EXHIBIT 10.1
FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION ("Agreement")
is entered into as of this 5th day of May 1998, by and among CARDIAC CONTROL
SYSTEMS, INC., a Delaware corporation ("Parent"), CCS SUBSIDIARY, INC., a New
Jersey corporation and wholly-owned subsidiary of Parent ("Acquisition Sub"),
and ELECTRO- CATHETER CORPORATION, a New Jersey corporation ('Company").
R E C I T A L S:
WHEREAS, Parent, Acquisition Sub and the Company entered into that certain
Agreement and Plan of Reorganization dated as of January 20, 1998 (the
"Reorganization Agreement"; terms used herein and as otherwise defined shall
have the meanings given to them in the Reorganization Agreement); and
WHEREAS, the parties desire to remove the ability to waive certain
conditions to the Closing and the consummation of the Merger; and
WHEREAS, due to changes in market conditions the parties desire to change
the Exchange Ratio; and
WHEREAS, Parent desires to reorganize through a holding company structure
pursuant to Section 251(g) of the General Corporation Law of the State of
Delaware, whereby Parent would form a direct, wholly-owned subsidiary
("Holdings"), which will form a direct, wholly-owned subsidiary ("Holdings
Merger Sub"), whereby Merger Sub will merge with and into Parent so that Parent
will become a direct, wholly-owned subsidiary of Holdings; and
WHEREAS, in order to obtain the required financing for the Merger, the
Company shall issue approximately 2,500,000 shares of Common Stock to
prospective investors immediately prior to the Effective Time of the Merger and
such shares of the Company Common Stock will be exchanged for shares of Holdings
common stock at the same ratio as all other shares of the Company Common Stock
are exchanged for shares of Holdings common stock (the "Financing Shares"); and
WHEREAS, the Company shareholders shall no longer exchange their issued and
outstanding shares of Common Stock for shares of Parent Common Stock, but
instead shall exchange such shares for shares of Holdings common stock at an
applicable ratio which shall result in the Company shareholders holding
approximately 71% of the issued and outstanding shares of Holdings common stock
other than the Financing Shares (the "Non-Financing Shares"), and the
shareholders of Parent will hold the remaining approximately 29% of the issued
and outstanding shares of Holdings Common Stock other than the Financing Shares;
and
WHEREAS, subsequent to the Effective Time of the Merger, Holdings will
effectuate a reverse stock split at a 1 for 5 ratio whereby the number of
Non-Financing Shares will be reduced to approximately 1.8 million, and the
number of Financing Shares will be reduced to approximately 500,000; and
WHEREAS, all Company Options, Company Warrants and conversion rights: (1)
shall be converted into options, warrants and conversion rights for shares of
Holdings common stock and will be added to the capital structure of Holdings;
(2) shall be adjusted in regards to the number and exercise price in accordance
to the same exchange ratio as the Company's Common Stock; (3) shall be subject
to the same reverse stock split ratio as the Holdings common stock; and (4) are
not included in the Company shareholders' 71% interest in shares of Holdings
outstanding common stock; and
1
WHEREAS, the parties hereby agree to amend the Reorganization Agreement to
effectuate the foregoing in accordance with the terms set forth herein below.
NOW, THEREFORE, for the reasons set forth hereinbelow, and in consideration
of the mutual promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. The first paragraph on the first page shall be deleted in its entirety
and replaced with the following:
The Boards of Directors of Parent, Acquisition Sub and the Company have
each duly approved and adopted this Agreement and Plan of Reorganization
(this "Agreement"), the plan of merger (the "Plan of Merger") and the
proposed merger of Acquisition Sub with and into the Company in accordance
with this Agreement, the Plan of Merger and the New Jersey Business
Corporation Act (the "New Jersey Statute"), whereby, among other things, the
issued and outstanding shares of common stock, $.10 par value, of the
Company (the "Company Common Stock"), will be exchanged and converted into
shares of common stock, $.10 par value, of a to be organized parent holding
company of Parent ("Holdings") (the "Holdings Common Stock") in the manner
set forth in Article II hereof and in the Plan of Merger, upon the terms and
subject to the conditions set forth in this Agreement and the Plan of
Merger.
2. Subsection 2.1(b)(iii) shall be deleted in its entirety and replaced with
the following:
owned by Holdings or any subsidiary of Holdings, shall be cancelled and no
Holdings Common Stock or other consideration shall be delivered in exchange
therefore.
3. Subsection 2.1(c) shall be deleted in its entirety and replaced with the
following:
Subject to Section 2.2, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares
cancelled pursuant to Section 2.1(b)) shall be deemed cancelled and
converted into and shall represent the right to receive one share of
Holdings Common Stock in accordance with Section 2.2. For convenience of
reference, the shares of Holdings Common Stock to be issued upon the
exchange and conversion of Company Common Stock in accordance with this
Section 2.1(c) are sometimes hereinafter collectively referred to as the
"Merger Shares".
4. Subsection 2.1(d) shall be deleted in its entirety.
5. For purposes of Sections 2.2(a) - (g), 3.4(ii), 4.4(ii), 5.2, 6.5 and
6.16, all references to the defined phrase Parent Common Stock shall be deleted
in their entirety and replaced with the phrase Holdings Common Stock.
6. For purposes of Sections 2.2(a) - (g), 3.4(ii), 4.4(ii), 5.2 and 6.16,
all references to the defined word Parent shall be deleted in their entirety and
replaced with the word Holdings.
7. The first sentence of Section 2.3 shall be deleted in its entirety and
replaced with the following:
At the Effective Time, each of the Company's then outstanding Company
Warrants, Company Options and conversion rights (whether or not exercisable
at the Effective Time) by virtue of the Merger and without any further
action on the part of the holder thereof, shall be assumed by Holdings and
automatically converted, on the same terms, into a warrant, option or
conversion right to purchase a number of shares of Holdings Common Stock (to
be registered shares to the extent the option, warrant or conversion right
2
holder is, by the terms of the Company option plan, warrant or conversion
right in effect, entitled upon exercise of the option, warrant or conversion
right, to receive registered stock) equal to the number of shares of Company
Common Stock covered by such Company Warrants, Company Options and
conversion rights immediately prior to the Effective Time, at an exercise
price per share of Holdings Common Stock equal to the exercise price in
effect under such Company Warrants, Company Options or conversion rights
immediately prior to the Effective Time.
8. The reference to Section 7.8 in the second sentence of Section 6.2 shall
be deleted.
9. Section 6.16 shall be deleted in its entirety and replaced with the
following:
PREFERRED STOCK; SECURED PROMISSORY NOTE. Holdings and The T Partnership
agree that: (a) the designation of Series A Preferred Stock of the Surviving
Corporation, which shall be convertible into the shares of Holdings Common
Stock at a conversion price equal to the product of 120% multiplied by the
price per share of the common stock of Holdings used as the basis for the
consideration given (either in the form of issued stock, if any, or
warrants, provided the exercise price of the warrant reflects the current
market value of common stock, or otherwise) in exchange for any capital
raised pursuant to Section 7.7 of this Agreement, shall be as set forth in
Exhibit 1.4 attached hereto, and such number of shares of Preferred Stock
having a liquidation value equal to $1,000,000 of the Company's indebtedness
outstanding and due to The T Partnership at the time of the Closing shall be
issued in redemption of $1,000,000 of such indebtedness; (b) Holdings shall
execute a conditional note for the benefit of The T Partnership in the form
set forth in Exhibit 6.16(b) attached hereto; and (c) Holdings shall execute
a secured promissory note in an amount not to exceed $1,300,000, which
amount shall include interest up through Closing on the Company's current
indebtedness to The T Partnership, but such amount shall not include any
amount described under Section 9.13(b) which shall be payable at Closing,
substantially in the form set forth in Exhibit 6.16(c) attached hereto.
10. The introductory phrase under ARTICLE VII shall be deleted in its
entirety and replaced with the following:
The obligations of each Party to perform this Agreement and the Plan of
Merger and to consummate the transactions contemplated hereby and thereby
will be subject to the satisfaction of the following conditions:
11. Section 7.1 shall be deleted in its entirety and replaced with the
following:
STOCKHOLDER APPROVAL. This Agreement, the Plan of Merger and the Merger
shall have been approved and adopted by at least two-thirds (2/3) of the
outstanding shares voting of the Company Common Stock.
12. Section 7.6 shall be deleted in its entirety and replaced with the
following:
BID PRICE RATIO. The ratio of the closing bid price of a share of Parent
Common Stock to a share of Company Common Stock shall not be greater than
2.00 nor less than .50 based on the average of closing bid prices for any
ten (10) day period ending on and including the second NASDAQ trading day
immediately preceding the Closing Date and rounding the result of such
average to the nearest 1/100ths.
3
13. Section 7.8 shall be inserted and read as follows:
HOLDING COMPANY REORGANIZATION. Immediately prior to the Effective Time,
Parent shall reorganize through a holding company structure pursuant to
Section 251(g) of the General Corporation Law of the State of Delaware and
an Agreement of Merger substantially in the form of Exhibit 7.8 attached
hereto, whereby Parent would form a direct, wholly-owned Delaware
subsidiary, which will also form a direct, wholly-owned Delaware subsidiary
("Holdings Merger Sub") whereby Holdings Merger Sub will merge with and into
Parent so that Parent will become a direct, wholly-owned subsidiary of
Holdings.
14. Introductory phrase to ARTICLE VIII shall be deleted in its entirety and
replaced with the following:
The obligations of Parent to perform this Agreement and to consummate the
transactions contemplated hereby and of Acquisition Sub to perform this
Agreement and the Plan of Merger and to consummate the transactions
contemplated hereby and thereby will be subject to the satisfaction of the
following conditions, unless waived by Parent and Acquisition Sub; provided,
however, only non-material approvals may be waived under Section 8.8 by
Parent and Acquisition Sub:
15. The introductory phrase to ARTICLE IX shall be deleted in its entirety
and replaced with the following:
The obligations of the Company to perform this Agreement and the Plan of
Merger and to consummate the transactions contemplated hereby and thereby
will be subject to the satisfaction of the following conditions, unless
waived by the Company; provided, however, Sections 9.6, and 9.9 through 9.13
may not be waived by the Company, except any non-material approvals under
Section 9.9 may be waived by the Company:
16. Section 9.10 shall be deleted in its entirety and replaced with the
following:
APPOINTMENT OF DIRECTORS The Board of Directors of Holdings shall have
taken such action as shall be necessary to expand the size of Holdings'
Board of Directors and to appoint Ervin Schoenblum and Abraham Nechemie as
directors of Holdings to serve on Holdings' Board of Directors until the
next annual meeting of the stockholders of Holdings. Holdings shall continue
to nominate such individuals at the next three (3) successive annual
meetings of the stockholders immediately following the next annual meeting
of the stockholders in the same manner and on equal standing as other
director nominees comprising management's slate.
17. Section 9.13 shall be deleted in its entirety and replaced with the
following:
COMPANY INDEBTEDNESS. Provisions shall have been made for payment at
Closing of indebtedness of the Company: (a) which is due at Closing to SSSG
for reasonable attorneys' fees and expenses; and (b) which may be incurred
subsequent to May 1, 1998 in an amount of $100,000, or any greater amount as
agreed to by the Company and Parent in writing, for the purpose of operating
capital pending completion of the Merger, and owed to The T Partnership.
18. The date set forth in Sections 11.1(b)(i) and 11.1(c) shall be changed
from May 1, 1998 to August 14, 1998.
19. The Section reference set forth in the proviso of the second sentence in
Section 11.2 shall be changed from 10.1(d) to 10.1(b).
20. The following shall be inserted after the first sentence of Section
12.6:
Without limiting the foregoing, the rights and obligations of Parent
under this Agreement shall be binding upon and inure to the benefit of
Holdings.
4
21. Notwithstanding any provision in the Reorganization Agreement to the
contrary, each of Parent and the Company may take such actions as shall allow
each of them to secure interim financing in an amount not to exceed $600,000 to
be used for operating capital pending completion of the transactions
contemplated under the Reorganization Agreement; provided, however, that, prior
to consummating such financing arrangement, the material terms thereof are
disclosed to the other party and such terms are reasonably acceptable to the
other party, except that the issuance of convertible debt securities by Parent
in the amount of $580,000 with an effective conversion price per share of not
less than $.30, or on terms more favorable than those specified, are hereby
acceptable to the Company and such a financing arrangement may be consummated by
Parent without further disclosure or consent. No action on the part of either
party in securing financing contemplated by this Agreement and in accordance
herewith shall result in a breach of the Reorganization Agreement or constitute
default under such Reorganization Agreement and each party hereby consents to
such actions by the other party. Parent and the Company shall cause each of
their respective Disclosure Schedules to be amended to reflect any such interim
financing that they may obtain in accordance with this Agreement.
22. Sections 3.8 and 3.14 of the Company Disclosure Schedule shall be
amended to reflect the settlement of the Ternyila Judgment.
23. All Exhibits and the Glossary to the Reorganization Agreement shall be
amended to reflect the amendments to the Reorganization Agreement set forth
herein.
24. Except to the extent amended hereby, all terms, provisions and
conditions of the Reorganization Agreement shall continue in full force and
effect and shall remain enforceable and binding in accordance with their
respective terms.
IN WITNESS WHEREOF, each of the parties hereto has caused this First
Amendment to Agreement and Plan of Reorganization to be executed on its behalf
as of the day and year first above written.
CARDIAC CONTROL SYSTEMS, INC.
By:________________________________
Alan J. Rabin, President
CCS SUBSIDIARY, INC.
By:________________________________
Alan J. Rabin, President
ELECTRO-CATHETER CORPORATION
By:________________________________
Ervin Schoenblum, Acting President
5
The T Partnership hereby executes this Agreement for the limited and sole
purpose amending its obligations under Section 6.16 of the Reorganization
Agreement as set forth in Section 9 above.
THE T PARTNERSHIP, LLP
By:________________________________
Name:
Its:
6