AGREEMENT AND PLAN OF MERGER
between
VANDEN CAPITAL GROUP, INC.
AND
ENTROPIN, INC.
dated
December 10, 1997
TABLE OF CONTENTS
Section 1. Effective Date....................................................1
Section 2. Governing Law.....................................................1
Section 3. Articles of Incorporation.........................................2
Section 4. Bylaws............................................................2
Section 5. Manner of Converting Shares.......................................2
5.1 Conversion...............................................2
5.2 Exchange of Certificates.................................3
5.3 Fractional Shares........................................3
5.4 Unexchanged Certificates.................................3
5.5 Legend on Vanden Certificates Issued in
Conversion of the Entropin Common
and Preferred Stock......................................3
Section 6. Board of Directors and Officers...................................4
Section 7. Effect of the Merger..............................................4
Section 8. Approval of Shareholders..........................................4
Section 9. Representations and Warranties of Entropin........................5
9.1 Corporate Organization and Good Standing.................5
9.2 Capitalization. .........................................5
9.3 Subsidiaries.............................................5
9.4 Financial Statements.....................................5
9.5 Absence of Undisclosed Liabilities.......................5
9.6 Absence of Certain Changes...............................6
9.7 Litigation, Etc..........................................6
9.8 Contracts................................................6
9.9 Title....................................................6
9.10 Tax Returns..............................................6
9.11 No Violation.............................................6
9.12 Authorization............................................6
9.13 Books and Records........................................6
9.14 Disclosure...............................................6
9.15 Broker's or Finder's Fees................................7
9.16 Due Diligence............................................7
Section 10. Representations and Warranties of Vanden..........................7
10.1 Corporate Organization and Good Standing.................7
10.2 Capitalization...........................................7
10.3 Subsidiaries.............................................7
10.4 Financial Statements.....................................7
10.5 Absence of Undisclosed Liabilities.......................8
10.6 Absence of Certain Changes...............................8
10.7 Litigation...............................................8
10.8 Contracts................................................8
10.9 Title....................................................8
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10.10 Tax Returns..............................................8
10.11 No Violation.............................................8
10.12 Authorization............................................8
10.13 Books and Records........................................8
10.14 Disclosure...............................................9
10.15 Broker's or Finder's Fees................................9
Section 11. Conduct of Entropin Pending the Effective Date....................9
11.1 Certificate of Incorporation and Bylaws..................9
11.2 Capitalization, Etc......................................9
11.3 Shareholders' Meeting....................................9
11.4 Conduct of Business......................................9
Section 12. Conduct of Vanden Pending the Effective Date......................9
12.1 Certificate of Incorporation and Bylaws. ...............10
12.2 Capitalization, Etc. ...................................10
12.3 Shareholders' Meeting...................................10
12.4 Conduct of Business.....................................10
Section 13. Conditions Precedent to Obligation of Entropin...................10
13.1 Vanden's Representations and Warranties.................10
13.2 Vanden's Covenants......................................10
13.3 Shareholder Approval....................................10
13.4 Dissenting Shareholders of Vanden.......................10
13.5 Opinion of Vanden's Counsel.............................10
13.6 Accountant's Letter. ...................................11
13.7 Proxy Information.......................................11
13.8 Assets. ................................................11
Section 14. Conditions Precedent to Obligation of Vanden.....................11
14.1 Entropin's Representations and Warranties...............11
14.2 Entropin's Covenants....................................12
14.3 Shareholder Approval....................................12
14.4 Dissenting Shareholders of Entropin.....................12
14.5 Opinion of Entropin's Counsel...........................12
14.6 Accountant's Letter.....................................12
14.7 Proxy Information.......................................13
14.8 Funding.................................................13
14.9 Due Diligence...........................................13
Section 15. Designation of Agent for Service.................................13
Section 16. Access...........................................................13
Section 17. Stand-still Agreement and Break-off Fee..........................13
Section 18. Notice of Events.................................................14
Section 19. Termination......................................................14
19.1 Circumstances of Termination. ..........................14
19.2 Effect of Termination...................................15
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Section 20. General Provisions...............................................15
20.1 Further Assurances......................................15
20.2 Waiver..................................................15
20.3 Entire Agreement........................................15
20.4 Headings................................................15
20.5 Governing Law...........................................15
20.6 Assignment..............................................15
20.7 Counterparts............................................15
Section 21. Survival of Representations, Warranties and Agreements...........15
Section 22. Indemnity Agreements of Vanden and Entropin......................16
Section 23. Fees and Expenses................................................16
Section 24. Other Agreements.................................................16
24.1 Public Disclosure.......................................16
24.2 Notices.................................................16
24.3 Binding Effect..........................................17
24.4 Entire Agreement........................................17
24.5 Schedules and Exhibits..................................17
24.6 Applicable Law and Jurisdiction.........................17
24.7 No Benefit to Third Parties. ...........................18
24.8 Counterparts. ..........................................18
24.9 Acknowledgements........................................18
SCHEDULES
Schedule 5.2(a) Entropin Common Stock Ownership
Schedule 5.2(b) Entropin Preferred Stock Ownership
Schedule 7(b) Property and Debts due Entropin
Schedule 9.5 Entropin Absence of Undisclosed Liabilities
Schedule 9.6 Entropin Changes in Business as of September 30, 1997
Schedule 9.7 Litigation
Schedule 9.8 Contracts
Schedule 9.9 Title
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of December 9, 1997,
between Vanden Capital Group, Inc., a Colorado corporation and its subsidiaries
("Vanden") and Entropin, Inc., a California corporation ("Entropin"), being
sometimes referred to herein as the "Constituent Corporations".
WHEREAS, the Board of Directors of each Constituent Corporation deems it
advisable for the general welfare of its Constituent Corporation and its
shareholders that the Constituent Corporations merge into a single corporation
pursuant to this Agreement and the applicable laws of the States of Colorado and
California; and
WHEREAS, the Constituent Corporations desire to adopt this
Agreement as a Plan of Reorganization and to consummate the merger in accordance
with the provisions of Section 368(a)(1) of the Internal Revenue Code of 1986,
as amended;
NOW, THEREFORE, the Constituent Corporations agree that Entropin shall be
merged with and into Vanden as the surviving corporation in accordance with the
applicable laws of Colorado and California, that the name of the surviving
corporation shall be Entropin, Inc. (which in its capacity as surviving
corporation is hereinafter called the "Surviving Corporation"), and that the
terms and conditions of the merger and the mode of carrying it into effect shall
be as follows:
SECTION 1. EFFECTIVE DATE
The merger provided for in this Agreement shall become effective upon the
completion of the following:
(1) Adoption of this Agreement by the shareholders of Entropin pursuant to
the laws of the State of California and by the shareholders of Vanden pursuant
to the laws of the State of Colorado;
(2) Execution and filing of the Certificate of Merger as required by the
laws of the States of California and Colorado; and
(3) Execution and filing of the Articles of Merger with the Secretary of
State in accordance with the laws of the State of Colorado.
The Constituent Corporations shall agree upon the date (the "Effective
Date") on which the Certificate of Merger and the Articles of Merger shall be
filed, but such filings shall take place with reasonable promptness after the
approval of this Agreement by the shareholders of the Constituent Corporations
and the fulfillment or waiver of the terms and conditions in Sections 13 and 14
hereof.
SECTION 2. GOVERNING LAW
The Surviving Corporation shall be governed by the laws of the State of
Colorado.
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SECTION 3. ARTICLES OF INCORPORATION
The Restated Articles of Incorporation of Vanden shall be the Articles of
Incorporation of the Surviving Corporation from and after the Effective Date,
subject to the right of the Surviving Corporation to amend its Articles of
Incorporation in accordance with the laws of the State of Colorado.
SECTION 4. BYLAWS
The Bylaws of the Surviving Corporation shall be the Bylaws of Vanden as in
effect on the date of this Agreement.
SECTION 5. MANNER OF CONVERTING SHARES
5.1 CONVERSION. The mode of carrying the merger into effect and the manner
and basis of converting the shares of Entropin into shares of the Surviving
Corporation are as follows:
(1) For and in consideration of the exchange of all shares of Entropin
Common Stock (no par value) issued and outstanding and Redeemable NonVoting
Preferred Stock (no par value) to be issued and outstanding on the Effective
Date:
(a) Vanden will recapitalize its issued and outstanding shares
of Common Stock ($.0001 par value) from 90,015,200 shares to
300,050 shares by a reverse split of 1 share for 300 shares
and increase the par value thereof to $.001. Vanden will
reduce its 50,000,000 shares of Preferred Stock ($.0001 par
value) to 10,000,000 shares and increase the par value
thereof to $.001. Thereafter, Vanden will issue 5,700,000
shares of new $.001 par value Common Stock to shareholders
of all issued and outstanding Entropin Common Stock in
exchange therefor on a one for one basis.
(b) Entropin will authorize and issue redeemable eight percent
(8%) non-cumulative non-voting preferred stock with no par
value for an issuance value of $1.00 per share in exchange
for all liabilities in excess of $350,000 exclusive of; (i)
usual and customary fees incurred in connection with this
Agreement; and, (ii) the obligation due Xx Xxxxxxxx as set
forth in Note 4 to cite Entropin's Financial Statement
accompanying the November 21, 1997 Report of Independent
Certified Public Accounts provided to Vanden. Such fees will
be paid from the proceeds of the Private Placement
referenced in Section 14.8 hereof. The preferred stock will
be redeemable only from twenty percent (20%) to fifty
percent (50%) of annual "Earnings", but not to exceed "Net
Cash Flow from Operating Activities". The foregoing
capitalized terms shall have the meaning ascribed under
Generally Accepted Accounting Principles. The preferred
stock will automatically cancel in seven years if not fully
redeemed within that time period.
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(c) Vanden will issue shares of redeemable non-voting preferred
stock to holders of an equal number of shares of Entropin
preferred stock in exchange therefor on a 1 share for 1
share basis. The Vanden preferred stock shall have the
identical terms of the Entropin preferred stock as set forth
in Section 5.1(1)(b).
(2) Each share of Entropin Common Stock and Preferred Stock
which is issued and outstanding on the Effective Date shall, by virtue of the
merger and without any action on the part of Entropin, be retired and cancelled.
(3) Each certificate evidencing ownership of shares of Vanden Common
Stock issued and outstanding on the Effective Date or held by Vanden in its
treasury shall continue to evidence ownership of the number of shares of Vanden
Common Stock giving effect to the 1-for-300 share Common Stock recapitalization.
5.2 EXCHANGE OF CERTIFICATES. As promptly as practicable after the
Effective Date, each holder of an outstanding certificate or certificates
theretofore representing shares of Entropin Common Stock and Preferred Stock
shall surrender the same to Corporate Securities Transfer ("Exchange Agent"),
Denver, Colorado, and shall receive in exchange a certificate or certificates
representing the number of full shares of Vanden Common Stock into which the
shares of Entropin Common Stock and Preferred Stock represented by the
certificate or certificates so surrendered shall have been converted. The name,
address and amount of shares owned by each holder of Entropin Common Stock is
set forth on Schedule 5.2(a). The same information for holders of Entropin
Preferred Stock, when issued, will be set forth on Schedule 5.2(b).
5.3 FRACTIONAL SHARES. Fractional shares of Vanden Common Stock shall not
be issued.
5.4 UNEXCHANGED CERTIFICATES. Until surrendered, each outstanding
certificate which, prior to the Effective Date, represented Entropin Common
Stock or Preferred Stock shall be deemed for all purposes, other than the
payment of dividends or other distributions, to evidence ownership of the whole
number of shares of Vanden Common Stock or Preferred Stock into which it is to
be converted, and no dividend or other distribution payable to holders of Vanden
Common Stock or Preferred Stock as of any date subsequent to the Effective Date
shall be paid to the holders of outstanding certificates. There shall be paid to
the record holders of the certificates issued in exchange therefor the amount,
without interest thereon, of dividends and other distributions which would have
been payable with respect to the shares of Vanden Common Stock or Preferred
Stock represented thereby.
5.5 LEGEND ON VANDEN CERTIFICATES ISSUED IN CONVERSION OF THE ENTROPIN
COMMON AND PREFERRED STOCK. Each of the certificates representing shares of
Vanden Common Stock and Preferred Stock issued in conversion of the Entropin
Common Stock as provided for herein shall bear the following legend:
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The securities represented by this Certificate have not been
registered under the Securities Act of 1933 (the "Act") and
are "restricted securities" as that term is defined in Rule
144 under the Act. The securities may not be offered for
sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Act or pursuant
to an exemption from registration under the Act, the
availability of which is to be established to the
satisfaction of the Corporation.
SECTION 6. BOARD OF DIRECTORS AND OFFICERS
Until the election and qualification of their successors, the members of
the Board of Directors of the Surviving Corporation shall be the Board of
Directors of Entropin in office on the Effective Date. The elected officers of
the Surviving Corporation, who shall continue in office at the pleasure of the
Board of Directors of the Surviving Corporation, shall be the elected officers
of Entropin on the Effective Date. The Directors and Officers of Vanden shall
resign on the Effective Date.
SECTION 7. EFFECT OF THE MERGER
On the Effective Date, the separate existence of Entropin shall cease
(except insofar as continued by statute) and it shall be merged with and into
the Surviving Corporation. All the property of each of the Constituent
Corporations, and all debts due to either of them, shall be transferred to and
vested in the Surviving Corporation, without further act or deed; except for
property of Vanden set forth in Section 10.3 hereof which is being transferred
to a subsidiary the shares of which shall be distributed to Vanden shareholders
prior to the Effective Date. The Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of each of the
Constituent Corporations, and any claim or judgment against either of the
Constituent Corporations may be enforced against the Surviving Corporation.
SECTION 8. APPROVAL OF SHAREHOLDERS
This Agreement shall be submitted to the shareholders of the Constituent
Corporations as provided by the applicable laws of their respective states of
incorporation at meetings called for that purpose. There shall be required for
the adoption of this Agreement: (1) as to Entropin, the affirmative vote of the
holders of all the shares of its Common Stock issued and outstanding and
entitled to vote; and (2) as to Vanden, the affirmative vote of the holders of
at least a majority of all the shares of its Common Stock issued and outstanding
and entitled to vote.
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SECTION 9. REPRESENTATIONS AND WARRANTIES OF ENTROPIN
Entropin represents and warrants that:
9.1 CORPORATE ORGANIZATION AND GOOD STANDING. Entropin is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, and is qualified to do business as a foreign corporation in
each jurisdiction, if any, in which its property or business requires such
qualification.
9.2 CAPITALIZATION. Entropin's authorized capital stock consists of 100,000
shares of Entropin Common Stock, no par value, of which 26,315.8 shares are
issued and outstanding, fully paid and nonassessable. There are no options,
warrants or rights outstanding to purchase shares of Entropin Common Stock from
Entropin except as disclosed on Schedule 9.2. Entropin will effect a 198.3599 to
1 forward stock split on all shares of Common Stock issued and outstanding as of
the Effective Date. Entropin will authorize and issue redeemable non-voting
preferred stock, the principal terms of which are set forth in Section 5.1(b)
hereof and more fully described in Article IV of Entropin's Amended Articles of
Incorporation, in exchange for all liabilities in excess of $350,000 exclusive
of usual and customary fees incurred in connection with this Agreement. Such
fees will be paid from the proceeds of the Private Placement referenced in
Section 14.8 hereof. The preferred stock will be redeemable only from twenty
percent (20%) to fifty percent (50%) of annual "Earnings", but not to exceed
"Net Cash Flow from Operating Activities". The foregoing capitalized terms shall
have the meaning ascribed under Generally Accepted Accounting Principles. The
preferred stock will automatically cancel in seven years if not fully redeemed
within that time period.
9.3 SUBSIDIARIES. Entropin has no subsidiaries.
9.4 FINANCIAL STATEMENTS. Entropin's balance sheets as of December 31,
1996, and the related statements of income and retained earnings for the years
ended December 31, 1995 and December 31, 1996, all certified by Xxxxxx Xxxxxx &
Xxxxx, Inc., independent certified public accountants, and the unaudited balance
sheets and related statements of income and retained earnings for the period
ended September 30, 1997, copies of which are to be delivered by Entropin to
Vanden, fairly present the financial condition of Entropin as of said dates and
the results of its operations for the periods then ended, in conformity with
generally accepted accounting principles consistently applied for the periods
covered and shall comply in form and substance with applicable rules and
regulations of the United States Securities and Exchange Commission ("SEC").
9.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in Entropin's balance sheet as of September 30,
1997, Entropin did not have at that date any liabilities or obligations
(secured, unsecured, contingent or otherwise) of a nature customarily reflected
in a corporate balance sheet prepared in accordance with generally accepted
accounting principles ("Liabilities"). All Liabilities incurred subsequent to
September 30, 1997 are set forth in Schedule 9.5 hereto.
5
9.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed on Schedule 9.6, there
has been no material adverse change in the business, properties or financial
condition of Entropin since September 30, 1997.
9.7 LITIGATION, ETC. Except as disclosed on Schedule 9.7, there is no
litigation, proceeding or investigation pending or, to the knowledge of
Entropin, threatened against Entropin which if successful might result in a
material adverse change in the business, properties or financial condition of
Entropin or which questions the validity or legality of this Agreement or of any
action taken or to be taken by Entropin in connection with this Agreement.
9.8 CONTRACTS. Except as disclosed on Schedule 9.8, Entropin is not a party
to any material contract not in the ordinary course of business which is to be
performed in whole or in part at or after the date of this Agreement.
9.9 TITLE. Entropin has good and marketable title to all property included
in the balance sheet of Entropin as of September 30, 1997, other than property
disposed of in the ordinary course of business after said date. Except as
disclosed on Schedule 9.9, the properties of Entropin as previously disclosed in
writing to Vanden, including its rights to all patents, know how and
intellectual property relating to its pharmaceutical product known as Esterom,
are not subject to any mortgage, encumbrance or lien of any kind except minor
encumbrances which do not materially interfere with the use of the property in
the conduct of the business of Entropin.
9.10 TAX RETURNS. Entropin has timely filed all required federal, state and
local tax returns and has no outstanding tax liabilities, including but not
limited to income, withholding, property and corporate franchise taxes.
9.11 NO VIOLATION. Consummation of the merger will not constitute or result
in a breach or default under any provision of any charter, bylaw, indenture,
mortgage, lease or agreement, or any order, judgment, decree, law or regulation
to which any property of Entropin is subject or by which Entropin is bound,
except for breaches or defaults which in the aggregate would not have a
materially adverse effect on Entropin's properties, business operations or
financial condition.
9.12 AUTHORIZATION. Execution of this Agreement has been duly authorized
and approved by Entropin's Board of Directors.
9.13 Books and Records. The corporate minute books, stock certificate
books, stock registers and other corporate records of Entropin are correct and
complete in all material respects, and the signatures appearing on all documents
contained therein are the true signatures of the persons purporting to have
signed the same.
9.14 DISCLOSURE. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof, or any document or
statement in writing which has been supplied by or on behalf of Entropin or by
any of Entropin's directors or officers, in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact, or omits
any statement of a material fact necessary in order to make the statements
6
contained herein or therein not misleading. There is no fact or circumstance
known to Entropin which materially and adversely affects or which may materially
and adversely affect its business, prospects or financial condition or its
assets, which has not been set forth in this Agreement, the Schedules, Exhibits,
certificates or statements furnished in writing to Vanden in connection with the
transactions contemplated by this Agreement.
9.15 BROKER'S OR FINDER'S FEES. Other than LMU & Company, no broker, finder
or similar intermediary is entitled to fees in connection with the transactions
contemplated by this Agreement by virtue of any action or agreement of Entropin.
9.16 DUE DILIGENCE. Entropin has completed its due diligence review of
Vanden.
SECTION 10. REPRESENTATIONS AND WARRANTIES OF VANDEN
Vanden represents and warrants that:
10.1 CORPORATE ORGANIZATION AND GOOD STANDING. Vanden is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado, and is qualified to do business as a foreign corporation in each
jurisdiction, if any, in which its property or business requires such
qualification.
10.2 CAPITALIZATION. Vanden's authorized capital stock consists of: (i)
300,000,000 shares of Common Stock, ($.0001 par value), of which 90,015,200
shares are issued and outstanding, fully paid and nonassessable; and, (ii)
100,000,000 shares of Preferred Stock ($.0001 par value) none of which are
issued and outstanding. There are no options, warrants or rights outstanding to
purchase shares of Vanden Common Stock from Vanden. Vanden will recapitalize its
authorized and issued and outstanding shares as set forth in Section 5.1.
10.3 SUBSIDIARIES. Vanden's subsidiary are as set forth in its Annual
Report on Form 10-KSB for fiscal year ended May 31, 1997. Vanden will transfer
to a subsidiary all non-cash assets consisting of (i) equity interests in: Quik
Byte Software, Inc.; Buyer's Resource, Inc. and a joint venture participation
interest in SeTevo, Inc.; and, (ii) a receivable from Buyer's Resource in the
amount of approximately $48,000. Vanden will spin-off by dividend the subsidiary
to its shareholders prior to the Effective Date at the Effective Date; Vanden
will have no subsidiaries. Vanden will use cash in excess of $220,000 for
payment of costs in connection with the transaction including legal, accounting,
printing, mailing, filing fees and compensation to its officers and directors.
10.4 FINANCIAL STATEMENTS. Vanden's balance sheet as of May 31, 1997 and
the related statements of income and retained earnings for the years ended May
31, 1996 and 1997, all certified by Xxxxxxxxxx & Associates, independent
certified public accountants, and the unaudited balance sheets and related
statements of income and retained earnings for the period ended August 31, 1997,
copies of which have been delivered by Vanden to Entropin, fairly resent the
7
financial condition of Vanden as of said dates and the results of its operations
for the periods then ended, in conformity with generally accepted accounting
principles consistently applied for the periods covered and comply in form and
substance with applicable regulations of the SEC.
10.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent reflected or
reserved against in Vanden's balance sheet as of August 31, 1997 Vanden did not
have at that date any liabilities or obligations (secured, unsecured, contingent
or otherwise) of a nature customarily reflected in a corporate balance sheet
prepared in accordance with generally accepted accounting principles
("Liabilities"). All Liabilities incurred subsequent to August 31, 1997 will be
paid by Vanden prior to closing.
10.6 ABSENCE OF CERTAIN CHANGES. There has been no material adverse change
in the business, properties or financial condition of Vanden since August 31,
1997.
10.7 LITIGATION. There is no litigation, proceeding or investigation
pending or, to the knowledge of Vanden, threatened against Vanden which if
successful might result in a material adverse change in the business, properties
or financial condition of Vanden or which questions the validity or legality of
this Agreement or of any action taken or to be taken by Vanden in connection
with this Agreement.
10.8 CONTRACTS. Vanden is not a party to any material contract not in the
ordinary course of business which is to be performed in whole or in part at or
after the date of this Agreement.
10.9 TITLE. Vanden has good and valid title to all property included in the
balance sheet of Vanden as of August 31, 1997, other than property disposed of
in the ordinary course of business after said date. The properties of Vanden are
not subject to any mortgage, encumbrance or lien of any kind.
10.10 TAX RETURNS. Vanden has timely filed all required federal, state and
local tax returns and has no outstanding tax liabilities, including but not
limited to income, withholding, property and corporate franchise taxes.
10.11 NO VIOLATION. Consummation of the merger will not constitute or
result in a breach or default under any provision of any charter, bylaw,
indenture, mortgage, lease or agreement, or any order, judgment, decree, law or
regulation to which any property of Vanden is subject or by which Vanden is
bound, except for breaches or defaults which in the aggregate would not have a
materially adverse effect on Vanden's properties, business operations or
financial condition.
10.12 AUTHORIZATION. Execution of this Agreement has been duly authorized
and approved by Vanden's Board of Directors.
10.13 BOOKS AND RECORDS. The corporate minute books, stock certificate
books, stock registers and other corporate records of Entropin are correct and
complete in all material respects, and the signatures appearing on all documents
8
contained therein are the true signatures of the persons purporting to have
signed the same.
10.14 DISCLOSURE. Neither this Agreement nor any Schedule, Exhibit or
certificate delivered in accordance with the terms hereof, or any document or
statement in writing which has been supplied by or on behalf of Vanden or by any
of Vanden's directors or officers, in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact, or omits
any statement of a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact or circumstance
known to Vanden which materially and adversely affects or which may materially
and adversely affect its business, prospects or financial condition or its
assets, which has not been set forth in this Agreement, the Schedules, Exhibits,
certificates or statements furnished in writing to Entropin in connection with
the transactions contemplated by this Agreement.
10.15 BROKER'S OR FINDER'S FEES. No broker, finder or similar intermediary
is entitled to fees in connection with the transactions contemplated by this
Agreement by virtue of any action or agreement of Vanden.
SECTION 11. CONDUCT OF ENTROPIN PENDING THE EFFECTIVE DATE
Entropin covenants that between the date of this Agreement and the
Effective Date:
11.1 CERTIFICATE OF INCORPORATION AND BYLAWS. Other than as required by
this Agreement, no change will be made in Entropin's certificate of
incorporation or bylaws.
11.2 CAPITALIZATION, ETC. Other than as required by this Agreement,
Entropin will not make any change in its authorized or issued capital stock, or
issue, encumber, purchase or otherwise acquire any of its capital stock other
than as provided for in this Agreement.
11.3 SHAREHOLDERS' MEETING. Entropin will submit this Agreement to the
shareholders' meeting contemplated by Section 8 with a favorable recommendation
by its Board of Directors and will use its best efforts to obtain the requisite
shareholder approval.
11.4 CONDUCT OF BUSINESS. Entropin will use its best efforts to maintain
and preserve its business organization and goodwill intact, and will not,
without the written consent of Vanden, enter into any material commitment except
in the ordinary course of business other than as provided for in this Agreement.
SECTION 12. CONDUCT OF VANDEN PENDING THE EFFECTIVE DATE
Vanden covenants that between the date of this Agreement and the Effective
Date:
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12.1 CERTIFICATE OF INCORPORATION AND BYLAWS. No change will be made in
Vanden's certificate of incorporation or bylaws.
12.2 CAPITALIZATION, ETC. Vanden will not make any change in its authorized
or issued capital stock, or issue, encumber, purchase or otherwise acquire any
of its capital stock, other than as provided for in this Agreement.
12.3 SHAREHOLDERS' MEETING. Vanden will submit this Agreement to the
shareholders' meeting contemplated by Section 8 with a favorable recommendation
by its Board of Directors and will use its best efforts to obtain the requisite
shareholder approval.
12.4 CONDUCT OF BUSINESS. Vanden will use its best efforts to maintain and
preserve its business organization and goodwill intact, and will not, without
the written consent of Entropin, enter into any material commitment other than
as provided for in this Agreement.
SECTION 13. CONDITIONS PRECEDENT TO OBLIGATION OF ENTROPIN
Entropin's obligation to consummate this merger shall be subject to
fulfillment on or before the Effective Date of each of the following conditions,
unless waived in writing by Entropin:
13.1 VANDEN'S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Vanden set forth in Section 10 hereof shall be true and correct at
the Effective Date as though made at and as of that date, except as affected by
transactions contemplated hereby.
13.2 VANDEN'S COVENANTS. Vanden shall have performed all covenants required
by this Agreement to be performed by it on or before the Effective Date.
13.3 SHAREHOLDER APPROVAL. This Agreement shall have been adopted by the
necessary vote of holders of the capital stock of the Constituent Corporations
as set forth in Section 8 hereof.
13.4 DISSENTING SHAREHOLDERS OF VANDEN. The number of shares of Common
Stock of Vanden with respect to which objections to the merger and demands for
payment of the fair value thereof shall have been made in accordance with the
provisions of Colorado law, and with respect to which such demands shall not
have been withdrawn with the consent of Vanden, shall not exceed five (5%)
percent of the number of shares entitled to object and make such demand.
13.5 OPINION OF VANDEN'S COUNSEL. Vanden shall have delivered to Entropin
the opinion of its counsel, Xxxxxxx Xxxxxxxx & Xxxxxxxxx, P.C., dated the
Effective Date, in form and substance satisfactory to counsel for Entropin, to
the effect that:
(1) Vanden is a corporation duly organized, validly existing and in
good standing, and is duly qualified to do business as a foreign corporation in
each jurisdiction (if any) in which, to the best knowledge of counsel, its
property or business requires such qualification.
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(2) Vanden's authorized capital stock is as set forth in Section 10.2
hereof.
(3) The execution and consummation of this Agreement have been duly
authorized and approved by Vanden's Board of Directors and shareholders and
consummation of this Agreement will not constitute or result in any breach or
default of the character described in Section 10.11 hereof of which counsel has
knowledge.
(4) Counsel has no knowledge of any liabilities or obligations of the
type described in Section 10.5 hereof, any litigation, proceeding, or
investigation of the type described in Section 10.7 hereof, or any defects in
title or mortgages, encumbrances or liens of the type described in Section 10.9
hereof.
(5) The shares of Vanden Common Stock into which Vanden Common Stock is
to be converted pursuant to this Agreement will, upon such conversion, be duly
and validly authorized and issued, and will be fully paid and nonassessable.
13.6 ACCOUNTANT'S LETTER. Vanden shall have received a letter from
Xxxxxxxxxx & Associates, certified public accountants, dated the Effective Date,
in form and substance satisfactory to Entropin, stating that on the basis of
consultation with officers of Vanden, a limited review (but not an audit) of
Vanden's accounting records, and other specified procedures and inquiries, which
Entropin may request in writing, nothing has come to their attention which
indicates that there has been any material adverse change in the financial
condition of Vanden during the period from August 31, 1997 to a specified date
not more than five days prior to the Effective Date.
13.7 PROXY INFORMATION. None of the information with respect to Vanden
which shall have been furnished by or on behalf of Vanden for inclusion in the
proxy solicitation material sent to the shareholders of Entropin in connection
with the meeting of such shareholders to be held in accordance with Section 8
hereof shall be false or misleading in any material respect or shall fail to
state any fact necessary to make the statements therein not false or misleading
in any material respect.
13.8 ASSETS. Vanden will have cash on hand of $220,000 at Closing and no
unpaid liabilities. Vanden will use cash in excess of $220,000 for payment of
costs in connection with the transaction including legal, accounting, printing,
mailing, filing fees and compensation to its officers and directors.
SECTION 14. CONDITIONS PRECEDENT TO OBLIGATION OF VANDEN
Vanden's obligation to consummate this merger shall be subject to
fulfillment on or before the Effective Date of each of the following conditions,
unless waived in writing by Vanden:
14.1 ENTROPIN'S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Entropin set forth in Section 9 hereof shall be true and correct
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at the Effective Date as though made at and as of that date, except as affected
by transactions contemplated hereby.
14.2 ENTROPIN'S COVENANTS. Entropin shall have performed all covenants
required by this Agreement to be performed by it on or before the Effective
Date.
14.3 SHAREHOLDER APPROVAL. This Agreement shall have been adopted by the
necessary vote of holders of the capital stock of the Constituent Corporations
as set forth in Section 8 hereof.
14.4 DISSENTING SHAREHOLDERS OF ENTROPIN. Entropin shall have no
shareholders dissenting from the merger.
14.5 OPINION OF ENTROPIN'S COUNSEL. Entropin shall have delivered to Vanden
the opinion of its counsel, Xxxx Xxx Xxxxx, Esq., dated the Effective Date, in
form and substance satisfactory to counsel for Vanden, to the effect that:
(1) Entropin is a corporation duly organized, validly existing and in good
standing, and is duly qualified to do business as a foreign corporation in each
jurisdiction (if any) in which, to the best knowledge of counsel, its property
or business requires such qualification.
(2) Entropin's authorized capital stock is as set forth in Section 9.2
hereof.
(3) The execution and consummation of this Agreement have been duly
authorized and approved by Entropin's Board of Directors and shareholders and
consummation of this Agreement will not constitute or result in any breach or
default of the character described in Section 9.11 hereof of which counsel has
knowledge.
(4) Counsel has no knowledge of any liabilities or obligations of the type
described in Section 9.5 hereof, any litigation, proceeding, or investigation of
the type described in Section 9.7 hereof, or any defects in title or mortgages,
encumbrances or liens of the type described in Section 10.9 hereof.
(5) The shares of Entropin Common Stock and Preferred Stock have been duly
and validly authorized and issued, and are fully paid and nonassessable.
14.6 ACCOUNTANT'S LETTER. Vanden shall have received a letter from Xxxxxx
Xxxxxx & Xxxxx, Inc., certified public accountants, dated the Effective Date, in
form and substance satisfactory to Vanden, stating that on the basis of
consultation with officers of Entropin, a limited review (but not an audit) of
Entropin's accounting records, and other specified procedures and inquiries,
which Vanden may request in writing, nothing has come to their attention which
indicates that there has been any material adverse change in the financial
12
condition of Entropin during the period from September 30, 1997, to a specified
date not more than five days prior to the Effective Date.
14.7 PROXY INFORMATION. None of the information with respect to Entropin
which shall have been furnished by or on behalf of Entropin for inclusion in the
proxy solicitation material sent to the shareholders of Vanden in connection
with the meeting of such shareholders to be held in accordance with Section 8
hereof shall be false or misleading in any material respect or shall fail to
state any fact necessary to make the statements therein not false or misleading
in any material respect.
14.8 FUNDING. Entropin will conduct a private placement of its common stock
which shall result in net proceeds of not less than $780,000 after payment of
all expenses (the "Private Placement"). The Private Placement will be made under
the provisions of Regulation D promulgated under the Securities Act of 1933, as
amended. The offering will be made only to"Accredited Investors" as that term is
defined in Regulation D.
14.9 DUE DILIGENCE. Vanden shall have completed a due diligence review of
all books, records and business and financial affairs of Entropin reasonably
satisfactory to it.
SECTION 15. DESIGNATION OF AGENT FOR SERVICE
As of the Effective Date, the Surviving Corporation hereby
irrevocably appoints the Secretary of State of California as its attorney to
accept service of process in any action, suit or proceeding for the enforcement
of any obligations of Entropin for which the Surviving Corporation is liable
under this Agreement or the laws of California.
SECTION 16. ACCESS
From the date hereof to the Effective Date, Vanden and Entropin shall
provide each other with such information and permit each other's officers and
representatives such access to its properties and books and records as the other
may from time to time reasonably request. If the merger is not consummated, all
documents received in connection with this Agreement shall be returned to the
party furnishing the same, and all information so received shall be treated as
confidential.
SECTION 17. STAND-STILL AGREEMENT AND BREAK-OFF FEE
From and after the date of this Agreement and up to and including the
Closing Date both parties agree to conduct their respective businesses in the
ordinary course and agree that during such period each shall have the exclusive
right to negotiate with the other with respect to the Merger and during such
period each party agrees not to directly or through intermediaries solicit,
entertain or otherwise discuss with any person or entity any other offer and
neither Vanden nor Entropin will issue or agree to issue, except as otherwise
12
disclosed in this Agreement, any additional securities without the consent of
the other party. Without the consent of the other party, neither party will,
except in the ordinary course of business, transfer assets or create liabilities
other than those contemplated herein. All reasonable expenses incurred in
connection with the completion of the transactions contemplated herein shall be
deemed to be in the ordinary course of business. Should any party be in
violation of this provision, it shall pay the other party the greater of: (i)
its expenses on an accountable basis, including time of its personnel and
representatives reasonably incurred in connection with the Transactions; or,
(ii) the sum of $25,000 as a Break-Off Fee within ten (10) days of written
notice from the other party and if any party fails to pay such fee, it shall be
liable to the other party for interest at the rate of eighteen percent (18%) per
annum together with reasonable attorneys fees for collection.
SECTION 18. NOTICE OF EVENTS
Each party shall promptly notify each other party of (a) any event,
condition or circumstance occurring from the date hereof through the Closing
Date that would constitute a violation or breach of this Agreement, or (b) any
event, occurrence, transaction or other item which would have been required to
have been disclosed on any Schedule, Exhibit or statement delivered hereunder,
had such event, occurrence, transaction or item existed on the date hereof,
other than items arising in the ordinary course of business which would not
render a change in any of the representations, warranties or other agreements of
said party.
SECTION 19. TERMINATION
19.1 CIRCUMSTANCES OF TERMINATION. This Agreement may be terminated
(notwithstanding approval by the shareholders of either party hereto):
(1) By the mutual consent in writing of the Boards of Directors of
Entropin and Vanden.
(2) By the Board of Directors of Entropin if any condition provided in
Section 13 hereof has not been satisfied or waived on or before the Effective
Date.
(3) By the Board of Directors of Vanden if any condition provided in
Section 14 hereof has not been satisfied or waived on or before the Effective
Date.
(4) By the Board of Directors of Vanden if the Closing has not occurred
by January 5, 1998, subject to an extension of up to seven (7) days which may be
exercised by Vanden upon written notice to Entropin. In addition, Entropin may
extend the closing up to seven (7) days upon written notice to Vanden in the
event that: 1.) audited financial statements of Entropin required for closing
are not available; and, 2.) such unavailability is not the result of Entropin's
inability to be audited or failure to pay or cooperate with its auditors.
14
19.2 EFFECT OF TERMINATION. In the event of a termination of this Agreement
pursuant to Section 19.1(1) hereof, each party shall pay the costs and expenses
incurred by it in connection with this Agreement and no party (or any of its
officers, directors and shareholders) shall be liable to any other party for any
costs, expenses, damage or loss of anticipated profits hereunder.
SECTION 20. GENERAL PROVISIONS
20.1 FURTHER ASSURANCES. At any time, and from time to time, after the
Effective Date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
20.2 WAIVER. Any failure on the part of either party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
20.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any other agreement,
representation, or communication, whether oral or written, between the parties
hereto relating to the transactions contemplated herein or the subject matter
hereof.
20.4 HEADINGS. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
20.5 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Colorado, without regard to
conflict of laws. This Agreement shall be subject to the jurisdiction and venue
of the state and federal courts situated in Denver, Colorado.
20.6 ASSIGNMENT. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided,
however, that any assignment by either party of its rights under this Agreement
without the written consent of the other party shall be void.
20.7 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 21. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All of the representations and warranties of the parties
contained in this Agreement shall survive for a period of two years after the
Closing Date.
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SECTION 22. INDEMNITY AGREEMENTS OF VANDEN AND ENTROPIN
Vanden and Entropin each shall indemnify, defend, reimburse
and hold harmless the other from and against any and all Losses resulting from:
(a) Any inaccuracy in, or breach of, any representation and warranty
or nonfulfillment of any covenant on the part of Vanden or Entropin,
respectively, contained in this Agreement.
(b) Any misrepresentation in or omission from or nonfulfillment of any
covenant on the part of Vanden or Entropin, respectively, contained in any
other agreement, certificate or other instrument furnished or to be
furnished to the other party by that party pursuant to this Agreement.
SECTION 23. FEES AND EXPENSES
Legal, accounting and other fees, costs and expenses to be incurred by each
party regarding this Agreement and the transactions contemplated hereby shall be
paid by the party incurring them. Notwithstanding any other provision in this
Agreement, in the event of any dispute or controversy, in addition to any other
remedies the prevailing party may obtain in such dispute, the prevailing party
in such dispute shall be entitled to recover from the other party all of its
reasonable legal fees and out-of-pocket costs incurred by such party in
enforcing or defending its rights hereunder.
SECTION 24. OTHER AGREEMENTS
24.1 PUBLIC DISCLOSURE. None of the parties hereto shall issue any press
release or otherwise make any public statement with respect to the transactions
contemplated hereby not required by law except upon the written consent of the
other party hereto. Such approval shall not be unreasonably withheld.
24.2 NOTICES. All consents, waivers, notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally or sent by facsimile transmission or by overnight courier
to the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:
(1) If to Vanden to:
Vanden Capital Group, Inc.
Mellon Financial Center, Suite 1001
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Attention: A. Xxxxxx Xxxxxxxxx, President
Facsimile: (000) 000-0000
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With copies to:
Xxxxxxx Xxxxxxxx & Xxxxxxxxx, P.C.
Mellon Financial Center, Suite 1001
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: A. Xxxxxx Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
(2) If to Entropin to:
Entropin, Inc.
00000 Xxxxx Xxxxxx
Xxxxx, XX 00000
Attn: Xxxxxxx Xxxxxx, President
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx and Xxxxxxx, Ltd.
Park Central VII, Suite 1000
00000 Xxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Any party may change the address to which notices, requests, demands and other
communications hereunder are to be sent to such party by giving the other
parties hereto written notice thereof in accordance with this Section 24.2.
24.3 BINDING EFFECT. This Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective successors and assigns;
provided that this Agreement may not be assigned by any party without the
consent of the other parties.
24.4 ENTIRE AGREEMENT. This Agreement (including the Exhibits and Schedules
referred to herein) constitutes the entire agreement and supersedes all other
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof.
24.5 SCHEDULES AND EXHIBITS. The Schedules and Exhibits referred to in this
Agreement shall be construed as an integral part of this Agreement as if the
same had been set forth herein and shall be satisfactory in form and substance
to each party hereto.
24.6 APPLICABLE LAW AND JURISDICTION. This Agreement shall be governed in
all respects, including validity, interpretation and effect, by the laws of the
State of Colorado without regard to conflict of law. This Agreement shall be
subject to the jurisdiction and venue of the state and federal courts situated
in Denver, Colorado.
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24.7 NO BENEFIT TO THIRD PARTIES. No provision of this Agreement is
intended to confer any rights or remedies upon any person not a party of this
Agreement.
24.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original but all of which, when
taken together, shall constitute only one document. It shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
24.9 ACKNOWLEDGEMENTS.
(a) The parties represent and acknowledge that each has been
represented and advised by counsel in connection with this
Agreement.
(b) Entropin acknowledges that certain members of Vanden's law firm
own a controlling interest in, and serve as officers and
directors of Vanden.
(c) Entropin acknowledges that in connection with the merger
management of Vanden intends (but is not obligated) to sell
shares of Vanden Common Stock (giving effect to the Vanden
recapitalization) representing approximately one percent (1%) of
Vanden Common Stock to be issued and outstanding upon completion
of the merger at the same per share price as the Entropin Private
Placement set forth in Section 14.8 hereof, but in no event less
than $2.75 per share.
(d) The parties acknowledge that Entropin has requested Vanden's law
firm to assist Entropin in preparing documents to be used in
connection with the Entropin Private Placement. Entropin
acknowledges that Vanden's law firm will be relying entirely upon
Entropin for the accuracy and completeness of the information
pertaining to Entropin contained in such documents. Entropin
acknowledges that neither Vanden nor Vanden's law firm shall have
any liability with respect to the Entropin Private Placement, and
Entropin shall fully indemnify and hold harmless Vanden and
Vanden's law firm from any such liability, including but not
limited to legal fees incurred in connection with the defense of
any claim of liability.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
VANDEN CAPITAL GROUP, INC., a Colorado
corporation
By /s/ A. Xxxxxx Xxxxxxxxx
---------------------------------------
A. Xxxxxx Xxxxxxxxx, President
ENTROPIN, INC., a California
corporation
By /s/ Xxxxxxx Xxxxxx
---------------------------------------
Xxxxxxx Xxxxxx, President
19
