Exhibit 10.40
SECOND ADDENDUM TO AGREEMENT AND PLAN OF MERGER
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This SECOND ADDENDUM TO AGREEMENT AND PLAN OF MERGER is made this December 6,
2000, by and among Kaire Holdings, Incorporated, a Delaware Corporation (the
"Acquiror") whose principle place of business is located at 0000 Xxxxxxxx
Xxxxxx, Xxxxx Xxxxxxxxx, Xxxxxxxxxx 00000, and Classic Care, Inc., a California
Corporation doing business as Classic Care Pharmacy (the "Company") with a
principle place of business located in Los Angeles California, and Xxxxxx
Oscherowitz and Xxxxx Xxxxxxxxxx (collectively the "Company Shareholders" and or
the "Stash Trust"), with reference to the following:
R E C I T A L S
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WHEREAS; Acquiror has entered into a Agreement and Plan of Merger (the
"Agreement") in May 2000 the subject of which concerns the merging of the
Company into Acquiror; and
WHEREAS, Since entering into the Agreement, Acquiror has complied with the
terms and conditions of the Agreement, and specifically those terms in sections
2.1 through 2.2 (c) which specify the consideration to be exchanged and the
manner in which it is to be paid (the "Prior Consideration"); and
WHEREAS, Since entering into the Agreement, The Company Shareholders and
Acquiror collectively secured a financing commitment from KCM, LLC ("KCM") in
September 2000, which provides staged equity financings of $2,500,000 (the
"Enhanced Funding"), and $6,000,000 (the "Structured Facility", collectively the
"Financing"); and
WHEREAS, Having secured the Financing, the Company Shareholders have
requested the remaining consideration, which under the terms and conditions of
the Agreement consist entirely of 15,500,000 shares of Acquiror's common stock
(the "Merger Shares") be restructured; and
WHEREAS; the Board's of Director's of Acquiror and the Company Shareholders
deem it advisable and in the best interests of their respective shareholders to
revise the structure of the remaining consideration.
NOW, THEREFORE, in consideration of the promises and mutual covenants and
agreements set forth herein and elsewhere and in reliance upon the
representations and warranties contained herein, the parties hereto covenant and
agree to revise the structure of the Consideration of Agreement and Plan of
Merger as follows:
RESTRUCTURE OF CONSIDERATION
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Acquiror and the Company Shareholders mutually agree that the consideration
exchanged in the Agreement as defined in ARTICLE 2, sections 2.1 (a) (b) and
(c), and 2.2 (a), (b), (c), and (d), and 2.3 therein, shall be restructured
according to the following terms and conditions.
1) Total Consideration: The total consideration, which includes all Prior
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Consideration, all Additional Cash Payments, and the value of the Merger
Shares, shall be $9,500,000.00 (the "Acquisition Price").
2) Prior Consideration: Acquiror has made prior payments to the Company
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Shareholders of $1,000,000.00 cash including interest thereto, and issuance
15,500,000 of the Merger Shares.
a) Valuation of the Merger Shares: Although issued, the value of the
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Merger Shares has not been established, nor has value been credited
toward the Acquisition Price. Valuation of the Merger Shares shall be
established not later than October 31, 2001. Valuation of each of the
Merger Shares shall be the average closing price of Acquiror's shares
during the 10 trading days preceding October 31, 2001. Once valued,
the total amount of the Merger Shares shall be credited toward the
Acquisition Price.
3) Additional Cash Payments: As part of the restructure of the remaining
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consideration, Acquiror shall pay the Company Shareholders $2,000,000 cash
(the "Additional Cash"), which shall be credited toward the Acquisition
Price, and payable according to the Schedule of Payments provided in the
tables below.
(The value of the Merger Shares in the table is intended to be an
example only. The actual valuation may be different.)
Example Table
Acquisition Price $9,500,000
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Prior Cash Payments $1,000,000
Additional Cash Payments $2,000,000
Merger Shares (Valued at 0$.4175) $6,500,000
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$9,500,000
4) Reliance On Outside Funds: It is understood that Acquiror is relying upon
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the Financing to meet the Schedule of Payments provided below.
a) Terms & Conditions of the Financing: The Financing provides an
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Enhanced Funding component of $2,500,000 (gross amount) to be funded
in three separate disbursements of $750,000, $500,000 and $1,250,000.
Each disbursement is contingent upon Acquiror completing certain
predetermined tasks that are defined in the Financing. In addition,
the Financing provides a second component (the "Structured Facility")
of $6,000,000, which Acquiror may access subject to certain trading
volumes of Acquiror's stock.
b) No Assurance: Although Acquiror has completed the first task defined
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in the Enhanced Financing, and believes that it will complete the
remaining tasks required under the Enhanced Financing, and further
believes that the trading volume of its common stock will meet the
criteria of the Structured Facility, there can be no assurance or
guarantee that Acquiror will in fact complete such tasks, or that the
trading volume of its common stock with meet the criteria of the
Structured Facility, or that KCM will in fact release any or all
funds, or that KCM will release funds in the amounts or on the dates
specified in the Schedule of Payments.
c) KCM Failure to Perform: KCM failure to release any of the Enhanced
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Financing or the Structured Facility funds will substantially affect
Acquiror's ability to meet the remaining Schedule of Payments. This
may include Acquiror's inability to make even a portion of remaining
Schedule of Payments.
d) Replacement Financing: In the event the KCM should fail in part or in
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whole to provide funds thereby preventing Acquiror from completing the
Schedule of Payments, then Acquiror shall use its best efforts to find
alternative financing in an amount sufficient to complete the Schedule
of Payments. Such replacement financing shall be on terms no less
favorable than those contained in the Financing.
e) No Penalty: If, through no fault of Acquiror, Acquiror is unable to
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meet the Payment Schedule due to the failure of KCM, then Acquiror
shall not be charged delinquent fees on payments made from the
Enhanced Financing or the Structured Facility
5) Schedule of Payments: The Additional Cash shall be paid in an amount equal
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to 50% of the net proceeds received by Acquiror from the Enhanced
Financing, and 50% of the net proceeds received by Acquiror from the
Structured Facility.
a) Prior Payment from Enhanced Financing: The Company Shareholders
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acknowledge receipt of Acquiror's $362,500.00 payment made on October
28, 2000. The balance of funds payable under the Enhanced Financing is
$796,250.00
Schedule of Payments Table - The Enhanced Financing
Date Gross Expense Net 50% Payment Paid
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10/25/00 $ 750,000. $ 87,500. $ 662,500. $ 362,500. 10/28/00
12/15/00 $ 500,000. $ 45,000. $ 455,000. $ 227,500.
02/15/01 $1,250,000. $112,500. $1,137,500. $ 568,750.
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Totals $2,500,000. $245,000. $2,225,000. $1,158,750.
Remaining Balance $ 841,250.
b) Structured Facility Payments: The remaining balance of $841,250 is to
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be paid from the Structured Facility component of the KCM Financing
Agreement. That component provides for Acquiror to draw a portion from
a $6,000,000 reserve each month. The draw is based on a percentage
formula contained in the Financing Agreement. As a percentage formula,
the amount of each draw will vary in a manner consistent with the
variances in trading volume of Acquiror's stock. Therefore, it is
agreed that Acquiror shall pay the Company Shareholders 50% of the net
proceeds of each draw until the balance is paid off.
(The dollar amounts contained in the table below have been provided as an
example only.)
Schedule of Payments Table - The Structured Facility
March $ 250,000* $ 22,500 $ 225,000 $112,500
April $ 250,000* $ 22,500 $ 225,000 $112,500
May $ 250,000* $ 22,500 $ 225,000 $112,500
June $ 250,000* $ 22,500 $ 225,000 $112,500
July $ 250,000* $ 22,500 $ 225,000 $112,500
August $ 250,000* $ 22,500 $ 225,000 $112,500
September $ 250,000* $ 22,500 $ 225,000 $112,500
October $ 250,000* $ 22,500 $ 225,000 $ 53,750
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$2,000,000 $180,000 $1,800,000 $841,250
c) Final Payment Date: Acquiror shall pay the entire Additional Cash on
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or before October 31, 2000.
6) Adjustment for Shortfall: In the event that the total of the Prior Cash
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payments and the Additional Cash Payments and the proceeds from the sale of
the Merger Shares, or the value of the Merger Shares does not equal or
exceed the Total Consideration on or before the Final Payment Date, then
Acquiror shall pay the Company Shareholders a combination of cash and
additional shares (the "Shortfall Shares") of Acquiror's common stock on or
before November 30, 2001.
7) Liquidity of Acquiror's Shortfall Shares: In the event that no market
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exists to sell the Shortfall Shares within sixty days of their issuance, or
that the market to sell the Shortfall Shares is insufficient to liquidate a
majority of the Shortfall Shares, then Acquiror shall replace the Shortfall
Shares with capital.
8) Adjustment for Overpayment/Overvaluation: If at any time during the period
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of time beginning on December 1, 2000 and continuing through November 30,
2001, should the value of the Merger Shares (the "Valuation Date") when
added to the total of the Additional
Cash Payments made as of the Valuation Date exceed the Acquisition Price,
then Acquiror shall not be required to complete the balance of the cash
payments.
9) Registration of the Merger Shares. Acquiror agrees to include the Merger
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Shares in the registration statement required by the KCM financing. If KCM
should disallow the inclusion of the Merger Shares in the registration
statement, it is understood and agreed that Rule 144 of the Securities
Exchange Act of 133 (as amended), provides that the Merger Shares will be
free trading, subject to certain restrictions, one year from the date of
issuance.
10) Closure of Acquisition: Upon execution of this Addendum, the acquisition
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shall be deemed "CLOSED" thereby transferring all rights to Acquiror.
Acquiror intends to assume immediate operational control of all aspects of
Classic Care Pharmacy. Commencing November 1, 2000.
11) No Further Modifications: All other terms of the Agreement and Plan of
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Merger shall remain intact. The revisions to the consideration are not
intended to affect eligibility for any tax-exempt status that the Company
Shareholders are legally entitled to receive.
12) Binding Agreement: This Addendum is intended to be a binding agreement as
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of the date hereof and supercedes all other understandings whether written
or oral relating the Agreement and Plan of Merger and all addendums
thereto. This Addendum is not assignable. The revisions in this addendum
are not intended to modify or alter the structure of the Agreement and Plan
of Merger.
IN WITNESS WHEREOF, the parties hereto have executed or caused this Agreement to
be executed effective as of the day and year first above written.
Acquiror Company Shareholders /
Xxxxx Trust
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Xxxxxx Xxxxxxxx Date Xxxxx Xxxxxxxxx Date
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Xxxx Xxxxxxxxx Date Xxxxx Xxxxxxxxxx Date
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Xxxxx Xxxxxxxxxx Date
