EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 12, 2004
AMONG
GENESIS BIOVENTURES, INC.
GBI ACQUISITION CORPORATION
AND
CORGENIX MEDICAL CORP.
E - 1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of March 12, 2004
---------
("Agreement Date"), by and among GENESIS BIOVENTURES, INC., a New York
---------------
corporation ("PARENT" or "GBI"), GBI ACQUISITION CORP.), a Delaware corporation
------
and a wholly owned subsidiary of PARENT ("ACQUISITION CORP."), and CORGENIX
----------------
MEDICAL CORPORATION, a Nevada corporation ("TARGET" or "Corgenix"). Certain
------
capitalized terms used herein shall have the meanings as set forth in Article
-------
XIII hereof.
----
WHEREAS, the parties hereto have entered into a Letter of Intent dated July
31, 2003, as amended, with respect to a prospective combination of the business
of TARGET with PARENT;
WHEREAS, the combination is subject to a financing condition;
WHEREAS, the parties currently believe that PARENT has a reasonable
opportunity to satisfy the financing condition, and wish to express their mutual
obligation with respect to the terms of the transactions, subject to the
conditions thereof;
WHEREAS, the parties hereto desire to effect the merger of TARGET with and
into ACQUISITION CORP. (the "Merger") pursuant to the applicable provisions of
------
the Delaware General Corporation Law (the "DGCL"):
----
WHEREAS, the Board of Directors of each of PARENT, ACQUISITION CORP. and
TARGET have approved the Merger and the terms and conditions of this Agreement
and have determined that the Merger is in the best interests of their respective
stockholders;
WHEREAS, PARENT, as sole stockholder of ACQUISITION CORP. has approved
the Merger for Acquisition Corp.
WHEREAS, the Board of Directors of each of PARENT and TARGET have directed
that this Agreement and the Merger be submitted to, and have recommended that
they be approved by, their respective stockholders; and
WHEREAS, the parties intend that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein, the parties hereto intending to be
legally bound hereby agree as follows:
ARTICLE I.
THE MERGER
1.1 The Merger. Subject to and upon the terms and conditions of this
-----------
Agreement and in accordance with the DGCL, at the Effective Time (as defined in
Section 1.2 hereof), TARGET shall be merged with and into ACQUISITION CORP.,
------------
which shall be the surviving corporation (sometimes hereinafter referred to as
the "SURVIVING CORPORATION") in the Merger.
----------------------
E - 2
1.2 Effective Time. If all the conditions to the Merger set forth in
---------------
Articles VIII and IX hereof shall have been fulfilled or waived in accordance
------------- --
herewith and this Agreement has not been terminated as provided in Article XIV
-----------
hereof, on the Closing Date the parties hereto shall cause certificates of
merger in the form required by the DGCL and the Nevada Business Corporation Act
("NBCA") (the "Merger Filings"), to be duly prepared and executed and filed in
--------------
accordance with the DGCL and NBCA. The Merger shall become effective at the
time the Merger Filings are filed with the Secretary of State of the State of
Delaware in accordance with the DGCL, or at such later time which the parties
hereto have agreed upon and designated in such filing as the effective time of
the Merger (the "Effective Time").
---------------
1.3 Effect of the Merger. From and after the Effective Time, the
-----------------------
Merger shall have all the effects set forth in the DGCL. Without limiting the
generality of the foregoing, at the Effective Time, by virtue of the Merger, all
properties, rights, privileges, powers and franchises of TARGET and ACQUISITION
CORP. shall vest in the SURVIVING CORPORATION and all debts, liabilities and
duties of TARGET and ACQUISITION CORP. shall become the debts, liabilities and
duties of the SURVIVING CORPORATION.
1.4 Supplementary Action. If at any time after the Effective Time, any
--------------------
further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the SURVIVING
CORPORATION the title to any property or rights of TARGET or ACQUISITION CORP.,
or otherwise to carry out the provisions of this Agreement, the officers and
directors of the SURVIVING CORPORATION are hereby authorized and empowered, in
the name of and on behalf of TARGET and ACQUISITION CORP., to execute and
deliver any and all things necessary or proper to vest or to perfect or confirm
title to such property or rights in the SURVIVING CORPORATION, and otherwise to
carry out the purposes and provisions of this Agreement.
ARTICLE II.
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation of the SURVIVING CORPORATION. The
-------------------------------------------------------------
Certificate of Incorporation of ACQUISITION CORP. as in effect at the Effective
Time shall be the certificate of incorporation of the SURVIVING CORPORATION
until thereafter amended in accordance with such certificate and applicable Law,
except that, as of the Effective Time, Article I of such Certificate of
Incorporation shall be amended to read as follows: "The name of the corporation
is CORGENIX MEDICAL CORPORATION."
2.2 Bylaws of the SURVIVING CORPORATION. The Bylaws of ACQUISITION
---------------------------------------
CORP. as in effect at the Effective Time shall be the bylaws of the SURVIVING
CORPORATION until thereafter amended in accordance with such bylaws and
applicable Law.
2.3 Directors and Officers of the SURVIVING CORPORATION. The directors
---------------------------------------------------
and officers of TARGET at the Effective Time shall be the directors and officers
of the SURVIVING CORPORATION until their respective successors are duly elected
and qualified in accordance with the SURVIVING CORPORATION certificate of
incorporation, bylaws and applicable Law.
E - 3
ARTICLE III.
CONSIDERATIONS; CONVERSION OF SHARES
Merger Consideration. The aggregate consideration payable by the PARENT in
--------------------
the Merger to holders of shares of TARGET capital stock ("TARGET Capital
Stock"), shall consist of Fourteen Million (14,000,000) shares (the "Merger
Shares") of the Common Stock, $0.0001 par value per share, of PARENT ("PARENT
Common Stock"). Immediately prior to the transactions contemplated hereunder,
PARENT shall have contributed the Merger consideration to the capital of
ACQUISITION CORP. for issuance upon the Closing.
3.1 Conversion of TARGET Capital Stock.
--------------------------------------
(a) Exchange Ratio for Common Stock. Each share of Common Stock, par
---------------------------------
value $.001 per share, of TARGET (the "TARGET Common Stock") issued and
---------------------
outstanding immediately prior to the Effective Time will be canceled and
extinguished and automatically converted (subject to Section 3.4) into the right
-----------
to receive shares of PARENT Common Stock as per an exchange ratio which shall be
determined by dividing the full amount of all of such issued and outstanding
Capital Stock of TARGET by 14,000,000 (the "Exchange Rate").
(b) TARGET Treasury Shares. At the Effective Time, all shares of
------------------------
TARGET Common Stock that are issued and held in TARGET's treasury immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding and shall be
cancelled without payment of consideration therefor.
(c) Common Stock Options, Common Stock Warrants, and Convertible or
-------------------------------------------------------------------
Exchangeable Securities. Each of the Common Stock Options and Warrants of
---------------------
TARGET and any other securities of TARGET convertible or exchangeable for Common
Stock (collectively "Common Stock Warrants") outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into Common Stock Warrants of like
terms and tenor to acquire PARENT Common Stock, the Shares purchasable and
exercise price adjusted in accordance with the Exchange Ratio (such PARENT
Common Stock Warrants received on conversion being referred to as "PARENT Merger
Warrants"). To the extent any TARGET Common Stock Warrant by its terms
accelerates and becomes fully exercisable upon occurrence of the Merger, the
PARENT Merger Warrant received in exchange therefore shall be fully exercisable
following the Merger. Schedule 3.1(c) sets forth a list of the Common Stock
Warrants of TARGET outstanding as of December 31, 2003, and the corresponding
number of Common Stock Warrants of PARENT (including number of Shares
purchasable and exercise price) as adjusted in accordance with the Exchange
Ratio. No Warrants may be issued by TARGET after December 31, 2003 without the
consent of PARENT. Schedule 3.1(c) will be updated at Closing to reflect the
Common Stock Warrants of TARGET outstanding as of the Closing Date (and the
corresponding number of Common Stock Warrants of PARENT to be received in
exchange therefore in accordance with the Exchange Ratio).
(d) Between the date hereof and the Effective Time, TARGET shall take
no action, without the express prior written consent of PARENT, to issue any
Common Stock Warrants or to accelerate the date on which any Common Stock
Warrant vests or becomes exercisable, convertible or exchangeable, or to amend
E - 4
or modify any of the other terms and conditions thereof (including the exercise,
conversion or exchange price).
(e) TARGET has no shares of capital stock other than TARGET Common
Stock or Common Stock Warrants. If, at the effective time, there shall be any
shares of TARGET Capital Stock other than TARGET Common Stock or Common Stock
Warrants, all such shares of TARGET Capital Stock which are not TARGET Common
Stock or Common Stock Warrants issued and outstanding immediately prior to the
Effective Time will be automatically converted (subject to Section 3.4) into the
-----------
right to receive shares of PARENT Common Stock as determined by the Board of
Directors of TARGET provided, by way of clarification, that in no event shall
--------
PARENT be required to pay Merger consideration with a greater number of Merger
Shares than as fixed pursuant to Section 3.1 of this Agreement.
------------
(f) Upon conversion of the outstanding TARGET Capital Stock in
accordance with this Section 3.1, all such shares shall no longer be outstanding
-----------
and shall automatically be canceled and retired and shall cease to exist; and
each certificate formerly representing any such shares shall thereafter
represent only the right to receive the Merger Shares into which the shares
represented by such Certificate have been converted in accordance with this
Section 3.1. Certificates previously representing shares of TARGET Capital
------------
Stock shall be exchanged for certificates representing whole shares of PARENT
Common Stock and cash in lieu of any fractional share, without interest, issued
in consideration therefor upon the surrender of such certificates in accordance
with Section 3.4 hereof.
------------
3.2 Common Stock of ACQUISITION CORP. Each share of common stock, par
----------------------------------
value $0.001 per share, of ACQUISITION CORP. issued and outstanding immediately
prior to the Effective Time shall by virtue of the Merger and without any action
on the part of ACQUISITION CORP. be converted into one validly issued,
fully-paid and non-assessable share of common stock of the SURVIVING
CORPORATION.
3.3 Other Capital Stock of ACQUISITION CORP. ACQUISITION CORP. shall
------------------------------------------
have no shares of Capital Stock other than Common Stock issued and outstanding
at or immediately prior to the Effective Time.
3.4 Dissenters' Rights. If holders of TARGET Capital Stock are
-------------------
entitled to dissenters' rights in connection with the Merger under the NBCA, any
shares of TARGET Capital Stock ("Dissenting Shares") held by persons who have
-----------------
complied with all requirements for perfecting dissenter's rights under the NBCA
("Dissenting Stockholders") shall not be converted into or represent the right
------------------------
to receive the Merger Shares but shall be converted into the right to receive
such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to the NBCA. TARGET shall give PARENT prompt notice
of any demand received by TARGET for appraisal of shares of TARGET Capital
Stock, withdrawals of such demands and any instruments served pursuant to the
NBCA and received by TARGET with respect to Dissenting Shares, and PARENT shall
have the right to participate in all negotiations and proceedings with respect
to any such demand. TARGET agrees that, except with the prior written consent
of PARENT, it will not voluntarily make any payment with respect to, or settle
or offer to settle, any such demands.
Each Dissenting Stockholder who, pursuant to the provisions of the NBCA,
becomes entitled to payment of the fair value of shares of TARGET Capital Stock
E - 5
shall receive payment therefore (but only after the value therefore shall have
been agreed upon or finally determined pursuant to such provisions). If, after
the Effective Time, any Dissenting Stockholder shall effectively withdraw or
lose (through failure to perfect or otherwise) its dissenter's rights under the
NBCA, then, as of the later of the Effective Time or the occurrence of such
event, such Dissenting Stockholder's shares of TARGET Capital Stock shall
automatically be converted into the right to receive the appropriate Merger
Shares as set forth in Section 3.1 above.
------------
3.5 Exchange of Certificates. At the Closing, or as soon as practicable
------------------------
thereafter, the TARGET Stockholders shall surrender their certificate(s), duly
endorsed, for cancellation as of the Effective Time. On the Closing Date or as
soon as practicable thereafter, PARENT will cause its transfer agent to issue to
each holder of TARGET surrendering a certificate a certificate representing the
number of whole shares of PARENT Common Stock to which such holder is entitled
pursuant to Section 3.1.
------------
(a) No certificates or scrip representing fractional shares of PARENT
Common Stock shall be issued as part of the Merger Shares. All fractional
shares of PARENT Common Stock that a TARGET Stockholder would otherwise be
entitled to receive as part of the Merger Shares shall be aggregated and if a
fractional share results from such aggregation, TARGET Stockholders entitled to
..50 of a Share or greater shall receive one additional full Share, provided that
such formula shall not increase the merger consideration required to be paid by
PARENT.
(b) If any Merger Shares are to be delivered to a person other than the
person in whose name the Certificate(s) for shares of TARGET Capital Stock
surrendered for exchange are registered, it shall be a condition to the payment
of such Merger Shares that (i) the Certificate(s) so surrendered shall be
transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) the person requesting such transfer shall pay any
transfer or other taxes payable by reason of the foregoing, and (iii) such
transfer shall otherwise be proper.
(c) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of fact by the person claiming such
Certificate to be lost, stolen or destroyed (which affidavit shall contain a
indemnity in favor of PARENT on customary terms and conditions applicable to
such affidavits), PARENT shall issue in exchange for such lost, stolen or
destroyed Certificate the appropriate Merger.
(d) Notwithstanding anything to the contrary in this Section 3.5, none
-----------
of PARENT, the SURVIVING CORPORATION or any party hereto shall be liable to any
person for any shares or amounts properly delivered or paid to a public official
pursuant to any applicable abandoned property, escheat or similar Law.
(e) Any portion of the Merger Shares that remains unclaimed by former
stockholders of TARGET for six months after the Effective Time shall be
delivered to the SURVIVING CORPORATION. Any former stockholder of the TARGET
who has not complied with this Article 3 shall thereafter look only to the
---------
SURVIVING CORPORATION for payment of their share of PARENT Common Stock and
other consideration accruing therefrom.
3.6 Dividends. No dividends or other distributions shall be declared
---------
or made prior to the Effective Time with respect to PARENT Common Stock.
E - 6
3.7 Adjustments. If, subsequent to the Agreement Date but prior to the
-----------
Effective Time, PARENT changes the number of shares of PARENT Common Stock
issued and outstanding as a result of a stock split, reverse stock split, stock
dividend, recapitalization, subdivision, reclassification, combination, exchange
or other similar change with a record date prior to the Effective Time, the
Exchange Ratio and the number of Merger Shares shall be proportionately and
equitably adjusted to reflect the effect of any such stock split, reverse stock
split, stock dividend, recapitalization or other similar change; provided, that
in no event shall any adjustment be made solely as a result of an increase in
the authorized capital stock of PARENT or as a result of the issuance of shares
by PARENT in connection with any financing approved by PARENT and TARGET.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE PARENT
The PARENT, for itself and Acquisition Corp., hereby jointly and severally
represent and warrant to TARGET as of the date hereof and as of the Closing
Date, as follows, each of such representations and warranties being true and
correct except as expressly set forth in the Disclosure Schedule delivered by
PARENT to TARGET prior to the execution and delivery of this Agreement and which
is specifically deemed a part of, and incorporated by reference in, this
Agreement (such Disclosure Schedule being sometimes hereafter referred to as the
"PARENT Disclosure Schedule"), provided, that it is understood and agreed TARGET
-------------------------- --------
is not required to undertake any independent investigation to determine the
truth, accuracy, and completeness of the representations and warranties made by
the PARENT, and that no due diligence investigation undertaken by TARGET shall
in any way be deemed to ascribe any knowledge to TARGET different from, or in
addition to, the following representations and warranties made to TARGET, or to
reduce, effect, or eliminate TARGET's reliance upon such representations and
warranties:
4.1 Corporate Status; Corporate Records. Each of PARENT and
--------------------------------------
ACQUISITION CORP., and any of PARENT'S Subsidiaries (i) is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation set forth on the Schedule 4.1, (ii) has the corporate power and
------------
authority to own, lease and operate its properties and assets and to conduct and
carry on its business as it is now being conducted and operated and (iii) is
duly qualified or licensed to conduct business as a foreign corporation and is
in good standing in all jurisdictions that require such qualification or
licensing, except where the failure to be so qualified or licensed or to be in
good standing will not have a Material Adverse Effect on PARENT. Schedule 4.1
------------
sets forth a true and complete list of each of the Subsidiaries of the PARENT,
indicating which are held directly and indirectly and, if indirectly, how the
interests in any such Subsidiary are held. True and complete copies of the
Certificate of Incorporation, as amended to date, and Bylaws, as amended to
date, of PARENT and of ACQUISITION CORP., have been provided to TARGET. The
stock ledgers of PARENT and of ACQUISITION CORP. contain accurate and complete
records of all issuances, transfers and cancellations of shares of the capital
stock of PARENT and of ACQUISITION CORP., respectively.
4.2 Capitalization of PARENT.
--------------------------
(a) The authorized capital stock of the PARENT consists of the classes
of securities, and the number of shares of each such class authorized, issued
and outstanding, and the outstanding Common Stock Warrants (and their respective
E - 7
exercise, strike or conversion prices, dates of issuance, term, and any
provisions regarding dilution or adjustment), are as are set forth on Schedule
--------
4.2(a). All of the issued and outstanding shares of capital stock of the PARENT
------
have been duly authorized and validly issued, are fully paid and non-assessable
and were validly offered, issued, sold, and delivered by. Upon consummation of
the Merger, the shares of PARENT Common Stock to be issued in exchange for
TARGET Capital Stock in accordance with this Agreement will be, when so issued,
duly authorized, validly issued, fully paid and nonassessable. PARENT has no
liability (or potential liability) to any Person for any dividends that have
been declared or accrued and remain unpaid.
(b) Except as set forth in Schedule 4.2(b), there are no outstanding
---------------
rights, options or warrants to acquire capital stock of PARENT, or convertible
securities convertible or exchangeable into Capital Stock of PARENT (sometimes
herein collectively referred to as "Common Stock Warrants") as of December 31,
2003. No Common Stock Warrants have been, or will be issued by PARENT after
December 31, 2003 without the consent of TARGET.
(c) Except as set forth in Schedule 4.2(c), (i) there are no
----------------
outstanding or existing proxies, voting agreements, voting trusts, preemptive
rights, rights of first refusal, rights of first offer, rights of co-sale or
tag-along rights, stockholder agreements to which PARENT is a party or other
rights, understandings or arrangements regarding the voting or disposition of
the capital stock of PARENT to which PARENT is a party or any other restrictions
(other than normal restrictions on transfer under applicable federal and state
securities laws) applicable to any of PARENT's outstanding stock or other
securities or to the conversion of any shares of capital stock of PARENT in the
Merger pursuant to any agreement or obligation to which PARENT or any of its
stockholders is a party; and (ii) PARENT has not granted or agreed to grant to
any person or entity any rights (including piggyback registration rights) to
have any capital securities of PARENT, including, without limitation, any Common
Stock Warrants or any securities underlying the same, registered with under the
Securities Act or any other Law.
(d) Except as set forth in Schedule 4.2(d), no Common Stock Warrants of
---------------
PARENT (i) are subject to acceleration or automatic vesting as a result of the
occurrence of the Merger, or (ii) contain any provision accelerating the vesting
of the right to exercise, exchange or convert the same upon a merger or
consolidation involving PARENT, an issuance or sale of PARENT Capital Stock, any
sale of all or substantially all of PARENT's assets or any business combination
or similar transactions involving or causing a change of control of PARENT.
(e) Except as set forth on Schedule 4.2(e), PARENT owns all of the
---------------
issued and outstanding capital stock of its Subsidiaries, free and clear of all
Liens.
(f) The authorized capital stock of Acquisition Corp. consists of the
classes of securities, and the number of shares of each such class authorized,
issued and outstanding, as are set forth on Schedule 4.2(f). All of the issued
---------------
and outstanding shares of capital stock of Acquisition Corp. have been duly
authorized and validly issued, are fully paid and non-assessable.
4.3 Authorization; Enforceability.
------------------------------
(a) PARENT and ACQUISITION CORP. have the corporate power and authority to
execute and deliver this Agreement and all documents to which either is or will
be a party in order to perform its respective obligations hereunder and
E - 8
thereunder and to consummate the transactions contemplated hereby and thereby
(the "Transaction Documents"). The execution, delivery and performance of this
Agreement and the Transaction Documents has been duly authorized by all
necessary corporate action on the part of each of PARENT and ACQUISITION CORP.
except to the extent that the consummation of the transactions contemplated by
this Agreement requires stockholder approval by the stockholders of PARENT, as
contemplated by this Agreement.
(b) This Agreement has been duly executed and delivered by each of PARENT
and ACQUISITION CORP. and has been approved by the Boards of Directors of PARENT
and ACQUISITION CORP., and subject to the terms and conditions set forth hereof,
constitutes, and, when fully executed and delivered, each Transaction Document
will constitute, a valid and binding obligation of PARENT and ACQUISITION CORP.
(as applicable), enforceable against them in accordance with its terms, except
as the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application affecting the
enforcement of creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
(c) A true and correct copy of the resolutions of the Board of Directors of
PARENT and ACQUISITION CORP. approving the Agreement and Merger will have been
furnished to TARGET prior to the Closing.
(d) The restrictions contained in Section 203 of the DGCL applicable to a
"business combination" (as defined in such Section 203) will not apply to the
execution, delivery or performance of this Agreement or to the consummation of
the Merger.
4.4 No Violation. The execution, delivery and performance of this
-------------
Agreement and the Transaction Documents by the PARENT and ACQUISITION CORP. do
not and will not (i) conflict with or violate any provision of respective
certificates of incorporation or bylaws, each as amended to date; (ii) violate
or breach any provision of, or result, through the mere passage of time, in a
violation of, or result in the termination or acceleration of, or diminishment
of rights under or a change in terms of, or entitle any party to terminate,
accelerate or diminish rights or change terms (whether after the giving of
notice or lapse of time or both) under, be in conflict with or constitute or
result in a default (or an event which, with notice or lapse of time or both,
would constitute such a default) under, or result in the imposition of any Lien
upon or with respect to the stock or any assets, business or properties of any
of either PARENT or ACQUISITION CORP. pursuant to, any instrument, commitment or
obligation to which either of them is a party or by which either any of their
respective assets is bound or subject, or violate or conflict with any other
restriction of any kind or character to which PARENT or ACQUISITON CORP. is
subject or bound; (iii) violate any Order to which either is a party or it or
its respective properties or assets is subject or bound; or (iv) violate any
Law, except for such violations, breaches conflicts or defaults that will not
have a Material Adverse Effect on PARENT.
4.5 Consents, etc. No consent, approval, order or authorization of, or
--------------
registration, qualification, designation, declaration or filing with, any
Governmental Authority or any other person or entity on the part of the PARENT
is required in connection with the execution, delivery and performance by PARENT
or ACQUISITION CORP. of this Agreement and the Transaction Documents, except (a)
stockholder approvals contemplated by this Agreement, which approval shall have
been obtained prior to Closing, (b) filings required to comply with applicable
securities Laws, (c) the Merger Filings, and (d) such other consents,
E - 9
authorizations, filings, approvals and registrations which, if not obtained or
made, will not have a Material Adverse Effect on PARENT and will not prevent,
materially alter or delay any of the transactions contemplated by this Agreement
or the Transaction Documents.
4.6 SEC Filings and Financial Statements.
----------------------------------------
(a) PARENT has previously delivered to TARGET and to TARGET's counsel a
copy of PARENT's most recent Report on Form 10-KSB for the period ended December
31, 2002 (the "PARENT 10KSB"), its subsequent Reports on Form 10-QSB filed
-------------
subsequent to the end of the last annual period (the "PARENT 10Qs"), its Reports
-----------
on Form 8-K filed subsequent to the end of the last annual period (the "PARENT
------
8Ks"), PARENT's other reports and proxy statements, if any, filed by PARENT with
---
the SEC pursuant to Sections 13, 14 or 15(d) of the Exchange Act subsequent to
the end of the last annual period reported on in the PARENT 10KSB (the "PARENT
------
Proxy and Other Reports"), and PARENT's other registration statements, reports,
------------------------
notices and filings filed with the SEC pursuant to the Exchange Act or the
Securities Act during the period subsequent to the end of the last annual period
reported on in the PARENT 10KSB or, in the case of registration statements filed
pursuant to the Securities Act prior to such last annual period, such
registration statements if such registration statements are still effective
("PARENT'S Securities Act Filings and Exchange Act Reports"), sometimes
---------------------------------------------------------------
hereafter referred to as PARENT "SEC Filings".
------------
(b) PARENT will also provide TARGET with drafts of such PARENT SEC
Filings prepared for filing on any date on or after the Agreement Date not less
than two (2) business days prior to effecting any such filing.
(c) As of the date on which each one was filed and as of the date
hereof, each PARENT SEC Filing (i) complied in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, other
applicable securities Laws, and the rules and regulations of the SEC thereunder
applicable to such SEC Filings and (ii) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(d) Since December 31, 2002, PARENT has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act, and all such
documents were filed within the time periods specified in the Exchange Act.
(e) As of their respective dates, the PARENT Financial Statements
included in the PARENT SEC filings complied as to form in all material respects
with the applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. The PARENT Financial Statements
have been prepared in accordance with GAAP, consistently applied, during the
periods involved and fairly present in all material respects the consolidated
financial position of PARENT as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect). PARENT keeps proper books, records and accounts
in accordance with GAAP which (i) are in all material respects true, complete
and correct, (ii) have been maintained in accordance with good business
E - 10
practices, and (iii) are stated in reasonable detail and accurately and fairly
reflect the basis for the PARENT Financial Statements. PARENT maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with management's
general or specific authorization; (B) transactions are recorded as necessary
(x) to permit preparation of financial statements in conformity with generally
accepted accounting principles or any other criteria applicable to such
statements, (y) to maintain accountability for assets, and (C) the amount
recorded for assets on the books and records of PARENT is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(f) Since December 31, 2002, neither PARENT nor ACQUISITION CORP. have
incurred any liabilities or obligations of any nature, whether or not accrued,
absolute, contingent or otherwise ("Liabilities"), other than (i) Liabilities
-----------
reflected on, or reserved against in, the PARENT Financial Statements, and (ii)
Liabilities incurred since December 31, 2002 in the ordinary course of business.
4.7 Absence of Certain Changes or Events; Conduct of Business.
-----------------------------------------------------------------
(a) Except as set forth in Schedule 4.7(a) since December 31, 2002,
PARENT has not done or suffered any of the following:
(i) amended or otherwise changed its Certificate of Incorporation or
Bylaws;
(ii) issued, sold, pledged, disposed of or encumbered, or authorized
the issuance, sale, pledge, disposition or encumbrance of, any shares of
its capital stock of any class or any Common Stock Warrants;
(iii) reclassified, combined, split, subdivided or redeemed, purchased
or otherwise acquired, directly or indirectly, any PARENT capital stock;
(iv) declared, set aside, made or paid any dividend or other
distribution, whether payable in cash, stock, property or otherwise, with
respect to any PARENT capital stock;
(v) acquired (including, without limitation, for cash or shares of
stock, by merger, consolidation or acquisition of stock or assets) any
interest in any corporation, partnership or other business organization or
division thereof or any assets, or made any investment either by purchase
of stock or securities, contributions of capital or property transfer, or
purchased any property or assets of any other Person;
(vi) made any loans or advances to any other Person;
(vii) borrowed any amount or incurred or became subject to any
Liabilities (absolute, accrued or contingent), other than current
Liabilities incurred in the ordinary course of business and Liabilities
under contracts entered into in the ordinary course of business in
accordance with past practice;
(viii) assumed, guaranteed or endorsed the obligations of any Person,
or entered into any "make-well" or "make-whole" or other agreements in
support of the credit of any Person, except in the ordinary course of
business consistent with past practice;
E - 11
(ix) discharged or satisfied any material Lien or adverse claim or
paid any Liability (absolute, accrued or contingent), other than current
Liabilities shown on the PARENT Audited Balance Sheet and current
Liabilities incurred since the date of the PARENT Audited Balance Sheet in
the ordinary course of business in accordance with past practice;
(x) mortgaged, pledged or subjected to any material Lien or adverse
claim any of its properties or assets, except for Liens for taxes not yet
due and payable or otherwise in the ordinary course of business in
accordance with past practice;
(xi) except in the ordinary course of its business, sold, assigned or
transferred any of its assets, tangible or intangible, having a value in
any single transaction in excess of $50,000;
(xii) suffered any extraordinary losses or waived any rights of
material value other than in the ordinary course of business in accordance
with past practice;
(xiii) made any capital expenditures or commitments therefor other
than in the ordinary course of business consistent with past practice or in
an amount less than $50,000;
(xiv) entered into any other transaction other than in the ordinary
course of business consistent with past practice in an amount less than
$50,000, or any material transaction, whether or not in the ordinary course
of business;
(xv) suffered any damages, destruction or casualty loss, whether or
not covered by insurance, affecting any of the properties or assets of
PARENT, which could, individually or in the aggregate, have or result in a
Material Adverse Effect;
(xvi) made any material change in the nature or operations of the
business of the PARENT;
(xvii) participated in any transaction that would have a Material
Adverse Effect or otherwise acted outside the ordinary course of business
in any material fashion;
(xviii) entered into, amended, terminated or canceled any Contract, or
relinquished any material rights thereunder, other than, in the ordinary
course of business, consistent with past practice, (provided, that for this
--------
purpose no Contract pursuant to which the PARENT ENTITIES have any rights
to own or use any intellectual property in their business (other than
"off-the-shelf" software) shall be deemed immaterial);
(xix) in respect of any instrument, commitment or obligation to which
PARENT is a party or by which any of its respective assets is bound or
subject, did any of the following:
(A) violated or breached any provision thereof,
(B) taken any action or omitted to take any action which,
immediately or after the passage of time, could result in a violation
thereof, or result in the termination or acceleration thereof, default
thereunder, or diminishment of rights under or a change in terms
E - 12
thereof, or entitle any third party to declare a default, terminate,
accelerate or diminish rights or change terms (whether after the
giving of notice or lapse of time or both) thereunder;
(C) result in the imposition of any Lien upon or with respect to
the stock or any assets, business or properties of PARENT; or
(D) violate or conflict with any other restriction of any kind or
character to which PARENT, or any of its respective properties or
assets, is subject or bound;
(xx) changed any accounting policies or procedures or made any change
in any accounting methods or systems of internal accounting controls,
except as may be appropriate to conform to changes in GAAP;
(xxi) made any Tax election, other than in the ordinary course of
business consistent with past practice;
(xxii) paid, discharged or satisfied any Liens, claims, debts,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
in the ordinary course of business and consistent with past practice of due
and payable liabilities reflected or reserved against in the PARENT
Financial Statements, as appropriate, or liabilities incurred after
December 31, 2002 in the ordinary course of business and consistent with
past practice;
(xxiii) entered into any Contract or transaction with or for the
benefit of, or made any loan or advance to or for the benefit of, any of
its directors, officers, stockholders, Affiliates or Associates or any
entity in which any such director, officer, stockholder, Affiliate or
Associate, or their respective Affiliates or Associates, has a direct or
indirect interest, whether or not in the ordinary course of business; or
(xxiv) entered into any agreement, commitment or understanding,
whether in writing or otherwise, to take or authorize any of the foregoing
actions or any action which would make any representation or warranty in
this Article IV untrue or incorrect in any respect.
-----------
4.8 No Material Adverse Change. Since December 31, 2002, there has not
---------------------------
been any Material Adverse Change in the business and financial condition PARENT,
taken as a whole, or any other event or condition of any character that has had
or will have a Material Adverse Effect on PARENT, taken as a whole.
4.9 Litigation. Except as set forth in Schedule 4.9:
---------- -------------
(a) There are no Legal Proceedings pending or, to PARENT's Knowledge,
threatened against PARENT or ACQUISITION CORP. challenging the Merger, or
seeking to restrain or prohibit the consummation of the Merger.
(b) There are no Legal Proceedings pending or, to PARENT's Knowledge,
threatened, against PARENT, its business or its assets which, if determined
adversely to such PARENT ENTITY, will have a Material Adverse Effect on PARENT.
E - 13
(c) There are no Legal Proceedings pending or, to PARENT's Knowledge,
threatened, against (i) any of PARENT's officers, directors, employees,
consultants or agents in their capacity as such or relating to their employment
services or relationship with PARENT or (ii) any PARENT ENTITY's officers,
directors, employees, consultants or agents in their capacity as such or
relating to their employment services or relationship with such PARENT.
(d) There is no Order of any Governmental Authority outstanding against
PARENT or any of the PARENT ENTITIES.
(e) There is no Order of any Governmental Authority or arbitrator
outstanding or, to PARENT's Knowledge, threatened against any of PARENT's
officers, directors, employees, consultants or agents in their capacity as such
or relating to their employment services or relationship with. None of such
persons have pled nolo contendre to or been convicted of any criminal violation
--------------
of any securities Law or any felony, or been barred by any Governmental
Authority (including, without limitation, the SEC or the FDA) or self-regulatory
organization or national securities exchange (including, without limitation, the
American Stock Exchange).
4.10 Ownership and Operations of ACQUISITION CORP. PARENT owns all
-----------------------------------------------
of the issued and outstanding capital stock of ACQUISITION CORP. Each
outstanding share of capital stock of ACQUISITION CORP. is duly authorized,
validly issued, fully paid and non-assessable and each such share owned by
PARENT is free and clear of all encumbrances of any nature whatsoever.
ACQUISITION CORP. was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
4.11 Tax Matters. Except as set forth in Section 4.11:
------------ -------------
(a) Except as set forth on Schedule 4.11(a) PARENT has paid or caused
to be paid all Taxes (including estimated Taxes) and other assessments due on or
prior to the Agreement Date. Without limiting the generality of the foregoing,
PARENT has duly paid state and local sales and use Taxes in all states in which
it is required to report and pay such Taxes. No additional Tax assessment
against PARENT has been heretofore proposed or, to PARENT's Knowledge,
threatened by any Governmental Authority for which provision has not been made
on its balance sheet.
(b) PARENT has timely filed all Tax Returns required by applicable Law
and all such Tax Returns are true and correct in all material respects, and (ii)
such Tax Returns are not subject to penalties under Section 6662 of the Code,
relating to accuracy-related penalties (or any corresponding provision of the
state, local or foreign Tax law) or any predecessor provision of law. An
extension of time within which to file any Tax Return that has not been filed
has not been requested or granted.
(c) PARENT has not had any Tax deficiency assessed against it. No tax
audit is currently in progress and there is no unassessed deficiency proposed
or, to the PARENT's Knowledge, threatened against.
(d) PARENT has withheld or collected from each payment made to each of
its employees, whether in cash, stock or in kind, the full amount of all Taxes
(including, but not limited to, federal income taxes, Federal Insurance
E - 14
Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be
withheld or collected therefrom, and has paid the same to the proper
Governmental Authority or authorized depositories. No material special charges,
penalties, fines, liens or other similar encumbrances have been asserted against
PARENT with respect to the payment or failure to pay any Taxes which have not
been paid or received without further liability to PARENT.
(e) PARENT (i) has not been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code and(ii) has not
agreed to make nor is it required to make any adjustments under Section 481(a)
of the Code by reason of a change in accounting method or otherwise.
(f) PARENT has no plan or intention to liquidate ACQUISITION CORP.
following the Merger or to cause ACQUISITION CORP. to sell or otherwise dispose
of any assets of TARGET acquired in the Merger, except for dispositions made in
the ordinary course of business or transfers described in Code Section
368(a)(2)(C) and the Treasury Regulations issued thereunder.
(g) Following the Merger, ACQUISITION CORP. will not issue additional
shares that would result in PARENT losing control of ACQUISITION CORP. within
the meaning of Section 368(c) of the Internal Revenue Code.
(h) PARENT has no plan or intention to reacquire any of its stock
issued in the Merger.
4.12 Contracts.
---------
(a) Except as set forth on Schedule 4.12(a) PARENT is not in default,
----------------
violation or jeopardy of cancellation for breach or other non-performance in
respect of any Contract:
(i) which is material to the business, assets, properties, condition
(financial or otherwise), liabilities, rights, obligations, operations,
business or prospects of the PARENT; and
(ii) every other Contract, as follows:
(A) between PARENT and any officer, director or key employee or
consultant of PARENT;
(B) between PARENT and any PARENT ENTITY;
(C) all Intellectual Property created by or on behalf of PARENT
or in which PARENT acquired an ownership interest or license of
rights;
(D) any Contract which may not be canceled by PARENT without
penalty upon notice of 30 days or less or which provides for payments
by or to PARENT in an amount in excess of $25,000 over the term of the
Contract;
(E) any Contract containing any covenant limiting in any respect
the right of PARENT to engage in any line of business or in any
jurisdiction or to compete with any Person or granting any exclusive
distribution rights;
E - 15
(F) any Contract relating to the disposition or acquisition by
PARENT after the Agreement Date of a material amount of assets not in
the ordinary course of business;
(G) any Contract pursuant to which PARENT has any material
ownership interest in any corporation, partnership, joint venture or
other business enterprise; or
(H) any Contract restricting, directly or indirectly, PARENT's
right to use Intellectual Property, other than such restrictions
imposed by manufacturers of software which is mass-produced for the
general public market and is available commercially in "shrink-wrap"
packages.
4.13 Intellectual Property.
----------------------
(a) PARENT IP Rights. PARENT owns, or has the valid right or license
------------------
to use, possess, sell or license free and clear of all Liens, all Intellectual
Property necessary or required for the conduct of its business as presently
conducted and as presently proposed to be conducted (such Intellectual Property
being hereinafter collectively referred to as the "PARENT IP Rights"), and such
rights to use, possess, distribute sell or license are sufficient for the
conduct of such business.
(b) Patents. Schedule 4.13(b) separately identifies each Patent, if
-------- -----------------
any, owned or licensed by PARENT or in which PARENT has an interest specifying
as to each item, as applicable: the title; the jurisdiction(s) in which the item
is issued or registered or in which an application for issuance or registration
has been filed; the issuance, registration, or application numbers and dates;
and as to Patents to which PARENT holds a right to use under license, the
material terms and conditions of such license, including, scope of license
rights, required license fees and any minimum fees, and term of the license.
(c) Trademarks. Schedule 4.13(c) separately identifies each Trademark,
----------- ----------------
if any, owned or licensed by PARENT specifying as to each item, as applicable:
the title; the jurisdiction(s) in which the item is issued or registered or in
which an application for issuance or registration has been filed; and the
issuance, registration, or application numbers and dates.
(d) Copyrights. Schedule 4.13(d) separately identifies each Copyright,
----------- ----------------
if any, owned or licensed by PARENT specifying as to each item, as applicable:
the title; the jurisdiction(s) in which the item is issued or registered or in
which an application for issuance or registration has been filed; and the
issuance, registration, or application numbers and dates; and as to Copyrights
to which PARENT holds a right to use under license, the material terms and
conditions of such license, including, scope of license rights, required license
fees and any minimum fees, and term of the license.
(e) Trade Secrets. Schedule 4.13(e) separately identifies each Trade
--------------- -----------------
Secret owned or licensed by PARENT specifying as to each such Trade Secret the
generic nature thereof without describing the Trade Secret itself.
E - 16
(f) Protection of Trade Secrets. PARENT has taken all reasonable
-------------------------------
precautions to protect the secrecy, confidentiality, and value of its Trade
Secrets and the proprietary nature and value of its Intellectual Property.
(g) Confidentiality Agreements with Key Persons. Each present or past
--------------------------------------------
key employee, officer, consultant or any other person who developed any part of
any PARENT product or any Intellectual Property that is or will be made, used or
sold by the PARENT has executed a valid and enforceable Confidentiality
Agreement with the PARENT.
(h) No Infringement by PARENT. To the Knowledge of the PARENT, none of
--------------------------
the Intellectual Property, products or services owned, used, developed,
provided, sold or licensed by the PARENT, or made for, used or sold by or
licensed to the PARENT by any Person or currently under development for PARENT,
or the marketing or distribution of any such products or services, infringes
upon or otherwise violates any Intellectual Property rights of others, nor has
PARENT received any notice of any claim of any such infringement, nor does
PARENT have Knowledge of any reasonable basis for any such claim
(i) No Infringement Upon PARENT's IP Rights. To the Knowledge of the
------------------------------------------
PARENT, no Person is infringing upon or otherwise violating the Intellectual
Property rights of the PARENT.
(j) No Breach by Employees or Consultants. No employee, consultant or
--------------------------------------
independent contractor of PARENT: (i) is in violation of any material term or
covenant of any employment contract, patent disclosure agreement, invention
assignment agreement, non-disclosure agreement, non-competition agreement or any
other contract or agreement with any other party by virtue of such employee's,
consultant's, or independent contractor's being employed by, or performing
services for, PARENT. Neither PARENT's employment of its employees, nor the use
by PARENT of the services of any consultant or independent contractor, subjects
PARENT to any material liability to any third party.
(k) Royalties; Fees; Honoraria. To PARENT's Knowledge, there are no
----------------------------
royalties, honoraria, fees or other payments payable by PARENT to any third
person by reason of the ownership, use, possession, license, sale, marketing,
advertising or disposition of any PARENT IP Rights.
(l) No Default. Neither the execution, delivery and performance of
-----------
this Agreement nor the consummation of the Merger and the other agreements and
transactions contemplated hereby and/or by the Transaction Documents will: (i)
constitute a breach, violation or default by PARENT under any material
instrument, contract, license or other agreement governing any PARENT IP Rights;
(ii) cause the forfeiture or termination of, or give rise to a right of
forfeiture or termination of, any PARENT IP Rights; or (iii) impair the right of
PARENT to use, possess, sell or license any PARENT IP Rights or portion thereof.
4.14 Employee and Employee Benefit Matters.
-----------------------------------------
(a) Neither the PARENT nor any entity which is or was under common
control maintains or contributes to, or has within the preceding six years
maintained or contributed to, or may have any liability with respect to any
employee benefit plan subject to Title IV of Employee Retirement Income Security
E - 17
Act of 1974, as amended ("ERISA"), or Section 412 of the Code or any "multiple
-----
employer plan" within the meaning of the Code or ERISA.
(b) PARENT does not and has not sponsored, maintained or contributed to
any "employee benefit plan", as defined in Section 3(3) of ERISA (including, but
not limited to, employee benefit plans which are not subject to the provisions
of ERISA) ("Plan"). Except as set forth in Schedule 4.14, PARENT is not a party
---- -------------
to any collective bargaining agreement, profit sharing, stock option, stock
purchase, pension, bonus, incentive, retirement, incentive award plan or
arrangement, vacation policy, severance pay policy or agreement for severance
pay, accelerated vesting or similar benefits following termination of employment
or upon the execution of this Agreement or the Closing, deferred compensation
agreement or arrangement, consulting agreement, employment contract, medical
reimbursement, life insurance or other benefit plan, agreement, arrangement,
program, practice or understanding ("Benefit Program").
----------------
(c) The PARENT does not have any obligations to provide or any direct
or indirect, whether contingent or otherwise, with respect to the provision of
health or death of any current or former employees.
(d) Schedule 4.14 lists all of PARENT's full-time or part-time
employees. There are no existing or, to PARENT's Knowledge, threatened labor
disputes. PARENT owes no wages, bonuses, commissions, taxes, penalties or
assessments, owed to, or arising out of the employment of, any officer,
director, employee or other person or consultant. PARENT is in compliance in
all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages and hours,
occupational safety and health, and is not engaged in any unfair labor or unfair
employment practices. There is no unfair labor practice charge or complaint or
any other matter against (or to PARENT's Knowledge, involving) PARENT pending
or, to PARENT's Knowledge, threatened before any Governmental Authority. No
agreement, arbitration or court decision or governmental order to which PARENT
is a party or, to PARENT's Knowledge, to which it or any of its properties or
assets is bound or subject in any way limits or restricts PARENT from relocating
or closing any of its operations.
4.15 Environmental Laws. PARENT is not in violation of any applicable
-------------------
Environmental Law and PARENT is not and will not be required to make any
expenditures to comply with any Environmental Law.
4.16 Insurance. Schedule 4.16 sets forth a true and complete list of
--------- --------------
all insurance policies (including the self-insurance retentions and deductibles
under those policies) in force naming PARENT as an insured or beneficiary or as
a loss payable payee or for which PARENT has paid or is obligated to pay all or
part of the premiums. PARENT has not received written notice of any pending or
threatened cancellation or material premium increase (retroactive or otherwise)
with respect thereto, and, PARENT is in compliance with all conditions contained
therein. There are no pending claims against such insurance by PARENT as to
which insurers are defending under reservation of rights or have denied
liability, and there exists no material claim under such insurance that has not
been properly filed by PARENT. The insurance policies maintained by PARENT are
adequate in scope and amount to cover all prudent and reasonably foreseeable
risks which may arise in the conduct of their business as currently conducted
and as proposed to be conducted.
E - 18
4.17 Related Party Transactions. Except as set forth on Schedule 4.17,
-------------------------- -------------
no director, officer or other Affiliate or Associate of PARENT or any entity in
which any such director, officer or other Affiliate or Associate, has any direct
or indirect material interest in, or owns any beneficial interest in any Person
(other than a publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than 1% of the
stock of which is beneficially owned by any such persons) that has any direct or
indirect interest in: (i) any property (real, personal or mixed), tangible, or
intangible, used or currently intended to be used in, the business or operations
of PARENT or any PARENT ENTITY, (ii) any Contract, or any other arrangement or
understanding with, or relating to, the business or operations of PARENT, or any
Person with which PARENT has a business relationship; (iii) any loan,
arrangement, understanding, agreement or contract for or relating to
indebtedness of PARENT or (iv) any Person that competes with PARENT.
4.18 Trading in PARENT Common Stock. Except as set forth on Schedule
-------------------------------- --------
4.18, during the six month period prior to the Agreement Date, none of PARENT,
----
any holder of 5% or more of the shares of PARENT, or any officer or director of
PARENT or any such other affiliate of PARENT, has directly or indirectly
purchased or sold (including short sales) any shares of PARENT Common Stock (or
any put, call, option or derivative security or the like relating thereto) in
any transactions.
4.19 FDA Matters. After due investigation, (i) the PARENT currently
------------
has no reasonable basis to believe that any Governmental Authority, including,
but not limited to, the United States Food and Drug Administration (the "FDA"),
---
will ultimately prohibit the marketing, sale, license or use in the United
States or elsewhere of any product developed, produced or marketed by the PARENT
or with third parties (each, a "Product"), (ii) the PARENT knows of no product
-------
or process which the FDA has prohibited from being marketed or used in the
United States which in function and composition is substantially similar to any
Product, (iii) the PARENT has no Product on clinical hold nor any reason to
expect that any Product is likely to be placed on clinical hold, (iv) the PARENT
has disclosed to the TARGET all submissions to the FDA made by the PARENT and
the FDA responses (and other material correspondence received from or submitted
to the FDA by the PARENT), including, but not limited to, all FDA warning
letters, regulatory letters and notice of adverse finding letters and the
relevant responses, received by the PARENT or any agent thereof relative to the
development of its Products, (v) none of the PARENT or, to the PARENT's
Knowledge, its employees, its Affiliates or its agents, has ever been
sanctioned, formally or otherwise, by the FDA, and (vi) there has not been any
suspensions or debarments by the FDA or other federal departments and state
regulatory bodies against the PARENT or, to the PARENT's Knowledge, any current
or former employees of the PARENT.
4.20 Investment Company. The PARENT is not an "investment company" or
-------------------
an "affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended.
4.21 Compliance. The PARENT Common Stock is registered pursuant to
----------
Section 12(g) of the Exchange Act, and is listed on the American Stock Exchange,
and the PARENT has taken no action designed to, or likely to have the effect of,
terminating the registration of the PARENT Common Stock under the Exchange Act
or delisting the Common Stock from the American Stock Exchange. The PARENT has
complied with all requirements with respect to the issuance of the Merger Shares
E - 19
and the listing thereof on the American Stock Exchange except for the matters
identified on Schedule 4.21, which include, among other things, matters required
-------------
as a condition to Closing which can't be consummated at the date of this
Agreement, all of which matters will be complied with prior to the Closing. The
PARENT has not taken and will not, in violation of applicable law, take, any
action outside the ordinary course of business designed to or that might
reasonably be expected to cause or result in unlawful manipulation of the price
of the PARENT Common Stock to facilitate the sale or resale of the Merger
Shares.
4.22 Broker's or Finder's Commissions. No investment banker, finder,
----------------------------------
broker, agent, financial person or other intermediary has acted on behalf of the
PARENT in connection with the Merger, this Agreement, or the transactions
contemplated hereby and thereby.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF TARGET
TARGET hereby represents and warrants to PARENT and to ACQUISITION CORP. as
of the date hereof and as of the Closing Date, as follows, each of such
representations and warranties being true and correct, except as expressly set
forth in the Disclosure Schedule delivered by TARGET to PARENT prior to the
execution and delivery of this Agreement and which is specifically deemed a part
of, and incorporated by reference in, this Agreement (such Disclosure Schedule
being sometimes hereafter referred to as the "TARGET Disclosure Schedule"),
--------------------------
provided, that it is understood and agreed PARENT is not required to undertake
--------
any independent investigation to determine the truth, accuracy, and completeness
of the representations and warranties made by the TARGET, and that no due
diligence investigation undertaken by PARENT shall in any way be deemed to
ascribe any knowledge to PARENT different from, or in addition to, the following
representations and warranties made to PARENT, or to reduce, effect or eliminate
PARENT's reliance upon such representations and warranties:
5.1 Corporate Status; Corporate Records. Each of TARGET and TARGETS
--------------------------------------
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation set forth on the Schedule
--------
5.1, (ii) has the corporate power and authority to own, lease and operate its
---
properties and assets and to conduct and carry on its business as it is now
being conducted and operated and (ii) is duly qualified or licensed to conduct
business as a foreign corporation and is in good standing in all jurisdictions
that require such qualification or licensing, except where the failure to be so
qualified or licensed or to be in good standing will not have a Material Adverse
Effect on TARGET. Schedule 5.1 sets forth a true and complete list of each of
------------
the Subsidiaries of the TARGET, indicating which are held directly and
indirectly and, if indirectly, how the interests in any such Subsidiary are
held. True and complete copies of the Certificate of Incorporation, as amended
to date, and Bylaws, as amended to date, of TARGET has been provided to PARENT.
The stock ledgers of TARGET contain accurate and complete records of all
issuances, transfers and cancellations of shares of the capital stock of TARGET.
5.2 Capitalization of TARGET and of each of TARGET's Subsidiaries.
---------------------------------------------------------------------
(a) The authorized capital stock of the TARGET consists of the classes
of securities, and the number of shares of each such class authorized, issued
and outstanding, and the outstanding Common Stock Warrants (and their respective
exercise, strike or conversion prices, dates of issuance, term, and any
provisions regarding dilution or adjustment), are as are set forth on Schedule
--------
E - 20
5.2(a). All of the issued and outstanding shares of capital stock of the TARGET
------
have been duly authorized and validly issued, are fully paid and non-assessable
and were offered, issued, sold, and validly delivered by TARGET.
(b) Except as set forth in Schedule 5.2(b), there are no outstanding
---------------
rights, options or warrants to acquire capital stock of TARGET, or convertible
securities convertible or exchangeable into Capital Stock of TARGET (herein
collectively referred to as "Common Stock Warrants of TARGET").
(c) Except as set forth in Schedule 5.2(c), (i) there are no
----------------
outstanding or existing proxies, voting agreements, voting trusts, preemptive
rights, rights of first refusal, rights of first offer, rights of co-sale or
tag-along rights, stockholder agreements to which TARGET is a party or other
rights, understandings or arrangements regarding the voting or disposition of
the capital stock of TARGET to which TARGET is a party or any other restrictions
(other than normal restrictions on transfer under applicable federal and state
securities laws) applicable to any of TARGET's outstanding stock or other
securities or to the conversion of any shares of capital stock of TARGET in the
Merger pursuant to any agreement or obligation to which TARGET or any of its
stockholders is a party; and (ii) TARGET has not granted or agreed to grant to
any person or entity any rights (including piggyback registration rights) to
have any capital securities of TARGET, including, without limitation, any Common
Stock Warrants or any securities underlying the same, registered with under the
Securities Act or any other Law.
(d) Except as set forth in Schedule 5.2(d), no Common Stock Warrants of
---------------
TARGET (i) are subject to acceleration or automatic vesting as a result of the
occurrence of the Merger, or (ii) contain any provision accelerating the vesting
of the right to exercise, exchange or convert the same upon a merger or
consolidation involving TARGET, an issuance or sale of TARGET Capital Stock, any
sale of all or substantially all of TARGET's assets or any business combination
or similar transactions involving or causing a change of control of TARGET.
(e) Except as set forth on Schedule 5.2(e), TARGET owns all of the
---------------
issued and outstanding capital stock of its Subsidiaries, free and clear of all
Liens.
(f) The authorized capital stock of the TARGET ENTITIES other than
TARGET consists of the classes of securities, and the number of shares of each
such class authorized, issued and outstanding, as are set forth on Schedule
--------
5.2(f). All of the issued and outstanding shares of capital stock of each of
------
such TARGET ENTITIES have been duly authorized and validly issued, are fully
paid and non-assessable.
5.3 Authorization; Enforceability.
------------------------------
(a) TARGET has the corporate power and authority to execute and deliver
this Agreement and all Transaction Documents to which it is or will be a party
and to perform its respective obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Transaction Documents has
been duly authorized by all necessary corporate action on the part of TARGET
except that the consummation of the transactions contemplated by this Agreement
requires stockholder approval by the stockholders of TARGET, as contemplated by
this Agreement
E - 21
(b) This Agreement has been duly executed and delivered by TARGET and, has
been approved by the Boards of Directors of TARGET, and subject to the terms and
conditions set forth hereof, constitutes, and, when fully executed and
delivered, each Transaction Document will constitute, a valid and binding
obligation of TARGET (as applicable), enforceable against them in accordance
with its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws of general
application affecting the enforcement of creditors' rights generally and general
equitable principles regardless of whether such enforceability is considered in
a proceeding at law or in equity.
(c) A true and correct copy of the resolutions of the Board of Directors of
TARGET approving the Agreement and Merger will have been furnished to PARENT
prior to the Closing.
(d) DGCL applicable to a "business combination" (as defined in such Section
203) will not apply to the execution, delivery or performance of this Agreement
or to the consummation of the Merger.
5.4 No Violation. The execution, delivery and performance of this
-------------
Agreement and the Transaction Documents by TARGET does not and will not (i)
conflict with or violate any provision of its certificate of incorporation or
bylaws, each as amended to date; (ii) violate or breach any provision of, or
result, through the mere passage of time, in a violation of, or result in the
termination or acceleration of, or diminishment of rights under or a change in
terms of, or entitle any party to terminate, accelerate or diminish rights or
change terms (whether after the giving of notice or lapse of time or both)
under, be in conflict with or constitute or result in a default (or an event
which, with notice or lapse of time or both, would constitute such a default)
under, or result in the imposition of any Lien upon or with respect to the stock
or any assets, business or properties of TARGET pursuant to, any instrument,
commitment or obligation to TARGET is a party or by any of its assets is bound
or subject, or violate or conflict with any other restriction of any kind or
character to which TARGET is subject or bound; (iii) violate any Order to which
TARGET is a party or it or its respective properties or assets is subject or
bound; or (iv) violate any Law, except for such violations, breaches conflicts
or defaults that will not have a Material Adverse Effect on TARGET.
5.5 Consents, etc. No consent, approval, order or authorization of, or
--------------
registration, qualification, designation, declaration or filing with, any
Governmental Authority or any other person on the part of the TARGET is required
in connection with the execution, delivery and performance by TARGET of this
Agreement and the Transaction Documents, except (a) stockholder approvals
contemplated by this Agreement, which approval shall have been obtained prior to
Closing, (b) filings required to comply with applicable securities Laws, (c) the
Merger Filings, and (d) such other consents, authorizations, filings, approvals
and registrations which, if not obtained or made, will not have a Material
Adverse Effect on PARENT and will not prevent, materially alter or delay any of
the transactions contemplated by this Agreement or the Transaction Documents.
5.6 SEC Filings and Financial Statements.
----------------------------------------
(a) TARGET has previously delivered to PARENT and to PARENT's counsel a
copy of TARGET's most recent Report on Form 10-KSB for the period ended June 30,
2003 (the "TARGET 10KSB"), its subsequent Reports on Form 10-QSB filed
-------------
subsequent to the end of the last annual period (the "TARGET 10Qs"), its Reports
-----------
E - 22
on Form 8-K filed subsequent to the end of the last annual period (the "TARGET
------
8Ks"), TARGET's other reports and proxy statements, if any, filed by PARENT with
---
the SEC pursuant to Sections 13, 14 or 15(d) of the Exchange Act subsequent to
the end of the last annual period reported on in the TARGET 10KSB (the "TARGET
------
Proxy and Other Reports"), and TARGET's other registration statements, reports,
------------------------
notices and filings filed with the SEC pursuant to the Exchange Act or the
Securities Act during the period subsequent to the end of the last annual period
reported on in the PARENT 10KSB or, in the case of registration statements filed
pursuant to the Securities Act prior to such last annual period, such
registration statements if such registration statements are still effective
("TARGET'S Securities Act Filings and Exchange Act Reports"), sometimes
---------------------------------------------------------------
hereafter referred to as TARGET "SEC Filings".)
------------
(b) As of the date on which each one was filed and as of the date
hereof, each TARGET SEC Filing (i) complied in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, other
applicable securities Laws, and the rules and regulations of the SEC thereunder
applicable to such SEC Filings and (ii) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) Since June 30, 2003, TARGET has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act, and all such
documents were filed within the time periods specified in the Exchange Act.
(d) As of their respective dates, the TARGET Financial Statements
included in the TARGET SEC filings complied as to form in all material respects
with the applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. The TARGET Financial Statements
have been prepared in accordance with GAAP, consistently applied, during the
periods involved and fairly present in all material respects the consolidated
financial position of TARGET as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect). TARGET keeps proper books, records and accounts
in accordance with GAAP which (i) are in all material respects true, complete
and correct, (ii) have been maintained in accordance with good business
practices, and (iii) are stated in reasonable detail and accurately and fairly
reflect the basis for the TARGET Financial Statements. TARGET maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with management's
general or specific authorization; (B) transactions are recorded as necessary
(x) to permit preparation of financial statements in conformity with generally
accepted accounting principles or any other criteria applicable to such
statements, (y) to maintain accountability for assets, and (C) the amount
recorded for assets on the books and records of TARGET is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(e) Since June 30, 2003, TARGET has not incurred any liabilities or
obligations of any nature, whether or not accrued, absolute, contingent or
otherwise ("Liabilities"), other than Liabilities reflected on, or reserved
-----------
E - 23
against in, the PARENT Financial Statements, and Liabilities incurred since June
30, 2003 in the ordinary course of business.
5.7 Absence of Certain Changes or Events; Conduct of Business.
-----------------------------------------------------------------
(a) Except as set forth in Schedule 5.7(a) since June 30, 2003, TARGET
has not done or suffered any of the following:
(i) amended or otherwise changed its Certificate of Incorporation or
Bylaws;
(ii) issued, sold, pledged, disposed of or encumbered, or authorized
the issuance, sale, pledge, disposition or encumbrance of, any shares of
its capital stock of any class or any Common Stock Warrants;
(iii) reclassified, combined, split, subdivided or redeemed, purchased
or otherwise acquired, directly or indirectly, any TARGET capital stock;
(iv) declared, set aside, made or paid any dividend or other
distribution, whether payable in cash, stock, property or otherwise, with
respect to any TARGET capital stock;
(v) acquired (including, without limitation, for cash or shares of
stock, by merger, consolidation or acquisition of stock or assets) any
interest in any corporation, partnership or other business organization or
division thereof or any assets, or made any investment either by purchase
of stock or securities, contributions of capital or property transfer, or
purchased any property or assets of any other Person;
(vi) made any loans or advances to any other Person;
(vii) borrowed any amount or incurred or became subject to any
Liabilities (absolute, accrued or contingent), other than current
Liabilities incurred in the ordinary course of business and Liabilities
under contracts entered into in the ordinary course of business in
accordance with past practice;
(viii) assumed, guaranteed or endorsed the obligations of any Person,
or entered into any "make-well" or "make-whole" or other agreements in
support of the credit of any Person, except in the ordinary course of
business consistent with past practice;
(ix) discharged or satisfied any material Lien or adverse claim or
paid any Liability (absolute, accrued or contingent), other than current
Liabilities shown on the TARGET Audited Balance Sheet and current
Liabilities incurred since the date of the TARGET Audited Balance Sheet in
the ordinary course of business in accordance with past practice;
(x) mortgaged, pledged or subjected to any material Lien or adverse
claim any of its properties or assets, except for Liens for taxes not yet
due and payable or otherwise in the ordinary course of business in
accordance with past practice;
(xi) except in the ordinary course of its business, sold, assigned or
transferred any of its assets, tangible or intangible, having a value in
any single transaction in excess of $50,000;
E - 24
(xii) suffered any extraordinary losses or waived any rights of
material value other than in the ordinary course of business in accordance
with past practice;
(xiii) made any capital expenditures or commitments therefor other
than in the ordinary course of business consistent with past practice or in
an amount less than $50,000;
(xiv) entered into any other transaction other than in the ordinary
course of business consistent with past practice in an amount less than
$50,000, or any material transaction, whether or not in the ordinary course
of business;
(xv) suffered any damages, destruction or casualty loss, whether or
not covered by insurance, affecting any of the properties or assets of
TARGET, which could, individually or in the aggregate, have or result in a
Material Adverse Effect;
(xvi) made any material change in the nature or operations of the
business of the TARGET;
(xvii) participated in any transaction that would have a Material
Adverse Effect or otherwise acted outside the ordinary course of business
in any material fashion;
(xviii) entered into, amended, terminated or canceled any Contract, or
relinquished any material rights thereunder, other than, in the ordinary
course of business, consistent with past practice, (provided, that for this
--------
purpose no Contract pursuant to which the TARGET ENTITIES have any rights
to own or use any intellectual property in their business (other than
"off-the-shelf" software) shall be deemed immaterial);
(xix) in respect of any instrument, commitment or obligation to which
TARGET is a party or by which any of its respective assets is bound or
subject, did any of the following:
(A) violated or breached any provision thereof,
(B) taken any action or omitted to take any action which,
immediately or after the passage of time, could result in a violation
thereof, or result in the termination or acceleration thereof, default
thereunder, or diminishment of rights under or a change in terms
thereof, or entitle any third party to declare a default, terminate,
accelerate or diminish rights or change terms (whether after the
giving of notice or lapse of time or both) thereunder;
(C) result in the imposition of any Lien upon or with respect to
the stock or any assets, business or properties of TARGET; or
(D) violate or conflict with any other restriction of any kind or
character to which TARGET, or any of its respective properties or
assets, is subject or bound;
E - 25
(xx) changed any accounting policies or procedures or made any change
in any accounting methods or systems of internal accounting controls,
except as may be appropriate to conform to changes in GAAP;
(xxi) made any Tax election, other than in the ordinary course of
business consistent with past practice;
(xxii) paid, discharged or satisfied any Liens, claims, debts,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
in the ordinary course of business and consistent with past practice of due
and payable liabilities reflected or reserved against in the TARGET
Financial Statements, as appropriate, or liabilities incurred after June
30, 2003 in the ordinary course of business and consistent with past
practice;
(xxiii) entered into any Contract or transaction with or for the
benefit of, or made any loan or advance to or for the benefit of, any of
its directors, officers, stockholders, Affiliates or Associates or any
entity in which any such director, officer, stockholder, Affiliate or
Associate, or their respective Affiliates or Associates, has a direct or
indirect interest, whether or not in the ordinary course of business; or
(xxiv) entered into any agreement, commitment or understanding,
whether in writing or otherwise, to take or authorize any of the foregoing
actions or any action which would make any representation or warranty in
this Article IV untrue or incorrect in any respect.
-----------
5.8 No Material Adverse Change. Since June 30, 2003, there has not been
--------------------------
any Material Adverse Change in the business and financial condition TARGET,
taken as a whole, or any other event or condition of any character that has had
or will have a Material Adverse Effect on TARGET, taken as a whole.
5.9 Litigation. Except as set forth in Schedule 5.9:
---------- -------------
(a) There are no Legal Proceedings pending or, to TARGET's Knowledge,
threatened against TARGET challenging the Merger, or seeking to restrain or
prohibit the consummation of the Merger.
(b) There are no Legal Proceedings pending or, to TARGET's Knowledge,
threatened, against TARGET, its business or its assets which, if determined
adversely to TARGET, will have a Material Adverse Effect on TARGET.
(c) There are no Legal Proceedings pending or, to TARGET's Knowledge,
threatened, against (i) any of TARGET's officers, directors, employees,
consultants or agents in their capacity as such or relating to their employment
services or relationship with TARGET or (ii) any TARGET ENTITY's officers,
directors, employees, consultants or agents in their capacity as such or
relating to their employment services or relationship with such TARGET.
(d) There is no Order of any Governmental Authority outstanding against
TARGET or any of the TARGET ENTITIES.
E - 26
(e) There is no Order of any Governmental Authority or arbitrator
outstanding or, to TARGET's Knowledge, threatened against any of TARGET's
officers, directors, employees, consultants or agents in their capacity as such
or relating to their employment services or relationship with. None of such
persons have pled nolo contendre to or been convicted of any criminal violation
--------------
of any securities Law or any felony, or been barred by any Governmental
Authority (including, without limitation, the SEC or the FDA) or self-regulatory
organization or national securities exchange (including, without limitation, the
American Stock Exchange).
5.10 Tax Matters. Except as set forth in Section 5.10:
------------ -------------
(a) Except as set forth on Schedule 5.10(a) TARGET has paid or caused
to be paid all Taxes (including estimated Taxes) and other assessments due on or
prior to the Agreement Date. Without limiting the generality of the foregoing,
TARGET has duly paid state and local sales and use Taxes in all states in which
it is required to report and pay such Taxes. No additional Tax assessment
against TARGET has been heretofore proposed or, to TARGET's Knowledge,
threatened by any Governmental Authority for which provision has not been made
on its balance sheet.
(b) TARGET has timely filed all Tax Returns required by applicable Law
and all such Tax Returns are true and correct in all material respects, and (ii)
such Tax Returns are not subject to penalties under Section 6662 of the Code,
relating to accuracy-related penalties (or any corresponding provision of the
state, local or foreign Tax law) or any predecessor provision of law. An
extension of time within which to file any Tax Return that has not been filed
has not been requested or granted.
(c) TARGET has not had any Tax deficiency assessed against it. No tax
audit is currently in progress and there is no unassessed deficiency proposed
or, to the TARGET's Knowledge, threatened against.
(d) TARGET has withheld or collected from each payment made to each of
its employees, whether in cash, stock or in kind, the full amount of all Taxes
(including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be
withheld or collected therefrom, and has paid the same to the proper
Governmental Authority or authorized depositories. No material special charges,
penalties, fines, liens or other similar encumbrances have been asserted against
TARGET with respect to the payment or failure to pay any Taxes which have not
been paid or received without further liability to TARGET.
(e) TARGET (i) has not been a member of an affiliated group of
corporations, within the meaning of Section 1504 of the Code and (ii) has not
agreed to make nor is it required to make any adjustments under Section 481(a)
of the Code by reason of a change in accounting method or otherwise.
5.11 Contracts.
---------
(a) Except as set forth on Schedule 5.11(a) TARGET is not in default,
----------------
violation or jeopardy of cancellation for breach or other non-performance in
respect of any Contract:
E - 27
(i) which is material to the business, assets, properties, condition
(financial or otherwise), liabilities, rights, obligations, operations,
business or prospects of the TARGET; and
(ii) every other Contract, as follows:
(A) between TARGET and any officer, director or key employee or
consultant of TARGET;
(B) between TARGET and any affiliate of TARGET;
(C) all Intellectual Property created by or on behalf of TARGET
or in which TARGET acquired an ownership interest or license of
rights;
(D) any Contract which may not be canceled by TARGET without
penalty upon notice of 30 days or less or which provides for payments
by or to TARGET in an amount in excess of $25,000 over the term of the
Contract;
(E) any Contract containing any covenant limiting in any respect
the right of TARGET to engage in any line of business or in any
jurisdiction or to compete with any Person or granting any exclusive
distribution rights;
(F) any Contract relating to the disposition or acquisition by
TARGET after the Agreement Date of a material amount of assets not in
the ordinary course of business;
(G) any Contract pursuant to which TARGET has any material
ownership interest in any corporation, partnership, joint venture or
other business enterprise; or
(H) any Contract restricting, directly or indirectly, TARGET's
right to use Intellectual Property, other than such restrictions
imposed by manufacturers of software which is mass-produced for the
general public market and is available commercially in "shrink-wrap"
packages.
5.12 Intellectual Property.
----------------------
(a) TARGET IP Rights. TARGET owns, or has the valid right or license
------------------
to use, possess, sell or license free and clear of all Liens, all Intellectual
Property necessary or required for the conduct of its business as presently
conducted and as presently proposed to be conducted (such Intellectual Property
being hereinafter collectively referred to as the "TARGET IP Rights"), and such
rights to use, possess, distribute sell or license are sufficient for the
conduct of such business.
(b) Patents. Schedule 5.12(b) separately identifies each Patent, if
-------- -----------------
any, owned or licensed by TARGET or in which TARGET has an interest specifying
as to each item, as applicable: the title; the jurisdiction(s) in which the item
is issued or registered or in which an application for issuance or registration
has been filed; and the issuance, registration, or application numbers and
dates; and as to Patents to which TARGET holds a right to use under license, the
E - 28
material terms and conditions of such license, including, scope of license
rights, required license fees and any minimum fees, and term of the license.
(c) Trademarks. Schedule 5.12(c) separately identifies each Trademark,
----------- ----------------
if any, owned or licensed by TARGET specifying as to each item, as applicable:
the title; the jurisdiction(s) in which the item is issued or registered or in
which an application for issuance or registration has been filed; and the
issuance, registration, or application numbers and dates.
(d) Copyrights. Schedule 5.12(d) separately identifies each Copyright,
----------- ----------------
if any, owned or licensed by TARGET specifying as to each item, as applicable:
the title; the jurisdiction(s) in which the item is issued or registered or in
which an application for issuance or registration has been filed; and the
issuance, registration, or application numbers and dates; and as to Copyrights
to which TARGET holds a right to use under license, the material terms and
conditions of such license, including, scope of license rights, required license
fees and any minimum fees, and term of the license.
(e) Trade Secrets. Schedule 5.12(e) separately identifies each Trade
--------------- -----------------
Secret owned or licensed by TARGET specifying as to each such Trade Secret the
generic nature thereof without describing the Trade Secret itself.
(f) Protection of Trade Secrets. TARGET has taken all reasonable
-------------------------------
precautions to protect the secrecy, confidentiality, and value of its Trade
Secrets and the proprietary nature and value of its Intellectual Property.
(g) Confidentiality Agreements with Key Persons. Each present or past
--------------------------------------------
key employee, officer, consultant or any other person who developed any part of
any TARGET product or any Intellectual Property that is or will be made, used or
sold by the TARGET has executed a valid and enforceable Confidentiality
Agreement with the TARGET.
(h) No Infringement by TARGET. To the Knowledge of the TARGET, none of
--------------------------
the Intellectual Property, products or services owned, used, developed,
provided, sold or licensed by the TARGET, or made for, used or sold by or
licensed to the TARGET by any Person or currently under development for TARGET,
or the marketing or distribution of any such products or services, infringes
upon or otherwise violates any Intellectual Property rights of others, nor has
TARGET received any notice of any claim of any such infringement, nor does
TARGET have Knowledge of any reasonable basis for any such claim
(i) No Infringement Upon TARGET's IP Rights. To the Knowledge of the
------------------------------------------
TARGET, no Person is infringing upon or otherwise violating the Intellectual
Property rights of the TARGET.
(j) No Breach by Employees or Consultants. No employee, consultant or
--------------------------------------
independent contractor of TARGET: (i) is in violation of any material term or
covenant of any employment contract, patent disclosure agreement, invention
assignment agreement, non-disclosure agreement, non-competition agreement or any
other contract or agreement with any other party by virtue of such employee's,
consultant's, or independent contractor's being employed by, or performing
services for, TARGET. Neither TARGET's employment of its employees, nor the use
by TARGET of the services of any consultant or independent contractor, subjects
TARGET to any material liability to any third party.
E - 29
(k) Royalties; Fees; Honoraria. To TARGET's Knowledge, there are no
----------------------------
royalties, honoraria, fees or other payments payable by TARGET to any third
person by reason of the ownership, use, possession, license, sale, marketing,
advertising or disposition of any TARGET IP Rights.
(l) No Default. Neither the execution, delivery and performance of
-----------
this Agreement nor the consummation of the Merger and the other agreements and
transactions contemplated hereby and/or by the Transaction Documents will: (i)
constitute a breach, violation or default by TARGET under any material
instrument, contract, license or other agreement governing any TARGET IP Rights;
(ii) cause the forfeiture or termination of, or give rise to a right of
forfeiture or termination of, any TARGET IP Rights; or (iii) impair the right of
TARGET to use, possess, sell or license any TARGET IP Rights or portion thereof.
5.13 Employee/Employee Benefit Matters.
-----------------------------------
(a) Neither the TARGET nor any entity which is or was under common
control maintains or contributes to, or has within the preceding six years
maintained or contributed to, or may have any liability with respect to any
employee benefit plan subject to Title IV of Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or Section 412 of the Code or any "multiple
-----
employer plan" within the meaning of the Code or ERISA.
(b) TARGET does not and has not sponsored, maintained or contributed to
any "employee benefit plan", as defined in Section 3(3) of ERISA (including, but
not limited to, employee benefit plans which are not subject to the provisions
of ERISA) ("Plan"). Except as set forth in Schedule 5.13, TARGET is not a party
---- -------------
to any collective bargaining agreement, profit sharing, stock option, stock
purchase, pension, bonus, incentive, retirement, incentive award plan or
arrangement, vacation policy, severance pay policy or agreement for severance
pay, accelerated vesting or similar benefits following termination of employment
or upon the execution of this Agreement or the Closing, deferred compensation
agreement or arrangement, consulting agreement, employment contract, medical
reimbursement, life insurance or other benefit plan, agreement, arrangement,
program, practice or understanding ("Benefit Program").
----------------
(c) The TARGET does not have any obligations to provide or any direct
or indirect, whether contingent or otherwise, with respect to the provision of
health or death of any current or former employees.
(d) Schedule 5.13 lists all of TARGET's full-time or part-time
--------------
employees. There are no existing or, to TARGET's Knowledge, threatened labor
disputes. TARGET owes no wages, bonuses, commissions, taxes, penalties or
assessments, owed to, or arising out of the employment of, any officer,
director, employee or other person or consultant. TARGET is in compliance in
all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages and hours,
occupational safety and health, and is not engaged in any unfair labor or unfair
employment practices. There is no unfair labor practice charge or complaint or
any other matter against (or to TARGET's Knowledge, involving) TARGET pending
or, to TARGET's Knowledge, threatened before any Governmental Authority. No
agreement, arbitration or court decision or governmental order to which TARGET
is a party or, to TARGET's Knowledge, to which it or any of its properties or
assets is bound or subject in any way limits or restricts TARGET from relocating
or closing any of its operations.
E - 30
5.14 Environmental Laws. TARGET is not in violation of any applicable
-------------------
Environmental Law and TARGET is not and will not be required to make any
expenditures to comply with any Environmental Law.
5.15 Insurance. Schedule 5.15 sets forth a true and complete list of
--------- --------------
all insurance policies (including the self-insurance retentions and deductibles
under those policies) in force naming TARGET as an insured or beneficiary or as
a loss payable payee or for which TARGET has paid or is obligated to pay all or
part of the premiums. TARGET has not received written notice of any pending or
threatened cancellation or material premium increase (retroactive or otherwise)
with respect thereto, and, TARGET is in compliance with all conditions contained
therein. There are no pending claims against such insurance by TARGET as to
which insurers are defending under reservation of rights or have denied
liability, and there exists no material claim under such insurance that has not
been properly filed by TARGET. The insurance policies maintained by TARGET are
adequate in scope and amount to cover all prudent and reasonably foreseeable
risks which may arise in the conduct of their business as currently conducted
and as proposed to be conducted.
5.16 Related Party Transactions. Except as set forth on Schedule 5.16,
-------------------------- -------------
no director, officer or other Affiliate or Associate of TARGET or any entity in
which any such director, officer or other Affiliate or Associate, has any direct
or indirect material interest in, or owns any beneficial interest in any Person
(other than a publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than 1% of the
stock of which is beneficially owned by any such persons) that has any direct or
indirect interest in: (i) any property (real, personal or mixed), tangible, or
intangible, used or currently intended to be used in, the business or operations
of TARGET, (ii) any Contract, or any other arrangement or understanding with, or
relating to, the business or operations of TARGET, or any person with which
TARGET has a business relationship; (iii) any loan, arrangement, understanding,
agreement or contract for or relating to indebtedness of TARGET or (iv) any
Person that competes with TARGET.
5.17 Trading in TARGET Common Stock. Except as set forth on Schedule
-------------------------------- --------
5.17, during the six month period prior to the Agreement Date, none of TARGET,
---
any holder of 5% or more of the shares of TARGET, or any officer or director of
TARGET or any other affiliate of TARGET, has directly or indirectly purchased or
sold (including short sales) any shares of TARGET Common Stock (or any put,
call, option or derivative security or the like relating thereto) in any
transactions.
5.18 FDA Matters. After due investigation, (i) the TARGET currently
------------
has no reasonable basis to believe that any Governmental Authority, including,
but not limited to, the United States Food and Drug Administration (the "FDA"),
---
will ultimately prohibit the marketing, sale, license or use in the United
States or elsewhere of any product developed, produced or marketed by the TARGET
or with third parties (each, a "Product"), (ii) the TARGET knows of no product
-------
or process which the FDA has prohibited from being marketed or used in the
United States which in function and composition is substantially similar to any
Product, (iii) the TARGET has no Product on clinical hold nor any reason to
expect that any Product is likely to be placed on clinical hold, (iv) the TARGET
has disclosed to the PARENT all submissions to the FDA made by the TARGET and
the FDA responses (and other material correspondence received from or submitted
to the FDA by the TARGET), including, but not limited to, all FDA warning
letters, regulatory letters and notice of adverse finding letters and the
relevant responses, received by the TARGET or any agent thereof relative to the
E - 31
development of its Products, (v) none of the TARGET or, to the TARGET's
Knowledge, its employees, its Affiliates or its agents, has ever been
sanctioned, formally or otherwise, by the FDA, and (vi) there has not been any
suspensions or debarments by the FDA or other federal departments and state
regulatory bodies against the TARGET or, to the TARGET's Knowledge, any current
or former employees of the TARGET.
5.19 Investment Company. The TARGET is not an "investment company" or
-------------------
an "affiliated person" of, or "promoter" or "principal underwriter" for an
-
investment company, within the meaning of the Investment Company Act of 1940, as
amended.
5.20 Broker's or Finder's Commissions. No investment banker, finder,
----------------------------------
broker, agent, financial person or other intermediary has acted on behalf of the
TARGET in connection with the Merger, this Agreement, or the transactions
contemplated hereby and thereby.
5.21 Limitation on Liability for Change of Control Payments. TARGET
---------------------------------------------------------
shall have obtained waivers from its Executives of the change of control
lump-sum payment provisions in their existing employment agreements or in the
absence of any of such waivers TARGET shall adjust the Lump Sum Payment
provisions not waived, so that not more than a maximum of One Hundred and Twenty
Thousand ($120,000) Dollars is payable to former Executives of TARGET upon any
change of control in connection with the Merger.
ARTICLE VI.
INTERIM OPERATIONS
6.1 Conduct of Business by TARGET Pending the Merger. TARGET hereby
---------------------------------------------------
covenants and agrees that, between the Agreement Date and the Effective Time,
(i) TARGET shall operate its business only in the ordinary course consistent
with past practice and will not engage in any new line of business or enter into
any new Contract, transaction or activity or make any commitment except in the
ordinary course of business consistent with past practice, or take any action
which would result in a breach of its representations, warranties, covenants and
agreements pursuant to this Agreement; (and in no event will TARGET make any
expenditure or other financial commitment over $25,000.00 without the prior
written consent of PARENT, such consent not to be unreasonably withheld or
delayed); and (ii) TARGET shall use commercially reasonable efforts to preserve
intact its business organization, to keep available the services of its current
officers, employees and consultants, and to preserve its present relationships
with customers, suppliers and other persons with which it has business
relations.
6.2 Conduct of Business by PARENT Pending the Merger. PARENT hereby
---------------------------------------------------
covenants and agrees that, between the Agreement Date and the Effective Time,
(i) PARENT shall operate its business only in the ordinary course consistent
with past practice and will not engage in any new line of business or enter into
any new Contract, transaction or activity or make any commitment except in the
ordinary course of business consistent with past practice, or take any action
which would result in a breach of its representations, warranties, covenants and
agreements pursuant to this Agreement (and in no event will PARENT make any
expenditure or other financial commitment over $25,000.00 without the prior
E - 32
written consent of TARGET, such consent not to be unreasonably withheld or
delayed); (ii) PARENT shall use commercially reasonable efforts to preserve
intact its business organization, to keep available the services of its current
officers, employees and consultants, and to preserve its present relationships
with customers, suppliers and other persons with which it has business
relations; and (iii) PARENT shall not, directly or indirectly, issue, sell,
transfer or otherwise dispose of any securities of PARENT, or enter into any
option, warrant, convertible instrument or other oral or written agreement or
understanding to do the same, without reasonable prior written notice to TARGET
and prior written consent by TARGET. PARENT acknowledges and agrees that TARGET
may object to the actual terms or conduct of any offering proposed by PARENT if
such offering would materially interfere with the consummation of public
offerings to financing the business plans of PARENT and TARGET post-closing, or
would materially change the management or control of PARENT or the condition of
PARENT, or TARGET's expectations with respect to the same (including, without
limitation, the anticipated percentage ownership of PARENT by TARGET
stockholders as of the Closing).
6.3 Approval of Stockholders. Both PARENT and TARGET shall take, as
--------------------------
promptly as reasonably practicable, and prosecute with all due and appropriate
speed such other steps reasonably necessary to obtain all stockholder approvals,
and regulatory approvals, required for the consummation of the Merger and the
other transactions contemplated by this Agreement, including, specifically, in
the case of PARENT, the filing of applicable preliminary proxy materials with
the SEC as promptly as practicable and, in any case, by April 30, 2004, and the
mailing of definitive final proxy materials to stockholders as soon as
practicable and permissible in anticipation of a meeting of the shareholders of
PARENT to be held as promptly as practicable and permissible but, in any case,
on or before July 30, 2004, or such later date as may be approved by the
parties, for approval of the Merger and the other aforesaid transactions.
ARTICLE VII.
ADDITIONAL AGREEMENTS
As used in this Section 7 and elsewhere in this Agreement GBI means PARENT,
and Corgenix or CONX means TARGET.
7.1 Best Efforts; Cooperation; Further Assurances. Each of the
------------------------------------------------
parties hereto shall use commercially reasonable efforts to take, or cause to be
taken, all appropriate actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws to consummate and make
effective the transactions contemplated herein, including, without limitation,
(i) cooperating with the other in the preparation and filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to any Law or the rules of the American Stock Exchange, in
connection with the transactions contemplated by this Agreement; (ii) using
commercially reasonable efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of any Governmental
Authority or other Persons (including, without limitation, parties to Contracts
with TARGET or PARENT) as are necessary for the consummation of the transactions
contemplated hereby (provided, that nothing herein shall require PARENT or
TARGET, as the case may be, to amend, modify or terminate any material Contract,
or take or refrain from taking any action with respect to its business as
currently conducted or as proposed to be conducted, to obtain any such license,
permit, consent, approval, authorization, qualification or orders); (iii) making
on a prompt and timely basis all governmental or regulatory notifications and
filings required to be made by it for the consummation of the transactions
contemplated hereby; (iv) defending all legal proceedings challenging this
Agreement or the consummation of the transactions contemplated hereby and to
lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
E - 33
hereby; and (v) executing and delivering such additional instruments and other
documents and taking such further actions as may be necessary or appropriate to
effectuate, carry out and comply with all of the terms of this Agreement and the
transactions contemplated hereby. In this connection, each party expressly
covenants and agrees to prepare and furnish to the other as promptly as
reasonably practicable following the execution and delivery of this Agreement
and, in any case, not less than ten (10) business days prior to the date upon
which PARENT is filing with the SEC proxy materials for the approval of the
transactions contemplated hereby, the business description, and in form
reasonably necessary and appropriate to permit PARENT to include the same in its
SEC proxy materials and other required SEC filings pertaining to the
transactions contemplated hereby in compliance with applicable SEC rules and
regulations.
7.2 Access to Information. From the Agreement Date to the Effective
-----------------------
Time, each party hereto shall (and shall cause its directors, officers,
employees, auditors, counsel and agents to) afford the other party hereto and
the other party's officers, employees, auditors, counsel and agents reasonable
access on reasonable notice during business hours, without undue disruption of
operations, to all assets, properties, books, records, accounts, contracts and
documents of or relating to such providing party and such other information as
the receiving party may reasonably request concerning the businesses, finances
and properties of such providing party and its operations. Until the Effective
Time, all confidential information provided pursuant to this Section 7.2 will be
-----------
subject to the confidentiality agreement previously executed by PARENT and
TARGET (the "Confidentiality Agreement") and the provisions of Section 15.11
-------------------------- -------------
hereof.
7.3 Notification of Certain Matters. Each of PARENT and TARGET
----------------------------------
promptly shall give written notice to the other of (i) any material change in
the normal course of its business; (ii) the receipt by it of notice of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or the receipt by it of a notice
of the institution or the threat of litigation or other legal proceedings
involving it; and (iii) the occurrence or non-occurrence of any other event
which causes, or would be reasonably likely to cause, any representation or
warranty by it contained herein to be untrue or inaccurate in any respect, or
any covenant, condition or agreement of it contained herein not to be complied
with or satisfied in any respect.
7.4 Publicity. No press release or other public announcement
---------
related to this Agreement or the transactions contemplated hereby shall be
issued by any party without the prior written approval of the other parties
hereto, except that (i) PARENT may make such public disclosure which it believes
in good faith to be required by applicable Law or the rules of the American
Stock Exchange after reasonable prior consultation with TARGET and (ii) TARGET
may make such public disclosure which it believes in good faith to be required
by applicable Law or the rules of the NASD after reasonable prior consultation
with PARENT.
7.5 Exclusive Dealings. From the Agreement Date until the Effective
-------------------
Time, or earlier termination of this Agreement as provided in Article XIV
-----------
hereof, none of PARENT, TARGET or their respective Affiliates, Associates,
directors, officers, agents, employees, advisors, counsel or other
representatives (collectively, "Representatives") shall, nor shall PARENT or
---------------
TARGET authorize or permit any of their respective Representatives to, directly
or indirectly: (i) solicit, encourage, initiate or participate in any
E - 34
negotiations or discussions with respect to, or respond to (other than a simple
response that none can be made), any offer or proposal to acquire all or any
part of PARENT or TARGET, as the case may be, whether by asset purchase,
license, joint venture, stock purchase, business combination or otherwise (a
"Competing Transaction"), (ii) disclose any information concerning itself not
----------------------
customarily disclosed to any Person and which information one could reasonably
assume would be used for the purposes of formulating an offer or proposal for a
Competing Transaction, (iii) cooperate with any Person to make any such offer or
proposal, (iv) agree to or endorse any Competing Transaction, or (v) authorize
any Representatives to take any action prohibited by this Section. Each of
PARENT and TARGET shall use its prudent business efforts, including (if
necessary) the taking of legal action, at its cost and expense, to cause its
respective Representatives to refrain from taking any action prohibited by this
Section. Each of PARENT and TARGET shall promptly notify the other of any
inquiry or contact with any Person with respect to an actual or potential
Competing Transaction, the identity of the person making the contact and the
material terms of any such contact. Each of PARENT and TARGET agrees that
during the period in which this Section shall apply, it will not take or permit
any material changes in its business, assets, liabilities, or condition,
financial or otherwise, or enter into any agreement or understanding to do the
same, except as expressly permitted under this Agreement.
7.6 Trading in PARENT or TARGET Common Stock. From the Agreement
-----------------------------------------
Date until the Effective Time, neither PARENT or TARGET nor any of their
Representatives will, directly or indirectly, purchase or sell (including short
sales) any shares of PARENT or TARGET Common Stock (or any put, call, option or
derivative security or the like relating thereto).
7.7 PARENT Board of Directors.
----------------------------
(a) PARENT shall take all necessary steps such that at Closing the
Board of Directors of PARENT and of ACQUISITION CORP. each initially shall
consist of eight (8) persons, at least four (4) of whom shall be "independent
directors" within the meaning of applicable rules and regulations of the SEC and
the American Stock Exchange, as follows:
(i) Four (4) of the directors, including two (2) independents,
shall be nominees selected by E. Xxxx XxXxxxxxx ("PARENT Co-Chair");
(ii) Four (4) of the directors, including two (2) independents,
shall be selected by Xx. Xxxx Xxxxx ("TARGET Co-Chair");
(iii) Messrs. McCartney and Xxxxx shall be Co-Chairpersons of the
Board;
(iv) All of the directors so chosen will agree in writing with
one another that neither they nor any one on their respective behalf
will undertake or act, including, without limitation, the solicitation
of any vote or proxy, to alter the "balanced" nature of the Board of
Directors during the three years following the effective date of the
merger Transaction.
(b) Management Team. The initial post merger management team of the
----------------
PARENT shall include, but not be limited to, the following persons:
Xx. Xxxx X. Xxxxx, Co-Chairman and Chief Scientific Officer
E. Xxxx XxXxxxxxx, Co-Chairman
E - 35
Xxxxxxxx X. Xxxxxxx, CEO and President
Xxxxxxx X. Xxxxxxxxxxx, V.P. and CFO
Xxxxxxxxx X. Xxxx, Ph.D., V.P. and General Manager
Xxx X. Xxxxxxxxxxx, V.P., Sales & Marketing
Xxxxx X. Xxxxxxxx, V.P., Facilities & Technology
(c) Treatment of CONX/GBI Employees. It is anticipated that the
----------------------------------
status quo for all PARENT and TARGET employees as of the Closing Date shall be
retained for at least 60 days post Closing, that key employees of GBI who are
not continued thereafter will be provided with up to eighteen (18) months
severance pay (with severance payments to such GBI employees not to exceed
$600,000 in the aggregate, and such severance to be paid ratably (in the same
ratio as each such employee's current salary payments) over the severance period
applicable to each such GBI employee), and that the Vancouver office will
continue to be an office of the Company but solely to assist management in
financing transactions and principally occupied by E. Xxxx XxXxxxxxx, GBI
Co-Chairman. A list of the key employees of PARENT who would be entitled to
participate in any such severance pay has been provided to TARGET by PARENT.
PARENT will provide to TARGET not less than ten (10) business days prior to the
Closing with a Severance Payment Schedule setting forth the severance payment
amounts and schedule for payment thereof to the GBI employees so entitled and
consistent with the provisions of this Section 7.7(c).
(d) Executive Options and Employment Agreement. Concurrently with the
----------------------------------------------
Closing PARENT will enter into employment agreements with the following key
employees of TARGET: Xx. Xxxx X. Xxxxx, Xxxxxxxx X. Xxxxxxx, Xxxxxxx X.
Xxxxxxxxxxx, Xx. Xxxxxxxxx X. Xxxx, Xxx X. Xxxxxxxxxxx, Xxxxx X. Xxxxxxxx (each
an "Executive" and collectively the "Executives") pursuant to which, in addition
to any other compensation such Executives are entitled to, they shall receive
options to purchase an aggregate of three (3) million shares of GBI's Common
Stock (the "Executive Options"). The TARGET Board shall determine the
allocation of such options, and TARGET will provide to PARENT a schedule thereof
not less than ten (10) days prior to the Closing Date. The employment agreement
with each Executive will be on the same terms and conditions as that existing
under each such Executive's current employment agreement with TARGET, except
that (i) salary and cash bonus compensation may be adjusted upward as agreed by
PARENT and such Executive and (ii) the severance period for termination without
cause will be extended to 18 months (from 12 months). Each option agreement
shall provide for 3 year vesting (33 1/3%) per year starting from the date of
grant and an initial exercise price equal 100% of the current fair market value
of GBI's common stock at the time of Closing. Existing options of TARGET will
be exchanged or converted to options for PARENT common stock with a number of
option shares and an exercise price equivalent to that under the prior TARGET
option adjusted to reflect the exchange ratio in the Merger, as described in
Section 3.1(a) above.
7.8 Transition Procedure. The Executive Offices of the Surviving
---------------------
Corporation subsequent to the Closing shall be the current offices of TARGET.
E - 36
As it consolidates the executive and corporate office functions and operations
of the post-Merger PARENT to the current offices of TARGET in Westminster,
Colorado, PARENT (as the Surviving Corporation) will execute the following
transition procedure:
(a) So long as it is reasonably practicable, and for at least six (6)
months, the Surviving Corporation shall also maintain an office for financial
and investor affairs in Vancouver, Canada, at which E. Xxxx XxXxxxxxx and
necessary staff will be based.
(b) For a period of sixty (60) days following the Closing Date, PARENT
will make no material change in the operations of the Surviving Company and its
constituent companies.
(c) Prior to the Closing, management of TARGET will conduct and analysis
and review of the consolidated operations, assets, employment, facilities and
resources of the Surviving Corporation, and prepare a post-Merger transition
plan for the Surviving Corporation (the "Transition Plan"), such Plan to
consider, among other items, the following issues:
(i) consolidated operations of the Surviving Corporation to assess the
desired operating structure and resource allocations for the Surviving
Corporation post-Merger;
(ii) headcount adjustments which may be necessary during the initial
six-month post-Merger period;
(iii) facility closing and other asset allocation adjustments deemed
necessary to occur during the six (6) month post-Merger period;
(iv) the status and xxxxxxx of the Vancouver, B.C. office and Ann
Arbor, Michigan offices; and
(v) staffing requirements to achieve the business objectives of the
Surviving Corporation for the period commencing six (6) months after the
Closing, including the possible functional/skill-set areas for which the
Surviving Corporation may require consulting services and associated
consulting offers to be made for services desired on a less than full-time
basis.
ARTICLE VIII.
CONDITIONS TO THE OBLIGATIONS OF PARENT AND ACQUISITIONS CORP.
The obligations of PARENT and Acquisition Corp to effect the Merger and the
other transactions contemplated hereunder shall be subject to the fulfillment at
or prior to the Effective Time of the following conditions, any or all of which
may be waived in whole or in part by PARENT:
8.1 Accuracy of Representations and Warranties and Compliance with
-------------------------------------------------------------------
Obligations; Disclosure Schedule. The representations and warranties of TARGET
---------------------------------
contained in this Agreement shall be true and correct in all material respects
at and as of the Effective Time with the same force and effect as though made at
E - 37
and as of that time except that those representations and warranties which
address matters only as of a particular date shall have been true and correct as
of such date. TARGET shall have performed and complied in all material respects
with all of its obligations required by this Agreement to be performed or
complied with at or prior to the Effective Time. TARGET shall have delivered to
PARENT and ACQUISITION CORP. a certificate, dated as of the Closing Date and
signed by its President, to the effect of the foregoing.
8.2 Corporate Matters. TARGET shall have delivered to PARENT: (a)
-----------------
copies of the Certificate of Incorporation and Bylaws of TARGET as in effect
immediately prior to the Effective Time; (b) copies of resolutions adopted by
the Board of Directors and stockholders of TARGET authorizing this Agreement and
the consummation of the transactions contemplated hereby; and (c) a certificate
of good standing of TARGET issued by the Secretary of State of Nevada and each
other state in which TARGET is qualified to do business as of a date not more
than ten (10) days prior to the Closing Date, certified in the case of
subsections (a) and (b) of this Section 8.2 as of the Closing Date by the
---------------- --- ------------
President of TARGET as being true, correct and complete.
8.3 No Adverse Proceedings. No Governmental Authority or other
------------------------
regulatory body shall have enacted, issued, promulgated, enforced or entered any
Law or Order (whether temporary, preliminary or permanent) which is then in
effect and has the effect of making illegal, materially restricting or
preventing or prohibiting the Merger or the transactions contemplated by this
Agreement. No Legal Proceeding shall be overtly threatened or pending against
the PARENT COMPANIES or TARGET before any court or Governmental Authority which
seeks to restrain, prohibit, invalidate or collect damages arising out of the
Merger or any other transaction contemplated hereby or obtain damages or other
relief from any such party, in connection with this Agreement or the
consummation of the transactions contemplated hereby.
8.4 Consents and Approvals. TARGET shall have delivered to PARENT
----------------------
copies of (a) all, if any, consents, approvals, orders and authorizations of,
and all registrations, qualifications, designations, declarations or filings
with, any Governmental Authority or other Persons required in connection with
the execution and delivery by TARGET of this Agreement or the consummation by
TARGET of the transactions contemplated hereby and (b) all consents to the
transactions contemplated hereby and waivers of rights to terminate or modify
any Contracts, rights or obligations of TARGET from any Person from whom such
consent or waiver is required under any Contract or instrument, or who, as a
result of the transactions contemplated hereby, would have such rights to
terminate or modify such Contracts or instruments, either by the terms thereof
or as a matter of Law.
8.5 Securities Offerings. The offering and issuance of shares of
---------------------
PARENT Common Stock in the Merger shall be in compliance with the Securities Act
and all other applicable securities Laws to the satisfaction of PARENT and
TARGET and each of their respective counsel. TARGET and holders of TARGET
Capital Stock shall have taken all steps reasonably required by PARENT to ensure
such compliance. TARGET shall have delivered to PARENT such documentation as
may be reasonably required to establish compliance under the Securities Act and
all other applicable securities Laws in connection with the issuance of Merger
Shares and other consideration by PARENT pursuant to this Agreement.
8.6 Financial Statements. PARENT shall have received TARGET's
---------------------
Financial Statements (such Financial Statements to be as of a date not more than
60 days prior to the anticipated Closing Date of the Merger), together with an
E - 38
agreement by TARGET's independent public accountant, in customary form, to the
effect that such accountants will cooperate, on customary terms and conditions,
as may be necessary or appropriate for the inclusion of TARGET's Financial
Statements in any report required by the SEC to be filed by PARENT with respect
to the Merger, this Agreement, and the transactions contemplated thereby.
8.7 No Material Adverse Change. Between the Agreement Date and
-----------------------------
the Effective Time, there shall not have been any Material Adverse Change with
respect to TARGET, and TARGET shall have delivered to PARENT a certificate to
such effect, dated as of the Closing Date and signed by an executive officer of
TARGET.
8.8 Governmental Consents. TARGET shall have delivered to PARENT
----------------------
copies of (a) all consents, approvals, orders and authorizations of, and all
registrations, qualifications, designations, declarations or filings with, any
Governmental Authority required in connection with the execution and delivery by
TARGET of this Agreement or the consummation by TARGET of the transactions
contemplated hereby and (b) all consents to the transactions contemplated hereby
and waivers of rights to terminate or modify any Contracts, rights or
obligations of TARGET, from any Person from whom such consent or waiver is
required under any Contract or instrument, or who, as a result of the
transactions contemplated hereby, would have such rights to terminate or modify
such Contracts or instruments, either by the terms thereof or as a matter of
Law.
8.9 PARENT Stockholder Approval. The stockholders of the PARENT shall
-----------------------------
have approved the Merger, this Agreement, and the transactions contemplated
thereby, in accordance with the PARENT's Certificate of Incorporation and
Bylaws, the New York Business Corporation Law or the DGCL, as applicable,
applicable securities Laws, and the rules and regulations of the American Stock
Exchange, and not revoked such approval.
8.10 (There is no Section 8.10.)
8.11 Lock-Up Agreements. At Closing, PARENT shall have received Lock-Up
-------------------
Agreements, substantially in the form of Exhibit 8.11 hereto and reasonably
------------
acceptable to PARENT in form and in substance, executed by each of the officers
and directors of TARGET and each Person who is the beneficial holder of 5% or
more of the TARGET Common Stock, to the effect that for 180 day period of time
after the Closing none of them will dispose of shares of PARENT Common Stock.
8.12 Board of Directors of PARENT and ACQUISITION CORP.
---------------------------------------------------------
Contemporaneously with the Closing, the Board of Directors of PARENT and
ACQUISITION CORP. shall have been constituted as required by Section 7.7.
-----------
8.13 TARGET Stockholder Approval. The stockholders of the TARGET shall
----------------------------
have approved the Merger, this Agreement, and the transactions contemplated
thereby, in accordance with the TARGET's Certificate of Incorporation and
Bylaws, Nevada corporate law, and applicable securities Laws.
8.14 Target Executive Change of Control Waivers. TARGET shall have
----------------------------------------------
obtained waivers from its Executives of the change of control lump-sum payment
provisions in their existing employment agreements.
E - 39
ARTICLE IX.
CONDITIONS TO THE OBLIGATIONS OF TARGET
The obligations of TARGET to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
or all of which may be waived in whole or in part by TARGET:
9.1 Accuracy of Representations and Warranties and Compliance with
-------------------------------------------------------------------
Obligations; Disclosure Letter. The representations and warranties of the
--------------------------------
PARENT COMPANIES contained in this Agreement shall be true and correct in all
material respects and as of the Effective Time with the same force and effect as
though made at and as of that time except that those representations and
warranties which address matters only as of a particular date shall have been
true and correct as of such date. Each of the PARENT COMPANIES shall have
performed and complied in all material respects with all of its obligations
required by this Agreement to be performed or complied with at or prior to the
Effective Time. Each of the PARENT COMPANIES shall have delivered to TARGET a
certificate, dated as of the Closing Date and signed by an executive officer, to
the effect of the foregoing. The Disclosure Schedule of the PARENT COMPANIES
shall not have been amended in such a manner so as not to be acceptable to
TARGET in form and in substance.
9.2 Corporate Matters. PARENT shall have delivered to TARGET: (a)
-----------------
copies of the Certificate or Articles of Incorporation and Bylaws of each of
PARENT and ACQUISITION CORP. as in effect immediately prior to the Effective
Time; (b) copies of resolutions adopted by the Board of Directors of PARENT and
the Board of Directors and stockholder of ACQUISITION CORP. authorizing this
Agreement and the consummation of the transactions contemplated hereby; and (c)
a certificate of good standing of PARENT issued by the Secretary of State of the
State of New York and a certificate of good standing of ACQUISITION CORP. issued
by the Secretary of State of the State of Delaware, in each case as of a date
not more than ten (10) days prior to the Closing Date, certified in the case of
subsections (a) and (b) of this Section 9.2 as of the Closing Date by an
---------------- --- ------------
executive officer of PARENT as being true, correct and complete. The
Certificate or Articles of Incorporation and Bylaws of each of PARENT and
ACQUISITION CORP. shall be satisfactory to TARGET and its counsel in form and in
substance.
9.3 No Adverse Proceedings. No Governmental Authority or other
------------------------
regulatory body shall have enacted, issued, promulgated, enforced or entered any
Law or Order (whether temporary, preliminary or permanent) which is then in
effect and has the effect of making illegal, or preventing or prohibiting the
Merger or the transactions contemplated by this Agreement. No Legal Proceeding
shall be overtly threatened or pending against the PARENT COMPANIES or TARGET
before any court or Governmental Authority which seeks to restrain, prohibit,
invalidate or collect damages arising out of the Merger or any other transaction
contemplated hereby or obtain damages or other relief from any such party, in
connection with this Agreement or the consummation of the transactions
contemplated hereby.
9.4 Consents and Approvals. PARENT shall have delivered to TARGET
----------------------
copies of (a) all consents, approvals, orders and authorizations of, and all
registrations, qualifications, designations, declarations or filings with, any
Governmental Authority or other Persons required in connection with the
execution and delivery by PARENT and ACQUISITION CORP. of this Agreement or the
E - 40
consummation by PARENT COMPANIES of the transactions contemplated hereby and (b)
all consents to the transactions contemplated hereby and waivers of rights to
terminate or modify any Contracts, rights or obligations of PARENT and
ACQUISITION CORP. from any Person from whom such consent or waiver is required
under any Contract or instrument, or who, as a result of the transactions
contemplated hereby, would have such rights to terminate or modify such
Contracts or instruments, either by the terms thereof or as a matter of Law.
9.5 Registration. The offering and issuance of shares of PARENT
------------
Common Stock in the Merger shall be in compliance with the Securities Act and
all other applicable federal and state securities Laws to the reasonable
satisfaction of TARGET and its counsel. The offering and issuance of the PARENT
Merger Options and the shares of PARENT Common Stock receivable on exercise of
thereof shall be in registered in compliance with the Securities Act and all
other applicable federal and state securities Laws to the reasonable
satisfaction of TARGET and its counsel.
9.6 No Material Adverse Change. Between the Agreement Date and
-----------------------------
the Effective Time, there shall not have been any Material Adverse Change with
respect to PARENT or ACQUISITION CORP., and PARENT shall have delivered to
TARGET a certificate to such effect, dated as of the Closing Date and signed by
an executive officer.
9.7 Financial Statements. TARGET shall have received PARENT's
---------------------
audited financial statements as of December 31, 2003 and PARENT shall have
received TARGET's unaudited financial statements as of December 31, 2003
together with an agreement by TARGET's independent public accountant, in
customary form, to the effect that such accountants will cooperate, on customary
terms and conditions, as may be necessary or appropriate for the inclusion of
TARGET's Financial Statements in any report required by the SEC to be filed by
PARENT with respect to the Merger, this Agreement, and the transactions
contemplated thereby.
9.8 Governmental Consents. PARENT shall have delivered to TARGET
----------------------
copies of (a) all consents, approvals, orders and authorizations of, and all
registrations, qualifications, designations, declarations or filings with, any
Governmental Authority required in connection with the execution and delivery by
PARENT of this Agreement or the consummation by PARENT of the transactions
contemplated hereby and (b) all consents to the transactions contemplated hereby
and waivers of rights to terminate or modify any Contracts, rights or
obligations of PARENT from any Person from whom such consent or waiver is
required under any Contract or instrument, or who, as a result of the
transactions contemplated hereby, would have such rights to terminate or modify
such Contracts or instruments, either by the terms thereof or as a matter of
Law.
9.9 Stockholder Approval. The stockholders of TARGET shall have
----------------------
approved the Merger, this Agreement, and the transactions contemplated thereby,
in accordance with the TARGET's Certificate of Incorporation and Bylaws, the
Nevada Business Corporation Law, and applicable securities laws and not revoked
such approval.
9.10 Lock-Up Agreements. At Closing, TARGET shall have received Lock-Up
-------------------
Agreements, substantially in the form of Exhibit 8.11 hereto and reasonably
------------
acceptable to TARGET and its counsel in form and in substance, executed by each
of the officers and directors of PARENT and each Person who is the beneficial
holder of 5% or more of the PARENT Common Stock, to the effect that for a 000
X - 00
day period of time after the Closing none of them will dispose of shares of
PARENT Common Stock.
9.11 Board of Directors of PARENT and ACQUISITION CORP.
--------------------------------------------------------
Contemporaneously with the Closing, the Board of Directors of PARENT and
ACQUISITION CORP. shall have been constituted as required by Section 7.7.
------------
9.12 PARENT Common Stock Listing. At Closing, the PARENT Common Stock
----------------------------
shall continue to be listed for trading on the American Stock Exchange, there
shall be no proceedings to terminate that listing pending or threatened, and
PARENT shall have no Knowledge of any basis therefor, and PARENT shall have
delivered a certificate of its President to TARGET, certifying the same to be
true and correct.
9.13 New Equity Financing. PARENT shall have obtained at least Six
----------------------
Million ($6,000,000) Dollars of new equity financing prior to the Closing.
9.14 Employment Agreements. PARENT shall have delivered to all required
---------------------
key executives signed employment agreements related to their employment by
PARENT, and PARENT shall have issued, in accordance with the instructions of
TARGET, the options to TARGET executives required by Section 7.7(d).
9.15 Tax Returns Filed. PARENT shall have filed with all applicable
------------------
taxing authorities PARENT's Tax Returns for the fiscal years ended December 31,
2001 and December 31, 2002.
9.16 D&O Insurance. PARENT shall have procured and shall have in force
-------------
for the benefit of its directors and officers D&O insurance with liability
coverage of not less than $4,000,000 individually and in the aggregate.
9.17 Executive Options. PARENT shall have amended its executive
------------------
stock option plan or adopted a new stock option plan authorizing the issuance of
up to an additional 7,000,000 shares of its common stock, and such action shall
have been approved by request consent of PARENT's stockholders. The shares of
PARENT Common Stock issuable upon exercise of the Executive Options will be
registered under all applicable provisions of the Securities Act of 1933
pursuant to a duly filed and effective Form S-8 of PARENT promptly after the
Closing.
9.18 Independent Auditor Review. PARENT shall be current in all
----------------------------
required independent auditor reviews, audits and reports regarding PARENT's
financial statements and public company reports.
ARTICLE X.
CLOSING
10.1 Closing. Unless this Agreement shall have been terminated
-------
pursuant to the provisions of Article XIV hereof, the closing of the
------------
transactions contemplated by this Agreement (the "Closing") shall take place at
-------
the offices of PARENT 0X-0000 Xxxx Xxxxxx Xxx. Xxxxxx, XX, Xxxxxx X0X 0X0, at
10:00 am., local time, on July 30, 2004 or the date which is three (3) business
days after all conditions to closing have been satisfied or are first capable of
being satisfied, but in no event later than August 31, 2004 unless otherwise
E - 42
mutually agreed by the parties to this Agreement. The date on which the Closing
occurs is referred to as the "Closing Date." The Closing shall be deemed
-------------
completed as of 12:01 a.m. on the morning of the Closing Date.
10.2 Deliveries by TARGET. At or prior to the Closing, TARGET shall
----------------------
deliver (or cause to be delivered) to PARENT:
(a) each certificate or other letter, agreement and other document or
instruments required to be delivered by TARGET to PARENT in accordance with
Article VIII hereof;
-------------
(b) constructive access to the stock book(s), stock ledger(s) and
minute book(s) of TARGET;
(c) constructive access to all originals and copies of agreements,
instruments, documents, deeds, books, records, files, tax returns and other data
and information within the possession of TARGET;
(d) evidence satisfactory to PARENT that with respect to each of
TARGET's accounts, credit lines, safe deposits boxes or vaults the authority of
all individuals with respect thereto has been terminated, other than those
individuals designated by PARENT in writing;
(e) the Merger Filings, duly executed by TARGET; and
(f) such other documents, instruments, agreements and all certificates
and other evidence as PARENT or its counsel may reasonably request as to the
satisfaction of the conditions to PARENT's obligations set forth herein.
10.3 Deliveries by PARENT. At or prior to the Closing, PARENT shall
----------------------
deliver (or cause to be delivered) to TARGET:
(a) each certificate or other letter, agreement and other document or
instruments required to be delivered by PARENT to TARGET or to TARGET's
stockholders in accordance with Article IX hereof;
-----------
(b) the Merger Filings, duly executed by ACQUISITION CORP.;
(c) the Certificates (evidencing the Merger Shares), to the extent the
conditions for delivery of the same at Closing set forth in Article III shall
-----------
have been satisfied, for delivery to the applicable TARGET stockholders; and
(d) such other documents, instruments, agreements and all certificates
and other evidence as TARGET or its counsel may reasonably request as to the
satisfaction of the conditions to TARGET's obligations set forth herein.
ARTICLE XI.
TRANSFER RESTRICTIONS; COMPLIANCE WITH SECURITIES LAWS
11.1 Limitation on Disposition of Shares. It is anticipated that the
-------------------------------------
shares of PARENT Common Stock to be issued to the TARGET Stockholders pursuant
E - 43
to the Merger shall have been registered under the Securities Act, and may be
freely sold, transferred or otherwise disposed of, by TARGET shareholders other
than as provided by the Lock-Up Agreements.
11.2 Legend. All certificates representing shares of PARENT Common
------
Stock issued pursuant to the Merger shall be issued without stop and without
legend.
ARTICLE XII.
SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS
12.1 Survival. All representations, warranties and covenants of PARENT
--------
COMPANIES and TARGET contained in this Agreement will survive the Effective Time
and remains operative and in full force and effect, regardless of any
investigation made by or on behalf of either party, for one year after the
Closing Date.
12.2 The parties agree that if there shall arise, subsequent to the
Closing, any dispute with respect to the Representations and Warranties given by
either party to the other that such dispute shall be resolved by mediation or
binding arbitration, if required.
(a) If a claim is first made by one or more former shareholders of
TARGET on behalf of TARGET against PARENT, the situs of the mediation or
arbitration shall be Vancouver, Canada, and if a claim is first made by one or
more existing shareholders of PARENT on behalf of PARENT against TARGET, the
situs of the mediation or arbitration shall be Denver, Colorado.
(b) The claiming party shall name its mediator. The responsive party
shall then name its mediator. The mediators shall meet in private and informally
with the parties. The mediators may, if they can agree, propose by joint
recommendation any equitable adjustment to share ownership as may be feasible
and appropriate under all of the facts and circumstances. The mediators shall be
persons of good reputation in the business community, who are each independent
from the appointing party, though they may have other business or social
relationships with the appointing party or affiliates.
(c) If the mediators cannot make a joint recommendation, or if the
Surviving Corporation cannot pragmatically implement the mediators joint
recommendation, the dispute shall be referred by the mediators to a mutually
appointed third person who, together with the mediators shall constitute an
arbitration panel. The arbitration panel shall hold one or more hearings, if
necessary, take evidence and render a determination. The determination of the
arbitration shall be final and binding and shall be enforceable in any court of
competent jurisdiction.
ARTICLE XIII.
DEFINITIONS
13.1 Each of the terms used in this Agreement with full capitalization
or initial capitalization have been defined in this Agreement in the Section
wherein such term was initially used.
E - 44
ARTICLE XIV.
TERMINATION/TERMINATION PAYMENT
14.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date solely:
(a) by mutual consent of the boards of directors of GBI and Corgenix;
(b) by Corgenix (acting through its board of directors), on the one
hand, or by GBI (acting through its board of directors), on the other hand, if
the transactions contemplated by this Agreement to take place at or prior to the
Closing shall not have been consummated by July 30, 2004 (including, but not
limited to, failure by GBI to consummate the $6,000,000 equity capital raise),
unless the failure of such transactions to be consummated is due to the failure
of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Closing Date;
(c) by Corgenix (acting through its board of directors) if a material
breach or default shall be made by GBI in the observance or in the due and
timely performance of any of the representations, covenants, agreements or
conditions contained herein, and the curing of such default shall not have been
made on or before the Closing Date; or
(d) by GBI (acting through its board of directors) if a material breach
or default shall be made by Corgenix in the observance or in the due and timely
performance of any of the representations, covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made on or
before the Closing Date.
14.2 Termination Payment in Event of Certain Terminations.
-----------------------------------------------------------
(a) Due to Corgenix Breach. In the event Corgenix fails to consummate
-----------------------
the Merger and such failure constitutes a breach of Corgenix's obligations under
this Agreement, Corgenix will pay to GBI the "Applicable Termination Payment"
(defined below).
(b) Due to GBI Breach. In the event GBI fails to consummate the Merger
-----------------
and such failure constitutes a breach of GBI's obligations under this Agreement,
GBI will pay to Corgenix the Applicable Termination Payment, and GBI
additionally will reimburse Corgenix for any and all sums, if any, required to
be paid by Corgenix in respect of the Note payable by Corgenix to GBI in the
principal amount of Five Hundred Thousand ($500,000) Dollars (the "Corgenix
Note"), including any interest paid thereon.
(c) Due to Business Combination Transaction. If there is a change in
-----------------------------------------
control of either Corgenix or GBI prior to the termination of this Agreement, or
if either Corgenix or GBI, over the objections of the other, unrightfully
refuses to proceed with the Merger, or refuses to proceed to Closing of the
Merger because it intends to proceed with a "business combination transaction"
with any other party (or actually proceeds with such a business combination
transaction with another party within six (6) months after any such unrightful
refusal to proceed), then the party (or its successor in any business
combination transaction) which has unrightfully refused to proceed with the
E - 45
Merger (the "Refusing Party") shall be obligated to pay a break-up fee to the
other party equal to such Refusing Party's Applicable Termination Payment as
liquidated damages for any such unrightful refusal to proceed with the
Transaction. In addition, in the event of any unrightful refusal by Corgenix
to proceed with the Merger, at the sole election of GBI, the Corgenix Note may
be converted into 1,250,000 additional Common Shares of Corgenix at a conversion
price of $.40 per Share subject to adjustment in accordance with the provisions
of the Corgenix Note. If the Merger does not close for any reason (other than
an unrightful refusal to close by Corgenix), the Note will convert to a fixed
two-year term note ("Term Note"), bearing interest at the prime rate in effect
as of the date of termination of the Merger, and fully-amortized over four
semi-annual payments of principal and accrued interest. In such event, the Term
Note will be convertible, at the election of GBI, into Common Stock of Corgenix
at a conversion price of $.568 per Share. As used herein, a "business
combination transaction" means and includes any stock purchase, asset purchase,
merger, consolidation, reverse merger, or other corporate transaction by a party
with a non-party to this Agreement as a result of which a change of control
occurs as to such party or non-party or the Merger transaction is vitiated.
(d) If Termination is due to Schedule Amendment.
--------------------------------------------------
(i) Each party hereto agrees that, with respect to the representations
and warranties of such party contained in this Agreement, such party shall
have the continuing obligation, and right (subject to Section 14(b) below),
until the Closing Date, to supplement or amend promptly the Schedules of
such party, with respect to any matter hereafter arising or discovered
that, if existing or known at the date of this Agreement, would have been
required to be set forth or described in such Schedules.
(ii) Upon and after the effectiveness of the Registration Statement
or, if earlier, the first distribution of a preliminary prospectus in
connection with the Merger, no amendment or supplement to a Schedule
prepared by Corgenix, on the one hand, or GBI, on the other hand, that
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect may be made unless both parties consent to such amendment or
supplement. In the event that a party seeks to amend or supplement a
Schedule pursuant to this Section 14 and the other party does not consent
to such amendment or supplement, this Agreement shall terminate.
(iii) For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions to Closing of the Merger
have been fulfilled, the Schedules hereto shall be deemed to be the
Schedules as amended or supplemented pursuant to this Section 14.4. No
party to this Agreement shall be liable to any other party if this
Agreement shall be terminated pursuant to the provisions of this Section
14.4, except that, notwithstanding anything to the contrary contained in
this Agreement, if Corgenix on the one hand, or GBI on the other hand,
proposes to amend or supplement a Schedule that results in a termination of
this Agreement pursuant to Section 14(b) and such amendment or supplement
arises out of or reflects facts or circumstances which amount to a Material
E - 46
Adverse Event that (i) such party knew or should have known about at the
time of execution of this Agreement and such party omitted to include such
facts or circumstances in the Schedules in bad faith or as a consequence of
intentional misrepresentation, or omission, or gross negligence, or (ii) if
such amendment or supplement has been proposed without justification in bad
faith, and as a result of such amendment or supplement the other party by
right terminates this Agreement, the party that made such amendment or
supplement shall (i) pay the other party the "Applicable Termination
Payment", and (ii) pay or reimburse the other party for all of the legal,
accounting and other out-of-pocket costs reasonably incurred by such other
party in connection with this Agreement.
(e) Applicable Termination Payment Defined. If payable by Corgenix,
-----------------------------------------
the "Applicable Termination Payment" shall be $1,500,000. If payable by GBI,
the "Applicable Termination Payment" shall be $1,000,000.
(f) Payment to Trustee for Bridge Notes. If at the time of an event
--------------------------------------
requiring the payment of an Applicable Termination Payment the Notes due to
investors pursuant to PARENT's Private Placement Memorandum (the "Memorandum")
dated December 1, 2003 (the "Bridge Notes") to Investors remain outstanding, the
Applicable Termination Payment so payable shall be delivered to any escrowee
appointed by (i) the Placement Agent or (ii) holders of a majority in principal
amount, of the Notes.
ARTICLE XV.
GENERAL PROVISIONS
15.1 Notices. All notices and other communications required or
-------
permitted under this Agreement shall be in writing and will be either hand
delivered in person, sent by telecopier, sent by certified or registered first
class mail, postage pre-paid, or sent by nationally recognized express courier
service. Such notices and other communications will be effective (i) upon
receipt if hand delivered or sent by telecopier, (ii) five (5) days after
mailing if sent by mail, and (iii) one (1) day after dispatch if sent via next
day service by express courier, to the following addresses, or such other
addresses as any party may notify the other parties in accordance with this
Section:
(a) if to the PARENT : Genesis Bioventures, Inc.
0X-0000 Xxxx Xxxxxx Xxxxxxx,
Xxxxxx, XX, Xxxxxx X0X 0X0
Attn: E. Xxxx XxXxxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: D. Xxxxx Xxxxx, Esq.
Jericho Atrium
000 Xxxxx Xxxxxxxx
Xxxxx 000
Xxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E - 47
(b) if to TARGET, to: Corgenix Medical Corporation
00000 Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: The Xxxxxxxx Law Firm, P.C.
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Denver Xxxxxx
0000 Xxxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
15.2 Entire Agreement. This Agreement (including the Exhibits and the
-----------------
parties respective Disclosure Schedules) and other documents delivered at the
Closing pursuant hereto, contains the entire understanding of the parties in
respect of its subject matter and supersedes all prior agreements and
understandings (oral or written) between or among the parties with respect to
such subject matter, except that the NDA between the parties shall continue to
------
be in full force and effect through the Effective Time except to the extent that
it conflicts with the terms of this Agreement, in which case the terms of this
Agreement would control. The Exhibits and Disclosure Schedules constitute a
part hereof as though set forth in full above.
15.3 Expenses. Except as set forth in this Section 15.3 or as otherwise
-------- ------------
provided in this Agreement, the parties hereto shall pay their own fees and
expenses, including their own legal, accounting, consulting and financial
advisory fees, incurred in connection with this Agreement or any transaction
contemplated hereby, whether or not the Merger is consummated, except as the
parties may otherwise hereafter agree in writing.
15.4 Amendment. This Agreement (including the Disclosure Schedules and
---------
Exhibits) may not be modified, amended, supplemented, canceled or discharged,
except by written instrument executed by all parties. The Agreement may be
amended by the parties hereto at any time before or after approval of the
stockholders of PARENT or TARGET; but, after such approval, no amendment will be
made which by applicable Law requires the further approval of the stockholders
of PARENT or TARGET without obtaining such further approval.
15.5 Waiver. No failure to exercise, and no delay in exercising, any
------
right, power or privilege under this Agreement shall operate as a waiver, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of any other right, power or privilege. No waiver of any
breach of any provision shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision, nor shall any waiver be
implied from any course of dealing between the parties. No extension of time
for performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts. The rights and remedies of the parties
under this Agreement are in addition to all other rights and remedies, at law or
equity, that they may have against each other.
E - 48
15.6 Binding Effect; Assignment. The rights and obligations of this
----------------------------
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Without prejudice to the rights and remedies
otherwise available to any party to this Agreement, each party to this Agreement
shall be entitled to equitable relief by way of injunction or otherwise, without
the necessity of having to post bond, if the other party or any of its
Representatives breach or threaten to breach Sections 7.4, 7.5, 7.6 or 15.11 of
------------ --- --- -----
this Agreement. Nothing expressed or implied herein shall be construed to give
any other person any legal or equitable rights hereunder except as expressly
provided herein. Except as expressly provided herein, the rights and
obligations of this Agreement may not be assigned by TARGET or PARENT.
Notwithstanding the foregoing, the stockholders of TARGET shall be deemed to be
third party beneficiaries of this Agreement.
15.7 Interpretation. When a reference is made in this Agreement to an
--------------
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference and convenience purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement or the schedules. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Time shall be of the essence in this Agreement.
15.8 Severability. Any term or provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction
only, be ineffective only to the extent of such prohibition or unenforceability,
and shall not invalidate the remaining provisions hereof or affect the validity
or enforceability of such provision in any other jurisdiction.
15.9 Governing Law; Interpretation. THIS AGREEMENT SHALL BE CONSTRUED
------------------------------
IN ACCORDANCE WITH AND GOVERNED FOR ALL PURPOSES BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE WHOLLY PERFORMED
WITHIN SUCH STATE, EXCEPT MERGER RELATED PROVISIONS GOVERNED BY THE DGCL. THE
PARTIES HERETO HEREBY AGREE THAT ANY SUIT OR PROCEEDING ARISING UNDER THIS
AGREEMENT, OR IN CONNECTION WITH THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED HEREBY, SHALL BE BROUGHT SOLELY IN A FEDERAL OR STATE COURT LOCATED
IN THE CITY AND STATE OF NEW YORK. BY ITS EXECUTION HEREOF, BOTH THE PARENT
COMPANIES AND THE TARGET HEREBY CONSENT AND IRREVOCABLY SUBMIT TO THE IN
PERSONAM JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN THE CITY AND
STATE OF NEW YORK AND AGREE THAT ANY PROCESS IN ANY SUIT OR PROCEEDING COMMENCED
IN SUCH COURTS UNDER THIS AGREEMENT MAY BE SERVED UPON IT PERSONALLY OR BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, OR BY FEDERAL EXPRESS OR
OTHER COURIER SERVICE, WITH THE SAME FORCE AND EFFECT AS IF PERSONALLY SERVED
UPON THE APPLICABLE PARTY IN NEW YORK AND IN THE CITY OR COUNTY IN WHICH SUCH
OTHER COURT IS LOCATED. THE PARTIES HERETO EACH WAIVE ANY CLAIM THAT ANY SUCH
JURISDICTION IS NOT A CONVENIENT FORUM FOR ANY SUCH SUIT OR PROCEEDING AND ANY
DEFENSE OF LACK OF IN PERSONAM JURISDICTION WITH RESPECT THERETO.
15.10 Arm's Length Negotiations. Each party herein expressly
---------------------------
represents and warrants to all other parties hereto that: (a) before executing
E - 49
this Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
15.11 Confidentiality. PARENT and TARGET each recognize that they have
---------------
received and will receive confidential information concerning the other during
the course of the Merger negotiations and preparations. Accordingly, PARENT and
TARGET each agree (a) to use its respective commercially reasonable efforts to
prevent the unauthorized disclosure of any confidential information concerning
the other that was or is disclosed during the course of such negotiations and
preparations, and is clearly designated in writing as confidential at the time
of disclosure, (b) to not make use of or permit to be used any such confidential
information other than for the purpose of effectuating the Merger and related
transactions, and (c) comply fully with the terms of the Confidentiality
Agreement. The obligations of this Section will not apply to information that
(i) is or becomes part of the public domain, (ii) is disclosed by the disclosing
party to third parties without restrictions on disclosure, (iii) is received by
the receiving party from a third party without breach of a nondisclosure
obligation to the other party, (iv) is necessary or desirable in connection with
a Legal Proceeding or to enforce one parties rights under this Agreement and the
Transaction Documents or (v) is required to be disclosed by Law. If this
Agreement is terminated, all copies of documents containing confidential
information shall be returned by the receiving party to the disclosing party.
15.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument. Facsimile signatures shall be deemed
suitable evidence of execution.
(Execution Page Follows)
E - 50
WHEREFORE, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
GENESIS BIOVENTURES, INC.
By: /s/ E. Xxxx XxXxxxxxx
------------------------
Name: E. Xxxx XxXxxxxxx
Title: President
GBI ACQUISITION CORP.
By: /s/ E. Xxxx XxXxxxxxx
------------------------
Name: E. Xxxx XxXxxxxxx
Title: President
CORGENIX MEDICAL CORPORATION
By: /s/ Xx. Xxxx Xxxxx
---------------------
Name: Xx. Xxxx Xxxxx
Title: Chairman
E - 51
