EXHIBIT
10.1
ASSET PURCHASE AGREEMENT AND
PLAN OF REORGANIZATION
This Asset Purchase Agreement and
Plan of Reorganization (this “ Agreement
”), dated as of July 25, 2008 (the “
Effective Date ”), is by and among Certified
Diabetic Services, Inc., a Delaware corporation with a mailing
address of 3030 Horseshoe Drive South, Suite 200, Naples, Florida
34104 (“ CDIP ”); Andover Medical, Inc.,
a Delaware corporation with a mailing address of 510 Turnpike
Street, Suite 204, N. Andover, Massachusetts 01845 (“
Andover ,” collectively with CDIP, the “
Target Companies ” and sometimes each
individually referred to as a “ Target Company
”); and Medical Solutions Management Inc., a Nevada
corporation with a mailing address of 237 Cedar Hill Street,
Marlboro, Massachusetts 01752 (“ MSMT ”).
MSMT and the Target Companies are each sometimes referred to
individually as a “ Constituent Company ”
and collectively as the “ Constituent Companies
.” All capitalized terms used in this Agreement without
definition shall have the respective meanings ascribed to such
terms in Section 7.12 hereof.
BACKGROUND
The Board of Directors of each
Constituent Company has, by resolutions duly adopted, determined
that it is in the best interests of its respective Constituent
Company and its respective stockholders to consolidate the
operations of CDIP and Andover with and into MSMT (the “
Reorganization ”). In furtherance of the same,
MSMT will issue shares of its capital stock to each Target Company
in exchange for substantially all of the assets of each Target
Company other than the Excluded Assets. Upon consummation of the
Reorganization, the parties intend that the stockholders of CDIP
will own forty-five percent (45.0%) of the outstanding voting
common stock, par value $0.0001, of MSMT (the “ MSMT
Common Stock ”); the stockholders of Andover will own
thirty-five percent (35.0%) of the outstanding MSMT Common
Stock; and the existing stockholders of MSMT will own twenty
percent (20.0%) of the outstanding MSMT Common Stock (in each
case calculated immediately following the Closing and after giving
effect to the conversion or exercise of all outstanding shares of
MSMT Preferred Stock and all convertible debentures of MSMT which
are convertible into shares of MSMT Common Stock, but excluding any
shares of MSMT Common Stock issuable upon the exercise of warrants
or options of MSMT). In order to accomplish the above and enable
the parties to receive the consideration set forth in this
Agreement without having to recognize income for federal income tax
purposes, the transactions contemplated by this Agreement are being
structured to qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the “ Code ”). In
consideration of the foregoing and the mutual representations,
warranties, covenants and agreements contained herein, the parties
hereto agree as follows:
OPERATIVE
PROVISIONS
ARTICLE I
EXCHANGE OF ASSETS FOR STOCK;
CLOSING
-1-
1.1. Purchase and Sale
.
(a) CDIP Purchase and Sale .
Upon the terms and subject to the conditions of this Agreement, and
in reliance upon the representations and warranties contained
herein, at the Closing, CDIP shall sell, transfer, convey, assign
and deliver to MSMT, and MSMT shall purchase from CDIP, free and
clear of all Liens and subject to the exclusions set forth in
Section 1.2(a), all of the assets of CDIP (the “
CDIP Purchased Assets ”) which shall include,
without limitation:
(i) those shares of capital stock or
other equity interests of each subsidiary of CDIP set forth on
Schedule 1.1(a)(i) hereto (each subsidiary, a “
CDIP Subsidiary ” and collectively, the “
CDIP Subsidiaries ”);
(ii) title to all of the property
used or held for use in CDIP’s business, including without
limitation, all furniture, fixtures, computers, office equipment
and miscellaneous assets of every kind and nature owned by CDIP or
used in or necessary for the operation of its business;
(iii) all right, title and interest
of CDIP in and to all contracts (expressly including unfilled
contracts for services), agreements, leases, commitments,
arrangements or understandings pertaining to the operation of
CDIP’s business;
(iv) all right, title and interest
in and to all of the following: patents and patent rights,
trademarks and trademark rights (whether registered or not),
including any goodwill therein, trade names and trade name rights,
domain names, service marks and service mark rights, service names
and service name rights, brand names, inventions, processes,
formulae, copyrights and copyright rights (whether registered or
not), trade dress, business and product names, logos, slogans,
trade secrets, industrial models, processes, designs,
methodologies, computer programs, software (whether in source or
object code) and related documentation, technical information,
manufacturing, engineering and technical drawings, know-how and all
pending applications for and registrations of patents, trademarks,
service marks and copyrights; the foregoing shall include, without
limitation, all software under development owned by CDIP and listed
on Schedule 1.1(a)(iv) (including the software development
schedule included therein) and all licenses, agreements and other
arrangements under which CDIP has the right to use any of the
intangible or proprietary rights of a third party to the extent
used or held for use by CDIP in the conduct of the
business;
(v) all lists of present customers
and lists of former customers and other customer-related records of
CDIP’s business;
(vi) all goodwill associated with
CDIP’s business or the CDIP Purchased Assets;
(vii) all books, files and records
of CDIP (including, without limitation, all surveys, schematics,
flow charts, permit filings, mailing lists, customer lists,
equipment maintenance records, warranty information, records of
operations, payroll history, standard forms of documents, manuals
of operation or business procedures, training manuals and training
aids and other proprietary or confidential information to the
extent the same may be necessary or
-2-
desirable for the operation of CDIP’s
business) relating to CDIP’s business (other than minutes of
corporate meetings, capital stock ledger and purely corporate
records); provided that any of the foregoing which CDIP reasonably
deems necessary to CDIP’s continued operation, proper
accounting and record keeping functions following the Closing shall
not constitute part of the CDIP Purchased Assets and shall be
retained by CDIP;
(viii) all of the governmental
permits, licenses, certificates of inspection, approvals or other
authorizations issued to CDIP and used in CDIP’s business
(collectively, the “ CDIP Governmental Permits
”) (and to the extent any such permits are not assignable or
transferable to MSMT, CDIP will use its best efforts to cooperate
with MSMT as may be reasonably requested to enable MSMT to apply
for and obtain the CDIP Governmental Permits or to receive the
benefits of the CDIP Governmental Permits); and
(ix) except as specifically provided
in Section 1.2(a), all other assets of CDIP that exist on the
Closing Date, whether tangible or intangible, real or
personal.
(b) Andover Purchase and Sale
. Upon the terms and subject to the conditions of this Agreement,
and in reliance upon the representations and warranties contained
herein, at the Closing, Andover shall sell, transfer, convey,
assign and deliver to MSMT, and MSMT shall purchase from Andover,
free and clear of all Liens and subject to the exclusions set forth
in Section 1.2(b), all of the assets of Andover (the “
Andover Purchased Assets ”) which shall
include, without limitation:
(i) those shares of capital stock of
each subsidiary of Andover set forth on Schedule 1.1(b)(i)
hereto (each subsidiary, an “ Andover
Subsidiary ” and collectively, the “
Andover Subsidiaries ”);
(ii) title to all of the property
used or held for use in Andover’s business, including without
limitation, all furniture, fixtures, computers, office equipment
and miscellaneous assets of every kind and nature owned by Andover
or used in or necessary for the operation of its
business;
(iii) all right, title and interest
of Andover in and to all contracts (expressly including unfilled
contracts for services), agreements, leases, commitments,
arrangements or understandings pertaining to the operation of
Andover’s business;
(iv) all right, title and interest
in and to all of the following: patents and patent rights,
trademarks and trademark rights (whether registered or not),
including any goodwill therein, trade names and trade name rights,
domain names, service marks and service mark rights, service names
and service name rights, brand names, inventions, processes,
formulae, copyrights and copyright rights (whether registered or
not), trade dress, business and product names, logos, slogans,
trade secrets, industrial models, processes, designs,
methodologies, computer programs, software (whether in source or
object code) and related documentation, technical information,
manufacturing, engineering and technical drawings, know-how and all
pending applications for and registrations of patents, trademarks,
service marks and copyrights; the foregoing shall include, without
limitation, all software under development owned by Andover and
listed on Schedule 1.1(b)(iv) and all licenses,
agreements
-3-
and other arrangements under which Andover has
the right to use any of the intangible or proprietary rights of a
third party to the extent used or held for use by Andover in the
conduct of the business;
(v) all lists of present customers
and lists of former customers and other customer-related records of
Andover’s business;
(vi) all goodwill associated with
Andover’s business or the Andover Purchased
Assets;
(vii) all books, files and records
of Andover (including, without limitation, all surveys, schematics,
flow charts, permit filings, mailing lists, customer lists,
equipment maintenance records, warranty information, records of
operations, payroll history, standard forms of documents, manuals
of operation or business procedures, training manuals and training
aids and other proprietary or confidential information to the
extent the same may be necessary or desirable for the operation of
Andover’s business) relating to Andover’s business
(other than minutes of corporate meetings, capital stock ledger and
purely corporate records); provided that any of the foregoing which
Andover reasonably deems necessary to Andover’s continued
operation, proper accounting and record keeping functions following
the Closing shall not constitute part of the Andover Purchased
Assets and shall be retained by Andover;
(viii) all of the governmental
permits, licenses, certificates of inspection, approvals or other
authorizations issued to Andover and used in Andover’s
business (collectively, the “ Andover Governmental
Permits ”) (and to the extent any such permits are
not assignable or transferable to MSMT, Andover will use its best
efforts to cooperate with MSMT as may be reasonably requested to
enable MSMT to apply for and obtain the Andover Governmental
Permits or to receive the benefits of the Andover Governmental
Permits); and
(ix) except as specifically provided
in Section 1.2(b), all other assets of Andover that exist on
the Closing Date, whether tangible or intangible, real or
personal.
1.2. Excluded Assets
.
(a) CDIP Excluded Assets .
Notwithstanding the provisions of Section 1.1(a), it is hereby
agreed that the CDIP Purchased Assets shall not include, and CDIP
is not selling to MSMT, and MSMT is not purchasing or acquiring
from CDIP, the assets listed on Schedule 1.2 (a)
(collectively, the “ CDIP Excluded Assets
”).
(b) Andover Excluded Assets .
Notwithstanding the provisions of Section 1.1(b), it is hereby
agreed that the Andover Purchased Assets shall not include, and
Andover is not selling to MSMT, and MSMT is not purchasing or
acquiring from Andover, the assets listed on Schedule 1.2(b)
(collectively, the “ Andover Excluded Assets
”).
1.3. Assumed Liabilities
.
(a) CDIP Assumed Liabilities
. In further consideration of the transfers contemplated hereby,
MSMT shall assume, effective as of the Closing Date, and shall
satisfy or perform as they come due, all liabilities and
obligations of CDIP (collectively, the “
CDIP
-4-
Assumed Liabilities ”) except for the CDIP Excluded
Liabilities. For purposes of this Agreement, the term “
CDIP Excluded Liabilities ” shall mean
(i) any liability arising out of or related to the CDIP
Excluded Assets; (ii) any liability arising out of or related
to the negotiation, consummation or performance of the
Reorganization, including, without limitation, any suit filed by a
stockholder or creditor of CDIP (whether directly or in the nature
of a derivative action) against CDIP, any member of its Board of
Directors or any of its officers alleging a breach of fiduciary
duty (or any claims of a similar nature) by any member of such
Board of Directors or any officer; and (iii) any liability set
forth on Schedule 1.3(a) .
(b) Andover Assumed
Liabilities . In further consideration of the transfers
contemplated hereby, MSMT shall assume, effective as of the Closing
Date, and shall satisfy or perform as they come due, all
liabilities and obligations of Andover (collectively, the “
Andover Assumed Liabilities ”) except for the
Andover Excluded Liabilities. For purposes of this Agreement, the
term “ Andover Excluded Liabilities ”
shall mean (i) any liability arising out of or related to the
Andover Excluded Assets; (ii) any liability arising out of or
related to the negotiation, consummation or performance of the
Reorganization, including, without limitation, any suit filed by a
stockholder or creditor of Andover (whether directly or in the
nature of a derivative action) against Andover, any member of its
Board of Directors or any of its officers alleging a breach of
fiduciary duty (or any claims of a similar nature) by any member of
such Board of Directors or any officer; and (iii) any
liability set forth on Schedule 1.3(b) .
1.4. Purchase Price
.
(a) CDIP Purchase Price . In
consideration of the sale, transfer, assignment, conveyance and
delivery by CDIP of the CDIP Purchased Assets to MSMT and of the
other agreements of CDIP stated herein, MSMT shall issue the
following shares of its voting capital stock to CDIP:
(i) Common Stock . MSMT shall
issue to CDIP shares of MSMT Common Stock equal to the product of
(a) the number of shares of CDIP voting common stock, par
value $0.001 (the “ CDIP Common Stock ”),
issued and outstanding immediately prior to the Closing, and
(b) the CDIP Pricing Ratio.
(ii) Preferred Stock . MSMT
shall issue to CDIP Four Hundred Sixty- Six Thousand
(466,000) shares of its Series B Voting Convertible Preferred
Stock, par value $0.0001, in the form set forth in the MSMT Charter
Amendment (the “ Series B Preferred Stock
”) and Eleven Million Two Hundred Seventy-Two Thousand Three
Hundred Fifty-Six (11,272,356) shares of its Series C Voting
Convertible Preferred Stock, par value $0.0001, in the form set
forth in the MSMT Charter Amendment (the “ Series C
Preferred Stock ”).
(b) Andover Purchase Price .
In consideration of the sale, transfer, assignment, conveyance and
delivery by Andover of the Andover Purchased Assets to MSMT and of
the other agreements of Andover stated herein, MSMT shall issue the
following shares of its voting capital stock to Andover:
(i) Common Stock . MSMT shall
issue to Andover shares of MSMT Common Stock equal to the product
of (a) the number of shares of Andover voting
common
-5-
stock, par value $0.001 (the “
Andover Common Stock ”) issued and outstanding
immediately prior to the Closing, and (b) the Andover Pricing
Ratio. The Andover Common Stock and CDIP Common Stock are sometimes
referred to herein collectively as the “ TC Common
Stock .”
(ii) Preferred Stock . MSMT
shall issue to Andover Five Million Sixty-Five Thousand Eight
Hundred (5,065,800) shares of its Series A Voting Convertible
Preferred Stock, par value $0.0001, in the form set forth in the
MSMT Charter Amendment (the “ Series A Preferred
Stock ,” collectively with the Series B Preferred
Stock and Series C Preferred Stock, the “ MSMT
Preferred Stock ” and collectively with the MSMT
Common Stock, the “ MSMT Securities ”)
and Two Million Six Hundred Seventy-Seven Thousand Six Hundred
Forty-Four (2,677,644) shares of Series C Preferred
Stock.
1.5. Common Stock Purchase
Warrants of the Target Companies .
(a) Common Stock Purchase
Warrants of CDIP . At the Closing, each outstanding warrant to
purchase CDIP Common Stock set forth on Schedule 1.5(a) (the
“ CDIP Warrants ”), shall be assumed by
MSMT and the holder thereof shall be entitled to be issued a new
MSMT warrant to purchase a number of shares of MSMT Common Stock
equal to the product (rounded up to the nearest whole number) of
(a) the number of shares of CDIP Common Stock subject to the
CDIP Warrant immediately prior to the Closing and (b) the CDIP
Pricing Ratio; at an exercise price per share (rounded down to the
nearest whole cent) equal to (x) the exercise price per share
of such CDIP Warrant immediately prior to the Closing divided by
(y) the CDIP Pricing Ratio (all of the foregoing collectively,
the “ Assumed CDIP Warrants ”). MSMT
shall assume the CDIP Warrants and the terms (as in effect as of
the Closing) of such agreements by which such CDIP Warrants are
evidenced. CDIP shall, as promptly as reasonably practicable but in
any event not later than ten (10) days following the Closing,
furnish to each holder of the Assumed CDIP Warrants a notice of the
consummation of the Reorganization, which notice shall set forth
such assumption of the CDIP Warrants and include the amount of MSMT
Common Stock into which each Assumed CDIP Warrant is exercisable.
At the request of a holder and upon surrender of each Assumed CDIP
Warrant, MSMT shall deliver to the holder a new MSMT warrant
evidencing the rights of the holder to purchase MSMT Common Stock,
which new MSMT warrant shall in all other respects be identical to
the surrendered Assumed CDIP Warrant.
(b) Common Stock Purchase
Warrants of Andover . At the Closing, each outstanding warrant
to purchase Andover Common Stock set forth on Schedule
1.5(b) (the “ Andover Warrants ”),
shall be assumed by MSMT and the holder thereof shall be entitled
to be issued a new MSMT warrant to purchase a number of shares of
MSMT Common Stock equal to the product (rounded up to the nearest
whole number) of (a) the number of shares of Andover Common
Stock subject to the Andover Warrant immediately prior to the
Closing and (b) the Andover Pricing Ratio; at an exercise
price per share (rounded down to the nearest whole cent) equal to
(x) the exercise price per share of such Andover Warrant
immediately prior to the Closing divided by (y) the Andover
Pricing Ratio (all of the foregoing collectively, the “
Assumed Andover Warrants ,” and collectively
with the CDIP Assumed Warrants, the “ Assumed
Warrants ”). MSMT shall assume the Andover Warrants
and the terms (as in effect as of the Closing) of such agreements
by which such Andover Warrants are evidenced. Andover shall, as
promptly as reasonably practicable but in any event not later than
ten (10) days
-6-
following the Closing, furnish to each holder of
the Assumed Andover Warrants a notice of the consummation of the
Reorganization, which notice shall set forth such assumption of the
Andover Warrants and include the amount of MSMT Common Stock into
which each Andover Warrant is exercisable. At the request of a
holder and upon surrender of each Assumed Andover Warrant, MSMT
shall deliver to the holder a new MSMT warrant evidencing the
rights of the holder to purchase MSMT Common Stock, which new MSMT
warrant shall in all other respects be identical to the surrendered
Assumed Andover Warrant.
1.6. Stock Options of Target
Companies .
(a) Stock Options of CDIP .
At the Closing, each option to purchase CDIP Common Stock set forth
on Schedule 1.6(a) (collectively, the “ CDIP
Options ”) that is outstanding and unexercised
immediately prior to the Closing (collectively, the “
Assumed CDIP Options ”), whether or not vested,
shall be assumed by MSMT (such assumption inclusive of the terms of
the option agreement by which such option is evidenced as in effect
as of the Closing Date) and the holder thereof shall be entitled to
be issued a new MSMT option to purchase the number of shares of
MSMT Common Stock equal to the product of (a) the number of
shares of CDIP Common Stock that were subject to such Assumed CDIP
Option immediately prior to the Closing and (b) the CDIP
Pricing Ratio, and rounding the resulting number up to the nearest
whole number of MSMT Common Stock; at a per share exercise price
equal to the quotient of (x) the per share exercise price of
CDIP Common Stock subject to such Assumed CDIP Option, as in effect
immediately prior to the Closing and (y) the CDIP Pricing
Ratio, and rounding the resulting exercise price down to the
nearest whole cent. Any remaining restrictions on the exercise of
any Assumed CDIP Option shall continue in full force and effect and
the term, exercisability, remaining vesting schedule and other
provisions of such Assumed CDIP Option shall otherwise remain
unchanged as a result of the assumption of such Assumed CDIP
Option. CDIP shall, as promptly as reasonably practicable but in
any event not later than ten (10) days following the Closing,
furnish to each holder of the Assumed CDIP Options a notice of the
consummation of the Reorganization, which notice shall set forth
such assumption of the CDIP Options and include the amount of MSMT
Common Stock into which each CDIP Option is exercisable. At the
request of a holder and upon surrender of each Assumed CDIP Option,
MSMT shall deliver to the holder a new MSMT option evidencing the
rights of the holder to purchase MSMT Common Stock, which new MSMT
option shall in all other respects be identical to the surrendered
Assumed CDIP Option.
(b) Stock Options of Andover
. At the Closing, each option to purchase Andover Common Stock set
forth on Schedule 1.6(b) (collectively, the “
Andover Options ”) that is outstanding and
unexercised immediately prior to the Closing (collectively, the
“ Assumed Andover Options ” and
collectively with the Assumed CDIP Options, the “
Assumed Options ”), whether or not vested,
shall be assumed by MSMT (such assumption inclusive of the terms of
the option agreement by which such option is evidenced as in effect
as of the Closing Date) and the holder thereof shall be entitled to
be issued a new MSMT option to purchase the number of shares of
MSMT Common Stock equal to the product of (a) the number of
shares of Andover Common Stock that were subject to such Assumed
Andover Option immediately prior to the Closing and (b) the
Andover Pricing Ratio, and rounding the resulting number up to the
nearest whole number of MSMT Common Stock; at a per share exercise
price equal to the quotient of (x) the per share exercise
price of Andover Common Stock subject to such Assumed
Andover
-7-
Option, as in effect immediately prior to the
Closing and (y) the Andover Pricing Ratio, and rounding the
resulting exercise price down to the nearest whole cent. Any
remaining restrictions on the exercise of any Assumed Andover
Option shall continue in full force and effect and the term,
exercisability, remaining vesting schedule and other provisions of
such Assumed Andover Option shall otherwise remain unchanged as a
result of the assumption of such Assumed Andover Option. Andover
shall, as promptly as reasonably practicable but in any event not
later than ten (10) days following the Closing, furnish to
each holder of the Assumed Andover Options a notice of the
consummation of the Reorganization, which notice shall set forth
such assumption of the Andover Options and include the amount of
MSMT Common Stock into which each Andover Option is exercisable. At
the request of a holder and upon surrender of each Assumed Andover
Option, MSMT shall deliver to the holder a new MSMT option
evidencing the rights of the holder to purchase MSMT Common Stock,
which new MSMT option shall in all other respects be identical to
the surrendered Assumed Andover Option.
1.7. Escrow of Additional MSMT
Common Stock . At the Closing, MSMT shall issue shares of MSMT
Common Stock in an amount equal to eight percent (8%) of the
issued and outstanding MSMT Common Stock (calculated immediately
following the Closing and after giving effect to the conversion or
exercise of all outstanding shares of MSMT Preferred Stock and all
convertible debentures of MSMT which are convertible into shares of
MSMT Common Stock, but excluding any shares of MSMT Common Stock
issuable upon the exercise of warrants or options of MSMT) (the
“ Escrow Shares ”) to the Escrow Agent
(as such term is defined in the Escrow Agreement) pursuant to an
escrow agreement by and among the Constituent Companies and the
Escrow Agent, the form of which is attached hereto as Exhibit
1.7 (the “ Escrow Agreement ”).
The Escrow Shares shall be distributed in accordance with the terms
of the Escrow Agreement.
1.8. Distribution of MSMT
Securities .
(a) CDIP Distribution of MSMT
Securities . CDIP hereby covenants and agrees that, as soon as
practicable after the Closing Date and no later than forty-five
(45) days following the Closing Date, CDIP shall distribute
the MSMT Securities received by it pursuant to Section 1.4(a)
and the notices referenced in Sections 1.5 and 1.6 regarding the
Assumed CDIP Warrants and Assumed CDIP Options as
follows:
(i) MSMT Common Stock received by
CDIP pursuant to Section 1.4(a)(i) shall be distributed by
CDIP on a pro-rata basis to the holders of record of CDIP Common
Stock existing on the Closing Date;
(ii) Series B Preferred Stock
received by CDIP pursuant to Section 1.4(a)(ii) shall be
distributed by CDIP on a pro-rata basis to the holders of record of
CDIP Series B Preferred Stock existing on the Closing
Date;
(iii) Series C Preferred Stock
received by CDIP pursuant to Section 1.4(a)(ii) shall be
distributed by CDIP on a pro-rata basis to the holders of record of
CDIP Series C Preferred Stock and CDIP Series D Preferred Stock
existing on the Closing Date;
-8-
(iv) notices regarding the Assumed
CDIP Warrants received by CDIP pursuant to Section 1.5(a)
shall be distributed to the holders of record thereof;
and
(v) notices regarding the Assumed
CDIP Options received by CDIP pursuant to Section 1.6(a) shall
be distributed to the holders of record thereof.
(b) Andover Distribution of MSMT
Securities . Andover hereby covenants and agrees that, as soon
as practicable after the Closing Date and no later than forty-five
(45) days following the Closing Date, Andover shall distribute
the MSMT Securities received by it pursuant to Section 1.4(b)
and the notices referenced in Section 1.5 and 1.6 regarding
the Assumed Andover Warrants and Assumed Andover Options as
follows:
(i) MSMT Common Stock received by
Andover pursuant to Section 1.4(b)(i) shall be distributed by
Andover on a pro-rata basis to the holders of record of Andover
Common Stock existing on the Closing Date;
(ii) Series A Preferred Stock
received by Andover pursuant to Section 1.4(b)(ii) shall be
distributed by Andover on a pro-rata basis to the holders of record
of Andover 6% Series A Convertible Preferred Stock existing on the
Closing Date;
(iii) Series C Preferred Stock
received by Andover pursuant to Section 1.4(b)(ii) shall be
distributed by Andover on a pro-rata basis to the holders of record
of Andover 6% Series B Convertible Preferred Stock and 8% Series D
Convertible Preferred Stock existing on the Closing
Date;
(iv) notices regarding the Assumed
Andover Warrants received by Andover pursuant to
Section 1.5(b) shall be distributed to the holders of record
thereof; and
(v) notices regarding the Assumed
Andover Options received by Andover pursuant to Section 1.6(b)
shall be distributed to the holders of record thereof.
(c) Issuance of MSMT
Securities . In connection with the distribution of the MSMT
Securities by each Target Company as contemplated in Sections
1.8(a) and 1.8(b), within five (5) Business Days after the
Closing each Target Company shall deliver to MSMT a notice
certifying the names of the stockholders of record to whom each
Target Company will distribute the MSMT Securities. Each notice
shall contain the name and address of each such stockholder of
record and the number and class of shares of MSMT Securities to
which each such stockholder is entitled. Upon receipt of each such
notice, MSMT will cause its transfer agent to issue stock
certificates in the names and denominations set forth therein and
to deliver the same to each Target Company within thirty
(30) days after the Closing. MSMT shall cause its transfer
agent to issue stock certificates which are, assuming the continued
effectiveness of the Registration Statement, free of any
restrictions or restrictive legends (other than with respect to
certificates to be issued to the Persons listed on Schedule
1.8(c) hereto who have been identified by MSMT as Persons who
will be Affiliates of MSMT immediately following the
Closing).
1.9. No Fractional Shares .
No fraction of a share of MSMT Common Stock will be issued to
Andover or CDIP (or subsequently distributed by Andover or CDIP to
their respective shareholders). In lieu thereof, MSMT, CDIP and
Andover shall round down any fractional
-9-
shares to the nearest whole number of shares of
MSMT Common Stock. Any shares of MSMT Common Stock remaining after
a Target Company’s distribution to its shareholders in
accordance with Section 1.8 hereof shall be forwarded to MSMT
for retirement.
1.10. Adjustment to Pricing
Ratios . The CDIP Pricing Ratio and the Andover Pricing Ratio,
as applicable, shall be equitably adjusted to reflect fully the
effect of (a) any stock split, reverse split, stock
combination, stock dividend (including any dividend or distribution
of securities convertible into CDIP Common Stock, Andover Common
Stock or MSMT Common Stock), reorganization, reclassification,
recapitalization or other like change with respect to CDIP Common
Stock, Andover Common Stock or MSMT Common Stock occurring after
the Effective Date and prior to the Closing Date; and (b) any
adjustment required as a result of any breach of the
representations and warranties contained in Sections 2.1(f), 2.2(f)
or 2.3(f), as contemplated by Section 4.12. In addition, the
Constituent Companies acknowledge that the CDIP Pricing Ratio and
the Andover Pricing Ratio reflect the issuance of securities
contemplated by the New MSMT Financing and New Andover Financing.
In the event that either the New MSMT Financing or New Andover
Financing have not been consummated prior to Closing, the CDIP
Pricing Ratio and Andover Pricing Ratio will adjusted accordingly.
At the Closing, the Constituent Companies will execute a
certificate containing the definitive CDIP Pricing Ratio and
Andover Pricing Ratio.
1.11. Closing . The closing
contemplated by this Agreement (the “ Closing
” and such date the Closing occurs on, the “
Closing Date ”) shall be held at the offices of
Bush Ross, P.A., 1801 N. Highland Avenue, Tampa, Florida 33602, on
a date determined by mutual agreement among the Constituent
Companies which date shall be as soon as practicable after the
satisfaction or waiver (subject to applicable law) of the latest to
occur of the conditions set forth in Article V hereof (other than
those conditions that relate to action to be taken at the Closing,
but subject to satisfaction of such conditions at Closing), unless
this Agreement has been theretofore terminated pursuant to its
terms or unless extended by mutual written agreement of the
Constituent Companies. At the Closing, the following deliveries
shall be made to the applicable parties:
(a) a bill of sale for the CDIP
Purchased Assets in the form of Exhibit 1.11(a) (the
“ CDIP Bill of Sale ”) executed by CDIP
in favor of MSMT;
(b) a bill of sale for the Andover
Purchased Assets in the form of Exhibit 1.11(b) (the
“ Andover Bill of Sale ”) executed by
Andover in favor of MSMT;
(c) an assignment of the CDIP
Purchased Assets that are intangible personal property of CDIP in
the form of Exhibit 1.11(c) , which assignment shall
also contain MSMT’s undertaking and assumption of the CDIP
Assumed Liabilities (the “ CDIP Assignment, Release and
Assumption Agreement ”), executed by CDIP and
MSMT;
(d) an assignment of the Andover
Purchased Assets that are intangible personal property of Andover
in the form of Exhibit 1.11(d) , which assignment
shall also contain MSMT’s undertaking and assumption of the
Andover Assumed Liabilities (the “ Andover Assignment,
Release and Assumption Agreement ”), executed by
Andover and MSMT;
-10-
(e) an assignment of the CDIP
Intellectual Property Rights in the form of Exhibit
1.11(e) executed by CDIP and MSMT;
(f) intentionally
omitted;
(g) certificates representing all of
the outstanding shares of each CDIP Subsidiary, duly endorsed (or
accompanied by duly executed stock powers in form and substance
reasonably satisfactory to MSMT and Andover) and, signed by CDIP,
for transfer to MSMT;
(h) certificates representing all of
the outstanding shares of each Andover Subsidiary, duly endorsed
(or accompanied by duly executed stock powers in form and substance
reasonably satisfactory to MSMT and CDIP) and, signed by Andover,
for transfer to MSMT;
(i) the Escrow Agreement executed by
CDIP, Andover and MSMT;
(j) a list, certified as true,
correct and complete by an officer of CDIP of all of the
stockholders of CDIP as of the Closing Date and the number and
class of securities owned by each such stockholder on the Closing
Date;
(k) a list, certified as true,
correct and complete by an officer of Andover of all of the
stockholders of Andover as of the Closing Date and the number and
class of securities owned by each such stockholder on the Closing
Date;
(l) a list, certified as true,
correct and complete by an officer of MSMT of all of the
stockholders of MSMT as of the Closing Date and the number and
class of securities owned by each such stockholder on the Closing
Date;
(m) a certificate of the secretary
of CDIP, certifying (i) that the resolutions attached to such
certificate authorizing and approving the execution and delivery of
this Agreement and the Transaction Documents to which CDIP is a
party and the consummation of the transactions contemplated hereby
and thereby were duly adopted by CDIP, (ii) that such
resolutions have not been amended and remain in full force and
effect, (iii) as to the incumbency of each signatory to this
Agreement and each Transaction Document to which CDIP is a party
and (iv) attaching certificates, dated not more than five
(5) days prior to the Closing Date, of the relevant
Governmental Authority or other appropriate official in each state
in which CDIP and each CDIP Subsidiary are organized as to each of
the aforementioned entities’ legal existence and good
standing in such state;
(n) a certificate of the secretary
of Andover, certifying (i) that the resolutions attached to
such certificate authorizing and approving the execution and
delivery of this Agreement and the Transaction Documents to which
Andover is a party and the consummation of the transactions
contemplated hereby and thereby were duly adopted by Andover,
(ii) that such resolutions have not been amended and remain in
full force and effect, (iii) as to the incumbency of each
signatory to this Agreement and each Transaction Document to which
Andover is a party and (iv) attaching certificates, dated not
more than five (5) days prior to the Closing Date, of the
relevant Governmental Authority or other appropriate official in
each state in which Andover and each Andover Subsidiary are
organized as to each of the aforementioned entities’ legal
existence and good standing in such state;
-11-
(o) a certificate of the secretary
of MSMT, certifying (i) that the resolutions attached to such
certificate authorizing and approving the execution and delivery of
this Agreement and the Transaction Documents to which MSMT is a
party and the consummation of the transactions contemplated hereby
and thereby were duly adopted by MSMT, (ii) that such
resolutions have not been amended and remain in full force and
effect, (iii) as to the incumbency of each signatory to this
Agreement and each Transaction Document to which MSMT is a party
and (iv) attaching certificates, dated not more than five
(5) days prior to the Closing Date, of the relevant
Governmental Authority or other appropriate official in each state
in which MSMT and each MSMT Subsidiary are organized as to each of
the aforementioned entities’ legal existence and good
standing in such state;
(p) a certificate executed by
CDIP’s Chief Executive Officer or Chief Financial Officer
stating that, with respect to CDIP, the conditions set forth in
Sections 5.1(a) and 5.1(b), as they relate to CDIP, have been
satisfied; the condition set forth in Section 5.1(e) as it
relates to the stockholders of CDIP has been satisfied; and the
conditions set forth in Sections 5.2(b)(i), 5.2(c)(i), 5.2(d)(i),
5.3(b)(ii), 5.3(c)(ii) and 5.3(d)(ii) have been
satisfied;
(q) a certificate executed by
Andover’s Chief Executive Officer or Chief Financial Officer
stating that with respect to Andover, the conditions set forth in
Sections 5.1(a) and 5.1(b), as they relate to Andover, have been
satisfied; the condition set forth in Section 5.1(e) as it
relates to the stockholders of Andover has been satisfied; and the
conditions set forth in Sections 5.2(b)(ii), 5.2(c)(ii),
5.2(d)(ii), 5.4(b)(ii), 5.4(c)(ii) and 5.4(d)(ii) have been
satisfied;
(r) a certificate executed by
MSMT’s Vice President-Controller stating that with respect to
MSMT, the conditions set forth in Sections 5.1(a) and 5.1(b), as
they relate to MSMT, have been satisfied; the conditions set forth
in 5.1(c) and 5.1(d) have been satisfied; the condition set forth
in Section 5.1(e) as it relates to the stockholders of MSMT
has been satisfied; and the conditions set forth in Sections
5.3(b)(i), 5.3(c)(i), 5.3(d)(i), 5.4(b)(i), 5.4(c)(i) and 5.4(d)(i)
have been satisfied;
(s) certificates representing the
shares of MSMT Common Stock to be issued to CDIP, duly endorsed (or
accompanied by duly executed stock powers in form and substance
reasonably satisfactory to CDIP) and, signed by MSMT;
(t) certificates representing the
shares of MSMT Common Stock to be issued to Andover, duly endorsed
(or accompanied by duly executed stock powers in form and substance
reasonably satisfactory to Andover) and, signed by MSMT;
(u) certificates representing the
shares of Series B Preferred Stock and Series C Preferred Stock to
be issued to CDIP, duly endorsed (or accompanied by duly executed
stock powers in form and substance reasonably satisfactory to CDIP)
and, signed by MSMT;
(v) certificates representing the
shares of Series A Preferred Stock and Series C Preferred Stock to
be issued to Andover, duly endorsed (or accompanied by duly
executed stock powers in form and substance reasonably satisfactory
to Andover) and, signed by MSMT;
(w) a certified copy of the MSMT
Charter Amendment as filed with the Secretary of State of the State
of Nevada;
-12-
(x) notices relating to the Assumed
CDIP Options and the Assumed CDIP Warrants; and
(y) notices relating to the Assumed
Andover Options and the Assumed Andover Warrants.
1.12. Post-Reorganization
Capitalization Table . Attached hereto as Exhibit
1.12 is a post-Reorganization capitalization table of MSMT
after giving effect to the transactions contemplated by this
Agreement and the New MSMT Financing and New Andover Financing.
(such post-Closing capitalization table shall be prepared on both a
pre-split and post-split basis).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE CONSTITUENT COMPANIES
2.1. Representations and
Warranties of Andover . Except as set forth under the
corresponding section of the disclosure schedules delivered to each
of CDIP and MSMT concurrently herewith (the “ Andover
Disclosure Schedules ”) or as otherwise disclosed in
the Andover SEC Reports (as defined below) filed by Andover, which
Andover Disclosure Schedules and Andover SEC Reports shall be
deemed a part hereof and to qualify any representation or warranty
otherwise made herein to the extent of such disclosure, Andover
hereby makes the representations and warranties set forth below to
CDIP and MSMT:
(a) Subsidiaries . All of the
direct and indirect subsidiaries of Andover are set forth on
Schedule 1.1(b)(i) . Except as set forth on Schedule
1.1(b)(i) , Andover owns, directly or indirectly, all of the
capital stock or other equity interests of each Andover Subsidiary
free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each Andover Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive
and similar rights to subscribe for or purchase
securities.
(b) Organization and
Qualification . Andover and each Andover Subsidiary is duly
incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of incorporation or
organization (as applicable), with the requisite corporate power
and authority to own and use its properties and assets and to carry
on its business as currently conducted. Neither Andover nor any
Andover Subsidiary is in violation or default of any of the
provisions of its certificate or articles of incorporation, bylaws
or other organizational or charter documents. Each of Andover and
each Andover Subsidiary is duly qualified to conduct business and
is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, could not have or reasonably be expected to result in
a Material Adverse Effect and no proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing or seeking
to revoke, limit or curtail such power and authority or
qualification.
(c) Authorization;
Enforcement . Andover has the requisite corporate power and
authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder. The
-13-
execution and delivery of each of the
Transaction Documents by Andover and the consummation by it of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Andover and no further
action is required by Andover, its Board of Directors or its
stockholders in connection therewith other than in connection with
the Andover Required Approvals (as defined in Section 2.1(e)
hereof). Each Transaction Document has been (or upon delivery will
have been) duly executed by Andover and, when delivered in
accordance with the terms hereof and thereof, will constitute the
valid and binding obligation of Andover enforceable against Andover
in accordance with its terms except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies
and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(d) No Conflicts . The
execution, delivery and performance of the Transaction Documents by
Andover and the consummation by Andover of the other transactions
contemplated hereby and thereby do not and will not:
(i) conflict with or violate any provision of Andover’s
or any Andover Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents,
or (ii) subject to the Andover Required Approvals, conflict
with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of
Andover or any Andover Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument or other understanding to which
Andover or any Andover Subsidiary is a party or by which any
property or asset of Andover or any Andover Subsidiary is bound or
affected, or (iii) subject to the Andover Required Approvals,
conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court or Governmental Authority to which Andover
or an Andover Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of Andover or an Andover Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not
have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and
Approvals . Neither Andover nor any Andover Subsidiary is
required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any
court or other federal, state, local or other Governmental
Authority or other Person in connection with the execution,
delivery and performance by Andover of the Transaction Documents,
other than the delivery of the notices and the receipt of the
approvals set forth on Schedule 2.1(e) (collectively, the
“ Andover Required Approvals
”).
(f) Capitalization . The
capitalization of Andover is as set forth on Schedule 2.1(f)
. Except as set forth on Schedule 2.1(f) , Andover has not
issued any capital stock since its most recently filed periodic
report under the Exchange Act. Except as set forth on Schedule
2.1(f) , no Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.
Except as set forth on Schedule 2.1(f) , there are no
outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities, rights or
-14-
obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for
or acquire, any shares of Andover Common Stock, or contracts,
commitments, understandings or arrangements by which Andover or any
Andover Subsidiary is or may become bound to issue additional
shares of Andover Common Stock or Common Stock Equivalents. All of
the outstanding shares of capital stock of Andover are validly
issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities.
Except as set forth on Schedule 2.1(f) , there are no
stockholders agreements, voting agreements or other similar
agreements with respect to Andover’s capital stock to which
Andover is a party or, to the knowledge of Andover, between or
among any of Andover’s stockholders.
(g) SEC Reports; Financial
Statements . Except as set forth on Schedule 2.1(g) ,
Andover has filed all reports, schedules, forms, statements and
other documents required to be filed by it under the Securities Act
and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, since August 31, 2006 (the foregoing materials,
including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the
“ Andover SEC Reports ”) on a timely
basis or has received a valid extension of such time of filing and
has filed any such Andover SEC Reports prior to the expiration of
any such extension. As of their respective dates, each Andover SEC
Report (i) was prepared in accordance and complied in all
material respects with the requirements of the Securities Act, or
the Exchange Act, as the case may be, and the rules and regulations
of the SEC thereunder applicable to such Andover SEC Reports, and
(ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement then on
the date of such filing) contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
None of the Andover Subsidiaries are required to file any forms,
reports or other documents with the SEC. The consolidated financial
statements of Andover and the Andover Subsidiaries included in the
Andover SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the SEC
with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United
States generally accepted accounting principles (“
GAAP ”) applied on a consistent basis during
the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the consolidated
financial position of Andover and the Andover Subsidiaries as of
and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit
adjustments.
(h) Material Changes . Since
the date of the latest audited annual consolidated financial
statements included within the Andover SEC Reports, except as
specifically disclosed in any subsequent Andover SEC Report:
(i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a
Material Adverse Effect; (ii) none of Andover or the Andover
Subsidiaries has incurred any material liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past
practice, and (B) liabilities not required to be reflected in
Andover’s consolidated financial statements pursuant to GAAP
or disclosed in filings made with
-15-
the SEC; (iii) Andover has not materially
altered its method of accounting; (iv) Andover has not
declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock
and (v) Andover has not issued any equity securities to any
officer, director or Affiliate of Andover or any Andover
Subsidiary. Andover does not have pending before the SEC any
request for confidential treatment of information. Except as set
forth on Schedule 2.1(h) , no event, liability or
development has occurred or exists with respect to Andover or any
Andover Subsidiary or their respective business, properties,
operations or financial condition, that is required to be disclosed
by Andover by the Exchange Act.
(i) Litigation . Except as
set forth on Schedule 2.1(i) , there is no action, suit,
inquiry, notice of violation, proceeding or investigation
(collectively, an “ Action ”) pending or,
to the knowledge of Andover, threatened against or affecting
Andover, any Andover Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state,
county, local or foreign) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the
Transaction Documents or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. Neither Andover nor any Andover
Subsidiary, nor, to the knowledge of Andover, any director or
officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of Andover, there is not pending or
contemplated, any investigation by the SEC involving Andover or any
current or, to the knowledge of Andover, former director or officer
of Andover. The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by
Andover under the Securities Act.
(j) Labor Relations . Except
as set forth on Schedule 2.1(j) , no material labor dispute
exists or, to the knowledge of Andover, is imminent with respect to
any of the employees of Andover or any Andover Subsidiary which
could be reasonably expected to result in a Material Adverse
Effect. None of Andover’s or Andover Subsidiaries’
employees is a member of a union that relates to such
employee’s relationship with Andover or any Andover
Subsidiary, as the case may be, and neither Andover nor any Andover
Subsidiary is a party to a collective bargaining agreement, and
Andover believes that its and the Andover Subsidiaries’
relationships with their respective employees are good. No employee
of Andover or any Andover Subsidiary, including their respective
executive officers, to the knowledge of Andover, is, or is now
expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information
agreement or non-competition agreement, or any other contract or
agreement or any restrictive covenant, and, to the knowledge of
Andover, the continued employment of each such executive officer
does not subject Andover or any Andover Subsidiary to any liability
with respect to any of the foregoing matters. To the knowledge of
Andover, Andover and the Andover Subsidiaries are in compliance
with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, have a Material Adverse Effect.
(k) Compliance . Except as
set forth on Schedule 2.1(k) , neither Andover nor any
Andover Subsidiary (i) is in material default under or in
violation of (and no event has
-16-
occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by
Andover or any subsidiary under), nor has Andover or any Andover
Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental
body, or (iii) to the knowledge of Andover, is or has been in
violation of any statute, rule or regulation of any Governmental
Authority, including without limitation all foreign, federal, state
and local laws applicable to its business and all such laws that
affect the environment, except in each case as could not be
expected to result in a Material Adverse Effect.
(l) Regulatory Permits .
Andover and each Andover Subsidiary possess all Material Permits,
except where the failure to possess such permits could not be
expected to result in a Material Adverse Effect, and neither
Andover nor any Andover Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
Material Permit.
(m) Title to Assets . Andover
and each Andover Subsidiary have good and marketable title in fee
simple to all real property owned by them that is material to the
business of Andover and each Andover Subsidiary and good and
marketable title to all personal property owned by them that is
material to the business of Andover and the Andover Subsidiaries,
in each case free and clear of all Liens, except for Liens for the
payment of federal, state or other taxes, the payment of which is
neither delinquent nor subject to penalties and Liens set forth on
Schedule 2.1(m) . Any real property and facilities held
under lease by Andover and the Andover Subsidiaries are held by
them under valid, subsisting and enforceable leases with which
Andover and the Andover Subsidiaries are in compliance.
(n) Patents and Trademarks .
Andover and each Andover Subsidiary have, or have rights to use,
all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property
rights and similar rights necessary or material for use in
connection with their respective businesses as described in the
Andover SEC Reports and which the failure to so have could have a
Material Adverse Effect (collectively, the “ Andover
Intellectual Property Rights ”). Neither Andover nor
any Andover Subsidiary has received a notice (written or otherwise)
that the Andover Intellectual Property Rights used by Andover or
any Andover Subsidiary violates or infringes upon the rights of any
Person unless such notice has been resolved without a Material
Adverse Effect. To the knowledge of Andover, all such Andover
Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Andover
Intellectual Property Rights. Andover and each Andover Subsidiary
have taken all security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the
aggregate, reasonably be expect to have a Material Adverse
Effect.
(o) Insurance . Andover and
each Andover Subsidiary are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which
Andover and each Andover Subsidiary are engaged. Neither Andover
nor any Andover Subsidiary have any reason to believe that it will
not be able to renew its existing insurance coverage as and when
such coverage expires or to
-17-
obtain similar coverage from similar insurers as
may be necessary to continue its business without a significant
increase in cost.
(p) Transactions With Affiliates
and Employees . Except as set forth in Schedule 2.1(p) ,
none of the officers, directors or other Affiliates of Andover or
any Andover Subsidiary, and, to the knowledge of Andover, none of
the employees of Andover or any Andover Subsidiary is presently a
party to any transaction with Andover or any Andover Subsidiary
(other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to
the knowledge of Andover, any entity in which any officer,
director, or any such employee has a substantial interest or is an
officer, director, trustee or partner, in each case in excess of
$60,000 other than (i) for payment of salary or consulting
fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of Andover and (iii) for other employee
benefits, including stock option agreements under any stock option
plan of Andover or any Andover Subsidiary.
(q) Sarbanes-Oxley; Internal
Accounting Controls . Andover is in material compliance with
all provisions of the Sarbanes-Oxley Act of 2002. Andover and each
Andover Subsidiary have established and maintain a system of
internal control over financial reporting required by Rule
13a-15(f) or 15d-15(f) of the Exchange Act regarding the
reliability of financial reporting and the preparation of its
consolidated financial statements in accordance with GAAP.
Andover’s certifying officers evaluated the effectiveness of
Andover’s internal controls as of the end of its most recent
fiscal year as required by Item 308 or Item 308T of
Regulation S-K and presented the report of such evaluation in its
Annual Report on Form 10-K filed with the SEC. Andover presented in
its most recently filed periodic report under the Exchange Act the
conclusions of its certifying officers about the effectiveness of
the disclosure controls and procedures based on their evaluations
as of the end of the period covered by the report (the “
Andover Evaluation Date ”) as required by
Item 307 of Regulation S-K. Since the Andover Evaluation Date,
there have been no changes in Andover’s internal control over
financial reporting (as such term is defined in the Exchange Act)
that has materially affected, or is reasonably likely to materially
affect, Andover’s internal control over financial
reporting.
(r) Certain Fees . Except as
set forth on Schedule 2.1(r) , no brokerage or
finder’s fees or commissions are or will be payable by
Andover or any Andover Subsidiary to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. Neither CDIP nor MSMT shall have any
obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type
contemplated in this Section 2.1(r) that may be due in
connection with the transactions contemplated by the Transaction
Documents.
(s) Registration Rights .
Except as set forth on Schedule 2.1(s) , no Person has any
right to cause Andover or any Andover Subsidiary to effect the
registration under the Securities Act of any securities of Andover
or any Andover Subsidiary.
-18-
(t) Listing and Maintenance
Requirements . Andover is obligated to file periodic reports
under the Exchange Act pursuant to Section 13(a) or 15(d) of
the Exchange Act, and Andover has not taken any action designed to,
or which to its knowledge is likely to have the effect of,
terminating such reporting obligation under the Exchange Act nor
has Andover received any notification that the SEC is contemplating
terminating such reporting obligation. Except as set forth on
Schedule 2.1(t) , Andover has not, in the twenty four
(24) months preceding the Effective Date, received notice from
any Trading Market on which the Andover Common Stock is or has been
listed or quoted to the effect that Andover is not in compliance
with the listing or maintenance requirements of such Trading
Market. Andover is, and has no reason to believe that it will not
in the foreseeable future continue to be, in compliance with all
such listing and maintenance requirements.
(u) Tax Status . Andover has
timely filed all Tax Returns and/or extensions required by law to
be filed with or supplied to any taxing authority with respect to
the Taxes owed by Andover and the Andover Subsidiaries. All such
Tax Returns are true, correct and complete in all material
respects. Except as set forth on Schedule 2.1(u) , all Taxes
due and payable by Andover and all Andover Subsidiaries on or
before the Closing Date have been paid or will be paid prior to the
time they become delinquent. All Taxes that Andover or any Andover
Subsidiary is or was required by law to withhold or collect have
been duly withheld or collected and, to the extent required, have
been paid to the proper governmental entity. Andover has not been
advised (i) that any of the Tax Returns have been or are being
examined or audited as of the Effective Date, (ii) that any
such examination or audit is currently threatened or contemplated,
or (iii) of any deficiency in assessment or proposed judgment
with to its or the Andover Subsidiaries’ Taxes. Andover has
no knowledge of any liability for any Taxes to be imposed upon its
or the Andover Subsidiaries’ respective properties or assets
as of the date of this Agreement that are not adequately provided
for in the consolidated financial statements included in the
Andover SEC Reports. Andover has delivered or made available to
CDIP and MSMT true and complete copies of all federal and state
income Tax Returns, examination reports, and statements of
deficiencies filed by, assessed against or agreed to by Andover or
any of the Andover Subsidiaries in the past three years. Andover
has never been a member of a consolidated or affiliated group of
corporations filing a consolidated or combined income Tax Return,
nor does Andover or any Andover Subsidiary have any liability for
Taxes of any other Person or entity. Neither Andover nor any
Andover Subsidiary is a party to any tax allocation or sharing
arrangement or tax indemnity agreement.
(v) Foreign Corrupt Practices
. Neither Andover, nor to the knowledge of Andover, any agent or
other Person acting on behalf of Andover or any Andover Subsidiary,
has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made
any unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by Andover or any Andover Subsidiary (or made
by any Person acting on its behalf of which Andover is aware) which
is in violation of law, or (iv) violated in any material
respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
(w) Auditors .
Andover’s auditors for the fiscal years ended
December 31, 2006 and 2007 and ending December 31, 2008
are set forth on Schedule 2.1(w) . To the
-19-
knowledge of Andover, each auditor on
Schedule 2.1(w) is a registered public accounting firm as
required by the Exchange Act and the rules and regulations of the
SEC.
(x) Disclosure . All
disclosure furnished by or on behalf of Andover to MSMT and CDIP
regarding Andover, each Andover Subsidiary, their respective
business and the transactions contemplated hereby, including the
Andover Disclosure Schedules, with respect to the representations
and warranties made herein are and will be true and correct with
respect to such representations and warranties as of the Effective
Date and as of the Closing Date and do not and will not contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
(y) Material Contracts .
Schedule 2.1(y) sets forth a true and complete list of all
agreements, understandings, instruments, and contracts, proposed
transactions (including a description of those currently being
negotiated), judgments, orders, writs, or decrees to which Andover
or any Andover Subsidiary is a party or, to its knowledge, by which
it is bound that may involve: (i) the sale of Andover’s
or any Andover Subsidiary’s products or services to any
customer, vendor, or provider (other than such contracts entered
into in the ordinary course of business); (ii) obligations
(contingent or otherwise) of, or payments to, Andover or any
Andover Subsidiary in excess of $50,000; (iii) the license of
any proprietary rights to or from Andover or any Andover Subsidiary
(other than licenses arising from the purchase of “off the
shelf” or other standard products); (iv) the
development, administration, or distribution of Andover’s and
any Andover Subsidiary’s products or services, including
without limitation, any that involve any brokers or dealers;
(v) provisions restricting or affecting the development,
manufacture, or distribution of Andover’s or any Andover
Subsidiary’s products or services or Andover’s or any
Andover Subsidiary’s freedom to compete in any line of
business; (vi) any joint venture or similar arrangement;
(vii) any restriction or limitation on the ability of Andover
or any Andover Subsidiary to pay dividends or make any other
distributions or to repurchase, redeem, or otherwise acquire any of
its equity securities; or (viii) indemnification by Andover or
any Andover Subsidiary of any other person or entity (except as may
be provided in the Transaction Documents) (each, an “
Andover Material Contract ”). Andover has
delivered or made available to CDIP and MSMT true and complete
copies of each Andover Material Contract. Each Andover Material
Contract is in full force and effect and is binding and enforceable
against the parties thereto in accordance with its terms, and
Andover and each Andover Subsidiary, as the case may be, has
performed in all material respects all obligations required to be
performed by it under each Andover Material Contract, and no
condition exists or events have occurred that, with or without the
passage of time or giving of notice, would constitute a default by
Andover or any Andover Subsidiary, as the case may be, under any
Andover Material Contract.
(z) Disclosure Documents; Andover
Information . The information relating to Andover and each
Andover Subsidiary provided to MSMT for use in the Registration
Statement will not, on the date the Registration Statement is filed
with the SEC, at any time it is amended or supplemented, or at the
time it becomes effective under the Securities Act, contain any
untrue statement of any material fact, or omit to state any
material fact required to be stated therein or necessary in order
to make the statements therein not false or misleading at the time
and in light of the circumstances under which such statement is
made. The information relating to Andover and each Andover
Subsidiary provided to MSMT for use in the Information Statement
will not,
-20-
on the date the Information Statement is first
mailed to MSMT’s stockholders or at the time of the MSMT
Stockholders’ Meeting, contain any untrue statement of any
material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein
not false or misleading at the time and in light of the
circumstances under which such statement is made. Notwithstanding
the foregoing, no representation is made by Andover with respect to
the information that has been or will be supplied by CDIP or MSMT
or their respective subsidiaries or their representatives for
inclusion in the Registration Statement or the Information
Statement.
2.2. Representations and
Warranties of CDIP . Except as set forth under the
corresponding section of the disclosure schedules delivered to each
of Andover and MSMT concurrently herewith (the “ CDIP
Disclosure Schedules ”) which CDIP Disclosure
Schedules shall be deemed a part hereof and to qualify any
representation or warranty otherwise made herein to the extent of
such disclosure, CDIP, hereby makes the representations and
warranties set forth below to Andover and MSMT:
(a) Subsidiaries . All of the
direct and indirect subsidiaries of CDIP are set forth on
Schedule 1.1(a)(i) . Except as set forth on Schedule
1.1(a)(i) , CDIP owns, directly or indirectly, all of the
capital stock or other equity interests of each CDIP Subsidiary
free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each CDIP Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities.
(b) Organization and
Qualification . Except as set forth on Schedule 2.2(b) ,
CDIP and each CDIP Subsidiary is duly incorporated or otherwise
organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization (as
applicable), with the requisite corporate power and authority to
own and use its properties and assets and to carry on its business
as currently conducted. Neither CDIP nor any CDIP Subsidiary is in
violation or default of any of the provisions of its certificate or
articles of incorporation, bylaws or other organizational or
charter documents. Each of CDIP and each CDIP Subsidiary is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have
or reasonably be expected to result in a Material Adverse Effect
and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
(c) Authorization;
Enforcement . CDIP has the requisite corporate power and
authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder. The execution
and delivery of each of the Transaction Documents by CDIP and the
consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part
of CDIP and no further action is required by CDIP, its Board of
Directors or its stockholders in connection therewith other than in
connection with the CDIP Required Approvals (as defined in
Section 2.2(e) hereof). Each Transaction Document has been (or
upon delivery will have been) duly executed by CDIP and, when
delivered in accordance with the
-21-
terms hereof and thereof, will constitute the
valid and binding obligation of CDIP enforceable against CDIP in
accordance with its terms except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies
and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(d) No Conflicts . The
execution, delivery and performance of the Transaction Documents by
CDIP and the consummation by CDIP of the other transactions
contemplated hereby and thereby do not and will not:
(i) conflict with or violate any provision of CDIP’s or
any CDIP Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents
or (ii) subject to the CDIP Required Approvals, conflict with,
or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation
of any Lien upon any of the properties or assets of CDIP or any
CDIP Subsidiary, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or
other instrument or other understanding to which CDIP or any CDIP
Subsidiary is a party or by which any property or asset of CDIP or
any CDIP Subsidiary is bound or affected, or (iii) subject to
the CDIP Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or Governmental Authority to
which CDIP or a CDIP Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or
asset of CDIP or a CDIP Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not
have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and
Approvals . Neither CDIP nor any CDIP Subsidiary is required to
obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or
other federal, state, local or other Governmental Authority or
other Person in connection with the execution, delivery and
performance by CDIP of the Transaction Documents, other than the
delivery of the notices and the receipt of the approvals set forth
on Schedule 2.2(e) (collectively, the “ CDIP
Required Approvals ”).
(f) Capitalization . The
capitalization of CDIP is as set forth on Schedule 2.2(f) .
Except as set forth on Schedule 2.2(f) , no Person has any
right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as set forth on
Schedule 2.2(f) , there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares
of CDIP Common Stock, or contracts, commitments, understandings or
arrangements by which CDIP or any CDIP Subsidiary is or may become
bound to issue additional shares of CDIP Common Stock or Common
Stock Equivalents. All of the outstanding shares of capital stock
of CDIP are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws,
and none of such outstanding shares was issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. Except as set forth on Schedule 2.2(f) , there
are no stockholders agreements, voting agreements or other similar
agreements with
-22-
respect to CDIP’s capital stock to which
CDIP is a party or, to the knowledge of CDIP, between or among any
of CDIP’s stockholders.
(g) Financial Statements .
CDIP has delivered to Andover and MSMT: (a) an audited balance
sheet of CDIP as at October 31, 2007 (the “ CDIP
Balance Sheet ”), and the related audited statements
of income, changes in stockholders’ equity and cash flows for
the two fiscal years then ended, including in each case the notes
thereto, together with the report thereon of KBL, LLP, CPA,
independent certified public accountants for CDIP for the fiscal
year ended October 31, 2007; (b) an audited balance sheet
of CDIP as at October 31, 2006, and the related audited
statements of income, changes in stockholders’ equity and
cash flows for the two fiscal years then ended, including in each
case the notes thereto, together with the report thereon of Wheeler
Herman Hopkins & Lagor, CPA, independent certified public
accountants for CDIP for the fiscal year ended October 31,
2007; (c) an audited balance sheet of Diabetic Plus, Inc. as
at October 31, 2007, and the related audited statements of
income, changes in stockholders’ equity and cash flows for
the two fiscal years then ended, including in each case the notes
thereto, together with the report thereon of KBL, LLP, CPA,
independent certified public accountants for Diabetic Plus, Inc.
for the fiscal year ended October 31, 2007; and (d) an
unaudited balance sheet of CDIP as at April 30, 2008 (the
“ CDIP Interim Balance Sheet ”) and the
related unaudited statements of income, changes in
stockholders’ equity and cash flows for the six months then
ended including in each case the notes thereto. Such financial
statements fairly present the financial condition and the results
of operations, changes in stockholders’ equity and cash flows
of CDIP as at the respective dates of and for the periods referred
to in such financial statements, all in accordance with GAAP. The
financial statements referred to in this Section 2.2(g)
reflect and will reflect the consistent application of such
accounting principles throughout the periods involved, except as
disclosed in the notes to such financial statements. Except as set
forth on Schedule 2.2(g) , CDIP has no Liability except for
Liabilities reflected or reserved against in the CDIP Balance Sheet
or the CDIP Interim Balance Sheet and current liabilities incurred
in the ordinary course of business of CDIP since the date of the
CDIP Interim Balance Sheet.
(h) Material Changes . Since
the date of the CDIP Interim Balance Sheet, except as specifically
disclosed on Schedule 2.2(h) : (i) there has been no
event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect;
(ii) none of CDIP or the CDIP Subsidiaries has incurred any
material liabilities (contingent or otherwise) other than
(A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in CDIP’s
consolidated financial statements pursuant to GAAP; (iii) CDIP
has not materially altered its method of accounting, (iv) CDIP
has not declared or made any dividend or distribution of cash or
other property to its stockholders or purchased, redeemed or made
any agreements to purchase or redeem any shares of its capital
stock and (v) CDIP has not issued any equity securities to any
officer, director or Affiliate of CDIP or any CDIP
Subsidiary.
(i) Litigation . Except as
set forth on Schedule 2.2(i) , there is no Action pending
or, to the knowledge of CDIP, threatened against or affecting CDIP,
any CDIP Subsidiary or any of their respective properties before or
by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign)
which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or
(ii) could, if there were an unfavorable decision, have or
reasonably be expected
-23-
to result in a Material Adverse Effect. Neither
CDIP nor any CDIP Subsidiary, nor, to the knowledge of CDIP, any
director or officer thereof, is or has been the subject of any
Action involving a claim of violation of or liability under federal
or state securities laws or a claim of breach of fiduciary
duty.
(j) Labor Relations . No
material labor dispute exists or, to the knowledge of CDIP, is
imminent with respect to any of the employees of CDIP or any CDIP
Subsidiary which could be reasonably be expected to result in a
Material Adverse Effect. None of CDIP or CDIP Subsidiaries’
employees is a member of a union that relates to such
employee’s relationship with CDIP or any CDIP Subsidiary, as
the case may be, and neither CDIP nor any CDIP Subsidiary is a
party to a collective bargaining agreement, and CDIP believes that
its and each CDIP Subsidiaries’ relationships with their
respective employees are good. No employee of CDIP or any CDIP
Subsidiary, including their respective executive officers, to the
knowledge of CDIP, is, or is now expected to be, in violation of
any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant, and, to the knowledge of CDIP, the continued employment
of each such executive officer does not subject CDIP or any CDIP
Subsidiary to any liability with respect to any of the foregoing
matters. To the knowledge of CDIP, CDIP and CDIP Subsidiaries are
in compliance with all U.S. federal, state, local and foreign laws
and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except
where the failure to be in compliance could not, individually or in
the aggregate, have a Material Adverse Effect.
(k) Compliance . Neither CDIP
nor any CDIP Subsidiary (i) is in material default under or in
violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by CDIP or any subsidiary under), nor has CDIP or any CDIP
Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental
body, or (iii) to the knowledge of CDIP, is or has been in
violation of any statute, rule or regulation of any Governmental
Authority, including without limitation all foreign, federal, state
and local laws applicable to its business and all such laws that
affect the environment, except in each case as could not to result
in a Material Adverse Effect.
(l) Regulatory Permits . CDIP
and each CDIP Subsidiary possess all Material Permits, except where
the failure to possess such permits could not have or reasonably be
expected to result in a Material Adverse Effect, and neither CDIP
nor any CDIP Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material
Permit.
(m) Title to Assets . CDIP
and each CDIP Subsidiary have good and marketable title in fee
simple to all real property owned by them that is material to the
business of CDIP and each CDIP Subsidiary and good and marketable
title to all personal property owned by them that is material to
the business of CDIP and the CDIP Subsidiaries, in each case free
and clear of all Liens, except for Liens for the payment of
federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties and Liens set forth on
Schedule 2.2(m) . Any
-24-
real property and facilities held under lease by
CDIP and the CDIP Subsidiaries are held by them under valid,
subsisting and enforceable leases with which CDIP and each CDIP
Subsidiary are in compliance.
(n) Patents and Trademarks .
CDIP and each CDIP Subsidiary have, or have rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights
necessary or material for use in connection with their respective
businesses and which the failure to so have could have a Material
Adverse Effect (collectively, the “ CDIP Intellectual
Property Rights ”). Neither CDIP nor any CDIP
Subsidiary has received a notice (written or otherwise) that the
CDIP Intellectual Property Rights used by CDIP or any CDIP
Subsidiary violates or infringes upon the rights of any Person
unless such notice has been resolved without a Material Adverse
Effect. To the knowledge of CDIP, all such CDIP Intellectual
Property Rights are enforceable and there is no existing
infringement by another Person of any of the CDIP Intellectual
Property Rights. CDIP and each CDIP Subsidiary have taken all
security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties, except where failure to do
so could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(o) Insurance . CDIP and each
CDIP Subsidiary are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which CDIP and each
CDIP Subsidiary are engaged. Neither CDIP nor any CDIP Subsidiary
have any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in
cost.
(p) Transactions With Affiliates
and Employees . Except as set forth in Schedule 2.2(p) ,
none of the officers, directors or other Affiliates of CDIP or any
CDIP Subsidiary, and, to the knowledge of CDIP, none of the
employees of CDIP or any CDIP Subsidiary is presently a party to
any transaction with CDIP or any CDIP Subsidiary (other than for
services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
CDIP, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee or partner, in each case in excess of $60,000 other than
(i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf
of CDIP and (iii) for other employee benefits, including stock
option or stock grant agreements under any stock option plan of
CDIP or any CDIP Subsidiary.
(q) Internal Controls . CDIP
maintains books and records reflecting its assets and Liabilities
and maintains internal accounting controls that CDIP reasonably
believes provide reasonable assurance that (i) transactions
are executed with management’s authorization;
(ii) transactions are recorded as necessary to permit
preparation of the consolidated financial statements of CDIP in
accordance with GAAP and to maintain accountability for
CDIP’s consolidated assets; (iii) access to CDIP’s
assets is permitted only in accordance with
-25-
management’s authorization; (iv) the
identification of CDIP’s assets is compared with existing
assets as necessary to permit preparation of the consolidated
financial statements of CDIP in accordance with GAAP and to
maintain accountability for CDIP’s consolidated assets;
(v) accounts, notes and other receivables and inventory are
recorded accurately, and adequate procedures are implemented to
effect the collection thereof on a timely basis; and
(vi) there are adequate procedures in place regarding
prevention or timely detection of unauthorized acquisition, use or
disposition of CDIP’s assets. As of the date of this
Agreement, to CDIP’s knowledge, (x) there are no
significant deficiencies in the design or operation of CDIP’s
internal controls over financial reporting that could reasonably be
expected to adversely affect in any material respect CDIP’s
ability to record, process, summarize and report financial data or
material weaknesses in internal controls over financial reporting
and (y) there has been no fraud, whether or not material, that
involved management or other employees of CDIP who have a
significant role in CDIP’s internal controls over financial
reporting.
(r) Certain Fees . Except as
set forth on Schedule 2.2(r) , no brokerage or
finder’s fees or commissions are or will be payable by CDIP
or any CDIP Subsidiary to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. Neither Andover nor MSMT shall have any
obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type
contemplated in this Section 2.2(r) that may be due in
connection with the transactions contemplated by the Transaction
Documents.
(s) Registration Rights .
Except as set forth on Schedule 2.2(s) , no Person has any
right to cause CDIP or any CDIP Subsidiary to effect the
registration under the Securities Act of any securities of CDIP or
any CDIP Subsidiary.
(t) Intentionally Omitted
.
(u) Tax Status . CDIP has
timely filed all Tax Returns required by law to be filed with or
supplied to any taxing authority with respect to the Taxes owed by
CDIP and the CDIP Subsidiaries. All such Tax Returns are true,
correct and complete in all material respects. All Taxes due and
payable by CDIP and all CDIP Subsidiaries on or before the Closing
Date have been paid or will be paid prior to the time they become
delinquent. All Taxes that CDIP or and CDIP Subsidiary is or was
required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
governmental entity. CDIP has not been advised (i) that any of
the Tax Returns have been or are being examined or audited as of
the Effective Date, (ii) that any such examination or audit is
currently threatened or contemplated, or (iii) of any
deficiency in assessment or proposed judgment with respect to its
or the CDIP Subsidiaries’ Taxes. CDIP has no knowledge of any
liability for any Taxes to be imposed upon its or the CDIP
Subsidiaries’ respective properties or assets as of the date
of this Agreement that are not adequately provided for on the CDIP
Balance Sheet. CDIP has delivered or made available to Andover and
MSMT true and complete copies of all federal and state income Tax
Returns, examination reports, and statements of deficiencies filed
by, assessed against or agreed to by CDIP or any of the CDIP
Subsidiaries in the past three years. Except as set forth on
Schedule 2.2(u) , CDIP has never been a member of a
consolidated or affiliated group of corporations filing a
consolidated or combined income Tax Return, nor does CDIP or
any
-26-
CDIP Subsidiary have any liability for Taxes of
any other Person or entity. Neither CDIP nor any CDIP Subsidiary is
a party to any tax allocation or sharing arrangement or tax
indemnity agreement.
(v) Foreign Corrupt Practices
. Neither CDIP, nor to the knowledge of CDIP, any agent or other
person acting on behalf of CDIP or any CDIP Subsidiary, has
(i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made
any unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by CDIP or any CDIP Subsidiary (or made by
any person acting on its behalf of which CDIP is aware) which is in
violation of law, or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as
amended.
(w) Auditors . CDIP’s
auditors for its two most recent fiscal years and present fiscal
year are set forth on Schedule 2.2(w) . Each auditor on
Schedule 2.2(w) is a registered public accounting firm as
required by the Exchange Act and the rules and regulations of the
SEC.
(x) Disclosure . All
disclosure furnished by or on behalf of CDIP to Andover and MSMT
regarding CDIP, each CDIP Subsidiary, their respective businesses
and the transactions contemplated hereby, including the CDIP
Disclosure Schedules, with respect to the representations and
warranties made herein are and will be true and correct with
respect to such representations and warranties as of the Effective
Date and as of the Closing Date and do not and will not contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
(y) Material Contracts .
Schedule 2.2(y) sets forth a true and complete list of all
agreements, understandings, instruments, and contracts, proposed
transactions (including a description of those currently being
negotiated), judgments, orders, writs, or decrees to which CDIP or
any CDIP Subsidiary is a party or, to its knowledge, by which it is
bound that may involve: (i) the sale of CDIP’s or any
CDIP Subsidiary’s products or services to any customer,
vendor, or provider (other than such contracts entered into in the
ordinary course of business); (ii) obligations (contingent or
otherwise) of, or payments to, CDIP or any CDIP Subsidiary in
excess of $50,000; (iii) the license of any proprietary rights
to or from CDIP or any CDIP Subsidiary (other than licenses arising
from the purchase of “off the shelf” or other standard
products); (iv) the development, administration, or
distribution of CDIP’s and any CDIP Subsidiary’s
products or services, including without limitation, any that
involve any brokers or dealers; (v) provisions restricting or
affecting the development, manufacture, or distribution of
CDIP’s or any CDIP Subsidiary’s products or services or
CDIP’s or any CDIP Subsidiary’s freedom to compete in
any line of business; (vi) any joint venture or similar
arrangement; (vii) any restriction or limitation on the
ability of CDIP or any CDIP Subsidiary to pay dividends or make any
other distributions or to repurchase, redeem, or otherwise acquire
any of its equity securities; or (viii) indemnification by
CDIP or any CDIP Subsidiary of any other person or entity (except
as may be provided in the Transaction Documents) (each, a “
CDIP Material Contract ”). CDIP has delivered
or made available to Andover and MSMT true and complete
-27-
copies of each Material Contract. Each Material
Contract is in full force and effect and is binding and enforceable
against the parties thereto in accordance with its terms, and CDIP
and each CDIP Subsidiary, as the case may be, has performed in all
material respects all obligations required to be performed by it
under each Material Contract, and no condition exists or events
have occurred that, with or without the passage of time or giving
of notice, would constitute a default by CDIP or any CDIP
Subsidiary, as the case may be, under any CDIP Material
Contract.
(z) Disclosure Documents; CDIP
Information . The information relating to CDIP and each CDIP
Subsidiary to be contained in the Registration Statement will not,
on the date the Registration Statement is filed with the SEC, at
any time it is amended or supplemented, or at the time it becomes
effective under the Securities Act, contain any untrue statement of
any material fact, or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein not false or misleading at the time and in light of the
circumstances under which such statement is made. The information
relating to CDIP and each CDIP Subsidiary to be contained in the
Information Statement will not, on the date the Information
Statement is first mailed to MSMT’s stockholders or at the
time of the MSMT’s Stockholders’ Meeting, contain any
untrue statement of any material fact, or omit to state any
material fact required to be stated therein or necessary in order
to make the statements therein not false or misleading at the time
and in light of the circumstances under which such statement is
made. The Information Statement will comply in all material
respects as to form with the requirements of the Exchange Act and
the rules and regulations thereunder. Notwithstanding the
foregoing, no representation is made by CDIP with respect to the
information that has been or will be supplied by Andover or MSMT or
their respective subsidiaries or their representatives for
inclusion in the Registration Statement or the Information
Statement.
2.3. Representations and
Warranties of MSMT . Except as set forth under the
corresponding section of the disclosure schedules delivered to each
of Andover and CDIP concurrently herewith (the “ MSMT
Disclosure Schedules ”) or as otherwise disclosed in
the MSMT SEC Reports filed by MSMT which MSMT Disclosure Schedules
and MSMT SEC Reports shall be deemed a part hereof and to qualify
any representation or warranty otherwise made herein to the extent
of such disclosure, MSMT, hereby makes the representations and
warranties set forth below to Andover and CDIP:
(a) Subsidiaries . All of the
direct and indirect subsidiaries of MSMT are set forth on
Schedule 2.3(a) (each, an “ MSMT
Subsidiary ” and collectively, the “ MSMT
Subsidiaries ”). Except as set forth on Schedule
2.3(a) , MSMT owns, directly or indirectly, all of the capital
stock or other equity interests of each MSMT Subsidiary free and
clear of any Liens, and all the issued and outstanding shares of
capital stock of each MSMT Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities.
(b) Organization and
Qualification . Except as set forth on Schedule 2.3(b) ,
MSMT and each MSMT Subsidiary is duly incorporated or otherwise
organized, validly existing and in good standing under the laws of
the jurisdiction of incorporation or organization (as applicable),
with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither MSMT nor any MSMT Subsidiary is in violation or
default of any of the provisions of its certificate or articles
of
-28-
incorporation, bylaws or other organizational or
charter documents. Each of MSMT and each MSMT Subsidiary is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have
or reasonably be expected to result in a Material Adverse Effect
and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
(c) Authorization;
Enforcement . Except as set forth on Schedule 2.3(c) ,
MSMT has the requisite corporate power and authority to enter into
and to consummate the transactions contemplated by each of the
Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by MSMT and the consummation by it of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of MSMT and no further
action is required by MSMT, its Board of Directors or its
stockholders in connection therewith other than in connection with
the MSMT Required Approvals (as defined in Section 2.3(e)
hereof). Each Transaction Document has been (or upon delivery will
have been) duly executed by MSMT and, when delivered in accordance
with the terms hereof and thereof, will constitute the valid and
binding obligation of MSMT enforceable against MSMT in accordance
with its terms except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions
may be limited by applicable law.
(d) No Conflicts . Except as
set forth on Schedule 2.3(d) , The execution, delivery and
performance of the Transaction Documents by MSMT and the
consummation by MSMT of the other transactions contemplated hereby
and thereby do not and will not: (i) conflict with or violate
any provision of MSMT’s or any MSMT Subsidiary’s
certificate or articles of incorporation, bylaws or other
organizational or charter documents or (ii) subject to the
MSMT Required Approvals, conflict with, or constitute a default (or
an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the
properties or assets of MSMT or any MSMT Subsidiary, or give to
others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument or other
understanding to which MSMT or any MSMT Subsidiary is a party or by
which any property or asset of MSMT or any MSMT Subsidiary is bound
or affected, or (iii) subject to the MSMT Required Approvals,
conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court or Governmental Authority to which MSMT or
a MSMT Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of MSMT or a MSMT Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not have
or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and
Approvals . Neither MSMT nor any MSMT Subsidiary is not
required to obtain any consent, waiver, authorization or order of,
give any
-29-
notice to, or make any filing or registration
with, any court or other federal, state, local or other
Governmental Authority or other Person in connection with the
execution, delivery and performance by MSMT of the Transaction
Documents, other than (i) the filing with the SEC of the
Registration Statement and the Information Statement, (ii) any
filings as are required to be made under applicable state
securities laws; and (iii) than the delivery of the notices
and the receipt of the approvals set forth on Schedule
2.3(e) (collectively, the “ MSMT Required
Approvals ”).
(f) Capitalization . The
capitalization of MSMT is as set forth on Schedule 2.3(f) .
Except as set forth on Schedule 2.3(f) , MSMT has not issued
any capital stock since its most recently filed periodic report
under the Exchange Act. Except as set forth on Schedule
2.3(f) , no Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.
Except as a result of the issuance of the MSMT Securities as
contemplated by this Agreement or as set forth on Schedule
2.3(f) , there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of MSMT
Common Stock, or contracts, commitments, understandings or
arrangements by which MSMT or any MSMT Subsidiary is or may become
bound to issue additional shares of MSMT Common Stock or Common
Stock Equivalents. All of the outstanding shares of capital stock
of MSMT are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws,
and none of such outstanding shares was issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. Upon the filing and effectiveness of the MSMT Charter
Amendment, the MSMT Common Stock (inclusive of the Escrow Shares)
and MSMT Preferred Stock, when issued in compliance with the
provisions of this Agreement, and the MSMT Common Stock, when
issued in compliance with the provisions of the MSMT Preferred
Stock, Assumed Options or Assumed Warrants, will have been in all
such cases duly authorized and validly issued, will be fully paid
and nonassessable, will have been issued in compliance with all
applicable laws concerning the issuance of securities, and will be
free and clear of any encumbrances (except any restrictions on
transfer under applicable securities laws). At the Closing, the
MSMT Common Stock issuable upon conversion of the MSMT Preferred
Stock and upon exercise of the Assumed Options and Assumed Warrants
will be duly and validly reserved for issuance. Except as set forth
on Schedule 2.3(f) , there are no stockholders agreements,
voting agreements or other similar agreements with respect to
MSMT’s capital stock to which MSMT is a party or, to the
knowledge of MSMT, between or among any of MSMT’s
stockholders.
(g) SEC Reports; Financial
Statements . Except as set forth on Schedule 2.3(g) ,
MSMT has filed all reports, schedules, forms, statements and other
documents required to be filed by it under the Securities Act and
the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for two years preceding the Effective Date (the foregoing
materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to
herein as the “ MSMT SEC Reports ”) on a
timely basis or has received a valid extension of such time of
filing and has filed any such MSMT SEC Reports prior to the
expiration of any such extension. As of their respective dates,
each MSMT SEC Report (i) was prepared in accordance and
complied in all material respects with the requirements of the
Securities Act or the Exchange
-30-
Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such MSMT SEC
Reports, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior the date of this Agreement
then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. None of the MSMT Subsidiaries are required to
file any forms, reports or other documents with the SEC. The
consolidated financial statements of MSMT and the MSMT Subsidiaries
included in the MSMT SEC Reports complied in all material respects
with applicable accounting requirements and the rules and
regulations of the SEC with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in
accordance with GAAP, except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the consolidated
financial position of MSMT and the MSMT Subsidiaries as of and for
the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit
adjustments.
(h) Material Changes . Since
the date of the latest audited annual consolidated financial
statements included within the MSMT SEC Reports, except as
specifically disclosed in any subsequent MSMT SEC Report:
(i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a
Material Adverse Effect; (ii) none of MSMT or the MSMT
Subsidiaries has incurred any material liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in
MSMT’s consolidated financial statements pursuant to GAAP or
disclosed in filings made with the SEC; (iii) MSMT has not
materially altered its method of accounting; (iv) MSMT has not
declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock
and (v) MSMT has not issued any equity securities to any
officer, director or Affiliate of MSMT or any MSMT Subsidiary. MSMT
does not have pending before the SEC and has not been granted by
the SEC any request for confidential treatment of information,
other than as set forth on Schedule 2.3(h) . Except as set
forth on Schedule 2.3(h) , no event, liability or
development has occurred or exists with respect to MSMT or any MSMT
Subsidiary or their respective business, properties, operations or
financial condition, that is required to be disclosed by MSMT under
the Exchange Act.
(i) Litigation . Except as
set forth on Schedule 2.3(i) , there is no Action pending
or, to the knowledge of MSMT, threatened against or affecting MSMT,
any MSMT Subsidiary or any of their respective properties before or
by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign)
which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or
(ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect.
Neither MSMT nor any MSMT Subsidiary, nor, to the knowledge of
MSMT, any director or officer thereof, is or has been the subject
of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary
duty. There has not been, and to the knowledge of MSMT, there is
not pending or contemplated, any investigation by the SEC involving
MSMT or any current or, to
-31-
the knowledge of MSMT, former director or
officer of MSMT. The SEC has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by MSMT under the Securities Act.
(j) Labor Relations . Except
as set forth on Schedule 2.3(j) , no material labor dispute
exists or, to the knowledge of MSMT, is imminent with respect to
any of the employees of MSMT or any MSMT Subsidiary which could be
reasonably expected to result in a Material Adverse Effect. None of
MSMT’s or the MSMT Subsidiaries’ employees is a member
of a union that relates to such employee’s relationship with
MSMT or any MSMT Subsidiary, as the case may be, and neither MSMT
or any MSMT Subsidiary is a party to a collective bargaining
agreement, and MSMT believes that its and the MSMT
Subsidiaries’ relationships with their respective employees
are good. No employee of MSMT or any MSMT Subsidiary, including
their respective executive officers, to the knowledge of MSMT, is,
or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary
information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant, and, to the
knowledge of MSMT, the continued employment of each such executive
officer does not subject MSMT or any MSMT Subsidiary to any
liability with respect to any of the foregoing matters. To the
knowledge of MSMT, MSMT and the MSMT Subsidiaries are in compliance
with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, have a Material Adverse Effect.
(k) Compliance . Except as
set forth on Schedule 2.3(k) , neither MSMT nor any MSMT
Subsidiary (i) is in material default under or in violation of
(and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by MSMT
or any MSMT Subsidiary under), nor has MSMT or any MSMT Subsidiary
received notice of a claim that it is in default under or that it
is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order
of any court, arbitrator or governmental body, or (iii) to the
knowledge of MSMT, is or has been in violation of any statute, rule
or regulation of any Governmental Authority, including without
limitation all foreign, federal, state and local laws applicable to
its business and all such laws that affect the environment, except
in each case as could not have or reasonably be expected to result
in a Material Adverse Effect.
(l) Regulatory Permits .
Except as set forth on Schedule 2.3(l) , MSMT and each MSMT
Subsidiary possess all Material Permits, except where the failure
to possess such permits could not have or reasonably be expected to
result in a Material Adverse Effect, and neither MSMT nor any MSMT
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(m) Title to Assets . MSMT
and each MSMT Subsidiary have good and marketable title in fee
simple to all real property owned by them that is material to the
business of MSMT and each MSMT Subsidiary and good and marketable
title in all personal property owned by them that is material to
the business of MSMT and the MSMT Subsidiaries, in each case free
and clear of all Liens, except for Liens for the payment of
federal, state or other taxes,
-32-
the payment of which is neither delinquent nor
subject to penalties and Liens set forth on Schedule 2.3(m)
. Any real property and facilities held under lease by MSMT and the
MSMT Subsidiaries are held by them under valid, subsisting and
enforceable leases with which MSMT and the MSMT Subsidiaries are in
compliance.
(n) Patents and Trademarks .
Except as set forth on Schedule 2.3(n) , MSMT and each MSMT
Subsidiary have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks,
trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses as
described in the MSMT SEC Reports and which the failure to so have
could have a Material Adverse Effect (collectively, the “
MSMT Intellectual Property Rights ”). Neither
MSMT nor any MSMT Subsidiary has received a notice (written or
otherwise) that the MSMT Intellectual Property Rights used by MSMT
or any MSMT Subsidiary violates or infringes upon the rights of any
Person unless such notice has been resolved without a Material
Adverse Effect. To the knowledge of MSMT, all such MSMT
Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the MSMT
Intellectual Property Rights. MSMT and each MSMT Subsidiary have
taken all security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties, except where
failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
Effect.
(o) Insurance . Except as set
forth on Schedule 2.3(o) , MSMT and each MSMT Subsidiary are
insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and
customary in the businesses in which MSMT and each MSMT Subsidiary
are engaged. Neither MSMT nor any MSMT Subsidiary have any reason
to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.
(p) Transactions With Affiliates
and Employees . Except as set forth in Schedule 2.3(p) ,
none of the officers, directors or other Affiliates of MSMT or any
MSMT Subsidiary, and, to the knowledge of MSMT, none of the
employees of MSMT or any MSMT Subsidiary is presently a party to
any transaction with MSMT or any MSMT Subsidiary (other than for
services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
MSMT, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee or partner, in each case in excess of $60,000 other than
(i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf
of MSMT and (iii) for other employee benefits, including stock
option agreements under any stock option plan of MSMT or any MSMT
Subsidiary.
(q) Sarbanes-Oxley; Internal
Accounting Controls . MSMT is in material compliance with all
provisions of the Sarbanes-Oxley Act of 2002. Except as set forth
in MSMT’s most recent periodic report filed with the SEC,
MSMT and each MSMT Subsidiary have established and maintain a
system of internal control over financial reporting required
by
-33-
Rule 13a-15(f) or 15d-15(f) of the Exchange Act
regarding the reliability of financial reporting and the
preparation of its consolidated financial statements in accordance
with GAAP. MSMT’s certifying officers evaluated the
effectiveness of MSMT’s internal controls as of the end of
its most recent fiscal year as required by Item 308 or
Item 308T of Regulation S-K and presented the report of such
evaluation in its Annual Report on Form 10-KSB filed with the SEC.
MSMT presented in its most recently filed periodic report under the
Exchange Act the conclusions of its certifying officers about the
effectiveness of the disclosure controls and procedures based on
their evaluations as of the end of the period covered by the report
(the “ MSMT Evaluation Date ”) as
required by Item 307 of Regulation S-K. Except as set forth on
Schedule 2.3(q) , since the MSMT Evaluation Date, there have
been no changes in MSMT’s internal control over financial
reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect,
MSMT’s internal control over financial reporting.
(r) Certain Fees . Except as
set forth on Schedule 2.3(r) , no brokerage or
finder’s fees or commissions are or will be payable by MSMT
or any MSMT Subsidiary to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. Neither Andover nor CDIP shall have any
obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type
contemplated in this section that may be due in connection with the
transactions contemplated by the Transaction Documents.
(s) Registration Rights .
Except as set forth on Schedule 2.3(s) , no Person has any
right to cause MSMT or any MSMT Subsidiary to effect the
registration under the Securities Act of any securities of MSMT or
any MSMT Subsidiary.
(t) Listing and Maintenance
Requirements . MSMT is obligated to file periodic reports under
the Exchange Act pursuant to Section 13(a) or 15(d) of the
Exchange Act. The MSMT Common Stock is registered pursuant to
Section 12(g) of the Exchange Act, and MSMT has not taken any
action designed to, or which to its knowledge is likely to have the
effect of, terminating such reporting obligation under the Exchange
Act, nor has MSMT received any notification that the SEC is
contemplating terminating such reporting obligation. Except as set
forth on Schedule 2.3(t) , MSMT has not, in the twenty-four
(24) months preceding the Effective Date, received notice from
any Trading Market on which the MSMT Common Stock is or has been
listed or quoted to the effect that MSMT is not in compliance with
the listing or maintenance requirements of such Trading Market.
MSMT is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.
(u) Tax Status . Except as
set forth on Schedule 2.3(u) , MSMT has timely filed all Tax
Returns required by law to be filed with or supplied to any taxing
authority with respect to the Taxes owed by MSMT and the MSMT
Subsidiaries. All such Tax Returns are true, correct and complete
in all material respects. All Taxes due and payable by MSMT and all
MSMT Subsidiaries on or before the Closing Date have been paid or
will be paid prior to the time they become delinquent. All Taxes
that MSMT or any MSMT Subsidiary is or was required by law to
withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper governmental
entity. MSMT has not been advised (i) that any of the Tax
Returns have been or are being examined or audited as of the date
hereof, (ii) that
-34-
any such examination or audit is currently
threatened or contemplated, or (iii) of any deficiency in
assessment or proposed judgment with respect to its or the MSMT
Subsidiaries’ Taxes. MSMT has no knowledge of any liability
for any Taxes to be imposed upon its or the MSMT
Subsidiaries’ respective properties or assets as of the date
of this Agreement that are not adequately provided for in the
consolidated financial statements included in the MSMT SEC Reports.
MSMT has delivered or made available to CDIP and Andover true and
complete copies of all federal and state income Tax Returns,
examination reports, and statements of deficiencies filed by,
assessed against or agreed to by MSMT or any MSMT Subsidiary in the
past three years. MSMT has never been a member of a consolidated or
affiliated group of corporations filing a consolidated or combined
income Tax Return, nor does MSMT or any MSMT Subsidiary have any
liability for Taxes of any other person or entity. Neither MSMT nor
any MSMT Subsidiary is a party to any tax allocation or sharing
arrangement or tax indemnity agreement.
(v) Foreign Corrupt Practices
. Except as set forth on Schedule 2.3(v) , Neither MSMT, nor
to the knowledge of MSMT, any agent or other person acting on
behalf of MSMT or any MSMT Subsidiary, has (i) directly or
indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or
domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by
MSMT or any MSMT Subsidiary (or made by any person acting on its
behalf of which MSMT is aware) which is in violation of law, or
(iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.
(w) Auditors . MSMT’s
auditors for the fiscal years ended December 31, 2006 and 2007
and ending December 31, 2008 are set forth on Schedule
2.3(w) . To the knowledge of MSMT, each auditor on Schedule
2.3(w) is a registered public accounting firm as required by
the Exchange Act and the rules and regulations of the
SEC.
(x) Disclosure . Except as
set forth on Schedule 2.3(x) , All disclosure furnished by
or on behalf of MSMT to Andover and CDIP regarding MSMT, each MSMT
Subsidiary, their respective businesses and the transactions
contemplated hereby, including the MSMT Disclosure Schedules, with
respect to the representations and warranties made herein are and
will be true and correct with respect to such representations and
warranties as of the Effective Date and will be true and correct as
of the Closing Date and do not and will not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not
misleading.
(y) Material Contracts .
Schedule 2.3(y) sets forth a true and complete list of all
agreements, understandings, instruments, and contracts, proposed
transactions (including a description of those currently being
negotiated), judgments, orders, writs, or decrees to which MSMT or
any MSMT Subsidiary is a party or, to its knowledge, by which it is
bound that may involve: (i) the sale of MSMT’s or any
MSMT Subsidiary’s products or services to any customer,
vendor, or provider (other than such contracts entered into in the
ordinary course of business); (ii) obligations (contingent or
otherwise) of, or payments to, MSMT or any MSMT
-35-
Subsidiary in excess of $50,000; (iii) the
license of any proprietary rights to or from MSMT or any MSMT
Subsidiary (other than licenses arising from the purchase of
“off the shelf” or other standard products);
(iv) the development, administration, or distribution of
MSMT’s and any MSMT Subsidiary’s products or services,
including without limitation, any that involve any brokers or
dealers; (v) provisions restricting or affecting the
development, manufacture, or distribution of MSMT’s or any
MSMT Subsidiary’s products or services or MSMT’s or any
MSMT Subsidiary’s freedom to compete in any line of business;
(vi) any joint venture or similar arrangement; (vii) any
restriction or limitation on the ability of MSMT or any MSMT
Subsidiary to pay dividends or make any other distributions or to
repurchase, redeem, or otherwise acquire any of its equity
securities; or (viii) indemnification by MSMT or any MSMT
Subsidiary of any other person or entity (except as may be provided
in the Transaction Documents) (each, an “ MSMT Material
Contract ”). Andover has delivered or made available
to CDIP and Andover true and complete copies of each MSMT Material
Contract. Each MSMT Material Contract is in full force and effect
and is binding and enforceable against the parties thereto in
accordance with its terms, and MSMT and each MSMT Subsidiary, as
the case may be, has performed in all material respects all
obligations required to be performed by it under each MSMT Material
Contract, and no condition exists or events have occurred that,
with or without the passage of time or giving of notice, would
constitute a default by MSMT or any MSMT Subsidiary, as the case
may be, under any MSMT Material Contract.
(z) Disclosure Documents; MSMT
Information . Except as set forth on Schedule 2.3(z) ,
the Registration Statement will not, on the date the Registration
Statement is filed with the SEC, at any time it is amended or
supplemented, or at the time it becomes effective under the
Securities Act, contain any untrue statement of any material fact,
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not false or
misleading at the time and in light of the circumstances under
which such statement is made. The Information Statement will not,
on the date the Information Statement is first mailed to
MSMT’s stockholders or at the time of the MSMT
Stockholders’ Meeting, contain any untrue statement of any
material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein
not false or misleading at the time and in light of the
circumstances under which such statement is made. The Information
Statement will comply in all material respects as to form with the
requirements of the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, no representation is
made by MSMT with respect to the information that has been or will
be supplied by Andover or CDIP or their respective subsidiaries or
their representatives for inclusion in the Registration Statement
or the Information Statement.
ARTICLE III
COVENANTS RELATING TO CONDUCT OF
BUSINESS
3.1. Conduct of the Constituent
Companies’ Businesses Pending the Closing Date . During
the period commencing on the Effective Date and ending at the
Closing Date or such earlier date as this Agreement may be
terminated in accordance with its terms (the “
Pre-Closing Period ”), each Constituent Company
agrees (unless required to take such action pursuant to this
Agreement or unless the other parties hereto have given their prior
written consent) to, and to cause each of its respective
subsidiaries to, carry on its business in the usual, regular
and
-36-
ordinary course consistent with past practice,
including with respect to working capital management, pay its
Liabilities and Taxes consistent with its respective past practices
(and in any event when due) unless being contested in good faith by
appropriate proceedings, pay or perform other material obligations
when due consistent with its respective past practice (other than
Liabilities, Taxes and other obligations, if any, contested in good
faith through appropriate proceedings), and use commercially
reasonable efforts to (x) preserve its present business
organization, (y) keep available the services of its present
officers and employees and (z) preserve its relationships with
customers, suppliers, distributors, licensors, licensees,
independent contractors and other persons having business dealings
with it, all with the express purpose and intent of preserving
unimpaired its goodwill and ongoing business. Without limiting the
generality of the foregoing, during the Pre-Closing Period, each
Constituent Company shall not do, cause or permit, and shall cause
its subsidiaries not to do, cause or permit, any of the following
actions, without the prior written consent of the other parties,
except as expressly provided or permitted in or as contemplated by
this Agreement:
(a) (i) declare, set aside or pay
any dividends on, or make any other distributions (whether in cash,
securities or other property) in respect of, any of its capital
stock, (ii) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital
stock or any of its other securities, or (iii) purchase,
redeem or otherwise acquire any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any
shares of its capital stock or any other of its securities or any
rights, warrants or options to acquire any such shares or other
securities other than, in the case of clauses (i) through
(iii) above, as required by law or the terms of such
Constituent Company’s outstanding securities;
(b) (i) authorize for issuance,
issue, deliver or sell or agree or commit to issue or sell (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) or accelerate the
vesting of any stock of any class or any other securities or equity
equivalents other than pursuant to pre-existing terms (including,
without limitation, stock appreciation rights) of such Constituent
Company (other than issuances upon conversion or exercise of
currently outstanding securities), or (ii) enter into any
contract with respect to the foregoing, or (iii) permit any
grants of restricted stock or issuance of similar stock-based
employee rights;
(c) cause, make or permit any change
or amendment to the organizational documents of such Constituent
Company or any of its subsidiaries, or change the authorized
capital stock or equity interests of such Constituent Company or
any of its subsidiaries;
(d) (i) other than with respect to
capitalized leases, incur any Indebtedness or guarantee any
Indebtedness of another Person, (ii) issue, sell or amend any
debt securities or warrants or other rights to acquire any debt
securities of such Constituent Company or any of its subsidiaries,
guarantee any debt securities of another Person, or enter into any
arrangement having the economic effect of any of the foregoing,
(iii) make any loans, advances or capital contributions to, or
investment in, any other Person, other than a direct or indirect
wholly-owned subsidiary of such Constituent Company, other than in
the ordinary course of business consistent with past practice, or
(iv) mortgage, pledge or otherwise encumber any material
assets, or create or suffer any material encumbrance thereupon,
except, in each case, in the ordinary course of
-37-
business consistent with past practice pursuant
to credit facilities in existence on the date hereof (or any
extensions or renewals thereof);
(e) (i) prepay any loans (if any)
from its stockholders, officers or directors or any Person
affiliated with any of the foregoing, (ii) amend its borrowing
arrangements or (iii) waive, release or assign any material
rights or claims, in each case, other than in the ordinary course
of business consistent with past practice;
(f) materially reduce the amount of
any insurance coverage provided by its existing insurance
policies;
(g) materially change or implement
accounting policies, methods or procedures, except as required by
GAAP or applicable law;
(h) (i) increase the annual or
discretionary amounts of base salary, bonus compensation or any
other form of compensation payable or to become payable to any
officer, employee, agent or consultant of such Constituent Company
or any of its subsidiaries, except in the ordinary course of
business consistent with past practice, or (ii) grant or agree
to grant or accelerate any right to any severance or termination
pay or enter into any contract to make or grant any severance or
termination pay or pay or agree to pay any bonus or other incentive
compensation to any officer or employee, except in the ordinary
course of business consistent with past practice;
(i) enter into, establish, adopt or
amend (except, in each case, (i) as may be required by
applicable laws, or (ii) to satisfy contractual obligations
existing as of the Effective Date, or (iii) in the ordinary
course of business consistent with past practice), any pension,
retirement, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any
trust agreement (or similar arrangement) related thereto, or
communicate any intention to take such foregoing actions, in
respect of any director, officer or employee of such Constituent
Company or any of its subsidiaries;
(j) hire any employee or consultant
with an annual salary in excess of $75,000 except in the ordinary
course of business consistent with past practice;
(k) make any material acquisition or
capital expenditure in excess of $100,000 in the aggregate for such
Constituent Company and its subsidiaries, taken as a whole, other
than in the ordinary course of business consistent with past
practice;
(l) sell, lease, license, pledge or
otherwise dispose of, distribute or encumber any properties or
assets of such Constituent Company or any of its subsidiaries other
than in the ordinary course of business consistent with past
practice;
(m) acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business
organization or division thereof;
-38-
(n) other than in the ordinary
course of business consistent with past practice, enter into,
modify, amend, violate or terminate any Material Contract (as such
term is defined herein or under Item 601(b)(10) of Regulation
S-K of the Exchange Act) or agreement to which such Constituent
Company or any of its subsidiaries is party, or knowingly waive,
release or assign any rights or claims (other than any write-off or
other compromise of any accounts receivable of such Constituent
Company or any of its subsidiaries in accordance with
GAAP);
(o) materially modify or terminate
any Lease, except as set forth in Schedule 3.1(o)
;
(p) acquire or dispose of any real
property, except as set forth in Schedule 3.1(p)
;
(q) settle or compromise any pending
or threatened Action (whether or not commenced prior to the date of
this Agreement) for an amount in excess of $100,000; or
(r) agree, commit to or enter into
any contract or arrangement to take any of the actions referred to
in Section 3.1(a) through Section 3.1(q) above, or
intentionally take any other action that would prevent such
Constituent Company from performing, or cause such Constituent
Company not to perform, any of its covenants and agreements
hereunder.
ARTICLE IV
ADDITIONAL
AGREEMENTS
4.1. Disclosure Documents
.
(a) As promptly as practicable after
the date of this Agreement, MSMT shall prepare and file or cause to
be filed with the SEC (i) an information statement pursuant to
Section 14 of the Exchange Act (the “ Information
Statement ”), relating to the vote of the requisite
MSMT stockholders to consider the adoption and approval of this
Agreement and the amendment and restatement of MSMT’s
articles of incorporation to increase the number of authorized
shares of MSMT Common Stock and to create the MSMT Preferred Stock
(herein, the “ MSMT Charter Amendment ,”
the form of which is attached hereto as Exhibit 4.1
), and (ii) a registration statement on Form S-4 (or other
appropriate form) (the “ Registration Statement
”) registering the MSMT Common Stock and the MSMT Common
Stock underlying the MSMT Preferred Stock and the Assumed Warrants
to be issued to the Target Companies pursuant to this Agreement.
MSMT shall use reasonable best efforts to cause the Registration
Statement and Information Statement, as the case may be, to comply
in all material respects in form and substance with the rules and
regulations promulgated by the SEC and to respond promptly to any
comments of the SEC or its staff with respect to the Registration
Statement and Information Statement, as the case may be. The Target
Companies shall furnish all information concerning themselves and
their subsidiaries, as applicable, as MSMT may reasonably request
in connection with the preparation of the Information Statement and
Registration Statement or which may be required under applicable
law. MSMT shall promptly notify the other parties upon the receipt
of any comments from the SEC or its staff or any request from the
SEC or its staff for amendments or supplements to the Registration
Statement or Information Statement, as
-39-
the case may be, shall consult with the other
parties prior to responding to any such comments or requests or
filing any amendment or supplement to the Registration Statement or
Information Statement, as the case may be, and shall provide the
other parties with copies of all correspondence between such party
and its representatives on the one hand and the SEC and its staff
on the other hand. MSMT shall use reasonable best efforts
(A) to cause the Registration Statement to be declared
effective by the SEC as promptly as reasonably practicable after
the filing thereof; (B) to allow MSMT to file a definitive
Information Statement with the SEC; (C) to obtain any
necessary state securities law or “Blue Sky” permits
and approvals required to carry out the transactions contemplated
by this Agreement; and (D) to cause the Information Statement
to be mailed to the MSMT’s stockholders as promptly as
practicable after the Registration Statement is declared effective
under the Securities Act. Each Constituent Company will promptly
inform MSMT of any material change in the information previously
provided to MSMT pursuant to Section 4.1.
(b) Notwithstanding anything to the
contrary stated above, prior to filing and mailing, as applicable,
the Registration Statement or Information Statement (or any
amendment or supplement thereto) or responding to any comments of
the SEC with respect thereto, MSMT shall provide the Target
Companies a reasonable opportunity to review and comment on such
document or response and shall discuss with the Target Companies
and include in such document or response, comments reasonably and
promptly proposed by either Target Company.
(c) MSMT will advise the Target
Companies, promptly after MSMT receives written notice thereof, of
the time when the Registration Statement has become effective or
any supplement or amendment has been filed, of the issuance of any
stop order or the suspension of the qualification of MSMT Common
Stock for offering or sale in any jurisdiction, of the initiation
or threat of any proceeding for any such purpose, or of any request
by the SEC for the amendment or supplement of the Registration
Statement or for additional information.
4.2. Constituent Companies’
Stockholder Meetings; Board Recommendation .
(a) Andover Stockholders’
Meeting; Board Recommendation .
(i) Promptly after the Registration
Statement is declared effective under the Securities Act, Andover
will take all action necessary in accordance with Delaware law and
its certificate of incorporation and bylaws to call, hold and
convene a meeting of its stockholders to consider the adoption and
approval of this Agreement and the transactions contemplated hereby
(the “ Andover Stockholders’ Meeting
”) to be held as promptly as reasonably practicable, and in
any event (to the extent permissible under applicable law) within
thirty (30) days after the mailing of the proxy statement
relating thereto (the “ Andover Proxy Statement
”) to Andover’s stockholders. Subject to
Section 4.3(d), Andover will use reasonable best efforts to
solicit from its stockholders proxies in favor of the adoption and
approval of this Agreement and the transactions contemplated
hereby, and will take all other action reasonably necessary or
advisable to secure the vote or consent of its stockholders
required by Delaware law to obtain such approvals. Notwithstanding
anything to the contrary contained in this Agreement, Andover may
adjourn or postpone the Andover Stockholders’ Meeting to the
extent necessary to ensure that any necessary supplement or
amendment to the Andover Proxy Statement is provided to its
stockholders in advance of a vote on this Agreement or, if as of
the time for which the
-40-
Andover Stockholders’ Meeting is scheduled
(as set forth in the Andover Proxy Statement) there are
insufficient shares of Andover Common Stock represented (either in
person or by proxy) to constitute a quorum necessary to conduct the
business of the Andover Stockholders’ Meeting. Andover shall
ensure that the Andover Stockholders’ Meeting is called,
noticed, convened, held and conducted, and that all proxies
solicited by it in connection with the Andover Stockholders’
Meeting are solicited in compliance with Delaware law, its
certificate of incorporation and bylaws and all other applicable
legal requirements.
(ii) Except to the extent expressly
permitted by Section 4.3(d): (A) the Board of Directors
of Andover shall recommend that Andover’s stockholders vote
at the Andover Stockholders’ Meeting in favor of the adoption
and approval of this Agreement and the transactions contemplated
hereby; and (B) the Andover Proxy Statement shall include a
statement to the effect that the Board of Directors of Andover has
recommended that Andover’s stockholders vote at the Andover
Stockholders’ Meeting in favor of the adoption and approval
of this Agreement and the transactions contemplated
hereby.
(b) CDIP Stockholders’
Meeting; Board Recommendation .
(i) Promptly after the Registration
Statement is declared effective under the Securities Act, CDIP will
take all action necessary in accordance with Delaware law and its
certificate of incorporation and bylaws to call, hold and convene a
meeting of its stockholders to consider the adoption and approval
of this Agreement and the transactions contemplated hereby (the
“ CDIP Stockholders’ Meeting ”) to
be held as promptly as reasonably practicable, and in any event (to
the extent permissible under applicable law) within thirty
(30) days after the mailing of the proxy statement relating
thereto (the “ CDIP Proxy Statement ”) to
CDIP’s stockholders. Subject to Section 4.3(d), CDIP
will use reasonable efforts to solicit from its stockholders
proxies in favor of the adoption and approval of this Agreement and
the transactions contemplated hereby, and will take all other
action reasonably necessary or advisable to secure the vote or
consent of its stockholders required by Delaware law to obtain such
approvals. Notwithstanding anything to the contrary contained in
this Agreement, CDIP may adjourn or postpone the CDIP
Stockholders’ Meeting to the extent necessary to ensure that
any necessary supplement or amendment to the CDIP Proxy Statement
is provided to its stockholders in advance of a vote on the
adoption and approval of this Agreement and the transactions
contemplated hereby or, if as of the time for which the CDIP
Stockholders’ Meeting is scheduled (as set forth in the CDIP
Proxy Statement) there are insufficient shares of CDIP Common Stock
represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of the CDIP Stockholders’
Meeting. CDIP shall ensure that the CDIP Stockholders’
Meeting is called, noticed, convened, held and conducted, and that
all proxies solicited by it in connection with the CDIP
Stockholders’ Meeting are solicited in compliance with
Delaware law, its certificate of incorporation and bylaws and all
other applicable legal requirements.
(ii) Except to the extent expressly
permitted by Section 4.3(d): (A) the Board of Directors
of CDIP shall recommend that CDIP’s stockholders vote at the
CDIP Stockholders’ Meeting in favor of the adoption and
approval of this Agreement and the transactions contemplated
hereby; and (B) the CDIP Proxy Statement shall include a
statement to the effect that the Board of Directors of CDIP has
recommended that CDIP’s stockholders vote at
-41-
the CDIP Stockholders’ Meeting in favor of
the adoption and approval of this Agreement and the transactions
contemplated hereby.
(c) MSMT Stockholders’
Meeting; Board Recommendation .
(i) Promptly after the Registration
Statement is declared effective under the Securities Act, MSMT will
take all action necessary in accordance with Nevada law and its
articles of incorporation and bylaws to call, hold and convene a
meeting of its stockholders to consider the adoption and approval
of this Agreement and the transactions contemplated hereby (the
“ MSMT Stockholders’ Meeting , ”
collectively with the Andover Stockholders’ Meeting and the
CDIP Stockholders’ Meeting, the “
Stockholders’ Meetings ”) to be held as
promptly as reasonably practicable, and in any event (to the extent
permissible under applicable law) within thirty (30) days
after the mailing of the Information Statement to MSMT’s
stockholders. Subject to Section 4.3(d), MSMT will take all
other action reasonably necessary or advisable to secure the vote
or consent of its stockholders required by Nevada law to obtain
such approvals. Notwithstanding anything to the contrary contained
in this Agreement, MSMT may adjourn or postpone the MSMT
Stockholders’ Meeting to the extent necessary to ensure that
any necessary supplement or amendment to the Information Statement
is provided to its stockholders in advance of a vote on the
adoption and approval this Agreement and the transactions
contemplated hereby or, if as of the time for which the MSMT
Stockholders’ Meeting is scheduled (as set forth in the
Information Statement) there are insufficient shares of MSMT Common
Stock represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of the MSMT
Stockholders’ Meeting. MSMT shall ensure that the MSMT
Stockholders’ Meeting is called, noticed, convened, held and
conducted, and that all proxies solicited by it in connection with
the Stockholders’ Meeting are solicited in compliance with
Nevada law, its articles of incorporation and bylaws and all other
applicable legal requirements.
(ii) Except to the extent expressly
permitted by Section 4.3(d): (A) the Board of Directors
of MSMT shall recommend that MSMT’s stockholders vote at the
MSMT Stockholders’ Meeting in favor of the adoption and
approval of this Agreement and the transactions contemplated
hereby; and (B) the Information Statement shall include a
statement to the effect that the Board of Directors of MSMT has
recommended that MSMT’s stockholders vote at the MSMT
Stockholders’ Meeting in favor of the adoption and approval
of this Agreement and the transactions contemplated
hereby.
(d) Consent of Stockholders in
Lieu of Meeting . Notwithstanding Sections 4.2(a)(i), 4.2(b)(i)
or 4.2(c)(i) and unless otherwise prohibited by a Constituent
Company’s charter documents, bylaws, or applicable law,
nothing contained herein shall preclude the stockholders of any
Constituent Company from adopting and approving this Agreement and
the transactions contemplated hereby without a meeting, without
prior notice and without a vote, at such time as is deemed
appropriate by such Constituent Company, if a consent or consents
in writing shall be signed by holders of the outstanding capital
stock of such Constituent Company having no less than the minimum
number of votes that would be necessary to authorize or take such
action at the applicable stockholders’ meetings at which the
requisite number of shares of capital stock of such Constituent
Company entitled to vote thereat were present and voted.
4.3. Acquisition Proposals
.
-42-
(a) No Solicitation . Each
Constituent Company agrees that none of it, any of its respective
subsidiaries, or any of its or its respective subsidiaries’
officers or directors, shall, and that it shall use all reasonable
efforts to cause its and its Affiliates, subsidiaries, agents and
representatives (including any of its or its subsidiaries’
investment bankers, financial advisors, attorneys, accountants or
other representatives) not to (and shall not authorize or permit
any of them to), directly or indirectly: (i) solicit, initiate
or knowingly induce any inquiry concerning any Acquisition
Proposal; (ii) participate or engage in any discussions or
negotiations regarding, or furnish to any Person other than its
representatives (including any of its or its subsidiaries’
investment bankers, financial advisors, attorneys, accountants or
other representatives) any nonpublic information with respect to,
or take any other action to encourage any inquiries concerning the
making of any proposal that constitutes or would reasonably be
expected to lead to, any Acquisition Proposal; (iii) approve,
endorse, recommend or make or authorize any public statement,
recommendation or solicitation in support of any Acquisition
Proposal; or (iv) execute or enter into, or agree to execute
or enter into, any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise
relating to any Acquisition Proposal or transaction contemplated
thereby, except in the case of clauses (ii), (iii) or
(iv) to the extent specifically permitted pursuant to Sections
4.3(c) or 4.3(d). Each Constituent Company and its respective
subsidiaries will immediately cease and cause to be terminated any
and all existing activities, discussions or negotiations
(including, without limitation, any such activities, discussions or
negotiations conducted by its Affiliates, directors, officers,
employees, agents and representatives (including any of its or its
subsidiaries’ investment bankers, financial advisors,
attorneys, accountants or other representatives) of such
Constituent Company or any of its subsidiaries) with any third
Persons conducted prior to the Effective Date with respect to the
consideration of any Acquisition Proposal. Each Constituent Company
will exercise any rights under any confidentiality or
non-disclosure agreements with any such third parties in connection
with the consideration of any Acquisition Proposal to require the
return or destruction of non-public information provided prior to
the Effective Date by such Constituent Company, its subsidiaries or
their agents and representatives, to any such third
Persons.
(b) Notification of Unsolicited
Acquisition Proposals . As promptly as practicable (and in any
event no later than two (2) Business Days) after receipt of
any Acquisition Proposal, any request for nonpublic information or
inquiry that would reasonably be expected to lead to an Acquisition
Proposal, or any other communication from any Person seeking to
have discussions or negotiations with a Constituent Company
relating to a possible Acquisition Proposal (the Constituent
Company receiving an unsolicited Acquisition Proposal, request or
inquiry or other communication is hereinafter referred to as the
“ Receiving Constituent Company ”), the
Receiving Constituent Company shall provide the other Constituent
Companies with notice of such Acquisition Proposal, request or
inquiry or other communication, including: (i) the material
terms and conditions of such Acquisition Proposal, request or
inquiry or other communication; and (ii) the identity of the
Person or group making any such Acquisition Proposal, request or
inquiry or other communication. The Receiving Constituent Company
shall provide the other Constituent Companies with two
(2) Business Days prior notice (or such lesser prior notice as
is provided to the members of its Board of Directors) of any
meeting of its Board of Directors at which its Board of Directors
is expected to consider any Acquisition Proposal or any such
request or inquiry or other communication to consider providing
nonpublic information to any such Person. The Receiving Constituent
Company shall notify the other Constituent Companies, in writing,
of any decision of its Board of Directors as to
-43-
whether to consider such Acquisition Proposal,
request or inquiry or other communication or to enter into
discussions or negotiations concerning any Acquisition Proposal or
to provide nonpublic information or data to any Person, which
written notice shall be given as promptly as practicable after such
meeting.
(c) Superior Offers .
Notwithstanding anything to the contrary contained in Sections
4.2(a), 4.2(b) or 4.2(c), in the event that any Receiving
Constituent Company receives, prior to the adoption and approval of
this Agreement and the transactions contemplated hereby by the
stockholders of such Receiving Constituent Company in accordance
with applicable law, an unsolicited, bona fide written Acquisition
Proposal from a third Person with respect to which such Receiving
Constituent Company’s Board of Directors has in good faith
concluded, after consultation with its outside legal counsel and
its financial advisor, if any, that such Acquisition Proposal is,
or is reasonably likely to result in, a Superior Offer, such
Receiving Constituent Company may then (i) furnish nonpublic
information to the third Person making such Acquisition Proposal,
and (ii) engage in negotiations with the third Person with
respect to such Acquisition Proposal; provided that:
(A) prior to furnishing any
nonpublic information or entering into any negotiations or
discussions with such third Person, such Receiving Constituent
Company receives from such third Person an executed confidentiality
agreement containing customary limitations on the use and
disclosure of all nonpublic written and oral information furnished
to such third Person on such Receiving Constituent Company’s
behalf; and
(B) the Board of Directors of such
Receiving Constituent Company reasonably determines in good faith,
after consultation with outside legal counsel, that the failure to
provide such information or enter into such discussion or
negotiations would reasonably be expected to result in a breach of
the Board of Directors’ fiduciary duties to the stockholders
of such Receiving Constituent Company under applicable
law.
(d) Change of Recommendation
. Notwithstanding anything to the contrary contained in Sections
4.2(a), 4.2(b) or 4.2(c), in response to the receipt of a Superior
Offer, (i) the Board of Directors of the Receiving Constituent
Company may withhold, withdraw, amend or modify its recommendation
in favor of the adoption and approval of this Agreement and the
transactions contemplated hereby, and, may recommend in favor of a
Superior Offer, and in the case of a Superior Offer that is a
tender or exchange offer made directly to the stockholders of such
Receiving Constituent Company, may recommend that the stockholders
of such Receiving Constituent Company accept the tender or exchange
offer (any of the foregoing actions, whether by the Board of
Directors of such Receiving Constituent Company or a committee
thereof, a “ Change of Recommendation ”),
(ii) such Receiving Constituent Company or its subsidiaries
(including each of their respective directors, officers, employees,
agents or other representatives) may approve, endorse, or recommend
a Superior Offer, or (iii) such Receiving Constituent Company
or any of its subsidiaries may execute or enter into or propose to
execute or enter into any letter of intent or similar document or
any contract, agreement or commitment (which may be conditioned on
the termination of this Agreement) contemplating or otherwise
relating to any Superior Offer or transaction contemplated thereby,
if all of the following conditions in clauses (A) through
(E) are met:
-44-
(A) the Board of Directors of such
Receiving Constituent Company determines in good faith, after
consultation with such Receiving Constituent Company’s
financial advisor, if any, and outside legal counsel, that a
Superior Offer has been made and not withdrawn;
(B) the stockholders of such
Receiving Constituent Company have not previously adopted and
approved this Agreement and the transactions contemplated hereby in
accordance with applicable law;
(C) such Receiving Constituent
Company shall have delivered to the other Constituent Companies
written notice (a “ Change of Recommendation
Notice ”) at least four (4) Business Days prior
to publicly effecting such Change of Recommendation which shall
state expressly (w) that such Receiving Constituent Company
has received a Superior Offer; (x) the most recent terms and
conditions of the Superior Offer and the identity of the Person or
group making the Superior Offer (and in the event such Receiving
Constituent Company exercises its right to terminate this Agreement
pursuant to Section 6.1(c), such Receiving Constituent Company
shall provide to the other Constituent Companies a copy of the
final agreement to be entered into in connection with the Superior
Offer); (y) that such Receiving Constituent Company intends to
effect a Change of Recommendation; and (z) that such Receiving
Constituent Company agrees to reimburse the expenses of the other
Constituent Companies as contemplated under
Section 6.2;
(D) after delivering the Change of
Recommendation Notice, such Receiving Constituent Company shall
provide the other Constituent Companies with a reasonable
opportunity to make such adjustments in the terms and conditions of
this Agreement during such four (4) Business Day period, and
negotiate in good faith with respect thereto during such four
(4) Business Day period, as would enable such Receiving
Constituent Company to proceed with its recommendation to its
stockholders in favor of the adoption and approval of this
Agreement and the transactions contemplated hereby without making a
Change of Recommendation; and
(E) the Board of Directors of such
Receiving Constituent Company shall have determined (x) after
consultation with its financial advisor, if any, that the terms of
the Superior Offer are more favorable to the stockholders of such
Receiving Constituent Company than the terms of this Agreement (as
it may be adjusted pursuant to subsection (D) above), and
(y) after consultation with outside legal counsel, the failure
to effect a Change of Recommendation would reasonably be expected
to result in a breach of the Board of Directors’ fiduciary
duties to the stockholders of such Receiving Constituent Company
under applicable law.
(e) Compliance with Disclosure
Obligations . Nothing contained in this Agreement shall
prohibit each Constituent Company or its respective Board of
Directors from complying with the Securities Act and the Exchange
Act and the rules and regulations promulgated
thereunder.
(f) Obligation to Call, Hold and
Convene Stockholders’ Meetings . Notwithstanding anything
to the contrary contained in this Agreement, the obligation of
any
-45-
Constituent Company to call, give notice of,
convene and hold the Stockholders’ Meetings shall be
terminated upon the commencement, disclosure, announcement or
submission of any Change of Recommendation.
(g) Specific Performance .
The parties hereto agree that irreparable damage would occur in the
event that the provisions of this Section 4.3 were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed by the parties hereto that each
of the Constituent Companies shall be entitled to an immediate
injunction or injunctions, without the necessity of proving the
inadequacy of money damages as a remedy and without the necessity
of posting any bond or other security, to prevent breaches of the
provisions of this Section 4.3 by any other Constituent
Company and to enforce specifically the terms and provisions hereof
in any court of the United States or any state having competent
jurisdiction, this being in addition to any other remedy to which
any Constituent Company may be entitled at law or in equity.
Without limiting the foregoing, it is understood that any violation
of the restrictions set forth above by any officer, director,
agent, representative or Affiliate of a Constituent Company shall
be deemed to be a breach of this Agreement by such Constituent
Company.
4.4. Board of Directors of
MSMT . Immediately following the Closing, the Board of
Directors of MSMT shall in accordance with provisions contained in
MSMT’s articles of incorporation and bylaws, take such action
as necessary to (a) increase the size of the Board of
Directors of MSMT to nine (9) directors and (b) elect
Lowell M. Fisher, Jr. (Chairman of the Board), Shad Stastney,
Christopher D. Phillips, Edwin A. Reilly, one designee of Frank
Magliochetti, two (2) designees of Vicis Capital Master Fund
and two (2) additional members who qualify as
“independent directors” as that term is defined by a
Senior Trading Market and who otherwise shall be reasonably
acceptable to a majority of the other above-named nominees, to
serve as members of its Board of Directors until December 31,
2009 or until their successors are duly qualified, seated and
elected, or until their earlier resignation or removal. Prior to
Closing, MSMT shall prepare the information statement required by
Rule 14f-1 promulgated under the Exchange Act (“ 14f-1
Information Statement ”), and MSMT shall file the
14f-1 Information Statement with the SEC and mail the same to each
of MSMT’s stockholders of record. MSMT will use its
reasonable best efforts to ensure that MSMT’s current
directors will remain as directors of MSMT until the expiration of
the ten (10) day period beginning on the date of the mailing
of the 14f-1 Information Statement.
4.5. Officers of MSMT .
Immediately following the Closing, the Board of Directors of MSMT
shall appoint and elect the individuals set forth on Schedule
4.5 to the corporate offices set forth opposite each persons
name to serve in those capacities until their successors are duly
elected, qualified and seated.
4.6. Third Party Consents and
Regulatory Approvals .
(a) Subject to the terms hereof and
applicable law, each Constituent Company shall use their reasonable
best efforts to:
(i) take, or cause to be taken, all
actions, and do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper,
or
-46-
advisable to consummate and make effective the
transactions contemplated hereby as promptly as
practicable;
(ii) as promptly as practicable,
obtain from any Governmental Authority or any other third party any
consents, licenses, permits, waivers, approvals, authorizations, or
orders required to be obtained or made by such Constituent
Companies or any of their respective subsidiaries in connection
with the authorization, execution, and delivery of this Agreement
and the consummation of the transactions contemplated
hereby;
(iii) as promptly as practicable,
make all necessary filings for such Constituent Company, and
thereafter make any other required submissions for such Constituent
Company, with respect to this Agreement required under (A) the
Securities Act, the Exchange Act and any other applicable federal
or state securities laws, and (B) any other applicable law;
and
(iv) execute or deliver any
additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this
Agreement.
(b) The Constituent Companies shall
cooperate with each other in connection with the making of all such
filings, including providing copies of all such documents to the
non-filing parties and their advisors prior to filing and, if
requested, accepting reasonable additions, deletions or changes
suggested in connection therewith. The Constituent Companies shall
use their respective reasonable best efforts to furnish to each
other all information required for any application or other filing
to be made pursuant to the rules and regulations of any applicable
law (including all information required to be included in the
Registration Statement and Information Statement) in connection
with the transactions contemplated by this Agreement.
(c) Each Constituent Company shall
use its reasonable best efforts to obtain the respective
authorizations, consents, orders and approvals and to make filings
from or with any Governmental Authority or other third party
necessary for its respective execution and delivery of, and the
performance of its respective obligations pursuant to, this
Agreement. The parties hereto will not take any action that will
have the effect of delaying, impairing or impeding the receipt of
any required approvals and shall promptly respond to any requests
for additional information from any Governmental
Authority.
4.7. Access and Investigation
. Between the Effective Date and the Closing Date, and upon
reasonable advance written notice, each Constituent Company shall
(a) afford the other Constituent Companies access, during
regular business hours, to such Constituent Company’s
personnel, properties, books and records and other documents and
data, such rights of access to be exercised in a manner that does
not unreasonably interfere with the operations of such Constituent
Company; (b) furnish the requesting Constituent Company with
copies of all such books and records and other existing documents
and data as the requesting Constituent Company may reasonably
request; (c) furnish the requesting Constituent Company with
such additional financial, operating and other relevant data and
information as the requesting Constituent Company may reasonably
request; and (d) otherwise cooperate and assist, to the
extent
-47-
reasonably requested, with the requesting
Constituent Company’s investigation of the properties, assets
and financial condition related to such Constituent
Company.
4.8. Application for listing on
Senior Trading Market; Reverse Stock Split . At or before the
Closing, MSMT shall prepare and submit a listing application to the
New York Stock Exchange, the American Stock Exchange, the Nasdaq
Global Select Market, the Nasdaq Global Market or the Nasdaq
Capital Market (a “ Senior Trading Market
”) covering the shares of MSMT Common Stock and shall use
commercially reasonable best efforts to obtain approval for the
listing of such shares of MSMT Common Stock on a Senior Trading
Market; provided, however , that in no event shall the
status of such application delay the Closing. In furtherance of the
same, to the extent necessary as determined by the MSMT Board of
Directors, MSMT will effect a reverse stock split in order to
satisfy certain pricing requirements of the Senior Trading
Market.
4.9. Proxy Agreement .
Andover shall use its best efforts to obtain from the holders of a
percentage of the Andover Common Stock acceptable to MSMT and CDIP
a written proxy in favor of Vicis Capital Master Fund, the form of
which is attached hereto as Exhibit 4.7 (the “
Form of Proxy ”).
4.10. Publicity . So long as
this Agreement is in effect, each Constituent Company shall not,
nor shall any Constituent Company permit any of its respective
subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to, or otherwise
make any public statement or filing concerning, the transactions
contemplated by this Agreement without the prior written consent of
all other parties, which consent shall not be unreasonably withheld
or delayed, except as may be required by applicable law or the
applicable rules of any stock exchange, in which case the party
required to make the release, announcement, statement or filing
shall use its reasonable best efforts to allow the other parties
reasonable time to comment on such release, announcement, statement
or filing in advance of such issuance. Upon the execution of this
Agreement and at the Closing, the Constituent Companies shall issue
a mutually agreed upon press release announcing the transactions
contemplated hereby.
4.11. Notification of Certain
Events . Each Constituent Company will give prompt written
notice to the other Constituent Companies of (a) any notice or
other communication from any Person alleging that the consent of
such Person is or may be required in connection with the
Reorganization or any of the other transactions contemplated by
this Agreement, (b) any notice or other communication from any
Governmental Authority in connection with the Reorganization or any
of the other transactions contemplated by this Agreement, or
(c) any litigation relating to, involving or otherwise
affecting the Constituent Companies or any of their respective
subsidiaries that relates to the Reorganization or any of the other
transactions contemplated by this Agreement.
4.12. Breach of Representation
and Warranty Concerning Capitalization . In the event of a
breach at any time of the representation and warranty concerning
the capitalization of any Constituent Company contained in Sections
2.1(f), 2.2(f) or 2.3(f), as applicable, the number of MSMT
Securities issuable by MSMT pursuant to the terms of this Agreement
shall be adjusted, without the exchange of any additional
consideration by the non-breaching Constituent Company, to that
amount of MSMT Securities that should have been issued had
such
-48-
representation and warranty been true and
correct at the time made so that the Constituent Company’s
percentage interest in MSMT is not less than that which it was
intended to be based upon the incorrect representation and
warranty.
4.13. Takeover Statutes . If
any anti-takeover, control share acquisition, fair price,
moratorium or other similar statute is or may become applicable to
the Reorganization or the other transactions contemplated by this
Agreement, each Constituent Company and their respective Boards of
Directors shall grant such approvals and take such lawful actions
as are necessary to ensure that such transactions may be
consummated as promptly as practicable on the terms contemplated by
this Agreement and otherwise take such lawful actions to eliminate
or minimize the effects of such statute and any regulations
promulgated thereunder on such transactions.
4.14. Tax Treatment . The
Constituent Companies hereto acknowledge and agree that the
transactions contemplated hereby are intended to qualify and to be
treated as tax-free reorganizations under Sections 368(a)(1)(C) of
the Code, and that this Agreement shall constitute a “plan of
reorganization” within the meaning of Section 368 of the
Code and the associated Treasury Regulations. In furtherance of the
same, each Constituent Company hereby makes the following
representations, warranties and covenants, severally and not
jointly, as applicable:
(a) Each Target Company will retain
only its corporate charter and those assets, if any, necessary to
satisfy state minimum law capital requirements to maintain
corporate existence (minimum capital).
(b) MSMT will acquire at least
ninety percent (90%) of the fair market value of the net
assets and at least seventy percent (70%) of the fair market
value of the gross assets held by each Target Company immediately
prior to the Closing Date. For purposes of this calculation, the
following shall be included as an asset of each Target Company held
immediately prior to the Closing Date: (i) the corporate
charter and minimum capital retained by each Target Company;
(ii) amounts paid by each Target Company to any dissenting
stockholder (if the Reorganization triggers dissenters’
rights); (iii) amounts used by each Target Company to pay its
expenses associated with the Reorganization; (iv) amounts paid
by each Target Company to its stockholders who receive cash or
other property; and (v) all redemptions and distributions
(except for regular, normal dividends) made by each Target Company
immediately preceding the Closing Date.
(c) The primary purpose for having
each Target Company maintain its corporate existence under state
law is to isolate each Target Company’s charter for resale to
an Unrelated Purchaser. As used herein, the term “
Unrelated Purchaser ” shall mean a purchaser
that did not own, actually or constructively pursuant to
Section 318(a) of the Code (as modified by
Section
