AGREEMENT AND PLAN OF MERGER BY AND AMONG VIRIUM PHARMACEUTICALS INC., REIT AMERICAS, INC., VIRIUM PHARMACEUTICALS, INC. (DELAWARE) AND VIRIUM MERGER SUB, INC. DATED AS OF MAY 25, 2007
EXHIBIT
2.1
AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
VIRIUM
PHARMACEUTICALS INC.,
VIRIUM
PHARMACEUTICALS, INC. (DELAWARE)
AND
VIRIUM
MERGER SUB, INC.
DATED
AS OF MAY 25, 2007
TABLE
OF CONTENTS
|
Page
No.
|
|||
|
ARTICLE
I THE MERGER
|
1
|
||
|
1.1
|
The
Merger
|
1
|
|
|
1.2
|
Closing;
Effective Time
|
2
|
|
|
1.3
|
Effects
of Merger
|
2
|
|
|
1.4
|
Certificate
of Incorporation
|
2
|
|
|
1.5
|
Bylaws
|
2
|
|
|
1.6
|
Directors
and Officers
|
2
|
|
|
|
|||
|
ARTICLE
II EFFECT OF THE MERGER ON CAPITAL STOCK; COMPANY PAYMENT
TO
PHARMACEUTICALS
|
3
|
||
|
2.1
|
Conversion
of Capital Stock
|
3
|
|
|
2.2
|
Exchange
of Certificates
|
3
|
|
|
2.3
|
Certain
Adjustments
|
4
|
|
|
2.4
|
Warrants
|
5
|
|
|
2.5
|
Bridge
Notes
|
6
|
|
|
2.6
|
Payment
from Company to Parent
|
6
|
|
|
ARTICLE
III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
6
|
||
|
3.1
|
Organization
and Qualification; Subsidiaries
|
6
|
|
|
3.2
|
Equity
Investments
|
6
|
|
|
3.3
|
Authority
to Execute and Perform Agreement
|
6
|
|
|
3.4
|
Binding
Effect
|
7
|
|
|
3.5
|
Capitalization
|
7
|
|
|
3.6
|
Vote
Required; Board Approval
|
7
|
|
|
3.7
|
Litigation
|
7
|
|
|
3.8
|
Title
to Properties; Absence of Liens
|
7
|
|
|
3.9
|
Compliance
with Laws
|
8
|
|
|
3.10
|
Consents
and Approvals
|
8
|
|
|
3.11
|
Non-contravention
|
8
|
|
|
3.12
|
Company
Material Contracts
|
8
|
|
|
3.13
|
Taxes
|
9
|
|
|
3.14
|
Financial
Statements
|
9
|
|
|
3.15
|
Books
and Records
|
10
|
|
|
3.16
|
Intellectual
Property
|
10
|
|
|
3.17
|
Environmental
Matters
|
10
|
|
|
3.18
|
Real
Property
|
10
|
|
|
3.19
|
Broker’s
Fees
|
10
|
|
|
3.20
|
Labor
Matters
|
10
|
|
|
3.21
|
Absence
of Liabilities
|
10
|
|
|
3.22
|
Absence
of Certain Changes or Events
|
11
|
|
|
3.23
|
Full
Disclosure
|
11
|
|
i
|
Page
No.
|
|||
|
ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF RAI, PHARMACEUTICALS
AND MERGER
SUB
|
11
|
||
|
4.1
|
Organization
and Qualification; Subsidiaries
|
11
|
|
|
4.2
|
Equity
Investment
|
12
|
|
|
4.3
|
Authority
to Execute and Perform Agreement
|
12
|
|
|
4.4
|
Binding
Effect
|
12
|
|
|
4.5
|
Capitalization
|
12
|
|
|
4.6
|
Board
Approval
|
14
|
|
|
4.7
|
SEC
Reports and Financial Statements
|
14
|
|
|
4.8
|
No
Material Adverse Change
|
14
|
|
|
4.9
|
Books
and Records
|
15
|
|
|
4.10
|
Litigation
|
15
|
|
|
4.11
|
Absence
of Liabilities
|
15
|
|
|
4.12
|
Title
to Properties; Absence of Liens
|
15
|
|
|
4.13
|
Compliance
with Laws
|
15
|
|
|
4.14
|
Intellectual
Property
|
15
|
|
|
4.15
|
Non-Contravention
|
15
|
|
|
4.16
|
Consents
and Approvals
|
16
|
|
|
4.17
|
Employee
Benefit Plans
|
16
|
|
|
4.18
|
RAI
Material Contracts
|
16
|
|
|
4.19
|
Taxes
|
16
|
|
|
4.20
|
Environmental
Matters
|
18
|
|
|
4.21
|
Real
Property
|
18
|
|
|
4.22
|
Broker’s
Fees
|
18
|
|
|
4.23
|
Labor
Matters
|
19
|
|
|
4.24
|
Articles
of Incorporation, Bylaws, and Minute Books
|
19
|
|
|
4.25
|
Full
Disclosure
|
19
|
|
|
|
|||
|
ARTICLE
V ADDITIONAL AGREEMENTS OF THE PARTIES
|
19
|
||
|
5.1
|
Actions
Pending Closing
|
19
|
|
|
5.2
|
Company
Shareholders’ Approval
|
21
|
|
|
5.3
|
RAI,
Pharmaceuticals and Merger Sub Stockholder Approval;
Proxy
Statement
|
21
|
|
|
5.4
|
Efforts;
Consents
|
22
|
|
|
5.5
|
Filing
of Tax Returns; Payment of Taxes
|
22
|
|
|
5.6
|
Access
to Information
|
22
|
|
|
5.7
|
Confidentiality
|
23
|
|
|
5.8
|
Notification
of Certain Matters
|
23
|
|
|
5.9
|
Non-Solicitation
|
24
|
|
|
5.10
|
Further
Assurances
|
25
|
|
|
5.11
|
Public
Disclosure
|
25
|
|
|
5.12
|
Board
of Directors
|
25
|
|
|
5.13
|
Reverse
Stock Split; Reincorporation
|
25
|
|
|
5.14
|
Existing
RAI Notes
|
25
|
|
ii
|
Page
No.
|
|||
|
ARTICLE
VI CONDITIONS TO CLOSING
|
25
|
||
|
6.1
|
Conditions
to Each Party’s Obligations to Consummate the Transactions
|
25
|
|
|
6.2
|
Conditions
to Obligations of the Company to Consummate the
Transactions
|
26
|
|
|
6.3
|
Conditions
to Obligations of Parent and Merger Sub to Consummate
the
Transactions
|
28
|
|
|
|
|||
|
ARTICLE
VII TERMINATION
|
29
|
||
|
7.1
|
Termination
|
29
|
|
|
7.2
|
Effect
of Termination
|
29
|
|
|
7.3
|
Expenses;
Termination Fees
|
30
|
|
|
ARTICLE
IX MISCELLANEOUS
|
30
|
||
|
8.1
|
Certain
Definitions; Rules of Construction
|
30
|
|
|
8.2
|
Waivers
and Amendments
|
37
|
|
|
8.3
|
Governing
Law
|
38
|
|
|
8.4
|
Notices
|
38
|
|
|
8.5
|
Section
Headings
|
39
|
|
|
8.6
|
Counterparts
|
39
|
|
|
8.7
|
Assignments
|
39
|
|
|
8.8
|
Entire
Agreement; Enforceability
|
39
|
|
|
8.9
|
Severability
|
39
|
|
|
Exhibits
|
|||
|
Exhibit
A
|
Certificate
of Incorporation of Pharmaceuticals
|
||
|
Exhibit
B
|
Investment
Letter
|
||
iii
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER (this “Agreement”),
dated
as of May 25, 2007, is entered into by and among Virium Pharmaceuticals
Inc., a
New York corporation (the “Company”),
REIT
Americas, Inc., a Maryland corporation (“RAI”),
Virium Pharmaceuticals, Inc., a Delaware corporation and direct,
wholly-owned
subsidiary of RAI (“Pharmaceuticals”)
and
Virium Merger Sub, Inc., a Delaware corporation and direct, wholly-owned
subsidiary of Pharmaceuticals (“Merger
Sub”).
For
purposes of this Agreement, the term “Parent”
shall
refer to RAI prior to the Reincorporation and shall refer to Pharmaceuticals
following the Reincorporation.
W
I T N E S S E T H :
WHEREAS,
the respective Boards of Directors of the Company, RAI, Pharmaceuticals
and
Merger Sub have each approved the merger of Merger Sub with and
into the
Company, with the Company surviving as a wholly-owned subsidiary
of
Pharmaceuticals (the “Merger”),
on
the terms and conditions contained herein and in accordance with
the New York
Business Corporation Law (the “NYBCL”)
and
the Delaware General Corporation Law (the “DGCL”),
and
have determined that the Merger and the transactions contemplated
herein are
advisable and in the best interest of their respective corporations
and
stockholders;
WHEREAS,
on or prior to the Closing Date, RAI will merge with and into Pharmaceuticals
for the sole purpose of changing RAI’s place of domicile from Maryland to
Delaware (the “Reincorporation”);
WHEREAS,
prior to the Reincorporation, RAI shall effect the Reverse Stock
Split as more
fully described below;
WHEREAS,
the parties hereto desire to make certain representations, warranties,
covenants
and agreements in connection with the Merger and to prescribe various
conditions
to the Merger; and
WHEREAS,
for U.S. federal income tax purposes, it is intended that the Merger
qualify as
a reorganization under the provisions of Section 368(a) and Section
351 of the
Code, and that this Agreement shall constitute a “plan of reorganization” for
the purposes of Section 368 and Section 351 of the Code.
NOW
THEREFORE, in consideration of the mutual representations, warranties,
covenants
and agreements contained herein, and intending to be legally bound
hereby, the
parties hereto agree as follows:
ARTICLE
I
THE
MERGER
1.1. The
Merger.
Upon
the terms and subject to the conditions of this Agreement, at the
Effective Time
(as defined below), Merger Sub shall be merged with and into the
Company in
accordance with the applicable provisions of the NYBCL and the
DGCL and in
accordance with this Agreement, and the separate existence of Merger
Sub shall
cease. The Company shall be the surviving corporation in the Merger
(hereinafter
sometimes referred to as the “Surviving
Corporation”),
and
shall continue under the laws of New York. As a result of the Merger,
the
Company shall become a direct, wholly-owned subsidiary of
Pharmaceuticals.
1.2. Closing;
Effective Time.
Subject
to the satisfaction or waiver of all of the conditions to Closing
contained in
Article VI, the closing of the Merger (the “Closing”),
shall
take place at the offices of ▇▇▇▇▇▇ and ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇, as soon as practicable (but not later than 5 Business
Days) after the
satisfaction or waiver of the conditions to Closing contained in
Article VI
(other than those conditions that by their nature are to be satisfied
at the
Closing, but subject to the fulfillment or waiver of those conditions),
unless
another date or place is agreed to in writing by the parties hereto.
The date on
which the Closing actually occurs is hereinafter referred to as
the
“Closing
Date.”
As
soon as is practicable after the Closing, the parties hereto shall
cause the
Merger to be consummated by (i) delivering to the Secretary of
State of the
State of New York a certificate of merger (the “New
York Certificate of Merger”),
in
such form as required by, and executed and acknowledged in accordance
with, the
relevant provisions of the NYBCL and (ii) delivering to the Secretary
of State
of the State of Delaware a certificate of merger (the “Delaware
Certificate of Merger”),
in
such form as required by, and executed and acknowledged in accordance
with, the
relevant provisions of the DGCL. The Merger shall become effective
as of the
date and at such time (the “Effective
Time”)
as the
New York Certificate of Merger is filed with the Secretary of State
of the State
of New York with respect to the Merger.
1.3. Effects
of Merger.
The
Merger shall have the effects set forth in the applicable provisions
of the
NYBCL and the DGCL. Without limiting the generality of the foregoing,
and
subject thereto, at the Effective Time, all the properties, rights,
privileges,
powers and franchises of the Company and Merger Sub shall vest
in the Surviving
Corporation, and all debts, liabilities and duties of the Company
and Merger Sub
shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4. Certificate
of Incorporation.
The
Certificate of Incorporation of the Company in effect immediately
prior to the
Effective Time shall become, from and after the Effective Time,
the Certificate
of Incorporation of the Surviving Corporation, until amended or
repealed in
accordance with the terms thereof and with Applicable Law.
1.5. Bylaws.
The
Bylaws of the Company in effect immediately prior to the Effective
Time shall
become, from and after the Effective Time, the Bylaws of the Surviving
Corporation, until thereafter amended or repealed in accordance
with the terms
thereof and with Applicable Law.
1.6. Directors
and Officers.
The
directors and officers of the Company immediately prior to the
Effective Time
shall become, from and after the Effective Time, the directors
and officers of
the Surviving Corporation, each to hold office from the Effective
Time in
accordance with the Certificate of Incorporation and Bylaws of
the Surviving
Corporation until their respective successors are duly elected
or appointed and
qualify, or they resign or are removed.
2
ARTICLE
II
EFFECT
OF THE MERGER ON CAPITAL STOCK;
COMPANY
PAYMENT TO PHARMACEUTICALS
2.1. Conversion
of Capital Stock.
As of
the Effective Time, by virtue of the Merger and without any action
on the part
of the parties or the registered holders of any shares of capital
stock of the
Company (each a “Company
Shareholder,”
and
collectively, the “Company
Shareholders”):
(a) Each
issued and outstanding share of common stock, par value $0.001
per share, of
Merger Sub shall be converted into and become one fully paid and
non-assessable
share of common stock, par value $0.01 per share, of the Surviving
Corporation.
(b) Each
issued and outstanding share of common stock, par value $0.01 per
share, of the
Company (the “Company
Common Stock”),
shall
be converted into the right to receive 0.376302949 shares of common
stock, par
value $ 0.001 per share, of Pharmaceuticals (the “Pharmaceuticals Common
Stock”),
payable to the registered holder thereof, upon satisfaction of
the exchange
procedures set forth in this Article II; provided that immediately
following the
Effective Time of the Merger and immediately prior to the closing
of the Equity
Financing, the Original Virium Shareholders shall, as a result
of the Merger,
hold a total of exactly 9,000,000 shares of Pharmaceuticals Common
Stock on a
Fully Diluted Basis. The number of shares of Pharmaceuticals Common
Stock issued
to each Company Stockholder in accordance with this Section 2.1(b)
shall
hereafter be referred to as the “Merger
Shares”
with
respect to such Company Stockholder. At the Effective Time, all
such shares of
Company Common Stock shall no longer be outstanding and shall automatically
be
cancelled and retired and shall cease to exist, and each registered
holder of
shares of Company Common Stock shall cease to have any rights with
respect
thereto, except the right to receive the Merger Shares.
(c) No
fraction of a share of Pharmaceuticals Common Stock will be issued,
but in lieu
of such issuance, each holder of Company Common Stock who would
otherwise be
entitled to a fraction of a share of Pharmaceuticals Common Stock
as a result of
the conversion and exchange of shares contemplated by this Article
II shall
receive from Pharmaceuticals one (1) additional share of Pharmaceuticals
Common
Stock. The fractional share interest of each Company Stockholder
shall be
aggregated such that no Company Stockholder shall receive more
than the one (1)
share of Pharmaceuticals Common Stock with respect to any interest
in fractional
shares.
2.2. Exchange
of Certificates.
(a) Immediately
prior to the Closing, Pharmaceuticals shall deposit, or shall cause
to be
deposited, with ▇▇▇▇▇▇ and ▇▇▇▇ LLP (the “Exchange
Agent”),
for
the benefit of the Company Stockholders certificates in the names
of each such
Company Stockholder evidencing the number of Merger Shares to be
issued to such
Company Stockholder in accordance with this Article II. As soon
as reasonably
practicable after the Effective Time, Pharmaceuticals will instruct
the Exchange
Agent to deliver to each holder of record of a certificate or certificates
which, immediately prior to the Effective Time evidenced outstanding
Company
Common Stock (collectively, the “Company
Certificates”)
a
letter of transmittal containing instructions for use in effecting
the surrender
of such Company Certificates to the Exchange Agent in exchange
for certificates
evidencing the relevant number of Merger Shares. Upon due surrender
of such
Company Certificates, each such Company Stockholder will be entitled
to receive
certificates evidencing the number of Merger Shares to be issued
to such Company
Stockholder in accordance with Section 2.1, and the Company Certificate
so
surrendered shall be forthwith cancelled. Until surrendered as
contemplated by
this Section 2.2, each Company Certificate evidencing Company Common
Stock shall
be deemed at any time after the Effective Time to evidence only
the right to
receive, upon such surrender, the Merger Shares. No interest shall
be paid on
the Merger Shares. All Merger Shares issued upon exchange of the
shares of
Company Common Stock in accordance with the terms hereof shall
be deemed to have
been issued or paid in full satisfaction of all rights pertaining
to such shares
of Company Common Stock.
3
(b) It
is
understood that the certificates evidencing the Merger Shares
will bear the
legends set forth below:
(i) The
Securities represented hereby have not been registered under the
Securities Act
of 1933, as amended (the “Act”), or under the securities laws of any other
jurisdictions. These securities are subject to restrictions on
transferability
and resale and may not be transferred or resold except as permitted
under the
Act and the applicable state securities laws, pursuant to registration
or
exemption therefrom. Investors should be aware that they may be
required to bear
the financial risks of this investment for an indefinite period
of time. The
issuer of these securities may require an opinion of counsel in
form and
substance satisfactory to the issuer to the effect that any proposed
transfer or
resale is in compliance with the Act and any applicable state securities
laws;
(ii) Any
additional legend required by Applicable Law.
The
legend set forth in (i) above shall be removed by Pharmaceuticals
from any
certificate evidencing such Merger Shares upon delivery to Pharmaceuticals
of an
opinion by counsel, reasonably satisfactory to Pharmaceuticals,
that such
security can be freely transferred without such a registration
statement being
in effect and that such transfer will not jeopardize the exemption
or exemptions
from registration pursuant to which the Company issued such Merger
Shares.
2.3. Certain
Adjustments.
If
after the date hereof and prior to the Effective Time and to the
extent
permitted by this Agreement, the outstanding shares of Pharmaceuticals
Common
Stock or Company Common Stock shall be changed into a different
number, class or
series of shares by reason of any reclassification, recapitalization
or
combination, forward stock split, reverse stock split (other than
the Reverse
Stock Split), stock dividend or rights issued in respect of such
stock, or any
similar event shall occur (any such action, an “Adjustment
Event”),
the
number of Merger Shares issued in exchange for each share of Company
Common
Stock shall be adjusted correspondingly to provide to the holders
of Company
Common Stock the right to receive the same economic effect as contemplated
by
this Agreement immediately prior to such Adjustment Event.
4
2.4. Warrants.
At the
Effective Time, to the extent not exercised prior to the Effective
Time, each
outstanding warrant to purchase shares of Company Common Stock
(a “Company
Warrant”)
set
forth in Section
3.5
of the
Company Disclosure Letter shall be automatically be converted into
a warrant to
acquire such number of shares of Pharmaceuticals Common Stock (a
“Pharmaceuticals
Warrant”)
as the
holder of such Company Warrants would have been entitled to receive
as Merger
Shares had such holder exercised such Company Warrant in full immediately
prior
to the Effective Time at an exercise price per share of Pharmaceuticals
Common
Stock appropriately adjusted such that the aggregate exercise price
for such
Pharmaceuticals Warrant shall be the same as it was prior to the
Effective Time.
At the Effective Time, Pharmaceuticals shall expressly assume the
due and
punctual observance and performance of each and every covenant
contained in, and
condition of, the Company Warrants to be performed and observed
by the Company
and all the obligations and liabilities thereunder. Notwithstanding
anything to
the contrary contained herein, immediately following the Closing
of the Merger,
the Original Virium Shareholders’ ownership immediately
following the Effective Time of the Merger and immediately prior
to the closing
of the Equity Financing, shall, as a result of the Merger, equal
a total of
exactly 9,000,000 shares of Pharmaceuticals Common Stock on a Fully
Diluted
Basis. Notwithstanding the foregoing, the number of shares acquirable
pursuant
to, and the exercise price of, the Company Warrants issued in connection
with
the Bridge Financing (the “Bridge
Warrants”)
shall
not be adjusted in connection with the Merger, and each such Bridge
Warrant
shall be automatically converted into a warrant to purchase an
identical number
of shares of Pharmaceuticals Common Stock.
(a) As
promptly as practicable after the Effective Time, Pharmaceuticals
shall deliver
to each holder of a Company Warrant a notice that contains a calculation
in
reasonable detail and accurately reflects the number of shares
of
Pharmaceuticals Common Stock that each such holder is entitled
to receive upon
the exercise of such holder's Company Warrant and the applicable
adjusted
exercise price. Together with such notice, or as part of such notice,
Pharmaceuticals shall deliver a duly executed confirmation that
Pharmaceuticals
has expressly assumed the due and punctual observance and performance
of each
and every covenant contained in, and condition of, the applicable
Company
Warrant to be performed and observed by the Company and all the
obligations and
liabilities thereunder.
(b) The
number of shares of Pharmaceuticals Common Stock issuable upon
exercise of the
Pharmaceuticals Warrants shall be reserved by Pharmaceuticals out
of authorized
but unissued Pharmaceuticals Common Stock for issuance upon exercise
in full of
all Pharmaceuticals Warrants after the Effective Time. Notwithstanding
the
foregoing, upon the expiration of the Pharmaceuticals Warrants,
such
Pharmaceuticals Common Stock reserved for issuance upon the exercise
of the
Pharmaceuticals Warrants shall no longer be reserved.
5
2.5. Bridge
Notes.
At the
Effective Time, Pharmaceuticals shall assume the due and punctual
performance of
all of the terms and conditions of each outstanding convertible
promissory note
issued in connection with the Bridge Financing (the “Bridge
Notes”)
and
each such Bridge Note shall, unless the conversion rights thereunder
have
previously expired, become convertible into the number of New Securities
(as
defined in the Bridge Note) of Pharmaceuticals and at such Conversion
Price (as
defined in the Bridge Note) as set forth therein.
2.6. Payment
from Company to Parent.
At the
Closing, the Company shall pay to Parent the amount of $300,000
in cash by wire
transfer of immediately available funds pursuant to wire instructions
provided
by the Parent (the “Cash
Payment”),
less
any amount previously paid by the Company to Parent as an advance
on the Cash
Payment. Such Cash Payment shall be disbursed as directed by the
Parent in
writing.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
OF
THE COMPANY
Except
as
may be provided in a disclosure letter delivered by the Company
to RAI,
Pharmaceuticals and Merger Sub on the date hereof (the “Company
Disclosure Letter”)
the
Company hereby represents and warrants to RAI, Pharmaceuticals
and Merger Sub as
follows:
3.1. Organization
and Qualification; Subsidiaries.
The
Company is a corporation duly incorporated or organized, validly
existing and in
good standing under the laws of its jurisdiction of incorporation,
has requisite
corporate power and authority and governmental approvals to own,
lease and
operate its properties and to carry on its business as currently
conducted. The
Company is duly qualified or licensed to do business and is in
good standing in
each jurisdiction in which the ownership or leasing of its property
or the
conduct of its business requires such qualification or licensing,
except where
the failure to be so qualified or licensed or in good standing
would not,
individually or in the aggregate, have a Material Adverse Effect
on the
Company.
3.2. Equity
Investments.
The
Company has no subsidiaries and does not own any equity interest
in any other
corporation or in any partnership, limited liability company or
other form of
business entity.
3.3. Authority
to Execute and Perform Agreement.
The
Company has the requisite power and all authority required to enter
into,
execute and deliver this Agreement and the Transaction Documents
to which it is
a party, to perform its obligations hereunder and thereunder and
to consummate
the transactions contemplated hereby and thereby (collectively,
the
“Transactions”).
The
execution, delivery and performance by the Company of this Agreement
and the
consummation by the Company of the Transactions have been duly
authorized and
approved by all necessary corporate action.
6
3.4. Binding
Effect.
This
Agreement has been validly executed and delivered by the Company
and, assuming
the due execution and delivery hereof by RAI, Pharmaceuticals and
Merger Sub,
constitutes a valid and binding obligation of the Company, enforceable
against
the Company in accordance with its terms, except to the extent
such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general applicability affecting
or relating
to enforcement of creditors’ rights generally, and (ii) general equitable
principles (regardless of whether such enforceability is considered
in equity or
at law).
3.5. Capitalization.
(a) As
of the
date hereof, the authorized capital stock of the Company consists
of (i)
50,000,000 shares of common stock, par value $0.01 per share, of
which
23,916,900 shares of common stock are issued and outstanding, all
of which are
duly authorized, validly issued, fully paid, non-assessable and
are not subject
to preemptive rights created by statutes, the Company’s articles of
incorporation or by laws or any agreement to which the Company
is a party or by
which it is bound, (ii) 1,000,000 shares of preferred stock, par
value $0.01 per
share, none of which is issued or outstanding. The Company has
no other
authorized, issued or outstanding class of capital stock.
(b) Except
for the notes and warrants to be issued in connection with the
Bridge Financing
and except as set forth in Section 3.5(b) of the Company Disclosure
Letter,
there are no existing options, rights, subscriptions, warrants,
unsatisfied
preemptive rights, calls, commitments or agreements relating to
(i) the
authorized and unissued capital stock of the Company, or (ii) any
securities or
obligations convertible into or exchangeable for, or giving any
Person any right
to subscribe for or acquire from the Company, any shares of capital
stock of the
Company and no such convertible or exchangeable securities or obligations
are
outstanding.
3.6. Vote
Required; Board Approval.
The
only vote of the holders of any class or series of the Company’s capital stock
necessary to approve the Merger is the affirmative vote of the
holders of a
majority of the outstanding shares of common stock of the Company.
The Board of
Directors of the Company, by resolutions duly adopted at a meeting
duly called
and held at which a quorum was present or by the unanimous written
consent in
lieu of such a meeting, has approved this Agreement, the Merger
and the
Transactions in accordance with the requirements of the NYBCL.
3.7. Litigation.
There
are no judicial, governmental, administrative or arbitral actions,
claims, suits
or proceedings or investigations (collectively, “Legal
Proceedings”)
pending or, to the Knowledge of the Company, threatened against
or involving the
Company or any of its respective property or assets. There are
no outstanding
orders, judgments, injunctions, awards or decrees of any court,
governmental or
regulatory body or arbitration tribunal against or involving the
Company.
3.8. Title
to Properties; Absence of Liens.
The
Company has (i) good and marketable title free and clear of any
and all liens
and encumbrances of any kind in and to all of its assets and properties,
excluding immaterial matters and (ii) sufficient rights to all
of their
respective assets and properties to permit them to carry on their
business as
currently contemplated, whether real, personal or fixed, free and
clear of all
Liens, in each case, except (a) for Liens set forth in Section
3.8 of the
Company Disclosure Letter, (b) for Liens for Taxes not yet due
and payable or
which the Company is contesting in good faith and for which adequate
reserves
have been established, (c) for such properties and assets as may
have been sold
since the date hereof in the ordinary course of business, and (d)
for Liens not
securing debt that do not materially detract from the value or
materially
interfere with the use of the property subject thereto (collectively,
“Permitted
Liens”).
7
3.9. Compliance
with Laws.
The
Company is not in violation of, default under, or conflict with,
any applicable
order, consent, approval, authorization, registration, declaration,
filing,
judgment, injunction, award, decree or writ of any Governmental
Body or court of
competent jurisdiction (collectively, “Orders”)
or any
Applicable Law, except for any such violations that would not,
individually or
in the aggregate, have a Material Adverse Effect on the Company.
3.10. Consents
and Approvals.
Except
for (i) those consents, approvals, orders, authorizations, filings
or notices
set forth in Section 3.10 of the Company Disclosure Letter, (ii)
applicable
requirements of the Securities Act, the Exchange Act or state securities
or
“blue sky” laws (“Blue
Sky Laws”),
(iii)
the New York Certificate of Merger and (iv) the Delaware Certificate
of Merger,
no consent, approval or authorization of, filing with, or notice
to, any
Governmental Body is required by the Company in connection with
the execution,
delivery and performance by the Company of this Agreement, each
and every
agreement contemplated hereby, and the consummation by the Company
of the
Transactions.
3.11. Non-contravention.
Except
as set forth in Section 3.11 of the Company Disclosure Letter,
the execution and
delivery of this Agreement and the Transaction Documents by the
Company, the
performance by the Company of its obligations hereunder and thereunder,
and the
consummation of the Transactions contemplated hereby and thereby
by the Company
(A) do not and will not conflict with, or result in a breach or
violation of (i)
any provision of the Company’s charter or bylaws, (ii) any applicable laws,
(iii) any material agreement, contract, lease, license or instrument
to which
the Company is a party or by which it or any of its properties
or assets are
bound and (B) will not result in the creation or imposition of
any Lien upon any
of the property or assets of the Company pursuant to any provision
of any
contract or Lien.
3.12. Company
Material Contracts.
The
Company is not in default under any Material Contract of the Company,
nor to the
Knowledge of the Company does any condition exist that, with notice
or lapse of
time or both, would constitute a default thereunder. To the Knowledge
of the
Company, no other party to any such Material Contract of the Company
is in
default thereunder, nor does any condition exist that with notice
or lapse of
time or both would constitute a default thereunder. Except for
those consents
and approvals set forth in Section 3.12 of the Company Disclosure
Letter, no
approval or consent of any person is needed in order that the Material
Contracts
of the Company continue in full force and effect following the
consummation of
the transactions contemplated by this Agreement.
8
3.13. Taxes.
(a) Filing
of Tax Returns.
The
Company has timely filed, or has had timely filed on its behalf,
with the
appropriate Taxing authorities all Tax Returns in respect of Taxes
it is
required to file. The Tax Returns filed (including any amendments
thereof) are
complete and accurate in all material respects. The Company has
not requested
any extension of time within which to file any Tax Return in respect
of any
Taxes, which Tax Return has not since been filed in a timely manner.
To the
Knowledge of the Company, no claim has ever been made by any Taxing
authority in
a jurisdiction where the Company does not file Tax Returns, or
has Tax Returns
filed on its behalf, that the Company is or may be subject to taxation
by that
jurisdiction, or liable for Taxes owing to that jurisdiction.
(b) Payment
of Taxes.
All
Taxes owed by the Company (whether or not shown as due on any Tax
Returns) have
been paid in full or adequate reserves on the Company’s books and/or records
have been established. The Company has withheld and paid all Taxes
required to
have been withheld and paid in connection with amounts paid or
owing to any
employee, independent contractor, creditor, stockholder, or other
third party.
The Company has made all required estimated Tax payments sufficient
to avoid any
underpayment penalties. The unpaid Taxes of the Company (A) do
not, as of the
Closing Date, exceed the reserve for Tax liability (rather than
any reserve for
deferred Taxes established to reflect the timing differences between
book and
Tax income) set forth on the face of the Company’s most recent balance sheets
(rather than any notes thereto) and (B) do not exceed that reserve
as adjusted
for the passage of time through the Closing Date in accordance
with the past
custom and practice of the Company in filing, or having filed on
its behalf, its
Tax Returns. The charges, accruals and reserves on the books of
the Company in
respect of any liability for Taxes (x) based on or measured by
net income for
any years not finally determined, (y) with respect to which the
applicable
statute of limitations has not expired or (z) that has been previously
deferred,
are adequate to satisfy any assessment for such Taxes for any such
years.
(c) Audits,
Investigations or Claims.
There
is no dispute or claim which has not been resolved concerning any
Tax liability
of the Company either (A) claimed or raised by any Taxing authority
in writing
or (B) as to which any of the directors and officers (and employees
responsible
for Tax matters) of the Company has Knowledge. There is no currently
pending
audit of any Tax Return of the Company by any Taxing authority,
and the Company
has not been notified in writing that any Taxing authority intends
to audit any
Tax Return of the Company. The Company has not executed any outstanding
waivers
or consents regarding the application of the statute of limitations
with respect
to any Taxes or Tax Returns.
3.14. Financial
Statements.
The
Company has delivered to RAI copies of its unaudited balance sheets
and
statements of income for the fiscal years ended December 31, 2006
and 2005 (the
“Company
Financial Statements”).
The
Company Financial Statements present fairly the financial condition
and results
of operations of the Company at the dates and for the periods covered
by the
Company Financial Statements. The Company represents and warrants
that there has
been no material adverse change in the financial condition of the
Company from
that stated in the Company Financial Statements.
9
3.15. Books
and Records.
The
books and records, financial and otherwise, of the Company are
in all material
respects complete and correct and have been maintained in accordance
with sound
business and bookkeeping practices so as to accurately and fairly
reflect, in
reasonable detail, the transactions and dispositions of the assets
and
liabilities of the Company.
3.16. Intellectual
Property.
Except
as set forth in Section 3.16 of the Company Disclosure Letter,
the Company has
no Intellectual Property for its business as now conducted and
as proposed to be
conducted. To the Knowledge of the Company, the business as conducted
and as
proposed to be conducted by the Company does not and will not cause
the Company
to infringe or violate any of the Intellectual Property of any
other
Person.
3.17. Environmental
Matters.
(i) the
Company is in compliance in all material respects with applicable
Environmental
Laws; (ii) the Company has all Permits required pursuant to Environmental
Laws
and are in compliance in all material respects with the terms thereof;
(iii)
there are no past or present events, activities, practices, incidents,
actions
or plans in connection with the operations of the Company which
have given rise
to or are reasonably likely to give rise to any material liability
on the part
of the Company under any Environmental Law; (iv) the Company has
not generated,
used, transported, treated, stored, released or disposed of, or
has suffered or
permitted anyone else to generate, use, transport, treat, store,
release or
dispose of any Hazardous Substance in violation of any Environmental
Laws; and
(v) there has not been any generation, use, transportation, treatment,
storage,
release or disposal of any Hazardous Substance in connection with
the conduct of
the business of the Company or the use of any property or facility
by the
Company, or to the Knowledge of Company, any nearby or adjacent
properties, in
each case, which has created or might reasonably be expected to
create any
material liability under any Environmental Law or which would require
reporting
to or notification of any Governmental Body.
3.18. Real
Property.
The
Company does not own, and has not owned, any real property or any
interest in
any real property.
3.19. Broker’s
Fees.
Except
as set forth in Section 3.19 of the Company Disclosure Letter,
no broker,
finder, agent or similar intermediary has acted on behalf of the
Company in
connection with this Agreement or the Transactions, and there are
no brokerage
commissions, finders’ fees or similar fees or commissions payable in connection
therewith based on any agreement, arrangement or understanding
with the
Company.
3.20. Labor
Matters.
The
Company is not now, and has not been in the last five years, bound
by or party
to any collective bargaining agreement and, to the Knowledge of
the Company, no
application for certification of a collective bargaining agent
is pending. The
Company is in compliance with all Applicable Laws applicable to
the Company
affecting employment practices and terms and conditions of
employment.
3.21. Absence
of Liabilities.
As of
December 31, 2006, the date of the Company’s most recent balance sheet, the
Company does not have any debts, liabilities or obligations of
any kind, whether
accrued, absolute, contingent or otherwise, and whether due or
to become due,
that are not otherwise set forth in Section 3.21 of the Company
Disclosure
Letter, which shall be updated as of the Closing Date.
10
3.22. Absence
of Certain Changes or Events.
Since
December 31, 2006, the Company has not:
(a) Conducted
any business or engaged in any activities other than activities
related to the
negotiation and execution of this Agreement or activities in the
ordinary course
of its business;
(b) Declared
or made any payment of dividends or other distributions to its
stockholders or
upon or in respect of any shares of its capital stock or purchased,
or obligated
itself to purchase, retire or redeem, any shares of its capital
stock or other
securities;
(c) Amended
its articles of incorporation or bylaws;
(d) Borrowed
or agreed to borrow any funds; incurred or agreed to incur or become
subject to
any debts, liabilities or obligations of any kind whatsoever (other
than (i) in
connection with the Bridge Financing, (ii) in conjunction with
the negotiation
and execution of this Agreement, (iii) legal, accounting, advisory
and board of
director fees and expenses, (iv) obligations incurred in the ordinary
course of
business or (v) as set forth in Section 3.22(d) of the Company
Disclosure
Letter); subjected or agreed to subject any of the assets or properties
of the
Company to any lien, security interest, charge, interest or other
encumbrance or
suffered such to be imposed; or guaranteed or agreed to guarantee
the debts or
obligations of others.
3.23. Full
Disclosure.
This
Agreement (including the Company Disclosure Letter) does not (i)
contain any
representation, warranty or information that is false or misleading
with respect
to any material fact, or (ii) omit to state any material fact necessary
in order
to make the representations, warranties and information contained
herein, in the
context in which made or provided, not false or misleading.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES
OF
RAI, PHARMACEUTICALS AND MERGER SUB
Except
as
may be provided in a disclosure letter delivered by RAI, Pharmaceuticals
and
Merger Sub to the Company on the date hereof (the “Parent
Disclosure Letter”),
RAI,
Pharmaceuticals and Merger Sub hereby, jointly and severally, represent
and
warrant to the Company as follows:
4.1. Organization
and Qualification; Subsidiaries.
RAI and
each of its Subsidiaries, including, without limitation, Pharmaceuticals
and
Merger Sub, is a corporation, limited liability company or other
legal entity
duly incorporated or organized, validly existing and in good standing
under the
laws of its jurisdiction of incorporation or organization, has
requisite power
and authority and governmental approvals to own, lease and operate
its
properties and to carry on its business as currently conducted.
RAI and each of
its Subsidiaries is duly qualified or licensed to do business and
is in good
standing in each jurisdiction in which the ownership or leasing
of its property
or the conduct of its business requires such qualification or licensing,
except
where the failure to be so qualified or licensed or in good standing
would not,
individually or in the aggregate, have a Material Adverse Effect
on Parent. Each
of Pharmaceuticals and Merger Sub are wholly-owned Subsidiaries
of RAI, and
except for activities incident to or contemplated by this Agreement,
neither
Pharmaceuticals nor Merger Sub has engaged in any business activities
of any
type or kind whatsoever.
11
4.2. Equity
Investment.
Except
for Pharmaceuticals and Merger Sub, RAI does not own any equity
interest in any
other corporation or in any partnership, limited liability company
or other form
of business entity.
4.3. Authority
to Execute and Perform Agreement.
Each of
RAI, Pharmaceuticals and Merger Sub has the requisite power and
all authority
required to enter into, execute and deliver this Agreement and
the Transaction
Documents to which it is a party, to perform its obligations hereunder
and
thereunder and to consummate the Transactions. The execution, delivery
and
performance by each of RAI, Pharmaceuticals and Merger Sub of this
Agreement and
the consummation by RAI, Pharmaceuticals and Merger Sub of the
Transactions have
been duly authorized by all necessary corporate action.
4.4. Binding
Effect.
This
Agreement has been validly executed and delivered by RAI, Pharmaceuticals
and
Merger Sub and, assuming the due execution and delivery hereof
by the Company,
constitutes a valid and binding obligation of each of RAI, Pharmaceuticals
and
Merger Sub, enforceable against each of RAI, Pharmaceuticals and
Merger Sub in
accordance with its terms, except to the extent such enforceability
may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium
or other
similar laws of general applicability affecting or relating to
enforcement of
creditors’ rights generally, and (ii) general equitable principles (regardless
of whether such enforceability is considered in equity or at law).
4.5. Capitalization.
(a) RAI.
As of
the date hereof, the authorized capital stock of RAI consists of
(i) 10,000,000
shares of common stock, par value $0.01 per share, of which 6,918,186
shares of
common stock are issued and outstanding, all of which are validly
issued, fully
paid and non-assessable and (ii) 250,000 shares of preferred stock,
par value
$0.01 per share, which have been designated as Series A Convertible
Preferred
Stock, of which none are issued and outstanding. RAI has no other
authorized,
issued or outstanding class of capital stock. At the Closing, immediately
prior
to the Reincorporation, RAI shall effect the Reverse Stock Split
as a result of
which RAI will have no more than 300,000 shares of RAI Common Stock,
issued and
outstanding on a Fully Diluted Basis, plus (i) up to 500 shares
of RAI Common
Stock which may be issued by RAI solely in connection with rounding
up
fractional shares resulting from the Reverse Stock Split and (ii)
up to 30,000
shares of RAI Common Stock which may be issued by RAI solely in
connection with
rounding up to 100 the number of shares to be issued to each Non-Round
Lot
Holder as a result of the Reverse Stock Split (such aggregate number
of shares
of RAI Common Stock issued and outstanding, the “Maximum
Capitalization”).
12
(b) Pharmaceuticals.
On the
Closing Date, immediately prior to the Closing and after the
Reincorporation
(and the exchange of shares effected thereby), the authorized
capital stock of
Pharmaceuticals shall consist of 100,000,000 shares of common
stock, par value
$0.001 per share, of which not more than a number of shares
of Pharmaceuticals
Common Stock that is equal to the Maximum Capitalization will
be issued and
outstanding on a Fully Diluted Basis, all of which will be
validly issued, fully
paid and non-assessable, and 20,000,000 shares of preferred
stock, par value
$0.001 per share, none of which will be issued or outstanding.
Pharmaceuticals
has no other authorized, issued or outstanding class of capital
stock. Each
issued and outstanding share of capital stock of Pharmaceuticals
is owned by RAI
free and clear of Liens. The certificate of incorporation of
Pharmaceuticals
following the effectiveness of the Reincorporation shall be
in the form attached
hereto as Exhibit
A.
(c) Merger
Sub.
Each
issued and outstanding share of capital stock of Merger Sub
is validly issued,
fully paid and non-assessable and each such share is owned
by RAI free and clear
of Liens.
(d) Liens;
Obligations.
Immediately after giving effect to the Merger, Pharmaceuticals
will own free and
clear of any Liens all of the outstanding capital stock of
the Surviving
Corporation. There are no obligations, contingent or otherwise,
of RAI,
Pharmaceuticals or Merger Sub, to repurchase, redeem or acquire
shares of RAI,
Pharmaceuticals or Merger Sub.
(e) Options,
Warrants, etc.
There
are no existing options, rights, subscriptions, warrants, unsatisfied
preemptive
rights, calls or commitments relating to (i) the authorized
and unissued capital
stock of RAI, Pharmaceuticals or Merger Sub, or (ii) any securities
or
obligations convertible into or exchangeable for, or giving
any Person any right
to subscribe for or acquire from RAI, Pharmaceuticals or Merger
Sub, any shares
of capital stock of RAI, Pharmaceuticals or Merger Sub and
no such convertible
or exchangeable securities or obligations are outstanding.
(f) Registration.
The
outstanding shares of the capital stock of RAI, Pharmaceuticals
and Merger Sub
have been issued in full compliance with the registration and
prospectus
delivery requirements of the Securities Act or in compliance
with applicable
exemptions therefrom, and the registration and qualification
requirements of all
applicable securities laws of states of the United States.
(g) Merger
Shares.
The
Merger Shares, when paid for and then issued as provided in
this Agreement, will
be duly authorized and validly issued, fully paid and nonassessable,
and will be
free of any Liens or encumbrances and of restrictions on transfer,
other than
restrictions on transfer under applicable state and federal
securities laws or
the Transaction Documents.
13
4.6. Board
Approval.
The
Board of Directors of each of RAI, Pharmaceuticals and Merger Sub,
by
resolutions duly adopted at a meeting duly called and held at which
a quorum was
present or by the unanimous written consent in lieu of such a meeting,
has
approved this Agreement, the Reverse Stock Split, the Reincorporation,
the
Merger and the Transactions in accordance with the requirements
of the Maryland
General Corporation Law (the “MGCL”)
and
DGCL
(as
applicable).
4.7. SEC
Reports and Financial Statements.
(a) Each
form, report, schedule, registration statement, proxy statement,
information
statement, exhibit and any other document, to the extent required
to be filed in
accordance with Applicable Law by RAI with the Securities and Exchange
Commission (the “SEC”)
(as
such documents have been amended prior to the date hereof, the
“SEC
Reports”),
as of
its respective date, has complied in all material respects with
the applicable
requirements of the Securities Act and Exchange Act and was timely
filed (except
where a valid extension of the filing date was filed and the applicable
SEC
Report was filed within the period permitted by such extension).
None of the SEC
Reports, as of their respective dates, contained any untrue statement
of a
material fact or omitted to state a material fact required to be
stated therein
or necessary to make the statements therein, in the light of the
circumstances
under which they were made, not misleading, except for such statements,
if any,
as have been modified or superseded by subsequent filings prior
to the date
hereof.
(b) The
consolidated financial statements of RAI included in such SEC Reports
and any
notes related thereto comply as to form in all material respects
with applicable
accounting requirements and with the published rules and regulations
of the SEC
with respect thereto, have been prepared in accordance with United
States
generally accepted accounting principles (“GAAP”)
applied on a consistent basis throughout the periods involved (except
as may be
indicated in the notes thereto or, in the case of the unaudited
interim
financial statements, as permitted by Form 10-QSB of the SEC) and
fairly present
in all material respects (subject, in the case of the unaudited
interim
financial statements, to normal, recurring year end adjustments
none of which
are or will be material in amount, individually or in the aggregate)
the
consolidated financial position of RAI and its Subsidiaries as
at the dates
thereof and the consolidated results of their operations and cash
flows for the
periods then ended.
(c) Neither
RAI nor any of its Subsidiaries have any direct or indirect liabilities
that
were not fully and adequately reflected or reserved against on
the balance sheet
or described in the notes to the audited financial statements of
RAI. Neither
RAI nor any of its Subsidiaries has any Knowledge of any circumstance,
condition, event or arrangement that has taken place at any time
that may
hereafter give rise to any liabilities.
4.8. No
Material Adverse Change.
Except
as set forth in SEC Reports filed since December 31, 2005 (the
“Recent
Reports”),
since
December 31, 2005, neither RAI nor any of its Subsidiaries have
conducted any
business or engaged in any activities other than activities related
to the
negotiation and execution of this Agreement or activities in the
ordinary
course, consistent with past practice, and there has been no change
in the
business, properties, assets, operations or condition (financial
or otherwise)
of RAI or any of its Subsidiaries which has resulted or reasonably
could be
expected to result in or which RAI or any of its Subsidiaries has
reason to
believe could reasonably be expected to result in a Material Adverse
Effect on
RAI, and neither RAI nor any of its Subsidiaries has any Knowledge
of any such
change that is threatened, nor has there been any damage, destruction
or loss
affecting the assets, properties, business, operations or condition
(financial
or otherwise) of RAI or any of its Subsidiaries, whether or not
covered by
insurance which has resulted or reasonably could be expected to
result in or
which RAI or any of its Subsidiaries has reason to believe could
reasonably be
expected to result in a Material Adverse Effect on RAI. Since December
31, 2005,
neither RAI nor any of its Subsidiaries has taken, directly or
indirectly, any
of the actions identified in Section 5.1, except as set forth in
the Recent
Reports.
14
4.9. Books
and Records.
The
books and records, financial and otherwise, of RAI and each of
its Subsidiaries
are in all material respects complete and correct and have been
maintained in
accordance with sound business and bookkeeping practices so as
to accurately and
fairly reflect, in reasonable detail, the transactions and dispositions
of the
assets and liabilities of RAI and each of its Subsidiaries.
4.10. Litigation.
There
are no Legal Proceedings pending or, to the Knowledge of RAI or
any of its
Subsidiaries, threatened against or involving RAI, any of its Subsidiaries,
or
any of their respective property or assets. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, governmental
or
regulatory body or arbitration tribunal against or involving RAI
or any of its
Subsidiaries.
4.11. Absence
of Liabilities.
As of
the date of RAI’s most recent quarterly report on Form 10-QSB filed with the SEC
on May 21, 2007 (the “Quarterly
Report”),
neither RAI nor any of its Subsidiaries has any debts, liabilities
or
obligations of any kind, whether accrued, absolute, contingent
or otherwise, and
whether due or to become due, that are not otherwise set forth
in Section
4.11
of the
Parent Disclosure Letter, which shall be updated as of the Closing
Date.
4.12. Title
to Properties; Absence of Liens.
RAI and
each of its Subsidiaries has good and marketable title to all of
their
respective assets and properties, whether real, personal or fixed,
free and
clear of all Liens, except for Liens for Taxes not yet due and
payable or which
RAI or any of its Subsidiaries is contesting in good faith and
for which
adequate reserves have been established.
4.13. Compliance
with Laws.
Neither
RAI nor any of its Subsidiaries is in violation of, default under,
or conflict
with, any applicable Order or any Applicable Law, except for any
such violations
that would not, individually or in the aggregate, have a Material
Adverse Effect
on RAI.
4.14. Intellectual
Property.
Neither
RAI nor any of its Subsidiaries owns, licenses or otherwise has
any rights in or
to any Intellectual Property.
4.15. Non-Contravention.
The
execution and delivery of this Agreement and the Transaction Documents
by RAI,
Pharmaceuticals and Merger Sub, the performance by each of RAI,
Pharmaceuticals
and Merger Sub of its obligations hereunder and thereunder, and
the consummation
of the Transactions contemplated hereby and thereby by such entities
(A) do not
and will not conflict with, or result in a breach or violation
of (i) any
provision of the charter or bylaws of any of RAI, Pharmaceuticals
and Merger
Sub, (ii) any applicable laws, (iii) any material agreement, contract,
lease,
license or instrument to which RAI, Pharmaceuticals or Merger Sub
is a party or
by which RAI, Pharmaceuticals or Merger Sub or any of each of their
properties
or assets are bound and (B) will not result in the creation or
imposition of any
Lien upon any of the property or assets of RAI, Pharmaceuticals
or Merger Sub
pursuant to any provision of any contract or Lien.
15
4.16. Consents
and Approvals.
Except
for (i) those consents, approvals, authorizations, filings or notices
set forth
in Section 4.16 of the Parent Disclosure Letter, (ii) applicable
requirements of
the Securities Act, the Exchange Act or Blue Sky Laws, (iii) notices
and filings
in connection with the Reverse Stock Split and the Reincorporation,
(iv) the New
York Certificate of Merger, and (v) the Delaware Certificate of
Merger, no
consent, approval or authorization of, filing with, or notice to,
any
Governmental Body is required by RAI, Pharmaceuticals or Merger
Sub in
connection with the execution, delivery and performance by RAI,
Pharmaceuticals
and Merger Sub of this Agreement, each and every agreement contemplated
hereby,
and the consummation by RAI, Pharmaceuticals and Merger Sub of
the
Transactions.
4.17. Employee
Benefit Plans.
Neither
RAI nor any of its Subsidiaries has at any time sponsored, maintained
or
contributed to any Benefit Plan.
4.18. RAI
Material Contracts.
Except
as set forth in Section 4.18 of the Parent Disclosure Letter, neither
RAI nor
any of its Subsidiaries is in default under any Material Contract
of RAI or any
of its Subsidiaries, nor to the Knowledge of RAI and its Subsidiaries,
does any
condition exist that, with notice or lapse of time or both, would
constitute a
default thereunder. To the Knowledge of RAI and its Subsidiaries,
no other party
to any such Material Contract of RAI or any of its Subsidiaries
is in default
thereunder, nor does any condition exist that with notice or lapse
of time or
both would constitute a default thereunder. No approval or consent
of any person
is needed in order that the Material Contracts of RAI or any of
its Subsidiaries
shall continue in full force and effect following the consummation
of the
transactions contemplated by this Agreement.
4.19. Taxes.
Except
as set forth in Section 4.19 of the Parent Disclosure Letter:
(a) Filing
of Tax Returns.
RAI and
each of its Subsidiaries has timely filed, or have had timely filed
on their
behalf, with the appropriate Taxing authorities all Tax Returns
in respect of
Taxes required to be filed by them. The Tax Returns filed (including
any
amendments thereof) are complete and accurate in all material respects.
RAI and
each of its Subsidiaries have not requested any extension of time
within which
to file any Tax Return in respect of any Taxes, which Tax Return
has not since
been filed in a timely manner. To the Knowledge of RAI, no claim
has ever been
made by any Taxing authority in a jurisdiction where RAI or any
of its
Subsidiaries does not file Tax Returns, or has Tax Returns filed
on their
behalf, that they are or may be subject to taxation by that jurisdiction,
or
liable for Taxes owing to that jurisdiction.
16
(b) Payment
of Taxes.
All
Taxes owed by RAI and each of its Subsidiaries (whether or not
shown as due on
any Tax Returns) have been paid in full or adequate reserves on
their respective
books and/or records have been established. RAI and each of its
Subsidiaries
have withheld and paid all Taxes required to have been withheld
and paid in
connection with amounts paid or owing to any employee, independent
contractor,
creditor, stockholder, or other third party. RAI has made all required
estimated
Tax payments sufficient to avoid any underpayment penalties. The
unpaid Taxes of
RAI and each of its Subsidiaries (A) do not, as of the Closing
Date, exceed the
reserve for Tax liability (rather than any reserve for deferred
Taxes
established to reflect the timing differences between book and
Tax income) set
forth on the face of RAI’s and each of its Subsidiaries’ most recent balance
sheets (rather than any notes thereto) and (B) do not exceed that
reserve as
adjusted for the passage of time through the Closing Date in accordance
with the
past custom and practice of RAI and each of its Subsidiaries in
filing, or
having filed on their behalf, their Tax Returns. The charges, accruals
and
reserves on the books of RAI and each of its Subsidiaries in respect
of any
liability for Taxes (x) based on or measured by net income for
any years not
finally determined, (y) with respect to which the applicable statute
of
limitations has not expired or (z) that has been previously deferred,
are
adequate to satisfy any assessment for such Taxes for any such
years.
(c) Audits,
Investigations or Claims.
There
is no dispute or claim which has not been resolved concerning any
Tax liability
of RAI or any of its Subsidiaries either (A) claimed or raised
by any Taxing
authority in writing or (B) as to which any of the directors and
officers (and
employees responsible for Tax matters) of RAI or any of its Subsidiaries
has
Knowledge. There is no currently pending audit of any Tax Return
of RAI or any
of its Subsidiaries by any Taxing authority, and neither RAI nor
any of its
Subsidiaries has ever been notified in writing that any Taxing
authority intends
to audit any Tax Return of RAI or any of its Subsidiaries. Neither
RAI nor any
of its Subsidiaries has executed any outstanding waivers or consents
regarding
the application of the statute of limitations with respect to any
Taxes or Tax
Returns.
(d) Lien.
There
are no encumbrances for Taxes (other than for current Taxes not
yet due and
payable) on any assets of RAI or any of its Subsidiaries.
(e) Tax
Elections.
RAI and
each of its Subsidiaries (i) have not agreed, or are required,
to make any
adjustment under Section 481(a) of the Code by reason of a change
in accounting
method or otherwise; (ii) have not made an election pursuant to
Code Sections
338 or 336(e) or the regulations thereunder or any comparable provisions
of any
foreign or state or local income tax law; (iii) are not subject
to any
constructive elections under Code Section 338 or the regulations
thereunder;
(iv) have not made any payments, are obligated to make any payments,
or are a
party to any agreement that under certain circumstances could obligate
it to
make any payments that will not be deductible under §280G and §162(m) of the
Code; and (v) have not made any of the foregoing elections or are
required to
apply any of the foregoing rules under any comparable state or
local income Tax
provision.
17
(f) Prior
Affiliated Groups.
RAI and
each of its Subsidiaries (A) have never been a member of an affiliated
group of
corporations within the meaning of Section 1504 of the Code (other
than a group
the common parent of which was RAI) and (B) do not have any liability
for the
Taxes of any person (other than any of RAI and its Subsidiaries)
under Treas.
Reg. §1502-6 (or any similar provision of state, local or foreign law),
as a
transferee or successor, by contract or otherwise. Neither RAI
nor any of its
Subsidiaries is a successor to any other person by way of merger,
reorganization
or similar transaction, other than the Reincorporation.
(g) Tax
Sharing Agreements.
Neither
RAI nor any of its Subsidiaries is a party to any Tax allocation,
indemnity or
sharing or similar agreement.
(h) Section
355.
Neither
RAI nor any of its Subsidiaries has distributed the stock of a
“controlled
corporation” (within the meaning of that term as used in Section 355(a) of the
Code) in a transaction subject to Section 355 of the Code within
the past two
years.
(i) Partnerships.
Neither
RAI nor any of its Subsidiaries owns an interest in a partnership
for Tax
purposes.
4.20. Environmental
Matters.
(i) RAI
and each of its Subsidiaries are in compliance in all material
respects with
applicable Environmental Laws; (ii) RAI and each of its Subsidiaries
have all
Permits required pursuant to Environmental Laws and are in compliance
in all
material respects with the terms thereof; (iii) there are no past
or present
events, activities, practices, incidents, actions or plans in connection
with
the operations of RAI or any of its Subsidiaries which have given
rise to or are
reasonably likely to give rise to any liability on the part of
RAI or any of its
Subsidiaries under any Environmental Law; (iv) neither RAI nor
any of its
Subsidiaries has generated, used, transported, treated, stored,
released or
disposed of, or has suffered or permitted anyone else to generate,
use,
transport, treat, store, release or dispose of any Hazardous Substance
in
violation of any Environmental Laws; and (v) there has not been
any generation,
use, transportation, treatment, storage, release or disposal of
any Hazardous
Substance in connection with the conduct of the business of RAI
or any of its
Subsidiaries or the use of any property or facility by RAI or any
of its
Subsidiary, or to the Knowledge of RAI and all of its Subsidiaries,
any nearby
or adjacent properties, in each case, which has created or might
reasonably be
expected to create any material liability under any Environmental
Law or which
would require reporting to or notification of any Governmental
Body.
4.21. Real
Property.
Neither
the Parent nor any of its Subsidiaries owns, or, since August 31,
2001, has
owned, any real property or any interest in any real property.
4.22. Broker’s
Fees.
No
broker, finder, agent or similar intermediary has acted on behalf
of RAI or any
of its Subsidiaries in connection with this Agreement or the Transactions,
and
there are no brokerage commissions, finders’ fees or similar fees or commissions
payable in connection therewith based on any agreement, arrangement
or
understanding with RAI or any of its Subsidiaries.
18
4.23. Labor
Matters.
RAI and
each of its Subsidiaries is not now, and has not been in the last
five years,
bound by or party to any collective bargaining agreement and, to
the Knowledge
of RAI and its Subsidiaries, no application for certification of
a collective
bargaining agent is pending. RAI and each of its Subsidiaries is
in compliance
with all Applicable Laws applicable to RAI and each of its Subsidiaries
affecting employment practices and terms and conditions of
employment.
4.24. Articles
of Incorporation, Bylaws, and Minute Books.
The
copies of the Articles of Incorporation and of the Bylaws of RAI
which have been
delivered to the Company are true, correct and complete copies
thereof. The
corporate minutes of RAI, which have been delivered to the Company,
are complete
and accurate minutes of all meetings and accurate consents in lieu
of meetings
of the Board of Directors (and any committee thereof) and of the
stockholders of
RAI since the date of incorporation and accurately reflects all
transactions
referred to in such minutes and consents in lieu of meetings. RAI
has delivered
to Company all books, records, agreements and other material information
of RAI
relating to the business of RAI (the “RAI
Information”).
All
documents furnished or caused to be furnished to the Company by
RAI are true and
correct copies, and there are no amendments or modifications thereto
except as
set forth in such documents.
4.25. Full
Disclosure.
This
Agreement (including the Parent Disclosure Letter) and the SEC
Reports, do not
(i) with respect to RAI or any of its Subsidiaries, contain any
representation,
warranty or information that is false or misleading with respect
to any material
fact, or (ii) with respect to RAI or any of its Subsidiaries, omit
to state any
material fact necessary in order to make the representations, warranties
and
information contained herein (including the Parent Disclosure Letter)
and the
SEC Reports, in the context in which made or provided, not false
or
misleading.
ARTICLE
V
ADDITIONAL
AGREEMENTS OF THE PARTIES
5.1. Actions
Pending Closing.
From
the date hereof until the Effective Time, unless otherwise agreed
to in writing,
Parent, Pharmaceuticals and Merger Sub each agree to conduct its
business and
operations only in the ordinary course and in substantially the
same manner as
heretofore conducted and Parent shall continue to make timely filings
(except
pursuant to valid extensions) as required by the SEC pursuant to
the Securities
Act and the Exchange Act and shall not take any action that will
adversely
affect the ability of Parent to qualify for quotation of common
stock of the
Parent on the over the counter bulletin board. Without limiting
the generality
of the foregoing, prior to the Effective Time, none of Parent,
Pharmaceuticals
and Merger Sub shall, except as contemplated by this Agreement,
without the
prior written consent of the other parties to this Agreement, directly
or
indirectly, do any of the following:
19
(a) except
to
the extent required by Applicable Law, as contemplated by this
Agreement, as
required to effect the Reverse Stock Split or as required to effect
the
Reincorporation, amend or otherwise change the Articles of Incorporation
Bylaws
or other similar organizational document;
(b) issue
or
authorize or propose the issuance of, sell, pledge or dispose of,
grant or
otherwise create, or agree to issue or authorize or propose the
issuance, sale,
pledge, disposition, grant or creation of any additional shares
of, or any
options, warrants, convertible securities or other rights of any
kind to acquire
any shares of, its capital stock or any debt or equity securities
convertible
into or exchangeable for such capital stock;
(c) purchase,
redeem or otherwise acquire or retire, or offer to purchase, redeem
or otherwise
acquire or retire, any shares of its capital stock (including any
security
convertible or exchangeable into its capital stock);
(d) enter
into any Material Contract;
(e) declare,
set aside, make or pay any dividend or other distribution, payable
in cash,
stock, property or otherwise, with respect to any of its capital
stock,
reclassify, recapitalize, split, combine or exchange any of its
shares of
capital stock;
(f) incur
or
become contingently liable with respect to any indebtedness for
borrowed money
or guarantee any such indebtedness or issue any debt securities;
(g) (i)
increase the compensation payable or to become payable to, or enter
into any
employment agreement with, any of its directors, executive officers
or
employees, (ii) grant any severance or termination pay to any director,
officer
or employee, (iii) enter into any severance agreement with any
director, officer
or employee, (iv) establish, adopt, enter into, terminate, withdraw
from or
amend in any material respect or take action to accelerate any
rights or
benefits under any collective bargaining agreement, any stock option
plan or any
employee Benefit Plan or policy, or (v) hire any employee or consultant;
(h) take
any
action, other than reasonable actions in the ordinary course of
business and
consistent with past practice, with respect to accounting policies
or
procedures, except as may be required by GAAP;
(i) acquire
or agree to acquire by merging or consolidating with, or by purchasing
a
substantial equity interest in or a substantial portion of the
assets of, or by
any other means, any business or any corporation, partnership,
association or
other business entity;
(j) mortgage
or otherwise encumber, subject to any Lien, or sell, transfer or
otherwise
dispose of, any of its properties or assets that are material,
individually or
in the aggregate;
(k) adopt
a
plan of complete or partial liquidation, dissolution, restructuring,
recapitalization or other reorganization;
20
(l) pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued,
asserted or unasserted, contingent or otherwise), other than the
payment,
discharge or satisfaction in the ordinary course of business and
consistent with
past practice of liabilities reflected or reserved against in the
financial
statements of RAI or incurred in the ordinary course of business
and consistent
with past practice;
(m) take,
or
agree in writing or otherwise to take, any of the actions described
in Sections
6.1(a) through (l) above, or any action which would make any of
the
representations or warranties contained in this Agreement untrue
or incorrect in
any material respect or prevent the parties to this Agreement from
performing or
cause the parties to this Agreement not to perform their respective
covenants
under this Agreement in any material respect;
(n) waive,
release, assign, settle or compromise any material rights, claims
or litigation
(including any confidentiality agreement);
(o) authorize
any of, or commit or agree to take any of, the foregoing actions;
or
(p) make
or
change any Tax election, settle any audit, claim or examination
of Taxes, adopt
or apply to change any method of accounting or accounting practice
for Tax
purposes, file any amended Tax Return, enter into any closing agreement
or
request a Tax ruling from a Tax authority, settle any claims for
Taxes,
surrender any right to claim a refund of Taxes, consent to any
extension or
waiver of the limitation period applicable to any Taxes, Tax Return
or claim for
Taxes, or take any action or fail to take any action that would
have a material
adverse effect on the Tax liability of any of the parties to this
Agreement;
provided,
however, that nothing in this Section 5.1 shall be construed to
preclude RAI
from effecting the Reverse Stock Split or to preclude RAI and Pharmaceuticals
from effecting the Reincorporation.
5.2. Company
Shareholders’ Approval.
As soon
as practicable after the date hereof, the Company will take all
steps necessary
to solicit the approval of the requisite number of stockholders
of the Company
approving the Merger and this Agreement in accordance with the
provisions of the
NYBCL (the “Company
Consent”).
Except as otherwise contemplated by this Agreement and subject
to the exercise
of the fiduciary duties of the Company’s directors, the Board of Directors of
the Company (i) shall recommend to the stockholders of the Company
that they
approve the Merger, and (ii) shall use its reasonable best efforts
to obtain the
Company Consent.
5.3. RAI,
Pharmaceuticals and Merger Sub Stockholder Approval; Proxy
Statement.
Pharmaceuticals hereby agrees to approve by written consent the
Merger and this
Agreement on behalf of Merger Sub as Merger Sub’s sole stockholder in accordance
with the DGCL. As soon as practicable, but no later than 30 calendar
days after
the date of this Agreement, RAI shall file with the SEC a proxy
statement
soliciting approval from the RAI stockholders for the Reverse Stock
Split and
the Reincorporation in accordance with Schedule 14A under the Exchange
Act (the
“Proxy
Statement”).
The
Company shall cooperate with RAI in the preparation of the Proxy
Statement. As
promptly as practicable after the filing of the Proxy Statement
with the SEC,
RAI shall mail the Proxy Statement to the RAI stockholders together
with a
Schedule 14(f) notifying such stockholders of a change in the majority
of RAI’s
Board of Directors. Subject to the exercise of the fiduciary duties
of RAI’s
directors, the Board of Directors of RAI (i) shall recommend to
the stockholders
of RAI that they approve the Reverse Stock Split and the Reincorporation,
and
(ii) shall use its reasonable best efforts to obtain the approval
of the RAI
stockholders.
21
5.4. Efforts;
Consents.
Each of
the parties to this Agreement agrees to, and to cause its respective
Subsidiaries to, use reasonable best efforts to take or cause to
be taken all
actions necessary, proper or advisable to consummate the Merger
and the
Transactions. Without limiting the generality of the foregoing,
each of the
parties hereto shall use, and shall cause its respective Subsidiaries
to use,
reasonable best efforts to obtain all authorizations, consents,
orders and
approvals of Federal, state, and local regulatory bodies, that
are or may become
necessary for the performance of its respective obligations pursuant
to this
Agreement, the Transactions Documents and the consummation of the
Transactions,
and shall cooperate fully in promptly seeking to obtain such authorizations,
consents, orders and approvals as may be necessary for the performance
of its
respective obligations pursuant to this Agreement, the Transaction
Documents and
the Transactions. The parties shall not take, and shall cause their
respective
Subsidiaries not to take, any action which would have the effect
of delaying,
impairing or impeding the receipt of any required regulatory approvals,
and the
parties shall use, and shall cause their respective Subsidiaries
to use,
reasonable best efforts to secure such approvals as promptly as
possible. The
parties shall use, and shall cause their respective Subsidiaries
to use,
reasonable best efforts not to take any action or enter into any
transaction
which would result in a breach of any covenant made by such party
in this
Agreement.
5.5. Filing
of Tax Returns; Payment of Taxes.
Each of
the parties to this Agreement will prepare in a manner consistent
with its past
practice and timely file all Tax Returns it is required to file,
the due date of
which (without extensions) occurs on or before the Closing Date
and shall pay
all Taxes due with respect to any such Tax Returns.
5.6. Access
to Information.
(a) The
Company shall afford RAI and shall cause its independent accountants
to afford
to RAI, and its accountants, counsel and other representatives,
reasonable
access during normal business hours during the period prior to
the Closing to
all information concerning the Company as RAI may reasonably request,
provided
that the Company shall not be required to disclose any information
which it is
legally required to keep confidential. RAI will not use such information
for
purposes other than this Agreement and will otherwise hold such
information in
confidence (and RAI will cause its consultants and advisors also
to hold such
information in confidence) until such time as such information
otherwise becomes
publicly available without any violation of this Agreement by RAI,
and in the
event of termination of this Agreement for any reason RAI shall
promptly return,
or cause to be returned, to the Company all documents obtained
from the Company,
and any copies made of such documents, extracts and copies thereof.
22
(b) RAI
shall
afford the Company and the Company Shareholders and shall cause
its independent
accountants to afford to the Company and the Company Shareholders,
and their
accountants, counsel and other representatives, reasonable access
during normal
business hours during the period prior to the Closing to all of
RAI’s
properties, books, contracts, commitments and records and to the
audit work
papers and other records of RAI’s independent accountants. During such period,
RAI shall use reasonable efforts to furnish promptly to the Company
and the
Company Shareholders such information concerning RAI as the Company
and the
Company Shareholders may reasonably request, provided that RAI
shall not be
required to disclose any information which it is legally required to keep
confidential. The Company and the Company Shareholders will not
use such
information for purposes other than this Agreement and will otherwise
hold such
information in confidence (and the Company and the Company Shareholders
will
cause their respective consultants and advisors also to hold such
information in
confidence) until such time as such information otherwise becomes
publicly
available without any violation of this Agreement by the Company,
and in the
event of termination of this Agreement for any reason the Company
and the
Company Shareholders shall promptly return, or cause to be returned,
to the
disclosing party all documents obtained from RAI, and any copies
made of such
documents, extracts and copies thereof.
5.7. Confidentiality.
Unless
(i) otherwise expressly provided in this Agreement, (ii) required
by Applicable
Law, (iii) necessary to secure any required consents as to which
the other party
has been advised, or (iv) consented to in writing by RAI and the
Company, this
Agreement and any information or documents furnished in connection
herewith
shall be kept strictly confidential by the Company, RAI and its
Subsidiaries,
and their respective officers, directors, employees and agents.
Prior to any
disclosure pursuant to the preceding sentence, the party intending
to make such
disclosure shall consult with the other party to the extent practicable
regarding the nature and extent of the disclosure. Subject to the
preceding
sentence, nothing contained herein shall preclude disclosures to
the extent
necessary to comply with accounting, SEC and other disclosure obligations
imposed by Applicable Law. In the event the Merger is not consummated,
RAI and
the Company shall return to the other all documents furnished by
the other and
all copies thereof made by such party and will hold in absolute
confidence all
information obtained from the other party except to the extent
(i) such party is
required to disclose such information by Law or such disclosure
is necessary in
connection with the pursuit or defense of a claim, (ii) such information
was
known by such party prior to such disclosure or was thereafter
developed or
obtained by such party independent of such disclosure, (iii) such
party received
such information on a non-confidential basis from a source, other
than the other
party, which is not known by such party to be bound by a confidentiality
obligation with respect thereto or (iv) such information becomes
generally
available to the public or is otherwise no longer confidential.
Prior to any
disclosure of information pursuant to the exception in clause (i)
of the
preceding sentence, the party intending to disclose the same shall
so notify the
party which provided the same to the extent practicable in order
that such party
may seek a protective order or other appropriate remedy should
it choose to do
so.
5.8. Notification
of Certain Matters.
RAI
shall give prompt notice to the Company if any of the following
occurs after the
date of this Agreement: (i) receipt of any notice or other communication
in
writing from any person alleging that the consent of such person
is or may be
required in connection with the transactions contemplated by this
Agreement;
(ii) receipt of any notice or other communication from any Governmental
Authority (including, but not limited to, the NASD, the SEC or
any securities
exchange) in connection with the transactions contemplated by this
Agreement;
(iii) the occurrence or non-occurrence of any fact or event which
could
reasonably be expected to cause any covenant, condition or agreement
hereunder
not to be complied with or satisfied in any material respect; (iv)
the
commencement or threat of any litigation involving or affecting
RAI or any of
its Subsidiaries, or any of their respective properties or assets;
(v) the
occurrence or non-occurrence of any fact or event that causes or
is reasonably
likely to cause a breach by RAI or Merger Sub of any provision
of this
Agreement, and (vi) the occurrence of any event that, had it occurred
prior to
the date of this Agreement without any additional disclosure hereunder,
would
have constituted a Material Adverse Effect on RAI.
23
5.9. Non-Solicitation.
(a) No
party
to this Agreement, nor any of their respective officers, directors,
employees,
agents, affiliates, accountants, counsel, investment bankers, financial
advisors
or other representatives (collectively, “Representatives”),
shall
(i) directly or indirectly, initiate, solicit or encourage, or
take any action
to facilitate the making of, any Acquisition Proposal, (ii) enter
into any
agreement or take any other action that by its terms could reasonably
be
expected to adversely affect the ability of the parties hereto
to consummate the
Merger, or (iii) directly or indirectly engage or otherwise participate
in any
discussions or negotiations with, or provide any information or
data to, or
afford any access to their properties, books or records to, or
otherwise assist,
facilitate or encourage, any person (other than the Company or
any affiliate or
associate thereof) relating to any Acquisition Proposal.
(b) Each
of
the parties to this Agreement and each of their Representatives
shall
immediately cease and cause to be terminated all existing discussions
and
negotiations, if any, with any other persons conducted heretofore
with respect
to any Acquisition Proposal.
For
purposes of this Agreement, an “Acquisition
Proposal”
means
any inquiry, proposal or offer from any person relating to (i)
any direct or
indirect acquisition or purchase of a business that constitutes
50% or more of
the net revenues, net income or assets of any party to this Agreement,
taken as
a whole, or 50% or more of the common stock or voting power (or
of securities or
rights convertible into or exercisable for such common stock or
voting power) of
the Company or RAI, (ii) any tender offer or exchange offer that
if consummated
would result in any person beneficially owning 50% or more of the
common stock
or voting power (or of securities or rights convertible into or
exercisable for
such common stock or voting power) of the Company or RAI, or (iii)
any merger,
consolidation, business combination, recapitalization, liquidation,
dissolution
or similar transaction involving the Company, RAI or any of their
Subsidiaries
that constitutes 50% or more of the net revenues, net income or
assets of the
Company and its Subsidiaries or RAI and its Subsidiaries, as the
case may be,
taken as a whole, or that results in the stockholders of the Company
or RAI, as
the case may be, immediately prior to such transaction owning less
than 50% of
the outstanding voting securities of the Company or RAI, as the
case may be,
immediately after such transaction, in each case other than the
transactions
contemplated by this Agreement. Each of the transactions referred
to in clauses
(i) - (iii) of the foregoing definition of Acquisition Proposal,
other than the
Merger proposed by this Agreement, is referred to herein as an
“Acquisition
Transaction.”
24
5.10. Further
Assurances.
At any
time and from time to time after the Closing, each party to this
Agreement
agrees to cooperate with each other party and to execute and deliver
such other
documents, instruments of transfer or assignment, files, books
and records and
do all such further acts as may be reasonably required to consummate
the
Transactions.
5.11. Public
Disclosure.
Prior
to the Closing, each party to this Agreement shall consult with
each other party
before issuing any press release or otherwise making any public
statements,
announcements or communications with respect to this Agreement
or any of the
Transactions and shall not issue any such press release or make
any such public
statement, announcement or communication without the prior written
consent of
the other parties, which consent shall not be unreasonably withheld,
except as
may be required by Applicable Law.
5.12. Board
of Directors.
Prior
to the Effective Time and after the Reincorporation, the Board
of Directors of
Pharmaceuticals, in accordance with applicable law, shall take
all necessary
action (including the resignation of existing directors) to cause
its Board of
Directors, as of the Effective Time, to consist of a total of five
members, with
one such member to be designated in writing by Parent and four
such members to
be designated in writing by the Company, each to hold office from
the Effective
Time until their respective successors are duly elected or appointed
and
qualify, or they resign or are removed.
5.13. Reverse
Stock Split; Reincorporation.
As soon
as practicable following the date of this Agreement, RAI and Pharmaceuticals
shall take those actions necessary to effect, on the Closing Date,
the Reverse
Stock Split and the Reincorporation, including, without limitation,
obtaining a
CUSIP number and filing any necessary documents as may be necessary
to effect
the Reverse Stock Split in accordance with the MGCL and the Reincorporation
pursuant to the MGCL and the DGCL. RAI shall effect the Reverse
Stock Split
prior to the Reincorporation.
5.14. Existing
RAI Liabilities.
At the
Closing, Parent shall pay or otherwise satisfy or discharge all
of its debts,
obligations and liabilities of any kind whatsoever, including,
without
limitation, all of the debts, obligations and liabilities set forth
on its
Quarterly Report, incurred between the date thereof and the Closing
Date.
ARTICLE
VI
CONDITIONS
TO CLOSING
6.1. Conditions
to Each Party’s Obligations to Consummate the Transactions.
The
respective obligations of each party to this Agreement to consummate
the
Transactions shall be subject to the following conditions, unless
waived in
writing prior to the Closing Date by such party:
25
(a) Consents
and Approvals.
All
consents, approvals, authorizations, orders and action of any Governmental
Body
required to permit the consummation of the Transactions shall have
been obtained
or made and shall be in full force and effect.
(b) No
Restraints.
No
action shall have been taken, and no statute, rule, regulation,
executive order,
judgment, decree, or injunction shall have been enacted, entered,
promulgated or
enforced (and not repealed, superseded, lifted or otherwise made
inapplicable),
by any court or governmental or regulatory agency of competent
jurisdiction
which restrains, enjoins or otherwise prohibits the consummation
of the
Transactions (each party agreeing to use its reasonable best efforts
to avoid
the effect of any such statute, rule, regulation or order or to
have any such
order, judgment, decree or injunction lifted).
(c) Investment
Letter.
Each
Company Shareholder shall have delivered to the Company and RAI
a completed
investment representation letter in the form attached hereto as
Exhibit
B
(each,
an “Investment
Letter”).
(d) Subscription
Agreement.
Pharmaceuticals and ▇▇▇▇▇▇ ▇▇▇▇▇ Securities, Inc., or its designees
(“▇▇▇▇▇▇
▇▇▇▇▇”),
shall
have entered into a Subscription Agreement on terms and conditions
satisfactory
to the parties hereto, pursuant to which Pharmaceuticals shall
issue to ▇▇▇▇▇▇
▇▇▇▇▇ 700,000 shares of Pharmaceuticals Common Stock.
6.2. Conditions
to Obligations of the Company to Consummate the Transactions.
The
obligation of the Company to consummate the Transactions shall
be subject to the
satisfaction of the following conditions, unless waived in writing
prior to the
Closing Date by the Company:
(a) Representations
and Warranties.
The
representations and warranties of RAI, Pharmaceuticals and Merger
Sub contained
herein that are qualified as to materiality or a Material Adverse
Effect (or
similar concept) shall be true and correct, and those not so qualified
shall be
true and correct in all material respects, in each case at and
as of the
Effective Time with the same force and effect as though made at
and as of the
Effective Time (except to the extent a representation or warranty
speaks
specifically as of an earlier date, in which case as of such date).
(b) Performance
of Obligations.
RAI,
Pharmaceuticals and Merger Sub shall have performed, in all material
respects,
all obligations and complied with all covenants required by this
Agreement to be
performed or complied with, in all material respects, by each of
them prior to
the Effective Time.
(c) Officer’s
Certificate.
RAI,
Pharmaceuticals and Merger Sub shall have executed and delivered
to the Company
a certificate, dated the date of Closing and signed by an officer
of RAI,
Pharmaceuticals and Merger Sub, evidencing compliance with Sections
6.2(a) and
6.2(b) hereof.
26
(d) Due
Diligence.
The
Company shall have completed its financial, business and legal
due diligence
investigation of RAI to the Company’s and its counsel’s satisfaction which shall
be determined at the sole and absolute discretion of the Company
and its
counsel.
(e) Reverse
Stock Split.
The
board of directors and a majority of the stockholders of RAI
shall have duly and
lawfully approved, in accordance with the MGCL and Section
14 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated
thereunder, the Reverse Stock Split, as a result of which RAI
(and, immediately
following the Reincorporation, Pharmaceuticals) will have a
number of shares of
common stock issued and outstanding on a Fully Diluted Basis
immediately prior
to the Closing that is not greater than the Maximum Capitalization,
and a
Certificate of Amendment to RAI’s articles of incorporation describing such
Reverse Stock Split shall have been duly filed with the Secretary
of State of
Maryland, with a certified copy thereof to be provided to the
Company at the
Closing.
(f) Bridge
Financing.
The
Company shall have consummated a bridge financing pursuant
to which certain
lenders shall have provided financing for the Company in an
amount not less than
$500,000, based on a pre-money valuation as reasonably agreed
among the parties
and on terms and conditions satisfactory to the Company (the
“Bridge
Financing”);
provided that $50,000 of the proceeds of the Bridge Financing
shall be paid to
Parent promptly following the consummation of the Bridge Financing
as an advance
on the Cash Payment described in Section 2.6. The Company shall
have delivered
copies of the executed Bridge Financing documents to Parent.
(g) Equity
Financing.
Definitive agreements obligating investors to acquire at least
$2,000,000 in
capital stock of Parent based on a pre-money valuation as reasonably
agreed
among the parties, on terms and conditions satisfactory to
the Company, in its
sole discretion, shall have been executed and delivered to
Parent, subject only
to the Closing of the Merger, and the purchase price for such
capital stock
shall have been placed in escrow with the release of such purchase
price subject
only to the closing of the Merger (such transaction, the “Equity
Financing”).
(h) Stock
Certificates.
Certificates evidencing the number of Merger Shares to be issued
to each Company
Shareholder in the names of such Company Shareholders shall
have been delivered
by Pharmaceuticals or Pharmaceuticals’ agent to counsel to the Company in
accordance with Section 2.2.
(i) Approval.
Holders
of at least ninety percent (90%) of the Company’s outstanding capital stock
shall have approved the Merger and this Agreement in accordance
with the
NYBCL.
(j) Legal
Opinion.
The
Company Shareholders shall have received the legal opinion
of counsel to Parent,
in agreed upon form addressed to such shareholders.
27
(k) Resignations.
The
members of the board of directors of Pharmaceuticals immediately
following the
Reincorporation shall have each delivered his or her resignation
effective as of
the Closing in a form reasonably acceptable to the Company.
(l) Reverse
Stock Split; Reincorporation.
The
Reverse Stock Split and the Reincorporation shall have been
completed and
effective and any and all notices or other arrangements shall
have been made
with any regulatory authority or other entity to enable Pharmaceuticals
to
continue on as a public reporting company after the
Reincorporation.
(m) Accountant’s
Opinion.
The
Company’s independent registered public accounting firm shall have
completed the
audit of the Company’s financial statements and shall have issued its opinion
related thereto.
(n) Material
Adverse Effect.
There
shall not have occurred after the date hereof any event or
events that,
individually or in the aggregate, constitute a Material Adverse
Effect on
Parent.
6.3. Conditions
to Obligations of Parent and Merger Sub to Consummate the
Transactions.
The
obligation of Parent and Merger Sub to consummate the Transactions
shall be
subject to the satisfaction of the following conditions, unless
waived in
writing prior to the Closing Date by Parent and Merger Sub:
(a) Representations
and Warranties.
The
representations and warranties of the Company contained herein
that are
qualified as to materiality or a Material Adverse Effect (or similar
concept)
shall be true and correct, and those not so qualified shall be
true and correct
in all material respects, in each case at and as of the Effective
Time with the
same force and effect as though made at and as of the Effective
Time (except to
the extent a representation or warranty speaks specifically as
of an earlier
date, in which case as of such date).
(b) Performance
of Obligations.
The
Company shall have performed, in all material respects, all obligations
and
complied with all covenants required by this Agreement to be performed
or
complied with, in all material respects, by it prior to the Effective
Time.
(c) Officer’s
Certificate.
The
Company shall have executed and delivered to Parent a certificate,
dated the
date of Closing and signed by an officer of the Company, evidencing
compliance
with Sections 6.3(a) and 6.3(b) hereof.
(d) Approval.
Holders
of at least ninety percent (90%) of the Company’ outstanding capital stock shall
have approved the Merger and this Agreement in accordance with
the
NYBCL.
(e) Material
Adverse Effect.
There
shall not have occurred after the date hereof any event or events
that,
individually or in the aggregate, constitute a Material Adverse
Effect on the
Company.
28
ARTICLE
VII
TERMINATION
7.1. Termination.
This
Agreement may be terminated at any time prior to the Effective
Time, whether
before or after approval of this Agreement and the Merger by the
stockholders of
the Company:
(a) by
the
mutual written consent of the parties to this Agreement;
(b) by
either
the Company or Parent, by written notice to the other if, for any
reason, the
Closing has not occurred prior to the close of business on or before
August 31,
2007; provided, however, that (i) the right to terminate this Agreement
pursuant
to this Section 7.1(b) shall not be available to the Company or
Parent, as
applicable, if the party seeking to terminate the Agreement is
responsible for
the delay;
(c) by
either
the Company or Parent, by written notice to the other, if any court
of competent
jurisdiction shall have issued an order, judgment or decree (other
than a
temporary restraining order) restraining, enjoining or otherwise
prohibiting the
Merger and such order, judgment or decree shall have become final
and
nonappealable;
(d) at
the
election of the Company, if (i) any of RAI, Pharmaceuticals or
Merger Sub has
materially breached any representation, warranty, covenant or agreement
contained in this Agreement, which breach has not been cured on
or before thirty
(30) Business Days following delivery of written notice of such
breach by the
Company to RAI, Pharmaceuticals or Merger Sub; provided, however,
that the right
to terminate this Agreement pursuant to this Section 7.1(d) (A)
shall not be
available to the Company if the Company at such time, is in material
breach of
any representation, warranty, covenant or agreement set forth in
this Agreement,
or (B) if the Company or its counsel is not satisfied with the
financial,
business or legal due diligence investigation of RAI or any item
or issue that
is discovered in the course of such investigation as determined
by the Company
or its counsel in its sole and absolute discretion; and
(e) at
the
election of Parent, if the Company has materially breached any
representation,
warranty, covenant or agreement contained in this Agreement, which
breach has
not been cured on or before thirty (30) Business Days following
delivery of
written notice to the Company of such breach by Parent or Merger
Sub; provided,
however, that the right to terminate this Agreement pursuant to
this Section
7.1(e) shall not be available to Parent if either RAI, Pharmaceuticals
or Merger
Sub, at such time, is in material breach of any representation,
warranty,
covenant or agreement set forth in this Agreement.
7.2. Effect
of Termination.
In the
event of the termination of this Agreement by either the Company
or Parent
pursuant to Section 7.1, (i) this Agreement shall forthwith become
void and have
no further force or effect, and (ii) there shall be no further
liability under
this Agreement on the part of Parent or the Company, other than
pursuant to the
provisions of Section 5.6, Section 5.7, this Section 7.2 and Section
7.3.
29
7.3. Expenses;
Termination Fees.
(a) Except
as
set forth in this Section 7.3, all costs and expenses incurred
in connection
with this Agreement and the Transaction shall be paid by the party
incurring
such costs and expenses, whether or not the Merger is consummated.
(b) The
Parent agrees to pay the Company, in addition to any other remedies
that may be
available to the Company, an amount equal to the Company’s Expenses if: (i) the
Company terminates this Agreement pursuant to Section 7.1(d)(i),
provided that
such termination is the result of a breach by RAI, Pharmaceuticals
or Merger Sub
or any of their respective Representatives of either Section 5.1
or Section 5.9,
or (ii) if the Parent executes a definitive agreement with respect
to an
Acquisition Transaction with any Person (other than Company) within
six (6)
months after the termination of this Agreement.
(c) All
payments under this Section 7.3 shall be made by wire transfer
of immediately
available funds to an account designated by the party to whom such
payment will
be made.
(d) The
term
“Expenses”
shall
mean all out-of-pocket expenses incurred by the Company and its
affiliates in
connection with this Agreement, any letter of intent related to
this Agreement,
and the transactions and due diligence contemplated hereby, including,
without
limitation, fees and expenses of accountants, attorneys and financial
advisors.
(e) The
parties acknowledge that the agreements contained in this Section
7.3 are an
integral part of the transactions contemplated by this Agreement,
and that,
without these agreements, neither Parent nor the Company would
enter into this
Agreement. Accordingly, if either party fails to promptly pay any
amounts owing
pursuant to this Section 7.3 when due, then the party from whom
such payment is
due shall in addition thereto pay to the other party all costs
and expenses
(including fees and disbursements of counsel) incurred in collecting
such
amounts, together with interest on such amounts (or any unpaid
portion thereof)
from the date such payment was required to be made until the date
such payment
is received by the party entitled to such payment hereunder at
the prime rate of
Chase Manhattan as in effect from time to time during such period.
ARTICLE
VIII
MISCELLANEOUS
8.1. Certain
Definitions; Rules of Construction.
Definitions shall apply equally to both the singular and plural
forms of the
terms defined. Whenever the context may require, any pronoun shall
include the
corresponding masculine, feminine and neuter forms. All references
herein to
Articles, Sections, Exhibits and Schedules shall be deemed to be
references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement
unless
the context shall otherwise require. All Exhibits and Schedules
attached hereto
shall be deemed incorporated herein as if set forth in full herein
and, unless
otherwise defined therein, all terms used in any Exhibit or Schedule
shall have
the meaning ascribed to such term in this Agreement. The words
“include,”
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation.” The words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement
as a whole and
not to any particular provision of this Agreement. Unless otherwise
expressly
provided herein, any agreement, plan, instrument or statute defined
or referred
to herein or in any agreement or instrument that is referred to
herein means
such agreement, plan, instrument or statute as from time to time
amended,
modified or supplemented, including (in the case of agreements
or instruments)
by waiver or consent and (in the case of statutes) by succession
of comparable
successor statutes and references to all attachments thereto and
instruments
incorporated therein. For the purposes of this Agreement, the following
terms
shall have the following meanings:
30
“Acquisition
Proposal”
has
the
meaning set forth in Section 5.9.
“Acquisition
Transaction”
has
the
meaning set forth in Section 5.9.
“Adjustment
Event”
has
the
meaning set forth in Section 2.3.
“Affiliate”
shall
mean, with respect to any Person, any other Person that directly
or indirectly
controls, is controlled by, or is under common control with, such
first Person.
The term “control” means possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of
a Person, whether
through the ownership of voting securities, by contract or
otherwise.
“Applicable
Law”
means
any Federal, state or local law, regulation, code, ordinance, statute,
rule,
Order, judgment, decree or other requirement of a Governmental
Body applicable
to the business of the Company, RAI, Pharmaceuticals or Merger
Sub, as the
context may require.
“Benefit
Plan”
means
each deferred compensation, executive compensation, incentive compensation,
stock purchase or other stock-based compensation plan, severance
or termination
pay, holiday, vacation or other bonus plan or practice, hospitalization
or other
medical, life or other insurance, supplemental unemployment benefits,
profit
sharing, pension, or retirement plan, program, agreement, commitment
or
arrangement, and each other employee Benefit Plan, program, agreement
or
arrangement, including, without limitation, each “employee Benefit Plan” as such
term is defined under Section 3(3) of ERISA.
“Blue
Sky Laws”
has
the
meaning set forth in Section 3.10.
“Bridge
Financing”
has
the
meaning set forth in Section 6.2(f).
“Bridge
Notes”
has
the
meaning set forth in Section 2.5.
“Bridge
Warrants”
has
the
meaning set forth in Section 2.4.
“Business
Day”
means
any day other than Saturday or Sunday or any other day on which
banks in the
State of New York are permitted or obligated to be closed for
business.
“Cash
Payment”
has
the
meaning set forth in Section 2.6.
31
“Claim”
means
any action, suit, claim, complaint, demand, litigation or similar
proceeding.
“Closing”
has
the
meaning set forth in Section 1.2.
“Closing
Date”
has
the
meaning set forth in Section 1.2.
“Company”
has
the
meaning set forth in the preamble.
“Company
Certificates”
has
the
meaning set forth in Section 2.2(a).
“Company
Common Stock”
has
the
meaning set forth in Section 2.1(b).
“Company
Consent”
has
the
meaning set forth in Section 5.2.
“Company
Disclosure Letter”
has
the
meaning set forth in Article III.
“Company
Financial Statements”
has
the
meaning set forth in Section 3.14.
“Company
Shareholder”
and
“Company
Shareholders”
have
the meaning set forth in Section 2.1.
“Company
Warrant”
has
the
meaning set forth in Section 2.4.
“DGCL”
has
the
meaning set forth in the recitals.
“Delaware
Certificate of Merger”
has
the
meaning set forth in Section 1.2.
“Effective
Time”
has
the
meaning set forth in Section 1.2.
“Environmental
Laws”
means
all applicable statutes, rules, regulations, ordinances, orders,
decrees,
judgments, permits, licenses, consents, approvals, authorizations,
and
governmental requirements or directives or other obligations lawfully
imposed by
Governmental Body under federal, state, local or common law, indemnity
agreements or other contractual obligations, in each case, pertaining
to the
protection of the environment, protection of public health, protection
of worker
health and safety, the treatment, emission and/or discharge of
gaseous,
particulate and/or effluent pollutants, and/or the handling of
hazardous
materials, including, without limitation, the Clean Air Act, 42
U.S.C. § 7401,
et seq., the Comprehensive Environmental Response, Compensation
and Liability
Act of 1980 (“CERCLA”), 42 U.S.C. § 9601, et seq., the Federal Water Pollution
Control Act, 33 U.S.C. § 1321, et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. § 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. § 6901, et seq. (“RCRA”), and the Toxic Substances Control Act, 15 U.S.C.
§ 2601, et seq.
“Equity
Financing”
has
the
meaning set forth in Section 6.2(g).
“Exchange
Act”
means
the Securities and Exchange Act of 1934, as amended, and the rules
and
regulations promulgated thereunder.
32
“Exchange
Agent”
has
the
meaning set forth in Section 2.2.
“Expenses”
has
the
meaning set forth in Section 7.3(d).
“Fully
Diluted Basis”
shall
mean that the amount of common stock of an entity outstanding shall
be
determined on the basis that all outstanding options, warrants
and other
convertible securities shall be deemed to be fully exercised or
converted (as
the case may be) into common stock; provided however,
that
the notes and warrants issued by the Company in connection with
the Bridge
Financing shall not be included in any Fully Diluted Basis calculation
for
purposes of this Agreement.
“GAAP”
has
the
meaning set forth in Section 4.7(b).
“Governmental
Body”
means
any court, administrative or regulatory agency or commission or
other
governmental authority of competent jurisdiction.
“Government
Agency”
means
(i) the United States Government, including all departments and
agencies of any
branch of the United States Government, all independent agencies
or
instrumentalities and all non-appropriated fund activities within
the United
States Government and United States Government corporations, and
(ii) any state
or local government, including all departments, agents, agencies,
branches,
independent agencies or instrumentalities, activities, and non-appropriated
fund
activities of or within a state or local government and all state
or local
government corporations.
“Hazardous
Substances”
means
any pollutants, contaminants, toxic or hazardous or extremely hazardous
substances, materials, wastes, constituents, compounds, chemicals
(including,
without limitation, petroleum or any by-products or fractions thereof,
any form
of natural gas, ▇▇▇▇▇▇ Amendment materials, lead, asbestos and
asbestos-containing materials, building construction materials
and debris,
polychlorinated biphenyls (“PCBs”) and PCB-containing equipment, radon and other
radioactive elements, ionizing radiation, electromagnetic field
radiation and
other non-ionizing radiation, sonic forces and other natural forces,
infectious,
carcinogenic, mutagenic, or etiologic agents, pesticides, defoliants,
explosives, flammables, corrosives and urea formaldehyde foam insulation)
that
are regulated by any Environmental Laws.
“Intellectual
Property”
means
all of the following as they are used in connection with the business
of a
Person as presently conducted and as they exist in all jurisdictions
throughout
the world, in each case, to the extent owned by such Person:
(a) patents,
patent applications and inventions, designs and improvements described
and
claimed therein, patentable inventions and other patent rights
(including any
divisions, continuations, continuations-in-part, substitutions,
or reissues
thereof, whether or not patents are issued on any such applications
and whether
or not any such applications are modified, withdrawn, or resubmitted);
33
(b) trademarks,
service marks, trade dress, trade names, brand names, designs,
logos, or
corporate names, whether registered or unregistered, and all registrations
and
applications for registration thereof;
(c) copyrights
and mask works, including all renewals and extensions thereof,
copyright
registrations and applications for registration thereof;
(d) trade
secrets, confidential business information and other proprietary
information,
concepts, ideas, designs, research or development information,
processes,
procedures, techniques, technical information, specifications,
operating and
maintenance manuals, engineering drawings, methods, know-how, technical
data and
databases, discoveries, inventions, modifications, extensions,
improvements, and
other proprietary rights (whether or not patentable or subject
to copyright,
mask work, or trade secret protection);
(e) computer
software programs, including, without limitation, all source code,
object code,
and documentation related thereto; and
(f) Internet
addresses, domain names, web sites, web pages and similar rights
and
items.
“Investment
Letter”
has
the
meaning set forth in Section 6.1(c).
“Knowledge”
with
respect to any Person, means the actual knowledge of any of the
officers or
directors of such Person after diligent inquiry.
“Legal
Proceedings”
has
the
meaning set forth in Section 3.7.
“Lien”
means
any mortgage, pledge, lien, charge, easement, restrictive covenant,
encumbrance,
voting or transfer restriction, or security interest.
“MGCL”
has
the
meaning set forth in Section 4.6.
“Material
Adverse Effect”
means
any change, effect, event or occurrence that is materially adverse
to the
condition (financial or otherwise), assets, properties, business
or operations
of a Person and its Subsidiaries, taken as a whole.
34
“Material
Contract”
means
all of the following contracts, agreements, understandings or arrangements,
whether or not in writing, to which a Person is a party or by or
to which any of
them or any of their assets or properties are bound or subject,
with respect to:
(i) any current or former officer, director, stockholder, employee,
consultant,
agent or other representative or with an entity in which any of
the foregoing is
a contracting person; (ii) any labor union or association representing
any
employee; (iii) the purchase or sale of materials, supplies, equipment,
merchandise or services that contain an escalation, renegotiation
or
redetermination clause calling for an aggregate purchase or sale
price or
payments of more than $5,000 in any one case (or in the aggregate,
in the case
of any related series of contracts and other agreements); (iv)
the sale of any
of its assets or properties other than in the ordinary course of
business or for
the grant to any person of any preferential rights to purchase
any of its assets
or properties; (v) joint ventures,
strategic alliances or partnerships; (vi) an indemnity or sharing
of any tax
liability of any third party; (vii) the purchase or sale price
or payments of
more than $5,000 in any one case (or in the aggregate, in the case
of any
related series of contracts and other agreements) that cannot be
canceled by
such Person with less than ninety days’ notice without incurring liability,
premium or penalty; (viii) the sharing of fees, the rebating of
charges or other
similar arrangements; (ix) obligations or liabilities of any kind
to holders of
such Person securities as such; (x) covenants of such Person not
to compete in
any line of business or with any person in any geographical area
or covenants of
any other person not to compete with the such Person in any line
of business or
in any geographical area; (xi) the acquisition by the such Person
of any
operating business, including the assets or the capital stock of
any other
person; (xii) options for the purchase of any asset, tangible or
intangible,
requiring the payment to any person of a commission or fee; (xiii)
the payment
of fees or other consideration on behalf of any officer or director
of such
Person or to any other entity in which any of the foregoing has
an interest;
(xiv) the borrowing of money; (xv) any purchase price or sale price
or payments
of more than $5,000 in any one case (or in the aggregate, in the
case of any
related series of contracts and other agreements) whether or not
made in the
ordinary course of business; (xvi) the purchase or sale of material,
supplies,
equipment, merchandise, intellectual property, real property, assets
(whether
tangible or intangible) or services where the purchase or sale
price, the
estimated purchase or sale price, the maximum order price, the
maximum contract
price, or the ceiling price (whether in one case or in the aggregate,
in the
case of a related series of contracts or other agreements) is more
than $5,000,
and a party to the contract or the known end or ultimate user,
seller, or
purchaser is any Government Agency; (xvii) any schedule contracts
with the
United States General Services Administration or any multiple award
schedule
contracts, basic agreements, basic ordering agreements, or blanket
purchase
agreements with any Government Agency; and (xviii) any other contract,
agreement
or arrangement that is material to the business of a Person.
“Maximum
Capitalization”
has
the
meaning set forth in Section 4.5(a).
“Merger”
has
the
meaning set forth in the recitals.
“Merger
Shares”
has
the
meaning set forth in Section 2.1(b).
“Merger
Sub”
has
the
meaning set forth in the preamble.
“NYBCL”
has
the
meaning set forth in the recitals.
“New
York Certificate of Merger”
has
the
meaning set forth in Section 1.2.
“Non-Round
Lot Holder”
shall
mean any Person who holds an amount of shares of RAI Common Stock
prior to the
Reverse Stock Split that would result in the amount of post Reverse
Stock Split
shares issued to such Person to be less than 100 shares without
giving effect to
the proviso in the definition of the term “Reverse Stock Split”.
35
“Orders”
has
the
meaning set forth in Section 3.9.
“Original
Virium Shareholders”
shall
mean all holders of shares of Company Common Stock or warrants,
options or other
rights to acquire Company Common Stock to the extent that such
shareholder hold
such shares, warrants, options or other rights as the result of
transactions
other than the Bridge Financing.
“Parent”
has
the
meaning set forth in the preamble.
“Parent
Disclosure Letter”
has
the
meaning set forth in Article IV.
“Permitted
Liens”
has
the
meaning set forth in Section 3.8.
“Person”
means
any individual, corporation, partnership, limited liability company
or
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government (including any agency
or political
subdivision thereof).
“Pharmaceuticals”
has
the
meaning set forth in the preamble.
“Pharmaceuticals
Common Stock”
has
the
meaning set forth in Section 2.1(b).
“Proxy
Statement”
has
the
meaning set forth in Section 5.3.
“Quarterly
Report”
has
the
meaning set forth in Section 4.11.
“RAI”
has
the
meaning set forth in the preamble.
“RAI
Common Stock”
means
the common stock, par value $0.01 per share, of RAI.
“RAI
Information”
has
the
meaning set forth in Section 4.24.
“Recent
Reports”
has
the
meaning set forth in Section 4.8.
“Reincorporation”
has
the
meaning set forth in the preamble.
“Representatives”
has
the
meaning set forth in Section 5.9.
“Reverse
Stock Split”
shall
mean a 1 for 23.06062 reverse stock split to be effected by RAI
prior to the
Reincorporation, pursuant to which each 23.06062 shares of RAI
Common Stock
issued and outstanding prior to such reverse stock split shall
be converted and
exchanged into one share of RAI Common Stock following such reverse
stock split,
with any fractional shares being rounded up to the next whole share;
provided
that a
Non-Round Lot Holder shall have the number of shares such Non-Round
Lot Holder
would otherwise receive as a result of the Reverse Stock Split
be rounded up to
100 such that the shares held by any Non-Round Lot Holder shall
be converted and
exchanged into an aggregate of 100 shares of RAI Common Stock following
the
Reverse Stock Split.
36
“SEC”
has
the
meaning set forth in Section 4.7(a).
“SEC
Reports”
has
the
meaning set forth in Section 4.7(a).
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Subsidiary”
of
any
Person means any corporation, partnership, joint venture or other
legal entity
of which such Person (either directly or through or together with
any other
Subsidiary of such Person), owns, directly or indirectly, 50% or
more of the
stock or other equity interests the holders of which are generally
entitled to
vote for the election of the board of directors or similar governing
body of
such corporation, partnership, joint venture or other legal entity.
“Surviving
Corporation”
has
the
meaning set forth in Section 1.1.
“Tax”
or
“Taxes”
means
any taxes, charges, fees, imposts, levies or other assessments,
including,
without limitation, all net income, franchise, profits, gross receipts,
capital,
sales, use, ad valorem, value added, transfer, transfer gains,
inventory,
capital stock, license, withholding, payroll, employment, social
security (or
similar), unemployment, excise, severance, stamp, occupation, real
or personal
property, premium, windfall profits, environmental (including taxes
under
Section 59A of the Code), customs duties, registration, alternative
or add-on
minimum, and estimated taxes, customs duties, fees, assessments
and charges of
any kind whatsoever, together with any interest and any penalties,
fines,
additions to tax or additional amounts thereon whether disputed
or not, imposed
by any taxing authority (Federal, state, local or foreign) and
shall include any
transferee liability in respect of Taxes.
“Tax
Return”
means
any returns, declarations, reports, estimates, information returns
or statements
relating to Taxes, including any schedule or attachment thereto,
and including
any amendment thereof.
“Transaction
Documents”
means
this Agreement and each of the agreements and instruments contemplated
hereby or
thereby, including, without limitation, the New York Certificate
of Merger and
the Delaware Certificate of Merger, the officer’s certificate to be delivered by
each of RAI, Pharmaceuticals and Merger Sub pursuant to Section
6.2(c) and the
Company pursuant to Section 6.3(c), the Company Disclosure Letter,
the Parent
Disclosure Letter and all documents, instruments or agreements
attached to or
contemplated by any of the foregoing.
“Transactions”
has
the
meaning set forth in Section 3.3.
8.2. Waivers
and Amendments.
Subject
to Applicable Law, this Agreement may be amended, superseded, canceled,
renewed
or extended, and the terms hereof may be waived, only by a written
instrument
signed by the parties hereto or, in the case of a waiver, by or
on behalf of the
party waiving compliance. No delay on the part of any party in
exercising any
right, power or privilege hereunder shall operate as a waiver thereof,
nor shall
any waiver on the part of any party of any such right, power or
privilege, nor
any single or partial exercise of any such right, power or privilege,
preclude
any further exercise thereof or the exercise of any other such
right, power or
privilege.
37
8.3. Governing
Law.
THIS
AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAWS OF SUCH
STATE, APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY
WITHIN SUCH
STATE.
8.4. Notices.
Any
notices or other communications required under this Agreement shall
be in
writing and be effective upon delivery if given by hand delivery
or facsimile
transmission or on the next day after given if delivered by overnight
courier,
and shall be given at the addresses or facsimile numbers set forth
below, with
copies provided as follows:
(a) if
to the
Company or the Surviving Corporation:
Virium
Pharmaceuticals Inc.
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇
and ▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attn:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
(b) if
to
Parent or Merger Sub:
▇▇▇▇
▇.
▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
with
copies to:
Blank
Rome LLP
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
or
at
such other place or places or to such other person or persons as
shall be
designated in writing by the parties to this Agreement in the manner
herein
proved.
38
8.5. Section
Headings.
The
section and paragraph headings contained in this Agreement are
for reference
purposes only and shall not in any way affect the meaning or interpretation
of
this Agreement.
8.6. Counterparts.
This
Agreement may be executed in one or more counterparts, each of
which shall be
deemed to be an original, but all of which, together, shall constitute
one and
the same instrument. This Agreement may be executed by facsimile
or other
electronic image transmission technology. Copies of signature pages
delivered by
facsimile or other means of electronic image transmission shall
have the same
force and effect as originals thereof.
8.7. Assignments.
This
Agreement, by operation of law or otherwise, shall be binding upon
and inure to
the benefit of successors and legal representatives of the parties
hereto.
8.8. Entire
Agreement; Enforceability.
This
Agreement and the Transaction Documents, including the Exhibits
and Schedules
attached hereto and thereto: (i) constitute the entire agreement
among the
parties with respect to the Transactions and supersedes all prior
agreements and
understandings, both written and oral, among the parties, with
respect to the
subject matter hereof and thereof; and (ii) shall be binding upon,
and are
solely for the benefit of each party hereto and nothing in this
Agreement is
intended to confer upon any other Person any rights or remedy of
any nature
whatsoever hereunder or by reason of this Agreement or any of the
Transaction
Documents.
8.9. Severability.
Any
term or provision of this Agreement which is invalid, illegal or
unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent
of such invalidity, illegality or unenforceability without rendering
invalid,
illegal or unenforceable the remaining terms and provisions of
this Agreement or
affecting the validity or enforceability of any of the terms or
provisions of
this Agreement in any other jurisdiction. If any provision of this
Agreement is
so broad as to be unenforceable, the provision shall be interpreted
to be only
so broad as is enforceable.
[Signature
page follows.]
39
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement
and Plan of
Merger to be duly executed as of the date first above written.
| Virium Pharmaceuticals Inc. | ||
| |
|
|
| By: |
/s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|
|
|
||
|
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
President & CEO
|
||
| REIT Americas, Inc. | ||
| |
|
|
| By: |
/s/
F. ▇▇▇▇ ▇▇▇▇▇▇▇
|
|
|
|
||
|
Name:
F. ▇▇▇▇ ▇▇▇▇▇▇▇
Title:
President
|
||
| Virium Pharmaceuticals, Inc. (Delaware) | ||
| |
|
|
| By: |
/s/
F. ▇▇▇▇ ▇▇▇▇▇▇▇
|
|
|
|
||
|
Name:
F. ▇▇▇▇ ▇▇▇▇▇▇▇
Title:
President
|
||
| Virium Merger Sub, Inc. | ||
| |
|
|
| By: |
/s/
F. ▇▇▇▇ ▇▇▇▇▇▇▇
|
|
|
|
||
|
Name:
F. ▇▇▇▇ ▇▇▇▇▇▇▇
Title:
President
|
||
40
EXHIBIT
A
CERTIFICATE
OF INCORPORATION OF PHARMACEUTICALS
EXHIBIT
B
FORM
OF INVESTMENT LETTER