EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
by and between
TECHNOLOGY HOLDINGS, INC.,
and
COLLEXIS HOLDINGS, INC.
February 13, 2007
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TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS................................................................1
ARTICLE II THE
MERGER................................................................6
Section 2.1
Merger..............................................................6
Section 2.2
Effective
Time......................................................6
Section 2.3
Certificate of Incorporation; By-laws; Directors and
Officers.......6
Section 2.4
Effects of the
Merger...............................................7
Section 2.5
Closing.............................................................7
ARTICLE III MERGER CONSIDERATION; CONVERSION OF
SECURITIES...........................7
Section 3.1
Manner and Basis of Converting Capital
Stock........................7
Section 3.2
Surrender and Exchange of
Certificates..............................8
Section 3.3
Options,
Warrants...................................................9
Section 3.4
Parent Common
Stock................................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
COMPANY............................10
Section 4.1
Organization.......................................................10
Section 4.2
Authorization; Validity of
Agreement...............................11
Section 4.3
Capitalization.....................................................11
Section 4.4
Consents and Approvals; No
Violations..............................11
Section 4.5
Financial
Statements...............................................11
Section 4.6
No Undisclosed
Liabilities.........................................12
Section 4.7
Litigation.........................................................12
Section 4.8
No Default; Compliance with Applicable
Laws........................12
Section 4.9
Broker's and Finder's
Fees.........................................12
Section 4.10
Assets and
Contracts...............................................12
Section 4.11
Tax Returns and
Audits.............................................13
Section 4.12
Patents and Other Intangible
Assets................................13
Section 4.13
Employee Benefit Plans;
ERISA......................................14
Section 4.14
Title to Property and
Encumbrances.................................15
Section 4.15
Condition of
Properties............................................15
Section 4.16
Insurance
Coverage.................................................15
Section 4.17
Interested Party
Transactions......................................15
Section 4.18
Environmental
Matters..............................................15
Section 4.19
Disclosure.........................................................16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
PARENT..................................17
Section 5.1
Organization.......................................................17
Section 5.2
Authorization; Validity of
Agreement...............................17
Section 5.3
Consents and Approvals; No
Violations..............................17
Section 5.4
Litigation.........................................................18
Section 5.5
No Default; Compliance with Applicable
Laws........................18
ii
Section 5.6
Broker's and Finder's Fees; Broker/Dealer
Ownership................18
Section 5.7
Capitalization of
Parent...........................................18
Section 5.8
Validity of
Shares.................................................19
Section 5.9
SEC Reporting and
Compliance.......................................19
Section 5.10
Financial
Statements...............................................20
Section 5.11
No General
Solicitation............................................20
Section 5.12
Absence of Undisclosed
Liabilities.................................20
Section 5.13
Changes............................................................20
Section 5.14
Tax Returns and
Audits.............................................21
Section 5.15
Employee Benefit Plans;
ERISA......................................21
Section 5.16
Interested Party
Transactions......................................22
Section 5.17
Questionable
Payments..............................................22
Section 5.18
Obligations to or by
Stockholders..................................22
Section 5.19
Schedule of Assets and
Contracts...................................22
Section 5.20
Environmental
Matters..............................................23
Section 5.21
Employees..........................................................24
Section 5.22
Disclosure.........................................................24
ARTICLE VI CONDUCT OF BUSINESSES PENDING THE
MERGER.................................24
Section 6.1
Conduct of Business by the Company Pending the
Merger..............24
Section 6.2
Conduct of Business by Parent Pending the
Merger...................25
ARTICLE VII ADDITIONAL
AGREEMENTS...................................................26
Section 7.1
Access and
Information.............................................26
Section 7.2
Additional
Agreements..............................................27
Section 7.3
Publicity..........................................................27
Section 7.4
Appointment of
Directors...........................................27
Section 7.5
Parent Name Change and Exchange
Listing............................27
Section 7.6
Meeting of
Stockholders............................................27
ARTICLE VIII CONDITIONS OF PARTIES'
OBLIGATIONS.....................................28
Section 8.1
Company
Obligations................................................28
Section 8.2
Parent
Obligations.................................................29
ARTICLE IX INDEMNIFICATION AND RELATED
MATTERS......................................31
Section 9.1
Indemnification by
Parent..........................................31
Section 9.2
Survival...........................................................32
Section 9.3
Time
Limitations...................................................32
Section 9.4
Limitation on
Liability............................................32
Section 9.5
Notice of
Claims...................................................32
Section 9.6
Payment of
Damages.................................................33
ARTICLE X TERMINATION PRIOR TO
CLOSING..............................................33
Section 10.1
Termination of
Agreement...........................................33
Section 10.2
Termination of
Obligations.........................................34
ARTICLE XI
MISCELLANEOUS............................................................34
iii
Section 11.1
Amendments.........................................................34
Section 11.2
Notices............................................................34
Section 11.3
Entire
Agreement...................................................35
Section 11.4
Expenses...........................................................35
Section 11.5
Severability.......................................................36
Section 11.6
Successors and Assigns;
Assignment.................................36
Section 11.7
No Third Party
Beneficiaries.......................................36
Section 11.8
Counterparts; Delivery by
Facsimile................................36
Section 11.9
Waiver.............................................................36
Section 11.10
No Constructive
Waivers............................................37
Section 11.11
Further
Assurances.................................................37
Section 11.12
Recitals...........................................................37
Section 11.13
Headings...........................................................37
Section 11.14
Governing
Law......................................................37
Section 11.15
Dispute
Resolution.................................................37
Section 11.16
Interpretation.....................................................38
LIST OF EXHIBITS
Exhibits
--------
Exhibit A
Certificate of Incorporation of Surviving Corporation
Exhibit B
By-laws of Surviving Corporation
Exhibit C
Directors and Officers of Surviving Corporation
iv
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into as of February
13. 2007
by and between TECHNOLOGY HOLDINGS ("Parent"), a Nevada
corporation, and
COLLEXIS HOLDINGS, INC., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is primarily engaged in the business of
developing
and marketing software that enables discovery by pulling the key
ideas out of
text;
WHEREAS, the Board of Directors of each of Parent and the Company
has
approved, and deems it advisable and in the best interests of its
stockholders
to consummate, the acquisition of the Company by Parent, which
acquisition is to
be effected by the merger of the Company with and into the Parent,
with the
Parent being the surviving entity (the "Merger"), upon the terms
and subject to
the conditions set forth in this Agreement (as defined herein); and
WHEREAS, the parties hereto intend that the Merger 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").
NOW, THEREFORE, in consideration of the mutual agreements and
covenants
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used in this Agreement shall have the following
meanings:
"Acquisition Proposal" shall have the meaning given to such term in
Section 6.2 hereof.
"Action" shall mean any claim, action, suit, proceeding,
investigation or
order.
"Affiliate" shall mean, with respect to any Person, any Person
directly or
indirectly controlling, controlled by or under common control with,
such Person.
For the purposes of this definition, "control" (including, with
correlative
meaning, the terms "controlling," "controlled by" and "under common
control
with") means the possession, directly or indirectly, of the power
to direct or
cause the direction of management and policies of such Person
through the
ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Agreement and Plan of Merger, including
the
Company Disclosure Schedule, the Parent Disclosure Schedule and the
exhibits
attached hereto or referred to herein, as the same may be amended
or modified
from time to time in accordance with the provisions hereof.
"Balance Sheet" shall have the meaning given to such term in
Section 4.5
hereof.
"Balance Sheet Date" shall have the meaning given to such term in
Section
4.5 hereof.
"By-laws" shall have the meaning given to such term in Section
2.3(b)
hereof.
"Certificate of Incorporation" shall have the meaning given to such
term
in Section 2.3(a) hereof.
"Closing" shall have the meaning given to such term in Section 2.5
hereof.
"Closing Date" shall have the meaning given to such term in Section
2.5
hereof.
"Code" shall have the meaning given to such term in the third
recital to
this Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock Options" shall have the meaning given to such term in
Section 3.3(a) hereof.
"Company" shall have the meaning given to such term in the preamble
to
this Agreement.
"Company Capital Stock" shall mean, collectively, the Company
Common
Stock.
"Company Common Stock" shall mean the common stock, par value
$0.001 per
share, of the Company.
"Company Material Adverse Effect" shall mean any change, effect or
circumstance that by itself, or together with other changes,
effects and
circumstances is materially adverse or is reasonably likely to be
materially
adverse to the business, assets, liabilities, condition (financial
or otherwise)
or operations of the Company and its subsidiaries, taken as a
whole.
"Contract" shall have the meaning given to such term in Section 4.4
hereof.
"Consents" shall mean any permits, filings, notices, licenses,
consents,
authorizations, accreditation, waivers, approvals and the like of,
to, with or
by any Person.
"DGCL" shall mean the General Corporation Law of the State of
Delaware, as
amended.
"Dissenting Shares" shall have the meaning given to such term in
Section
3.2(d) hereof.
"Effective Time" shall have the meaning given to such term in
Section 2.2
hereof.
"Employee Benefit Plans" shall have the meaning assigned to it in
Section
4.13 hereof.
"Environmental Law" shall mean the Comprehensive Environmental
Response,
Compensation and Liability Act, 42 U.S.C. ss.ss. 9601 et seq.; the
Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C. ss.ss.
11001 et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. ss.ss.
6901 et seq.;
the Toxic Substances Control Act, 15 U.S.C. ss.ss. 2601 et seq.;
the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. ss.ss. 136 et
seq. and
comparable state statutes dealing with the registration, labeling
and use of
pesticides and herbicides; the Clean Air Act, 42 U.S.C. ss.ss. 7401
et seq.; the
Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C.
ss.ss. 1251 et
seq.; the Safe Drinking Water Act, 42 U.S.C. ss.ss.
2
300f et seq.; and the Hazardous Materials Transportation Act, 49
U.S.C. ss.ss.
1801 et seq., as any of the above referenced statutes have been
amended as of
the date hereof, all rules, regulations and policies promulgated
pursuant to any
of the above referenced statutes, and any other foreign, federal,
state or local
law, statute, ordinance, rule, regulation or policy governing
environmental
matters, as the same have been amended as of the date hereof.
"ERISA" shall mean the Employee Retirement Income Securities Act of
1974,
as amended, and the regulations issued thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended,
and the rules and regulations issued thereunder.
"GAAP" shall mean generally accepted accounting principles as in
effect
from time to time in the United States consistently applied.
"Hazardous Material" means any substance or material meeting any
one or
more of the following criteria: (a) it is or contains a substance
designated as
or meeting the characteristics of a hazardous waste, hazardous
substance,
hazardous material, pollutant, chemical substance or mixture,
contaminant or
toxic substance under any Environmental Law; (b) its presence at
some quantity
requires investigation, notification or remediation under any
Environmental Law;
(c) it contains, without limiting the foregoing, asbestos,
polychlorinated
biphenyls, petroleum hydrocarbons, petroleum derived substances or
waste,
pesticides, herbicides, crude oil or any fraction thereof, nuclear
fuel, natural
gas or synthetic gas; or (d) mold.
"Incentive Plans" shall have the meaning given to such term in
Section
3.3(d) hereof.
"Indebtedness" shall mean any obligation of the Company that under
GAAP is
required to be shown on the Balance Sheet of the Company as a
Liability. Any
obligation secured by a Lien on, or payable out of the proceeds of
production
from, property of the Company shall be deemed to be Indebtedness
even though
such obligation is not assumed by the Company.
"Indebtedness for Borrowed Money" shall mean (a) all Indebtedness
in
respect of money borrowed including, without limitation,
Indebtedness which
represents the unpaid amount of the purchase price of any property
and is
incurred in lieu of borrowing money or using available funds to pay
such amounts
and not constituting an account payable or expense accrual incurred
or assumed
in the ordinary course of business of the Company, (b) all
Indebtedness
evidenced by a promissory note, bond or similar written obligation
to pay money,
or (c) all such Indebtedness guaranteed by the Company or for which
the Company
is otherwise contingently liable.
"Information Statement" shall have the meaning given to such term
in
Section 7.7 hereof.
"Intellectual Property" shall have the meaning given to such term
in
Section 4.12(b) hereof.
"Investment Company Act" shall mean the Investment Company Act of
1940, as
amended.
"Letter of Transmittal" shall have the meaning assigned to it in
Section
3.2 hereof.
3
"Liability" shall mean any and all liability, debt, obligation,
deficiency, Tax, penalty, fine, claim, cause of action or other
loss, cost or
expense of any kind or nature whatsoever, whether asserted or
unasserted,
absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and
whether due or to become due and regardless of when asserted.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance,
lien or charge of any kind, including, without limitation, any
conditional sale
or other title retention agreement, any lease in the nature thereof
and the
filing of or agreement to give any financing statement under the
Uniform
Commercial Code of any jurisdiction and including any lien or
charge arising by
statute or other law.
"Merger" shall have the meaning given to such term in the second
recital
to this Agreement.
"Parent" shall have the meaning given to such term in the preamble
to this
Agreement.
"Parent Balance Sheet" shall have the meaning assigned to such term
in
Section 5.13 hereof.
"Parent Balance Sheet Date" shall have the meaning assigned to it
in
Section 5.13 hereof.
"Parent Common Stock" shall have the meaning given to such term in
the
fourth recital to this Agreement.
"Parent Employee Benefit Plans" shall have the meaning assigned to
such
term in Section 5.16 hereof.
"Parent Financial Statements" shall have the meaning assigned to
such term
in Section 5.11 hereof.
"Parent Material Adverse Effect" means any change, effect or
circumstance
that by itself, or together with other changes, effects and
circumstances is
materially adverse or is reasonably likely to be materially adverse
to the
business, assets, liabilities, condition (financial or otherwise)
or operations
of Parent and its subsidiaries, taken as a whole.
"Parent SEC Documents" shall have the meaning assigned to such term
in
Section 5.10(b) hereof.
"Permitted Liens" shall mean (a) Liens for taxes and assessments or
governmental charges or levies not at the time due or in respect of
which the
validity thereof shall currently be contested in good faith by
appropriate
proceedings; (b) Liens in respect of pledges or deposits under
workmen's
compensation laws or similar legislation, carriers',
warehousemen's, mechanics',
laborers' and materialmens' and similar Liens, if the obligations
secured by
such Liens are not then delinquent or are being contested in good
faith by
appropriate proceedings; and (c) Liens incidental to the conduct of
the business
of the Company that were not incurred in connection with the
borrowing of money
or the obtaining of advances or credits and which do not in the
aggregate
materially detract from the value of its property or materially
impair the use
made thereof by the Company in its business.
4
"Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, trust or other entity or
organization,
including any government or political subdivision or an agency or
instrumentality thereof.
"Private Placement" shall mean the private placement offering to
accredited investors of units consisting of shares of Parent Common
Stock.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and
the rules and regulations issued thereunder.
"Stockholder" shall mean any record holder of Company Capital
Stock.
"Surviving Corporation" shall have the meaning given to such term
in
Section 2.1 hereof.
"Tax" or "Taxes" shall mean (a) any and all taxes, assessments,
customs,
duties, levies, fees, tariffs, imposts, deficiencies and other
governmental
charges of any kind whatsoever (including, but not limited to,
taxes on or with
respect to net or gross income, franchise, profits, gross receipts,
capital,
sales, use, ad valorem, value added, transfer, real property
transfer, transfer
gains, transfer taxes, inventory, capital stock, license, payroll,
employment,
social security, unemployment, severance, occupation, real or
personal property,
estimated taxes, rent, excise, occupancy, recordation, bulk
transfer,
intangibles, alternative minimum, doing business, withholding and
stamp),
together with any interest thereon, penalties, fines, damages
costs, fees,
additions to tax or additional amounts with respect thereto,
imposed by the
United States (federal, state or local) or other applicable
jurisdiction; (b)
any liability for the payment of any amounts described in clause
(a) as a result
of being a member of an affiliated, consolidated, combined, unitary
or similar
group or as a result of transferor or successor liability,
including, without
limitation, by reason of Code Section 1.1502-6; and (c) any
liability for the
payments of any amounts as a result of being a party to any Tax
Sharing
Agreement or as a result of any express or implied obligation to
indemnify any
other Person with respect to the payment of any amounts of the type
described in
either clauses (a) or (b).
"Tax Return" shall include all returns and reports (including
elections,
declarations, disclosures, schedules, estimates and information
returns
(including Form 1099 and partnership returns filed on Form 1065))
required to be
supplied to a Tax authority relating to Taxes.
"Tax Sharing Agreements" shall have the meaning given to such term
in
Section 4.15 hereof.
ARTICLE II
THE MERGER
Section 2.1
Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, the Company shall be merged with
and into the
Parent in accordance with Section 92A.190 of the Revised Statutes
of the State
of Nevada and Section 252 of the DGCL. Following the Effective
Time, the
separate corporate existence of the Company shall cease, and the
Parent shall
continue as the corporation surviving the Merger (sometimes
hereinafter referred
to as the "Surviving Corporation").
5
Section 2.2
Effective Time. The Company and Parent shall cause a
certificate of merger to be filed on the Closing Date (or on such
other date as
the Company and Parent may agree in writing) with the Secretary of
State of the
State of Nevada as provided in Section 92A.190 of the Revised
Statutes of the
State of Nevada and with the Secretary of State of Delaware as
provided in
Section 252 of the DGCL, and shall make all other filings or
recordings required
by the Revised Statutes of the the State of Nevada and the DGCL in
connection
with the Merger. The Merger shall become effective at such time as
the
certificates of merger are duly filed in accordance with the
Revised Statutes of
Nevada and the DGCL with the Secretaries of State of the States of
Nevada and
Delaware or such later time as specified in the certificates of
merger, and such
time is hereinafter referred to as the "Effective Time."
Section 2.3
Certificate of Incorporation; By-laws; Directors and
Officers.
(a)
The articles of incorporation of Parent. as in effect
immediately prior to the Effective Time, with such changes as are
set
forth in the copy of such articles attached as Exhibit A hereto,
shall be
the articles of incorporation of the Surviving Corporation (the
"Certificate of Incorporation") from and after the Effective Time
until
thereafter changed or amended as provide therein or in accordance
with
applicable law.
(b)
The by-laws of the Parent, as in effect immediately prior to
the Effective Time, a copy of which is attached as Exhibit B
hereto, shall
be the by-laws of the Surviving Corporation (the "By-laws") from
and after
the Effective Time until thereafter changed or amended as provided
therein
or in accordance with applicable law.
(c)
The individuals identified on Exhibit C hereto under the
heading "Directors" shall, from and after the Effective Time, be
the
directors of the Surviving Corporation until their successors have
been
duly elected or appointed and qualified or until their earlier
death,
resignation or removal in accordance with the Certificate of
Incorporation
and By-laws. The individuals identified on Exhibit C hereto under
the
heading "Officers" shall, from and after the Effective Time, be the
officers of the Surviving Corporation until their successors have
been
duly elected or appointed and qualified or until their earlier
death,
resignation or removal in accordance with the Certificate of
Incorporation
and By-laws.
Section 2.4
Effects of the Merger. The Merger shall have the effects set
forth in Section 92A.190 of the Revised Statutes of the State of
Nevada. Without
limiting the generality of the foregoing, at the Effective Time,
except as
otherwise provided herein, all of the property, rights, privileges,
powers and
franchises of the Company shall vest in the Surviving Corporation,
and all
debts, liabilities and duties of the Company shall become the
debts, liabilities
and duties of the Surviving Corporation. The Company acknowledges
that, upon the
effectiveness of the Merger, Parent shall have the absolute and
unqualified
right to deal with the assets and business of the Surviving
Corporation as its
own property without limitation on the disposition or use of such
assets or the
conduct of such business.
Section 2.5
Closing. The consummation of the transactions contemplated
by this Agreement, including the Merger (the "Closing"), shall take
place: (a)
at the offices of Greenberg & Kahr, 230 Park Avenue, Suite 430,
New York, New
York at 10:00 a.m. local time on the date on which all of the
conditions to the
Closing set forth in Article VIII hereof shall be
6
fulfilled or waived in accordance with this Agreement (other than
conditions
that can be satisfied only at the Closing, but subject to the
fulfillment or
waiver of those conditions at the Closing); or (b) at such other
place, time and
date as the Company and Parent may agree in writing (the "Closing
Date").
ARTICLE III
MERGER CONSIDERATION; CONVERSION OF SECURITIES
Section 3.1
Manner and Basis of Converting Capital Stock. At the
Effective Time, by virtue of the Merger and without any action on
the part of
the Company or Parent or the holders of any outstanding shares of
capital stock
or other securities of the Company or Parent:
(a)
Company Common Stock. Except as provided in Section 3.1(c)
and Section 3.2(d) hereof, each share of Company Common Stock
issued and
outstanding immediately prior to the Effective Time shall be
converted
into the right to receive 15,394.12333334 shares of Parent Common
Stock.
(b)
Treasury Stock. Notwithstanding any provision of this
Agreement to the contrary, each share of Company Capital Stock held
in the
treasury of the Company and each share of Company Capital Stock, if
any,
owned by Parent or any direct or indirect wholly-owned subsidiary
of
Parent immediately prior to the Effective Time shall be canceled in
the
Merger and shall not be converted into the right to receive any
shares of
capital stock or other securities of Parent.
(c)
No Fractional Shares. No fractional shares of Parent Common
Stock shall be issued in, or as a result of, the Merger. Any
fractional
share of Parent Common Stock that a holder of record of Company
Capital
Stock would otherwise be entitled to receive as a result of the
Merger
shall be aggregated. If a fractional share of Parent Common Stock
results
from such aggregation, the number of shares required to be issued
to such
record holder shall be rounded up to the nearest whole number of
shares of
Parent Common Stock.
Section 3.2
Surrender and Exchange of Certificates.
(a)
Letter of Transmittal. Promptly after the Effective Time,
Parent shall mail, or cause to be mailed, to each record holder of
certificate(s) formerly representing ownership of Company Capital
Stock
that was converted into the right to receive Parent Common Stock
pursuant
to Section 3.1 hereof (i) a letter of transmittal ("Letter of
Transmittal") for delivery of such certificate(s) to Parent and
(ii)
instruction for use in effecting the surrender of certificate(s),
in each
case in form and substance mutually agreeable to the Company and
Parent.
Delivery shall be effected, and risk of loss and title to the
Parent
Common Stock shall pass, only upon delivery to the Parent (or a
duly
authorized agent of Parent) of certificate(s) formerly representing
ownership of Company Capital Stock (or an affidavit of lost
certificate
and indemnification or surety bond) and a properly completed and
duly
executed Letter of Transmittal, as described in Section 3.2(b)
hereof.
Notwithstanding the foregoing, Parent shall not be required to
mail, or
cause to be mailed, a Letter of Transmittal to any record holder of
certificate(s) formerly representing ownership of Company Capital
Stock if
such holder has previously agreed
7
or consented to the exchange of certificates that are held in
custody by
the Company for the benefit of such holder.
(b)
Exchange Procedures. Parent shall issue to each former
record holder of Company Capital Stock, upon delivery to Parent (or
a duly
authorized agent of Parent) of (i) certificate(s) formerly
representing
ownership of Company Capital Stock endorsed in blank or accompanied
by
duly executed stock powers (or an affidavit of lost certificate and
indemnification in form and substance reasonably acceptable to
Parent
stating that, among other things, the former record holder has lost
his or
her certificate(s) or that such certificate(s) have been destroyed)
and
(ii) a properly completed and duly executed Letter of Transmittal
in form
and substance reasonably satisfactory to Parent, a certificate or
certificates registered in the name of such former record holder
representing the number of shares of Parent Common Stock that such
former
record holder is entitled to receive in accordance with Section 3.1
hereof. Subject to Section 3.2(d) hereof, until the certificate(s)
(or
affidavit) is delivered together with the Letter of Transmittal in
the
manner contemplated by this Section 3.2(b), each certificate (or
affidavit) previously representing ownership of Company Capital
Stock
shall be deemed at and after the Effective Time to represent only
the
right to receive Parent Common Stock and the former record holders
thereof
shall cease to have any other rights with respect to his or her
Company
Capital Stock.
(c)
Termination of Exchange Process. Any Parent Common Stock
that remains unclaimed by a former record holder of Company Capital
Stock
at the first anniversary of the Effective Time may be deemed
"abandoned
property" subject to applicable abandoned property, escheat and
other
similar laws in the State in which the former record holder
resides. None
of the Company, Parent or the Surviving Corporation shall be liable
to any
person in respect of any Parent Company Stock delivered to a public
official pursuant to any applicable abandoned property, escheat or
similar
law.
(d)
Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, shares of Company Capital Stock issued
and
outstanding immediately prior to the Effective Time and held by a
Stockholder who has not voted in favor of the Merger or consented
thereto
in writing and who has demanded appraisal for such shares of
Company
Capital Stock in accordance with applicable provisions of the
Revised
Statutes of Nevada or the DGCL ("Dissenting Shares") shall not be
entitled
to vote for any purpose or receive dividends, shall not be
converted into
the right to receive Parent Common Stock in accordance with Section
3.1
hereof, and shall only be entitled to receive such consideration as
shall
be determined pursuant to the Revised Statutes of Nevada or the
DGCL;
provided, however, that if, after the Effective Time, such
Stockholder
fails to perfect or withdraws or loses his or her right to
appraisal or
otherwise fails to establish the right to be paid the value of such
Stockholder's shares of Company Capital Stock under the Revised
Statutes
of Nevada or the DGCL, such shares of Company Capital Stock shall
be
treated as if they had converted as of the Effective Time into the
right
to receive Parent Common Stock in accordance with Section 3.1
hereof, and
such shares of Company Capital Stock shall no longer be Dissenting
Shares.
All negotiations with respect to payment for Dissenting Shares
shall be
handled jointly by Parent and the Company prior to the Closing and
exclusively by Parent thereafter.
8
(e)
Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company will be closed and there will be no
further
registration of transfers of shares of Company Capital Stock
thereafter on
the records of the Company. If, after the Effective Time,
certificates
formerly representing Company Capital Stock are presented to the
Surviving
Corporation, these certificates shall be canceled and exchanged for
the
number of shares of Parent Common Stock to which the former record
holder
may be entitled pursuant to Section 3.1 hereof.
Section 3.3
Options, Warrants.
(a)
Common Stock Options. The Company has issued and outstanding
warrants and options to purchase shares of Company Common Stock
(collectively, the "Common Stock Options"). At the Effective Time,
by
virtue of the Merger and without any action on the part of the
Company,
Parent or Acquisition Corp. or the holders of any outstanding
Common Stock
Options, the right to acquire a share of Company Common Stock under
each
Common Stock Option shall be converted into the right to acquire
15,394.12333334 shares of Parent Common Stock at an exercise price
equal
to the exercise price stated in the Common Stock Option adjusted
reciprocally (i.e., such that the aggregate exercise price for all
shares
subject to any Common Stock Option shall remain the same after the
Effective Time as before), subject in all respects to all other
terms and
conditions of the Common Stock Option. Except for the change in
security
underlying the Common Stock Options from Company Common Stock to
Parent
Common Stock and the change in the number of shares covered and the
per
share exercise price, it is the intent of the parties hereto that
the
Common Stock Options shall continue after the Effective Time, and
that the
terms and conditions of the Common Stock Options shall otherwise
remain
unchanged.
(b)
Issuance of Replacement Securities. In order to effect the
foregoing transactions referenced in this Section 3.3, the Common
Stock
Options shall be terminated and the Parent shall issue new forms of
options or warrants, as applicable, to purchase Parent Common Stock
consistent with the adjustments and changes set forth in this
Section 3.3.
(c)
No Fractional Shares. Notwithstanding anything to the
contrary in this Section 3.3, no fractional shares of the Parent
Common
Stock shall be issued in, or as a result of, the Merger. Any
fractional
share of the Parent Common Stock that a Person would otherwise be
entitled
to receive as a result of the transactions referenced in this
Section 3.3
shall be rounded up to the nearest whole number of shares of Parent
Common
Stock.
Section 3.4
Parent Common Stock. Parent shall reserve a sufficient
number of shares of Parent Common Stock to complete the conversion
and exchange
of Company Capital Stock into Parent Common Stock contemplated by
Sections 3.1
and 3.2 hereof and the issuance of any Parent Common Stock in
accordance with
Section 3.3 hereof and in the Private Placement. Parent covenants
and agrees
that immediately prior to the Effective Time there will be no more
than
10,800,000 shares of Parent Common Stock issued and outstanding,
exclusive of
any shares of Parent Common Stock issued or to be issued in the
Private
Placement, and that no other common or preferred stock or equity
securities of
the Parent, or any options, warrants, rights or
9
other agreements or instruments convertible, exchangeable or
exercisable into
common or preferred stock or equity securities of the Parent, shall
be issued or
outstanding at the Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent as follows:
Section 4.1
Organization. The Company and each of its subsidiaries (i)
is duly organized, validly existing and in good standing (or its
equivalent)
under the laws of its state, province or country of incorporation
or
organization, (ii) has all licenses, permits, authorizations and
other Consents
necessary to own, lease and operate its properties and assets and
to carry on
its business as it is now being conducted and (iii) has all
requisite corporate
or other applicable power and authority to own, lease and operate
its properties
and assets and to carry on its business as it is now being
conducted and
presently proposed to be conducted, except where such failure would
not have, or
be reasonably likely to have, a Company Material Adverse Effect.
The Company and
each of its subsidiaries is duly qualified or authorized to conduct
business and
is in good standing (or its equivalent) as a foreign corporation or
other entity
in all jurisdictions in which the ownership or use of its assets or
nature of
the business conducted by it makes such qualification or
authorization
necessary, except where the failure to be so duly qualified,
authorized and in
good standing would not have a Company Material Adverse Effect.
Section 4.2
Authorization; Validity of Agreement. The Company has all
requisite corporate power and authority to execute and deliver this
Agreement
and to consummate the transactions contemplated hereby. The
execution, delivery
and performance by the Company of this Agreement and the
consummation of the
transactions contemplated hereby, have been duly authorized by the
Board of
Directors of the Company and no other action (except the approval
of the
Stockholders solely with respect to consummation of the Merger) on
the part of
the Company or any of its Stockholders or subsidiaries is necessary
to authorize
the execution and delivery of this Agreement and the consummation
of the
transactions contemplated hereby. This Agreement has been duly
executed and
delivered by the Company (and assuming due and valid authorization,
execution
and delivery hereof by Parent) is a valid and binding obligation of
the Company,
enforceable against the Company in accordance with its terms,
except as such
enforcement is limited by bankruptcy, insolvency and other similar
laws
affecting the enforcement of creditors' rights generally and by
general
principles of equity.
Section 4.3
Capitalization.
(a)
As of the date hereof, the authorized capital stock of the Company
consists of 3,000 shares of Company Common Stock. As of the date
hereof, there
are 3,000 shares of Company Common Stock and no shares of Company
Preferred
Stock issued and outstanding. All the outstanding shares of Company
Capital
Stock are duly authorized, validly issued, fully paid and
non-assessable. There
are issued and outstanding Company Stock Options to purchase
1,257.3707 shares
of Company Common Stock.
(b)
The subsidiaries of the Company set forth on Schedule 4.3(b) of the
Company Disclosure Schedule are all the subsidiaries of the
Company. All of the
outstanding shares of capital stock (or limited liability company
interests) of
each subsidiary of the Company are owned beneficially and of record
as set forth
on Schedule 4.3(b) of the Company Disclosure
10
Schedule, free and clear of Liens. All of the outstanding shares of
capital
stock (or limited liability company interests) of each subsidiary
are duly
authorized, validly issued, fully paid and non-assessable. There
are no options,
warrants, calls, subscriptions or other rights, convertible
securities,
agreements or commitments of any character obligating any
subsidiary of the
Company to issue, transfer or sell any shares of capital stock or
other equity
interest in, such subsidiary or securities convertible into or
exchangeable for
such shares or equity interests.
Section 4.4
Consents and Approvals; No Violations. Except for (a)
approval of the Merger by the Stockholders and (b) filing of the
certificate of
merger with the Secretary of State of the State of Delaware and the
Secretary of
State of the State of Nevada, neither the execution, delivery or
performance of
this Agreement by the Company nor the consummation of the
transactions
contemplated hereby will (i) violate any provision of its
certificate of
incorporation or by-laws; (ii) violate, conflict with or result in
a breach of
any provision of, or constitute a default (or an event which, with
notice or
lapse of time or both, would constitute a default) under, require
the consent of
or result in the creation of any encumbrance upon any of the
properties of the
Company or any of its subsidiaries under, any material note, bond,
mortgage,
indenture, deed of trust, license, franchise, permit, lease,
contract, agreement
or other instrument (collectively, "Contract") to which the Company
or any its
subsidiaries or any of their respective properties may be bound;
(iii) require
any Consent, approval or authorization of, or notice to, or
declaration, filing
or registration with, any governmental entity by or with respect to
the Company
or any of its subsidiaries; or (iv) violate any order, writ,
judgment,
injunction, decree, law, statute, rule or regulation applicable to
the Company
or any of its subsidiaries or any of their respective properties or
assets.
Section 4.5
Financial Statements. The Company has delivered or made
available as of the date hereof or shall, prior to the Closing
Date, deliver or
make available to Parent the balance sheet (the "Balance Sheet") of
the Company
for the fiscal year ended December 31, 2005 and the related
consolidated and
consolidating statements of income, stockholders' equity and cash
flows of the
Company for the fiscal year ended December 31, 2005 (the "Balance
Sheet Date").
The foregoing financial statements (including any notes thereto)
(i) have been
prepared based upon the books and records of the Company, (ii) have
been
prepared in accordance with GAAP (except as otherwise noted
therein), and (iii)
present fairly, in all material respects, the financial position,
results of
operations and cash flows of the Company as at their respective
dates and for
the periods then ended. To the knowledge of the Company, there is
no existing
fact that has not been disclosed to Parent that has had or could
reasonably be
expected to have a Company Material Adverse Effect.
Section 4.6
No Undisclosed Liabilities. Except (a) for Liabilities
reflected on the face of the Balance Sheet and (b) Liabilities of
the same type,
magnitude and scope as those reflected on the Balance Sheet which
have arisen
since the Balance Sheet Date in the ordinary course of business,
and which would
not, individually or in the aggregate, result in a Company Material
Adverse
Effect, the Company does not have any Liability.
Section 4.7
Litigation. There is no Action pending or, to the knowledge
of the Company, threatened, involving the Company or its
subsidiaries or
affecting any of the officers, directors or employees of the
Company or its
subsidiaries with respect to the Company's or any subsidiary's
business by or
before any governmental entity or by any third party and neither
the Company nor
any of its subsidiaries have received notice that any such Action
is threatened.
11
Neither the Company nor any of its subsidiaries is in default under
any
judgment, order or decree of any governmental entity applicable to
its business.
Section 4.8
No Default; Compliance with Applicable Laws. The Company is
not in default or violation of any material term, condition or
provision of (i)
its certificate of incorporation or by-laws or (ii) any law
applicable to the
Company or its property and assets, and the Company has not
received notice of
any violation of or Liability under any of the foregoing (whether
material or
not).
Section 4.9
Broker's and Finder's Fees. No Person has, or as a result of
the transactions contemplated or described herein will have, any
right or valid
claim against the Company, Parent or any Stockholder for any
commission, fee or
other compensation as a finder or broker, or in any similar
capacity.
Section 4.10
Assets and Contracts. Except for this Agreement and except
as set forth on Schedule 4.10, neither the Company nor any of its
subsidiaries
is a party to any Contract not made in the ordinary course of
business that is
material to the Company and its subsidiaries taken as a whole.
Except as listed
on Schedule 4.10, neither the Company nor any of its subsidiaries
is a party to
any contract (a) with a labor union, (b) for the purchase of fixed
assets or for
the purchase of materials, supplies or equipment in excess of
normal operating
requirements, (c) for the employment of any officer, individual
employee or
other Person on a full-time basis, (d) with respect to bonus,
pension, profit
sharing, retirement, stock purchase, deferred compensation,
medical,
hospitalization or life insurance or similar plan, contract or
understanding any
or all of the employees of the Company or any of its subsidiaries
or any other
Person, (e) relating to or evidencing Indebtedness for Borrowed
Money or
subjecting any asset or property of the Company or any of its
subsidiaries to
any Lien or evidencing any Indebtedness, (f) guaranteeing any
Indebtedness, (g)
under which the Company or any of its subsidiaries is lessee of or
holds or
operates any property, real or personal, owned by any other Person
under which
payments to such Person exceed $100,000 per year and with an
unexpired term
(including any period covered by an option to renew exercisable by
any other
party) of more than 60 days, (h) under which the Company or any of
its
subsidiaries is lessor or permits any Person to hold or operate any
property,
real or personal, owned or controlled by the Company or any such
subsidiary, (i)
granting any preemptive right, right of first refusal or similar
right to any
Person, (j) with any Affiliate of the Company or any present or
former officer,
director or Stockholder of the Company, (k) obligating the Company
or any of its
subsidiaries to pay any royalty or similar charge for the use or
exploitation of
any tangible or intangible property, (1) containing a covenant not
to compete or
other restriction on the Company's or any of its subsidiaries'
ability to
conduct a business or engage in any other activity, (m) with
respect to any
distributor, dealer, manufacturer's representative, sales agency,
franchise or
advertising contract or commitment, (n) regarding registration of
securities
under the Securities Act, (o) characterized as a collective
bargaining
agreement, or (p) with any Person continuing for a period of more
than three
months from the Closing Date which involves an expenditure or
receipt by the
Company or any of its subsidiaries in excess of $100,000. The
Company has made
available to Parent true and complete copies of all Contracts and
other
documents requested by Parent.
Section 4.11
Tax Returns and Audits. All required federal, state and
local and foreign Tax Returns of the Company and its subsidiaries
have been
accurately prepared and duly and timely filed, and all federal,
state, local and
foreign Taxes required to be paid with respect to the
12
periods covered by such returns have been paid. Neither the Company
nor any of
its subsidiaries is and none of them has been delinquent in the
payment of any
Tax. Neither the Company nor any of its subsidiaries has had a Tax
deficiency
proposed or assessed against it and none of them has executed a
waiver of any
statute of limitations on the assessment or collection of any Tax.
None of the
Company's federal income Tax Returns nor any state or local income
or franchise
Tax Returns has been audited by governmental authorities. The
reserves for Taxes
reflected on the Balance Sheet are and will be sufficient for the
payment of all
unpaid Taxes payable by the Company or its subsidiaries as of the
Balance Sheet
Date. Since the Balance Sheet Date, the Company has made adequate
provisions on
its books of account for all Taxes with respect to its business,
properties and
operations for such period. The Company and its subsidiaries have
withheld or
collected from each payment made to each of their employees the
amount of all
Taxes (including, but not limited to, federal, state, local and
foreign income
taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment Tax Act
taxes) required to be withheld or collected therefrom, and has paid
the same to
the proper Tax receiving officers or authorized depositaries. There
are no
federal, state, local or foreign audits, actions, suits,
proceedings,
investigations, claims or administrative proceedings relating to
Taxes or any
Tax Returns of the Company or any of its subsidiaries now pending,
and the
Company has not received any notice of any proposed audits,
investigations,
claims or administrative proceedings relating to Taxes or any Tax
Returns. The
Company is not obligated to make a payment, nor is it a party to
any agreement
that under certain circumstances could obligate it to make a
payment, that would
not be deductible under Section 280G of the Code. The Company has
not agreed nor
is required to make any adjustments under Section 481(a) of the
Code (or any
similar provision of state, local and foreign law) by reason of a
change in
accounting method or otherwise for any Tax period for which the
applicable
statute of limitations has not yet expired. The Company is not a
party to, is
not bound by and does not have any obligation under, any Tax
sharing agreement,
Tax indemnification agreement or similar contract or arrangement,
whether
written or unwritten (collectively, "Tax Sharing Agreements"), nor
does it have
any potential liability or obligation to any Person as a result of,
or pursuant
to, any Tax Sharing Agreements.
Section 4.12
Patents and Other Intangible Assets.
(a)
Except as set forth in the Memorandum, the Company and its
subsidiaries (i) own or have the right to use, free and clear of
all
Liens, all patents, trademarks, service marks, trade names,
copyrights,
licenses and rights with respect to the foregoing used in or
necessary for
the conduct of its business as now conducted or proposed to be
conducted
without infringing upon or otherwise acting adversely to the right
or
claimed right of any Person under or with respect to any of the
foregoing
and (ii) is not obligated or under any obligation to make any
payments by
way of royalties, fees or otherwise to any owner or licensor of, or
other
claimant to, any patent, trademark, service mark, trade name,
copyright or
other intangible asset, with respect to the use thereof or in
connection
with the conduct of its business or otherwise.
(b)
To the best knowledge of the Company, the Company and its
subsidiaries own and have the unrestricted right to use all trade
secrets,
if any, including know-how, negative know-how, formulas, patterns,
programs, devices, methods, techniques, inventions, designs,
processes,
computer programs and technical data and all information that
derives
independent economic value, actual or potential, from not being
generally
known or known by competitors (collectively, "Intellectual
Property")
required for or
13
incident to the development, operation and sale of all products and
services sold by the Company and its
