Exhibit 2:
AGREEMENT
AND
PLAN OF MERGER
BETWEEN
CELESTIAL VENTURES CORPORATION
AND
POLYMER DYNAMICS, INC.
ARTICLE 1: THE MERGER.............................................................................1
1.1 The Merger.............................................................................1
1.2 Effect of the Merger...................................................................1
1.3 Further Assurances.....................................................................2
1.4 Effective Time; Effective Date.........................................................2
1.5 Conversion of Securities...............................................................2
1.6 Exchange Procedures....................................................................4
1.7 The Closing............................................................................5
1.8 Dissenting Shares......................................................................5
1.9 Conversion Transactions................................................................6
1.10 Tax-Free Reorganization................................................................6
1.11 Ratification of Celestial Reverse Stock Split..........................................6
1.12 Satisfaction of Preemptive Rights......................................................6
1.13 Ratification of Series A Preferred Shares Conversion...................................6
ARTICLE 2: REPRESENTATIONS AND WARRANTIES OF PDI..................................................6
2.1 Incorporation of PDI...................................................................6
2.2 Authorization..........................................................................7
2.3 Non-Contravention......................................................................7
2.4 Consents...............................................................................7
2.5 Capitalization of PDI..................................................................7
2.6 Stock Options, Warrants and Conversion Rights..........................................8
2.7 Subsidiaries...........................................................................8
2.8 Financial Statements...................................................................8
2.9 Absence of Adverse Changes.............................................................8
2.10 Undisclosed Liabilities................................................................9
2.11 Title to Properties and Absence of Liens...............................................9
2.12 Contracts and Leases...................................................................9
2.13 Litigation.............................................................................9
2.14 Taxes..................................................................................9
2.15 ERISA Plans............................................................................9
2.16 Labor Relations........................................................................9
2.17 Environmental Matters.................................................................10
2.18 Required Consent......................................................................10
2.19 Corporate Records.....................................................................10
2.20 Accounting Controls...................................................................10
2.21 Brokers and Financial Advisers........................................................11
ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF CELESTIAL...........................................11
3.1 Incorporation of Celestial............................................................11
3.2 Authorization.........................................................................11
3.3 Non-Contravention.....................................................................11
3.4 Consents..............................................................................12
3.5 Capitalization of Celestial...........................................................12
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3.6 Stock Options and Conversion Rights...................................................12
3.7 Subsidiaries..........................................................................12
3.8 Financial Statements..................................................................12
3.9 Absence of Adverse Changes............................................................12
3.10 Undisclosed Liabilities...............................................................12
3.11 Title to Properties and Absence of Liens..............................................13
3.12 Contracts and Leases..................................................................13
3.13 Litigation............................................................................13
3.14 Taxes.................................................................................13
3.15 ERISA Plans...........................................................................13
3.16 Employees.............................................................................13
3.17 Environmental Matters.................................................................13
3.18 Corporate Records.....................................................................14
3.19 Accounting Controls...................................................................14
3.20 Insurance.............................................................................15
3.21 SEC Reports...........................................................................15
3.22 Takeover Laws.........................................................................15
3.23 Required Consent......................................................................15
3.24 Brokers and Financial Advisers........................................................15
3.25 Survival of Guarantees................................................................15
3.26 Interim Financial Information.........................................................16
3.27 Qualified Small Business Stock........................................................16
ARTICLE 4: COVENANTS OF PDI......................................................................16
4.1 Certain Actions Pending Merger........................................................16
4.2 PDI Stockholders' Consent.............................................................17
4.3 Rule 145 Affiliates...................................................................17
ARTICLE 5: COVENANTS OF CELESTIAL................................................................17
5.1 Celestial Stockholders' Consent.......................................................17
5.2 Certain Other Covenants by Celestial..................................................17
5.3 The Guarantees........................................................................18
5.4 Delivery of Stock.....................................................................18
ARTICLE 6: ADDITIONAL AGREEMENTS OF PDI AND CELESTIAL............................................18
6.1 Reasonable Best Efforts...............................................................18
6.2 Stockholder Approvals.................................................................19
6.3 Information Statement.................................................................19
6.4 Press Releases........................................................................19
6.5 Access; Information; Updated Disclosure Statement.....................................20
6.6 Acquisition Proposals.................................................................20
6.7 Confidentiality.......................................................................21
6.8 Indemnification.......................................................................21
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ARTICLE 7: CONDITIONS TO OBLIGATIONS OF PDI......................................................21
7.1 Representations and Warranties........................................................21
7.2 Performance of Covenants..............................................................21
7.3 Delivery of Closing Certificate 23....................................................21
7.4 No Litigation.........................................................................21
7.5 Governmental Approvals................................................................22
7.6 Other Approvals.......................................................................22
7.7 Shareholder Approval..................................................................22
7.8 Tax Opinion...........................................................................22
7.9 Material Adverse Change...............................................................22
7.10 Information Statement.................................................................22
7.11 Termination of Employment Agreement...................................................22
7.12 Stock Combination.....................................................................22
7.13 Satisfaction of Preemptive Rights.....................................................22
7.14 Guarantees............................................................................23
7.15 Articles of Incorporation and Bylaws..................................................23
7.16 Satisfactory Due Diligence............................................................23
7.17 Other Agreements......................................................................23
ARTICLE 8: CONDITIONS TO OBLIGATIONS OF CELESTIAL................................................23
8.1 Representations and Warranties........................................................23
8.2 Performance of Covenants..............................................................23
8.3 Delivery of Closing Certificate.......................................................23
8.4 No Litigation.........................................................................23
8.5 Governmental Approvals................................................................23
8.6 Other Approvals.......................................................................24
8.7 Shareholder Approval..................................................................24
8.8 Tax Opinion...........................................................................24
8.9 Material Adverse Change...............................................................24
8.10 Information Statement.................................................................24
8.11 Conversion of Notes...................................................................24
ARTICLE 9: TERMINATION...........................................................................24
9.1 Termination by Mutual Consent.........................................................24
9.2 Termination by Celestial or PDI.......................................................24
9.3 Termination by PDI....................................................................25
9.4 Termination by Celestial..............................................................25
9.5 Effect of Termination.................................................................25
9.6 Amendment.............................................................................25
9.7 Waiver................................................................................25
ARTICLE 10: MISCELLANEOUS.........................................................................25
10.1 Survival..............................................................................25
10.2 Expenses..............................................................................26
10.3 Notices...............................................................................26
10.4 Prior Agreements; Modifications; Waivers..............................................26
10.5 Governing Law.........................................................................27
10.6 Captions..............................................................................27
10.7 Counterparts..........................................................................27
10.8 No Third Party Rights.................................................................27
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AGREEMENT AND PLAN OF MERGER (the "Agreement") dated April 3, 2001,
between Celestial Ventures Corporation, a Nevada corporation ("Celestial"), and
Polymer Dynamics, Inc., a Pennsylvania corporation ("PDI").
WHEREAS, Celestial and PDI deem it advisable that, subject to the terms
and conditions set forth in this Agreement, PDI be merged into Celestial (the
"Merger") pursuant to the plan of merger set forth herein and the applicable
provisions of the laws of the States of Nevada and Pennsylvania;
WHEREAS, the Boards of Directors of Celestial and PDI have determined
that it is in the best interests of their respective companies and their
respective stockholders to consummate the business combination transaction
provided for herein in which PDI will, subject to the terms and conditions set
forth herein, merge with and into Celestial;
WHEREAS, the Merger is intended to constitute a plan of reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"); and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and intending to be legally bound,
the parties hereto do hereby agree as follows:
ARTICLE 1: THE MERGER
----------
1.1 The Merger. Subject to and in accordance with the provisions
of this Agreement, the General Corporation Law of Nevada, as amended (the
"Nevada GCL") and the Pennsylvania Business Corporation Law of 1988, as amended
(the "PaBCL"), at the Effective Time (as defined in Section 1.4), PDI shall be
merged into Celestial, and Celestial shall be the surviving corporation
organized under the Nevada GCL (the "Surviving Corporation"). At the Effective
Time, the separate corporate existence of PDI shall cease.
1.2 Effect of the Merger.
--------------------
(a) The Articles of Incorporation of Celestial in effect
at the Effective Time of the Merger shall be the Articles of Incorporation of
the Surviving Corporation until such time as they are altered, amended or
repealed in accordance with the provisions thereof and of applicable law.
(b) The By-Laws of Celestial in effect at the Effective
Time of the Merger shall be the By-Laws of the Surviving Corporation until such
time as they are altered, amended or repealed in accordance with the provisions
thereof and of applicable law.
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(c) The directors of the Surviving Corporation
immediately after the Effective Time shall be the directors of PDI immediately
prior to the Effective Time, Xxxxx Xxxxxxxxxxx and Xxxxxx Xxxxxxxx, each of whom
shall serve as directors of the Surviving Corporation until such time as their
terms expire and their successors are duly elected and qualified or until their
earlier death, resignation, or removal, all in accordance with the procedures
set forth in the By-Laws of the Surviving Corporation.
(d) The officers of the Surviving Corporation immediately
after the Effective Time shall be the officers of PDI immediately prior to the
Effective Time, each of whom shall serve in accordance with the By-Laws of the
Surviving Corporation and, if applicable, the terms and conditions contained in
any written Employment Agreement between such officer and the Surviving
Corporation.
1.3 Further Assurances. If at any time after the Effective Time
the Surviving Corporation shall determine that any further deeds, assignments or
assurances in law or any other acts are necessary or desirable (i) to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation, title
to and possession of any property or right of PDI acquired or to be acquired by
reason of, or as a result of, the Merger, or (ii) otherwise to carry out the
purposes of this Agreement, PDI and its proper officers and directors shall be
deemed to have granted to the Surviving Corporation an irrevocable power of
attorney to execute and deliver all such deeds, assignments and assurances in
law and to do all acts necessary or desirable to vest, perfect or confirm title
to and possession of such property or rights in the Surviving Corporation and
otherwise to carry out the purposes of this Agreement; and the proper officers
and directors of the Surviving Corporation are fully authorized in the name of
PDI or otherwise to take any and all such action.
1.4 Effective Time; Effective Date. (a) The Merger shall become
effective (the "Effective Time") upon the later to occur of (i) the proper
adoption and filing with the Secretary of State of the State of Nevada of
Articles of Merger in accordance with Section 92A.200 of the Nevada GCL; and
(ii) the proper adoption and filing in the Department of State of the
Commonwealth of Pennsylvania of Articles of Merger and the certificates or
statement, if any, required by Section 139 of the PaBCL, by PDI in accordance
with Section 1926 of the PaBCL. The Articles of Merger shall be delivered to the
Secretary of State of the State of Nevada and the Department of State of the
Commonwealth of Pennsylvania for filing simultaneously with the Closing referred
to in Section 1.7 of this Agreement.
1.5 Conversion of Securities. At the Effective Time (a) each share
of Celestial's Common Stock, par value $.001 per share (the "Celestial Common"),
issued and outstanding immediately prior to the Effective Time (excluding those
held by persons who perfect their dissenters' rights pursuant to the Nevada GCL,
which shall cease to exist and be cancelled) and (b) each warrant or option to
purchase shares of Common issued and outstanding immediately prior to the
Effective Time, shall, by virtue of the Merger and without any action on the
part of the holder thereof, remain unchanged. Each share of Celestial Preferred
Stock, par value $.001 per share (the "Celestial Preferred"), issued and
outstanding immediately prior to the Effective Time (excluding those held by
persons who perfect their dissenters' rights under the Nevada GCL which shall
cease to exist and be cancelled) shall, by virtue of the Merger and without any
action on the part of the holder thereof be converted into one (1) share of
Common Stock, par value $.001 per share of the Surviving Corporation.
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(b) Each share of PDI's Common Stock, par value $.01 per
share (the "PDI Common") issued and outstanding immediately prior to the
Effective Time (excluding those held by persons who perfect their dissenters'
rights pursuant to the PaBCL, which shall cease to exist and be cancelled)
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become one share of Common Stock of the Surviving
Corporation.
(c) Each issued share of Celestial Common or Celestial
Preferred held in the treasury of Celestial immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of
Celestial, be retired and shall resume the status of authorized and unissued
shares of Celestial Common or Celestial Preferred, as the case may be.
(d) Each option to purchase shares of PDI Common
outstanding immediately prior to the Effective Time of the Merger granted under
PDI's Stock Option Plan (the "PDI Stock Option Plan"), or outside of such Plan,
and each warrant to purchase shares of PDI Common outstanding immediately prior
to the Effective Time of the Merger, shall be assumed by the Surviving
Corporation and shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and become an option or warrant,
as the case may be, to purchase the identical number of shares of the Surviving
Corporation's Common Stock, at the identical exercise price and each such option
or warrant shall otherwise have the same terms and conditions as provided
therein. The PDI Stock Option Plan and all other option plans and programs
described in the PDI Disclosure Statement shall be assumed as of the Effective
Time by the Surviving Corporation with such amendments thereto as may be
required to reflect the Merger. The Board of Directors of the Surviving
Corporation shall have all of the powers conferred upon the Board of Directors
of PDI under the PDI Stock Option Plan in administering the options outstanding
thereunder.
(e) No fractional shares of Surviving Corporation Common
Stock, and no certificate or scrip representing such fractional shares, shall be
issued upon the conversion of any Celestial Preferred or PDI Common into shares
of Surviving Corporation Common Stock pursuant to this Section 1.5. Instead, if,
pursuant to this Section 1.5 a shareholder would otherwise be entitled to
receive a fractional share of Surviving Corporation Common Stock, the Surviving
Corporation shall, at its option in its sole discretion, elect to (i) pay to
such shareholder in cash the value of such a fractional share based on the then
applicable fair market value per share of such Common Stock or (ii) round the
number of shares to be issued to such shareholder up to the next highest number
of whole shares. If more than one certificate representing shares of Celestial
Preferred or PDI Common shall be surrendered at one time for the account of the
same shareholder, the number of full shares of Surviving Corporation Common
Stock for which certificates shall be delivered shall be computed on the basis
of the aggregate number of shares represented by the certificates so
surrendered.
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(f) Each share of PDI Common and PDI Series A Preferred,
Series B Preferred and Series C Preferred, if any, issued and held in the
treasury of PDI immediately prior to the Effective Time of the Merger shall, by
virtue of the Merger and without any action on the part of PDI, be cancelled and
retired and shall cease to exist, without any conversion thereof into shares, or
the right to receive shares, of Surviving Corporation Common Stock.
(g) For the purposes of this Section 1.5, each
certificate which, immediately prior to the Effective Time of the Merger,
represented shares of Celestial Preferred shall, at the Effective Time of the
Merger and thereafter, be deemed for all purposes to represent the number of
shares of Surviving Corporation Common Stock into which the shares of Celestial
Preferred represented by such certificate have been converted pursuant to this
Section 1.5.
(h) For the purposes of this Section 1.5, each
certificate which, immediately prior to the Effective Time of the Merger,
represented shares of PDI Common shall, at the Effective Time of the Merger and
thereafter, be deemed for all purposes to represent the number of shares of
Surviving Corporation Common Stock into which the shares of PDI Common
represented by such certificate have been converted pursuant to this Section
1.5.
1.6 Exchange Procedures. (a) (i) At the Effective Time, the
Surviving Corporation shall deposit with a bank, trust company, transfer agent
or other person designated by the Surviving Corporation, which may be the
Surviving Corporation itself (the "Exchange Agent"), for the benefit of each
holder of an outstanding certificate or certificates (the "PDI Certificates")
which prior thereto represented shares of PDI Common (the "PDI Shares"), for
exchange in accordance with this Section 1.6(a), certificates representing the
shares of Common Stock of the Surviving Corporation into which such PDI Shares
have been so converted.
(ii) As promptly as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of a PDI
Certificate which prior thereto represented PDI Shares (x) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the PDI Certificates shall pass, only upon delivery of the PDI
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as the Surviving Corporation may specify), and (y) instructions for
use in effecting the surrender of the PDI Certificates in exchange for
certificates representing the Surviving Corporation's Common Stock and, if
applicable, any cash or certificates in lieu of any fractional shares. Such
holder shall upon such surrender receive in exchange therefor a certificate or
certificates representing the number of whole shares of Surviving Corporation
Common Stock into which such PDI Shares shall have been converted. Until so
surrendered and exchanged, each outstanding PDI Certificate which, prior to the
Effective Time, represented PDI Shares shall, upon and after the Effective Time,
be deemed for all purposes (other than to the extent provided in the following
sentence) to evidence ownership of the number of whole shares of the Surviving
Corporation's Common Stock into which such PDI Shares have been converted.
Dividends, if any, payable after the Effective Time to the holders of the
Surviving Corporation's Common Stock shall, at the option of the Surviving
Corporation, be withheld from holders of PDI Certificates formerly representing
PDI Shares until such PDI Certificates (or lost share affidavits reasonably
acceptable in form and substance to the Surviving Corporation) are surrendered
for exchange in accordance with this Section 1.6(a) and, if so withheld, shall
then be paid without interest.
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(iii) In the event that any PDI Certificates
formerly representing PDI Shares (or lost share affidavits reasonably acceptable
in form and substance to the surviving corporation) are not surrendered for
exchange by the first anniversary of the Effective Time (the "Unsurrendered
Certificates"), those certificates representing the Surviving Corporation's
Common Stock corresponding to such Unsurrendered Certificates then held by the
Exchange Agent shall be delivered to the Surviving Corporation, upon demand, and
any stockholders of PDI who have not previously complied with this Section 1.6
shall thereafter look only to the Surviving Corporation for payment of their
claim for the Surviving Corporation's Common Stock and any cash or certificates
in lieu of fractional shares of Common Stock of the Surviving Corporation.
(b) At the Effective Time, the Surviving Corporation will
follow similar exchange procedures as set forth in Section 1.6(a) for purposes
of the exchange of certificates which prior thereto represented shares of
Celestial Preferred for certificates representing the shares of Common Stock of
the Surviving Corporation into which such shares of Celestial Preferred have
been so converted.
(c) Following the Closing, the Surviving Corporation
shall establish and implement procedures so that holders of stock certificates
issued by PDI prior to the Merger may exchange those certificates for new stock
certificates in equivalent denominations issued by the Surviving Corporation.
1.7 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall, unless the parties hereto otherwise agree,
take place at the offices of PDI, 0000 Xxxxx 00xx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxxxx 00000, after the fulfillment or waiver of the last of the
conditions specified in Articles 7 and 8 hereof, or at such other time and place
and on such other date as PDI and Celestial may agree not later than December
31, 2001 (the "Closing Date").
1.8 Dissenting Shares. (a) Notwithstanding anything herein to the
contrary, shares of Celestial Common that are outstanding immediately prior to
the Effective Time and that are held by stockholders, if any, who shall have
performed all such acts as are required to perfect dissenters' rights pursuant
to the applicable provisions of the Nevada GCL (a "Celestial Dissenter") shall
be converted into the right to receive the consideration payable in respect
thereof in accordance with the Nevada GCL, unless such holder loses the status
and rights of a Celestial Dissenter after the Effective Time. Any such payment
shall be made by the Surviving Corporation. If after the Effective Time such
holder loses the status and rights of a Celestial Dissenter, the Celestial
Common or Celestial Preferred held by such holder shall be treated as if they
had been converted as of the Effective Time into the right to receive Common
Stock of the Surviving Corporation. Celestial shall promptly provide PDI with
copies of any written demand for payment received by Celestial from a Celestial
Dissenter.
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(b) Notwithstanding anything herein to the contrary,
shares of PDI Common and PDI Preferred that are outstanding immediately prior to
the Effective Time and that are held by stockholders, if any, who shall have
performed all such acts as are required to perfect dissenters' rights pursuant
to the applicable provisions of the PaBCL (a "PDI Dissenter") shall be converted
into the right to receive the consideration payable in respect thereof in
accordance with the PaBCL, unless such holder loses the status and rights of a
PDI Dissenter after the Effective Time. Any such payment shall be made by the
Surviving Corporation. If after the Effective Time such holder loses the status
and rights of a PDI Dissenter, the PDI Common or PDI Preferred held by such
holder shall continue to be outstanding shares of the Surviving Corporation's
Common Stock or Preferred Stock, as the case may be. PDI shall promptly provide
Celestial with copies of any written demand for payment received by PDI from a
PDI Dissenter.
1.9 Conversion Transactions. Prior to the Effective Time, PDI
shall endeavor to obtain the conversion of Series A Preferred Shares, Series B
Preferred Shares, and Series C Preferred Shares into shares of PDI Common, at
the exchange ratios expressed in Sections 1.13, 2.5(b) and 2.5(c) hereof, along
with the debt on the books of PDI in the aggregate of approximately $10,000,000.
The conversion transactions contemplated by this Section are referred to as the
"Conversion Transactions". In the event that these Conversion Transactions are
not consummated prior to the Effective Time, the parties shall amend this
Agreement to reflect that such securities are still outstanding.
1.10 Tax-Free Reorganization. The parties intend that the Merger
qualify as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended, (the "Code") and the regulations thereunder.
1.11 Ratification of Celestial Reverse Stock Split. Celestial shall
obtain prior to the Effective Time the requisite approval and ratification by
its stockholders of (i) the 1 for 15 stock combination effected by Celestial in
May 1996 and the corresponding proportionate adjustment in the conversion ratio
of Celestial's outstanding Preferred Stock (the "Stock Combination"), and (ii)
any necessary amendment to Celestial's Articles of Incorporation required by the
Nevada GCL in connection therewith (the "Stock Combination Articles Amendment").
1.12 Satisfaction of Preemptive Rights. Celestial shall, prior to
the Effective Time, obtain waivers or otherwise resolve to PDI's satisfaction
any claims that Celestial's stockholders may have under Section 78.265 of the
Nevada GCL to purchase securities of Celestial in respect of prior issuances of
securities made by Celestial.
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1.13 Ratification of Series A Preferred Shares Conversion. At, or
prior to the Effective Time, the Board of Directors of PDI shall have approved
the conversion of PDI's Series A Preferred Shares into PDI Common at a
conversion ratio of .7519 Common Shares for every share of Series A Preferred in
accordance with the PaBCL and the By-Laws of PDI.
ARTICLE 2: REPRESENTATIONS AND WARRANTIES OF PDI
-------------------------------------
PDI represents and warrants to Celestial that at the date of this
Agreement, except as disclosed in the disclosure statement of PDI delivered by
PDI to Celestial on the date hereof (the "PDI Disclosure Statement"):
2.1 Incorporation of PDI. PDI is a corporation validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and has
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted. PDI is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which its ownership of property or the conduct of its
business makes such qualification necessary and in which the failure to so
qualify would have a material adverse effect upon the business, prospects,
assets, financial condition, or results of operations of PDI (a "PDI Material
Adverse Effect").
2.2 Authorization. PDI has full corporate power and authority to
execute, deliver and perform this Agreement and the Merger. This Agreement has
been duly executed and delivered by PDI, and has been duly authorized by its
Board of Directors. Upon the requisite approval thereof by its stockholders, all
corporate action of PDI necessary for due authorization of this Agreement and
the Merger will have been duly taken. Upon execution and delivery of this
Agreement by PDI, it shall be the valid obligation of PDI, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy or insolvency laws or by general equitable principles.
2.3 Non-Contravention. The execution and delivery of this
Agreement do not, and at the Closing, assuming requisite shareholder and board
approval of the Merger and this Agreement, the performance and the consummation
of the transactions contemplated by this Agreement will not, result in any
conflict with, breach or violation of or default, termination or forfeiture
under, any terms or provisions of the Articles of Incorporation or By-laws of
PDI, or any statute, rule or regulation, or any judicial or governmental decree,
order or judgment, or any material contract, mortgage, indenture, agreement,
lease or other instrument to which PDI is a party or to which any of its assets
is subject.
2.4 Consents. Except for compliance with Federal and state
securities laws, the requisite approvals of the board of directors and
stockholders of PDI and Celestial, and the filing of Articles of Merger and
certificates or statement pursuant to Section 1.4 and assuming completion of the
Conversion Transactions prior to the Merger, no consent, approval,
authorization, order, registration or qualification of or with any court, any
regulatory authority or other governmental body, or any other person, is
required, which if not obtained would prevent the Merger or would have a PDI
Material Adverse Effect.
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2.5 Capitalization of PDI. (a) The authorized capital stock of PDI
consists of (i) 50,000,000 shares of Common Stock, par value $.01 per share,
(ii) 3,443,040 Series A Preferred Shares, par value $1.00 per share, (iii)
20,000 Series B Preferred Shares, par value $100 per share, (iv) 100,000 Series
C Preferred Shares, par value $50 per share, (v) 5,000,000 Series D Preferred
Shares, par value $1.00 per share, and (vi) 41,436,960 undesignated Preferred
Shares. Of these authorized shares, before giving effect to the Conversion
Transactions, 29,374,424 Common Shares, 1,263,846 Series A Preferred Shares,
20,000 Series B Preferred Shares and 100,000 Series C Preferred Shares are
validly issued and outstanding, fully paid and nonassessable. No Series D
Preferred Shares or other Preferred Shares are issued or outstanding.
(b) After the Merger, each Series B Preferred Share is
convertible by its terms into 104.5334 Common Shares, with all outstanding
Series B Preferred Shares convertible into an aggregate of 2,090,668 Common
Shares. After the Merger, each Series C Preferred Share is convertible by its
terms into 37.5399 Common Shares, with all outstanding Series C Preferred Shares
convertible into an aggregate of 3,753,990 Common Shares.
(c) 2,500,000 Shares of PDI Common are reserved for
issuance upon exercise of options granted and to be granted under the PDI Stock
Option Plan described in the PDI Disclosure Statement.
(d) 2,409,173 Shares of PDI Common are reserved for
issuance upon exercise of outstanding warrants.
(e) An aggregate of 7,416,104 Shares of PDI Common are
reserved for issuance pursuant to conversion of an aggregate of approximately
$10,000,000 in principal and accrued interest in outstanding loans to PDI from
various entities and individuals.
(f) The Board of Directors of PDI has authorized the
issuance of up to 3,759,398 shares of PDI Common pursuant to a private placement
for $5,000,000 at a price of $1.33 per share.
Assuming consummation of all the Conversion Transactions (but not giving effect
to the exercise of any options or warrants or the proposed private placement),
PDI shall at the Effective Time have 46,085,436 shares of PDI Common Stock
issued and outstanding and no shares of any class or series of Preferred Stock
issued and outstanding.
2.6 Stock Options, Warrants and Conversion Rights. PDI does not
have outstanding any stock or other security, or any option, warrant or other
right which entitles the holder thereof to purchase or otherwise acquire, or
convert the same into, any capital stock or other security of PDI, other than
the convertible securities, options and warrants described in Section 2.5.
8
2.7 Subsidiaries. PDI has no subsidiaries and does not own any
interest, directly or indirectly, in any other corporation, partnership, joint
venture or other enterprise or entity, other than Polymer Dynamics Technology,
Inc., Polymer Dynamics Engineering, Inc., and Polymer Properties I, Inc.
2.8 Financial Statements. The balance sheets of PDI and its
consolidated subsidiaries at June 30, 2000, and 1999, and the statements of
income, cash flow and stockholders' equity for the two years then ended,
including the notes thereto and the reports thereon of Xxxxxxx Xxxxxx, LLP,
independent accountants, and the unaudited balance sheets of PDI and its
consolidated subsidiaries at December 31, 2000 and 1999, and the unaudited
statements of income, stockholders' equity and cash flow for the six months then
ended, together with the notes thereto, all of which have been delivered to
Celestial, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered by such
statements and present fairly in all material respects the financial position of
PDI and its consolidated subsidiaries as of the dates and for the periods
indicated.
2.9 Absence of Adverse Changes. Other than as set forth in the PDI
Disclosure Statement, since December 31, 2000, there has not been any material
adverse change in the business, prospects, assets, financial condition or
results of operations of PDI (a "PDI Material Adverse Change").
2.10 Undisclosed Liabilities. PDI does not have any material
obligations or liabilities that are required to be disclosed on a balance sheet
prepared in accordance with generally accepted accounting principles, other than
(i) obligations or liabilities reflected on its balance sheet at December 31,
2000, and the notes thereto, (ii) obligations and liabilities incurred since
December 31, 2000, in the ordinary course of PDI's business, (iii) obligations
and liabilities to be performed or satisfied after December 31, 2000, under
contracts and leases to which PDI is a party, and (iv) obligations or
liabilities listed on the PDI Disclosure Statement.
2.11 Title to Properties and Absence of Liens. PDI, directly or
through its subsidiaries, has good title to all material properties and assets,
real and personal, reflected in PDI's balance sheet as of December 31, 2000, and
related notes, if any (other than any such properties or assets sold or disposed
of since December 31, 2000, in the ordinary course of PDI's business), free and
clear of all liens, encumbrances, security interests and claims ("Liens"),
except (i) Liens for current taxes not yet due and payable, (ii) Liens reflected
in such balance sheet or in the related notes, and (iii) Liens, if any, as are
not material in character, amount or extent and do not materially detract from
the value, or materially interfere with the use by PDI in its business of the
properties subject thereto or affected thereby.
2.12 Contracts and Leases. Set forth in the PDI Disclosure
Statement is a description of all material real property leases and material
employment contracts obligating PDI to employ any officers or employees other
than on an at-will basis.
9
2.13 Litigation. Except as set forth in the PDI Disclosure
Statement, there is no action, suit or other litigation or proceeding or
governmental investigation pending, or to the knowledge of PDI threatened,
against PDI which, if adversely determined, would have a PDI Material Adverse
Effect.
2.14 Taxes. Except as set forth in the PDI Disclosure Statement or
in the PDI financial statements previously provided to Celestial: (i) PDI has
filed all Federal, state and local income, withholding, franchise, sales and
other tax returns required to be filed by it; (ii) all taxes shown on such
returns have been paid in full; (iii) the tax returns of PDI have not been
audited by the Internal Revenue Service, other than those listed on the PDI
Disclosure Statement; (iv) no taxing authority has asserted any tax deficiency
against PDI, and PDI has no knowledge of any deficiency proposed or threatened
to be asserted against it; (v) there are no agreements, waivers, or other
arrangements providing for extension of time with respect to the assessment or
collection of any tax, nor are there any actions, suits, proceedings, or claims
now pending or threatened by any Federal, state or local authority relating to
any taxes.
2.15 ERISA Plans. PDI has no pension, profit-sharing or other
employee benefit or welfare plan subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") other than those listed on the PDI
Disclosure Statement. PDI has no bonus or other compensation plan for its
officers, directors or employees not subject to ERISA, other than those listed
on the PDI Disclosure Statement.
2.16 Labor Relations. PDI's employees are not represented by any
labor union or other collective bargaining unit, and to PDI's knowledge, there
is no union campaign being conducted to solicit cards from any employees to
authorize the union to request an NLRB certification election with respect to
those employees. There is no labor trouble, dispute, grievance or strike pending
or, to PDI's knowledge, threatened, against PDI.
2.17 Environmental Matters. To PDI's knowledge, except as disclosed
in certain Phase I and Phase II studies which PDI has made available to
Celestial.
(a) PDI has been and is in material compliance with all
applicable federal, state and local law or regulation concerning or relating to
industrial hygiene or the protection of health and/or the environment (the
"Environmental Laws");
(b) There are no conditions on, about, beneath or arising
from any properties owned or leased by PDI which would give rise to any
liability under any applicable Environmental Law or which would require any
response, removal or remedial action, as such terms are defined in Section 101
of the Comprehensive Environmental, Compensation and Liability Act, 42 U.S.C.
ss.9601 et seq. (1995), as amended, by such party;
10
(c) PDI has obtained and possesses all permits, licenses,
approvals and other authorizations necessary under any applicable Environmental
Law for the operation of its business except as would not have a PDI Material
Adverse Effect;
(d) PDI has not received any notification of a release or
threat of a release of any substance regulated under any of the Environmental
Laws ("Hazardous Substance") at any site or location owned or operated by PDI;
and
(e) PDI has not disposed of, transported or caused to be
transported any Hazardous Substance on or to any on-site or off-site location
which location currently is the subject of a federal, state or local enforcement
action or other investigation or for which claims have been asserted against
such party for clean-up costs, remedial work or damages to natural resources.
2.18 Required Consent. Assuming the completion of the Conversion
Transactions, the written consent of the holders of a majority of the shares of
PDI Common described in Section 4.2 are the only consents of the holders of any
class or series of capital stock of PDI necessary to approve this Agreement or
the Merger.
2.19 Corporate Records. The minute books of PDI are accurate and
complete and reflect all resolutions adopted and all other actions authorized or
ratified by the directors and stockholders of PDI.
2.20 Accounting Controls. (a) To PDI's knowledge, neither PDI, nor
any director, officer, agent, employee, consultant or other person associated
with or acting on behalf of PDI, has (i) used, promised to use or authorized the
use of any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, or (ii) made, promised
to make, or authorized the making of any direct or indirect unlawful payments to
government officials or others from corporate funds or established or maintained
any unlawful or unrecorded funds.
(b) To PDI's knowledge, PDI makes and keeps accurate
books and records which in reasonable detail accurately and fairly reflect its
transactions and dispositions of its assets and maintains internal accounting
controls which provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of PDI's financial
statements in accordance with generally accepted accounting principles or any
other criteria applicable to such statements and to maintain accountability for
the assets of PDI, (iii) access to the assets of PDI is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability of the assets of PDI is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
difference.
11
2.21 Brokers and Financial Advisers. All negotiations relating to
this Agreement and the transactions contemplated hereby have been carried on by
PDI in such manner as not to give rise as a result of any action by PDI to any
valid claim against any of the parties hereto for a brokerage commission,
finder's fee or financial advisory fee.
ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF CELESTIAL
-------------------------------------------
Celestial represents and warrants to PDI that at the date of this
Agreement, except as disclosed in the disclosure statement of Celestial
delivered by Celestial to PDI on the date hereof (the "Celestial Disclosure
Statement"):
3.1 Incorporation of Celestial. Celestial is a corporation validly
existing and in good standing under the laws of the State of Nevada, and has all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as now being conducted. Celestial is duly qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction in which its ownership of property or the conduct of its business
makes such qualification necessary and in which the failure to so qualify would
have a material adverse effect upon Celestial's business, prospects, assets,
financial condition or results of operations (a "Celestial Material Adverse
Effect").
3.2 Authorization. Celestial has full corporate power and
authority to execute, deliver and perform this Agreement, the Merger and the
Stock Combination. This Agreement has been duly executed and delivered by
Celestial, and has been duly authorized, by its Board of Directors. Upon the
requisite approval thereof by its stockholders, all corporate action of
Celestial necessary for due authorization of this Agreement, the Merger and the
Stock Combination will have been duly taken. Upon execution and delivery of this
Agreement, it shall be the valid obligation of Celestial, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy or insolvency laws or general equitable principles.
3.3 Non-Contravention. The execution and delivery of this
Agreement do not, and at the Closing, assuming requisite shareholder approval of
the Merger and this Agreement, the performance and the consummation of the
transactions contemplated by this Agreement will not, result in any conflict
with, breach or violation of or default, termination or forfeiture under, any
terms or provisions of the Articles of Incorporation or By-laws of Celestial, or
any statute, rule or regulation, or any judicial or governmental decree, order
or judgment, or any contract, mortgage, indenture, agreement or other instrument
to which Celestial is a party or to which any of its assets is subject.
3.4 Consents. Except for compliance with Federal and state
securities laws, the requisite approvals of the directors and stockholders of
PDI and Celestial, and the filing of Articles of Merger pursuant to Section 1.4,
and any other filings required by the PaBCL, no consent, approval,
authorization, order, registration or qualification of or with any court, any
regulatory authority or other governmental body, or any other person, is
required for the execution, delivery or performance by Celestial of this
Agreement or the Merger.
12
3.5 Capitalization of Celestial. The authorized capital stock of
Celestial consists of (i) 500,000,000 shares of Common Stock, par value $.001
per share, and (ii) 500,000,000 shares of Preferred Stock, par value $.001 per
share. 3,365,720 shares of Common Stock are validly issued and outstanding,
fully paid and nonassessable, none of which shares of Common Stock are issued
and held in the treasury. 258,853 shares of Preferred Stock are validly issued
and outstanding, fully paid and nonassessable. No holders of any securities are
entitled to any preemptive rights or registration rights.
3.6 Stock Options and Conversion Rights. Other than as set forth
in the Celestial Disclosure Statement, Celestial does not have outstanding any
stock or other security, or any option, warrant or other right, which entitles
the holder thereof to purchase or otherwise acquire or convert the same into any
capital stock or other security of Celestial.
3.7 Subsidiaries. Celestial has no subsidiaries and does not own
any interest, directly or indirectly, in any other corporation, partnership,
joint venture, enterprise or entity.
3.8 Financial Statements. The balance sheets of Celestial at June
30, 2000 and 1999, and the statements of income, cash flow, and stockholders'
equity for the years then ended, including the notes thereto and the report
thereon of, Raich Ende Xxxxxx Xxxxxx & Co., independent accountants, and the
unaudited balance sheets of Celestial at December 31, 2000 and 1999, and the
unaudited statements of income, cash flow and stockholder's equity for the six
months then ended, together with the notes thereto, all of which have been
delivered to PDI, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered by such statements and present fairly in all material respects the
financial position of Celestial and the results of operations and changes in
financial position of Celestial as of the dates and for the periods indicated.
3.9 Absence of Adverse Changes. Since December 31, 2000, there has
not been any material adverse change in the business, prospects, assets,
financial condition or results of operations of Celestial (a "Celestial Material
Adverse Change").
3.10 Undisclosed Liabilities. Celestial does not have any
liabilities or obligations of any nature, whether absolute, contingent, accrued
or otherwise, other than (i) obligations or liabilities reflected on its balance
sheet at December 31, 2000, and the notes thereto, (ii) obligations and
liabilities to be performed or satisfied after December 31, 2000, under
contracts and leases to which Celestial is a party and listed in the Celestial
Disclosure Statement and (iii) obligations or liabilities listed in the
Celestial Disclosure Statement.
13
3.11 Title to Properties and Absence of Liens. Celestial has good
title to all material properties and assets, real and personal, reflected in
Celestial's balance sheet as of December 31, 2000, and related notes, (other
than any cash expended since December 31, 2000, in payment of professional
services rendered by Celestial's counsel and independent accountants, or as
disclosed on the Celestial Disclosure Statement), free and clear of all Liens
except (i) Liens for current taxes not yet due and payable, (ii) Liens reflected
in the balance sheet at December 31, 2000 or in the related notes, and (iii)
Liens, if any, as are not material in character, amount or extent and do not
materially detract from the value of the properties subject thereto or affected
thereby.
3.12 Contracts and Leases. Set forth in the Celestial Disclosure
Statement is a list of all contracts, leases and other agreements to which
Celestial is a party or by which it or any of its assets or properties in bound.
Celestial is not in breach of the provisions of any contract, lease or other
agreement referred to in this Section 3.12.
3.13 Litigation. Except as set forth in the Celestial Disclosure
Statement, there is no action, suit or other litigation or proceeding or
governmental investigation pending, or to the knowledge of Celestial threatened,
against Celestial.
3.14 Taxes. Celestial has filed all federal, state and local
income, withholding, franchise, sales and other tax returns required to be filed
by it. All taxes shown on such returns have been paid in full. The tax returns
of Celestial have not been audited by the Internal Revenue Service. No taxing
authority has asserted any tax deficiency against Celestial, and Celestial has
no knowledge of any tax deficiency proposed or threatened to be asserted against
it. There are no agreements, waivers, or other arrangements providing for
extension of time with respect to the assessment or collection of any tax, nor
are there any actions, suits, proceedings, or claims now pending or threatened
by any Federal, state or local authority relating to any taxes.
3.15 ERISA Plans. Celestial has no pension, profit-sharing or other
employee benefit or welfare plan subject to ERISA other than those listed on the
Celestial Disclosure Statement. Celestial has no bonus or other compensation
plan for its officers, directors or employees not subject to ERISA, other than
those listed on the Celestial Disclosure Statement.
3.16 Employees. Celestial has no officers or employees except as
set forth in the Celestial Disclosure Statement. The current compensation of
such persons is disclosed in the Celestial Disclosure Statement.
3.17 Environmental Matters. To Celestial's knowledge:
(a) Celestial has been and is in material compliance with
all applicable federal, state and local law or regulation concerning or relating
to industrial hygiene or the protection of health and/or the environment (the
"Environmental Laws");
(b) There are no conditions on, about, beneath or arising
from any properties owned or leased by Celestial which would give rise to any
liability under any applicable Environmental Law or which would require any
response, removal or remedial action, as such terms are defined in Section 101
of the Comprehensive Environmental, Compensation and Liability Act, 42 U.S.C.
ss.9601 et seq. (1995), as amended, by such party;
14
(c) Celestial has obtained and possesses all permits,
licenses, approvals and other authorizations necessary under any applicable
Environmental Law for the operation of its business except as would not have a
Celestial Material Adverse Effect;
(d) Celestial has not received any notification of a
release or threat of a release of any substance regulated under any of the
Environmental Laws ("Hazardous Substance") at any site or location owned or
operated by Celestial; and
(e) Celestial has not disposed of, transported or caused
to be transported any Hazardous Substance on or to any on-site or off-site
location which location currently is the subject of a federal, state or local
enforcement action or other investigation or for which claims have been asserted
against such party for clean-up costs, remedial work or damages to natural
resources.
3.18 Corporate Records. The minute books of Celestial are accurate
and complete and reflect all resolutions adopted and all other actions
authorized or ratified by the directors and stockholders of Celestial.
3.19 Accounting Controls. (a) To Celestial's knowledge, neither
Celestial, nor any director, officer, agent, employee, consultant or other
person associated with or acting on behalf of Celestial, has (i) used, promised
to use, or authorized the use of any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity,
or (ii) made, promised to make, or authorized the making of any direct or
indirect unlawful payments to government officials or others from corporate
funds or established or maintained any unlawful or unrecorded funds.
(b) To Celestial's knowledge, Celestial makes and keeps
accurate books and records which in reasonable detail accurately and fairly
reflect its transactions and dispositions of its assets and maintains internal
accounting controls which provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of Celestial's
financial statements in accordance with generally accepted accounting principles
or any other criteria applicable to such statements and to maintain
accountability for the assets of Celestial, (iii) access to the assets of
Celestial is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability of the assets of Celestial
is compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any difference.
15
(c) Celestial has not received, in the last four (4)
years, any "management letters" from its certified public accountants regarding
Celestial's accounting practices and procedures or internal financial controls
or suggesting any changes to any thereof.
3.20 Insurance. The Celestial Disclosure Statement sets forth all
policies of insurance for workmen's compensation, fire, theft, business
interruption, property, fire and other casualty, liability, and directors' and
officers' liability insurance owned by Celestial which are now in force. The
amount and extent of coverage on each such policy is sufficient to cover risk of
loss commensurate with Celestial's current business and assets.
3.21 SEC Reports. Except as stated in the Celestial Disclosure
Statement, Celestial has filed on a timely basis (i) all forms, reports,
statements and other documents required to be filed with the SEC, including
without limitation (i) all Annual Reports on Form 10-KSB, (ii) all Quarterly
Reports on Form 10-QSB (iii) all proxy statements relating to meetings of
stockholders (whether annual or special), (iv) all Current Reports on Form 8-K
and (v) all other reports, schedules, registration statements or other documents
(collectively referred to as the "SEC Reports"). The SEC Reports (i) were
prepared in all material respects in accordance with the requirements of
applicable law, including the Securities Act of 1933, as amended (the "1933
Act") or the Securities Exchange Act of 1934, as amended (the "1934 Act") as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such SEC Reports, and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
3.22 Takeover Laws. Celestial has taken all action required to be
taken by it so that this Agreement, and the Merger and the other transactions
contemplated by this Agreement, are exempt from the requirements of the
provisions of Sections 78.378 to 78.3793 of the Nevada GCL pertaining to the
acquisition of a controlling interest in Celestial, the provisions of Sections
78.411 to 78.444 of the Nevada GCL pertaining to business combinations with
interested stockholders, and any other anti-takeover laws and regulations of the
Nevada GCL. Celestial has not adopted any stockholders' rights plan, or any
other anti-takeover device in its Articles of Incorporation, By-laws or
otherwise.
3.23 Required Consent. The written consent of (i) the holders of a
majority of the shares of Celestial Preferred described in Section 5.2; and (ii)
the holders of a majority of the shares of Celestial Common, each voting as a
class, are the only consents of the holders of any class or series of capital
stock of Celestial necessary to approve this Agreement or the Merger.
3.24 Brokers and Financial Advisers. All negotiations relating to
this Agreement and the transactions contemplated hereby have been carried on by
Celestial in such manner as not to give rise as a result of any action by
Celestial to any valid claim against any of the parties hereto for a brokerage
commission, finder's fee or financial advisory fee.
16
3.25 Survival of Guarantees. As set forth in the Celestial
Disclosure Statement, certain potential liabilities of Celestial have been
guaranteed by Xxxx X. Xxxxxx, a shareholder of Celestial (the "Guarantees"). The
Guarantees are legal, valid and binding obligations of Xx. Xxxxxx to Celestial
and shall, at the Effective Time, remain legal, valid and binding obligations of
Xx. Xxxxxx to the Surviving Corporation.
3.26 Interim Financial Information. Celestial has provided to PDI
and its certified public accountants copies of all financial and accounting
records of Celestial for the periods from June 30, 2000 to and including the
date of this Agreement, including without limitation all journals, general
ledgers, statements of accounts and banking records (the "Supplemental
Records"). Celestial hereby represents and warrants that there have been no
transactions effected or liabilities undertaken that are not accounted for in
the Supplemental Records. Nothing has come to the attention of management of
Celestial that would render any of the Supplemental Records inaccurate in any
respect or that would indicate the existence of any unasserted claim or
contingent liability not reflected in the financial statements referred to in
Section 3.8, above, or in the Supplemental Records.
3.27 Qualified Small Business Stock. The Celestial stock received
by the PDI stockholders in the Merger qualifies as "qualified small business
stock" under Section 1202 of the Internal Revenue Code of 1986, as amended.
ARTICLE 4: COVENANTS OF PDI
----------------
4.1 Certain Actions Pending Merger. Except for the completion of
the Conversion Transactions and the Senior Credit Facility, and the exercise or
granting of options under the option plans and programs described in this
Agreement or the PDI Disclosure Statement, prior to the Closing, without the
consent of Celestial, which consent shall not be unreasonably withheld or
delayed, PDI:
(a) will conduct its business in the ordinary and usual
course;
(b) will not dispose of any material properties or assets
except in the ordinary course of business;
(c) shall use its best efforts to preserve intact its
business organization and maintain satisfactory relationships with its clients,
employees, agents and service providers;
(d) will not amend its charter or by-laws;
(e) will not issue, sell or otherwise permit to become
outstanding any additional shares of capital stock other than those shares
reserved for issuance as set forth in Section 2.5 hereof and up to 3,760,000
shares in a proposed private placement of PDI equity securities being
contemplated by it; and
17
(f) will not make, declare or pay any dividends in
respect of its capital stock, or combine or split any shares of any class or
series of its capital stock.
4.2 PDI Stockholders' Consent. PDI will take all action in
accordance with the PaBCL to obtain the approval and consent of its stockholders
regarding the Merger and this Agreement.
4.3 Rule 145 Affiliates. (a) Promptly following the execution of
this Agreement, PDI shall identify in a letter to Celestial all persons who
might, at the Effective Time, be deemed to be an affiliate of PDI within the
meaning of Rule 145 ("Rule 145 Affiliate").
(b) PDI shall use all reasonable efforts to deliver to
Celestial as soon as practicable and in any case prior to the Effective Time, an
agreement signed by each such Rule 145 Affiliate of PDI regarding compliance
with Rule 145, which agreements (the "Affiliate Agreements") shall be in
substantially the form of Exhibit C attached hereto.
(c) The Surviving Corporation shall be entitled to place
legends on the certificates evidencing Common Stock of the Surviving Corporation
to be received by Rule 145 Affiliates pursuant to the terms of this Agreement,
and to issue appropriate stop transfer instructions to the transfer agent for
Common Stock of the Surviving Corporation, consistent with the terms of such
Affiliate Agreements, whether or not such Affiliate Agreements are actually
delivered to the Surviving Corporation.
ARTICLE 5: COVENANTS OF CELESTIAL
----------------------
5.1 Celestial Stockholders' Consent. Celestial will take all
action in accordance with the Nevada GCL to obtain the approval and consent of
its stockholders regarding the Merger and this Agreement.
5.2 Certain Other Covenants by Celestial. Prior to the Closing,
without the consent of PDI, Celestial shall not:
(a) sell, transfer, mortgage, pledge or otherwise dispose
of any of its properties or assets;
(b) enter into or carry on any business, incur any
liability to any party, whether for services to be rendered or otherwise, or
enter into any contracts or agreements;
(c) amend its articles of incorporation or by-laws other
than those amendments contemplated by this Agreement or Amendments requested or
committed to by PDI;
18
(d) issue or sell any stock, other than up to an
aggregate of 100,000 shares of common stock which Celestial may issue or sell to
raise working capital, or grant or otherwise issue options, warrants or rights
to subscribe for, or which are convertible into, its stock;
(e) declare, set aside or pay any dividend or make any
distribution of assets or stock to its stockholders;
(f) split into a greater number or combine into a smaller
number the outstanding shares of any class or series of its stock;
(g) make any investment of a capital nature, whether by
purchasing stock or securities, making contributions to capital, making property
transfers or otherwise, or by the purchase of any property or assets of any
other individual, firm or corporation, or by merger with or acquisition of
substantially all of, the assets of any other person; provided, however, that
Celestial may make loans to, or investments in, PDI.
(h) increase in any manner the compensation or fringe
benefits of any of its officers or directors or employees, or pay or agree to
pay any pension or retirement allowance or enter into or amend any employment
agreement or any incentive compensation, profit sharing, stock purchase, stock
option, savings, consultant, deferred compensation, retirement pension or other
"fringe benefit" plan or arrangement with or for the benefit of any officer,
employee or other person;
(i) permit any insurance policy naming it as a
beneficiary or a loss payee to be cancelled or terminated or any of the coverage
thereunder to lapse;
(j) incur any liabilities or obligations (other than
liabilities and obligations to Celestial's counsel and independent accountants
for professional services); or
(k) fail to timely file all SEC Reports.
5.3 The Guarantees. Celestial shall take any and all actions and
shall execute and deliver any and all documents, and shall use its best efforts
to cause Xxxx X. Xxxxx to take any and all actions and to execute and deliver
any and all documents requested by PDI to ensure that the Surviving Corporation
shall succeed to all the benefits of the Guarantees, as set forth in Section
3.25, above.
5.4 Delivery of Stock. Celestial shall issue and cause to be
delivered to the stockholders of PDI such number of shares of Surviving
Corporation Common Stock as such shareholders are entitled to receive in
connection with the Merger.
19
ARTICLE 6: ADDITIONAL AGREEMENTS OF PDI AND CELESTIAL
------------------------------------------
6.1 Reasonable Best Efforts. PDI hereby covenants to and agrees
with Celestial, and Celestial hereby covenants to and agrees with PDI, that
subject to the terms and conditions of this Agreement, it shall use its
reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Merger as promptly as reasonably practicable and otherwise to enable
consummation of the transactions contemplated hereby, including, without
limitation, obtaining (and cooperating with the other party herein in obtaining)
any consent, authorization, order or approval of, or any exemption by any
regulatory authority and any other third party that is required to be obtained
by Celestial or PDI or any of their respective subsidiaries in connection with
the Merger and the other transactions contemplated by this Agreement.
6.2 Stockholder Approvals. The Board of Directors of each of
Celestial and PDI will recommend to their stockholders that their stockholders
approve this Agreement and the Merger, and each of Celestial and PDI will take
all reasonable lawful action to solicit such approval by its respective
stockholders, provided that each of Celestial and PDI may withdraw, modify or
change in an adverse manner to the other party its recommendations if the Board
of Directors of such party, after having consulted with and based upon the
advice of outside counsel, determines in good faith that the failure to so
withdraw, modify or change its recommendation could constitute a breach of the
fiduciary duties of such party's Board of Directors under applicable law.
6.3 Information Statement.
---------------------
(a) Each of Celestial and PDI agrees to cooperate in the
preparation of an information statement containing the information specified in
Schedule 14C (Rule 14c-101 under the 1934 Act) (the "Information Statement") to
be filed by Celestial with the SEC in connection with the consummation of the
Merger and the issuance of Common Stock of the Surviving Corporation in the
Merger. PDI agrees to furnish to Celestial all information concerning PDI, its
subsidiaries, officers, directors, and stockholders as may be reasonably
requested in connection with the foregoing.
(b) Each of PDI and Celestial agrees, as to itself and
its subsidiaries, that none of the information supplied by it for inclusion or
incorporation by reference in the Information Statement or in any other document
to be filed with the SEC will contain any statement which, at the time and in
the light of the circumstances under which such statement is made, will be false
or misleading with respect to any material fact, or which will omit to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier statement in the
Information Statement or any amendment or supplemental thereto. Celestial agrees
that the Information Statement will comply as to form in all material respects
with the requirements of the 1934 Act and the rules and regulations of the SEC
thereunder.
20
(c) Celestial will advise PDI, promptly after Celestial
receives notice thereof, of the time when the Information Statement has been
filed with the SEC, and will provide to PDI, immediately upon receipt by
Celestial, copies of any request by the SEC for the amendment or supplement of
the Information Statement or for additional information, and any other
communication from the SEC in respect of the Merger or the documents filed in
connection therewith.
6.4 Press Releases. PDI hereby covenants to and agrees with
Celestial, and Celestial hereby covenants to and agrees with PDI, that it will
not, without the prior approval of the other, issue any press release or written
statement for general circulation relating to the transactions contemplated
hereby, except as otherwise required by applicable law.
6.5 Access; Information; Updated Disclosure Statement.
-------------------------------------------------
(a) PDI hereby covenants to and agrees with Celestial,
and Celestial hereby covenants to and agrees with PDI, that upon reasonable
notice, it, shall afford the other party and its officers, employees, counsel,
accountants and other authorized representatives, access, during normal business
hours throughout the period prior to the Effective Time, to all of its
properties, books, contracts, commitments and records and, during such period,
it shall furnish promptly to the other (i) a copy of each material report,
schedule and other document filed by it pursuant to the requirements of federal
or state securities laws, and (ii) all other information concerning the
business, properties and personnel of it as the other may reasonably request.
Neither Celestial nor PDI, nor any of their respective subsidiaries, shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
the attorney-client or similar privilege with respect to such information or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or
agreement entered into prior to the date hereof. The parties will use their
reasonable best efforts to make appropriate substitute disclosure arrangements,
to the extent practicable, in circumstances in which the restrictions of the
preceding sentence apply.
(b) Neither party shall use any information obtained
pursuant to this Section 6.5 for any purpose unrelated to the consummation of
the transactions contemplated by this Agreement and, if this Agreement is
terminated, will hold all information and documents obtained pursuant to this
paragraph in confidence (as provided in Section 6.7) unless and until such time
as such information or documents become publicly available other than by reason
of any action or failure to act by the party required to hold such information
in confidence or as such party is advised by counsel that any such information
or document is required by applicable law to be disclosed.
(c) No investigation by either party of the business and
affairs of the other shall affect or be deemed to modify or waive any
representation, warranty, covenant or agreement in this Agreement, or the
conditions to either party's obligation to consummate the transactions
contemplated by this Agreement.
21
(d) On or prior to the fifteenth day following the date
of this Agreement, PDI and Celestial shall each deliver to the other an updated
PDI Disclosure Statement or Celestial Disclosure Statement, respectively, or a
certificate of the President of PDI or Celestial, as applicable, that no changes
shall be made to any respective PDI Disclosure Statement or Celestial Disclosure
Statement delivered upon execution and delivery of this Agreement.
(e) Nothing in this Section 6.5 or elsewhere in this
Agreement shall prohibit accurate disclosure by either party of information that
is required to be disclosed to its stockholders, whether in any document
required to be filed with the SEC or otherwise required to be publicly disclosed
by applicable law or regulation.
6.6 Acquisition Proposals. Without the prior written consent of
the other, neither Celestial nor PDI shall, and each of them shall cause its
respective subsidiaries and its subsidiaries' officers and directors not to,
solicit or encourage inquiries with respect to, or engage in negotiations
concerning, or provide any confidential information or assistance to, or have
any discussions with, any person relating to, any tender offer or exchange offer
for, or any proposal for the acquisition of a substantial equity interest in, or
a substantial portion of the assets of, such party. Nothing contained in this
Section 6.6 shall prohibit the Board of Directors of Celestial from complying
with Rule 14e-2 promulgated under the 1934 Act with regard to an unsolicited
tender offer or exchange offer.
6.7 Confidentiality. Except as otherwise provided in Section
6.5(b), each of the parties hereto and their respective agents, attorneys and
accountants will maintain the confidentiality of all information provided in
connection herewith which has not been publicly disclosed (other than by any
party in violation of this Agreement) unless and until it is advised by counsel
that any such information or document is required by applicable law to be
disclosed.
6.8 Indemnification. If the Merger is completed, all rights to
indemnification (including advancement of expenses) existing on the Closing Date
in favor of the present or former officers and directors of PDI with respect to
action taken in their capacities as directors or officers of PDI prior to the
Effective Time as provided in the Articles of Incorporation of PDI, the Bylaws
of PDI or any indemnification agreements with PDI, as in effect prior to the
Effective Time, shall survive the Merger and continue in full force and effect
as obligations of the Surviving Corporation and any modifications required to
the Articles of Incorporation or By-Laws of the Surviving Corporation to reflect
such indemnities shall be included in the amended forms of such documents to be
effective at the Effective Time.
22
ARTICLE 7: CONDITIONS TO OBLIGATIONS OF PDI
--------------------------------
The obligations of PDI to effect the transactions contemplated hereby
are, at its option, subject to the satisfaction or waiver of the following
conditions precedent:
7.1 Representations and Warranties. The representations and
warranties of Celestial contained in this Agreement shall be true at and as of
the Closing Date as though such representations and warranties were made at and
as of such time except to the extent affected by the transactions contemplated
hereby.
7.2 Performance of Covenants. Celestial shall have performed or
complied with each of its agreements and covenants required by this Agreement to
be performed or complied with by it prior to or at the Closing.
7.3 Delivery of Closing Certificate. Celestial shall have
delivered to PDI a certificate dated the Closing Date and signed by its
President to the effect set forth in Sections 7.1 and 7.2 above.
7.4 No Litigation. No suit, action, investigation, or legal or
administrative proceeding shall have been brought or shall have been threatened
by any person (other than by Celestial) which questions the validity or legality
of the transactions contemplated hereby.
7.5 Governmental Approvals. All approvals, consents, permits,
licenses or qualifications of or with any governmental body or agency having
jurisdiction required for the consummation of the Merger pursuant to this
Agreement shall have been obtained and be effective, and no such approval,
consent, permit, license or qualification shall impose any condition or
provision or requirement on the Surviving Corporation which was not imposed on
Celestial or PDI prior to the Merger.
7.6 Other Approvals. The consent or approval of all persons (other
than governmental agencies) necessary for the consummation of the Merger
pursuant to this Agreement, shall have been granted, and no such consent or
approval (i) shall have been conditioned upon the modification, cancellation or
termination of any lease, contract, commitment, agreement, franchise, license,
or other right of either Celestial or PDI, or (ii) shall impose on the Surviving
Corporation any condition or provision or requirement not imposed on Celestial
or PDI prior to the Merger.
7.7 Shareholder Approval. The stockholders of Celestial shall have
duly approved the Merger, this Agreement and all other matters related thereto
for which the Nevada GCL require such approval.
7.8 Tax Opinion. Celestial and PDI shall have received from tax
counsel selected by the parties a written opinion, in form and substance
reasonably satisfactory to them, to the effect that the Merger, when effected in
accordance with this Agreement, will qualify as a reorganization under Section
368(a) of the Code, and Celestial and PDI will constitute parties to such
reorganization.
23
7.9 Material Adverse Change. From the date hereof to the Closing
Date, no Celestial Material Adverse Change shall have occurred.
7.10 Information Statement. The Information Statement shall have
been filed with and examined by the SEC and Celestial shall have been informed
by the SEC that it shall have no further comment upon the Information Statement.
7.11 Termination of Employment Agreement. The employment agreement
between Celestial and Xxxxx Xxxxxxxxxxx described in the Celestial Disclosure
Statement shall have been terminated prior to the Effective Time by Celestial
and Xxxxx Xxxxxxxxxxx, at no cost or liability to or of Celestial or the
Surviving Corporation.
7.12 Stock Combination. The Stock Combination and Stock Combination
Articles Amendment shall have been approved and ratified by Celestial's
stockholders and the Stock Combination Articles Amendment shall have been duly
filed with the Secretary of State of the State of Nevada prior to the Effective
Time.
7.13 Satisfaction of Preemptive Rights. Celestial shall have
obtained waivers or otherwise resolved to PDI's satisfaction any claims that
Celestial's stockholders may have under Section 78.265 of the Nevada GCL to
purchase securities of Celestial in connection with prior issuances of
securities made by Celestial.
7.14 Guarantees. PDI shall have received evidence reasonably
satisfactory to PDI and its counsel evidencing the availability to the Surviving
Corporation of the Guarantees.
7.15 Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws in effect for the Surviving Corporation upon the Merger
shall be in a form and substance satisfactory to PDI.
7.16 Satisfactory Due Diligence. PDI and its accountants,
attorneys, and representatives shall have completed to its reasonable
satisfaction a due diligence review of Celestial's business and operations and
PDI shall be satisfied in all respects with the results of such review.
7.17 Other Agreements. The parties shall have entered into such
other arguments as PDI may reasonably request.
24
ARTICLE 8: CONDITIONS TO OBLIGATIONS OF CELESTIAL
--------------------------------------
The obligations of Celestial to effect the transactions contemplated
hereby are, at its option, subject to the satisfaction or waiver of the
following conditions:
8.1 Representations and Warranties. The representations and
warranties of PDI contained in this Agreement shall be true at and as of the
Closing Date as though such representations and warranties were made at and as
of such time except to the extent affected by the transactions contemplated
hereby.
8.2 Performance of Covenants. PDI shall have performed or complied
with each of its agreements and covenants required by this Agreement to be
performed or complied with by it prior to or at the Closing.
8.3 Delivery of Closing Certificate. PDI shall have delivered to
Celestial a certificate dated the Closing Date and signed by its President to
the effect set forth in Sections 8.1 and 8.2 above.
8.4 No Litigation. No suit, action, investigation, or legal or
administrative proceeding shall have been brought or shall have been threatened
by any person (other than PDI) which questions the validity or legality of the
transactions contemplated hereby.
8.5 Governmental Approvals. All approvals, consents, permits,
licenses or qualifications of or with any governmental body or agency having
jurisdiction required for the consummation of the Merger pursuant to this
Agreement shall have been obtained and be effective, and no such approval,
consent, permit, license or qualification shall impose any condition or
provision or requirement on the Surviving Corporation which was not imposed on
PDI or Celestial prior to the Merger.
8.6 Other Approvals. The consent or approval of all persons (other
than governmental agencies) necessary for, the consummation of the Merger
pursuant to this Agreement shall have been granted, and no such consent or
approval (i) shall have been conditioned upon the modification, cancellation or
termination of any lease, contract, commitment, agreement, franchise, license,
or other right of either Celestial or PDI, or (ii) shall impose on the Surviving
Corporation any condition or provision or requirement not imposed on PDI or
Celestial prior to the Merger.
8.7 Shareholder Approval. The stockholders of PDI shall have duly
approved the Merger, this Agreement and all other matters related thereto for
which the PaBCL requires such approval.
8.8 Tax Opinion. Celestial and PDI shall have received from tax
counsel selected by the parties a written opinion, in form and substance
reasonably satisfactory to them, to the effect that the Merger, when effected in
accordance with this Agreement, will qualify as a reorganization under Section
368(a) of the Code, and Celestial and PDI will constitute parties to such
reorganization.
25
8.9 Material Adverse Change. From the date hereof to the Closing
Date, no PDI Material Adverse Change shall have occurred.
8.10 Information Statement. The Information Statement shall have
been filed with and examined by the SEC and Celestial shall have been informed
by the SEC that it shall have no further comment upon the Information Statement.
8.11 Conversion of Notes. Prior to the Effective Time, (i) PDI's
Series A Preferred Shares, Series B Preferred Shares and Series C Preferred
Shares outstanding shall have been fully converted into Common Shares of PDI at
the conversion rates provided for in Section 2.5(b) hereof, and (ii) PDI's Notes
in the aggregate principal amount of $10,000,000 shall have been fully converted
into Common Shares of PDI.
ARTICLE 9: TERMINATION
-----------
9.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the filing of
the Articles of Merger, before or after obtaining the requisite stockholder
approvals, by the mutual consent of Celestial and PDI, by action of their
respective boards of directors.
9.2 Termination by Celestial or PDI. This Agreement may be
terminated and the Merger may be abandoned by action of either the board of
directors of Celestial or the board of directors of PDI if (i) the Merger shall
not have been consummated on or before June 30, 2001, or such later date as may
be mutually agreed to by the parties hereto, provided that the party seeking to
terminate this Agreement is not otherwise in breach in any material respect of
any of its obligations hereunder or (ii) any court of competent jurisdiction
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable.
9.3 Termination by PDI. This Agreement may be terminated and the
Merger may be abandoned by action of the board of directors of PDI if (i)
Celestial shall have failed to comply in any material respect with any of the
covenants or agreements contained in this Agreement to be complied with or
performed by it at or prior to the Effective Time and such failure has not been
cured within 30 days after receipt of notice thereof, (ii) the Merger shall fail
to receive the requisite vote for approval by the stockholders of Celestial, or
(iii) there is a non-occurrence of any of the conditions precedent set forth in
Article 7 hereof.
9.4 Termination by Celestial. This Agreement may be terminated and
the Merger may be abandoned by action of the board of directors of Celestial if
(i) PDI shall have failed to comply in any material respect with any of the
covenants or agreements contained in this Agreement to be complied with or
performed by it at or prior to the Effective Time and such failure has not been
cured within 30 days after receipt of notice thereof, (ii) the Merger shall fail
to receive the requisite vote for approval by the stockholders of PDI, or (iii)
there is a non-occurrence of any of the conditions precedent set forth in
Article 8 hereof.
26
9.5 Effect of Termination. (a) Except as provided in Section 6.5
hereof with respect to information obtained in connection with the transactions
contemplated hereby, and except as provided in paragraph (b) below, in the event
of the termination of this Agreement, and the abandonment of the Merger, this
Agreement shall thereafter become void and have no effect, and no party thereto
shall have any liability to any other party hereto or its stockholders,
directors or officers in respect thereof, and each party shall be responsible
for its own costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby, except that nothing herein shall relieve
any party from liability for any willful breach hereof.
9.6 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto, except as
set forth in Section 9.7. In the event of such an amendment subsequent to the
adoption of the plan by shareholders of either PDI or Celestial, the Board of
Directors of each party shall have the authority to approve the amendment
subject to the provisions of Section 1922 of the PaBCL and Section _____ of the
Nevada GCL.
9.7 Waiver. Any time prior to the Effective Time, any party hereto
may (i) in the case of Celestial, extend the time for the performance of any of
the obligations or other acts of PDI, or waive compliance with any of the
agreements of PDI or with any conditions to its own obligations or (ii) in the
case of PDI, extend the time for the performance of any of the obligations or
other acts of Celestial, or waive compliance with any agreements of Celestial or
with any conditions to its own obligations. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party by a duly authorized
officer.
ARTICLE 10: MISCELLANEOUS
-------------
10.1 Survival. None of the representations and warranties included
or provided for herein shall survive consummation of the Merger.
10.2 Expenses. (a) Except as provided in paragraph (b) below, each
of the parties hereto shall bear the expenses incurred by it in connection
herewith.
(b) If the Merger occurs, the Surviving Corporation shall
pay the fees and expenses of counsel to each of the parties and the fees and
expenses of PDI's accountants.
27
10.3 Notices. Any notice hereunder to a party shall be deemed to be
properly served if in writing and delivered or mailed to, in the case of
Celestial:
Celestial Ventures Corporation
000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxxx, President
with a copy to:
Xxxxxxx Xxxxx Xxxxxxx Xxxxx & Lerach LLP
Xxx Xxxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esquire
and, in the case of PDI:
Polymer Dynamics, Inc.
0000 Xxxxx 00xx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxx, XX 00000-0000
Attention: X.X. Xxxxxxx, President
with a copy to:
Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP
0000 Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esquire
of Pennsylvania, or to such other address as may have been furnished in writing
by such party to the other party to this Agreement, and shall be deemed to have
been given as of the time delivered or mailed registered or certified mail,
postage prepaid, except that notice of termination pursuant hereto shall be
effective only upon receipt.
10.4 Prior Agreements; Modifications; Waivers. This Agreement,
together with the PDI Disclosure Statement and the Celestial Disclosure
Statement, shall supersede any and all prior agreements, documents or other
instruments with respect to the matters covered hereby. No modification of this
Agreement, no waiver of any of the provisions and conditions hereof and no
granting of any consent contemplated hereby shall be valid unless in writing and
signed by duly authorized officers of the parties hereto.
10.5 Governing Law. The terms of this Agreement shall be governed
by, and interpreted and construed in accordance with the provisions of, the laws
of the Commonwealth except to the extent that mandatory provisions of Federal
law or the corporate laws of the state of Nevada govern.
28
10.6 Captions. The captions in this Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
10.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original copy hereof.
10.8 No Third Party Rights. Nothing in this Agreement, express or
implied, is intended to confer upon any other person, other than the persons
indemnified under Section 6.8, any rights or remedies under or by reason of this
Agreement.
IN WITNESS WHEREOF, each of the corporate parties hereto has caused
this Agreement to be signed in its corporate name by its President or one of its
Vice Presidents and its corporate seal to be hereto affixed and to be attested
by its Secretary or one of its Assistant Secretaries, all at the date
first-above written.
Attest: CELESTIAL VENTURES CORPORATION
By: By:
-------------------------------- --------------------------------
Name: Xxxxx Xxxxxxxxxxx Name: Xxxxx Xxxxxxxxxxx
Title: Secretary Title: President
Attest: POLYMER DYNAMICS, INC.
By: By:
-------------------------------- --------------------------------
Name: Xxxxxxx X. Xxxxxx Name: X. X. Xxxxxxx
Title: Secretary Title: President
29
DISCLOSURE STATEMENT
OF POLYMER DYNAMICS, INC.
-------------------------
This document constitutes the PDI Disclosure Statement which is
referred to in the Agreement and Plan of Merger dated April 3, 2001 ( the
"Agreement") between Celestial Ventures Corporation ("Celestial") and Polymer
Dynamics, Inc. ("PDI").
The purpose of this PDI Disclosure Statement is to set forth the
qualifications and exceptions to the representations and warranties of PDI set
forth in Article II of the Agreement.
PDI's disclosure of qualifications and exceptions to its
representations and warranties is as follows:
1. In general, PDI's representations and warranties are qualified
for all of the matters disclosed in PDI's Private Placement Memorandum dated
September 1, 2000, a copy of which has previously been furnished to Celestial
(the "PPM").
2. PDI's representations and warranties in Section 2.9, "Absence
of Adverse Changes," are qualified by the disclosure that PDI has continued to
incur operating losses in its current fiscal year. It is not yet operating at
break-even.
3. PDI's representations and warranties in Section 2.10,
"Undisclosed Liabilities," are qualified by the disclosures in Schedules 2.10
and 2.11 attached hereto, and other liabilities described in the PPM.
4. PDI's representations and warranties in Section 2.11, "Title
to Properties and Absence of Liens," are qualified by the disclosures in
Schedule 2.11 attached hereto.
5. PDI's representations and warranties in Section 2.12,
"Contracts and Leases," are qualified by the disclosures in Schedule 2.12
attached hereto.
6. PDI's representations and warranties in Section 2.13,
"Litigation," are qualified by the disclosures set forth in Schedule 2.10
attached hereto.
7. PDI's representations and warranties in Section 2.14, "Taxes,"
are qualified by the disclosures on Schedule 2.14 attached hereto.
8. PDI's representations and warranties set forth in Section
2.15, "ERISA Plans," are qualified by the information set forth on Schedule 2.15
attached hereto.
9. The Phase I and Phase II environmental reports referred to in
Section 2.17 of the Agreement have been previously delivered to Celestial.
PDI also discloses that if the Conversion Transactions described in
Section 1.9 of the Agreement are not completed prior to the Merger, the consent
of the holders of PDI's outstanding Demand Notes will be required for the
Agreement and the completion of the Merger.
Dated: April 3, 2001 POLYMER DYNAMICS, INC.
By:
--------------------------------
Name: X.X. Xxxxxxx
Title: President
Attest:
----------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Secretary
ACKNOWLEDGED AND ACCEPTED:
CELESTIAL VENTURES CORPORATION
By:
--------------------------------------
Name: Xxxxx Xxxxxxxxxxx
Title: President, Chief Executive and
Financial Officer, Director
Attest:
----------------------------------
Name:
Title: Secretary
1
SCHEDULE 2.10
Undisclosed Liabilities
1. The Company commenced litigation in August 1999 against Bayer
Corporation on several legal theories, including a RICO cause of action for
treble damages. The lawsuit arises from Bayer's alleged fraud and other
deceptive practices, including the sale and delivery of defective machinery and
parts, denying and covering up problems with the machinery and parts, theft of
PDI's confidential information and trade secrets, as well as other improper
conduct. PDI's suit encompasses, but is not limited to, a RICO cause of action,
fraud, negligent misrepresentation, breach of fiduciary duty, misappropriation
of trade secrets, unfair competition, and breach of contract. In response, Bayer
filed a Motion to Dismiss raising technical defenses. On December 29, 1999,
Judge Xxxxxxx entered an order accepting supplemental briefing filed by the
parties, thereby certifying the motion as ready for decision.
On August 14, 2000, Judge Xxxxxxx rendered a decision denying Bayer's motion to
dismiss all claims except Breach of Fiduciary Duty. PDI is now in a position to
continue prosecution of the remaining actions which include: RICO: 18U.S.C.
ss.1962(c), Common Law Fraud, Negligent Misrepresentation, Breach of Contract,
Misappropriation of Confidential Commercial Information an Trade Secrets, Unfair
Competition, and Breach of Disclosure Agreement. The Company is prepared to
incur the costs associated with these actions and vigorously pursue them to
their economic resolution.
2. On April 29, 1999, the Xxxxxx Sports Group, Inc. filed suit against PDI
in the Supreme Court of the State of New York, County of New York for Breach of
Contract, Specific Performance, Quantum Meruit, Account Stated, and Unjust
Enrichment requesting damages in the amount of $196,000 and 100,000 shares of
common stock of the Company. On December 14, 1999 the Supreme Court of the State
of New York dismissed the case from the Commercial Division for failure to meet
their criteria and transferred it to the Supreme Court General Docket. On April
12, 2000, the court granted PDI's motion to dismiss the Xxxxxx Sports Group's
complaint is based upon PDI's alleged "transaction of business" but denied PDI's
motion to dismiss on the grounds that PDI was not "doing business" in New York.
The Plaintiff has abandoned his contract claim based on a "draft agreement" and
the case has become a collection case for an "alleged payable" in the amount of
$58,000. PDI has defended this case vigorously, and intends to do so until
resolution. Any settlement of this claim will not have any material adverse
affect on the Company .
3. The Company is in receipt of a claim by Team Compufyne filed December
3, 1999 in the District Court of the County of Suffolk, State of New York in the
amount of $11,473. Any settlement of this claim will not have any material
adverse affect on the Company.
2. The Company is in receipt of a claim by Summit Machinery for failure to
take receipt of machines ordered through them and pay commissions allegedly due
to Summit. PDI's intention is to thoroughly defend this litigation, and
currently there is a request in front of the plaintiff's attorney to withdraw
the suit in its entirety. Settlement discussions have been held in the range of
$30,000; and while there is no guarantee the suit will be settled for this
amount, any settlement of the claim will not have any material adverse affect on
the Company.
3. The Company is receipt of a suit filed by XxXxxx Xxxxxx Financial
Services, Inc. in the Xxxxxxx County Court of Common Pleas wherein they
accelerated a lease for full payment in the amount $108,669.11. Settlement
discussions are being held and any settlement of the claim will not have any
adverse affect on the Company.
4. The Company is in receipt of a suit filed by Xxxxxxx Plastics, Inc. in
the Court of Common Pleas of Berks County, Pennsylvania for $14,948.00.
Settlement discussions are being held and any settlement of the claim will not
have any adverse affect on the Company.
2
SCHEDULE 2.11
Title to Properties and Absence of Liens
1. PDI issued certain demand notes (the "1998 Notes") that are
secured by certain real property of PDI. These 1998 Notes are as follows:
a) Xxxxx Xxxxxx, in the amount of $1,000,000 dated
October 1, 1998.
b) Accrued Investment, Inc., in the amount of $200,000
dated October 1, 1998.
These 1998 Notes bear interest at the rate of 8% and are secured by a second
position in a security interest in real property as described in an Open End
Second Position Mortgage dated October 1, 1998.
In connection with these 1998 Notes, PDI issued (i) a warrant to Xxxxx Xxxxxx to
purchase 100,000 shares of Common Stock at $3.00 per share and (ii) a warrant to
Accrued Investment, Inc. to purchase 20,000 shares of Common Stock at $3.00 per
share. The warrants were not exercised as of their exercise date of October 1,
2000 and have expired.
2. Polymer Dynamics, Inc. has a mortgage with The Bryn Mawr Trust Company
in the amount of $2,000,000 at 10% Bank's prime rate of interest plus 1
1/2% interest rate, payable in full on March 1, 2003. This mortgage is
collateralized by PDI's facility and property located at 0000 Xxxxx
00xx Xxxxxx, Xxxxxxxxx, XX 00000.
3. The Company entered into an agreement to factor its accounts
receivables with Philadelphia Factors, Inc. on December 1, 1999. As
part of the agreement, Philadelphia Factors has a lien against the
Xxxxxx Grinding machine, accounts receivable, and parts inventory. This
lien is assigned by Philadelphia Factors to Star Financial, LP.,
Wilmington, DE.
4. The following UCC-1 financing statements were filed with PDI, and/or
its subsidiaries, as debtor:
a) A filing in favor of Mitel Corporation for telephone
equipment installed in the facility.
b) A filing in favor of Palacras, Ltd. for a lien
against intellectual property;
c) A filing in favor of Tokai Financial Services for
leased computer equipment.
3
SCHEDULE 2.12
Contracts and Leases
1. Equipment Leases
a) PDI leases certain equipment used in its
manufacturing plant from Palacras, Ltd. The leases are on a month-to-month
basis, with monthly rental fixed at below market prices in the amount of $9,186.
PDI intends to lease this equipment from Palacras indefinitely for as long as
the equipment is useful in its business. Palacras, Ltd. is a wholly owned by
Xxxxxxx X. Xxxxxxx.
b) PDI leases certain equipment from Tokai Financial
Services, Inc. The lease is for 48 months, with monthly rental in the amount of
$8,282.92. This lease is the same as De Xxxx Xxxxxx Financial Services, Inc. as
identified under Section 2.10 Litigation.
c) PDI leases certain equipment from Mitel Capital
Corporation. The lease is for 60 months, with monthly rental in the amount of
$2,568.03.
2. From time to time PDI enters into Employment Agreements with
certain of its employees except its officers.
3. PDI, from time to time, enters into Independent Sales
Agreements with individuals having extensive background in the footwear OEM or
retail markets. All contracts are specifically on a commission basis and capable
of being terminated within sixty days notice. The Company has no responsibility
for any payments to the Independent Sales Representatives except for commissions
earned by them for sales in their respective territories.
4
SCHEDULE 2.14
As of February 28, 2001, PDI is delinquent on certain of its taxes as
follows:
Pennsylvania Department of Revenue $ 473,146.89
Internal Revenue Service $ 3,893,188.66
City of Allentown $ 36,957.12
Real Estate Taxes $ 180,848.96
Total $ 4,584,141.63
--------------
The above amounts are exclusive of penalties and interest. The
following tax liens have been filed against the Company and will require
satisfaction:
------------------------------------------- ---------------- -------------------- ------------------- ----------------
Filed by: Docket Number: Type: Date Filed: Amount
------------------------------------------- ---------------- -------------------- ------------------- ----------------
IRS 00-81 Employment 8/18/00 $688,680
------------------------------------------- ---------------- -------------------- ------------------- ----------------
Commonwealth of Pennsylvania 00-110 Employment 3/23/00 $903,039
------------------------------------------- ---------------- -------------------- ------------------- ----------------
Commonwealth of Pennsylvania 00-U-37 Unemployment 6/30/00 $58,837
------------------------------------------- ---------------- -------------------- ------------------- ----------------
------------------------------------------- ---------------- -------------------- ------------------- ----------------
PDI has received extensions for the filing and has as of yet not filed
its federal tax return for the year ended 6/30/00.
5
SCHEDULE 2.15
ERISA and other Plans
With the exception of Item #1 below, none of the following plans are
subject to ERISA.
1. Effective March 1, 1998, PDI established a 401(k) Plan for all
employees of PDI meeting certain eligibility requirements, which in its initial
form will be "non-contributing" by PDI. This plan is administered by Benefits
Services Corporation, 0000 Xxxxxxxxx Xxxxxx, XX, Xxxxx 000, Xxxxxxx XX
00000-0000. A 401K filing is due on this plan; however it requires receipt of
audited financial statement for year ending 12/31/99.
2. PDI currently offers a health insurance plan to its employees.
PDI currently pays the premiums of these plans for all of its employees, and
when negotiated, also pays for family coverage. If family coverage has not been
a part of the hiring negotiations, the employee is given the option to provide
for family coverage through a payroll deduction program.
3. PDI has implemented, and pays for, a life insurance plan for
all of its employees at two times their annual wage.
4. PDI has negotiated the rates of a short-term disability
program for hourly workers and a long-term disability program for salaried
workers. These programs are offered to employees, solely at their expense,
through a payroll deduction program. PDI does not contribute to this expense.
5. PDI offers a group dental insurance program to all of its
employees through a payroll deduction program. PDI does not contribute to this
expense.
6. PDI's Board of Directors authorized and approved the
establishment of the 1997 Stock Option Plan for officers, directors, and key
employees. Under the program, 3,500,000 shares of Common Stock have been
reserved for future issuance at an exercise price of $0.10 per share. In March
2001, PDI's Board of Directors authorized and approved the establishment of the
2001 Stock Option Plan for officers, directors, and key employees. Under this
program, 2,500,000 shares of Common Stock have been reserved for future issuance
at an exercise price of $0.25 per share. Both of the Plan's administration are
by the Board of Directors of the Company.
7. Although PDI owns no vehicles, it does reimburse payments for
ownership of vehicles at varying amounts to Xxxxxxx X. Xxxxxxx, Xxxxx Xxxxxxx,
Xxxxx X. Xxxxxxx, and Xxxxxxx X. Xxxxxx. In addition vehicle reimbursement
plans, which range from $400 to $650 per month, are paid to approximately 10
other employees who are in management, sales and/or maintenance positions within
PDI.
6
DISCLOSURE STATEMENT OF
CELESTIAL VENTURES CORPORATION
This document constitutes the Celestial Disclosure Statement which is
referred to in the Agreement and Plan of Merger dated April 3, 2001 (the "Merger
Agreement") between Celestial Ventures Corporation ("Celestial") and Polymer
Dynamics, Inc. ("PDI").
The purpose of this Disclosure Statement is to set forth the
qualifications and exceptions to the representations and warranties of the
Celestial as set forth in Article III of the Merger Agreement. Each of the
following schedules relates to the corresponding numbered section of Article III
of the Merger Agreement.
Schedule 3.6 Stock Options and Conversion Rights
None.
Schedule 3.7 Subsidiaries
Celestial owns 1,488,889 shares of common stock of PDI.
Schedule 3.10 Undisclosed Liabilities
See disclosures in Schedule 3.13 below.
Schedule 3.11 Title to Properties and Absence of Liens
Since December 31, 2000, Celestial has not had any cash expenditures
other than in payment of professional services rendered by Celestial's counsel
and independent accountants.
Schedule 3.12 Contracts and Leases
1. Assumption Agreement dated June 20, 1997 between Xxxx Xxxxxx and
Celestial for the R. M. Engineering note in the principal amount of
$170,000 and the Dynamic subordinated note in the principal amount of
$300,000.
2. Celestial maintains its corporate headquarters at 000 X Xxxxxxxx
Xxxxxx, Xxxxx 000, Xxxxx Xxxxxx Xxxxx, Xxx Xxxxxx, 00000. This facility
is currently leased by the holding company of The Remarkable Group,
Inc., which expires on December 31, 2004 and provides for an option to
renew for one five-year period. Although there is no formal sublease
agreement between Celestial and Remarkable, Celestial has agreed to
reimburse Remarkable for any use of the space by Celestial as well as
for the use of Remarkable's personnel.
Schedule 3.13 Litigation
1. W. A. Xxxxxxx, et al., vs. Celestial Ventures Corp., et al., No.
98-2948; in the 334th Judicial District of Xxxxxx County, Texas.
This matter arises out of the sale of X. X. Xxxxxx Company to Celestial
Ventures Corp. and Central Valve Company. The allegations involved an assertion
that the assets of X. X. Xxxxxx Company were misrepresented by X. X. Xxxxxxxx
(former President of Celestial). There is a note that plaintiff believed
obligated Celestial Ventures Corp. to pay between $400,000 and $500,000, based
on these misrepresentations. Celestial vigorously disputed this assertion. The
plaintiff, Xx. Xxxxxxx, passed away and the case is inactive.
2. Xxxxxxxx, I. D. vs. Celestial Ventures Corp., X. X. Xxxxxxxx.,
Individually, and Xxxxxxx Xxxxxxx, Individually; In the County Court at
law Number Four (4) of Xxxxxx Xxxxxx, Xxxxx, Xx. 000000.
Celestial has been named in the matter which we believe involves the
same business dealings and operative facts involving the sale of X. X. Xxxxxx
Co. described above in the Xxxxxxx matter, but involving smaller dollar amounts.
According to local counsel, Celestial has not yet been properly served in this
matter.
3. Xxxxx Pine Sales, Inc. vs. X. X. Xxxxxx Co. and Celestial Ventures
Corp., In the Judicial District of Xxxxxx County, Texas, No. 643629.
Celestial has been named in the matter, which we believe involves
similar allegations as the Xxxxxxx matter described above, but involving smaller
dollar amounts. According to local counsel, Celestial has not yet been properly
served in this matter.
Schedule 3.15 ERISA Plans
None.
Schedule 3.16 Employees
Xxxxx Xxxxxxxxxxx, President, Chief Executive Officer and Chief
Financial Officer of Celestial, is Celestial's sole employee.
Xx. Xxxxxxxxxxx entered into a five-year employment agreement dated
March 1, 1996 with Celestial to act as President and Chief Executive Officer;
which provided for an initial annual base salary of $140,000. Xx. Xxxxxxxxxxx
has forgone large portions of his compensation and other benefits from Celestial
during fiscal years 2000, 1999, 1998 and 1997 in order to assist Celestial in
meeting its cash flow needs and to support its capital expenditures. However,
during fiscal 1999 and 1998, he received $30,000 and $71,669 respectively, in
salary. In addition, for the year ended June 30, 1999, Celestial issued 100,000
shares of common stock to Xx. Xxxxxxxxxxx for director's fees.
Schedule 3.20 Insurance
None.
Schedule 3.21 SEC Reports
Since June 30, 1998, Celestial has filed the following reports with the
Securities and Exchange Commission, each of which was not timely filed, on the
dates listed:
Form Type Form Description Date Filed
--------- ---------------- ----------
10-QSB Quarterly Report for the period ended December 31, 2000. 02/28/01
10-QSB Quarterly Report for the period ended September 30, 2000. 02/13/01
10-KSB Annual Report for the period ended June 30, 2000. 11/16/00
10-QSB Quarterly Report for the period ended March 31, 2000. 06/06/00
10-QSB Quarterly Report for the period ended December 31, 1999. 03/10/00
10-QSB Quarterly Report for the period ended September 30, 1999. 03/10/00
10-KSB Annual Report for the period ended June 30, 1999. 03/10/00
10-QSB Quarterly Report for the period ended March 31, 1999. 09/27/99
10-QSB Quarterly Report for the period ended December 31, 1998. 09/27/99
10-QSB Quarterly Report for the period ended September 30, 1998. 09/27/99
10-KSB Annual Report for the period ended June 30, 1998. 05/07/99
Schedule 3.25 Survival of Guarantees
1. Assumption Agreement dated June 20, 1997 between Xxxx Xxxxxx and
Celestial for the R. M. Engineering note in the principal amount of
$170,000 and the Dynamic subordinated note in the principal amount of
$300,000.
2. Indemnification Agreement dated April 2, 2001 between Xxxx Xxxxxx and
Celestial for the matters disclosed in Schedule 3.13 herein.
Dated: April 3, 2001
CELESTIAL VENTURES CORPORATION
By:
-------------------------------------
Name: Xxxxx Xxxxxxxxxxx
Title: President, Chief Executive and
Financial Officer, Director
ACKNOWLEDGED AND ACCEPTED:
POLYMER DYNAMICS, INC.
By:
-------------------------------------
Name: X.X. Xxxxxxx
