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AGREEMENT AND PLAN OF MERGER

 

BY AND BETWEEN

 

SKYWIDE CAPITAL MANAGEMENT LIMITED

 

AND

 

SINOENERGY CORPORATION

 

DATED AS OF OCTOBER 12, 2009

 

 


 

ARTICLE I

1

1.1

Certain Defined Terms

1

1.2

Other Defined Terms

6

ARTICLE II THE MERGER

   6

2.1

Effective Time of the Merger

6

2.2

Closing

7

2.3

Effects of the Merger

7

2.4

Directors and Officers

7

ARTICLE III CONVERSION OF SECURITIES

7

3.1

Conversion of Capital Stock

7

3.2

Exchange of Certificates, Company Stock Options and Company Stock Purchase Warrants

8

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY

10

4.1

Organization, Standing and Power; Subsidiaries.

10

4.2

Capitalization.

11

4.3

Authority; No Conflict; Required Filings and Consents.

13

4.4

SEC Filings; Financial Statements; Reporting Requirements.

14

4.5

No Undisclosed Liabilities; Indebtedness

16

4.6

Absence of Certain Changes or Events

17

4.7

Taxes

17

4.8

Owned and Occupied Real Properties

17

4.9

Intellectual Property

17

4.1

Agreements, Contracts and Commitments; Government Contracts.

17

4.11

Litigation; Product Liability; Product Recalls

18

4.12

Environmental Matters

18

4.13

Employee Benefit Plans

18

4.14

Compliance With Laws

18

4.15

Labor Matters

18

4.16

Opinions of Financial Advisors

18

4.17

Insurance

18

4.18

Brokers

18

4.19

Certain Approvals

19

4.2

Unlawful Payments

19

4.21

Affiliate Transactions

19

4.22

Guaranteed Senior Notes

19

4.23

No Other Representations or Warranties.

19

 

 

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ARTICLE V   REPRESENTATIONS AND WARRANTIES OF THE BUYER

20

5.1

Organization, Standing and Power

20

5.2

Authority; No Conflict; Required Filings and Consents.

20

5.3

Information Provided

21

5.4

Financing

21

5.5

Brokers

21

5.6

Shares

21

ARTICLE VI   CONDUCT OF BUSINESS

22

6.1

Covenants of the Company

22

ARTICLE   VII ADDITIONAL AGREEMENTS

24

7.1

No Solicitation.

24

7.2

Proxy Statement.

26

7.3

Nasdaq Quotation

27

7.4

Access to Information

27

7.5

Shareholders Meeting

27

7.6

Cooperation; Further Action.

28

7.7

Public Disclosure

29

7.8

Company Stock Plans.

29

7.9

Shareholder Litigation

29

7.1

Notification of Certain Matters

30

7.11

Directors’ and Officers’ Indemnification and Insurance.

30

7.12

Loans to Company Employees, Officers and Directors

31

7.13

Takeover Statutes and Laws

31

7.14

Standstill Agreements; Confidentiality Agreements

32

ARTICLE VIII CONDITIONS TO MERGER

32

8.1

Conditions to Each Party’s Obligation To Effect the Merger

32

8.2

Additional Conditions to Obligations of the Buyer

32

8.3

Additional Conditions to Obligations of the Company

34

ARTICLE IX   TERMINATION AND AMENDMENT

35

9.1

    Termination

35

9.2

      Effect of Termination

36

9.3

    Fees and Expenses

  36

 

ARTICLE X   MISCELLANEOUS

38

10.1

Amendment

38

10.2

Extension; Waiver

38

10.3

Non−Survival of Representations, Warranties and Agreements

38

10.4

Notices

38

10.5

Entire Agreement

39

10.6

No Third Party Beneficiaries

39

10.7

Assignment

40

10.8

Severability

40

10.9

Counterparts and Signature

40

10.1

Interpretation

40

10.11

Governing Law

41

10.12

Remedies

41

10.13

Submission to Jurisdiction

41

10.14

Waiver Of Jury Trial

41

 

 

 

 

 

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AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of October 12, 2009, is by and between Skywide Capital Management Limited, a company incorporated with limited liability under the laws of the British Virgin Islands (the “ Buyer ”) and Sinoenergy Corporation, a corporation organized under the laws of the state of Nevada (the “ Company ”).

 

WHEREAS, the Board of Directors and members of Buyer and the Board of Directors of the Company deem it advisable and in the best interests of each Party and their respective members and shareholders that the Buyer acquire the Company in order to advance the long-term business interests of the Buyer and the Company;

 

WHEREAS, the acquisition of the Company shall be effected through a merger (the “ Merger ”) of the Company with and into the Buyer in accordance with the terms of this Agreement and the NGCL and the BVIBCA.

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, the Buyer and the Company agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1   Certain Defined Terms .  As used in this Agreement, the following terms have the meanings ascribed thereto in this Article:

 

Action means any claim, action, suit, arbitration, mediation, inquiry, proceeding or investigation by or before any Governmental Entity, arbitrator or mediator.

 

Affiliate when used with respect to any party shall mean any person who is an “affiliate” of that party within the meaning of Rule 405 promulgated under the Securities Act; provided , that for purposes of this Agreement, Buyer shall not be deemed an Affiliate of the Company and the Company shall not be deemed an Affiliate of Buyer.

 

Agreement has the meaning attributed thereto in the Preamble.

 

Business Day means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in The City of New York.

 

Buyer has the meaning attributed thereto in the Preamble.

 

Buyer Material Adverse Effect   means any material adverse change, event, circumstance or development with respect to, or any material adverse effect on, (i) the business, assets, liabilities, capitalization, prospects, condition (financial or otherwise), or results of operations of the Buyer and its Subsidiaries, taken as a whole or (ii) the ability of the Buyer to consummate the transactions contemplated by this Agreement.  For the avoidance of doubt, the parties agree that the terms “material”, “materially” or “materiality” as used in this Agreement with an initial lower case “m” shall have their respective customary and ordinary meanings, without regard to the meanings ascribed to Buyer Material Adverse Effect  or Company Material Adverse Effect.

 

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BVIBCA means the British Virgin Islands Business Companies Act, 2004, as amended.

 

Company has the meaning attributed thereto in the Preamble.

 

Company Balance Sheet means  the consolidated, audited balance sheet of the Company as of September 30, 2008.

 

Company Board means the Board of Directors of the Company.

 

Company Disclosure Schedule has the meaning attributable thereto in the first paragraph of Article IV.

 

Company Material Adverse Effect means any change in, or effect on, the business, operations, assets, liabilities or condition (financial or otherwise) of the Company and its Subsidiaries which, when considered either individually or in the aggregate together with all other adverse changes or effects with respect to which such phrase is used in this Agreement, is, or is reasonably likely to be, materially adverse to the business, operations, assets, liabilities or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, excluding effects resulting from (i) changes in general economic conditions or in the securities markets in general that do not affect the Company and its Subsidiaries in a materially disproportionate manner relative to other companies in the same industry, (ii) changes in the industries in which the Company and its Subsidiaries operate (including legal and regulatory changes) that do not specifically relate to the Company and its Subsidiaries and that do not affect the Company and its Subsidiaries in a materially disproportionate manner relative to other companies in such industry, (iii) acts taken pursuant to or in accordance with this Agreement at the request of the Buyer, or (iv) acts of terrorism or war (whether or not declared); provided , however , that the Buyer recognizes that the Company has incurred net losses for the three and nine months ended June 30, 2009, and that the financial statements at June 30, 2009 and for the nine months then ended include an explanatory paragraph stating that the financial statements have been prepared on a going concern basis and do not include any adjustments that might result from the uncertainties described in the third paragraph of Note 2 of the notes to such consolidated financial statements (the “ Uncertainties Paragraph ”) and the continuation of losses substantially consistent with such losses and the continuation of the matters described in the Uncertainties Paragraph shall not be deemed a Company Material Adverse Effect.

 

Company Unaudited Balance Sheet means the consolidated, unaudited balance sheet of the Company as of June 30, 2009.

 

Encumbrance means any security interest, pledge, mortgage, lien, charge, hypothecation, option to purchase or lease or otherwise acquire any interest, conditional sales agreement, claim, restriction, covenant, easement, right of way, title defect, adverse claim of ownership or use, transfer restriction, voting agreement, proxy or other limitation on voting rights, or other encumbrance of any kind, other than any obligation to accept returns of inventory in the ordinary course of business and other than those arising by reason of restrictions on transfers under federal, state and foreign securities Laws.

 

 

2


 

Exchange Act means the Securities Exchange Act of 1934, as amended.

 

Governmental Entity means any court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority, agency or instrumentality of any nation, state or other political subdivision thereof, or any stock market or stock exchange on which the Shares are listed for trading.

 

Governmental Order means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity.

 

Indebtedness means, with respect to any Person, without duplication, (A) all obligations of such Person for borrowed money, or with respect to deposits or advances of any kind to such Person, (B) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (C) all obligations of such Person upon which interest charges are customarily paid, (D) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person, (E) all obligations of such Person issued or assumed as the deferred purchase price of property or services (excluding obligations of such Person or creditors for raw materials, inventory, services and supplies incurred in the Ordinary Course of Business), (F) all capitalized lease obligations of such Person, (G) all obligations of others secured by any lien on property or assets owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (H) all obligations of such Person under interest rate or currency hedging transactions (valued at the termination value thereof), (I) all letters of credit issued for the account of such Person and (J) all guarantees and arrangements having the economic effect of a guarantee by such Person of any Indebtedness of any other Person.

 

Intellectual Property means the rights associated with or arising out of any of the following:  (i) domestic and foreign patents and patent applications, together with all reissuances, divisionals, continuations, continuations-in-part, revisions, renewals, extensions, and reexaminations thereof, and any identified invention disclosures (“ Patents ”); (ii) trade secret rights and corresponding rights in confidential information and other non-public information (whether or not patentable), including ideas, formulas, compositions, inventor’s notes, discoveries and improvements, know-how, manufacturing and production processes and techniques, testing information, research and development information, inventions, invention disclosures, unpatented blueprints, drawings, specifications, designs, plans, proposals and technical data, business and marketing plans, market surveys, market know-how and customer lists and information (“ Trade Secrets ”); (iii) all copyrights, copyrightable works, rights in databases, data collections, “moral” rights, mask works, copyright registrations and applications therefore and corresponding rights in works of authorship (“ Copyrights ”); (iv) all trademarks, service marks, logos, trade dress and trade names and domain names indicating the source of goods or services, and other indicia of commercial source or origin (whether registered, common law, statutory or otherwise), all registrations and applications to register the foregoing anywhere in the world and all goodwill associated therewith (“ Trademarks ”); (v) all computer software and code, including assemblers, applets, compilers, source code, object code, development tools, design tools, user interfaces and data, in any form or format, however fixed (“ Software ”); and (vi) all Internet electronic addresses, uniform resource locators and alphanumeric designations associated therewith and all registrations for any of the foregoing (“ Domain Names ”).

 

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Knowledge means, with respect to any particular matter pertaining to the Company or any Subsidiary, the actual knowledge of the chief executive officer, the executive vice president or the chief financial officer of the Company regarding such matter; provided that such officers shall be deemed to have made due and diligent inquiry of those employees, agents, consultants or other Persons whom such officers reasonably believe would have knowledge of the matters represented.

 

Law means any statute, law, ordinance, regulation, rule, code, principle of common law and equity or other requirement of law of a Governmental Entity or any Governmental Order.

 

Merger has the meaning attributed thereto in the Preamble.

 

NGCL means the Nevada General Corporation Law (NRS §§ 78.010, et seq. and NRS §§ 92A.005, et seq. ) , as amended.

 

Ordinary Course of Business , with respect to any action, means such action is:

 

(i)           consistent with the recent past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; and

 

(ii)           not required to be authorized by the board of directors of such Person.

 

Person means any individual, partnership, firm, corporation, association, trust, unincorporated organization, Governmental Authority, joint venture, limited liability company or other entity.

 

SEC means the United States Securities and Exchange Commission.

 

Securities Act   means the Securities Act of 1933, as amended.

 

Shares means the $.001 par value common stock of the Company.

 

Subsidiary means, with respect to a party, any corporation, partnership, joint venture, limited liability company or other business association or entity, whether incorporated or unincorporated, of which (i) such party or any other Subsidiary of such party is a general partner or a managing member (excluding partnerships, the general partnership interests of which held by such party and/or one or more of its Subsidiaries do not have a majority of the voting interest in such partnership), (ii) such party and/or one or more of its Subsidiaries holds voting power to elect a majority of the board of directors or other governing body performing similar functions, or (iii) such party and/or one or more of its Subsidiaries, directly or indirectly, owns or controls more than 50% of the equity, membership, partnership or similar interests.

 

 

4


 

Taxes means all taxes, charges, fees, levies or other similar assessments or liabilities, including income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, services, transfer, withholding, employment, payroll and franchise taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States of America or any such government, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof.

 

Tax Returns means all reports, returns, declarations, statements or other information required to be supplied to a taxing authority in connection with Taxes.

 

A Triggering Event shall be deemed to have occurred if:  (a) the Company Board shall have failed to recommend that the Company’s shareholders vote to approve the Agreement, or shall have withdrawn or modified (without the consent of the Buyer) in a manner adverse to the Buyer the Company Board Recommendation (it being understood and agreed that any “stop-look-and-listen” communication by the Company Board to the shareholders of the Company pursuant to Rule 14d-9(f) of the Exchange Act shall not be deemed to constitute a withdrawal, modification or change of its recommendation of this Agreement); (b) the Company shall have failed to include in the Proxy Statement the Company Board Recommendation; (c) the Company Board fails to reaffirm the Company Board Recommendation, or fails to reaffirm its determination that the Merger is fair to and in the best interests of the Company’s shareholders, in a press release if so requested by the Buyer, within 10 days after the Buyer requests in writing that such recommendation or determination be reaffirmed; (d) the Company Board shall have approved, endorsed or recommended any Acquisition Proposal; (e) the Company shall have entered into any letter of intent or similar document or any Contract relating to any Acquisition Proposal, other than confidentiality agreements that the Company is required or permitted to enter into pursuant Section 7.1 of the Agreement; (f) a tender or exchange offer relating to securities of the Company shall have been commenced and the Company shall not have sent to its security holders, or filed with the SEC, within 10 Business Days after the commencement of such tender or exchange offer, a statement disclosing that the Company recommends rejection of such tender or exchange offer; or (g) the Company or any Representative of the Company shall have breached in any material respect any material obligations set forth in Section 7.1 of this Agreement.

 

5


 

1.2   Other Defined Terms .  The following terms have the meanings defined for such terms in the Sections set forth below:

 

Term                                                                                                             Section

Acquisition Proposal

7.1(d)

Articles of Merger

2.1

BMC

4.15

Certificates

3.2(a)

Closing

2.2

Closing Date

2.2

Code

3.2(g)

Company Board Recommendation

7.5

Company Convertible Notes

4.2(b)

Company Material Contracts

4.10(a)

Company SEC Reports

4.4(a)

Company Shareholder Approval

4.3(a)

Company Shareholders Meeting

4.4(d)

Company Stock Options

4.2(b)

Company Stock Plans

4.2(b)

Company Stock Purchase Warrants

4.2(b)

Company Voting Proposal

4.3(a)

Costs

7.11(a)

Effective Time

2.1

Exchange Agent

3.2(a)

Exchange Fund

3.2(a)

Expenses

9.3(a)

GAAP

4.4(b)

Indemnified Directors and Officers

7.11(a)

Instruments of Indebtedness

4.10(a)

Material Contract

4.10(a)

Merger Consideration

3.1(a)

Option Consideration

7.8(b)

Outside Date

9.1(b)

Proxy Statement

4.4(d)

Registrar

2.1

Regulation M-A Filing

4.4(d)

Representatives

7.1(a)

Requisite Regulatory Approvals

8.1(b)

Regulation M-A Filing

4.4(d)

Reverse Termination Fee

9.3(c)

Superior Proposal

7.1(d)

Surviving Company

2.3

Termination Fee

9.3(b)

Uncertainties Paragraph

1.1

 

 

 

ARTICLE II

 

THE MERGER

 

2.1   Effective Time of the Merger .  Subject to the provisions of this Agreement, prior to the Closing, the Buyer shall prepare, and on the Closing Date or as soon as practicable thereafter the Buyer shall cause to be filed with the Secretary of State of the State of Nevada, and with the Registrar of Corporate Affairs of the British Virgin Islands (the “ Registrar ”), articles of merger (in each case, the “ Articles of Merger ”) in such form as is required by, and executed by the Surviving Company in accordance with, the relevant provisions of the NGCL and the BVIBCA and shall make all other filings or recordings required under the NGCL and BVIBCA.  The Merger shall become effective upon the filing of the Articles of Merger with the Secretary of State of the State of Nevada and with the Registrar, or at such later time as is established by the Buyer and the Company and set forth in the Articles of Merger (the “ Effective Time ”).

 

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2.2   Closing .  The closing of the Merger (the “ Closing ”) shall take place at 10:00 a.m., Eastern time, on a date to be specified by the Buyer and the Company (the “ Closing Date ”), which shall be no later than the second Business Day after satisfaction or waiver of the conditions set forth in Article VII (other than delivery of items to be delivered at the Closing and other than satisfaction of those conditions that by their nature are to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain subject to the delivery of such items and the satisfaction or waiver of such conditions at the Closing), at the offices of Arent Fox LLP, 1675 Broadway, New York, New York  10019, unless another date, place or time is agreed to in writing by the Buyer and the Company.

 

2.3   Effects of the Merger .  At the Effective Time (i) the separate existence of the Company shall cease and the Company shall be merged with and into the Buyer (the Buyer following the Merger is sometimes referred to herein as the “ Surviving Company ”) and (ii) the memorandum and articles of association of the Buyer as in effect immediately prior to the Effective Time shall be the memorandum and articles of association of the Surviving Company, until further amended in accordance with the BVIBCA.  The Merger shall have the effects set forth in Section 92A.250 of the NGCL and Sections 173 and 174 of the BVIBCA.

 

2.4   Directors and Officers .  The directors of the Buyer immediately prior to the Effective Time shall be the initial directors of the Surviving Company and officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Company, each to hold office in accordance with the articles of association of the Surviving Company.

 

ARTICLE III

 

CONVERSION OF SECURITIES

 

3.1   Conversion of Capital Stock .  As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of the capital stock of the Company or authorized shares of the Buyer:

 

(a)   Each of the Shares issued and outstanding immediately prior to the Effective Time (other than Shares held in the Company’s treasury or by any wholly-owned Subsidiary of the Company and Shares owned beneficially by the Buyer or any wholly-owned Subsidiary of the Buyer) shall be converted into and represent the right to receive $1.90 in cash per share of the Shares, without any interest thereon (the “ Merger Consideration ”).

 

(b)   Cancellation of Stock Owned by the Parties and Their Subsidiaries .  All of the Shares that are owned by the Company as treasury stock or by any wholly-owned Subsidiary of the Company and any Shares owned by the Buyer, any shareholder of the Buyer or any wholly-owned Subsidiary of the Buyer immediately prior to the Effective Time shall be cancelled and shall cease to exist and no shares of the Buyer or other consideration shall be delivered in exchange therefor.

 

7


 

(c)   Treatment of Company Stock Options and Common Stock Purchase Warrants .  Prior to the Effective Time, the Company Board (and/or, if appropriate, the Compensation Committee thereof) shall adopt appropriate resolutions and take all other actions necessary to provide that each Company Stock Option and each Company Stock Purchase Warrant, whether or not then vested or exercisable, shall, at the Effective Time, be cancelled, and each holder thereof, other than the Buyer, any shareholder of the Buyer or any wholly-owned Subsidiary of the Buyer, shall be entitled to receive a payment in cash as provided in Section 7.8(b) hereof (subject to any applicable withholding taxes).  As provided herein, unless otherwise determined by the Buyer, the Company Stock Plans (and any feature of any other Benefit Plans or other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company) shall terminate as of the Effective Time.  After the date hereof, the Company will not issue any Company Stock Options, Company Stock Purchase Warrants or other options, warrants, rights or agreements which would entitle any person to acquire any capital stock of the Company or, except as otherwise provided in this Section 3.1(c) or in Section 7.8 , to receive any payment in respect thereof.

 

3.2   Exchange of Certificates, Company Stock Options and Company Stock Purchase Warrants .  The procedures for exchanging outstanding Shares for Merger Consideration, and outstanding Company Stock Options and Company Stock Purchase Warrants for Option Consideration, pursuant to the Merger are as follows:

 

(a)   Exchange Agent .  As of the Effective Time, the Buyer shall deposit with the Company’s transfer agent or another bank or trust company designated by the Buyer and reasonably acceptable to the Company (the “ Exchange Agent ”), for the benefit of the holders of Shares, Company Stock Options and Company Stock Purchase Warrants, for exchange in accordance with this Section  3.2 , through the Exchange Agent, cash in an amount sufficient to pay the aggregate Merger Consideration and the aggregate Option Consideration (such aggregate consideration being hereinafter referred to as the “ Exchange Fund ”), payable pursuant to Section  3.1 to holders of certificates which immediately prior to the Effective Time represented outstanding Shares (the “ Certificates ”), and pursuant to Sections 3.1(c) and 7.8(b) to the holders of Company Stock Options and Company Stock Purchase Warrants.

 

(b)   Exchange Procedures .  As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of a Certificate, Company Stock Option and Company Stock Purchase Warrant (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates, Company Stock Options and Company Stock Purchase Warrants shall pass, only upon delivery of the Certificates, Company Stock Options and Company Stock Purchase Warrants to the Exchange Agent and shall be in such form and have such other provisions as the Buyer may reasonably specify) and (ii) instructions for effecting the surrender of the Certificates, Company Stock Options and Company Stock Purchase Warrants in exchange for each holder’s respective Merger Consideration or Option Consideration.  Upon surrender of a Certificate, Company Stock Option or Company Stock Purchase Warrant for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by the Buyer, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Exchange Agent, the holder of each Certificate, Company Stock Option and Company Stock Purchase Warrant shall be entitled to receive in exchange therefor cash representing (i) that number of whole Shares evidenced by such Certificate multiplied by the Merger Consideration, and the Certificate so surrendered shall immediately be cancelled; and/or (ii) the Option Consideration payable with respect to the surrendered Company Stock Option or Company Stock Purchase Warrant.  In the event of a transfer of ownership of Shares which is not registered in the transfer records of the Company, the payment representing the Merger Consideration payable to the registered holder may be paid to a person other than the person in whose name the Certificate so surrendered is registered, if such Certificate is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid.  Until surrendered as contemplated by this Section  3.2 , each Certificate, Company Stock Option and Company Stock Purchase Warrant shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the payment contemplated by this Section  3.2 or Section 7.8(b) , as the case may be.

 

 

8


 

(c)   No Further Ownership Rights in Shares .  All payments upon the surrender for exchange of Certificates in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such Shares, and from and after the Effective Time there shall be no further registration of transfers on the share transfer books or register of members of the Surviving Company of the Shares which were outstanding immediately prior to the Effective Time.  If, after the Effective Time, Certificates are presented to the Surviving Company or the Exchange Agent for any reason, they shall be cancelled and exchanged as provided in this Article II.

 

(d)   Termination of Exchange Fund .  Subject to any applicable escheat or similar Law, any portion of the Exchange Fund which remains undistributed to the holders of Shares 180 days after the Effective Time shall be delivered to the Buyer, upon demand, and any holder of Shares who has not previously complied with this Section  3.2 shall thereafter look only to the Buyer, as a general unsecured creditor, for payment of his, her or its claim for Merger Consideration.

 

(e)   Investment of Exchange Fund   The Exchange Agent shall invest cash included in the Exchange Fund, as directed by the Buyer, on a daily basis, provided that no such investment or loss thereon shall affect the amounts payable pursuant to the provisions of this Article III.  Any interest and other income resulting from such investments shall be paid to the Buyer.

 

(f)   No Liability .  To the extent permitted by applicable Law, none of the Buyer, the Company, the Surviving Company or the Exchange Agent shall be liable to any holder of Shares delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.  If any Certificate shall not have been surrendered prior to one year after the Effective Time (or immediately prior to such earlier date on which any cash payable to the holder of such Certificate pursuant to this Article III would otherwise escheat to or become the property of any Governmental Entity), any such cash in respect of such Certificate shall, to the extent permitted by applicable Law, become the property of the Surviving Company, free and clear of all claims or interest of any person previously entitled thereto.

 

(g)   Withholding Rights .  Each of the Buyer and the Surviving Company shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts as it reasonably determines that it is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “ Code ”), or any other applicable provision of Law.  To the extent that amounts are so withheld by the Surviving Company or the Buyer, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by the Surviving Company or the Buyer, as the case may be.

 

9


 

(h)   Lost Certificates .  If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Company, the posting by such person of a bond in such reasonable amount as the Surviving Company may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration deliverable in respect thereof pursuant to this Agreement.

 

ARTICLE IV

 

 

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to the Buyer that the statements contained in this Article IV are true and correct, subject to the exceptions set forth in the disclosure schedule delivered by the Company to the Buyer on or before the execution and delivery of this Agreement (the “ Company Disclosure Schedule ”).  The Company Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article IV that contain references to such Company Disclosure Schedule; provided , however , that any information contained in response to any numbered or lettered section of this Article IV shall constitute disclosure pursuant to this Article IV.  For purposes of this Agreement, each statement or other item of information set forth in the Company Disclosure Schedule shall be deemed to be a representation and warranty made by the Company in Article IV.

 

4.1   Organization, Standing and Power; Subsidiaries .

 

(a)   Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation, has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as now being conducted, except for such failures to be so organized, qualified or in good standing, individually or in the aggregate, that have not had, and could not reasonably be expected to have a Company Material Adverse Effect.  There is no jurisdiction in the United States in which the nature of the business conducted by the Company or property owned by it requires qualification as a foreign corporation.

 

(b)   Section 4.1(b) of the Company Disclosure Schedule sets forth a complete and accurate list of (i) all of the Company’s Subsidiaries and the Company’s direct or indirect equity interest therein and (ii) the Company’s interest in any Person which is not a Subsidiary, including any Person in which the Company has a non-controlling equity interest.

 

(c)   The Company has delivered to the Buyer complete and accurate copies of the certificate of incorporation and by-laws of the Company and of the charter, by-laws or other organizational documents of each Subsidiary of the Company, in each case as amended to date.  The Company is not in default under, or in violation of, its certificate of incorporation or by-laws, and each of its Subsidiaries is not in violation of its comparable organizational documents.

 

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4.2   Capitalization .

 

(a)   The authorized capital stock of the Company consists of 10,000,000 shares of preferred stock, par value $0.001 per share, none of which are outstanding or authorized for issuance, and 50,000,000 Shares.  The rights and privileges of each class of the Company’s capital stock are as set forth in the Company’s certificate of incorporation.  As of the date of this Agreement, 15,942,336 Shares were issued and outstanding, and no Shares were held in the treasury of the Company or by Subsidiaries of the Company.

 

(b)   Section 4.2(b) of the Company Disclosure Schedule lists the number of Shares reserved for issuance pursuant to outstanding convertible notes, stock options and stock purchase warrants, as of the date of this Agreement and any plans or other arrangements under which additional notes, options and warrants may be issued or granted (collectively, the “ Company Stock Plans ”) and sets forth a complete and accurate list of all holders of outstanding notes convertible into, and options and warrants to purchase, Shares (such outstanding notes, options and warrants, respectively, the “ Company Convertible Notes ,” “ Company Stock Options ” and the “ Company Stock Purchase Warrants ”), whether or not granted under the Company Stock Plans, and the number of Shares issuable pursuant to each Company Convertible Note, each Company Stock Option and each Company Stock Purchase Warrant, and the conversion, exercise or purchase price, the date of grant or issuance, the repurchase price payable per unvested Share, and the expiration date thereof. The Company has provided to the Buyer accurate and complete copies of all Company Stock Plans, and the forms of all convertible note, stock option and common stock warrant agreements evidencing Company Convertible Notes, Company Stock Options and Company Stock Purchase Warrants, and there are no agreements, understandings or commitments to amend, modify or supplement such documents, which documents include any applicable provisions relating to adjustments in the number of Shares whic


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