AGREEMENT AND PLAN OF MERGER BY AND AMONG PATHWORKS FLORIDA, INC., LEXICON UNITED INCORPORATED AND LEXICON ACQUISITION, INC.
EXHIBIT
10.1
AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
PATHWORKS
FLORIDA, INC.,
LEXICON
UNITED INCORPORATED
AND
LEXICON
ACQUISITION, INC.
This AGREEMENT AND PLAN OF MERGER (this
“Agreement”) is
made and entered into as of August 2, 2010, among Lexicon United Incorporated, a
Delaware corporation (“Parent”), Pathworks
PCO of Florida, Inc., a Florida corporation (“Pathworks-Florida”), and Lexicon
Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent (“Merger
Sub”).
RECITALS
A.
Upon the terms and subject
to the conditions of this Agreement and in accordance with the Delaware General
Corporation Law (the “DGCL”), Parent, Pathworks-Florida and Merger Sub intend to
enter into a business combination transaction.
B. The
Board of Directors of Pathworks-Florida (i) has determined that the Merger (as
defined in Section 1.1 below) is consistent with and in furtherance of the
long-term business strategy of Pathworks-Florida and fair to, and in the best
interests of, Pathworks-Florida and its stockholders, (ii) has approved this
Agreement, the Merger and the other transactions contemplated by this Agreement,
(iii) has adopted a resolution declaring the Merger advisable, and (iv) has
determined to recommend that the stockholders of Pathworks-Florida adopt this
Agreement.
C. The
Board of Directors of Parent (i) has determined that the Merger is consistent
with and in furtherance of the long-term business strategy of Parent and fair
to, and in the best interests of, Parent and its stockholders, (ii) has approved
this Agreement, the Merger and the other transactions contemplated by this
Agreement, (iii) has adopted a resolution declaring the Merger advisable, and
(iv) has approved the issuance of shares of Parent Common Stock (as defined in
Section 1.6(a) below) pursuant to the Merger (the “Share
Issuance”).
D. The
Board of Directors of Merger Sub (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Merger
Sub, and fair to and in the best interests of, Merger Sub and its stockholder,
(ii) has approved this Agreement, the Merger and the other transactions
contemplated by this Agreement, (iii) has adopted a resolution declaring the
Merger advisable, and (iv) has determined to recommend that the sole stockholder
of Merger Sub adopt this Agreement.
NOW,
THEREFORE, in consideration of the covenants, promises and representations set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE
I
THE
MERGER
1.1. The
Merger. At the Effective Time (as defined in Section 1.2
hereof) and subject to and upon the terms and conditions of this Agreement and
the applicable provisions of the DGCL, Merger Sub shall be merged with and into
Pathworks-Florida (the “Merger”), the
separate corporate existence of Merger Sub shall cease and Pathworks-Florida
shall continue as the surviving corporation and shall become a wholly-owned
subsidiary of Parent. The surviving corporation after the Merger is
sometimes referred to hereinafter as the “Surviving
Corporation.”
1.2. Effective
Time. Unless this Agreement is earlier terminated pursuant to
Article VII hereof, the closing of the Merger and the other transactions
contemplated by this Agreement (the “Closing”) will take
place at the offices of Parent’s counsel, at a time and date to be specified by
the parties, but in no event later than two (2) business days following
satisfaction or waiver of the conditions set forth in Article VI
hereof. The date upon which the Closing actually occurs is herein
referred to as the “Closing
Date.” On the Closing Date, the parties hereto shall cause the
Merger to be consummated by filing a Certificate of Merger in the form attached
as Exhibit A
hereto or like instrument (a “Certificate of
Merger”) with the Secretary of State of the State of Florida, in
accordance with the relevant provisions of the DGCL (the time at which the
Merger has become fully effective (or such later time as may be agreed in
writing by Pathworks-Florida and specified in the Certificate of Merger) is
referred to herein as the “Effective
Time”).
1.3. Effect of the
Merger.
(a) At
the Effective Time, the effect of the Merger shall be as provided in the
applicable provisions of the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, except as provided
herein, all the property, rights, privileges, powers and franchises of
Pathworks-Florida and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of Pathworks-Florida and Merger Sub shall
become the debts, liabilities and duties of the Surviving
Corporation.
(b) Prior
to or at the Effective Time, the properties and assets of Parent and Merger Sub
will be free and clear of any and all encumbrances, charges, claims, equitable
interests, liens, options, pledges, security interests, mortgages, rights of
first refusal or restrictions of any kind and nature (collectively, the “Encumbrances”),
except for such liabilities, accounts payable, debts, adverse claims, duties,
responsibilities and obligations of every kind or nature, whether accrued or
unaccrued, known or unknown, direct or indirect, absolute, contingent,
liquidated or unliquidated and whether arising under, pursuant to or in
connection with any contract, tort, strict liability or otherwise (collectively
the “Liabilities”) of
Parent which are described in Section 3.7 hereof.
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1.4. Certificates of
Incorporation; Bylaws. From and after the Effective Time and
until further amended in accordance with applicable law, (i) the Certificate of
Incorporation of Lexicon as in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation, and (ii)
the Bylaws of Lexicon as in effect immediately prior to the Effective Time shall
be the Bylaws of the Surviving Corporation.
1.5. Pathworks-Florida Directors
and Officers.
(a) Unless
otherwise determined by Pathworks-Florida prior to the Effective Time, the
directors of Lexicon immediately prior to the Effective Time shall be the
directors of the Surviving Corporation at and after the Effective Time, each to
hold the office of a director of the Surviving Corporation in accordance with
the provisions of the DGCL and the Certificate of Incorporation and Bylaws of
the Surviving Corporation until their successors are duly elected and
qualified. In addition, at the Closing, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall be
appointed to the board of directors of Lexicon, each to hold the office of a
director of the Surviving Corporation in accordance with the provisions of the
DGCL and the Certificate of Incorporation and Bylaws of the Surviving
Corporation until their successors are duly elected and qualified.
(b) Unless
otherwise determined by the Parties prior to the Effective Time, the officers of
Lexicon immediately prior to the Effective Time shall be the officers of the
Surviving Corporation at and after the Effective Time, each to hold office in
accordance with the provisions of the Bylaws of the Surviving
Corporation.
1.6. Effect on Capital
Stock. Subject to the terms and conditions of this Agreement,
at the Effective Time, by virtue of the Merger and without any action on the
part of Parent, Pathworks-Florida and Merger Sub or the holders of any of the
following securities, the following shall occur:
(a) Conversion of Pathworks-Florida
Capital Stock. At
the Effective Time, the Parent shall issue (or reserve for issuance upon
exercise or exchange of Pathworks-Florida common shares (as defined below)) a
number of shares of Lexicon common stock (the “Parent Common Stock”) which shall
be equal, on a pro-form, post-closing basis to forty-seven (47%) of the issued
and outstanding shares of Lexicon common stock shall be issued to the holders of
Pathworks-Florida Common Stock on a Fully Diluted Basis (as defined below) (the
“Merger
Consideration”) (See Capitalization Schedule attached hereto as Schedule
2.6). Each share of common stock of Pathworks-Florida (the
“Pathworks-Florida
Common Stock”) issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares (as defined in Section 1.10 below)) will be
automatically converted (subject to Section 1.6(d)), into a number of shares of
Parent Common Stock determined by multiplying each such share of
Pathworks-Florida Common Stock by the quotient determined by dividing (x) the
aggregate number of Parent Common Stock to be issued in the merger transaction
by (y) the aggregate number of shares of Pathworks-Florida Common Stock issued
and outstanding immediately prior to the Effective Time, on a Fully Diluted
Basis (“Pathworks-Florida
Convertible Securities”) (the “Exchange Ratio”),
such aggregate shares of Parent Common Stock being referred to in this Agreement
as the “Merger
Consideration”. If any shares of Pathworks-Florida Common
Stock outstanding immediately prior to the Effective Time are unvested or are
subject to a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with
Pathworks-Florida, then the shares of Parent Common Stock issued in exchange for
such shares of Pathworks-Florida Common Stock will also be unvested and subject
to the same repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Common Stock may accordingly be
Pathworks-Florida with appropriate legends. For purposes of
this Agreement “Fully
Diluted Basis” shall mean the number of shares of Common Stock that would
be outstanding upon the conversion or exercise, as the case may be, of all
securities of Pathworks-Florida convertible into, exercisable for, or
exchangeable for, directly or indirectly, shares of Pathworks-Florida Common
Stock.
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(b) Adjustments to Merger
Consideration. Except as described in Section 1.10, the Merger
Consideration shall be adjusted to reflect appropriately the effect of any stock
split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into or exercisable or exchangeable for
Parent Common Stock or Pathworks-Florida Common Stock), reorganization,
recapitalization, reclassification, combination, exchange of shares or other
like change with respect to Parent Common Stock or Pathworks-Florida Common
Stock occurring or having a record date on or after the date hereof and prior to
the Effective Time.
(c) Fractional
Shares. No fraction of a share of Parent Common Stock will be
issued by virtue of the Merger. In lieu thereof any fractional share
will be rounded to the nearest whole share of Parent Common Stock (with 0.5
being rounded up).
1.7 [Reserved]
1.8 Rights of Holders of
Pathworks-Florida Capital Stock.
(a) On
and after the Effective Date and until surrendered for exchange, each
outstanding stock certificate that immediately prior to the Effective Date
represented shares of Pathworks-Florida Common Stock (except Dissenting Shares
and shares cancelled or extinguished pursuant to Section 1.11) shall be deemed
for all purposes, to evidence ownership of and to represent the number of whole
shares of Parent Common Stock into which such shares of Pathworks-Florida Common
Stock shall have been converted pursuant to Section 1.6(a)
above. The record holder of each such outstanding certificate
representing shares of Pathworks-Florida Common Stock, shall, after the
Effective Date, be entitled to vote the shares of Parent Common Stock into which
such shares of Pathworks-Florida Common Stock shall have been converted on any
matters on which the holders of record of the Parent Common Stock, as of any
date subsequent to the Effective Date, shall be entitled to vote. In any matters
relating to such certificates of Pathworks-Florida Common Stock, Parent may rely
conclusively upon the record of stockholders maintained by Pathworks-Florida
containing the names and addresses of the holders of record of Pathworks-Florida
Common Stock on the Effective Date.
(b) On
and after the Effective Date, Parent shall reserve a sufficient number of
authorized but unissued shares of Parent Common Stock for issuance in connection
with (i) the conversion of Pathworks-Florida Common Stock into Parent Common
Stock and (ii) the exercise of all options, warrants, and any other instrument
convertible into, or exchangeable for, shares of Pathworks-Florida Common Stock,
to purchase shares of Pathworks-Florida Common Stock outstanding immediately
prior to the Effective Time.
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1.9 Procedure for Exchange of
Pathworks-Florida Common Stock.
(a) After
the Effective Time, holders of certificates theretofore evidencing outstanding
shares of Pathworks-Florida Common Stock (except Dissenting Shares and shares
cancelled or extinguished pursuant to Section 1.11), upon surrender of such
certificates to the registrar or transfer agent for Parent Common Stock, shall
be entitled to receive certificates representing the number of whole shares of
Parent Common Stock into which shares of Pathworks-Florida Common Stock
theretofore represented by the certificates so surrendered shall have been
converted as provided in Section (a) hereof. Parent shall not be
obligated to deliver the Merger Consideration to which any former holder of
shares of Pathworks-Florida Common Stock is entitled until such holder
surrenders the certificate or certificates representing such
shares. Upon surrender, each certificate evidencing Pathworks-Florida
Common Stock shall be cancelled. If there is a transfer of
Pathworks-Florida Common Stock ownership which is not registered in the transfer
records of Pathworks-Florida, a certificate representing the proper number of
shares of Parent Common Stock may be issued to a person other than the person in
whose name the certificate so surrendered is registered if: (x) upon
presentation to the Secretary of Parent, such certificate shall be properly
endorsed or otherwise be in proper form for transfer, (y) the person requesting
such payment shall pay any transfer or other taxes required by reason of the
issuance of shares of Parent Common Stock to a person other than the registered
holder of such certificate or establish to the reasonable satisfaction of Parent
that such tax has been paid or is not applicable, and (z) the issuance of such
Parent Common Stock shall not, in the sole discretion of Parent, violate the
requirements of the Regulation D “safe harbor” of the Securities Act with
respect to the private placement of Parent Common Stock that will result from
the Merger.
(b) All
shares of Parent Common Stock issued upon the surrender for exchange of
Pathworks-Florida Common Stock in accordance with the above terms and conditions
shall be deemed to have been issued and paid in full satisfaction of all rights
pertaining to such shares of Pathworks-Florida Common Stock.
(c) No
holder surrendering a certificate representing shares of Pathworks-Florida
Common Stock will be issued in exchange a certificate representing other than a
whole number of shares of Parent Common Stock.
(d) Any
shares of Parent Common Stock issued in the Merger will not be transferable
except (1) pursuant to an effective registration statement under the
Securities Act or (2) upon receipt by Parent of a written opinion of
counsel reasonably satisfactory to Parent to the effect that the proposed
transfer is exempt from the registration requirements of the Securities Act and
relevant state securities laws. Restrictive legends must be placed on
all certificates representing shares of Parent Common Stock issued in the
Merger, substantially as follows:
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“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE, NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE CORPORATION AND ITS LEGAL
COUNSEL, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
(e) In
the event any certificate for Pathworks-Florida Common Stock shall have been
lost, stolen or destroyed, Parent shall issue and pay in exchange for such lost,
stolen or destroyed certificate, upon the making of an affidavit of that fact by
the holder thereof, such shares of the Parent Common Stock and cash for
fractional shares, if any, as may be required pursuant to this Agreement; provided, however, that
Parent, in its discretion and as a condition precedent to the issuance and
payment thereof, may require the owner of such lost, stolen or destroyed
certificate to deliver a bond in such sum as it may direct as indemnity against
any claim that may be made against Parent or any other party with respect to the
certificate alleged to have been lost, stolen or destroyed.
1.10 Dissenting
Shares.
(a) Shares
of capital stock of Pathworks-Florida held by stockholders of Pathworks-Florida
who have not consented to and approved this agreement in writing and who have
properly exercised and preserved appraisal rights with respect to those shares
in accordance with all of the provisions of the DGCL (“Dissenting Shares”)
shall not be converted into or represent a right to receive shares of Parent
Common Stock pursuant to Section (a) above, but the holders thereof shall be
entitled only to such rights as are granted by the DGCL. Each holder
of Dissenting Shares who becomes entitled to payment for such shares pursuant to
the DGCL shall receive payment therefore from the Surviving Corporation in
accordance with such laws; provided, however, that if
any such holder of Dissenting Shares shall have effectively withdrawn such
holder’s demand for appraisal of such shares or lost such holder’s right to
appraisal and payment of such shares under the DGCL, such holder or holders (as
the case may be) shall forfeit the right to appraisal of such shares and each
such share shall thereupon be deemed to have been cancelled, extinguished and
converted, as of the Effective Time, into and represent the right to receive
payment from Parent of shares of Parent Common Stock as provided in Section (a)
above.
(b) Any
payments in respect of Dissenting Shares will be deemed made by the Surviving
Corporation.
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1.11 No Further Ownership Rights
in Pathworks-Florida Common Stock. All shares of Parent Common
Stock issued in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of
Pathworks-Florida Common Stock. After the Effective Time, there shall
be no further registration of transfers on the records of Surviving Corporation
of shares of Pathworks-Florida Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time,
certificates are presented to Surviving Corporation for any reason, they shall
be cancelled and exchanged as provided in this ARTICLE I.
1.12 Tax
Treatment. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the “Code”). Each
of the parties hereto adopts this Agreement as a “plan of reorganization” within
the meaning of Section 1.368-2(g) of the United States Treasury Regulations (the
“Regulations”). Both
prior to and after the Closing, each party's books and records shall be
maintained, and all federal, state and local income tax returns and schedules
thereto shall be filed in a manner consistent with the Merger being qualified as
a reverse triangular merger under Section 368(a)(2)(E) of the Code (and
comparable provisions of any applicable state or local laws), except to the
extent the Merger is determined in a final administrative or judicial decision
not to qualify as a reorganization within the meaning of Code Section
368(a).
1.13 Payments to Public
Officials. Notwithstanding anything to the contrary in this
ARTICLE I, none of Pathworks-Florida, Parent, Merger Sub or Surviving
Corporation shall be liable to a holder of Pathworks-Florida Common Stock or
Parent Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar applicable
law.
1.14 Taking of Necessary Action;
Further Action. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation (and/or its successor in
interest) with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of Pathworks-Florida and Merger Sub, the
officers and directors of Parent and the Surviving Corporation shall be fully
authorized (in the name of Merger Sub, Pathworks-Florida and otherwise) to take
all such necessary action.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF PATHWORKS-FLORIDA
Except as set forth in the schedules
attached hereto, Pathworks-Florida hereby represents and warrants to Parent that
the statements contained in this ARTICLE II are true and correct.
2.1. Organization, Qualification
and Subsidiaries. Pathworks-Florida is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Florida. Pathworks-Florida
has no subsidiaries and does not have an equity interest in any other firm,
partnership, association or other entity. Pathworks-Florida is duly
qualified to transact business as a foreign corporation and is in good standing
under the applicable laws of each jurisdiction where the location of its
properties or the conduct of its business makes such qualification necessary,
except where the failure to be so qualified would not have an Pathworks-Florida
Material Adverse Effect (as defined in Section 2.3 below).
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2.2. Authorization,
Enforcement. Pathworks-Florida has the requisite corporate
power and authority to conduct its business as presently conducted and to enter
into and to consummate the Merger. The execution and delivery of this
Agreement by Pathworks-Florida and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of Pathworks-Florida and no further consent or action is required by
Pathworks-Florida, other than the Required Approvals (as defined in Section 3.2
below) and the approval of Pathworks-Florida’s stockholders and the approval of
the stockholders of Merger Sub of the Merger and the amendments to their
respective certificates of incorporation (the “Stockholder
Approvals”). This Agreement, when executed and delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of Pathworks-Florida enforceable against Pathworks-Florida in
accordance with its terms, subject to the Stockholder Approvals, applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar applicable laws affecting creditors’ rights and remedies generally and
general principles of equity.
2.3. No
Conflicts. The execution, delivery and performance of this
Agreement by Pathworks-Florida and the consummation by Pathworks-Florida of the
Merger do not and will not: (i) conflict with or violate any provision of
Pathworks-Florida’s Certificate of Incorporation or Bylaws, or (ii) subject to
obtaining the Stockholder Approvals and the filing with the Secretary of State
of Florida of the Certificate of Merger (collectively, the “Required Approvals”),
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice or
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing Pathworks-Florida debt or otherwise) or other
understanding to which Pathworks-Florida is a party or by which any material
property or asset of Pathworks-Florida is bound or affected, or (iii) result in
a violation of any applicable law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
as currently in effect to which Pathworks-Florida is subject (including federal
and state securities laws and regulations), or by which any material property or
asset of Pathworks-Florida is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate (a)
materially and adversely affect the legality, validity or enforceability of the
Merger, (b) have or result in a material adverse effect on the results of
operations, assets, business or condition (financial or otherwise) of
Pathworks-Florida, taken as a whole, or (c) materially and adversely impair
Pathworks-Florida’s ability to perform fully on a timely basis its obligations
under this Agreement (any of (a), (b) or (c), a “Pathworks-Florida Material
Adverse Effect”); provided, however,
that any adverse change, event or effect that is demonstrated to be caused
primarily by the conditions generally affecting the United States economy, or by
conditions generally effecting the biotechnology or pharmaceutical industries,
shall be deemed not to be an Pathworks-Florida Material Adverse
Effect.
2.4. Filings, Consents and
Approvals. Pathworks-Florida is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by Pathworks-Florida of this Agreement, other than the
Required Approvals.
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2.5. Pathworks-Florida Common
Stock. The Pathworks-Florida Common Stock delivered in
exchange for the Parent common stock will be duly authorized and validly issued,
fully paid and nonassessable, free and clear of all liens at
issuance.
2.6. Capitalization. As
of the date of this Agreement, Pathworks-Florida’s authorized capital consists
of 10,000 shares of Pathworks-Florida Common Stock and zero shares of preferred
stock. Pathworks-Florida’s outstanding capital (i) as of the date of
this Agreement and (ii) as of immediately before the Effective Time, is set
forth on Schedule
2.6. Except as described in Schedule 2.6, there
are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of
Pathworks-Florida Common Stock, or contracts, commitments, understandings or
arrangements by which Pathworks-Florida is or may become bound to issue
additional shares of Pathworks-Florida Common Stock or rights convertible or
exchangeable into shares of Pathworks-Florida Common Stock.
2.7.
Contracts and
Commitments.
(a) Schedule 2.7 hereto
lists the following agreements, whether oral or written, to which
Pathworks-Florida is a party, which are currently in effect, and which relate to
the operation of Pathworks-Florida’s business: (i) collective bargaining
agreement or contract with any labor union; (ii) bonus, pension, profit sharing,
retirement or other form of deferred compensation plan; (iii) hospitalization
insurance or other welfare benefit plan or practice, whether formal or informal;
(iv) stock purchase or stock option plan; (v) contract for the employment of any
officer, individual employee or other person on a full-time or consulting basis
or relating to severance pay for any such person; (vi) contract, agreement or
understanding relating to the voting of Pathworks-Florida Common Stock or the
election of directors of Pathworks-Florida; (vii) agreement or indenture
relating to the borrowing of money or to mortgaging, pledging or otherwise
placing a lien on any of the assets of Pathworks-Florida; (viii) guaranty of any
obligation for borrowed money or otherwise; (ix) lease or agreement under which
Pathworks-Florida is lessee of, or holds or operates any property, real or
personal, owned by any other party, for which the annual rental exceeds $25,000;
(x) lease or agreement under which Pathworks-Florida is lessor of, or permits
any third party to hold or operate, any property, real or personal, for which
the annual rental exceeds $10,000; (xi) contract which prohibits
Pathworks-Florida from freely engaging in business anywhere in the world; (xii)
license agreement or agreement providing for the payment or receipt of royalties
or other compensation by Pathworks-Florida in connection with intellectual
property rights held by Pathworks-Florida; (xiii) contract or commitment for
capital expenditures in excess of $50,000; (xiv) agreement for the sale of any
capital asset; or (xvi) other agreement which is either material to
Pathworks-Florida’s business or was not entered into in the ordinary course of
business.
(b) To
Pathworks-Florida’s knowledge, (i) Pathworks-Florida has performed all
obligations required to be performed by it in connection with the contracts or
commitments required to be disclosed in Schedule 2.7 hereto
and is not in receipt of any claim of default under any contract or commitment
required to be disclosed under such caption; (ii) Pathworks-Florida has no
present expectation or intention of not fully performing any material obligation
pursuant to any contract or commitment required to be disclosed under such
caption; and (iii) Pathworks-Florida has no knowledge of any breach or
anticipated breach by any other party to any contract or commitment required to
be disclosed under such caption.
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2.8. Affiliate
Transactions. Except as set forth in Schedule 2.8 hereto,
and other than pursuant to this Agreement, no officer, director or employee of
Pathworks-Florida, or any member of the immediate family of any such officer,
director or employee, or any entity in which any of such persons owns any
beneficial interest (other than any publicly-held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market and
less than five percent (5%) of the stock of which is beneficially owned by any
of such persons) (collectively “Pathworks-Florida
Insiders”), has any agreement with Pathworks-Florida (other than normal
employment arrangements) or any interest in any property, real, personal or
mixed, tangible or intangible, used in or pertaining to the business of
Pathworks-Florida (other than ownership of capital stock of Pathworks-Florida).
Except as set forth on Schedule 2.8,
Pathworks-Florida is not indebted to any Pathworks-Florida Insider (except for
amounts due as normal salaries and bonuses and in reimbursement of ordinary
business expenses) and no Pathworks-Florida Insider is indebted to
Pathworks-Florida (except for cash advances for ordinary business expenses).
None of the Pathworks-Florida Insiders has any direct or indirect interest in
any competitor, supplier or customer of Pathworks-Florida or in any person, firm
or entity from whom or to whom Pathworks-Florida leases any property, or in any
other person, firm or entity with whom Pathworks-Florida transacts business of
any nature. For purposes of this Section 2.7, the members of the immediate
family of an officer, director or employee shall consist of the spouse, parents,
children and siblings of such officer, director or employee.
2.9. Financial
Statements. Pathworks-Florida has provided the Parent and the
Merger Sub with audited financial statements for the year ending December 31,
2009 and reviewed financial statements for the interim period through June 30,
2010. The financial statements of Pathworks-Florida, together
with the related notes thereto, present fairly, in all material respects, the
financial position of Pathworks-Florida as of the dates specified and the
results of its operations and changes in financial position for the periods
covered thereby. Such financial statements and related notes were
prepared in accordance with United States Generally Accepted Accounting
Principles (“GAAP”) throughout the
period indicated except as may be disclosed in the notes
thereto. Except as required to be set forth in such financial
statements, or on Schedule 2.9, Pathworks-Florida
has no material liabilities of any kind, whether accrued, absolute, contingent
or otherwise or entered into any material transactions or
commitments.
2.10. Taxes. Pathworks-Florida
has filed, on a timely basis, each Federal, state, local and foreign Tax Return
which is required to be filed by it, or has requested an extension therefore,
and has paid all Taxes and all related assessments, penalties and interest shown
on such tax returns to the extent that the same have become due and are not
being contested in good faith.
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2.11. Litigation. Other
than as set forth on Schedule 2.11, there
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of Pathworks-Florida, threatened against or
affecting Pathworks-Florida or its properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which: (i)
materially adversely affects or challenges the legality, validity or
enforceability of this Agreement or (ii) would, if there were an unfavorable
decision, individually or in the aggregate, have or reasonably be expected to
result in an Pathworks-Florida Material Adverse
Effect. Pathworks-Florida is not nor has it ever been the subject of
any Action involving a claim of violation of or liability under federal or state
securities laws. There has not been, and to
the knowledge of Pathworks-Florida, there is not pending or contemplated, any
investigation by the SEC or any other governmental authority involving
Pathworks-Florida.
2.12. Compliance. Pathworks-Florida
is not: (i) in violation of its certificate of incorporation or by-laws; (ii) in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
Pathworks-Florida under), nor has Pathworks-Florida received notice of a claim
that it is in default under or that it is in violation of, any material
indenture, loan or credit agreement or any other material agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), which default
or violation would have or result in an Pathworks-Florida Material Adverse Effect;
(iii) in violation of any order of any court, arbitrator or governmental body;
or (iv) in violation of any statute, rule or regulation of any governmental
authority, except in each case as would not, individually or in the aggregate,
have or result in an Pathworks-Florida Material Adverse
Effect.
2.13. Regulatory
Permits. Pathworks-Florida possesses or has applied for all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct its
business, except where the failure to possess such permits would not,
individually or in the aggregate, have an Pathworks-Florida Material Adverse Effect
(“Material
Permits”), and Pathworks-Florida has not received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
2.14. Properties. Pathworks-Florida
does not own any real property in fee simple, and Pathworks-Florida has good and
marketable title to all property (personal, tangible and intangible) owned by
it, free and clear of all security interests, liens and encumbrances, except
those that (i) do not materially interfere with the use made of such property by
Pathworks-Florida; (ii) for such imperfections of title and
encumbrances that would not have an Pathworks-Florida Material Adverse Effect;
or (iii) for liens that are not yet due and payable.
2.15. Intellectual
Property. Pathworks-Florida owns all right, title and interest
in, or possesses adequate and enforceable rights to use, all patents, patent
applications, trade marks, trade names, service marks, copyrights, rights,
licenses, franchises, trade secrets, confidential information, processes,
formulations, software and source and object codes necessary for the conduct of
Pathworks-Florida’s business (collectively, the “Intangibles”), except
to the extent that the failure to own or possess adequate rights to such
Intangibles would not have an Pathworks-Florida Material Adverse
Effect. To the knowledge of Pathworks-Florida, Pathworks-Florida has
not infringed upon the rights of others with respect to the Intangibles and
Pathworks-Florida has not received written notice that it has or may have
infringed or is infringing upon the rights of others with respect to the
Intangibles, or any written notice of conflict with the asserted rights of
others with respect to the Intangibles, which infringement or conflict, if the
subject of an unfavorable decision, would have an Pathworks-Florida Material
Adverse Effect.
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2.16. Insurance. The
insurance policies owned and maintained by Pathworks-Florida that are material
to Pathworks-Florida are in full force and effect, all premiums due and payable
thereon have been paid (other than retroactive or retrospective premium
adjustments that Pathworks-Florida is not currently required, but may in the
future be required, to pay with respect to any period ending prior to the date
of this Agreement), and Pathworks-Florida has received no notice of cancellation
or termination with respect to any such policy that has not been replaced on
substantially similar terms prior to the date of such cancellation.
2.17. No Undisclosed
Liabilities. Except as reflected in the balance sheet of
December 31, 2009 (the “Pathworks-Florida Balance
Sheet”) contained in the financial statements referenced in Section 2.9,
or as otherwise disclosed on Schedule 2.17,
Pathworks-Florida has no liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise except liabilities which have arisen after the date of
the Pathworks-Florida Balance Sheet in the ordinary course of business (none of
which is a material uninsured liability for breach of contract, breach of
warranty, tort, infringement, claim or lawsuit).
2.18. Environmental
Matters. None of the operations of Pathworks-Florida involves
the generation, transportation, treatment, storage or disposal of hazardous
waste, as defined under 40 C.F.R. Parts 260-270 or any state, local or foreign
equivalent.
2.19. Material
Changes. Except for the Reverse Split, the transactions
contemplated thereby and such other transactions as are set forth on Schedule 2.19, since
the date of the Pathworks-Florida Balance Sheet: (i) there has been no event,
occurrence or development that has had an Pathworks-Florida Material Adverse
Effect, (ii) Pathworks-Florida has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice, and (B) liabilities
not required to be reflected in Pathworks-Florida’s financial statements
pursuant to GAAP or required to be disclosed in filings made with the SEC, (iii)
Pathworks-Florida has not altered its method of accounting or the identity of
its auditors, (iv) Pathworks-Florida has not declared or made any dividend or
distribution of cash or other property to its stockholders except in the
ordinary course of business consistent with prior practice, or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock except consistent with prior practice or pursuant to existing
Pathworks-Florida stock option or similar plans, and (v) Pathworks-Florida has
not issued any equity shares to any officer, director or affiliate, except
pursuant to existing Pathworks-Florida stock option or similar plans or upon
conversion or exercise of outstanding Pathworks-Florida securities.
2.20. Full Disclosure. The
representations and warranties of Pathworks-Florida contained in this Agreement
(and in any schedule, exhibit, certificate or other instrument to be delivered
under this Agreement) are true and correct in all material respects, and such
representations and warranties do not omit any material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact of which Pathworks-Florida has
knowledge that has not been disclosed to Parent pursuant to this Agreement,
including the schedules hereto, all taken together as a whole, which has had or
could reasonably be expected to have an Pathworks-Florida Material Adverse
Effect or materially adversely affect the ability of Pathworks-Florida to
consummate in a timely manner the transactions contemplated hereby.
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ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
OF
PARENT AND MERGER SUB
Each of Parent and Merger Sub, jointly
and severally, hereby represents and warrants to Pathworks-Florida that the
statements contained in this ARTICLE III are true and correct.
3.1. Organization of Parent and
Merger Sub.
(a) Each
of Parent and Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation; has
the corporate power and authority to own, lease and operate its assets and
property and to carry on its business as now being conducted; and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a Parent
Material Adverse Effect. As used in this Agreement, the term “Parent Material Adverse
Effect” means a material adverse effect on the condition (financial or
otherwise), business, assets or results of operations of Parent and Merger Sub
as a whole or on the ability of Parent to consummate the transactions
contemplated by this Agreement; provided, however,
that any adverse change, event or effect that is demonstrated to be caused
primarily by the conditions generally affecting the United States economy shall
be deemed not to be a Parent Material Adverse Effect.
(b) Parent
has no subsidiaries other than Merger Sub, a Delaware corporation and a
wholly-owned subsidiary of Parent, which is inactive.
(c) Parent
has delivered or made available to Pathworks-Florida a true and correct copy of
the Certificate of Incorporation and Bylaws of each of Parent and Merger Sub,
each as amended to date, and each such instrument is in full force and
effect. Neither Parent nor Merger Sub is in violation of any of the
provisions of its Certificate of Incorporation or Bylaws or equivalent governing
instruments.
3.2. Capital
Structure. As of the date of this Agreement, the authorized
capital stock of Parent consists of 40,000,000 shares of Parent Common Stock of
which there were 8,828,134
shares issued and outstanding as of the date hereof and 10,000,000 shares
of preferred stock, none of which is issued and outstanding. As of
the Closing, the authorized capital stock of Parent shall consist of 40,000,000
shares of Parent Common Stock and 10,000,000 shares of preferred stock and there
shall be issued and outstanding such number of shares of Parent Common Stock as
is required pursuant to Section 4.3 hereof and no shares of preferred stock
shall be issued and outstanding. The authorized capital stock of
Merger Sub consists of 1,000 shares of Common Stock, par value $0.001 per share
(the “Merger Sub
Common Stock”), all of which were issued and outstanding as of the date
hereof. All outstanding shares of Parent and Merger Sub Common Stock
are duly authorized, validly issued, fully paid and nonassessable, were issued
in compliance with applicable securities laws and are not subject to preemptive
rights created by statute, the Certificate of Incorporation or Bylaws of Parent
and Merger Sub or any agreement or document to which Parent or Merger Sub is a
party or by which it is bound. Other than as set forth on Schedule 3.2, as of the date
hereof, Parent did not have any options or warrants to purchase common stock
outstanding.
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3.3. Obligations With Respect to
Capital Stock. Other than as set forth on Schedule 3.3, there
are no equity securities, partnership interests or similar ownership interests
of any class of Parent or Merger Sub, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests issued, reserved for issuance or
outstanding. There are no equity securities, partnership interests or
similar ownership interests of any class of Merger Sub of Parent, or any
security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests issued,
reserved for issuance or outstanding. There are no options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
to which Parent or Merger Sub is a party or by which it is bound obligating
Parent or Merger Sub to issue, deliver or sell, or cause to be issued, delivered
or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition, of any shares of capital stock of Parent or Merger
Sub or obligating Parent or Merger Sub to grant, extend, accelerate the vesting
of or enter into any such option, warrant, equity security, partnership interest
or similar ownership interest, call, right, commitment or
agreement. There are no registration rights and there are no voting
trusts, proxies or other agreements or understandings with respect to any equity
security of any class of Parent or with respect to any equity security
partnership interest or similar ownership interest of any class of Merger
Sub.
3.4. Authority.
(a) Each
of Parent and Merger Sub has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action on the part of each of Parent and Merger Sub,
subject only to the adoption of this Agreement by Merger Sub’s stockholders and
the filing and recordation of the Certificate of Merger pursuant to the
DGCL. This Agreement has been duly executed and delivered by each of
Parent and Merger Sub and, assuming the due authorization, execution and
delivery by Pathworks-Florida, constitutes the valid and binding obligation of
each of Parent and Merger Sub, enforceable in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws and general principles of
equity.
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(b)
The execution and delivery of this Agreement by each of Parent and Merger Sub,
do not, and the performance of this Agreement by each of Parent and Merger Sub,
will not (i) conflict with or violate the Certificate of Incorporation or Bylaws
of Parent, or Merger Sub, respectively, (collectively, the “Parent Charter
Documents”); (ii) subject to compliance with the requirements set forth
in Section 3.4(c) below, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Parent or Merger Sub, respectively, or
by which its or any of their respective properties is bound or affected; or
(iii) result in any breach of, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair any of,
Parent's or Merger Sub's rights or alter the rights or obligations of any third
party under, or to Parent's knowledge, give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of Parent or Merger Sub,
respectively, pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which any of Parent or Merger Sub is a party or by which Parent or Merger
Sub, or any of their respective properties are bound or affected.
(c) No
consent, approval, order or authorization of, or registration, declaration or
filing with any Governmental Entity is required by or with respect to any of
Parent or Merger Sub in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of the Certificate of Merger with the Secretary of State of
Delaware, (ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and (iii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, individually or in
the aggregate, would not be reasonably likely to have a Parent Material Adverse
Effect.
3.5. Parent Financial
Statements. Parent has provided Pathworks-Florida with audited
financial statements for the year ending December 31, 2009 and reviewed
statements for the period ended June 30, 2010 (“Parent Financial
Statements”). The financial statements of Parent, together with
the related notes thereto, present fairly, in all material respects, the
financial position of Parent as of the dates specified and the results of its
operations and changes in financial position for the periods covered
thereby. Such financial statements and related notes were prepared in
accordance with United States Generally Accepted Accounting Principles (“GAAP”) throughout the
period indicated except as may be disclosed in the notes
thereto. Except as required to be set forth in such financial
statements, or on Schedule 3.5, Parent
has no material liabilities of any kind, whether accrued, absolute, contingent
or otherwise or entered into any material transactions or
commitments.
3.6. Absence of Certain Changes
or Events. Except as disclosed in the Parent Financial
Statements or as contemplated by this Agreement, since the date of the Parent
Financial Statements, Parent has conducted business only in, and has not engaged
in any material transaction other than according to, the ordinary and usual
course of such businesses and there has not been (i) any change that
individually or in the aggregate, has had or is reasonably likely to have a
Parent Material Adverse Effect; (ii) any material damage, destruction or other
casualty loss with respect to any material asset or property owned, leased or
otherwise used by Parent or Merger Sub, whether or not covered by insurance;
(iii) any declaration, setting aside or payment of any dividend or other
distribution in cash, stock or property in respect of the capital stock of
Parent, except for dividends or other distributions on its capital stock
publicly announced prior to the date hereof and except as expressly permitted
hereby; (iv) any event that would constitute a violation of Section 4.1 or Section 4.2 hereof, if such event occurred after
the date of this Agreement and prior to the Effective Time; or (v) any change by
Parent in accounting principles, practices or methods.
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3.7. No Undisclosed
Liabilities. Except as reflected in the Parent Financial
Statements or as otherwise disclosed on Schedule 3.7, Parent
has no liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise except liabilities which have arisen after the date of the Parent
Financial Statements in the ordinary course of business (none of which is a
material uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit).
3.8. Tax
Matters.
(a) There
have been duly and timely filed by Parent with the appropriate Taxing
Authorities all Tax Returns required to be filed before the Closing Date and all
such Tax Returns were true, correct and complete in all material
respects. No extension is in effect for Parent with respect to the
filing of any Tax Return, the payment of any Taxes, or any limitation period
regarding the assessment or collection of any Taxes.
(b) Parent
has paid in full all Taxes which have become due and payable on or before the
Closing Date (whether or not shown on any Tax Return). Adequate
reserves and accruals have been established to provide for the payment of all
Taxes which are not yet due and payable with respect to the Parent through the
Closing Date.
(c) There
are no liens for Taxes upon Parent or Merger Sub or any of their properties or
assets except for Taxes not yet due and payable.
(d) Neither
Parent nor Merger Sub has ever been a member of an affiliated, consolidated,
unitary or combined group filing a consolidated, unitary or combined Tax
Return. Neither Parent nor Merger Sub has ever been a party to any
tax allocation, sharing or reimbursement agreement or arrangement.
(e) Neither
Parent nor Merger Sub has any liability for the Taxes of any other person under
Treasury Regulation Section 1.502-6 (or similar provisions of state, local or
foreign tax law), as a transferee or successor, by contract, or
otherwise.
(f) Parent
does not have pending any ruling requests filed by it or on its behalf with any
Taxing Authority and is not a party to any closing agreement described in
Internal Revenue Code Section 7121 (or similar provisions of state, local or
foreign law).
(g) Parent
has delivered to Pathworks-Florida correct and complete copies of all income Tax
Returns and all other material Tax Returns filed with respect to Parent for all
completed taxable years commencing on or after January 1, 2007, together with
all examination reports by any Taxing Authority, any statements of deficiencies
proposed or assessed against or agreed to by Parent, and any notices of proposed
adjustments received with respect to such years.
(h) No
deficiency or proposed adjustment for any amount of Tax has been proposed,
asserted, assessed or reassessed (as may be applicable) by any Taxing Authority
against Parent that has not been paid, settled or otherwise
resolved. There is no action, suit, claim, examination,
investigation, proceeding or audit now pending, proposed or threatened against
Parent with respect to any Taxes. Parent has not been notified by any
Taxing Authority that any issues have been raised with respect to any Tax
Return.
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(i) No
claim has been made within the past five (5) calendar years by any Taxing
Authority in a jurisdiction where Parent did not file Tax Returns that it is or
may be subject to taxation by that jurisdiction.
(j) Neither
Parent nor Merger Sub is an “investment company” within the meaning of Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
(k) As
used in this Agreement, “Tax” means any federal, state, province, local or
foreign income taxes (including any tax on or based upon net income, or gross
income, or income as specially defined, or earnings, or profits, or selected
items of income, earnings or profits) and all gross receipts, estimated, sales,
use, ad valorem, transfer, franchise, license, withholding, payroll, employment,
excise, capital stock, social security (or similar), unemployment, disability,
severance, stamp, gains, registration, value added, occupation, premium, real
property, personal property, profits, windfall profits, environmental,
alternative or add-on minimum taxes, custom duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any Taxing
Authority whether disputed or not.
(l) As
used in this Agreement, “Tax Return” is
defined as any return, declaration, report, claim for refund, information
return, statement or other document (including any related or supporting
information, schedule, attachment and any amendment thereof) filed or required
to be filed with any federal, state, province, local or foreign governmental
entity or other authority (a “Taxing Authority”) in
connection with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements relating
to any Tax.
3.9. Contracts and
Commitments.
(a) Schedule 3.9 hereto
lists the following agreements, whether oral or written, to which Parent or
Merger Sub is a party, which are currently in effect, and which relate to the
operation of Parent’s business, or where applicable, the business of Merger Sub:
(i) collective bargaining agreement or contract with any labor union; (ii)
bonus, pension, profit sharing, retirement or other form of deferred
compensation plan; (iii) hospitalization insurance or other welfare benefit plan
or practice, whether formal or informal; (iv) stock purchase or stock option
plan; (v) contract for the employment of any officer, individual employee or
other person on a full-time or consulting basis or relating to severance pay for
any such person; (vi) confidentiality agreement; (vii) contract, agreement or
understanding relating to the voting of Parent Common Stock or the election of
directors of Parent; (viii) agreement or indenture relating to the borrowing of
money or to mortgaging, pledging or otherwise placing a lien on any of the
assets of Parent or Merger Sub; (ix) guaranty of any obligation for borrowed
money or otherwise; (x) lease or agreement under which Parent or Merger Sub is
lessee of, or holds or operates any property, real or personal, owned by any
other party, for which the annual rental exceeds $25,000; (xi) lease or
agreement under which Parent or Merger Sub is lessor of, or permits any third
party to hold or operate, any property, real or personal, for which the annual
rental exceeds $25,000; (xii) contract which prohibits Parent or Merger Sub from
freely engaging in business anywhere in the world; (xiii) license agreement or
agreement providing for the payment or receipt of royalties or other
compensation by Parent or Merger Sub in connection with any intellectual
property rights; (xiv) contract or commitment for capital expenditures in excess
of $50,000; (xv) agreement for the sale of any capital asset; (xvi) contract
with Merger Sub any affiliate thereof which in any way relates to Parent (other
than for employment on customary terms); or (xvii) other agreement which is
either material to Parent’s business or was not entered into in the ordinary
course of business.
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(b) To
Parent’s knowledge, Parent and Merger Sub has performed all obligations required
to be performed by them in connection with the contracts or commitments required
to be disclosed in Schedule 3.9 hereto
and is not in receipt of any claim of default under any contract or commitment
required to be disclosed under such caption, Parent and Merger Sub, where
applicable, have no present expectation or intention of not fully performing any
material obligation pursuant to any contract or commitment required to be
disclosed under such caption, and Parent has no knowledge of any breach or
anticipated breach by any other party to any contract or commitment required to
be disclosed under such caption.
3.10. Patents and
Trademarks. Parent has no patents, trademarks, licenses,
sublicenses, or any agreement relating to the ownership of use of any
intellectual property.
3.11. Compliance; Permits;
Restrictions.
(a) Neither
Parent nor Merger Sub is in conflict with, or in default or violation of (i) any
law, rule, regulation, order, judgment or decree applicable to Parent or Merger
Sub or by which it or any of its properties are bound or affected, or (ii) any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or Merger Sub is a
party or by which Parent or Merger Sub or its or any of their respective
properties is bound or affected except for those conflicts, defaults or
violations which would not be reasonably expected to have a Parent Material
Adverse Effect. To the knowledge of Parent, no investigation or
review by any Governmental Entity is pending or threatened against Parent or
Merger Sub, nor has any Governmental Entity indicated in writing an intention to
conduct the same. There is no agreement, judgment, injunction, order
or decree binding upon Parent or Merger Sub which has or would reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of Parent or Merger Sub, any acquisition of material property by Parent
or Merger Sub or the conduct of business by Parent as currently
conducted.
(b) Parent
and Merger Sub hold all permits, licenses, variances, exemptions, orders and
approvals from Governmental Entities which are necessary to the conduct of the
business of Parent except those the absence of which would not, individually or
in the aggregate, be reasonably likely to have a Parent Material Adverse Effect,
(collectively, the “Parent
Permits”). Parent and Merger Sub are in compliance in all
material respects with the terms of the Parent Permits.
3.12. Litigation. There
is no action, suit, proceeding, claim, arbitration or investigation pending,
including derivative suits brought by or on behalf of Parent, or as to which
Parent or Merger Sub has received any written notice of assertion nor, to
Parent's knowledge, is there a threatened action, suit, proceeding, claim,
arbitration or investigation against Parent or Merger Sub seeking to delay,
limit or enjoin the transactions contemplated by this Agreement or which might
reasonably be expected to have a Parent Material Adverse Effect.
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3.13. Brokers' and Finders'
Fees. Parent has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.14. Employees.
(a) The
Company does not now have, nor has it had during its most recently completed two
fiscal years, any employees.
(b) Except
as otherwise set forth in Schedule 3.14, or as
contemplated by this Agreement, to the knowledge of Parent, neither any
executive employee of Parent nor any group of Parent’s employees has any plans
to terminate his, her or its employment; (b) Parent has no material labor
relations problem pending and its labor relations are satisfactory; (c) there
are no workers’ compensation claims pending against Parent nor is Parent aware
of any facts that would give rise to such a claim; (d) to the knowledge of
Parent, no employee of Parent is subject to any secrecy or non-competition
agreement or any other agreement or restriction of any kind that would impede in
any way the ability of such employee to carry out fully all activities of such
employee in furtherance of the business of Parent; and (f) no employee or former
employee of Parent has any claim with respect to any intellectual property
rights of Parent.
3.15. Affiliate
Transactions. Except as set forth in Schedule 3.15 hereto,
and other than pursuant to this Agreement, no officer, director or employee of
Parent, Merger Sub or any member of the immediate family of any such officer,
director or employee, or any entity in which any of such persons owns any
beneficial interest (other than any publicly-held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market and
less than one percent of the stock of which is beneficially owned by any of such
persons) (collectively “Parent Insiders”),
has any agreement with Parent (other than normal employment arrangements) or any
interest in any property, real, personal or mixed, tangible or intangible, used
in or pertaining to the business of Parent (other than ownership of capital
stock of Parent). Parent is not indebted to any Parent Insider (except for
amounts due as normal salaries and bonuses and in reimbursement of ordinary
business expenses) and no Parent Insider is indebted to Parent) except for cash
advances for ordinary business expenses, in each case in an amount less than
$1,000). None of the insiders has any direct or indirect interest in any
competitor, supplier or customer of Parent or in any person, firm or entity from
whom or to whom Parent leases any property, or in any other person, firm or
entity with whom Parent transacts business of any nature. For purposes of this
Section 3.15, the members of the immediate family of an officer, director or
employee shall consist of the spouse, parents and children of such officer,
director or employee.
3.16. Books and
Records. The books of account, minute books, stock record
books, and other records of Parent, all of which have been made available to
Pathworks-Florida, have been properly kept and contain no inaccuracies except
for inaccuracies that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent. At the Closing,
all of Parent’s records will be in the possession of Parent.
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3.17. Real
Property. Neither Parent nor Merger Sub owns any real
property. Schedule 3.17 contains
an accurate list of all leaseholds and other interests of Parent and Merger Sub
in any real property. Parent and Merger Sub have good and valid title
to those leaseholds and other interests free and clear of all liens and
encumbrances, and the real property to which those leasehold and other interests
pertain constitutes the only real property used in Parent’s
business.
3.18. Insurance. The
insurance policies owned and maintained by Parent that are material to Parent
are in full force and effect, all premiums due and payable thereon have been
paid (other than retroactive or retrospective premium adjustments that Parent is
not currently required, but may in the future be required, to pay with respect
to any period ending prior to the date of this Agreement), and Parent has
received no notice of cancellation or termination with respect to any such
policy that has not been replaced on substantially similar terms prior to the
date of such cancellation.
3.19. Environmental
Matters. None of the operations of Parent or any Merger Sub
involves the generation, transportation, treatment, storage or disposal of
hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state, local or
foreign equivalent.
3.20. Absence of Liens and
Encumbrances. Each of Parent and Merger Sub has good and valid
title to, or, in the case of leased properties and assets, valid leasehold
interests in, all of its tangible properties and assets, real, personal and
mixed, used in its business, free and clear of any liens and encumbrances except
(i) as reflected in the Parent Financial Statements, (ii) for liens for taxes
not yet due and payable and (iii) for such imperfections of title and
encumbrances, if any, which would not be reasonably expected to have a Parent
Material Adverse Effect.
3.21. Board
Approval. The Board of Directors of each of Parent and Merger
Sub has (i) determined that the Merger is fair to, advisable and in the best
interests of it and its stockholders, (ii) has approved the Share Issuance and
(iii) duly approved the Merger, this Agreement and the transactions contemplated
hereby.
3.22. Valid
Issuances. The Merger Consideration to be issued by Parent in
the Merger, when issued in accordance with the provisions of this Agreement,
will be duly authorized, validly issued, full paid and non-assessable, free of
all liens and encumbrances and not subject to preemptive rights.
3.23. Disclosed
Information. None of the information supplied or to be
supplied by Parent for inclusion in any proxy statement, or any amendments or
supplements thereto, to be distributed to the shareholders of either
Pathworks-Florida or the Surviving Corporation in connection with a meeting of
such stockholders to vote upon this Agreement and the transactions contemplated
hereby, will, at the time of the mailing of such proxy statement and the time of
such meeting contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
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3.24. Investigations and
Inquiries. Nether Parent nor any of its respective directors or officers
is the subject of any investigation, inquiry or proceeding before the Securities
Exchange Commission or any state securities commission or administrative
agency.
3.25. Foreign Corrupt
Practices. Neither the Parent, nor to the Parent’s knowledge,
any director, officer, agent, employee or other Person acting on behalf of the
Parent or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Parent (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
3.26. ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act. Other than as set forth on Schedule 3.26, the
Parent is either in compliance with any and all applicable requirements of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are effective as of the date hereof, and any and
all applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof.
3.27. Patriot
Act. To the extent applicable, both the Parent and Merger Sub
are in compliance, in all material respects, with the (i) Trading with the Enemy
Act, as amended, and each of the foreign assets control regulations of the
United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended)
and any other enabling legislation or executive order relating thereto, and (ii)
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (USA Patriot Act of 2001).
3.28. Off Balance Sheet
Arrangements. There is no transaction, arrangement, or other
relationship between the Parent and an unconsolidated or other off balance sheet
entity that is required to be disclosed by the Parent in its 1934 Act filings
and is not so disclosed or that otherwise would be reasonably likely to have a
Parent Material Adverse Effect.
3.29. Investment Company
Status. Neither Parent nor the Merger Sub is, nor upon
consummation of the sale of the Securities will not be, an “investment company,”
a company controlled by an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company” as such terms
are defined in the Investment Company Act of 1940, as amended.
3.30. Full Disclosure. The
representations and warranties of Parent and Merger Sub contained in this
Agreement (and in any schedule, exhibit, certificate or other instrument to be
delivered under this Agreement) are true and correct in all material respects,
and such representations and warranties do not omit any material fact necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading. There is no fact of which Parent has
knowledge that has not been disclosed to Pathworks-Florida pursuant to this
Agreement, including the schedules hereto, all taken together as a whole, which
has had or could reasonably be expected to have a Material Adverse Effect on
Parent or Merger Sub or materially adversely affect the ability of Parent or
Merger Sub to consummate in a timely manner the transactions contemplated
hereby.
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ARTICLE
IV
CONDUCT
PRIOR TO THE EFFECTIVE TIME
4.1. Conduct of Business by the
Parties. During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
ARTICLE VIII or the Effective Time, except as contemplated by this Agreement,
each of Pathworks-Florida, Merger Sub and Parent shall conduct their respective
businesses in the ordinary course and in substantial compliance with all
applicable laws and regulations, pay their respective debts and Taxes when due
subject to good faith disputes over such debts or Taxes, pay or perform other
material obligations when due subject to good faith disputes over such
obligations, and use their commercially reasonable efforts consistent with past
practices and policies to (i) preserve intact their present business
organization; (ii) keep available the services of each of their present officers
and employees, respectively; and (iii) preserve their relationships with
customers, suppliers, distributors, licensors, licensees and others with which
each party has business dealings material to their respective
business.
4.2. Covenants of
Parent. Except as disclosed in Schedule 4.2 hereto
or permitted by the terms of this Agreement or the transactions contemplated
hereby and thereby, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, Parent shall not (i) amend the Parent Charter
Documents (other than as provided herein); (ii) split, combine or reclassify its
outstanding shares of capital stock; (iii) declare, set aside or pay any
dividend payable in cash, stock or property in respect of any capital stock;
(iv) take any action that would prevent the Merger from qualifying as a
reorganization under Section 368(a) of the Code or a qualifying exchange under
Section 351 of the Code; (v) conduct its business, other than in the ordinary
course consistent with past practices; (vi) issue any capital stock or any
options, warrants or other rights to subscribe for or purchase any capital stock
or any securities convertible into or exchangeable or exercisable for, or rights
to purchase or otherwise acquire, any shares of the capital stock of Parent; or
(vii) directly or indirectly redeem, purchase, sell or otherwise acquire any
capital stock of Parent.
4.3. Affirmative Pre-Closing
Covenants of Parent. Prior to the Closing, Parent shall take all actions
required such that immediately after the Effective Time the holders of Parent
Common Stock, or any securities convertible into or exchangeable into shares of
Parent Common Stock, including any shares issuable to Section 6.2(h) hereof,
shall own in the aggregate a number of shares of Parent Common Stock, which
shall represent forty-seven percent (47%) of the fully diluted shares of Parent
Common Stock immediately following the Effective Time.
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4.4. Covenants of
Pathworks-Florida. Except as disclosed in Schedule 4.4 hereto
or permitted by the terms of this Agreement or the transactions contemplated
hereby and thereby, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, Pathworks-Florida shall not (i) amend the
Pathworks-Florida Charter Documents (other than as provided herein); (ii) split,
combine or reclassify its outstanding shares of capital stock; (iii) declare,
set aside or pay any dividend payable in cash, stock or property in respect of
any capital stock; (iv) take any action that would prevent the Merger from
qualifying as a reorganization under Section 368(a) of the Code or a qualifying
exchange under Section 351 of the Code; (v) conduct its business, other than in
the ordinary course consistent with past practices; (vi) issue any capital stock
or any options, warrants or other rights to subscribe for or purchase any
capital stock or any securities convertible into or exchangeable or exercisable
for, or rights to purchase or otherwise acquire, any shares of the capital stock
of Pathworks-Florida; or (vii) directly or indirectly redeem, purchase, sell or
otherwise acquire any capital stock of Pathworks-Florida.
ARTICLE
V
ADDITIONAL
AGREEMENTS
5.1. Public Disclosure;
Securities Law Filings. Parent and Pathworks-Florida will
consult with each other, and to the extent practicable, agree, before issuing
any press release or otherwise making any public statement with respect to the
Merger or this Agreement and will not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
law, in which case reasonable efforts to consult with the other party will be
made prior to such release or public statement. In addition,
Parent and Pathworks-Florida agree to cooperate in the preparation and filing of
all filings required by applicable securities laws.
5.2. Expenses. Except
as otherwise provided in this Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
5.3. Commercially Reasonable
Efforts; Notification.
(a) Upon
the terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including to
accomplish the following: (i) causing the conditions precedent set forth in
ARTICLE IV to be satisfied; (ii) obtaining all necessary actions or
non-actions, waivers, consents, approvals, orders and authorizations from any
federal, state, local or foreign governmental authority (collectively, “Governmental
Entities” and each a “Governmental
Entity”); (iii) making all necessary registrations, declarations and
filings (including registrations, declarations and filings with Governmental
Entities, if any); (iv) avoiding any suit, claim, action, investigation or
proceeding by any Governmental Entity challenging the Merger or any other
transaction contemplated by this Agreement; (v) obtaining all consents,
approvals or waivers from third parties required as a result of the transactions
contemplated in this Agreement; (vi) defending any suits, claims, actions,
investigations or proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed; and (vii) executing or
delivering any additional instruments reasonably necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement.
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(b) Parent
shall give prompt notice to Pathworks-Florida upon becoming aware that any
representation or warranty made by it or Merger Sub contained in this Agreement
has become untrue or inaccurate, or of any failure of Parent or Merger Sub to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in each
case, where the conditions set forth in Section 6.2(a) or Section 6.2(b) would
not be satisfied as a result thereof; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(c) Pathworks-Florida
shall give prompt notice to Parent upon becoming aware that any representation
or warranty made by it contained in this Agreement has become untrue or
inaccurate, or of any failure of Pathworks-Florida to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, where the conditions set
forth in Section 6.3(a) or Section 6.3(b) would not be satisfied as a result
thereof; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.4. Third Party
Consents. On or before the Closing Date, Parent and
Pathworks-Florida will each use its commercially reasonable efforts to obtain
any consents, waivers and approvals under any of its respective agreements,
contracts, licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby.
5.5 Parent Board of Directors
and Officers.
(a) Unless
otherwise determined by the Parties prior to the Effective Time, the directors
of Parent immediately prior to the Effective Time shall be the directors of the
Surviving Corporation at and after the Effective Time, each to hold the office
of a director of the Surviving Corporation in accordance with the provisions of
the DGCL and the Certificate of Incorporation and Bylaws of the Parent until
their successors are duly elected and qualified. In addition, at the
Closing, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall be appointed to the board of directors of
Parent, each to hold the office of a director of the Parent in accordance with
the provisions of the DGCL and the Certificate of Incorporation and Bylaws of
the Parent until their successors are duly elected and qualified.
(b) Unless
otherwise determined by the Parties prior to the Effective Time, the officers of
Parent immediately prior to the Effective Time shall be the officers of the
Parent at and after the Effective Time, each to hold office in accordance with
the provisions of the Bylaws of the Parent.
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5.6 Private Placement.
Each of Pathworks-Florida and Parent shall take all necessary action on its part
such that the issuance of the Merger Consideration to Pathworks-Florida
stockholders constitutes a valid “private placement” under the Securities
Act. Without limiting the generality of the foregoing,
Pathworks-Florida shall (1) provide each Pathworks-Florida stockholder with
a stockholder qualification questionnaire in the form reasonably acceptable to
both Parent and Pathworks-Florida (a “Stockholder
Questionnaire”) and (2) use its best efforts to cause each
Pathworks-Florida stockholder to attest that that stockholder either (A) is
an “accredited investor” as defined in Regulation D of the Securities Act,
(B) has such knowledge and experience in financial and business matters
that the stockholder is capable of evaluating the merits and risks of receiving
the Merger Consideration, or (C) has appointed an appropriate person reasonably
acceptable to both Parent and Pathworks-Florida to act as the stockholder’s
purchaser representative in connection with evaluating the merits and risks of
receiving the Merger Consideration.
5.7 Pathworks-Florida
Stockholder Written Consent; Materials to Stockholders.
(a) Pathworks-Florida
shall use commercially reasonable efforts to obtain, in lieu of holding a
stockholder meeting, the written consent of the number of Pathworks-Florida
stockholders necessary under its Certificate of Incorporation, Bylaws, and
applicable law to approve this agreement and the Merger.
(b) Pathworks-Florida
shall as promptly as practicable following the date of this agreement prepare
and mail to Pathworks-Florida stockholders all information as may required to
comply with applicable law and the Securities Act.
5.8 No
Negotiation. Until the Effective Date, or such time, if any,
as this Agreement is terminated pursuant to ARTICLE VII below, neither Parent
nor Pathworks-Florida shall, nor shall they permit any of their respective
affiliates, directors, officers, employees, investment bankers, attorneys or
other agents, advisors or representatives to, directly or indirectly, (a) sell,
offer or agree to sell its business, by sale of shares or assets, merger or
otherwise (each an “Acquisition
Transaction”) other than pursuant to this Agreement, (b) solicit or
initiate the submission of any proposal for an Acquisition Transaction, or (c)
participate in any discussions or negotiations with, or furnish any information
concerning its business to, any corporation, person or other entity in
connection with a possible Acquisition Transaction other than pursuant to this
Agreement. If either Parent or Pathworks-Florida is contacted or
solicited by any third-party regarding any action contemplated hereunder, such
party must promptly inform the other in writing.
5.9 Limitation of
Liability. Notwithstanding anything to the contrary contained
in this Agreement, except as a result of a fraud, or a material misstatement or
omission hereunder, perpetrated by any party to this agreement, or their
respective successors or affiliates, shall have any liability hereunder from and
after the Closing Date.
5.10 Failure to Fulfill
Conditions. In the event that either
of the parties hereto determines that a condition to its respective obligations
to consummate the transactions contemplated hereby cannot be fulfilled on or
prior to the termination of this Agreement, it will promptly notify the other
party.
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5.11 Notification of Certain
Matters. On
or prior to the Effective Date, each party shall give prompt notice to the other
party of (i) the occurrence or failure to occur of any event or the discovery of
any information, which occurrence, failure or discovery would be likely to cause
any representation or warranty on its part contained in this Agreement to be
untrue, inaccurate or incomplete after the date hereof in any material respect
or, in the case of any representation or warranty given as of a specific date,
would be likely to cause any such representation or warranty on its part
contained in this Agreement to be untrue, inaccurate or incomplete in any
material respect as of such specific date, and (ii) any material failure of such
party to comply with or satisfy any covenant or agreement to be complied with or
satisfied by it hereunder.
5.12 Access to
Information. Each of Pathworks-Florida and Parent shall afford
to the other and the other's accountants, counsel, financial advisors and other
representatives reasonable access during normal business hours throughout the
period prior to the Effective Time to all properties, books, contracts,
commitments and records (including, but not limited to, tax returns) of it and,
during such period, shall furnish promptly such information concerning its
business, properties and personnel as the other shall reasonably request;
provided, however, that no investigation pursuant to this Section shall affect
any representation or warranty made herein or the conditions to the obligations
of the respective parties to consummate the Merger. All non-public documents and
information furnished to either Pathworks-Florida or Parent, as the case may be,
in connection with the transactions contemplated by this Agreement shall be
deemed to have been received, and shall be held by the recipient, in confidence,
except that Pathworks-Florida and Parent, as applicable, may disclose such
information as may be required under applicable law. Each party shall promptly
advise the others, in writing, of any change or the occurrence of any event
after the date of this Agreement and prior to the Effective Time having, or
which, insofar as can reasonably be foreseen, in the future would reasonably be
expected to have, any Pathworks-Florida Material Adverse Effect or Parent
Material Adverse Effect on, as applicable.
5.13 Finance
Transaction. Concurrent with the Closing, Parent will commence
its best efforts to raise an additional approximately $12 million of new
capital, approximately $2 million of which would be in the form of preferred
stock (with terms to be determined) and approximately $10 million in the form of
either preferred stock (with terms to be determined) or debt financing secured
by the proceeds of certain service contracts held by
Pathworks-Florida. The terms, conditions and structure of any future
financing would be subject to negotiation between Parent, Pathworks-Florida and
third party financiers.
5.14 Employment
Agreements. Effective at Closing, Parent will enter into new
employment contracts with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ on terms to
be determined.
5.15 Chesscom Share
Exchange. Effective at the Closing, Parent will enter into an
agreement with The Bankers Store, Inc. (“BSTR”) whereby BSTR will grant Parent
an exclusive option to acquire all of the issued and outstanding shares of
Chesscom Technologies, Inc. (“Chesscom”) at a price equal to the residual value
of all assets of Chesscom other than its interest in
Pathworks-Florida.
5.15 Pathworks Cure
Agreement. Effective at the Closing, Pathworks, Inc.
(“Pathworks”) will enter into an agreement with Parent whereby Parent shall have
the right to cure any Pathworks default with respect to a Master Agreement dated
as of May 21, 2010 with CenturyTel Services Group, LLC (“CenturyLink”) in
exchange for Parent’s acquisition of the ownership of Pathworks on terms and
conditions to be agreed by the Parties.
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ARTICLE
VI
CONDITIONS
TO THE MERGER
6.1. Conditions to Obligations of
Each Party to Effect the Merger. The respective obligations of
each party to this Agreement to effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of the following conditions, any of
which may be waived if waived in writing by both Parent and
Pathworks-Florida:
(a) No Prohibitive Change of Law.
There shall have been no law, statute, rule or regulation, domestic or foreign,
enacted or promulgated which would prohibit or make illegal the consummation of
the transactions contemplated hereby.
(b) Stockholder
Approvals. This Agreement shall have been adopted and the
Merger shall have been duly approved by the stockholders of Pathworks-Florida by
the requisite vote under applicable law and in accordance with the procedures
set forth in its Certificate of Incorporation, Bylaws and applicable
law.
(c) Dissenting
Shares. Pathworks-Florida stockholders holding in the
aggregate not more than five percent (5%) of the Pathworks-Florida Common Stock
shall have delivered to Pathworks-Florida a written demand for appraisal in
accordance with applicable Florida law.
(d) No Order. No
Governmental Entity shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in effect and which
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(e) Schedules. Each of
the parties hereto shall have delivered to each other complete and accurate
Schedules to this Agreement and such Schedules shall have been approved by the
recipient.
(f) Exhibits. The
parties shall mutually agree upon the form and substance of all the Exhibits to
this Agreement and the appropriate signatories thereto shall have executed and
delivered each such document.
(g) Officers’
Certificate. Each party shall have furnished to the other a
certificate of its Chief Executive Officer dated as of the Effective Date, in
which such officers shall certify that, to their best knowledge, the conditions
set forth in Section 6.2(a) and 6.2(b) or 6.3(a) and 6.3(b) (as applicable) have
been fulfilled and are true and correct.
6.2. Additional Conditions to
Obligations of Pathworks-Florida. The obligation of
Pathworks-Florida to effect the Merger shall be subject to the satisfaction at
or prior to the Closing Date of each of the following conditions, any of which
may be waived, in writing, exclusively by Pathworks-Florida:
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(a) Representations and
Warranties. The representations and warranties of Parent and
Merger Sub set forth in this Agreement shall be true and correct as of the date
of this Agreement and as of the Closing Date as if made on and as of the Closing
Date (except to the extent any such representation and warranty expressly speaks
only as of an earlier date) and Pathworks-Florida shall have received a
certificate signed on behalf of Parent by the Chief Executive Officer of Parent
to such effect.
(b) Agreements and
Covenants. Each of Parent and Merger Sub shall have performed
or complied with, in all material respects, all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and Pathworks-Florida shall have received a certificate to
such effect signed on behalf of each of Parent and Merger Sub by an authorized
officer of Pathworks-Florida.
(c) Consents and
Approvals. Parent and Merger Sub shall have obtained all
consents and approvals necessary to consummate the transactions contemplated by
this Agreement in order that the transactions contemplated herein not constitute
a breach or violation of, or result in a right of termination or acceleration
of, or creation of any encumbrance on any of Parent’s or Merger Sub’s assets
pursuant to the provisions of, any agreement, arrangement or undertaking of or
affecting Parent or any license, franchise or permit of or affecting Parent or
Merger Sub.
(d) No Closing Material Adverse
Effect. Since the date hereof, there has not occurred a Parent
Material Adverse Effect. For purposes of the preceding sentence and
Section (a), the occurrence of any of the following events or circumstances, in
and of themselves and in combination with any of the others, shall not
constitute a Parent Material Adverse Effect:
(i) any
litigation or threat of litigation filed or made after the date hereof
challenging any of the transactions contemplated herein or any stockholder
litigation or threat of stockholder litigation filed or made after the date
hereof resulting from this Agreement or the transactions contemplated herein
unless Pathworks-Florida shall conclude that it has or could have a Parent
Material Adverse Effect on the Parent and the Parent, taken as a whole;
and
(ii) any
adverse change, event or effect that is demonstrated to be caused primarily by
conditions generally affecting the United States economy.
(e) Corporate Documents. Pathworks-Florida
shall have received a copy of the Certificate of Incorporation of each of the
Parent and Merger Sub, certified by the Secretary of State of the State of
Delaware evidencing the good standing of Parent and Merger Sub in such
jurisdiction.
(f) Other Agreements and
Resignations. Each of the officers and directors of Parent and Merger Sub
immediately prior to the Closing Date shall deliver duly executed resignations
from their positions with each such applicable corporation immediately upon the
Effective Time.
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(g) Compliance with Securities Law
Requirements. Parent shall be in compliance in all material
respects with all requirements of applicable securities laws and shall have
taken all actions with respect thereto as shall be required or reasonably
requested by Pathworks-Florida in connection therewith.
6.3. Additional Conditions to the
Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Parent:
(a) Representations and
Warranties. The representations and warranties of
Pathworks-Florida set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Closing Date as if made on and as of
the Closing Date (except to the extent any such representation and warranty
expressly speaks only as of an earlier date or to the extent such representation
and warranty is no longer true on account of transactions contemplated by this
Agreement) and Parent shall have received a certificate signed on behalf of
Pathworks-Florida by the Chief Executive Officer of Pathworks-Florida to such
effect; provided, however, that notwithstanding anything herein to the contrary,
this Section 6.3(a) shall be deemed to have been satisfied even if such
representations or warranties are not so true and correct unless the failure of
such representations or warranties to be so true and correct, individually or in
the aggregate, has had, or is reasonably likely to have, an Pathworks-Florida
Material Adverse Effect.
(b) Agreements and
Covenants. Pathworks-Florida shall have performed or complied
with, in all material respects, all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Pathworks-Florida by an authorized officer of
Pathworks-Florida.
(c) No Closing Material Adverse
Effect. Since the date hereof, there shall not have occurred
an Pathworks-Florida Material Adverse Effect. For purposes of the
preceding sentence and Section 6.3(a), the occurrence of any of the following
events or circumstances, in and of themselves and in combination with any of the
others, shall not constitute an Pathworks-Florida Material Adverse
Effect:
(i) any
litigation or threat of litigation filed or made after the date hereof
challenging any of the transactions contemplated herein or any stockholder
litigation or threat of stockholder litigation filed or made after the date
hereof resulting from this Agreement or the transactions contemplated herein
unless Pathworks-Florida shall conclude that it has or could have an
Pathworks-Florida Material Adverse Effect on Pathworks-Florida and the Parent,
taken as a whole; and
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(ii) any
adverse change, event or effect that is demonstrated to be caused primarily by
conditions generally affecting the United States economy, or by conditions
generally affecting the telecommunications industry.
ARTICLE
VII
TERMINATION,
AMENDMENT AND WAIVER
7.1. Termination. This
Agreement may be terminated at any time prior to the Effective Time, whether
before or after the requisite approval of the stockholders of
Pathworks-Florida:
(a) by
mutual written consent duly authorized by the Boards of Directors of Parent and
Pathworks-Florida; or
(b) by
either Parent or Pathworks-Florida if the Merger shall not have been consummated
by October 31, 2010, provided, however, that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party whose
action or failure to act has been a principal cause of, or resulted in the
failure of, the Merger to occur on or before such date if such action or failure
to act constitutes a breach of this Agreement; or
(c) by
either Parent or Pathworks-Florida if a Governmental Entity shall have issued an
order, decree or ruling or taken any other action, in any case having the effect
of permanently restraining, enjoining or otherwise prohibiting the Merger, which
order, decree, ruling or other action shall have become final and non-appealable
or any law, order, rule or regulation is in effect or is adopted or issued,
which has the effect of prohibiting the Merger; or
(d) by
Parent, on the one hand, or Pathworks-Florida, on the other, if any condition to
the obligation of any such party to consummate the Merger set forth in Section
6.2 (in the case of Pathworks-Florida) or 6.3 (in the case of Parent) becomes
incapable of satisfaction prior to the Closing Date; provided, however, that the
failure of such condition is not the result of a breach of this Agreement by the
party seeking to terminate this Agreement.
7.2. Fees and
Expenses. All Expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such Expenses whether or not the Merger is consummated. As
used in this Agreement, “Expenses” shall
include all reasonable out-of-pocket expenses (including, without limitation,
all fees and expenses of counsel, accountants, experts and consultants to a
party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and all other matters relating to
the closing of the Merger and the other transactions contemplated
hereby.
7.3. Amendment. This
Agreement may be amended by the parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to the Effective Time;
provided, however, that, after the approval and adoption of this Agreement by
the stockholders of Pathworks-Florida, there shall not be any amendment that by
applicable law requires further approval by the stockholders of
Pathworks-Florida without the further approval of such
stockholders. This Agreement may not be amended by the parties hereto
except by execution of an instrument in writing signed on behalf of each of
Parent, Pathworks-Florida and Merger Sub.
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7.4. Extension;
Waiver. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. Delay in
exercising any right under this Agreement shall not constitute a waiver of such
right.
ARTICLE
VIII
CONTINUATION
OF BUSINESS
8.1 Continuation of
Business. After the Effective Time of the Merger, Parent,
either directly or through Pathworks-Florida as long as Pathworks-Florida is
within Parent’s “qualified group” within the meaning of Regulations Section
1.368-1(d)(4)(ii) (the “Qualified Group”),
will continue at least one significant historic business line of
Pathworks-Florida, or use at least a significant portion of Pathworks-Florida's
historic business assets in a business, in each case within the meaning of
Regulations Section 1.368-1(d), except that Pathworks-Florida's historic
business assets may be transferred (a) to a corporation that is another
member of Parent’s Qualified Group, or (b) to an entity taxed as a
partnership if (i) one or more members of Parent’s Qualified Group have
active and substantial management functions as a partner with respect to
Parent’s historic business or (ii) members of Parent’s Qualified Group in
the aggregate own an interest in the partnership representing a significant
interest in Pathworks-Florida's historic business, in each case within the
meaning of Regulations Section 1.368-1(d)(4)(iii).
ARTICLE
IX
GENERAL
PROVISIONS
9.1. Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed given on the day of delivery if delivered personally or sent via telecopy
(receipt confirmed) or on the second business day after being sent if delivered
by commercial delivery service, to the parties at the following addresses or
telecopy numbers (or at such other address or telecopy numbers for a party as
shall be specified by like notice):
(a) if
to Parent or Merger Sub (prior to Closing):
Lexicon
United Incorporated
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇
▇▇▇▇▇
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With a
copy to:
▇▇▇▇▇▇ ▇.
▇. ▇▇▇▇▇▇, Esq.
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇
▇▇▇▇▇
Phone: (▇▇▇)
▇▇▇-▇▇▇▇
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
(b) if
to Pathworks-Florida to:
Pathworks PCO of Florida,
Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
#▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
9.2. Interpretation.
(a) When
a reference is made in this Agreement to Exhibits, such reference shall be to an
Exhibit to this Agreement unless otherwise indicated. When a
reference is made in this Agreement to a Section, such reference shall be to a
Section of this Agreement. Unless otherwise indicated the words
“include,” “includes” and “including” when used herein shall be deemed in each
case to be followed by the words “without limitation.” The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to “the business of” an
entity, such reference shall be deemed to include the business of all direct and
indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be deemed to include all direct and indirect subsidiaries of
such entity.
(b) For
purposes of this Agreement, the term “knowledge” means with respect to a party
hereto, with respect to any matter in question, that any of the officers of such
party has actual knowledge of such matter.
(c) For
purposes of this Agreement, the term “person” shall mean any individual,
corporation (including any non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company), firm
or other enterprise, association, organization, entity or Governmental
Entity.
(d) For
purposes of this Agreement, an “agreement,” “arrangement,” “contract,”
“commitment” or “plan” shall mean a legally binding, written agreement,
arrangement, contract, commitment or plan, as the case may be.
9.3. Counterparts;
Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or by e-mail delivery of a
“.pdf” format or other electronic data file, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.
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9.4. Entire Agreement; Third
Party Beneficiaries. This Agreement and the documents and
instruments and other agreements among the parties hereto as contemplated by or
referred to herein constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. Nothing in this Agreement is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
9.5. Severability. In
the event that any provision of this Agreement, or the application thereof,
becomes or is declared by a court of competent jurisdiction to be illegal, void
or unenforceable, the remainder of this Agreement will continue in full force
and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
9.6. Other Remedies; Specific
Performance. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall
be entitled to seek an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which t they are entitled at law or in
equity. In any action at law or suit in equity to enforce this
Agreement or the rights of any of the parties hereunder, the prevailing party in
such action or suit shall be entitled to receive a reasonable sum for its
attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
9.7. Governing Law;
Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of law
thereof. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in Austin, Texas, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.
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9.8. Rules of
Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.9. Assignment. No
party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other
parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
9.10. Waiver of Jury
Trial. EACH OF PARENT, PATHWORKS-FLORIDA AND MERGER SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, PATHWORKS-FLORIDA AND
MERGER SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF.
9.11. Survival of Representations
and Warranties. The respective representations, warranties,
obligations, agreements and promises of the parties contained in this Agreement
and in any exhibit, schedule, certificate or other document delivered pursuant
to this Agreement, shall survive for a period of one year following the Closing
Date.
[Signature
Page Follows]
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PATHWORKS
PCO OF FLORIDA, INC.
|
|
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By:
|
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
|
|
Name:
|
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
|
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Title:
|
President
|
|
LEXICON
UNITED INCORPORATED CORPORATION
|
|
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By:
|
/s/
▇▇▇▇ ▇▇▇▇▇▇▇
|
|
Title:
|
President
|
|
Name:
|
▇▇▇▇ ▇▇▇▇▇▇▇
|
|
LEXICON
ACQUISITION, INC.
|
|
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By:
|
/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
|
|
Name:
|
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
|
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Title:
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Vice
President
|
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