AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NANNACO, INC.,
NANNACO ACQUISITION, INC.
AND
GAK ACQUISITION CORP.
DATED AS OF March 17, 2006
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is made and entered into as of March 17,
2006 among Nannaco, Inc.., a Texas corporation ("PARENT" or "PARENT COMPANY"),
Nannaco Acquisition, Inc., a Washington corporation and a wholly-owned
subsidiary of Parent ("MERGER SUB"), and GAK Acquisition Inc. a New York
corporation (the "COMPANY").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2) and in accordance with the Texas General Corporation Law
("TEXAS LAW"), the New York Business Corporations Law ("NEW YORK LAW") and the
Revised Code of Washington ("WASHINGTON LAW"), Parent, Merger Sub and the
Company intend to enter into a business combination transaction.
B. Immediately upon the Effective Time (as defined in Section 1.2) of the
Merger (as defined in Section 1.1), the Board of Directors of Parent (as the
combined company resulting from such business combination transaction) will
consist of three (3) members, with designees of the Company, as set forth
herein, to hold two (2) seats, subject to the approval of Parent, and a designee
of Parent to hold one (1) seat. The Board of Directors of Parent and shall take
all necessary actions to appoint the Company Parent designees to the Parent
Board, whereupon all other remaining members of the Parent's board of directors
and the Company's board of directors shall resign.
C. The Board of Directors of the Parent has determined that the Company
will become a wholly owned subsidiary of Parent and that the Parent will change
its name at the discretion of the Company, as soon as practicable following the
Effective Time.
D. The Board of Directors of the Parent hereby acknowledges that this
Merger is conditioned upon the simultaneous closing of the stock purchase
agreement, promissory note agreement, employment agreement, security pledge
agreement non-compete agreement and the shareholders agreement (the "GAK
Documents") between GAK Acquisition, Inc. and Comprehensive Physics & Regulatory
Services, Ltd., pursuant to which the Company shall purchase a 70% interest in
Comprehensive Physics & Regulatory Services, Ltd. ("CPRS") and simultaneously
assign such right of purchase to Parent in exchange for the shareholders of the
Company receiving shares of Parent representing 95% of the issued and
outstanding stock of Parent;
E. The Board of Directors of the Company (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of the Company and fair to, and in the best interests of, the Company and its
stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) has determined to
recommend that the stockholders of the Company adopt and approve this Agreement
and approve the Merger.
F. The Board of Directors of Parent (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and fair to, and in the best interests of, Parent and its shareholders, (ii) has
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and (iii) has determined to recommend that the shareholders of
Parent vote to approve the issuance of shares of Parent Common Stock (as defined
herein) to the stockholders of the Company pursuant to the terms of the Merger.
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G. The parties intend, by executing this Agreement, to adopt a Plan of
Merger within the meaning of Section 368 of the Internal Revenue Code of 1986,
as amended (the "CODE").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement applicable
subsequent to the Effective Time, and the applicable provisions of New York Law,
Texas Law, and Washington Law, Merger Sub shall be merged with and into the
Company (the "Merger"), the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation and as a
wholly-owned subsidiary of Parent, whom will remain in control. The Company as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "SURVIVING CORPORATION."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger on the preprinted form of Certificate of Merger required
by the Secretary of State of the State of Texas (the "CERTIFICATE OF MERGER"),
with the Secretary of State of the State of Texas in accordance with the
relevant provisions of Texas Law (the time of such filing or such later time as
may be agreed in writing by the parties and specified in the Certificate of
Merger) being the "EFFECTIVE TIME") as soon as practicable on or after the
Closing Date (as defined herein). Unless the context otherwise requires, the
term "AGREEMENT" as used herein refers collectively to this Agreement and Plan
of Reorganization and the Certificate of Merger. The closing of the Merger (the
"CLOSING") shall take place at the offices of The Otto Law Group, PLLC at a time
and date to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions set forth in
Article VI, or at such other time, date and location as the parties hereto agree
in writing (the "CLOSING DATE").
1.3 Closing Conditions of the Merger.
(a) The Closing of this Agreement shall be conditioned upon the
assignment, from GAK Acquisition, Inc. of the GAK Documents between GAK
Acquisition, Inc. and CPRS as described in that letter of intent between GAK
Acquisition, Inc. and CPRS dated _________________, pursuant to which GAK
Acquisition, Inc. shall purchase a 70% interest in CPRS (the "Purchase
Agreement") and simultaneously effect the Merger on behalf of the Company with
and into the Parent's Merger Sub. The Purchase Agreement shall be delivered at
Closing, and shall contain provisions for providing, among other things, the
authorization, agreement and all necessary cooperation of CPRS to the terms of
this Agreement including, but not limited to, Subsections 1.3 (b), 1.3(c), and
1.3(d), as follows;
(b) The parties further agree that the Closing shall be conditioned upon
the recapitalization of the Parent Company's common stock such that the issued
and outstanding common stock will be reverse-split to a number of issued and
outstanding common stock as determined by the board of directors to be in the
best interest of the Parent Company;
(c) The parties further agree the Closing of this Agreement shall be
conditioned upon the resolution of the existing debt and material liabilities of
Parent and Company in a manner acceptable to the Parent and the Company;
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(d) The parties further agree the Closing of this Agreement shall be
conditioned upon the receipt of financing of not less than six hundred thousand
dollars ($600,000.00), of which three hundred fifty thousand dollars shall
($350,000.00) be allocated to meet the initial payment required by the Purchase
Agreement, due and payable upon the upon the Closing Date, and the remainder of
which shall be allocated at the discretion of the board of directors of parent
following the Closing Date.
1.4 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of New York
Law, Texas Law and Washington Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.5 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of Parent, as in
effect immediately prior to the Effective Time, shall remain the Articles of
Incorporation of the Parent Corporation and the Articles of Incorporation of the
Company shall be the Articles of Incorporation of the Surviving Company to the
extent that they are not in conflict with the Articles of Incorporation of the
Parent, action of the Board of Directors of the Parent, or with this Agreement,
and as soon as practicable thereafter the Articles of Incorporation of the
Surviving Corporation shall be amended consistent with the forgoing and as
provided by law and such Articles of Incorporation of the Surviving Corporation;
provided, however, that the name of the Parent in its Articles of Incorporation
shall be changed concurrent with the Effective Time at the discretion of the
Company, in its Articles of Incorporation in the State of Texas.
(b) The Bylaws of the Parent, as in effect immediately prior to the
Effective Time, shall remain, at the Effective Time, the Bylaws of the Parent
until thereafter amended as necessary and consistent with this Agreement. The
Bylaws of the Company, as in effect immediately prior to the Effective Time,
shall be, at the Effective Time, the Bylaws of the Surviving Corporation until
thereafter amended as necessary and consistent with the Bylaws of the Parent.
1.6 Directors and Officers. As soon as practicable after the Effective
Time, the Board of Directors of Parent shall consist of Mitchell Segal (who
shall act as Chairman), an additional Company appointee, and Parent shall have
the right to appoint, subject to the approval of the Company, one (1)
representative to serve on the Board of Directors of Parent. In addition, at the
Effective Time, any remaining members of the Parent board of directors and the
all of Company's board of directors shall resign.
1.7 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Conversion of Company Common Stock. It is understood and agreed by the
parties that the aggregate number of shares of Parent Common Stock issuable to
the Company shareholders by virtue of the conversion of the shares of Company
Common Stock to Parent Common Stock issued as consideration for the Merger, and
based on an exchange ratio of Company common stock ("Company Stock") for Parent
Common Stock that shall be approximately 1 for __________ (________________) (to
be determined as soon as practicable prior to the Closing) (the "Exchange
Ratio") and amount to 95% of the issued and outstanding shares (fully diluted)
of Parent Common Stock, and upon the exercise of vested warrants and convertible
rights within the Parent to the extent that the adjustment does not violate such
existing exercise or conversion rights (for the avoidance of doubt, the above
reference exchange
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ratio assumes that all outstanding securities exercisable for, or convertible
into, shares of Company Stock have been so exercised or converted, and that all
of the Company Stock Options have been exercised), as adjusted to appropriately
reflect the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into Parent
Common Stock or Company Stock), reorganization, recapitalization or other like
change with respect to Parent Common Stock or Company Stock occurring on or
after the date hereof and prior to the Effective Time. The parties agree that
Parent Common Stock issued in consideration of this Merger, including that
issued in subsequent adjustments as stated above, shall be included the next
registration statement filed with the SEC, such that the Parent agrees not to
file a registration statement with the SEC, other than on Form 10, Form S-4
(except for a public reoffering or resale) or Form S-8 without first having
registered (or simultaneous registering) the Parent Common stock issued
hereunder.
(b) Parent Common Stock Ownership. It is understood and agreed by the
parties that the aggregate number of shares of Parent Common Stock issuable to
the Company shareholders by virtue conversion of the shares of preferred stock
referenced in Section 1.7(a) hereof and Parent Common Stock issued as
consideration for the Merger, and based on an exchange ratio of Company common
stock ("Company Stock") for Parent Common Stock that shall be approximately
____________(___________)(to be determined as soon as practicable prior to the
Closing) (the "Exchange Ratio") and amount to approximately 95% shares of Parent
Common Stock, and upon the exercise of vested warrants and convertible rights
within the Parent to the extent that the adjustment does not violate such
existing exercise or conversion rights (for the avoidance of doubt, the above
reference exchange ratio assumes that all outstanding securities exercisable
for, or convertible into, shares of Company Stock have been so exercised or
converted, and that all of the Company Stock Options have been exercised), as
adjusted to appropriately reflect the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Stock), reorganization,
recapitalization or other like change with respect to Parent Common Stock or
Company Stock occurring on or after the date hereof and prior to the Effective
Time. The parties agree that Parent Common Stock issued in consideration of this
Merger, including that issued in subsequent adjustments as stated above, shall
be included on the next registration statement filed with the SEC, such that the
Parent agrees not to file a registration statement with the SEC, other than on
Form 10, Form S-4 (except for a public reoffering or resale) or Form S-8 without
first having registered (or simultaneous registering) the Parent Common stock
issued hereunder.
(c) Capital Stock of Merger Sub. Each share of Common Stock, $0.001 par
value, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and outstanding
immediately prior to the Effective Time shall be converted into one validly
issued, fully paid and nonassessable share of Common Stock, $0.001 par value, of
the Surviving Corporation. Each certificate evidencing ownership of shares of
Merger Sub Common Stock shall continue to evidence ownership of such shares of
capital stock of the Surviving Corporation.
(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be
additionally adjusted (such adjustment to be subject to the consent of the
Company, which shall not be unreasonably withheld) to reflect appropriately the
effect of any stock split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into Parent Common Stock),
reorganization, recapitalization or other like change with respect to Parent
Common Stock or Company Stock occurring on or after the Effective Time.
(e) Fractional Shares. No fraction of a share of Parent Common Stock will
be issued by virtue of the Merger, but in lieu thereof each holder of shares of
Company Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent
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Common Stock to be received by such holder) shall receive from Parent, in the
sole discretion of Parent, either the nearest whole share of Common Stock
greater than any fraction of a share of Common Stock that any stockholder would
otherwise receive, or an amount of cash (rounded to the nearest whole cent)
equal to the product of (i) such fraction, multiplied by (ii) the closing price
of one share of Parent Common Stock on the trading day immediately prior to the
Effective Time, as reported on the Over-the-Counter Bulletin Board ("OTCBB") or,
if not available, on the Pink Sheets News Service.
1.8 Surrender of Certificates.
(a) Exchange Agent. Parent shall select an institution reasonably
satisfactory to the Company to act as the exchange agent (the "EXCHANGE AGENT")
in the Merger.
(b) Parent to Provide Common Stock. As soon as practicable after the
Effective Time, Parent shall make available to the Exchange Agent, for exchange
in accordance with this Article I, certificates representing the shares of
Parent Common Stock issuable in exchange for outstanding shares of Company
Stock.
(c) Exchange Procedures. As soon as practicable after the Effective Time,
Parent shall cause the Exchange Agent to mail to each holder of record (as of
the Effective Time) a certificate or certificates (the "CERTIFICATES") which
immediately prior to the Effective Time represented outstanding shares of
Company Stock whose shares were converted into the right to receive shares of
Parent Common Stock on a one to ______ (to be determined as soon as practicable
prior to the Closing) basis, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent Common
Stock. Upon surrender of Certificates for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by Parent, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefore certificates representing the number of whole
shares of Parent Common Stock and the Certificates so surrendered shall
forthwith be canceled. Until so surrendered, outstanding Certificates will be
deemed from and after the Effective Time, for all corporate purposes to evidence
only the ownership of the number of full shares of Parent Common Stock into
which such shares of Company Stock shall have been so converted.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Parent Common Stock represented thereby until the holders of record of
such Certificates shall surrender such Certificates. Following surrender of any
such Certificates, the Exchange Agent shall deliver to the record holders
thereof, without interest, certificates representing whole shares of Parent
Common Stock issued in exchange hereof and, subject to applicable law, the
amount of any such dividends or other distributions with a record date after the
Effective Time payable with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If certificates for shares of Parent Common
Stock are to be issued in a name other than that in which the Certificates
surrendered in exchange therefore are registered, it will be a condition of the
issuance thereof that the Certificates so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the persons requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of certificates for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificates surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
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(f) No Liability. Notwithstanding anything to the contrary in this Section
1.7, neither the Exchange Agent, Parent, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of Parent Common Stock or Company
Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in the Company Stock. All shares of Parent
Common Stock issued upon the surrender for exchange of shares of the Company
Stock in accordance with the terms hereof shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Company Stock, and
there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Stock which were outstanding
immediately prior to the Effective Time. If after the Effective Time
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.10 Appraisal Rights.
(a) Notwithstanding any provision of this Agreement to the contrary, any
shares of capital stock of the Company held by a holder who has exercised and
perfected appraisal rights for such shares in accordance with Texas Law and who,
as of the Effective Time, has not effectively withdrawn or lost such appraisal
rights ("DISSENTING SHARES"), shall not be converted into or represent a right
to receive that number of shares of Parent Common Stock (including any cash in
lieu of fractional shares) that such holder is entitled to receive in the
Merger, but the holder thereof shall only be entitled to such rights as are
granted by Texas Law.
(b) Notwithstanding the provisions of subsection (a), if any holder of
Dissenting Shares shall effectively withdraw or lose (through failure to perfect
or otherwise) such holder's appraisal rights, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive that
number of shares of Parent Common Stock, plus any cash in lieu of fractional
shares, upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written demand
for appraisal received by the Company pursuant to the applicable provisions of
Texas Law, Washington Law and New York Law and (ii) the opportunity to
participate in all negotiations and proceedings with respect to such demands.
The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment or offer to make any payment with respect to any
such demands or offer to settle or settle any such demands. Any payments
relating to Dissenting Shares shall be made solely by the Surviving Corporation,
and no funds or other property will be provided by Merger Sub.
1.11 Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Common Stock
and any dividends or distributions payable pursuant to Section 1.7(d); provided,
however, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
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1.12 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall constitute
a reorganization within the meaning of Section 368 of the Code. The parties
hereto adopt this Agreement as a "Plan of Merger" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
(b) It is intended by the parties hereto that the Merger shall qualify for
accounting treatment as a pooling of interests.
1.13 Taking of Necessary Action, Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub will take all such lawful and necessary action, so long
as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
2.1 Organization of the Company.
(a) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted and as proposed to be conducted; and is duly qualified or
licensed to do business and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified would not have a Material Adverse Effect (as defined
herein) on the Company.
(b) The Company has delivered to Parent a true and complete list of all of
the Company's subsidiaries, indicating the jurisdiction of incorporation of each
subsidiary and listing the shareholders of each such subsidiary and the number
of shares held by each such shareholder.
(c) The Company has delivered or made available to Parent a true and
correct copy of the Certificate of Incorporation and Bylaws of the Company and
similar governing instruments of each of its subsidiaries, each as amended to
date, and each such instrument is in full force and effect. Neither the Company
nor any of its subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws or equivalent governing instruments.
(d) When used in connection with the Company, the term "MATERIAL ADVERSE
EFFECT" means, for purposes of this Agreement, any change, event or effect that
is materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of the Company and its subsidiaries
taken as a whole except for those changes, events and effects that are directly
caused by (i) conditions affecting the United States economy as a whole, or (ii)
conditions affecting the health services related industries as a whole, which
conditions (in the case of clause (i) or (ii)) do not affect the Company in a
disproportionate manner) or (iii) conditions that in the good faith judgment of
the Company's Board of Directors result principally from the execution or
delivery of this Agreement or the announcement of the pendency of the Merger.
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2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of 200 shares of
Common Stock, $0.0 par value per share, of which there were 200 shares issued
and outstanding as of the date of this Agreement. All outstanding shares of
Company Stock are duly authorized, validly issued, fully paid and nonassessable
and are not subject to preemptive rights created by statute, the Articles of
Incorporation or Bylaws of the Company or any agreement or document to which the
Company is a party or by which it is bound.
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Article 2.2(a) herein, there are no equity securities, partnership interests or
similar ownership interests of any class of the Company, or any securities
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except for securities the Company owns, directly or
indirectly through one or more subsidiaries, there are no equity securities,
partnership interests or similar ownership interests of any class of any
subsidiary of the Company, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as set
forth in Section 2.2(a), there are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Company or any of its subsidiaries is a party or by which it is bound obligating
the Company or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition, of any shares of capital stock,
partnership interests or similar ownership interests of the Company or any of
its subsidiaries or obligating the Company or any of its subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. There are no registration rights
and, to the knowledge of the Company, as of the date of this Agreement, there
are no voting trusts, proxies or other agreements or understandings (except for
the Company Voting Agreements) with respect to any equity security of any class
of the Company or with respect to any equity security, partnership interest or
similar ownership interest of any class of any of its subsidiaries.
2.4 Authority.
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by the Company's
stockholders and the filing of the Certificate of Merger pursuant to New York,
Washington Law and Texas Law. Votes of the holders of a majority of the
outstanding shares of Company Stock is required for the Company's stockholders
to approve and adopt this Agreement and approve the Merger. This Agreement has
been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and, if applicable, Merger Sub,
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other similar laws and general principles of equity. The execution and
delivery of this Agreement by the Company does not, and the performance of this
Agreement by the Company will not, (i) conflict with or violate the Certificate
of Incorporation or Bylaws of the Company or the equivalent organizational
documents of any of its subsidiaries, (ii) subject to obtaining the approval and
adoption of this Agreement and the approval of the Merger by the Company's
stockholders and compliance with the requirements set forth in Section 2.4(b)
below, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by which its or
any of their respective properties is bound or affected, or (iii) assuming the
receipt of all material consents, waivers and approvals referred to in the last
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sentence of this Section 2.4(a), result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or impair the Company's rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or any of its
subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or its or any of their respective
properties are bound or affected. The Company Schedules list all material
consents, waivers and approvals under any of the Company's or any of its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("GOVERNMENTAL ENTITY"), is required by or with respect to the Company in
connection with the execution and delivery of this Agreement or the consummation
of the Merger, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of New York, the State of Texas and with the
State of Washington, (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings (if any) as may be required under
applicable federal and state securities laws and the securities or antitrust
laws of any foreign country, and (iii) such other consents, authorizations,
filings, approvals and registrations (if any) which if not obtained or made
would not be material to the Company or Parent or have a material adverse effect
on the ability of the parties to consummate the Merger.
2.5 Company Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) of the Company
(the "THE COMPANY FINANCIALS"), (x) was prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, and (y) fairly presented the
consolidated financial position of the Company and its subsidiaries as of and at
the respective dates thereof and the consolidated results of the Company's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments. The balance sheet of the Company
as of the end of its most recent fiscal year and, if the most recent fiscal year
ended more than 90 days before the date of this Agreement, the most recent
fiscal quarter, is hereinafter referred to as the "THE COMPANY BALANCE SHEET."
Except as disclosed in the Company Financials, since the date of the Company
Balance Sheet the Company has no liabilities (absolute, accrued, contingent or
otherwise) of a nature required to be disclosed on a balance sheet or in the
related notes to the consolidated financial statements prepared in accordance
with GAAP which are, individually or in the aggregate, material to the business,
results of operations or financial condition of the Company taken as a whole,
except liabilities (i) provided for in the Company Balance Sheet, or (ii)
incurred since the date of the Company Balance Sheet in the ordinary course of
business consistent with past practices.
2.6 Absence of Certain Changes or Events. Since the date of the Company
Balance Sheet there has not been: (i) any Material Adverse Effect on the
Company, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in respect of, any of
the Company's or any of its subsidiaries' capital stock, or any purchase,
redemption or other acquisition by the Company of any of the Company's capital
stock or any other securities of the Company or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities except
for repurchases from employees following their termination pursuant to the terms
of their pre-existing stock option or purchase agreements, (iii) any split,
combination or reclassification of any of the
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Company's or any of its subsidiaries' capital stock, (iv) any granting by the
Company or any of its subsidiaries of any increase in compensation or fringe
benefits, except for normal increases of cash compensation in the ordinary
course of business consistent with past practice, or any payment by the Company
or any of its subsidiaries of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting by the Company
or any of its subsidiaries of any increase in severance or termination pay or
any entry by the Company or any of its subsidiaries into any currently effective
employment, severance, termination or indemnification agreement or any agreement
the benefits of which are contingent or the terms of which are materially
altered upon the occurrence of a transaction involving the Company of the nature
contemplated hereby, (v) entry by the Company or any of its subsidiaries into
any licensing or other agreement with regard to the acquisition or disposition
of any material Company IP Rights (as defined in Section 2.7) other than
licenses in the ordinary course of business consistent with past practice, (vi)
any material change by the Company in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, or (vii) any
revaluation by the Company of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or accounts
receivable other than in the ordinary course of business.
2.7 Intellectual Property.
(a) To the knowledge of the Company, the Company and its subsidiaries own,
or have the right to use, sell or license all intellectual property necessary or
required for the conduct of their respective businesses as presently conducted
(such intellectual property and the rights thereto are collectively referred to
herein as the "COMPANY IP RIGHTS").
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any of the Company IP Rights to
which the Company or any subsidiary of the Company is a party or by which, to
its knowledge, it is bound or affected, will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any the
Company IP Rights or materially impair the right of the Company, the Surviving
Corporation or Parent to use, sell or license any the Company IP Rights or
portion thereof.
(c) To the knowledge of the Company, the manufacture, marketing, license,
sale or intended use of any product or technology currently licensed or sold or
under development by the Company or any of its subsidiaries does not violate any
license or agreement between the Company or any of its subsidiaries and any
third party nor infringe any intellectual property right of any other party.
(d) There is no pending or, to the knowledge of the Company, threatened
claim or litigation contesting the validity, ownership or right to use, sell,
license or dispose of any the Company IP Rights, nor has the Company received
any written notice asserting that any the Company IP Rights or the proposed use,
sale, license or disposition thereof conflicts or will conflict with the rights
of any other party.
(e) The Company has taken commercially reasonable steps designed to
safeguard and maintain the confidentiality of, and its proprietary rights in,
all the Company IP Rights.
2.8 Compliance; Permits; Restrictions.
(a) Neither the Company nor any of its subsidiaries is, in any material
respect, in conflict with, or in default or violation of (i) any law, rule,
regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which the Company or any of its subsidiaries or any of their
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respective properties is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected. No investigation or review by any
Governmental Entity is pending or, to the Company's knowledge, threatened
against the Company or any of its subsidiaries, nor has any Governmental Entity
indicated an intention to conduct the same. There is no agreement, judgment,
injunction, order or decree binding upon the Company or any of its subsidiaries
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or any of its
subsidiaries, any acquisition of material property by the Company or any of its
subsidiaries or the conduct of business by the Company as currently conducted.
(b) The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to the operation of the business of the Company (collectively, the
"COMPANY PERMITS"). The Company and its subsidiaries are in compliance in all
material respects with the terms of the Company Permits.
(c) The Company has no knowledge of any pending regulatory action of any
sort against the Company, or any contract manufacturer (a "CONTRACT
MANUFACTURER"), of certain of the Company's products by any regulatory agency or
any other duly authorized governmental authority which regulates the health
services and related industries in any jurisdiction which could have a Material
Adverse Effect on the Company or in any material way limit or restrict the
ability of the Company to market its existing products.
2.9 Litigation. There is no pending or, to the knowledge of the Company,
there is no action, suit, proceeding, claim, arbitration or investigation
pending, or as to which the Company or any of its subsidiaries has received any
notice of assertion nor, to the Company's knowledge, is there a threatened
action, suit, proceeding, claim, arbitration or investigation against the
Company or any of its subsidiaries which reasonably would be likely to be
material to the Company, or which in any manner challenges or seeks to prevent,
enjoin, alter or delay any of the transactions contemplated by this Agreement.
As a condition subsequent to the Effective Time and to be met prior to the
Closing Date, the Company shall promptly disclose to Parent all pending
litigation including, to the knowledge of the Company, any action, suit,
proceeding, claim, arbitration or investigation pending that arises prior to the
Closing Date.
2.10 Brokers' and Finders' Fees. The Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
2.11 Agreements, Contracts and Commitments. Except as set forth in the
attached Schedule A, neither the Company nor any of its subsidiaries is a party
to or is bound by:
(a) Any employment or consulting agreement, contract or commitment with
any officer or director level employee or member of the Company's Board of
Directors, other than those that are terminable by the Company or any of its
subsidiaries on no more than thirty (30) days notice without liability or
financial obligation;
(b) Any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
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(c) Any agreement of indemnification or guaranty not entered into in the
ordinary course of business other than indemnification agreements between the
Company or any of its subsidiaries and any of its officers or directors;
(d) Any agreement, contract or commitment containing any covenant limiting
the freedom of the Company or any of its subsidiaries to engage in any line of
business or compete with any person or granting any exclusive distribution
rights;
(e) Any agreement, contract or commitment currently in force relating to
the disposition or acquisition of assets not in the ordinary course of business
or any ownership interest in any corporation, partnership, joint venture or
other business enterprise; or
(f) Any material joint marketing or development agreement.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined herein), has
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the material terms or conditions of any of
the agreements, contracts or commitments to which the Company or any of its
subsidiaries is a party or by which it is bound of the type described in clauses
(a) through (f) above (any such agreement, contract or commitment, a "COMPANY
CONTRACT") in such a manner as would permit any other party to cancel or
terminate any such Company Contract, or would permit any other party to seek
damages, which would be reasonably likely to be material to the Company.
2.12 Change of Control Payments. The Company Schedule B ( set forth each
plan or agreement pursuant to which any amounts may become payable (whether
currently or in the future) to current or former officers or directors of the
Company as a result of or in connection with the Merger.
2.13 Board Approval. The Board of Directors of the Company has, as of the
date of this Agreement, determined (i) that the Merger is fair to, and in the
best interests of the Company and its stockholders, (ii) to propose this
Agreement for approval and adoption by the Company's stockholders and to declare
the advisability of this Agreement, and (iii) to recommend that the stockholders
of the Company approve and adopt this Agreement and approve the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Organization of Parent.
(a) Parent and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; has the corporate power and authority to own, lease and operate
its assets and property and to carry on its business as now being conducted and
as proposed to be conducted; and is duly qualified or licensed to do business
and is in good standing in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except where the failure to be so
qualified would not have a Material Adverse Effect (as defined herein) on
Parent.
(b) Parent has delivered to the Company a true and complete list of all of
Parent's subsidiaries, indicating the jurisdiction of incorporation of each
subsidiary and listing the shareholders of each such subsidiary and the number
of shares held by each such shareholder.
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(c) Parent has delivered or made available to the Company a true and
correct copy of the Articles of Incorporation and Bylaws of Parent and similar
governing instruments of each of its subsidiaries, each as amended to date, and
each such instrument is in full force and effect. Parent is not in violation of
any of the provisions of its Articles of Incorporation or Bylaws or equivalent
governing instruments.
(d) When used in connection with Parent, the term "MATERIAL ADVERSE
EFFECT" means, for purposes of this Agreement, any change, event or effect that
is materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of Parent and its subsidiaries
taken as a whole except for those changes, events and effects that are directly
caused by (i) conditions affecting the United States economy as a whole, or (ii)
conditions affecting the persona security and related industries as a whole, as
a whole, which conditions (in the case of clause (i) or (ii)) do not affect
Parent in a disproportionate manner), or (iii) conditions that in the good faith
judgment of Parent's Board of Directors result principally from the execution or
delivery of this Agreement or the announcement of the pendency of the Merger.
3.2 Parent and Merger Sub Capital Structure.
(a) The authorized capital stock of Parent consists of 500,000,000 shares
of Common Stock, par value $.001 per share, of which all or substantially all of
such 18,234,090 shares of common stock are issued and outstanding, with vested
right to issue approximately 486 million shares prior to the date of the reverse
split, as described in Section 1.3 of this Agreement, as of the date of this
Agreement and 100,000,000 shares of Preferred Stock, par value $.001 per share,
of which zero shares are issued or outstanding as of the date of this Agreement.
All outstanding shares of Parent Common Stock are duly authorized, validly
issued, fully paid and non-assessable and are not subject to preemptive rights
created by statute, the Articles of Incorporation or Bylaws of Parent or any
agreement or document to which Parent is a party or by which it is bound. The
authorized capital stock of Merger Sub consists of one share of Common Stock,
$0.001 par value per share, all of which, as of the date hereof, are issued and
outstanding and are held by Parent. Merger Sub was formed with an Effective Time
of February 25, 2006, for the purpose of consummating the Merger, has no
material assets or liabilities except as necessary for such purpose and has not,
and prior to the Effective Time will not have, conducted any business except as
necessary for such purpose.
(b) There are no commitments or agreements of any character to which
Parent is bound obligating Parent to accelerate the vesting of any Parent stock
option as a result of the Merger.
3.3 Obligations With Respect to Capital Stock. Except as otherwise
disclosed in its annual and quarterly reports as filed with the SEC, there are
no equity securities, partnership interests or similar ownership interests of
any class of Parent, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except for
securities Parent owns, directly or indirectly through one or more subsidiaries,
there are no equity securities, partnership interests or similar ownership
interests of any class of any subsidiary of Parent, or any security exchangeable
or convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in Section 3.2, there are no options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
to which Parent is a party or by which it is bound obligating Parent to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition, of any
shares of capital stock, partnership interests or similar ownership interests of
Parent or obligating Parent to grant, extend, accelerate the vesting of or enter
into any such option, warrant, equity security, call, right, commitment or
agreement.
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There are no registration rights and, to the knowledge of Parent, as of the date
of this Agreement, there are no voting trusts, proxies or other agreements or
understandings with respect to any equity security of any class of Parent or
with respect to any equity security, partnership interest or similar ownership
interest of any class of any of its subsidiaries.
3.4 Authority.
(a) Each of Parent and Merger Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub, subject
only to the filing of the Certificate of Merger pursuant to Texas Law and the
approval by Parent's shareholders of the issuance of shares of Parent Common
Stock issuable under the terms of the Merger. A vote of the holders of a
majority of the outstanding shares of Parent Common Stock is required for
Parent's shareholders to approve the issuance of shares of Parent Common Stock
by virtue of the Merger. This Agreement has been duly executed and delivered by
each of Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes the valid and binding obligation of each of
Parent and Merger Sub, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement by each of
Parent and Merger Sub do not, and the performance of this Agreement by each of
Parent and Merger Sub will not (i) conflict with or violate the Articles of
Incorporation or Bylaws of Parent or the Certificate of Incorporation or Bylaws
of Merger Sub or the equivalent organizational documents of any of Parent's
other subsidiaries, (ii) subject to obtaining the approval of Parent's
shareholders of the issuance of shares of Parent Common Stock by virtue of the
Merger and compliance with the requirements set forth in Section 3.4(b) below,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Parent (or Merger Sub) or by which its or any of their respective
properties is bound or affected, or (iii) assuming the receipt of all material
consents, waivers and approvals referred to in the last sentence of this Section
3.4(a), result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair
Parent's rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Parent (including Merger Sub) pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent (including
Merger Sub) is a party or by which Parent or its or any of its respective
properties are bound or affected. The Parent Schedules list all material
consents, waivers and approvals under any of Parent's agreements, contracts,
licenses or leases required to be obtained in connection with the consummation
of the transactions contemplated hereby.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Parent or Merger Sub in connection with the execution and delivery of
this Agreement or the consummation of the Merger, except for (i) the filing of
the Certificate of Merger with the Secretary of State of the State of Texas and
that with the State of Washington on behalf of the Merger Sub, (iii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings (if any) as may be required under applicable federal and state
securities laws and the securities or antitrust laws of any foreign country, and
(v) such other consents, authorizations, filings, approvals and registrations
(if any) which if not obtained or made would not be material to Parent or the
Company or have a material adverse effect on the ability of the parties to
consummate the Merger.
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3.5 Parent SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, with the exception of its most recent Form
10-KSB for the year ended 2005, reports and documents required to be filed with
the Securities and Exchange Commission (the "SEC") since inception, and has made
available to the Company such forms, reports and documents in the form filed
with the SEC. All such required forms, reports and documents (including those
that Parent may file subsequent to the date hereof) are referred to herein as
the "PARENT SEC REPORTS." As of their respective dates, the Parent SEC Reports
(i) were prepared in all material respects with the requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Parent 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 Parent's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in Parent SEC Reports (the "PARENT
FINANCIALS"), including any Parent SEC Reports filed after the date hereof until
the Closing, (x) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (y) was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-QSB under the Exchange Act) and (z) fairly presented the financial position
of Parent as at the respective dates thereof and the results of Parent's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments. The balance sheet of Parent
contained in Parent SEC Reports as of June 30, 2005 is hereinafter referred to
as the "PARENT BALANCE SHEET." Except as disclosed in the Parent Financials,
since the date of the Parent Balance Sheet Parent has no liabilities (absolute,
accrued, contingent or otherwise) of a nature required to be disclosed on a
balance sheet or in the related notes to the consolidated financial statements
prepared in accordance with GAAP which are, individually or in the aggregate,
material to the business, results of operations or financial condition of Parent
and its subsidiaries taken as a whole, except liabilities (i) provided for in
the Parent Balance Sheet, or (ii) incurred since the date of the Parent Balance
Sheet in the ordinary course of business consistent with past practices.
3.6 Absence of Certain Changes or Events. Since the date of Parent Balance
Sheet there has not been: (i) any Material Adverse Effect on Parent, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of Parent's capital
stock, or any purchase, redemption or other acquisition by Parent of any of
Parent's capital stock or any other securities of Parent or its subsidiaries or
any options, warrants, calls or rights to acquire any such shares or other
securities except for repurchases from employees following their termination
pursuant to the terms of their pre-existing stock option or purchase agreements,
(iii) any split, combination or reclassification of any of Parent's capital
stock, (iv) any granting by Parent of any increase in compensation or fringe
benefits, except for normal increases of cash compensation in the ordinary
course of business consistent with past practice, or any payment by Parent of
any bonus, except for bonuses made in the ordinary course of business consistent
with past practice, or any granting by Parent of any increase in severance or
termination pay or any entry by Parent into any currently effective employment,
severance, termination or indemnification agreement or any agreement the
benefits of which are contingent or the terms of which are materially altered
upon the occurrence of a transaction involving Parent of the nature contemplated
hereby, (v) entry by Parent into any licensing or other agreement with
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regard to the acquisition or disposition of any material Parent IP Rights (as
defined in Section 3.8) other than licenses in the ordinary course of business
consistent with past practice, (vi) any material change by Parent in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP, or (vii) any revaluation by Parent of any of its assets,
including, without limitation, writing down the value of capitalized inventory
or writing off notes or accounts receivable other than in the ordinary course of
business.
3.7 Tax.
(a) Tax Returns and Audits.
(i) Parent and each of its subsidiaries have timely filed all Returns
relating to Taxes required to be filed by Parent and each of its subsidiaries,
except such Returns which are not material to Parent, and have paid all Taxes
shown to be due on such Returns.
(ii) Parent and each of its subsidiaries as of the Effective Time will
have withheld and paid over, as appropriate, with respect to its employees all
federal and state, local and/or foreign income taxes, FICA, FUTA and other Taxes
required to be withheld.
(iii) Parent has not been delinquent in the payment of any Tax nor is
there any Tax deficiency outstanding which are not material to Parent, proposed
or assessed against Parent, nor has Parent executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of Parent is presently in
progress, nor has Parent been notified of any request for such an audit or other
examination.
(v) No adjustment relating to any Returns filed by Parent has been
proposed formally or informally by any Tax authority to Parent or any
representative thereof and, to the knowledge of Parent, no basis exists for any
such adjustment which would be material to Parent.
(vi) Parent has no liability for unpaid Taxes which has not been accrued
for or reserved on the Parent Balance Sheet, whether asserted or unasserted,
contingent or otherwise, which is material to Parent, and the Company has not
incurred any liability for Taxes other than in the ordinary course of business
since the date of the Company Balance Sheet.
(vii) None of Parent's assets are treated as "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(viii) There is no contract, agreement, plan or arrangement, including but
not limited to the provisions of this Agreement, covering any employee or former
employee of Parent that, individually or collectively, could give rise to the
payment of any amount that would not be deductible pursuant to Sections 280G or
404 of the Code.
(ix) Parent has not filed any consent agreement under Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by Parent.
(x) Parent is not, and has not been at any time, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
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(xi) No power of attorney that is currently in force has been granted with
respect to any matter relating to Taxes payable by Parent.
(xii) Parent is not, nor has it been, a member of a consolidated, combined
or affiliated group or is a party to or affected by any tax-sharing or
allocation agreement or arrangement.
(xiii) The Parent Schedules list (y) any Tax exemption, Tax holiday or
other Tax-sparing arrangement that Parent has in any jurisdiction, including the
nature, amount and lengths of such Tax exemption, Tax holiday or other
Tax-sparing arrangement and (z) any expatriate tax programs or policies
affecting Parent. Each of Parent and its subsidiaries is in full compliance with
all terms and conditions of any Tax exemption, Tax holiday or other Tax-sparing
arrangement or order of any Governmental Entity and the consummation of the
transactions contemplated hereby will not have any adverse effect on the
continued validity and effectiveness of any such Tax exemption, Tax holiday or
other Tax-sparing arrangement or order.
3.8 Intellectual Property.
(a) To the knowledge of Parent, the Parent and its subsidiaries own, or
have the right to use, sell or license all intellectual property necessary or
required for the conduct of their respective businesses as presently conducted
(such intellectual property and the rights thereto are collectively referred to
herein as the "PARENT IP Rights").
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any of the Parent IP Rights to
which the Parent or any subsidiary of the Parent is a party or by which, to its
knowledge, it is bound or affected, will not cause the forfeiture or termination
or give rise to a right of forfeiture or termination of any Parent IP Rights or
materially impair the right of Parent, the Surviving Corporation or the Company
to use, sell or license any Parent IP Rights or portion thereof.
(c) To the knowledge of Parent, the manufacture, marketing, license, sale
or intended use of any product or technology currently licensed or sold or under
development by Parent does not violate any license or agreement between Parent
and any third party or infringe any intellectual property right of any other
party.
(d) There is no pending or, to the knowledge of Parent, threatened claim
or litigation contesting the validity, ownership or right to use, sell, license
or dispose of any Parent IP Rights, nor has Parent received any written notice
asserting that any Parent IP Rights or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party.
(e) Parent has taken commercially reasonable steps designed to safeguard
and maintain the confidentiality of, and its proprietary rights in, all Parent
IP Rights.
3.9 Compliance; Permits; Restrictions.
(a) Parent is not, in any material respect, in conflict with, or in
default or violation of (i) any law, rule, regulation, order, judgment or decree
applicable to Parent or by which Parent or any of its is bound or affected, or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent is a party
or by which Parent or its properties is bound or affected. No investigation or
review by any Governmental Entity is pending or, to Parent's knowledge,
threatened against Parent, nor has any Governmental Entity indicated an
intention to conduct the same. There is no agreement, judgment, injunction,
order or decree binding upon Parent which has or could reasonably be expected to
have the effect of prohibiting or materially impairing any business practice of
Parent, any acquisition of material property by Parent or the conduct of
business by Parent as currently conducted.
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(b) Parent and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to the operation of the business of Parent (collectively, the "PARENT
PERMITS"). Parent and its subsidiaries are in compliance in all material
respects with the terms of the Parent Permits.
(c) Related Matters. The Parent has no knowledge of any pending regulatory
action of any sort against the Parent by any regulatory agency or any other duly
authorized governmental authority which regulates the health services and/or
related industries which could have a Material Adverse Effect on the Parent, or
in any material way limit or restrict the ability of the Parent to market its
existing products.
3.10 Litigation. There is no action, suit, proceeding, claim, arbitration
or investigation pending, or as to which Parent has received any notice of
assertion nor, to Parent's knowledge, is there a threatened action, suit,
proceeding, claim, arbitration or investigation against Parent which reasonably
would be likely to be material to Parent, or which in any manner challenges or
seeks to prevent, enjoin, alter or delay any of the transactions contemplated by
this Agreement.
3.11 Brokers' and Finders' Fees. Parent has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.12 Employee Benefit Plans and Employment Matters.
(a) Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
(i) "PARENT EMPLOYEE PLAN" means any plan, program, policy, practice, contract,
agreement or other arrangement providing for compensation, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits or remuneration of any kind, whether written
or unwritten or otherwise, funded or unfunded, including without limitation,
each "employee benefit plan," within the meaning of Section 3(3) of ERISA which
is or has been maintained, contributed to, or required to be contributed to, by
Parent or any Affiliate for the benefit of any Parent Employee;
(ii) "PARENT EMPLOYEE" means any current, former, or retired employee, officer,
or director of Parent or any Affiliate;
(iii) "PARENT EMPLOYEE AGREEMENT" means each management, employment, severance,
consulting, relocation, repatriation, expatriation, visas, work permit or
similar agreement or contract between Parent or any Affiliate and any Employee
or consultant;
(iv) "PARENT PENSION PLAN" means each Parent Employee Plan which is an "employee
pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule. Parent does not have any plan or commitment to establish any
new Parent Employee Plan, to modify any Parent Employee Plan or Parent Employee
Agreement (except to the extent required by law or to conform any such Parent
Employee Plan or Parent Employee Agreement to the requirements of any applicable
law, in each case as previously disclosed to the Company in writing, or as
required by this Agreement), or to enter into any Parent Employee Plan or Parent
Employee Agreement, nor does it have any intention or commitment to do any of
the foregoing.
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(c) Documents. Parent has provided to the Company: (i) correct and
complete copies of all documents embodying each Parent Employee Plan and each
Parent Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Parent Employee Plan; (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each Parent Employee Plan or related trust; (iv) if the Parent Employee Plan is
funded, the most recent annual and periodic accounting of Parent Employee Plan
assets; (v) the most recent summary plan description together with the summary
of material modifications thereto, if any, required under ERISA with respect to
each Parent Employee Plan; (vi) all IRS determination, opinion, notification and
advisory letters, and rulings relating to Parent Employee Plans and copies of
all applications and correspondence to or from the IRS or the DOL with respect
to any Parent Employee Plan; (vii) all material written agreements and contracts
relating to each Parent Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts; (viii) all communications material to any Parent Employee relating to
any Parent Employee Plan and any proposed Parent Employee Plans, in each case,
relating to any amendments, terminations, establishments, increases or decreases
in benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to Parent; (ix) all COBRA forms and
related notices; and (x) all registration statements and prospectuses prepared
in connection with each Parent Employee Plan.
(d) Parent Employee Plan Compliance. (i) Parent has, to its knowledge,
performed in all material respects all obligations required to be performed by
it under, is not in default or violation of, and has no knowledge of any default
or violation by any other party to each Parent Employee Plan, and each Parent
Employee Plan has been established and maintained in all material respects in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA or the Code;
(ii) each Parent Employee Plan intended to qualify under Section 401(a) of the
Code and each trust intended to qualify under Section 501(a) of the Code has
either received a favorable determination letter from the IRS with respect to
each such Plan as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a determination
letter and make any amendments necessary to obtain a favorable determination;
(iii) no "prohibited transaction," within the meaning of Section 4975 of the
Code or Sections 406 and 407 of ERISA, and not otherwise exempt under Section
408 of ERISA, has occurred with respect to any Parent Employee Plan; (iv) to
Parent's knowledge, there are no actions, suits or claims pending or threatened
or reasonably anticipated (other than routine claims for benefits) against any
Parent Employee Plan or against the assets of any Parent Employee Plan; (v) each
Parent Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to Parent or
any of its Affiliates (other than ordinary administration expenses typically
incurred in a termination event); (vi) to Parent's knowledge, there are no
audits, inquiries or proceedings pending or threatened by the IRS or DOL with
respect to any Parent Employee Plan; and (vii) to Parent's knowledge, neither
Parent nor any Affiliate is subject to any penalty or tax with respect to any
Parent Employee Plan under Section 402(i) of ERISA or Sections 4975 through 4980
of the Code.
(e) Parent Pension Plans. Parent does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Parent Pension Plan which is subject to Title IV of ERISA or Section 412 of the
Code.
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(f) Parent Multiemployer Plans. At no time has Parent contributed to or
been requested to contribute to any Parent Multiemployer Plan.
(g) No Post-Employment Obligations. No Parent Employee Plan provides, or
has any liability to provide, retiree life insurance, retiree health or other
retiree employee welfare benefits to any person for any reason, except as may be
required by COBRA or other applicable statute, and Parent has never represented,
promised or contracted (whether in oral or written form) to any Parent Employee
(either individually or to Parent Employees as a group) or any other person that
such Parent Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) Health Care Continuation Obligations. Neither Parent nor any Affiliate
has, prior to the Effective Time, and in any material respect, violated any of
the health care continuation requirements of COBRA, the requirements of FMLA or
any similar provisions of state law applicable to its Employees.
(i) Effect of Transaction.
(i) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Parent
Employee Plan, Parent Employee Agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Parent Employee.
(ii) No payment or benefit which will or may be made by Parent or its
Affiliates with respect to any Parent Employee as a result of the transactions
contemplated by this Agreement will be characterized as an "excess parachute
payment," within the meaning of Section 280G(b)(1) of the Code.
(j) Employment Matters. To Parent's knowledge, Parent (i) is in compliance
in all material respects with all applicable foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with respect to
Parent Employees; (ii) has withheld all amounts required by law or by agreement
to be withheld from the wages, salaries and other payments to Parent Employees;
(iii) is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; and (iv) is not liable for any
material payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no pending, threatened or reasonably anticipated
claims or actions against Parent under any worker's compensation policy or
long-term disability policy. To Parent's knowledge, no Parent Employee has
violated any employment contract, nondisclosure agreement or noncompetition
agreement by which such employee is bound due to such employee being employed by
Parent and disclosing to Parent or using trade secrets or proprietary
information of any other person or entity.
3.13 Absence of Liens and Encumbrances. Parent and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the Parent Financials
and except for liens for taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which would not be material to Parent.
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3.14 Labor Matters. No work stoppage or labor strike against Parent is
pending, threatened or reasonably anticipated. Parent does not have knowledge of
any activities or proceedings of any labor union to organize any Employees.
There are no actions, suits, claims, labor disputes or grievances pending, or,
to the knowledge of Parent, threatened or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to Parent. Neither Parent has
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act. Parent is not presently, nor has it been in the past, a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Parent Employees and no collective bargaining agreement is being negotiated
by Parent. Parent and its subsidiaries are and have been in compliance in all
material respects with all applicable laws regarding employment practices, terms
and conditions of employment, and wages and hours (including, without
limitation, WARN or any similar state or local law).
3.15 Agreements, Contracts and Commitments. Except as otherwise disclosed,
Parent is not a party to or is bound by:
(a) Any employment or consulting agreement, contract or commitment with
any officer or director level employee or member of Parent's Board of Directors,
other than those that are terminable by Parent on no more than thirty days
notice without liability or financial obligation;
(b) Any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) Any agreement of indemnification or guaranty not entered into in the
ordinary course of business other than indemnification agreements between Parent
and any of its officers or directors;
(d) Any agreement, contract or commitment containing any covenant limiting
the freedom of Parent to engage in any line of business or compete with any
person or granting any exclusive distribution rights;
(e) Any agreement, contract or commitment currently in force relating to
the disposition or acquisition of assets not in the ordinary course of business
or any ownership interest in any corporation, partnership, joint venture or
other business enterprise; or
(f) Any material joint marketing or development agreement. Parent, nor to
Parent's knowledge any other party to a Parent Contract (as defined below), has
breached, violated or defaulted under, or received notice that it has breached
violated or defaulted under, any of the material terms or conditions of any of
the agreements, contracts or commitments to which Parent is a party or by which
it is bound of the type described in clauses (a) through (f) above (any such
agreement, contract or commitment, a "PARENT CONTRACT") in such a manner as
would permit any other party to cancel or terminate any such Parent Contract, or
would permit any other party to seek damages, which would be reasonably likely
to be material to Parent.
3.16 Change of Control Payments. There is no plan or agreement pursuant to
which any amounts may become payable (whether currently or in the future) to
current or former officers or directors of Parent as a result of or in
connection with the Merger.
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3.17 Board Approval. The Board of Directors of Parent and Merger Sub have,
as of the date of this Agreement, determined that the Merger is fair to, and in
the best interests of their respective shareholders.
ARTICLE IV
CONDUCT PRECEDENT TO THE EFFECTIVE TIME
4.1 Conduct of Business. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Closing Date, the Company (which for the purposes of this
Article 4 shall include the Company and each of its subsidiaries) and Parent
(which for the purposes of this Article 4 shall include Parent and each of its
subsidiaries) agree, except to the extent that the other of them shall otherwise
consent in writing, to carry on its business diligently and in accordance with
good commercial practice and to carry on its business in the usual, regular and
ordinary course, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, to pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, to pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to preserve intact its
present business organization, keep available the services of its present
officers and employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. In addition, each of the Company and Parent will promptly notify the
other of any material event involving its business or operations. No information
or knowledge obtained in any investigation will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger. In addition, except as
permitted by the terms of this Agreement, without the prior written consent of
the other, neither the Company nor Parent shall do any of the following, and
neither the Company nor Parent shall permit its subsidiaries to do any of the
following, nor take, or cause or permit to be taken, any other action that would
be reasonably likely to have the effect of causing any of its respective
representatives or warranties contained in this Agreement to become untrue if
such representation or warranty were deemed made at the time such action is
taken:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize cash
payments in exchange for any options granted under any of such plans, without
authorization of the Board of Directors of Parent or the Board of Directors of
Company, as the case may be;
(b) Grant any severance or termination pay to any officer or employee
except payments in amounts consistent with policies and past practices or
pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to the other, or adopt any new
severance plan, without authorization of the Board of Directors of Parent or the
Board of Directors of Company, as the case may be;
(c) Transfer or license to any person or entity or otherwise extend, amend
or modify in any material respect any rights to the Company IP Rights or the
Parent IP Rights, as the case may be, or enter into grants to future patent
rights, other than in the ordinary course of business consistent with past
practice, without authorization of the Board of Directors of Parent or the Board
of Directors of Company, as the case may be;
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(d) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock or split,
combine or reclassify any capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any
capital stock, without authorization of the Board of Directors of Parent or the
Board of Directors of Company, as the case may be;
(e) Repurchase or otherwise acquire, directly or indirectly, any shares of
capital stock except pursuant to rights of repurchase of any such shares under
any employee, consultant or director stock plan existing on the date hereof,
without authorization of the Board of Directors of Parent or the Board of
Directors of Company, as the case may be;
(f) Issue, deliver, sell, authorize or propose the issuance, delivery or
sale of, any shares of capital stock or any securities convertible into shares
of capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of capital
stock, or enter into other agreements or commitments of any character obligating
it to issue any such shares or convertible securities, other than (i) the
issuance of shares of Company Stock or Parent Common Stock, as the case may be,
pursuant to the exercise of stock options therefore outstanding as of the date
of this Agreement, (ii) the grant of options to purchase shares of Company Stock
or Parent Common Stock, as the case may be, to be granted at fair market value
in the ordinary course of business, consistent with past practice and in
accordance with stock option plans existing on the date hereof, (iii) shares of
Company Stock or Parent Common Stock, as the case may be, issuable upon the
exercise of the options referred to in clause (ii), and (iv) shares of Company
Stock or Parent Common Stock, as the case may be, issuable to participants in
the Parent Purchase Plan or the Company Purchase Plan consistent with past
practice and the terms thereof, without authorization of the Board of Directors
of Parent or the Board of Directors of Company, as the case may be;
(g) Cause, permit or propose any amendments to any charter document or
Bylaw (or similar governing instruments of any subsidiaries), except as required
for the implementation of this Agreement;
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a material portion of the assets of, or by
any other manner, any business or any corporation, partnership interest,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of the Company or Parent, as the case may be, or
enter into any material joint ventures, strategic partnerships or alliances,
without authorization of the Board of Directors of Parent or the Board of
Directors of Company, as the case may be;
(i) Sell, lease, license, encumber or otherwise dispose of any properties
or assets which are material, individually or in the aggregate, to the business
of the Company or Parent, as the case may be, except in the ordinary course of
business consistent with past practice, without authorization of the Board of
Directors of Parent or the Board of Directors of Company, as the case may be;
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(j) Incur any indebtedness for borrowed money (other than ordinary course
trade payables or pursuant to existing credit facilities in the ordinary course
of business) or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire debt securities of the Company or
Parent, as the case may be, or guarantee any debt securities of others, without
authorization of the Board of Directors of Parent or the Board of Directors of
Company, as the case may be;
(k) Adopt or amend any employee benefit or employee stock purchase or
employee option plan, or enter into any employment contract, pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates of its officers or employees other than in the ordinary
course of business, consistent with past practice, or change in any material
respect any management policies or procedure, without authorization of the Board
of Directors of Parent or the Board of Directors of Company, as the case may be;
(l) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business,
without authorization of the Board of Directors of Parent or the Board of
Directors of Company, as the case may be;
(m) Make any grant of exclusive rights to any third party, without
authorization of the Board of Directors of Parent;
(n) Take any action that would be reasonably likely to interfere with
Parent's ability to account for the Merger as a pooling of interests, except as
by mutual Agreement between the parties hereto; or
(o) Agree in writing or otherwise to take any of the actions described in
Article 4 (a) through (n) above, provided however that nothing in this Article
IV shall be construed to limit or impair Parent's ability or willingness to sell
its securities to private investors prior to the Binding Date.
4.2 OTCBB Quotation. Parent shall continue the quotation of its Common
Stock on the OTCBB during the term of this Agreement. Parent shall take all
reasonable steps to maintain the quotation of its Common Stock on the OTCBB.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Other Filings; Board Recommendations.
(a) As promptly as practicable after the date of this Agreement, the
Company and Parent will prepare and file any other filings required under the
Exchange Act, the Securities Act or any other Federal, foreign or Blue Sky laws
relating to the Merger and the transactions contemplated by this Agreement (the
"OTHER FILINGS"). Each of the Company and Parent will notify the other promptly
upon the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff or any other government officials.
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5.2 Confidentiality. As used in this Agreement, "Confidential Information"
means all nonpublic information disclosed by the one party or its agents to the
other or that, given the nature of the information or the circumstances
surrounding its disclosure, reasonably should be considered as confidential or
otherwise provided in connection with this Agreement. Confidential Information
includes, without limitation (i) nonpublic information relating the Company's,
Parent's or Merger Sub's business, technology, customers, business plans,
promotional and marketing activities, finances and other business affairs, and
(ii) information provided by one party to the other party that is not in the
public domain. The parties to this Agreement may use Confidential Information
only in pursuance of its consummation of this Agreement. Except as expressly
provided in this Agreement, each party will not disclose Confidential
Information to any person or entity without the other party's prior written
consent. Each party will take all reasonable measures to avoid disclosure,
dissemination or unauthorized use of Confidential Information, including, at a
minimum, those measures it takes to protect its own confidential information of
a similar nature.
5.3 No Solicitation.
(a) Restrictions on Parent.
(i) From and after the date of this Agreement until the earlier of the
Closing Date or termination of this Agreement pursuant to its terms, Parent and
its subsidiaries shall not,and will instruct their respective directors,
officers, employees, representatives, investment bankers, agents and affiliates
not to, directly or indirectly, (i) solicit or knowingly encourage submission
of, any proposals or offers by any person, entity or group (other than the
Company and its affiliates, agents and representatives), or (ii) participate in
any discussions or negotiations with, or disclose any non-public information
concerning Parent to, or afford any access to the properties, books or records
of Parent to, or otherwise assist or facilitate, or enter into any agreement or
understanding with, any person, entity or group (other than the Company and its
affiliates, agents and representatives), in connection with any Acquisition
Proposal with respect to Parent. Parent will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. For the purposes of this
Agreement, an "ACQUISITION PROPOSAL" with respect to an entity means any
proposal or offer relating to (i) any merger, consolidation, sale of substantial
assets or similar transactions involving the entity or any subsidiaries of the
entity (other than sales of assets or inventory in the ordinary course of
business or as permitted under the terms of this Agreement), (ii) sale of 15% or
more of the outstanding shares of capital stock of the entity (including without
limitation by way of a tender offer or an exchange offer), (iii) the acquisition
by any person of beneficial ownership or a right to acquire beneficial ownership
of, or the formation of any "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) which beneficially owns,
or has the right to acquire beneficial ownership of, 15% or more of the then
outstanding shares of capital stock of the entity (except for acquisitions for
passive investment purposes only in circumstances where the person or group
qualifies for and files a Schedule 13G with respect thereto and only for so long
as such person or group continues to be eligible to report its beneficial
ownership of such capital stock on Schedule 13G); or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing. Parent will immediately cease any
and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. Parent will (i)
notify the Company as promptly as practicable if any inquiry or proposal is made
or any information or access is requested in connection with an Acquisition
Proposal or potential Acquisition Proposal and (ii) as promptly as practicable
notify the Company of the significant terms and conditions of any such
Acquisition Proposal. In addition, subject to the other provisions of this
Section 5.3(a), from and after the date of this Agreement until the earlier of
the Effective Time and termination of this Agreement pursuant to its terms,
Parent and its subsidiaries will not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, make or authorize any public
statement, recommendation or solicitation in support of any Acquisition Proposal
made by any person, entity or group (other than the Company); provided, however,
that nothing herein shall prohibit Parent's Board of Directors from taking and
disclosing to Parent's shareholders a position with respect to a tender offer
pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
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(ii) Notwithstanding the provisions of paragraph (a)(i) above, prior to
the Effective Time, Parent may, to the extent the Board of Directors of Parent
determines, in good faith, after consultation with outside legal counsel, that
the Board's fiduciary duties under applicable law require it to do so,
participate in discussions or negotiations with, and, subject to the
requirements of paragraph (a)(iii), below, furnish information to any person,
entity or group after such person, entity or group has delivered to Parent in
writing, an unsolicited bona fide Acquisition Proposal which the Board of
Directors of Parent in its good faith reasonable judgment determines, after
consultation with its independent financial advisors, would result in a
transaction more favorable than the Merger to the stockholders of Parent (a
"PARENT SUPERIOR PROPOSAL"). In addition, notwithstanding the provisions of
paragraph (a)(i) above, in connection with a possible Acquisition Proposal,
Parent may refer any third party to this Section 5.3(a) or make a copy of this
Section 5.3(a) available to a third party.
(b) Restrictions on the Company.
From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to its terms, the
Company and its subsidiaries will not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, (i) solicit or knowingly encourage
submission of, any proposals or offers by any person, entity or group (other
than Parent and its affiliates, agents and representatives), or (ii) participate
in any discussions or negotiations with, or disclose any non-public information
concerning the Company or any of its subsidiaries to, or afford any access to
the properties, books or records of the Company or any of its subsidiaries to,
or otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than Parent and its affiliates, agents
and representatives), in connection with any Acquisition Proposal with respect
to the Company. The Company will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. The Company will (i) notify Parent as
promptly as practicable if any inquiry or proposal is made or any information or
access is requested in connection with an Acquisition Proposal or potential
Acquisition Proposal and (ii) as promptly as practicable notify Parent of the
significant terms and conditions of any such Acquisition Proposal. In addition,
subject to the other provisions of this Section 5.3(b), from and after the date
of this Agreement until the earlier of the Effective Time and termination of
this Agreement pursuant to its terms, the Company and its subsidiaries will not,
and will instruct their respective directors, officers, employees,
representatives, investment bankers, agents and affiliates not to, directly or
indirectly, make or authorize any public statement, recommendation or
solicitation in support of any Acquisition Proposal made by any person, entity
or group (other than Parent); provided, however, that nothing herein shall
prohibit the Company's Board of Directors from taking and disclosing to the
Company's stockholders a position with respect to a tender offer pursuant to
Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
5.4 Public Disclosure. Parent and the Company will consult with each other
before issuing any press release or otherwise making any public statement with
respect to the Merger, this Agreement or an Acquisition Proposal and will not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange or Nasdaq.
5.5 Legal Requirements. Each of Parent, Merger Sub and the Company will
use its respective reasonable commercial efforts to take all actions necessary
or desirable to comply promptly with all legal requirements which may be imposed
on them with respect to the consummation of the transactions contemplated by
this Agreement (including furnishing all information required in connection with
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approvals by or filings with any Governmental Entity, and prompt resolution of
any litigation prompted hereby) and will promptly cooperate with and furnish
information to any party hereto necessary in connection with any such filings
with or investigations by any Governmental Entity, and any other such
requirements imposed upon any of them or their respective subsidiaries in
connection with the consummation of the transactions contemplated by this
Agreement. Parent will use its commercially reasonable efforts to take such
steps as may be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable to the issuance of Parent Common Stock
pursuant hereto. The Company will use its commercially reasonable efforts to
assist Parent as may be necessary to comply with the securities and blue sky
laws of all jurisdictions which are applicable in connection with the issuance
of Parent Common Stock pursuant hereto.
5.6 Third Party Consents. As soon as practicable following the date
hereof, Parent and the Company will each use its commercially reasonable efforts
to obtain all material consents, waivers and approvals under any of its or its
subsidiaries' agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated hereby.
5.7 Notification of Certain Matters. Parent and Merger Sub will give
prompt notice to the Company, and the Company will give prompt notice to Parent,
of the occurrence, or failure to occur, of any event, which occurrence or
failure to occur would be reasonably likely to cause (a) any representation or
warranty contained in this Agreement and made by it to be untrue or inaccurate
in any material respect at any time from the date of this Agreement to the
Effective Time such that the conditions set forth in Section 6.2(a) or 6.3(a),
as the case may be, would not be satisfied as a result thereof or (b) any
material failure of Parent and Merger Sub or the Company, as the case may be, or
of any officer, director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement. Notwithstanding the above, the delivery of any notice
pursuant to this section will not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
5.8 Reasonably Commercial Efforts and Further Assurances. Subject to the
respective rights and obligations of Parent and the Company under this
Agreement, each of the parties to this Agreement will use its reasonably
commercial efforts to effectuate the Merger and the other transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement; provided that neither Parent nor the Company nor
any subsidiary or affiliate thereof will be required to agree to any divestiture
by itself or any of its affiliates of shares of capital stock or of any
business, assets or property, or the imposition of any material limitation on
the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties and stock. Subject to the foregoing, each
party hereto, at the reasonable request of another party hereto, will execute
and deliver such other instruments and do and perform such other acts and things
as may be necessary or desirable for effecting completely the consummation of
the transactions contemplated hereby.
5.9 Board of Directors and Certain Officers of the Combined Company.
(a) The Board of Directors of Parent will take all actions necessary to
cause the Board of Directors of Parent and the Surviving Corporation,
immediately after the Effective Time, to consist of the three (3) persons named
in Section 1.5 hereof (the "COMPANY DESIGNEES"). If, prior to the Effective
Time, any of the Company Designees or the Parent's designees shall decline or be
unable to serve as a director of Parent or the Surviving Corporation, the
Company (if such person was designated by the Company) shall designate another
person to serve in such person's stead, which person shall be reasonably
acceptable to the other party.
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(b) The Board of Directors of Parent will take all actions necessary to
cause the officers of Parent and the Surviving Corporation, immediately after
the Effective Time, to include the persons named in Section 1.5 hereof.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder and Shareholder Approval. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the stockholders of the Company and the
Merger Sub.
(b) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
6.2 Additional Conditions to Obligations of the Company. The obligation of
the Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall have been true and
correct in all material respects as of the date of this Agreement. In addition,
the representations and warranties of Parent and Merger Sub contained in this
Agreement shall be true and correct in all material respects on and as of the
Effective Time except for changes contemplated by this Agreement and except for
those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such particular
date), with the same force and effect as if made on and as of the Effective
Time, except in such cases (other than the representations in Sections 3.2, 3.3
and 3.19) where the failure to be so true and correct would not have a Material
Adverse Effect on Parent. The Company shall have received a certificate with
respect to the foregoing signed on behalf of Parent by the Chairman of the Board
of Directors of Parent. Such certificate shall also certify the about of
liabilities incurred by Parent from July 1, 2005 until the Closing Date, which
amount of liabilities shall be acceptable to the Company, in its sole
discretion.
(b) Agreements and Covenants. Parent and Merger Sub shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them on or prior to the
Effective Time, and the Company shall have received a certificate to such effect
signed on behalf of Parent by the Chief Executive Officer and the Chief
Financial Officer of Parent.
(c) Legal Opinion. The Company shall have received the legal opinion from
The Otto Law Group, PLLC, legal counsel to Parent, opining, in principal part,
that Parent and Merger Sub are validly existing and duly organized in the State
of Texas and the State of Washington and that all shares of Preferred Stock to
be issued by Parent pursuant to this Agreement is validly existing, duly
authorized and non-assessable.
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(d) Material Adverse Effect. No Material Adverse Effect with respect to
Parent shall have occurred since the date of this Agreement.
(e) Appointment of Directors. The persons named in Section hereof shall
have been appointed to the Board of Directors of the Company effective not later
than the Effective Time as evidenced by way of resolution of the Board of
Directors of Parent in a form acceptable to the Company in the Company's sole
discretion and be the only directors of Parent at such time.
(f) Liabilities. Parent and Company shall agree upon an acceptable level
of liabilities to exist as of the Closing Date of this Merger.
(g) Certificate of Designation. The Company shall have approved in writing
the form of Certificate of Designation containing the rights and preferences of
the shares of Preferred Stock, if any, to be issued to the Company pursuant to
this Agreement, which Certificate of Designation shall be filed with the
Secretary of State of the State of Texas prior to the Effective Time.
(h) Certificate of Merger. The Company shall have approved in writing the
form of Certificate of Merger which shall, pursuant to this Agreement, be filed
with the Secretary of State of the State of Texas and the State of Washington.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. The representations and warranties of
the Company contained in this Agreement shall have been true and correct in all
material respects as of the date of this Agreement. In addition, the
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects on and as of the Effective Time
except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such particular date), with the
same force and effect as if made on and as of the Effective Time, except in such
cases (other than the representations in Sections 2.2, 2.3 and 2.19) where the
failure to be so true and correct would not have a Material Adverse Effect on
the Company. Parent shall have received a certificate with respect to the
foregoing signed on behalf of the Company by the President and Chief Executive
Officer and the Chief Financial Officer of the Company.
(b) Agreements and Covenants. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time, and the Parent shall have received a certificate to such effect signed on
behalf of the Company by the President and Chief Executive Officer and the Chief
Financial Officer of the Company.
(c) Material Adverse Effect. No Material Adverse Effect with respect to
the Company shall have occurred since the date of this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of the Merger by
the stockholders of the Company or the approval of the issuance of Parent Common
Stock in connection with the Merger by the shareholders of Parent:
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(a) by mutual written consent duly authorized by the Boards of Directors
of Parent and the Company;
(b) by either the Company or Parent if the Merger shall not have been
consummated by June 30, 2006, provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a breach of this Agreement;
(c) by either the Company or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action (an "ORDER"), in any
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree or ruling is final and
nonappealable;
(d) by either the Company or Parent if the required approvals of the
stockholders of the Company or the shareholders of Parent contemplated by this
Agreement shall not have been obtained by reason of the failure to obtain the
required vote upon a vote taken at a meeting of stockholders or shareholders, as
the case may be, duly convened therefor or at any adjournment thereof (provided
that the right to terminate this Agreement under this Section 7.1(d) shall not
be available to any party where the failure to obtain shareholder or stockholder
approval of such party shall have been caused by the action or failure to act of
such party in breach of this Agreement);
(e) by Parent, if the Board of Directors of the Company recommends another
proposal to the stockholders of the Company, or if the Board of Directors of the
Company shall have withheld, withdrawn or modified in a manner adverse to Parent
its recommendation in favor of adoption and approval of this Agreement and
approval of the Merger;
(f) by the Company, if the Board of Directors of Parent recommends a
Parent Superior Proposal to the shareholders of Parent, or if the Board of
Directors of Parent shall have withheld, withdrawn or modified in a manner
adverse to the Company its recommendation in favor of approving the issuance of
the shares of Parent Common Stock by virtue of the Merger;
(g) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in Parent's representations and warranties or breach by Parent is
curable prior to June 30, 2006, by Parent through the exercise of its
commercially reasonable efforts, then the Company may not terminate this
Agreement under this Section 7.1(g) provided Parent continues to exercise such
commercially reasonable efforts to cure such breach; or
(h) by Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in the Company's representations and warranties or breach by the
Company is curable prior to June 30, 2006 by the Company through the exercise of
its commercially reasonable efforts, then Parent may not terminate this
Agreement under this Section 7.1(h) provided the Company continues to exercise
such commercially reasonable efforts to cure such breach. 7.2 Notice of
Termination; Effect of Termination.
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(i) Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2, Section 7.3 and Article 8, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for any breach of this Agreement. No termination of this
Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
7.2 Fees and Expenses. All fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses whether or not the Merger is consummated;
provided, however, that Parent and the Company shall share equally all fees and
expenses.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Covenants. The
representations and warranties of the Company, Parent and Merger Sub contained
in this Agreement shall terminate at the Effective Time, and only the covenants
that by their terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) If to Parent or Merger Sub, to:
The Otto Law Group, PLLC
601 Union Street, Suite 4500
Seattle, WA 98101
Attention: David M. Otto, Esq.
Telephone No.: (206) 262-9545
Telecopy No.: (206) 262-9513
(b) If to the Company, to:
Mitchell Segal
GAK Acquisition Inc.,
1010 Northern Boulevard, Suite 208
Great Neck, New York 11021
Telephone No.: (516) 484-4441
Telecopy No.: (206) 484-0088
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(c) With copy to:
[Insert]
8.3 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. When reference is made herein to "THE BUSINESS
OF" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be "deemed to include" all direct and indirect subsidiaries
of such entity. References herein to "Sections" are references to Sections
hereof unless otherwise stated herein.
8.4 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all parties need not sign
the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
confidentiality agreement herein contained in Section 5.2 hereof shall continue
in full force and effect until the Closing and shall survive any termination of
this Agreement for a period of five (5) years; and (b) are not intended to
confer upon any other person any rights or remedies hereunder except as
otherwise provided herein.
8.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
the Superior Court of King County State of Washington, and the federal district
court for the Western District of Washington, in connection with any matter
based upon or arising out of this Agreement or the matters contemplated herein,
agrees that process may be served upon them in any manner authorized by the laws
of the State of Texas for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.
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8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 Definition of "Knowledge". Wherever used in this Agreement, the term
"KNOWLEDGE" shall mean the actual knowledge of: (a) in the case of the Company,
its (i) President and Chief Executive Officer, (ii) Executive Vice President and
Chief Financial Officer and (iii) other Executive Vice Presidents; and (b) in
the case of Parent and Merger Sub, Parent's (i) Chief Executive Officer, (ii)
President and Chief Operating Officer and (iii) Chief Financial Officer.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
NANNACO, INC.
By: /s/ Steve Careaga
------------------------------------
Name: Steve Careaga
Title: Chairman and Secretary
NANNACO ACQUISITION INC.
By: /s/ Steve Careaga
------------------------------------
Name: Steve Careaga
Title: Director and Secretary
GAK ACQUISITION INC. .
By: /s/ Mitchell Segal
------------------------------------
Name: Mitchell Segal
Title: President
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