SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
CELCOR, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-
6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[x] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Celcor, Inc. Common Stock, par value $.001
2) Aggregate number of securities to which transaction applies:
1,750,000
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. (Set
forth the amount on which the filing fee is calculated
and state how it was determined):
$.625 based upon the August 4, 1995
average of the bid and ask price
4) Proposed maximum aggregate value of transaction:
$1,093,750.00
5) Total fee paid:
$218.75
[x] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
CELCOR INC.
1800 BLOOMSBURY AVENUE
OCEAN, NEW JERSEY 07712
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
(R>(to be held on December 7, 1995)
Notice is hereby given that a special meeting of stockholders
of Celcor, Inc. (the "Company") will be held on December 7, 1995 at 10:00
a.m., eastern time, at the Sheraton LaGuardia East, 135-20 39th Avenue,
Flushing, New York, to:
1. Consider and act upon a proposal to approve an Agreement
and Plan of Merger dated as of March 15, 1995, between Northeast (USA)
Corp. ("Northeast"), a New York corporation, the stockholders of
Northeast and the Company, which provides for, among other things: (i)
the merger of Northeast with and into the Company (the "Merger"), with
the Company continuing as the surviving corporation; and (ii) the
conversion of each outstanding share of common stock, no par value, of
Northeast into 10,000 shares of common stock, par value $.001 per share,
of the Company ("Celcor Common Stock"); all as more fully described in
the attached Proxy Statement;
2. Elect seven persons to serve as directors of the
Company, each such director to serve for a period of one year and
thereafter until his successor shall have been duly elected and shall
have qualified;
3. (A) Ratify the issuance by the Company of 275,000
shares of its Series C 8% Convertible Preferred Stock (the "Series C
Preferred Stock"), issued by the Company in June, 1994 ; and (B) approve
an amendment to the Company's certificate of incorporation expressly
authorizing the board of directors of the Company to establish the rights,
preferences and limitations of any other class or series of preferred stock
which may be issued in the future (none is presently contemplated).
The Series C Preferred Stock was issued to a group of 13 individual
investors in a private placement. The purpose of the offering was to fund
ongoing administrative expenses of the Company and to provide a source of
money which could be used to help finance an acquisition or merger.
4. To consider and act upon any other matter which may
properly come before the meeting or any adjournment thereof.
The board of directors has fixed November 6, 1995 as
the record date for the special meeting and only holders of record of
Celcor Common Stock at the close of business on that date will be entitled
to receive notice of and to vote at the special meeting or any adjournment
or adjournments thereof.
Pursuant to the provisions of the Delaware General Corporation
Law, holders of Celcor Common Stock and Preferred Stock will have statutory
dissenters' rights with respect to the Merger. A copy of Section 262
of the Delaware General Corporation Law is annexed to this Proxy Statement
as Exhibit A. Stockholders are advised that they must follow the procedures
set forth therein in order to properly perfect their right to dissent from
the Merger.
The affirmative vote of a majority of the outstanding shares
of Celcor Common Stock is required to approve the Merger and the other
proposals described above. A form of proxy is enclosed for use at the
Special Meeting if a stockholder is unable to attend in person. Each
proxy may be revoked at any time before it is exercised by giving written
notice to the Secretary, or by submitting a duly executed later dated
proxy.
All stockholders are requested to complete, sign, date and
return the enclosed Proxy promptly, whether or not they expect to attend
the special meeting.
By Order of the Board of Directors
___________________________________
Stephen E. Roman, Jr., Secretary
Ocean, New Jersey
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, MANAGEMENT URGES YOU
TO DATE, SIGN AND MAIL THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED STAMPED ENVELOPE. YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO
ITS EXERCISE. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON.
PRELIMINARY PROXY STATEMENT
CELCOR, INC.
1800 Bloomsbury Avenue
Ocean, New Jersey 07712
The following Proxy Statement is furnished in connection
with the solicitation of proxies by the board of directors of Celcor, Inc.
(the "Company" or "Celcor"), a Delaware corporation. The proxies will
be used at a special meeting of stockholders of the Company (the "Special
Meeting") which will be held at the Sheraton LaGuardia East, 135-20 39th
Avenue, Flushing, New York on Thursday, December 7, 1995 at 10:00 a.m.
Proxies are being solicited from stockholders of record of
the Company in order to (i) consider and act upon an Agreement and Plan of
Merger, dated as of the 15th day of March, 1995 (the "Merger Agreement"),
a copy of which is annexed hereto as Exhibit B, by and between the Company,
Northeast (USA) Corp. ("Northeast") and the stockholders of Northeast
providing, among other things, for the merger of Northeast with and into
the Company (the "Merger"); (ii) elect seven persons to serve as directors
of the Company; (iii) ratify the issuance by the Company of 275,000 Shares
of its Series C 8% Convertible Preferred Stock (the "Series C Preferred
Stock"); and (iv) approve an amendment to the Company's certificate of
incorporation (the "Certificate of Incorporation"), expressly authorizing the
board of directors of the Company to establish the rights, preferences and
limitations of any other class or series of preferred stock which may be
issued in the future (none is presently contemplated).
Upon the consummation of the Merger Agreement, Northeast
will be merged with and into the Company, with the Company continuing as
the surviving corporation. Each outstanding share of common stock, no par
value of Northeast ("Northeast Common Stock"), other than shares held by
Northeast stockholders who dissent from the Merger ("Dissenting Shares"),
will be converted into the right to receive 10,000 shares of Celcor common
stock, par value $.001 per share (the "Celcor Common Stock"). Counsel
for Celcor has furnished an opinion that the Merger will constitute a
reorganization for federal income tax purposes.
The exchange rate which will be utilized in the Merger of 10,000
shares of Celcor Common Stock for each outstanding share of Northeast Common
Stock is the result of negotiations between the two companies and reflects
the judgment of the board of directors of the Company, based upon the advice
of its financial advisor, concerning the relative value of the Northeast
Common Stock and the Celcor Common Stock, taking into consideration such
factors as the market value of the Celcor Common Stock, the value of
Northeast's assets (its stock is not publicly traded), and the value of
Northeast's business and future prospects.
It is anticipated that 1,750,000 shares of Celcor Common
Stock will be issued to the stockholders of Northeast pursuant to the Merger
Agreement. After giving effect to the issuance of such shares, Northeast
stockholders will hold approximately 34% of the outstanding shares of
Celcor Common Stock (calculated before giving effect to the 825,000 shares
of Celcor Common Stock issuable upon the conversion of the outstanding
Series C Preferred Stock, and approximately 29% of the outstanding shares
of Celcor Common Stock, calculated after giving effect to the full conversion
of the Series C Preferred Stock).
The shares of Celcor Common Stock issuable to Northeast
stockholders will not be registered pursuant to the Securities Act of 1933,
as amended (the "Securities Act"), or applicable state securities laws
in reliance on exemptions under such laws. Accordingly, the subsequent
sale or transfer of the Celcor Common Stock issued to the stockholders of
Northeast will be restricted. The transfer of such shares will be permit
ted only if such shares are registered for sale pursuant to the Securities
Act and applicable state securities laws, or will be transferred in a
transaction which is exempt from the registration requirements of the
Securities Act and such laws. The certificates for the Celcor Common Stock
issued to Northeast stockholders will bear an appropriate restrictive
legend to provide notice of the restrictions on the further transfer of
such shares.
Celcor Common Stock is registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934. It is not actively traded, but
quotations are available in the "Pink Sheets." As a result of the absence
of an active market for the stock, bid-ask spreads are often substantial.
On August 12, 1994, the day prior to the first public announcement of the
Merger, the low bid and high ask price per share of Celcor Common Stock
was $1.00 and $2.00, respectively. On March 17, 1995, the day prior to
the announcement of the signing of the Merger Agreement, the low bid
and high ask price per share of Celcor Common Stock was $.25 and $2.25,
respectively.
TABLE OF CONTENTS
Page
Available Information 1
Incorporation of Certain Documents by Reference 2
Information Concerning the Special Meeting 3
General 3
Date, Place and Time of Special Meeting 3
Purpose of Special Meeting 3
Voting; Revocation of Proxy; Quorum
and Vote Required 3
Costs of Solicitation 4
Dissenters' Rights 4
Proposal One - Approval of the Merger 6
Approval Sought 6
History of Celcor 6
Background of the Merger 7
Terms of the Merger 10
Business of Northeast 11
Recommendation of the Board of Directors 13
Fairness Opinion 14
Additional Terms of the Merger Agreement 15
Issuance of Restricted Shares 16
Effective Date of the Merger 16
Accounting Treatment 17
Federal Income Tax Consequences 17
Rights of Dissenting Stockholders 18
Selected Financial Data for the Company and Northeast 20
Celcor, Inc. 20
Northeast (USA) Corp. 21
Management's Discussion and Analysis of
Financial Condition and Results of Operations 22
Celcor, Inc. 22
Liquidity 22
Statement of Operations 23
Northeast (USA) Corp. 23
Results of Operations 23
Financial Condition and Liquidity 24
Financial and Operating Plans for the Next 12 Months 24
Proposal Two - Election of Directors 26
Nominees 26
Executive Compensation 28
Section 16 Compliance 29
Common Stock of the Company 29
Market Price Information 29
Dividend Policy 30
Security Ownership of Certain Beneficial
Owners and Management 31
Certain Relationships and Related
Party Transactions 33
Proposal Three - Ratification of Issuance of
Series C Preferred Stock; Approval
of Amendment to Certificate of Incorporation 34
Description of Capital Stock of the Company 36
Celcor Common Stock 36
Preferred Stock 36
Description of Series C Convertible Preferred Stock 37
Experts 39
Presence of Accountants at Special Meeting 39
Other Matters 39
EXHIBITS
Section 262 of the Delaware General Corporation
Law - Appraisal Rights A
Agreement and Plan of Merger among Celcor, Inc.,
Northeast (USA) Corp. and the Stockholders of Northeast B
Fairness Opinion of Chartered Capital Advisers, Inc. C
Form of Proxy D
Proposed Amendment to Certificate of Incorporation E
Financial Statements F-1
AVAILABLE INFORMATION
Celcor is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files proxy statements, reports and other information
with the Securities and Exchange Commission (the "Commission"). Proxy
statements, reports and other information concerning Celcor can be inspected
and copied at Room 1024 of the Commission's offices at 450 Fifth Street,
NW, Washington, D.C. 20549 and at the Commission's regional offices in
New York (7 World Trade Center, 13th Floor, New York, New York 10048)
and in Chicago (Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661). Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, NW,
Washington, D.C. 20549, at prescribed rates.
All information contained in this Proxy Statement with
respect to Northeast was furnished by Northeast. Although Celcor has no
knowledge that would indicate that any statements or information (including
financial statements) relating to Northeast contained herein is inaccurate
or incomplete, Celcor does not warrant the accuracy or completeness of such
statements or information.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement and, if given or made,
such information or representation should not be relied upon as having been
authorized. Neither the delivery of this Proxy Statement, nor any
distribution of the securities issuable in connection with the Merger
Agreement, shall, under any circumstances, create any implication that
there has been no change in the information concerning Celcor contained
in this Proxy Statement since the date of such information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange
Commission by the Company pursuant to the Exchange Act are incorporated
by reference in this Proxy Statement:
1. The Company's Annual Report on Form 10-KSB fo
r its fiscal year ended June 30, 1995.
All documents and reports subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Proxy Statement and prior to the date of the Special
Meeting shall be deemed to be incorporated by reference in this Proxy
Statement and to be a part hereof from the date of filing of such documents
or reports. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for the purposes of this Proxy Statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Proxy Statement.
The Company hereby undertakes to provide, without charge
to each person, including any stockholder, to whom a copy of this Proxy
Statement has been delivered, upon written or oral request of such person,
a copy of any and all information that has been incorporated by reference
in this Proxy Statement (excluding exhibits, unless specifically incorporated
therein). Requests for such copies should be directed to Celcor, Inc., 1800
Bloomsbury Ave., Ocean, New Jersey, 07712; Attention: Mr. Stephen E. Roman,
Jr., telephone number (908) 922-3158. In order to insure timely delivery of
the documents, any requests should be made by November ___, 1995.
INFORMATION CONCERNING THE SPECIAL MEETING
General.
This Proxy Statement is being furnished to holders of Celcor
Common Stock in connection with the solicitation of proxies by the board
of directors of Celcor for use at a Special Meeting of stockholders to be
held on Thursday, December 7, 1995, and any adjournment or adjournments
thereof, to consider and take action upon (i) the Merger Agreement; (ii)
the election of directors; (iii) the ratification of the issuance by the
Company of 275,000 shares of its Series C Preferred Stock; (iv) a proposed
amendment to the Company's Certificate of Incorporation expressly
authorizing the board of directors of the Company to establish the rights,
preferences and limitations of any other class or series of preferred
stock which may be issued in the future (none is presently contemplated);
and (v) the transaction of such other business as may properly come
before the Special Meeting and any adjournment thereof.
This Proxy Statement, the attached Notice and the form of
Proxy enclosed herewith are first being mailed to stockholders of Celcor
on or about November __, 1995.
Date, Place and Time of Special Meeting.
The Special Meeting will be held at the Sheraton LaGuardia
East, 135-20 39th Avenue, Flushing, New York on Thursday, December 7,
1995 at 10:00 a.m., EST. Only holders of record of Celcor Common Stock at
the close of business on November 6, 1995 will be entitled to receive
notice of, and to vote at, the Special Meeting. At the close of business
on the record date, there were 3,364,674 shares of Celcor Common Stock
outstanding and entitled to vote at the Special Meeting, which were
held of record by 226 stockholders. Each such share is entitled to one
vote. This Proxy Statement is also being furnished to holders of the
Company's Series C Preferred Stock; however, such stockholders will not be
entitled to vote on any of the matters presented to holders of Celcor
Common Stock at the Special Meeting.
Purpose of Special Meeting.
At the Special Meeting, the holders of Celcor Common Stock
will be asked to approve the Merger Agreement, a copy of which is attached
to this Proxy Statement as Exhibit B. Stockholders are also being asked to
elect directors, to ratify the creation and issuance by the Company of
275,000 shares of the Company's Series C Preferred Stock and to approve a
related amendment to the Company's Certificate of Incorporation.
Voting; Revocation of Proxy; Quorum and Vote Required.
A form of proxy is enclosed for use at the Special Meeting
if a stockholder is unable to attend in person. Each proxy may be revoked
at any time before it is exercised by giving written notice to the
secretary of the Special Meeting, or by submitting a duly executed, later
dated proxy. All shares represented by valid proxies pursuant to this
solicitation (and not revoked before they are exercised) will be voted as
specified in the form of proxy. If the proxy is signed but no specification
is given, the shares subject thereto will be voted in favor of the Merger,
in favor of the board's nominees for election to the board of directors,
in favor of the ratification of the issuance of the Series C Preferred
Stock and approval of the amendment to the Certificate of Incorporation.
A majority of the shares outstanding on the record date will constitute
a quorum for purposes of the Special Meeting. Votes will not be
considered cast, however, if the shares are not voted for any reason,
including if an abstention is indicated as such on a written proxy or ballot,
or if votes are withheld by a broker. Such abstentions and broker non votes
will be considered solely for purposes of determining whether a quorum is
present. Assuming that a quorum is present, directors will be elected by
a plurality of the votes cast. Each other proposal will require the
affirmative approval of a majority of the shares of Celcor Common Stock
outstanding on the record date. The Company believes that a total of
1,557,583 shares (46.3% of the shares entitled to vote), all of which are
held by affiliates of the Company, are committed to vote in favor of each
of the proposals being considered by stockholders. Although these commitments
do not assure passage of the proposals, it makes such passage highly
likely.
Costs of Solicitation.
The entire cost of soliciting these proxies will be borne
by the Company. The Company estimates that such cost (comprised primarily
of legal and accounting expenses, postage and printing costs) will be
approximately $30,000. In following up the original solicitation of proxies
by mail, the Company may make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy materials
to the beneficial owners of Celcor Common Stock and may reimburse them for
their expenses in so doing. If necessary, the Company may also use its
officers to solicit proxies from stockholders, either personally, by
telephone or special letter. The officers will not be separately
compensated in connection therewith.
Even if they plan to attend the Special Meeting, holders of
Celcor Common Stock are requested to complete, date and sign the
accompanying proxy and return it promptly to the Company in the enclosed,
postage paid envelope.
Dissenters' Rights.
Pursuant to Section 262 of the General Corporation Law of
the State of Delaware, a copy of which is attached hereto as Exhibit A,
any holder of Celcor Common Stock or Series C Preferred Stock who objects
to the Merger will be entitled to dissent and exercise appraisal rights.
That Section enables an objecting stockholder to be paid, in cash, the
value of his Celcor Common Stock or Series C Preferred Stock, as applicable,
as determined by the Delaware Court of Chancery, provided that the following
conditions are satisfied:
(1) Such stockholder must file with the Company a written
demand for appraisal of his shares, separate and apart from any proxy or
vote against the Merger, before the taking of the vote on the Merger.
If a stockholder elects to exercise dissenters' rights, such right may only
be exercised as to all shares of Celcor capital stock held by the dissenting
stockholder.
(2) Such stockholder must not vote in favor of the Merger,
nor submit a proxy in which directions are not given.
(3) Within 120 days after the Effective Date of the Merger,
either the Company or any stockholder who has complied with Section 262
may, by petition filed in the Delaware Court of Chancery, demand a
determination by the Court of the value of the shares of all objecting
stockholders with whom agreements as to the value of such shares have not
been reached.
Within 10 days after the Effective Date of the Merger, the Company will
notify each stockholder who has complied with Section 262 and not voted
for, or consented to, the Merger of the date on which the Merger became
effective.
If the Company and the dissenting stockholder cannot agree on
the value of the shares, the Court, based upon an appraisal prepared by
an independent appraiser, will make its own determination. Under Delaware
law, the dissenting shares would be valued on a going concern and not a
liquidation basis. An appraiser would be obligated to determine the
intrinsic value of the shares, without giving effect to the proposed Merger,
considering all factors and elements which reasonably may enter into such
a determination, including market value, asset value, earnings prospects
and the nature of the enterprise. The value determined by the court may
be more than, less than or equal to the Merger consideration (i.e., the
value of the Celcor Common Stock after the Merger).
Notwithstanding the foregoing, at any time within 60 days
after the Effective Date of the Merger or thereafter, with the written
approval of the Company, any objecting stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered pursuant
to the Merger, provided that no appraisal proceeding in the Delaware Court
of Chancery may be dismissed without the approval of such Court. The
costs of an appraisal proceeding may be determined by such Court and taxed
upon the parties as the Court deems equitable under the circumstances.
FAILURE BY A STOCKHOLDER TO FOLLOW THE STEPS REQUIRED BY
DELAWARE LAW FOR PERFECTING HIS DISSENTER'S RIGHTS WILL RESULT IN THE LOSS
OF SUCH RIGHTS.
PROPOSAL ONE
APPROVAL OF THE MERGER
Approval Sought.
Stockholders are being asked to approve an Agreement and
Plan of Merger, dated as of March 15, 1995 (the "Merger Agreement"), a copy
of which is annexed hereto as Exhibit B, among the Company, Northeast (USA)
Corp. and the stockholders of Northeast, which provides for, among other
things (i) the merger of Northeast with and into the Company, with the
Company continuing as the surviving corporation (the "Merger"), and
(ii) the conversion of each outstanding share of common stock, no par value,
of Northeast ("Northeast Common Stock") into 10,000 shares of Celcor Common
Stock.
The affirmative vote of a majority of the outstanding shares
of Celcor Common Stock is required for the approval of this proposal. The
Company believes that a total of 1,557,583 shares (46.3% of the shares
entitled to vote), all of which are held by affiliates of the Company,
are committed to vote in favor of this proposal. Although these commitments
do not assure passage of the proposals, it makes such passage highly likely.
The exchange rate of 10,000 shares of Celcor Common Stock
for each share of Northeast Common Stock was negotiated by the board of
directors of the Company on the basis of the advice of its financial
advisor and its independent judgment concerning the relative value of a share
of Northeast Common Stock and a share of Celcor Common Stock, taking into
consideration such factors as the market value of the Celcor Common Stock,
the value of Northeast's assets, and value of Northeast's business and
future prospects.
History of Celcor.
Celcor was organized on January 16, 1984 to exploit new
markets created by the approval of the new "cellular" mobile telephone
technology by the Federal Communications Commission and the deregulation of
the telecommunications industry. After the completion of its initial public
offering in February, 1985, the Company extended its business into other
areas in the telecommunications field, such as radio paging and (through
its acquisition of the Pay Telephone Company, Inc. in December, 1985),
the private pay telephone market, and the private network switching business.
However, because the growth and profitability of its operations
fell short of expectations and because of the limited success of a second
public financing in July of 1987, the Company, beginning in 1987, began
selling or closing some of its operations. By February, 1991, the Company
had ceased or had sold all of its operations.
Unable to obtain financing to repay debt or fund operations
of any kind, the Company, in April of 1991, filed for protection under
Chapter 11 of the United States Bankruptcy Code. In March of 1992, the
Company's only subsidiary, the Pay Telephone Company, Inc., filed a Chapter
7 bankruptcy petition and was liquidated. There was no distribution to
creditors.
Pursuant to a Stock Purchase Agreement (the "Majestic
Agreement"), dated June 20, 1991 and amended October 29, 1991, between the
Company and Majestic International, Inc. ("Majestic"), the Company was
able to secure additional equity capital and emerge from bankruptcy. The
Majestic Agreement, among other things, provided for the sale by the
Company to Majestic of shares of Celcor Common Stock constituting a 49%
interest in the Company. The purchase price for the shares was $155,000.
Also, pursuant to the Majestic Agreement, the Company filed a reorganization
plan (the "Plan"), with the Bankruptcy Court, which utilized the proceeds
received from Majestic to pay administrative claims associated with the
bankruptcy proceeding and to settle all existing debts of the Company. On
May 28, 1992, the Plan was approved by the Bankruptcy Court. Subsequently,
8,242,000 shares of Celcor Common Stock were sold to Majestic (1,648,400
shares after giving effect to a subsequent one for five reverse stock
split) and 824,200 shares (164,840 shares on a post split basis) were is
sued to two finders (618,150 shares to Lyncroft Corp. and 206,050 to Yung
Hua Ho). The result of these transactions was the emergence of the Company
from bankruptcy with virtually no assets or liabilities.
Since its emergence from bankruptcy, the Company has not
conducted any business activities, but has been seeking new business
opportunities, especially with entities having business interests or
operations in and with the People's Republic of China.
In order to raise capital with which to fund its immediate
limited operations, and to become more attractive to a potential operational
partner, the Company raised $825,000 during May and June of 1994 from the
sale of the Series C Preferred Stock in a private placement. The Series
C Preferred Stock was sold to a group of thirteen individual investors,
all but two of whom reside in Taiwan or Thailand) and consisted of the
sale of 275,000 shares of such stock at a price of $3 per share. Each
share of Series C Preferred Stock is convertible into three shares of Celcor
Common Stock. See "Proposal Three - Ratification of Sale of Series C
Preferred Stock and Amendment to the Certificate of Incorporation" and
"Description of Capital Stock of the Company."
Background of the Merger
Certain of the directors and stockholders of the Company
have significant experience doing business in China. Based upon this
experience, they believe there are significant opportunities for America
n companies in China. Areas identified as being of particular interest are
the pharmaceutical and cosmetics industries. Given the Company's limited
resources, the board determined to seek business opportunities for the
Company in the People's Republic of China through mergers, acquisitions
and joint ventures.
In May, 1994, the Company initiated discussions with
Northeast, a privately held company which has significant business
relationships with entities located in the People's Republic of China,
concerning a possible business combination between the two companies.
Organized in February, 1993, Northeast may be deemed to be an affiliate of
Celcor by virtue of certain family inter-relationships among the individuals
controlling the two companies. Mr. Su Shi Lo is the controlling stockholder
of Majestic, which in turn, is the largest stockholder of the Company,
holding 19.4% of the outstanding shares of Celcor Common Stock. Mr. Lo's
daughter, Jennifer Lo Wu, is the chairperson and her husband, Dr. Nanshan
Wu, is the president of Northeast. In addition, Jennifer Lo Wu is the
sole stockholder of Lyncroft Corp., a stockholder of both Northeast and
Celcor.
After a detailed analysis by the Board of the business
opportunities available to the Company through an affiliation with
Northeast, including due consideration to the conflicts involved, on
August 15, 1994, the Company signed a letter of intent with Northeast under
the terms of which the Company agreed to effect the merger of Northeast with
and into the Company. The terms of the letter of intent provided that the
consummation of the Merger would be subject to the execution of a definitive
merger agreement, stockholder approval and the completion of due diligence.
None of the current members of the Board of Directors of the Company is
affiliated with Majestic or Northeast.
Northeast holds the rights to certain technology used to
manufacture various vitamin products and vitamin based cosmetics and has
entered into an agreement with Northeast General Pharmaceutical Factory,
one of the largest pharmaceutical companies in the People's Republic of
China, providing for the production and distribution of vitamins and
cosmetics. See "Business of Northeast".
In August, 1994, in anticipation of the Merger, the Company
loaned $700,000 to Northeast, which was used by Northeast to fund its
obligations under the joint venture agreement between Northeast and
Northeast General Pharmaceutical Factory, described in more detail below.
The loan is secured by a pledge by the stockholders of Northeast of their
Northeast Common Stock. The Company was able to fund this loan by using
the proceeds received by it from the sale of the Series C Preferred
Stock.
During March, 1995, Stephen E. Roman, Jr., the president
of Celcor, met with Dr. Nanshan Wu, the president of Northeast, to negotiate
the definitive Merger Agreement. Following these negotiations, the
definitive Merger Agreement was executed by the parties on March 15, 1995.
In July, 1995, the board of directors of the Company
unanimously determined, subject to the receipt of a fairness opinion, that
the Merger Agreement was in the best interests of the Company and approved
the execution and delivery of the Agreement.
In making this determination, the board concluded that a
merger with Northeast would offer a number of important benefits to the
Company, including the following:
- the opportunity to acquire an interest in a recently formed joint
venture between Northeast and a state owned enterprise, which is
one of China's largest pharmaceutical companies;
- the existence of a substantial market in China for low cost
consumer products, including the products expected to be
produced by the joint venture (vitamins and cosmetics), with
little competition;
- the possibility of distributing the joint venture's products
in the United States and other markets;
- the possibility of using the distribution channels which will be
developed by the joint venture in China to distribute products
obtained elsewhere; and
- the opportunity to acquire an interest in an operating company
(albeit a start-up company) that has significant potential arising
from (i) its ownership of formulae for the production of vitamin
and body care products, and (ii) the substantial experience of
Northeast's management in doing business in China, including
important relationships with the Chinese government and
industrial leaders.
In evaluating these factors, the board also took into consideration
the conflict arising from the fact that the president and chairman of
Northeast are the son-in-law and daughter, respectively, of the chairman of
Majestic, the Company's largest stockholder. Notwithstanding this
conflict, the board believes that the Merger is in best interests of, and
that the terms of the Merger are fair to, the stockholders of the Company.
In reaching this conclusion, the board also considered the potential
disadvantages associated with the Merger. Effectively, the Merger will
result in a change in control. After the Merger, the stockholders of
Northeast will, in the aggregate, hold 34% of the outstanding Celcor Common
Stock. If such shares are voted together, the shares held by the former
Northeast stockholders might constitute a plurality of the outstanding
shares and could thereby control the election of directors and other
matters. Moreover, after the Merger, the Company will be managed by the
present management of Northeast.
The board also recognized that the Merger will significantly increase
the Company's working capital needs, as significant cash will be required
to implement the business plan of Northeast. There can be no assurances
that the combined company will be successful in raising the capital which
will be required. Finally, the board recognized that there is significantly
greater risk to doing business in China when compared to doing business in the
United States. Despite these concerns, the board concluded that the potential
returns justify the greater risks being taken. As a "shell company" with no
existing business and an insignificant net worth, the board believers
that there is little additional risk to stockholders. The Company emerged
from bankruptcy in 1992 with a de minimis amount of assets and since then, has
been unable to identify any other prospective business partners with an
interest in the Company. The board believes that if the Merger is not
approved, the only alternatives available to the Company would be to
liquidate (in which case it is unlikely that there would be any distribution
to stockholders), or to continue as a "dormant" company until another
business combination is identified. The board believes that given the
current financial condition of the Company, it is unlikely that any other
business combination would provide the same value to stockholders.
Terms of the Merger.
On the effective date of the Merger (the "Effective Date"),
Northeast will merge with and into Celcor, with Celcor continuing as the
surviving corporation. All of the common stock of Northeast issued and
outstanding immediately prior to the consummation of the Merger (other
than Dissenting Shares, if any), will be converted into shares of Celcor
Common Stock. All of the Celcor Common Stock and Series C Preferred
Stock which is issued and outstanding immediately prior to the consummation
of the Merger will remain outstanding and will not change as a result of
the Merger. 3,364,674 shares of Celcor Common Stock and 275,000 shares of
Series C Preferred Stock are presently outstanding. The Certificate of
Incorporation of Celcor shall be and remain the certificate of
incorporation of the surviving corporation and the by-laws of Celcor shall
be the by-laws of the surviving corporation.
Upon the Effective Date, each share of Northeast Common
Stock outstanding immediately prior to the Effective Date shall, by virtue
of the Merger, be converted into the right to receive 10,000 shares of
Celcor Common Stock. Any shares of Northeast Common Stock held by Celcor
or Northeast on the Effective Date shall be canceled and will be given no
effect in the Merger. It is anticipated that 1,750,000 shares of Celcor
Common Stock will be issued pursuant to the Merger. After giving effect
to the issuance of such shares, but excluding the shares of Celcor Common
Stock issuable upon the conversion of the Series C Preferred Stock, the
former Northeast stockholders will hold approximately 34% of the outstanding
Celcor Common Stock (calculated before giving effect to the 825,000 shares
of Celcor Common Stock issuable upon the conversion of the outstanding
Series C Preferred Stock and approximately 29% of the outstanding shares
of Celcor Common Stock, calculated after giving effect to the full
conversion of the outstanding Series C Preferred Stock).
On or immediately after the Effective Date, each holder of an
outstanding certificate or certificates which prior thereto represented
shares of Northeast Common Stock, shall surrender the same to Celcor.
Each Northeast stockholder who shall have surrendered its certificate
representing shares of Northeast Common Stock shall be entitled to receive,
in exchange therefor, a certificate or certificates representing the number
of whole shares of Celcor Common Stock into which the Northeast Common
Stock shall have been converted.
When the Merger becomes effective, the former stockholders
of Northeast shall thereupon cease to have any rights in respect of
Northeast Common Stock, other than the right to receive the certificates for
Celcor Common Stock. Unless and until any certificates shall be so
surrendered and exchanged, (i) the holders of Northeast Common Stock shall
not have any voting rights in respect of the Celcor Common Stock into which
the shares of Northeast Common Stock shall have been converted, and (ii)
dividends or other distributions (if any) payable to holders of record of
shares of Celcor Common Stock shall not be paid to the holder of the
certificate. Upon surrender of the certificate representing shares of
Northeast Common Stock, the dividends or other distributions which shall be
or become payable subsequent to the Effective Date with respect to the
number of whole shares of Celcor Common Stock represented by the certificate
issued in exchange for the surrendered Northeast certificate, shall be paid,
but without interest. No fraction of a share of Celcor Common Stock will
be issued pursuant to the Merger.
Business of Northeast
Northeast was organized in February, 1993 in the expectation
of pursuing business opportunities in China for the production and
distribution of pharmaceutical and body care products. The principal
executive offices of Northeast are located at113-25 14th Avenue, College
Point, New York and the telephone number at that address is (718)886-3400.
In May, 1994, Northeast entered into a joint venture agreement
with Northeast General Pharmaceutical Factory ("Northeast General
Pharmaceutical"), a state owned Chinese pharmaceutical manufacturer located
in Shenyang, China. Pursuant to the joint venture agreement, the parties
created Shenyang United Vitatech as a Chinese limited company ("United
Vitatech"). United Vitatech will have an initial capitalization of U.S.
$5.75 million, U.S. $2.5 million to be contributed by Northeast General
Pharmaceutical and balance of U.S. $3.25 million to be provided by
Northeast through contributions of cash and technology. Of the amount to be
contributed by Northeast, U.S. $2.1 million will be in cash (payable in
three installments in July, 1994, June 1995 and December, 1995), with the
balance of the capital to be in the form of a contribution of proprietary
technology and formulae for the production of vitamin products. At the
present time, $1.0 million has been contributed to United Vitatech by
Northeast. Northeast has deferred the payment of the installment which was
due in June, 1995 until the joint venture has a need for the funds. United
Vitatech will use these funds to build a new factory in Shenyang and since
other temporary production facilities have been provided by Northeast
General Pharmaceutical,there is no immediate need to build the new factory.
Of the amount which has been contributed to date by Northeast General
Pharmaceutical, $750,000 was in cash and the balance consisted of a
contribution to the venture of the development rights to build an office
and factory complex on an 84,000 square meter parcel of land located in
Shenyang, China. In exchange for its capital contribution, Northeast
received a 56% interest in the joint venture and elects 4 of 7 directors.
United Vitatech has received Chinese government approval to
produce a chewable Vitamin C tablet and is seeking additional government
approvals for a multi-vitamin and pre-natal vitamin. The Vitamin C tablet
is currently being manufactured for the joint venture by Northeast General
Pharmaceutical, but once other products are approved, the joint venture
intends to construct its own factory in Shenyang to produce its own products.
Under the current manufacturing agreement, Northeast General
Pharmaceutical provides labor and equipment to manufacture the vitamins
and Northeast provides managerial and technical support. Plans to construct
an office and factory complex on the land contributed to the venture in
Shenyang are now being reviewed by Chinese regulatory authorities and it
is anticipated that construction will begin in calendar year 1996. The
facility will be built in stages, with a portion of an office complex and
production and warehouse space built first.
United Vitatech is also importing into China a soft gel skin
care series called Jennifer-E-18. This product comes in heart shaped
capsules which are broken open and applied to a person's face. The
principal ingredients of the product are ginseng and Vitamin E. Test
marketing of this product began in Shenyang, China in March, 1995 and test
marketing expanded to Beijing in May, 1995. Limited distribution of this
product has also commenced in the United States, South America and the
Caribbean.
Initially, United Vitatech will seek to distribute its
products primarily in Liao Ning Province and the surrounding region.
Located in northeast China, this region (formerly known as Manchuria) has
a population in excess of 200 million people and is believed by the
management of Northeast to be among the most promising in China for the
distribution of consumer products. Northeast has initiated an advertising
campaign for its products on Chinese television and recognized its first
revenues in the latter part of fiscal 1995. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Northeast"
and "Northeast Financial Statements".
In addition to its participation in the joint venture,
Northeast is involved in importing and distributing bulk ascorbic acid in
the United States. Ascorbic acid, which is used to manufacture synthetic
vitamin C, is derived from corn. The largest corn fields in China are
located in the northeast region of the country, making the region conducive
to supporting the growth of this business. Management of Northeast believes
that by producing this product in China, Northeast will gain a significant
price advantage over its much larger U.S. and European competitors.
Since July, 1994, Northeast has imported and sold approximately 135 tons
of ascorbic acid in the United States. The ascorbic acid is purchased
from Northeast General Pharmaceutical, Northeast's joint venture partner.
Its initial customers have been chemical wholesalers that sell bulk
chemicals to pharmaceutical companies. The bulk ascorbic acid purchased
by pharmaceutical companies will be processed and used in vitamin products.
To date, most of the purchases made of ascorbic acid have been against
firm orders to sell the product. Since it does not maintain an inventory
and acts essentially as a wholesaler, profit margins on these sales are
low (approximately 5%). This part of Northeast's business tends to be
opportunistic - sales are only made when adequate supplies are available,
pricing is favorable and the Company has an interested buyer.
Northeast also owns a small parcel of land in Queens, New
York, which was contributed to the corporation by Dziou Thai, one of
Northeast's stockholders, in exchange for 30 shares of Northeast Common
Stock. Tung Ying, the controlling stockholder, of Dziou Thai, is the
brother of Dr. Wu, the Chairman of Northeast. The value of the land
recorded on Northeast's balance sheet at the time the property was acquired
was $600,000. The area in which the land is located is a mixed residential
and commercial neighborhood with a high concentration of Chinese businesses
and residents. Northeast acquired the land intending to develop the parcel
as a combined residential and office facility to provide living and office
space to individuals from the northeast region of China who are in New York
for an extended visit. However, in order to devote its limited resources to
its operations in China, Northeast is presently attempting to sell the property.
Northeast has obtained a current appraisal of the property and recorded a
write-down of $180,000 with respect to this asset during the year ended
June 30, 1995 to reflect the current fair market value of $420,000.
Recommendation of the Board of Directors.
The board of directors of Celcor unanimously approved the
Merger Agreement on July 11, 1995. The board believes that the Merger
is in the best interests of stockholders and recommends that stockholders
vote for the proposed Merger. The current members of the Board of Direct
ors are David Chow and Stephen E. Roman, Jr., neither of whom is affiliated
with Majestic or Northeast.
Numerous factors were considered by the board in approving
and recommending that stockholders approve the Merger Agreement. Most
important of these factors is the manner in which the board believes
Northeast can help the Company achieve its long-term objective (as expressed
in the Company's strategic plan) of entering into the pharmaceutical and
cosmetics industries in the People's Republic of China. The board believes
that, based upon the relationships which Northeast has with important
manufacturing and distribution partners in China, Northeast will be able
to provide the Company with unique access to Chinese production facilities
and markets.
The Board recognized that there are significant risks
associated with doing business in China, and in particular, in concentrating
the Company's future business activities in China. Among the more
significant risks are the great political and economic instability prevailing
in China, including the ever-changing political relationships between China
and the United States, the continuing evolution of the Chinese economy from
pure communism to a mixed economy, an uncertain legal and regulatory
environment, currency fluctuations and uncertainty concerning the ability of
the Company to repatriate its investment from China. Nevertheless, the
Board has concluded that the potential returns available justify the level
of risk being assumed.
Other factors considered by the Board included the agreed
upon exchange ratio and the tax-free nature of the transaction to the
stockholders of both companies for federal income tax purposes. The board
also evaluated and took into consideration the following:
(i) the board's familiarity with the financial condition,
business prospects and strategic objectives of Celcor. Since emerging
from bankruptcy in the summer of 1992, the Company has been unable to
conduct any operations and has had no revenues. The Company is unable
to enter into a new line of business without a significant capital
infusion. The Board believes that a sale of the Company is not feasible
since the Company has no significant assets to sell. Accordingly, the Board
believes that it is in the best interests of stockholders to merge with
another company. During the last three years, the Company has made
inquiries to identify other prospective merger partners, but has been
unable to locate any other company with an interest in merging with the
Company;
(ii) the trading history of Ceclor's Common Stock;
(iii) the board's analysis of Northeast's history, business,
financial condition and prospects;
(iv) the familiarity which each of the directors has with
business conditions and opportunities and the difficulties
encountered by American companies in attempting to do business
in the People's Republic of China; and
(v) the terms and conditions of the Merger Agreement,
including that fact that the consideration will consist of
the issuance of additional shares of Common Stock of the Company.
In addition, the directors met with Chartered Capital
Advisers, Inc., investment bankers retained by the Company to evaluate the
Merger from a financial point of view. Based upon these discussions, and
the analysis conducted by the investment bankers, the investment bankers
issued and the board considered the fairness opinion provided by the
investment bankers.
Fairness Opinion.
The Company has retained the investment banking firm of
Chartered Capital Advisers, Inc. ("Chartered Capital") to serve as its
financial advisor in connection with the Merger.
Chartered Capital provides merger and acquisition and valuation
services on behalf of corporate clients, investors, financial institutions,
investment funds, attorneys, the courts and participants in employee benefit
plans.
Chartered Capital has rendered its opinion to the board of
directors of Celcor that the terms of the Merger are fair to the
stockholders of Celcor from a financial point of view. In reaching its
conclusion, Chartered Capital considered, among other things, certain
financial and publicly available information concerning the trading of, and
the market for, the Celcor Common Stock. Chartered Capital also reviewed
various documents with respect to Northeast, including, but not limited to:
(i) historical financial information; (ii) prospective financial information;
(iii) a business plan; (iv) manufacturing and distribution agreements; (v)
a technology agreement; and (vi) a real estate development agreement.
Chartered Capital reviewed the Merger Agreement, and interviewed the
management of each company and their advisors. To evaluate the fairness
of the Merger, Chartered Capital considered various financial, economic,
and market information deemed to be relevant and believes that there is
an adequate financial basis to support its fairness opinion. Key
considerations of the opinion were:
- The value of the shares of Celcor Common Stock to be issued
to Northeast stockholders is approximately $1,150,000, based upon
the market value of the Celcor Common Stock.
- The value of the Celcor Common Stock which will be issued is
below the price at which Northeast Common Stock was originally issued
to the Northeast stockholders.
- Since the stock to be issued is restricted stock, the Northeast
stockholders will be unable to "cash out" following the consummation
of the proposed Merger, so their financial interests will be similar
to those of Celcor stockholders.
- The following valuation analyses were performed:
(a) capitalization multiples of publicly held companies deemed to
be relevant to the value of Northeast,
(b) capitalization multiples that have been paid in acquisitions
deemed to be relevant to Northeast and,
(c) discounted cash flow analysis based upon the projected revenues
of Northeast.
These analyses support values for Northeast that are in excess of
the value of the Celcor Common Stock which will be received by
Northeast stockholders.
- Absent the proposed transaction, Celcor Common Stock does not
appear to afford any potential for appreciation in value; if
Northeast is successful, there is significant appreciation
potential.
In rendering its opinion, Chartered Capital relied, without
independent verification, on the accuracy and completeness of the
information concerning each corporation which it considered necessary in
rendering its opinion. Copies of the written opinion, which describe the
assumptions made and the matters considered by such firm, is attached to
this Proxy Statement as Exhibit C and such opinion should be read by each
stockholder in its entirety.
Celcor has agreed to pay to Chartered Capital a fee of $15,000
for its services in connection with the Merger. Of such fee, $5,000
became payable at the time Chartered Capital was retained, $5,000 was
payable upon the completion of the valuation analysis and the remaining
$5,000 is payable at the time the fairness opinion is delivered. Celcor
has also agreed to reimburse Chartered Capital for certain of its expenses
and to indemnify Chartered Capital against certain potential liabilities
and expenses, including liabilities under the federal securities laws.
Additional Terms of the Merger Agreement.
The Merger Agreement provides for customary representations and
warranties by each party to the transaction including, among others, (i)
its due incorporation and organization, (ii) capitalization, (iii) title
and condition of assets, (iv) material contracts, (v) absence of employee
benefit plans, (vi) licenses and permits, (vii) compliance with other
instruments, (viii) need for consents, (ix) compliance with laws, (x)
accuracy of financial statements,(xi) authority and enforceability of
Merger Agreement, and (xii) absence of litigation.
Prior to the Effective Date (as defined in the Merger
Agreement), each corporation has agreed to conduct its business only in
the ordinary course of business and to provide access to the other company
to facilitate the completion of all necessary due diligence investigations.
The obligations of Celcor and Northeast to consummate the
Merger are subject to the satisfaction of the following conditions, among
others, unless waived: (i) approval and adoption of the Merger Agreement
by the requisite stockholder votes by the stockholders of each corporation,
(ii) the absence of any pending litigation or proceeding initiated by
any governmental authority to enjoin or prohibit the Merger, (iii) the
continued accuracy of the representations and warranties made by the parties,
(iv) the performance by each party of its respective obligations under the
Merger Agreement, and (v) the receipt of certain opinions, certificates and
consents.
The stockholders of Northeast are obligated to indemnify
Celcor against any claims, actions, suits, proceedings, investigations an
d damages arising from or relating to (i) any breach or failure of
Northeast to perform any of its covenants or agreements, (ii) the inaccuracy
of any representation or warranty made by Northeast, (iii) any fixed or
contingent obligation or liability not disclosed in Northeast's financial
statements, and (iv) any liability for taxes, other than those which were
accrued as liabilities by Northeast on its balance sheet.
Issuance of Restricted Shares.
The shares of Celcor Common Stock issuable pursuant to
the Merger will not be registered under the Securities Act of 1933, as
amended (the "Securities Act"), or the securities laws of any state, but will
be issued in reliance upon the exemption from registration afforded by
Section 4(2) of the Securities Act and Regulation D promulgated by the
Securities and Exchange Commission thereunder and similar exemptions from
registration available under state securities laws. The stockholders
of Northeast will be required to make certain representations to Celcor at
the closing concerning the sophistication and suitability of each such
stockholder to acquire restricted shares.
The Celcor Common Stock issuable to the Northeast
stockholders may not be sold or transferred in the absence of registration
under the Securities Act and applicable state securities laws, or the
availability of an exemption from such registration requirements. Each
certificate of Celcor Common Stock issued pursuant to the Merger will bear an
appropriate restrictive legend prohibiting the transfer of such shares.
Effective Date of the Merger.
The Merger will become effective (the "Effective Date") at the
time that a Certificate of Merger is filed in accordance with the Delaware
General corporation Law and Articles of Merger are filed in accordance
with the New York Business Corporation Act. These filings will be made
within five days after the Merger Agreement is approved by the stockholders
of Celcor, unless the parties agree to a later date.
Accounting Treatment.
The Merger will be accounted for as a reverse acquisition
whereby, for accounting purposes, Northeast will be the acquiror of Celcor.
It is characterized as a reverse acquisition because even though Celcor will
continue as the surviving Corporation, only Northeast has significant assets
or operations. Also, Northeast management will manage the combined entity
and its stockholders may control the election of the board and other matters.
Since Celcor is a shell with no operations, its assets will be recorded in
the balance sheet of the combined company at book value.
The unaudited pro forma financial information contained in
this Proxy Statement has been prepared accounting for the Merger as a
reverse acquisition.
Federal Income Tax Consequences.
THE FOLLOWING IS A SUMMARY DESCRIPTION OF THE MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER. THIS SUMMARY IS NOT A COMPLETE
DESCRIPTION OF ALL THE CONSEQUENCES OF THE MERGER.
THIS SUMMARY IS BASED UPON RELEVANT PROVISIONS OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE APPLICABLE TREASURY REGULATIONS
PROMULGATED THEREUNDER, JUDICIAL AUTHORITY AND CURRENT ADMINISTRATIVE RULINGS
AND PRACTICE, ALL OF WHICH ARE SUBJECT TO CHANGE, POSSIBLY ON A RETROACTIVE
BASIS. THIS SUMMARY DOES NOT ADDRESS ALL ASPECTS OF FEDERAL INCOME TAXATION
THAT MAY BE RELEVANT TO PARTICULAR STOCKHOLDERS IN LIGHT OF THEIR PERSONAL
CIRCUMSTANCES, OR TO STOCKHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER THE
CODE (FOR EXAMPLE, S CORPORATIONS, CERTAIN ESTATES AND TRUSTS, INSURANCE
COMPANIES, FOREIGN PERSONS, TAX EXEMPT ORGANIZATIONS, TAXPAYERS SUBJECT TO
THE ALTERNATIVE MINIMUM TAX, FINANCIAL INSTITUTIONS, BROKERS, DEALERS OR
HOLDERS THAT OWN 10% OR MORE OF THE VOTING POWER OF NORTHEAST). THE COMPANY
HAS NOT REQUESTED A RULING FROM THE INTERNAL REVENUE SERVICE WITH RESPECT TO
THESE MATTERS.
EACH STOCKHOLDER'S INDIVIDUAL CIRCUMSTANCES MAY AFFECT THE
TAX CONSEQUENCES OF THE MERGER TO SUCH STOCKHOLDER. IN ADDITION, NO
INFORMATION IS PROVIDED HEREIN WITH RESPECT TO THE TAX CONSEQUENCES OF THE
MERGER UNDER APPLICABLE FOREIGN, STATE OR LOCAL LAWS. CONSEQUENTLY, EACH
NORTHEAST STOCKHOLDER IS ADVISED TO CONSULT ITS OWN TAX ADVISOR AS TO THE
SPECIFIC IMPACT ON SUCH STOCKHOLDER OF FEDERAL, FOREIGN, STATE OR LOCAL LAWS.
Counsel to the Company has provided its opinion that
the Merger will be treated as a tax-free reorganization as defined in Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"),
and that, accordingly, (i) no gain or loss will be recognized by the
Stockholders of Northeast upon the exchange of their shares of Northeast
Common Stock solely for shares of Celcor Common Stock pursuant to the Merger;
(ii) the basis of the Celcor Common Stock received by each stockholder of
Northeast in exchange for shares of Northeast Common Stock will be the same,
immediately after the exchange, as the basis of such stockholders' Northeast
Common Stock exchanged therefor, and (iii) the holding period for any Celcor
Common Stock received in exchange for Northeast Common Stock will include the
period during which the Northeast Common Stock surrendered for exchange was
held, provided such stock was held as a capital asset on the date of the
exchange.
A dissenting Northeast stockholder who receives only cash
for his shares of Northeast Common Stock will recognize gain or loss for
federal income tax purposes measured by the difference, if any, between
such holder's basis in the stock and the amount received by him for his stock.
The gain or loss will be characterized for federal income tax purposes as
capital gain or loss or as ordinary income. The gain or loss will be
characterized as capital if (i) the holder's shares of Northeast Common
Stock are held as capital assets, and (ii) the holder receives cash with
respect to all shares of Northeast Common Stock which he owns, including
shares owned by application of the attribution rules of Section 318 of the
Code.
Section 318 of the Code provides, in part, that a stockholder
will be considered to be the owner of shares which are owned by certain
corporations, partnerships, trusts and estates in which the stockholder has
a beneficial ownership interest, shares which such stockholder has an option
to acquire, and shares owned by certain members of his family (not including
brothers and sisters). Under certain circumstances, the attribution rules
with respect to shares attributed from a family member may be waived.
Rights of Dissenting Stockholders.
Pursuant to Section 262 of the General Corporation Law of
the State of Delaware, a copy of which is attached hereto as Exhibit A,
any holder of Celcor Common Stock or Series C Preferred Stock who objects
to the Merger will be entitled to dissent and exercise appraisal rights.
That Section enables an objecting stockholder to be paid, in cash, the
value of his Celcor Common Stock or Series C Preferred Stock, as applicable,
as determined by the Delaware Court of Chancery, provided that the following
conditions are satisfied:
(1) Such stockholder must file with the Company a written
demand for appraisal of his shares, separate and apart from any proxy or vote
against the Merger, before the taking of the vote on the Merger. If a
stockholder elects to exercise dissenters' rights, such right may only be
exercised as to all shares of Celcor capital stock held by the dissenting
stockholder.
(2) Such stockholder must not vote in favor of the Merger,
nor submit a proxy in which directions are not given.
(3) Within 120 days after the Effective Date of the
Merger, either the Company or any stockholder who has complied with Section
262 may, by petition filed in the Delaware Court of Chancery, demand a
determination by the Court of the value of the shares of all objecting
stockholders with whom agreements as to the value of such shares have not been
reached.
Within 10 days after the Effective Date of the Merger, the Company will
notify each stockholder who has complied with Section 262 and not voted for,
or consented to, the Merger of the date on which the Merger became effective.
If the Company and the dissenting stockholder cannot agree
on the value of the shares, the Court, based upon an appraisal prepared by
an independent appraiser, will make its own determination. Under Delaware
law, the dissenting shares would be valued on a going concern and not a
liquidation basis. An appraiser would be obligated to determine the
intrinsic value of the shares, without giving effect to the proposed Merger,
considering all factors and elements which reasonably may enter into such a
determination, including market value, asset value, earnings prospects and
the nature of the enterprise. The value determined by the court may be more
than, less than or equal to the Merger consideration (i.e., the value of the
Celcor Common Stock after the Merger).
Notwithstanding the foregoing, at any time within 60 days
after the Effective Date of the Merger or thereafter, with the written
approval of the Company, any objecting stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered pursuant
to the Merger, provided that no appraisal proceeding in the Delaware Court
of Chancery may be dismissed without the approval of such Court. The costs
of an appraisal proceeding may be determined by such Court and taxed upon
the parties as the Court deems equitable under the circumstances.
FAILURE BY A STOCKHOLDER TO FOLLOW THE STEPS REQUIRED BY
DELAWARE LAW FOR PERFECTING HIS DISSENTER'S RIGHTS WILL RESULT IN THE LOSS
OF SUCH RIGHTS.
SELECTED FINANCIAL DATA
FOR THE COMPANY AND NORTHEAST
The following is a summary of selected financial data for
the Company and Northeast. See the financial statements included herein
for more complete information.
CELCOR, INC.
The following financial information has been derived from
Celcor's financial statements for each of the fiscal years set forth below,
which statements are unaudited, except for the fiscal years ended June 30,
1993, 1994 and 1995. The statements for the fiscal years ended June 30, 1994
and 1995 are included herein. The information for the years ended June 30,
1991 and 1992 is unaudited but, in the opinion of management of Celcor,
includes all adjustments, consisting of normal recurring adjustments, necessary
to present fairly the financial data for such periods. The following should
be read in conjunction with the financial statements and notes related thereto
included elsewhere herein.
(In thousands, except per share amounts)
At June 30 and for the year
then ended
1995 1994 1993 1992 1991
Revenues from continuing
operations - - - - -
Net loss before discontinued
operations and extraordinary ($ 54) ($ 4) ($ 23) ($ 135) ($80)
Net income (loss) (1) (80) (54) (4) 2,010 (133)
Net loss per common share
before discontinued opera-
tions and extraordinary item (.02) (.02) - (.05) (.10)
Net income (loss) per common
share (.02) (.02) - 1.30 (.10)
Working capital(deficit) (15) 765 19 (157) (2,166)
Total assets 712 769 19 - 29
Total liabilities 27 4 25 157 2,195
Long-term debt and redeemable
preferred stock - 25 - 139
Stockholders' equity (deficit) 685 765 (6) (157) (2,166)
Dividends per common share None None None None None
________________________
(1) For the 1991 period, income from discontinued operations totaled
$1,501. For the 1992 period, discontinued operations consisted of a $447,129
gain on the liquidation of a subsidiary and a $1,585,184 gain on
extinguishment of debt as an extraordinary item.
The above information reflects the consolidated results of
Celcor, Inc. and The Pay Telephone Company, Inc. through the 1992 fiscal
year. The Pay Telephone Company filed for liquidation pursuant to Chapter 7
of the United States Bankruptcy Code and was liquidated during the 1992
fiscal year. Effective July 1, 1992, the Company adopted fresh start
reporting standards as a result of its reorganization under Chapter 11 of
the Bankruptcy Code. Consequently, the 1993 fiscal year and subsequent
periods may not be comparable to the earlier periods reported above.
NORTHEAST (USA) CORP.
The following financial information has been derived from
Northeast's audited financial statements for each of the fiscal years set
forth below, which statements for the years ended June 30, 1995 and 1994 are
included herein. The following should be read in conjunction with the
financial statements and notes related thereto included elsewhere herein.
(In thousands)
At June 30, and At June 30 At June 30 and
for the year for the year for the year
then ended then ended then ended
1995 1994 1993(1)
Revenues $ 905 -- --
Net income (loss) (700) ($234) ($16)
Working capital (deficit) (110) 699 124
Total assets 3,413 3,416 136
Total liabilities 998 155 2
Long-term debt -- -- --
Stockholders' equity 225 $841 134
Dividends per common share None None None
_______________
(1) The date of inception of Northeast's operations was February, 1993
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CELCOR
Liquidity
Since its emergence from Chapter 11 Bankruptcy proceedings at
the beginning of its 1993 fiscal year, the Company has had no operations or
business. Subsequent to its reorganization, the Company had virtually no
assets or liabilities and its need for working capital has been minimal. At
the time of its emergence from bankruptcy, the Company was able to secure
$40,000 in loans from an unaffiliated investor (an individual residing in
Taiwan), which was sufficient to fund the Company's minimal administrative
expenses. In order for the Company to actively pursue its business plan to
seek new business opportunities, such as mergers, acquisitions or joint
ventures, more substantial permanent financing was required. In fiscal
1994, the Company was able to obtain $780,000 in equity capital through the
private placement of the Series C Preferred Stock. The holder of the $40,000
loan payable by the Company converted the loan and interest payable thereon
to shares of the Series C Preferred Stock, making the total proceeds received
from the Series C Preferred Stock issuance $825,000. After the conclusion of
the offering of the Series C Preferred Stock, $700,000 of the proceeds was
loaned to Northeast in anticipation of the Merger. See "Proposal One-Approval
of the Merger - Background of the Merger". The Company believes that if the
Merger with Northeast is consummated (see Note 7 to the Company's Financial
Statements), the Company will require significant additional capital to fund
its obligations under the joint venture agreement with Northeast General
Pharmaceutical, to pay ongoing operating expenses and to support the Company's
working capital needs. Alternatively, should the Merger with Northeast not be
consummated, the Company may be unable to recover the loan balance in cash
from Northeast and would be illiquid. While the Company believes that the
value inherent in the stock of Northeast (which the Company holds as
collateral against the loan) would be adequate for the ultimate recovery (in
future years) of the loan balance, additional capital in the short term would
be required for the Company to operate in any capacity.
Should the Merger with Northeast be consummated, the Company
intends to raise additional capital to fund the continuing operations of the
combined entity through one or more private placements of debt and equity
securities, utilizing both domestic and foreign investment sources. Should the
Merger not be consummated, the Company does not believe it will have any
ability to raise additional capital.
Because of the above mentioned liquidity concerns, the Company's
independent accountants, in their report, have issued an explanatory
paragraph regarding the Company's ability to carry out its business plans.
Statement Of Operations
Fiscal 1994 Compared to Fiscal 1995
During the 1995 fiscal year, the Company was actively
involved in its efforts to consummate a merger with Northeast, with
which it signed a letter of intent on August 15, 1994 and a Merger Agreement
on March 15, 1995. As such, the Company incurred substantial legal and
accounting fees in conjunction with this transaction, which increased the
loss compared to the 1994 fiscal year. Apart from its activities related to
the Merger, the Company had no ongoing operations in either year and no
revenues. It incurred a relatively modest amount of expenses in each year
in order to maintain its corporate existence (SEC filings, tax returns and
stock transfer fees).
NORTHEAST (USA) CORP.
Results of Operations
Year ended June 30, 1994
Compared to the Year ended June 30, 1995.
For the fiscal year ended June 30, 1994, Northeast had no revenues
from operations. During this period Northeast was in the process of
establishing its operations, both in the U.S. and in Shenyang, China. The
loss is primarily the result of general and administrative expenses, (primarily
office salaries, travel costs and office rental) incurred for this purpose.
For the fiscal year ended June 30, 1995, Northeast recognized its
first revenues, primarily a result of sales of bulk ascorbic acid (vitamin C),
which it purchased in China from Northeast General Pharmaceutical, its joint
venture partner, and resold in the United States. As Northeast prepared a
selling effort for its domestic operations and its Chinese subsidiary, costs
and expenses were incurred with little revenue being realized. Additionally,
the Chinese subsidiary operated for only six months in the 1994 year and a full
twelve months for the 1995 fiscal year, thus accounting for a portion of the
increase in costs and expenses from year to year. Costs and expenses for the
1995 period consisted primarily of depreciation and amortization, salaries,
travel costs, and professional and consulting fees.
As noted above, Northeast's revenues during the 1995 period were
primarily derived from the sale of bulk ascorbic acid. Northeast generally
makes bulk purchases of this material from China only when it has a buyer for
such quantity in the U.S. Because a sale takes place almost simultaneously with
the purchase, Northeast incurs only minimal expenses in connection with the
sale. It is for this reason that Northeast accepts a low profit margin on
these sales. Due to the uncertainty of the supply from China and the price
at which the supply will be available to Northeast, it is not known if these
profit margins will increase on future sales of ascorbic acid.
During the 1995 fiscal year, Northeast recorded a write down of
$180,000 in connection with vacant land which it owns. Northeast intends to
sell the property in the near future and has based the write down on a current
appraisal of the property.
Financial Condition and Liquidity
Northeast will require significant additional capital to carry out its
business plans. Northeast believes that much of its ability to raise
additional capital will be dependent on the consummation of the proposed
Merger with Celcor. Should the Merger be consummated, the combined entity
would have a greater ability to raise additional capital through a private
placement and/or public offering of debt or equity securities. Northeast's
consolidated cash balance of $351,400 at June 30, 1995 is primarily a result
of the receipt of a $700,000 loan from Celcor. Should the proposed Merger with
Celcor not take place, Northeast would not have the ability to repay the
$700,000 loan and may not have the ability to raise any significant amount of
additional capital.
Subsequent to the 1995 fiscal year end, for short-term working capital
purposes, Northeast borrowed $50,000 from a bank and $150,000 from its
president. Additionally, Northeast is offering for sale a parcel of vacant
property which it owns. If a buyer can be found, Northeast expects it would
realize approximately $400,000 from such a sale.
Since Northeast is currently unprofitable, the $200,000 in short
term loans it has recently obtained may be insufficient to fund it to the
point when it can generate positive cash flow from operations. It is not
known how quickly the vacant land can be sold. Because of these liquidity
concerns, Northeast's independent accountants, in their report, have issued
an explanatory paragraph regarding the uncertainty of Northeast's ability to
carry out its business plans.
Financial and Operating Plans for the Next 12 Months
Northeast's operational plans include (1) domestically, the development
of new products and the expansion of its marketing efforts, and (2) expansion
of the operations of its Chinese subsidiary, both in production and marketing
capabilities. To carry out these plans, Northeast must fund the following
cash requirements in the next 12 months:
1. Pursuant to the terms of the joint venture agreement under which
Northeast's majority owned subsidiary, United Vitatech, was formed, Northeast is
scheduled to make additional cash investments in United Vitatech according to
the following schedule:
By June 30, 1995 - $600,000
By December 31, 1995 - 500,000
Total additional cash investment required $1,100,000
Of this total, approximately $600,000 would be utilized to
build an office, factory and warehouse in Shenyang, China. While architect's
plans have been substantially completed, construction will not commence until
Northeast's cash investment (above) has been completed. If Northeast is
successful in raising the required capital, construction could commence in the
spring or summer of 1996.
The capital contribution scheduled to be made on June 30, 1995
has been deferred by Northeast as Northeast believes it will be easier for
it to raise this capital subsequent to the pending Merger with Celcor. At
present, United Vitatech does not require the capital for operational
purposes. The funds required for the construction of production facilities
in China are not immediately needed as United Vitatech currently leases space
for its operations. Should United Vitatech's operations subsequently generate
a need for the additional capital contribution, Northeast has obtained a
verbal commitment from an individual residing in Europe (who is not presently
a stockholder of Northeast) to make a loan to Northeast to enable Northeast to
satisfy its June 30, 1995 $600,000 obligation to United Vitatech. This
commitment is not a binding obligation and there can be no assurances that
Northeast will be able to obtain this loan, if needed. It is anticipated that
should the Merger with Celcor take place, this loan, if made, would be
converted into Celcor Common Stock. No terms for any such conversion have been
discussed. Should the Merger not be consummated, Northeast has no current
identifiable source to repay this loan, other than to issue additional stock
of Northeast.
2. It is anticipated that as long as the Merger with Northeast is
still in process, Celcor will continue to extend the due date of the $700,000
loan due it from Northeast. Should the Merger with Celcor be consummated, the
note will be cancelled. If the Merger is never consummated and Northeast is
unable to repay the note, Celcor will have the right to exercise its remedies
under the terms of a pledge agreement whereby the Northeast stockholders
pledged their shares of Northeast to Celcor as security for the note. In such
event, Celcor would have the right to acquire the shares itself or sell them to
a third party.
3. For product development, marketing costs and working capital
for its domestic operations, Northeast believes it will require an additional
$1 million in financing.
To fund the needs described above, Northeast believes it will require
approximately $2.0 million in additional financing. This assumes that the
Merger with Celcor will take place, eliminating the need to repay the
$700,000 loan, and that Northeast will not be required to repay bank debt and
the officer loan prior to the date Northeast begins to generate, positive
cash flow.
As with any new, growing business, Northeast believes additional
outside capital may be required by it on ongoing basis to fund its longer
term expansion.
PROPOSAL TWO
ELECTION OF DIRECTORS
Nominees
The holders of Celcor Common Stock will elect seven directors
at the special meeting, each of whom will be elected for a one year term.
Unless a stockholder either indicates "withhold authority" on his proxy or
indicates on his proxy that his shares should not be voted for certain
nominees, it is intended that the persons named in the proxy will vote for the
election of the persons named in the table below to serve until the expiration
of their terms and thereafter until their successors shall have been duly
elected and shall have qualified. Discretionary authority is also solicited
to vote for the election of a substitute for any of said nominees who, for
any reason presently unknown, cannot be a candidate for election. The Board
of Directors has no reason to believe that any of the nominees will be
unavailable for election. Directors will be elected by a plurality of the
votes cast at the Special Meeting.
Each of the nominees named below has consented to being named
as a nominee in this Proxy Statement and has agreed to serve as a director at
the Special Meeting, but such consent is conditioned upon the approval of the
Merger by stockholders.
The table below sets forth the names and ages (as of October
____, 1995) of each of the nominees, the other positions and offices presently
held by each such person with the Company, the period during which each such
person has served on the board of directors of the Company, and the principal
occupations and employment of each such person during the past five years.
DIRECTOR
OF THE
COMPANY
NAME AGE PRESENT POSITION SINCE
Stephen E. Roman, Jr.(1) 47 Director 1994
David Chow (2) 35 Director 1993
Eugene Cha (3) 38 -- --
Frank Nelson (4) 73 -- --
Jennifer Lo Wu (5) 42 -- --
Chin-Sung (Joe) Chen (6) 43 -- --
Michael Hsu (7) 55 -- --
_______________
(1) Mr. Roman was elected to the Board of Directors of the Company in
June, 1994. He has served as president and secretary since June
of 1994 on a part-time basis. He was vice president - finance
and chief financial officer since 1984 and served in this capacity on
a part-time basis from October, 1989 to June, 1994. Mr. Roman is a
certified public accountant and is self-employed. Mr. Roman is also the
chief financial officer of a privately held company involved in the
personal security industry and has a number of other business interests.
Mr. Roman beneficially owns 16,153 shares of Celcor Common Stock.
(2) David Chow is Managing Director of Center Laboratories, Taiwan, and
Center Pharmaceutical Co., Ltd., People's Republic of China.
Additionally, Mr. Chow is Chairman of the Taiwan Pharmaceutical
Association, Director of the China Pharmaceutical Development Association
and Director of the GMP Committee of the China Pharmaceutical Industrial
Association. Mr. Chow does not beneficially own any shares of Celcor
Common Stock.
(3) Eugene Cha is an attorney and since 1987 had been a partner in the law
firm of Cha & Pan, a firm with offices in New York and China. He holds
law degrees from both National Taiwan University and the University of
Michigan. He is also a member of the National Assembly of the Republic
of China. Mr. Cha does not beneficially own any shares of Celcor Common
Stock.
(4) Frank A. Nelson is president of Zhou Lin International, Inc. and has
served in this capacity for more than 12 years. Zhou Lin is a medical
devices manufacturing and marketing company. From 1988 to 1994, Mr.
Nelson was also president of Natural Pharmaceutical International, Inc.,
a natural pharmaceutical products research and development company.
Since January, 1994, Mr. Nelson has also served as Chairman of Health
Guard International, Inc., a health food manufacturing and marketing
company. Mr. Nelson does not beneficially own any shares of Celcor
Common Stock.
(5) Jennifer Lo Wu is a trained pharmacist and from February, 1993 until
the present date has served as chairperson of Northeast. Ms. Wu also
serves as chairperson of Shenyang United Vitatech Ltd., Northeast's
Chinese joint venture. Prior to her association with Northeast,
Ms. Wu was a real estate agent in Flushing, New York. Ms. Wu is married
to Dr. Nanshan Wu, the president of Northeast. Ms. Wu is the sole
stockholder of Lyncroft Corp., which owns 123,630 shares of Celcor
Common Stock and 10 shares of Northeast Common Stock.
(6) Chin-Sung (Joe) Chen is presently general manager of Hyscios Pharmacy
International Co., Ltd., a distributor of pharmaceutical products
based in Taipei, Taiwan. Prior to his association with Hyscios, Mr.
Chen was employed for approximately 16 years by Lederle, where he served
in a variety of increasing responsible positions. From April, 1991 to
November, 1993, Mr. Chen was national marketing manager of Lederle
Taiwan. Mr. Chen does not beneficially own any shares of Celcor Common
Stock.
(7) Michael Hsu has served as a part time vice-president-finance of the
Company since June 1994. Mr. Hsu is also a self-employed certified
public accountant and has been engaged in this capacity for more than
the last 5 years. Mr. Hsu does not beneficially own any shares of Celcor
Common Stock.
Presently, the Company has two directors - David Chow and
Stephen E. Roman, Jr., both of whom are standing for re-election. The last
meeting of stockholders of the Company at which directors were elected was
held on November 20, 1993. At the time, stockholders elected Paul Siu,
David Chow and Hong Yuan Shi to serve as directors. On May 18, 1994, Mr.
Shi resigned as a director and on May 23, 1994, Mr. Siu resigned as a
director. Mr. Roman was elected to the Board in June, 1994 by Mr. Chow, the
remaining director, following the resignation of Messrs. Shi and Siu, each
of whom resigned because of an inability to participate as board members in
a meaningful way. Mr. Shi is the deputy managing director of Northeast
General Pharmaceutical Factories Group and chief economist and general
director of Northeast General Pharmaceutical Factory. As a resident of
China, Mr. Shi was unable to attend meetings of the Board. Mr. Siu
resigned for personal reasons to pursue other opportunities. The board of
directors does not presently have an audit, compensation or nominating
committee. There was one meeting of the board of directors during the fiscal
year ended June 30, 1995, which was attended by Mr. Roman and Mr. Chow
(either in person or by proxy).
Executive Compensation
During the Company's fiscal year ended June 30, 1995, Mr.
Roman received an aggregate of $15,750 in compensation from the Company. This
amount includes all cash and non-cash compensation, bonuses, deferred
compensation and perquisites. No other compensation of any kind was paid to
any executive officer or director of the Company. The Company does not
presently have any long-term incentive plan, deferred compensation plan, stock
option or stock grant plan, pension plan or other benefit plans. The Company
does not presently have any employment contracts, termination of employment,
or change in control arrangements with any of its executive officers.
Under the terms of the Merger Agreement, the following persons
have been designated to serve as executive officers of the Company following the
consummation of the Merger:
Name Age Title
Dr. Nanshan Wu 45 President
Stephen E. Roman, Jr. 47 Vice president,
secretary and chief
financial officer
Michael Hsu 55 Treasurer
Information concerning Mr. Roman has been provided above.
Mr. Hsu is and for the last five years has been a self-employed certified
public accountant. He has served without compensation as vice president -
finance and treasurer of the Company since June 1994 on a part-time basis.
Dr. Wu presently serves as the president of Northeast and has served in this
capacity since Northeast was first organized in February, 1993. Dr. Wu is
also an obstetrician/gynecologist and for the last five years has maintained
an active medical practice.
Section 16 Compliance
Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to Celcor, Celcor believes that Messrs. Chow and Hsu
have each filed a Form 3 in their capacity as officers or directors of
the Company but, that such filings were not made on a timely basis. Neither
individual owns any shares of Celcor Common Stock. In addition, Celcor
believes that Majestic International, Inc. and Verchi Holdings Limited,
each of which is believed to be the beneficial owner of more than 10%
of the outstanding Celcor Common Stock has filed Form 3, but that such
filing was not made on a timely basis. Celcor further believes that
Shenyang Tianfa Social Service Company and Verchi Holdings, each owns
in excess of 10% of the outstanding Celcor Common Stock and has not filed
a Form 3 with respect to such beneficial ownership.
COMMON STOCK OF THE COMPANY
Market Price Information
The Company's Common Stock is traded over-the-counter and
its quotations are carried in the National Quotation Bureau's daily "Pink
Sheets".
The following table shows the range of high and low bid or
last trade quotations for the Company's Common Stock in the over-the-counter
market as reported to the Company by the National Quotation Bureau
Incorporated. No review of the daily Pink Sheets for the periods indicated
has been undertaken by the Company. The quotations reflect prices between
dealers, without retail mark-ups, mark-downs or commissions and may not
necessarily represent actual transactions or be indicative of prices at
which the Company's stock was traded. In November of 1993, the Company
effected a reverse stock split on a one for five basis. All bids reflected
below have been adjusted to give effect to the reverse split.
FISCAL YEAR FISCAL QTR. ENDED LOW BID HIGH BID
1994 September 30, 1993 $.005 $ .05
December 31, 1993 .02 .025
March 31, 1994 .05 .05
June 30, 1994 .25 .31
1995 September 30, 1994 .12 1.25
December 31, 1994 .25 .87
March 31, 1995 .25 .87
June 30, 1995 .25 .87
1996 September 30, 1995 .12 .37
On August 12, 1994, the day prior to the first reported
announcement of the Merger, the low bid and high ask price for Celcor
Common Stock was $1.00 and $2.00, respectively. On March 17, 1995, the day
prior to the signing of the definitive Merger Agreement, the low bid and
high ask price was $.25 and $2.25, respectively.
The number of record holders of the Company's Common Stock,
as of October 16, 1995, was approximately 226. However, the Company
believes that there may be substantially more beneficial holders.
Dividend Policy.
The Company has not paid any dividends on its Common Stock
since its inception. The Company anticipates that for the foreseeable
future, earnings, if any, will be retained for use in the business or for
other corporate purposes, and it is not anticipated that cash dividends
will be paid on its Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of
Celcor Common Stock owned by each person who, as of March 31, 1995, owned of
record, or was known by the Company to own beneficially, more than 5% of
the outstanding shares of Celcor Common Stock, as well as the ownership of
Celcor Common Stock by each current director of the Company, each nominee
for director and the shares beneficially owned by all current executive
officers and directors as a group.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
Majestic International, Inc. 648,400 19.4%
227 Gloucester Rd.
Wan Chi, Hong Kong (1)
Shenyang Tianfa Social 450,000 13.5%
Service Company (2)
No 37 Zhong Gong Bei Street
Tiexi District
Shenyang, Peoples Republic
of China
Verchi Holdings Limited (2) 550,000 16.5%
Room 312, Entrance 3, Bldg 14,
Compound 3, Jingouhe Road
Wukesong - Haidian District
Beijing, Peoples Republic of
China
Barbara Edwards 219,810 6.53%
800 Palisades Avenue
Fort Lee, NJ 07024
Builtland Partners 171,800 (3) 5.1%
1271 Ave. of the Americas
Suite 4200
New York, NY
David Chow -- --
Shinwi Road
Section 2
No. 34
6th Floor
Taipei, Taiwan
Stephen E. Roman, Jr. 161,153 --
1800 Bloomsbury Avenue
Ocean, New Jersey
Eugene Cha -- --
c/o Cha & Pan
36 W. 44th Street
New York, New York 10036
Frank A. Nelson -- --
4296 Lares Circle
Salt Lake City, Utah 84124
Jennifer Lo Wu 123,620(4) 3.67%
129-09 26th Avenue
Suite 202
Flushing, NY 11355
Chin-Sung Chen -- --
Peian Rd.
No. 21, Lane 595
3rd Floor
Taipei, Taiwan
Michael Hsu -- --
136-21 Roosevelt Avenue
Flushing, NJ 11354
Executive Officers and Directors
as a group (3 persons) 16,153 --
_______________
(1) Majestic, the Company's largest stockholder, acquired all of its
Celcor Common Stock from the Company in 1992 in connection with the
adoption of a plan of reorganization and emergence of the Company from
bankrutpcy.
(2) On September 27, 1994, Majestic sold 450,000 shares of Celcor Common
Stock to Shenyang Tianfa Social Service Company and 550,000 shares to
Verchi Holdings Limited. Both sales were effected in private
transactions. The Company has been advised that neither Shenyang Tianfa
Social Service Company nor Verchi Holdings Limited is an affiliate of
Majestic and that the sales were negotiated on an arms' length basis.
(3) Includes 34,800 shares held by the Milstein Foundation, an affiliate
of Builtland. Builtland Partners is a partnership comprised of the
following partners: Seymour Milstein, Howard Milstein, Paul Milstein (a
former director of the Company), Philip Milstein, Edward Milstein, Barbara
Zalaznik, Dr. Roslyn Meyer and Constance Lederman.
(4) Includes shares owned by Lyncroft Corp., a corporation of which Ms. Wu is
the sole stockholder.
Certain Relationships and Related Party Transactions
Celcor and Northeast may be deemed to be related parties
by virtue of certain family inter-relationships among the individuals
controlling the two companies. Mr. Su Shi Lo is the controlling
stockholder of Majestic, which, in turn, is the largest stockholder of the
Company, holding 19.4% of the outstanding shares of Celcor Common Stock.
Mr. Lo's daughter, Jennifer Lo Wu is the chairperson and her husband, Dr.
Nanshan Wu, is the president of Northeast. In addition, Jennifer Lo Wu
is the sole stockholder of Lyncroft Corp., a stockholder of both
Northeast and Celcor.
In August, 1994, the Company made a loan to Northeast in
the amount of $700,000, which was used by Northeast to fund a portion of
its obligation to contribute capital under the joint venture agreement with
Northeast General Pharmaceutical. The loan is evidenced by a promissory
note dated August 9, 1994. The loan is on an interest free basis until
November, 1995 and thereafter accrues interest at an annual rate of fifteen
(15%) per annum. The Company has obtained a stock pledge from the
stockholders of Northeast whereby all of the outstanding stock of
Northeast secures the repayment of the loan. At the time the Merger is
consummated, the loan will be cancelled. If the Merger is not consummated
and Northeast is unable to repay the loan at maturity, the Company will
be entitled to exercise its remedies under the Pledge Agreement.
Northeast purchases bulk ascorbic acid for resale from
Northeast General Pharmaceutical, its joint venture partner.
PROPOSAL THREE
A. RATIFICATION OF ISSUANCE OF SERIES C PREFERRED STOCK
In May and June of 1994, the Company issued and sold 275,000
shares of a new series of preferred stock, designated as Series C 8%
Convertible Preferred Stock ("Series C Preferred Stock"). The shares were
issued at $3.00 per share and resulted in gross proceeds to the Company
of $825,000. The Series C Preferred Stock was issued to a group of 13
individual investors in a private placement. None of the investors was a
stockholder of the Company prior to acquiring the Series C Preferred Stock.
Of the 13 purchasers, two reside in New York, one in Thailand, and the
remaining 10 investors are residents of Taiwan.
The Series C Preferred Stock provides for the payment of
cumulative dividends at an annual rate of 8%. Each share is convertible
at any time after July 1, 1994 and prior to June 30, 1997 into three shares
of Celcor Common Stock, subject to adjustment in certain circumstances.
At the time of issuance of the Series C Preferred Stock, the high and
low bid price for Celcor Common Stock was $.31 and $.25, respectively.
The conversion price of $1.00 a share was intended to establish a
conversion rate significantly above the market price of the Celcor Common
Stock in order to make conversion desirable only if there is a significant
increase in the future in the price of the Celcor Common Stock. The holders
of the Series C Preferred Stock generally do not vote on any matter
submitted to stockholders for a vote. For more information concerning the
rights, preferences and limitations of the Series C Preferred Stock, see
"Desription of Capital Stock of the Company - Description of Series C 8%
Convertible Preferred Stock."
Of the proceeds received by the Company from the sale of
the Series C Preferred Stock, $700,000 was used to make a loan to Northeast.
The remaining $125,000 was used to pay offering expenses, ongoing
administrative expenses and the costs associated with the Merger and this
proxy solicitation.
The Certificate of Incorporation of the Company authorizes
the issuance of 2,000,000 shares of preferred stock. Section 151(g) of
the Delaware General Corporation Law provides that a board of directors
may establish the powers, designations, preferences and relative rights
of a new class or series of capital stock if expressly authorized to do so
by the certificate of incorporation. Although the Company believes that
this authority was intended by the Company's Certificate of Incorporation,
there is, at present, no express delegation to the board in the Certificate
of Incorporation of power to specify the relative rights and preferences
of the Series C Preferred Stock. Accordingly, the board is asking
stockholders to ratify the creation of the Series C Preferred Stock .
Although no such claim has been asserted, the risk exists
that the issuance of the Series C Preferred Stock without stockholder
approval could be challenged. If such a claim was asserted and was success
ful, it is possible that the Series C Preferred Stock could be held to have
been invalidly issued. It is difficult to predict what the consequences
of such a determination might be. In order to eliminate this uncertainty,
the board recommends that stockholders ratify the issuance of the Series
C Preferred Stock.
B. APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
The Company is also seeking stockholder approval to amend its
Certificate of Incorporation to insert express language confirming
the right of the board, in the future, to create one or more additional
series or classes of capital stock, each containing such powers,
designations, preferences and relative rights as may be established by the
board.
The Company has no present plans to issue any additional shares of
preferred stock of any class or series; however, as the Company's business
expands following the Merger, it will face a continuing need for capital.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." A copy of the proposed Amendment is annexed hereto
as Exhibit E.
The board believes that such authority is necessary in or
der to ensure that the Company has sufficient flexibility to create new
securities, as needed, on an expeditious basis, in order to meet the
Company's needs.
This authority would remain subject to the limitation,
presently contained in the Certificate of Incorporation, limiting the
aggregate number of shares of preferred stock which may be issued to
2,000,000.
If stockholders do not vote in favor of this proposal, it
will be necessary for the board to seek stockholder approval each time
the Company proposes to issue a new series of preferred stock. The delays
attendant to seeking stockholder approval would make it difficult for
the Company to go into the market quickly when market conditions favor such
financing. As a result, after obtaining stockholder approval, the
Company may be unable to consummate a proposed financing because the
opportunity to sell the new series of preferred stock on favorable terms
may no longer be available. In addition, the Company would incur significant
additional expenses to solicit stockholder approval each time a determination
was made to sell preferred stock.
At the same time, stockholders should be aware that by
delegating such broad authority to the board, the board will be authorized
to create preferred stock in the future with voting, conversion or
redemption rights which could adversely affect the economic rights or voting
power of the holders of Celcor Common Stock. Among other things, the
preferred stock could be used to discourage the acquisition of the Company
or the Celcor Common Stock in the future.
Stockholders must vote separately on each part of this
proposal. The affirmative vote of a majority of the outstanding shares of
Celcor Common Stock is required for the approval of each part of the
proposal. Accordingly, stockholders may choose to ratify the issuance of the
Series C Preferred Stock, but vote against the proposal to amend the
Certificate of Incorporation. The effect of such a vote would be to require
stockholder approval any time the board proposed to issue a new series of
preferred stock.
For the reasons described above, the board recommends that
stockholders vote in favor of each part of this proposal.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
The authorized capital stock of the Company consists of
20,000,000 shares of Celcor Common Stock and 2,000,000 shares of preferred
stock, $.001 par value (the "Preferred Stock"). The following summary is
qualified in its entirety by reference to the Company's Restated Certificate
of Incorporation, a copy of which is available for inspection at the
Company's executive offices. The discussion below assumes that stockholders
approve the proposed amendment to the Company's certificate of
incorporation, described above under the caption "Proposal Three - A.
Ratification of Issuance of Series C Preferred Stock; B. Approval of
Amendment to Certificate of Incorporation."
Celcor Common Stock
Subject to the prior rights, if any, of holders of the
Preferred Stock, the holders of Celcor Common Stock have equal rights to
dividends when, as and if declared by the board of directors, from funds
legally available therefor. Holders of Celcor Common Stock do not have any
pre-emptive rights, nor are any shares subject to redemption. Upon
liquidation, dissolution or winding up of the Company, and after payment
to creditors and subject to the rights of the holders of Preferred Stock, the
assets will be divided pro rata on a share-for-share basis among the holders
of the shares of Celcor Common Stock. All shares of Celcor Common Stock
now outstanding, and shares to be outstanding upon consummation of the
Merger, are and will be fully paid, validly issued and nonassessable.
The holders of Celcor Common Stock exercise all of the
voting power, except as required by law or as specifically reserved to other
classes upon the occurrence of certain events as described below. Each
share of Celcor Common Stock allows the holder thereof to one vote. Holders
of the Celcor's Common Stock do not have cumulative voting rights, which
means that the holders of more than 50% of the shares voting for the
election of directors can elect all of the directors and, in that event,
the holders of the remaining shares will not be able to elect anyone to
the board of directors.
The Company has never paid any dividends to holders of Celcor Common
Stock. It is the present intention of the Company not to pay any cash or
stock dividends on Celcor Common Stock for the foreseeable future.
Preferred Stock
Shares of Preferred Stock are issuable from time to time
in one or more series and with such designations, powers, preferences,
rights, qualifications, limitations, or restrictions as may be determined
by the board of directors, consistent with the Certificate of
Incorporation, and with the laws of the State of Delaware. Unless the nature
of a particular transaction and the rules of law applicable thereto require
such approval, the board of directors has the authority to issue these shares
without stockholder approval. The board of directors, without stockholder
approval, can thus issue preferred stock with voting and conversion rights
which could adversely affect the voting power of the common stockholders.
The Preferred Stock could thus be used to discourage the acquisition of
the Company or its Common Stock. The Company has no present plans,
arrangements, commitments or understandings to issue any additional
Preferred Stock.
Series A and Series B Preferred shares have previously been
retired or converted as applicable.
Description of Series C 8% Convertible Preferred Stock
Dividends
Holders of Series C Preferred Stock have a preference in
the payment of dividends over the payment of dividends on Celcor Common
Stock, or any other class of Celcor stock junior to the Series C Preferred
Stock with respect to dividends (other than a dividend payable in the form
of Celcor Common Stock or such other junior stock). Dividends are
cumulative and payable quarterly on the last day of March, June, September
and December at a rate of $0.24 per annum per share out of funds legally
available therefor.
Preemptive Rights
Holders of Series C Preferred Stock are not entitled to
preemptive or subscriptive rights for the purchase of additional shares of
any class of Celcor capital stock.
Liquidation
If Celcor voluntarily or involuntarily liquidates, dissolves
or winds-up (any of the above referred to as a "Liquidation") the holders
of Series C Preferred Stock will have a preference of $3.00 per share,
plus all dividends accrued and unpaid thereon, whether or not declared,
to the date of payment, or such lesser amount remaining after the claim
s of all creditors have been satisfied, before any payments will be made
with respect to Celcor Common Stock or any other class of Celcor stock
ranking junior to the Series C Preferred Stock as to payment upon
liquidation. In the event that, upon any such Liquidation, the available
assets of Celcor are insufficient to pay the liquidation preference on the
outstanding shares of Series C Preferred Stock, the holders of all such
shares will share ratably in any distribution of assets in proportion to the
full amounts to which they would otherwise be respectively entitled.
Redemption
Shares of Series C Preferred Stock will be redeemable, in
whole or in part, at any time after July 1, 1996, at the option of the
board of directors of Celcor, at $4.50 per share plus all dividends accrued
and unpaid on such shares to the date of redemption. If any proposed
redemption shall be of less than all of the outstanding shares of Series C
Preferred Stock, the redemption shall be effected pro rata according to
the number of shares held by each holder of such shares.
Conversion
Holders of shares of Series C Preferred Stock have the
right, at their option, at any time during the period beginning July 1, 1994
and ending on June 30, 1997 (unless the shares have been called for
redemption, in which case such period shall end on, but not after, the close
of business on the date fixed for redemption) (the "Conversion Period"),
to convert each share of Series C Preferred Stock into three shares of
fully paid and non-assessable shares of Celcor Common Stock. Shares of
Celcor Common Stock will be delivered, and the person exercising such option
will be deemed to be the holder of shares of Celcor Common Stock, upon
surrender to Celcor, or its transfer agent appointed for such conversion,
of the certificate or certificates representing shares of Series C Preferred
Stock being converted. Upon conversion, no allowance or adjustment will be
made with respect to the dividends upon either class of Celcor stock.
Shares of Series C Preferred Stock that have been converted will not be
reissued.
The number of shares of Celcor Common Stock issuable upon
conversion of a share of Series C Preferred Stock is subject to adjustment
(to the nearest one-hundred thousandth (1/100,000) of a share, or the
nearest one one-thousandth (1/1,000) of one cent, as appropriate) in certain
events, including (i) subdivision, combination, reclassification or
split-up of Celcor Common Stock; (ii) the issuance of Celcor Common Stock
as a dividend on Celcor Common Stock; (iii) the issuance or sale of Celcor
Common Stock (excluding certain shares described below) including an is
suance or sale by way of the issuance of options or rights to subscribe for
shares of Celcor Common Stock or the issuance of securities convertible
into, exchangeable for, or carrying rights of purchase of, shares of Celcor
Common Stock, for a consideration per share other than the Conversion Price
then in effect. The Conversion Price is an amount equal to the number of
shares of Celcor Common Stock into which one share of Series C Preferred
Stock will be converted, divided by three dollars ($3.00) and is
initially set at one dollar ($1.00). Notwithstanding the above, no
adjustment will be made to the number of shares of Celcor Common Stock
issuable upon conversion of Series C Preferred Stock upon the issuance of
shares pursuant to options or stock purchase agreements granted to, or
entered into with, officers and employees of Celcor, or of any subsidiary
thereof, provided that the number of shares so issued does not exceed 300,000
shares of Celcor Common Stock, as such number of 300,000 shares shall be a
djusted in the case of subdivision, combination, reclassification, split-
up or stock dividend of the outstanding shares of Celcor Common Stock.
Except as described above, no adjustment will be made to the number of
shares of Celcor Common Stock issuable upon conversion of Series C Preferred
Stock.
No adjustment in the conversion rate will be required,
however, unless such adjustment (aggregated with any other adjustments
calculated, but not previously effected by reason of this limitation) would
require an increase or decrease in the Conversion Price of at least ten
cents ($0.10). Any calculated adjustment not effected because of this
limitation, however, will be carried forward and taken into account in any
subsequent adjustment.
Voting
Holders of Celcor Series C Preferred Stock have no voting
rights, except as provided by law and except that, so long as any shares
of Celcor Series C Preferred Stock are outstanding, Celcor may not, with
out the consent of the holders of at least 66 2/3% of the aggregate number
of shares of Celcor Series C Preferred Stock then outstanding:
(i) alter or change the preferences, special rights or
powers of the Celcor Preferred Stock so as to adversely affect the Celcor
Series C Preferred Stock; or
(ii) consolidate or merge with or into another
corporation (whether or not Celcor is the surviving Corporation), or sell all
or substantially all of its assets to another corporation, unless in
connection therewith, lawful and adequate provision is made whereby the holders
of Celcor Series C Preferred Stock shall receive the right to convert
during the Conversion Period (as defined above) into the kind and amount
of shares of stock and other securities to be received by holders of the
number of shares of Celcor Common Stock into which the Celcor Series C
Preferred Stock might have been converted immediately prior to such
consolidation, merger or sale, which right is subject to adjustment as
described above.
Experts
The audited financial statements of Celcor and Northeast
included in this proxy statement have been audited by BDO Seidman, LLP,
independent certified public accountants, to the extent and for the periods
indicated in their reports (which contain an explanatory paragraph regarding
uncertainties as to their ability to continue as going concerns), appearing
elsewhere herein, and are included herein in reliance upon such reports
given upon the authority of said firm as experts in accounting and
auditing.
Presence of Accountants
at Special Meeting
Representatives of BDO Seidman, the Company's independent
accountants for the Company's current and most recently completed fiscal
years, are not expected to be present at the Special Meeting, but will be
available by telephone to respond to appropriate questions of stockholders.
Other Matters
At the time that this Proxy Statement was mailed to
stockholders, management was not aware of any matter, other than the matters
described herein, that would be presented for action at the Special Meeting.
If other matters properly come before the Special Meeting, it is intended
that shares represented by proxies will be voted with respect to those
matters in accordance with the best judgment of the persons voting them.
If a stockholder intends to present a proposal at the next
Annual Meeting of Stockholders, the proposal must be received by the Company
in writing no later than ______, 1995, in order for such proposal to be
eligible for inclusion in the Company's Proxy Statement and form of proxy
for next year's meeting.
By Order of the Board of Directors
Stephen E. Roman, Jr., Secretary
Dated: November ___, 1995
</page>
<PAGE>
CELCOR, INC./NORTHWEST (USA) CORP.
Index to Financial Statements
Celcor, Inc. Pro Forma Condensed Consolidated Financial
Statements - Unaudited:
Introduction F-2
Balance sheet as of June 30, 1995 F-3
Statement of operations for the year ended
June 30, 1995 F-4
Notes to pro forma condensed consolidated
financial statements F-5
Celcor, Inc. Financial Statements - Audited:
Report of independent certified public accountants F-6
Balance sheet as of June 30, 1995 F-7
Statements of operations for the years ended
June 30, 1995 and 1994 F-8
Statements of stockholders' equity for the years ended
June 30, 1995 and 1994 F-9
Statements of cash flows for the years ended
June 30, 1995 and 1994 F-10
Notes to financial statements F-11 - F-13
Northeast (USA) Corp. Consolidated Financial Statements -
Audited:
Report of independent certified public accountants F-14
Balance sheet as of June 30, 1995 F-15
Statements of operations for the years ended
June 30, 1995 and 1994 F-16
Statements of stockholders' equity for the
years ended June 30, 1995 and 1994 F-17
Statements of cash flows for the years ended
June 30, 1995 and 1994 F-18
Summary of accounting policies F-19 - F-21
Notes to consolidated financial statements F-22 - F-24
F-1
</PAGE>
<PAGE>
Celcor, Inc. Unaudited Pro Forma Condensed
Consolidated Financial Statements
Introduction
The following unaudited pro forma condensed consolidated balance sheet as
of June 30, 1995, and the unaudited pro forma condensed consolidated
statement of operations for the year ended June 30, 1995 reflect the pro for
ma condensed consolidated financial statements of Celcor, Inc. giving
effect to the pro forma adjustments described herein as though the merger
with Northeast (USA) Corp. had been consummated at June 30, 1995 for the
condensed consolidated balance sheet and at July 1, 1994 for the condensed
consolidated statement of operations.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the notes thereto and with the historical
financial statements of Celcor, Inc. and Northeast (USA) Corp. included
elsewhere herein. See "Index to Financial Statements". The unaudited pro
forma condensed consolidated statements of operations are not necessarily
indicative of operating results that would have been achieved had the merger
actually been consummated at July 1, 1994 and should not be construed as
indicative of future operations.
Under the terms of the merger agreement, Celcor, Inc. will issue 1,750,000
shares of its common stock in exchange for all of the outstanding shares
of common stock of Northeast (USA) Corp. The transaction is being accounted
for as a reverse acquisition whereby Northeast (USA) Corp. is the acquiror
for accounting purposes.
F-2
</page>
<PAGE>
CELCOR, INC.
PRO FORM CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, 1995
Northeast
Celcor, Inc. (USA) Corp. Adjustments Pro forma
Assets
Current:
Cash and cash equivalents $12,037 $351,400 $- $363,437
Receivables - 34,534 - 34,534
Inventory - 432,121 - 432,121
Other - 70,058 - 70,058
12,037 888,113 - 900,150
Notes receivable 700,000 - (700,000)(2) -
Property and equipment, net - 348,535 - 348,535
Land held for sale - 420,000 - 420,000
Intangible assets - 1,742,666 - 1,742,666
Other assets - 13,610 - 13,610
$712,037 $3,412,924 $(700,000) $3,424,961
Liabilities and Stockholders'
Equity
Current:
Accounts payable $ - $ 94,363 $ 25,000(3) $ 119,363
Accrued expenses 26,983 203,820 - 230,803
Notes payable - 700,000 (700,000)(2) -
26,983 998,183 (675,000) 350,166
Minority interest - 2,189,998 - 2,189,998
26,983 3,188,181 (675,000) 2,540,164
Stockholders' equity:
Preferred stock 275 - - 275
(1,050,000)(1)
Common stock 3,515 1,050,000 1,750(1) 5,265
Additional paid-in capital 1,570,475 - 910,139(1) 2,480,614
Accumulated deficit (138,111) (949,995) 138,111(1) (974,995)
(25,000)(3)
Treasury stock (751,100) - - (751,100)
Foreign translation adjustment - 124,738 - 124,738
685,054 224,743 (25,000) 884,797
$712,037 $3,412,924 $(700,000) $3,424,961
See accompanying notes to pro forma condensed consolidated financial statements.
F-3
</page>
<PAGE>
CELCOR, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Year ended June 30, 1995
Northeast
Celcor, Inc. (USA) Corp. Adjustments Pro forma
Sales $ - $ 904,795 $ - $ 904,795
Expenses:
Cost of sales - 860,556 - 860,556
Selling, general and
administrative 80,106 787,131 25,000(3) 892,237
Loss on write-down of land - 180,000 - 180,000
Interest expense - 7,680 - 7,680
80,106 1,835,367 25,000 1,940,473
(80,106) (930,572) (25,000) (1,035,678)
Minority interest - 230,615 - 230,615
Net loss $(80,106) $(699,957) $(25,000) $ (805,063)
Net loss per share $ (.02) $ (.16)
Weighted average common
shares outstanding 3,364,674 5,114,674(4)
See accompanying notes to pro forma condensed consolidated financial statements.
F-4
</page>
<PAGE>
CELCOR, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
1. To record issuance of 1,750,000 shares of Celcor, Inc. common stock
to acquire Northeast (USA) Corp. As discussed in the introduction
section, the acquisition was recorded as a reverse acquisition.
2. To eliminate intercompany loan.
3. To accrue costs (professional fees) relating to the merger.
4. Average number of Celcor, Inc. common stock plus 1,750,000 shares
issued to merge with Northeast (USA) Corp.
F-5
</page>
<PAGE>
Report of Independent Certified Public Accountants
The Board of Directors and Stockholders
Celcor, Inc.
Ocean, New Jersey
We have audited the accompanying balance sheet of Celcor, Inc. as of June
30, 1995, and the related statements of operations, stockholders' equity,
and cash flows for each of the two years in the period ended June 30,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Celcor, Inc. as of
June 30, 1995, and the results of its operations and its cash flows for
each of the two years in the period ended June 30, 1995 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has no current source of revenues or funds
and has a working capital deficit as of June 30, 1995. In addition, the
Company may acquire Northeast (USA) Corp. (see Note 5) which will require
additional funds to finance the combined operations. These matters raise
substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
BDO Seidman, LLP
New York, New York
August 25, 1995
F-6
</page>
<PAGE>
CELCOR, INC.
BALANCE SHEET
June 30, 1995
Assets
Current:
Cash $12,037
Total current assets 12,037
Notes receivable (Note 5) 700,000
$712,037
Liabilities and Stockholders' Equity
Current:
Accrued expenses $26,983
Stockholders' equity:
Preferred stock - 8% convertible;
$.001 par value; liquidation
preference of $3.00; Series C -
2,000,000 shares authorized; 275,000
shares issued and outstanding (Note 4) 275
Common stock - $.001 par value;
20,000,000 shares authorized;
3,514,894 shares issued and
3,364,674 outstanding (Note 2) 3,515
Additional paid-in capital 1,570,475
Accumulated deficit (138,111)
Treasury stock - 150,220 shares at cost (751,100)
Total stockholders' equity 685,054
$ 712,037
See accompanying notes to financial statements.
F-7
</page>
<PAGE>
CELCOR, INC.
STATEMENTS OF OPERATIONS
Year ended June 30, 1995 1994
Revenue $ - $ -
General and administrative expenses 80,106 50,325
Operating loss (80,106) (50,325)
Other expense - interest - (3,261)
Net loss $(80,106) $(53,586)
Net loss per share $ (.02) $( .02)
See accompanying notes to financial statements.
F-8
</page>
<PAGE>
CELCOR, INC.
<TABLE>
STATEMENTS OF STOCKHOLDERS' EQUITY
Common stock Preferred stock
<C> <C> <C> <C> <C> <C> <C> <C>
Additional Accumulated Treasury
Shares(1) Amount Shares Amount paid-in capital deficit stock Total
<S>
Balance, June 30, 1993 3,514,894 $3,515 - $ - $745,750 $ (4,419) $ 751,100 $ (6,254)
Sale of cumulative
preferred Series C
shares in private
placement (Note 4) - - 260,000 260 779,740 - - 780,000
Conversion of notes payable
and accrued interest to
Series C preferred shares
(Note 4) - - 15,000 15 44,985 - - 45,000
Net loss - - - - - (53,586) - (53,586)
Balance, June 30,1994 3,514,894 3,515 275,000 275 1,570,475 (58,005) (751,100) 765,160
Net loss - - - - - (80,106) - (80,106)
Balance, June 30,1995 3,514,894 $3,515 275,000 $275 $1,570,475 $(138,111) $(751,100) $685,054
See accompanying notes to financial statements.
_________________
(1) Adjusted retroactively for the effect of a one-for-five reverse stock split (Note 2).
F-9
</TABLE>
</page>
<PAGE>
CELCOR, INC.
STATEMENTS OF CASH FLOWS
Year ended June 30, 1995 1994
Cash flows from operating activities:
Net loss $(80,106) $(53,586)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Increase (decrease) in liabilities:
Accrued expenses 22,859 4,124
Accrued interest - (354)
Net cash used in
operating activities (57,247) (49,816)
Cash flows from investing activities:
Loan to Northeast (USA) (Note 5) (700,000) -
Cash flows from financing activities:
Borrowings of notes payable - 20,000
Proceeds from sale of stock - 780,000
Net cash provided by financing
activities - 800,000
Net increase (decrease) in cash (757,247) 750,184
Cash, beginning of year 769,284 19,100
Cash, end of year $12,037 $769,284
Supplemental disclosure of cash
flows information:
Cash paid during the year for:
Interest $ - $ -
Noncash financing activity -
conversion of debt to preferred
stock $ - $ 45,000
See accompanying notes to financial statements.
F-10
</page>
<PAGE>
CELCOR, INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business Celcor, Inc. (the "Company") is a Delaware
corporation. The Company emerged from Chapter
11 bankruptcy proceedings in July of 1992 and
has had no business operations since 1991.
Its current business plans include the seeking
of business opportunities in the People's
Republic of China through acquisitions,
mergers, joint ventures and/or the formation
of operating subsidiaries.
2. Summary of Significant
Accounting Policies Basis of Presentation
The Company's financial statements have been
presented on the basis that it is a going
concern, which contemplates the realization of
assets and the satisfaction of liabilities in
the normal course of business. The Company
has incurred losses and has no current source
of revenues or funds and has a working capital
deficit as of June 30, 1995. In addition, the
Company plans to acquire Northeast (USA) Corp.
(see Note 5) which will require additional
funds to finance the combined operations.
The Company's continued existence is dependent
upon its ability to secure adequate financing.
Should the acquisition take place, the Company
plans to raise capital for the combined entity
through a private placement; however, there are
no assurances that the financing will occur.
The financial statements do not include any
adjustments that might result from the
outcome of these uncertainties.
Common Stock
On September 20, 1993, the Company's Board of
Directors approved a one-for-five reverse stock
split. Accordingly, all share data has been
restated for periods prior to the stock split.
Net Loss Per Common Share
The weighted average number of common shares
outstanding used in computing net loss per
common share was 3,364,674 in 1995 and 1994.
The weighted average number of common shares
used in computing the net loss per common
share does not include any shares issuable
upon the assumed conversion of the preferred
stock, since the effect would have been to
decrease net loss per common share in each
period.
F-11
</page>
<PAGE>
CELCOR INC.
NOTES TO FINANCIAL STATEMENTS
3. Income Taxes The Company follows the liability method of
accounting for income taxes in accordance with
Statement of Financial Accounting Standards
No. 109 (SFAS 109), "Accounting for Income
Taxes". Under SFAS 109, deferred income
taxes are provided at the enacted marginal
rates on the difference between the financial
statement and income tax carrying amounts of
assets and liabilities.
The Company has a net operating loss
carryforward of $135,000 which expires in
years through 2010. Losses prior to June 30,
1992 were forfeited as a result of the change
in ownership of the Company. Deferred tax
assets relating to the net operating loss
totaling $47,000 were offset by a valuation
allowance, since utilization of the loss is
uncertain.
4. Preferred Stock In May 1994, the Company sold 260,000 shares
of its newly designated Series C convertible
preferred stock, $.001 par value, for an
aggregate amount of $780,000 to a group of
private investors. The preferred shares may
be converted in whole or in part at any time
through June 30, 1997 into three shares of
common stock. The Company has the right,
at any time after July 1, 1996, to redeem
the shares at $4.50. The shares carry a stated
dividend rate of 8% per annum. Dividends are
cumulative and are payable on June 30, 1997 and
quarterly thereafter. Cumulative dividends
totaled $71,500 at June 30, 1995.
In connection with the offering of 8%
cumulative preferred shares, $45,000
of notes payable and accrued interest
were converted into 15,000 shares of
Series C convertible preferred stock
at a rate of $3.00 per share.
5. Potential Acquisition and
Notes Receivable On August 15, 1994, the Company signed a
letter of intent to acquire Northeast (USA)
Corp. ("Northeast") and, on March 15, 1995,
executed an Agreement and Plan of Merger
with Northeast. The transaction is subject,
among other conditions, to completion of a
due diligence examination and stockholder
approval. Northeast stockholders would
receive 1,750,000 shares of the Company's
common stock for all of the issued and
outstanding shares of Northeast. Northeast
is a manufacturer and distributor of various
vitamin products with operations in the
People's Republic of China and the United
States.
F-12
</PAGE>
<PAGE>
CELCOR, INC
NOTES TO FINANCIAL STATEMENTS
On August 9, 1994, the Company loaned
$700,000 to Northeast. This loan, evidenced
by a promissory note, does not bear interest
until the original maturity date, November 30,
1994, at which time interest would have
accrued at 15% per annum. The maturity date
of the loan has been extended to October 31,
1995 by the Company as the Company's proposed
merger with Northeast continues to proceed.
Concurrent to the note, Northeast's
stockholders pledged all existing shares of
their common stock as collateral. Although
Northeast currently does not have the necessary
funds to repay the loan, management of the
Company believes that the value of the above-
mentioned collateral exceeds the amount of the
loan. Accordingly, no valuation reserve was
considered necessary at June 30, 1995. Since
the loan is not currently collectible, the loan
has been recorded as a long-term asset on the
balance sheet at June 30, 1995.
F-13
</PAGE>
<PAGE>
Report of Independent Certified Public Accountants
Northeast (USA) Corp.
New York, New York
We have audited the accompanying consolidated balance sheet of Northeast
(USA) Corp. and subsidiaries as of June 30, 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the two years in the period ended June 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Northeast (USA) Corp. and subsidiaries at June 30, 1995, and the results of
their operations and their cash flows for each of the two years in the
period ended June 30, 1995, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in the summary of
accounting policies to the financial statements, the Company has incurred
recurring losses since inception, has no current source of funds and has a
working capital deficit as of June 30, 1995. The Company's continued
existence is dependent upon its ability to secure adequate financing. These
matters raise substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
BDO Seidman, LLP
New York, New York
September 25, 1995
F-14
</PAGE>
<PAGE>
NORTHEAST (USA) CORP. AND SUBSIDIARIES
CONSOLDIATED BALANCE SHEET
June 30, 1995
Assets
Current:
Cash and cash equivalents $351,400
Receivables 34,534
Inventory (Note 2) 432,121
Other 70,058
Total current assets 888,113
Property and equipment, net (Note 3) 348,535
Land held for sale (Note 4) 420,000
Intangible assets - land use rights 1,742,666
Other assets 13,610
$3,412,924
Liabilities and Stockholders' Equity
Current:
Notes payable - Celcor, Inc. (Note 8) $ 700,000
Accounts payable 94,363
Accrued expenses 203,820
Total current liabilities 998,183
Commitments (Notes 1, 6 and 8)
Minority interest (Note 1) 2,189,998
Stockholders' equity (Note 8):
Common stock, no par value - shares
authorized 200; issued and
outstanding 175 1,050,000
Accumulated deficit (949,995)
Foreign translation adjustments 124,738
Total stockholders' equity 224,743
$3,412,924
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-15
</PAGE>
<PAGE>
NORTHEAST (USA) CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended June 30, 1995 1994
Sales (Note 7) $904,795 $ -
Expenses:
Cost of sales (Note 7) 860,556 -
Selling, general and administrative 787,131 312,736
Loss on write-down of
land held for sale (Note 4) 180,000 -
Interest 7,680 910
1,835,367 313,646
Loss before minority interest (930,572) (313,646)
Minority interest in loss
of joint venture 230,615 79,487
Net loss $(699,957) $(234,159)
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-16
</PAGE>
<PAGE>
NORTHEAST (USA) CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended June 30, 1995 and 1994
<TABLE>
<S> <C> <C> <C> <C>
Foreign Total
translation stockholders'
Common Stock Deficit adjustments equity
Balance, July 1, 1993 $150,000 $(15,879) $- $134,121
Issuance of 45 shares
for cash 300,000 - - 300,000
Issuance of 30 shares
for property 600,000 - - 600,000
Issuance of 80 shares
for technology - - - -
Net loss - (234,159) - (234,159)
Translation adjustments - - 40,887 40,887
Balance, June 30, 1994 1,050,000 (250,038) 40,887 840,849
Net loss - (699,957) - (699,957)
Translation adjustments - - 83,851 83,851
Balance, June 30, 1995 $1,050,000 $(949,995) $124,738 $224,743
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-17
</PAGE>
<PAGE>
NORTHEAST (USA) CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended June 30, 1995 1994
Cash flows from operating activities:
Net loss $(699,957) $ (234,159)
Adjustments to reconcile net
loss to net cash used in operating
activities:
Depreciation and amortization 129,545 9,332
Loss on write-down of land to
realizable value 180,000 -
Minority interest (230,615) (79,487)
Increase in:
Receivables (32,163) ( 2,371)
Inventory (430,921) ( 1,200)
Increase in:
Accounts payable and
accrued expenses 183,428 113,090
Increase in other assets (77,144) (700)
Other (199) ( 9,691)
Total adjustments (278,069) 28,973
Net cash used in operating
activities: (978,026) ( 205,186)
Cash flows from investing activities:
Capital expenditures (192,376) ( 201,624)
Cash flows from financing activities:
Proceeds from sale of stock - 300,000
Proceeds from note payable - stockholder - 40,000
Proceeds from notes 750,000 -
Repayment of notes (90,000) -
Proceeds from minority investor - 750,000
Net cash provided by financing
activities 660,000 1,090,000
Effect of exchange rate changes on cash 11,592 40,887
Net increase (decrease) in cash and
cash equivalents (498,810) 724,077
Cash and cash equivalents,
beginning of period 850,210 126,133
Cash and cash equivalents, end of period $351,400 $ 850,210
Noncash financing and investing activities:
In 1994, the Company issued 110
shares of its common stock, valued
at $600,000, for property and
technology.
In 1994, the minority investor in a
joint venture contributed land
use rights, valued at $1,750,000,
to the joint venture.
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-18
</Page>
<PAGE>
NORTHEAST (USA) CORP. AND SUBSIDIAIRIES
Summary of Accounting Policies
Line of Business Northeast (USA) Corp. (the "Company") was
incorporated on February 24, 1993 in New York.
The Company and its subsidiaries entered into
an agreement with Northeast General Pharmaceutical
Factory ("NEGPF") in China to become the preferred
sales agent for NEGPF to market certain vitamin and
cosmetic products initially into the Chinese market.
The Company commenced operations during the fiscal year
ended June 30, 1995.
Basis of Presentation The Company's financial statements have been presented
on the basis that it is a going concern, which
contemplates the realization of assets and the
satisfaction of liabilities in the normal course of
business. The Company has incurred losses, has no current
source of funds and has a working capital deficit as of
June 30, 1995. The Company's continued existence
is dependent upon its ability to secure adequate
financing. Should the acquisition with Celcor, Inc.
take place (see Note 8), the combined entity will
attempt to raise capital through a private placement;
however, there are no assurances that the financing
will occur. The financial statements do not include
any adjustments that might result from the outcome of
these uncertainties.
Principles of
Consolidation The consolidated financial statements include the accounts
of the Company, Shenyang United Vitatech Ltd. ("UV"), a
majority-owned joint venture (see Note 1), and Northeast
(Shenyang) Consulting Co., Ltd., an inactive wholly-owned
subsidiary. Both subsidiaries are located in Shenyang,
China. All material intercompany accounts and
transactions are eliminated.
Cash and Cash
Equivalents The Company considers investments with original
maturities of three months or less when purchased to
be cash equivalents. Cash balances at June 30, 1995
consist primarily of Chinese bank accounts.
Inventories Inventories are valued at the lower of cost or market.
Cost is determined by the first-in, first-out (FIFO)
method.
F-19
</page>
<PAGE>
NORTHEAST (USA) CORP. AND SUBSIDIARIES
Summary of Accounting Policies
Property and Equipment,
and Depreciation Property and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed
on the straight-line method over the estimated
useful lives of the assets.
Intangible Assets In fiscal 1994, the Company issued 80 shares of its
common stock to Mannion Consultants Ltd. ("Mannion")
to obtain certain proprietary technology which is
finished and ready for commercialization and which
will be used in producing the Company's vitamin and
cosmetic products. The technology did not have an
ascertainable book value as of the date of the
transfer. Accordingly, no valuation has been
assigned by the Company for this technology or the
issued common shares. Mannion was not previously
affiliated with either the Company or Celcor, Inc.
(see Note 8).
The minority investor, NEGPF, contributed certain
land use rights in mainland China as part of its
investment in UV. This subsidiary will build a factory
to produce and sell vitamin and cosmetic products on
this land. NEGPF's cost basis for the land use rights
($1,750,000) was used to value this contribution. The
rights have a life of 30 years, the life of the joint
venture agreement (see Note 1). Amortization on the
land use rights totalled approximately $90,000 for the
year ended June 30, 1995.
Translation of
Foreign Currencies The financial position and results of operations of
the Company's foreign subsidiaries are accounted for
using the local currency as the functional currency.
Assets and liabilities of these subsidiaries are
translated at the exchange rate in effect at year-end.
Income statement accounts are translated at the average
rate of exchange prevailing during the year. Translation
adjustments arising from the use of differing exchange
rates from period to period and exchange gains and
losses on intercompany balances of a long-term
investment nature are included in the cumulative
translation adjustment account in stockholders' equity.
F-20
</page>
<PAGE>
NORTHEAST (USA) CORP. AND SUBSIDIARIES
Summary of Accounting Policies
Income Taxes The Company follows Statement of Financial Accounting
Standards No. 109 ("SFAS No. 109"), "Accounting for
Income Taxes". SFAS No. 109 is an asset and liability
approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax
consequences of events that have been recognized in the
Company's financial statements or tax returns.
Revenue Recognition The Company recognizes its revenues upon shipment of
the related goods.
Research and
Development Research and development costs (which have been
immaterial to date) are expensed as incurred.
Reclassification Certain 1994 balances were reclassified to conform
with the 1995 presentation.
F-21
</page>
<PAGE>
NORTHEAST (USA) CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Joint Venture
Agreement The Company formed a joint venture agreement with
NEGPF whereby both companies agreed to establish UV.
UV will construct a factory to produce and sell vitamin
and cosmetic products. The Company will contribute a
portion of the technology it acquired in fiscal 1994
(see Summary of Accounting Policies) and cash of $2.1
million in consideration of 56.52% ownership of UV. In
October 1994, the Company paid $1 million to UV. The
balance of the Company's cash investment ($1.1 million)
is to be paid by December 31, 1995. The Company's
contributions to UV have been (or will be) eliminated
in consolidation.
NEGPF agreed to contribute land use rights (see Summary
of Accounting Policies) and cash of $750,000 in
consideration of 43.48% ownership of UV. These
contributions were made prior to June 30, 1994.
The minority interest balance of $2.2 million at June 30,
1995 represents NEGPF's investment in UV as of that date,
reduced for its share of UV's losses.
2. Inventories Inventories consist of the following:
Raw materials $242,194
Work-in-process 14,421
Finished goods 175,506
$432,121
F-22
</PAGE>
<PAGE>
NORTHEAST (USA) CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Property and
Equipment Property and equipment consist of the following:
Machinery and equipment $158,507
Furniture and fixtures 26,268
Automobiles 211,516
396,291
Less: Accumulated depreciation 47,756
$348,535
4. Land Held for Sale In 1994, thirty (30) shares of the Company's common
stock were issued to Dziou Tai Associates (a company
controlled by a relative of the chief executive officer
of the Company) in exchange for land in Queens, New
York. The Company originally planned to build a
residential and office complex on the land. The property
acquired was valued at the predecessor owner's cost
basis of $600,000.
During fiscal 1995, the Company decided to sell the
land. The land was written down by $180,000 to reflect
the estimated realizable value of the land. The asset has
been classified as long term since the Company cannot
determine when the asset will be sold. See Note 9.
5. Income Taxes At June 30, 1995, the Company had a net operating loss
for Federal income tax purposes of $364,000 which expires
in 2008. A deferred tax asset of $120,000 has been offset
by a valuation allowance of the same amount. The Company
also has a foreign net operating loss in the amount of
$705,000 which expires in 2000. Deferred tax assets of
$235,000 have been offset by a valuation allowance.
6. Commitments The Company leases office space in New York on a month-to-
month basis. Rent expense totaled $37,000 in 1995 and
$28,000 in 1994.
F-23
</PAGE>
<PAGE>
NORTHEAST (USA) CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Business OperationsThe Company is located in New York and the subsidiaries
(which were formed in fiscal 1994) are located in China.
The identifiable assets of the Chinese operation total
$2,900,000 at June 30, 1995 and $2,350,000 at June
30, 1994. The pre-tax loss of the Chinese operation
totals $530,000 and $180,000 and the capital expenditures
were $140,000 and $198,000 for the years ended June 30,
1995 and 1994, respectively. Almost all sales occurred
domestically in 1995.
Sales to one customer totaled $819,000 in 1995. The
majority of purchases of inventory were from NEGPF.
8. Potential
Acquisition and
Notes Payable On August 15, 1994, the Company signed a letter of intent
to merge with Celcor, Inc. ("Celcor") and, on March 15,
1995, executed an Agreement and Plan of Merger with
Celcor. The transaction is subject, among other
conditions, to completion of a due diligence examination
and stockholder approval. The Company's stockholders
would receive 1,750,000 shares of Celcor's common stock
for all of the issued and outstanding shares of the
Company.
On August 9, 1994, Celcor loaned $700,000 to the Company.
This loan, evidenced by a promissory note, does not bear
interest until the original maturity date, November 30,
1994, at which time interest would have accrued at 15%
per annum. The maturity date of the loan has been
extended to October 31, 1995 by Celcor as the proposed
merger continues to proceed. Concurrent to the note, the
Company's stockholders pledged all existing shares of
their common stock as collateral. In October 1995, the
Company repaid $15,000 of this loan.
9. Subsequent Event On July 11, 1995, the Company entered into an unsecured
promissory note for $50,000 with a bank due in 90 days
paying interest at 11.5%.
In September 1995, the president of the Company loaned
$150,000 to the Company. The loan is payable on demand
and has interest at 11.25%.
F-24
</PAGE>
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Celcor, Inc.
Ocean, New Jersey
We hereby consent to the use in the Proxy Statement relative to the
December 7, 1995 meeting of the stockholders of our report dated
August 25, 1995, relating to the financial statements of Celcor,
Inc. and our report dated August 25, 1995, relating to the financial
statements of Northeast (USA) Corp., which are contained in the Proxy
Statement. Our reports for both companies contain explanatory paragraphs
regarding uncertainties as to their ability to continue as going concerns.
We also consent to the reference to us under the caption "Experts"
in the Proxy Statement.
BDO Seidman, LLP
New York, New York
October 24, 1995
EXHIBIT A
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such
shares, who continuously holds such shares through the effective
date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in
writing pursuant to 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of his
shares of stock under the circumstances described in subsections
(b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock
corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what
is ordinarily meant by those words and also membership interest
of a member of a nonstock corporation; and the words "depository
receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or
fractions thereof, solely of stock of a corporation, which stock
is deposited with the depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to 251, 252,
254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect thereof,
at the record date fixed to determine the stockholders entitled
to receive notice of and to vote at the meeting of stockholders
to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a merger
if the merger did not require for its approval the vote of the
holders of the surviving corporation as provided in subsection
(f) of 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of
stock or depository receipts at the effective date of the
merger or consolidation will be either listed on a national
securities exchange or designated as a national market
system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs
a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs
a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under 253 of this title
is not owned by the parent corporation immediately prior to the
merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as a
result of an amendment to its certificate of incorporation, any
merger or consolidation in which the corporation is a constituent
corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those
set forth in subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof
that appraisal rights are available for any or all of the shares
of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the
appraisal of his shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written
demand for appraisal of his shares. Such demand will be sufficient if
it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to
228 or 253 of this title, the surviving or resulting corporation, either
before the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail,
return receipt requested, addressed to the stockholder at
his address as it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days
after the date of mailing of the notice, demand in writing from
the surviving or resulting corporation the appraisal of his
shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his
shares.
(e) Within 120 days after the effective date of the merger
or consolidation, the surviving or resulting corporation or any
stockholder who has complied with subsections (a) and (d) hereof
and who is otherwise entitled to appraisal rights, may file a
petition in the Court of Chancery demanding a determination of
the value of the stock of all such stockholders. Notwithstanding
the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days
after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections
(a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation
or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall, within 20 days after such
service, file in the office of the Register of Chancery in which
the petition was filed a duly verified list containing the names
and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting
corporation. If the petition shall be filed by the surviving or
resulting corporation, the petition shall be accompanied by such
a duly verified list. The Register in Chancery, if so ordered by
the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown
on the list at the addresses therein stated. Such notice shall
also be given by 1 or more publications at least 1 week before
the day of the hearing, in a newspaper of general circulation
published in the City of Wilmington, Delaware or such publication
as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for their
shares and who hold stock represented by certificates to submit
their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the
Court may dismiss the proceedings as to such stockholder;
(h) After determining the stockholders entitled to an appraisal,
the Court shall appraise the shares, determining their fair value
exclusive of any element of value arising from the accomplishment or
expectation of the merger or consolidation, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair
value. In determining such fair value, the Court shall take into account
all relevant factors. In determining the fair rate of interest, the Court
may consider all relevant factors, including the rate of interest which
the surviving or resulting corporation would have had to pay to borrow
money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial
upon the appraisal prior to the final determination of the stockholder
entitled to an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to subsection
(f) of this section and who has submitted his certificates of stock to the
Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and in the case of
holders of shares represented by certificates, upon the surrender
to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court
of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the
value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded his appraisal
rights as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive payment
of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written
withdrawal of his demand for an appraisal and an acceptance of
the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder
to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
EXHIBIT B
AGREEMENT AND PLAN
OF MERGER
AMONG
CELCOR, INC.,
NORTHEAST (USA) CORP.
and
THE STOCKHOLDERS
of
NORTHEAST (USA) CORP.
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS 1-1
ARTICLE II THE PLAN OF MERGER 2-1
2.01 The Merger and the Surviving Corporation 2-1
2.02 Effectiveness of the Merger 2-2
2.03 Exchange of Securities 2-2
2.04 Adjustment Upon Recapitalization 2-3
2.05 Securities Law Matters 2-3
ARTICLE III REPRESENTATIONS AND WARRANTIES 3-1
3.1. Representation and Warranties of Northeast
and Stockholders 3-1
3.1.1 Organization of Northeast 3-1
3.1.2 Capitalization 3-1
3.1.3 Subsidiaries 3-1
3.1.4 Foreign Qualifications 3-2
3.1.5 Other Business Names 3-2
3.1.6 Owned Real Estate Interests 3-2
3.1.7 Leased Real Estate 3-2
3.1.8 Tangible Personal Property 3-2
3.1.9 Intangible Personal Property; Computer Programs 3-2
3.1.10 Stockholders; Title to Northeast Stock 3-3
3.1.11 Title to Assets 3-3
3.1.12 Material Contracts 3-4
3.1.13 Labor Matters 3-4
3.1.14 Benefit Plans; ERISA 3-5
3.1.15 Licenses and Permits 3-5
3.1.16 Authority Relative to Agreement; Enforceability 3-5
3.1.17 Compliance with Other Instruments; Consents 3-6
3.1.18 Compliance with Applicable Laws 3-6
3.1.19 Environmental Compliance 3-6
3.1.20 Financial Statements 3-7
3.1.21 Taxes 3-7
3.1.22 Litigation 3-8
3.1.23 Brokerage 3-8
3.1.24 Full Disclosure 3-8
3.2 Representations and Warranties of Celcor 3-8
3.2.1 Organization 3-8
3.2.2 Capitalization 3-8
3.2.3 Authorization 3-9
3.2.4 Title to Assets 3-9
3.2.5 No Third Party Consent Required; No Violation of
Other Instruments 3-9
3.2.6 Litigation 3-9
3.2.7 Brokerage 3-10
3.2.8 Financial Statements 3-10
3.2.9 Full Disclosure 3-10
ARTICLE IV ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES4-1
4.01 Corporate Approval 4-1
4.02 Stockholders' Agreement to Vote 4-1
4.03 Conduct of Business 4-1
4.04 Negative Covenants 4-1
4.05 Filing with Securities and Exchange Commission 4-1
4.06 Access 4-1
4.07 Best Efforts 4-2
4.08 Brokers or Finders 4-2
4.09 Environmental Matters 4-2
4.10 Exclusive Dealing 4-3
ARTICLE V THE CLOSING 5-1
5.01 The Closing 5-1
5.02 Termination 5-1
5.03 Liability on Termination 5-1
5.04 Termination Fees 5-2
ARTICLE VI CONDITIONS TO OBLIGATION OF EACH PARTY 6-1
6.01 No Prohibition of Transaction 6-1
6.02 Compliance with Law 6-1
6.03 Proceedings, Documentation and Consents 6-1
6.04 Tax Free Reorganization 6-1
ARTICLE VII CONDITIONS TO THE OBLIGATION OF CELCOR TO CLOSE 7-1
7.01 Representations and Warranties True at
the Closing Date 7-1
7.02 No Material Adverse Change: Officers' Certificates 7-1
7.03 Corporation's Performance 7-1
7.04 Necessary Corporate Approvals 7-1
7.05 Resolutions Authorizing the Execution of
this Agreement 7-1
7.06 Opinion of Counsel 7-1
7.07 Investment Letters 7-1
7.08 Satisfactory Searches 7-2
7.09 Environmental Review 7-2
7.10 Consents to Transaction 7-2
7.11 Dissenters' Rights 7-2
7.12 Title Insurance 7-2
7.13 Financial Statements 7-2
7.14 Fairness Opinion 7-2
7.15 Results of Investigation 7-2
ARTICLE VIII CONDITIONS TO NORTHEAST'S OBLIGATION TO CLOSE 8-1
8.01 Representations and Warranties True at the Closing 8-1
8.02 Celcor's Performance 8-1
8.03 No Material Adverse Change 8-1
8.04 Authority 8-1
8.05 Opinion of Celcor's Counsel 8-1
8.06 Results of Investigation 8-1
ARTICLE IX SURVIVAL OF REPRESENTATIONS AND INDEMNIFICATION 9-1
9.01 Representations to Survive Closing 9-1
9.02 Indemnification by the Stockholders 9-1
9.03 Indemnification by Celcor 9-1
9.04 Enforcement of Indemnification Rights 9-2
9.05 Remedies Cumulative 9-3
ARTICLE X MISCELLANEOUS 10-1
10.01 Notices 10-1
10.02 Assignability and Parties in Interest 10-1
10.03 Expenses 10-2
10.04 Governing Law 10-2
10.05 Counterparts 10-2
10.06 Headings 10-2
10.07 Pronouns 10-2
10.08 Complete Agreement 10-2
10.09 Modifications, Amendments and Waivers 10-2
10.10 Severability 10-2
APPENDICES
SECTION
DESCRIPTION REFERENCE
Appendix A Private Placement Questionnaire 2.05(a), 7.07
Appendix B Opinion of Northeast's Counsel 7.06
Appendix C Opinion of Celcor's Counsel 8.05
EXHIBITS
EXHIBIT
DESCRIPTION REFERENCE
Shareholders of Subsidiaries which are not wholly owned 3.1.3
Description of real estate interests 3.1.6
Leased real estate 3.1.7
Equipment List 3.1.8
Joint Venture and similar agreements 3.1.9
Shareholder List 3.1.10
Material Contracts 3.1.12
U.S. Employees 3.1.13
Underground Tanks 3.1.19
Tax elections 3.1.21
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") has
been made and entered into as of this ____ day of ___________,
1995, among Celcor, Inc., a Delaware corporation ("Celcor"),
Northeast (USA) Corp., a New York corporation ("Northeast"), and
the shareholders of Northeast listed on the signature page of
this Agreement ("Stockholders").
R E C I T A L S:
1. The respective Boards of Directors of Celcor and
Northeast have determined that it is in the best interests of
each corporation and its respective stockholders that Northeast
be merged with and into Celcor (the "Merger") in accordance with
the laws of the States of Delaware and New York in the manner and
on the terms and conditions set forth herein.
2. Stockholders own 100% of the issued and
outstanding voting stock of Northeast and have agreed to vote
their shares in favor of the Merger contemplated hereby.
3. Pursuant to the Merger, the outstanding capital
stock of Northeast will be converted into the right to receive
shares of Celcor common stock ("Celcor Stock") on the basis of
10,000 shares of Celcor Stock for each outstanding share of
Northeast common stock.
4. The respective Boards of Directors of Celcor and
Northeast desire to effectuate the Merger as a tax free
reorganization for United States federal income tax purposes.
NOW, THEREFORE, in consideration of the mutual
agreements and covenants contained herein, the parties hereby
adopt this Agreement as and for a Plan of Reorganization (the
"Plan") under Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended and agree that Northeast shall be merged with
and into Celcor and that the terms and conditions of such Merger
and the mode of carrying the same into effect shall be as
follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article (except as otherwise
expressly provided in this Agreement) for all purposes of this
Agreement shall have the respective meanings specified in this
Article.
1.01 "Affiliate" shall mean any entity controlling or
controlled by another person, under common control with another
person, or controlled by any entity which controls such person.
1.02 "Agreement" shall mean this Agreement, and all the
exhibits and other documents attached to or referred to in the
Agreement, and all amendments and supplements, if any, to the
Agreement.
1.03 "Closing" shall mean the meeting of the parties at
which the Closing Documents shall be exchanged by the parties,
except for those documents, or other items specifically required
to be exchanged at a later time.
1.04 "Closing Date" shall mean May 25, 1995, or such
other date as agreed to by the parties on which the Closing
occurs.
1.05 "Closing Documents" shall mean the papers,
instruments and documents required to be executed and delivered
at the Closing pursuant to this Agreement.
1.06 "Code" shall mean the Internal Revenue of 1986, or
any successor law, and regulations issued by the Internal Revenue
Service pursuant to the Internal Revenue Code or any successor
law.
1.07 "Encumbrance" shall mean any charge, claim,
community property interest, condition, equitable interest, lien,
option, pledge, security interest, right of first refusal, or
restriction of any kind, including any restriction on use, voting
(in the case of any security), transfer, receipt of income, or
exercise of any other attribute of ownership.
1.08 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.09 "GAAP" shall mean generally accepted accounting
principles applied in a manner consistent with prior periods.
1.10 "Knowledge" Any limitation or qualification of a
representation or warranty made in this Agreement which is based
on "knowledge" shall include facts known, or which should be
known, to the following person, in the case of a representation
or warranty by Celcor: Stephen E. Roman, Jr. and the following
person in the case of a representation or warranty made by
Northeast: Nanshan Wu.
1.11 "Ordinary Course of Business" shall mean actions
consistent with the past practices of the designated party which
are similar in nature and style to actions customarily taken by
the designated party and which do not require, and in the past
have not received, specific authorization by the board of
directors of the designated party.
1.12 "Regulated Substances" includes any pollutant,
chemical substance, hazardous wastes, hazardous substances or
contaminant regulated under, or defined in or pursuant to the
Solid Waste Disposal Act, as amended (42 U.S.C. 6901 et seq.)
("SWDA"), the Comprehensive Environmental Response Compensation
and Liability Act (42 U.S.C. 9601 et seq.) ("CERCLA"), the Toxic
Substance Control Act, as amended (15 U.S.C. 2601, et seq.), the
Clean Air Act, as amended (42 U.S.C. 7401 et seq.), the Clean
Water Act, as amended (33 U.S.C. 1251, et seq.), and any other
federal, state or local law or regulation designed to provide
safe and healthful working conditions and to reduce occupational
safety and health hazards.
1.13 "SEC" shall mean the Securities and Exchange Commission.
1.14 "Taxes" shall include federal, state and local income
taxes, capital gains tax, value-added taxes, franchise, personal
property and real property taxes, levies, assessments, tariffs, duties
(including any customs duty), business license or other fees, sales, use
and any other taxes relating to the assets of Celcor or Northeast, as
applicable, or the business of Celcor or Northeast, as applicable, for
all periods up to and including the Closing Date, together with any related
charge or amount, including interest, fines, penalties and additions to
tax, if any, arising out of tax assessments.
1.15 "Transaction" shall mean the transaction contemplated by
this Agreement.
1.16 Terms Defined in Other Sections. The following
terms are defined elsewhere in this Agreement in the following
Sections:
Act 2.05(a)
Celcor Heading
Celcor Stock 2.03(a)
Effective Date 2.01(a)
Loss or Losses 10.02
Merger Recital 1
Northeast Heading
Northeast Stock 2.03(b)
Outside Date 5.01
Plan Recitals
Stockholders Heading
Surviving Corporation 2.01(a)
ARTICLE II
THE PLAN OF MERGER
2.01 The Merger and the Surviving Corporation.
(a) Merger. Upon the date on which the Merger is
to be effective, as determined pursuant to Section 2.02
("Effective Date"), Northeast shall be merged with and into Celcor.
Celcor shall be the surviving corporation (the "Surviving Corporation").
The separate existence of Northeast shall cease and the existence of Celcor
shall continue unaffected and unimpaired by the Merger, with all of the
rights, privileges, immunities and powers, and subject to all of the duties
and liabilities of a corporation organized under the general corporation
law of the State of Delaware. All rights, privileges, powers, immunities
and franchises of Northeast shall, on the Effective Date, be automatically
vested in Celcor. All real and personal property of Northeast, tangible
and intangible, of every kind and description, shall become vested in
Celcor and all liabilities, claims and obligations of Northeast may be
enforced against Celcor, all without further action or deed by
either party. In all other respects, the effect of the Merger
shall be as set forth in Delaware General Corporation Law 252
("Delaware General Corporation Law" or "DGCL").
(b) Certificate of Incorporation. The Certificate of
Incorporation of Celcor shall be and remain the Certificate of
Incorporation of the Surviving Corporation following the Effective
Date, until the same shall be altered or amended, except that such
Certificate of Incorporation shall be amended (i) to change the name
of the Surviving Corporation to "Northeast, Inc." and (ii) to increase,
if determined to be necessary, the authorized capital stock to that number
of shares which is sufficient to enable Celcor to issue the number of
shares of its common stock contemplated by the Merger.
(c) By-Laws. The by-laws of Celcor shall be the by-laws
of the Surviving Corporation following the Effective Date, until the same
shall be altered or amended.
(d) Directors. From and after the Effective Date, the
Board of Directors of the Surviving Corporation shall consist of Eugene
Cha, Frank Nelson, Jennifer Lo Wu, Joe Chen, David Chow, Shi Hong-Yuan and
Michael Hsu, until their respective successors shall be duly elected and
qualified.
(e) Officers. From and after the Effective Date, the
officers of the Surviving Corporation shall consist of the persons listed
below, holding the respective office listed opposite such person's name, until
their respective successors shall be duly elected or appointed and qualified:
Name Title
Nanshan Wu President
Stephen E. Roman, Jr. Vice President, Treasurer and
Chief Financial Officer
Michael Hsu Secretary
2.02 Effectiveness of Merger.
(a) Certificate of Merger. Following the approval of the
Merger by the respective stockholders of Celcor and Northeast and upon the
fulfillment or waiver of the conditions specified in Articles VI, VII and
VIII hereof, and provided that this Agreement has not been terminated and
abandoned pursuant to Article V hereof, Celcor shall cause a Certificate
of Merger to be executed, acknowledged and filed with the Secretary of State
of Delaware as provided in Section 252(c) of the DGCL and with the New York
Department of State, as provided in Sections 904 and 907 of the Business
Corporation Law of the State of New York ("B.C.L.").
(b) Effective Date. The Merger shall become effective
immediately upon the filing of the Certificate of Merger referred to in
Section 2.02(a) hereof with the Secretary of State of the State of
Delaware and with the Secretary of State of the State of New York.
2.03 Exchange of Securities. The manner of converting the
securities of Northeast into securities of the Surviving Corporation
at the Effective Date shall be as follows:
(a) Celcor's Shares. Each share of common stock of
Celcor ("Celcor Stock") which shall be outstanding at the Effective Date
shall remain outstanding, as the outstanding common stock of the surviving
corporation.
(b) Northeast Common Stock. Each share of Common Stock,
no par value, of Northeast ("Northeast Stock") outstanding immediately
prior to the Effective Date shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into the right
to receive 10,000 shares of Celcor Stock.
(c) Treasury Stock. Any shares of Northeast Stock held
by Celcor, any subsidiary of Celcor, or in Northeast's treasury on the
Effective Date shall be canceled and given no effect in the Merger.
(d) Records. For the purposes of this Agreement,
the stock transfer books of Northeast shall be closed as of the
Effective Date, and no transfer of record of any shares of
Northeast Stock shall take place after the Effective Date.
(e) Surrender of Northeast Stock Certificates.
On or immediately after the Closing Date, each holder of an
outstanding certificate or certificates which prior thereto
represented shares of Northeast Stock shall surrender the same to
Celcor. Each Stockholder who shall have surrendered his
certificate for shares of Northeast Stock shall be entitled to
receive in exchange therefor a certificate or certificates
representing the number of whole shares of Celcor Stock into
which Northeast Stock shall have been converted and exchanged.
When the Merger becomes effective, the former stockholders of
Northeast shall thereupon cease to have any rights in respect of
Northeast Stock, other than to receive the certificates for
Celcor Stock described in Section 2.03(b) hereof. Unless and
until any certificates shall be so surrendered and exchanged, (i)
the holder shall not have any voting rights in respect of Celcor
Stock into which the shares of Northeast Stock shall have been so
converted and exchanged, and (ii) dividends or other
distributions payable to holders of record of shares of Celcor
Stock following the Effective Date shall not be paid to the
holder of the certificate. Upon surrender of the certificate
representing shares of Northeast Stock, there shall be paid to
the record holder of the certificate the amount of the dividends
or other distributions which shall have become payable following
the Effective Date with respect to the number of whole shares of
Celcor Stock represented by the certificate issued in exchange
for the surrendered certificate, but without interest.
2.04 Adjustment Upon Recapitalization. Subject to the
limitations of Section 4.03 hereof, the number of shares of
Celcor Stock to be issued at the Closing shall be appropriately
adjusted in the event that, prior to the Effective Date, the
Celcor Stock should be split, combined, or otherwise
recapitalized, or if any stock dividend should be paid on the
Celcor Stock, or the record date for the payment of any such
stock dividend should occur.
2.05 Securities Law Matters.
(a) Private Offering. Northeast and Stockholders
understand that the Celcor Stock to be issued and delivered to
Stockholders pursuant to the Merger will not be registered under
the Securities Act of 1933, as amended (the "Act"), but will be
issued in reliance upon the exemption afforded by Section 4(2) of
the Act and Regulation D promulgated by the SEC thereunder, and
that Celcor is relying upon the truth and accuracy of the
representations set forth in the answers to the questionnaire in
the form of Appendix A hereto delivered concurrently with the
execution of this Agreement. Each certificate of Celcor Stock
issued pursuant to this Agreement shall bear the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE TRANSFERRED UNLESS THEY ARE SO REGISTERED
OR, IN THE OPINION OF COUNSEL ACCEPTABLE TO
THIS CORPORATION, SUCH TRANSFER IS EXEMPT FROM
REGISTRATION.
Celcor shall give instructions to its transfer agent consistent
with the foregoing legend.
(b) Limited Transfer Rights. The Stockholders
may not transfer, sell or assign the Celcor Stock until such
shares are registered pursuant to the Act; provided that, in the
absence of such registration, a Stockholder may transfer shares
of Celcor Stock to one or more members of a group consisting of
(i) the spouse or children of any Stockholder, and (ii) one or
more trusts for their benefit; provided however, that the
transferee in each case will furnish Celcor with an investment
letter in form and substance satisfactory to counsel for Celcor
who shall be satisfied with the competence of such persons to
give an investment letter.
(c) Blue Sky Filings. Celcor shall promptly
institute and diligently prosecute such proceedings before, and
make such filings with, such state regulatory agencies as may be
necessary or appropriate in connection with or preliminary to the
issuance of Celcor Stock required to be issued to the
Stockholders pursuant to the Merger and any solicitation of the
Stockholders for their approval of the Plan and the matters
related hereto.
(d) Removal of Legend. If any Stockholder
desires to sell his Celcor Stock at any time after the Closing,
he shall notify Celcor of that desire and the number of shares he
desires to sell, together with such other information concerning
the transferee or purchaser and the manner of sale as counsel to
Celcor shall request. If counsel for Celcor is of the opinion
that such Celcor Stock may be sold without registration under the
Act, and shall render that opinion in writing to the Stockholder
and the Transfer Agent for Celcor Stock, the Transfer Agent shall
deliver to that Stockholder, certificates which are free of any
restrictive legend representing shares of Celcor Stock equal in
number to the number of shares submitted for transfer by that
Stockholder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Northeast and
Stockholders. Northeast and the Stockholders jointly and
severally represent and warrant to Celcor as follows:
3.1.1 Organization of Northeast. Northeast is a
corporation, duly organized, validly existing, and in good
standing under the laws of the State of New York, and has all
requisite corporate power, franchises, and licenses to own its
property and conduct the business in which it is engaged.
Complete copies of Northeast's certificate of incorporation, by-
laws, as amended, minutes, stock transfer records and agreements,
if any, among some or all of the Stockholders have been delivered
to Celcor.
3.1.2 Capitalization.
3.1.2.1 Northeast has an authorized capital stock
consisting of 200 shares of common stock, no par value per
share, of which 175 shares are issued and outstanding. All
of such shares of Northeast Stock have been validly issued,
fully paid, are non-assessable, and were issued in
compliance with applicable federal and state securities
laws.
3.1.2.2 Northeast does not have outstanding any
subscriptions, options, rights, warrants, convertible
securities or other agreements or commitments to issue, or
contracts or any other agreements obligating Northeast to
issue, or to transfer from treasury, any shares of its
capital stock of any class or kind, or securities
convertible into such stock. No persons who are now holders
of Northeast Stock, and no persons who previously were
holders of Northeast Stock, are or ever were entitled to pre-
emptive rights, other than persons who exercised or waived
those rights.
3.1.3 Subsidiaries. Northeast does not directly or
indirectly have any subsidiaries, nor hold any equity interest in
any corporation, partnership or joint venture, other than
Shenyang United Vitatech Ltd. and Northeast (Shenyang) Consulting
Co. Ltd. (together, the "Subsidiaries"). The Subsidiaries are
each corporations, duly organized, validly existing and in good
standing under the laws of The Peoples Republic of China, and
each has all requisite corporate power, licenses and franchises
to own its properties and assets and conduct the business in
which it is engaged. Complete copies of the certificate of
incorporation, by-laws, as amended, minutes, stock transfer
records and agreements, if any, among some or all of the
stockholders of the Subsidiaries (if not wholly owned by
Northeast) have been delivered to Celcor. Exhibit 3.1.3 lists
the shareholders of any Subsidiary which is not wholly owned.
3.1.4 Foreign Qualifications. Northeast and each
Subsidiary is duly qualified to conduct business as a foreign
corporation in each state or other jurisdiction in which it is
required to be so qualified.
3.1.5 Other Business Names. Neither Northeast nor
any Subsidiary transacts business under any trade name or
fictitious name.
3.1.6 Owned Real Estate; Real Estate Interests.
3.1.6.1 Northeast and each Subsidiary has
good and marketable title to the land which it owns, all of
which is listed on Exhibit 3.1.6 annexed hereto. The real
estate owned by Northeast is unimproved vacant land which
has been acquired to build a residential and office facility
located in Queens, New York. The land is not subject to any
mortgage, lien or similar encumbrance.
3.1.6.2 The interest held by Shenyang United
Viatech, Ltd. in certain real estate located in Shenyang,
China to develop a factory to produce vitamin and cosmetic
products is also described in Exhibit 3.1.6 annexed hereto.
3.1.7 Leased Real Estate. Neither Northeast nor
any Subsidiary leases any real estate from any person, nor has
Northeast or any Subsidiary leased any real estate to any person,
except as described in Exhibit 3.1.7.
3.1.8 Tangible Personal Property.
3.1.8.1 Exhibit 3.1.8 annexed hereto identifies
all items initially valued at more than $10,000.00 of
machinery, motor vehicles, computer equipment, furniture,
fixtures, leasehold improvements, and all other tangible
personal property owned and used by Northeast and its
Subsidiaries in connection with their business on the date
hereof.
3.1.8.2 Northeast and its Subsidiaries do not
lease any equipment which involve monthly payments of more
than $1,000.00 on account of any such lease. Copies of all
equipment leases which are in effect have been or will
promptly be furnished to Celcor. Northeast is not in
default under any of such equipment leases and is not aware
of any fact which, with notice and/or passage of time, would
constitute such a default. All personal property owned by
Northeast or its Subsidiaries, or leased and used by
Northeast or any Subsidiary in its business is in good
condition, normal wear and tear excepted, and is in good
operating order.
3.1.9 Intangible Personal Property; Computer Programs.
3.1.9.1 Northeast and its Subsidiaries do not own
any patents, patent applications, inventions, trademarks,
trademark applications, copyrights, trade names or
proprietary technology, except for certain formulas for the
production of vitamins and cosmetic products described on
Exhibit 3.1.9. Except as listed on Exhibit 3.1.9 annexed
hereto, neither Northeast nor any Subsidiary is a party to
any distributorship, franchise, joint venture or license
agreements (whether as grantor or grantee). Copies of all
written instruments which evidence such intangible personal
property have been or will promptly be delivered to Celcor.
3.1.9.2 There are no infringement or other claims
or demands against Northeast or its Subsidiaries with
respect to any items of intangible personal property, and no
proceedings have been instituted, are pending, or to the
knowledge of Northeast, have been threatened to terminate or
cancel any agreement affording to Northeast the right to use
any intangible asset, or which challenge the rights of
Northeast or its Subsidiaries with respect to any of its
intangible assets; and there are no facts known to Northeast
which make it likely that any such license or similar
agreement will not be renewed at its next expiration date or
which might reasonably serve as the basis, in whole or in
part, of any claim that any part of the business carried on
by Northeast or any Subsidiary infringes the patent,
trademark, trade name, copyright, or other rights of any
other person. Northeast (or one of its Subsidiaries) is the
sole and exclusive owner of each of said items of intangible
personal property.
3.1.9.3 Northeast does not use, is not licensed
to use and has no need to use any patent, patent application,
trademark, trademark application, trade name, formula or copyright which
is owned by an unrelated third party.
3.1.10 Stockholders; Title to Northeast Stock.
Exhibit 3.1.10 annexed hereto contains a complete list of the
names and addresses of all the Stockholders of Northeast and the
number of shares of Northeast Stock owned by each of them. Each
of the persons listed on such Exhibit is the record and
beneficial owner of the shares of Northeast Stock listed on that
Exhibit, owns those shares of Northeast Stock free and clear of
any security interests, liens, encumbrances or claims, (other
than a pledge of the shares in favor of Celcor), and has the
unrestricted right to vote the Northeast Stock owned by such
person in favor of the Transaction and transfer such shares to
Celcor without the consent of any person.
3.1.11 Title to Assets. Northeast and its
Subsidiaries have good and marketable title in and to all of
their property reflected in the most recent consolidated
financial statement plus all assets purchased by Northeast and
its Subsidiaries since the date of that financial statement, less
all assets which Northeast and its Subsidiaries have disposed of
in the ordinary course, which property is free and clear of any
security interests, consignments, liens, judgments, encumbrances,
restrictions, or claims of any kind. The only liens or security
interests which exist and, at the Closing will exist, on
Northeast's assets are those which either (a) secure liabilities
disclosed on the financial statements annexed hereto, or (b) are
liens for current taxes or assessments not yet due.
3.1.12 Material Contracts. Exhibit 3.1.12 annexed
hereto identifies the following contracts, leases and other
obligations to which Northeast or any of its Subsidiaries is a
party or by which any of them is bound and which are not
identified elsewhere in any other Exhibit to this Agreement: (a)
contracts with or loans to any of Northeast's stockholders,
officers, directors, employees, agents, consultants, advisors,
salesmen, distributors or sales representatives; (b) secured
loans and unsecured loans and lines of credit; (c) contracts
restricting Northeast or any of its Subsidiaries from doing
business in any areas or in any way limiting competition; (d)
contracts calling for aggregate payments by Northeast or by any
of its Subsidiaries in excess of $50,000 and which are not
terminable without cost or liability on notice of 60 days or
less; and (e) guarantees by Northeast or by any of its
Subsidiaries of the obligations of any other party, except those
resulting from the endorsement of customer checks deposited by
the payee for collection. Except as disclosed on Exhibit 3.1.12,
Northeast and each of its Subsidiaries have, in all material
respects, performed or complied with all material obligations
required on their part to be performed or complied with through
the date hereof under any of such contracts, obligations or
commitments to which each is a party or otherwise bound and no
default has occurred thereunder, whether waived or not waived,
which could have an adverse effect upon the business or financial
condition of or impose a liability upon Northeast or any of its
Subsidiaries. All parties to such contracts, obligations or
commitments with Northeast or any of its Subsidiaries are in
substantial compliance therewith and no event has occurred which,
through the giving of notice or the passage of time or both,
would cause or constitute a material default under any such
contracts, obligations or commitments, or would cause the
acceleration of any obligation of any party thereto. Copies of
the contracts listed or referred to in Exhibit 3.1.12 have been
or will promptly be delivered or made available to Celcor.
3.1.13 Labor Matters.
3.1.13.1 There are presently no employment or
consulting contracts with or covenants against competition
by, any present or former employees of Northeast or any of
its Subsidiaries.
3.1.13.2 Annexed hereto as Exhibit 3.1.13 is a
current list showing the names of all United States
employees of Northeast and its Subsidiaries, their original
dates of employment, job titles and annual rate of pay for
salaried employees and hourly rates for hourly employees.
3.1.13.3 All employees of Northeast and its
Subsidiaries are employees at will who may be terminated by
Northeast at any time with no obligation to make any payment
except wages to the date of termination.
3.1.13.4 Neither Northeast nor any of its
Subsidiaries is indebted to, nor a creditor of, any
Stockholder or of any relative of any of such Stockholder,
except for accrued wages and salaries.
3.1.13.5 Northeast and its Subsidiaries are in
compliance with all federal and state laws respecting
employment, wages and hours, and in compliance with any
relevant Chinese laws. Northeast and its subsidiaries are
not engaged in any discriminatory hiring or employment
practices or any unfair labor practices nor have any
employment discrimination or unfair labor practice
complaints against Northeast or any of its Subsidiaries been
filed, or to the knowledge of Northeast or any Subsidiary
threatened to be filed, with any Chinese, or any U.S.
federal or state agency having jurisdiction over Northeast's
labor matters. Neither Northeast nor any of its
Subsidiaries has been threatened by any former employee with
any suit alleging wrongful termination, nor does Northeast
have knowledge of facts which might form a basis for such a
suit.
3.1.13.6 Northeast and its Subsidiaries have not,
directly or through agents and independent contractors,
employed any unauthorized aliens, as defined in 8 U.S.C.
Section 1324a(h)(3). Northeast and its Subsidiaries have
complied, or caused any such agent or independent
contractor, to comply with the employment verification and
record-keeping requirements of 8 U.S.C. Section 1324a and 8
C.F.R. Section 274a, as amended.
3.1.14 Benefit Plans; ERISA. Neither Northeast, nor
any of its Affiliates maintains a group health plan (within the
meaning of Section 5000(b)(1) of the Code). Northeast does not
now and has never maintained, sponsored or contributed to any
plan or program or arrangement providing post-termination of
employment retirement, health, dental, disability or life
insurance benefits with respect to employees or former employees
and their spouses and dependents.
3.1.15 Licenses and Permits. Northeast and its
Subsidiaries and their respective employees or agents have all
material licenses, permits, orders, approvals and authorizations
required by Northeast or any such Subsidiary for the conduct of
businesses as presently and anticipated to be conducted
(including both U.S. and Chinese licenses, permits,
authorizations or approvals). Northeast and its Subsidiaries are
acting within the terms of such licenses, permits, orders, and
approvals. Neither Northeast nor any of its Subsidiaries has
received any notice of investigation, evaluation or suspension of
any such licenses, permits, orders, approvals or authorizations.
To the best knowledge of Northeast and its Subsidiaries, no
suspension or cancellation of any such licenses, permits, orders,
approvals and authorizations has been threatened or is
contemplated.
3.1.16 Authority Relative to Agreement;
Enforceability. The execution, delivery and performance of this
Agreement is within the legal capacity and power of Northeast and
the Stockholders and have been duly authorized by all requisite
corporate action on the part of Northeast. This Agreement is a
legal, valid and binding obligation of Northeast and the
Stockholders, enforceable against Northeast and the Stockholders
in accordance with its terms, except insofar as its enforcement
may be limited by (a) bankruptcy, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and (b) equitable principles limiting the availability
of equitable remedies. All persons who execute this Agreement on
behalf of Northeast have been duly authorized to do so.
3.1.17 Compliance with Other Instruments; Consents.
Neither the execution of this Agreement, nor the consummation of
the Transaction, will conflict with, violate or result in a
breach or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default), or result in
the termination of, or accelerate the performance required by, or
result in the creation of any lien or encumbrance upon any of the
assets of Northeast or any of its Subsidiaries under any
provision of any certificate of incorporation, by-law, indenture,
mortgage, lien, lease, agreement, contract, instrument, or any
other restriction of any kind or character to which Northeast or
any of its Subsidiaries is subject or by which Northeast or any
of its Subsidiaries is bound, or require the consent of any third
party or governmental agency. To the extent the consent of
Celcor to the Merger is required under the terms of that certain
pledge agreement among Celcor and the shareholders of Northeast,
by its execution of this Agreement, Celcor consents to the
Merger.
3.1.18 Compliance with Applicable Laws. Northeast
and its Subsidiaries are in compliance with all Chinese and U.S.
federal, state, county, and municipal laws, ordinances,
regulations, judgments, orders or decrees applicable to the
conduct of the business of each, or to the assets owned, used, or
occupied by each, and neither Northeast nor any of its
Subsidiaries has received notice or advices to the contrary. All
reports required by any or all Chinese and U.S. federal, state
and local governments have been timely filed and all information
contained therein is true and correct. Neither the execution of
this Agreement, nor consummation of the Transaction will (a)
violate any order, writ, injunction, statute, rule or regulation
applicable to Northeast or any of its Subsidiaries, or (b)
require the consent, approval, authorization or permission of, or
the filing with or the notification of any Chinese or U.S.
federal, state or local government agency.
3.1.19 Environmental Compliance.
3.1.19.1 Northeast and its Subsidiaries are in
compliance with all applicable Chinese and U.S. federal,
state and local laws and regulations relating to pollution
control and environmental contamination and all laws and
regulations with regard to record-keeping, notification and
reporting requirements respecting Regulated Substances.
Neither Northeast nor any of its Subsidiaries has been
alleged to be in violation of, nor has any of the foregoing
Companies been subject to any administrative or judicial
proceeding pursuant to such laws or regulations, either now
or any time during the past three years.
3.1.19.2 None of the real property owned, used
and/or occupied by Northeast or any Subsidiary and located
in the United Stated has ever been used by previous or
current owners, users and/or operators to generate,
manufacture, refine, transport, treat, store, handle,
dispose, transfer or process Regulated Substances.
3.1.19.3 Except as listed on Exhibit 3.1.19
annexed hereto, Northeast and its Subsidiaries do not own or
use underground storage tanks at any of the real property
owned or occupied by Northeast or any of its Subsidiaries.
If such tanks are owned or used, Northeast and its
Subsidiaries have complied in all respects with all laws
regulating underground storage tanks and the Federal
Technical Standards and Corrective Action Requirements for
Owners and Operators of Underground Storage Tanks (40 C.F.R.
Part 280).
3.1.20 Financial Statements. Northeast and its
Subsidiaries have delivered to Celcor consolidated balance sheets
and related consolidated statements of operations, changes in
stockholders' equity and cash flows for the fiscal years ended
June 30, 1993 and June 30, 1994 and the four months and one year
then ended, in each case audited by BDO Seidman, independent
certified public accountants. Within thirty days of the date of
this Agreement, Northeast and its Subsidiaries will deliver an
unaudited consolidated balance sheet dated December 31, 1994 and
consolidated statement of operations, changes in stockholders'
equity and cash flows for the six months ended December 31, 1994.
The audited financial statements fairly present and the interim
financial statements, when delivered, will present, the financial
position of Northeast and its Subsidiaries and the results of
their operations as at the dates and for the periods to which
they apply, and such statements have been (and in the case of the
interim statements, will be) prepared in conformity with GAAP,
applied on a consistent basis throughout the periods involved.
The interim statements will include all adjustments (subject only
to normal year-end audit adjustments) necessary for a fair
presentation of Northeast's consolidated financial position and
results of operations for that period.
3.1.21 Taxes.
3.1.21.1 All tax and information returns required
to have been filed by Northeast or any of its Subsidiaries
have either been filed with the appropriate taxing authority
or Northeast has filed for any required extension; and all
Taxes of Northeast and its Subsidiaries have been paid (or
estimated taxes have been deposited) to the extent such
payments are required prior to the date hereof or accrued on
the books of Northeast and its Subsidiaries. The returns
were (or will be) correct as (or when) filed. Northeast's
consolidated financial statements include adequate provision
for Taxes incurred or accrued as of the date of the most
recent balance sheet. True and complete copies of the most
recent federal, state and local tax returns of Northeast or
any of its Subsidiaries will promptly be delivered to Celcor
when filed.
3.1.21.2 None of the federal taxes and state and
local franchise and sales tax returns of Northeast and its
Subsidiaries have been audited (or examined by IRS in the
case of federal tax returns). No assessments or additional
Taxes have been proposed or threatened against Northeast or
any Subsidiary or any of their respective assets, and
neither Northeast nor any Subsidiary has executed any waiver
of the statute of limitations on the assessment or
collection of any Tax Liabilities.
3.1.21.3 There are no pending investigations of
Northeast or any of its Subsidiaries or their respective tax
returns by any federal, state or local taxing authority, and
there are no federal, state, local or foreign tax liens upon
any of Northeast's assets or the assets of any Subsidiary.
3.1.21.4 Exhibit 3.1.21 annexed hereto lists any
elections which Northeast has made with respect to the
income tax treatment of any items which cannot be revoked
without the consent of the Commissioner of Internal Revenue.
3.1.22 Litigation. There are no legal,
administrative, arbitration or other proceedings or claims
pending or to the knowledge of Northeast, threatened, against
Northeast, or any of its Subsidiaries, nor is Northeast or any
Subsidiary subject to any existing judgment which might affect
the financial condition, business, property or prospects of
Northeast or any Subsidiary; nor has Northeast or any Subsidiary
received any inquiry from an agency of the federal or of any
state or local government about the Transaction, or about any
violation or possible violation of any law, regulation or
ordinance affecting its business or assets; nor has Northeast or
any Subsidiary been subject to any products liability claims
during the three years ended on the date of this Agreement.
3.1.23 Brokerage. No broker or finder has rendered
services to Northeast or to any Stockholder in connection with
the Transaction.
3.1.24 Full Disclosure. No representation or
warranty made by Northeast or any Subsidiary in this Agreement,
and no certification furnished or to be furnished to Celcor
pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits, or will omit, to state a
material fact necessary to make the statements contained herein
or therein not misleading.
3.2 Representations and Warranties of Celcor. Celcor
hereby represents and warrants to Northeast and Stockholders
that:
3.2.1 Organization. Celcor is duly organized,
validly existing, and in good standing under the laws of the
state of its incorporation and has the corporate power to
execute, deliver, and perform this Agreement.
3.2.2 Capitalization.
3.2.2.1 Celcor has an authorized capital stock
consisting of 20,000,000 shares of common stock, par value
$0.001 per share, of which 3,364,674 shares are issued and
outstanding and 2,000,000 shares of preferred stock, par
value $0.001 per share, of which 275,000 shares are issued
and outstanding. All of such shares of stock have been
validly issued, fully paid, are non-assessable, and were
issued in compliance with applicable federal and state
securities laws.
3.2.2.2 Except for its outstanding convertible
preferred stock, Celcor does not have outstanding any
subscriptions, options, rights, warrants, convertible
securities or other agreements or commitments to issue, or
contracts or any other agreements obligating Celcor to
issue, or to transfer from treasury, any shares of its
capital stock of any class or kind, or securities
convertible into such stock. No persons who are now holders
of Celcor Stock, and no persons who previously were holders
of Celcor Stock, are or ever were entitled to pre-emptive
rights other than persons who exercised or waived those
rights.
3.2.3 Authorization. The execution and delivery of
this Agreement and the consummation of the Transaction have been
duly authorized by the Board of Directors of Celcor. This
Agreement constitutes the legal, valid and binding obligation of
Celcor, enforceable against it in accordance with its terms,
except insofar as the enforcement thereof may be limited by
bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors' rights generally and subject to equitable
principles limiting the availability of equitable remedies. All
persons who have executed this Agreement on behalf of Celcor have
been duly authorized to do so.
3.2.4 Title to Assets. Celcor has good and
marketable title in and to all of its properties reflected in the
most recent financial statement, plus all assets purchased by
Celcor since the date of that financial statement, less all
assets which Celcor has disposed of in the ordinary course, which
property is free and clear of any security interests,
consignments, liens, judgments, encumbrances, restrictions, or
claims of any kind. The only liens or security interests which
exist and, at the Closing will exist, on Celcor's assets are
those which either (a) secure liabilities disclosed in the
financial statements annexed hereto, (b) secure the ownership
interests of lessors' of equipment used by Celcor, or (c) are
liens for current taxes or assessments not yet due.
3.2.5 No Third Party Consent Required; No Violation
of Other Instruments. Except for the need to obtain the consent
of its stockholders, neither the execution nor the performance of
this Agreement by Celcor requires the consent of any third party,
nor will it violate or result in a breach or constitute a default
under any provision of the certificate of incorporation or by-
laws of Celcor, or any indenture, mortgage, lien, lease,
agreement, contract, instrument, order, judgment, decree,
statute, ordinance, regulation or any other restriction of any
kind or character to which Celcor is subject or by which it is
bound.
3.2.6 Litigation. There are no legal,
administrative, arbitration or other proceedings or claims
pending, or to the knowledge of Celcor, threatened, against
Celcor, nor is Celcor subject to any existing judgment which
might affect the financial condition, business, property or
prospects of Celcor; nor has Celcor received any inquiry from an
agency of the federal or of any state or local government about
the Transaction, or about any violation or possible violation of
any law, regulation or ordinance affecting its business or
assets; nor has Celcor been subject to any products liability
claims during the three years ended on the date of this
Agreement.
3.2.7 Brokerage. No broker or finder has rendered
services to Celcor in connection with the Transaction.
3.2.8 Financial Statements. Celcor has delivered
to Northeast Celcor's Annual Report to the SEC on Form 10-K for
its year ended June 30, 1994, which includes its financial
statements as of that date and for two years then ended, and its
quarterly report to the SEC on Form 10-Q for the three and six
month periods ended December 31, 1994. Those statements fairly
present the financial position of Celcor as at the dates and for
the periods to which they apply and have been prepared in
conformity with GAAP.
3.2.9 Full Disclosure. No representation or
warranty made by Celcor in this Agreement, and no certification
furnished or to be furnished to Northeast and the Stockholders
pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits, or will omit, to state a
material fact necessary to make the statements contained herein
or therein not misleading.
ARTICLE IV
ADDITIONAL COVENANTS AND AGREEMENTS OF
THE PARTIES
4.01 Corporate Approval. Promptly following the date
hereof, Celcor will call a special meeting of its stockholders
for the purpose of considering and approving this Agreement, the
Transaction and the Plan. Celcor shall promptly call that
meeting by preparing a proxy statement and giving written notice
to all its stockholders in accordance with its by-laws and
applicable corporation law.
4.02 Stockholders' Agreement to Vote. Promptly
following the date hereof, Northeast will either call a special
meeting of its stockholders for the purpose of considering and
approving this Agreement, the Transaction and the Plan, or will
obtain the written consent of its stockholders with respect to
such matters. The undersigned Stockholders hereby agree to vote
all Northeast Stock which they own in favor of the Transaction.
4.03 Conduct of Business. Prior to the Closing Date,
each corporation shall conduct its business only in the Ordinary
Course of Business, except as otherwise permitted by this
Agreement or consented to the other party in writing. Each party
shall promptly advise the other in writing of any material
adverse change in the business, assets or prospects of such
corporation. Without the prior consent of the other party,
neither Northeast nor Celcor shall, prior to the Effective Date,
(a) issue, sell, purchase or redeem, or grant options or warrants
or rights to purchase, or otherwise agree to issue, sell,
purchase or redeem, any common stock or other securities; (b)
incur any indebtedness or other liability, or discharge any
obligation or liability other than in the Ordinary Course of
Business; (c) make any distribution to its stockholders; (d)
amend its Certificate of Incorporation or by-laws; (e) enter into
an employment agreement or make any changes in compensation or
other employment benefits for its executive officers; (f) sell or
otherwise dispose of any of its material assets; (g) mortgage,
pledge or subject to lien or other Encumbrance any of its assets;
or (h) acquire or enter into a contract to acquire any business
or material asset.
4.05 Filing With Securities And Exchange Commission.
Northeast recognizes that Celcor may be required to report the
Transaction to the SEC on Form 8-K and will be obligated to
solicit shareholder approval pursuant to a proxy statement, each
of which must be accompanied by financial statements of
Northeast. Northeast shall cause its regular accountants to
furnish such statements to Celcor and to consent to the use of
those statements and their related report in said proxy statement
and Form 8-K.
4.06 Access. Between the date hereof and the Closing
Date, each party shall give to the other and their respective
designees full access, during normal business hours and upon
reasonable notice, in such a manner as not to disrupt normal
business activities, to the premises, property, material
contracts and books of account and records of such party. Each
party will hold, and will cause all of its directors, officers,
employees and representatives to hold in complete confidence, all
information so obtained and will use such information only for
the purpose of conducting its due diligence investigation. If
the Transaction is not consummated as contemplated herein, each
party will return to the other all returnable information and
data and will not disclose any such data or information to any
other person. Such obligation of confidentiality shall not
extend to any information which is shown to have been previously
known to the party to whom the information was provided, or
generally known to others engaged in the same trade or business
as the party who provided the information, or that is part of
public knowledge.
4.07 Best Efforts. Northeast, the Stockholders and
Celcor shall use their best efforts, and shall cooperate with and
assist each other in their efforts to obtain such consents and
approvals of third parties as may be necessary to consummate the
Transaction and to permit each party to enjoy the benefits of the
Transaction without any cost beyond that contemplated by this
Agreement.
4.08 Brokers or Finders. Each party agrees to hold the
other harmless and to indemnify it against the claims of any
persons or entities claiming to be entitled to any brokerage
commission, finder's fee, advisory fee or like payment from such
other party based upon actions of the indemnifying party in
connection with the Transaction.
4.09 Environmental Matters.
4.9.1 Celcor shall have the right, at its expense,
to make such environmental studies of any real property owned by
Northeast and its Subsidiaries, or any real property which
Northeast and its Subsidiaries have the right to acquire, as it
shall deem necessary to determine whether there is any reason to
believe there is contamination to any soil, subsurface condition
or groundwater caused by the presence of a Regulated Substance
which could give rise to an obligation to perform remediation or
clean-up, and whether Northeast's underground fuel storage tanks,
if any, leak. If there should be evidence of the presence of any
Regulated Substance or improper installation or leakage of a
tank, Celcor will so advise the Stockholders who will cause
Northeast to take whatever action is necessary to remediate the
situation, including clean up of contaminated soil, removal of
the tank, if appropriate, or removal of the contents of the tank
and filling of the tank with sand or other non-polluting
material. The entire cost of that cleanup shall be accrued as a
liability of Northeast.
4.9.2 If the Closing shall occur prior to the
completion of that remediation, the cleanup cost, as estimated by
a consultant acceptable to Celcor and Northeast, shall be accrued
as a liability of Northeast. If the actual cost of that cleanup,
including but not limited to the cost of preliminary studies,
tank and soil removal, installation and operation of monitoring
wells, governmental fees and fines relating to that pollution and
remediation should exceed the estimate, the Stockholders shall
jointly and severally reimburse Celcor for the excess cost.
4.9.3 If Celcor determines that any such tank is
not leaking, it shall so advise the Stockholders who shall then
have no further obligation with respect to the tank other than to
pay for the cost of upgrading the tank as required by the Federal
Technical Standards and Correction Action Requirements for Owners
and Operators of Underground Storage Tanks and any applicable
state statute or regulation dealing with Northeast's underground
tanks.
4.10 Exclusive Dealing. Until this Agreement shall be
consummated or terminated in accordance with its terms, neither
Northeast nor any Stockholder shall take, or permit any other
person acting on its or his behalf, to take or refrain from
taking any action, directly or indirectly, to encourage, initiate
or engage in discussions or negotiations with, or provide
information to, any person or group other than Celcor with
respect to any purchase of the stock of Northeast or any purchase
of any substantial portion of the assets of, or merger with,
Northeast, other than disclosures consented to in writing by
Celcor. Northeast and the Stockholders shall promptly notify
Celcor of any solicitation or inquiry which any of them receive
with respect to any such matter.
ARTICLE V
THE CLOSING
5.01 The Closing. The Closing shall take place at the
offices of Lowenstein, Sandler, Kohl, Fisher & Boylan, 65
Livingston Avenue, Roseland, New Jersey 07068, commencing at
9:00 a.m. local time on the Closing Date, provided that all
conditions precedent to the obligations of Northeast and Celcor
to close have then been met or waived. Either party may postpone
the Closing for a reasonable period of time if necessary to
enable it to perform any obligations hereunder. If the Closing
shall not take place on or before the 120 day following the date
hereof (the "Outside Date"), this Agreement may be terminated at
the option of either party, other than a party whose act or
failure to act prevented the Closing from occurring on or before
the Outside Date.
5.02 Termination. This Agreement may be terminated at
any time until completion of the Closing as follows: (a) by
mutual consent of Celcor and Northeast; (b) by Celcor or
Northeast, respectively, if, at or before the completion of the
Closing, any material condition set forth herein upon the
obligation of such party to consummate the Transaction shall not
have been duly satisfied or waived; (c) by Celcor or Northeast if
the Closing shall not have occurred on or before the Outside
Date, but no party shall be entitled to terminate pursuant to
this clause if its own acts or failures to act delay the Closing
beyond the Outside Date; or (d) by Celcor or Northeast,
respectively, if it shall have discovered that any representation
or warranty made herein for its benefit, or in any certificate,
schedule or document furnished to it, pursuant to this Agreement
is untrue in any material respect, or if the other party shall
have defaulted in the performance of any obligation to be
performed by such party under this Agreement; provided, however,
that in order to terminate this Agreement under Section 5.02 (b)
or (d), the party seeking to terminate this Agreement shall, upon
discovery of a breach or default, give written notice thereof to
the other party and the other party shall fail to cure the breach
or default within ten (10) days after receipt of such notice.
5.03 Liability on Termination. Upon any termination of
this Agreement pursuant to Section 5.02 (a), no party shall have
any liability or obligation hereunder (except to observe the
confidentiality provisions hereof), and each party shall bear the
expenses incurred by it. If a party should terminate pursuant to
Section 5.02(b) or Section 5.02(d), the terminating party shall
have no liability, but the defaulting party shall not be excused
from liability to the other party unless it can clearly
demonstrate that the failure to perform was caused by persons or
acts beyond its control. If the termination is the result of an
event described in Section 5.02(c) above, the terminating party
shall have no liability to the other party provided that the
terminating party did not delay the closing beyond the Outside
Date, but the party causing that delay shall not be excused from
liability to the other party unless it can clearly demonstrate
that such delay was caused by persons or acts beyond its control.
5.04 Termination Fees. In order to induce each party
to enter into this Agreement, and as a means of compensating the
parties for the substantial efforts and direct and indirect
monetary costs incurred and to be incurred in connection with the
Transaction, (i) in the event that Celcor terminates this
Agreement as a result of Northeast's failure to satisfy any of
the conditions set forth in Article VII, Northeast shall
reimburse Celcor for all reasonable out-of-pocket expenses
actually incurred by it or on its behalf in connection with this
Agreement and the Transaction in an amount not to exceed $25,000;
and (ii) in the event that Northeast terminates this Agreement as
a result of Celcor's failure to satisfy any of the conditions set
forth in Article VIII, Celcor shall reimburse Northeast for all
reasonable out-of-pocket expenses actually incurred by it or on
its behalf in connection with this Agreement and the transaction
in an amount not to exceed $25,000; provided, however, that any
claim that a representation of a party, which is based on the
knowledge of such party, is false shall not give rise to a claim
under this Section unless that representation is false to the
knowledge of such party on the date of this Agreement.
ARTICLE VI
CONDITIONS TO OBLIGATION OF EACH PARTY
The obligation of each party to effect the Transaction
shall be subject to the fulfillment, at or prior to the Closing
Date, of the following conditions:
6.01 No Prohibition of Transaction.
(a) No third party shall have instituted any suit
or proceeding to restrain, enjoin or otherwise prevent the
consummation of the Transaction, or to seek damages from or
impose obligations upon either party by reason of the Transaction
which, in such party's reasonable judgment, would involve expense
or lapse of time that would be materially adverse to that party's
interest.
(b) No order shall have been issued by any court
or administrative body to inquire into, restrain, enjoin or
otherwise prevent consummation of the Transaction.
6.02 Compliance with Law. There shall have been
obtained all permits, approvals and consents of any governmental
body or agency which counsel for Celcor or Northeast may
reasonably deem necessary or appropriate to consummate the
Transaction in compliance with laws applicable to the
Transaction, assets or business of either party.
6.03 Proceedings, Documentation and Consents. All
proceedings and Closing Documents contemplated by this Agreement,
together with all consents to and approvals of the Transaction
(the form and substance of all of which shall be reasonably
satisfactory to the parties) as are necessary to effect the
Merger, shall have been obtained.
6.04 Tax Free Reorganization. The Merger and the
receipt by the shareholders of Northeast of shares of Celcor
Stock in exchange for their shares of Northeast Stock shall
constitute a tax free reorganization pursuant to Section
368(a)(i)(A) of the Internal Revenue Code of 1986, as amended.
ARTICLE VII
CONDITIONS TO THE OBLIGATION OF CELCOR TO CLOSE
The obligations of Celcor hereunder are subject to the
satisfaction, on or prior to the Closing Date, of all the
following conditions, compliance with which or the occurrence of
which may be waived in whole or in part by Celcor in writing.
7.01 Representations and Warranties True at the Closing
Date. Except for changes contemplated by this Agreement and
changes which do not individually or in the aggregate have a
material adverse effect upon the assets or business acquired, the
representations and warranties of Northeast contained in Article
III shall be deemed to have been made again at and as of the
Closing Date and shall then be true and correct, except for
changes in the Ordinary Course of Business of Northeast.
7.02 No Material Adverse Change; Officers'
Certificates. During the period from the date of this Agreement
to the Closing Date there shall not have been any material
adverse change in the financial condition, results of operations
or prospects of Northeast, nor any material loss or damage to its
assets, whether or not insured, which materially adversely
affects its ability to conduct its business.
7.03 Corporation's Performance. Each of the
obligations of Northeast to be performed on or before the Closing
Date pursuant to the terms of this Agreement shall have been duly
performed.
7.04 Necessary Corporate Approvals. The board of
directors and stockholders of Northeast shall have duly
authorized and approved the execution and delivery of this
Agreement and all corporate action necessary or proper on the
part of Northeast to authorize the execution, delivery and
performance of this Agreement and the Plan, shall have been taken
on or prior to the Closing Date.
7.05 Resolutions Authorizing the Execution of this
Agreement. At the Closing, Northeast will furnish to Celcor
copies of the resolutions or consents of Northeast's board of
directors and its stockholders, appropriately certified by
Northeast's secretary, authorizing the execution, delivery, and
performance of this Agreement and the Plan.
7.06 Opinion of Counsel. Northeast shall have
furnished Celcor with a favorable opinion dated on and as of the
Closing Date, of Cha and Pan, counsel to Northeast, in the form
of Appendix B hereto.
7.07 Investment Letters. On or prior to the Closing
Date, each Stockholder shall have executed and delivered to
Celcor a letter agreement and questionnaire in the form of
Appendix A hereto, it being understood that Celcor, in issuing
the Celcor Stock, will be relying on the representations of said
persons therein contained.
7.08 Satisfactory Searches. Celcor shall have received
evidence, satisfactory to it, that (a) Northeast is duly
organized, validly existing and in good standing in its state of
incorporation, (b) Northeast is qualified to do business as a
foreign Corporation where, in the opinion of counsel to
Northeast, it is required to be so qualified, and (c) Northeast
has good title to all assets listed in its financial statements
free and clear of all Encumbrances.
7.09 Environmental Review. Celcor shall not have
discovered the presence of Regulated Substances on any real
property owned by Northeast requiring remediation under any
federal or state law, rule or regulation, nor any improper
installation of or leakage from any underground storage tanks on
such real property, or any violation of environmental laws, rules
or regulations with regard to such Regulated Substance or such
tanks on such property that shall not have been remediated prior
to the Closing Date.
7.10 Consents to Transaction. On or prior to the
Closing Date, Northeast shall furnish Celcor with such consents
to the Transaction as in the opinion of Celcor or its counsel are
required to permit Ceclor to enjoy the benefits of the
Transaction without any cost beyond that contemplated by this
Agreement.
7.11 Dissenters' Rights. Northeast shall not have
received notices from any holders of any class of Northeast Stock
of their intent to dissent from the Transaction.
[7.12 Title Insurance. Celcor shall have obtained
a title insurance policy or binder insuring the Surviving
Corporation's interest in any real estate owned by Northeast.]
7.13 Financial Statements. Northeast shall have
delivered to Celcor, at Northeast's expense, a consolidated
balance sheet of Northeast as of June 30, 1994, and consolidated
statements of income and cash flows for the year ended June 30,
19994, certified by BDO Seidman and interim financial statements
for the six months ended December 31, 1994, all, as required by
SEC Regulation S-X.
7.14 Fairness Opinion. Celcor shall have received an
opinion from Chartered Capital Advisors, Inc., dated as of the
date of the proxy statement sent to its stockholders, to the
effect that the rate of exchange of Celcor Stock for Northeast
Stock is fair to the stockholders of Celcor from a financial
point of view, and such opinion shall not have been withdrawn
prior to the date of the meeting of Celcor stockholders held for
the purpose of approving the Plan.
7.15 Results of Investigation. Celcor shall have
determined in good faith that the results of its investigation do
not show any losses, liabilities, commitments, contingencies or
other conditions of or relating to Northeast which are not set
forth or reflected in the financial statements of Northeast
previously delivered to Celcor or have not been otherwise
disclosed to Celcor and which in the aggregate materially and
adversely affect the business, financial condition, properties,
results of operations, forecasts or prospects of Northeast (as
defined in SEC regulations).
ARTICLE VIII
CONDITIONS TO NORTHEAST'S OBLIGATION TO CLOSE
The obligations of Northeast hereunder are subject to
the satisfaction, on or prior to the Closing Date, of the
following conditions, compliance with which, or the occurrence of
which may be waived in whole or in part in writing by Northeast.
8.01 Representations and Warranties True at the
Closing. The representations and warranties of Celcor contained
in Article III shall be deemed to have been made again at and as
of the Closing Date and shall then be true and correct in all
material respects except for changes in the Ordinary Course of
Business of Celcor.
8.02 Celcor's Performance. Each of the obligations of
Celcor to be performed on or before the Closing Date, pursuant to
the terms of this Agreement, shall have been duly performed at
the Closing Date. There shall have been no change in Celcor's
financial or business condition, nor any litigation or
proceeding, actual or threatened, which is reasonably likely to
prevent Celcor from performing any obligation undertaken by it
under this Agreement which is to be performed after the Closing.
8.03 No Material Adverse Change. During the period
from the date of this Agreement to the Closing Date, there shall
not have been any material adverse change in the financial
condition, results of operations or prospects of Celcor, nor any
material loss or damage to its assets, whether or not insured,
which materially affects Celcor's ability to conduct its
business.
8.04 Authority. All actions required to be taken by or
on the part of Celcor to authorize the execution, delivery and
performance of this Agreement by Celcor and the consummation of
the Transaction shall have been duly and validly taken by the
Board of Directors and stockholders of Celcor.
8.05 Opinion of Celcor's Counsel. Celcor shall have
furnished Northeast with an opinion of Lowenstein, Sandler, Kohl,
Fisher & Boylan, P.C., counsel to Celcor, dated the Closing Date,
in the form of Appendix C hereto. Such opinion may expressly
rely as to matters of fact upon certificates of appropriate
officers of Celcor or appropriate governmental officials. Copies
of such certificates shall be delivered to Northeast.
8.06 Results of Investigation. Northeast shall have
determined in good faith that the results of its investigation do
not show any losses, liabilities, commitments, contingencies or
other conditions of or relating to Celcor which are not set forth
or reflected in the financial statements of Celcor previously
delivered to Northeast or have not been otherwise disclosed in
writing to Northeast and which in the aggregate materially and
adversely affect the business, financial condition, properties,
results of operations, forecasts or prospects of Celcor.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND INDEMNIFICATION
9.01 Representations to Survive Closing. The
representations and warranties of Celcor, Northeast and the
Stockholders contained herein or in any document furnished
pursuant hereto shall survive the Closing of the Transaction, but
the exclusive remedy following the Closing for a breach of any
representation or warranty shall be to assert a claim in
accordance with the provisions of this Article IX. Except as
provided in this Article IX, neither Celcor, Northeast, nor their
respective stockholders, directors or officers, shall have any
liability to the other after the Effective Date on account of any
breach or failure or the incorrectness of any of those
representations and warranties.
9.02 Indemnification by the Stockholders.
(a) Obligation to Indemnify. The Stockholders
jointly and severally agree to and do hereby indemnify, and agree
to defend and hold Celcor and the Surviving Corporation and their
respective directors, officers, employees, fiduciaries, agents
and affiliates, and each other person, if any, who controls such
persons, harmless against any claims, actions, suits,
proceedings, investigations, losses, expenses, damages,
obligations, liabilities, judgments, fines, fees, costs and
expenses (including costs and reasonable attorneys' fees) and
amounts paid in settlement of any pending, threatened or
completed claim, action, suit, proceeding or investigation
(collectively "Loss" or "Losses") which arise or result from or
are related to (i) any breach or failure of Northeast and the
Stockholders to perform any of their covenants or agreements set
forth herein, (ii) the inaccuracy of any representation or
warranty made by Northeast and Stockholders herein, (iii) any
fixed or contingent obligation or liability of Northeast
(including but not limited to liabilities arising in tort,
contract, guarantees and indemnities) which existed as of the
Closing Date and would be required by GAAP to be disclosed on
Northeast's financial statements, or in the notes thereto, and is
not so disclosed prior to Closing, and (iv) any liability for
Taxes, other than those which are accrued as liabilities of
Northeast, together with interest and penalties and additions to
tax, if any, arising out of tax assessments. No liability shall
attach under this Section 9.02, however, until Celcor has
incurred a Loss or Losses in the aggregate totaling fifty
thousand dollars ($50,000) and no claim shall be asserted by
Celcor after one year in the case of claims asserted on the basis
of clause (i), two years in the case of a claim asserted on the
basis of clause (ii) or (iii), and no time limitation in the case
of a claim asserted on the basis of clause (iv).
(b) Reimbursement on Demand. The Stockholders
will reimburse Celcor from time to time on demand for any payment
made by Celcor at any time in respect of any Loss which Celcor
may sustain or incur to which the foregoing indemnity relates.
9.03 Indemnification by Celcor.
(a) Obligation to Indemnify. Celcor agrees to
and does hereby indemnify and hold Northeast and the Stockholders
harmless against any claims, losses, damages, expenses or
liabilities (including costs and reasonable attorney's fees)
resulting to Northeast and the Stockholders from (i) any breach
or failure of Celcor to perform any of its covenants or
agreements set forth herein, (ii) the inaccuracy of any
representations or warranties made by Celcor herein, (iii) any
fixed or contingent obligation or liability of Celcor (including
but not limited to liabilities arising in tort, contract,
guarantees and indemnities) which existed as of the Closing Date
and would be required by GAAP to be disclosed on Celcor's
financial statements, or in the notes thereto, and is not so
disclosed prior to closing, and (iv) any liability for Taxes,
other than those which are accrued as liabilities of Celcor,
together with interest and penalties and additions to tax, if
any, arising out of tax assessments. No liability shall attach
under this Section 9.03, however, until the stockholders have
incurred a Loss or Losses in the aggregate totaling fifty
thousand dollars ($50,000) and no claim shall be asserted by
Northeast or the stockholders after one year in the case of
claims asserted on the basis of clause (i), two years in the case
of a claim asserted on the basis of clause (ii) or (iii) and no
time limitation in the case of a claim asserted on the basis of
clause (iv).
(b) Reimbursement on Demand. Celcor will
reimburse the Stockholders from time to time on demand for any
payment made by the Stockholders at any time in respect of any
Loss which the Stockholders may sustain or incur to which the
foregoing indemnity relates.
9.04 Enforcement of Indemnification Rights.
(a) Notification. Any person or entity seeking
enforcement of indemnification rights hereunder shall notify each
potentially liable person or entity of (i) any payment made in
respect of any liability, obligation or claim to which the
foregoing indemnity applies, (ii) any Loss which such person or
entity may sustain or incur, to which the foregoing indemnity
relates, and (iii) any claim made or suit filed against such
person or entity with respect to Northeast or Celcor, as
applicable, their respective assets or this Agreement. Such
notification shall include a specific demand for indemnification
and defense if such person or entity wishes to assert his or its
indemnification rights hereunder.
(b) Disputes. If there is any dispute as to the
right to indemnification and defense hereunder, the disputing
party shall give the other party written notice of such dispute,
specifying in detail the basis of the dispute, not later than 20
days after receipt of demand for indemnification. The parties
agree to resolve any such dispute pursuant to the New Jersey
Alternate Procedure for Dispute Resolution Act (N.J.S.A. 2A:23A).
All parties hereto agree to submit to the jurisdiction of such
court for the purpose of such suit or suits.
(c) Time Limit. If there is no dispute as to the
right to indemnification with respect to any such demand within
such 20 day period, TIME BEING OF THE ESSENCE, or upon resolution
of any such dispute by the parties or by a court, the person or
entity entitled to indemnification shall be promptly paid the
amount of such demand, the amount agreed to by the parties or the
amount ordered by a court.
(d) Calculation of Loss. In determining the
amount of any Loss, net after tax proceeds of insurance received
shall reduce the Loss. Tax benefits, if any, derived from such
Loss by the party seeking indemnification shall not reduce the
Loss, unless the amount paid to indemnify it for such Loss shall
not be treated by it as income subject to federal or state income
tax, in which event the amount of the Loss shall be reduced by
the tax benefits derived therefrom.
(e) Litigation Procedure. If a party entitled to
be indemnified pursuant to this Article IX notifies the other
party of the commencement of an action against it, the party
obligated to provide indemnification will be entitled, at his or
its own expense, to (i) participate in, and (ii) except in the
case of a claim that relates to a tax liability, assume the
defense of the action. If the indemnifying party wishes to
assume the defense of that action, counsel selected by the
indemnifying party shall be reasonably satisfactory to the
indemnified party, and the indemnified party shall cooperate in
all reasonable respects, at its cost and expense, with the
indemnifying party and such counsel in the investigation and
defense of such action and any appeal arising therefrom. After
the indemnifying party shall notify the indemnified party of its
election to assume the defense of any such action, the
indemnifying party will not be liable to the indemnified party
under this Article IX for any legal fees or other expense
subsequently incurred by the indemnified party in connection with
the defense thereof. Even if the indemnifying party should
assume the defense of any such actions, the indemnified party
shall have the right at its expense to participate in the defense
thereof. If the indemnifying party assumes the defense of any
such actions, it shall not settle or otherwise compromise any
such action without the prior written consent of the indemnified
party. If the indemnifying party should fail or refuse to assume
the defense of any such action, the indemnifying party shall
jointly and severally reimburse the indemnified party for the
fees and expenses of counsel engaged by it to defend that action.
9.05 Remedies Cumulative. Persons or entities entitled
to indemnification hereunder shall be entitled to such
indemnification from time to time and shall be entitled to rely
upon one or more provisions of this Agreement without waiving its
right to rely upon any other provisions at the same time or any
other time.
ARTICLE X
MISCELLANEOUS
10.01 Notices. All notices, requests, demands and
other communications hereunder shall be in writing and shall be
deemed delivered if delivered by hand, by telecopier, by courier
or mailed by certified or registered mail, postage prepaid,
addressed as follows:
If to Celcor:
Celcor, Inc.
Attn: Mr. Stephen E. Roman, Jr.
1800 Bloomsbury Avenue
Wanamassa, NJ 07712
Tel: (908) 922-3158
Fax No.: (908) 922-2221
with a copy to:
Lowenstein, Sandler, Kohl, Fisher & Boylan
Attn: George J. Mazin, Esq.
65 Livingston Avenue
Roseland, NJ 07068
Tel. (201) 992-8700
Fax No. (201) 992-5820
If to Northeast or the Stockholders:
Northeast (USA) Corp.
Attn: Dr. N. Wu
129-09 26th Ave.
Flushing, N.Y. 11355
Fax No.
with copy to:
Cha Pan
36 West 44th Street
New York, NY 10036
Fax No. (212) 575-1830
10.02 Assignability and Parties in Interest. This
Agreement shall not be assignable by any of the parties hereto
without the consent of all other parties hereto. This Agreement
shall inure to the benefit of and be binding upon the parties
hereto and their respective successors. Nothing in this
Agreement is intended to confer, expressly or by implication,
upon any other person any rights or remedies under or by reason
of this Agreement.
10.03 Expenses. Each party shall, except as
otherwise specifically provided, bear its own expenses and costs,
including the fees of any attorney retained by it, incurred in
connection with the preparation of this Agreement and
consummation of the Transaction.
10.04 Governing Law. This Agreement shall be
governed by, and construed and enforced in accordance with, the
laws of the State of New Jersey. Northeast consents to the
personal jurisdiction of the federal and state courts in the
State of New Jersey in connection with any action arising under
or brought with respect to this Agreement.
10.05 Counterparts. This Agreement may be executed
as of the same effective date in one or more counterparts, each
of which shall be deemed an original.
10.06 Headings. The headings and subheadings
contained in this Agreement are included solely for ease of
reference, and are not intended to give a full description of the
contents of any particular Section and shall not be given any
weight whatever in interpreting any provision of this Agreement.
10.07 Pronouns, etc. Use of male, female and
neuter pronouns in the singular or plural shall be understood to
include each of the other pronouns as the context requires. The
word "and" includes the word "or". The word "or" is disjunctive
but not necessarily exclusive.
10.08 Complete Agreement. This Agreement, the
Appendices hereto, and the documents delivered pursuant hereto or
referred to herein or therein contain the entire agreement
between the parties with respect to the Transaction and, except
as provided herein, supersede all previous negotiations,
commitments and writings.
10.09 Modifications, Amendments and Waivers. This
Agreement shall not be modified or amended except by a writing
signed by Celcor and Northeast. Prior to the Closing, either
Celcor or Northeast may amend any of the exhibits to Article III
by giving the other party notice of such amendments. If such
amended disclosures reveal material adverse information about the
party making the change, the recipient of the information may
terminate this Agreement without liability to the other party.
10.10 Severability. If any term or other provision
of this Agreement is invalid, illegal, or incapable of being
enforced by any rule of law or public policy, all other terms and
provisions of this Agreement will nevertheless remain in full
force and effect so long as the economic or legal substance of
the Transaction is not affected in any manner adverse to any
party hereto. Upon any such determination that any term or other
provision is invalid, illegal, or incapable of being enforced,
the parties hereto will negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as
closely as possible in any acceptable manner to the end that the
Transaction is consummated to the extent possible.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
ATTEST: CELCOR, INC.
/S DARLENE L. RUBIN By: /S STEPHEN E. ROMAN, JR.
President
ATTEST: NORTHEAST (USA) CORP.
/S DEBRA WANG By: /S JENNIFER LO
Jennifer Lo
Chairperson
By: /S TING-HUI LIN
Ting-Hui Lin President
Mannion Consultants, Ltd.
By: /S S.Y. UENG
S.Y. Ueng General Manager
Fowler Holding Ltd.
By: /S T. Y. WU
T. Y. Wu General Partner
Dziou Tai Associates
By: /S CHRISTINE HUANG
Christine Huang Secretary
Lyncroft Corporation
By: /S DENG MING MING
Deng Ming Ming Representative in USA
Northeast General Pharmaceutical Factory
EXHIBIT A
QUESTIONNAIRE
This form should be completed by a corporate officer of the Stockholder.
1. Please furnish the following information:
Name of Stockholder: _________________________________________
Name of person completing form: ______________________________
Address: ____________________________________________________
______________________________________________________________
Telephone Number: ( ) ________________________________
Taxpayer Identification Number(s) of Stockholder: ___________
Provide the following information for the person making investment decisions
for the Stockholder:
2. Employment Information:
Occupation or Profession(s): ________________________________
Current Position or Title: __________________________________
Length of Time in Present Position: _________________________
Nature of Business: _________________________________________
Name and Address of Employer(s): ____________________________
Office Telephone Number: ( ) __________________________
3. List any business or professional education, including degrees
received, if any:
_____________________________________________________________
_____________________________________________________________
4. List any professional licenses or registrations,
including bar admissions, accounting certificates, real
estate brokerage licenses, and SEC, NASD, or state broker-
dealer registrations held by you:
5(a). If the Stockholder is an accredited investor within the
meaning of Section 501(a) of Regulation D, as adopted pursuant to
the Securities Act of 1933, check the appropriate box below to
indicate the basis upon which the undersigned stockholder
qualifies as an accredited investor:
CHECK THE APPROPRIATE BOX(ES).
Subscriber is:
[ ] A corporation, business trust or
partnership which has not been formed
for the purpose of making this
investment and which has total assets
in excess of $5,000,000.
[ ] An entity which has not been formed
for the purpose of making an
investment in the Company and in which
all of the equity owners are qualified
accredited investors, on the basis of
income (annual income of not less than
$200,000, or $300,000 with a spouse)
or net worth (not less than $1,000,000
net worth, including home, furnishings
and automobiles).
5(b). The undersigned stockholder is not an accredited investor
_____________.
Approximate net worth $_______________.
6. Rule 506 of the Securities and Exchange Commission requires
that each purchaser have sufficient knowledge and experience
in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the
Common Stock, or that such purchaser retain the services of a
Purchaser Representative (who may be an attorney, accountant
or other financial advisor) for the purpose of this
particular transaction.
I hereby represent that:
The officers and professional advisors of the undersigned
stockholder have such knowledge and experience in financial
and business matters that they are capable of evaluating the
merits and risks of an investment in the Common Stock.
I understand that the Company will be relying on the accuracy
and completeness of my responses to the questions in this
questionnaire and I represent and warrant to the Company as
follows:
(i) The answers to the above questions are complete and
correct and may be relied upon by the Company in
determining whether the offering in connection with
which I have executed this questionnaire is exempt from
registration under the Securities Act of 1933, pursuant
to Rule 506 or otherwise; and
(ii) I will notify the Company immediately of any material
change in any statement made herein that occurs prior
to the consummation of the Merger.
Date: _______________ Stockholder Name: ______________
Signed by: _____________________
Title: _________________________
APPENDIX B
_____________, 1995
Celcor, Inc.
1800 Bloomsbury Avenue
Wanamassa, New Jersey 07712
Dear Ladies and Gentlemen:
We have acted as counsel to Northeast (USA) Corp., a New York
corporation (the "Company" or "Northeast"), in connection with
its merger with Celcor, Inc. ("Celcor"), pursuant to an Agreement
and Plan of Merger among the Company, Celcor and the stockholders
of Northeast (the "Northeast Stockholders"), dated as of
__________, 1995 (the "Agreement"). This opinion is delivered
pursuant to Section 7.06 of the Agreement. Capitalized terms not
otherwise defined herein shall have the meanings provided in the
Agreement.
As counsel to the Company, we have reviewed the Agreement and
have examined such corporate records, certificates and other
documents, and have considered such questions of law as we
considered appropriate for purposes of rendering this opinion.
In our examination of such records and documents, we have assumed
the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to
authentic documents of all documents submitted to us as
certified, conformed or photostatic copies.
As to certain factual matters material to the opinions expressed
herein, we have relied on the representations of Northeast in the
Agreement and on certificates of public officials and officers of
Northeast, all without independent investigation.
In this opinion, we express no opinion as to the laws of any
jurisdiction other than the federal laws of the United States of
America, the laws of the State of New York and to the extent
relevant, The People's Republic of China.
Based upon the foregoing and subject to the qualifications,
exceptions and limitations set forth herein, we are of the
opinion that:
1. The Company is duly organized, validly existing and in good
standing under the laws of the State of New York and has all
requisite corporate power, franchises and licenses to own its
property and conduct the business in which it is engaged.
2. The Company has the corporate power and authority to enter
into and perform the Agreement.
3. The Company does not directly or indirectly have any
subsidiaries, nor hold any equity interest in any corporation,
partnership or joint venture, other than Shenyang United Vitatech
Ltd. and Northeast (Shenyang) Consulting Co. Ltd. (together, the
"Subsidiaries"). The Subsidiaries are each corporations, duly
organized, validly existing and in good standing under the laws
of The Peoples Republic of China, and each has all requisite
corporate power, licenses and franchises to own its properties
and assets and conduct the business in which it is engaged.
4. The Company has an authorized capital stock consisting of
200 shares of common stock, no par value, of which 175 shares are
presently issued and outstanding. The outstanding shares of
Northeast common stock are validly issued, fully paid and non-
assessable.
5. To the best of our knowledge, the Company does not have
outstanding any subscriptions, options, rights, warrants,
convertible securities or other agreements or commitments to
issue, or contracts or any other agreements obligating Northeast
to issue, or to transfer from treasury, any shares of its capital
stock of any class or kind, or securities convertible into such
stock. No persons who are now holders of Northeast Stock, and no
persons who previously were holders of Northeast Stock, are or
ever were entitled to pre-emptive rights, other than persons who
exercised or waived those rights.
6. The Company and each Subsidiary is duly qualified to conduct
business as a foreign corporation in each state or other
jurisdiction in which it is required to be so qualified.
7. To the best of our knowledge, neither the Company nor any
Subsidiary transacts business under any trade name or fictitious
name.
8. The execution and delivery of this Agreement and the
consummation of the transaction contemplated thereby (the
"Transaction") have been duly authorized by the Board of
Directors and Northeast Stockholders. The Agreement constitutes
the legal, valid and binding obligation of Northeast, enforceable
against it and its shareholders in accordance with its terms,
except insofar as the enforcement thereof may be limited by
bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors' rights generally and subject to equitable
principles limiting the availability of equitable remedies. All
persons who have executed this Agreement on behalf of Northeast
have been duly authorized to do so.
9. Neither the execution of this Agreement, nor
consummation of the Transaction will (a) violate any order, writ,
injunction, statute, rule or regulation applicable to Northeast
or any of its Subsidiaries, or (b) require the consent, approval,
authorization or permission of, or the filing with or the
notification of any Chinese or U.S. federal, state or local
government agency. Neither the execution nor the performance of
this Agreement by Northeast will conflict with, violate or result
in a breach or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default), or
result in the termination of, or accelerate the performance
required by, or result in the creation of any lien or encumbrance
upon any of the assets of Northeast or any of its Subsidiaries
under any provision of the certificate of incorporation or by-
laws of Northeast or its Subsidiaries, or any indenture,
mortgage, lien, material lease, agreement, or other material
contract or instrument known to us, or any order, judgment or
decree of which we are aware, or any statute, ordinance or
regulation to which Northeast or its Subsidiaries are subject or
by which they are bound.
10. To the best of our knowledge (i) there are no infringement
or other claims or demands against Northeast or its Subsidiaries
with respect to any items of intangible personal property; and
(ii) no proceedings have been instituted, are pending, or have
been threatened to terminate or cancel any agreement affording to
Northeast the right to use any intangible asset, or which
challenge the rights of Northeast or its Subsidiaries with
respect to any of its intangible assets.
11. To the best of our knowledge, Northeast is not in default of
any of its obligations under the Joint Venture Agreement and
related regulations with China Northeast Pharmaceutical Factory
pursuant to which Shenyang United Vitatech Pharmaceutical Factory
was established and such agreement is in full force and effect.
12. To the best of our knowledge, (i) the Company and its
Subsidiaries and their respective employees or agents have all
material licenses, permits, orders, approvals and authorizations
required by Northeast or any such Subsidiary for the conduct of
business as presently and anticipated to be conducted (including
both U.S. and Chinese licenses, permits, authorizations or
approvals); (ii) Northeast and its Subsidiaries are acting within
the terms of such licenses, permits, orders, and approvals; (iii)
neither Northeast nor any of its Subsidiaries has received any
notice of investigation, evaluation or suspension of any such
licenses, permits, orders, approvals or authorizations; and (iv)
no suspension or cancellation of any such licenses, permits,
orders, approvals and authorizations has been threatened or is
contemplated.
13. To the best of our knowledge, the Company and its
Subsidiaries are in compliance with all Chinese and U.S. laws,
ordinances, regulations, judgments, orders or decrees applicable
to the conduct of the business of each, or to the assets owned,
used, or occupied by each, and neither Northeast nor any of its
Subsidiaries has received notice or advices to the contrary.
14. To our best knowledge (i) there are no legal,
administrative, arbitration or other proceedings or claims
pending or threatened, against Northeast; (ii) Northeast is not
subject to any existing judgment which might affect the financial
condition, business, property or prospects of Northeast; (iii)
Northeast has not received any inquiry from an agency of the
federal or of any state or local government about the
Transaction, or about any violation or possible violation of any
law, regulation or ordinance affecting its business or assets;
and (iv) Northeast has not been subject to any products liability
claims during the three years ended on the date of this
Agreement.
15. Upon the filing of the Certificate of Merger with the
Secretary of State of New York, the merger will have become
effective in accordance with the provisions of the Business
Corporation Law of the State of New York.
This opinion is rendered to you solely for your benefit in
connection with the Agreement. This opinion may not be relied
upon by you for any other purpose, nor may it be disclosed to or
relied upon by any other person, firm or corporation for any
purpose without our prior written consent.
Very truly yours,
CHA & PAN
By: ________________________
___________________, Esq.
APPENDIX C
[Letterhead of Lowenstein, Sandler, Kohl, Fisher & Boylan]
_____________, 1995
Northeast (USA) Corp.
129-09 26th Ave.
Flushing, N.Y. 11355
Dear Ladies and Gentlemen:
We have acted as counsel to Celcor, Inc., a Delaware corporation
(the "Company"), in connection with its merger with Northeast
(USA) Corp. ("Northeast"), pursuant to an Agreement and Plan of
Merger among the Company, Northeast and the stockholders of
Northeast (USA) Corp. (the "Northeast Stockholders"), dated as of
__________, 1995 (the "Agreement"). This opinion is delivered
pursuant to Section 8.05 of the Agreement. Capitalized terms not
otherwise defined herein shall have the meanings provided in the
Agreement.
As counsel to the Company, we have reviewed the Agreement and
have examined such corporate records, certificates and other
documents, and have considered such questions of law as we
considered appropriate for purposes of rendering this opinion.
In our examination of such records and documents, we have assumed
the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to
authentic documents of all documents submitted to us as
certified, conformed or photostatic copies.
As to certain factual matters material to the opinions expressed
herein, we have relied on the representations of Celcor in the
Agreement and on certificates of public officials and officers of
Celcor, all without independent investigation.
In this opinion, we express no opinion as to the laws of any
jurisdiction other than the federal laws of the United States of
America, the laws of the State of New Jersey and to the extent
relevant, the laws of the State of Delaware.
Based upon the foregoing and subject to the qualifications,
exceptions and limitations set forth herein, we are of the
opinion that:
1. The Company is validly existing and in good standing under
the laws of Delaware.
2. The Company has the corporate power and authority to enter
into and perform the Agreement.
3. The Company has an authorized capital stock consisting of
20,000,000 shares of common stock, par value $0.001 per share,
and 2,000,000 shares of preferred stock, par value $0.001 per
share. The shares of Celcor common stock being issued to the
Northeast Stockholders upon consummation of the merger will be
validly issued, fully paid and non-assessable.
4. The execution and delivery of this Agreement and the
consummation of the Transaction have been duly authorized by the
Board of Directors of Celcor. This Agreement constitutes the
legal, valid and binding obligation of Celcor, enforceable
against it in accordance with its terms, except insofar as the
enforcement thereof may be limited by bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights
generally and subject to equitable principles limiting the
availability of equitable remedies. All persons who have
executed this Agreement on behalf of Celcor have been duly
authorized to do so.
5. Except for the need to obtain the consent of its
stockholders, which consent has been obtained, neither the
execution nor the performance of this Agreement by Celcor
requires the consent of any third party, nor will it violate or
result in a breach or constitute a default under any provision of
the certificate of incorporation or by-laws of Celcor, or any
indenture, mortgage, lien, material lease, agreement, or other
material contract or instrument known to us, or any order,
judgment or decree of which we are aware, or any statute,
ordinance or regulation to which Celcor is subject or by which it
is bound.
6. To our best knowledge (i) there are no legal,
administrative, arbitration or other proceedings or claims
pending or threatened, against Celcor; (ii) Celcor is not subject
to any existing judgment which might affect the financial
condition, business, property or prospects of Celcor; (iii)
Celcor has not received any inquiry from an agency of the federal
or of any state or local government about the Transaction, or
about any violation or possible violation of any law, regulation
or ordinance affecting its business or assets; and (iv) Celcor
has not been subject to any products liability claims during the
three years ended on the date of this Agreement.
7. Upon the filing of the Certificate of Merger with the
Secretary of State of Delaware, the merger will have become
effective in accordance with the provisions of the Delaware
General Corporation Law.
This opinion is rendered to you solely for your benefit in
connection with the Agreement. This opinion may not be relied
upon by you for any other purpose, nor may it be disclosed to or
relied upon by any other person, firm or corporation for any
purpose without our prior written consent, except that copies of
this opinion may be furnished to and relied upon by the Northeast
Stockholders.
Very truly yours,
LOWENSTEIN, SANDLER, KOHL,
FISHER & BOYLAN
A Professional Corporation
By: ________________________
George J, Mazin, Esq.
A Member of the Firm
EXHIBIT C
August 9, 1995
Board of Directors
Celcor, Inc.
Post Office Box 2184
Ocean, New Jersey 07712
Dear Members of the Board of Directors:
We understand that Celcor, Inc. ("Celcor") and
Northeast (USA) Corp. ("Northeast") have entered into a
merger agreement (the "Merger") pursuant to which Northeast
will be merged into Celcor. In connection with the Merger,
Celcor will issue 1,750,000 shares of its common stock in
exchange for all of the outstanding common stock of
Northeast.
You have requested our opinion of the Merger with
respect to fairness, from a financial point of view, to
Celcor. Chartered Capital Advisers, Inc. is customarily
engaged in the valuation of businesses and their securities
in connection with mergers & acquisitions, private
placements, shareholder transactions, estate and gift taxes,
litigation, and for other purposes.
In connection with rendering our opinion we have, among
other things:
(1) Reviewed the Agreement and Plan of Merger Among
Celcor, Inc., Northeast (USA) Corp. and the Stockholders of
Northeast (USA) Corp.;
(2) Reviewed the Preliminary Proxy Statement
prepared by Celcor;
(3) Analyzed financial information with respect to
Northeast, including but not limited to audited financial
statements as of and for the period from inception (February
24, 1993) through June 30, 1994, unaudited financial
statements as of and for the nine months ended March 31,
1995, and management forecasts of sales and earnings through
1998;
(4) Reviewed various documents with respect to
Northeast, including but not limited to, a business plan and
agreements pertaining to: (a) the manufacture and sale of
products in China; (b) the distribution outside of China of
products manufactured by the Chinese joint venture partner
of Northeast; (c) the rights to the technology to produce
certain products to be sold by Northeast; and (d) the
development of vacant land owned by Northeast;
(5) Analyzed financial information with respect to
Celcor, including but not limited to, the Form 10Q as of and
for the nine months ended March 31, 1995, the Form 10K as of
and for the year ended June 30, 1994, the 1993 annual
report, and a private placement memorandum prepared in
connection with the issuance of Series C 8% Convertible
Preferred Stock;
(6) Engaged an experienced real estate appraiser
who has visited the undeveloped property located in
Flushing, New York that is owned by Northeast, and confirmed
to us that its fair market value, exclusive of soft costs,
was not materially different from the amount disclosed in
the balance sheet of Northeast as of June 30, 1994;
(7) Held discussions with certain members of both
Northeast and Celcor senior management and with the
independent accountant of Northeast concerning the past,
current, and planned operations, financial condition, and
business prospects of each company;
(8) Discussed with the legal advisors of Celcor the
results of their due diligence of Northeast;
(9) Reviewed the historical market prices of Celcor
common stock;
(10) Reviewed the composition of ownership of
Northeast and Celcor common stock;
(11) Reviewed the financial terms of the Merger; and
(12) Considered such other information, financial
studies, and analyses as we deemed relevant, and performed
such analyses, studies, and investigations as we deemed
appropriate.
Chartered Capital Advisers, Inc. has assumed and relied
upon, without independent verification, the accuracy and
completeness of the information reviewed by us. With
respect to any projections, we assumed that they have been
reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial
performance of Northeast. We have also assumed without
independent verification that Northeast owns and has
adequate legal protection for all material tangible assets
and intellectual property that it purports to own, and that
key agreements to which Northeast purports to be a party are
valid and enforceable. We have also assumed that the Merger
will be a nontaxable transaction that will be accounted for
as a purchase. Accordingly, we do not make any warranties,
nor do we make any representations with respect to the
aforementioned items.
We have not performed an appraisal of the assets,
liabilities, or intellectual property of Northeast, nor have
we been furnished with any such valuations or appraisals.
We have assumed that the assessments of management have been
made in good faith and reflect the best currently available
management judgments as to the matters covered. Our opinion
is necessarily based upon economic, market, and other
conditions as in effect on, and the information made
available to us as of, the date of this letter. Our opinion
is limited to the fairness of the Merger as of the date
hereof, from a financial point of view. We make no
representations with respect to the business decision to
effect the Merger or any other terms of the Merger. This
opinion does not represent our opinion as to what the value
of Celcor or Northeast may be as of the date of this letter.
We understand that in considering the Merger, the Board
of Directors of Celcor has considered a wide range of
financial and nonfinancial factors, many of which are beyond
the scope of this letter. This letter is not intended to
substitute for the Board's exercise of its own business
judgment in reviewing the Merger.
Based upon and subject to the foregoing considerations,
it is our opinion as financial advisors that the Merger is
fair from a financial point of view to Celcor.
The foregoing opinion is to be used solely for the
information and assistance of Celcor. Accordingly, it is
understood and agreed that no person other than Celcor and
its officers and directors shall be allowed to use or rely
upon this opinion.
Very truly yours,
CHARTERED CAPITAL ADVISERS, INC.
Ronald G. Quintero, CPA, CFA
Managing Director
EXHIBIT D
CELCOR, INC.
This Proxy is Solicited from all holders of Common Stock by the
Board of Directors for a Special Meeting of Stockholders, December 7. 1995
The undersigned hereby appoints Stephen E. Roman,Jr. and Michael Hsu, and
each of them, attorneys and proxies, with power of substitution in each
of them, to vote for and on behalf of the undersigned at the Special
Meeting of Stockholders of Celcor, Inc. ("Celcor") to be held on
December 7, 1995, and at any adjournment or adjourments thereof, upon
matter properly comming before the Special Meeting as set forth in the
related Notice of Meeting and Proxy Statement (the "Proxy Statement"),
both of which have been received by the undersigned, and upon all such
other matters that may properly be brought before the meeting and/or
any adjournment or adjourments thereof, as to which the undersigned
hereby confers discretionary authority upon said proxies. Without otherwise
limiting the general authorization given herebym said attorneys and
proxies are instructed to vote as follows:
1. Approval of an Agreement and Plan of Merger (the "Merger Agreement"),
among Celcor, Northeast (USA) Corp. ("Northeast"), and the shareholders
of Northeast, providing among other things, for the merger of Northeast
with and into Celcor, and the issuance of shares of Celcor Common Stock
to the holders of Northeast Common Stock, as more fully described in the
Proxy Statement. (The Board of Directors recommends a vote "FOR".)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Election of the Board's nominees for Directors. (The Board of
Directors recommends a vote "FOR".)
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all
contrary below). nominees listed below
Nominees: Stephen E. Roman, Jr., Eugene Cha, Frank Nelson,
Jennifer Lo Wu, Chin-Sung (Joe) Chen, David Chow and Michael
Hsu
Instruction: To withhold authority to vote for any one or more nominees, write
the name(s) of such nominee(s) in the space provided: ___________
____________________________________________________
3. Ratification and confirmation of the authorization and issuance of 275,000
shares of Series C 8% Convertible Preferred Stock, par value one mil
($0.001) per share, as more fully described in the Proxy Statement. (The
Board of Directors recommends a vote "FOR".)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of a proposed amendment to the Company's Certificate of
Incorporation expressly authorizing the Board of Directors to establish
the rights, preferences and limitations of any class or series of preferred
stock which may be issued in the future. (The Board of Directors
recommends a vote "FOR".)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, said proxies are authorized to vote upon such
other business as may properly come before the Special Meeting.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED IN THIS PROXY, THIS
PROXY WILL BE VOTED (i) FOR THE RATIFICATION AND APPROVAL OF THE MERGER
AGREEMENT, (ii) FOR THE ELECTION OF ALL OF THE BOARD'S NOMINEES FOR DIRECTOR,
(iii) FOR THE RATIFICATION AND CONFIRMATION OF THE AUTHORIZATION AND
ISSUANCE OF THE SERIES C 8% CONVERTIBLE PREFERRED STOCK AND (iv) FOR THE
ADOPTION OF THE PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION.
Please sign this proxy and return it promptly whether or not you expect
to attend the Special Meeting. You may nevertheless vote in person if
you attend.
Please sign exactly as your name appears hereon. Give full title if
any Attorney, Trustee, Guardian, etc. For an account in the name
of two or more person, each should sign, or if one signs, he should
attach evidence of his authority.
This proxy is to be used only be holders of Celcor, Inc. Common Stock.
Dated: ___________________, 1995
Signed:_________________________
________________________________
EXHIBIT E
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CELCOR, INC.
Celcor, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State
of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of
Celcor, Inc. resolutions were duly adopted setting forth a
proposed amendment of the Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and calling
a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed
amendment is attached hereto as Exhibit A.
SECOND: That thereafter, pursuant to resolution of its
Board of Directors, a special meeting of the stockholders of said
corporation was duly called and held, upon notice in accordance
with Section 222 of the General Corporation Law of the State of
Delaware, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in
accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Celcor, Inc. has caused this
Certificate to be signed by Stephen E. Roman, Jr., its President,
and Michael W. Hsu, its Secretary, this ___ day of _______, 1995.
By: _______________________________
Stephen E. Roman, Jr., President
ATTEST: __________________________
Michael W. Hsu, Secretary
EXHIBIT A
RESOLVED, that it is advisable that Article FIRST of the
Certificate of Incorporation of the Corporation be deleted in its
entirety and replaced with the following:
FIRST: The name of the corporation
(hereinafter called the "corporation") is
Northeast (USA) Corp.
RESOLVED, that it is advisable that Article FOURTH of the
Certificate of Incorporation of the Corporation be deleted and
replaced with the following:
FOURTH: The total number of shares of
all classes of stock which the corporation
shall have authority to issue is twenty two
million (22,000,000), of which two million
(2,000,000) shares are to be Preferred Stock,
par value one mil ($.001) per share
("Preferred Stock"), and twenty million
(20,000,000) shares are to be Common Stock,
par value one mil ($.001) per share ("Common
Stock"). The Board of Directors shall have
the right to divide the preferred stock into
one or more series, each containing the
number of shares and the relative powers,
designations, preferences and relative,
participating, optional or other rights, and
qualifications, limitations or restrictions
as may be determined by the board from time
to time, each such series to be distinctly
designated.
For purposes of illustration only, the
foregoing power of the board includes, but is
not limited to, the determination of: (i)
the number of shares constituting each
series; (ii) the rate and times at which,
and the terms and conditions on which,
dividends on shares of a series will be paid,
and whether the dividends are cumulative or
non-cumulative or are participating or non-
participating; (iii) the voting rights of
the holders of shares of the series,
including whether the shares shall have no
voting rights, or multiple, full, limited, or
special voting rights; (iv) the right, if
any, of the holders of shares of a series to
convert their shares into, or exchange them
for, shares of other classes or series of
stock of the corporation, and the terms and
conditions of the conversion or exchange,
including provisions for adjustment of the
conversion price or rate in such events as
the board shall determine; (v) the right, if
any, of the corporation or the holders of the
shares to cause the shares of the series to
be redeemed, and the redemption price or
prices and the time or times at which, and
the terms and conditions on which, shares of
the series may be redeemed; (vi) the rights
of the holders of shares of the series upon
the voluntary or involuntary dissolution,
liquidation or winding-up of the corporation
and whether those rights are limited or
participating; and (vii) the obligation, if
any, of the corporation to establish a
sinking fund for the purchase of redemption
of the shares of the series, the amounts and
time of payments to that fund, and the other
terms and conditions of that fund.
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