SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
May 29, 1997
Rainbow Medical, Inc. (formerly Andover Equities Corp.)
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(Exact name of registrant as specified in its Charter
Florida 33-25646 59-2720407
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(State of other jurisdiction Commission (I.R.S. Employer
of incorporation) File Number Identification No.)
631 N.W. 183rd Street, Miami, Florida 33169
(Address of principal executive offices)
Registration's telephone number, including area code: (305) 651-2335
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT:
(a) On May 29, 1997, the registrant took the final steps
necessary to effectuate the Board's resolution, dated April
30, 1997, providing for a 91.25 to 1 reverse stock split with
respect to its then outstanding shares. Immediately subsequent
thereto, the registrant's issuance of an aggregate of
3,018,571 post-split shares was deemed effective, thereby
resulting in a change of control of the registrant. Of such
3,018,571 shares, 1,135,312 were issued directly to Dr. Hugo
Goldstraj and Marcela Goldstraj, his wife ("Dr. & Mrs.
Goldstraj") and 1,135,312 of such shares were issued directly
to Dr. Roberto Novo ("Dr. Novo"). By virtue of the issuance of
the foregoing shares, the relationship of Dr. Goldstraj and
Dr. Novo as well as a consequence of the granting to Dr. Novo
and Dr. Goldstraj of voting power with respect to 436,075
shares of the registrant's common stock, Dr. Goldstraj and Dr.
Novo obtained control of the registrant.
The reverse stock split and issuance of 3,018,571
post-split shares were effectuated pursuant to the terms of an
Agreement of Merger by and among the registrant, a
newly-formed Florida subsidiary, Merger Subsidiary, Inc.
("Merger Subsidiary"), and Rainbow Pediatrics, Inc. ("Rainbow
Pediatrics"). Pursuant to the terms of the Agreement of
Merger, Merger Subsidiary merged with and into Rainbow
Pediatrics, with Rainbow Pediatrics surviving the merger, and
the shares of common stock of Merger Subsidiary became shares
of common stock of Rainbow Pediatrics, and the Rainbow
Pediatrics common shares outstanding prior to the merger
became shares of the registrant's common stock. As a result
thereof, Rainbow Pediatrics became a wholly-owned subsidiary
of the registrant.
The shares of common stock owned of record directly by
Dr. & Mrs. Goldstraj (1,135,312 shares) and Dr. Novo
(1,135,312 shares), when aggregated with the 436,875 shares
over which Dr. Goldstraj and Dr. Novo have voting power, may
be deemed to be beneficially owned by each of such
individuals. After giving effect to the issuance of 1,300,000
shares of the registrant's common stock to certain investors
in a private placement, Dr. & Mrs. Goldstraj and Dr. Novo may
each be deemed to beneficially own an aggregate of 2,707,499
shares of the registrant's common stock, constituting 62.69%
of the 4,318,572 outstanding shares of common stock of the
registrant.
Pursuant to the terms of the Agreement of Merger, the
former and new control groups agreed that the former directors
would, in a stepped transaction, resign and elect Dr. Hugo
Goldstraj, Marcela Goldstraj, Dr. Roberto Novo and Sandra
Giblin to serve as the new directors of the registrant, until
such time as their successors are elected by the registrant's
shareholders.
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS:
Reference is made to the acquisition of Rainbow Pediatrics,
Inc., described in Item 1, above.
ITEM 3: BANKRUPTCY OR RECEIVERSHIP:
Not Applicable.
ITEM 4: CHANGES IN REGISTRANT'S CERTIFYING ACCOUNT:
Not Applicable.
ITEM 5: OTHER EVENTS:
Not Applicable.
ITEM 6: RESIGNATION OF REGISTRANT'S DIRECTORS:
Not Applicable.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Rainbow Pediatrics, Inc. And pro forma
financial information are not included in this report. Such
financial statements and pro forma financial information will
be filed by amendment not later than 60 days afer the date
that this Form 8-K is required to be filed.
(b) Exhibits: Attached hereto as an exhibit to this Form 8-K is an
Agreement of Merger by and among Andover Equities Corp.,
Merger Subsidiary, Inc. and Rainbow Pediatrics, Inc.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Rainbow Medical, Inc.
(Registrant)
By: /sgd/ Roberto Novo
Date: June 4, 1997. -----------------------------------
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AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (the "Agreement") is entered into as of this 30th
day of April, 1997, by and among ANDOVER EQUITIES CORP. ("Andover"), a
corporation organized under the laws of the State of Florida ("Andover"), MERGER
SUBSIDIARY, INC., a corporation organized under the laws of the State of Florida
and a wholly-owned subsidiary of Andover ("Merger Subsidiary") and RAINBOW
PEDIATRICS, INC., a corporation organized under the laws of the State of Florida
("Rainbow").
W I T N E S S E T H:
WHEREAS, the parties have agreed that Andover shall acquire all of the
issued and outstanding shares of capital stock of Rainbow (the "Rainbow Shares")
and, in exchange, the holders of the outstanding shares of capital stock of
Rainbow shall receive shares of common stock of Andover (the "Andover Shares")
through a merger of Merger Subsidiary with and into Rainbow.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. SCOPE. On and subject to the terms and conditions hereof, Merger
Subsidiary shall merge with and into Rainbow (the "Merger"). Rainbow shall
survive the Merger. The shares of common stock of Merger Subsidiary shall become
shares of common stock of Rainbow and the Rainbow Shares outstanding prior to
the merger shall become Andover Shares. Rainbow shall, as a result thereof,
become a wholly-owned subsidiary of Andover.
2. CLOSING DATE. The closing of the transaction contemplated herein
("the Closing") shall take place at the offices of Bryn & Associates on May 2,
1997, following the satisfaction or waiver of all conditions to the obligations
of the parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective parties will take at the
Closing itself) or such other date as the parties may mutually determine in
writing (the "Closing Date"). At the Closing, (i) Rainbow and Merger Subsidiary
will file with the Secretary of State of the State of Florida the Articles of
Merger in the form of the exhibits attached hereto (the "Articles of Merger");
(ii) the officers of Andover shall resign and the directors of Andover shall
resign, in accordance with Paragraph 8, below; (iii) Andover and Merger
Subsidiary will deliver to Rainbow the various certificates, instruments, and
documents referred to in Paragraph 6, below, and (iv) Rainbow will deliver to
Andover and Merger Subsidiary the various certificates, instruments, and
documents referred to in Paragraph 7, below.
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3. EFFECT OF MERGER.
(a) GENERAL. The Merger shall become effective at the time (the
"Effective Time") Rainbow and Merger Subsidiary file the Articles of Merger with
the Secretary of State for the State of Florida. The Merger shall have the
effect set forth in the Florida Business Corporation Act (the "Florida Act").
Rainbow, the surviving corporation, may, at any time after the Effective Time,
take any action (including executing and delivering any document) in the name
and on behalf of either Merger Subsidiary or Rainbow in order to carry out and
effectuate the transactions contemplated by this Agreement.
(b) ARTICLES OF INCORPORATION. The Articles of Incorporation of
Rainbow shall remain the same.
(c) BYLAWS. The Bylaws of Rainbow shall remain the same.
(d) DIRECTORS AND OFFICERS. The directors and officers of Rainbow
shall remain the directors and officers of Rainbow at and as of the Effective
Time (retaining their respective positions and terms of office).
(e) CONVERSION OF RAINBOW SHARES. At and as of the Effective Time,
each Rainbow Share (other than any "Dissenting Share", as hereinafter defined)
shall be converted into one $.00001 par value share(s) of common stock of
Andover.
(f) CONVERSION OF CAPITAL STOCK OF MERGER SUBSIDIARY. At and as of
the Effective Time, each share of common stock, $.00l par value per share, of
Merger Subsidiary shall be converted into one share of common stock, $ .001 par
value per share, of Rainbow.
(g) CLOSING OF TRANSFER RECORDS. After the close of business on
the Closing Date, transfers of Rainbow Shares outstanding prior to the Effective
Time shall not be made on the stock transfer books of Rainbow.
(h) LEGEND ON ANDOVER CERTIFICATES. The following legend shall be
placed on all certificates representing shares of Andover which are delivered to
the shareholders of Rainbow, pursuant to the transactions contemplated hereby:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF A CURRENT AND EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT WITH RESPECT TO SUCH SHARES, OR AN
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OPINION OF THE REGISTERED HOLDER'S COUNSEL
REASONABLY ACCEPTABLE TO ISSUER'S COUNSEL TO THE
EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE
ACT.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ANDOVER AND MERGER
SUBSIDIARY. Andover and Merger Subsidiary hereby represent, warrant and covenant
to Rainbow, except to the extent specifically set forth in the exhibits attached
hereto and made a part hereof, as follows:
a) Andover and Merger Subsidiary have full authority and legal
capacity to execute and deliver this Agreement and, in addition, on the Closing
Date, each will have full authority and legal capacity to perform this
Agreement. This Agreement has been duly and validly executed and delivered by
Andover and Merger Subsidiary and constitutes the valid and binding obligation
of Andover and Merger Subsidiary, enforceable against Andover and Merger
Subsidiary in accordance with its respective terms, except to the extent that:
(1) enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights; and
(2) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
such proceeding may be brought.
(b) The Andover Shares to be issued to the Rainbow Shareholders
pursuant hereto will, when issued, be legally issued, fully paid and
non-assessable with no personal liability attaching hereto.
(c) The execution and delivery of this Agreement does not and will
not violate any provision of any agreement or conflict with any restriction of
any kind or nature to which Andover or Merger Subsidiary is a party or by which
any of them is bound, nor will such execution and delivery allow any party to
any such agreement to terminate such agreement or alter the terms or conditions
thereof. On the Closing Date, the consummation of the transactions contemplated
hereby will not violate any provision of any agreement or conflict with any
restriction of any kind or nature to which Andover or Merger Subsidiary is a
party or by which any of them is bound, and Andover will have the unqualified
right to issue, assign and deliver the Andover Shares to the Rainbow
Shareholders and to pass to the Rainbow Shareholders good and valid title
thereto, free and clear of any and all liens, claims, charges or encumbrances
whatsoever.
(d) Merger Subsidiary is the only "subsidiary" of Andover, as the
term "subsidiary" is defined in Rule 405 under the Securities Act of 1933 (the
"Act").
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(e) Andover and Merger Subsidiary have been duly organized under
respective jurisdictions of organization, are validly existing and in good
standing therein, and have the requisite corporate power and authority to carry
on their businesses to the extent presently conducted. Andover and Merger
Subsidiary are duly licensed and/or qualified to do business in each
jurisdiction wherein the respective character of the properties owned or the
nature of the businesses transacted by them requires such licensing and/or
qualification.
(f) The authorized capital stock of Andover consists of
900,000,000, $0.00001 par value, common shares, of which 18,250,000 of such
shares are issued and outstanding. Immediately prior to the Closing, the
authorized capital stock of Andover will consist of 900,000,000, $0.00001 par
value common shares, of which 200,000 of such shares will be issued and
outstanding. The authorized capital stock of Merger Subsidiary consists of 1,000
common shares, of which 100 shares are issued and outstanding and are owned
exclusively by Andover. There is not and there will not be as of the Closing
Date any outstanding options, warrants or other rights to subscribe for or
purchase any shares of capital stock of Andover or Merger Subsidiary; nor is
there or will there be outstanding any security or other instrument convertible
into or exchangeable for shares of capital stock of Andover or Merger
Subsidiary; nor has Andover or Merger Subsidiary entered into any agreement,
arrangement or understanding to issue any of the foregoing. All of the
outstanding equity securities of Andover and Merger Subsidiary have been duly
authorized, validly issued and are fully paid and non-assessable with no
personal liability attaching thereto.
(g) Andover has delivered to Rainbow copies of the following
documents, which have been filed with the United States Securities and Exchange
Commission (the "SEC"), all of which are hereinafter collectively referred to as
the "Andover Disclosure Documents":
(1) Andover's Annual Report on Form 10-KSB for its fiscal year
ended May 31, 1995;
(2) Andover's Annual Report on Form l0-QSB for its fiscal year
ended May 31, 1996; and
(3) Andover's Quarterly Report on Form 10-QSB for the
quarterly period ended August 31, 1996 (the "August 31, 1996
l0-QSB").
(h) Neither the execution nor delivery hereof nor the consummation
of the transactions contemplated hereby constitutes a violation by Andover or
Merger Subsidiary of any law, rule, regulation, order, judgment or decree of any
court or of any local governmental authority or of their organizational
documents or bylaws.
(i) The unaudited balance sheet of Andover as of August 31, 1996,
together with the unaudited statement of operations and statement of cash flows
for the period then ended, and the unaudited notes to the financial statements
(collectively the "Andover Financial Statements") contained in the August 31,
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1996 10-QSB accurately reflect in all material respects Andover's financial
condition as of such date and the results of its operations and cash flows for
such period. The Andover Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied.
(j) Other than that which pertains to this Agreement and the
transactions contemplated hereunder, Merger Subsidiary does not have any
material liabilities or obligations of any nature whatsoever, whether absolute,
accrued, contingent or otherwise due, including, without limitation, liabilities
as a result of taxes with respect to or measured by income or liabilities for
taxes arising from any transaction or state of facts entered into or in
existence prior to such date.
(k) As of the Closing Date, neither Andover nor Merger Subsidiary
will have, other than liabilities which may result from the preparation,
execution and performance of this Agreement, any material liabilities or
obligations of any nature whatsoever, whether absolute, accrued, contingent or
otherwise due, including, without limitation, liabilities as a result of taxes
with respect to or measured by income or liabilities for taxes arising from any
transaction or state of facts entered into or in existence prior to such date.
(l) Except to the extent reflected or reserved against in the
Andover Financial Statements or the August 31, 1996 10-QSB, Andover did not
have, as of the date thereof, any material liabilities or obligations of any
nature whatsoever, whether absolute, accrued, contingent or otherwise due,
including, without limitation, liabilities as a result of taxes with respect to
or measured by income or liabilities for taxes arising from any transaction or
state of facts entered into or in existence prior to such date.
(m) Andover and Merger Subsidiary have duly filed all tax reports
and returns required to be filed thereby and have duly paid all taxes and other
charges due or claimed to be owed by all taxing authorities (including, without
limitation, taxes due in connection with property or the use thereof, income,
franchises, licenses, duties, excises, tangible assets, sales and payrolls).
There are no pending administrative, equitable or legal proceedings or notices
thereof, including, but not limited to, tax audits, relating to, or claims
asserted for, taxes or assessments against Andover or Merger Subsidiary.
(n) None of the assets of Andover or Merger Subsidiary is the
subject of any mortgage, pledge, lien, conditional sale agreement, encumbrance
or charge whatsoever.
(o) No petition in bankruptcy has been filed by or against Andover
or Merger Subsidiary, nor has any of them made any assignment for the benefit of
creditors.
(p) other than with respect to the transactions contemplated
hereby, since the respective dates of the Andover Financial Statements and the
organization of Merger Subsidiary, neither Andover nor Merger Subsidiary, as the
case may be, has:
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(1) Suffered a Material Adverse Effect, as that term is hereby
defined, as to the respective financial condition of Andover
and Merger Subsidiary or as to any of their respective assets,
liabilities, prospects, suppliers, customers or respective
results of operations or businesses, including, but not
limited to, any such change resulting from any change in any
Statute, ordinance, rule or regulation. For all purposes under
this Agreement, "Material Adverse Effect" shall be defined as
any occurrence that affects the assets, liabilities, financial
condition or business of a person, the consequence of which
would impair or alter the ability of such person to continue
to own, use or operate any of its assets and/or conduct or
operate the business of such person in the same manner as is
owned, used, operated and conducted as of the date immediately
prior to the date of any such occurrence;
(2) Incurred any obligation or liability, whether absolute,
accrued or contingent, other than in the ordinary course of
business or in connection with this Agreement.
(3) Made any capital expenditure or commitment or otherwise;
(4) Declared, paid or set aside for payment to stockholders
any dividend or other distribution, or redeemed, purchased or
otherwise acquired any of their respective capital stock or
any option relating thereto, or agreed to take any such
action;
(5) Made any material change in any method of accounting or
accounting practice;
(6) Failed to keep the business records of Andover and Merger
Subsidiary in good order.
(q) Neither Andover nor any subsidiary is in violation of any
applicable law, ordinance, rule or regulation, the result of which would have a
Material Adverse Effect. All permits, grants, franchises and licenses required
to be obtained by Andover, Merger Subsidiary or any of their respective
employees in connection with their businesses have been obtained. Neither
Andover nor Merger Subsidiary has any reason to believe, nor do any of them
believe, that any such permit, grant, franchise or license will not be renewed
upon the expiration thereof.
(r) There are no actions, proceedings or investigations pending or
threatened against Andover or Merger Subsidiary, nor against any property owned
or utilized by any of them. Andover and Merger Subsidiary are not aware of any
basis for any such action, proceeding or investigation. Andover and Merger
Subsidiary are not the subject of an order, writ, injunction, decree or judgment
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of any arbitrator, arbitration panel or any court or other federal, state or
other governmental agency, department, commission, board or instrumentality,
either domestic or foreign, the result of which would have a Material Adverse
Effect.
(s) There is no outstanding contract or commitment that, upon the
completion or the performance thereof, after allowance for expenses, is likely
to result in a Material Adverse Effect to Andover or Merger Subsidiary, or that,
in the aggregate, is not likely to result in normal profits to Andover or Merger
Subsidiary consistent with past practice.
(t) There are no claims for brokerage commissions or finder's fees
in connection with the transactions contemplated hereby that have arisen or may
arise from any act or failure to act of Andover or Merger Subsidiary, or any
person or entity authorized to act on their behalf.
(u) None of the representations or warranties by Andover or Merger
Subsidiary contained in this Agreement, in any schedule referred to herein, or
in any certificate or document furnished by Andover or Merger Subsidiary
pursuant hereto, including, but not limited to, the Andover Financial
Statements, contains or will contain any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements or
information contained herein or therein, in light of the circumstances under
which they were made, not misleading.
(v) Andover and Merger Subsidiary have not, in connection with the
transactions contemplated hereby:
(1) employed any device, scheme or artifice to defraud; or
(2) engaged in any act, practice, or course of conduct that
operates or would operate as a fraud or deceit upon any
person.
(aa) Andover will acquire the Rainbow Shares from Merger Subsidiary
solely for investment purposes for Andover's own account, and not with a view to
the distribution, fractionalization or other disposition thereof or any interest
therein.
(ab) Andover is able to bear the economic risk of the investment in
the Rainbow Shares, and Andover is aware of the limited ability to sell,
transfer or otherwise dispose of the Rainbow Shares.
(ac) Andover has knowledge and experience in financial and business
matters and can evaluate the merits and risks of the investment in the Rainbow
Shares as contemplated hereby.
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(ad) Andover understands that:
(1) The Rainbow Shares are not being sold pursuant to a
registration statement under the Act. Accordingly, Andover
must bear the economic risk of an investment in the Rainbow
Shares for an indefinite period of time since the Rainbow
Shares have not been registered under the Act or any other
applicable federal or state statute and they cannot be
transferred, sold or otherwise disposed of, unless registered
under the Act or pursuant to an exemption therefrom;
(2) The following legend will be placed on the certificate
evidencing the Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT 0F
1933 (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED
F0R INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF A CURRENT AND EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT WITH RESPECT TO SUCH SHARES, OR AN
OPINION OF THE REGISTERED HOLDER'S COUNSEL
REASONABLY ACCEPTABLE TO ISSUER'S COUNSEL TO THE
EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE
ACT.
and
(3) Until such time as the Rainbow Shares are registered under
the Act, Rainbow will issue "stop-transfer" instructions to
its transfer agent with respect to the Rainbow Shares.
(ae) Andover is aware that Rule 144 under the Act, as herein
relevant, permits public sales of restricted securities such as the Rainbow
Shares; only if a minimum of two years, as calculated in accordance with the
provisions of such Rule, has elapsed between the later of the date of the
acquisition of such securities from Rainbow or an affiliate of Rainbow, and with
respect to any resale of such securities in reliance on Rule 144 for the account
of either Andover or any subsequent holder of such securities, such two-year
period to begin at the time that such securities are fully paid, as contemplated
in such Rule, and only upon satisfaction of the other conditions to the
availability of such Rule. If such Rule is available to Andover, Andover may
make only routine sales of such securities in limited amounts in accordance with
the terms and conditions of such Rule.
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(af) Andover understands that Rainbow is the only person which may
register the Rainbow Shares under the Act and that Rainbow has no intention or
obligation to do so.
(ag) Andover and Merger Subsidiary have received all requested
documents from Rainbow, and has had an opportunity to ask questions of and
receive answers from the officers of Rainbow.
(ah) Andover has made all filings with the SEC that it has been
required to make under the Act and the Securities Exchange Act of 1934 (the
"Exchange Act") (such filings are collectively referred to as the "Public
Reports"). Each of the Public Reports has complied with the Act and the Exchange
Act in all material respects. None of the Public Reports, as of their respective
dates, contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(ai) On and prior to the Closing Date, Andover shall timely file
with the SEC all reports and documents required to be filed by it pursuant to
the Exchange Act.
(aj) From the date hereof to and including the Closing Date, upon
reasonable notice, Andover and Merger Subsidiary shall afford the officers,
employees and authorized agents and representatives of Rainbow reasonable
access, during normal business hours, to the offices, properties, books and
records of Andover.
No investigation by Rainbow shall diminish or obviate any of the
representations, warranties, covenants or agreements of Andover or Merger
Subsidiary under this Agreement. Andover and Merger Subsidiary shall provide
Rainbow with the opportunity to make such business, accounting and legal review,
examination or investigation as Rainbow may wish as to the business affairs of
Andover and Merger Subsidiary. Andover and Merger Subsidiary shall furnish the
representatives of Rainbow during such period with all such information and
copies of such documents concerning the affairs of Andover and Merger Subsidiary
as such representatives may reasonably request, and Andover and Merger
Subsidiary shall cause their officers, employees, consultants, agents,
accountants and attorneys to cooperate fully with such representatives in
connection with such review and examination and to make full disclosure to
Rainbow of all material facts affecting the financial condition and business
operations of Andover and Merger Subsidiary.
(ak) The management of Andover and Merger Subsidiary have had the
opportunity to discuss the business, management and financial condition of
Rainbow with the management of Rainbow. Rainbow has made available to Andover
and Merger Subsidiary all documents and information Andover and Merger
Subsidiary have requested in order for Andover to evaluate the merits and risks
of an investment in Rainbow.
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5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF RAINBOW. Rainbow hereby
represents, warrants and covenants to Andover and Merger Subsidiary, except to
the extent specifically set forth in the exhibits attached hereto and made a
part hereof, as follows:
(a) Rainbow has full authority and legal capacity to execute and
deliver this Agreement and, in addition, on the Closing Date, will have, subject
to obtaining requisite shareholder approval, full authority and legal capacity
to perform this Agreement. This Agreement has been duly and validly executed and
delivered by Rainbow and constitutes the valid and binding obligation of
Rainbow, enforceable against Rainbow in accordance with its respective terms,
except to the extent that:
(1) enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights; and
(2) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
such proceeding may be brought.
(b) The Rainbow Shares to be transferred pursuant hereto will be
legally issued, fully paid and non-assessable with no personal liability
attaching thereto.
(c) The execution and delivery of this Agreement does not and will
not violate any provision of any agreement or conflict with any restriction of
any kind or nature to which Rainbow is a party or by which it is bound, nor will
such execution and delivery allow any party to any such agreement to terminate
such agreement or alter the terms or conditions thereof. On the Closing Date,
subject to this Agreement and the transactions contemplated hereby, including,
but not limited to the Merger, having received the requisite approval of the
shareholders of Rainbow, the consummation of the transactions contemplated
hereby will not violate any provision of any agreement or conflict with any
restriction of any kind or nature to which Rainbow is a party or by which it is
bound and Rainbow will have the unqualified right to issue, assign and deliver
the Rainbow Shares to Merger Subsidiary and to pass thereto good and valid title
thereto, free and clear of any and all liens, claims, charges or encumbrances
whatsoever.
(d) Rainbow has been duly organized under its jurisdiction of
organization, is validly existing and in good standing therein, and has the
requisite corporate power and authority to carry on its business to the extent
presently conducted. Rainbow is duly licensed and/or qualified to do business in
each jurisdiction where the character of the properties owned or the nature of
the business transacted by it requires such licensing and/or qualification.
(e) The authorized capital stock of Rainbow consists of
25,000,000, $0.001 par value, common shares, of which 3,018,572 common shares
are issued and outstanding. Immediately prior to the Closing, the authorized
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capital stock of Rainbow will consist of 25,000,000, $0.001 par value, common
shares, of which no more than 3,018,752 common shares will be issued and
outstanding. The names of the shareholders of Rainbow, and the number of shares
owned by each and the nature of such ownership, are set forth on Exhibit "A".
Other than as disclosed in a Confidential Investment Summary, dated April 2,
1997, a copy of which is set forth as Exhibit "B", there are not, and there will
not be as of the Closing Date, any outstanding options, warrants or other rights
to subscribe for or purchase any shares of capital stock of Rainbow; nor is
there or will there be outstanding any security or other instrument convertible
into or exchangeable for shares of capital stock of Rainbow; nor has Rainbow
entered into any agreement, arrangement or understanding to issue any of the
foregoing. All of the outstanding equity securities of Rainbow have been duly
authorized, validly issued and are fully paid and non-assessable with no
personal liability attaching thereto.
(f) Rainbow has delivered to Andover and Merger Subsidiary copies
of the documents described in the exhibits attached hereto, including, but not
limited to, a shareholders' list, current as of the Closing Date of Rainbow's
shareholders, all of which are hereinafter collectively referred to as the
"Rainbow Disclosure Documents".
(g) Neither the execution nor delivery hereof nor the consummation
of the transactions contemplated hereby constitutes a violation by Rainbow of
any law, rule, regulation, order, judgment or decree of any court or of any
local governmental authority or of its organizational documents or bylaws.
(h) The unaudited balance sheet of Rainbow as of September 30,
1996, together with the unaudited statement of operations and unaudited
statement of cash flows for the period then ended, and the unaudited notes to
the financial statements, together with the notes thereto (the "Rainbow
Financial Statements"), a copy of which has heretofore been delivered to Andover
by Rainbow, accurately reflect in all material respects Rainbow's financial
condition as of such date and the results of its operations and cash flows for
such period. The Rainbow Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied.
(i) No petition in bankruptcy has been filed by or against
Rainbow, nor has Rainbow made any assignment for the benefit of creditors.
(j) Since the date of the Rainbow Financial Statements, Rainbow
has not:
(1) Suffered any Material Adverse Effect as to its
financial condition or as to its assets, liabilities,
prospects, suppliers, customers or results of
operations, or business, including, but not limited to,
any such change resulting from any change in any
statute, ordinance, rule or regulation;
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(2) Incurred any obligation or liability, whether
absolute, accrued or contingent, other than in the
ordinary course of business or in connection with this
Agreement;
(3) Paid any claim or satisfied any material lien,
encumbrance or liability, whether absolute, accrued or
contingent, other than liabilities reflected in the
Rainbow Financial Statements;
(4) Permitted or allowed any of its assets, whether
tangible or intangible, to be mortgaged, pledged or
otherwise subjected to any liens or encumbrances;
(5) canceled any debtor claims, waived any rights of
substantial value, or sold or transferred any of its
assets, except in the ordinary course of business or as
is consistent with its past practices;
(6) Disposed of or permitted to lapse any patents,
trademarks, service marks or copyrights, or any patent,
trademark, service mark or copyright application, or
disposed of or disclosed to any person any trade secret,
formula, process or know-how;
(7) Made any capital expenditure or commitment in excess
of an aggregate of Five Thousand and No/100 Dollars
($5,000.00) for capital improvements to its property,
equipment or otherwise;
(8) Declared, paid or set aside for payment to
stockholders any dividend or other distribution, or
redeemed, purchased or otherwise acquired any of its
capital stock or any option relating thereto, or agreed
to take any such action;
(9) Made any material change in any method of accounting
or accounting practice;
(10) Engaged in any action or failed to act where the
result is likely to interfere with the consummation of
the transactions contemplated hereby;
(11) Failed to keep in good standing and in full force
and effect all insurance policies and coverage in such
commercially reasonable amounts as are necessary in
order to properly operate the business of Rainbow as
presently operated; or
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(12) Failed to keep the business records of Rainbow in
good order.
(k) All of the equipment of Rainbow that is necessary for the
operation of the business of Rainbow is in good operating condition and repair,
normal wear and tear excepted.
(l) Rainbow is not in violation of any applicable law, ordinance,
rule or regulation, the result of which would have a Material Adverse Effect.
All permits, grants, franchises and licenses required to be obtained by Rainbow
or its employees in connection with its respective business have been obtained.
Rainbow has no reason to believe nor does it believe that any such permit,
grant, franchise or license will not be renewed upon the expiration thereof.
(m) There are no actions, proceedings or investigations pending or
threatened against Rainbow, or any property owned or utilized by it, which if
adversely determined would have a Material Adverse Effect. Rainbow is not aware
of any basis for any such action, proceeding or investigation. Rainbow is not
the subject of arbitration panel or any court or other federal, state or other
governmental agency, department, commission, board or instrumentality, either
domestic or foreign, the result of which would have a Material Adverse Effect.
(n) There is no outstanding contract or commitment which, upon the
completion or the performance thereof, after allowance for expenses, is likely
to result in a Material Adverse Effect to Rainbow or which, in the aggregate, is
not likely to result in normal profits to Rainbow consistent with past practice.
(o) There are no unpaid claims for brokerage commissions or
finder's fees in connection with the transactions contemplated hereby that may
arise from any act or failure to act or Rainbow or any person or entity
authorized to act on its behalf.
(p) None of the representations or warranties by Rainbow contained
in this Agreement, in any schedule referred to herein, or in any certificate or
document furnished by Rainbow pursuant hereto, including, but not limited to,
the Rainbow Financial Statements, contains or will contain any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements or information contained herein or therein, in light of the
circumstances under which they were made, not misleading.
(q) Rainbow has not, in connection with the transactions
contemplated hereby:
(1) employed any device, scheme or artifice to defraud
or
(2) engaged in any act, practice or course of conduct that
operates or would operate as a fraud or deceit upon any
person.
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(r) Subsequent to the date hereof and on or before the Closing
Date, no event will occur or fail to occur that would render any of the
representations and warranties set forth herein untrue if such representations
and warranties were made on and as of the Closing Date.
(s) From the date hereof to and including the Closing Date, upon
reasonable notice, Rainbow shall afford the officers, employees and authorized
agents and representatives of Andover and Merger Subsidiary reasonable access,
during normal business hours, to the offices, properties, books and records of
Rainbow.
No investigation by Andover or Merger Subsidiary shall diminish or obviate any
of the representations, warranties, covenants or agreements of Rainbow under
this Agreement. Rainbow shall provide Andover and Merger Subsidiary with the
opportunity to make such business, accounting and legal review, examination or
investigation as Andover or Merger Subsidiary may wish as to the business
affairs of Rainbow. Rainbow shall furnish the representatives of Andover and
Merger Subsidiary during such period with all such information and copies of
such documents concerning the affairs of Rainbow and such representatives may
reasonably request; and Rainbow shall cause its officers, employees,
consultants, agents, accountants and attorneys to cooperate fully with such
representatives in connection with such review the examination and to make full
disclosure to Andover and Merger Subsidiary of all material facts affecting the
financial condition and business operations of Rainbow.
(aa) The management of Rainbow has had the opportunity to discuss the
business, management and financial condition of Andover and Merger Subsidiary
with their respective management. Andover and Merger Subsidiary have made
available to Rainbow all documents and information Rainbow has requested in
order for Rainbow to evaluate the merits and risks of an investment in Andover
by Rainbow and its shareholders.
(ab) To the best of Rainbow's knowledge and belief, after reasonable
inquiry:
(1) At the time Rainbow sold shares of its common stock or an
option or warrant to acquire its common stock, each purchaser
was a sophisticated investor who could withstand the risk of
loss of his entire investment and each such purchaser did so
with an intention to hold such shares for investment purposes;
(2) Rainbow is not aware of any transfers or other
dispositions of its equity securities by the original holders
thereof other than (a) by unconditional gift; (b) through the
laws of descent and distribution; or (c) through sales by a
person who has never been an affiliate of Rainbow, as the term
"affiliate" is defined in Rule 144 under the Act, and had
purchased and fully paid for such securities more than three
years prior to such sales.
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(3) Each holder of Rainbow's common stock or options or
warrants for the purchase of such common stock holds such
security for his or her own account and not for the beneficial
account of any other person; and
(4) There are no more than 35 persons who own or have a
beneficial interest in Rainbow's common stock or options or
warrants for the purchase of such common stock who are not
"accredited investors", as such term is defined in Rule 501
(a) under the Act.
6. CONDITIONS TO RAINBOW'S OBLIGATIONS. The obligations of
Rainbow to merge with Merger Subsidiary and to consummate the transactions
contemplated hereby are subject to the following conditions:
(a) The representations, warranties and covenants of Andover
and Merger Subsidiary contained herein and in any schedule or exhibit, or in any
instrument, list or certificate delivered to Rainbow in connection herewith,
were true and correct when made and will be true and correct in all material
respects on the Closing Date as if made thereon, except for changes that may
arise in the ordinary course of business and that have no Material Adverse
Effect on the financial condition or results of operation of Andover and Merger
Subsidiary;
(b) Andover and Merger Subsidiary shall have complied with
all agreements, obligations and conditions required hereunder at or prior to the
Closing Date;
(c) Rainbow shall have received a certificate, dated the
Closing Date, reasonably satisfactory in form and substance to Rainbow and its
counsel, signed by the presidents of Andover and Merger Subsidiary certifying:
(1) as to the accuracy of the statements set forth in
Paragraph 4 hereof; and
(2) that Andover and Merger Subsidiary have performed
and complied with all the covenants and obligations of
Andover and Merger Subsidiary to be performed or
complied with hereunder on or prior to the Closing Date;
(d) this Agreement and the transactions contemplated hereby,
including, but not limited to, the Merger, shall have received the requisite
approval of the shareholders of Merger Subsidiary;
(e) Andover and Merger Subsidiary shall have furnished to
Rainbow such further certificates, letters, documents and other instruments as
Rainbow shall reasonably request.
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All certificates, letters, documents and other instruments delivered in
connection with the exchange of the Andover Shares as herein contemplated shall
be deemed in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to Rainbow and its counsel.
7. CONDITIONS TO ANDOVER'S AND MERGER SUBSIDIARY'S OBLIGATIONS. The
obligations of Andover and Merger Subsidiary to consummate the transactions
contemplated hereby are subject to the following conditions:
(a) This Agreement and the transactions contemplated hereby,
including, but not limited to the Merger, shall have received the requisite
approval of the shareholders of Rainbow; and the number of Dissenting Shares
shall not exceed 5% of the number of outstanding shares of common stock of
Rainbow;
(b) The representations, warranties and covenants of Rainbow
contained herein and in any exhibit, or in any instrument, list or certificate
delivered to Andover in connection herewith, or in any document furnished by
Rainbow for the express purpose of being used in a disclosure document offering
securities or seeking shareholder approval, were true and correct when made and
will be true and correct in all material respects on the Closing Date as if made
thereon, except for changes that may arise in the ordinary course of business
and that have no Material Adverse Effect on the financial condition or results
of operation of Rainbow, except that there shall have been no change in the
number of Rainbow Shares outstanding or the non-existence of any Rainbow Option,
Warrants or other obligations to issue Rainbow Shares;
(c) Rainbow shall have complied with all agreements, obligations
and conditions required hereunder at or prior to the Closing Date;
(d) This Agreement and the transactions contemplated hereby,
including, but not limited to the Merger, shall have received the requisite
approval of the shareholders of Merger Subsidiary;
(e) Andover shall receive investment representations, reasonably
acceptable to Andover, from all Rainbow shareholders;
(f) Andover shall be reasonably satisfied that an exemption from
registration under the Act is available in connection with the completion of the
transactions contemplated hereby; and
(g) Rainbow shall have furnished to Andover such further
certificates, letters, documents and other instruments as Andover shall
reasonably request.
All certificates, letters, documents and other instruments delivered in
connection with the exchange of the Rainbow Shares as herein contemplated shall
be deemed in compliance with the provision hereof only if they are reasonably
satisfactory in form and substance to Andover and its counsel.
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8. CONDITION SUBSEQUENT
In the event Rainbow does not consummate the private placement
offered, pursuant to the Confidential Investment Summary, within 20 days of the
consummation of the transactions contemplated hereby, then the transactions
contemplated hereby shall be rescinded ab initio without any obligation or
liability accruing to any other party hereto. By its signature below, Rainbow
acknowledges that it has sole responsibility for the preparation of the
Confidential Investment Summary and that neither Andover nor Merger Subsidiary
has in any way participated in the preparation of the Confidential Investment
Summary or in making any offers for the purchase of the Units offered thereby.
9. ADDITIONAL AGREEMENTS:
(a) The parties hereto shall each use their respective best
efforts to obtain or make, at the earliest practicable date, all consents and
filings necessary to the consummation of the transactions contemplated hereby or
which are reasonably requested by the other party.
(b) Upon the closing hereof, all of the existing members of
the Board of Directors and officers of Andover shall resign except for Larry
Kaplan; and Larry Kaplan shall appoint Hugo D. Goldstraj, M.D., Roberto P. Novo,
M.D., Marcel C. Goldstraj and Sandra R. Giblin, CPA, to serve on the Board of
Directors of Andover until such time as a new Board of Directors is elected by
the shareholders of Andover.
10. SURVIVAL OF REPRESENTATIONS WARRANTIES AND AGREEMENTS. All of
the representations, warranties and agreements of the parties hereto shall
survive the closing of the transactions contemplated hereby.
11. TERMINATION. Without prejudice to other remedies which may be
available to the parties by law or pursuant to the terms of this Agreement, this
Agreement may be terminated and the exchange contemplated herein may be
abandoned:
(a) by mutual consent of the parties hereto; or
(b) by a non-defaulting party (the "Notifying Party") hereto
by giving written notice of such termination on the Closing Date to the other
party (the "Notified Party") if, as of the Closing Date, any material conditions
precedent to the performance of the obligations of the party giving such notice
shall not have been satisfied and shall not have been waived by such party;
provided, however, that the Notified Party shall be allowed five business (5)
days within which to satisfy any such unsatisfied condition precedent, other
than the failure to deliver the Rainbow Shares or the Andover Shares, as the
case may be; or
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(c) by either party (a "Non-defaulting Party") if the
closing of the transactions contemplated hereunder shall not have been
consummated on or before May 15, 1997, provided such party is not in default
hereunder, unless the Closing Date is extended by written agreement of the
parties hereto; provided, however, that neither party shall exercise such right
of termination if the other party has satisfied all conditions to be satisfied
by it hereunder.
12. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party hereto or related
entity or person, shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
consent of Andover and Rainbow; provided, however, that any party may make any
public disclosure such party believes in good faith is required by applicable
law.
13. MISCELLANEOUS.
(a) BENEFIT. This Agreement shall enure to the benefit of the
parties hereto and their respective successors and assigns.
(b) ENTIRE AGREEMENT. This Agreement, including all schedules and
other instruments or documents referred to herein or delivered pursuant hereto
which form a part hereof, contains the entire understanding of the parties
hereto in respect of the subject matter contained herein. There are no
representations, warranties, promises, covenants or undertakings other than
those expressly set forth herein or therein. This Agreement supersedes all prior
agreements, whether written or oral, between the parties with respect to the
subject matter hereof. This Agreement may be amended only by a written agreement
duly executed by the parties hereto. Any condition to a particular party's
obligations hereunder may be waived in writing by such party.
(c) HEADINGS. The headings contained in this Agreement have been
inserted for convenience and reference purposes only and shall not affect the
meaning or interpretation hereof in any manner whatsoever.
(d) SEVERABILITY. If any of the terms, provisions or conditions
contained in this Agreement shall be declared to be invalid or void in any
judicial proceeding, this Agreement shall be honored and enforced to the extent
of its validity, and those provisions not declared invalid shall remain in full
force and effect.
(e) REMEDIES. In the event of a breach or threatened breach by
either party of its obligations hereunder, each party acknowledges that the
other party may not have an adequate remedy at law and shall be entitled to such
equitable and injunctive relief as may be available to restrain the other party
from any violation of such obligations. Nothing herein shall be construed as
prohibiting either party from pursuing any other remedies available for such
breach or threatened breach, including the recovery of damages.
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(f) DISCLOSURE. Any disclosure made in any schedule or exhibit
hereto shall be deemed to be a disclosure in all other applicable schedules and
exhibits hereto.
(g) EXHIBITS AND SCHEDULES. All exhibits and schedules shall be
deemed to be a part hereof.
(h) NOTICES. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be deemed given
when sent, postage paid, by Registered or Certified Mail, Return Receipt
Requested, or recognized overnight delivery service (i.e. Federal Express)
addressed to each of the parties, as follows:
If to Andover or Merger Subsidiary, to:
Andover Equities Corp.
150 Vanderbilt Motor Parkway
Suite 311
Hauppauge, N.Y. 11788
attn: Larry Kaplan, President
Telephone: (516) 273-0058
Facsimile: (516) 273-0047
with a copy to:
Schoeman, Marsh & Updike, LLP
60 East 42nd Street
New York, N.Y. 10165
attn: Michael Schoeman, Esq.
Telephone: (212) 661-5030
Facsimile: (212) 687-2123
If to Rainbow, to:
Rainbow Pediatrics, Inc.
631 N.W. 183rd Street
Miami, Florida 33169
attn: Hugo D. Goldstraj, M.D., Chief Executive Officer
Telephone: (305) 651-2334
Facsimile: (305) 654-9567
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with a copy to:
Bryn & Associates, P.A.
2 S. Biscayne Blvd.
Suite 3599
Miami, Florida 33131
attn: Mark J. Bryn, Esq.
Telephone: (305) 374-0501
Facsimile: (305) 372-8068
or to such other address, or the attention of such other party, as the parties
shall advise the other by notice given in conformity herewith.
(i) GOVERNING LAW. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of Florida, without giving
effect to conflicts of law.
(j) COUNTERPARTS. This Agreement may be executed in counterparts
each of which shall be deemed an original and all of which together shall
constitute one and the same agreement.
(k) ASSIGNMENTS. This Agreement may not be assigned by any party.
(l) FACSIMILE SIGNATURES. Facsimile signatures on counterparts of
this Agreement are hereby authorized and shall be acknowledged as if such
facsimile signatures were an original execution, and this agreement shall be
deemed as executed when an executed facsimile hereof is transmitted by a party
to any other party.
(m) LITIGATION, JURISDICTION AND VENUE. In the event any action,
suit or proceeding is instituted as a result of this Agreement by any party to
this Agreement, the prevailing party in such action, suit or proceeding shall be
entitled to receive reimbursement of the costs of such action, suit or
proceeding at all levels, including reasonable attorneys' fees. Further, in the
event of the institution of any such action, suit or proceeding, each of the
parties hereto hereby consents to the exclusive jurisdiction and venue of the
courts of the State of Florida located in Dade County, Florida, and the United
States District Court in and for the Southern District of Florida with respect
to any matter relating to this Agreement and the performance of the parties'
obligations thereunder, and each of the parties hereto hereby further consents
to the personal jurisdiction of such courts. Any action, suit or proceeding
brought by or on behalf of any of the parties hereto relating to such matters
shall be commenced, pursued, defended and resolved only in such courts and any
appropriate appellate court having jurisdiction to hear an appeal from any
judgment entered in such courts. The parties hereby agree that service of
process may be made in any manner permitted by the rules of such courts and the
laws cf the State of Florida.
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(n) CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
RAINBOW PEDIATRICS, INC.
(Corporate Seal) By: /s/ Roberto Novo
-----------------------------------
Roberto Novo, President
ANDOVER EQUITIES CORP.
(Corporate Seal) By: /s/ Larry Kaplan
-----------------------------------
Larry Kaplan, President
MERGER SUBSIDIARY, INC.
(Corporate Seal) By: /s/ Larry Kaplan
-----------------------------------
Larry Kaplan, President
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WRITTEN DIRECTOR ACTION
The undersigned, being the sole director of Merger Subsidiary, Inc. ("Merger
Subsidiary"), hereby authorizes Merger Subsidiary, or any officer of Merger
Subsidiary or any agents acting on its behalf, to take all necessary corporate
actions to execute that certain Agreement of Merger by and among Andover
Equities Corp., Merger Subsidiary, Inc. and Rainbow Pediatrics, Inc., to file
appropriate Articles of Merger with the Secretary of State for the State of
Florida, and execute copies of the Articles of Merger substantially in the form
attached hereto as Exhibit "A".
Dated as of May 2, 1997.
By: /s/ Larry Kaplan
--------------------------------
Larry Kaplan,/Sole Director of
Andover Equities Corp.
<PAGE>
WRITTEN SHAREHOLDER CONSENT
The undersigned, being the sole shareholder of Merger Subsidiary, Inc.,
hereby adopts the Plan of Merger, and the Agreement of Merger by and among
Andover Equities Corp., Merger Subsidiary, Inc. and Rainbow Pediatrics, Inc.,
attached hereto as Exhibits "A" and "B", respectively, and authorize the
execution of same on behalf of Merger Subsidiary, Inc.
Dated as of May 2, 1997.
ANDOVER EQUITIES CORP.
By: /s/ Larry Kaplan
--------------------------------
Larry Kaplan, its President
