Common use of BACKGROUND AND RECITALS Clause in Contracts

BACKGROUND AND RECITALS. The Company has 15,144,885 shares of common stock outstanding (the “Company Shares”) after giving effect to the Cancellation Agreement, as defined below. In connection with a recapitalization of Parent, and subject to the terms and conditions of this Agreement, including without limitation the execution and delivery of the Constituent Agreements (as defined below), the parties hereto have agreed to effect the merger of Merger Sub with and into the Company (the “Merger”) pursuant to the terms of this Agreement, with Company remaining as the Surviving Company (as defined herein). As a result of the Merger, among other effects, at the Effective Time of the Merger (as defined herein), (i) Fifty One Percent (51%) of the Company Shares issued and outstanding immediately prior to the Effective Time (calculated on a pro rata basis among the shareholders of the Company immediately prior to the Effective Time of the Merger) shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist and certificates previously evidencing any such Company Shares shall thereafter represent the right to receive an aggregate of One Hundred and Fifty Million (150,000,000) newly issued shares of common stock, par value $0.001 per share, of the Parent, (the “Parent Common Stock”) or, at the election of any holder of the Company Shares who, as a result of receiving shares of Parent Common Stock in connection with the Merger would hold in excess of 5% of the issued and outstanding shares of Parent Common Stock, shares of Series C Convertible Preferred Stock, par value $0.001 per share, of the Parent, with such rights and limitations as set forth in the Certificate of Designations of Preferences, Rights and Limitations of Series C Convertible Preferred Stock, attached hereto as Exhibit A (the “Parent Preferred Stock”) (such shares of Parent Common Stock and Parent Preferred Stock issued in the Merger, if any, the “Parent Stock) (ii) Forty Nine (49%) of the Company Shares issued and outstanding immediately prior to the Effective Time (calculated on a pro rata basis among the shareholders of the Company immediately prior to the Effective Time of the Merger) shall remain outstanding and represent the right to receive shares of the Surviving Company equal to Forty Nine Percent (49%) of the issued and outstanding stock of the Surviving Company and (iii) each share of Merger Sub, par value $0.0001 per share, held by Parent immediately prior to the Effective Time of the Merger shall, by virtue of the Merger and without any action on the part of the Parent, be converted into the right to receive 7,723,892 shares of the Surviving Company, which shall represent Fifty One Percent (51%) of the Surviving Company’s issued and outstanding common stock. The Merger is intended to constitute a reorganization within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), or such other tax free reorganization or restructuring provisions as may be available under the Code. The Board of Directors of each of the Parent and the Company has determined that it is desirable to effect this plan of reorganization and Merger. Concurrent with and as a condition to the Merger, (i) the Parent will enter into an employment agreement with ▇▇▇▇ ▇▇▇▇▇ (“Green”), in the form attached as Exhibit B to serve as Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of Parent (the “Employment Agreement”), (ii) Green and the Incoming Directors (as defined herein) shall execute lockup agreements, in the form attached hereto as Exhibit C (the “Incoming Lockup Agreements”); (iii) the Outgoing Officers and Directors (as defined herein) shall execute lockups agreements, in the form attached hereto as Exhibit D (the “Outgoing Lockup Agreements”); (iv) the Parent and ▇▇▇▇▇ ▇▇▇▇▇▇ (“Tuffin”), the Parent’s current Chief Executive Officer and interim Chief Financial Officer, shall enter into the Severance Agreement, in the form attached hereto as Exhibit E (the “Tuffin Severance Agreement”);(v) the Parent, and the recipients of the Former Management Shares (as defined herein) (collectively, the “Indemnifying Individuals”) shall enter into an escrow agreement, in the form attached hereto as Exhibit F (the “Escrow Agreement”) with a third party escrow agent pursuant to which the Indemnifying Individuals shall deposit certain securities of the Parent and cash into an escrow account (vi) the Parent and ▇▇▇▇▇▇ ▇▇▇▇▇▇, the Parent’s Senior Vice President of Marketing and Clinical Research and Secretary shall enter into a severance agreement in the form attached hereto as Exhibit G (the “▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement”); and (vii) the President of the Company will enter into a Cancellation Agreement in the form attached hereto as Exhibit H (the “Cancellation Agreement”). The Employment Agreement, the Incoming Lockup Agreements, the Outgoing Lockup Agreements, the Tuffin Severance Agreement, the Escrow Agreement, the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement and the Cancellation Agreement shall collectively be referred to herein as the “Constituent Agreements”. The Parties intend for the Merger to occur at a concurrent closing upon execution and delivery of this Agreement and the Constituent Agreements.

BACKGROUND AND RECITALS. The Company has 15,144,885 shares of common stock outstanding One Hundred (100) membership units (the “Company SharesMembership Units”) after giving effect to the Cancellation Agreementoutstanding, as defined belowall of which are held by Seller. In connection with a recapitalization of Parent, and subject to the terms and conditions of this Agreement, including without limitation the closing of the Concurrent Transactions (as defined below) and execution and delivery of the Constituent Agreements (as defined below), the parties hereto have agreed to effect the merger of Merger Sub with and into the Company (the “Merger”) pursuant to the terms of this Agreement, with Company remaining as the Surviving Company (as defined herein). As a result of the Merger, among other effects, at the Effective Time of the Merger (as defined herein), (i) Fifty One Percent (51%) of the Company Shares issued Membership Units will be canceled and outstanding immediately prior to the Effective Time (calculated on a pro rata basis among the shareholders of the Company immediately prior to the Effective Time of the Merger) shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist and certificates previously evidencing any such Company Shares shall thereafter represent the right to receive exchanged for an aggregate of One Two Hundred and Fifty Ninety Seven Million Two Hundred and Eighteen Thousand Two Hundred and Thirty Seven (150,000,000297,218,237) newly issued shares of common stockstock (the “Parent Stock”), par value $0.001 per share, of the Parent, (the “Parent Common Stock”) or, at the election of any holder of and the Company Shares who, as a result of receiving shares of Parent Common Stock in connection with will be the Merger would hold in excess of 5% of the issued and outstanding shares of Parent Common Stock, shares of Series C Convertible Preferred Stock, par value $0.001 per share, of the Parent, with such rights and limitations as set forth in the Certificate of Designations of Preferences, Rights and Limitations of Series C Convertible Preferred Stock, attached hereto as Exhibit A (the “Parent Preferred Stock”) (such shares of Parent Common Stock and Parent Preferred Stock issued in entity surviving the Merger, if any, the “Parent Stock) (ii) Forty Nine (49%) of the Company Shares issued and outstanding immediately prior to the Effective Time (calculated on a pro rata basis among the shareholders of the Company immediately prior to the Effective Time of the Merger) shall remain outstanding and represent the right to receive shares of the Surviving Company equal to Forty Nine Percent (49%) of the issued and outstanding stock of the Surviving Company and (iii) each share of Merger Sub, par value $0.0001 per share, held by Parent immediately prior to the Effective Time of the Merger shall, by virtue of the Merger and without any action on the part of the Parent, be converted into the right to receive 7,723,892 shares of the Surviving Company, which shall represent Fifty One Percent (51%) of the Surviving Company’s issued and outstanding common stock. The Merger is intended to constitute a reorganization within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), or such other tax free reorganization or restructuring provisions as may be available under the Code. The Board of Directors of each of the Parent and the Company has determined that it is desirable to effect this plan of reorganization and Merger. Concurrent with and as a condition to the Merger, (i) the Parent will enter into an employment agreement agreements with each of ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ (collectively the “GreenHeywards”), in the form forms attached as Exhibit B A and Exhibit B, respectively, to serve as Chairman and Chief Executive OfficerOfficer and President, Chief Financial Officerrespectively, Secretary and Treasurer of Parent (collectively, the “Employment AgreementAgreements”), (ii) Green and the Incoming Directors (as defined herein) Heywards shall execute lockup agreements, in the form attached hereto as Exhibit C (the “Incoming Lockup Agreements”); (iii) the Outgoing Officers and Directors (as defined herein) shall execute lockups agreements, in the form attached hereto as Exhibit D (the “Outgoing Lockup Agreements”); (iv) the Parent and ▇▇▇▇▇ ▇▇▇▇▇▇ (“Tuffin”), the Parent’s current Chief Executive Officer and interim Chief Financial Officer, shall enter into the Severance Agreement, in the form attached hereto as Exhibit E (the “Tuffin Severance Agreement”);(v) the Parent, and the recipients of the Former Management Shares (as defined herein) (collectively, the “Indemnifying IndividualsOfficer Lockup Agreements”) shall enter into an escrow and a registration rights agreement, in the form attached hereto as Exhibit F C, with the Seller covering the Parent Stock (the “Escrow Agreement”) with a third party escrow agent pursuant to which the Indemnifying Individuals shall deposit certain securities of the Parent and cash into an escrow account (vi) the Parent and ▇▇▇▇▇▇ ▇▇▇▇▇▇, the Parent’s Senior Vice President of Marketing and Clinical Research and Secretary shall enter into a severance agreement in the form attached hereto as Exhibit G (the “▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement”); and (vii) the President of the Company will enter into a Cancellation Agreement in the form attached hereto as Exhibit H (the “Cancellation Registration Rights Agreement”). . The Employment Agreement, the Incoming Lockup Agreements, the Outgoing Officer Lockup Agreements, the Tuffin Severance Agreement, the Escrow Agreement, the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement Agreements and the Cancellation Registration Rights Agreement shall collectively be referred to herein as the “Constituent Agreements”. Concurrent with and as a condition to the Merger, Parent will issue authorized but unissued shares of Parent Stock in conjunction with the Merger and the transactions and recapitalization discussed in Section 4.23 herein (collectively the “Transactions” or “Concurrent Transactions”). The Parties intend for the Merger and the other Concurrent Transactions to occur at a concurrent closing upon execution and delivery of this Agreement and the Constituent AgreementsAgreements and for the Parent Stock to represent immediately after the Closing of the Merger 50% issued and outstanding shares of Parent Common Stock after giving effect to the Concurrent Transactions.