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AGREEMENT AND PLAN OF MERGER
Dated as of May 24, 2007,
by and among
BTHC VI, INC.,
B-VI ACQUISITION CORP.
and
ATHERSYS, INC.
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Location of Defined Terms in Agreement
Term Location in Agreement
"affiliate" ss.8.03
"Agreement" Preamble
"Assumed Options" ss.5.03(a)
"Bankruptcy Court" ss.3.02(e)
"Blank Check Preferred Shares" ss.3.01(c)
"BTHC Plan" ss.3.02(e)
"business day" ss.8.03
"Certificate of Merger" ss.1.03
"Certificate of Compliance" ss.3.02(e)
"Class A Convertible Preferred Shares" ss.3.01(c)
"Class B Convertible Preferred Shares" ss.3.01(c)
"Class C Convertible Preferred Shares" ss.3.01(c)
"Class D Convertible Preferred Shares" ss.3.01(c)
"Class E Convertible Preferred Shares" ss.3.01(c)
"Class F Convertible Preferred Shares" ss.3.01(c)
"Class G Convertible Preferred Shares" ss.3.01(c)
"Closing" ss.1.02
"Closing Date" ss.1.02
"Code" ss.1.08
"Company" Preamble
"Company Benefit Plans" ss.8.03
"Company Certificate" ss.2.05(b)
"Company Certificate Amendments" ss.3.01(c)
"Company Common Share" ss.2.02(a)
"Company Disclosure Letter" ss.3.01(b)
"Company Financial Statements" ss.3.01(d)
"Company Representatives" ss.4.02(a)
"Company Share Plans" ss.3.01(c)
"Company Solicitation Statement" ss.5.09
"Company Stock Options" ss.3.01(c)
"Company Stockholder Approval" ss.3.01(g)
"Company Subsidiary" ss.3.01(a)
"Company Superior Proposal" ss.4.02(b)
"Company Takeover Proposal" ss.4.02(a)
"Contract" ss.3.01(d)
"DGCL" ss.1.01
"Dissenting Shares" ss.2.07
"Effective Time" ss.1.03
"Environmental Claim" ss.3.02(aa)
"Environmental Laws" ss.3.02(aa)
"Environmental Permits" ss.3.02(aa)
"Equity Financing" ss.6.01(c)
"ERISA" ss.3.02(p)
"Exchange Act" ss.3.02(f)
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"Exchange Agent" ss.2.05(a)
"Exchange Fund" ss.2.05(a)
"Exchange Ratio" ss.2.02(a)
"14f-1 Information Statement" ss.5.08
"GAAP" ss.3.01(e)
"Governmental Entity" ss.3.01(d)
"Hazardous Materials" ss.3.02(aa)
"Indemnified Party" ss.5.04(c)
"Joinder Agreement" ss.5.10
"Judgment" ss.3.01(d)
"knowledge" ss.8.03
"Law" ss.3.01(d)
"Liens" ss.3.01(b)
"Losses" ss.5.04(c)
"Merger" Recitals
"Merger Consideration" ss.2.02(a)
"New Parent Shares" ss.2.08
"New Parent Securities" ss.2.08
"Options" ss.3.01(c)
"Outside Date" ss.7.01(b)
"Parent" Preamble
"Parent Certificate Amendments" ss.2.01
"Parent Common Stock" ss.8.03
"Parent Disclosure Letter" ss.3.02
"Parent Representatives" ss.4.03(a)
"Parent SEC Documents" ss.3.02(f)
"Parent Stock Plans" ss.5.03(b)
"Parent Stockholder Approval" ss.3.02(q)
"Parent Takeover Proposal" ss.4.03(a)
"Private Placement Memorandum" ss.3.01(d)
"Permits" ss.3.02(t)
"person" ss.8.03
"Placement Agents" ss.5.10
"Placement Agency Agreement" ss.5.10
"Preferred Shares" ss.3.01(c)
"Release" ss.3.02(aa)
"SEC" ss.3.02(f)
"Securities Act" ss.2.08
"Sub" Preamble
"subsidiary" ss.8.03
"Surviving Corporation" ss.1.01
"Taxes" ss.3.02(v)
"Tax Returns" ss.3.02(v)
"Transferee" ss.2.05(b)
"Treasury Shares" ss.2.02(a)
"Units" ss.6.01(c)
"Voting Preferred Shares" ss.3.01(g)
2
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ARTICLE I THE
MERGER...............................................1
Section 1.01. The
Merger......................................1
Section 1.02.
Closing.........................................1
Section 1.03. Effective
Time..................................1
Section 1.04. Effects of the
Merger...........................2
Section 1.05. Certificate of Incorporation and
Bylaws.........2
Section 1.06. Directors and Officers of the Surviving
Corporation.....................................2
Section 1.07. Directors of
Parent.............................2
Section 1.08. Tax
Consequences................................2
ARTICLE II EFFECT OF THE MERGER ON THE SHARES OF THE
CONSTITUENT
CORPORATIONS; SURRENDER OF CERTIFICATES AND
PAYMENT..................................................3
Section 2.01. Certificate
Amendments..........................3
Section 2.02. Merger
Consideration............................3
Section 2.03. Rights as Shareholders; Share
Transfers.........3
Section 2.04. Fractional
Shares...............................4
Section 2.05. Exchange of
Certificates........................4
Section 2.06. Anti-Dilution
Adjustments.......................6
Section 2.07. Dissenter's
Rights..............................6
Section 2.08. Restrictions on
Transfer........................6
ARTICLE III REPRESENTATIONS AND
WARRANTIES...........................7
Section 3.01. Representations and Warranties of
the Company.....................................7
Section 3.02. Representations and Warranties of
Parent and Sub.................................10
ARTICLE IV COVENANTS RELATING TO CONDUCT OF
BUSINESS...............20
Section 4.01. Conduct of
Business............................20
Section 4.02. No Solicitation by the
Company.................23
Section 4.03. No Solicitation by
Parent......................24
ARTICLE V ADDITIONAL
AGREEMENTS...................................25
Section 5.01. Access to Information;
Confidentiality.........25
Section 5.02. Reasonable Best Efforts;
Notification..........25
Section 5.03. Stock
Options..................................27
Section 5.04.
Indemnification................................28
Section 5.05. Fees and
Expenses..............................29
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Section 5.06. Public Announcements; Transaction Form
8-K.....29
Section 5.07. Tax
Treatment..................................30
Section 5.08. Schedule 14f-1 Information
Statement...........30
Section 5.09. Company Stockholder Approval and Consent
Solicitation Statement.........................30
Section 5.10. Equity
Financing...............................31
Section 5.11. Parent Board
Composition.......................31
ARTICLE VI CONDITIONS
PRECEDENT....................................31
Section 6.01. Conditions to Each Party's Obligation to
Effect the Merger..............................31
Section 6.02. Conditions to Obligations of Parent and
Sub....32
Section 6.03. Conditions to Obligation of the
Company........32
Section 6.04. Frustration of Closing
Conditions..............33
ARTICLE VII TERMINATION, AMENDMENT AND
WAIVER.......................33
Section 7.01.
Termination....................................33
Section 7.02. Effect of
Termination..........................34
Section 7.03.
Amendment......................................34
Section 7.04. Extension;
Waiver..............................34
Section 7.05. Procedure for Termination, Amendment,
Extension or Waiver............................35
ARTICLE VIII GENERAL
PROVISIONS......................................35
Section 8.01. Nonsurvival of Representations and
Warranties.....................................35
Section 8.02.
Notices........................................35
Section 8.03.
Definitions....................................36
Section 8.04.
Interpretation.................................36
Section 8.05.
Severability...................................37
Section 8.06.
Counterparts...................................37
Section 8.07. Entire Agreement; No Third-Party
Beneficiaries..................................37
Section 8.08. Governing
Law..................................37
Section 8.09.
Assignment.....................................37
Section 8.10.
Enforcement....................................37
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of May 24, 2007 (this
"Agreement"), by and among BTHC VI, Inc., a Delaware corporation
("Parent"),
B-VI ACQUISITION CORP., a Delaware corporation and a direct
wholly owned
subsidiary of Parent ("Sub"), and ATHERSYS, INC., a Delaware
corporation (the
"Company").
WHEREAS the respective Boards of Directors of Parent, the
Company and
Sub have approved and declared advisable the merger of Sub with
and into the
Company (the "Merger"), upon the terms and subject to the
conditions set forth
in this Agreement;
WHEREAS for Federal income tax purposes it is intended that the
Merger
qualify as a "reorganization" within the meaning of Section
368(a) of the Code;
WHEREAS, the Company intends to complete the Equity
Financing
contemporaneously with the Closing;
WHEREAS, Parent intends to effect the Parent Certificate
Amendments
and obtain stockholder approval of the BTHC VI, Inc. Long-Term
Incentive Plan
prior to the Closing; and
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in
connection with the
Merger and also to prescribe various conditions to the
Merger.
NOW, THEREFORE, in consideration of the representations,
warranties,
covenants and agreements contained in this Agreement, and for
other good and
valuable consideration, the receipt and sufficiency of which are
hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Upon the terms and subject to the
conditions
set forth in this Agreement, and in accordance with the General
Corporation Law
of the State of Delaware (the "DGCL"), Sub shall be merged with
and into the
Company at the Effective Time. Following the Effective Time, the
separate
corporate existence of Sub shall cease and the Company shall
continue as the
surviving corporation (the "Surviving Corporation").
SECTION 1.02 Closing. Upon the terms and subject to the
conditions set
forth in this Agreement, the closing of the Merger (the
"Closing") shall take
place at 10:00 a.m. (New York City time) on a date to be
specified by the
parties (the "Closing Date"), which shall be no later than the
second business
day after satisfaction or waiver (subject to applicable Law) of
the conditions
set forth in Article VI (other than those conditions that by
their nature are to
be fulfilled at Closing, but subject to the fulfillment or
waiver of such
conditions), at the offices of Jones Day, 901 Lakeside Avenue,
Cleveland, Ohio
44114, unless another location is agreed to in writing by the
parties hereto.
SECTION 1.03 Effective Time. Prior to the Closing, the Company
shall
prepare, and on the Closing Date or as soon as practicable
thereafter, the
Company shall file with the Secretary of State of the State of
Delaware a
<PAGE>
certificate of merger (the "Certificate of Merger") executed in
accordance with
the relevant provisions of the DGCL, and Parent and the Company
shall make all
other filings or recordings required under the DGCL in
connection with the
Merger. The Merger shall become effective on such date as the
Certificate of
Merger is duly filed with the Secretary of State of the State of
Delaware, or on
such later date as the parties hereto may agree and specify in
the Certificate
of Merger (the date and time the Merger becomes effective being
the "Effective
Time").
SECTION 1.04 Effects of the Merger. The Merger shall have the
effects
set forth in the DGCL. Without limiting the generality of the
foregoing, and
subject thereto, at the Effective Time, all the property,
rights, privileges,
immunities, powers, franchises and authority of the Company and
Sub will be
vested in the Surviving Corporation, and all debts, liabilities
and duties of
the Company and Sub will become the debts, liabilities and
duties of the
Surviving Corporation.
SECTION 1.05 Certificate of Incorporation and Bylaws.
(a) The Certificate of Incorporation of Sub, as in effect
immediately
prior to the Effective Time, shall be the Certificate of
Incorporation of the
Surviving Corporation until thereafter changed or amended as
provided therein or
by applicable Law, except that such Certificate of Incorporation
shall provide
that the name of the Surviving Corporation shall be "Athersys,
Inc.".
(b) The Bylaws of Sub, as in effect immediately prior to the
Effective
Time, shall be the Bylaws of the Surviving Corporation until
thereafter changed
or amended as provided therein or by applicable Law.
SECTION 1.06. Directors and Officers of the Surviving
Corporation. The
individuals who are the directors and officers of the Company
immediately prior
to the Effective Time shall be the directors and officers,
respectively, of the
Surviving Corporation until thereafter they cease to be
directors and officers,
respectively, in accordance with the DGCL and the Certificate of
Incorporation
and Bylaws of the Surviving Corporation.
SECTION 1.07. Directors of Parent. Upon the Closing, the Board
of
Directors of Parent shall be replaced as set forth in Section
5.11.
SECTION 1.08. Tax Consequences. It is intended by the parties
hereto
that the Merger shall constitute a "reorganization" within the
meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
The parties hereto adopt this Agreement as a "plan of
reorganization" within the
meaning of Sections 354 and 361 of the Code and Sections
1.368-2(g) and
1.368-3(a) of the Treasury Regulations and for all relevant Tax
purposes.
<PAGE>
ARTICLE II
EFFECT OF THE MERGER ON THE SHARES OF THE CONSTITUENT
CORPORATIONS; SURRENDER OF
CERTIFICATES AND PAYMENT
SECTION 2.01. Certificate Amendments. Prior to the Closing, (i)
Parent
shall amend its Certificate of Incorporation to (A) effect a
1-for-1.67 reverse
split of the shares of Parent Common Stock outstanding as of May
24, 2007 and
(B) increase the number of authorized shares of Parent Common
Stock from
40,000,000 to 100,000,000 (the "Parent Certificate Amendments")
and (ii) the
Company shall, by means of the Company Certificate Amendments
described in
Section 3.01(c), (A) convert its outstanding convertible
preferred stock into
Company Common Shares and (B) increase the number of authorized
Company Common
Shares.
SECTION 2.02. Merger Consideration. Subject to the terms and
conditions of this Agreement, at the Effective Time, by virtue
of the Merger and
without any action on the part of Parent, Sub or any holder of
shares of the
Company:
(a) Each common share, par value $.01 per share, of the
Company
("Company Common Share") issued and outstanding immediately
prior to the
Effective Time (other than Company Common Shares held directly
or indirectly by
the Company ("Treasury Shares"), Dissenting Shares and Company
Common Shares
owned by Parent, Sub or any other wholly owned subsidiary of
Parent) will be
extinguished, cancelled and automatically converted into the
right to receive
0.0358493 (the "Exchange Ratio") fully paid and nonassessable
shares of Parent
Common Stock ("Merger Consideration").
(b) Each Company Common Share that, immediately prior to the
Effective
Time, is a Treasury Share or is owned directly by Parent, Sub or
any other
wholly owned subsidiary of Parent will be canceled and retired
and will cease to
exist, and no exchange or payment will be made therefor.
(c) At the Effective Time, each common share, par value $.01
per
share, of Sub issued and outstanding immediately prior to the
Effective Time
shall be converted into and become one fully paid and
nonassessable common
share, par value $.01 per share, of the Surviving
Corporation.
SECTION 2.03. Rights as Shareholders; Share Transfers. At
the
Effective Time, holders of Company Common Shares will cease to
be, and will have
no rights as, shareholders of the Company, other than the right
to receive (a)
any dividend or other distribution with respect to such Company
Common Shares
with a record date occurring prior to the Effective Time and (b)
the Merger
Consideration provided under Section 2.02, provided that in the
case of holders
of Dissenting Shares, such shareholders shall have the rights
described in
Section 2.07 in lieu of any rights to the Merger Consideration.
After the
Effective Time, there will be no transfers of Company Common
Shares on the share
transfer books of the Surviving Corporation. If, after the
Effective Time, any
certificates formerly representing Company Common Shares are
presented to
Parent, the Surviving Corporation or the Exchange Agent for any
reason, they
shall be canceled and exchanged as provided in this Article
II.
<PAGE>
SECTION 2.04. Fractional Shares. Notwithstanding any other
provision
in this Agreement, no fractional shares of Parent Common Stock,
and no
certificates or scrip therefor, or other evidence of ownership
thereof, will be
issued in the Merger. Any fractional share interests to which a
holder of
Company Common Shares would otherwise be entitled under Section
2.02 shall be
rounded to the nearest whole number. No cash shall be issued in
lieu of any
fractional shares.
SECTION 2.05. Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent and
Company
will designate a national bank, trust company or transfer agent
to act as agent
of Parent for purposes of, among other things, mailing and
receiving transmittal
letters and distributing the Merger Consideration to the Company
stockholders
(the "Exchange Agent"). As of the Effective Time, Parent and the
Exchange Agent
shall enter into an agreement which will provide that Parent
shall deposit with
the Exchange Agent as of the Effective Time, for the benefit of
the holders of
Company Common Shares, for exchange in accordance with this
Article II, through
the Exchange Agent, certificates representing the shares of
Parent Common Stock
(such shares of Parent Common Stock, together with any dividends
or
distributions with respect thereto with a record date after the
Effective Time,
being hereinafter referred to as the "Exchange Fund") issuable
pursuant to
Section 2.02 in exchange for outstanding Company Common
Shares.
(b) Exchange Procedures.
(i) As promptly as practicable after the Effective Time, the
Exchange Agent will mail to each holder of record of a
certificate
formerly representing Company Common Shares (a "Company
Certificate")
whose Company Common Shares were converted into the right to
receive
the Merger Consideration (A) a letter of transmittal (which
will
specify that delivery will be effected, and risk of loss and
title to
the Company Certificates will pass, only upon proper delivery of
the
Company Certificates to the Exchange Agent and will be in such
form
and have such other provisions as Parent and the Company may
specify
consistent with this Agreement) and (B) instructions for use
in
effecting the surrender of the Company Certificates in exchange
for
the Merger Consideration.
(ii) After the Effective Time, and upon surrender in
accordance with Section 2.05(b)(i) of a Company Certificate
for
cancellation to the Exchange Agent, together with such letter
of
transmittal, duly executed, and such other documents as may
reasonably
be required by the Exchange Agent, the holder of such
Company
Certificate will be entitled to receive in exchange therefor
the
Merger Consideration that such holder has the right to
receive
pursuant to the provisions of this Article II, and certain
dividends
or other distributions, if any, in accordance with this Article
II,
and the Company Certificate so surrendered will forthwith be
canceled.
In the event of a transfer of ownership of Company Common Shares
that
are not registered in the transfer records of the Company,
payment may
be issued to a person other than the person in whose name the
Company
Certificate so surrendered is registered (the "Transferee") if
such
Company Certificate is properly endorsed or otherwise in proper
form
for transfer and the Transferee pays any transfer or other
Taxes
required by reason of such payment to a person other than
the
<PAGE>
registered holder of such Company Certificate or establishes to
the
satisfaction of the Exchange Agent that such Tax has been paid
or is
not applicable. Until surrendered as contemplated by this
Section
2.05, each Company Certificate will be deemed at any time after
the
Effective Time to represent only the right to receive upon
such
surrender the Merger Consideration that the holder thereof has
the
right to receive in respect of such Company Certificate pursuant
to
the provisions of this Article II, and certain dividends or
other
distributions, if any, in accordance with Section 2.05(c).
(c) Dividends; Other Distributions. No dividends or other
distributions with respect to Parent Common Stock with a record
date after the
Effective Time will be paid to the holder of any unsurrendered
Company
Certificate with respect to the shares of Parent Common Stock
represented
thereby, and all such dividends and other distributions will be
paid by Parent
to the Exchange Agent and will be included in the Exchange Fund,
in each case
until the surrender of such Company Certificate in accordance
with this Article
II. Subject to the effect of applicable escheat or similar Laws,
following
surrender of any such Company Certificate in accordance
herewith, there will be
paid to the holder of the certificate representing whole shares
of Parent Common
Stock issued in exchange therefor, without interest, (i) at the
time of such
surrender, the amount of dividends or other distributions with a
record date
after the Effective Time theretofore paid with respect to such
whole shares of
Parent Common Stock and (ii) at the appropriate payment date,
the amount of
dividends or other distributions with a record date after the
Effective Time but
prior to such surrender and with a payment date subsequent to
such surrender
payable with respect to such whole shares of Parent Common
Stock.
(d) No Further Ownership Rights in Company Common Shares. All
shares
of Parent Common Stock issued in accordance with the terms of
this Article II
(including any cash paid pursuant to Section 2.05(c)) will be
deemed to have
been issued or paid, as the case may be, in full satisfaction of
all rights
pertaining to the Company Common Shares theretofore represented
by such Company
Certificates, and there will be no further registration of
transfers on the
stock transfer books of the Surviving Corporation of Company
Common Shares that
were outstanding immediately prior to the Effective Time. If,
after the
Effective Time, Company Certificates are presented to Parent,
the Surviving
Corporation or the Exchange Agent for any reason, they will be
canceled and
exchanged as provided in this Article II.
(e) Termination of Exchange Fund. Any portion of the Exchange
Fund
that remains undistributed to the holders of the Company
Certificates for six
months after the Effective Time will be delivered to Parent,
upon demand, and
any holders of Company Certificates who have not theretofore
complied with this
Article II may thereafter look only to Parent for payment of
their claim for
Merger Consideration and any dividends or distributions, if any,
with respect to
Parent Common Stock.
(f) No Liability. None of Parent, the Surviving Corporation or
the
Exchange Agent will be liable to any person in respect of any
shares of Parent
Common Stock, any dividends or distributions with respect
thereto, in each case,
delivered to a public official pursuant to any applicable
abandoned property,
escheat or similar Law.
(g) Lost Certificates. If any Company Certificate has been
lost,
stolen or destroyed, upon the making of an affidavit of that
fact by the person
claiming such Company Certificate to be lost, stolen or
destroyed and, if
<PAGE>
required by Parent or the Surviving Corporation, as the case may
be, the posting
by such person of a bond in such reasonable amount as Parent or
the Surviving
Corporation, as the case may be, may direct as indemnity against
any claim that
may be made against it with respect to such Company Certificate,
the Exchange
Agent shall issue, in exchange for such lost, stolen or
destroyed Company
Certificate, the Merger Consideration and, if applicable, any
unpaid dividends
and distributions on shares of Parent Common Stock deliverable
in respect
thereof, in each case, due to such person pursuant to this
Agreement.
SECTION 2.06. Anti-Dilution Adjustments. Except with respect to
the
transactions contemplated by the Parent Certificate Amendments,
should Parent
change (or establish a record date for changing) the number of
shares of Parent
Common Stock issued and outstanding prior to the Effective Time
by way of a
split, dividend, combination, recapitalization, exchange of
shares or similar
transaction with respect to the outstanding Parent Common Stock
having a record
date preceding the Effective Time, the Exchange Ratio will be
adjusted
appropriately to provide to the holders of Company Common Shares
the same
economic effect as contemplated by this Agreement prior to such
split, dividend,
combination, recapitalization, exchange of shares or similar
transaction.
SECTION 2.07. Dissenter's Rights. Company Common Shares that
have not
been voted for adoption of this Agreement and with respect to
which appraisal
has been properly demanded in accordance with Section 262 of the
DGCL
("Dissenting Shares") will not be converted into the right to
receive the Merger
Consideration at or after the Effective Time unless and until
the holder of such
shares withdraws such demand for such appraisal (in accordance
with Section
262(k) of the DGCL) or becomes ineligible for such appraisal. If
a holder of
Dissenting Shares withdraws such demand for appraisal (in
accordance with
Section 262(k) of the DGCL) or becomes ineligible for such
appraisal, then, as
of the Effective Time or the occurrence of such event, whichever
last occurs,
each of such holder's Dissenting Shares will cease to be a
Dissenting Share and
will be converted into and represent the right to receive the
Merger
Consideration, without interest thereon. The Company shall give
Parent prompt
notice of any demands for appraisal, attempted withdrawals of
such demands and
any other instruments received by the Company relating to
stockholders' rights
of appraisal. Parent shall conduct all negotiations and
proceedings with respect
to demand for appraisal under the DGCL and the Company will be
entitled to
participate in such negotiations only as and to the extent
requested by Parent.
The Company shall not, except with the prior written consent of
Parent, make any
payment with respect to any demands for appraisal of Dissenting
Shares,
compromise or offer to settle or settle any such demands or
approve any
withdrawal of any such demands.
SECTION 2.08. Restrictions on Transfer. The shares of Parent
Common
Stock that are being issued in connection with the Merger (the
"New Parent
Shares"), and any shares of Parent Common Stock issuable upon
exercise of
options issued pursuant to Section 5.03 (collectively, with the
New Parent
Shares, the "New Parent Securities") are being issued pursuant
to an exemption
from registration provided for in Section 4(2) of the Securities
Act of 1933, as
amended (the "Securities Act"). Each certificate representing
any New Parent
Securities shall be subject to stop transfer instructions and
shall bear all
legends required under all applicable securities Laws.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Company.
Except as
set forth in the Company Disclosure Letter (with specific
reference to the
relevant sections of the representations and warranties or
covenants in this
Agreement or disclosure in such a way to make its relevance to
the information
called for by the representations and warranties or covenants
reasonably
apparent), which Company Disclosure Letter shall be deemed a
part hereof, or as
otherwise expressly contemplated by this Agreement, the Company
represents and
warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the
Company
and each of its subsidiaries (each, a "Company Subsidiary") is a
corporation,
partnership or other legal entity duly organized, validly
existing and in good
standing under the Laws of the jurisdiction in which it is
organized and has the
requisite power and authority to carry on its business as now
being conducted.
Each of the Company and each Company Subsidiary is duly
qualified or licensed to
do business and is in good standing in each jurisdiction in
which the nature of
its business or the ownership or leasing of its properties makes
such
qualification or licensing necessary. The Company has made
available to Parent
complete and correct copies of its Amended and Restated
Certificate of
Incorporation and Amended and Restated Bylaws, in each case as
amended to the
date of this Agreement.
(b) Company Subsidiaries. Section 3.01(b) of the letter from
the
Company, dated the date of this Agreement, addressed to Parent
(the "Company
Disclosure Letter") lists each Company Subsidiary and the
ownership or interest
therein of the Company. All the outstanding shares of each
Company Subsidiary
have been validly issued and are fully paid and nonassessable
and are owned by
the Company, by another Company Subsidiary or by the Company and
another Company
Subsidiary, free and clear of all pledges, claims, liens,
charges, encumbrances
and security interests of any kind or nature whatsoever
(collectively, "Liens").
(c) Capital Structure. As of the date of this Agreement,
authorized
shares of the Company consist of (i) 40,000,000 Company Common
Shares, (ii)
3,939,000 shares of Class A Convertible Preferred Stock, par
value $.01 per
share (the "Class A Convertible Preferred Shares"), (iii)
319,800 shares of
Class B Convertible Preferred Stock, par value $.01 per share
(the "Class B
Convertible Preferred Shares"), (iv) 4,116,000 shares of Class C
Convertible
Preferred Stock, par value $.01 per share (the "Class C
Convertible Preferred
Shares"), (v) 150,000 shares of Class D Convertible Preferred
Stock, par value
$.01 per share (the "Class D Convertible Preferred Shares"),
(vi) 18,100 shares
of Class E Convertible Preferred Stock, par value $.01 per share
(the "Class E
Convertible Preferred Shares"), (vii) 4,000,000 shares of Class
F Convertible
Preferred Stock, par value $.01 per share (the "Class F
Convertible Preferred
Shares"), (viii) 639,450 shares of Class G Preferred Stock, par
value $.01 per
share (the "Class G Convertible Preferred Shares"), and (ix)
250,000 shares of
Preferred Stock, par value $.01 per share (the "Blank Check
Preferred Shares").
At the close of business on May 23, 2007: (i) 8,286,550 Company
Common Shares
were outstanding, all of which were validly issued, fully paid
and
nonassessable; (ii) 2,739,000 Class A Convertible Preferred
Shares were
outstanding, all of which were validly issued, fully paid and
nonassessable;
(iii) 319,800 Class B Convertible Preferred Shares were
outstanding, all of
which were validly issued, fully paid and nonassessable; (iv)
2,766,300 Class C
Convertible Preferred Shares were outstanding, all of which were
validly issued,
<PAGE>
fully paid and nonassessable; (v) 150,000 Class D Convertible
Preferred Shares
were outstanding, all of which were validly issued, fully paid
and
nonassessable; (vi) 12,015 Class E Convertible Preferred Shares
were
outstanding, all of which were validly issued, fully paid and
nonassessable;
(vii) 3,541,666.337 Class F Convertible Preferred Shares were
outstanding, all
of which were validly issued, fully paid and nonassessable;
(viii) 639,450 Class
G Convertible Preferred Shares were outstanding, all of which
were validly
issued, fully paid and nonassessable; (ix) no Blank Check
Preferred Shares were
outstanding; (x) there were 1,655,129 Treasury Shares; (xi)
2,842,918 Company
Common Shares were subject to issued and outstanding options to
purchase Company
Common Shares granted under the Company's 1995 Incentive Plan,
2000 Stock
Incentive Plan and a plan approved in connection with the
Company's 2003
restructuring (the "Company Share Plans," and such stock options
collectively,
the "Company Stock Options"); (xii) 3,897,135 Company Common
Shares were
reserved for issuance pursuant to the Company Share Plans;
(xiii) 606,000
Company Common Shares were subject to warrants issued to the
holders of Class C
Convertible Preferred Shares; (xiv) shares of Company Common
Shares were subject
to warrants issuable to lenders related to long-term debt; (xv)
shares of
Company Common Shares were subject to warrants issued to
investors in a bridge
financing; (xvi) shares of Company Common Shares were subject to
issuance upon
conversion of convertible promissory notes plus accrued
interest; and (xvii)
shares of Company Common Shares were subject to issuance upon
achievement of
certain milestones related to collaborative agreements. Except
as set forth
above, at the close of business on May 23, 2007, no shares or
other voting
securities of the Company were issued, reserved for issuance or
outstanding.
Prior to the Closing, the Company shall amend its Certificate of
Incorporation
(the "Company Certificate Amendments") such that immediately
prior to the
Closing, (i)(A) each Class A Convertible Preferred Share, Class
B Convertible
Preferred Share, Class D Convertible Preferred Share and Class G
Convertible
Preferred Share will convert into 2.163324 Company Common
Shares, (B) each Class
C Convertible Preferred Share will convert into 4.322537 Company
Common Shares,
(C) each Class E Convertible Preferred Share will into 12.484395
Company Common
Shares and (D) each Class F Convertible Preferred Share will
convert into
9.292039 Company Common Shares; (ii) the number of authorized
Company Common
Shares will be increased to 100,000,000; and (iii) all accrued
dividends will be
eliminated. Prior to the Closing, the Company will retire its
Treasury Shares
and cancel the warrants to purchase 606,000 Company Common
Shares issued to the
holders of Class C Convertible Preferred Shares. There are not
any bonds,
debentures, notes or other indebtedness of the Company having
the right to vote
(or convertible into, or exchangeable for, securities having the
right to vote)
on any matters on which shareholders of the Company may vote.
Except as set
forth above, as of the date of this Agreement there are not any
options,
warrants, calls, rights, commitments, agreements, arrangements
or undertakings
of any kind (collectively, "Options") to which the Company or
any Company
Subsidiary is a party or by which any of them is bound relating
to the issued or
unissued shares of the Company or any Company Subsidiary, or
obligating the
Company or any Company Subsidiary to issue, transfer, grant or
sell any shares
or other equity interests in, or securities convertible or
exchangeable for any
shares or other equity interests in, the Company or any Company
Subsidiary or
obligating the Company or any Company Subsidiary to issue,
grant, extend or
enter into any such Options. All Company Common Shares that are
subject to
issuance as aforesaid, upon issuance on the terms and conditions
specified in
<PAGE>
the instrument pursuant to which they are issuable, will be duly
authorized,
validly issued, fully paid and nonassessable and not subject to
any preemptive
rights. As of the date of this Agreement, there are not any
outstanding
contractual obligations of the Company or any Company Subsidiary
to repurchase,
redeem or otherwise acquire any shares of the Company or any
Company Subsidiary,
or make any material investment (in the form of a loan, capital
contribution or
otherwise) in, any person other than a Company Subsidiary.
(d) Authority; Noncontravention. The Company has all
requisite
corporate power and authority to enter into this Agreement and,
subject to the
Company Stockholder Approval, to consummate the transactions
contemplated by
this Agreement. The Board of Directors of the Company has
unanimously approved
this Agreement and the transactions contemplated by this
Agreement, and has
resolved to recommend to the Company's shareholders that they
give the Company
Stockholder Approval. The execution and delivery of this
Agreement by the
Company and the consummation by the Company of the transactions
contemplated by
this Agreement have been duly authorized by all necessary
corporate action on
the part of the Company, subject to the Company Stockholder
Approval. This
Agreement has been duly executed and delivered by the Company
and, assuming the
due authorization, execution and delivery by each of the other
parties hereto,
constitutes a valid and binding obligation of the Company,
enforceable against
the Company in accordance with its terms (subject to bankruptcy,
insolvency,
moratorium, reorganization or similar Laws affecting the rights
of creditors
generally and the availability of equitable remedies). The
execution and
delivery of this Agreement and the consummation of the
transactions contemplated
by this Agreement and compliance with the provisions of this
Agreement will not
conflict with, or result in any violation of, or default (with
or without notice
or lapse of time, or both) under, or give rise to a right of
termination or
acceleration of any obligation or to loss of any material rights
under, or
result in the creation of any Lien upon any of the properties or
assets of the
Company or any Company Subsidiary under, (i) the Amended and
Restated
Certificate of Incorporation or Amended and Restated Bylaws of
the Company or
the comparable organizational documents of any Company
Subsidiary, (ii) any
written contract, loan or credit agreement, note, bond,
mortgage, indenture,
lease or other property agreement, partnership or joint venture
agreement or
other legally binding agreement (a "Contract") or Permit,
applicable to the
Company or any Company Subsidiary or their respective properties
or assets or
(iii) subject to the governmental filings and the obtaining of
the Company
Stockholder Approval and other matters referred to in the
following sentence,
any judgment, order or decree of any Governmental Entity
("Judgment") or
statute, law, ordinance, rule or regulation of any Governmental
Entity ("Law")
applicable to the Company or any Company Subsidiary or their
respective
properties or assets, other than, in the case of clauses (ii)
and (iii), any
such conflicts, violations, defaults, rights or Liens that,
individually or in
the aggregate, would not reasonably be expected to be materially
adverse to the
Company and the Company Subsidiaries, taken as a whole. No
consent, approval,
order or authorization of, or registration or filing with, any
Federal, state or
local government or any court, administrative agency or
commission or other
governmental authority or agency, domestic or foreign (a
"Governmental Entity"),
is required by or with respect to the Company or any Company
Subsidiary in
connection with the execution and delivery of this Agreement by
the Company or
the consummation by the Company of the transactions contemplated
by this
Agreement, except for (i) the filing of the Certificate of
Merger with the
Delaware Secretary of State, (ii) those that may be required
solely by reason of
Parent's or Sub's (as opposed to any other third party's)
participation in the
Merger and the other transactions contemplated by this Agreement
and (iii) such
<PAGE>
other consents, approvals, orders, authorizations, registrations
and filings
that, if not obtained or made, would not, individually or in the
aggregate,
reasonably be expected to be materially adverse to the Company
and the Company
Subsidiaries, taken as a whole.
(e) Financial Statements; Undisclosed Liabilities. The
audited
consolidated financial statements (collectively, the "Company
Financial
Statements") included in the Private Placement Memorandum dated
April 19, 2007
(the "Private Placement Memorandum") have been prepared in
accordance with
generally accepted accounting principles in the United States
("GAAP") applied
on a basis consistent throughout the periods indicated and
fairly present in all
material respects the consolidated financial position of the
Company and the
Company Subsidiaries at the dates and during the periods
indicated therein.
Except for liabilities incurred in connection with the
transactions contemplated
by this Agreement or in the ordinary course of business since
December 31, 2006,
neither the Company nor any Company Subsidiary has any
liabilities or
obligations of any nature (whether accrued, absolute, contingent
or otherwise)
required by GAAP to be set forth on a consolidated balance sheet
of the Company
or the notes thereto which, individually or in the aggregate,
would be
reasonably expected to be materially adverse to the Company and
the Company
Subsidiaries, taken as a whole.
(f) Absence of Certain Changes or Events. From December 31, 2006
to
the date of this Agreement, the Company and the Company
Subsidiaries, taken as a
whole, have conducted their respective businesses only in the
ordinary course,
and during such period there has not been any event,
circumstance, change or
occurrence which, individually or in the aggregate, has had or
would reasonably
be expected to be materially adverse to the Company and the
Company
Subsidiaries, taken as a whole.
(g) Voting Requirements. The affirmative vote of (i) the
majority of
the outstanding Company Common Shares entitled to vote thereon
and the
outstanding Class A Convertible Preferred Shares, Class B
Convertible Preferred
Shares, Class C Convertible Preferred Shares, Class D
Convertible Preferred
Shares, Class F Convertible Preferred Shares and Class G
Preferred Shares (such
preferred shares, collectively, the "Voting Preferred Shares")
entitled to vote
thereon voting on an as-converted basis, voting together as a
class, and (ii) at
least 75% of the outstanding Voting Preferred Shares entitled to
vote thereon
voting on an as-converted basis, voting as a class
(collectively, the "Company
Stockholder Approval"), are the only votes of the holders of any
class or series
of shares of the Company necessary to adopt and approve this
Agreement and the
Merger.
(h) Brokers. Other than in connection with the Equity Financing,
no
broker, investment banker, financial advisor or other person is
entitled to any
broker's, finder's, financial advisor's or other similar fee or
commission in
connection with the transactions contemplated by this Agreement
based upon
arrangements made by or on behalf of the Company.
(i) State Takeover Statutes. No "fair price", "moratorium",
"control
share acquisition" or other similar anti-takeover statute or
regulation enacted
under state or federal Laws in the United States (with the
exception of Section
203 of the DGCL) applicable to the Company is applicable to the
transactions
contemplated by this Agreement. The action of the Board of
Directors of the
Company in approving this Agreement (and the transactions
provided for herein)
is sufficient to render inapplicable to this Agreement (and the
transactions
<PAGE>
provided for herein) the restrictions on "business combinations"
(as defined in
Section 203 of the DGCL) as set forth in Section 203 of the
DGCL.
SECTION 3.02. Representations and Warranties of Parent and Sub.
Except
as set forth in the letter from Parent, dated the date of this
Agreement,
addressed to the Company (the "Parent Disclosure Letter") (with
specific
reference to the relevant sections of the representations and
warranties or
covenants in this Agreement or disclosure in such a way to make
its relevance to
the information called for by the representations and warranties
or covenants
reasonably apparent), which Parent Disclosure Letter shall be
deemed a part
hereof, or as otherwise expressly contemplated by this
Agreement, Parent and Sub
represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent
and Sub
is a corporation duly organized, validly existing and in good
standing under the
Laws of the State of Delaware and has the requisite power and
authority to carry
on its business as now being conducted. Each of Parent and Sub
is duly qualified
or licensed to do business and is in good standing in each
jurisdiction in which
the nature of its business or the ownership or leasing of its
properties makes
such qualification or licensing necessary. Parent has made
available to the
Company complete and correct copies of its Certificate of
Incorporation and
Bylaws, and the Certificate of Incorporation and Bylaws of Sub,
in each case as
amended to the date of this Agreement.
(b) Parent Subsidiaries. Except for all of the issued and
outstanding
shares of capital stock of Sub, Parent does not own any capital
stock or have
any interest in any corporation, partnership, or other form of
business
organization. Parent owns all of the capital stock or other
equity interests of
Sub free and clear of any Liens, rights of first refusal,
preemptive rights or
other restrictions.
(c) Capital Structure. At the close of business on May 23, 2007,
the
authorized capital stock of Parent consists of (i) 40,000,000
shares of Parent
Common Stock, $0.001 par value, 500,000 shares of which are
outstanding, validly
issued, fully paid and nonassessable, and (ii) 10,000,000
preferred shares,
$0.001 par value, none of which are outstanding. Except as set
forth above, at
the close of business on May 23, 2007, no shares of capital
stock or other
voting securities of Parent were issued, reserved for issuance
or outstanding.
There are not any bonds, debentures, notes or other indebtedness
of Parent
having the right to vote (or convertible into, or exchangeable
for, securities
having the right to vote) on any matters on which stockholders
of Parent may
vote. Except as set forth above, as of the date of this
Agreement there are not
any Options to which Parent is a party or by which it is bound
relating to the
issued or unissued capital stock of Parent, or obligating Parent
to issue,
transfer, grant or sell any shares of capital stock or other
equity interests
in, or securities convertible or exchangeable for any capital
stock or other
equity interests in, Parent or obligating Parent to issue,
grant, extend or
enter into any such Options. All shares of Parent Common Stock
that are subject
to issuance pursuant to the Merger and the Equity Financing,
upon issuance
pursuant to this Agreement, will be duly authorized, validly
issued, fully paid
and nonassessable and not subject to preemptive rights. As of
the date of this
Agreement, there are not any outstanding contractual obligations
of Parent to
<PAGE>
repurchase, redeem or otherwise acquire any shares of capital
stock of Parent,
or make any material investment (in the form of a loan, capital
contribution or
otherwise) in any person.
(d) As of the date of this Agreement, the authorized shares of
Sub
consist of 1,000 common shares, par value $.01 per share, all of
which have been
validly issued, are fully paid and nonassessable and are owned
by Parent free
and clear of any Lien.
(e) Authority; Noncontravention. Parent and Sub have all
requisite
corporate power and authority to enter into this Agreement and
to consummate the
transactions contemplated by this Agreement. The Board of
Directors of Parent
has unanimously approved and declared advisable this Agreement
and the
transactions contemplated by this Agreement. The execution and
delivery of this
Agreement and the consummation of the transactions contemplated
by this
Agreement, in each case by Parent or by Parent and Sub, as the
case may be, have
been duly authorized by all necessary corporate action on the
part of Parent and
Sub. This Agreement has been duly executed and delivered by
Parent and Sub,
respectively, and, assuming the due authorization, execution and
delivery by the
Company, constitutes a valid and binding obligation of Parent
and Sub,
respectively, enforceable against each such party in accordance
with its terms
(subject to bankruptcy, insolvency, moratorium, reorganization
or similar Laws
affecting the rights of creditors generally and the availability
of equitable
remedies). The execution and delivery of this Agreement and the
consummation of
the transactions contemplated by this Agreement and compliance
with the
provisions of this Agreement will not conflict with, or result
in any violation
of, or default (with or without notice or lapse of time, or
both) under, or give
rise to a right of termination or acceleration of any obligation
or to loss of
any material rights under, or result in the creation of any Lien
upon any of the
properties or assets of Parent or Sub under, (i) the Certificate
of
Incorporation and By-laws of Parent or the Certificate of
Incorporation and
By-laws of Sub, (ii) the First Amended Joint Plan of
Reorganization Filed by the
Debtors and Official Committee of Unsecured Creditors (the "BTHC
Plan") and the
order confirming the BTHC Plan entered by the United States
Bankruptcy Court for
the Northern District of Texas (the "Bankruptcy Court") in Case
No.
03-33152-HDH-11, (iii) any Contract or Permit applicable to
Parent or Sub or
their respective properties or assets or (iv) subject to the
governmental
filings and other matters referred to in the following sentence,
any Judgment or
Law applicable to Parent or Sub or their respective properties
or assets. No
consent, approval, order or authorization of, or registration or
filing with,
any Governmental Entity, including the Bankruptcy Court, is
required by or with
respect to Parent or Sub in connection with the execution and
delivery of this
Agreement by Parent or Sub, as the case may be, or the
consummation by Parent or
Sub, as the case may be, of the transactions contemplated by
this Agreement,
except for (i) the filing of the Certificate of Merger with the
Delaware
Secretary of State and such filings with Governmental Entities
to satisfy the
applicable requirements of state securities or "blue sky" laws,
(ii) the
certificate of compliance with reverse acquisition requirements
to be filed with
the Bankruptcy Court (the "Certificate of Compliance") and any
related notice
required by the BTHC Plan and (iii) those that may be required
solely by reason
of the Company's (as opposed to any other third party's)
participation in the
Merger and the other transactions contemplated by this
Agreement.
(f) Satisfaction of Bankruptcy Obligations. The BTHC Plan has
become
effective in accordance with its terms. Other than the notice
following the
filing of the Certificate of Compliance, all other notices
required by the BTHC
<PAGE>
Plan have been served and all other post-effective date
obligations of Parent
have been satisfied. The discharge and injunctions contemplated
by the BTHC Plan
are effective and have not been challenged. Parent has all
requisite power and
authority to enter into this Agreement and to consummate the
transactions
contemplated by the Agreement, without further action by the
Bankruptcy Court.
Upon the completion of the transactions contemplated by this
Agreement, the
filing of the Certificate of Compliance and the provision of
written
confirmation of the completion of reverse merger within 15 days
of the Effective
Time to the holders of the Parent Common Stock, the Consummation
of the Plan
Date (as defined in the BTHC Plan) will occur, and Parent and
its assets will
not be subject to the supervision of the Bankruptcy Court. Upon
the completion
of the transactions contemplated by this Agreement and the
Consummation of the
Plan (as defined in the BTHC Plan), Parent will not have any
liability for any
pre-petition or pre-confirmation debts or liabilities of the
Debtors (as defined
in the BTHC Plan) or obligations of the Trust (as defined in the
BTHC Plan).
(g) SEC Documents; Undisclosed Liabilities. Parent has timely
filed
all required reports, schedules, forms, statements and other
documents with the
United States Securities and Exchange Commission ("SEC") since
July 6, 2006 (the
"Parent SEC Documents"). As of its date, each Parent SEC
Document complied in
all material respects with the requirements of the Securities
Act or the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as the case
may be, and the rules and regulations of the SEC promulgated
thereunder
applicable to such Parent SEC Documents, and did not contain any
untrue
statement of a material fact or omit to state a material fact
required to be
stated therein or necessary in order to make the statements
therein not
misleading, except to the extent that such Parent SEC Document
has been modified
or superseded by a later filed Parent SEC Document. As of the
date hereof, there
are no outstanding or unresolved comments in comment letters
received from the
SEC staff with respect to any of the Parent SEC Documents. The
financial
statements of Parent included in Parent's (i) annual report on
Form 10-KSB for
the fiscal year ended December 31, 2006 and (ii) quarterly
report on Form 10-QSB
for the quarterly period ended March 31, 2007, complied at the
time they were
filed as to form in all material respects with applicable
accounting
requirements and the published rules and regulations of the SEC
with respect
thereto, have been prepared in accordance with GAAP (except, in
the case of
unaudited statements, as permitted by Form 10-QSB of the SEC)
applied on a
consistent basis during the periods involved (except as may be
indicated in the
notes thereto) and each fairly presented in all material
respects the financial
position of Parent as of the dates thereof and the results of
its operations and
cash flows for the periods then ended (subject, in the case of
unaudited
statements, to normal year-end audit adjustments). Except for
liabilities
incurred in connection with the transactions contemplated by
this Ag
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