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Sample Business ContractsHome: Sample Business Contracts:
AGREEMENT AND PLAN OF MERGER
by and among
CANCERVAX CORPORATION,
CMI ACQUISITION CORP.
and
CELL-MATRIX, INC.
Dated: January 8, 2002
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TABLE OF CONTENTS
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Page
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I. DEFINITIONS and INTERPRETATION provisions.............................................. 1
1.1 Affiliate................................................................. 1
1.2 Buyer Disclosure Schedule................................................. 2
1.3 Buyer Preferred Stock Price............................................... 2
1.4 Cell-Matrix Disclosure Schedule........................................... 2
1.5 Encumbrances.............................................................. 2
1.6 Escrow Termination Date................................................... 2
1.7 Exchange Act.............................................................. 2
1.8 GAAP...................................................................... 2
1.9 Intellectual Property..................................................... 2
1.10 Knowledge................................................................. 3
1.11 Material Adverse Effect................................................... 3
1.12 Permit.................................................................... 3
1.13 Person.................................................................... 3
1.14 Related Party............................................................. 3
1.15 SEC....................................................................... 3
1.16 Securities Act............................................................ 3
1.17 Selling Expenses.......................................................... 3
1.18 Taxes..................................................................... 4
1.19 Tax Returns............................................................... 4
1.20 Other Defined Terms....................................................... 4
1.21 Interpretation Provisions................................................. 6
II. THE MERGER............................................................................ 6
2.1 The Merger................................................................ 6
2.2 Effect of the Merger...................................................... 6
2.3 Effective Time............................................................ 6
2.4 Directors and Officers.................................................... 7
2.5 Certificate of Incorporation; Bylaws...................................... 7
2.6 Taking of Necessary Action; Further Action................................ 7
2.7 The Closing............................................................... 8
2.8 Tax Consequences.......................................................... 8
2.9 Cell-Matrix Closing Liabilities........................................... 8
III. CONVERSION OF SECURITIES............................................................. 8
3.1 Conversion of Securities.................................................. 8
3.2 No Further Rights in Cell-Matrix Common Stock............................. 10
3.3 Stock Transfer Books...................................................... 10
3.4 Fractional Shares......................................................... 10
IV. REPRESENTATIONS AND WARRANTIES OF CELL-MATRIX......................................... 10
4.1 Due Organization.......................................................... 10
4.2 Capitalization of Cell-Matrix............................................. 11
4.3 Subsidiaries.............................................................. 11
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4.4 Authorization............................................................. 11
4.5 Non-Contravention......................................................... 11
4.6 Consents and Approvals.................................................... 12
4.7 Financial Statements...................................................... 12
4.8 No Undisclosed Liabilities................................................ 12
4.9 No Changes................................................................ 13
4.10 Accounts Receivable....................................................... 14
4.11 Title to and Condition of Assets.......................................... 15
4.12 Leases, Premises.......................................................... 15
4.13 Contracts and Commitments................................................. 16
4.14 Litigation, Proceedings and Applicable Law................................ 17
4.15 Compliance with Law....................................................... 17
4.16 Insurance................................................................. 17
4.17 Benefit Plans............................................................. 18
4.18 Labor Matters............................................................. 18
4.19 Tax Matters............................................................... 19
4.20 Environmental Matters..................................................... 20
4.21 Customers and Suppliers................................................... 22
4.22 Books and Records......................................................... 23
4.23 No Brokers................................................................ 23
4.24 Powers of Attorney........................................................ 23
4.25 Transactions With Related Parties......................................... 23
4.26 Intellectual Property..................................................... 23
4.27 Identification of Depositories and Authorities............................ 26
4.28 Legal and Tax Advice...................................................... 27
4.29 Vote Required............................................................. 27
4.30 Tax Treatment............................................................. 27
4.31 Disclosure................................................................ 27
4.32 Dissenters Rights......................................................... 27
4.33 Subsequent Financing...................................................... 28
4.34 Capital Equipment Agreement............................................... 28
V. REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB................................. 28
5.1 Due Organization.......................................................... 28
5.2 Capitalization of Buyer................................................... 28
5.3 Authorization............................................................. 28
5.4 Non-Contravention......................................................... 29
5.5 Consents and Approvals.................................................... 29
5.6 Buyer Preferred Stock..................................................... 29
5.7 No Brokers................................................................ 29
5.8 Merger Sub................................................................ 30
VI. PRE-CLOSING COVENANTS................................................................. 30
6.1 Conduct of Business by Cell-Matrix Pending the Closing.................... 30
6.2 Further Assurances........................................................ 31
6.3 No Solicitation........................................................... 32
6.4 Affiliates' Letters....................................................... 32
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6.5 Access to Information, Properties and Personnel........................... 32
6.6 Confidential Information.................................................. 32
6.7 Notification of Certain Matters........................................... 33
6.8 Consents.................................................................. 33
6.9 Stockholder Agreement..................................................... 34
6.10 Employee Matters.......................................................... 34
6.11 Benefit Plans............................................................. 34
6.12 Cell-Matrix Equity Plan................................................... 34
6.13 Sub-lease................................................................. 35
VII. CONDITIONS TO CLOSING................................................................ 35
7.1 Conditions to Each Party's Obligation to Effect the Merger................ 35
7.2 Conditions to Cell-Matrix's Obligation to Effect the Merger............... 35
7.3 Conditions to Buyer and Merger Sub's Obligations to Effect the Merger..... 36
VIII. THE STOCKHOLDER REPRESENTATIVE...................................................... 38
8.1 Appointment............................................................... 38
8.2 Election and Replacement.................................................. 38
8.3 Authority................................................................. 38
8.4 No Liability of Buyer..................................................... 39
IX. POST-CLOSING COVENANTS................................................................ 39
9.1 Litigation Support........................................................ 39
9.2 Tax Matters............................................................... 39
X. SURVIVAL; INDEMNIFICATION.............................................................. 40
10.1 Survival of Representations, Etc.......................................... 40
10.2 Indemnification........................................................... 40
10.3 Defense of Claims......................................................... 41
10.4 Payment of Damages........................................................ 42
10.5 Limitations............................................................... 42
10.6 Indemnification Dispute Resolution........................................ 43
XI. MISCELLANEOUS......................................................................... 43
11.1 Disclosure Schedule....................................................... 43
11.2 Termination............................................................... 44
11.3 Further Assurances........................................................ 45
11.4 Assignment................................................................ 45
11.5 Notices................................................................... 45
11.6 Entire Agreement; Amendments and Waivers.................................. 46
11.7 Service of Process; Consent to Jurisdiction............................... 46
11.8 Multiple Counterparts..................................................... 47
11.9 Headings.................................................................. 47
11.10 Exhibits and Schedules................................................ 47
11.11 Publicity; Confidentiality............................................ 47
11.12 Governing Law......................................................... 47
11.13 Construction.......................................................... 47
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11.14 Expenses.............................................................. 47
11.15 Invalidity............................................................ 47
11.16 Cumulative Remedies................................................... 47
11.17 Specific Performance.................................................. 48
11.18 California Corporate Securities Law................................... 48
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EXHIBITS
EXHIBIT A: CERTIFICATE OF MERGER
EXHIBIT B: ARTICLES OF MERGER
EXHIBIT C: ESCROW AGREEMENT
EXHIBIT D: STOCKHOLDERS AGREEMENT
EXHIBIT E: ANNUAL FINANCIAL STATEMENTS
EXHIBIT F: INTERIM FINANCIAL STATEMENTS
EXHIBIT G: AFFILIATE LETTER
EXHIBIT H: RESIGNATION AND RELEASE AGREEMENT
EXHIBIT I: OPINION OF LATHAM & WATKINS
EXHIBIT J: FORM OF CONSULTING AGREEMENT
EXHIBIT K: OPINION OF DENNIS GEORGE & ASSOCIATES, P.C.
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is
entered into as of January 8, 2002 by and among CancerVax Corporation, a
Delaware corporation ("Buyer"), CMI Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of Buyer ("Merger Sub"), and Cell-Matrix, Inc., a
Nevada corporation ("Cell-Matrix"). Merger Sub and Cell-Matrix are hereinafter
sometimes collectively referred to as the "Constituent Corporations."
RECITALS
A. The respective Boards of Directors of Buyer, Merger
Sub and Cell-Matrix have determined that it is advisable and in the best
interests of the respective corporations and their stockholders that Merger Sub
be merged with and into Cell-Matrix in accordance with the Delaware General
Corporation Law (the "DGCL") and the Nevada General Corporation Law (the "NGCL")
and the terms of this Agreement, pursuant to which Cell-Matrix will be the
surviving corporation and will remain a wholly-owned subsidiary of Buyer (the
"Merger").
B. The holders of all of Cell-Matrix's capital stock
(collectively, the "Stockholders" and individually a "Stockholder") have
approved the Merger.
C. Pursuant to the Merger, and the terms provided for
herein, the outstanding shares of common stock of Cell-Matrix, no par value per
share (the "Cell-Matrix Common Stock"), will be canceled and extinguished and
converted into the right to receive shares of Acquisition Preferred Stock of
Buyer, par value $0.00004 per share ("Buyer Preferred Stock").
D. For federal income tax purposes, it is intended that
the Merger qualify as a reorganization under the provisions of Sections
368(a)(1)(A) and 368(a)(2)(E) of the United States Internal Revenue Code of
1986, as amended (the "Code").
E. Buyer, Merger Sub and Cell-Matrix desire to make
certain representations, warranties, covenants and agreements in connection
with, and establish various conditions precedent to, the Merger.
AGREEMENT
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements set forth in this Agreement, the parties
hereto hereby agree as follows:
I.
DEFINITIONS AND INTERPRETATION PROVISIONS
As used herein, the following terms shall have the following meanings:
1.1 Affiliate. The term "Affiliate" shall mean, when used with
reference to a specified Person, (a) any Person who directly or indirectly
controls, is controlled by or is under common control with the specified Person,
(b) any Person who is an officer, partner or trustee of, or serves in a similar
capacity with respect to, the specified Person, or for which the specified
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Person is an officer, partner or trustee or serves in a similar capacity, (c)
any Person who, directly or indirectly, is the beneficial owner of ten percent
(10%) or more of any class of equity securities of the specified Person, or of
which the specified Person, directly or indirectly, is the owner of ten percent
(10%) or more of any class of equity securities or (d) any relative of the
specified Person.
1.2 Buyer Disclosure Schedule. The term "Buyer Disclosure Schedule"
shall mean a schedule delivered by Buyer to Cell-Matrix on the date hereof,
which sets forth exceptions to the representations and warranties contained in
Article V hereof and certain information called for by this Agreement.
1.3 Buyer Preferred Stock Price. The term "Buyer Preferred Stock Price"
shall mean $3.50 (Three U.S. Dollars and Fifty Cents).
1.4 Cell-Matrix Disclosure Schedule. The term "Cell-Matrix Disclosure
Schedule" shall mean a schedule delivered by Cell-Matrix to Buyer on the date
hereof, which sets forth exceptions to the representations and warranties
contained in Article IV hereof and certain information called for by this
Agreement.
1.5 Encumbrances. The term "Encumbrances" shall mean any claim, lien,
pledge, option, charge, easement, security interest, mortgage, right-of-way,
encumbrance, right of first refusal or first offer, restriction, reservation or
other similar right or interest of any nature of any third party.
1.6 Escrow Termination Date. The term "Escrow Termination Date" shall
mean the date that is twelve (12) months after the Closing Date.
1.7 Exchange Act. The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.8 GAAP. The term "GAAP" shall mean U.S. generally accepted accounting
principles, consistently applied.
1.9 Intellectual Property. The term "Intellectual Property" shall mean
(a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including without limitation all ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business
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and marketing plans and proposals), (f) all computer software (including all
source code, data and related documentation) to the extent developed by or
exclusively for the businesses of Cell-Matrix, (g) all Internet domain names,
URLs and any content therein, past or present, (h) all proprietary rights to all
content of all past and present publications of Cell-Matrix, whether in print or
electronic form, (i) all other proprietary rights, and (j) all copies and
tangible embodiments thereof (in whatever form or medium).
1.10 Knowledge. The term "Knowledge" shall mean, with respect to
Cell-Matrix, the actual knowledge, or such knowledge as a prudent individual
could be expected to discover or otherwise become aware of in the course of
conducting a reasonable investigation concerning the truth or existence of such
fact or other matter, of any of the officers or directors of Cell-Matrix
identified on Schedule 1.10.
1.11 Material Adverse Effect. The term "Material Adverse Effect" shall
mean changes, developments or occurrences which, individually or in the
aggregate, have materially adversely affected or would have a material adverse
effect on the business, prospects, financial position or results of operations
of the entity concerned, taken as a whole with such entity's consolidated
subsidiaries, other than such of the foregoing arising or resulting from changes
in general economic conditions or changes generally affecting the industry in
which such entity operates.
1.12 Permit. The term "Permit" shall mean any approval, consent,
waiver, exemption, variance, franchise, certificate, order, permit,
authorization or license of or from any federal, state, local or foreign
government, governmental agency, board, tribunal, commission, court or other
agency or body with regulatory or governmental authority, including, without
limitation, any federal, state, local or foreign zoning, health, environmental
protection, pollution, sanitation, safety, siting or building permit or license
or authorization.
1.13 Person. The term "Person" shall mean any individual, corporation,
firm, limited liability company, partnership, association, trust, estate or
other entity or organization.
1.14 Related Party. The term "Related Party" shall mean any
Stockholder, any officer or director of Cell-Matrix, any Affiliate or relative
of any Stockholder, Cell-Matrix or any of their respective officers or
directors, or any business or entity in which any Stockholder, Cell-Matrix, any
of the officers or directors of Cell-Matrix or any Affiliate or relative of any
such Person has any direct or material indirect interest.
1.15 SEC. The term "SEC" shall mean the Securities and Exchange
Commission.
1.16 Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended.
1.17 Selling Expenses. The term "Selling Expenses" shall mean all
expenses, including, but not limited to, legal and accounting fees, incurred by
Cell-Matrix in connection with the negotiation, preparation, and execution of
this Agreement and all other agreements,
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documents and instruments contemplated hereby, or otherwise in connection with
the preparation for carrying this Agreement into effect.
1.18 Taxes. The term "Taxes" (including, with correlative meaning, the
term "Tax") shall mean all taxes, charges, fees, levies or other assessments,
including, without limitation, all net income, gross income, gross receipts,
sales, use, service, service use, ad valorem, transfer, franchise, profits, net
worth, license, lease, withholding, social security, payroll, employment,
excise, estimated, severance, stamp, recording, occupation, real and personal
property, gift, windfall profits or other taxes, customs, duties, fees,
assessments or charges of any kind whatsoever, whether computed on a separate,
consolidated, unitary, combined or other basis, together with any interest,
fines, penalties, additions to tax or other additional amounts imposed thereon
or with respect thereto imposed by the Internal Revenue Service or any taxing
authority (whether domestic or foreign) including, without limitation, any
state, county, local or foreign government or any subdivision or taxing agency
thereof, including a United States possession.
1.19 Tax Returns. The term "Tax Returns" shall mean all reports,
estimates, declarations of estimated tax, information statements and returns
relating to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
1.20 Other Defined Terms. The following terms shall have the meanings
given them in the Sections of this Agreement set forth below:
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Term Section
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Agreement..................................................... Preamble
Annual Financial Statements................................... 4.7(a)
Articles of Merger............................................ 2.3
Benefit Plan.................................................. 4.17(a)
Buyer......................................................... Preamble
Buyer Common Stock............................................ 5.2
Buyer Preferred Stock......................................... Recitals
Buyer Parties................................................. 10.2(a)
Certificate of Merger......................................... 2.3
Claim......................................................... 10.3
Claim Notice.................................................. 10.3
Cleanup....................................................... 4.20(a)(i)
Closing....................................................... 2.7
Closing Date.................................................. 2.7
Closing Liability Schedule.................................... 2.9(a)
Code.......................................................... Recitals
Cell-Matrix................................................... Preamble
Cell-Matrix Closing Liabilities............................... 2.9
Cell-Matrix Intellectual Property............................. 4.26(a)
Cell-Matrix Common Stock...................................... Recitals
Cell-Matrix Parties........................................... 10.2(b)
Cell-Matrix Stock Option...................................... 3.1(c)
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Competing Transaction......................................... 6.3
Confidentiality Agreement..................................... 6.6
Confidential Information...................................... 6.6
Constituent Corporations...................................... Preamble
Consulting Agreements......................................... 7.3(f)
Damages....................................................... 10.2(a)
DGCL.......................................................... Recitals
Effective Date................................................ 2.3
Effective Time ............................................... 2.3
Environmental Claim........................................... 4.20(a)(ii)
Environmental Laws............................................ 4.20(a)(iii)
Equity Plan................................................... 3.1(c)
ERISA......................................................... 4.17(a)
Escrow Account................................................ 3.1(a)(ii)
Escrow Agreement.............................................. 3.1(a)(ii)
Financial Statements.......................................... 4.7(a)
GAAP.......................................................... Recitals
Hazardous Materials........................................... 4.20(a)(iv)
Indemnification Threshold..................................... 10.6
Indemnified Party............................................. 10.2(c)
Indemnifying Party............................................ 10.2(c)
Instrument.................................................... 8.3
Interim Date.................................................. 4.7(a)
Interim Financial Statements.................................. 4.7(a)
Leases........................................................ 4.12
Lender........................................................ 7.3(l)
Liabilities................................................... 4.8
Loan Agreement................................................ 7.3(l)
Majority...................................................... 8.2
Master Landlord............................................... 4.12
Master Lease.................................................. 4.12
Material Contracts............................................ 4.13
Material Customers............................................ 4.21
Material Suppliers............................................ 4.21
Merger ....................................................... Recitals
Merger Consideration.......................................... 3.1(a)
Merger Sub.................................................... Preamble
NGCL.......................................................... Recitals
Offered Employee.............................................. 6.10
Release....................................................... 4.20(a)(v)
Stockholder................................................... Recitals
Stockholder Representative.................................... 8.1
Stockholders Agreement........................................ 3.1(a)(ii)
Surviving Corporation......................................... 2.1
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1.21 Interpretation Provisions
(a) The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement, and article,
section, schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. The term "or" is disjunctive but
not necessarily exclusive. The terms "include" and "including," however used,
are not limiting and mean "including without limitation."
(b) References to agreements and other documents shall be
deemed to include all subsequent amendments and other modifications thereto.
(c) References to statutes shall include all regulations
promulgated thereunder and references to statutes or regulations shall be
construed as including all statutory and regulatory provisions consolidating,
amending or replacing the statute or regulation.
(d) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
(e) The language used in this Agreement shall be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall under any circumstances be applied against any
Party.
II.
THE MERGER
2.1 The Merger. At the Effective Time (as defined in Section 2.3
hereof), Merger Sub shall be merged with and into Cell-Matrix upon the terms and
conditions set forth herein, as permitted by and in accordance with the DGCL and
the NGCL. Thereupon, the separate existence of Merger Sub shall cease and
Cell-Matrix shall continue as the surviving corporation. Cell-Matrix, in its
capacity as the corporation surviving the Merger, is sometimes referred to
herein as the "Surviving Corporation."
2.2 Effect of the Merger. At the Effective Time, the separate existence
of Merger Sub will cease, and the Surviving Corporation shall succeed to all the
rights and property, and be subject to all the debts and liabilities of the
Constituent Corporations, all without further act or deed and with the effects
of a merger as set forth in the DGCL and the NGCL.
2.3 Effective Time. The consummation of the Merger shall be effected as
promptly as practicable after the satisfaction or waiver of the conditions set
forth in Article VII hereof, provided that this Agreement has not been
terminated pursuant to Section 11.2 hereof, and the parties hereto will cause a
Certificate of Merger in the form attached hereto as Exhibit A (the "Certificate
of Merger") to be executed and filed with the Secretary of State of the State of
Delaware as provided in Section 251 of the DGCL and Articles of Merger in the
form attached hereto as Exhibit B (the "Articles of Merger") to be executed and
filed with the Secretary of State of the State of Nevada as provided in Section
92A.200 of the NGCL. The date on which
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the Merger shall become effective is referred to herein as the "Effective Date,"
and the time on the Effective Date at which the Merger shall become effective is
referred to herein as the "Effective Time." If the Secretary of State of the
State of Delaware requires any changes in the Certificate of Merger or the
Secretary of State of the State of Nevada requires any changes in the Articles
of Merger as a condition to filing or to issuing their certificates to the
effect that the Merger is effective, the parties shall execute any necessary
revisions incorporated in such changes, provided such changes are not
inconsistent with and do not result in any material change to the terms of this
Agreement.
2.4 Directors and Officers. From and after the Effective Time, the
directors and officers of the Surviving Corporation shall be the directors and
officers of Merger Sub immediately prior to the Effective Time. Such directors
and officers of the Surviving Corporation shall hold office for the term
specified in, and subject to the provisions contained in, the Bylaws of the
Surviving Corporation, applicable law and any agreements between any of such
directors or officers and Cell-Matrix or the Surviving Corporation entered into
as of the Effective Time. If, at or after the Effective Time, a vacancy shall
exist on the Board of Directors of Cell-Matrix or in any of the offices of the
Surviving Corporation, such vacancy shall be filled in the manner provided in
the Bylaws of the Surviving Corporation.
2.5 Certificate of Incorporation; Bylaws. From and after the Effective
Time and until further amended in accordance with applicable law, the
Certificate of Incorporation of Cell-Matrix as amended and restated in the
Certificate of Merger shall be the Certificate of Incorporation of the Surviving
Corporation. From and after the Effective Time and until further amended in
accordance with applicable law, the Bylaws of Cell-Matrix as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation.
2.6 Taking of Necessary Action; Further Action. Buyer, Merger Sub and
Cell-Matrix, respectively, each shall use its best efforts to take all such
action as may be necessary or appropriate to effectuate the Merger under the
DGCL and the NGCL at the time specified in Section 2.3 hereof. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right and title to and possession of all assets, property, rights,
privileges, powers and franchises of either of the Constituent Corporations, the
officers of the Surviving Corporation are fully authorized in the name of each
Constituent Corporation or otherwise to take, and shall take, all such lawful
and necessary action.
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2.7 The Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to the
provisions of Section 11.2, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 9:00 a.m. (Pacific time) on the
second business day after the satisfaction or waiver of all conditions set forth
in Article VII hereof, or at such other time and date as Buyer and Cell-Matrix
may mutually agree (such date and time on and at which the Closing occurs being
referred to herein as the "Closing Date"). The Closing shall take place at the
offices of Latham & Watkins, 12636 High Bluff Drive, Suite 300, San Diego,
California 92130, or at such other location as Buyer and Cell-Matrix may
mutually agree, and will be effective as of the Effective Time.
2.8 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, and each of
Buyer, Merger Sub and Cell-Matrix hereby adopts this Agreement as a "plan of
reorganization" for purposes of Treasury Regulations Section 1.368-2(g).
2.9 Cell-Matrix Closing Liabilities. Not more than five (5) nor less
than two (2) business days prior to the Closing Date, Cell-Matrix shall prepare
in good faith and deliver to Buyer a written schedule of Cell-Matrix's
liabilities (the "Closing Liabilities Schedule"), which schedule shall be
reasonably satisfactory to Buyer and shall set forth a description of the nature
of, and the estimated amount of, Cell-Matrix's consolidated liabilities,
determined in accordance with GAAP, that would be reflected on an audited
consolidated balance sheet of Cell-Matrix and its subsidiaries prepared as of
the Closing Date. The aggregate amount of Cell-Matrix's consolidated liabilities
set forth on the Closing Liabilities Schedule in excess of $3,500,000 (Three
Million Five Hundred Thousand U.S. Dollars) shall be the "Cell-Matrix Closing
Liabilities;" provided, however, that the amounts payable to Summit Bank shall
not be used to calculate the amount of liabilities in excess of $3,500,000.
III.
CONVERSION OF SECURITIES
3.1 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Buyer, Merger Sub, Cell-Matrix, the
Surviving Corporation or the holder of any securities of the foregoing:
(a) The shares of Cell-Matrix Common Stock issued and
outstanding immediately prior to the Effective Time shall be canceled and
extinguished and be converted in the aggregate into the right to receive the
consideration set forth below (the "Merger Consideration"). The Merger
Consideration will be as follows:
(i) On the Closing Date, Buyer will deliver to
the Stockholder Representative, for delivery to the Stockholders upon their
surrendering in accordance with Section 3.1(f) below the certificates formerly
representing their shares of Cell-Matrix Common Stock, certificates representing
an aggregate number of shares of Buyer Preferred Stock equal to (A) $6,000,000
(Six Million U.S. Dollars) less the amount of Cell-Matrix Closing Liabilities
and the Selling Expenses, divided by (B) the Buyer Preferred Stock Price, and
rounded down to the nearest whole share; and
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(ii) On the Closing Date, Buyer will deposit into
an escrow account (the "Escrow Account") certificates representing an aggregate
number of shares of Buyer Preferred Stock equal to (A) $500,000 (Five Hundred
Thousand U.S. Dollars), divided by (B) the Buyer Preferred Stock Price, and
rounded down to the nearest whole share. The amount deposited in the Escrow
Account will be available for the satisfaction of claims with respect to
representations, warranties and covenants of Cell-Matrix. The Escrow Account
will be administered by an independent escrow agent acceptable to the Parties
pursuant to an agreement in the form attached hereto as Exhibit C (the "Escrow
Agreement") to be executed by Buyer and Cell-Matrix and to be adopted by the
Stockholders through execution of the Stockholders Agreement in the form
attached hereto as Exhibit D (the "Stockholders Agreement"). Any fees or charges
on the Escrow Account shall be paid by Cell-Matrix. Any dividends or other
distributions on the shares held in the Escrow Account will be added to the
shares held in the Escrow Account and will be released along with the shares and
any other property in the account in accordance the Escrow Agreement and the
following terms and conditions. The shares and other property, if any, held in
the Escrow Account will be released to the Stockholders within five (5) days
after the Escrow Termination Date, except to the extent of any indemnity claim
previously asserted in good faith (as to which the number of shares reasonably
necessary to satisfy such claim shall continue to be held in the Escrow
Account). For purposes of this Section 3.1(a)(ii) and the Escrow Agreement, the
value of one share of Buyer Preferred Stock shall be deemed to be equal to the
Buyer Preferred Stock Price.
(iii) On the Closing Date, Buyer will deliver to
the Stockholder Representative the cash payment in lieu of fractional shares
contemplated in Section 3.4 hereof, for delivery to the Stockholders upon their
surrendering in accordance with Section 3.1(f) below the certificates formerly
representing their shares of Cell-Matrix Common Stock.
(b) The shares of Buyer Preferred Stock to be delivered
to the Stockholder Representative for delivery to the Stockholders and the
shares of Buyer Preferred Stock deposited into the Escrow Account, shall be
allocated among the Stockholders in the manner set forth in Section 3.1 of
Cell-Matrix Disclosure Schedule. The shares of Buyer Preferred Stock to be
issued will not be registered under the Securities Act and Buyer will have no
duty to register such shares.
(c) As of the Effective Time, each outstanding option to
purchase a share of Cell-Matrix Common Stock (each, a "Cell-Matrix Stock
Option") granted by Cell-Matrix under the Cell-Matrix, Inc. 2000 Stock Option
Plan (the "Equity Plan") and each other security, whether debt or equity, of
Cell-Matrix, including without limitation each warrant or other security
exercisable or convertible into shares of capital stock or other securities of
Cell-Matrix, shall be terminated or canceled and cease to be outstanding,
without further consideration to the holder thereof, and such holder shall have
no further rights pertaining to such Cell-Matrix Stock Option or such other
security of Cell-Matrix.
(d) Each share of Cell-Matrix Common Stock issued and
outstanding immediately prior to the Effective Time and owned or held in
treasury by Cell-Matrix shall be canceled and extinguished, and no payment shall
be made with respect thereto.
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(e) Each share of Common Stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one share of Cell-Matrix Common Stock.
(f) On the Closing Date, each of the Stockholders of
Cell-Matrix will deliver to the Buyer certificates representing all of his or
her Cell-Matrix Common Stock, duly endorsed or accompanied by duly executed
assignment documents. If any certificate for shares of Buyer Preferred Stock is
to be issued in a name other than that in which the corresponding certificate
for shares of Cell-Matrix Common Stock so surrendered is then registered, such
surrender shall be accompanied by payment of any applicable transfer taxes and
documents required for a valid transfer.
3.2 No Further Rights in Cell-Matrix Common Stock. Subject to Section
3.4 below, all shares of Buyer Preferred Stock delivered or issued upon
conversion of the shares of Cell-Matrix Common Stock in accordance with the
terms of this Agreement shall be deemed to have fully satisfied all rights
pertaining to the shares of Cell-Matrix Common Stock.
3.3 Stock Transfer Books. As of the date hereof, the stock transfer
books of Cell-Matrix shall be closed, and, except for the conversion of
outstanding convertible securities and the exercise of outstanding warrants or
stock options, there shall be no further registration of transfers of
Cell-Matrix Common Stock thereafter on the records of Cell-Matrix. From and
after the Effective Time, the Stockholders shall cease to have any rights with
respect to Cell-Matrix Common Stock except as otherwise provided in this
Agreement or by law.
3.4 Fractional Shares. No fractional shares of Buyer Preferred Stock
and no certificates or scrip certificates therefor shall be issued to represent
any such fractional interest pursuant to this Agreement. In lieu of any such
fractional shares, each of the Stockholders who would otherwise have been
entitled to a fractional share of Buyer Preferred Stock upon surrender of
certificates for exchange will be paid an amount in cash (without interest)
equal to the product of (a) the fraction of one share to which such Stockholder
otherwise would have been entitled, multiplied by (b) the Buyer Preferred Stock
Price.
IV.
REPRESENTATIONS AND WARRANTIES OF CELL-MATRIX
Except as is otherwise set forth with appropriate section references
(other than as provided in Section 11.1 hereof) in Cell-Matrix Disclosure
Schedule, Cell-Matrix hereby makes the representations and warranties set forth
below to Buyer and Merger Sub as of the date hereof.
4.1 Due Organization. Cell-Matrix is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada, and
has all requisite corporate power and authority to own, lease and operate its
properties and conduct its business as it is presently conducted and as proposed
to be conducted. Cell-Matrix is duly qualified to do business as a foreign
corporation or other entity and is in good standing in each state of the United
States in which such qualification is necessary under the applicable law as a
result of the conduct of its business or the ownership of its properties, except
where the failure to be so qualified would not
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have a Material Adverse Effect on Cell-Matrix. The only state in which
Cell-Matrix is qualified to do business as a foreign corporation or other entity
is California.
4.2 Capitalization of Cell-Matrix. The authorized capital stock of
Cell-Matrix consists of 10,000,000 shares of Cell-Matrix Common Stock, of which
(i) 969,000 shares are duly issued and outstanding, fully paid and
non-assessable; and (ii) 37,000 are held in treasury.
Section 4.2 of Cell-Matrix Disclosure Schedule contains a true, complete and
correct list of the Stockholders, including the number of shares of Cell-Matrix
Common Stock held of record and beneficially by each of them and their state of
residency. Except as set forth in Section 4.2 of the Cell-Matrix Disclosure
Schedule, all such outstanding shares are duly authorized, validly issued, fully
paid and nonassessable and free of all liens, claims and Encumbrances, and were
issued in compliance with applicable securities laws. Cell-Matrix has not issued
any securities, including, but not limited to, options, warrants or other
securities convertible into or exercisable for shares of capital stock of
Cell-Matrix or other securities of Cell-Matrix, nor has Cell-Matrix repurchased,
redeemed or otherwise acquired any of its outstanding shares of capital stock.
4.3 Subsidiaries. Cell-Matrix does not own any stock, partnership
interest, membership interest, joint venture interest or any other security or
ownership interest issued by any other corporation, or by any partnership,
limited liability company, organization or other entity.
4.4 Authorization. Cell-Matrix has all necessary corporate power and
authority, and has taken all corporate action necessary (including obtaining the
approval of the holders of all capital stock of Cell-Matrix), to execute and
deliver this Agreement, to consummate the transactions contemplated hereby and
to perform its obligations hereunder. The execution and delivery of this
Agreement by Cell-Matrix and the consummation by Cell-Matrix of the transactions
contemplated hereby have been duly approved by the Board of Directors of
Cell-Matrix. No other corporate proceedings on the part of Cell-Matrix are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Cell-Matrix and is a
legal, valid and binding obligation of Cell-Matrix, enforceable against
Cell-Matrix in accordance with its terms, subject to general principles of
equity and laws of general application relating to bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally, regardless of
whether considered in a proceeding in equity or at law.
4.5 Non-Contravention. Except as set forth in Section 4.5 of the
Cell-Matrix Disclosure Schedule, the execution, delivery and performance of this
Agreement by Cell-Matrix and the consummation by Cell-Matrix of the transactions
contemplated hereby do not and will not, with or without the giving of notice or
the lapse of time, or both, violate, conflict with, result in the breach of or a
default under, or accelerate the performance required by or under any of the
terms, conditions or provisions of, (i) the charter, bylaws or other
organizational documents of Cell-Matrix or (ii) any covenant, agreement,
commitment or understanding (including any license or sub-license agreement,
covenant not to compete, employment agreement or consulting agreement) to which
Cell-Matrix is a party or by which any of its assets are bound except as set
forth in Section 4.5 of Cell-Matrix Disclosure Schedule, or (iii) any Permit,
authorization, order, ruling, decree, judgment or arbitration award, or any law,
rule, regulation or stipulation, to which
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Cell-Matrix or any of its assets is subject, or result in the creation of any
Encumbrance upon any of the properties or assets of Cell-Matrix other than with
respect to (ii) and (iii) above, such conflicts, breaches, defaults or resulting
Encumbrances which will not in the aggregate result in a Material Adverse
Effect.
4.6 Consents and Approvals. Except as set forth in Section 4.6 of the
Cell-Matrix Disclosure Schedule, no consent, approval or authorization of, or
declaration, filing or registration with, any federal, state, local, foreign or
other governmental or regulatory authority, or any other Person, is required to
be made or obtained by Cell-Matrix or by the Stockholders in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, except for (a) compliance with applicable
securities laws and (b) the filing of all documents necessary to consummate the
Merger with the Secretary of State of the State of Delaware and the Secretary of
State of the State of Nevada.
4.7 Financial Statements.
(a) The unaudited financial statements of Cell-Matrix as
of and for the years ended December 31, 1999 and 2000 (the "Annual Financial
Statements"), as set forth in Exhibit E hereto, and the unaudited balance sheet
of Cell-Matrix as of December 31, 2001 (the "Interim Date") and the unaudited
income statement of Cell-Matrix for the twelve-month period ended on the Interim
Date, in each case as set forth in Exhibit F hereto (the "Interim Financial
Statements" and, together with the Annual Financial Statements, the "Financial
Statements"), (i) are complete and accurate in all material respects and are
consistent with the books and records of Cell-Matrix (which are complete and
accurate in all material respects), (ii) have been prepared in accordance with
GAAP consistently applied as of the dates and for the periods covered thereby
and (iii) fairly present, in accordance with GAAP consistently applied as of the
dates and for the periods covered thereby, the financial condition and results
of operations of Cell-Matrix as of the dates and for the periods then ended and
include no change in the application of accounting principles; provided,
however, that the Interim Financial Statements do not include footnote
disclosures in accordance with GAAP and are subject to year-end adjustments
(which adjustments and omitted footnote disclosures are not in the aggregate
material).
(b) The information set forth on the Closing Liabilities
Schedule is a true and accurate description of all of the Liabilities of
Cell-Matrix as of the Closing Date, and, except as set forth on the Closing
Liabilities Schedule, Cell-Matrix shall have no Liabilities as of the Closing.
4.8 No Undisclosed Liabilities. At the Interim Date, Cell-Matrix had no
liabilities, obligations or commitments of any nature (absolute, accrued,
contingent or otherwise) matured or unmatured (collectively, "Liabilities"),
except (a) Liabilities which are adequately reflected or reserved against in the
Interim Financial Statements or (b) Liabilities disclosed in Section 4.8 of
Cell-Matrix Disclosure Schedule. Cell-Matrix has not taken any action which has
resulted in a waiver or extension of the statute of limitations applicable to
any of its Liabilities. Cell-Matrix has not since the Interim Date, and will not
prior to the Closing, incur any Liabilities except in the ordinary course of
business, none of which will have a Material Adverse Effect on Cell-Matrix.
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4.9 No Changes. Since the Interim Date Cell-Matrix has conducted its
business only in the ordinary course. Without limiting the generality of the
foregoing sentence, except as disclosed in Section 4.9 of Cell-Matrix Disclosure
Schedule, since the Interim Date there has not been:
(a) any material change in the financial condition,
assets, liabilities, net worth or business of Cell-Matrix;
(b) any damage, destruction or loss, whether or not
covered by insurance, adversely affecting the properties in the aggregate or
business of Cell-Matrix, or any deterioration in the operating condition of
Cell-Matrix's assets;
(c) any mortgage, pledge or actual or pending lien,
charge or Encumbrance of any kind of any of Cell-Matrix's assets, tangible or
intangible;
(d) any strike, walkout, labor trouble or any other new
or continued event, development or condition of similar character at
Cell-Matrix;
(e) any declaration, setting aside or payment of a
dividend or other distribution in respect of any of the stock of Cell-Matrix, or
any direct or indirect redemption, purchase or other acquisition of any stock of
Cell-Matrix or any rights to purchase such stock or securities convertible into
or exchangeable for such stock;
(f) any increase in the salaries or other compensation
payable or to become payable to, or any advance (excluding advances for ordinary
business expenses) or loan to, any officer, director, employee, agent or
Stockholder of Cell-Matrix, or any increase in, or any addition to, other
benefits (including without limitation any bonus, profit sharing, pension or
other plan) to which any of Cell-Matrix's officers, directors, employees, agents
or Stockholders may be entitled, or any payments to any pension, retirement,
profit sharing, bonus or similar plan except payments in the ordinary course of
business and consistent with past practice made pursuant to the employee benefit
plans described in Section 4.17 of Cell-Matrix Disclosure Schedule, or any other
payment of any kind to or on behalf of any such officer, director, employee,
agent or Stockholder other than payment of base compensation and reimbursement
or advance for reasonable business expenses in the ordinary course of business;
(g) any making or authorization of any capital
expenditures in excess of $5,000 per month;
(h) any cancellation or waiver of any right material to
the operation of Cell-Matrix's business or any cancellation or waiver of any
debts or claims;
(i) any sale, transfer or other disposition of any assets
of Cell-Matrix;
(j) any payment, discharge or satisfaction of any
Liability by Cell-Matrix, other than the payment, discharge or satisfaction, in
the ordinary course of business, of Liabilities shown or reflected on the
Interim Financial Statements;
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(k) any material adverse change or any threat of any
material adverse change in Cell-Matrix's relations with, or any loss or threat
of loss of, any of Cell-Matrix's material customers, clients or suppliers,
including without limitation, Cell-Matrix's licensees and licensors;
(l) any write-offs as uncollectable of any notes or
accounts receivable of Cell-Matrix or write-downs of the value of any assets by
Cell-Matrix;
(m) any change by Cell-Matrix in any method of accounting
or keeping its books of account, accounting practices, investment practices, or
claims, payment and processing practices or policies;
(n) any creation, incurrence, assumption or guarantee by
Cell-Matrix of any Liabilities, except in the ordinary course of business, or
any creation, incurrence, assumption or guarantee by Cell-Matrix of any
indebtedness for money borrowed (other than renewals on comparable terms of
Liabilities reflected on the Interim Financial Statements);
(o) any payment, loan or advance of any amount to or in
respect of, or any transfer or lease of any properties or assets (whether real,
personal or mixed, tangible or intangible) to, or entering into of any
agreement, arrangement or transaction with, any Related Party except for
compensation to the officers and employees of Cell-Matrix at rates not exceeding
the rates of compensation disclosed in Section 4.18 of Cell-Matrix Disclosure
Schedule or as permitted in clause (f) of this Section 4.9;
(p) any disposition of or failure to keep in effect any
rights in, to or for the use of any patent, trademark, service mark, trade name
or copyright, or any disclosure to any Person not an employee or Related Party
(other than disclosures to Cell-Matrix, Buyer or those made in the ordinary
course of business pursuant to an effective confidentiality agreement) or other
disposal of any trade secret, process or know-how used by Cell-Matrix in its
business;
(q) any transaction, agreement or event outside the
ordinary course of Cell-Matrix's business;
(r) any amendment to the charter, bylaws or other
organizational documents of Cell-Matrix; or
(s) any failure to maintain in full force and effect
substantially the same level and types of insurance coverage as in effect on the
Interim Date.
4.10 Accounts Receivable. All of the accounts and notes receivable of
Cell-Matrix fairly state, consistent with GAAP, amounts receivable for services
actually provided or merchandise actually delivered (or, in the case of
non-trade accounts or notes, represent amounts receivable in respect of other
bona fide business transactions) and have arisen in the ordinary course of
business. All such receivables are fully collectible in the normal and ordinary
course of business. Section 4.10 of Cell-Matrix Disclosure Schedule sets forth
(a) the total amount of accounts receivable of Cell-Matrix outstanding as of the
last day of the month immediately preceding the present month and (b) the agings
of such receivables based on the following schedule: 0-30 days, 31-60 days and
over 60 days, from the due date thereof.
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4.11 Title to and Condition of Assets.
(a) Cell-Matrix does not own any real property. Section
4.12 of Cell-Matrix Disclosure Schedule contains a complete and accurate list of
all real property (including, without limitation, offices, buildings and other
structures) leased by Cell-Matrix and any rights that Cell-Matrix may have in
real property (including, without limitation, easements and rights-of-way and
access). Section 4.11 of Cell-Matrix Disclosure Schedule identifies all tangible
personal property and rights in tangible personal property of Cell-Matrix in
excess of $1,000 in value. All material tangible properties and assets owned or
leased by Cell-Matrix are, except for changes in the ordinary course of business
after the Interim Date, reflected in the Interim Financial Statements.
Cell-Matrix owns good and marketable fee, or valid leasehold, title to the real
and personal property owned or leased by it, free and clear of all Encumbrances,
except (i) as reflected in the Financial Statements, (ii) for Encumbrances
created by the lessors thereof, (iii) for Encumbrances related to Taxes not yet
due and payable by Cell-Matrix and (iv) as set forth in Section 4.11 of
Cell-Matrix Disclosure Schedule (none of which Encumbrances, except as disclosed
in Section 4.11 of Cell-Matrix Disclosure Schedule, impairs the current use or
diminishes the value of any material item of property to any material extent).
(b) All of the material equipment and tangible personal
property owned or leased by Cell-Matrix is in good operating condition and
repair and none of such assets is in need of maintenance or repairs except for
ordinary, routine maintenance.
4.12 Leases, Premises. Section 4.12 of Cell-Matrix Disclosure Schedule
lists all real property leases, subleases, amendments, options and other
leasehold interests to which Cell-Matrix is a party (the "Leases"), true and
correct copies of which have been previously provided to Buyer. All of the
Leases are valid and binding, in full force and effect and enforceable against
Cell-Matrix and the other parties thereto in accordance with their terms,
subject to general principles of equity and laws of general application relating
to bankruptcy, insolvency, moratorium or similar laws affecting creditors'
rights generally, regardless of whether considered in a proceeding in equity or
at law. Cell-Matrix is not in default under any Lease, and no event exists which
with notice or lapse of time or both would constitute a default or an event of
default by Cell-Matrix thereunder. To the Knowledge of Cell-Matrix, such leased
properties are not subject to any Encumbrances, encroachments, zoning
ordinances, administrative regulations or building or use restrictions which
interfere with or impair the present and continued use thereof in the usual and
normal conduct of the business of Cell-Matrix. Upon the request of Buyer,
Cell-Matrix shall promptly prepare and deliver to Buyer a description of the
commencement date, the termination date, the monthly rent, the square feet, any
rent escalation provisions, any mandatory or elective expansion provisions, any
renewal options and any early termination options covered by each Lease. That
certain lease dated December 1, 1999 (the "Master Lease"), by and between Ross
Sausedo and Margaret Dilsaver, as Trustees of The Steve Sausedo and Lucille
Sausedo 1981 Trust UDT dated February 5, 1981 (the "Master Landlord") and
Bio-Management, Inc., is in full force and effect, has not been amended, and is
enforceable against the parties thereto in accordance with its terms, subject to
general principles of equity and laws of general application relating to
bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights
generally, regardless of whether considered in a proceeding in equity or at law.
To the
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Knowledge of Cell-Matrix, neither the Master Landlord nor VBI, Inc., a
California corporation, is in default under any of the terms of the Master
Lease.
4.13 Contracts and Commitments. Except as set forth in Section 4.13 of
Cell-Matrix Disclosure Schedule, Cell-Matrix is not a party to any written or
oral:
(a) contract, agreement, commitment or personal property
lease which requires Cell-Matrix to make payments thereunder in excess of
$10,000;
(b) note, loan or evidence of indebtedness on the part of
Cell-Matrix;
(c) contracts, agreements or commitments not otherwise
described in (a) or (b) above which are not in the ordinary course of
Cell-Matrix's business or which materially affect Cell-Matrix's business;
(d) contracts, agreements or commitments containing
covenants limiting the freedom of Cell-Matrix to engage in any line of business
or compete with any other Person;
(e) partnership or joint venture agreements;
(f) agreements under which Cell-Matrix may be required to
pay any royalties, honoraria, fees or other payments to any Person by reason of
Cell-Matrix's ownership, use, license, sales or disposition of the Intellectual
Property of the Person;
(g) agreements under which Cell-Matrix may be entitled to
royalties, honoraria, fees or other payments from any Person by reason of such
Person's ownership, use, license, sale or disposition of Cell-Matrix
Intellectual Property; or
(h) contracts, agreements or commitments which have an
unexpired term in excess of twelve (12) months from the date hereof, other than
those which can be terminated on not more than thirty (30) days notice without
Liability to Cell-Matrix or Buyer.
Neither Cell-Matrix nor, to the Knowledge of Cell-Matrix, any other party
thereto is in default (nor does any circumstance exist which, with notice or the
lapse of time or both, would result in such a default) under any agreement,
contract, lease or commitment described in this Section 4.13 (the "Material
Contracts"). Each of the Material Contracts is in full force and effect, is
valid and binding and is enforceable against Cell-Matrix and each other party
thereto in accordance with its terms, subject to general principles of equity
and laws of general application relating to bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights generally, regardless of whether
considered in a proceeding in equity or at law. Cell-Matrix has delivered to
Buyer true and correct copies of the Material Contracts. Copies of each personal
property lease have been provided to Buyer and Section 4.13 of Cell-Matrix
Disclosure Schedule sets forth a list of such leases. Upon the request of Buyer,
Cell-Matrix shall promptly prepare and deliver to Buyer (with no representation
as to the truth or accuracy of such information) a description of the leased
property, the monthly rent, the term of the lease and any options to purchase
the leased property covered by each personal property lease listed in Section
4.13 of Cell-Matrix Disclosure Schedule.
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4.14 Litigation, Proceedings and Applicable Law. Except as set forth in
Section 4.14 of Cell-Matrix Disclosure Schedule, there is no action, suit or
other proceeding pending or threatened against Cell-Matrix. Except as set forth
in Section 4.14 of Cell-Matrix Disclosure Schedule, to the Knowledge of
Cell-Matrix, there is no investigation pending or threatened against
Cell-Matrix. Cell-Matrix is not in default with respect to any judgment, order,
writ, injunction or decree of any court or governmental agency. Cell-Matrix is
subject to no outstanding order, ruling, decree, judgment or stipulation by or
with any court, administrative agency, arbitration panel or other similar
authority.
4.15 Compliance with Law. Except with respect to any environmental
matters, as to which Section 4.20 shall be applicable, (a) Cell-Matrix has
complied and is now in compliance with all federal, state, local and foreign
laws, ordinances and regulations (including, without limitation, those relating
to employment and employment practices and occupational safety and health, but
excluding any laws, ordinances and regulations relating to occupational safety
and health which are covered by Section 4.18) applicable to Cell-Matrix, (b) no
written claims or complaints have been received by Cell-Matrix from any
governmental authorities or other parties that Cell-Matrix is in violation of
any such laws, ordinances and regulations, including any applicable building,
zoning, occupational safety and health or similar law, ordinance or regulation
(but excluding any laws, ordinances and regulations relating to occupational
safety and health which are covered by Section 4.18) in relation to its offices,
buildings or other structures or equipment, or the operation thereof, or of any
applicable fair employment, equal opportunity or similar law, ordinance or
regulation and no such claims or complaints have been threatened and (c)
Cell-Matrix has not received any notice from any governmental authorities of any
pending proceedings to take all or any part of the properties of Cell-Matrix
(whether leased or owned) by condemnation or right of eminent domain and no such
proceedings are threatened. Section 4.15 of Cell-Matrix Disclosure Schedule sets
forth all Permits issued or required to be issued as of the date hereof to
Cell-Matrix with respect to the ownership or lease of its properties and assets
or the conduct of its business, except for those environmental Permits as to
which Section 4.20 applies. Cell-Matrix has not failed to comply with, nor is it
in violation of, any such Permit, and all such Permits are final and in full
force and effect and are not subject to any appeals or further proceedings or to
any unsatisfied conditions (other than normal renewal procedures on comparable
terms). No modification, suspension, rescission, relocation or cancellation of
any such Permit, or any proceeding with respect to any of the foregoing, is
pending or threatened.
4.16 Insurance. Section 4.16 of Cell-Matrix Disclosure Schedule sets
forth a complete and accurate list of all casualty, business interruption,
directors and officers liability, general liability, workers' compensation and
other types of insurance maintained by or for the benefit of Cell-Matrix,
together with the names of the policyholder, carriers and insureds, additional
insureds and loss payees, and the liability limits and expiration date for each
such policy and (b) a description of any risks for which Cell-Matrix is
self-insured and the amount of reserves established for such purpose. Each
policy is in force, and no notice has been received by Cell-Matrix from any
insurance carrier purporting to cancel or refuse renewal, reduce or dispute
coverage under any such policy. All premiums or other payments due under all
such policies have been paid in accordance with the payment schedule established
under each such policy. Section 4.16 of Cell-Matrix Disclosure Schedule
identifies which insurance policies are
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"occurrence" or "claims made." Cell-Matrix is not in default under any of such
policies or binders, and Cell-Matrix has not failed to give any notice or to
present any claim under any such policy or binder in a due and timely fashion.
No policy aggregates, limits or maximums affecting the coverage available on
Cell-Matrix's insurance policies have been reached or exceeded for any policy
years commencing on or after the date of incorporation of Cell-Matrix.
4.17 Benefit Plans.
(a) With respect to each employee benefit plan ("Benefit
Plan"), as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), maintained by Cell-Matrix covering any
employee of Cell-Matrix, Cell-Matrix has made available to Buyer, where
applicable, a true, correct and complete copy of (i) the most recent annual
report (Form 5500) filed with the Internal Revenue Service, (ii) such Benefit
Plan, (iii) each trust agreement and group annuity contract, if any, relating to
such Benefit Plan and (iv) the most recent actuarial report or valuation
relating to a Benefit Plan subject to Title IV of ERISA. Set forth on Section
4.17(a) of Cell-Matrix Disclosure Schedule is a list of each such Benefit Plan.
(b) With respect to all Benefit Plans maintained or
contributed to by Cell-Matrix or any of its subsidiaries, individually and in
the aggregate, there exists no condition or set of circumstances, in connection
with which Cell-Matrix or any of its subsidiaries would be subject to any
Liability (except Liability for benefits claims and funding obligations payable
in the ordinary course) under ERISA, the Code or any other applicable law.
(c) With respect to all Benefit Plans maintained or
contributed to by Cell-Matrix or any of its subsidiaries, individually and in
the aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded obligations
which have not been accounted for by reserves.
(d) All Benefit Plans maintained or contributed to by
Cell-Matrix or any of its subsidiaries have been operated in compliance with the
applicable provisions of ERISA and the Code and all reports and returns required
to be filed thereunder have been duly and timely filed. No prohibited
transactions within the meaning of Title I of ERISA or Section 4975(c)(1) of the
Code have occurred with respect to said plans. Neither Cell-Matrix nor any of
its subsidiaries is a party or has contributed to any Multiemployer Plan as
defined in Section 3(37) of ERISA. Each of Cell-Matrix and its subsidiaries has
complied with the continuation of coverage and notification requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985 and former Section 162(k)
and Section 4980B of the Code and Sections 601 through 608 of ERISA.
4.18 Labor Matters. Cell-Matrix is not a party to any labor agreement
with respect to its employees with any labor organization, union, group or
association and there are no employee unions (nor any other similar labor or
employee organizations) under local statutes, custom or practice. Since its
inception, Cell-Matrix has not experienced any attempt by organized labor or its
representatives to make Cell-Matrix conform to demands of organized labor
relating to its employees or to enter into a binding agreement with organized
labor that would cover the employees of Cell-Matrix. There is no labor strike or
labor disturbance pending or threatened against Cell-Matrix nor is any grievance
currently being asserted, and Cell-Matrix has not
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experienced a work stoppage or other labor difficulty since the date of its
incorporation. Cell-Matrix is in compliance with all applicable laws respecting
employment practices, employee documentation, terms and conditions of employment
and wages and hours and is not and has not engaged in any unfair labor practice.
There is no unfair labor practice charge or complaint against Cell-Matrix
pending before the National Labor Relations Board or any other domestic or
foreign governmental agency arising out of Cell-Matrix's activities, and there
are no facts or information which would give rise thereto. Section 4.18 of the
Cell-Matrix Disclosure Schedule sets forth the name, position, salary level,
bonus entitlement and any other material financial information pertaining to
such employee, of each of the Offered Employees.
4.19 Tax Matters.
(a) Cell-Matrix has timely filed all Tax Returns required
to be filed by it. All such Tax Returns are true, correct and complete in all
material respects. Cell-Matrix has made timely payment of all Taxes required to
be paid on or before the date hereof and adequate reserves for unpaid Tax
liabilities (excluding reserves for deferred Taxes to reflect timing differences
between book and taxable income) have been established on the Financial
Statements. Cell-Matrix has fulfilled all withholding obligations relating to
Taxes and has paid or remitted to the appropriate governmental authorities the
proper amounts with respect to the foregoing.
(b) Cell-Matrix has not waived any statute of limitations
in respect of Taxes or agreed to an extension of time with respect to the period
for assessment or collection of Taxes. Neither the Internal Revenue Service nor
any foreign, state, local or other taxing authority is now asserting or
threatening to assert any claim for assessment or collection of any Taxes
against Cell-Matrix. There are no audits or other administrative proceedings or
court proceedings presently pending with regard to any Taxes or Tax Returns of
Cell-Matrix. Cell-Matrix has not received any written notice or announcement of
any audits or proceedings.
(c) Immediately prior to the Closing, Cell-Matrix will
have no net operating losses, tax credit carryovers or other tax attributes
presently subject to limitation under Sections 382, 383 and 384 of the Code,
Treasury Regulation Section 1.1502-15T or 21T or otherwise.
(d) Cell-Matrix is not a party to, or bound by, any tax
sharing, tax allocation or similar agreement.
(e) Cell-Matrix has not made any payments, is not
obligated to make any payments, and is not a party to any agreement, contract,
arrangement or plan that will obligate it to make any payments not deductible
under Section 280G of the Code with respect to the transactions contemplated
hereby. Cell-Matrix has not agreed to make, nor will it be required to make as a
result of any of the transactions contemplated hereby, any adjustment under
Section 481 of the Code (or any similar provision of the Tax laws of any
jurisdiction).
(f) Cell-Matrix has not filed a consent under Section
341(f) of the Code (or any similar provision of state, local or foreign law)
concerning collapsible corporations, and will not file such a consent.
Cell-Matrix has not agreed to have Section 341(f)(2) of the Code apply to any
disposition of any asset owned by it.
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(g) No Stockholder is a "foreign person" as defined in
Code Section 1445(f)(3). Cell-Matrix has not been a United States Real Property
Holding Corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code and
Buyer is not required to withhold tax on the purchase of stock of Cell-Matrix by
reason of Code Section 1445.
(h) Cell-Matrix (i) has not been a member of an
affiliated group filing a consolidated federal income tax return and (ii) has no
Liability for the Taxes of any Person (other than any Taxes of Cell-Matrix)
under Treasury Regulation Section 1.1502-6 (or any similar state, local or
foreign law), as a transferee or successor.
(i) There are no liens for Taxes (other than for current
taxes not yet due and payable) upon the assets of Cell-Matrix.
(j) Cell-Matrix has not taken any positions on its
federal income Tax Returns that would require disclosure in order to avoid a
substantial understatement penalty within the meaning of Section 6662 of the
Code.
(k) Cell-Matrix has furnished to Buyer (i) true, complete
and correct copies of all federal, foreign, state and local income or franchise
Tax Returns filed for Cell-Matrix with respect to all open Tax years; (ii) true,
complete and correct copies of all audit reports, statements of deficiencies,
closing or other agreements received by Cell-Matrix from Tax authorities related
to Taxes, including, without limitation, all reports, statements, memoranda and
opinions, whether formal or informal, regarding audits and examinations that
have begun but have not been completed; (iii) a list of all elections in effect
with respect to Taxes that will survive the Closing and (iv) a schedule that
contains an accurate and complete description of any carryovers of Tax
attributes.
(l) Cell-Matrix has filed all reports and created and/or
retained all records required under Code Section 6038A with respect to
transactions with related parties.
(m) Cell-Matrix has no Liability pursuant to Section 6901
of the Code or otherwise under applicable law by virtue of any transfer of an
asset or assets to it, and Buyer will not be subject to such Liability as a
result of any of the transactions contemplated thereby.
(n) Cell-Matrix has not distributed stock of a
"controlled corporation" (within the meaning of Section 355(a) of the Code) in a
transaction subject to Code Section 355 within the past two years.
4.20 Environmental Matters.
(a) As used in this Agreement:
(i) "Cleanup" means all actions required to (A)
cleanup, remove, treat or remediate Hazardous Materials in the indoor or outdoor
environment; (B) prevent the Release of Hazardous Materials so that they do not
migrate, endanger or threaten to endanger public health or welfare of the indoor
or outdoor environment; (C) perform pre-remedial studies and investigations and
post-remedial monitoring and care or (D) respond to any government requests
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for information or documents in any way relating to cleanup, removal, treatment
or remediation or potential cleanup, removal, treatment or remediation of
Hazardous Materials in the environment.
(ii) "Environmental Claim" means any claim,
action, cause of action, investigation or notice (written or oral) by any Person
alleging potential Liability (including, without limitation, potential Liability
for investigatory costs, Cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (A) the presence, or Release into the
environment, of any Hazardous Materials at any location, whether or not owned or
operated by Cell-Matrix or (B) any violation of any Environmental Law.
(iii) "Environmental Laws" means all federal,
state, local and foreign laws and regulations relating to pollution or
protection of human health or the environment, including without limitation,
laws relating to Releases or threatened Releases of Hazardous Materials into the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
disposal, transport or handling of Hazardous Materials and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Materials, and all laws relating to
endangered or threatened species of fish, wildlife and plants and the management
or use of natural resources.
(iv) "Hazardous Materials" means all substances
defined as Hazardous Substances, Oils, Pollutants or Contaminants in the
National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.
Section 300.5, or defined as such by, or regulated as such under, any
Environmental Law.
(v) "Release" means any release, spill,
emission, discharge, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the environment (including, without
limitation, ambient air, surface water, groundwater and surface or subsurface
strata) or into or out of any property, including the movement of Hazardous
Materials through or in, the air, soil, surface water, groundwater or property.
(b) Cell-Matrix is in compliance with all applicable
Environmental Laws (which compliance includes, but is not limited to, the
possession by Cell-Matrix of all Permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof). Cell-Matrix has not received any communication (written or
oral), whether from a governmental authority or a third party, that alleges that
Cell-Matrix is not in such compliance, and there are no past or present actions,
activities, circumstances, conditions, events or incidents that may prevent or
interfere with such compliance in the future. All Permits and other governmental
authorizations currently held by Cell-Matrix pursuant to applicable
Environmental Laws are identified in Section 4.20 of Cell-Matrix Disclosure
Schedule.
(c) No transfers of Permits or other governmental
authorizations under Environmental Laws, and no additional Permits or other
governmental authorizations under
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Environmental Laws, will be required for Cell-Matrix to conduct its business in
full compliance with all applicable Environmental Laws immediately following the
Closing.
(d) There is no Environmental Claim pending or threatened
against Cell-Matrix or against any Person whose liability for any Environmental
Claim Cell-Matrix has or may have retained or assumed either contractually or by
operation of law.
(e) There are no past or present actions, activities,
circumstances, conditions, events or incidents caused or created by Cell-Matrix
or, to the Knowledge of Cell-Matrix, caused or created by any third party,
including, without limitation, the presence or Release of any Hazardous
Material, which are reasonably likely to form the basis of any material
Environmental Claim against Cell-Matrix or against any Person whose Liability
for any Environmental Claim Cell-Matrix has or may have retained or assumed
either contractually or by operation of law.
(f) Cell-Matrix has not, and, to the Knowledge of
Cell-Matrix, no other Person has, Released, placed, buried or dumped Hazardous
Materials produced by, or resulting from, any business, commercial or industrial
activities, operations or processes, on or beneath any property currently or
formerly owned, operated or leased by Cell-Matrix.
(g) Cell-Matrix has delivered or otherwise made available
for inspection to Buyer true, complete and correct copies and results of any
reports, studies, analyses, tests or monitoring data possessed or initiated by
Cell-Matrix pertaining to Hazardous Materials in, on, beneath or adjacent to any
property currently or formerly owned, operated or leased by Cell-Matrix, or
regarding Cell-Matrix's compliance with applicable Environmental Laws.
(h) Without in any way limiting the generality of the
foregoing, to the Knowledge of Cell-Matrix, any properties owned, operated or
leased by Cell-Matrix do not contain any: (i) underground storage tanks;
asbestos; polychlorinated biphenyls; (ii) underground injection wells; (iii)
radioactive materials or (iv) septic tanks or waste disposal pits in which
process wastewater or any Hazardous Materials have been discharged or disposed.
(i) At the time Cell-Matrix commenced occupancy of the
property located at 1929 Zonal Avenue, Los Angeles, California, Cell-Matrix
undertook all appropriate inquiry consistent with good commercial and customary
practice into the previous use of such property.
4.21 Customers and Suppliers. Except as set forth in Schedule 4.21
of Cell-Matrix Disclosure Schedule, no customer or supplier accounted for more
than 10% of Cell-Matrix's sales or purchases in Cell-Matrix's last fiscal year
or current fiscal year to date. Section 4.21 of Cell-Matrix Disclosure Schedule
sets forth a complete and accurate list of Cell-Matrix's top ten customers (the
"Material Customers") in terms of gross sales volume for Cell-Matrix's last
fiscal year or current fiscal year to date. Cell-Matrix is not involved in any
claim with any Material Customer and is not involved in any dispute with other
customers which in the aggregate is reasonably likely to be deemed material. No
customer or supplier material to the business of Cell-Matrix (the "Material
Suppliers") has terminated or altered, or notified Cell-Matrix in writing of any
intention to terminate or alter, its relationship with Cell-Matrix, and
Cell-Matrix has no Knowledge that a Material Customer or a Material Supplier
will terminate or materially alter its relationship with Cell-Matrix.
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4.22 Books and Records. Cell-Matrix has made and kept books,
records and accounts which accurately reflect its activities and the acquisition
and disposition of its assets in all material respects. Cell-Matrix has made
available to Buyer complete and accurate, in all material respects, books and
records reflecting all proceedings of the Stockholders and Board of Directors of
Cell-Matrix, and complete and accurate copies of the Certificate of
Incorporation, Bylaws and other organizational documents of Cell-Matrix, in each
case as amended to the date hereof.
4.23 No Brokers. Cell-Matrix has not entered into nor will it enter
into any contract, agreement, arrangement or understanding with any Person which
will result in an obligation of Cell-Matrix, Buyer or Merger Sub to pay any
finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
4.24 Powers of Attorney. There are no outstanding powers of
attorney or similar authorizations given by Cell-Matrix.
4.25 Transactions With Related Parties. Except as set forth in
Section 4.25 of the Cell-Matrix Disclosure Schedule, Cell-Matrix has not entered
into a transaction with any Related Party other than at arms' length, and no
Related Party:
(a) has borrowed money from or loaned money to
Cell-Matrix which will not be repaid on or before or which will remain on the
books of Cell-Matrix following the Closing Date;
(b) has any contractual or other claim, express or
implied, of any kind whatsoever against Cell-Matrix; or
(c) has been engaged, since the date of incorporation of
Cell-Matrix, in any other transaction with Cell-Matrix (other than employment
relationships at no greater than the current salaries disclosed in Section 4.25
of Cell-Matrix Disclosure Schedule) or investments in Cell-Matrix.
4.26 Intellectual Property.
(a) Ownership and Adequacy. Cell-Matrix owns or has the
right to use all Intellectual Property necessary or desirable for the operation
of the business of Cell-Matrix as presently conducted and as proposed to be
conducted, or that is controlled or used, by and/or on behalf of Cell-Matrix, or
in which Cell-Matrix has any interest whatsoever ("Cell-Matrix Intellectual
Property"). Cell-Matrix has taken all necessary, commercially reasonable,
prudent, and desirable action(s) to perfect its ownership of, maintain, protect,
and safeguard each item of Cell-Matrix Intellectual Property. Each item of
Cell-Matrix Intellectual Property owned or used by Cell-Matrix immediately prior
to the Effective Time will be owned or available for use by the Buyer on
identical terms and conditions immediately subsequent to the Closing hereunder.
Upon Closing, Buyer will succeed to all of Cell-Matrix's right, title and
interest in and to Cell-Matrix Intellectual Property, including all rights,
claims and damages regarding past infringements of Cell-Matrix Intellectual
Property by any third party (and Cell Matrix's right to seek enforcement of all
such rights to prevent the infringement or misappropriation thereof), free and
clear of all liens, claims and Encumbrances. Section 4.26(a) of Cell-Matrix
Disclosure Schedule lists and
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identifies all Cell-Matrix Intellectual Property. True and correct copies of all
Cell-Matrix Intellectual Property (including all pending applications and
application related documents and materials) owned, controlled or used by or on
behalf of Cell-Matrix or in which Cell-Matrix has any interest whatsoever, as
amended prior to the Closing Date, have been provided or made available to
Buyer. Except as set forth in Section 4.26(a) of the Cell-Matrix Disclosure
Schedule, with respect to each item of Cell-Matrix Intellectual Property:
(i) Cell-Matrix possesses all right, title, and
interest in and to the item, free and clear of all liens, claims and
Encumbrances or other restrictions;
(ii) all necessary or desirable assignments,
documents, and certificates in connection with such Cell-Matrix Intellectual
Property have been filed with the relevant patent, trademark, copyright, or
other authorities in the United States or foreign jurisdictions, as applicable,
for purposes of maintaining such Cell-Matrix Intellectual Property;
(iii) except as provided in Section 4.26(a) of
Cell-Matrix Disclosure Schedule, the item is valid and subsisting, and all
necessary or desirable, annuities, filing, registration, maintenance, renewal
fees in conjunction with such Cell-Matrix Intellectual Property have been paid;
(iv) each such patent application, contains a
full, complete, and accurate written description sufficient to enable practice
of the invention and includes the best mode of practicing the invention known to
Cell-Matrix and/or the inventors; no undisclosed information, including without
limitation, any algorithm, is necessary to provide adequate written description,
to enable, or to disclose the best mode;
(v) except as set forth on Section 4.26(a) of
Cell-Matrix Disclosure Schedule, there are no actions that must be taken within
ninety (90) days of the Closing Date for the purposes of obtaining, maintaining,
perfecting, preserving, or renewing any Cell-Matrix Intellectual Property;
(vi) in each case where Cell-Matrix has acquired
any Cell-Matrix Intellectual Property from any Person, or jointly developed
Cell-Matrix Intellectual Property with any Person, Cell-Matrix has obtained a
valid, enforceable, and irrevocable transfer of all right, title, and interest
to the such Cell-Matrix Intellectual Property;
(vii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(viii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, enforceability, use, or ownership of
the item;
(ix) Cell-Matrix has never agreed to indemnify
any Person for or against any interference, infringement, misappropriation, or
other conflict with respect to the item; and
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(x) Cell-Matrix has not granted to any Person
any license, option or other rights to use in any manner any Cell-Matrix
Intellectual Property whether requiring the payment of royalties or not, with
respect to the item.
(b) Third Party Rights. Section 4.26(b) of Cell-Matrix
Disclosure Schedule identifies each item of Intellectual Property that any third
party owns and that Company uses pursuant to license, sublicense, agreement, or
permission. Cell-Matrix has delivered to the Buyer correct and complete copies
of all such licenses, sublicenses, agreements, and permissions, as amended prior
to the Closing Date. Cell-Matrix does not and will not interfere with, infringe
upon, misappropriate, or otherwise come into conflict with any Intellectual
Property rights of third parties as a result of the past or continued operation
of its business as presently conducted or as proposed to be conducted. Except as
provided in Section 4.26(b) of Cell-Matrix Disclosure Schedule, Cell-Matrix does
not have any contractual obligation to compensate any Person for the use of any
Cell-Matrix Intellectual Property. Except as set forth in Section 4.26(b) of the
Cell-Matrix Disclosure Schedule, with respect to each item of Intellectual
Property required to be identified in Section 4.26(b) of Cell-Matrix Disclosure
Schedule:
(i) the license, sublicense, agreement, or
permission covering such item is legal, valid, binding, enforceable, and in full
force and effect;
(ii) the license, sublicense, agreement, or
permission covering such item will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
(iii) no party to the license, sublicense,
agreement, or permission covering such item is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration thereunder;
(iv) no party to the license, sublicense,
agreement, or permission covering such item has repudiated any provision
thereof;
(v) with respect to each sublicense, the
representations and warranties set forth in subsections 4.26(b)(i) through (iv)
above are true and correct with respect to the underlying license;
(vi) no Person who has licensed Intellectual
Property to Cell-Matrix has any ownership rights or license or permission to use
any improvements made by Cell-Matrix in such Intellectual Property;
(vii) the underlying item of Intellectual Property
is not subject to any outstanding injunction, judgment, order, decree, ruling,
or charge;
(viii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is threatened
which challenges the legality, validity, or enforceability of the underlying
item of Intellectual Property;
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(ix) Cell-Matrix has not granted any sublicense
or similar right with respect to the license, sublicense, agreement, or
permission covering such item; and
(x) Cell-Matrix shall provide, before and after
Closing, all reasonable cooperation necessary to effectuate the proper and valid
assignment and transfer of each license, sublicense, agreement or permission
covering such item in Section 4.26(b) of Cell-Matrix Disclosure Schedule to
Buyer.
(c) Enforceability, Validity, and Absence of Claims.
Except as disclosed in Section 4.26(c) of Cell-Matrix Disclosure Schedule, there
are no facts or circumstances (including any information or fact that would
constitute prior art) that would render any Cell-Matrix Intellectual Property
unpatentable, invalid, unenforceable or infringed, or would adversely effect any
pending application for any Cell-Matrix Intellectual Property. Cell-Matrix has
not misrepresented, or failed to disclose and has no knowledge of any
misrepresentation or failure to disclose, any fact or circumstances in any
application for any Cell-Matrix Intellectual Property that would constitute
fraud or misrepresentation or breach of the duty of candor with respect to such
application or that would otherwise affect the patentability, validity,
enforceability or infringement of any Cell-Matrix Intellectual Property.
Cell-Matrix has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of any third
party, and neither Cell-Matrix nor its directors, officers, employees or agents
has ever received any charge, complaint, claim, demand, or notice alleging such
interference, infringement, misappropriation, or violation (including any claim
that Cell-Matrix must license or refrain from the use, or offer of a license
under, any Intellectual Property rights of any third party). No third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of Cell-Matrix. Cell-Matrix has
never made any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that the third party must license or refrain from using, or offer of a license
under, any Intellectual Property rights of Cell-Matrix.)
4.27 Identification of Depositories and Authorities. Section 4.27
of Cell-Matrix Disclosure Schedule sets forth a complete and accurate list of
the names and addresses of all banks, trust companies, savings and loan
associations and other financial institutions in which Cell-Matrix has assets,
deposits or safe deposit boxes and the signatories thereunder.
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4.28 Legal and Tax Advice. Cell-Matrix has had an opportunity to
discuss this Agreement with counsel of its choosing, and has had the legal
consequences of this Agreement and the transactions contemplated hereby
explained by such counsel. The Stockholders have had sufficient time to, and
Cell-Matrix has recommended that the Stockholders, discuss this Agreement with
counsel of their choosing, including an explanation by such counsel of the legal
consequences of this Agreement and the transactions contemplated hereby. The
Stockholders also have had sufficient time to, and Cell-Matrix has recommended
that the Stockholders obtain, the advice of competent tax professionals with
respect to the tax consequences of this Agreement and the transactions
contemplated hereby. Cell-Matrix is not relying upon Buyer, Merger Sub or any of
their respective stockholders, members, directors, officers, attorneys,
accountants, agents or representatives for purposes of interpreting the
provisions of this Agreement or assessing the consequences hereof.
4.29 Vote Required. The approval of the Merger and this Agreement
and the consummation of the transactions contemplated hereby by the affirmative
vote or written consent of Stockholders holding shares of Cell-Matrix Common
Stock representing a majority of the votes entitled to be cast by all holders of
Cell-Matrix Common Stock is the only vote or consent of the holders of any class
or series of the capital stock of Cell-Matrix required to approve the Merger and
this Agreement and the transactions contemplated hereby. Cell-Matrix has
obtained the approval of the holders of all of the outstanding shares of
Cell-Matrix Common Stock as to the Merger and this Agreement and the
transactions contemplated hereby. The Board of Directors of Cell-Matrix has: (a)
unanimously approved the Merger and this Agreement and the consummation of the
transactions contemplated hereby; and (b) determined that the Merger and this
Agreement and the consummation of the transactions contemplated hereby are fair
to, and in the best interests of, the Stockholders.
4.30 Tax Treatment. Neither Cell-Matrix nor, to the Knowledge of
Cell-Matrix, any of Cell-Matrix's Affiliates, has taken or agreed to take any
action that would prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code. Cell-Matrix has no Knowledge of any
agreement, plan or other circumstance that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
4.31 Disclosure. This Agreement, Cell-Matrix Disclosure Schedule
and the Closing bringdown certificates furnished or to be furnished to Buyer by
or on behalf of Cell-Matrix pursuant to or in connection with this Agreement (a)
do not and will not contain any untrue statement of a material fact and (b) do
not and will not omit to state a material fact necessary, in light of the
circumstances under which made, to make the statements contained herein and
therein not misleading.
4.32 Dissenters Rights. Each Stockholder has approved the Merger,
thereby waiving his or her right to demand and receive payment for the fair
value of his or her shares under Sections 92A.300-92A.500 of the NGCL.
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4.33 Subsequent Financing. Cell-Matrix acknowledges that Buyer
intends to issue equity securities in a capital raising transaction subsequent
to the Closing and that Buyer makes no representation as to whether the price
per share of any equity securities sold in such capital raising transaction will
be greater than or less than the Buyer Preferred Stock Price.
4.34 Capital Equipment Agreement. Cell-Matrix's existing Loan
Agreement, dated January 31, 2000, by and between Cell-Matrix and Summit Bank,
contains no prohibition or fee to pre-pay any amounts owed thereunder or
terminate such agreement.
V.
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Except as is otherwise set forth with appropriate section references in
the Buyer Disclosure Schedule, Buyer and Merger Sub, jointly and severally,
hereby make the representations and warranties set forth below to Cell-Matrix as
of the date hereof.
5.1 Due Organization. Each of Buyer and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has all requisite corporate power
and authority to own, lease and operate its properties and conduct its business
as it is presently being conducted. Each of Buyer and Merger Sub is duly
qualified to do business as a foreign corporation or other entity and is in good
standing in each jurisdiction in which such qualification is necessary under the
applicable law as a result of the conduct of its business or the ownership of
its properties, except where the failure to be so qualified would not have a
Material Adverse Effect on Buyer or Merger Sub.
5.2 Capitalization of Buyer. The authorized capital stock of Buyer
consists of 54,659,753 shares of common stock, par value $0.00004 per share
("Buyer Common Stock"), and 49,118,234 shares of preferred stock, par value
$0.00004 per share, of which 16,693,877 shares have been designated as "Series A
Preferred Stock," 26,281,500 shares have been designated as "Junior Preferred
Stock," 500,000 shares have been designated as "Vendor Preferred Stock, Series
1" and 2,142,857 shares have been designated as "Acquisition Preferred Stock."
As of January 1, 2002, 1,575,796 shares of Common Stock were issued and
outstanding, 16,326,530 shares of Series A Preferred Stock were issued and
outstanding, 22,608,031 shares of Junior Preferred Stock were issued and
outstanding, 65,306 shares of Vendor Preferred Stock, Series 1 were issued and
outstanding and no shares of Acquisition Preferred Stock were issued and
outstanding. All such outstanding shares are duly authorized, validly issued,
fully paid and nonassessable and free of all liens, claims and Encumbrances, and
were issued in compliance with applicable securities laws. In addition, Buyer
has an obligation to issue 367,437 shares of Series A Preferred Stock pursuant
to the terms of a settlement agreement and warrants to purchase 75,000 shares of
Vendor Preferred Stock, Series 1 pursuant to the terms of a lease agreement.
5.3 Authorization. Each of Buyer and Merger Sub has all necessary
corporate power and authority, and has taken all corporate action necessary, to
execute and deliver this Agreement, to consummate the transactions contemplated
hereby and to perform its obligations hereunder. The execution and delivery of
this Agreement by Buyer and Merger Sub and the consummation by Buyer and Merger
Sub of the transactions contemplated hereby have been
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duly approved by all requisite corporate action on the part of Buyer and Merger
Sub. No other corporate proceedings on the part of Buyer or Merger Sub are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Buyer and Merger Sub and
is a legal, valid and binding obligation of each of them, enforceable against
each of them in accordance with its terms, subject to general principles of
equity and laws of general application relating to bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally, regardless of
whether considered in a proceeding in equity or at law.
5.4 Non-Contravention. The execution, delivery and performance of
this Agreement by Buyer and Merger Sub and the consummation by Buyer and Merger
Sub of the transactions contemplated hereby do not, and will not, with or
without the giving of notice or the lapse of time, or both, violate, conflict
with, result in the breach of or a default under, or accelerate the performance
required by or result in any Material Adverse Effect under any of the terms,
conditions or provisions of, the charter or bylaws of Buyer or Merger Sub or any
covenant, agreement, commitment or understanding (including any license or
sub-license agreement, covenant not to compete, employment agreement or
consulting agreement) to which Buyer or Merger Sub is a party except as set
forth in Section 5.4 of the Buyer Disclosure Schedule, or any Permit,
authorization, order, ruling, decree, judgment or arbitration award, or any law,
rule, regulation or stipulation, to which Buyer or Merger Sub is subject, or
result in the creation of any Encumbrance upon any of the properties or assets
of Buyer or Merger Sub.
5.5 Consents and Approvals. Other than forms which may be required
to be filed by Buyer with the Securities and Exchange Commission or state
securities commissioners after the Closing and the filing by Merger Sub of all
documents necessary to consummate the Merger with the Secretary of State of the
State of Delaware and the Secretary of State of the State of Nevada, no consent,
approval, authorization, declaration, filing or registration with any
governmental or regulatory authority, or any other Person, is required to be
made or obtained by Buyer or Merger Sub in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
5.6 Buyer Preferred Stock. All of the shares of Buyer Preferred
Stock to be issued pursuant to this Agreement have been duly authorized and,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable and free of all liens, claims and
Encumbrances (other than transfer restrictions imposed on such shares by federal
and state securities laws) created by Buyer.
5.7 No Brokers. Neither Buyer nor Merger Sub has entered into nor
will enter into any contract, agreement, arrangement or understanding with any
Person which will result in the obligation of Cell-Matrix, Buyer or Merger Sub
to pay any finder's fee, brokerage commission or similar payment in connection
with the transactions contemplated hereby.
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5.8 Merger Sub. Merger Sub is a wholly owned subsidiary of Buyer
formed for the purpose of engaging in the Merger and Merger Sub has not engaged,
nor will engage, prior to the Merger, in any commercial business activities
other than those necessary to effectuate, or otherwise in connection with the
effectuation of, the terms of this Agreement.
VI.
PRE-CLOSING COVENANTS
6.1 Conduct of Business by Cell-Matrix Pending the Closing. During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Closing, Cell-Matrix covenants and
agrees that, unless Buyer shall otherwise agree in writing, Cell-Matrix shall
conduct its business in the ordinary course of business and consistent with past
practice. Without limiting the generality of the foregoing and except as set
forth on Section 6.1 of the Cell-Matrix Disclosure Schedule, Cell-Matrix shall
not directly or indirectly do, or propose to do, any of the following without
the prior written consent of Buyer, in its sole discretion:
(a) amend or otherwise change Cell-Matrix's charter,
bylaws or other organizational documents;
(b) issue, sell, pledge, dispose of or encumber, or
authorize the issuance, sale, pledge, disposition or Encumbrance of, any of its
stock or any options, warrants, convertible securities or other rights of any
kind to acquire any of its stock, or any other ownership interest in Cell-Matrix
or any of its Affiliates;
(c) sell, pledge, dispose of or encumber any assets of
Cell-Matrix (other than sales of inventory in the ordinary course of business
and in a manner consistent with past practice);
(d) (i) declare, set aside, make or pay any dividend or
other distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its stock, (ii) split, combine or reclassify any
of its stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for its stock or (iii)
amend the terms or change the period of exercisability of, purchase, repurchase,
redeem or otherwise acquire any of its securities, including, without
limitation, its stock or any option, warrant or right, directly or indirectly,
to acquire its stock, or propose to do any of the foregoing;
(e) (i) acquire (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership or other business organization
or division thereof; (ii) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any Person, or make any loans or
advances, except in the ordinary course of business consistent with past
practice; (iii) enter into or amend any Material Contract other than in the
ordinary course of business (including, without limitation, any agreement
between Cell-Matrix and any officer, director, employee or stockholder of
Cell-Matrix (or any entity affiliated with such Persons)); (iv) authorize any
capital expenditures or purchase of fixed assets which are, in the aggregate, in
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excess of $1,000 for Cell-Matrix or (v) enter into or amend any contract,
agreement, commitment or arrangement to effect any of the matters prohibited by
this Section 6.1(e);
(f) increase the compensation payable or to become
payable to its directors, officers or employees, except for increases in salary
or wages of employees of Cell-Matrix in accordance with past practices, or grant
any severance or termination pay to, or enter into any employment or severance
agreement with any director, officer or other employee of Cell-Matrix, or
establish, adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
current or former directors, officers or employees, except, in each case, as may
be required by law;
(g) take any action to change any accounting policies or
procedures;
(h) make any Tax election inconsistent with past practice
or settle or compromise any federal, state, local or foreign tax Liability or
agree to an extension of a statute of limitations;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or otherwise)
other than in the ordinary course of business consistent with past practice; or
(j) take, or agree in writing or otherwise to take, any
of the actions described in Sections 6.1(a) through 6.1(i), or any action which
would make any of the representations or warranties of Cell-Matrix contained in
this Agreement untrue or incorrect or cause Cell-Matrix not to perform its
covenants hereunder.
6.2 Further Assurances. Upon the terms and subject to the
conditions contained herein, the parties agree, both before and after the
Closing, (a) to use all commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement, (b) to execute any documents, instruments or conveyances of any
kind which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder and (c) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the parties agree
to use their respective commercially reasonable efforts (i) to obtain all
necessary waivers, consents and approvals from other parties to consummate the
transactions contemplated by this Agreement, (ii) to obtain all necessary
Permits as are required to be obtained under any laws, statutes, ordinances,
rules or regulations, (iii) to defend all actions challenging this Agreement or
the consummation of the transactions contemplated hereby, (iv) to lift or
rescind any injunction or restraining order or other court order adversely
affecting the ability of the parties to consummate the transactions contemplated
hereby, (v) to give all notices to, and make all registrations and filings with,
third parties, including without limitation submissions of information requested
by governmental authorities and (vi) to fulfill all conditions to this
Agreement.
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6.3 No Solicitation. Cell-Matrix and its Stockholders, directors,
officers, representatives and agents, shall not, directly or indirectly,
solicit, initiate encourage or otherwise participate with respect to any
inquiries or proposals concerning a sale of assets or securities of Cell-Matrix,
or any acquisition, merger, consolidation or similar transaction involving
Cell-Matrix (a "Competing Transaction"). For purposes hereof, "participate"
shall not include (i) actions performed in a purely ministerial capacity (e.g.,
secretaries or receptionists taking phone messages) which are not performed to
circumvent the above restrictions or (ii) responses to unsolicited contacts by
third parties which are limited to "cannot discuss the matter."
(a) Cell-Matrix agrees to immediately notify Buyer after
receipt of any Competing Transaction proposal, or any modification of or
amendment to any Competing Transaction proposal, or any request for access to
the properties, books or records of Cell-Matrix by any Person that has informed
or concurrently informs the Board of Directors of Cell-Matrix that it is
considering making, or has made, a Competing Transaction proposal. Such notice
shall be made orally and in writing.
(b) Cell-Matrix shall immediately cease and cause to be
terminated any existing discussions or negotiations with any Persons (other than
Buyer) conducted heretofore with respect to any Competing Transaction proposal.
Cell-Matrix agrees not to release any third party from the confidentiality
provisions of any confidentiality agreement to which Cell-Matrix is a party.
(c) Cell-Matrix shall advise its Stockholders, directors,
officers, representatives and agents of the restrictions described in this
Section 6.3.
6.4 Affiliates' Letters. The Affiliates of Cell-Matrix as of the
date of this Agreement are listed in Section 6.4 of Cell-Matrix Disclosure
Schedule. Cell-Matrix shall deliver to Buyer prior to the Closing a letter
identifying all Persons wh |
