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Exhibit 2.1
AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF
MERGER
AMENDMENT
NO. 2 (this “ Second Amendment ”) dated as of
September 29, 2006 to the Agreement and Plan of Merger dated as of
March 14, 2006 (the “ Initial Merger Agreement
”) among Pharmos Corporation, a Nevada corporation (“
Parent ” or “ Pharmos ”), Vela
Acquisition Corporation, a Delaware corporation and direct
wholly-owned subsidiary of Parent (“ Sub ”), and
Vela Pharmaceuticals Inc., a Delaware corporation (“
Target ” or “ Vela ”), as
previously amended by letter agreements among the parties dated
August 4 and August 10, 2006 (the “ Extension Letters
”) and Amendment to Agreement and Plan of Merger dated as of
August 31, 2006 (“ Amendment No. 1 ”;
collectively with the Extension Letters and with the Initial Merger
Agreement, the “ Merger Agreement ”).
Parent,
Sub and Target have agreed to amend the Merger Agreement on the
terms and conditions set forth in this Second Amendment, and to
include Vela Acquisition No.2 Corporation, a Delaware corporation
and direct wholly-owned subsidiary of Sub (“Sub2
”), as a party to the Merger Agreement, and Sub2 has agreed
to become a party to the Merger Agreement.
In
consideration of the mutual covenants and agreements hereinafter
set forth and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1.
Defined Terms . Unless
otherwise indicated, capitalized terms used herein shall have the
meanings ascribed to them in the Merger Agreement.
2.
Recitals . The recitals to
the Merger Agreement shall be deleted in their entirety and shall
be replaced by the following:
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“WHEREAS, the Boards of
Directors of each of Parent, Sub, Sub2 and Target believe that the
merger of Sub2 into Target (the “ Sub2 Merger
”), to be immediately followed by the merger of Target into
Sub (the “ Merger ”; collectively with the Sub2
Merger, the “ Mergers ”), would be advantageous
and beneficial to their respective corporations and stockholders;
and
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WHEREAS, this Agreement is
intended to be and is adopted as a plan of reorganization within
the meaning of §368(a) of the Internal Revenue Code of 1986,
as amended (the “ Code ”).
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NOW, THEREFORE, in consideration
of the mutual covenants and agreements hereinafter set forth and of
other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree that Sub2
shall be merged with and into Target, and, immediately thereafter,
Target shall be merged with and into Sub, each upon the terms and
subject to the conditions set forth in this
Agreement.”
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3.
Amendment of Section 1.1 .
Section 1.1 of the Merger Agreement shall
be deleted in its entirety and shall be replaced by the
following:
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“1.1
Closing and Effective Date of Merger .
Subject to
the closing conditions in Sections 7 and 8 hereof, at a closing
(the “Closing”) to be held at the offices of Parent
at
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10:00 a.m. on the second business
day immediately following the date on which the stockholders of
Parent approve the issuance of shares of Parent common stock
pursuant to this Agreement or on such other date and time as may be
agreed to by the parties (the “ Closing Date ”),
(i) Sub2 and Target shall cause to be definitively executed and
delivered to one another the Certificate of Merger in the form
attached hereto as Exhibit A-1 (the “ Sub2
Certificate of Merger” ) and shall cause such document to
be filed with the Secretary of State of the State of Delaware (the
time of such filing is referred to herein as the “
Effective Time ”), in order to cause the Sub2 Merger
to become effective under the laws of the State of Delaware and
(ii) immediately thereafter Target and Sub shall cause to be
definitively executed and delivered to one another the Certificate
of Merger in the form attached hereto as Exhibit A-2 (the
“ Certificate of Merger” , together with the
Sub2 Certificate of Merger, the “ Certificates of
Merger ”) and shall cause such document to be filed with
the Secretary of State of the State of Delaware, in order to cause
the Merger contemplated by this Agreement to become effective under
the laws of the State of Delaware. The Sub2 Merger shall become
effective on the date and at the time of the filing of the Sub2
Certificate of Merger with the Secretary of State of the State of
Delaware, and the Merger shall become effective on the date and at
the time of the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware. The “
Effective Date ” shall be the date on which the
Certificates of Merger have been duly filed with the Secretary of
State of the State of Delaware. References herein to the “
Surviving Corporation ” shall mean Sub following the
Merger.”
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4.
Amendment of Sections 1.2(a) through (g) .
Sections 1.2(a) through (g) of the Merger
Agreement shall be deleted in their entirety and shall be replaced
by the following:
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“1.2 Terms and
Conditions of Merger.
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(a) At the
Effective Time, Sub2 shall be merged with and into Target and the
separate existence of Sub2 shall cease. Immediately after the Sub2
Merger on the Effective Date, Target shall be merged with and into
Sub and the separate existence of Target shall cease.
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(b) Following the
Sub2 Merger, Target shall continue as the surviving corporation in
the Sub2 Merger, and its authorized capital stock shall consist of
1,000 shares of common stock, par value $0.001 per share, all of
which will be issued and outstanding and owned by Sub. Following
the Merger, Sub shall continue as the Surviving Corporation in the
Merger, the authorized capital stock of which shall consist of
1,000 shares of common stock, par value $0.001 per share, all of
which will be issued and outstanding and owned by
Parent.
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(c) The Restated
Certificate of Incorporation of Target shall be further restated as
set forth in Exhibit A to Exhibit A-1 hereto, which shall be
the Certificate of Incorporation of Target following the Sub2
Merger. The Certificate of Incorporation of Sub in effect on the
date hereof shall be the Certificate of Incorporation of the
Surviving Corporation following the Merger.
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(d) The By-Laws of
Target shall remain unchanged and shall be the By-Laws of Target
following the Sub2 Merger. The By-Laws of Sub in effect on the date
hereof shall be the By-Laws of the Surviving Corporation following
the Merger.
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(e) At the Effective
Time, Parent will pay the sum of $6,000,000 by wire transfer to or
on behalf of Target (the “ Initial Cash Consideration
”), to be used, along with all of Target’s cash on hand
immediately prior to the Effective Time and the amount to
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be paid to Target at the
Effective Time pursuant to Section 6.12 below, for the purpose of
(1) establishing a reserve fund to pay for transaction costs and
expenses that may be incurred by the Representatives (as defined in
Section 16 below) after the Closing Date and (2) paying or
discharging certain of Target’s liabilities as of the Closing
Date, including without limitation (i) all of Target’s costs
and expenses incurred through the Closing Date in connection with
the consummation of the transactions contemplated hereby, (ii)
Target’s obligations at the Effective Time under its 2005
Acquisition Bonus Plan, as amended (as amended, the “
ABP ”), (iii) all interest accrued through the Closing
Date in connection with (A) Target’s outstanding Senior
Convertible Promissory Notes set forth on Schedule 1.2(e) in
the aggregate principal amount of $14,000,000 (the “
Bridge Notes ”) and (B) Target’s senior notes
issued under its senior credit facility (the “ Senior
Notes ”), (iv) all of the outstanding principal amount of
the Senior Notes, and (v) a portion of the outstanding principal
amount of the Bridge Notes.
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(f) At the Effective
Time, any portion of the outstanding principal amount of the Bridge
Notes that has not been repaid as set forth in Section 1.2(e)(2)(v)
above shall be automatically converted into shares of
Target’s Series D Redeemable Convertible Preferred Stock in
accordance with the terms of such Bridge Notes and shall be
cancelled, and certificates representing such shares of
Target’s Series D Redeemable Convertible Preferred Stock
shall be issued to the holders of the cancelled Bridge
Notes.
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(g) At the Effective
Time, Parent shall issue 6,500,000 shares (the “ Closing
Shares ”) of its common stock, par value $.03 per share
(“ Parent Stock ”), which shall be valued based
on the Average Trading Price (as defined in Section 18 below) and,
subject to Section 1.2(u), shall be distributed among the holders
of Target Capital Stock (as defined in Section 18 below) in
accordance with the written instructions of Target delivered to
Parent at or prior to the Closing, which instructions shall be
based solely upon the terms and conditions of Target’s
Restated Certificate of Incorporation, as amended, in effect
immediately prior to the Effective Date (“ Target’s
Restated Certificate ”).”
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5.
Amendment of Sections 1.2(q) through (t)
. Sections 1.2(q) through (t) of the Merger
Agreement shall be deleted in their entirety and shall be replaced
by the following:
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(q) At the Effective
Time, pursuant to the Sub2 Merger, (i) each share of capital stock
of Sub2 outstanding at the Effective Time shall become and be
converted into a newly-issued share of Target common stock, which
shall be the only shares of Target capital stock outstanding after
the Sub2 merger, and (ii) each share of Target Capital Stock
outstanding at the Effective Time shall, by virtue of the Sub2
Merger, automatically and without any action on the part of the
holder thereof, become and be converted into the right to receive
the consideration provided for in this Agreement. Pursuant to the
Merger, each share of Target capital stock that is outstanding
after the Sub2 Merger shall be cancelled and shall cease to
exist.
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(r) At the Effective
Time, pursuant to the Sub2 Merger, all outstanding options,
warrants and other securities exercisable or convertible into
shares of Target Capital Stock that are not otherwise exercised or
converted into Target Capital Stock prior to the Effective Time
shall be cancelled and terminated.
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(s) At the Effective
Time, pursuant to the Sub2 Merger, all of the estate, properties,
rights, privileges, powers and franchises of Sub2 and Target (other
than (A) the right to receive the consideration hereunder and (B)
any other rights under this
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Agreement and the agreements and
documents executed in connection with the consummation of the
transactions contemplated by this Agreement), and all of their
property, real, personal and mixed
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