<PAGE>
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
KI NUTRICARE, INC.
LONGHORN ACQUISITION CORP.
AND
ALLERGY RESEARCH GROUP, INC.
DATED AS OF AUGUST 8, 2008
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TABLE OF CONTENTS
PAGE
ARTICLE 1
THE OFFER AND THE
MERGER...................................................................2
Section 1.1
The
Offer.........................................................................2
Section 1.2
Company
Actions...................................................................4
Section 1.3
Option to Acquire Additional
Shares...............................................5
ARTICLE 2
THE
MERGER................................................................................7
Section 2.1
The
Merger........................................................................7
Section 2.2
Merger
Closing....................................................................7
Section 2.3
Effect of Merger; Organizational Documents; Directors and
Officers................7
Section 2.4
Conversion of Merger Sub Capital
Stock............................................8
Section 2.5
Conversion of
Shares..............................................................8
Section 2.6
Appraisal
Rights..................................................................9
Section 2.7
Exchange of
Certificates..........................................................9
Section 2.8
Further
Action...................................................................11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.............................................11
Section 3.1
Organization.....................................................................11
Section 3.2
Capitalization...................................................................12
Section 3.3
Authorization; No
Conflict.......................................................14
Section 3.4
Subsidiary.......................................................................15
Section 3.5
SEC Reports and Financial
Statements.............................................16
Section 3.6
Absence of Material Adverse Changes,
etc.........................................17
Section 3.7
Litigation.......................................................................18
Section 3.8
Information
Supplied.............................................................18
Section 3.9
Broker's or Finder's
Fees........................................................18
Section 3.10
Employee
Plans...................................................................18
Section 3.11
Taxes............................................................................21
Section 3.12
Environmental
Matters............................................................23
Section 3.13
Compliance With
Laws.............................................................23
Section 3.14
Intellectual
Property............................................................24
Section 3.15
Employment
Matters...............................................................25
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TABLE OF CONTENTS
(continued)
Section 3.16
Insurance........................................................................26
Section 3.17
Material
Contracts...............................................................26
Section 3.18
Real
Property....................................................................27
Section 3.19
Anti-Takeover
Statutes...........................................................27
Section 3.20
Products
Liability...............................................................27
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB...................................28
Section 4.1
Organization.....................................................................28
Section 4.2
Merger
Sub.......................................................................28
Section 4.3
Authorization; No
Conflict.......................................................28
Section 4.4
Information
Supplied.............................................................29
Section 4.5
Availability of
Funds............................................................30
Section 4.6
Ownership of Company Common
Stock................................................30
Section 4.7
Broker's or Finder's
Fees........................................................30
Section 4.8
Litigation.......................................................................30
ARTICLE 5
CONDUCT OF
BUSINESS.......................................................................30
Section 5.1
Conduct of Business by the Company Pending the Acceptance
Time...................30
Section 5.2
Conduct of Business by Parent and Merger Sub Pending the
Merger..................33
ARTICLE 6
ADDITIONAL
AGREEMENTS.....................................................................33
Section 6.1
Preparation of Proxy Statement; Stockholders
Meetings............................33
Section 6.2
State Takeover
Laws..............................................................34
Section 6.3
Rule
14d-10(d)...................................................................34
Section 6.4
Public
Statements................................................................35
Section 6.5
Standard of
Efforts..............................................................35
Section 6.6
Notification of Certain
Matters..................................................35
Section 6.7
Access to Information;
Confidentiality...........................................36
Section 6.8
No
Solicitation..................................................................36
Section 6.9
Indemnification and
Insurance....................................................38
Section 6.10
Section 16
Matters...............................................................39
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TABLE OF CONTENTS
(continued)
Section 6.11
Employee
Matters................................................................40
Section 6.12
FIRPTA
Certificate...............................................................41
Section 6.13
De-registration..................................................................41
Section 6.14
Employment
Agreements............................................................41
ARTICLE 7
CONDITIONS................................................................................41
Section 7.1
Conditions to Each Party's Obligation to Effect the
Merger.......................41
ARTICLE 8
TERMINATION, AMENDMENT AND
WAIVER.........................................................42
Section 8.1
Termination......................................................................42
Section 8.2
Effect of
Termination............................................................43
Section 8.3
Fees and
Expenses................................................................44
Section 8.4
Amendment........................................................................45
Section 8.5
Waiver...........................................................................45
Section 8.6
Procedure for Termination, Amendment, Extension or
Waiver........................45
ARTICLE 9
GENERAL
PROVISIONS........................................................................45
Section 9.1
Notices..........................................................................45
Section 9.2
Nonsurvival of Representations, Warranties and
Agreements........................47
Section 9.3
Interpretations..................................................................47
Section 9.4
Governing Law; Jurisdiction; Waiver of Jury
Trial................................47
Section 9.5
Counterparts; Facsimile Transmission of
Signatures...............................48
Section 9.6
Assignment; No Third Party
Beneficiaries.........................................48
Section 9.7
Severability.....................................................................48
Section 9.8
Entire
Agreement.................................................................48
Section 9.9
Enforcement......................................................................49
Section 9.10
Disclosure
Letter................................................................49
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TABLE OF DEFINED TERMS
SECTION
ACCEPTANCE TIME
Exhibit A
AFFILIATE
Exhibit A
AGREEMENT
Opening Paragraph
APPRAISAL SHARES
Section 2.6
BANKRUPTCY AND EQUITY EXCEPTION
Section 3.3(a)
BENEFIT PLAN
Section 3.10
BOARD RECOMMENDATION
Section 3.3(d)
BOOK-ENTRY SHARES
Section
2.7(b)
BUSINESS DAYS
Exhibit A
CERTIFICATE
Section 2.7(b)
CERTIFICATE OF MERGER
Section 2.2(b)
CLOSING
Section 2.2(a)
CLOSING DATE
Section 2.2(a)
CODE
Exhibit A
COMPANY
Opening Paragraph
COMPANY ADVERSE RECOMMENDATION CHANGE
Section 6.8(d)
COMPANY AFFILIATES
Section 3.21(a)
COMPANY BOARD
Introduction
COMPANY CHARTER DOCUMENTS
Section 3.1(b)
COMPANY COMMON STOCK
Introduction
COMPANY DISCLOSURE LETTER
ARTICLE 3
COMPANY FINANCIAL STATEMENTS
Section 3.5(b)
COMPANY INTELLECTUAL PROPERTY
Section 3.14(b)
COMPANY LEASES
Section 3.18(b)
COMPANY MATERIAL ADVERSE EFFECT
Exhibit A
COMPANY MATERIAL CONTRACT
Section 3.17(a)
COMPANY PREFERRED STOCK
Section 3.2(a)
COMPANY SEC REPORTS
Section 3.5(a)
COMPANY SPECIAL COMMITTEE
Introduction
COMPANY STOCKHOLDERS MEETING
Section 6.1(b)
COMPANY SUBSIDIARY
Section 3.4(a)
COMPANY VOTING PROPOSAL
Section 6.1(b)
CONFIDENTIALITY AGREEMENT
Section 6.7(b)
CONSTITUENT CORPORATIONS
Section 2.1
CONTRACT
Exhibit A
D&O INSURANCE
Section 6.9(c)
DOL
Section 3.10
DSHEA
Section 3.13(b)
EFFECTIVE TIME
Section 2.2(b)
ENVIRONMENTAL LAWS
Exhibit A
ERISA
Section 3.10
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ERISA AFFILIATE
Section 3.10
EXCHANGE ACT
Section 1.1(a)
EXCHANGE AGENT
Section 2.7(a)
EXCHANGE FUND
Section 2.7(a)
FBCA
Introduction
FCPA
Section 3.5(f)
FDA
Section 3.13(b)
FDA ACT
Section 3.13(b)
GAAP
Section 3.5(b)
GOVERNMENTAL AUTHORITY
Section 3.3(c)
HAZARDOUS SUBSTANCES
Exhibit A
INDEMNIFIED PARTY
Section 6.9(a)
INDEMNIFYING PARTIES
Section 6.9(b)
INFORMATION STATEMENT
Section 3.3(c)
INTELLECTUAL PROPERTY
Section 3.14(a)
IRS
Section 3.10
JUDGMENT
Section 3.3(b)
KNOWLEDGE
Exhibit A
LAW
Section 3.3(b)
LIEN
Exhibit A
MAXIMUM AMOUNT
Section 6.9(c)
MERGER
Introduction
MERGER CONSIDERATION
Section 2.5(a)
MERGER SUB
Opening Paragraph
MINIMUM CASH AMOUNT
Annex A
MINIMUM TENDER CONDITION
Annex A
NOTE
Section 1.3
OFFER
Introduction
OFFER CONDITIONS
Section 1.1(a)
OFFER DOCUMENTS
Section 1.1(f)
OFFER PRICE
Introduction
OPTIONS
Exhibit A
ORDINARY COURSE OF BUSINESS
Exhibit A
PARENT
Opening Paragraph
PARENT MATERIAL ADVERSE EFFECT
Exhibit A
PERMITS
Section 3.1(a)
PERMITTED LIENS
Exhibit A
PERSON
Exhibit A
POLICIES
Section 3.16
PRE-CLOSING PERIOD
Section 5.1
PROXY STATEMENT
Section 3.3(c)
REGISTERED IP
Section 3.14(c)
REPRESENTATIVES
Section 6.8(a)
REQUIRED COMPANY STOCKHOLDER VOTE
Section 3.3(a)
RESTRICTED STOCK
Exhibit A
SARBANES-OXLEY ACT
Section 3.5(d)
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SCHEDULE 14D-9
Section 1.2(b)
SEC
Exhibit A
SECURITIES ACT
Section 3.5(a)
SHARE
Introduction
SHARES
Introduction
SPECIAL COMMITTEE
3.2(g)
STOCK PLANS
Exhibit A
SUBSEQUENT OFFERING PERIOD
Section 1.1(d)
SUBSIDIARY
Exhibit A
SUBSIDIARY DOCUMENTS
Section 3.1(b)
SUPERIOR PROPOSAL
Exhibit A
SUPERIOR PROPOSAL NOTICE
Section 8.1 (d)(iii)
SURVIVING CORPORATION
Section 2.1
TAKEOVER PROPOSAL
Exhibit A
TAX AUTHORITY OR TAXING AUTHORITY
Exhibit A
TAX OR TAXES
Exhibit A
TAX RETURNS
Exhibit A
TENDER AND SUPPORT AGREEMENT
Introduction
TERMINATION FEE
Section 8.3(b)
TOP-UP OPTION
Section 1.3
TOP-UP OPTION SHARES
Section 1.3
TRANSACTIONS
Section 1.2(a)
WALK AWAY DATE
Section 8.1(b)(i)
WARN ACT
Section 3.1(c)
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<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "AGREEMENT"), dated as of August
8,
2008, among KI NutriCare, Inc., a New York corporation ("PARENT"),
Longhorn
Acquisition Corp., a Florida corporation and wholly-owned
subsidiary of Parent
("MERGER SUB"), and Allergy Research Group, Inc., a Florida
corporation (the
"COMPANY").
INTRODUCTION
The respective Boards of Directors of Parent, Merger Sub and
the
Company have approved and declared advisable and in the best
interests of each
of their respective corporations this Agreement, including the
Offer and the
Merger, on the terms and subject to the conditions set forth in
this Agreement.
In furtherance of such acquisition, Parent has agreed, on the terms
and
subject to the conditions set forth in this Agreement, to cause
Merger Sub to
commence a cash tender offer (as it may be amended from time to
time as
permitted under this Agreement, the "OFFER") to purchase all the
shares of
common stock, par value $0.001 per share, of the Company (the
"COMPANY COMMON
STOCK") issued and outstanding (each share of Company Common Stock,
a "SHARE"
and, collectively, the "SHARES"), at a price per Share of $1.33
(such amount, or
any higher amount per Share paid pursuant to the Offer in
accordance with this
Agreement, the "OFFER PRICE"), subject to any required withholding
of Taxes (as
provided in SECTION 2.7(G)), net to the seller in cash (without
interest), on
the terms and subject to the conditions set forth in this
Agreement.
Following consummation of the Offer, subject to the terms and
conditions of this Agreement, Parent shall cause Merger Sub to
merge with and
into the Company (the "MERGER"), with the Company surviving the
Merger as a
wholly owned subsidiary of Parent, in accordance with the Florida
Business
Corporation Act (the "FBCA"). Each Share that is not tendered and
accepted
pursuant to the Offer, other than certain Shares as provided in
SECTION 2.5(B)
and SECTION 2.6, will thereupon be cancelled and converted in the
Merger into
the right to receive cash in an amount equal to the Offer Price on
the terms and
subject to the conditions set forth herein.
The Board of Directors of the Company (the "COMPANY BOARD"), at
a
meeting duly called and held following unanimous recommendation by
a special
committee consisting of only independent directors (the "COMPANY
SPECIAL
COMMITTEE"), has duly and unanimously adopted resolutions (i)
declaring that
this Agreement and the Transactions, including the Offer and the
Merger, are
fair and reasonable to and in the best interests of the Company and
its
stockholders, (ii) approving and declaring advisable this Agreement
and the
Transactions, including the Offer and the Merger (such approval
having been made
in accordance with the FBCA), and (iii) recommending that the
Company's
stockholders accept the Offer, tender their Shares to Merger Sub
pursuant to the
Offer and adopt this Agreement.
Each of Parent and the Board of Directors of Merger Sub has
approved,
and the Board of Directors of the Company has determined that this
Agreement and
the Transactions, including the Offer and the Merger, are
advisable.
<PAGE>
Concurrently with the execution and delivery of this Agreement, and
as
a condition and inducement to Parent's and Merger Sub's willingness
to enter
into this Agreement, certain of the Company's stockholders are
entering into a
Tender and Support Agreement with Parent and Merger Sub
substantially in the
form attached as EXHIBIT B (the "TENDER AND SUPPORT
AGREEMENT").
In consideration of the foregoing and of the representations,
warranties, covenants and agreements set forth in this Agreement
and for other
good and valuable consideration, the receipt and sufficiency of
which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
THE OFFER AND THE MERGER
Section 1.1 THE
OFFER.
(a) Provided that nothing shall have occurred that, had the Offer
been
commenced, would give rise to a right to terminate the Offer
pursuant to any of
the conditions set forth in ANNEX A, as promptly as reasonably
practicable after
the date of this Agreement, Merger Sub shall commence the Offer,
within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as
amended
("EXCHANGE ACT"), to purchase any and all outstanding Shares at a
price equal to
the Offer Price. The obligations of Merger Sub to, and of Parent to
cause Merger
Sub to, purchase, accept for payment, and pay for, Shares tendered
pursuant to
the Offer are subject to the satisfaction or waiver of each of the
conditions
set forth in ANNEX A (the "OFFER CONDITIONS").
(b) The initial expiration date of the Offer shall be the
twentieth
(20th) Business Day following the commencement of the Offer
(determined using
Rules 14d-1(g)(3) and 14d-2 under the Exchange Act).
Notwithstanding the
foregoing, if, on the initial expiration date or any subsequent
date as of which
the Offer is scheduled to expire, all of the Offer Conditions have
not been
satisfied or waived by Merger Sub, then Merger Sub shall have the
right to, in
its sole discretion, extend (and re-extend) the Offer and its
expiration date
beyond the initial expiration date or such other date for one or
more periods,
until a date as of which all of the Offer Conditions, including the
Minimum
Tender Condition, are satisfied or waived. Notwithstanding the
foregoing, Merger
Sub shall, and Parent shall cause Merger Sub to, extend the Offer
for any period
required by any rule, regulation, interpretation or position of the
SEC or the
staff thereof applicable to the Offer or any period required by any
other Law.
The Offer may not be terminated prior to its expiration date (as
such expiration
date may be extended and re-extended in accordance with this
Agreement), unless
this Agreement is validly terminated in accordance with ARTICLE 8.
Nothing in
this SECTION 1.1(B) shall affect any termination rights in ARTICLE
8; and in the
event of any conflict between the provisions of this SECTION 1.1(B)
and ARTICLE
8, ARTICLE 8 shall be controlling.
(c) Subject to the terms and conditions of this Agreement, Merger
Sub
shall (and Parent shall cause Merger Sub to) accept for payment and
promptly pay
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<PAGE>
for all Shares validly tendered and not withdrawn pursuant to the
Offer as
promptly as practicable following the later of: (i) the earliest
date as of
which Merger Sub is permitted under applicable Law to accept for
payment Shares
tendered pursuant to the Offer and (ii) the earliest date as of
which each of
the Offer Conditions shall have been satisfied or waived.
(d) Following the expiration of the Offer, Merger Sub may, in
its
discretion, elect to provide for a subsequent offering period (and
one or more
extensions thereof) in accordance with Rule 14d-11 under the
Exchange Act (each
a "SUBSEQUENT OFFERING PERIOD") following the Acceptance Time if at
the
commencement of any Subsequent Offering Period (or extension
thereof) the number
of Shares owned by Parent, Merger Sub and their respective
Subsidiaries
(including any Shares beneficially owned by any of the foregoing)
represent less
than 80% of the outstanding Shares on a fully-diluted basis.
Subject to the
terms and conditions set forth in this Agreement and the Offer,
Parent shall
cause Merger Sub to, and Merger Sub shall, accept for payment and
pay for all
Shares validly tendered and not withdrawn during such Subsequent
Offering Period
as promptly as practicable after any such Shares are tendered
during any
Subsequent Offering Period and in any event in compliance with Rule
14d-11(c)
under the Exchange Act.
(e) Parent and Merger Sub expressly reserve the right to waive
any
condition to the Offer, to increase the Offer Price and/or to
modify the other
terms of or conditions to the Offer, except that unless otherwise
provided in
this Agreement, without the consent of the Company, Parent and
Merger Sub shall
not do any of the following:
(i) reduce the number of Shares subject to the Offer;
(ii) reduce the Offer Price;
(iii) change or waive the Minimum Tender Condition; or
(iv)
change the form of consideration payable in the Offer.
(f) On the date of commencement of the Offer (within the meaning
of
Rule 14d-2 under the Exchange Act), Merger Sub shall file with the
SEC, pursuant
to Regulation M-A under the Exchange Act, a Tender Offer Statement
on Schedule
TO with respect to the Offer, which Tender Offer Statement shall
contain an
offer to purchase and a related letter of transmittal and summary
advertisement
(such Schedule TO and the documents included therein pursuant to
which the Offer
will be made, together with any supplements or amendments thereto,
being
referred to as the "OFFER DOCUMENTS"). The Company shall promptly
upon request
of Parent provide Parent with all information concerning the
Company that is
required to be included in the Offer Documents. Parent and Merger
Sub shall
cause the Offer Documents to comply in all material respects with
the
requirements of the Exchange Act and, on the date first filed with
the SEC and
on the date first published, sent or given to the holders of
Shares, and not to
contain any untrue statement of a material fact or omit to state
any material
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<PAGE>
fact required to be stated therein or necessary in order to make
the statements
therein, in light of the circumstances under which they were made,
not
misleading, except that no covenant is made by Parent or Merger Sub
with respect
to information supplied by the Company for inclusion or
incorporation by
reference in the Offer Documents. Each of Parent, Merger Sub and
the Company
shall promptly correct any information provided by it for use in
the Offer
Documents if and to the extent necessary such that the Offer
Documents do not
contain an untrue statement of a material fact or omit to state any
material
fact required to be stated therein or necessary in order to make
the statements
therein, in light of the circumstances under which they are made,
not
misleading. Each of Parent and Merger Sub shall take all steps
necessary to
amend or supplement the Offer Documents and to cause the Offer
Documents as so
amended or supplemented to be filed with the SEC and disseminated
to the holders
of Shares, in each case as and to the extent required by the
Exchange Act.
Parent and Merger Sub shall provide to the Company and its counsel
copies of any
written comments or telephonic notification of any oral comments
Parent, Merger
Sub or their counsel may receive from the SEC or its staff with
respect to the
Offer Documents promptly after the receipt of such comments, and
shall provide
the Company with copies of all written responses and telephonic
notification of
any oral responses thereto of Parent or Merger Sub or their
counsel.
(g) The Offer Price shall be adjusted to reflect fully the effect
of
any reclassification, stock split, reverse split, stock dividend
(including any
dividend or distribution of securities convertible into Company
Common Stock),
cash dividend, reorganization, recapitalization combination, or
other like
change with respect to Company Common Stock occurring (or for which
a record
date is established) on or after the date of this Agreement and
prior to the
payment by Merger Sub for the Shares validly tendered and not
withdrawn in
connection with the Offer; PROVIDED, HOWEVER, the provisions of
this SECTION
1.1(G) are not authority for the Company to take any action
referenced in
SECTION 5.1(B), and in the event of any conflict between the
provisions of
SECTION 5.1(B) and this SECTION 1.1(G), the provision of SECTION
5.1(B) shall be
controlling.
Section 1.2
COMPANY ACTIONS.
(a) The Company hereby approves of and consents to the Offer,
the
Merger and the other transactions contemplated by this Agreement
(collectively,
the "TRANSACTIONS"). The Company hereby consents to the inclusion
of a statement
in the Offer Documents that to the Knowledge of the Company all
directors and
executive officers of the Company intend to tender all of their
respective
Shares, if they hold any, in the Offer.
(b) Contemporaneously with the commencement of the Offer, the
Company
shall file with the SEC a Solicitation/Recommendation Statement on
Schedule
14D-9 with respect to the Offer (such Schedule 14D-9, as amended
and
supplemented from time to time, the "SCHEDULE 14D-9") and shall
disseminate the
Schedule 14D-9, to the extent required by Rule 14D-9 promulgated
under the
Exchange Act and any other applicable Laws, to the holders of
Shares. Except and
to the extent otherwise permitted pursuant to SECTION 6.8 below,
the Offer
Documents and the Schedule 14D-9 shall contain the Board
Recommendation, and the
Company hereby consents to the inclusion in the Offer Documents of
such
recommendation. The Schedule 14D-9 shall comply in all material
respects with
the requirements of applicable U.S. federal securities laws and on
the date
first filed with the SEC and on the date first published, sent or
given to the
Company's stockholders, shall not contain any untrue statement of a
material
fact or omit to state any material fact required to be stated
therein or
necessary in order to make the statements therein, in light of the
circumstances
under which they were made, not misleading, except that the Company
makes no
covenant, agreement, representation or warranty with respect to
information
supplied by Parent or Merger Sub in writing specifically for
inclusion in the
Schedule 14D-9. Each of the Company, Parent and Merger Sub shall
promptly
correct any information provided by it for use in the Schedule
14D-9 if and to
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<PAGE>
the extent necessary such that the Schedule 14D-9 does not contain
any untrue
statement of a material fact or omit to state any material fact
required to be
stated therein or necessary in order to make the statements
therein, in light of
the circumstances under which they are made, not misleading. The
Company shall
take all steps necessary to amend or supplement the Schedule 14D-9
and to cause
the Schedule 14D-9 as so amended or supplemented to be filed with
the SEC and
disseminated to the holders of Shares, in each case as and to the
extent
required by the Exchange Act.
(c) Parent and its counsel shall be afforded a reasonable
opportunity
to review and comment upon the Schedule 14D-9 before it is filed
with the SEC
and disseminated to holders of Shares. The Company shall provide
Parent and its
counsel copies of any written comments or telephonic notification
of any oral
comments the Company or its counsel may receive from the SEC or its
staff with
respect to the Schedule 14D-9 promptly after the receipt of such
comments, shall
consult with Parent and its counsel prior to responding to any such
comments and
shall provide Parent with copies of all written responses and
telephonic
notification of any oral responses thereto of the Company and its
counsel.
(d) In connection with the Offer, the Company shall instruct
its
transfer agent to furnish Parent and Merger Sub promptly with
mailing labels
containing the names and addresses of the record holders of Shares
as of a
recent date and of those persons becoming record holders subsequent
to such
date, together with copies of all lists of stockholders, security
position
listings and computer files and all other information in the
Company's
possession or control regarding the beneficial owners of Shares,
and shall
furnish to Parent and Merger Sub such information and assistance
(including
updated lists of stockholders, security position listings and
computer files) as
Parent may reasonably request for the purpose of communicating the
Offer to the
holders of Shares. Subject to the requirements of applicable Law
and except for
such steps as are necessary to disseminate the Offer Documents and
any other
documents necessary to consummate the Offer, the Merger and the
other
Transactions, Parent and Merger Sub shall, until consummation of
the Offer, hold
in confidence the information contained in any of such labels and
lists in
accordance with the Confidentiality Agreement, shall use such
information only
in connection with the Offer, the Merger and the other Transactions
and, if this
Agreement shall be terminated in accordance with SECTION 8.1, shall
deliver to
the Company all copies of such information then in their possession
or under
their control.
Section 1.3 OPTION TO ACQUIRE ADDITIONAL SHARES. The Company
hereby
grants to Merger Sub an irrevocable option (the "TOP-UP OPTION"),
exercisable in
accordance with this SECTION 1.3, to purchase the number of Shares
(the "TOP-UP
OPTION SHARES") equal to the number of shares of Company Common
Stock that, when
added to the number of shares of Company Common Stock owned by
Merger Sub
immediately prior to the exercise of the Top-Up Option (which such
shares of
Company Common Stock owned by Merger Sub shall not be less than the
Minimum
Tender Condition) shall constitute one share more than 80% of the
number of
Shares then outstanding (after giving effect to the issuance of the
Top-Up
Option Shares) for a purchase price per Top-Up Option Share equal
to the Offer
Price. The Top-Up Option may be exercised by Merger Sub in whole
but not in
part; PROVIDED, HOWEVER, that Merger Sub agrees that it will
exercise the Top-Up
Option only if doing so would allow it to consummate the Merger
pursuant to
Section 607.1104 of the FBCA. In no event shall the Top-Up Option
be exercisable
for a number of Shares in excess of the Company's then authorized
and unissued
-5-
<PAGE>
Shares (including as authorized and unissued shares of Common
Stock, for
purposes of this SECTION 1.3, any Shares reserved for issuance,
upon the
exercise of any outstanding Option or with respect to any other
outstanding
security convertible into or exercisable or exchangeable for
Shares). The Top-Up
Option may be exercised by Merger Sub at any time at or after the
Acceptance
Time and the expiration of any subsequent offering period and on or
prior to the
tenth (10th) Business Day after the later of (i) the expiration
date of the
Offer or (ii) the expiration of any Subsequent Offering Period;
PROVIDED,
HOWEVER, that the obligation of the Company to deliver Top-Up
Option Shares upon
the exercise of the Top-Up Option is subject to the conditions,
unless waived by
the Company, that (A) no provision of any applicable Law, and no
temporary
restraining order, preliminary or permanent injunction or other
judgment or
order issued by a court of competent jurisdiction or other
Governmental
Authority of competent jurisdiction, shall prohibit the exercise of
the Top-Up
Option or the delivery of the Top-Up Option Shares in respect of
such exercise,
(B) after issuance of the Top-Up Option Shares upon exercise, the
number of
Shares owned by Parent or Merger Sub or any wholly owned Subsidiary
of Parent or
Merger Sub constitutes one share more than 80% of the number of
Shares that will
be outstanding immediately after the issuance of the Top-Up Option
Shares, and
(C) upon exercise of the Top-Up Option, Merger Sub covenants to
cause the
Closing to occur as soon as practicable thereafter; and, provided,
FURTHER, that
the Top-Up Option shall terminate concurrently with the termination
of this
Agreement. The parties shall cooperate to ensure that the issuance
of the Top-Up
Option Shares is accomplished in a manner consistent with all
applicable Law,
including compliance with an applicable exemption from registration
of the
Top-Up Option Shares under the Securities Act. If Merger Sub wishes
to so
exercise the Top-Up Option, Merger Sub shall give the Company
written notice
thereof specifying a place and time (which, subject to applicable
Law and any
required regulatory approvals, shall be at least two (2), but not
more than five
(5), Business Days after the date of delivery of such written
notice) for the
closing of such purchase. At such closing, (i) the purchase price
in respect of
the Top-Up Option Shares purchased upon such exercise of the Top-Up
Option
(which shall equal the product of (x) the number of Top-Up Option
Shares being
purchased pursuant to the Top-Up Option and (y) the Offer Price)
shall be paid
to the Company, at Merger Sub's election, either (A) in immediately
available
funds by wire transfer to an account designated by the Company or
(B) by paying
in cash an amount equal to not less than the aggregate par value of
such Top-Up
Option Shares and by delivering Parent's unsecured,
non-negotiable,
non-transferable promissory note (the "NOTE") in the principal
amount of the
balance of such purchase price, which promissory note shall bear
interest at the
rate of 3% per annum, shall mature on the first anniversary of the
date thereof
and may be prepaid in whole or in part without premium or penalty,
and (ii) the
Company shall deliver to Merger Sub a certificate or certificates
representing
the number of Top-Up Option Shares so purchased. Parent and Merger
Sub
acknowledge that the Top-Up Option Shares that Merger Sub may
acquire upon
exercise of the Top-Up Option will not be registered under the
Securities Act,
and will be issued in reliance upon an exemption thereunder for
transactions not
involving a public offering. Parent and Merger Sub represent and
warrant to the
Company that Merger Sub is, or will be upon the purchase of the
Top-Up Option
Shares, an "accredited investor", as defined in Rule 501 of
Regulation D under
the Securities Act. Merger Sub agrees that the Top-Up Option and
the Top-Up
Option Shares to be acquired upon exercise of the Top-Up Option are
being and
will be acquired by Merger Sub for the purpose of investment and
not with a view
to, or for resale in connection with, any distribution thereof in
violation of
the Securities Act.
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ARTICLE 2
THE MERGER
Section 2.1 THE MERGER. Subject to the terms and conditions of
this
Agreement and in compliance with the FBCA, Merger Sub shall be
merged with and
into the Company, the separate existence of Merger Sub shall cease,
and the
Company shall continue as the surviving corporation. For purposes
of this
Agreement, (i) the corporation surviving the Merger after the
Effective Time is
sometimes referred to as the "SURVIVING CORPORATION" and (ii) the
Company and
Merger Sub are collectively referred to as the "CONSTITUENT
CORPORATIONS".
Section 2.2
MERGER CLOSING.
(a) The Merger shall be consummated (the "CLOSING") at 10:00 a.m.
(San
Francisco time) on a date to be specified by the parties, which
shall be no
later than the fifth (5th) Business Day after satisfaction or (to
the extent
permitted by applicable Law) waiver of the conditions set forth in
ARTICLE 7
(other than any such conditions that by their nature cannot be
satisfied until
the Closing Date, which shall be required to be so satisfied or (to
the extent
permitted by applicable Law) waived on the Closing Date), at the
offices of
O'Melveny & Myers LLP, 275 Battery Street, San Francisco,
California 94111-3305,
unless another time, date or place is agreed to in writing by the
parties hereto
(such date upon which the Closing occurs, the "CLOSING DATE").
(b) At the Closing, the parties hereto shall cause the Merger to
be
consummated by filing with the Secretary of State of the State of
Florida a
certificate of merger or a certificate of ownership and merger, as
the case may
be (in any such case, the "CERTIFICATE OF MERGER"), in such form as
required by,
and executed in accordance with, the relevant provisions of the
FBCA and shall
make all other filings or recordings required under the FBCA. The
Merger shall
become effective at such time as the Certificate of Merger is duly
filed with
the Secretary of State of the State of Florida, or at such later
time as Parent
and the Company shall agree and specify in the Certificate of
Merger (the time
the Merger becomes effective being the "EFFECTIVE TIME").
Section 2.3
EFFECT OF MERGER; ORGANIZATIONAL DOCUMENTS; DIRECTORS
AND OFFICERS.
(a) The Merger shall have the effects set forth in Section
607.11101 of
the FBCA.
(b) The articles of incorporation of the Surviving Corporation
shall at
the Effective Time be amended in its entirety to read the same as
the articles
of incorporation of Merger Sub, as in effect immediately prior to
the Effective
Time, except that all references to the name of Merger Sub therein
shall be
changed to refer to the name of the Company, until thereafter
amended as
provided therein and under the FBCA. In addition, subject to
SECTION 6.9 hereof,
Parent shall cause the bylaws of the Surviving Corporation to be
amended and
restated in their entirety so that, immediately following the
Effective Time,
they are identical to the bylaws of Merger Sub as in effect
immediately prior to
the Effective Time, except that all references to the name of
Merger Sub therein
shall be changed to refer to the name of the Company, and, as so
amended and
restated, such bylaws shall be the bylaws of the Surviving
Corporation, until
further amended in accordance with the FBCA. The directors of
Merger Sub
immediately prior to the Effective Time shall be the initial
directors of the
Surviving Corporation and shall serve until the earlier of their
resignation or
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<PAGE>
removal or their respective successors are duly elected or
appointed and
qualified, as the case may be. The officers of the Company
immediately prior to
the Effective Time shall be the initial officers of the Surviving
Corporation
and shall serve until the earlier of their resignation or removal
or until their
respective successors have been duly elected or appointed and
qualified, as the
case may be.
(c) If requested by Parent prior to the Effective Time, the
Company
shall cause the directors of the Company Subsidiary to tender their
resignations
as directors, effective as of the Effective Time, and to deliver to
Parent
written evidence of such resignations at the Effective Time.
Section 2.4 CONVERSION OF MERGER SUB CAPITAL STOCK. At the
Effective
Time, by virtue of the Merger and without any action on the part of
Parent,
Merger Sub, the Company or any holder of shares of Merger Sub
capital stock,
each share of Merger Sub capital stock shall be converted into and
become one
fully paid and nonassessable share of common stock, par value
$0.001 per share,
of the Surviving Corporation.
Section 2.5 CONVERSION OF SHARES. At the Effective Time, by virtue
of
the Merger and without any action on the part of Parent, Merger
Sub, the Company
or any holder of Shares, the following shall occur:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than (i) any Shares to be canceled or remain
outstanding
pursuant to SECTION 2.5(B) and (ii) any Appraisal Shares) shall at
the Effective
Time be canceled and converted automatically into the right to
receive an amount
in cash equal to the Offer Price (the "MERGER CONSIDERATION"). As
of the
Effective Time, all such Shares shall no longer be outstanding and
shall
automatically be canceled and shall cease to exist, and each holder
of a
certificate previously representing any such Shares shall cease to
have any
rights with respect thereto, except the right to receive the
Merger
Consideration upon surrender of such certificate in accordance with
SECTION 2.7,
without interest.
(b)
Each Share held in the treasury of the Company and each Share
owned
by Parent (other than Shares held by any direct or indirect
wholly-owned
subsidiary of Parent or of the Company, which shall remain
outstanding except
that the number of such Shares shall be adjusted in the Merger to
maintain
relative ownership percentages) immediately prior to the Effective
Time shall be
canceled without any conversion thereof and no payment or
distribution shall be
made with respect thereto.
(c) The Merger Consideration shall be adjusted to reflect fully
the
effect of any reclassification, stock split, reverse split, stock
dividend
(including any dividend or distribution of securities convertible
into Company
Common Stock), reorganization, recapitalization or other like
change with
respect to Company Common Stock occurring (or for which a record
date is
established) after the date hereof and prior to the Effective Time;
PROVIDED,
HOWEVER, the provisions of this SECTION 2.5(C) are not authority
for the Company
to take any action referenced in SECTION 5.1(B), and in the event
of any
conflict between the provisions of SECTION 5.1(B) and this SECTION
2.5(C), the
provisions of SECTION 5.1(B) shall be controlling.
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<PAGE>
Section 2.6 APPRAISAL RIGHTS. Notwithstanding anything in this
Agreement to the contrary, Shares that are outstanding immediately
prior to the
Effective Time and that are held by any Person who is entitled to
demand and
properly demands appraisal of such Shares ("APPRAISAL SHARES")
pursuant to, and
who complies in all respects with, Section 607.1322 of the FBCA
shall not be
converted into the right to receive Merger Consideration as
provided in SECTION
2.5(A), but rather the holders of Appraisal Shares shall be
entitled to payment
of the fair value of such Appraisal Shares in accordance with
Section 607.1302
of the FBCA (and at the Effective Time, such Appraisal Shares shall
no longer be
outstanding and shall automatically be cancelled and shall cease to
exist, and
such holders shall cease to have any right with respect thereto,
except the
right to receive the fair value of such Appraisal Shares in
accordance with
Section 607.1302 of the FBCA); PROVIDED, HOWEVER, that if any such
holder shall
fail to perfect or otherwise shall waive, withdraw or lose the
right to
appraisal under Section 607.1302 of the FBCA, then the right of
such holder to
be paid the fair value of such holder's Appraisal Shares shall
cease and such
Appraisal Shares shall be deemed to have been converted as of the
Effective Time
into, and to have become exchangeable solely for the right to
receive, Merger
Consideration as provided in SECTION 2.5(A). The Company shall
promptly notify
Parent in writing of any written demands received by the Company
for appraisal
of any Shares, and Parent shall have the right to participate in
all
negotiations and proceedings with respect to such demands. Prior to
the
Effective Time, the Company shall not, without the prior written
consent of
Parent, make any payment with respect to, or settle or offer to
settle, any such
demands, or agree to do any of the foregoing. Any portion of the
Merger
Consideration made available to the Exchange Agent pursuant to
SECTION 2.7(a) to
pay for Shares that are instead paid fair value in an appraisal
proceeding
pursuant to Section 607.1302 of the FBCA shall be returned to
Parent upon
demand.
Section 2.7
EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent shall
appoint
an agent (the "EXCHANGE Agent"), which shall provide for the
payment of Merger
Consideration in accordance with the terms of this SECTION 2.7. At
the Effective
Time, Parent shall, or shall take all steps necessary to enable and
cause the
Merger Sub to, deposit with the Exchange Agent at or prior to the
Effective
Time, for the benefit of the holders of Shares outstanding
immediately prior to
the Effective Time, for payment by the Exchange Agent in accordance
with this
ARTICLE 2, the cash necessary to pay for the Shares converted into
the right to
receive Merger Consideration (the "EXCHANGE FUND"). The Exchange
Fund shall not
be used for any other purpose. The Exchange Fund shall, pending its
disbursement
to such holders, be invested by the Exchange Agent as directed by
Parent.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable (and in
any
event within ten (10) Business Days) after the Effective Time,
Parent shall
cause the Exchange Agent to mail to each Person who was a holder of
record of
Shares immediately prior to the Effective Time, whose Shares were
converted into
the right to receive the Merger Consideration pursuant to SECTION
2.5, (i) the
form of letter of transmittal for use in effecting the surrender of
stock
certificates that immediately prior to the Effective Time
represented Shares
(each, a "CERTIFICATE") or non-certificated Shares represented by
Book-Entry
("BOOK-ENTRY SHARES") (which transmittal letter shall be in
customary form and
shall specify that delivery shall be effected, and risk of loss and
title to the
Certificates shall pass, only upon delivery of the Certificates to
the Exchange
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<PAGE>
Agent) and (ii) instructions for use in surrendering the
Certificates or
Book-Entry Shares in exchange for the Merger Consideration. The
parties hereby
acknowledge and agree that the ten (10) Business Day period set
forth in the
previous sentence will be tolled for each Business Day the Exchange
Agent has
not received the necessary stockholder records from the Company's
transfer
agent. Upon surrender of a Certificate or a Book-Entry Share 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 Certificate or Book-Entry Share shall be paid
promptly in
exchange therefor, and Parent shall cause the Exchange Agent to pay
to such
holder, the Merger Consideration in respect of the Shares
previously represented
by such Certificate or Book-Entry Share, and the Certificate or
Book-Entry
Shares so surrendered shall forthwith be canceled. In the event of
a transfer of
ownership of Shares that is not registered in the transfer records
of the
Company, payment may be made to a Person other than the Person in
whose name the
Certificate so surrendered is registered if such Certificate shall
be properly
endorsed or otherwise be in proper form for transfer and the Person
requesting
such issuance shall pay any transfer or other Taxes required by
reason of the
payment to a Person other than the registered holder of such
Certificate or
establish to the satisfaction of Parent that such Tax has been paid
or is not
applicable. Each Certificate and Book-Entry Share shall be deemed
at all times
from and after the Effective Time to represent only the right to
receive upon
surrender in accordance with this SECTION 2.7 the Merger
Consideration in
respect of the Shares previously represented by such Certificate or
Book-Entry
Share. No interest shall be paid or shall accrue on any cash
payable to holders
of Certificates or Book Entry Shares pursuant to the provisions of
this ARTICLE
2.
(c) NO FURTHER OWNERSHIP RIGHTS IN SHARES. The Merger
Consideration
paid upon the surrender for exchange of Certificates and Book Entry
Shares in
accordance with the terms of this ARTICLE 2 shall be deemed to have
been paid in
full satisfaction of all rights pertaining to the Shares previously
represented
by such Certificates and Book Entry Shares. From and after the
Effective Time,
the Surviving Corporation shall not permit any further registration
of transfers
on the stock transfer books of the Company of the Shares that were
outstanding
immediately prior to the Effective Time. If, after the Effective
Time,
Certificates or Book Entry Shares are presented to the Surviving
Corporation or
the Exchange Agent for any reason, they shall be canceled and
exchanged as
provided in this ARTICLE 2, except as otherwise provided by
Law.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
that
remains undistributed to the holders of Shares for 180 days after
the Effective
Time shall be delivered to Parent, upon demand, and any holders of
Certificates
or Book Entry Shares who have not theretofore complied with this
ARTICLE 2 shall
thereafter only be entitled to receive from Parent (subject to
abandoned
property, escheat or similar Laws, as general creditors thereof)
payment of
their claim for Merger Consideration.
(e) NO LIABILITY. To the extent permitted by applicable Law, none
of
Parent, Merger Sub, the Company or the Exchange Agent shall be
liable to any
Person in respect of any cash from the Exchange Fund delivered to a
public
official pursuant to any applicable abandoned property, escheat or
similar Law.
(f) LOST CERTIFICATES. If any Certificate shall have been lost,
stolen
or destroyed, upon the making of an affidavit of that fact by the
Person
claiming such Certificate to be lost, stolen or destroyed and, if
requested by
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<PAGE>
Parent or the Exchange Agent, the posting by such Person of a bond
in such
reasonable amount as Parent or the Exchange Agent may direct as
indemnity
against any claim that may be made against it with respect to such
Certificate,
the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed
Certificate the applicable Merger Consideration with respect
thereto pursuant to
this Agreement.
(g) WITHHOLDING RIGHTS. Notwithstanding any provision of this
Agreement
to the contrary, each of Parent, the Surviving Corporation and the
Exchange
Agent shall be entitled to deduct and withhold from the
consideration otherwise
payable pursuant to this Agreement such amounts as it is required
to deduct and
withhold with respect to the making of such payment under any
applicable Law. To
the extent that amounts are so withheld by Parent, the Surviving
Corporation or
the Exchange Agent, as applicable, such amount shall be treated for
all purposes
of this Agreement as having been paid to the Person in respect of
which such
deduction and withholding was made.
Section 2.8 FURTHER ACTION. If at any time after the Effective
Time,
any further action is necessary or desirable to vest the Surviving
Corporation
with full right, title and possession to all assets, property,
rights,
privileges, powers and franchises of either of the Constituent
Corporations, the
officers and directors of the Surviving Corporation are fully
authorized in the
name of each Constituent Corporation, or otherwise, to take, and
shall take, all
such lawful and necessary action.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the disclosure letter (each section of
which
qualifies (i) the correspondingly numbered representation and
warranty or
covenant and (ii) other sections of this Agreement to the extent it
is
reasonably apparent solely from a reading of the disclosure that
such disclosure
is applicable to such other sections without any independent
knowledge on the
part of the reader regarding the matter(s) so disclosed) previously
delivered by
the Company to Parent (the "COMPANY DISCLOSURE LETTER"), the
Company hereby
represents and warrants to Parent and Merger Sub as follows:
Section 3.1
ORGANIZATION.
(a) Each of the Company and the Company Subsidiary is a corporation
or
company limited by shares duly organized, validly existing and,
where
applicable, in good standing under the laws of the jurisdiction of
its
organization. Each of the Company and the Company Subsidiary has
all requisite
corporate power and authority necessary to enable it to own,
operate and lease
its properties and to carry on its business as now conducted. Each
of the
Company and the Company Subsidiary possesses all licenses,
franchises, permits,
certificates, approvals and authorizations from Governmental
Authorities, or
required by Governmental Authorities to be obtained, in each case
necessary for
the lawful conduct of their respective businesses as now
conducted
(collectively, "PERMITS"), except for such Permits, the lack of
which,
individually or in the aggregate, has not had and would not
reasonably be likely
to have a Company Material Adverse Effect.
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<PAGE>
(b) The copies of the articles of incorporation and bylaws of
the
Company (the "COMPANY CHARTER DOCUMENTS") that are incorporated by
reference as
exhibits to the Company's Annual Report on Form 10-KSB for the year
ended
December 31, 2007 are complete and correct copies of such documents
and contain
all amendments thereto as in effect on the date of this Agreement.
The Company
has delivered or made available to Parent complete and correct
copies of the
articles of incorporation and by-laws of the Company Subsidiary
(the "SUBSIDIARY
Documents"), as amended to the date of this Agreement. All such
Company Charter
Documents and Subsidiary Documents are in full force and effect and
neither the
Company nor the Company Subsidiary is in violation of any of their
respective
provisions. The Company has made available to Parent complete
copies of all
material minutes (or, in the case of minutes that have not yet been
finalized, a
brief summary of the meeting) of all meetings of stockholders, the
Company Board
and each committee of the Company Board; PROVIDED that the Company
shall not be
obligated to make available to Parent any minutes for portions of
any meetings
that discuss the Transactions or any current or prior alternatives
thereto
considered by the Company Board or any such committee.
Section 3.2
CAPITALIZATION.
(a) The authorized capital stock of the Company consists of (i)
100,000,000 shares of Company Common Stock and (ii) 1,000,000
shares of
preferred stock, par value $0.25 per share ("COMPANY PREFERRED
STOCK"). As of
the date hereof: (A) 14,666,200 shares of Company Common Stock were
issued and
outstanding; (B) no shares of Company Preferred Stock were issued
or
outstanding; (C) 439,155 Shares were held by the Company in its
treasury; (D)
there were no Shares or Shares of Preferred Stock reserved for
issuance, (E) no
outstanding Options or warrant to purchase Shares and (F) 656,250
Shares were
reserved for issuance under the Stock Plans. Such issued and
outstanding Shares
have been duly authorized and validly issued, are fully paid and
nonassessable,
and are free of preemptive or similar rights under any provision of
the FBCA and
the Company's certificate of incorporation or bylaws or any
agreement to which
the Company is a party or by which the Company is otherwise
bound.
(b) SECTION 3.2 of the Company Disclosure Letter sets forth a
complete
and accurate list, as of the date hereof, of all Stock Plans,
indicating for
each Stock Plan, as of such date, (i) the number of shares of
Company Common
Stock issued under such Stock Plan, (ii) the number of shares of
Company Common
Stock subject to outstanding Options under such Stock Plan, (iii)
the number of
shares of Company Common Stock reserved for future issuance under
such Stock
Plan, (iv) the number of shares of Company Common Stock vested
under such Stock
Plan, (v) the number of shares of Company Common Stock unvested
under such Stock
Plan, (vi) the average exercise price of the outstanding Options
under such
Stock Plan, (vii) the aggregate number of shares of Restricted
Stock that are
subject to repurchase by the Company pursuant to restricted stock
or similar
agreements with the Company, (viii) the number of shares of
formerly Restricted
Stock that are vested, (ix) the number of shares of Restricted
Stock that are
unvested and (x) the average repurchase price relating to the
shares of
Restricted Stock. The Company has made available to Parent complete
and accurate
copies of all (x) Stock Plans, (y) forms of stock option agreements
evidencing
Options and (z) forms of agreements evidencing shares of Restricted
Stock.
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<PAGE>
(c) There are no outstanding or authorized stock appreciation
rights,
phantom stock awards or other rights that are linked in any way to
the price of
the Shares or the value of the Company or any part or division
thereof.
(d) The Company has not declared or paid any dividend, or declared
or
made any distribution on, or authorized the creation or issuance
of, or issued,
or authorized or effected any split-up or any other
recapitalization of, any of
its capital stock, or directly or indirectly redeemed, purchased or
otherwise
acquired any of its outstanding capital stock, other than as a
result of any
cashless exercise of any Option or the acquisition of any shares of
Restricted
Stock from employees of the Company or the Company Subsidiary whose
employment
has terminated with the Company or the Company Subsidiary. There
are no
outstanding contractual obligations of the Company to redeem,
purchase or
otherwise acquire any outstanding shares of capital stock of the
Company.
(e) Other than shares of Company Common Stock, there are no
outstanding
bonds, debentures, notes or other indebtedness or securities of the
Company
having the right to vote which are convertible into, or
exchangeable for,
securities having the right to vote on any matters on which
stockholders of the
Company may vote.
(f) Except as described in this SECTION 3.2, as of the date hereof,
(i)
no shares of capital stock or other voting securities of the
Company are issued,
reserved for issuance or outstanding, and (ii) there are no
outstanding
securities, options, warrants, calls, rights, commitments,
agreements,
arrangements or undertakings of any kind to which the Company or
the Company
Subsidiary is a party or by which any of them is bound obligating
the Company or
the Company Subsidiary, whether upon the exercise, exchange or
conversion
thereof or otherwise, to issue, deliver or sell, or cause to be
issued,
delivered or sold, additional shares of capital stock or other
voting securities
or equity interests of the Company or of the Company Subsidiary or
obligating
the Company or the Company Subsidiary to issue, grant, extend or
enter into any
such security, option, warrant, call, right, commitment, agreement,
arrangement
or undertaking.
(g) In addition to approval by the Company Board as a whole,
the
Company Board committee comprised solely of the Company's director
who is
independent within the meaning of the rules of the Nasdaq Stock
Market listing
standards (the "SPECIAL COMMITTEE") has taken, at a duly convened
meeting
thereof, all such actions as may be required to cause to be
exempted under Rule
14d-10(d)(2) under the Exchange Act, any and all employment
compensation,
severance and employee benefit agreements and arrangements that
have been
entered into or granted by the Company or the Company Subsidiary
with or to
current or future directors, officers, or employees of the Company
and the
Company Subsidiary, to ensure that all such agreements and
arrangements satisfy
the non-exclusive safe harbor provisions of Rule 14d-10(d)(2) of
the Exchange
Act. All Options were granted at an exercise price at least equal
to the fair
market value (within the meaning of Section 409A of the Code) of a
Share on the
date of grant and no Option has been extended, amended or repriced
since the
date of the grant, except for any such pricing, extensions,
amendments or
repricings that, individually or in the aggregate, have not had and
would not
reasonably be likely to have a Company Material Adverse Effect.
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<PAGE>
Section 3.3
AUTHORIZATION; NO CONFLICT.
(a) The Company has the requisite corporate power and authority
to
enter into and deliver this Agreement and, subject to the adoption
of this
Agreement by the Company's stockholders under the FBCA to the
extent required by
applicable Law in the case of the Merger, to carry out its
obligations
hereunder. Assuming the accuracy of the representations and
warranties of Parent
set forth in SECTION 4.6, the execution and delivery of this
Agreement by the
Company, the performance by the Company of its obligations
hereunder and the
consummation by the Company of the Transactions have been duly
authorized and
approved by the Company Board. Assuming the accuracy of the
representations and
warranties of Parent set forth in SECTION 4.6, no other corporate
proceedings on
the part of the Company is necessary to authorize the execution and
delivery of
this Agreement, the performance by the Company of its obligations
hereunder and
the consummation by the Company of the Transactions, except, in the
case of the
Merger (to the extent required by the FBCA), for the adoption of
this Agreement
by the holders of a majority of the issued and outstanding Shares
(the "REQUIRED
COMPANY STOCKHOLDER VOTE"). This Agreement has been duly executed
and delivered
by the Company and constitutes a valid and binding obligation of
the Company,
enforceable against the Company in accordance with its terms,
subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or
similar Laws of general application affecting or relating to the
enforcement of
creditors rights generally and equitable principles of general
applicability,
whether considered in a proceeding at law or in equity (the
"BANKRUPTCY AND
EQUITY EXCEPTION").
(b) Neither the execution and delivery of this Agreement by the
Company
nor the performance or consummation by the Company of the
Transactions will (i)
result in a violation or breach of or conflict with the Company
Charter
Documents or the Subsidiary Documents, (ii) result in a violation
or breach of
or conflict with any provisions of, or result in the loss of any
material
benefit under or constitute a default (or an event that, with
notice or lapse of
time or both, would constitute a default) under, or result in the
termination or
cancellation of, or give rise to a right of purchase (including
pursuant to any
right of first refusal or the like) under, or accelerate the
performance
required by, or result in a right of termination or acceleration
under, or
result in the creation of any Lien upon any of the properties or
assets owned or
operated by the Company or the Company Subsidiary under any of the
terms,
conditions or provisions of any Contract to which the Company or
the Company
Subsidiary is a party or by which the Company or the Company
Subsidiary or any
of their respective properties or assets may be bound or (iii)
subject to
receipt of the Required Company Stockholder Vote (to the extent
required by the
FBCA) and obtaining or making the consents, approvals, orders,
authorizations,
registrations, declarations and filings referred to in SECTION
3.3(C) below,
violate any judgment, ruling, order, writ, injunction or decree of
any
Governmental Authority ("JUDGMENT") or any statute, code, decree,
law,
ordinance, rule, regulation or order of any Governmental Authority
("LAW"), in
each case applicable to the Company, the Company Subsidiary or any
of their
respective properties or assets, other than, with respect to events
described in
the foregoing clauses (ii) and (iii), any such event or events
that,
individually or in the aggregate, has not had and would not
reasonably be likely
to have a Company Material Adverse Effect.
(c) No consent, approval, order or authorization of, or
registration,
declaration or filing with, any United States Federal, state or
local
governmental or regulatory authority, court, body or
instrumentality or any
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governmental or regulatory authority, court, body or
instrumentality outside of
the United States (each, a "GOVERNMENTAL AUTHORITY") is necessary
to be obtained
or made by the Company or the Company Subsidiary in connection with
the
Company's execution and delivery of this Agreement or the
consummation by the
Company of the Transactions, except for (i) the filing of the
Articles of Merger
with the Florida Secretary of State and appropriate corresponding
documents with
the appropriate authorities of other states in which the Company is
qualified as
a foreign corporation to transact business, (ii) the filing with
the SEC of (A)
the Offer Documents and Schedule 14D-9, (B) if necessary, a proxy
statement in
definitive form relating to the Company Stockholders Meeting (as
defined in
SECTION 6.1(B)) (such proxy statement, as amended or supplemented
from time to
time, (the "PROXY STATEMENT")) and compliance with other applicable
requirements
of the Exchange Act, (C) any information statement required by Rule
14f-1
promulgated by the SEC under the Exchange Act (the "INFORMATION
STATEMENT") in
connection with the Offer and (D) such reports under Section 13 or
16 of the
Exchange Act and the rules and regulations promulgated thereunder,
as may be
required in connection with this Agreement and the Transactions,
and (iv)
compliance with the "blue sky" laws of various states.
(d) The Special Committee at a meeting duly called and held, has
duly
and unanimously adopted resolutions determining the Merger
Agreement and the
Transactions, including the Offer and the Merger, are fair and
reasonable and in
the best interests of the Company and Company's unaffiliated
stockholders, and
the Company Board, at a meeting duly called and held, has duly and
unanimously
adopted resolutions (i) declaring that this Agreement and the
Transactions,
including the Offer and the Merger, are fair and reasonable to and
in the best
interests of the Company and its stockholders, (ii) approving and
declaring
advisable this Agreement and the Transactions, including the Offer
and the
Merger (such approval having been made in accordance with the
FBCA), and (iii)
recommending that the Company's stockholders accept the Offer,
tender their
Shares to Merger Sub pursuant to the Offer and adopt this Agreement
(such
recommendations, the "BOARD RECOMMENDATION").
Section 3.4
SUBSIDIARY.
(a) Nutricology, Inc., a California corporation (the "COMPANY
SUBSIDIARY") is the only Subsidiary of the Company. Other than the
Company
Subsidiary, the Company does not own or control, directly or
indirectly, any
membership interest, partnership interest, joint venture interest,
other equity
interest or any other capital stock of any Person, other than
securities held
for investment by the Company or the Company Subsidiary and
consisting of less
than 5% of the outstanding capital stock or other ownership
interest of such
Person.
(b) All of the outstanding shares of capital stock or other
equity
securities of, or other ownership interests in, the Company
Subsidiary is duly
authorized, validly issued, fully paid and nonassessable, and the
Company is the
record and beneficial owner of such shares, securities or
interests, free and
clear of any Liens or limitations on voting rights. All such shares
of capital
stock, equity securities and other ownership interests have been
duly and
validly issued and are fully paid and nonassessable. There are no
subscriptions,
options, warrants, calls, rights, convertible securities or other
agreements or
commitments to which the Company or the Company Subsidiary is a
party or by
which they are bound and that provide for the issuance, transfer,
sales,
delivery, voting or redemption (including any rights of conversion
or exchange
under any outstanding security or other instrument) for any of the
capital stock
or other equity interests of, or other ownership interests in the
Company
Subsidiary. There are no agreements requiring the Company or the
Company
Subsidiary to make contributions to the capital of, or lend or
advance funds to,
the Company Subsidiary.
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<PAGE>
Section 3.5 SEC
REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has, to its Knowledge, filed with or furnished to
the
SEC all forms, reports, schedules, certifications, registration
statements,
definitive proxy statements and other documents required to be
filed or
furnished by the Company with or to the SEC. All such registration
statements,
forms, reports, schedules, certifications, registration statements,
definitive
proxy statements and other documents (including those that the
Company may file
after the date hereof until the Closing) are referred to herein as
the "COMPANY
SEC REPORTS." As of their respective dates, and giving effect to
any amendments
or supplements thereto filed prior to the date of this Agreement,
to the
Knowledge of the Company (i) the Company SEC Reports filed prior to
the date of
this Agreement complied, and the Company SEC Reports to be filed
after the date
of this Agreement will comply, in all material respects with the
requirements of
the Securities Act of 1933, as amended (the "SECURITIES ACT") and
the Exchange
Act, as the case may be, and the respective rules and regulations
of the SEC
promulgated thereunder applicable to such Company SEC Reports, (ii)
none of such
Company SEC Reports that is not a registration statement contained
(or, in the
case of Company SEC Reports to be filed after the date of this
Agreement, will
contain) any untrue statement of a material fact or omitted to
state any
material fact required to be stated therein or necessary in order
to make the
statements therein, in the light of the circumstances under which
they were
made, not misleading. To the Knowledge of the Company, each Company
SEC Report
that is a registration statement, as amended or supplemented, if
applicable,
filed pursuant to the Securities Act, as of the date such
registration statement
or amendment became effective, did not, and each such Company SEC
Report filed
subsequent to the date of this Agreement and prior to the
consummation of the
Offer will not, contain any untrue statement of a material fact or
omit to state
any material fact required to be stated therein or necessary to
make the
statements therein not misleading. The Company has made available
to Parent
copies of all comment letters received by the Company from the SEC
since January
1, 2003 relating to the Company SEC Reports, together with all
written responses
of the Company thereto. As of the date of this Agreement, there are
no
outstanding or unresolved comments received from the SEC Staff with
respect to
the Company SEC Reports. To the Knowledge of the Company, none of
the Company
SEC Reports is the subject of ongoing SEC review or
investigation.
(b) The consolidated balance sheets and the related
consolidated
statements of operations, consolidated statements of stockholders'
equity and
consolidated statements of cash flows (including, in each case, any
related
notes and schedules thereto) for the past five (5) fiscal years
(collectively,
the "COMPANY FINANCIAL STATEMENTS") of the Company contained or to
be contained
in the Company SEC Reports complied or will comply 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 or will be
prepared in
conformity with United States generally accepted accounting
principles ("GAAP")
(except as may be indicated in the notes to such financial
statements or, in the
case of unaudited interim financial statements, as permitted by the
SEC on Form
10-Q under the Exchange Act) applied on a consistent basis during
the periods
involved (except as otherwise noted therein) and present or will
present fairly
in all material respects the consolidated financial position and
the
consolidated results of operations and cash flows of the Company
and the Company
Subsidiary as of the dates or for the periods presented therein
(subject, in the
case of unaudited statements, to normal and recurring year end
adjustments). To
the Knowledge of the Company, except as disclosed in the Company
Financial
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<PAGE>
Statements as of and for the period ended December 31, 2007 or
included in the
Company SEC Reports filed after that date and prior to the date of
this
Agreement, the Company and the Company Subsidiary do not have any
liabilities of
any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP
to be reflected on a consolidated balance sheet of the Company and
the Company
Subsidiary.
(c) Neither the Company nor the Company Subsidiary is a party to,
or
has any commitment to become a party to, any joint venture,
off-balance sheet
partnership or any similar contract (including any contract or
arrangement
relating to any transaction or relationship between or among the
Company and the
Company Subsidiary, on the one hand, and any unconsolidated
Affiliate,
including, any structured finance, special purpose or limited
purpose entity or
Person, on the other hand, or any "off-balance sheet arrangements"
(as defined
in Item 303(a) of Regulation S-K of the SEC)), where the results,
purpose or
effect of such contract is to avoid disclosure of any material
transaction
involving, or material liabilities of, the Company or the Company
Subsidiary in
the Company SEC Reports.
(d) To the Knowledge of the Company, the Company is in compliance
in
all material respects with the applicable provisions of the
Sarbanes-Oxley Act
of 2002 (the "SARBANES-OXLEY ACT") currently applicable to smaller
reporting
companies. Each required form, report and document containing
financial
statements that has been filed with or submitted to the SEC since
March 31, 2003
was accompanied by the certifications required to be filed or
submitted by the
Company's chief executive officer and chief financial officer
pursuant to the
Sarbanes-Oxley Act and, at the time of filing or submission of each
such
certification, such certification complied in all material respects
with the
applicable provisions of the Sarbanes-Oxley Act and the rules and
regulations
promulgated thereunder.
(e) The Company maintains disclosure controls and procedures
required
by Rule 13a-15 or 15d-15 under the Exchange Act as currently
applicable to
smaller reporting companies. Such disclosure controls and
procedures are
effective to ensure that all material information concerning the
Company and the
Company Subsidiary, taken as a whole, is made known on a timely
basis to the
individuals responsible for the preparation of the Company's
filings with the
SEC and other public disclosure documents.
(f) To the Knowledge of the Company, the Company and the
Company
Subsidiary have not violated the provisions of the Foreign Corrupt
Practices Act
of 1977, as amended, and the rules and regulations thereunder (the
"FCPA"),
except for any such violations that, individually or in the
aggregate, have not
had and would not reasonably be likely to have a Company Material
Adverse
Effect. The Company has disclosed to Parent all internal
investigations and, to
the Knowledge of the Company, all external, governmental or other
regulatory
investigations, in each case regarding any action or any allegation
of any
action prohibited by the FCPA, except for any such investigations
that,
individually or in the aggregate, have not had and would not
reasonably be
likely to have a Company Material Adverse Effect.
Section 3.6 ABSENCE OF MATERIAL ADVERSE CHANGES, ETC. Since
December
31, 2007, there has not been or occurred any event, change,
occurrence or
development of a state of facts that, to the Knowledge of the
Company,
individually or in the aggregate, has had or would reasonably be
likely to have
a Company Material Adverse Effect. From December 31, 2007 until the
date of this
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<PAGE>
Agreement, except as contemplated hereby, (a) the business of the
Company and
the Company Subsidiary, taken as a whole, has been conducted in the
Ordinary
Course of Business and (b) there has not been any action or event
that would
have required the consent of Parent under SECTION 5.1 of this
Agreement (other
than paragraphs (b)(vii), (viii) and (xiii) of SECTION 5.1) had
such action or
event occurred after the date of this Agreement.
Section 3.7 LITIGATION. Except as disclosed in SECTION 3.7 of
the
Company Disclosure Letter, there are no suits, actions, claims or
legal,
administrative, arbitration or other proceedings or governmental or
regulatory
investigations pending or, to the Knowledge of the Company,
threatened, to which
the Company or the Company Subsidiary is a party, or, to the
Knowledge of the
Company, that materially affects the business or assets of the
Company or the
Company Subsidiary. There are no material Judgments outstanding
(or, to the
Knowledge of the Company, threatened to be imposed) against the
Company or the
Company Subsidiary.
Section 3.8 INFORMATION SUPPLIED. The information to be supplied by
or
on behalf of the Company for inclusion or incorporation by
reference in the
Offer Documents, on the date the Offer Documents are first
published, sent or
given to holders of Shares, shall not contain any untrue statement
of a material
fact or omit to state any material fact required to be stated
therein or
necessary in order to make the statements therein, in light of the
circumstances
in which they shall be made, not misleading. If at any time prior
to the
Acceptance Time any fact or event relating to the Company or any of
its
Affiliates should be discovered by the Company that should be set
forth in a
supplement to the Offer Documents, the Company shall, promptly
after becoming
aware thereof, inform Parent of such fact or event.
Section 3.9 BROKER'S OR FINDER'S FEES. Except as disclosed in
SECTION
3.9 of the Company Disclosure Letter, no agent, broker, investment
banker, or
similar Person or firm acting on behalf of the Company or the
Company Subsidiary
or under the Company's or the Company Subsidiary's authority is or
will be
entitled to any advisory, commission or broker's or finder's fee or
similar fee
or commission or reimbursement of expenses from any of the parties
hereto in
connection with any of the Transactions. The Company has heretofore
made
available to Parent a complete and correct copy of the Company's
engagement
letter with each of the parties listed in SECTION 3.9 of the
Company Disclosure
Letter, which letters describe all fees payable to such Persons in
connection
with the Transactions, all agreements under which any such fees or
any expenses
are payable and all indemnification and other agreements related to
the
engagement of such Persons.
Section 3.10 EMPLOYEE
PLANS.
(a) Section 3.10 of the Disclosure Schedule sets forth a true
and
complete list of each "employee benefit plan," as defined in
Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and each
other material written, unwritten, formal or informal plan,
agreement, program,
policy or other arrangement involving direct or indirect
compensation to
employees or other service providers (other than workers'
compensation,
unemployment compensation and other government programs), including
employment,
severance, consulting, disability benefits, supplemental
unemployment benefits,
vacation benefits, retirement benefits, deferred compensation,
profit-sharing,
bonuses, stock options, stock appreciation rights, other forms of
incentive
compensation, post-retirement insurance benefits, or other
benefits, entered
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<PAGE>
into, maintained or contributed to by the Company or the Company
Subsidiary or
with respect to which the Company or the Company Subsidiary has or
may in the
future have any liability (contingent or otherwise). Each such
plan, agreement,
program, policy or arrangement required to be set forth on the
Disclosure
Schedule pursuant to the foregoing is referred to herein as a
"BENEFIT PLAN."
(b) The Company has made available the following documents to
Parent
with respect to each Benefit Plan: (1) correct and complete copies
of all
documents embodying such Benefit Plan, including (without
limitation) all
amendments thereto, and all related trust documents, (2) a written
description
of any Benefit Plan that is not set forth in a written document,
(3) the most
recent summary plan description together with the summary or
summaries of
material modifications thereto, if any, (4) the three most recent
annual
actuarial valuations, if any, (5) all Internal Revenue Service
("IRS") or
Department of Labor ("DOL") determination, opinion, notification
and advisory
letters, (6) the three most recent annual reports (Form Series 5500
and all
schedules and financial statements attached thereto), if any, (7)
all material
correspondence to or from any Governmental Authority received in
the last three
years, (8) all discrimination tests for the most recent three plan
years, and
(9) all material written agreements and contracts currently in
effect, including
(without limitation) administrative service agreements, group
annuity contracts,
and group insurance contracts.
(c) Each Benefit Plan has been maintained and administered in
all
material respects in compliance with its terms and with the
requirements
prescribed by any and all statutes, orders, rules and regulations
(foreign and
domestic), including (without limitation) ERISA and the Code, which
are
applicable to such Benefit Plans. All contributions, reserves or
premium
payments required to be made or accrued as of the date hereof to
the Benefit
Plans have been timely made or accrued. Each Benefit Plan intended
to be
qualified under Section 401(a) of the Code and each trust intended
to qualify
under Section 501(a) of the Code is so qualified and either: (1)
has obtained a
currently effective favorable determination notification, advisory
and/or
opinion letter, as applicable, as to its qualified status (or the
qualified
status of the master or prototype form on which it is established)
from the IRS
covering the amendments to the Code effected by the Tax Reform Act
of 1986 and
all subsequent legislation for which the IRS will currently issue
such a letter,
and no amendment to such Benefit Plan has been adopted since the
date of such
letter covering such Benefit Plan that would adversely affect such
favorable
determination; or (2) still has a remaini
