FIRST AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
BY AND AMONG
EQUITEX, INC.,
EI ACQUISITION CORP.,
And
HYDROGEN POWER, INC.
OCTOBER 31, 2005
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
(this "Agreement") is entered into as of October 31, 2005, by and among Hydrogen
Power, Inc., a Delaware corporation (the "COMPANY"), Equitex, Inc., a Delaware
corporation ("EQUITEX"), and EI Acquisition Corp., a Delaware corporation that
is wholly owned by Equitex (the "MERGER SUB").
INTRODUCTION
A. The Company, Equitex and Merger Sub have entered into that certain
Agreement and Plan of Merger and Reorganization dated September 13, 2005 (the
"Merger Agreement") whereby the Company and Merger Sub will merge with the
surviving corporation being a subsidiary of Equitex (the "MERGER").
B. Equitex desires to acquire 850,000 shares of the common stock of the
Company from the shareholders of the Company (the "HPI Shareholders") in
exchange for the issuance of 700,000 shares of the common stock of Equitex to
the HPI Shareholders, on a pro rata basis (the "Share Exchange").
C. The Share Exchange is to be completed in advance of the Merger on the
terms and subject to the conditions of the share exchange agreement to be
entered into between Equitex and the HPI Shareholders in the form attached
hereto as Exhibit A (the "Share Exchange Agreement").
D. The Company, Equitex and Merger Sub have agreed to amend the Merger
Agreement by entering into this Agreement in order to consent to the Share
Exchange Agreement and to adjust the share conversion ratios as a result of the
completion of the Share Exchange in advance of the Merger.
E. The Company, Equitex and Merger Sub have agreed to further amend the
Merger Agreement by entering into this Agreement in order to confirm that the
Company Warrants (as defined herein) will be exchanged for warrants to purchase
an equivalent number of shares of Equitex common stock at an exercise price of
$3.00 per share.
F. The Company, Equitex and Merger Sub have agreed to further amend the
Merger Agreement to (i) allow for the Company to merge with and into the Merger
Sub, and the Merger Sub to be the Surviving Corporation (as defined in Section
1.1 of the Merger Agreement) and (ii) provide voting rights to the holders of
the Series L Preferred Stock issued pursuant to the Merger.
G. The parties to this Agreement intend to adopt the Merger Agreement, as
amended by this Agreement, as a plan of reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"),
and the regulations promulgated thereunder, and intend that the Merger and the
transactions contemplated by this Agreement be undertaken pursuant to that plan.
Accordingly, the parties to the Merger Agreement, as amended by this Agreement,
confirm their intention that the Merger qualify as a "reorganization," within
the meaning of Code Section 368(a) and a "foreign merger" within the meaning of
Section 87(8.1) of the Income Tax Act (Canada), and that, with respect to the
Merger, Equitex, Merger Sub and the Company will each be a "party to a
reorganization," within the meaning of Code Section 368(b).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, and the
representations, warranties and covenants contained herein, the parties hereto
agree as follows:
ARTICLE 1
AMENDMENT
1.1 SHARE EXCHANGE. Each party hereto consents to the completion of the
Share Exchange on the terms and conditions of Share Exchange Agreement.
1.2 AMENDMENT TO MERGER STRUCTURE. In order to reflect a change in the
structure of the Merger with respect to the surviving corporation in the Merger:
(a) Paragraph A of the Introduction to the Merger Agreement is hereby
deleted in its entirety and replaced with the following:
"A. The boards of directors of the Company, Equitex and Merger Sub
have determined that it is in the best interests of such
corporations and their respective stockholders to consummate a
merger (the "MERGER") of the Company with and into the Merger Sub,
with the Merger Sub remaining as the surviving corporation and a
wholly owned subsidiary of Equitex."
(b) Section 1.1 of the Merger Agreement is hereby deleted in its
entirety and replaced with the following:
"1.1 THE MERGER. Subject to the satisfaction or waiver of the
conditions set forth in Article 6, at the Effective Time (as
defined in Section 1.2(d) below), (i) the Company will merge with
and into the Merger Sub, and (ii) the Merger Sub will be the
surviving corporation to the Merger and a wholly owned subsidiary
of Equitex. The term "Surviving Company" as used herein shall mean
the Merger Sub as a wholly owned subsidiary of Equitex after giving
effect to the Merger. The Merger will be effected pursuant to the
execution and filing of a certificate of merger in accordance with
the provisions of the DGCL, and in substantially the form attached
hereto as Exhibit A (the "Certificate of Merger")."
1.3 AMENDMENT TO DATE OF CLOSING. In order to reflect a change in the date
of the Closing, Section 1.2(d) of the Merger Agreement is hereby deleted in its
entirety and replaced with the following:
"(d) Subject to the provisions of Article 6 and Article 7, the
closing of the transactions contemplated hereby (the "CLOSING")
shall take place by mutual release of all Closing deliveries at a
mutually agreeable date and time, but in no event later than
December 31, 2005. On the Closing date, to effect the Merger, the
parties hereto will cause the Certificate of Merger to be filed
with the Delaware Secretary of State in accordance with the DGCL.
The Merger shall become effective upon such filing of the
Certificate of Merger or at such later date or time as is specified
in the Certificate of Merger (the "EFFECTIVE TIME"). As used
herein, the term "EFFECTIVE DATE" shall mean the date on which
Merger shall become effective pursuant to this Section 1.2(d)."
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1.4 ADJUSTMENT TO MERGER CONSIDERATION. In order to reflect the completion
of the Share Exchange in advance of the Merger, Section 1.3 of the Merger
Agreement is hereby deleted in its entirety and replaced with the following:
"1.3 EFFECT ON THE COMPANY'S CAPITAL STOCK AND MERGER SUB CAPITAL
STOCK. To effectuate the Merger, and subject to the terms and conditions of this
Agreement, at the Effective Time:
(a) Each issued and outstanding share of Company common stock ("Company
Common Stock") immediately prior to the Effective Time, other than shares
to be extinguished pursuant to Section 1.3(d), shall be converted into and
exchanged for:
(i) that number of fully paid and non-assessable shares of Equitex
common stock ("EQUITEX COMMON STOCK") equal to the quotient resulting
from dividing (A) the number of shares determined by taking the product
of (1) the number of shares of Equitex Common Stock issued and
outstanding immediately prior to the Effective Time minus 700,000,
multiplied by (2) 0.4, and subtracting from such product 700,000 by (B)
the number shares of the Company's Common Stock issued and outstanding
immediately prior to the Effective Time, on a fully diluted basis, less
850,000, but not assuming the exercise of the Company Warrants (as
defined in Section 1.3(c)) issued and outstanding immediately prior to
the Effective Time (the "COMMON STOCK EXCHANGE RATIO"); and
(ii) that number of fully paid and non-assessable shares of each of
the Equitex Series L-1 Convertible Preferred Stock (the "L-1 PREFERRED
STOCK"), Equitex Series L-2 Convertible Preferred Stock (the "L-2
PREFERRED STOCK") and Equitex Series L-3 Convertible Preferred Stock
(the "L-3 PREFERRED STOCK"; collectively, the L-1 Preferred Stock, L-2
Preferred Stock and the L-3 Preferred Stock shall be referred to as the
"SERIES L PREFERRED STOCK"), respectively, equal to the quotient
resulting from dividing (A) 100,000 by (B) the number of issued and
outstanding shares of the Company's Common Stock immediately prior to
the Effective Time, on a fully diluted basis, less 850,000, but not
assuming the exercise of the Company Warrants (as defined in Section
1.3(d)) issued and outstanding immediately prior to the Effective Time
(the "PREFERRED STOCK EXCHANGE RATIO"); the Series L Preferred Stock
shall have the rights, preferences and privileges as set forth in the
Equitex Series L Convertible Preferred Stock Certificate of
Designation, in the form attached hereto as EXHIBIT B (the "CERTIFICATE
OF DESIGNATION"), and be convertible as set forth therein.
Equitex shall issue to each holder of Company Common Stock (other than
holders of shares extinguished pursuant to Section 1.3(d)) the number
of shares of Equitex Common Stock and Series L Preferred Stock equal to
the number of shares of Company Common Stock held by such shareholder
multiplied by the Common Stock Exchange Ratio and Preferred Stock
Exchange Ratio, respectively. No fractional shares of Equitex Common
Stock or Series L Preferred Stock will be issued upon the exchange of
Company Common Stock.
(b) All options to purchase Company Common Stock, as set forth in
Disclosure Schedule 2.3 to this Agreement (the "Company Options"), or other
securities of the Company exercisable or convertible into, or exchangeable
for, shares of Company Common Stock that are outstanding immediately prior
to the Effective Time, other than the Company Warrants (collectively, the
"COMPANY CONVERTIBLE SECURITIES"), shall convert automatically into
securities exercisable or convertible into, or exchangeable for, that
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number of shares of Equitex Common Stock and Series L Preferred Stock
("EQUITEX CONVERTIBLE SECURITIES") as the holders thereof would have been
entitled to receive if such Company Convertible Securities had been
converted into or exercised for shares of Company Common Stock immediately
prior to the Effective Time, based on the Common Stock Exchange Ratio and
Preferred Stock Exchange Ratio, respectively; PROVIDED, HOWEVER, that the
exercise price per share of Equitex Common Stock under each such Equitex
Convertible Security received by holders of Company Convertible Securities
will be equal to the quotient obtained by dividing the purchase price per
share of Company Common Stock under each outstanding Company Convertible
Security by the Common Stock Exchange Ratio and Preferred Stock Exchange
Ratio, as applicable. No fractional shares of Equitex Common Stock or
Series L Preferred Stock will be issued upon exercise or conversion of
Equitex Convertible Securities issuable hereunder.
(c) All outstanding warrants to purchase shares of the Company's common
stock, as listed in Disclosure Schedule 2.3 to this Agreement (the "Company
Warrants"), shall be exchanged for warrants to purchase an equivalent
number of shares of Equitex Common Stock, without adjustment, at an
exercise price of $3.00 per share ("Equitex Warrants") for the unexpired
term of the original share purchase warrants.
(d) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and owned by Equitex or Merger Sub,
if any, shall be cancelled and extinguished without any conversion thereof
and no payment shall be made with respect thereto.
(e) All issued and outstanding shares of common stock of Merger Sub
held by Equitex immediately prior to the Effective Time will be converted
into and become one validly issued, fully paid and non-assessable share of
common stock of the Surviving Company.
(f) The Equitex Warrants issuable upon the Merger under paragraph
1.3(c) above, the Equitex Convertible Securities issuable upon the Merger
under paragraph 1.3(b) above and the Equitex Common Stock and the Series L
Preferred Stock issuable upon the Merger under paragraph 1.3(a) above are
collectively referred to as the "MERGER CONSIDERATION.""
1.5 REGISTRATION RIGHTS FOR WARRANT SHARES. The shares of Equitex common stock
issuable upon exercise of the Equitex Share Purchase Warrants will be treated as
"Registrable Securities" for the purposes of Section 5.11 of the Merger
Agreement and Equitex will use its best efforts to prepare and file with the
Securities and Exchange Commission (the "SEC"), as early as possible following
closing of the Merger Agreement, and in no event later than sixty (60) days
following closing, a registration statement under the Securities Act covering
the resale of the shares of Equitex common stock issuable upon exercise of the
Equitex Share Purchase Warrants. Equitex will use its best efforts to obtain the
effectiveness of such registration statement(s) as soon as practicable, and once
effective, to maintain such effectiveness for a period of at least two years
from the date such shares issued. Equitex's obligation to obtain and maintain
such effectiveness is conditioned upon the cooperation of the holders of the
Equitex Share Purchase Warrants in furnishing information to Equitex relating to
such holders' method of distribution and other information requested by Equitex.
Any and all expenses incurred in connection with such registration shall be
borne by Equitex. Any and all selling expenses incurred by the holders of the
Equitex Share Purchase Warrants shall be borne by such holders.
1.6 ADDITIONAL CONDITIONS TO OBLIGATIONS OF EQUITEX AND MERGER SUB. The
following shall be incorporated into the Merger Agreement as Section 6.2(i):
"(i) The Company shall have received, on or prior to the Closing Date,
from the holders thereof, all of the Company Warrants to be exchanged
for Equitex Warrants."
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1.7 INCLUSION OF VOTING RIGHTS FOR SERIES L PREFERRED STOCK. In order to
allow for the provision of voting rights to the holders of the Series L
Preferred Stock, the Certificate of Designation attached as Exhibit B to the
Merger Agreement is hereby deleted in its entirety and replaced with the
Certificate of Designation attached hereto as Exhibit A.
ARTICLE 2
GENERAL PROVISIONS
2.1 MERGER AGREEMENT IN FULL FORCE AND EFFECT. The Merger Agreement shall
continue in full force and effect without amendment except as expressly provided
for in this Agreement.
2.2 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
Sections and Articles of this Agreement unless otherwise stated.
2.3 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties shall negotiate
in good faith to modify this Agreement and to preserve each party's anticipated
benefits under this Agreement.
2.4 AMENDMENT. This Agreement may not be amended or modified except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
2.5 MISCELLANEOUS. This Agreement (together with all other documents and
instruments referred to herein): (a) constitutes the entire agreement, and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties, with respect to the subject matter hereof; and (b) shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, but shall not be assignable by either party hereto
without the prior written consent of the other party hereto.
2.6 COUNTERPARTS; DELIVERY. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement. In addition, executed counterparts may be delivered by means of
facsimile or other electronic transmission; and signatures so delivered shall be
fully and validly binding to the same extent as the delivery of original
signatures.
2.7 GOVERNING LAW. This Agreement is governed by the internal laws of the
State of Delaware without regard to its conflicts-of-law principles.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of the date first written above.
HYDROGEN POWER, INC.: EQUITEX, INC.:
By: /S/ JAMES MATKIN By: /S/ HENRY FONG
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Name: James Matkin Name: Henry Fong
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Title: Chairman Title: President
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EI ACQUISITION CORP.:
By: /S/ HENRY FONG
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Name: Henry Fong
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Title: President
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