AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 30, 2004
BY AND AMONG
GVI SECURITY SOLUTIONS, INC.,
RAPOR ACQUISITION CORP.,
and
RAPOR, INC.
TABLE OF CONTENTS
PAGE
----
1. CERTAIN DEFINITIONS....................................................1
1.1 Defined Terms.................................................1
1.2 References to Dollars.........................................6
2. THE MERGER.............................................................6
2.1 The Merger....................................................6
2.2 Consummation of the Merger and Effective Time.................6
2.3 Conversion or Cancellation of Shares..........................6
2.4 Merger Consideration..........................................7
2.5 Certificate of Incorporation and By laws......................7
2.6 Directors and Officers........................................7
3. THE CLOSING............................................................7
3.1 Closing.......................................................7
3.2 Issuance of Purchaser Shares..................................8
3.3 Exchange of Certificates......................................8
4. REPRESENTATIONS AND WARRANTIES OF Rapor................................8
4.1 Organization and Good Standing................................8
4.2 Capitalization of Rapor; Title to the Rapor Shares............9
4.3 Authority Relative to Agreement..............................10
4.4 Absence of Conflict..........................................10
4.5 Consents and Approvals; Effect of Change in Control..........10
4.6 Financial Statements.........................................11
4.7 Title to Property; Sufficiency; Encumbrances.................11
4.8 Leased Property..............................................12
4.9 Intellectual Property Rights.................................12
4.10 Litigation...................................................13
4.11 Tax Matters..................................................13
4.12 Absence of Certain Changes or Events.........................15
4.13 Employee Benefits; Executive Officers; Labor.................17
4.14 Insurance; Claims............................................17
4.15 Contracts and Commitments....................................17
4.16 Status of Agreements.........................................18
4.17 Compliance with Law..........................................19
4.18 Transactions with Related Parties............................20
4.19 Bank Accounts................................................20
4.20 No Guaranties................................................20
4.21 Records......................................................20
4.22 No Brokers or Finders........................................20
4.23 Investment Representations...................................20
4.24 Tax Reporting................................................21
4.25 Disclosure...................................................21
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PURCHASER SUBSIDIARY..21
5.1 Organization and Good Standing...............................21
5.2 Capitalization of Purchaser..................................21
5.3 Authority Relative to Agreement..............................22
5.4 Absence of Conflict..........................................22
5.5 No Brokers or Finders........................................22
5.6 SEC Documents: Financial Statements..........................23
5.16 No Brokers or Finders........................................23
5.17 Tax Reporting................................................23
5.18 Purchaser Subsidiary's Operations............................23
5.19 Disclosure...................................................23
6. CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND PURCHASER SUBSIDIARY...24
6.1 Legal Opinion................................................24
6.2 No Injunction................................................24
6.3 Representations, Warranties and Agreements...................24
6.4 Approvals....................................................24
6.5 No Material Adverse Effect...................................24
6.6 Investment Representations Certificate.......................24
6.7 Resignations.................................................24
6.8 Proceedings Satisfactory.....................................25
6.9 Corporate Approval...........................................25
6.10 Secretary of State Certificates..............................25
6.11 Secretary's Certificate of Rapor.............................25
6.12 Termination of CDA Obligations...............................25
6.13 Rapor Convertible Securities ................................26
6.14 Limitation of Liabilities ...................................26
6.15 Voting Agreement ............................................26
7. CONDITIONS TO THE OBLIGATIONS OF RAPOR................................25
7.1 Legal Opinion................................................26
7.2 No Injunction................................................26
7.3 Representations, Warranties and Agreements...................26
7.4 Approvals....................................................26
7.5 Proceedings Satisfactory ....................................26
7.6 Corporate Approval...........................................26
7.7 Secretary of State Certificates..............................26
7.8 Secretary's Certificate......................................26
7.9 Registrations Rights.........................................26
ii
8. FURTHER AGREEMENTS OF THE PARTIES.....................................27
8.1 Expenses.....................................................27
8.2 Access Prior to the Closing..................................27
8.3 Publicity....................................................28
8.4 Conduct of Business of Rapor.................................28
8.5 Further Assurances...........................................29
8.6 Amending Schedules...........................................29
8.7 Termination of CDA Obligations...............................29
8.8 Consents: Regulatory Approval...............................29
8.9 Conversions of Rapor Securities..............................29
10. TERMINATION...........................................................29
10.1 Termination Procedures.......................................29
10.2 Effect of Termination........................................30
11. MISCELLANEOUS.........................................................30
11.1 Entire Agreement.............................................30
11.2 Governing Law................................................30
11.3 Headings.....................................................30
11.4 Notices......................................................30
11.5 Binding Effect; Assignment...................................31
11.6 Counterparts.................................................31
11.7 Amendment and Waiver.........................................31
11.8 Dispute Resolution...........................................31
EXHIBITS
Exhibit A.........Investment Representation Letter
Exhibit B.........Registration Rights Agreement
Exhibit C.........Form of Purchaser Warrant
Exhibit D.........Voting Agreement
iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of June 30, 2004,
by and among GVI Security Solutions, Inc., a Delaware corporation ("Purchaser"),
Rapor Acquisition Corp., a Florida corporation and a wholly-owned subsidiary of
Purchaser ("Purchaser Subsidiary") and Rapor, Inc., a Florida corporation
("Rapor").
W I T N E S S E T H:
WHEREAS, the Board of Directors of each of Purchaser, Purchaser Subsidiary
and Rapor has determined that it is in the best interests of each such company
and its respective stockholders for Purchaser Subsidiary to merge with and into
Rapor upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of each of Purchaser and Purchaser
Subsidiary and the stockholder of Purchaser Subsidiary have adopted resolutions
approving this Agreement and the transactions contemplated hereby in accordance
with the Delaware General Corporation Law and Section 607.1101 of the Florida
Business Corporation Act (the "FBCA"), respectively;
WHEREAS, the Board of Directors and the stockholders of Rapor have adopted
resolutions approving this Agreement and the transactions contemplated hereby
pursuant to Section 607.1101 of the FBCA; and
WHEREAS, the Parties hereto intend that the merger contemplated herein
shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code of 1986, as amended (the "Code"), by reason of Section
368(a)(2)(E) of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto do hereby agree as follows:
1. CERTAIN DEFINITIONS.
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings specified or referred to below (terms defined in the singular
to have the correlative meaning in the plural and vice versa):
"Affiliate" of any Person shall mean any Person which, directly or
indirectly, controls or is controlled by that Person, or is under common control
with that Person. For the purposes of this definition, "control" (including,
with correlative meaning, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such person, whether through the ownership of voting securities
or by contract or otherwise.
"Agreement" shall have the meaning set forth in the recitals.
"Approvals" shall have the meaning set forth in Section 4.5.
"Articles of Merger" shall have the meaning set forth in Section
2.2.
"Assets" shall have the meaning set forth in Section 4.7(b).
"Business Day" shall mean any day that is not a Saturday or a Sunday
or a day on which banks located in New York City are authorized or required to
be closed.
"CDA" shall mean the Connecticut Development Authority.
"CDA Loan" shall mean that certain loan from the CDA to Rapor, in
the original principal amount of $750,000, pursuant to that certain Loan and
Stock Purchase Agreement, dated as of February 19, 2002, between Rapor and the
CDA.
"CDA Obligations" shall mean all obligations of Rapor to the CDA
under the CDA Loan and otherwise in connection with that certain Loan and Stock
Purchase Agreement, dated as of February 19, 2002, between Rapor and the CDA.
"Closing" shall have the meaning set forth in Section 3.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended. All
citations to the Code or to the regulations promulgated thereunder shall include
any amendments or any substitute or successor provisions thereto. All references
to the Code or to the regulations promulgated thereunder in this Agreement shall
be deemed to include a reference to any comparable provisions of state, local or
foreign income tax law, without prejudice to the construction of references to
the Code or to the regulations promulgated thereunder in any other section
hereof.
"Contemplated Transactions" shall mean the merger of Purchaser
Subsidiary with and into Rapor and the execution, delivery and performance of
and compliance with this Agreement and all other agreements to be executed and
delivered pursuant to this Agreement.
"Contract" shall have the meaning set forth in Section 4.15.
"Effective Time" shall mean the date and time of consummation of the
Merger, as evidenced by the filing of the Articles of Merger with the Secretary
of State of the State of Florida.
"Encumbrance" shall mean any security interest, pledge, mortgage,
lien, charge, encumbrance, license, easement, right-of-way, adverse claim or
restriction of any kind, including, but not limited to, any restriction on the
use, voting, transfer, receipt of income or other exercise of any attributes of
ownership.
"Environmental Laws" shall mean any Law, now or hereafter in effect
and as amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, health, safety or Hazardous Materials, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended through the date hereof; the Resource
Conservation and Recovery Act, 42 U.S.C.ss.ss.6901 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C.ss.ss.6901 et seq.; the Clean Water Act,
33 U.S.C.ss.ss.1251 et seq.; the Toxic Substances Control Act, 15
U.S.C.ss.ss.2601 et seq.; the Clean Air Act, 42 U.S.C.ss.ss.7401 et seq.; the
Safe Drinking Water Act, 42 U.S.C.ss.ss.300f et seq.; the Atomic Energy Act, 42
U.S.C.ss.ss.2011 et seq.; the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C.ss.ss.136 et seq.; and the Federal Food, Drug and Cosmetic Act, 21
X.X.X.xx.xx. 301 et seq.
2
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations and publications thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean, with respect to the shares of
Purchaser Common Stock to be delivered to the CDA on the Closing Date pursuant
to Section 3.1(b)(4), for each such share, the average over the 10 trading days
preceding the date of this Agreement of the average of the closing bid and asked
prices for each such day, as reported by the NASD OTC Bulletin Board or Pink
Sheets LLC, as applicable.
"FBCA" shall have the meaning set forth in the recitals.
"Financial Statements" shall have the meaning set forth in Section
4.6.
"GAAP" shall mean generally accepted accounting principles in the
United States.
"Governmental Body" shall mean any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal or judicial or arbitral
body or any quasi-governmental or private body exercising any regulatory or
taxing authority thereunder.
"Hazardous Materials" shall mean (a) petroleum and petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain polychlorinated biphenyls, and radon gas, (b) any other chemicals,
materials or substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," "contaminants" or "pollutants", or words of
similar import, under any applicable Environmental Law, and (c) any other
chemical, material or substances exposure to which is regulated by any
Governmental Body.
3
"Intellectual Property" shall mean any and all United States and
foreign: (a) inventions, whether or not patentable, whether or not reduced to
practice, and whether or not yet made the subject of a pending patent
application or applications, (b) ideas and conceptions of potentially patentable
subject matter, including, without limitation, any patent disclosures, whether
or not reduced to practice and whether or not yet made the subject of a pending
patent application or applications, (c) national (including, but not limited to
the United States) and multinational statutory invention registrations, patents
(including but not limited to design patents), patent registrations and patent
applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights therein
provided by international treaties or conventions and all improvements to the
inventions disclosed in each such registration, patent or application, (d)
trademarks, service marks, trade dress, logos, trade names and corporate names,
whether or not registered and regardless of where used, including but not
limited to all common law rights, and registrations and applications for
registration thereof, including, but not limited to, all marks registered in the
United States Patent and Trademark office, the Trademark Offices of the States
and Territories of the United States of America, and the Trademark Offices of
other nations throughout the world, and all rights therein provided by
international treaties or conventions, (e) copyrights (including but not limited
to copyrights on designs) (registered or otherwise) and registrations and
applications for registration thereof, and all rights therein provided by any
national law, international treaties or conventions, (f) computer software,
including, without limitation, source code, operating systems and
specifications, data, data bases, files, documentation and other materials
related thereto, data and documentation, (g) trade secrets and confidential,
technical and business information (including but not limited to ideas,
formulas, compositions, inventions, and conceptions of inventions whether
patentable or unpatentable and whether or not reduced to practice), (h) whether
or not confidential, technology (including know-how and show-how), manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, (i) any right arising under any law providing protection to
industrial or other designs, (j) copies and tangible embodiments of all the
foregoing, in whatever form or medium, (k) all rights to obtain and rights to
apply for patents, and to register trademarks and copyrights, and (l) all rights
to xxx or recover and retain damages and costs and attorneys fees for present
and past infringement of any of the foregoing.
"Laws" shall have the meaning set forth in Section 4.17(a).
"Leases" shall have the meaning set forth in Section 4.8
"Licenses" shall have the meaning set forth in Section 4.17(a).
"Material Adverse Effect" shall mean any act, occurrence, fact,
event, omission or circumstance which in the reasonable judgment of an
experienced, prudent business person would (a) reduce the value of the business
of Rapor, or (b) result in a decision not to consummate the Contemplated
Transactions on the terms and conditions set forth in this Agreement.
"Merger" shall mean the merger of Purchaser Subsidiary with and into
Rapor, as contemplated by this Agreement.
"Merger Consideration" shall have the meaning set forth in Section
2.4.
"Party" shall mean any of Purchaser, Purchaser Subsidiary and Rapor.
"Permitted Encumbrances" shall have the meaning set forth in Section
4.7(b).
4
"Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, trust, association, unincorporated
organization, other entity or Governmental Body.
"Plans" shall have the meaning set forth in Section 4.13(a).
"Purchaser" shall mean GVI Security Solutions, Inc., a Delaware
corporation.
"Purchaser Common Stock" shall mean the Common Stock, par value
$.001 per share, of Purchaser.
"Purchaser Financial Statements" shall have the meaning set forth in
Section 5.6.
"Purchaser SEC Documents" shall have the meaning set forth in
Section 5.6.
"Purchaser Shares" shall have the meaning set forth in Section 2.4.
"Purchaser Subsidiary" shall mean Rapor Acquisition Corp., a Florida
corporation.
"Purchaser Warrants" shall have the meaning set forth in Section
2.4.
"Rapor" shall mean Rapor, Inc., a Florida corporation.
"Rapor Convertible Securities" shall have the meaning set forth in
Section 4.2(b).
"Rapor Intellectual Property" shall have the meaning set forth in
Section 4.9.
"Rapor Preferred Stock" shall mean the Series A Preferred Stock,
$.001 par value per share, of Rapor. "Rapor Shares" shall have the meaning set
forth in Section 2.3.1.
"Recent Balance Sheet" shall have the meaning set forth in Section
4.6(a).
"SEC" means the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stockholders" shall mean the stockholders of Rapor immediately
prior to the Effective Time.
"Subsidiary" shall mean with respect to any specified Person, any
other Person (a) whose board of directors or similar governing body, or a
majority thereof, may presently be directly or indirectly elected or appointed
by such specified Person, (b) whose management decisions and corporate actions
are directly or indirectly subject to the present control of such specified
Person, or (c) whose voting securities or equity securities are more than fifty
percent (50%) owned, directly or indirectly, by such specified Person.
5
"Surviving Corporation" shall have the meaning set forth in Section
2.1.
"Tax Affiliates" means Rapor or the affiliated combined or unitary
group of which Rapor is or was a member, and any individual member thereof.
"Taxes" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross
receipts, capital, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation, property
and estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to
tax or additional amounts imposed by any Governmental Body and shall include any
transferee liability in respect of Taxes.
"Tax Returns" means any federal, state, local or foreign return,
report, information return or other document (including any related or
supporting information) filed or required to be filed with any Governmental Body
in connection with the determination, assessment or collection of any Taxes or
the administration of any laws, regulations or administrative requirements
relating to any Taxes.
"Third Party" shall mean a Person who or which is neither a Party
nor an Affiliate of a Party.
1.2 References to Dollars. References to dollars or "$" in this Agreement
shall mean United States dollars.
2. THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions hereof, and
in accordance with the provisions of the FBCA, Purchaser Subsidiary shall be
merged with and into Rapor as soon as practicable following the satisfaction or
waiver of the conditions set forth in Articles 6 and 7 hereof. Following the
Merger, Rapor shall continue as the surviving corporation (the "Surviving
Corporation") under its current name and shall continue its existence under the
laws of the State of Florida and the separate existence of Purchaser Subsidiary
shall thereupon cease. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, by virtue of the Merger and without
further act or deed, all properties, rights, privileges, powers and franchises
of Rapor and Purchaser Subsidiary shall vest in the Surviving Corporation, and
all debts, liabilities, obligations and duties of Rapor and Purchaser Subsidiary
shall become the debts, liabilities, obligations and duties of the Surviving
Corporation.
2.2 Consummation of the Merger and Effective Time. The Merger shall be
effected by the filing of articles of merger with the Secretary of State of the
State of Florida (the "Articles of Merger"), pursuant to Section 607.1105 of the
FBCA. The Parties hereto shall take all such other and further actions as may be
required by Law to make the Merger effective.
2.3 Conversion or Cancellation of Shares. The manner of converting or
canceling shares of Rapor or Purchaser Subsidiary in the Merger shall be as
follows. At the Effective Time,
6
2.3.1 Each share of Rapor's common stock, $.001 par value (the
"Rapor Shares"), issued and outstanding immediately prior to the Effective Time,
other than the Rapor Shares held in the treasury of Rapor shall, by virtue of
the Merger and without any action on the part of the holders thereof, be
converted into the right to receive the Merger Consideration. All Rapor Shares
by virtue of the Merger and without any action on the part of the holders
thereof, shall no longer be outstanding and shall be canceled and retired and
shall cease to exist. The holders of certificates representing Rapor Shares
shall thereafter cease to have any rights with respect to such Rapor Shares,
except the right to receive the Merger Consideration upon the surrender of such
certificates.
2.3.2 Each Rapor Share issued and held in Rapor's treasury shall
cease to be outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
2.3.3 Each share of Purchaser Subsidiary's common stock, par value
$.001 per share, 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, be converted into one fully paid and non-assessable share of the
Surviving Corporation's common stock, par value $.001 per share.
2.4 Merger Consideration. Subject to Section 3.2.1, the "Merger
Consideration" shall mean for each Rapor Share (i) that number of shares of
Purchaser Common Stock equal to the quotient obtained by dividing (x) 2,707,851,
by (y) the aggregate number of Rapor Shares, and (ii) a five-year warrant to
purchase that number of shares of Purchaser Common Stock equal to the quotient
obtained by dividing (x) 1,353,925, by (y) the aggregate number of Rapor Shares,
at an exercise price of $3.04 per share, pursuant to a Warrant in the form of
Exhibit C. The shares of the Purchaser Common Stock which constitute the Merger
Consideration are hereinafter referred to as the "Purchaser Shares" and the
warrants which constitute the Merger Consideration are hereinafter referred to
as the "Purchaser Warrants."
2.5 Certificate of Incorporation and By laws. The Certificate of
Incorporation and the Bylaws of Rapor shall be and remain the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
2.6 Directors and Officers. At the Effective Time, the directors and
officers of the Surviving Corporation shall be as set forth on Schedule 2.6.
3. THE CLOSING.
3.1 Closing. (a) Unless this Agreement shall have been terminated pursuant
to Section 10, a closing of the Merger (the "Closing") will be held at the
offices of Kronish Xxxx Xxxxxx & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, on the date on which the conditions set forth in Sections
6 and 7 shall be satisfied or duly waived (or such other place and date as
Purchaser and Rapor may agree in writing).
7
(b) At the Closing:
(1) Rapor shall deliver to Purchaser or Purchaser Subsidiary,
as applicable, all documents contemplated by Article 6, to the
extent not theretofore delivered.
(2) Purchaser or Purchaser Subsidiary, as applicable, shall
deliver to Rapor all documents contemplated by Article 7, to the
extent not theretofore delivered.
(3) Purchaser shall, subject to Section 3.2.1 below, deliver
to the Stockholders the Purchaser Warrants and certificates
representing the Purchaser Shares.
(4) Purchaser shall (i) cause to be paid to the CDA cash in
the amount of $183,764.00, and (ii) deliver to the CDA a certificate
representing that number of shares of Purchaser Common Stock
(rounded to the nearest whole number) having an aggregate Fair
Market Value of $551,291.00.
3.2 Issuance of Purchaser Shares and Warrants.
3.2.1 At the Effective Time or as soon as practicable thereafter,
upon surrender by the Stockholders of certificates evidencing the Rapor Shares,
Purchaser shall issue to each Stockholder (i) certificates registered in the
name of such Stockholder and bearing the legends set forth in Section 4.23(d),
representing the number of Purchaser Shares, rounded to the nearest whole
number, to which such Stockholder is entitled pursuant to Section 2.4(i), and
(ii) a Purchaser Warrant exercisable for that number of shares of Purchaser
Common Stock, rounded to the nearest whole number, to which such Stockholder is
entitled pursuant to Section 2.4(ii), and the certificates previously evidencing
the Rapor Shares shall forthwith be cancelled.
3.2.2 Prior to the Effective Time, Purchaser shall have the right to
establish reasonable and/or customary rules, not inconsistent with the terms of
this Agreement, for the issuance and delivery of certificates for the Purchaser
Shares and Purchaser Warrants into which the Rapor Shares are converted in the
Merger.
3.3 Exchange of Certificates. If any Purchaser Warrant or stock
certificate representing Purchaser Shares is to be issued in a name other than
that in which the stock certificate (previously representing Rapor Shares)
surrendered is registered, it shall be a condition of exchange that the stock
certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such exchange shall pay any
transfer or other taxes required by reason of the exchange with a Person other
than the registered holder of the stock certificates surrendered or establish to
the reasonable satisfaction of Purchaser that such tax has been paid or is not
applicable.
4. REPRESENTATIONS AND WARRANTIES OF Rapor.
Rapor represents and warrants to Purchaser and Purchaser Subsidiary
as follows:
4.1 Organization and Good Standing.
8
(a) Rapor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida. Rapor (i) has all
requisite corporate power to own, operate and lease its properties and carry on
its business as the same is now being conducted and (ii) is duly qualified and
in good standing as a foreign corporation under the laws of each jurisdiction
where the properties owned, leased or operated, or the business conducted by it,
require such qualification. Schedule 4.1 sets forth the jurisdictions in which
Rapor is authorized to do business.
(b) Complete and correct copies of the certificate of incorporation
and bylaws of Rapor as currently in effect have been delivered to Purchaser.
Rapor has no Subsidiaries nor does it own any equity interest in, or control
directly or indirectly, any other entity. Rapor is not a party to any joint
venture or partnership arrangement. Rapor has not assumed by merger, contract,
assignment or assumption any liabilities of any other Person.
4.2 Capitalization of Rapor; Title to the Rapor Shares.
(a) The authorized capital stock of Rapor consists of 20,000,000
shares of common stock, $0.001 par value, of which 125,115.17 shares are issued
and outstanding, and 1,000,000 shares Rapor Preferred Stock, of which 22,222.22
shares are issued and outstanding. All of the Rapor Shares have been duly
authorized and validly issued and are fully paid and nonassessable, free of any
Encumbrances. Schedule 4.2(a) sets forth (i) the name and address of each Person
owning shares of capital stock of Rapor and (ii) the certificate number of each
certificate evidencing shares of capital stock issued by Rapor, the number of
shares evidenced by each such certificate, the date of issuance thereof and, in
the case of cancellation, the date of cancellation.
(b) Except as forth on Schedule 4.2(b), there are no outstanding
subscriptions, options, rights, warrants, convertible securities, preemptive
rights or other agreements (other than this Agreement) or calls, demands or
commitments of any kind (collectively, Rapor Convertible Securities") relating
to the issuance, sale or transfer of any capital stock or other equity
securities of Rapor, whether directly or upon the exercise or conversion of
other securities. Schedule 4.2(b) sets forth a true and complete list of the
prices at which outstanding Rapor Convertible Securities may be exercised or
converted, as applicable, the number and class of Rapor Convertible Securities
outstanding at each such price and the name of the holder of each such Rapor
Convertible Security. Schedule 4.2(b) sets forth with respect to each holder of
Rapor Preferred Stock and Rapor Convertible Securities, the number of Rapor
Shares to be issued to such holder upon conversion of such security prior to
Closing as contemplated by Section 6.13. Except as forth on Schedule 4.2(b),
there are no outstanding contractual obligations of Rapor to repurchase, redeem
or otherwise acquire any shares of Rapor's capital stock or to provide funds to,
or make any investment (in the form of a loan, capital contribution or
otherwise) in, any other Person.
(c) There are no voting trusts, stockholder agreements, proxies or
other agreements or understandings in effect with respect to the voting or
transfer of any shares of capital stock of or any other interests in Rapor.
9
(d) Each Stockholder owns the Rapor Shares of record and
beneficially, free and clear of all Encumbrances. The delivery of the
certificates representing the Rapor Shares in accordance with Section 3.2 in
consideration of the payment of the Merger Consideration therefor will transfer
record and beneficial ownership of, and good and valid title to, the Rapor
Shares, free and clear of all Encumbrances.
4.3 Authority Relative to Agreement. Rapor has all requisite power and
authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and has taken all action necessary, corporate
or otherwise, in order to execute and deliver this Agreement and to consummate
the Contemplated Transactions, including, but not limited to, obtaining all
required Board of Directors and stockholder approvals. This Agreement has been
duly executed and delivered by Rapor. This Agreements constitute the valid and
binding obligations of Rapor, enforceable against Rapor accordance with its
terms, subject to laws relating to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, marshaling or other laws and rules of
law affecting the enforcement generally of creditors' rights and remedies
(including such as may deny giving effect to waivers of debtors' or guarantors'
rights).
4.4 Absence of Conflict. Except as set forth in Schedule 4.4, neither the
execution and delivery of this Agreement nor the consummation of the
Contemplated Transactions will (a) violate, conflict with, result in a breach or
termination of, constitute a default under or give rise to a right to terminate
or accelerate (or an event which, with notice or lapse of time or both, would
constitute the same) (i) any agreement, commitment, deed of trust, indenture,
lease, mortgage or other instrument to which Rapor is a party or by which any of
its properties or assets is bound, (ii) the certificate of incorporation or
bylaws of Rapor or (iii) any Law, order of a Governmental Body or any other
restriction of any kind or character applicable to Rapor or any of its
properties or assets, or (b) result in the creation or imposition of any
Encumbrance upon any properties or assets of Rapor under any agreement or
commitment to which Rapor is a party or by which Rapor or its properties or
assets may be bound.
4.5 Consents and Approvals; Effect of Change in Control. Except for the
filing of a Articles of Merger as provided in Section 2.2, and as otherwise set
forth in Schedule 4.5, no consent, waiver, registration, certificate, approval,
grant, franchise, permit, license, exception or authorization of, or declaration
or filing with, or notice or report to, (a) any Governmental Body or (b) any
other Person (including, but not limited to, any party to a Contract or other
agreement or commitment of Rapor) (collectively, the "Approvals"), is required
in connection with the execution, delivery or performance of this Agreement or
the consummation of the Contemplated Transactions by Rapor, other than Approvals
which have already been obtained. Except as set forth in Schedule 4.5, there are
no Contracts or Approvals by which Rapor or any of its assets or properties may
be bound that contain (i) any change in control provisions that will become
applicable or inapplicable as a result of the Contemplated Transactions, or (ii)
any other provision which will diminish the benefit or value, or result in a
change of the terms, of such Contract or Approval to Purchaser as a result of
the consummation of the Contemplated Transactions.
10
4.6 Financial Statements.
(a) Rapor has delivered to Purchaser the audited balance sheet of
Rapor as at December 31, 2003 and the related audited statements of income and
retained earnings, and cash flows of Rapor for the calendar year then ended,
together with the report thereon of Xxxxxxx & Andelson and an unaudited balance
sheet of Rapor as at March 31, 2004 (the "Recent Balance Sheet") and the related
statements of income and retained earnings, and cash flows of Rapor for the
three month period then ended (collectively, the "Financial Statements"). The
Financial Statements were prepared from the respective books and records of
Rapor, have been prepared in accordance with GAAP consistently applied
throughout the periods indicated, and fairly present the financial position,
results of operations and cash flows of Rapor as at the respective dates thereof
and for the periods therein referred to.
(b) Rapor does not have any liabilities or obligations (whether
known or unknown, absolute, accrued, contingent or otherwise and whether due or
to become due) that were not fully reflected or reserved against in the Recent
Balance Sheet, except for non-material liabilities and obligations incurred in
the ordinary course of business and consistent with past practice since the date
thereof. The reserves reflected in the Recent Balance Sheet are adequate,
appropriate and reasonable and are in accordance with GAAP consistently applied.
(c) Since the date of the Recent Balance Sheet, there has been no
material adverse change in the business, operations, financial condition or
prospects of Rapor or any event, condition or contingency that could reasonably
be expected to have a Material Adverse Effect.
(d) The accounts receivable of Rapor reflected in the Recent Balance
Sheet constitute valid and enforceable claims arising from bona fide
transactions in the ordinary course of business. Rapor has not received written
notice of any counterclaims or setoffs against such accounts receivable for
which reserves have not been established in accordance with GAAP. There has been
no material adverse change since the date of the Recent Balance Sheet in the
amount of accounts receivable or other debts due Rapor or the allowances with
respect thereto, or accounts payable of Rapor, from that reflected in the Recent
Balance Sheet.
(e) As of the date of this Agreement, the aggregate amount of the
liabilities of Rapor that would be reflected on a balance sheet of Rapor dated
as of the date hereof, in accordance with GAAP, excluding indebtedness under the
CDA Loan and debt under Rapor Convertible Securities to be converted into Rapor
Shares prior to the Merger, would not exceed the sum of Rapor's (i) accounts
receivable, (ii) prepaid expenses, and (iii) inventory, as each of such assets
would be reflected on such balance sheet in accordance with GAAP.
4.7 Title to Property; Sufficiency; Encumbrances.
(a) Rapor has never owned any real property or any interest in real
property.
11
(b) Except as disclosed in Schedule 4.7(b), Rapor leases or owns all
the properties and assets used or intended to be used in the conduct of its
business and, with respect to contract rights, is a party to and enjoys the
right to the benefits of all contracts, agreements and other arrangements used
or intended to be used by Rapor in the conduct of its business (all such
properties, assets and contract rights being the "Assets"). Rapor has good and
marketable title to, or, in the case of leased Assets, valid and subsisting
leasehold interests in, all the Assets, free and clear of all Encumbrances,
except for Permitted Encumbrances. As used herein, "Permitted Encumbrances"
means (i) those statutory liens for current taxes or assessments not yet due or
delinquent or the validity of which are being contested in good faith by
appropriate proceedings and for which adequate reserves are reflected on the
Recent Balance Sheet; and (ii) those Encumbrances disclosed on Schedule 4.7.
(c) The Assets constitute all the properties, assets and rights that
are necessary in the conduct of Rapor's business. Rapor has caused the Assets to
be maintained in accordance with good business practice, and all the Assets are
in good operating condition and repair, reasonable wear and tear excepted, and
are suitable for the purposes for which they are used and intended.
(d) Following the consummation of the Contemplated Transactions, the
Surviving Corporation will continue to own, pursuant to good and marketable
title, or lease, under valid and subsisting leases, or otherwise retain its
respective interest in, the Assets without incurring any penalty or other
adverse consequence, including, without limitation, any increase in rentals,
royalties, or licenses or other fees imposed as a result of, or arising from,
the consummation of the Contemplated Transactions. Immediately following the
Effective Time, the Surviving Corporation shall own and possess all documents,
books, records, agreements and financial data of any sort used by Rapor in the
conduct of its business.
4.8 Leased Property. Schedule 4.8 sets forth a true and complete list of
each lease under which Rapor is a lessee or lessor (each, a "Lease"). Rapor has
delivered to Purchaser complete and correct copies of each such Lease. Each such
Lease is a valid and binding obligation of Rapor, enforceable in accordance with
its terms, is in full force and effect, and except as set forth on Schedule 4.8,
upon consummation of the Contemplated Transactions, will continue to entitle the
Surviving Corporation to the use and possession of the property specified in
such lease for the purposes for which such property is now being used by Rapor.
4.9 Intellectual Property Rights. Rapor owns, or is licensed or otherwise
has the valid rights to use, all Intellectual Property used in, acquired or
developed for use in, or necessary for the conduct of its business as heretofore
conducted, and as presently contemplated to be conducted (the "Rapor
Intellectual Property"). Schedule 4.9 contains an accurate and complete
description of (a) the Rapor Intellectual Property owned by Rapor and all
applications therefor, (b) the Rapor Intellectual Property licensed to Rapor for
use and a summary of the terms of each license pursuant to which Rapor uses such
Intellectual Property (c) all licenses granted by Rapor to others to use the
Rapor Intellectual Property and (d) a summary of the terms of all other
agreements relating to the Rapor Intellectual Property. Except as set forth in
Schedule 4.9, Rapor has the sole and exclusive right to use the Rapor
Intellectual Property referred to therein, and the consummation of the
Contemplated Transactions will not alter or impair any such rights; no claims
have been asserted by any Person to the use of any such Intellectual Property or
challenging or questioning the validity or effectiveness of any such licenses or
agreements and to the best of Rapor's knowledge, there is no valid basis for any
such claim; and the use of such Rapor Intellectual Property by Rapor does not
violate or infringe the rights of any Person. Neither Rapor nor, to the best of
Rapor's knowledge, any other Person is in default under any license or other
agreement relating to such Rapor Intellectual Property, and all such licenses
and agreements are valid, in full force and effect and enforceable. Rapor has
taken reasonable steps to safeguard and maintain the secrecy and confidentiality
of, and its proprietary rights in, the Rapor Intellectual Property. No present
or former employee or consultant of Rapor owns or has any proprietary, financial
or other interest, direct or indirect (other than through ownership of Rapor
Shares), in whole or in part, in any Rapor Intellectual Property. Schedule 4.9
lists all confidentiality and non-disclosure agreements to which Rapor or any of
its employees or consultants is a party and indicates which of those would be
binding on or enforceable by or against Purchaser.
12
4.10 Litigation. Except as set forth in Schedule 4.10, there is no action,
suit, inquiry, arbitration, proceeding or investigation by or before any court
or Governmental Body or arbitration pending or, to the knowledge of Rapor,
threatened against or involving Rapor or the Assets or which questions or
challenges the validity of this Agreement or the Contemplated Transactions, and
Rapor has not received any notice of any event or occurrence which could result
in any such action, suit, inquiry, proceeding or investigation nor, to the
knowledge of Rapor, is there any valid basis for any such action, suit, inquiry,
proceeding or investigation.
4.11 Tax Matters.
(a) The Tax Affiliates have filed or caused to be filed on a timely
basis all Tax Returns that are or were required to be filed by or with respect
to them, their operations and their assets through the Effective Time, pursuant
to the Laws or administrative requirements of each Governmental Body with taxing
power over it or its assets. As of the time of filing, such Tax Returns
correctly reflected the facts regarding the income, business, assets,
operations, activities, status, and other matters of the Tax Affiliates and any
other information required to be shown thereon. In particular, such Tax Returns
are not subject to penalties under Section 6662 of the Code or any predecessor
provision of law or any other provision of the Code. An extension of time within
which to file any Tax Return that has not been filed has not been requested or
granted. The Tax Affiliates have delivered to Purchaser true, complete and
correct copies of all federal, state, local or foreign income Tax Returns filed
by them since January 1, 1999. Schedule 4.11(a) lists all state, local and
foreign jurisdictions in which the Tax Affiliates have previously filed or
currently file Tax Returns, which are all of the state, local or foreign taxing
jurisdictions in which the Tax Affiliates have been or are required to file Tax
Returns.
(b) With respect to all amounts in respect of Taxes imposed on the
Tax Affiliates or for which the Tax Affiliates are or could be liable, whether
to Governmental Bodies (as, for example, under law) or to other Persons (as, for
example, under tax allocation agreements), with respect to all taxable periods
or portions of periods through the Effective Time, (i) all applicable tax laws
and agreements have been fully complied with, (ii) all such amounts required to
be paid by the Tax Affiliates to Governmental Bodies or others have been paid,
except such taxes, if any, as are set forth in Schedule 4.11(b) and are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP consistently applied) have been provided in the Financial
Statements, and (iii) reserves have been established for the payment of all
Taxes not yet due and payable, which reserves are reflected on the Recent
Balance Sheet and are adequate and in accordance with the past custom and
practice of the Tax Affiliates.
13
(c) None of the Tax Affiliates have requested, executed or filed
with the IRS or any other Governmental Body any agreement or other document
extending or having the effect of extending the period for assessment or
collection of any Taxes for which any Tax Affiliate could be liable.
(d) There exists no proposed tax assessment against any Tax
Affiliate nor any lien for Taxes against any property of any Tax Affiliate
except as disclosed in the Financial Statements or on Schedule 4.11(d).
(e) All Taxes that the Tax Affiliates are or were required by law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other Person.
(f) No Tax Affiliate is, was, or will be a party to, bound by or
subject to any obligation under any tax sharing, tax indemnity, tax allocation
or similar agreement.
(g) There is no claim, audit, action, suit, proceeding, or
investigation with respect to Taxes due or claimed to be due from any Tax
Affiliate or of any Tax Return filed or required to be filed by any Tax
Affiliate pending or threatened against or with respect to any Tax Affiliate.
(h) No Tax Affiliate has made, or is a party to any agreement
requiring it to make, any payment which would not be deductible under Code
Section 280G or which would be subject to the excise tax imposed by Code Section
4999.
(i) No Tax Affiliate has executed or entered into any closing
agreement pursuant to Section 7121 of the Code.
(j) No Tax Affiliate has filed a consent pursuant to Section 341(f)
of the Code (or any corresponding provision of state, local or foreign income
tax law) or agreed to have Section 341(f)(2) of the Code (or any corresponding
provision of state, local or foreign income tax law) apply to any disposition of
a subsection (f) asset (as such term is defined in Section 341(f)(4) of the
Code) owned by a Tax Affiliate.
(k) No Tax Affiliate (i) has agreed to or is required to make any
adjustment pursuant to Section 481(a) of the Code by reason of a change in
accounting method initiated by a Tax Affiliate, (ii) is aware that the IRS has
proposed any such adjustment or change in accounting method that relates to the
business and operations of a Tax Affiliate, or (iii) has an application pending
with any Governmental Body requesting permission for any change in accounting
method that relates to the business and operations of a Tax Affiliate.
(l) No Tax Affiliate holds any debt instrument with respect to which
it is reporting the income under the installment method or that has an adjusted
basis that is less than 90 percent of the stated redemption price at maturity.
14
(m) No Tax Affiliate has any liability for the Taxes of any person
(other than a Tax Affiliate) under Treas. Reg. ss. 1.1502-6, as a transferee or
successor, or otherwise.
(n) All material elections with respect to Taxes affecting any Tax
Affiliate as of the date hereof are set forth in Schedule 4.11(n). After the
date hereof, no election with respect to Taxes will be made without the written
consent of Purchaser.
(o) None of the assets of any Tax Affiliate is required to be
treated as owned by any other Person pursuant to the "safe harbor lease"
provisions of former Section 168(f)(8) of the Code or otherwise pursuant to the
Code.
(p) None of the assets of any Tax Affiliate directly or indirectly
secures any debt the interest on which is tax-exempt under Section 103(a) of the
Code.
(q) None of the assets of any Tax Affiliate is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(r) No Tax Affiliate has participated in or will participate in an
international boycott within the meaning of Section 999 of the Code. (s) No Tax
Affiliate is or has been a United States real property holding corporation (as
defined in Section 897(c)(2) of the Code) during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code.
(t) All of the Tax Affiliates are United States persons within the
meaning of the Code.
(u) The transaction contemplated herein is not subject to the tax
withholding provisions of Section 3406 of the Code, Subchapter A of Chapter 3 of
the Code, or any other provision of law.
(v) No Tax Affiliate has, or has had, either a permanent
establishment in any foreign country, as defined in any applicable tax treaty or
convention between the United States and such foreign country, or business
activity in any country other than the United States that would subject it to a
Tax in such country that would not apply to a United States person without a
business activity in such country.
(w) Except as set forth in Schedule 4.11(w), no Tax Affiliate is a
party to any joint venture, partnership, or other arrangement or contract that
could be treated as a partnership for federal income tax purposes.
4.12 Absence of Certain Changes or Events. Since the date of the Recent
Balance Sheet, except as set forth in Schedule 4.12, Rapor has conducted its
business only in the ordinary course consistent with past practice and has not:
(a) declared or paid any dividend or made any other payment or
distribution in respect of its capital stock;
15
(b) purchased, redeemed, issued, sold or otherwise acquired or
disposed of, either directly or indirectly, any of its capital stock or
reclassified, split or otherwise changed any of its capital stock or granted or
entered into any options, warrants, puts or calls or other rights to purchase,
sell or convert any obligation into any of, its capital stock;
(c) paid, discharged or satisfied any Encumbrance (other than an
Encumbrance then required to be paid, discharged or satisfied), claim, liability
or obligation (whether fixed, accrued, contingent or otherwise, whether due or
to become due), other than a claim, liability or obligation that is a current
liability shown on the Recent Balance Sheet or incurred since the date of the
Recent Balance Sheet in the ordinary course of business consistent with past
practice;
(d) canceled or compromised any debt or claim, or waived or released
any material right, other than adjustments in the ordinary course of business
which, in the aggregate, are not material;
(e) sold, assigned, transferred, conveyed, leased, pledged,
encumbered or otherwise disposed of any of its Assets (real or personal,
tangible or intangible) except in the ordinary course of business consistent
with past practice.
(f) transferred or granted any right under, or entered into any
settlement regarding the breach or infringement of, any Intellectual Property
right, or modified any existing right with respect thereto;
(g) made or granted any general increase in the compensation
(whether salary, commission, bonus, benefits (retirement, severance or other) or
other direct or indirect remuneration) of any of Rapor's employees (other than
individual increases which were generally consistent in amount with Rapor's
historical practices), or made or granted any increase in the compensation of
the officers of Rapor, or entered into any employment, severance, bonus or
similar agreement with any employee of Rapor;
(h) changed accounting methods other than in accordance with GAAP;
(i) received any notice of termination of any Contract or suffered
any damage, destruction or loss adversely affecting Rapor's Assets;
(j) made any capital expenditures or additions to property, plant or
equipment or acquired of any other property or assets (other than raw materials
and supplies) at a cost in excess of $10,000;
(k) incurred or assumed any indebtedness for money borrowed or
guarantied any indebtedness or other obligation of another Person;
(l) suffered any Material Adverse Effect; or
(m) agreed or otherwise committed, whether in writing or otherwise,
to do, or taken any action or omitted to take any action that would result in,
any of the foregoing.
16
4.13 Employee Benefits; Executive Officers; Labor.
(a) No employees of Rapor are covered by collective bargaining
agreements or are members of unions. Schedule 4.13(a) sets forth a true and
complete list of (i) all written employment and consulting agreements to which
Rapor is a party, indicating those which will terminate at the Effective Time;
and (ii) all written executive compensation plans, bonus plans, incentive
compensation plans, deferred compensation plans or agreements, employee pension
plans or retirement plans, employee profit sharing plans, employee stock
purchase plans, group life insurance, hospitalization insurance, severance or
other employee benefit plans (as defined in Section 3(3) of ERISA) of Rapor (the
"Plans") providing for benefits for any employees of Rapor. There are no other
binding plans or commitments of the type referred to in this Section 4.13(a)
which are not reduced to writing, and Rapor has no agreement or commitment to
create any additional such Plan. Rapor has no unfunded obligations relating to
the Plans. To the extent applicable, the Plans comply in all material respects
with ERISA.
(b) Schedule 4.13(b) includes a true and complete list of all
officers or other employees of Rapor and the compensation (including bonuses,
incentives and similar compensation) received by each. To the knowledge of
Rapor, no past or present officer or other executive employee of Rapor has ever
been indicted, tried or convicted of a criminal felony. To the knowledge of
Rapor, no officer or other employee of Rapor is in violation of (a) any material
term of any employment agreement, non-disclosure agreement, noncompete agreement
or other similar agreement with any previous employer (and to the knowledge of
Rapor, the employment of such employee by Surviving Corporation, Purchaser or
any of their Affiliates will not result in a violation of any such agreement) or
(b) any obligation binding on such employee which would prohibit the use of
information obtained from such employee which Rapor has used.
(c) Neither the execution and delivery of this Agreement nor the
consummation of any of the Contemplated Transactions will entitle any current or
former employee of Rapor to severance pay or other similar payment, or
accelerate the time of payment or increase the amount of compensation due to any
such employee or former employee. To the knowledge of Rapor, Rapor has no
threatened or pending labor disputes with any of its employees.
4.14 Insurance; Claims. Schedule 4.14 sets forth a true, correct and
complete list of all insurance policies of any kind or nature maintained by or
on behalf of Rapor and relating to its business and/or assets, indicating the
type of coverage, name of insured, name of insurance carrier or underwriter,
premium thereon, policy limits and expiration date of each policy. All such
insurance policies are in full force and effect, and Rapor is not in default
with respect to its obligations under any such insurance policy, and no notice
of cancellation or termination has been received with respect to any such
policy. Rapor has delivered to Purchaser complete and correct copies of such
insurance policies (together with all riders and amendments thereto).
4.15 Contracts and Commitments. Schedule 4.15 contains a true, complete
and accurate list of each of the following contracts, agreements, understandings
or other obligations (whether written or oral) to which Rapor is a party or by
which any of its assets or properties are bound (together with each of the
agreements disclosed on Schedule 4.8, 4.9 and 4.13, a "Contract"):
17
(a) all rental or use agreements, contracts, covenants or
obligations;
(b) any contract, agreement, commitment or obligation to make any
capital expenditures;
(c) contracts, agreements, commitments or other obligations with any
Person containing any provision or covenant limiting the ability of Rapor to
engage in any line of business or to compete with or to obtain products or
services from any Person or limiting the ability of any Person to compete with
or to provide products or services to, or obtain products or services from,
Rapor, or covering indemnification of another Person other than in the ordinary
course of business;
(d) any profit-sharing or similar contract, agreement, understanding
or obligation with any Person;
(e) contracts, agreements, commitments or other obligations with
respect to the purchase or sale by or to Rapor of any product, equipment,
facility, or similar item that by their respective terms do not expire or
terminate or are not terminable by Rapor, without penalty, premium or other
liability within 30 days or may involve the payment by or to Rapor of more than
$10,000;
(f) license, royalty, franchise, distributorship, dealer, service,
sales agency, consulting, advisory, public relations or advertising contracts,
agreements, commitments or other obligations;
(g) contracts, agreements, commitments or other obligations to
provide services or facilities by or to Rapor or to or by another Person which
is not terminable by Rapor within 30 days without penalty, premium or other
liability or involving payment by Rapor or the other Person of more than
$10,000;
(h) all other contracts, agreements, commitments, or other
obligations whether or not made in the ordinary course of business which either
(i) may involve the expenditure by Rapor of funds in excess of $10,000 per
commitment (or under a group of similar commitments), or (ii) are not terminable
within 30 days from the date hereof without penalty, premium or other liability,
or are otherwise material to Rapor;
(i) contracts, agreements, commitments or other obligations with any
Person requiring indemnification by Rapor of another Person other than in the
ordinary course of business; or
(j) all other contracts, agreements, commitments, or other
obligations of any kind that involve or relate to any Stockholder, officer,
director, employee or consultant of Rapor or any Affiliate or relative thereof.
4.16 Status of Agreements. All Contracts to which Rapor is a party are in
full force and effect and constitute valid and binding obligations of Rapor and
to the knowledge of Rapor, are binding on the other parties thereto. There are
no existing defaults (or events which, with notice or lapse of time or both,
would constitute a default) by Rapor or any other party thereunder, and Rapor
has not received notice of any claim by another party to any Contract that Rapor
is in default thereunder. Rapor is not a party to any Contract that has or may
reasonably be expected to have, individually or in the aggregate, with any other
Contracts, a Material Adverse Effect and Rapor is not a party to any Contract
which requires Rapor to provide a service at a cost which Rapor reasonably
expects will exceed the payment to Rapor under such Contract.
18
4.17 Compliance with Law.
(a) Schedule 4.17(a) is a true and complete list of each license,
permit, order, authorization or approval of Governmental Bodies ("Licenses")
held or obtained by Rapor in connection with the business conducted by Rapor.
The operations of Rapor have been conducted in all material respects in
accordance with all applicable laws, regulations and other requirements of all
Governmental Bodies having jurisdiction over Rapor (collectively "Laws"). Rapor
has not received any notification of any asserted present or past failure to
comply with any such Laws. Rapor has all Licenses required for the conduct of
Rapor's business, other than any such License the failure of which to hold or
obtain would not cause a Material Adverse Effect on Rapor, and Rapor is not in
violation of any such License. All such Licenses are in full force and effect
and no suspension or cancellation thereof has been threatened. Except as set
forth in Schedule 4.17(a), there are no other Licenses required in connection
with the operation of Rapor's business as currently conducted or as proposed to
be conducted.
(b) Rapor has obtained all Licenses which are required under all
Environmental Laws. Rapor is in compliance in all material respects with all
terms and conditions of such required Licenses, and is also in compliance in all
material respects with all Environmental Laws. Except as set forth in Schedule
4.17(b), there does not exist as a result of any action or inaction of Rapor or,
to the knowledge of Rapor, as a result of any action or inaction of any other
Person, nor has Rapor received notice of, any events, condition or circumstances
which may interfere with or prevent continued compliance, or which may give rise
to any liability, or otherwise form the basis of any claim, action, suit,
proceedings, hearing or investigation, based on or related to the violation of
an Environmental Law or the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any Hazardous
Material.
(c) No Hazardous Material has been incorporated in, used on, stored
on or under, released from, treated on, transported to or from, or disposed of
by Rapor on or from any property owned or leased by Rapor or by any other Person
such that, under Environmental Laws (i) any such Hazardous Material would be
required to be removed, cleaned up or remediated before the property owned or
leased by Rapor could be altered, renovated, demolished or transferred, or (ii)
the owner or lessee of the property (as applicable to Rapor) could be subjected
to liability for the removal, clean up or remediation of such Hazardous
Material; and Rapor has not received notification from any Governmental Bodies
or other Persons relating to Hazardous Material on or affecting any property
owned or leased by GVI or relating to any potential or known liability under
Environmental Laws arising from the ownership or leasing of any property.
19
4.18 Transactions with Related Parties. Except as disclosed in Schedule
4.18, Rapor is not a party to any contract, lease, license, commitment or
arrangement, written or oral, which, were Rapor a "Registrant" under the
Exchange Act, would be required to be disclosed pursuant to Item 404(a) or (c)
of Regulation S-K as promulgated by the SEC, and there are no loans outstanding
to or from any Person specified in Item 404(a) of Regulation S-K from or to
Rapor.
4.19 Bank Accounts. Schedule 4.19 sets forth a true, correct and complete
list of the names and addresses of all banks and other financial institutions in
which Rapor maintains an account, deposit or safe-deposit box or lockbox
account, together with the names of all Persons authorized to draw on such
accounts or deposits or to have access to such boxes.
4.20 No Guaranties. None of the obligations or liabilities of Rapor
incurred in connection with the operation of its business is guaranteed by or
subject to a similar contingent obligation of any other Person. Rapor has not
guaranteed or become subject to a similar contingent obligation in respect of
the obligations or liabilities of any other Person. There are no outstanding
letters of credit, surety bonds or similar instruments of Rapor or any of its
Affiliates.
4.21 Records. The books of account, corporate records and minute books of
Rapor are complete and correct in all material respects. Complete and accurate
copies of all such books of account, corporate records and minute books and of
the stock register of Rapor have been provided to Purchaser.
4.22 No Brokers or Finders. Rapor has not, and its Affiliates, officers,
directors or employees have not, employed any broker or finder or incurred any
liability for any brokerage or finder's fee or commissions or similar payment in
connection with any of the Contemplated Transactions.
4.23 Investment Representations.
(a) For the purpose of this Section 4.23, the term "Purchaser
Shares" shall include the Purchaser Shares, the Purchaser Warrants, and any
securities, including, without limitation, the Purchaser Common Stock, into
which the Purchaser Shares or Purchaser Warrants may be exchanged or converted.
(b) Rapor has informed each of the Stockholders (i) that the
Purchaser Shares to be issued to such Stockholder pursuant to this Agreement
have not been registered for sale under any federal or state securities laws and
that such Purchaser Shares are being offered and sold to such Stockholder
pursuant to an exemption from registration provided under Section 4(2) of the
Securities Act, (ii) that such Stockholder is acquiring such Purchaser Shares
for such Stockholder's own account for investment purposes and without a view to
any distribution thereof, (iii) that Purchaser intends to rely on a certificate
signed by each Stockholder containing the representations and warranties set
forth in Exhibit A hereto for purposes of claiming such exemption, and (iv) that
such Stockholder must bear the economic risk of the investment in such Purchaser
Shares for an indefinite period of time as such Purchaser Shares cannot be sold
unless subsequently registered under such laws or unless an exemption from
registration is available.
20
(c) Each Stockholder is an "accredited investor" within the meaning
of Rule 501 of Regulation D under the Securities Act.
(d) Rapor agrees that the certificates evidencing the Purchaser
Shares shall bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT."
4.24 Tax Reporting. Consistent with the intent of the parties hereto,
Rapor shall treat, and cause its Affiliates to so treat, the Merger as a
reorganization under Section 368(a)(1)(A) by reason of Section 368(a)(2)(E) with
respect to all Tax Returns, to the extent consistent with Law.
4.25 Disclosure. No representations or warranties by Rapor in this
Agreement and no statement contained in any schedules, exhibits or certificates
furnished or to be furnished by Rapor or any Stockholder to Purchaser or
Purchaser Subsidiary or any of their representatives pursuant to the provisions
hereof, contains or will contain any untrue statement of material fact or omits
or will omit to state any material fact necessary, in light of the circumstances
under which it was made, in order to make the statements herein or therein not
misleading. Documents delivered or to be delivered by Rapor or any Stockholder
to Purchaser or Purchaser Subsidiary pursuant to this Agreement are or will be
true and complete copies of what they purport to be.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PURCHASER SUBSIDIARY
Purchaser and Purchaser Subsidiary hereby represent and warrant to
Rapor as follows:
5.1 Organization and Good Standing. Each of Purchaser and Purchaser
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the States of Delaware and Florida, respectively.
Purchaser (i) has all requisite corporate power to own, operate and lease its
properties and carry on its business as the same is now being conducted and (ii)
is duly qualified and in good standing as a foreign corporation under the laws
of each jurisdiction where the properties owned, leased or operated, or the
business conducted by it require such qualification. Complete and correct copies
of the certificate of incorporation and bylaws of Purchaser and Purchaser
Subsidiary as currently in effect have been delivered to Rapor. Other than
Purchaser Subsidiary and GVI Security, Inc., Purchaser has no Subsidiaries.
5.2 Capitalization of Purchaser.
(a) The authorized capital stock of Purchaser consists of (i)
75,000,000 shares of common stock, par value $.001 per share, of which
approximately 29,604,000 shares are issued and outstanding as of the date
hereof, and (ii) 3,000,000 shares of preferred stock, par value $.001 per share,
of which (v) 1,148,800 shares have been designated Series A Convertible
Preferred Stock, none of which are issued and outstanding, (w) 200 shares have
been designated Series B Convertible Preferred Stock, all of which are issued
and outstanding, (x) 10,000 have been designated Series D Convertible Preferred
Stock, none of which are issued and outstanding, and (y) 1,000,000 have been
designated Series E Convertible Preferred Stock, none of which are issued and
outstanding. Except as set forth on Schedule 5.2(a), there are no outstanding
subscriptions, options, rights, warrants, convertible securities, preemptive
rights or other agreements (other than this Agreement) or calls, demands or
commitments of any kind relating to the issuance, sale or transfer of any
capital stock or other equity securities of Purchaser, whether directly or upon
the exercise or conversion of other securities. There are no outstanding
contractual obligations of Purchaser to repurchase, redeem or otherwise acquire
any shares of Purchaser's capital stock or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
other Person.
21
(b) All of the issued and outstanding shares of Purchaser Subsidiary
are owned by Purchaser. All of the Purchaser Shares to be issued to the
Stockholders in the Merger will, as of the Effective Time, be duly authorized
and validly issued, fully paid and nonassessable.
5.3 Authority Relative to Agreement. Each of Purchaser and Purchaser
Subsidiary, as applicable, has all requisite power and authority, corporate or
otherwise, to execute, deliver and perform their obligations under this
Agreement and has taken all action necessary, corporate or otherwise, in order
to execute and deliver this Agreement and to consummate the Contemplated
Transactions. This Agreement has been duly executed and delivered by Purchaser
and Purchaser Subsidiary. Each of this Agreement constitutes valid and binding
obligations of Purchaser and Purchaser Subsidiary, as applicable, enforceable
against Purchaser and Purchaser Subsidiary in accordance with their respective
terms, subject to laws relating to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, marshaling or other laws and rules of
law affecting the enforcement generally of creditors' rights and remedies
(including such as may deny giving effect to waivers of debtors' or guarantors'
rights).
5.4 Consents and Approvals; Effect of Change in Control. Except for the
filing of a Articles of Merger as provided in Section 2.2, and as otherwise set
forth in Schedule 4.5, no Approval is required in connection with the execution,
delivery or performance of this Agreement or the consummation of the
Contemplated Transactions by Purchaser or Purchaser Subsidiary, other than
Approvals which have already been obtained.
5.5 Absence of Conflict. Neither the execution and delivery of this
Agreement and the other Documents to which it is a party nor the consummation of
the Contemplated Transactions will (a) violate, conflict with, result in a
breach or termination of, constitute a default under or give rise to a right to
terminate or accelerate (or an event which, with notice or lapse of time or
both, would constitute the same) (i) any agreement, commitment, deed of trust,
indenture, lease, mortgage or other instrument to which Purchaser is a party or
by which any of its properties or assets is bound; (ii) the certificate of
incorporation or bylaws of Purchaser and Purchaser Subsidiary or (iii) any Law,
order of a Governmental Body or any other restriction of any kind or character
applicable to Purchaser or any of its properties or assets, or (b) result in the
creation or imposition of any Encumbrance upon any properties or assets of
Purchaser or Purchaser Subsidiary under any agreement or commitment to which
Purchaser or Purchaser Subsidiary is a party or by which Purchaser or Purchaser
Subsidiary or their respective properties or assets may be bound.
22
5.6 SEC Documents: Financial Statements. As of their respective filing
dates (i) each quarterly and other report and registration statement (without
exhibits) filed by Purchaser with the SEC since January 1, 2002 (the "Purchaser
SEC Documents"), complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) none of the Purchaser SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading. The financial statements of Purchaser
included in the Purchaser SEC Documents (the "Purchaser Financial Statements")
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in conformity with GAAP consistently applied
(except as may be indicated in the notes thereto or, in the case of unaudited
financial statements, as permitted by the rules and regulations of the SEC) and
present fairly, in all material respects, the financial position of Purchaser
and its consolidated subsidiaries at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal, recurring and certain
non-recurring audit adjustments).
5.7 No Brokers or Finders. Purchaser has not, and its Affiliates,
officers, directors or employees have not, employed any broker or finder or
incurred any liability for any brokerage or finder's fee or commissions or
similar payment in connection with any of the Contemplated Transactions.
5.8 Tax Reporting. Consistent with the intent of the parties hereto,
Purchaser (i) shall treat, and cause its Affiliates to so treat, the Merger as a
reorganization under Section 368(a) with respect to all Tax Returns, to the
extent consistent with Law, and (ii) agrees that this Agreement constitutes a
"plan of reorganization" within the meaning of Section 1.368-2(g) of the income
tax regulations promulgated under the Code, and Purchaser will not, and will
cause its Affiliates to not, take any action to treat this Agreement otherwise.
5.9 Purchaser Subsidiary's Operations. Purchaser Subsidiary was formed
solely for the purpose of engaging in the Contemplated Transactions and has not
(i) engaged in any business activities, (ii) conducted any operations other than
in connection with the Contemplated Transactions, (iii) incurred any liabilities
other than in connection with the Contemplated Transactions or (iv) owned any
assets or property.
5.10 Disclosure. No representations or warranties by Purchaser or
Purchaser Subsidiary in this Agreement and no statement contained in any
schedules, exhibits or certificates furnished or to be furnished by Purchaser or
Purchaser Subsidiary to Rapor pursuant to the provisions hereof, contains or
will contain any untrue statement of material fact or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was made, in order to make the statements herein or therein not misleading.
Documents delivered or to be delivered by Purchaser or Purchaser Subsidiary to
Rapor pursuant to this Agreement are or will be true and complete copies of what
they purport to be.
23
6. CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND PURCHASER SUBSIDIARY
The obligations of Purchaser and Purchaser Subsidiary to effect the
Merger shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any one or more of which may be waived by
Purchaser, to the extent permitted by applicable law:
6.1 Legal Opinion. Purchaser and Purchaser Subsidiary shall have received
the opinion of counsel to Rapor, dated the Effective Time and addressed to
Purchaser and Purchaser Subsidiary, in substantially the form of Exhibit 6.1.
6.2 No Injunction. There shall not be in effect or threatened any
injunction, order or decree of a Governmental Body of competent jurisdiction
that prohibits or delays, or seeks to prohibit or delay, consummation of any
material part of the Contemplated Transactions.
6.3 Representations, Warranties and Agreements. (a) The representations
and warranties of Rapor set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Effective
Time with the same effect as though made as of the Effective Time, unless made
as of another date, in which case they shall be true and correct in all
materials respects as of such date, (b) Rapor shall have performed and complied
in all material respects with the agreements contained in this Agreement
required to be performed and complied with by them prior to or as of the
Effective Time and (c) Purchaser shall have received a certificate to the
foregoing effect signed by an authorized executive officer of Rapor.
6.4 Approvals. All Approvals necessary in connection with the execution,
delivery and performance of this Agreement by Rapor for the consummation of the
Contemplated Transactions shall have been obtained or made and shall be in full
force and effect.
6.5 No Material Adverse Effect. No event, occurrence, fact, condition,
change, development or effect shall have occurred, exist or come to exist since
the date of this Agreement that, individually or in the aggregate, has
constituted or resulted in, or could reasonably be expected to constitute or
result in a Material Adverse Effect.
6.6 Investment Representations Certificate. Each Stockholder shall have
delivered to Purchaser a certificate containing investment representations with
respect to such Stockholder in the form of Exhibit B hereto.
6.7 Resignations. The directors of Rapor other than those listed on
Schedule 2.6 shall have delivered to Rapor duly executed resignations as of the
Effective Time.
6.8 Proceedings Satisfactory. All certificates, opinions and other
documents to be delivered by Rapor to Purchaser or Purchaser Subsidiary and all
other corporate or organizational matters to be accomplished by Rapor prior to
or at the Closing shall be satisfactory in the reasonable judgment of Purchaser
and its counsel.
24
6.9 Corporate Approval. Prior to the Effective Time, this Agreement and
the Contemplated Transactions shall have been duly approved by the Board of
Directors of Rapor and the Stockholders of Rapor, in accordance with applicable
law.
6.10 Secretary of State Certificates. Purchaser shall have received
certificates of the Secretary of State of the State of Florida with respect to
Rapor, and of each state in which Rapor is qualified to do business as a foreign
corporation, as of a recent date, showing Rapor to be validly existing and in
good standing in the State of Florida and qualified to do business and in good
standing in such other states as a foreign corporation, as the case may be.
6.11 Secretary's Certificate of Rapor. Purchaser shall have received a
certificate of the Secretary or Assistant Secretary of Rapor certifying (i) a
true and complete copy of the resolutions duly and validly adopted by the Board
of Directors and Stockholders of Rapor, evidencing the authorization of the
execution and delivery of this Agreement and the consummation of the
Contemplated Transactions, (ii) the names and signatures of the officers of
Rapor authorized to sign this Agreement and the other documents to be delivered
hereunder (iii) a true and complete copy of the certificate of incorporation and
bylaws of Rapor, and (iv) a true and complete list of the Stockholders, setting
forth with respect to each such Stockholder (x) such Stockholder's name and
address, (y) the number of Rapor Shares held by such Stockholder, and (z) the
total Merger Consideration such Stockholder is entitled to receive under the
terms of this Agreement.
6.12 Termination of CDA Obligations. Rapor shall have entered into an
agreement with the CDA, in form and substance satisfactory to Purchaser and its
counsel, pursuant to which all of the CDA Obligations shall be terminated and
released at or prior to the Effective Time in consideration only of the
deliveries of Purchaser provided for under Section 3.1(b)(4).
6.13 Rapor Convertible Securities. All shares of Rapor Preferred Stock and
all other Rapor Convertible Securities shall have been converted or exchanged
for Rapor Shares as provided for in Schedule 4.2(b), and no shares of Rapor
Preferred Stock or other Rapor Convertible Securities shall be outstanding.
6.14 Limitation of Liabilities. The aggregate amount of the liabilities of
Rapor that would be reflected on a balance sheet of Rapor dated as of the
Closing Date in accordance with GAAP, excluding indebtedness under the CDA Loan,
shall not exceed the sum of Rapor's (i) accounts receivable, (ii) prepaid
expenses, and (iii) inventory, as each of such assets would be reflected on such
balance sheet in accordance with GAAP, and Purchaser shall have received an
unaudited balance sheet of Rapor dated as of the Closing Date certified by an
officer of Rapor, and such other documents and information as Purchaser shall
reasonably request to determine that the foregoing condition has been satisfied.
6.15 Voting Agreement. Stockholders that will hold in the aggregate at
least 75% of the Purchaser Shares immediately following the Merger shall have
entered into a Voting Agreement in the form of Exhibit D.
25
7. CONDITIONS TO THE OBLIGATIONS OF Rapor.
The obligations of Rapor to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of each of the following
conditions, any one or more of which may be waived by Rapor, to the extent
permitted by applicable law:
7.1 Legal Opinion. Rapor shall have received the legal opinion of Kronish
Xxxx Xxxxxx & Xxxxxxx LLP, counsel to Purchaser, in substantially the form of
Exhibit 7.1.
7.2 No Injunction. There shall not be in effect or threatened any
injunction, order or decree of a Governmental Body of competent jurisdiction
that prohibits or delays, or seeks to prohibit or delay, consummation of any
material part of the Contemplated Transactions.
7.3 Representations, Warranties and Agreements. (a) The representations
and warranties of Purchaser and Purchaser Subsidiary set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective Time with the same effect as though made as of
the Effective Time, unless made as of another date, in which case they shall be
true and correct in all material respects as of such date, (b) Purchaser and
Purchaser Subsidiary shall have performed and complied in all material respects
with the agreements contained in this Agreement required to be performed and
complied with by it prior to or at the Closing and (c) Rapor shall have received
a certificate to the foregoing effect signed by an authorized executive officer
of Purchaser.
7.4 Approvals. All Approvals necessary in connection with the execution,
delivery and performance of this Agreement by Purchaser and Purchaser Subsidiary
or for the consummation of the Contemplated Transactions shall have been
obtained or made and shall be in full force and effect.
7.5 Proceedings Satisfactory. All certificates, opinions and other
documents to be delivered by Purchaser or Purchaser Subsidiary to Rapor and all
other corporate or organizational matters to be accomplished by Purchaser or
Purchaser Subsidiary prior to or at the Closing shall be satisfactory in the
reasonable judgment of Rapor and its counsel.
7.6 Corporate Approval. Prior to the Effective Time, this Agreement and
the Contemplated Transactions shall have been duly approved by the Board of
Directors of Purchaser and Purchaser Subsidiary and the stockholder of Purchaser
Subsidiary, in accordance with applicable law.
7.7 Secretary of State Certificates. Rapor shall have received
certificates of (i) the Secretary of State of the State of Delaware with respect
to Purchaser and of each state in which Purchaser is qualified to do business as
a foreign corporation as of a recent date, showing Purchaser to be validly
existing and in good standing in the State of Delaware and qualified to do
business and in good standing in such other states as a foreign corporation, as
the case may be, and (ii) the Secretary of State of the State of Florida with
respect to Purchaser Subsidiary as of a recent date, showing Purchaser
Subsidiary to be validly existing and in good standing in the State of Florida.
26
7.8 Secretary's Certificate. Rapor shall have received certificates of the
Secretary or Assistant Secretary of Purchaser and Purchaser Subsidiary
certifying (i) a true and complete copy of the resolutions duly and validly
adopted by the Board of Directors of Purchaser and Purchaser Subsidiary, as
applicable, evidencing the authorization of the execution and delivery of this
Agreement and the consummation of the Contemplated Transactions, (ii) the names
and signatures of the officers of Purchaser and Purchaser Subsidiary, as
applicable, authorized to sign this Agreement and the other documents to be
delivered hereunder and (iii) a true and complete copy of the certificate of
incorporation and bylaws of each of Purchaser and Purchaser Subsidiary.
7.9 Registration Rights. Purchaser shall have entered into a registration
rights agreement in the form of Exhibit B pursuant to which Purchaser shall
agree to register (on a "piggyback" basis) the shares of Purchaser Common Stock
issuable upon conversion of the Purchaser Shares and exercise of the Purchaser
Warrants.
8. FURTHER AGREEMENTS OF THE PARTIES.
8.1 Expenses. The Parties shall each bear their own respective expenses
incurred in connection with this Agreement and the Contemplated Transactions.
8.2 Access Prior to the Closing. (a) Between the date of this Agreement
and the Effective Time, Rapor shall as Purchaser may from time to time request
with reasonable notice to Rapor, (i) give Purchaser and its authorized
representatives full and complete access to all properties, personnel,
facilities and offices of Rapor and to the books and records of Rapor (and
permit Purchaser to make copies thereof), (ii) permit Purchaser to make
inspections thereof, (iii) cause the officers and employees of, and consultants
to, Rapor to furnish Purchaser with all financial information and operating data
and other information with respect to the business and properties of Rapor, and
to discuss with Purchaser and its authorized representatives the affairs of
Rapor.
(b) Between the date of this Agreement and the Effective Time, each
of the Parties shall and shall cause their respective Affiliates and officers
and directors, and shall use reasonable efforts to cause all their other
respective employees, auditors, attorneys, consultants, advisors and agents, to
treat as confidential and hold in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of Law, and after prior written notice to the
other Party, all confidential information of Rapor or Purchaser, as the case may
be, furnished to Purchaser by Rapor or to Rapor by Purchaser, as the case may
be, or any of their respective representatives in connection with the
Contemplated Transactions and will not release or disclose such confidential
information to any other Person, except their respective auditors, attorneys,
financial advisors and other consultants, agents and advisors in connection with
the consummation of the Contemplated Transactions. If the Closing does not occur
(i) such confidence shall be maintained by the Parties and each Party shall
cause its officers and directors and Affiliates and shall use reasonable efforts
to cause such other Persons to maintain such confidence, except to the extent
such information comes into the public domain (other than as a result of an
action by such Party, its officers, directors or such other persons in
contravention of this Agreement), (ii) each Party shall and shall cause its
officers and directors and Affiliates and shall use reasonable efforts to cause
such other Persons to refrain from using any of such confidential information
except in connection with this Agreement, and (iii) upon the request of any
Party, the other Party shall promptly return to the requesting Party any written
materials remaining in its possession, which materials it has received from the
requesting Party, or their respective representatives.
27
8.3 Publicity. Between the date of this Agreement and the Effective Time,
except to the extent required by Law, neither Purchaser nor Rapor shall, and
none of them shall permit any Affiliate to, issue any press release or public
announcement of any kind concerning, or otherwise publicly disclose, the
Contemplated Transactions without the consent of the other; and in the event any
such public announcement, release or disclosure is required by Law, the Parties
will consult prior to the making thereof and use their best efforts to agree
upon a mutually satisfactory text.
8.4 Conduct of Business of Rapor. Except as expressly permitted by this
Agreement, between the date of this Agreement and the Effective Time, Rapor
shall conduct its business only in the ordinary course in substantially the same
manner as heretofore conducted, and use all its reasonable efforts to preserve
intact its present business organization and employees and to preserve the
goodwill of Persons having business relations with Rapor. Without limiting the
generality of the foregoing, except as otherwise expressly provided in this
Agreement, between the date of this Agreement and the Effective Time, Rapor
shall pay accounts payable and pay and perform other obligations of the business
of Rapor when they become due and payable in the ordinary course of business
consistent with past practice, or when required to be performed, as the case may
be, and shall not:
(a) amend its articles or certificate of incorporation or bylaws;
(b) organize any Subsidiary or acquire any capital stock or other
equity securities of any Person or any equity or ownership interest in any
business;
(c) enter into any instrument which would constitute a Contract or
enter into any material amendment, supplement or waiver in respect of any such
Contract;
(d) incur any severance pay obligation by reason of this Agreement
or the Contemplated Transactions;
(e) grant or extend any power of attorney other than in the ordinary
course of business which does not affect a material part of Rapor's business;
(f) keep in full force and effect insurance comparable in amount and
scope of coverage to insurance now carried by it;
(g) not take, or permit to be taken, any action which is represented
and warranted in Section 4.12 not to have been taken since the Recent Balance
Sheet Date;
(h) promptly advise Purchaser in writing of any Material Adverse
Effect with respect to Rapor; or
(i) agree or otherwise commit, whether in writing or otherwise, to
do, or take any action or omit to take any action that would result in, any of
the foregoing.
28
8.5 Further Assurances. Following the Closing, the Parties shall, and
shall cause each of their Affiliates to, from time to time, execute and deliver
such additional instruments, documents, conveyances or assurances and take such
other actions as shall be necessary, or otherwise reasonably requested by the
other Party, to confirm and assure the rights and obligations provided for in
this Agreement and render effective the consummation of the Contemplated
Transactions.
8.6 Amending Schedules. From time to time prior to the Closing, Rapor and
Purchaser shall promptly supplement or amend the Schedules hereto with respect
to any matter arising after the date of this Agreement which, if existing or
occurring at the date of this Agreement, would have been required to have been
set forth in the Schedules hereto. Such supplement or amendment shall have the
effect of curing any related misrepresentation or breach of warranty made in
connection with the transactions contemplated by this Agreement; provided,
however, each party shall have a commercially reasonable period of time
following receipt of any supplemented or amended Schedules to elect (i) to
terminate this Agreement without any further liability to Purchaser or Rapor or
(ii) in such non-amending party's sole discretion, to elect to waive such breach
and consummate the transactions contemplated by this Agreement.
8.7 Termination of CDA Obligations. Rapor shall use its best efforts to
enter into an agreement with the CDA, in form and substance satisfactory to
Purchaser and its counsel, pursuant to which all of the CDA Obligations shall be
terminated and released at or prior to the Effective Time in consideration only
of the deliveries of Purchaser provided for under Section 3.1(b)(4).
8.8 Consents; Regulatory Approval. Each Party will take all such
commercially reasonable actions as may be necessary to obtain all Approvals from
Persons or Governmental Bodies in order to permit the consummation of the
Contemplated Transactions.
8.9 Rapor Convertible Securities. Rapor shall use its best efforts to
cause each holder of Rapor Preferred Stock and each holder of other Rapor
Convertible Securities to convert or exchange such securities for Rapor Shares
as provided for in Schedule 4.2(b).
9. TERMINATION.
9.1 Termination Procedures. This Agreement may be terminated before the
Effective Time only as follows:
(a) by written agreement of Rapor and the Purchaser at any time;
(b) by Rapor, by notice to Purchaser at any time:
(c) by Purchaser, by notice to Rapor, if (x) satisfaction of any of
the conditions to Purchaser's or Purchaser Subsidiary's obligations set forth in
Section 6 becomes impossible, and such condition has not been waived by
Purchaser or (y) the Closing has not occurred by August 15, 2004, in either
case, other than by the breach or default of Purchaser; or
(d) by Rapor, by notice to Purchaser, if (x) satisfaction of any of
the conditions to Rapor's obligations set forth in Section 7 becomes impossible,
and such condition has not been waived by Rapor or (y) the Closing has not
occurred by August 15, 2004, in either case other than by the breach or default
by Rapor.
29
9.2 Effect of Termination. In the event that this Agreement is terminated
pursuant to Section 9.1(a) or (d), this Agreement shall terminate without any
liability or further obligation of any Party to another, except for the
obligations of the Parties under Sections 8.1 and 8.2(b).
10. MISCELLANEOUS.
10.1 Entire Agreement. This Agreement contains, and is intended as, a
complete statement of all of the terms and the arrangements between the Parties
with respect to the matters provided for, supersede any previous agreements and
understandings between the Parties with respect to those matters and cannot be
changed or terminated orally. No Party makes, and each Party hereby expressly
disclaims reliance upon, any representations or warranties with respect to the
Contemplated Transactions other than as expressly set forth herein as limited by
the exceptions contained in the Schedules hereto.
10.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York applicable to agreements made
and to be performed therein without giving effect to conflicts of law
principles.
10.3 Headings. The section headings contained in this Agreement are solely
for the purpose of reference, are not part of the Agreement of the Parties and
shall not in any way affect the meaning or interpretation of this Agreement. All
references in this Agreement to Sections, Schedules and Exhibits are to
sections, schedules and exhibits to this Agreement, unless otherwise indicated.
10.4 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given when (a) delivered by hand, (b)
transmitted by facsimile (and confirmed by return facsimile), or (c) delivered,
if sent by Express Mail, Federal Express or other express delivery service, or
registered or certified mail, return receipt requested, to the addressee at the
following addresses or telecopier numbers (or to such other addresses, telex
number or telecopier number as a party may specify by notice given to the other
party pursuant to this provision):
If to Purchaser, Purchaser Subsidiary or the Surviving Corporation to:
GVI Security Solutions, Inc.
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Kronish Xxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
30
If to Rapor, to:
Rapor, Inc.
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Facsimile No.:
with a copy to:
Kleban & Samor, P.C.
0000 Xxxx Xxxx
X.X. Xxx 000 Xxxxxxxxx,
Xxxxxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
10.5 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any Person who is not a Party. No
assignment of this Agreement or of any rights or obligations hereunder may be
made by the parties and any such attempted assignment shall be void.
10.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.7 Amendment and Waiver. This Agreement may be amended, or any provision
of this Agreement may be waived, provided that such amendment or waiver will be
binding on Purchaser only if such amendment or waiver is set forth in a writing
executed by Purchaser, and provided that any such amendment or waiver will be
binding upon Rapor only if such amendment or waiver is set forth in a writing
executed by Rapor. The waiver of any Party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any other
breach.
10.8 Dispute Resolution. The Parties agree to attempt initially to solve
all claims, disputes or controversies arising under, out of or in connection
with this Agreement by conducting good faith negotiations. If the Parties are
unable to settle the matter between themselves, the matter shall thereafter be
resolved by alternative dispute resolution, starting with mediation and
including, if necessary, a final and binding arbitration. Whenever a Party shall
decide to institute arbitration proceedings, it shall give written notice to
that effect to the other Party. The Party giving such notice shall refrain from
instituting the arbitration proceedings for a period of sixty (60) days
following such notice. During such period, the Parties shall make good faith
efforts to amicably resolve the dispute without arbitration. Any arbitration
hereunder shall be conducted under the rules of the American Arbitration
Association. Each such arbitration shall be conducted by a panel of three
arbitrators: one arbitrator shall be appointed by each of Purchaser and Rapor
and the third shall be appointed by the American Arbitration Association. Any
such arbitration shall be held in New York, New York. The arbitrators shall have
the authority to grant specific performance. Judgment upon the award so rendered
may be entered in any court having jurisdiction or application may be made to
such court for judicial acceptance of any award and an order of enforcement, as
the case may be. In no event shall a demand for arbitration be made after the
date when institution of a legal or equitable proceeding based on such claim,
dispute or other matter in question would be barred under this Agreement or by
the applicable statute of limitations. The prevailing party in any such
arbitration shall be entitled to recover from the other party, in addition to
any other remedies, all reasonable costs, attorneys' fees and other expenses
incurred by such prevailing party.
31
IN WITNESS WHEREOF, the Parties hereto have executed this instrument as of
the date and year first above written.
GVI SECURITY SOLUTIONS, INC.
By:
----------------------------------
Name:
Title:
RAPOR ACQUISITION CORP.
By:
----------------------------------
Name:
Title:
RAPOR, INC.
By:
----------------------------------
Name:
Title:
32
EXHIBIT A
INVESTMENT REPRESENTATION LETTER
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
EXHIBIT C
FORM OF PURCHASER WARRANT
EXHIBIT D
VOTING AGREEMENT
