AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE ARIELLE CORP.
AND
METHOD PRODUCTS CORP.
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER by and between The Arielle Corp., a
Delaware corporation, ("AC") and Method Products Corp., a Florida corporation,
("MPC").
WHEREAS, the Boards of Directors of AC and MPC, deem it advisable for
the mutual benefit of AC and MPC, and their respective shareholders, that MPC be
merged into AC (the "Merger"), and have approved this Agreement and Plan of
Merger (the "Agreement"); and
WHEREAS, the Boards of Directors of AC and MPC have unanimously
resolved to recommend to their shareholders acceptance of the Merger
contemplated herein.
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, and for the purpose of setting
forth certain terms and conditions of the Merger, and the mode of carrying the
same into effect, MPC and AC hereby agree as follows:
ARTICLE 1
MERGER AND ORGANIZATION
SECTION 1.1 The Merger. As of the Effective Date (as hereinafter
defined), subject to the terms and conditions hereof, MPC shall be merged with
and into AC as soon as practicable through AC's acquisition of 100% of MPC's
issued and outstanding shares of Common Stock in exchange for shares of Common
Stock of AC, the surviving entity (the "Surviving Entity"). Immediately after
consummation of the Merger, the Surviving Entity shall be and continue as the
public entity, and shall have issued and outstanding 7,791,521 shares of common
stock: 7,135,521 (representing 91.6% of the Surviving Entity) to be held by
former MPC stockholders in proportion to the amount that each of said
shareholders previously held shares of common stock of MPC; 156,000 shares
representing 2% of the surviving entity to be held by Schonfeld & Weinstein,
L.L.P., and 500,000 (representing 6.5% of the Surviving Entity) to be held by
current AC stockholders in the same proportions as currently held shares. AC and
MPC are herein sometimes referred to as the "Constituent Corporations." The
Merger is to be done in such a manner as to be tax-free to all parties involved.
SECTION 1.2. Effect of Merger. The parties agree to the following
provisions with respect to the Merger:
(a) Name of Surviving Corporation. After the Merger and Effective
Date (as defined in Section 1.2(e) hereof), the name of the Surviving Entity
shall become Method Products Corp.
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(b) Articles of Incorporation. The Articles of Incorporation of
AC as in effect immediately prior to the Effective Date shall from and after the
Effective Date be and continue to be the Articles of Incorporation of the
Surviving Entity until changed or amended as provided.
(c) By-Laws. The By-Laws of AC as in effect immediately prior to
the Effective Date shall from and after the Effective Date be and continue to be
the By-Laws of the Surviving Entity until changed or amended as provided by law.
(d) Corporate Organization. All of the issued and outstanding
shares of common stock of MPC shall be acquired by AC. The Surviving Entity
shall thenceforth be responsible for all the liabilities and obligations of each
of the Constituent Corporations, with the effect set forth in the appropriate
provisions of Delaware law and the appropriate provisions of Florida law.
(e) Filing of Articles of Merger and Amendment to Articles of
Association. If this Agreement is duly approved by each of the Constituent
Corporations in accordance with the appropriate provisions of Delaware law and
the appropriate provisions of Florida law and the respective Articles or
Certificate of Incorporation and By-laws of the Constituent Corporations and not
terminated pursuant to Article 8 hereof, and approved by the shareholders of AC
pursuant to Rule 419 under Regulation C of the Securities Act of 1933, as
amended ("Rule 419"), as soon as practicable after all other conditions to the
Merger set forth in Article 6 hereof shall have been satisfied or waived, and
after AC's Post-Effective Amendment filed pursuant to Rule 419 has been declared
effective by the Securities and Exchange Commission and AC 's shareholder
reconfirmation has been successfully completed and the closing of this Agreement
(the "Closing") has taken place, the Merger shall be consummated and Articles of
Merger, to which this Agreement shall be appended, shall be filed with the
appropriate Florida governmental agency and an amendment to AC's Articles of
Association shall be filed with the Delaware Secretary of State ( the "Effective
Date"). The Closing of this Agreement shall take place at the offices of
Schonfeld & Weinstein, L.L.P., 63 Wall Street, New York, New York 10005, or at
such other time, place or date as the parties may mutually agree.
(f) Further Assurances. If at any time after the Effective
Date, the Surviving Entity shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Entity, its right, title or interest in, to or under any of the
rights, properties or assets of the Constituent Corporations acquired or to be
acquired as a result of the Merger, or (b) otherwise to carry out the purposes
of this Agreement, the Constituent Corporations agree that the Surviving Entity
and its proper officers and directors shall be authorized to execute and
deliver, in the name and on behalf of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and do, in the name and on
behalf of the Constituent Corporations, all such other acts and things
necessary, desirable or proper to best, perfect or confirm its right, title or
interest in, to or under any of the rights, properties or assets of the
Constituent Corporations acquired or to be acquired as a result of the Merger
and otherwise to carry out the purposes of this Agreement.
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(g) Upon consummation of the Merger, the current officers and
directors of AC shall resign, and a minimum of three (3) directors shall be
appointed to the Surviving Entity, which directors shall nominate officers of
the Surviving Entity, subject to shareholder approval. The certificate of
incorporation shall be amended to change the name of The Arielle Corp. to Method
Products Corp.
ARTICLE 2
THE MERGER
SECTION 2.1 Conversion of Shares in the Merger.
(a) Issuance of New Shares. On the Effective Date, and upon the
acquisition of 100% of all shares of Common Stock of MPC, AC shall issue
7,135,521 shares of its authorized common stock to former MPC share holders, in
the same proportion said share holders held shares of common stock of MPC.
156,000 shares representing 2% of the total amount issued after the merger shall
be issued to S&W. AC shareholders shall continue to hold 500,000 shares of AC
common stock, 100,000 of which shall be held by purchasers of AC's initial
public offering, and 400,000 of which shall be held by the inside shareholders
of AC or their designees. Thus, after the Effective Date the Surviving Entity
shall have 7,791,521 shares of common stock issued and outstanding.
(b) 10% of the 7,791,521 shares or 779,152 shares of common stock
which are to be issued to MPC's shareholders shall be held in escrow by S&W and
released to the shareholders of MPC only if MPC obtains sales of a minimum of
$5,000,000 in the first complete fiscal year following the completion of the AC
merger. In the event MPC does achieve such sales, these escrowed shares shall be
released to MPC shareholders on the date such $5,000,000 sales is achieved
within the first fiscal year on a pro rata basis. If MPC fails to obtain these
sales, the 779,152 shares shall be returned to treasury.
SECTION 2.2 Further Transfer of Stock. The former MPC stockholders may
distribute their shares of the Surviving Entity as they determine in accordance
with any and all applicable state and federal securities laws, and shall provide
counsel to AC with a list at the time of closing for delivery to the transfer
agent.
SECTION 2.3 Release of Shares and Funds from Escrow. Pursuant to Rule
419, certificates representing the shares of Common Stock purchased in AC's
initial public offering which offering was declared effective by the United
States Securities and Exchange Commission on April 5,1999, as well as the funds
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used to purchase said shares, are being held in escrow pending consummation of a
Merger (the "Deposited Securities" and the "Deposited Funds," respectively). AC
has eighteen (18) months in which to consummate a Merger. If a Merger is not
consummated within that time, the Deposited Securities and Deposited Funds shall
be returned to AC and AC shareholders, respectively. Pursuant to Rule 419,
Deposited Securities shall be released to shareholders and Deposited Funds
released to AC following effectiveness of a Post-Effective Amendment and a
reconfirmation offering pursuant to which AC shareholders representing a minimum
of 80% of the offering proceeds of AC 's initial public offering ($28,000)
reconfirm their investments.
SECTION 2.4 Surrender of Certificates. (a) AC has designated Transfer
On Line, as Transfer Agent (the "Transfer Agent") hereunder. Immediately
following effectiveness of the Post-Effective Amendment and shareholder
reconfirmation offering, the Transfer Agent shall have mailed and/or made
available to each AC shareholder and each former MPC shareholder notice and
letter of transmittal advising such holder of the effectiveness of the
Post-Effective Amendment and shareholder reconfirmation, and the procedure for
surrendering MPC stock to the Transfer Agent. MPC shall immediately turn in MPC
common stock certificates to the Transfer Agent. Upon the surrender to the
Transfer Agent of such certificates, together with a letter of transmittal, duly
executed and completed in accordance with the instructions thereon, the Transfer
Agent shall promptly convert and issue an aggregate of 7,012,369 shares of AC
common stock to former MPC shareholders in exchange for 100% of the authorized
and outstanding shares of MPC. An additional 779,152 shares shall be held in
escrow until the merged entity achieves a minimum of $5,000,000 in the first
complete fiscal year after consummating the merger. If such sales are achieved,
the shares shall be released to all of the shareholders of MPC as of the date of
this agreement on a pro rata basis. Until so surrendered and exchanged, each
certificate theretofore representing shares shall represent in the case of
Dissenter's Shares, the right to seek appraisal pursuant to the laws of the
state of incorporation of the Constituent Corporation in which the holder owns
stock (if such right has been perfected).
(b) At the Effective Date each holder of AC common stock issued
before the Effective Date, including those 100,000 shares held in escrow
pursuant to Rule 419, shall surrender his/her stock certificate to the Transfer
Agent and the Transfer Agent shall issue such holder one share of the Surviving
Entity's common stock for each share of AC common stock held before the Merger.
SECTION 2.5 Transfer Agent. Prior to the Offering, AC shall have made
such arrangements to insure that an adequate number of its shares of Common
Stock have been deposited with the Transfer Agent as necessary in sufficient
time to permit prompt distribution against surrender of MPC stock certificates
as provided hereunder.
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ARTICLE 3
ADDITIONAL AGREEMENTS IN CONNECTION WITH THE MERGER
SECTION 3.1 Confidentiality; Inconsistent Activities. Unless and until
this Agreement has been terminated in accordance with its terms , neither MPC
nor AC will (i) solicit or encourage, directly or indirectly, any inquiries or
proposals to acquire any shares of capital stock of MPC or AC or any significant
portion of the total assets of either Constituent Corporation or any subsidiary
or division of either of the Constituent Corporations (whether by merger,
purchase of assets, tender offer or other similar transaction); (ii) afford any
third party which may be considering the acquisition of any shares of capital
stock of MPC or AC or any significant portion of the total assets of either
Constituent Corporation, access to the properties, books or records of either
Constituent Corporation except as required by mandatory provisions of law; or
(iii) enter into any discussions or negotiations for, or enter into any
agreement which provides for, the sale of any shares of capital stock of MPC or
AC or any significant portion of the total assets of MPC or AC to a person other
than in connection with the transactions contemplated herein.
SECTION 3.2 Reasonable Efforts. Subject to the terms and conditions
hereof, each of the parties hereto agrees to use any and all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary to satisfy the other conditions of Closing set forth herein.
SECTION 3.3 Conduct of Business by Each of the Constituent Corporations
Pending the Merger. MPC and AC covenant and agree that, prior to the Effective
Date, unless MPC or AC, respectively, shall otherwise agree in writing and
except as contemplated by this Agreement:
(a) The business of each of the Constituent Corporations shall
be conducted only in the ordinary and usual course and consistent with its past
practice, and except in the ordinary course of business neither MPC nor AC shall
purchase or sell (or enter into any agreement to so purchase or sell) any
properties or assets or make any other changes in the operations of MPC or AC,
respectively, taken as a whole;
(b) Neither Constituent Corporation shall (i) amend its
Articles of Incorporation or By-Laws, (ii) change the number of authorized or
outstanding shares of its capital stock, except as set forth in Section 2
hereof, or (iii) declare, set aside or pay any dividend or other distribution or
payment in cash, stock or property, except as designated herein;
(c) Neither Constituent Corporation shall (i) issue, grant, sell
or pledge or agree or propose to issue, grant, sell or pledge any shares of, or
rights of any kind to acquire any shares of, its capital stock (ii) incur any
indebtedness other than in the ordinary course of business, (iii) acquire
directly or indirectly by redemption or otherwise any shares of its capital
stock of any class or (iv) enter into or modify any contact, agreement,
commitment or arrangement with respect to any of the foregoing, except as stated
in Section 2.1 of this Agreement and in Exhibit A attached hereto.
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(d) Each Constituent Corporation shall use its best efforts to
preserve intact its business organizations, to keep available the services of it
and its current officers and key employees, and to preserve the good will of
those having business relationships with it.
(e) MPC and AC will not (i) increase the compensation payable or
to become payable by it to any of its officers or directors, (ii) make any
payment or provision with respect to any bonus, profit sharing, stock option,
stock purchase, employee stock ownership, pension, retirement, deferred
compensation, employment or other payment plan, agreement or arrangement for the
benefit of its employees, (iii) grant any stock options or stock appreciation
rights or permit the exercise of any stock appreciation right where the exercise
of such right is subject to its discretion, (iv) make any change in the
compensation to be received by any of its officers, or adopt, or amend to
increase compensation or benefits payable under, any collective bargaining,
bonus, profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund or arrangement for the benefit of employees, (v) enter into any
agreement with respect to termination or severance pay, or any employment
agreement or other contract or arrangement with any officer or director or
employee of MPC or AC, respectively, with respect to the performance of personal
services that is not terminable without liability by it on thirty days' notice
or less, (vi) increase benefits payable under its current severance or
termination, pay agreements or policies or (vii) make any loan or advance to, or
enter into any written contract, lease or commitment with, any of its officers
or directors;
(f) Neither MPC nor AC shall assume, guarantee, endorse or
otherwise become responsible for the obligations of any other individual, firm
or corporation or make any loans or advances to any individual, firm or
corporation;
(g) Neither MPC nor AC shall make any investment of a capital
nature either by purchase of stock or securities, contributions to capital,
property transfers or otherwise, or by the purchase of any property or assets of
any other individual, firm or corporation;
(h) Neither MPC nor AC shall reduce its cash or short term
investments or their equivalent, other than to meet cash needs arising in the
ordinary course of business, consistent with past practices, or in performing
its obligations under this Agreement; and
(i) Neither MPC nor AC shall enter into an agreement to do any of
the things described in clauses (a), (b), (c), (e), (f), (g) and (h).
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SECTION 3.4 Access and Information.
(a) MPC shall afford to AC and its accountants, counsel and other
representatives full access, during normal business hours throughout the period
prior to the Effective Date, to all of the properties, books, contracts,
commitments and records (including but not limited to tax returns) of MPC and,
during such period, MPC shall furnish promptly to AC (i) a copy of each report,
schedule and other document filed or received by it pursuant to the requirements
of federal or state securities laws, and (ii) all other information concerning
the business, properties and personnel of MPC that may reasonably be requested.
In the event of the termination of this Agreement, AC will, and will cause its
representatives to, deliver to MPC all documents, work papers and other
material, and all copies thereof, obtained by it or on its behalf from MPC as a
result of this Agreement or in connection herewith, whether so obtained before
or after the execution hereof, and will hold in confidence all confidential
information, and will not use any such confidential information, until such time
as such information is otherwise publicly available or as it is advised by
counsel that any such information or document is required by law to be
disclosed. If this Agreement is terminated, AC will deliver to MPC all documents
so obtained by it.
(b) AC shall afford to MPC and its accountants, counsel and other
representatives full access, during normal business hours throughout the period
prior to the Effective Date, to all of the properties, books, contracts,
commitments and records (including but not limited to tax returns) of AC and,
during such period, AC shall furnish promptly to MPC (i) a copy of each report,
schedule and other document filed or received by it pursuant to the requirements
of federal or state securities laws, and (ii) all other information concerning
the business, properties and personnel of AC that may reasonably be requested.
In the event of the termination of this Agreement, MPC will, and will cause its
representatives to, deliver to AC all documents, work papers and other material,
and all copies thereof, obtained by it or on its behalf from AC as a result of
this Agreement or in connection herewith, whether so obtained before or after
the execution hereof, and will hold in confidence all confidential information,
and will not use any such confidential information, until such time as such
information is otherwise publicly available or as it is advised by counsel that
any such information or document is required by law to be disclosed. If this
Agreement is terminated, MPC will deliver to AC all documents so obtained by it.
SECTION 3.5 Notice of Actions and Proceedings. MPC shall promptly
notify AC, and AC shall promptly notify MPC of any claims, actions, proceedings
or investigations commenced or, to the best of its knowledge, threatened,
involving or affecting MPC or AC or any of their property or assets, or, to the
best of its knowledge, against any employee, consultant, director, officer or
shareholder, in his, her or its capacity as such, of MPC or AC which, if pending
on the date hereof, would have been required to have been disclosed in writing
pursuant to Section 4.4 hereof or which relates to the consummation of the
Merger or the transactions contemplated hereby.
SECTION 3.6 Notification of Other Certain Matters. MPC shall give
prompt notice to AC, and AC shall give prompt notice to MPC of:
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(a) any notice of, or other communication relating to, a default
or event which, with notice or lapse of time or both, would become a default,
received by MPC or AC subsequent to the date of this Agreement and prior to the
Effective Date, under any agreement, indenture or instrument material to the
financial condition, properties, business or results of operations of MPC or AC
taken as a whole to which MPC or AC is a party or is subject;
(b) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement; and
(c) AC shall advise MPC of all SEC correspondence and oral
comments and shall supply MPC with copies of the correspondence and substance of
any oral comments; and
(d) any material adverse change in the financial condition,
properties, businesses or results or operations of MPC or AC, or the occurrence
of an event which, so far as reasonably can be foreseen at the time of its
occurrence, would result in any such change.
SECTION 3.7 Stockholder Meeting of MPC. MPC shall, at a meeting of its
stockholders duly called by the Board of Directors of MPC to be held as soon as
practicable following execution of this Agreement, or by written consent by the
majority stockholders' if so permissible pursuant to Florida Law, the following
proposals for the authorization and approval of the stockholders of MPC and
recommend their adoption by the stockholders:
a) ratification of this Agreement and authorization of the
consummation of the Merger contemplated herein.
SECTION 3.8 Filing of Post-Effective Amendment. Upon signing this Merger
Agreement and shareholder approval pursuant to a special meeting of
shareholders, AC shall promptly file with the Securities and Exchange Commission
a Post-Effective Amendment reflecting the Merger as required by Rule 419.
SECTION 3.9 Reconfirmation Offering. Within five (5) days of effectiveness
of the Post-Effective Amendment, AC shall issue a reconfirmation offering to its
shareholders. Pursuant to Rule 419, the Merger will be consummated only if a
minimum number of investors representing 80% of the maximum offering proceeds of
AC's initial public offering ($28,000) elect to reconfirm their investments.
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SECTION 3.10 Other Agreements of AC. AC shall file with the SEC any
appropriate statements or requirements within the Securities Exchange Act of
1934, as amended, with respect to the Merger, obtain any consents, amendments to
or waivers under the terms of any of AC 's arrangements required by the
transactions contemplated by this Agreement, and defend any lawsuits or other
legal proceedings, whether judicial or administrative and whether brought
derivatively or on behalf of third parties (including governmental agencies or
officials), challenging this Agreement, or the consummation of the transactions
contemplated hereby (provided that the maximum amount that AC shall be required
to spend on such lawsuits or proceedings shall be $5,000 in the aggregate).
SECTION 3.11 AC Stockholder Consent. AC shall obtain written consent of
two-thirds of its shareholders to take the following actions:
a) ratification of this Agreement and authorization of the
consummation of the Merger contemplated herein;
b) issuance of 7,012,369 shares of AC common stock to former MPC
shareholders;
c) issuance of 779,152 shares of AC common stock to be held in
escrow pending minimum sales of $5,000,000 by the surviving entity during the
first fiscal year after consummation of this merger;
d) issuance of 156,000 shares of AC common stock to Schonfeld &
Weinstein, L.L.P.
e) the tender of resignations of the directors of AC, whose
resignations are contingent on the consummation of this merger, and which shall
occur on the Effective Date.
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ARTICLE 4
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF AC
AC represents and warrants to, and agrees with MPC as follows:
SECTION 4.1 Organization and Good Standing. AC is a duly incorporated and
validly existing corporation in good standing under the laws of the state of its
incorporation, with all requisite power and authority (corporate and other) to
own its properties and conduct its business, and is duly qualified and in good
standing as a foreign corporation authorized to do business.
SECTION 4.2 Authorization; Binding Agreement. AC has the corporate power
and authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been duly and validly
authorized, executed and delivered by AC, and subject to any requisite approval
of the Merger by the shareholders of AC, including a shareholder reconfirmation
pursuant to Rule 419, constitutes a valid and binding agreement of AC in
accordance with its terms.
SECTION 4.3 Capitalization. The authorized capital stock of AC consists of
20,000,000 shares of common stock, par value $.0001 per share. Between October
13, 1997 and March 30, 1998 AC issued 400,000 shares of Common Stock to four (4)
inside shareholders at $.05 per share. On April 15, 1998, three shareholders
each transferred 5,000 shares to Allen S. Frankel. AC's public offering, whereby
100,000 shares of Common Stock were sold at $.35 per share, closed on October 5,
1999. As of the date hereof, 500,000 shares of common stock are outstanding,
100,000 of which are currently held in escrow. All of the outstanding
non-escrowed shares of capital stock of AC have been duly authorized and validly
issued and are fully paid and nonassessable. AC is not aware of any voting
trusts, voting agreements or similar understandings applicable to the Shares. AC
does not have any outstanding options, subscriptions or other rights, agreements
or commitments, which either; (a) obligates AC to issue, sell or transfer any
shares of the capital stock of AC or (b) restricts the transfer of or otherwise
relates to the shares of its Common Stock, except for the 100,000 shares of
common stock currently held in escrow pending consummation of a business
combination pursuant to Rule 419.
SECTION 4.4 Litigation. Except as may be disclosed in the SEC Filings
(as defined in Section 4.5 hereof), or to MPC in writing on or prior to the date
hereof, as of the date hereof there are no claims, actions, proceedings, or
investigations pending or, to the best knowledge of AC, threatened against AC or
to the best of AC knowledge, pending or threatened against AC or any AC
employee, consultant, director, officer or shareholder, in his, her or its
capacity as such, before any court or governmental or regulatory authority or
body which, if decided adversely, could materially and adversely affect the
financial condition, business, prospects or operations of AC. As of the date
hereof, neither AC nor any of its property is subject to any order, judgment,
injunction or decree, which materially and adversely affects the financial
condition, business, prospects or operations of AC.
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SECTION 4.5 Financial Statements and Reports. AC has provided MPC with
true and complete copies of (a) AC's most recent audit, (b) copies of AC 's
Registration Statement on Form SB-2 and Prospectus which was declared effective
by the SEC on April 5, 1999, (c) all other reports, statements and registration
statements filed by it with the SEC since April 5, 1999. The reports, statements
and registration statements referred to in the immediately preceding sentence
including any that are filed subsequent to the date hereof and prior to the
effective date are referred to in the Agreement as the "SEC Filings." As of
their respective dates, the SEC Filings did not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made, not misleading. The financial statements of AC included in
the SEC Filings were prepared by an independent certified public accountant in
accordance with generally accepted accounting principles applied on a consistent
basis (except as otherwise noted in such statements) and present fairly the
financial position, results of operations and changes in financial position of
AC as of the dates and for the periods indicated subject, in the case of
unaudited interim financial statements, to normal year-end adjustments and any
other adjustments described therein. On the Effective Date, AC will have
approximately $31,500, consisting of the proceeds from AC's initial public
offering, currently held in escrow.
SECTION 4.6 Absence of Certain Changes or Events. Except as set forth in
the SEC Filings, or as disclosed to MPC in writing, (a) there has not been any
change or any development involving a prospective change, which has affected or
may affect materially and adversely the business, assets or prospects or the
financial position or the results of operations of and its subsidiaries taken as
whole; and (b) AC has not incurred any indebtedness for money borrowed, or
purchased or sold any material amount of assets, other than in the ordinary
course of business, or entered into any other transaction other than in the
ordinary course of business.
SECTION 4.7 Absence of Breach. Except as may be disclosed to MPC in
writing on or prior to the date hereof, the execution, delivery and performance
by AC of this Agreement, and the performance by AC of its obligations hereunder,
will not
(a) subject to the appropriate approval by AC's shareholders,
conflict with or result in a breach of any of the provisions of its Articles of
Incorporation or By-Laws;
(b) subject to obtaining the governmental and other consents
referred to in Section 4.8 hereof, contravene any law, rule or regulation of any
state or of the United States or any political subdivision thereof or therein,
or any order, writ, judgment, injunction, decree, determination or award
currently in effect, which, singly or in the aggregate, would have a material
adverse effect on AC;
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(c) conflict in any respect with or result in a breach of or
default under any indenture, loan or credit agreement relating to money borrowed
or (iv) conflict in any respect with or result in a breach of or default under
any other indenture, mortgage, lien, lease, agreement, contract or instrument to
which AC is a party or by which it or any of its properties may be affected or
bound, which, singly or in the aggregate, would have a material adverse effect
on AC.
SECTION 4.8 Governmental and Other Consents, etc. Subject to the requisite
shareholder approval and any required filings with the Securities and Exchange
Commission, no consent, waiver, approval, license or authorization of or
designation, declaration or filing with any governmental agency or authority or
other public persons or entities in the United States on the part of AC is
required in connection with the execution or delivery by AC of his Agreement or
the consummation by the Company of the transactions contemplated hereby other
than (i) filings in the State of Delaware in accordance with state law thereof,
(ii) filings under state securities "Blue Sky" or anti-takeover laws and (iii)
filings with the SEC and any applicable national securities exchange.
SECTION 4.9 Benefits Plans. Except as disclosed in the SEC Filings or as
disclosed in writing to MPC before the date hereof, AC does not have any
employment agreement with any executive officer of AC or any incentive
compensation, deferred compensation, profit sharing, stock option, stock bonus,
stock purchase, savings, consultant, retirement, pension or other "fringe
benefit" plan or arrangement with or for the benefit of any officer, employee,
former employee or consultant.
SECTION 4.10 Certain Contracts. Except as disclosed in the SEC Filings or
as disclosed in writing to MPC on or prior to the date hereof, AC is not a party
to any collective bargaining agreement or any other agreement with employees of
AC or any of the subsidiaries as a group.
SECTION 4.11 ERISA. AC has no employee benefit plans, as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
SECTION 4.12 Transactions With Management. Except as disclosed in the SEC
Filings or to MPC in writing on or before the date hereof, AC is not now a party
to any material contract, lease, loan or commitment with or to any officer or
director, or person owning more than 5% of the outstanding Common Stock of AC or
any subsidiary of AC or any affiliate or associate of such officer, director or
person.
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ARTICLE 5
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF MPC
MPC, represents and warrants to, and agrees with AC as follows:
SECTION 5.1 Organization and Good Standing. MPC is a duly incorporated and
validly existing corporation in good standing under the laws of the State of
Florida, with all requisite power and authority (corporate and other) to own its
properties and conduct its businesses.
SECTION 5.2 Authorization; Binding Agreement. MPC has the requisite
corporate power and authority to execute and deliver this Agreement. This
Agreement has been duly and validly authorized, executed and delivered by MPC
and constitutes a valid and binding agreement of MPC in accordance with its
terms.
SECTION 5.3 Absence of Breach. The execution, delivery and performance by
MPC of this Agreement, and the performance by MPC of its obligations hereunder,
do not (i) conflict with or result in a breach of any of the provisions of its
articles of incorporation or by-laws, (ii) subject to obtaining the governmental
and other consents referred to in Section 5.4 hereof, contravene any law, rule
or regulation of any state or of the United States or any political subdivision
thereof or therein, or any order, writ, judgment, injunction, decree,
determination or award currently in effect, which, singly or in the aggregate,
would have a material adverse effect on MPC, (iii) conflict in any respect with
or result in a breach of or default under any indenture, loan or credit
agreement (appropriate waivers having been obtained) or any other agreement or
instrument to which MPC is a party or by which MPC properties may be affected or
bound, which, singly or in the aggregate, would have a material adverse effect
on MPC.
SECTION 5.4 Governmental and Other Consents, etc. Subject to the requisite
Board of Directors approval, no material consent, approval or authorization of
or designation, declaration or filing with any governmental agency or authority
or other public persons or entities in the United States on the part of MPC is
required in connection with the execution delivery by MPC of this Agreement or
the consummation by MPC of the transaction contemplated hereby other than (i)
filings in the state of Delaware in accordance with the laws of that state and
in Florida in accordance with the laws of that state, thereof, (ii) filings
under state securities "Blue Sky" or anti-takeover laws, and (iii) filings with
the SEC and any applicable national securities exchange.
SECTION 5.5. Financial Statements. MPC shall provide AC with certified
consolidated financial statements for the past two fiscal years (including the
notes thereto) which have been prepared by an independent certified public
accountant in accordance with generally accepted accounting principles (as in
effect from time to time) applied on a consistent basis and which present fairly
the consolidated financial position, results of operations and changes in
financial position of MPC.
SECTION 5.6. Capitalization. MPC will have at closing a capitalization
of a minimum of $1,000,000.00.
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SECTION 5.7 Litigation. Except as may be disclosed to AC in writing on or
prior to the date hereof, as of the date hereof there are no claims, actions,
proceedings, or investigations pending or, to the best knowledge of MPC,
threatened against MPC or to the best of MPC knowledge, pending or threatened
against any employee, consultant, director, officer or shareholder, in his, her
or its capacity as such, before any court or governmental or regulatory
authority or body which, if decided adversely, could materially and adversely
affect the financial condition, business, prospects or operations of MPC. As of
the date hereof, neither AC nor any of its property is subject to any order,
judgment, injunction or decree, which materially and adversely affects the
financial condition, business, prospects or operations of MPC.
SECTION 5.8 Absence of Certain Changes or Events. Except as disclosed to
AC in writing, (a) there has not been any change or any development involving a
prospective change, which has affected or may affect materially and adversely
the business, assets or prospects or the financial position or the results of
operations of AC and its subsidiaries taken as whole; and (b) MPC has not
incurred any indebtedness for money borrowed, or purchased or sold any material
amount of assets, other than in the ordinary course of business, or entered into
any other transaction other than in the ordinary course of business.
ARTICLE 6
CONDITIONS
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Date of the following
conditions:
(a) This Agreement and the transactions contemplated hereby
having been approved and adopted at or prior to the Effective Date by the
requisite vote of the shareholders of each company as required by applicable
law;
(b) No preliminary or permanent injunction or other order issued
by any federal or state court of competent jurisdiction in the United States or
any foreign jurisdiction preventing the consummation of the Merger shall be in
effect;
SECTION 6.2 Conditions to Obligation of MPC to Effect the Merger. The
obligation of MPC to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Date of the following conditions any one or more of which
(except Section 6.2(h) and (i)) may be waived by AC:
(a) MPC shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Effective Date including those specified in Section 5.5 herein;
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(b) MPC shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Effective Date, including the surrender of 100% of its issued and
outstanding common stock to AC upon AC's issuance of an aggregate of 7,135,521
shares of its common stock to MPC, of which 779,152 shares shall remain in
escrow pursuant to this merger agreement;
(c) the representations and warranties of MPC set forth in this
Agreement shall be true and correct in all material respects on and as of the
Effective Date as if made on and as of such date, except as contemplated or
permitted by this Agreement.
(d) MPC shall have delivered a certificate of its President or
its Chairman of the Board to the effect set forth in paragraphs (a), (b) and (c)
of this Section 6.2;
(e) MPC shall have delivered to AC copies of resolutions duly
adopted by its Board of Directors approving the execution and delivery of this
Agreement, such resolutions being certified by the Secretary;
(f) No action or preceding before any court or governmental or
regulatory authority or body, United States, federal or state or foreign, shall
have been instituted (and be pending) or threatened by any government or
governmental authority, which seeks to prevent or delay the consummation of the
Merger or which challenges any of the terms or provisions of this Agreement;
(g) No order issued by any United States federal or state or
foreign governmental or regulatory authority or body of by any court of
competent jurisdiction nor any statute, rule, regulation or executive order
promulgated or enacted by any United States federal or state or foreign
governmental authority which prevents the consummation of the Merger shall be in
effect;
(h) MPC acknowledges that the Post-Effective Amendment filed with
the SEC after this Agreement is signed must be declared effective by the SEC and
the shareholder reconfirmation offering contained therein shall have been
approved by investors representing a minimum of 80% of the proceeds of AC's
initial public offering, i.e., $28,000;
(i) The capitalization of MPC at the closing will be at least
$1,000,000.
(j) Opinion of Counsel to MPC. AC shall have received an opinion
dated the effective date of this Merger by counsel to MPC, satisfactory to AC,
in substantially the following form:
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i) MPC is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Florida and has the corporate
power to own all of its properties and assets and carry on its business in all
material respects as it is now being conducted, and is qualified to do business
as a foreign corporation in the states in which the character and location of
the assets owned by it or the nature of the business transacted by it requires
qualification.
ii) The execution and delivery by MPC of this Agreement and the
consummation of the transactions contemplated by this Agreement in accordance
with the terms hereof will not conflict with or result in a breach of any term
or provision of MPC's certificate of incorporation or by-laws or constitute a
default or give rise to a right of termination, cancellation or acceleration
under any material mortgage, indenture, deed of trust, license agreement, or
other obligation or violate any court order, writ, injunction or decree
applicable to MPC, or its properties or assets;
iii) This Agreement has been duly and validly authorized,
executed and delivered and constitutes the legal and binding obligation of MPC,
except as limited by bankruptcy and insolvency laws and by others laws affecting
the rights of creditors generally; and
iv) There are no actions, suits or proceedings pending, or to the
best knowledge of such counsel, threatened by or against MPC or affecting MPC or
its properties, at law or in equity, before any court or any other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind.
(k) Tax Opinion. MPC shall have received an opinion of its tax
counsel, advisor or accountant that the Merger to be consummated by the terms of
this Agreement qualifies as a tax-free reorganization as defined under the
Internal Revenue Code of 1986, as amended.
SECTION 6.3 Conditions to the Obligation of AC to Effect the Merger. The
obligation of AC to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Date of the following conditions, any one or more of
which may be waived by MPC:
(a )AC shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Effective Date including those specified in Section 4 5 herein;
(b) AC shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Effective Date, including the issuance by AC of an aggregate of 7,135,521
shares of its common stock to MPC, of which 779,152 shares shall remain in
escrow pursuant to this merger agreement upon the surrender by MPC of 100% of
its issued and outstanding common stock to AC
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(c) The representations and warranties of AC set forth in this
Agreement shall be true and correct in all material respects on and as of the
Effective Date as if made on and as of such date, except as contemplated or
permitted by this Agreement;
(d) Except to the extent such consents are not required at the
Effective Date, AC shall have received the consents or exemptions, or made the
filings, as the case may be, which were referred to in Section 5.4;
(e) AC shall have delivered a certificate of its President to the
effect set forth in paragraph (a) of this Section 6.3;
(f) AC shall have delivered to MPC copies of resolutions duly
adopted by the Board of Directors of AC approving the execution and delivery of
this Agreement, such resolutions being certified by the Secretary of AC;
(g) No action or proceeding before any court or governmental or
regulatory authority or body, United States federal or state or foreign, shall
have been instituted (and be pending or threatened) by any government or
governmental authority, which seeks to prevent or delay the consummation of the
Merger or which challenges any of the terms or provisions of this Agreement; and
(h) No order issued by any United States federal or state or
foreign governmental or regulatory authority or body, or by any court of
competent jurisdiction nor any statute, rule, regulation, or executive order
promulgated or enacted by any United States, federal, or state or foreign
government or governmental authority, which prevented the consummation of the
Merger or materially and adversely affects the business, financial condition, or
operations of AC shall be in effect.
(i) Shareholder Approval. The shareholders of AC upon the
Effective Date of this Merger will have duly approved the Merger, and the
issuance of 7,135,521 additional shares of AC common stock, pursuant to a
reconfirmation offering in which shareholders representing a minimum of $28,000
of the proceeds from AC's initial public offering elect to reconfirm their
investment.
(j) Opinion of Counsel to AC. MPC shall have received an opinion
dated the effective date of this Merger by Schonfeld & Weinstein, 63 Wall
Street, Suite 1801, New York, New York 10005, counsel to AC, satisfactory to
MPC, in substantially the following form:
i) AC is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power to own all of its properties and assets and carry on its business in all
material respects as it is now being conducted, and is qualified to do business
as a foreign corporation in the states in which the character and location of
the assets owned by it or the nature of the business transacted by it requires
qualification.
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ii) The execution and delivery by AC of this Agreement and the
consummation of the transactions contemplated by this Agreement in accordance
with the terms hereof will not conflict with or result in a breach of any term
or provision of AC's certificate of incorporation or by-laws or constitute a
default or give rise to a right of termination, cancellation or acceleration
under any material mortgage, indenture, deed of trust, license agreement, or
other obligation or violate any court order, writ, injunction or decree
applicable to AC, or its properties or assets;
iii) The authorized capitalization of AC consists of 20,000,000
shares of common stock, par value $.0001 per share. As of the date of this
Agreement, there are 500,000 shares of common stock issued and outstanding,
including the 100,000 shares being held in escrow pending consummation of the
Merger, as per Rule 419. As of the Effective Date, after the issuance of
7,135,521 to MPC (779,152 of which will be held in escrow pursuant to this
merger), and 156,000 shares to S&W, there will be 7,791,521 shares of AC
outstanding;
iv) This Agreement has been duly and validly authorized, executed
and delivered and constitutes the legal and binding obligation of AC, except as
limited by bankruptcy and insolvency laws and by others laws affecting the
rights of creditors generally; and
v) There are no actions, suits or proceedings pending, or to the
best knowledge of such counsel, threatened by or against AC or affecting AC or
its properties, at law or in equity, before any court or any other governmental
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind.
k) Net Cash. AC shall have net cash, including the Deposited
Funds, of $31,500 on the Effective Date.
l) Release of Deposited Funds. On the Effective Date, the
Deposited Funds held in escrow from AC 's initial public offering shall be
released to AC. AC shall then immediately deposit these funds, plus any
additional funds held by AC, into a trust account with Schonfeld & Weinstein,
L.L.P. to be disbursed to the Surviving Entity.
m) AC shall amend Section 9 of its By-Laws and obtain approval
thereof to provide for corporate action without a shareholders meeting upon the
written consent of a majority of the shareholders entitled to vote thereon.
SECTION 6.4 Waiver of Condition; Right to Proceed. Unless stated otherwise
herein, if any of the conditions to the obligations of MPC and AC specified in
Sections 6.2 and 6.3 hereof has not been satisfied (excluding Sections 6.2(h)
and (i) and 6.2(g)), MPC or AC, as the case may be, in addition to any other
rights which may be available to them or it, shall have the right to waive such
conditions and to proceed with the Merger (subject to satisfaction of the other
conditions contained herein, unless also waived).
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ARTICLE 7
RULE 419 REQUIREMENTS
SECTION 7.1 Merger Criteria. Pursuant to Rule 419 under Regulation C of
the Securities Act of 1933, as amended ("Rule 419"), the fair market value of
MPC must represent at least 80% of the maximum offering proceeds of AC 's
initial public offering, i.e., MPC's fair market value must be at least $28,000
(80% x $35,000). If the fair market value of MPC is determined by AC to be less
than $28,000, this Agreement shall terminate immediately.
SECTION 7.2 Post-Effective Amendment. Once the Merger Agreement has been
executed, AC shall update its registration statement with a Post-Effective
Amendment. The Post-Effective Amendment shall contain updated information
concerning AC and information about MPC and its business, including audited
financial statements and the results of AC's initial public offering. The
Post-Effective Amendment shall also include the terms of the reconfirmation
offer mandated by Rule 419. The reconfirmation offer shall include certain
prescribed conditions which must be satisfied before Deposited Securities can be
released from escrow. If the Post-Effective Amendment is not declared effective
by the Securities and Exchange Commission and/or the reconfirmation offering is
not complete within 18 months of the date of effectiveness of AC's initial
public offering (October 5, 2000), this Agreement shall terminate automatically.
SECTION 7.3 Reconfirmation Offering. The reconfirmation offer must
commence after the effective date of the Post-Effective Amendment. Pursuant to
Rule 419, the terms of the reconfirmation offer shall include the following
conditions:
(a) The prospectus contained in the Post-Effective Amendment will
be sent to each investor whose securities are held in the Escrow Account within
5 business days after the effective date of the Post-Effective Amendment;
(b) Each investor will have no fewer than 20 and no more than 45
business days from the effective date of the Post-Effective Amendment to notify
AC in writing that the investor elects to remain an investor;
(c) If AC does not receive written notification from any investor
within 20 business days following the effective date of the Post-Effective
Amendment, the pro rata portion of the Deposited Funds (and any related interest
or dividends) held in escrow on such investor's behalf will be returned to the
investor within 5 business days by first class mail or other equally prompt
means;
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(d) The Merger will be consummated only if a minimum number of
investors representing 80% of the maximum offering proceeds ($28,000) elect to
reconfirm their investment;
(e) If the Merger has not been consummated by October 5, 2000 (18
months from the date of the prospectus), the Deposited Funds held in escrow
shall be returned to all investors on a pro rata basis within 5 business days by
first class mail or other equally prompt means, and this Agreement shall be
declared null and void;
SECTION 7.4 Release of Deposited Funds and Deposited Securities. The
Deposited Funds and Deposited Securities may be released to AC and the investors
in AC 's initial public offering, respectively, after:
(a) The Escrow Agent has received a signed representation from AC
and any other evidence acceptable by the Escrow Agent that:
(i) AC has executed an agreement for Merger of a business for
which the par value of the business represents at least 80% of the maximum
offering proceeds and has filed the required Post-Effective Amendment;
(ii) The Post-Effective Amendment has been declared effective,
the mandated reconfirmation offer having the conditions prescribed by Rule 419
has been completed, and AC has satisfied all of the prescribed conditions of the
reconfirmation offer.
(b) The Merger of a business with the fair value of at least 80%
of the maximum proceeds is consummated.
ARTICLE 8
TERMINATION
SECTION 8.1 Board Action. This Agreement may be terminated at any time by
mutual consent of the Boards of Directors of AC and MPC.
SECTION 8.2 Certain Dates. In the event that AC shall not have received
certified financial statements from MPC and/or this Agreement is not executed by
both parties by January 5, 2000, this Agreement may be terminated by either
party upon written notice, whether before or after approval of the Merger
thereof by the holders of the requisite number of shares of AC. This Agreement
shall terminate automatically if the Merger has not been consummated by October
5, 2000, eighteen (18) months from the effective date of AC's initial public
offering, which consummation includes a declaration of effectiveness by the
Securities and Exchange Commission of AC's Post-Effective Amendment and
successful completion of a shareholder reconfirmation offering, pursuant to
which shareholders representing less than 80% of the proceeds from AC's initial
public offering vote to reconfirm their investments.
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SECTION 8.3 Audited Financial Statements. In the event that MPC's audited
financial statements are materially and adversely inconsistent with the MPC
unaudited financial statements contained herein, AC shall have the right to
unilaterally terminate this Agreement by the Board of Directors of AC notifying
MPC and its counsel, Kipnis, Tescher, Lippman and Valinsky, of such termination.
Such notice shall be sent to MPC and its United States counsel prior to the
Effective Date.
SECTION 8.4 Effect of Termination. In the event of the termination of this
Agreement, this Agreement shall thereafter become void and have no effect and no
party hereto shall have any liability to any other party hereto or its
shareholders or directors or officers in respect thereof, except for the
obligations of the parties hereto in Section 9.2 hereof.
ARTICLE 9
GENERAL AGREEMENTS
SECTION 9.1 Cooperation. Each of the parties hereto shall cooperate with
the other in every reasonable way in carrying out the transactions contemplated
herein, and in delivering all documents and instruments deemed reasonably
necessary or useful by counsel for any party hereto.
SECTION 9.2 Funds. Each party shall incur all its own costs and expenses
in connection with this Agreement and the transactions contemplated hereby.
After the consummation of the Merger, all expenses will be incurred by the
Surviving Entity.
SECTION 9.3 Survival of Representations and Warranties. All
representations and warranties in this Agreement or in any instrument or
certificate delivered pursuant to this Agreement delivered on or prior to the
Effective Date shall survive the consummation of the Merger.
SECTION 9.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered by
messenger, transmitted by telex or telegram or mailed by registered or certified
mail, postage prepaid, as follows:
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(a) If to AC, to:
David Kass
26 Aerie Road
North Hills, New York 11030
With a copy to:
Joel Schonfeld, Esq.
Schonfeld & Weinstein, L.L.P.
63 Wall Street, Suite 1801
New York, New York 10005
(b) If to MPC, to:
Mark Antonucci
1301 West Copans Road
Suite F-1
Pompano Beach, Florida 33064
With a copy to:
Jay Valinsky, Esq.
Kipnis, Tescher, Lippman and Valinsky
100 NE 3rd Avenue, Suite 610
Fort Lauderdale, Florida 33301
The date of any such notice shall be the date hand delivered or otherwise
transmitted or mailed.
SECTION 9.5 Amendment. This Agreement (including the documents and
instruments referred to herein or therein) (a) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof, (b) is not
intended to confer upon any other person any rights or remedies hereunder, and
(c) shall not be assigned by operation of law or otherwise. This Agreement may
be amended or modified in whole or in part to the extent permitted by New York
law at any time, by an agreement in writing executed in the same manner as this
Agreement after authorization to do so by the Board of Directors of MPC and AC.
SECTION 9.6 Waiver. At any time prior to the Effective Date, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representation and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid is set forth in an instrument in writing
signed on behalf of such party.
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SECTION 9.7 Brokers. MPC and AC represent and warrant that no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger, except as stated herein or
elsewhere in writing.
SECTION 9.8 Publicity. So long as this Agreement is in effect, the parties
hereto shall not issue or cause the publication of any press release or other
announcement with respect to the Merger or this Agreement without the consent of
the other party, which consent shall not be unreasonably withheld or delayed
where such release or announcement is required by applicable law.
SECTION 9.9 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.10 Successors and Assigns. This Agreement shall be binding upon
and insure to the benefit of and enforceable by the respective successors and
assigns of the parties hereto.
SECTION 9.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
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COUNTERPART SIGNATURE PAGE TO
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE ARIELLE CORP.
AND
METHOD PRODUCTS CORP.
IN WITNESS WHEREOF the parties have executed this Agreement by their duly
authorized officers as of the ____ day of __________, 2000
THE ARIELLE CORP.
By:
-------------------
President
METHOD PRODUCTS CORP.
By:
-------------------
President
