Exhibit 2.1
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
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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 desirable for the operation of
CDIP’s business) relating to CDIP’s business (other
than minutes
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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 and
other arrangements under which Andover has the right to use any of
the intangible or
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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 Assumed
Liabilities ”) except for the CDIP Excluded
Liabilities. For purposes of this
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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 stock, par value $0.001
(the “ Andover Common Stock ”) issued and
outstanding immediately
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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 following the Closing, furnish to each holder of
the Assumed Andover Warrants a notice of the
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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
Option, as in effect immediately prior to the Closing and
(y) the Andover Pricing Ratio, and
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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;
(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
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(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 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.
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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;
(e)
an assignment of the CDIP
Intellectual Property Rights in the form of
Exhibit 1.11(e) executed by CDIP and
MSMT;
10
(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;
(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
11
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
