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EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 31, 2007
AMONG
HEALTHSPORT, INC.,
INNOZEN, INC.
AND
INNOZEN ACQUISITION SUB, INC.
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THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") dated as
of
January 31, 2007 is entered into by and among INNOZEN, INC., a
Delaware
corporation ("COMPANY"), HEALTHSPORT, INC., a Delaware corporation
("PARENT")
and INNOZEN ACQUISITION SUB, INC., a Delaware corporation and a
wholly owned
subsidiary of Parent ("ACQUISITION SUB"). Capitalized terms not
otherwise
defined in this Agreement are defined in Schedule A. This Agreement
is made and
entered into with reference to the following facts:
A. Company is a formulator, developer and manufacturer of edible
thin
film strips that deliver drug actives (the "COMPANY BUSINESS"), and
Parent and
its subsidiaries are in the business of the development,
manufacturing and
marketing of nutritional supplements in a oneof-a-kind edible film
strip
delivery system (the "PARENT BUSINESS").
B. In accordance with the provisions of this Agreement, and subject
to
its terms and conditions, (i) the Board of Directors of Company has
determined,
and as soon as practicable after the date of this Agreement, each
of the Boards
of Directors of Parent and Acquisition Sub will determine, that the
Merger is
fair and in the best interests of their respective stockholders and
(ii) the
Board of Directors of Company has approved, and as soon as
practicable after the
date of this Agreement, each of the Boards of Directors of Parent
and
Acquisition Sub will approve, the Merger in accordance with this
Agreement.
NOW THEREFORE in consideration of the premises and the
representations,
warranties, covenants and agreements herein contained and intending
to be
legally bound hereby, Company, Parent and Acquisition Sub hereby
agree as
follows:
ARTICLE 1
THE MERGER
Section 1.1. THE MERGER. At the Effective Time and upon the terms
and
subject to the conditions of this Agreement and in accordance with
the DGCL,
Acquisition Sub will be merged with and into Company (the
"MERGER"). Following
the Merger, Company will continue as the surviving corporation (the
"SURVIVING
COMPANY") and the separate corporate existence of Acquisition Sub
will cease.
The Merger is intended to qualify as a tax-free reorganization
under Section 368
of the Code.
Section 1.2. FILING OF MERGER CERTIFICATE. Subject to the terms
and
conditions set forth in this Agreement, the Certificate of Merger
will be duly
executed and acknowledged by Company and thereafter delivered to
the Secretary
of State of the State of Delaware for filing pursuant to the DGCL
on the Closing
Date.
Section 1.3. CLOSING OF THE MERGER. The closing of the Merger
(the
"CLOSING") will take place at a time and on a date (the "CLOSING
DATE") to be
specified by the parties, which will be no later than the fifth
business day
following the satisfaction or waiver of the conditions set forth in
ARTICLE 6,
at the offices of Guth I Christopher LLP, Suite 1250, 10866
Wilshire Boulevard,
Los Angeles, CA 90024, unless another time, date or place is agreed
to in
writing by the parties.
Section 1.4. EFFECTS OF THE MERGER. The Merger will have the
effects
set forth in the DGCL. Without limiting the generality of the
foregoing and
subject thereto, at the Effective Time the Surviving Company will
succeed to all
the rights and property of Acquisition Sub and Company and will be
subject to
all the debts and liabilities of Acquisition Sub and Company.
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Section 1.5. CERTIFICATE OF INCORPORATION AND BYLAWS. The
Certificate
of Incorporation of Acquisition Sub in effect at the Effective Time
will be the
Certificate of Incorporation of the Surviving Company until amended
in
accordance with Law. The bylaws of the Company in effect at the
Effective Time
will be the bylaws of the Surviving Company until amended in
accordance with
Law. The Certificate of Incorporation of Acquisition Sub is
attached hereto as
Exhibit A.
Section 1.6. DIRECTORS. The directors of Acquisition Sub at the
Effective Time will be the initial directors of the Surviving
Company, each to
hold office in accordance with the Certificate of Incorporation and
bylaws of
the Surviving Company until such director's successor is duly
elected or
appointed and qualified.
Section 1.7. OFFICERS. The officers of the Company at the
Effective
Time will be the initial officers of the Surviving Company, each to
hold office
in accordance with the Certificate of Incorporation and bylaws of
the Surviving
Company until such officer's successor is duly elected or appointed
and
qualified.
ARTICLE 2
EFFECT ON
EQUITY INTERESTS OF THE
CONSTITUENT ENTITIES; EXCHANGE OF CERTIFICATES
Section 2.1. CONVERSION OF COMPANY CAPITAL SHARES.
Section 2.1.1. MERGER CONSIDERATION. At the Effective Time,
each Company Capital Share issued and outstanding immediately prior
to the
Effective Time (other than Dissenting Shares and Treasury Shares)
will, without
any action on the part of Acquisition Sub, Company or the holder
thereof, be
converted into and become a number of fully paid and nonassessable
Parent Common
Shares equal to the Exchange Ratio (the "MERGER
CONSIDERATION").
Section 2.1.2. FRACTIONAL SHARES. No fractional Parent Common
Shares will be issued in the Merger. If any Stockholder would
otherwise be
entitled to a fractional Parent Common Share, that Stockholder will
be entitled
to receive an amount of cash determined by multiplying the Exchange
Price by the
fractional share interest to which that Stockholder would otherwise
be entitled.
This cash amount will not bear interest, and will be paid to the
Stockholder
upon surrender of each certificate representing that Stockholder's
outstanding
Company Capital Shares. The parties acknowledge that payment of
cash in lieu of
issuing fractional shares was not separately bargained for, but
merely
represents a mechanical rounding off for purposes of simplifying
the corporate
and accounting complexities which would otherwise be caused by the
issuance of
fractional shares.
Section 2.1.3. CANCELLATION OF TREASURY SHARES. At the
Effective Time, each Treasury Share will be automatically canceled,
and no
Parent Common Shares will be delivered with respect thereto.
Section 2.1.4. DELIVERY AND PAYMENT OF MERGER CONSIDERATION.
Promptly after surrender by a Stockholder to the Surviving Company
of each
certificate representing the Stockholder's Company Capital Shares
and a duly
executed letter of transmittal, that Stockholder will receive (i)
one or more
certificates representing the aggregate whole number of Parent
Common Shares
constituting the Merger Consideration to be delivered to that
Stockholder
pursuant to Section 2.1.1 and (ii) the amount of cash, if any, to
be paid in
lieu of fractional Parent Common Shares pursuant to Section
2.1.2.
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Section 2.1.5. EFFECT OF EXCHANGE. The Merger Consideration
delivered upon the surrender of certificates representing Company
Capital
Shares, in accordance with the terms of this Agreement, will be in
full
satisfaction of all rights pertaining to such Company Capital
Shares, and after
the Effective Time there will be no further registration of
transfers on the
stock transfer books of the Surviving Company of the Company
Capital Shares
which were outstanding immediately prior to the Effective Time.
Section 2.1.6. CONVERSION OF ACQUISITION SUB COMMON SHARES. At
the Effective Time, each outstanding Acquisition Sub Common Share
will be
converted into one Surviving Company Common Share.
Section 2.2. APPRAISAL RIGHTS.
Section 2.2.1. DISSENTING SHARES. Dissenting Shares will not
be converted into or represent the right to receive the Merger
Consideration,
but will instead represent the right to receive payment of the
appraised value
of the Dissenting Shares in accordance with the provisions of
Section 262 of the
DGCL.
Section 2.2.2. FAILURE TO PERFECT. Each Company Capital Share
held by Stockholders who have failed to perfect, or who have
withdrawn or lost,
their rights to appraisal of such shares under Section 262 of the
DGCL will be
deemed to have been converted into, and to have become exchangeable
for, the
right to receive the Merger Consideration as of the Effective Time,
without
interest. The Merger Consideration will be paid upon surrender of
each
certificate that formerly evidenced such Company Capital Shares as
provided in
Section 2.1.1.
Section 2.2.3. NOTICE TO PARENT. Company will give Parent
prompt written notice of any assertions of appraisal rights or
withdrawals of
assertions of appraisal rights, and any other instrument in respect
thereof
received by Company and the opportunity to direct all negotiations
and
proceedings with respect to demands for appraisal under the
DGCL.
Section 2.3. TREATMENT OF STOCK OPTIONS AND WARRANTS.
Section 2.3.1. CONVERSION OF STOCK OPTIONS. Each Company Stock
Option (each of which is exercisable into one Company Common Share)
will be
converted into the right to receive a vested option to purchase one
Parent
Common Share at an exercise price of $1.36 per share (based on a
$0.30 current
exercise price). Company Stock Options with exercise prices higher
than $0.30
will be converted into options with an equally increased exercise
price (for
example, a Company Stock Option with an exercise price of $0.35
will be
converted into an option to purchase one Parent Common Share for
$1.41).
Section 2.3.2. FORM S-8. At the earlier to occur of (i) the
effectiveness of a Form S-3 filed by Parent with respect to the
Parent Common
Shares issued hereunder or (ii) twelve (12) months after the
Closing, Parent
will file a registration statement on Form S-8 (or any successor or
other
appropriate forms) with respect to Parent Common Shares subject to
stock options
granted pursuant to Section 2.3.1. Parent will use its best efforts
to maintain
the effectiveness of such registration statement or registration
statements (and
maintain the current status of the prospectus or prospectuses
contained therein)
for so long as such options remain outstanding.
Section 2.3.3. EXERCISE OF WARRANTS. Immediately prior to the
Effective Time, Company will require all holders of its outstanding
warrants (as
described in Section 3.3) to exercise such warrants.
Section 2.3.4. AMENDMENTS TO COMPANY STOCK OPTIONS. At or
before the Closing, Company will amend the terms of the Company
Stock Options,
if necessary, to give effect to the provisions of this Section
2.3.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
As an inducement for Parent and Acquisition Sub to enter into
this
Agreement, Company represents and warrants that, except as set
forth in the
Company Disclosure Schedule or as contemplated by this Agreement,
each of the
following statements is true and correct as of the date hereof:
Section 3.1. ORGANIZATION, STANDING AND POWER. Company (i) is a
corporation duly organized and validly existing in good standing
under the laws
of the State of Delaware; (ii) has the requisite power and adequate
authority,
rights and franchises to own its properties and to carry on its
business as now
conducted; and (iii) is duly qualified and in good standing in each
jurisdiction
in which the character of its business makes such qualification
necessary,
except where the failure to be qualified is not reasonably expected
to have a
Material Adverse Effect.
Section 3.2. AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY.
Section 3.2.1. Company has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate
the Merger and
the other Transactions to be performed or consummated by Company in
accordance
with the terms of this Agreement. The execution and delivery by
Company of this
Agreement and the consummation by Company of the Merger and the
other
Transactions to be performed or consummated by Company in
accordance with the
terms of this Agreement have been duly authorized by all necessary
corporate
action on the part of Company, subject, in the case of the Merger,
to receipt of
Company Stockholder Approval. Company has duly executed and
delivered this
Agreement, and, assuming due authorization, execution and delivery
of this
Agreement by Parent and Acquisition Sub, this Agreement constitutes
its legal,
valid and binding obligation, enforceable against it in accordance
with its
terms, except as such enforceability may be limited by applicable
bankruptcy,
insolvency, moratorium, reorganization or similar laws from time to
time in
effect which affect creditors' rights generally, and by legal and
equitable
limitations on the availability of specific remedies.
Section 3.2.2. The Company's Board of Directors, at a meeting
duly called and held, adopted resolutions (i) adopting this
Agreement and
approving the Merger and the other Transactions to be performed or
consummated
by Company in accordance with the terms of this Agreement, (ii)
determining that
the terms of the Merger and the other Transactions to be performed
or
consummated by Company in accordance with the terms of this
Agreement are fair
to and in the best interests of Company and its stockholders, (iii)
directing
that this Agreement be submitted to a vote of Company's
stockholders and (iv)
recommending that the Company's stockholders approve this
Agreement.
Section 3.2.3. The only vote of holders of any Company Capital
Shares necessary to approve this Agreement and the Merger is the
Company
Stockholder Approval.
Section 3.3. CAPITAL STRUCTURE. Upon acceptance by the Secretary
of
State of Delaware of the filing of the Company's Fourth Amended and
Restated
Certificate of Incorporation (a copy of which is attached hereto as
Exhibit B),
which filing shall be completed prior to Closing, the authorized
capital stock
of the Company will consist of (i) 27,000,000 shares of Common
Stock, par value
$0.0001 per share (the "COMPANY COMMON SHARES"), (ii) 8,000,000
shares of Series
A Preferred Stock, par value $0.0001 per share (the "SERIES A
SHARES"), and
(iii) 2,000,000 shares of Series B Preferred Stock, par value of
$0.0001 per
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share (the "SERIES B SHARES", and together with the Company Common
Shares and
the Series A Shares, the "COMPANY CAPITAL SHARES"), of which there
are
14,000,000 Company Common Shares, 7,334,354 Series A Shares, and
1,385,040
Series B Shares issued and outstanding. All of the issued and
outstanding
Company Capital Shares have been duly and validly authorized and
issued, and are
fully paid and non-assessable. There are no outstanding
subscriptions, warrants,
options, calls, commitments or other rights or agreements by which
the Company
is bound relating to the issuance, sale or redemption of Company
Capital Shares
or other securities of the Company, except for: (A) Company Stock
Options to
purchase an aggregate of 2,825,390 Company Common Shares; (B)
warrants to
purchase an aggregate of 540,000 Company Common Shares; and (C)
Series A
Warrants to purchase an aggregate of 342,745 Series A Shares.
Except with
respect to the Company Stock Options and the warrants described in
the preceding
sentence, no Company Capital Shares or other securities of the
Company are
reserved for any purpose. All Company Stock Options and warrants
will be
exercised or cancelled prior to Closing and no Company Stock
Options or warrants
will be outstanding at Closing.
Section 3.4. NO SUBSIDIARIES; INTERESTS. Company has no debt or
equity
interest in any other entity, nor any obligation, option or right
to acquire any
such interest.
Section 3.5. NO CONFLICTS. The execution, delivery and performance
by
the Company of this Agreement and the consummation of the Merger
and the other
Transactions do not (i) violate any Permit, Law or Order applicable
to the
Company; (ii) violate or conflict with any provision of the charter
documents or
bylaws of the Company; (iii) result in a breach of, or constitute a
default (or
an event which, with or without notice or lapse of time or both,
would
constitute a default) under, or permit cancellation of, or result
in the
creation of any Lien upon the Company's assets under any of the
terms,
conditions or provisions of any contract, Order or Permit to which
the Company
is a party; or (iv) require the consent of any third party or
Authority except
for violations, conflicts, defaults, consents or other similar
occurrence that
are not reasonably expected to have a Material Adverse Effect.
Section 3.6. PERMITS; COMPLIANCE WITH LAW; ENVIRONMENTAL
COMPLIANCE.
The Company holds all material Permits currently necessary for the
lawful
operation of the Business. The Company has complied with, and is
not in default
under or in violation of, any Permit, Law or Order to which it is
subject,
except for defaults or violations that are not reasonably expected
to have a
Material Adverse Effect. To the knowledge of the Company, the
Company and the
Leased Properties are in compliance with (i) all terms and
conditions of any
Permits required by the Environmental Laws and (ii) all other
requirements of
the Environmental Laws, except in each case for matters which are
not reasonably
expected to have a Material Adverse Effect.
Section 3.7. CONTINGENCIES. To the knowledge of the Company, except
for
Claims arising in the ordinary course of business, which are not
expected to be
materially inconsistent in type or number with past experience,
there are no
Claims pending or threatened against the Company which are
reasonably expected
to have a Material Adverse Effect. The Company is not subject to
any Order which
is reasonably expected to have a Material Adverse Effect.
Section 3.8. FINANCIAL CONDITION. The unaudited balance sheets of
the
Company as of December 31, 2004, 2005 and 2006, and the unaudited
related income
statements for the periods then ended (collectively, the "COMPANY
FINANCIAL
STATEMENTS"), previously furnished to Parent (i) are true and
correct in all
material regards as of the dates thereof and for the periods then
ended and (ii)
fairly present the financial condition of the Company as at the
dates
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thereof and the results of operations of the Company for the
periods covered
thereby, and (iii) have been prepared in accordance with GAAP.
Section 3.9. TITLE TO ASSETS. The Company has good title to all
assets
reflected on its books except for (i) Liens securing obligations
set forth in
the Company Financial Statements, (ii) Liens securing taxes which
are not
delinquent or are being contested in good faith, (iii) Liens
arising as a result
of purchase or sales orders in the ordinary course of business
consistent with
past practice, and (iv) any defects in title or Liens that are not
reasonably
expected to have a Material Adverse Effect.
Section 3.10. REAL PROPERTY LEASES. The only material interests in
real
property held by the Company are leasehold interests as set forth
on SCHEDULE
3.10 (the "COMPANY LEASED PROPERTIES"). Except for normal wear and
tear and for
matters not reasonably expected to have a Material Adverse Effect,
the Company
Leased Properties have been well maintained and are in good
operating condition
and repair. The Company has delivered to Parent true, correct and
complete
copies of the leases relating to the Company Leased Properties.
Section 3.11. INTELLECTUAL PROPERTY. To the knowledge of the
Company,
the use of the Intellectual Property in the operation of the
Company Business
does not infringe any intellectual property rights of another
Person, except for
Claims which are not reasonably expected to have a Material Adverse
Effect. The
Company has not received any notice contesting its right to use, or
asserting
infringement with respect to, any Intellectual Property now used by
it in
connection with the Company Business or the operation thereof,
except for
matters previously resolved or which are not reasonably expected to
have a
Material Adverse Effect. Except for matters not reasonably expected
to have a
Material Adverse Effect, the Company possesses the right to use in
perpetuity
(without royalty or payment) all Intellectual Property necessary to
conduct the
Company Business as of the date hereof.
Section 3.12. CONTRACTS. SCHEDULE 3.12 lists each Significant
Contract
to which Company is a party. Except for matters not reasonably
expected to have
a Material Adverse Effect, to Company's knowledge, each of the
Significant
Contracts listed on Schedule 3.12 (i) has been duly authorized,
executed and
delivered by the parties thereto, (ii) remains in full force and
effect to the
extent of its terms, (iii) is binding on the parties thereto in
accordance with
and to the extent of its terms and Laws; and (iv) is not subject
to, and Company
has not received any written notice threatening or declaring,
termination as a
result of any existing or alleged uncured breach or default by
Company and no
other party is in default thereunder in any material respect.
Section 3.13. INSURANCE. The Company has previously delivered to
Parent
true and complete copies of all insurance policies currently
providing coverage
for the assets of the Company Business.
Section 3.14. LABOR CONTROVERSIES. To the knowledge of the Company,
(i)
no concerted work stoppage or other general labor dispute, and (ii)
no
application for certification of a collective bargaining agent, is
pending or
threatened against the Company. The Company is in compliance with
all laws
relating to the employment and safety of labor, including
provisions relating to
wages, hours, benefits and collective bargaining and the
occupational safety and
health acts, laws and regulations, except for matters not
reasonably expected to
have a Material Adverse Effect. The Company is not liable for any
material
arrears (except for the current pay period and accrued vacation and
personal
time) in wages or any taxes or penalties for failure to comply with
any of the
foregoing. No key employee of the Company recently terminated his
or
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her employment with the Company or, to the knowledge of the
Company, plans to
terminate his or her employment with the Company.
Section 3.15. ERISA. The Company does not have any material
liability
with respect to any Employee Benefit Plan. The Company does not
have any
liability with respect to a "multi-employer plan" (as defined in
section 3(37)
of ERISA). A true and correct copy of each material Employee
Benefit Plan of the
Company has been delivered to Parent. Each Employee Benefit Plan of
the Company
complies and has been administered in form and in operation in all
material
respects with all applicable requirements of law, and no event has
occurred
which will or could cause any such plan to fail to comply with such
requirements
in any material respect. No notice has been issued by any Authority
questioning
or challenging such compliance. There have been no (i) "prohibited
transactions"
(as described in section 406 of ERISA or section 4975 of the Code)
with respect
to any Employee Benefit Plan of the Company or (ii) reportable
events (as
described in section 4043 of ERISA) with respect to any Employee
Benefit Plan of
the Company that is subject to Title IV of ERISA. If any Employee
Benefit Plan
of the Company were terminated immediately after the Closing, there
would be no
unfunded liability with respect to the plan, its participants or
beneficiaries
or the Pension Benefit Guaranty Corporation. The Company has no
liability for
providing, under any Employee Benefit Plan or otherwise, any
post-retirement
medical or life insurance benefits, other than statutory liability
for providing
group health plan continuation coverage under Part 6 of Title I of
ERISA and
section 4980B of the Code.
Section 3.16. TAXES. All federal, and all material state, local
and
foreign Tax returns required to be filed by the Company through the
Closing Date
have been accurately prepared in all material respects, and were
duly and timely
filed, and all material Taxes (including Taxes withheld from the
salaries of
employees that were issued Form W-2 statements) and all other
withholding Taxes
and obligations and all deposits required to be made by the Company
with respect
to such withholding Taxes or otherwise), interest, penalties,
assessments and/or
deficiencies required to be paid before the Closing Date have been
timely paid.
The provisions for the payment of taxes on the Company Financial
Statements or
the books of account for taxes not due and payable as of the
Closing Date are
reasonable. The Company has never (i) filed a consent under Code
Sec. 341(f)
concerning collapsible corporations; (ii) made any payments, nor is
it a party
to any contract that could reasonably be expected to obligate it to
make any
payments, that will not be deductible under Code Sec. 280G; (iii)
entered into
any tax allocation or sharing agreement; or (iv) been a member of a
consolidated
group during any part of any consolidated return year.
Section 3.17. LIST OF EMPLOYEES. SCHEDULE 3.17 hereto correctly
sets
forth in all material regards a list of the Company's employees as
of the date
hereof, and their current gross compensation.
Section 3.18. AFFILIATE AGREEMENTS. Except for compensation and
distributions reflected in the Company Financial Statements,
employee benefits
and transactions not material either singly or in the aggregate,
the Company has
not had any transactions with any Affiliate in the past twelve
months.
Section 3.19. BROKERS. The Company has not employed any broker
or
finder in connection with the Merger or other Transactions, and
Parent and
Acquisition Sub shall not have any liability or otherwise suffer or
incur any
loss as a result of or in connection with any brokerage or finder's
fee or other
commission of any Person retained by the Company in connection with
the Merger
or other Transactions.
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Section 3.20. ACCURACY OF STATEMENTS. To the knowledge of the
Company,
neither this Agreement nor any Schedule hereto furnished by the
Company contains
any untrue statement of a material fact regarding the Company, or
omits to state
a material fact necessary to make the statements regarding the
Company contained
herein or therein, in light of the circumstances in which they are
made, not
misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
As an inducement for Company to enter into this Agreement, Parent
and
Acquisition Sub jointly and severally represent and warrant that,
except as set
forth in the Parent Disclosure Schedule or as contemplated by this
Agreement,
each of the following statements is true and correct as of the date
hereof:
Section 4.1. ORGANIZATION, STANDING AND POWER. Each company in
the
Parent Group is a corporation duly organized, validly existing and
in good
standing under the laws of the state of its incorporation, which
states are
shown on Schedule 4.5 for all such companies. Each company in the
Parent Group
(i) has the requisite power and adequate authority, rights and
franchises to own
its properties and to carry on its business as now conducted; and
(ii) is duly
qualified and in good standing in each jurisdiction in which the
character of
its business makes such qualification necessary, except where the
failure to be
qualified is not reasonably expected to have a Material Adverse
Effect.
Section 4.2. AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY.
Section 4.2.1. Each of Parent and Acquisition Sub has all
requisite corporate power and authority to execute and deliver this
Agreement
and to consummate the Merger and the other Transactions to be
performed or
consummated by each of them in accordance with the terms of this
Agreement. The
execution and delivery by each of Parent and Acquisition Sub of
this Agreement
and the consummation by each of them of the Merger and the other
Transactions to
be performed or consummated by each of them in accordance with the
terms of this
Agreement will be duly authorized by all necessary corporate action
on the part
of each of Parent and Acquisition Sub, subject, in the case of the
Merger, to
ratification by the Board of Directors of each of Parent and
Acquisition Sub and
receipt of Parent Stockholder Approval. Each of Parent and
Acquisition Sub has
duly executed and delivered this Agreement, and, assuming due
authorization,
execution and delivery of this Agreement by Company, this Agreement
constitutes
its legal, valid and binding obligation, enforceable against it in
accordance
with its terms, except as such enforceability may be limited by
applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws
from time to
time in effect which affect creditors' rights generally, and by
legal and
equitable limitations on the availability of specific remedies.
Section 4.2.2. Each Board of Directors of Parent and
Acquisition Sub, at a meeting duly called and held, will adopt
resolutions (i)
adopting this Agreement, ratifying the execution and delivery
thereof and
approving the Merger and the other Transactions to be performed or
consummated
by each of them in accordance with the terms of this Agreement,
(ii) determining
that the terms of the Merger and the other Transactions to be
performed or
consummated by each of them in accordance with the terms of this
Agreement are
fair to and in the best interests of each of them and its
stockholders, (iii)
directing that this Agreement be submitted to a vote of Parent's
stockholders
and (iv) recommending that Parent's stockholders approve this
Agreement.
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Section 4.3. The only vote of holders of any Parent Capital
Shares
necessary to approve this Agreement and the Merger is the Parent
Stockholder
Approval.
Section 4.4. CAPITAL STRUCTURE. The authorized capital stock of
Acquisition Sub consists of 1,000,000 shares of Common Stock, par
value $0.01
per share (the "ACQUISITION SUB COMMON SHARES"), of which 100,000
shares shall
be issued to Parent. T he authorized capital stock of Parent
consists of (i)
500,000,000 shares of Common Stock, par value $0.0001 per share
(the "PARENT
COMMON SHARES"), and (ii) 2,000,000 shares of Preferred Stock, par
value $2.75
per share (the "PARENT PREFERRED SHARES", and together with the
Parent Common
Shares, the "PARENT CAPITAL SHARES"), of which there are 19,501,945
Parent
Common Shares and no Parent Preferred Shares issued and
outstanding. All of the
issued and outstanding Parent Common Shares and Acquisition Common
Shares have
been duly and validly authorized and issued, and are fully paid
and
non-assessable. There are no outstanding subscriptions, warrants,
options,
calls, commitments or other rights or agreements by which Parent is
bound
relating to the issuance, sale or redemption of Parent Capital
Shares or other
securities of Parent, except for: (A) Parent Stock Options to
purchase an
aggregate of 495,000 Parent Common Shares; and (B) warrants to
purchase an
aggregate of 107,500 Parent Common Shares. Except with respect to
the Parent
Stock Options, the warrants described in the preceding sentence and
the Private
Placement, no Parent Capital Shares, Acquisition Sub Common Shares
or other
securities of either Parent or Acquisition Sub are reserved for any
purpose.
Section 4.5. SUBSIDIARIES; INTERESTS. Acquisition Sub has no debt
or
equity interest in any other entity, nor any obligation, option or
right to
acquire any such interest. Other than Acquisition Sub and the
subsidiaries
listed on Schedule 4.5 (the "Parent Subsidiaries"), Parent has no
debt or equity
interest in any other entity, nor any obligation, option or right
to acquire any
such interest. Parent is the holder of 100% of the outstanding
equity interests
in each of the Parent Subsidiaries, none of the Parent Subsidiaries
has any
outstanding debt obligations and no Person has any obligation,
option or right
to acquire any equity or debt interest in any of the Parent
Subsidiaries.
Section 4.6. NO PRIOR ACTIVITIES. Except for obligations incurred
in
connection with its incorporation or organization or the
negotiation and
consummation of this Agreement and the Transaction, Acquisition Sub
has neither
incurred any obligation or liability nor engaged in any business or
activity of
any type or kind whatsoever or entered into any agreement or
arrangement with
any Person.
Section 4.7. NO CONFLICTS. The execution, delivery and performance
of
this Agreement by each of Parent and Acquisition Sub and the
consummation of the
Merger and the other Transactions do not (i) violate any Permit,
Law or Order
applicable to any company in the Parent Group; (ii) violate or
conflict with any
provision of the charter documents or bylaws of either Parent or
Acquisition
Sub; (iii) result in a breach of, or constitute a default (or an
event which,
with or without notice or lapse of time or both, would
