental Law, (A) has been
placed on the "National Priorities List", the "CERCLIS" list, or any similar
state or federal list, or (B) is subject to or the source of a claim, an
administrative order or other request to take "removal", "remedial",
"corrective" or any other "response" action, as defined in any Environmental
Law, or to pay for the costs of any such action at the site; (ii) the Company is
not involved in (and has no basis to reasonably expect to be involved in) any
suit or proceeding and has not received (and has no basis to reasonably expect
to receive) any notice, request for information or other communication from any
governmental authority or other third party with respect to a release or
threatened release of any Hazardous Material or a violation or alleged violation
of any Environmental Law, and has not received (and has no basis to reasonably
expect to receive) notice of any claims from any Person relating to property
damage, natural resource damage or to personal injuries from exposure to any
Hazardous Material; and (iii) the Company has timely filed every report required
to be filed, acquired all necessary certificates, approvals and permits, and
generated and maintained all required data, documentation and records under all
Environmental Laws, in all such instances except where the failure to do so
would not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the Condition of the Company.
2.25 QUESTIONABLE PAYMENTS. Neither the Company nor any director,
officer or, to the best knowledge of the Company, agent, employee or other
Person associated with or acting on behalf of the Company, has used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payments to government officials or employees from corporate funds;
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; made any false or fictitious entries on the books of record of any
15
such corporations; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
2.26 OBLIGATIONS TO OR BY STOCKHOLDERS. Except as disclosed in the
Memorandum or any Schedule hereto, the Company has no liability or obligation or
commitment to any Stockholder or any Affiliate or "associate" (as such term is
defined in Rule 405 under the Securities Act) of any Stockholder, nor does any
Stockholder or any such Affiliate or associate have any liability, obligation or
commitment to the Company.
2.27 DUTY TO MAKE INQUIRY. To the extent that any of the
representations or warranties in this Section 2 are qualified by "knowledge" or
"belief," the Company represents and warrants that it has made due and
reasonable inquiry and investigation concerning the matters to which such
representations and warranties relate, including, but not limited to, diligent
inquiry of its directors, officers and key personnel.
2.28 DISCLOSURE. There is no fact relating to the Company that the
Company has not disclosed to Parent and Acquisition Corp. in writing which has
had or is currently having a material and adverse effect nor, insofar as the
Company can now foresee, will materially and adversely affect, the Condition of
the Company. No representation or warranty by the Company herein and no
information disclosed in the schedules or exhibits hereto by the Company
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.
3. Representations and Warranties of Parent and Acquisition Corp. Parent
and Acquisition Corp. represent and warrant to the Company as follows:
3.1 ORGANIZATION AND STANDING. Parent is a corporation duly organized
and existing in good standing under the laws of the State of Florida.
Acquisition Corp. is a corporation duly organized and existing in good standing
under the laws of the State of Delaware. Parent and Acquisition Corp. have
heretofore delivered to the Company complete and correct copies of their
respective Certificates of Incorporation and By-laws as now in effect. Parent
and Acquisition Corp. have full corporate power and authority to carry on their
respective businesses as they are now being conducted and as now proposed to be
conducted and to own or lease their respective properties and assets. Neither
Parent nor Acquisition Corp. has any subsidiaries (except Parent's ownership of
Acquisition Corp.) or direct or indirect interest (by way of stock ownership or
otherwise) in any firm, corporation, limited liability company, partnership,
association or business. Parent owns all of the issued and outstanding capital
stock of Acquisition Corp. free and clear of all Liens, and Acquisition Corp.
has no outstanding options, warrants or rights to purchase capital stock or
other equity securities of Acquisition Corp., other than the capital stock owned
by Parent. Unless the context otherwise requires, all references in this Section
3 to the "Parent" shall be treated as being a reference to the Parent and
Acquisition Corp. taken together as one enterprise.
3.2 CORPORATE AUTHORITY. Each of Parent and/or Acquisition Corp. (as
the case may be) has full corporate power and authority to enter into the Merger
Documents and the other agreements to be made pursuant to the Merger Documents,
and to carry out the transactions contemplated hereby and thereby. All corporate
acts and proceedings required for the authorization, execution, delivery and
performance of the Merger Documents and such other agreements and documents by
16
Parent and/or Acquisition Corp. (as the case may be) have been duly and validly
taken or will have been so taken prior to the Closing. Each of the Merger
Documents constitutes a legal, valid and binding obligation of Parent and/or
Acquisition Corp. (as the case may be), each enforceable against them in
accordance with their respective terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by general principles of equity.
3.3 BROKER'S AND FINDER'S FEES. No person, firm, corporation or other
entity is entitled by reason of any act or omission of Parent or Acquisition
Corp. to any broker's or finder's fees, commission or other similar compensation
with respect to the execution and delivery of this Agreement or the Certificate
of Merger, or with respect to the consummation of the transactions contemplated
hereby or thereby, except as disclosed in a Schedule hereto or provided in any
document or agreement disclosed in any Schedule hereto. Parent and Acquisition
Corp. jointly and severally indemnify and hold Company harmless from and against
any and all loss, claim or liability arising out of any such claim from any
other Person who claim they introduced Parent or Acquisition Corp. to, or
assisted them with the transactions contemplated by or described herein.
3.4 CAPITALIZATION OF PARENT. The authorized capital stock of Parent
consists of (a) 100,000,000 shares of common stock, par value $0.0001 per share
(the "PARENT COMMON STOCK"), of which not more than 1,850,000 shares will be,
prior to the Effective Time, issued and outstanding, before taking into
consideration the issuance of Parent Common Stock in the Private Placement, and
(b) 20,000,000 shares of "blank check" preferred stock, par value $0.0001 per
share, of which 300 shares have been, or will be at the Closing, designated as
Series A Convertible Preferred Stock (the "PARENT SERIES A PREFERRED STOCK")
pursuant to a Certificate of Designation substantially as set forth in Exhibit E
hereto, of which no shares are issued and outstanding prior to the date hereof,
and following the Effective Date will be outstanding, a minimum of 100 Units and
maximum of 240 Units (276 Units if the over-allotment is exercised) shares of
Parent Series A Preferred Stock under the Private Placement following the
Closing. Parent has no outstanding options, rights or commitments to issue
shares of Parent Common Stock or any other Equity Security of Parent or
Acquisition Corp., and there are no outstanding securities convertible or
exercisable into or exchangeable for shares of Parent Common Stock or any other
Equity Security of Parent or Acquisition Corp. There is no voting trust,
agreement or arrangement among any of the beneficial holders of Parent Common
Stock affecting the nomination or election of directors or the exercise of the
voting rights of Parent Common Stock. All outstanding shares of the capital
stock of Parent are validly issued and outstanding, fully paid and
nonassessable, and none of such shares have been issued in violation of the
preemptive rights of any person.
3.5 ACQUISITION CORP. Acquisition Corp. is a wholly-owned Delaware
subsidiary of Parent that was formed specifically for the purpose of the Merger
and that has not conducted any business or acquired any property, and will not
conduct any business or acquire any property prior to the Closing Date, except
in preparation for and otherwise in connection with the transactions
contemplated by this Agreement, the Certificate of Merger and the other
agreements to be made pursuant to or in connection with this Agreement and the
Certificate of Merger.
17
3.6 VALIDITY OF SHARES. The 4,790,471 shares of Parent Common Stock
to be issued at the Closing pursuant to Section 1.5(a)(ii) hereof and up to 276
shares of Parent Series A Preferred Stock to be issued at one or more Closings
pursuant to the Memorandum, when issued and delivered in accordance with the
terms hereof and of the Certificate of Merger, shall be duly and validly issued,
fully paid and nonassessable. Based in part on the representations and
warranties of the Stockholders as contemplated by Section 4 hereof and assuming
the accuracy thereof, the issuance of the Parent Common Stock upon the Merger
pursuant to Section 1.5(a)(ii) will be exempt from the registration and
prospectus delivery requirements of the Securities Act and from the
qualification or registration requirements of any applicable state blue sky or
securities laws.
3.7 SEC REPORTING AND COMPLIANCE. (a) Parent filed a registration
statement on Form SB-2 under the Securities Act which became effective on or
about November 20, 2003. Since that date, Parent has filed with the Commission
all registration statements, proxy statements, information statements and
reports required to be filed pursuant to the Exchange Act. Parent has not filed
with the Commission a certificate on Form 15 pursuant to Rule 12h-3 of the
Exchange Act.
(b) Parent has delivered to the Company true and complete copies
of the registration statements, information statements and other reports
(collectively, the "PARENT SEC DOCUMENTS") filed by the Parent with the
Commission. None of the Parent SEC Documents, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements contained therein not misleading.
(c) Except as set forth on SCHEDULE 3.7, Parent has not filed,
and nothing has occurred with respect to which Parent would be required to file,
any report on Form 8-K since September 30, 2004. Prior to and until the Closing,
Parent will provide to the Company copies of any and all amendments or
supplements to the Parent SEC Documents filed with the Commission since January
1, 2004 and all subsequent registration statements and reports filed by Parent
subsequent to the filing of the Parent SEC Documents with the Commission and any
and all subsequent information statements, proxy statements, reports or notices
filed by the Parent with the Commission or delivered to the stockholders of
Parent.
(d) Parent is not an investment company within the meaning of
Section 3 of the Investment Company Act.
(e) The shares of Parent Common Stock are quoted on the
Over-the-Counter (OTC) Bulletin Board under the symbol "MDLL," and Parent is in
compliance in all material respects with all rules and regulations of the OTC
Bulletin Board applicable to it and the Parent Stock.
(f) Between the date hereof and the Closing Date, Parent shall
continue to satisfy the filing requirements of the Exchange Act and all other
requirements of applicable securities laws and the OTC Bulletin Board.
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(g) To the best knowledge of the Parent, the Parent has
otherwise complied with the Securities Act, Exchange Act and all other
applicable federal and state securities laws.
3.8 FINANCIAL STATEMENTS. The balance sheets, and statements of
income, stockholders' equity and cash flows contained in the Parent SEC
Documents (the "PARENT FINANCIAL STATEMENTS") (i) have been prepared in
accordance with GAAP applied on a basis consistent with prior periods (and, in
the case of unaudited financial information, on a basis consistent with year-end
audits), (ii) are in accordance with the books and records of the Parent, and
(iii) present fairly in all material respects the financial condition of the
Parent at the dates therein specified and the results of its operations and
changes in financial position for the periods therein specified. The financial
statements included in the Annual Report on Form 10-KSB for the fiscal year
ended April 30, 2004, are as audited by, and include the related opinions of
Daszkal Xxxxxx LLP, Parent's independent certified public accountants. The
financial information included in the Quarterly Report on Form 10-QSB for the
quarter ended July 31, 2004, is unaudited, but reflects all adjustments
(including normally recurring accounts) that Parent considers necessary for a
fair presentation of such information and have been prepared in accordance with
generally accepted accounting principles, consistently applied.
3.9 GOVERNMENTAL CONSENTS. All material consents, approvals, orders,
or authorizations of, or registrations, qualifications, designations,
declarations, or filings with any federal or state governmental authority on the
part of Parent or Acquisition Corp. required in connection with the consummation
of the Merger shall have been obtained prior to, and be effective as of, the
Closing.
3.10 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. The execution,
delivery and performance by Parent and/or Acquisition Corp. of this Agreement,
the Certificate of Merger and the other agreements to be made by Parent or
Acquisition Corp. pursuant to or in connection with this Agreement or the
Certificate of Merger and the consummation by Parent and/or Acquisition Corp. of
the transactions contemplated by the Merger Documents will not cause Parent
and/or Acquisition Corp. to violate or contravene (i) any provision of law, (ii)
any rule or regulation of any agency or government, (iii) any order, judgment or
decree of any court, or (v) any provision of their respective certificates of
incorporation or by-laws as amended and in effect on and as of the Closing Date
and will not violate or be in conflict with, result in a breach of or constitute
(with or without notice or lapse of time, or both) a default under any material
indenture, loan or credit agreement, deed of trust, mortgage, security agreement
or other agreement or contract to which Parent or Acquisition Corp. is a party
or by which Parent and/or Acquisition Corp. or any of their respective
properties is bound.
3.11 NO GENERAL SOLICITATION. In issuing Parent Common Stock in the
Merger hereunder, neither Parent nor anyone acting on its behalf has offered to
sell the Parent Common Stock by any form of general solicitation or advertising.
3.12 BINDING OBLIGATIONS. The Merger Documents constitute the legal,
valid and binding obligations of the Parent and Acquisition Corp., and are
enforceable against the Parent and Acquisition Corp., in accordance with their
19
respective terms, except as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity. 3.13 ABSENCE OF UNDISCLOSED
LIABILITIES. Neither Parent nor Acquisition Corp. has any material obligation or
liability (whether accrued, absolute, contingent, liquidated or otherwise,
whether due or to become due), arising out of any transaction entered into at or
prior to the Closing, except (a) as disclosed in the Parent SEC Documents, (b)
to the extent set forth on or reserved against in the balance sheet of Parent as
of July 31, 2004 (the "PARENT BALANCE SHEET") or the notes to the Parent
Financial Statements, (c) current liabilities incurred and obligations under
agreements entered into in the usual and ordinary course of business since July
31, 2004 (the "PARENT BALANCE SHEET DATE"), none of which (individually or in
the aggregate) materially and adversely affects the condition (financial or
otherwise), properties, assets, liabilities, business operations, results of
operations or prospects of the Parent or Acquisition Corp., taken as a whole
(the "CONDITION OF THE PARENT"), and (d) by the specific terms of any written
agreement, document or arrangement attached as an exhibit to the Parent SEC
Documents.
3.14 CHANGES. Since the Parent Balance Sheet Date, except as disclosed
in the Parent SEC Documents, the Parent has not (a) incurred any debts,
obligations or liabilities, absolute, accrued or, to the Parent's knowledge,
contingent, whether due or to become due, except for current liabilities
incurred in the usual and ordinary course of business, (b) discharged or
satisfied any Liens other than those securing, or paid any obligation or
liability other than, current liabilities shown on the Parent Balance Sheet and
current liabilities incurred since the Parent Balance Sheet Date, in each case
in the usual and ordinary course of business, (c) mortgaged, pledged or
subjected to Lien any of its assets, tangible or intangible, other than in the
usual and ordinary course of business, (d) sold, transferred or leased any of
its assets, except in the usual and ordinary course of business, (e) cancelled
or compromised any debt or claim, or waived or released any right of material
value, (f) suffered any physical damage, destruction or loss (whether or not
covered by insurance) which could reasonably be expected to have a material
adverse effect on the Condition of the Parent, (g) entered into any transaction
other than in the usual and ordinary course of business, (h) encountered any
labor union difficulties, (i) made or granted any wage or salary increase or
made any increase in the amounts payable under any profit sharing, bonus,
deferred compensation, severance pay, insurance, pension, retirement or other
employee benefit plan, agreement or arrangement, other than in the ordinary
course of business consistent with past practice, or entered into any employment
agreement, (j) issued or sold any shares of capital stock, bonds, notes,
debentures or other securities or granted any options (including employee stock
options), warrants or other rights with respect thereto, (k) declared or paid
any dividends on or made any other distributions with respect to, or purchased
or redeemed, any of its outstanding capital stock, (l) suffered or experienced
any change in, or condition affecting, the financial condition of the Parent
other than changes, events or conditions in the usual and ordinary course of its
business, none of which (either by itself or in conjunction with all such other
changes, events and conditions) could reasonably be expected to have a material
adverse effect on the Condition of the Parent, (m) made any change in the
accounting principles, methods or practices followed by it or depreciation or
amortization policies or rates theretofore adopted, (n) made or permitted any
amendment or termination of any material contract, agreement or license to which
it is a party, (o) suffered any material loss not reflected in the Parent
20
Balance Sheet or its statement of income for the year ended on the Parent
Balance Sheet Date, (p) paid, or made any accrual or arrangement for payment of,
bonuses or special compensation of any kind or any severance or termination pay
to any present or former officer, director, employee, stockholder or consultant,
(q) made or agreed to make any charitable contributions or incurred any
non-business expenses in excess of $5,000 in the aggregate, or (r) entered into
any agreement, or otherwise obligated itself, to do any of the foregoing.
3.15 TAX RETURNS AND AUDITS. All required federal, state and local Tax
Returns of the Parent have been accurately prepared in all material respects and
duly and timely filed, and all federal, state and local Taxes required to be
paid with respect to the periods covered by such returns have been paid to the
extent that the same are material and have become due, except where the failure
so to file or pay could not reasonably be expected to have a material adverse
effect upon the Condition of the Parent. The Parent is not and has not been
delinquent in the payment of any Tax. The Parent has not had a Tax deficiency
assessed against it. None of the Parent's federal income tax returns nor any
state or local income or franchise tax returns has been audited by governmental
authorities. The reserves for Taxes reflected on the Parent Balance Sheet are
sufficient for the payment of all unpaid Taxes payable by the Parent with
respect to the period ended on the Parent Balance Sheet Date. There are no
federal, state, local or foreign audits, actions, suits, proceedings,
investigations, claims or administrative proceedings relating to Taxes or any
Tax Returns of the Parent now pending, and the Parent has not received any
notice of any proposed audits, investigations, claims or administrative
proceedings relating to Taxes or any Tax Returns.
3.16 EMPLOYEE BENEFIT PLANS; ERISA. (a) Except as disclosed in the
Parent SEC Documents, there are no "employee benefit plans" (within the meaning
of Section 3(3) of ERISA) nor any other employee benefit or fringe benefit
arrangements, practices, contracts, policies or programs other than programs
merely involving the regular payment of wages, commissions, or bonuses
established, maintained or contributed to by the Parent. Any plans listed in the
Parent SEC Documents are hereinafter referred to as the "PARENT EMPLOYEE BENEFIT
PLANS."
(b) Any current and prior material documents, including all
amendments thereto, with respect to each Parent Employee Benefit Plan have been
given to the Company or its advisors.
(c) All Parent Employee Benefit Plans are in material compliance
with the applicable requirements of ERISA, the Code and any other applicable
state, federal or foreign law.
(d) There are no pending, or to the knowledge of the Parent,
threatened, claims or lawsuits which have been asserted or instituted against
any Parent Employee Benefit Plan, the assets of any of the trusts or funds under
the Parent Employee Benefit Plans, the plan sponsor or the plan administrator of
any of the Parent Employee Benefit Plans or against any fiduciary of a Parent
Employee Benefit Plan with respect to the operation of such plan.
(e) There is no pending, or to the knowledge of the Parent,
threatened, investigation or pending or possible enforcement action by the
Pension Benefit Guaranty Corporation, the Department of Labor, the Internal
21
Revenue Service or any other government agency with respect to any Parent
Employee Benefit Plan.
(f) No actual or, to the knowledge of Parent, contingent
liability exists with respect to the funding of any Parent Employee Benefit Plan
or for any other expense or obligation of any Parent Employee Benefit Plan,
except as disclosed on the financial statements of the Parent or the Parent SEC
Documents, and to the knowledge of the Parent, no contingent liability exists
under ERISA with respect to any "multi-employer plan," as defined in Section
3(37) or Section 4001(a)(3) of ERISA.
3.17 LITIGATION. There is no legal action, suit, arbitration or other
legal, administrative or other governmental proceeding pending or, to the
knowledge of the Parent, threatened against or affecting the Parent or
Acquisition Corp. or their properties, assets or business. To the knowledge of
the Parent, neither Parent nor Acquisition Corp. is in default with respect to
any order, writ, judgment, injunction, decree, determination or award of any
court or any governmental agency or instrumentality or arbitration authority.
3.18 INTERESTED PARTY TRANSACTIONS. Except as disclosed in the Parent
SEC Documents, no officer, director or stockholder of the Parent or any
Affiliate or "associate" (as such term is defined in Rule 405 under the
Securities Act) of any such Person or the Parent has or has had, either directly
or indirectly, (a) an interest in any Person that (i) furnishes or sells
services or products that are furnished or sold or are proposed to be furnished
or sold by the Parent or (ii) purchases from or sells or furnishes to the Parent
any goods or services, or (b) a beneficial interest in any contract or agreement
to which the Parent is a party or by which it may be bound or affected.
3.19 QUESTIONABLE PAYMENTS. Neither the Parent, Acquisition Corp. nor
to the knowledge of the Parent, any director, officer, agent, employee or other
Person associated with or acting on behalf of the Parent or Acquisition Corp.,
has used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity; made any direct or
indirect unlawful payments to government officials or employees from corporate
funds; established or maintained any unlawful or unrecorded fund of corporate
monies or other assets; made any false or fictitious entries on the books of
record of any such corporations; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
3.20 OBLIGATIONS TO OR BY STOCKHOLDERS. Except as disclosed in the
Parent SEC Documents, the Parent has no liability or obligation or commitment to
any stockholder of Parent or any Affiliate or "associate" (as such term is
defined in Rule 405 under the Securities Act) of any stockholder of Parent, nor
does any stockholder of Parent or any such Affiliate or associate have any
liability, obligation or commitment to the Parent.
3.21 SCHEDULE OF ASSETS AND CONTRACTS. Except as expressly set forth
in this Agreement, the Parent Balance Sheet or the notes thereto, the Parent is
not a party to any written or oral agreement not made in the ordinary course of
business that is material to the Parent. Parent does not own any real property.
Parent is not a party to or otherwise barred by any written or oral (a)
agreement with any labor union, (b) agreement for the purchase of fixed assets
or for the purchase of materials, supplies or equipment in excess of normal
22
operating requirements, (c) agreement for the employment of any officer,
individual employee or other Person on a full-time basis or any agreement with
any Person for consulting services, (d) bonus, pension, profit sharing,
retirement, stock purchase, stock option, deferred compensation, medical,
hospitalization or life insurance or similar plan, contract or understanding
with respect to any or all of the employees of Parent or any other Person, (e)
indenture, loan or credit agreement, note agreement, deed of trust, mortgage,
security agreement, promissory note or other agreement or instrument relating to
or evidencing Indebtedness for Borrowed Money or subjecting any asset or
property of Parent to any Lien or evidencing any Indebtedness, (f) guaranty of
any Indebtedness, (g) lease or agreement under which Parent is lessee of or
holds or operates any property, real or personal, owned by any other Person, (h)
lease or agreement under which Parent is lessor or permits any Person to hold or
operate any property, real or personal, owned or controlled by Parent, (i)
agreement granting any preemptive right, right of first refusal or similar right
to any Person, (j) agreement or arrangement with any Affiliate or any
"associate" (as such term is defined in Rule 405 under the Securities Act) of
Parent or any present or former officer, director or stockholder of Parent, (k)
agreement obligating Parent to pay any royalty or similar charge for the use or
exploitation of any tangible or intangible property, (1) covenant not to compete
or other restriction on its ability to conduct a business or engage in any other
activity, (m) distributor, dealer, manufacturer's representative, sales agency,
franchise or advertising contract or commitment, (n) agreement to register
securities under the Securities Act, (o) collective bargaining agreement, or (p)
agreement or other commitment or arrangement with any Person continuing for a
period of more than three months from the Closing Date that involves an
expenditure or receipt by Parent in excess of $1,000. The Parent maintains no
insurance policies or insurance coverage of any kind with respect to Parent, its
business, premises, properties, assets, employees and agents. SCHEDULE 3.21
contains a true and complete list and description of each bank account, savings
account, other deposit relationship and safety deposit box of Parent, including
the name of the bank or other depository, the account number and the names of
the individuals having signature or other withdrawal authority with respect
thereto. Except as disclosed on SCHEDULE 3.21, no consent of any bank or other
depository is required to maintain any bank account, other deposit relationship
or safety deposit box of Parent in effect following the consummation of the
Merger and the transactions contemplated hereby. Parent has furnished to the
Company true and complete copies of all agreements and other documents disclosed
or referred to in SCHEDULE 3.21, as well as any additional agreements or
documents, requested by the Company.
3.22 EMPLOYEES. Other than pursuant to ordinary arrangements of
employment compensation, Parent is not under any obligation or liability to any
officer, director, employee or Affiliate of Parent.
3.23 DISCLOSURE. There is no fact relating to Parent that Parent has
not disclosed to the Company in writing that materially and adversely affects
nor, insofar as Parent can now foresee, will materially and adversely affect,
the condition (financial or otherwise), properties, assets, liabilities,
business operations, results of operations or prospects of Parent. No
representation or warranty by Parent herein and no information disclosed in the
schedules or exhibits hereto by Parent contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein misleading.
23
4. Additional Representations, Warranties and Covenants of the
Stockholders.
Promptly after the Effective Time, Parent shall cause to be mailed to
each holder of record of Company Common Stock that was converted pursuant to
Section 1.5 hereof into the right to receive Parent Common Stock a letter of
transmittal ("Letter of Transmittal") which shall contain additional
representations, warranties and covenants of such Stockholder, including without
limitation, that (i) such Stockholder has full right, power and authority to
deliver such Company Common Stock and Letter of Transmittal, (ii) the delivery
of such Company Common Stock will not violate or be in conflict with, result in
a breach of or constitute a default under, any indenture, loan or credit
agreement, deed of trust, mortgage, security agreement or other agreement or
instrument to which such Stockholder is bound or affected, (iii) such
Stockholder has good, valid and marketable title to all shares of Company Common
Stock indicated in such Letter of Transmittal and that such Stockholder is not
affected by any voting trust, agreement or arrangement affecting the voting
rights of such Company Common Stock, (iv) such Stockholder is an "accredited
investor," as such term is defined in Regulation D under the Securities Act and
that such Stockholder is acquiring Parent Common Stock for investment purposes,
and not with a view to selling or otherwise distributing such Parent Common
Stock in violation of the Securities Act or the securities laws of any state,
and (v) such Stockholder has had an opportunity to ask and receive answers to
any questions such Stockholder may have had concerning the terms and conditions
of the Merger and the Parent Common Stock and has obtained any additional
information that such Stockholder has requested. Delivery shall be effected, and
risk of loss and title to the Parent Common Stock shall pass, only upon delivery
to the Parent (or an agent of the Parent) of (x) certificates evidencing
ownership thereof as contemplated by Section 1.6 hereof (or affidavit of lost
certificate), and (y) the Letter of Transmittal containing the representations,
warranties and covenants contemplated by this Section 4.
5. Conduct of Businesses Pending the Merger.
5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Prior to
the Effective Time, unless Parent or Acquisition Corp. shall otherwise agree in
writing or as otherwise contemplated by this Agreement:
(i) the business of the Company shall be conducted only in the
ordinary course;
(ii) the Company shall not (A) directly or indirectly redeem,
purchase or otherwise acquire or agree to redeem, purchase or otherwise acquire
any shares of its capital stock; (B) amend its Certificate of Incorporation or
By-laws except to effectuate the transactions contemplated in the Memorandum; or
(C) split, combine or reclassify the outstanding Company Stock or declare, set
aside or pay any dividend payable in cash, stock or property or make any
distribution with respect to any such stock;
(iii)the Company shall not (A) issue or agree to issue any
additional shares of, or options, warrants or rights of any kind to acquire any
shares of, Company Stock, except to issue shares of Company Common Stock in
connection with any matter relating to the Memorandum; (B) acquire or dispose of
any fixed assets or acquire or dispose of any other substantial assets other
than in the ordinary course of business; (C) incur additional Indebtedness or
any other liabilities or enter into any other transaction other than in the
24
ordinary course of business; (D) enter into any contract, agreement, commitment
or arrangement with respect to any of the foregoing; or (E) except as
contemplated by this Agreement, enter into any contract, agreement, commitment
or arrangement to dissolve, merge, consolidate or enter into any other material
business combination;
(iv) the Company shall use its best efforts to preserve intact
the business organization of the Company, to keep available the service of its
present officers and key employees, and to preserve the good will of those
having business relationships with it;
(v) the Company will not, nor will it authorize any director or
authorize or permit any officer or employee or any attorney, accountant or other
representative retained by it to, make, solicit, encourage any inquiries with
respect to, or engage in any negotiations concerning, any Acquisition Proposal
(as defined below). The Company will promptly advise Parent orally and in
writing of any such inquiries or proposals (or requests for information) and the
substance thereof. As used in this paragraph, "Acquisition Proposal" shall mean
any proposal for a merger or other business combination involving the Company or
for the acquisition of a substantial equity interest in it or any material
assets of it other than as contemplated by this Agreement. The Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any person conducted heretofore with respect to
any of the foregoing; and
(vi) the Company will not enter into any new employment
agreements with any of its officers or employees or grant any increases in the
compensation or benefits of its officers and employees or amend any employee
benefit plan or arrangement.
5.2 CONDUCT OF BUSINESS BY PARENT AND ACQUISITION CORP. PENDING THE
MERGER. Prior to the Effective Time, unless the Company shall otherwise agree in
writing or as otherwise contemplated by this Agreement:
(i) the business of Parent and Acquisition Corp. shall be
conducted only in the ordinary course; PROVIDED, HOWEVER, that Parent shall take
the steps necessary to have discontinued its existing business without liability
to Parent or Acquisition Corp. as of the Closing Date;
(ii) neither Parent nor Acquisition Corp. shall (A) directly or
indirectly redeem, purchase or otherwise acquire or agree to redeem, purchase or
otherwise acquire any shares of its capital stock; (B) amend its certificate of
incorporation or by-laws other than to authorize the Parent to issue one or more
series or classes of preferred stock in order to create therefrom the Parent
Series A Preferred Stock which shall be issued at the Closing in the Private
Placement; or (C) split, combine or reclassify its capital stock or declare, set
aside or pay any dividend payable in cash, stock or property or make any
distribution with respect to such stock; and
(iii)neither Parent nor Acquisition Corp. shall (A) issue or
agree to issue any additional shares of, or options, warrants or rights of any
kind to acquire shares of, its capital stock; (B) acquire or dispose of any
assets other than in the ordinary course of business (except for dispositions in
connection with Section 5.2(i) hereof); (C) incur additional Indebtedness or any
25
other liabilities or enter into any other transaction except in the ordinary
course of business; (D) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing, or (E) except as contemplated
by this Agreement, enter into any contract, agreement, commitment or arrangement
to dissolve, merge; consolidate or enter into any other material business
contract or enter into any negotiations in connection therewith.
(iv) neither the Parent nor Acquisition Corp. will, nor will they
authorize any director or authorize or permit any officer or employee or any
attorney, accountant or other representative retained by them to, make, solicit,
encourage any inquiries with respect to, or engage in any negotiations
concerning, any Acquisition Proposal (as defined below for purposes of this
paragraph). Parent will promptly advise the Company orally and in writing of any
such inquiries or proposals (or requests for information) and the substance
thereof. As used in this paragraph, "ACQUISITION PROPOSAL" shall mean any
proposal for a merger or other business combination involving the Parent or
Acquisition Corp or for the acquisition of a substantial equity interest in
either of them or any material assets of either of them other than as
contemplated by this Agreement. The Parent will immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
person conducted heretofore with respect to any of the foregoing; and
(v) neither the Parent nor Acquisition Corp. will enter into any
new employment agreements with any of their officers or employees or grant any
increases in the compensation or benefits of their officers and employees.
6. Additional Agreements.
6.1 ACCESS AND INFORMATION. The Company, Parent and Acquisition Corp.
shall each afford to the other and to the other's accountants, counsel and other
representatives full access during normal business hours throughout the period
prior to the Effective Time of all of its properties, books, contracts,
commitments and records (including but not limited to tax returns) and during
such period, each shall furnish promptly to the other all information concerning
its business, properties and personnel as such other party may reasonably
request, provided that no investigation pursuant to this Section 6.1 shall
affect any representations or warranties made herein. Each party shall hold, and
shall cause its employees and agents to hold, in confidence all such information
(other than such information which (i) is already in such party's possession or
(ii) becomes generally available to the public other than as a result of a
disclosure by such party or its directors, officers, managers, employees, agents
or advisors, or (iii) becomes available to such party on a non-confidential
basis from a source other than a party hereto or its advisors, provided that
such source is not known by such party to be bound by a confidentiality
agreement with or other obligation of secrecy to a party hereto or another party
until such time as such information is otherwise publicly available; PROVIDED,
26
HOWEVER, that (A) any such information may be disclosed to such party's
directors, officers, employees and representatives of such party's advisors who
need to know such information for the purpose of evaluating the transactions
contemplated hereby (it being understood that such directors, officers,
employees and representatives shall be informed by such party of the
confidential nature of such information), (B) any disclosure of such information
may be made as to which the party hereto furnishing such information has
consented in writing, and (C) any such information may be disclosed pursuant to
a judicial, administrative or governmental order or request; PROVIDED, however,
that the requested party will promptly so notify the other party so that the
other party may seek a protective order or appropriate remedy and/or waive
compliance with this Agreement and if such protective order or other remedy is
not obtained or the other party waives compliance with this provision, the
requested party will furnish only that portion of such information which is
legally required and will exercise its best efforts to obtain a protective order
or other reliable assurance that confidential treatment will be accorded the
information furnished). If this Agreement is terminated, each party will deliver
to the other all documents and other materials (including copies) obtained by
such party or on its behalf from the other party as a result of this Agreement
or in connection herewith, whether so obtained before or after the execution
hereof.
6.2 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including using its commercially reasonable efforts to satisfy
the conditions precedent to the obligations of any of the parties hereto to
obtain all necessary waivers, and to lift any injunction or other legal bar to
the Merger (and, in such case, to proceed with the Merger as expeditiously as
possible). In order to obtain any necessary governmental or regulatory action or
non-action, waiver, consent, extension or approval, each of Parent, Acquisition
Corp. and the Company agrees to take all reasonable actions and to enter into
all reasonable agreements as may be necessary to obtain timely governmental or
regulatory approvals and to take such further action in connection therewith as
may be necessary. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and/or directors of Parent, Acquisition Corp. and the
Company shall take all such necessary action.
6.3 PUBLICITY. No party shall issue any press release or public
announcement pertaining to the Merger that has not been agreed upon in advance
by Parent and the Company, except as Parent reasonably determines to be
necessary in order to comply with the rules of the Commission or of the
principal trading exchange or market for Parent Common Stock, provided that in
such case Parent will use its best efforts to allow Company to review and
reasonably approve any same prior to its release.
6.4 APPOINTMENT OF DIRECTORS AND OFFICERS. Immediately upon the
Effective Time, Parent shall accept the resignations of the current officers and
directors of Parent as provided by Section 7.2(f)(6) hereof, and shall cause the
persons listed as directors in EXHIBIT D hereto to be elected to the Board of
Directors of Parent. At the first annual meeting of Parent stockholders and
thereafter, the election of members of Parent's Board of Directors shall be
accomplished in accordance with the by-laws of Parent.
6.5 PARENT NAME CHANGE AND EXCHANGE LISTING. At the Effective Time,
Parent shall take all required legal actions to change its corporate name to
CepTor Corporation Promptly following the Effective Time, Parent shall take all
required actions to, upon satisfaction of the original listing requirements,
list the Parent Common Stock for trading on the American Stock Exchange or the
Nasdaq Smallcap Market.
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7. Conditions of Parties' Obligations.
7.1 PARENT AND ACQUISITION CORP. OBLIGATIONS. The obligations of
Parent and Acquisition Corp. under this Agreement and the Certificate of Merger
are subject to the fulfillment at or prior to the Closing of the following
conditions, any of which may be waived in whole or in part by Parent.
(a) NO ERRORS, ETC. The representations and warranties of the
Company under this Agreement shall be deemed to have been made again on the
Closing Date and shall then be true and correct in all material respects.
(b) COMPLIANCE WITH AGREEMENT. The Company shall have performed
and complied in all material respects with all agreements and conditions
required by this Agreement to be performed or complied with by them on or before
the Closing Date.
(c) NO DEFAULT OR ADVERSE CHANGE. There shall not exist on the
Closing Date any Default or Event of Default or any event or condition that,
with the giving of notice or lapse of time, or both, would constitute a Default
or Event of Default, and since the Balance Sheet Date, there shall have been no
material adverse change in the Condition of the Company.
(d) CERTIFICATE OF OFFICERS. The Company shall have delivered to
Parent and Acquisition Corp. a certificate dated the Closing Date, executed on
its behalf by the Chief Executive Officer and Chief Financial Officer of the
Company, certifying the satisfaction of the conditions specified in paragraphs
(a), (b) and (c) of this Section 7.1.
(e) OPINION OF THE COMPANY'S COUNSEL. Acquisition Corp. shall
have received from Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP, New York, New
York, counsel for the Company, a favorable opinion dated the Closing Date to the
effect set forth in Exhibit F hereto.
(f) CONSUMMATION OF PRIVATE PLACEMENT. Consummation of the
Merger shall occur simultaneously with the closing of the Private Placement.
(g) NO RESTRAINING ACTION. No action or proceeding before any
court, governmental body or agency shall have been threatened, asserted or
instituted to restrain or prohibit, or to obtain substantial damages in respect
of, this Agreement or the Certificate of Merger or the carrying out of the
transactions contemplated by the Merger Documents.
(h) SUPPORTING DOCUMENTS. Parent and Acquisition Corp. shall
have received the following:
(1) Copies of resolutions of the Board of Directors and the
stockholders of the Company, certified by the Secretary of the Company,
authorizing and approving the execution, delivery and performance of the Merger
Documents and all other documents and instruments to be delivered pursuant
hereto and thereto.
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(2) A certificate of incumbency executed by the Secretary of
the Company certifying the names, titles and signatures of the officers
authorized to execute any documents referred to in this Agreement and further
certifying that the Certificate of Incorporation and By-laws of the Company
delivered to Parent and Acquisition Corp. at the time of the execution of this
Agreement have been validly adopted and have not been amended or modified.
(3) A certificate, dated the Closing Date, executed by the
Company's Secretary, certifying that, except for the filing of the Certificate
of Merger: (i) all consents, authorizations, orders and approvals of, and
filings and registrations with, any court, governmental body or instrumentality
that are required for the execution and delivery of this Agreement and the
Certificate of Merger and the consummation of the Merger shall have been duly
made or obtained, and all material consents by third parties that are required
for the Merger have been obtained; and (ii) no action or proceeding before any
court, governmental body or agency has been threatened, asserted or instituted
to restrain or prohibit, or to obtain substantial damages in respect of, this
Agreement or the Certificate of Merger or the carrying out of the transactions
contemplated by the Merger Documents.
(4) Evidence as of a recent date of the good standing and
corporate existence of the Company issued by the Secretary of State of the State
of Delaware and evidence that the Company is qualified to transact business as a
foreign corporation and is in good standing in each state of the United States
and in each other jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary.
(5) Such additional supporting documentation and other
information with respect to the transactions contemplated hereby as Parent and
Acquisition Corp. may reasonably request.
(i) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
hereby and all certificates, opinions, agreements, instruments and documents
mentioned herein or incident to any such transactions shall be reasonably
satisfactory in form and substance to Parent and Acquisition Corp. The Company
shall furnish to Parent and Acquisition Corp. such supporting documentation and
evidence of the satisfaction of any or all of the conditions precedent specified
in this Section 7.1 as Parent or its counsel may reasonably request.
7.2 COMPANY OBLIGATIONS. The obligations of the Company under this
Agreement and the Certificate of Merger are subject to the fulfillment at or
prior to the Closing of the conditions precedent specified in paragraphs (f),
(g), (h) and (i) of Section 7.1 hereof, and the following additional conditions:
(a) NO ERRORS, ETC. The representations and warranties of Parent
and Acquisition Corp. under this Agreement shall be deemed to have been made
again on the Closing Date and shall then be true and correct in all material
respects.
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(b) COMPLIANCE WITH AGREEMENT. Parent and Acquisition Corp.
shall have performed and complied in all material respects with all agreements
and conditions required by this Agreement and the Certificate of Merger to be
performed or complied with by them on or before the Closing Date.
(c) NO DEFAULT OR ADVERSE CHANGE. There shall not exist on the
Closing Date any Default or Event of Default or any event or condition, that
with the giving of notice or lapse of time, or both, would constitute a Default
or Event of Default, and since the Parent Balance Sheet Date, there shall have
been no material adverse change in the Condition of the Parent.
(d) CERTIFICATE OF OFFICERS. Parent and Acquisition Corp. shall
have delivered to the Company a certificate dated the Closing Date, executed on
their behalf by their respective Presidents or other duly authorized officers,
certifying the satisfaction of the conditions specified in paragraphs (a), (b),
and (c) of this Section 7.2.
(e) OPINION OF PARENT'S COUNSEL. The Company shall have received
from The Law Offices of Xxxxx X. Xxxxxxx XX, P.A., Boca Raton, Florida, counsel
for Parent, a favorable opinion dated the Closing Date to the effect set forth
in Exhibit G hereto.
(f) SUPPORTING DOCUMENTS. The Company shall have received the
following:
(1) Copies of resolutions of Parent's and Acquisition
Corp.'s respective board of directors and the sole stockholder of Acquisition
Corp., certified by their respective Secretaries, authorizing and approving, to
the extent applicable, the execution, delivery and performance of this
Agreement, the Certificate of Merger and all other documents and instruments to
be delivered by them pursuant hereto and thereto.
(2) A certificate of incumbency executed by the respective
Secretaries of Parent and Acquisition Corp. certifying the names, titles and
signatures of the officers authorized to execute the documents referred to in
paragraph (i) above and further certifying that the certificates of
incorporation and by-laws of Parent and Acquisition Corp. appended thereto have
not been amended or modified.
(3) A certificate, dated the Closing Date, executed by the
Secretary of each of the Parent and Acquisition Corp., certifying that, except
for the filing of the Certificate of Merger: (i) all consents, authorizations,
orders and approvals of, and filings and registrations with, any court,
governmental body or instrumentality that are required for the execution and
delivery of this Agreement and the Certificate of Merger and the consummation of
the Merger shall have been duly made or obtained, and all material consents by
third parties required for the Merger have been obtained; and (ii) no action or
proceeding before any court, governmental body or agency has been threatened,
asserted or instituted to restrain or prohibit, or to obtain substantial damages
in respect of, this Agreement or the Certificate of Merger or the carrying out
of the transactions contemplated by any of the Merger Documents.
(4) A certificate of Register and Transfer Company, Parent's
transfer agent and registrar, certifying as of the business day prior to the
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date any shares of Parent Common Stock are first issued in the Private
Placement, a true and complete list of the names and addresses of the record
owners of all of the outstanding shares of Parent Common Stock, together with
the number of shares of Parent Common Stock held by each record owner.
(5) A letter from Register and Transfer Company, Parent's
transfer agent and registrar setting forth that the number of shares of Parent
Common Stock that would be issued and outstanding as of the Closing Date, but
prior to the closing of the Private Placement and the Merger, is no more than
1,850,000 shares of Parent Common Stock.
(6) (i) The executed resignations of all directors and
officers of Parent, with the director resignations to take effect at the
Effective Time, and (ii) executed releases from each of Xxxx Xxxxxx, Xxxx
Xxxxxxx, Xxxxxx Xxxxxxxx, Xxxx Xxxxx and Xxxxxxx Xxxxx in the form attached
hereto as EXHIBIT H.
(7) Evidence as of a recent date of the good standing and
corporate existence of each of the Parent and Acquisition Corp. issued by the
Secretary of State of their respective states of incorporation and evidence that
the Parent and Acquisition Corp. are qualified to transact business as foreign
corporations and are in good standing in each state of the United States and in
each other jurisdiction where the character of the property owned or leased by
them or the nature of their activities makes such qualification necessary.
(8) Such additional supporting documentation and other
information with respect to the transactions contemplated hereby as the Company
may reasonably request.
(g) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
hereby and all certificates, opinions, agreements, instruments and documents
mentioned herein or incident to any such transactions shall be satisfactory in
form and substance to the Company. Parent and Acquisition Corp. shall furnish to
the Company such supporting documentation and evidence of satisfaction of any or
all of the conditions specified in this Section 7.2 as the Company may
reasonably request.
The Company and Parent may waive compliance with any of the conditions
precedent specified in this Section 7.2.
8. Non-Survival of Representations and Warranties.
The representations and warranties of the parties made in Sections 2
and 3 of this Agreement (including the Schedules to the Agreement which are
hereby incorporated by reference) shall not survive beyond the Effective Time.
This Section 8 shall not limit any claim for fraud or any covenant or agreement
of the parties which by its terms contemplates performance after the Effective
Time or pursuant to any other Certificate, statement or agreement.
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9. Amendment of Agreement.
This Agreement and the Certificate of Merger may be amended or
modified at any time in all respects by an instrument in writing executed (i) in
the case of this Agreement by the parties hereto and (ii) in the case of the
Certificate of Merger by the parties thereto.
10. Definitions.
Unless the context otherwise requires, the terms defined in this
Section 10 shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined.
"ACQUISITION CORP." means CepTor Corporation Acquisition Corp., a
Delaware corporation.
"AFFILIATE" shall mean any Person that directly or indirectly
controls, is controlled by, or is under common control with, the indicated
Person.
"AGREEMENT" shall mean this Agreement.
"BALANCE SHEET" and "BALANCE SHEET DATE" shall have the meanings
assigned to such terms in Section 2.10 hereof.
"BRIDGE NOTES" shall have the meaning assigned to it in Section 2.3
hereof.
"CERTIFICATE OF MERGER" shall have the meaning assigned to it in the
second recital of this Agreement.
"CLOSING" and "CLOSING DATE" shall have the meanings assigned to such
terms in Section 11 hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMISSION" shall mean the U.S. Securities and Exchange Commission.
"COMPANY" shall mean CepTor Corporation, a Delaware corporation.
"COMPANY COMMON STOCK" shall mean the Common Stock of the Company.
"COMPANY OPTION PLAN" shall have the meaning assigned to it in Section
1.7 hereof.
"COMPANY STOCK" shall have the meaning assigned to it in Section 2.5.
"CONDITION OF THE COMPANY" shall have the meaning assigned to it in
Section 2.2 hereof.
"CONDITION OF THE PARENT" shall have the meaning assigned to it in
Section 3.13 hereof.
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"DEFAULT" shall mean a default or failure in the due observance or
performance of any covenant, condition or agreement on the part of the Company
to be observed or performed under the terms of this Agreement or the Certificate
of Merger, if such default or failure in performance shall remain unremedied for
five (5) days.
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"DETERMINATION DATE" shall have the meaning set forth in Section 11.6
hereof.
"EFFECTIVE TIME" shall have the meaning assigned to it in Section 1.2
hereof.
"EMPLOYEE BENEFIT PLANS" shall have the meaning assigned to it in
Section 2.17 hereof.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. xx.xx. 9601, et seq.; the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C. xx.xx. 11001, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. xx.xx. 6901, et
seq.; the Toxic Substances Control Act, 15 U.S.C. xx.xx. 2601 et seq.; the
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. xx.xx. 136, et
seq. and comparable state statutes dealing with the registration, labeling and
use of pesticides and herbicides; the Clean Air Act, 42 U.S.C. xx.xx. 7401 et
seq.; the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C.
xx.xx. 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. xx.xx. 300f, et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. xx.xx. 1801, et
seq.; as any of the above statutes have been amended as of the date hereof, all
rules, regulations and policies promulgated pursuant to any of the above
statutes, and any other foreign, federal, state or local law, statute,
ordinance, rule, regulation or policy governing environmental matters, as the
same have been amended as of the date hereof.
"EQUITY SECURITY" shall mean any stock or similar security of an
issuer or any security (whether stock or Indebtedness for Borrowed Money)
convertible, with or without consideration, into any stock or similar equity
security, or any security (whether stock or Indebtedness for Borrowed Money)
carrying any warrant or right to subscribe to or purchase any stock or similar
security, or any such warrant or right.
"ERISA" shall mean the Employee Retirement Income Securities Act of
1974, as amended.
"EVENT OF DEFAULT" shall mean (a) the failure of the Company to pay
any Indebtedness for Borrowed Money, or any interest or premium thereon, within
five (5) days after the same shall become due, whether such Indebtedness shall
become due by scheduled maturity, by required prepayment, by acceleration, by
demand or otherwise, (b) an event of default under any agreement or instrument
evidencing or securing or relating to any such Indebtedness, or (c) the failure
of the Company to perform or observe any material term, covenant, agreement or
condition on its part to be performed or observed under any agreement or
instrument evidencing or securing or relating to any such Indebtedness when such
term, covenant or agreement is required to be performed or observed.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
33
"FAIR MARKET VALUE" shall mean, with respect to a share of Common
Stock on any Determination Date, the average of the daily closing prices for the
10 consecutive business days prior to such date. The closing price for each day
shall be the last sales price or in case no sale takes place on such day, the
average of the closing high bid and low asked prices, in either case (a) as
officially quoted by the NASD over the counter bulletin board, Nasdaq SmallCap
Market or the Nasdaq National Market or such other market on which the Common
Stock is then listed for trading, or (b) if, in the reasonable judgment of the
Board of Directors of Parent, the NASD over-the-counter bulletin board, the
Nasdaq SmallCap Market or the Nasdaq National Market is no longer the principal
United States market for the Common Stock, then as quoted on the principal
United States market for the Common Stock as determined by the Board of
Directors of Parent, or (c) if, in the reasonable judgment of the Board of
Directors of the Parent, there exists no principal United States market for the
Common Stock, then as reasonably determined by the Board of Directors of Parent.
"GAAP" shall mean generally accepted accounting principles in the
United States, as in effect from time to time.
"HAZARDOUS MATERIAL" means any substance or material meeting any one
or more of the following criteria: (a) it is or contains a substance designated
as or meeting the characteristics of a hazardous waste, hazardous substance,
hazardous material, pollutant, contaminant or toxic substance under any
Environmental Law; (b) its presence at some quantity requires investigation,
notification or remediation under any Environmental Law; or (c) it contains,
without limiting the foregoing, asbestos, polychlorinated biphenyls, petroleum
hydrocarbons, petroleum derived substances or waste, pesticides, herbicides,
crude oil or any fraction thereof, nuclear fuel, natural gas or synthetic gas.
"INDEBTEDNESS" shall mean any obligation of the Company which under
generally accepted accounting principles is required to be shown on the balance
sheet of the Company as a liability. Any obligation secured by a Lien on, or
payable out of the proceeds of production from, property of the Company shall be
deemed to be Indebtedness even though such obligation is not assumed by the
Company.
"INDEBTEDNESS FOR BORROWED MONEY" shall mean (a) all Indebtedness in
respect of money borrowed including, without limitation, Indebtedness which
represents the unpaid amount of the purchase price of any property and is
incurred in lieu of borrowing money or using available funds to pay such amounts
and not constituting an account payable or expense accrual incurred or assumed
in the ordinary course of business of the Company, (b) all Indebtedness
evidenced by a promissory note, bond or similar written obligation to pay money,
or (c) all such Indebtedness guaranteed by the Company or for which the Company
is otherwise contingently liable.
"INVESTMENT COMPANY ACT" shall mean the Investment Company Act of
1940, as amended.
"KNOWLEDGE" and "KNOW" means, when referring to any person or entity,
the actual knowledge of such person or entity of a particular matter or fact,
and what that person or entity would have reasonably known after due inquiry. An
entity will be deemed to have "knowledge" of a particular fact or other matter
if any individual who is serving, or who has served, as an executive officer of
such entity has actual "knowledge" of such fact or other matter, or had actual
"knowledge" during the time of such service of such fact or other matter, or
would have had "knowledge" of such particular fact or matter after due inquiry.
34
"LETTER OF TRANSMITTAL" shall have the meaning assigned to it in
Section 4 hereof.
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction and including any lien or charge
arising by statute or other law.
"MEMORANDUM" shall have the meaning assigned to it in the fourth
recital hereof.
"MERGER" shall have the meaning assigned to it in Section 1.1 hereof.
"MERGER DOCUMENTS" shall have the meaning assigned to it in Section
2.6 hereof.
"PARENT" shall mean Medallion Crest Management, Inc., a Florida
corporation.
"PARENT BALANCE SHEET DATE" shall have the meaning assigned to it in
Section 3.14 hereof.
"PARENT COMMON STOCK" shall mean the common stock, par value $.001 per
share, of Parent.
"PARENT EMPLOYEE BENEFIT PLANS" shall have the meaning assigned to it
in Section 3.16 hereof.
"PARENT FINANCIAL STATEMENTS" shall have the meaning assigned to it in
Section 3.8 hereof.
"PARENT SEC DOCUMENTS" shall have the meaning assigned to it in
Section 3.7 hereof.
"PARENT WARRANTS" shall have the meaning assigned to it in Section
1.7(c) hereof.
"PERMITTED LIENS" shall mean (a) Liens for taxes and assessments or
governmental charges or levies not at the time due or in respect of which the
validity thereof shall currently be contested in good faith by appropriate
proceedings; (b) Liens in respect of pledges or deposits under workmen's
compensation laws or similar legislation, carriers', warehousemen's, mechanics',
laborers' and materialmens' and similar Liens, if the obligations secured by
such Liens are not then delinquent or are being contested in good faith by
appropriate proceedings; and (c) Liens incidental to the conduct of the business
of the Company that were not incurred in connection with the borrowing of money
or the obtaining of advances or credits and which do not in the aggregate
materially detract from the value of its property or materially impair the use
made thereof by the Company in its business.
35
"PERSON" shall include all natural persons, corporations, business
trusts, associations, limited liability companies, partnerships, joint ventures
and other entities and governments and agencies and political subdivisions.
"PRIVATE PLACEMENT" shall mean the private offering of shares of
Parent Stock pursuant to the terms of the Memorandum.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"STOCKHOLDERS" shall mean all of the stockholders of the Company.
"SURVIVING CORPORATION" shall have the meaning assigned to it in
Section 1.1 hereof.
"TAX" or "TAXES" shall mean (a) any and all taxes, assessments,
customs, duties, levies, fees, tariffs, imposts, deficiencies and other
governmental charges of any kind whatsoever (including, but not limited to,
taxes on or with respect to net or gross income, franchise, profits, gross
receipts, capital, sales, use, ad valorem, value added, transfer, real property
transfer, transfer gains, transfer taxes, inventory, capital stock, license,
payroll, employment, social security, unemployment, severance, occupation, real
or personal property, estimated taxes, rent, excise, occupancy, recordation,
bulk transfer, intangibles, alternative minimum, doing business, withholding and
stamp), together with any interest thereon, penalties, fines, damages costs,
fees, additions to tax or additional amounts with respect thereto, imposed by
the United States (federal, state or local) or other applicable jurisdiction;
(b) any liability for the payment of any amounts described in clause (a) as a
result of being a member of an affiliated, consolidated, combined, unitary or
similar group or as a result of transferor or successor liability, including,
without limitation, by reason of Regulation section 1.1502-6; and (c) any
liability for the payments of any amounts as a result of being a party to any
Tax Sharing Agreement or as a result of any express or implied obligation to
indemnify any other Person with respect to the payment of any amounts of the
type described in clause (a) or (b).
"TAX RETURN" shall include all returns and reports (including
elections, declarations, disclosures, schedules, estimates and information
returns (including Form 1099 and partnership returns filed on Form 1065)
required to be supplied to a Tax authority relating to Taxes.
11. Closing.
The closing of the Merger (the "CLOSING") shall occur concurrently
with the Effective Time (the "CLOSING DATE"). The Closing shall occur at the
offices of [OGFR&W] referred to in Section 14.1 hereof. At the Closing, Parent
shall present for delivery to each Stockholder the certificate representing the
Parent Common Stock to be issued pursuant to Section 1.5(a)(ii) hereof to them
pursuant to Sections 1.6 and 4 hereof. Such presentment for delivery shall be
against delivery to Parent and Acquisition Corp. of the certificates, opinions,
agreements and other instruments referred to in Section 7.1 hereof, and the
certificates representing all of the Common Stock issued and outstanding
immediately prior to the Effective Time. Parent will deliver at such Closing to
the Company the officers' certificate and opinion referred to in Section 7.2
hereof. All of the other documents and certificates and agreements referenced in
36
Section 7 will also be executed as described therein. At the Effective Time, all
actions to be taken at the Closing shall be deemed to be taken simultaneously.
12. Indemnification and Related Matters.
12.1 INDEMNIFICATION BY PARENT. Parent shall indemnify and hold
harmless the Company and the Stockholders (the "COMPANY INDEMNIFIED PARTIES"),
and shall reimburse the Company Indemnified Parties for, any loss, liability,
claim, damage, expense (including, but not limited to, costs of investigation
and defense and reasonable attorneys' fees) or diminution of value
(collectively, "DAMAGES") arising from or in connection with (a) any inaccuracy,
in any material respect, in any of the representations and warranties of Parent
and Acquisition Corp. in this Agreement or in any certificate delivered by
Parent and Acquisition Corp. to the Company pursuant to this Agreement, or any
actions, omissions or statements of fact inconsistent with any such
representation or warranty, (b) any failure by Parent or Acquisition Corp. to
perform or comply in any material respect with any covenant or agreement in this
Agreement, (c) any claim for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by any such party with Parent or Acquisition Corp. in connection with any
of the transactions contemplated by this Agreement, (d) taxes attributable to
any transaction or event occurring on or prior to the Closing, (e) any claim
relating to or arising out of any liabilities reflected on the Balance Sheet or
with respect to accounting fees arising thereafter, or (f) any litigation,
action, claim, proceeding or investigation by any third party relating to or
arising out of the business or operations of Parent, or the actions of Parent or
any holder of Parent capital stock prior to the Effective Time.
12.2 SURVIVAL. All representations, warranties, covenants and
agreements of Parent and Acquisition Corp. contained in this Agreement or in any
certificate delivered pursuant to this Agreement shall survive the Closing for
the time period set forth in Section 12.3 notwithstanding any investigation
conducted with respect thereto. The representations and warranties of the
Company contained in this Agreement or in any certificate delivered pursuant to
this Agreement shall not survive the Closing.
12.3 TIME LIMITATIONS. Neither Parent nor Acquisition Corp. shall have
any liability (for indemnification or otherwise) with respect to any
representation or warranty, or agreement to be performed and complied with prior
to the Effective Time, unless on or before the one-year anniversary of the
Effective Time (the "CLAIMS DEADLINE"), Parent is given notice of a claim with
respect thereto, in accordance with Section 12.7, specifying the factual basis
therefore in reasonable detail to the extent then known by the Company
Indemnified Parties.
12.4 LIMITATION ON LIABILITY. The obligations to Parent and
Acquisition Corp. to the Company Indemnified Parties set forth in Section 12.1
shall be subject to the following limitations:
(a) The aggregate liability of Parent and Acquisition Corp. to
the Company Indemnified Parties under this Agreement shall not exceed the gross
proceeds of the Private Placement and shall be payable solely by the issuance of
additional shares of Common stock pursuant to Section 12.6.
37
(b) Other than claims based on fraud or for specific
performance, injunctive or other equitable relief, the indemnity provided in
this Section 12 shall be the sole and exclusive remedy of the Company
Indemnified Parties against Parent and Acquisition Corp. at law or equity for
any matter covered by Section 12.1.
12.5 NOTICE OF CLAIMS.
(a) If, at any time on or prior to the Claims Deadline, Company
Indemnified Parties shall assert a claim for indemnification pursuant to Section
12.1, such Company Indemnified Parties shall submit to Parent a written claim in
good faith signed by an authorized officer of the Company or other Company
Indemnified Parties, as applicable, stating: (i) that a Company Indemnified
Party incurred or reasonably believes it may incur Damages and the reasonable
estimate of the amount of any such Damages; (ii) in reasonable detail, the facts
alleged as the basis for such claim and the section or sections of this
Agreement alleged as the basis or bases for the claim; and (iii) if the Damages
have actually been incurred, the number of additional shares of Common Stock to
which the Stockholders are entitled with respect to such Damages, which shall be
determined as provided in Section 12.6 below. If the claim is for Damages which
the Company Indemnified Parties reasonably believe may be incurred or are
otherwise unliquidated, the written claim of the applicable Company Indemnified
Parties shall state the reasonable estimate of such Damages, in which event a
claim shall be deemed to have been asserted under this Article 12 in the amount
of such estimated Damages, but no distribution of additional shares of Common
Stock to the Stockholders pursuant to Section 12.6 below shall be made until
such Damages have actually been incurred.
(b) In the event that any action, suit or proceeding is brought
against any Company Indemnified Party with respect to which Parent may have
liability under this Section 12, the Parent shall have the right, at its cost
and expense, to defend such action, suit or proceeding in the name and on behalf
of the Company Indemnified Party; provided, however, that a Company Indemnified
Party shall have the right to retain its own counsel, with fees and expenses
paid by Parent, if representation of the Company Indemnified Party by counsel
retained by Parent would be inappropriate because of actual or potential
differing interests between Parent and the Company Indemnified Party. In
connection with any action, suit or proceeding subject to the Section 12 hereof,
Parent and each Company Indemnified Party agree to render to each other such
assistance as may reasonably be required in order to ensure proper and adequate
defense of such action, suit or proceeding. Parent shall not, without the prior
written consent of the applicable Company Indemnified Parties, which consent
shall not be unreasonably withheld or delayed, settle or compromise any claim or
demand if such settlement or compromise does not include an irrevocable and
unconditional release of such Company Indemnified Parties for any liability
arising out of such claim or demand.
12.6 PAYMENT OF DAMAGES. In the event that the Company Indemnified
Parties shall be entitled to indemnification pursuant to this Section 12 for
actual Damages incurred by them, Parent shall, within thirty (30) days after the
final determination of the amount of such Damages, issue to the Stockholders
that number of additional shares of Common Stock in an aggregate amount equal to
the quotient obtained by dividing (x) the amount of such Damages by (y) the Fair
Market Value per share of the Common Stock as of the date (the "DETERMINATION
DATE") of the submission of the notice of claim to Parent pursuant to Section
12.5. Such shares of Common Stock shall be issued to the Stockholders pro rata,
38
in proportion to the number of Parent Shares issued (or issuable) to the
Stockholders at the Effective Time and under the Private Placement.
13. Termination Prior to Closing.
13.1 TERMINATION OF AGREEMENT. This Agreement may be terminated
at any time prior to the Closing:
(a) By the mutual written consent of the Company,
Acquisition Corp. and Parent;
(b) By the Company, if Parent or Acquisition Corp. (i)
fails to perform in any material respect any of its agreements contained herein
required to be performed by it on or prior to the Closing Date, (ii) materially
breaches any of its representations, warranties or covenants contained herein,
which failure or breach is not cured within thirty (30) days after the Company
has notified Parent and Acquisition Corp. of its intent to terminate this
Agreement pursuant to this paragraph (b);
(c) By Parent and Acquisition Corp., if the Company (i)
fails to perform in any material respect any of its agreements contained herein
required to be performed by it on or prior to the Closing Date, (ii) materially
breach any of its representations, warranties or covenants contained herein,
which failure or breach is not cured within thirty (30) days after Parent or
Acquisition Corp. has notified the Company of its intent to terminate this
Agreement pursuant to this paragraph (c);
(d) By either the Company, on the one hand, or Parent and
Acquisition Corp., on the other hand, if there shall be any order, writ,
injunction or decree of any court or governmental or regulatory agency binding
on Parent, Acquisition Corp. or the Company, which prohibits or materially
restrains any of them from consummating the transactions contemplated hereby,
provided that the parties hereto shall have used their best efforts to have any
such order, writ, injunction or decree lifted and the same shall not have been
lifted within ninety (90) days after entry, by any such court or governmental or
regulatory agency; or
(e) By either the Company, on the one hand, or Parent and
Acquisition Corp., on the other hand, if the Closing has not occurred on or
prior to December 31, 2004, for any reason other than delay or nonperformance of
the party seeking such termination.
13.2 TERMINATION OF OBLIGATIONS. Termination of this Agreement
pursuant to this Section 13 shall terminate all obligations of the parties
hereunder, except for the obligations under Sections 6.1, 14.3 and 14.12;
provided, however, that termination pursuant to paragraphs (b) or (c) of Section
13.1 shall not relieve the defaulting or breaching party or parties from any
liability to the other parties hereto.
14. Miscellaneous.
14.1 NOTICES. Any notice, request or other communication
hereunder shall be given in writing and shall be served either personally by
overnight delivery or delivered by mail, certified return receipt and addressed
to the following addresses:
39
If to Parent
or Acquisition Corp.: Medallion Crest Management, Inc.
0000 Xxxxx Xxxxxxx Xxxx Xxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx
With a copy to: The Law Offices of Xxxxx Xxxxxxx XX, P.A.
0000 Xxxxxxxx Xxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxx, Esq.
If to the Company: CepTor Corporation
000 Xxxxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx,
Chairman and Chief Executive Officer
With a copy to: Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Notices shall be deemed received at the earlier of actual receipt or
three (3) business days following mailing. Counsel for a party (or any
authorized representative) shall have authority to accept delivery of any notice
on behalf of such party.
14.2 ENTIRE AGREEMENT. This Agreement, including the schedules and
exhibits attached hereto and other documents referred to herein, contains the
entire understanding of the parties hereto with respect to the subject matter
hereof. This Agreement supersedes all prior agreements and undertakings between
the parties with respect to such subject matter.
14.3 EXPENSES. Each party shall bear and pay all of the legal,
accounting and other expenses incurred by it in connection with the transactions
contemplated by this Agreement;
14.4 DISPUTE RESOLUTION. The Parties agree to attempt initially to
solve all claims, disputes or controversies arising under, out of or in
connection with this Agreement by conducting good faith negotiations. If the
Parties are unable to settle the matter between themselves, the matter shall
thereafter be resolved by alternative dispute resolution, starting with
mediation and including, if necessary, a final and binding arbitration. Whenever
a Party shall decide to institute arbitration proceedings, it shall give written
notice to that effect to the other Party. The Party giving such notice shall
refrain from instituting the arbitration proceedings for a period of sixty (60)
days following such notice. During such period, the Parties shall make good
faith efforts to amicably resolve the dispute without arbitration. Any
arbitration hereunder shall be conducted under the rules of the American
Arbitration Association. Each such arbitration shall be conducted by a panel of
three arbitrators: one arbitrator shall be appointed by each of Parent and
Company and the third shall be appointed by the American Arbitration
40
Association. Any such arbitration shall be held in New York, New York. The
arbitrators shall have the authority to grant specific performance. Judgment
upon the award so rendered may be entered in any court having jurisdiction or
application may be made to such court for judicial acceptance of any award and
an order of enforcement, as the case may be. In no event shall a demand for
arbitration be made after the date when institution of a legal or equitable
proceeding based on such claim, dispute or other matter in question would be
barred under this Agreement or by the applicable statute of limitation. The
prevailing party in any such arbitration shall be entitled to recover from the
other party, in addition to any other remedies, all reasonable costs, attorneys'
fees and other expenses incurred by such prevailing party.
14.5 TIME. Time is of the essence in the performance of the parties'
respective obligations herein contained.
14.6 SEVERABILITY. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns and heirs; provided, however, that neither party shall directly or
indirectly transfer or assign any of its rights hereunder in whole or in part
without the written consent of the others , which may be withheld in its sole
discretion , and any such transfer or assignment without said consent shall be
void.
14.8 NO THIRD PARTIES BENEFITED. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto, their
successors, assigns and heirs, and no other Person shall have any right or
action under this Agreement.
14.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, with the same effect as if all parties had signed the same
document. Each such counterpart shall be an original, but all such counterparts
together shall constitute a single agreement.
14.10 RECITALS, SCHEDULES AND EXHIBITS. The Recitals, Schedules and
Exhibits to this Agreement are incorporated herein and, by this reference, made
a part hereof as if fully set forth herein.
14.11 SECTION HEADINGS AND GENDER. The Section headings used herein
are inserted for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement. All personal pronouns used in this
Agreement shall include the other genders, whether used in the masculine,
feminine or neuter gender, and the singular shall include the plural, and vice
versa, whenever and as often as may be appropriate.
14.12 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware without regard
to principles of conflict of laws.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be binding and effective as of the day and year first above written.
PARENT:
MEDALLION CREST MANAGEMENT, INC.
By: /s/ Xxxx Xxxxxx
----------------------------------
Name: Xxxx Xxxxxx
Title: Chief Executive Officer
ACQUISITION CORP.:
CEPTOR ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Attorney-in-Fact for Xxxx Xxxxxx
CEPTOR CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman and CEO
