AGREEMENT AND PLAN OF MERGER BY AND AMONG FULL CIRCLE INDUSTRIES, INC., BIOGOLD FUELS CORPORATION, AND BIOGOLD ACQUISITION, INC. DATED AS OF APRIL 13, 2007
EXHIBIT
2.1
AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
FULL
CIRCLE INDUSTRIES, INC.,
BIOGOLD
FUELS CORPORATION,
AND
BIOGOLD
ACQUISITION, INC.
DATED
AS OF APRIL 13, 2007
AGREEMENT
AND PLAN OF MERGER
BETWEEN:
Biogold
Fuels Corporation,
a body
corporate incorporated under the State laws of Nevada (hereinafter referred
to
as “Parent”);
OF
THE FIRST PART
-and-
Biogold
Acquisition, Inc.,
a body
corporate incorporated under the laws of the State of Nevada and a wholly-owned
subsidiary of Parent, (hereinafter referred to as “Merger Sub”);
OF
THE SECOND PART
-and-
Full
Circle industries, Inc. (“Company”),
a body
corporate incorporated under the laws of the State of Nevada, (hereinafter
referred to as “Company”);
RECITALS
WHEREAS
Company
is a technology company whose business goal is to commercialize their licensed
and proprietary processing system for biodiesel production on an industrial
scale and to become a leading provider of biodiesel in the United States and
elsewhere as described in the Executive Summary delivered to
Parent;
AND
WHEREAS
upon the
terms and subject to the conditions of this Agreement (as defined in Section
1.2) and in accordance with the Revised Statues of the State of Nevada (the
“RSN”), Parent and Company intend to enter into a business combination
transaction by means of a merger between Merger Sub and the Company in which
the
Company will merge with Merger Sub and be the surviving entity, through an
exchange of all the issued and outstanding shares of capital stock of the
Company for shares of common stock of the Parent.
AND
WHEREAS
the
Board of Directors of the Company, Parent and Merger Sub have determined that
the Merger (as defined in Section 1.1) is fair to, and in the best interests
of,
their respective companies and their respective stockholders.
AND
WHEREAS
The
parties intend, by executing this Agreement, to adopt a plan of reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the “Code”).
THIS
AGREEMENT WITNESSES
that, in
consideration of the premises and of the covenants, agreements, warranties
and
representations herein set forth and provided for, the parties hereto
respectively covenant and agree as follows:
ARTICLE
I
THE
MERGER
1.1 The
Merger.
At the
Effective Time (as defined in Section 1.2) and subject to and upon the terms
and
conditions of this Agreement and the applicable provisions of the RSN, Merger
Sub shall be merged with and into the Company (the “Merger”), the separate
corporate existence of Merger Sub shall cease and the Company shall continue
as
the surviving corporation. The Company as the surviving corporation after the
Merger is hereinafter sometimes referred to as the “Surviving Corporation.” The
Merger is hereinafter sometimes referred to as the “Transaction.”
1.2 Effective
Time; Closing.
Subject
to the conditions of this Agreement, the parties hereto shall cause the Merger
to be consummated by filing with the Secretary of State of the State of Nevada
in accordance with the relevant provisions of the RSN a Articles of Merger
(the
“Articles of Merger”) (the time of such filing with the Secretary of State of
the State of Nevada, or such later time as may be agreed in writing by the
Company and Parent and specified in the Articles of Merger, being the “Effective
Time”) as soon as practicable on or after the Closing Date (as herein defined).
The term “Agreement” as used herein refers to this Agreement and Plan of Merger,
as the same may be amended from time to time, and all schedules hereto
(including the Company Schedules and Parent Schedules). Unless this Agreement
shall have been terminated hereunder, the closing of the Merger (the “Closing”)
shall take place on April 25, 2007 at the offices of the Company, ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇, or at such
other time, date and location as the parties hereto agree in writing (the
“Closing Date”).
1.3 Effect
of the Merger.
At the
Effective Time, the effect of the Merger shall be as provided in this Agreement
and the applicable provisions of the RSN. Without limiting the generality of
the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest
in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Articles
of Incorporation; Bylaws.
(a) At
the
Effective Time, the Articles of Incorporation of the Parent shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation of the Surviving
Corporation.
(b) The
Bylaws of the Parent shall be the Bylaws of the Surviving Corporation.
1.5 Directors
and Officers.
The
initial directors of the Surviving Corporation shall be the directors of the
Parent immediately prior to the Effective Time, until their respective
successors are duly elected or appointed and qualified. The initial officers
of
the Surviving Corporation shall be the officers of the Parent immediately prior
to the Effective Time; provided, however, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, chief executive
officer of the Company prior to the Effective Time, shall be appointed to the
position of Chief Executive Officer of the Surviving Corporation at the
Effective Time.
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1.6 Effect
on Capital Stock.
Subject
to the terms and conditions of this Agreement, at the Effective Time, by virtue
of the Merger and this Agreement and without any action on the part of Merger
Sub, the Company or the holders of any of the following securities, the
following shall occur:
(a) Conversion
of Company Capital Stock.
Each
share of preferred stock of the Company, par value $0.0001 per share (“Company
Preferred Stock) and each share of common stock, par value $0.0001 per share
(“Company Common Stock), of the Company (collectively, the Company Preferred
Stock and the Company Common Stock shall be referred to herein as the “Company
Capital Stock”) issued and outstanding immediately prior to the Effective Time
as listed on Schedule 2.1 attached hereto, will be automatically converted
into
the right to receive on the Closing Date one share of Common Stock, par value
$0.0001 per share, of Parent (“Parent Common Stock”) (the “Common Exchange
Ratio”) upon surrender of the certificate representing such share of Company
Capital Stock in the manner provided in Section 1.7 (or in the case of a lost,
stolen or destroyed certificate, upon delivery of an affidavit (and bond, if
required) in the manner provided in Section 1.9). If any shares of Company
Capital Stock outstanding immediately prior to the Effective Time are unvested
or are subject to a repurchase option, risk of forfeiture or other condition
under any applicable restricted stock purchase agreement or other agreement
with
the Company, then the shares of Parent Common Stock issued in exchange for
such
shares of Company Capital Stock will also be unvested or subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends. The Company shall take all action that may be necessary
to
ensure that, from and after the Effective Time, Parent is entitled to exercise
any such repurchase option or other right set forth in any such restricted
stock
purchase agreement or other agreement.
(b) Assumption
of Company Stock Options.
At the
Closing, each outstanding option to purchase shares of Company Common Stock
(each, a “Company Stock Option”), whether or not vested, shall be assumed by
Parent. Each Company Stock Option so assumed by Parent under this Agreement
will
continue to have, and be subject to, the same terms and conditions of such
Company Stock Option immediately prior to the Closing (including, without
limitation, any repurchase rights or vesting provisions and provisions regarding
the acceleration of vesting on certain transactions, other than the transactions
contemplated by this Agreement), except that (i) each Company Stock Option
will
be exercisable (or will become exercisable in accordance with its terms) for
that number of whole shares of common stock, no par value per share, of Parent
(“Parent Common Stock”) equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Stock Option
immediately prior to the Closing multiplied by one (“Option Exchange Ratio”),
rounded up to the nearest whole number of shares of Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Company Stock Option will be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock
at
which such Company Stock Option was exercisable immediately prior to the Closing
by the Option Exchange Ratio, rounded down to the nearest whole cent.
4
(c) Assumption
of Company Common Stock Warrants.
At the
Closing, each outstanding warrant to purchase shares of Company Common Stock
(each, a “Company Common Stock Warrant”) shall be assumed by Parent and will
continue to have, and be subject to, the same terms and conditions of such
Company Common Stock Warrants immediately prior to the Closing, except that
(i)
such Company Common Stock Warrant will be exercisable (or will become
exercisable in accordance with its terms) for that number of shares of Parent
Common Stock equal to the product of the number of shares of Company Common
Stock that were issuable upon exercise of such Company Common Stock Warrant
immediately prior to the Closing multiplied by the Option Exchange Ratio,
rounded up to the nearest whole number of shares of Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Company Common Stock Warrant will be equal to
the
quotient determined by dividing the exercise price per share of Company Common
Stock at which such Company Common Stock Warrant was exercisable immediately
prior to the Closing by the Option Exchange Ratio, rounded down to the nearest
whole cent.
(d) Capital
Stock of Merger Sub.
Each
share of common stock, par value $0.001 per share, of Merger Sub (the “Merger
Sub Common Stock”) issued and outstanding immediately prior to the Effective
Time shall be converted into one validly issued, fully paid and nonassessable
share of common stock, no par value, of the Surviving Corporation. Each
certificate evidencing ownership of shares of Merger Sub Common Stock shall
evidence ownership of such shares of capital stock of the Surviving Corporation.
(e) Adjustments
to Exchange Ratios.
The
Exchange Ratios (as defined below) shall be adjusted to reflect appropriately
the effect of any stock split, reverse stock split, stock dividend (including
any dividend or distribution of securities convertible into Parent Common Stock
or Company Common Stock), extraordinary cash dividends, reorganization,
recapitalization, reclassification, combination, exchange of shares or other
like change with respect to Parent Common Stock, Company Common Stock, Company
Preferred Stock (or any options or warrants with respect to the foregoing)
occurring on or after the date hereof and prior to the Effective
Time.
(f) Fractional
Shares.
Fractional shares of Parent Common Stock will be issued by virtue of the Merger
(rounded to the second decimal point).
1.7 Surrender
of Certificates.
(a) Exchange
Agent.
Company
or such other agent or agents as Company may appoint shall be designated by
the
parties hereto to act as the exchange agent (the “Exchange Agent”) in the
Merger.
(b) Parent
to Provide Parent Common Stock.
Promptly after the Effective Time, and in no event more than three (3) business
days thereafter, Parent shall make available for exchange in accordance with
this Article I, the shares of Parent Common Stock issuable pursuant to Section
1.6 in exchange for outstanding shares of Company Common Stock and any dividends
or distributions to which holders of such shares may be entitled pursuant to
Section 1.7(d).
5
(c) Exchange
Procedures.
Promptly after the Effective Time, and in no event more than three (3) business
days thereafter, Parent shall mail to each holder of record (as of the Effective
Time) of a certificate or certificates (the “Certificates”), which immediately
prior to the Effective Time represented outstanding shares of Company Capital
Stock whose shares were converted into the right to receive shares of Parent
Common Stock pursuant to Section 1.6: (i) a letter of transmittal in customary
form (which shall specify that delivery shall be effected, and risk of loss
and
title to the Certificates shall pass, only upon delivery of the Certificates
to
Parent and shall contain such other customary provisions as Parent may
reasonably specify), and (ii) instructions for use in effecting the surrender
of
the Certificates in exchange for certificates representing shares of Parent
Common Stock and any dividends or other distributions pursuant to Section
1.7(d). Upon surrender of Certificates for cancellation to Parent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates representing the number of shares
of
Parent Common Stock into which their shares of Company Capital Stock were
converted into the right to receive at the Effective Time and any dividends
or
distributions payable pursuant to Section 1.7(d), and the Certificates so
surrendered shall forthwith be canceled. Until so surrendered, outstanding
Certificates will be deemed from and after the Effective Time, to evidence
only
the right to receive the applicable number of shares of Parent Common Stock
(or
Common Stock issuable upon conversion of Common Stock) issuable pursuant to
Section 1.6.
(d) Distributions
With Respect to Unexchanged Shares.
No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holders of any unsurrendered Certificates
with respect to the shares of Parent Common Stock to be issued upon surrender
thereof until the holders of record of such Certificates shall surrender such
Certificates. Subject to applicable law, following surrender of any such
Certificates with a properly completed letter of transmittal letter, Parent
shall promptly deliver to the record holders thereof, without interest,
certificates representing shares of Parent Common Stock issued in exchange
therefor and the amount of any such dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
shares.
(e) Transfers
of Ownership.
If
certificates representing shares of Parent Common Stock are to be issued in
a
name other than that in which the Certificates surrendered in exchange therefor
are registered, it will be a condition of the issuance thereof that the
Certificates so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the persons requesting such exchange will have paid
to Parent or any agent designated by it any transfer or other taxes required
by
reason of the issuance of certificates representing shares of Parent Common
Stock in any name other than that of the registered holder of the Certificates
surrendered, or established to the satisfaction of Parent or any agent
designated by it that such tax has been paid or is not payable.
(f) Required
Withholding.
Each of
Parent, any agents appointed by Parent and the Surviving Corporation shall
be
entitled to deduct and withhold from any consideration payable or otherwise
deliverable pursuant to this Agreement to any holder or former holder of Company
Capital Stock such amounts as are required to be deducted or withheld therefrom
under the Code or under any provision of state, local or foreign tax law or
under any other applicable legal requirement. To the extent such amounts are
so
deducted or withheld, such amounts shall be treated for all purposes under
this
Agreement as having been paid to the person to whom such amounts would otherwise
have been paid.
6
(g) Termination
of Exchange Agent Funding.
Parent
Common Stock held by the Exchange Agent (other than Parent) which have not
been
delivered to holders of Certificates within six months after the Effective
Time
shall promptly be paid or delivered, as appropriate, to Parent, and thereafter
holders of Certificates who have not theretofore complied with the exchange
procedures outlined in and contemplated by this Section 1.7 shall thereafter
look only to Parent (subject to abandoned property, escheat and similar laws)
only as general creditors thereof for their claim for shares of Parent Common
Stock and any dividends or distributions pursuant to Section 1.7(d) with respect
to such shares to which they are entitled.
(h) No
Liability.
Notwithstanding anything to the contrary in this Section 1.7, neither the
Exchange Agent, Parent, the Surviving Corporation, the Company nor any party
hereto shall be liable to a holder of shares of Parent Common Stock or Company
Capital Stock for any amount properly paid to a public official pursuant to
any
applicable abandoned property, escheat or similar law.
1.8 No
Further Ownership Rights in Company Capital Stock.
All
shares of Parent Common Stock issued in accordance with the terms hereof shall
be deemed to have been issued in full satisfaction of all rights pertaining
to
such shares of Company Capital Stock, and there shall be no further registration
of transfers on the records of the Surviving Corporation of shares of Company
Capital Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided
in
this Article I.
1.9 Lost,
Stolen or Destroyed Certificates.
In the
event that any Certificates shall have been lost, stolen or destroyed, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder
thereof, certificates representing the shares of Parent Common Stock which
the
shares of Company Capital Stock formerly represented by such Certificates were
converted into the right to receive pursuant to Section 1.6.
1.10 Tax
Consequences.
It is
intended by the parties hereto that the Merger shall constitute a reorganization
within the meaning of Section 368 of the Code. The parties hereto adopt this
Agreement as a “plan of reorganization” within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Income Tax
Regulations.
1.11 Taking
of Necessary Action; Further Action.
If, at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of Company and Merger Sub, the
officers and directors of Company and Merger Sub will take all such lawful
and
necessary action.
7
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF COMPANY
Except
as
disclosed on the schedules prepared by the Company (the "Company Schedules"),
the Company hereby represents and warrants to, and covenants with, Parent and
Merger Sub, as follows:
2.1 Company
has been duly formed, organized and is a duly existing corporation and in good
standing under the laws of Nevada and to the Company’s knowledge, (i) the issued
and outstanding capital stock of the Company is issued in the amounts and to
the
individuals/entities as set forth on Schedule 2.1 attached heretoCompany and
(ii) Schedule 2.1 sets forth all of the issued and outstanding capital stock
of
the Company;
2.2 the
unaudited financial statements of the Company delivered to the Parent
(collectively the “Financial Statements”) are the complete and correct copies of
the Company Financial Statements. The Company Financial Statements present
fairly the financial position and results of operations and changes in cash
flows of Company as of the respective dates or for the respective periods
reflected therein;
2.3 no
person, firm or corporation now has, or at Closing will have, any agreement
or
option or any right capable of becoming an agreement for the purchase,
subscription or issuance of any of the unissued shares in the capital of Company
other than as noted on any schedule hereto;
2.4 no
dividend on any shares in the capital of Company has been declared, paid or
authorized, or will be declared, paid or authorized after the date hereof and
up
to Closing other than as noted on any schedule hereto;
2.5 no
payments have been made or authorized, or will be made or authorized after
the
date hereof and prior to Closing by Company to officers, directors, shareholders
or employees of Company except in the ordinary course of business and at the
regular rate of salary or other remuneration other than as noted on any schedule
hereto;
2.6 no
bonuses have been paid or authorized, or will be paid or authorized after the
date hereof and prior to Closing by Company to officers, directors, shareholders
or employees of Company except in the ordinary course of business and at regular
rate of salary or other remuneration other than as noted on any schedule
hereto;
2.7 no
capital expenditures in excess of $10,000 have been authorized, or will be
authorized after the date hereof and up to Closing by Company with the exception
of the necessary expenditures to be incurred in the normal course of business
other than as noted on any schedule hereto;
2.8 Company
will not have at Closing any outstanding contracts other than contracts in
the
ordinary course of business, and previously disclosed to Parent, other than
as
listed on any schedule hereto;
8
2.9 except
as
indicated on any schedule attached hereto, to the best of the Company’s
knowledge and belief, there are not now and at Closing there will be no actions,
suits or proceedings (whether or not purportedly on behalf of Company) pending
or to the knowledge of Company threatened against or affecting Company at law
or
in equity or before or by any federal, provincial, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and which involve the possibility of any judgment or
liability not fully covered by insurance;
2.10 to
the
best of the Company’s knowledge and belief, Company is not in material default
or material breach of any material contracts, agreements, written or oral,
indentures or other instruments to which it is a party or by which it is bound
and there exists no state of facts which after notice or lapse of time or both
would constitute such a default or breach and all such contracts, agreements,
indentures or other instruments are now in good standing and Company is entitled
to all benefits thereunder, provided that this provision shall not apply to
any
default or breach adversely affecting the financial position of Company to
the
extent of less than $10,000.00 in the aggregate other than as noted on any
schedule hereto;
2.11 to
the
best of the Company’s knowledge and belief, Company is conducting its business
in material compliance with all applicable laws, rules and regulations of each
jurisdiction in which its business is carried on. Company is not in breach
of
any such laws, rules or regulations, except for breaches which in the aggregate
are immaterial, and is duly licensed, registered or qualified in each
jurisdiction in which it owns or leases property or carries on business, to
enable its business to be carried on as now conducted by it and its property
and
assets to be owned, licensed and operated, and all such licences, registrations
and qualifications are valid and subsisting and in good standing other than
as
noted on any schedule hereto;
2.12 Company
has filed or will be filing, all tax returns required to be filed by it and
has
paid all taxes which are due and payable, and has paid all assessments and
reassessments, and all other taxes, governmental charges, penalties, interest
and fines due and payable by it on or before the date hereof. Adequate provision
has been made for taxes payable for the current period for which tax returns
are
not yet required to be filed; there are no agreements, waivers or other
arrangements providing for an extension of time with respect to the filing
of
any tax return by, or payment of any tax, governmental charge or deficiency
against Company. There are no actions, suits, proceedings, investigations or
claims now threatened or pending against Company in respect of taxes,
governmental charges or assessments, asserted by any such authority, Company
has
withheld from each payment made to any of its past and present creditors,
shareholders, officers, directors and employees the amount of all taxes,
including but not limited to income tax, and other deductions required to be
withheld therefrom and has paid the same to proper tax or other receiving
officers within the time required under any applicable tax legislation;
and
2.13 Company
has no loans or indebtedness outstanding which have been made to directors,
former directors, officers, shareholders and/or employees of Company or to
any
person or corporation not dealing at arm’s length with any of the foregoing
except those to be discharged as part of this transaction other than as noted
on
any schedule hereto.
9
The
Company hereby acknowledges that Parent is relying upon the above covenants,
representations and warranties in connection with the completion by Parent
of
the transaction contemplated hereby.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF PARENT
Except
as
disclosed on the schedules prepared by the Parent (the "Parent Schedules"),
the
Parent hereby represents and warrants to, and covenants with Company, as
follows:
3.1 Parent
has been duly incorporated and organized and is validly subsisting under the
laws of Nevada and that it has the corporate power to hold its property and
to
carry on the business of Parent as now being conducted by it;
3.2 Except
for Merger Sub which is a wholly-owned subsidiary of Parent, Parent has no
subsidiaries and does not own, directly or indirectly, any ownership, equity,
profits or voting interest in any person or have any agreement or commitment
to
purchase any such i8terest;
3.4 the
authorized capital of Parent, as of the date hereof consists of an 125,000,000
number of common shares without par value, of which 26,442,123 shares are issued
and outstanding at the date hereof. No person, firm or corporation now has,
or
at Closing will have, any agreement or option or any right capable of becoming
an agreement for the purchase, subscription or issuance of any of the unissued
shares in the capital of Parent other than as noted herein;
3.5 all
shares issued to the Company Shareholders pursuant to this agreement will be
duly issued, validly authorized, fully paid and non-assessable common shares
of
the capital stock of Parent;
3.6 no
dividends on any shares in the capital of Parent have been declared, paid or
authorized since its incorporation or will be declared, paid or authorized
after
the date hereof and up to Closing;
3.7 Parent
has not guaranteed, or agreed to guarantee any debt, liability or other
obligation of any person, firm or corporation;
3.8 Parent
is
in good standing with all regulatory authorities;
3.9 there
are
no orders, suits, fines, or injunctions, issued or threatened against Parent
and
Parent is in compliance with all laws, regulations and rules of any federal
or
provincial jurisdiction to which it is subject, and their no claims (including
environmental claims) which have been made against Parent; nor are there any
circumstances existing, to the knowledge of Parent, which 5ould result in such
claims arising in the future;
3.10 Parent
is, and has always been, in compliance with all environmental laws, including
the applicable common law relating to the protection of the environment and
public health and safety. Parent is not required to perform any work, repairs,
construction, change in business practices or operations or comply with any
written demand or notice with respect to any breach or liability under any
environmental laws;
10
3.11 there
are
no material changes in the business or affairs of Parent which have not been
properly and publicly disclosed;
3.12 Parent
has not made nor agreed to make any loans to anyone;
3.13 Parent
has no legal obligations of any kind or nature whatsoever except as disclosed
herein with the exception of the obligation to issue shares as set out herein
and with the exception of its normal obligations as a reporting issuer in the
normal and ordinary course of business;
3.14 Parent
has no liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to any
financial statements of the Parent;
3.15 there
are
no restrictions on the business that may be carried on by Parent;
3.16 Board
of
Directors of Parent (including any required committee or subgroup of the Board
of Directors of Parent) has, as of the date of this Agreement, approved this
Agreement and the transactions contemplated hereby and Parent’s shareholders
has, as of the date of this Agreement, unanimously approved this Agreement
and
the transactions contemplated hereby; and
3.17 Parent
has filed or will be filing, all tax returns required to be filed by it and
has
paid all taxes which are due and payable, and has paid all assessments and
reassessments, and all other taxes, governmental charges, penalties, interest
and fines due and payable by it on or before the date hereof. Adequate provision
has been made for taxes payable for the current period for which tax returns
are
not yet required to be filed; there are no agreements, waivers or other
arrangements providing for an extension of time with respect to the filing
of
any tax return by, or payment of any tax, governmental charge or deficiency
against Parent; there are no actions, suits, proceedings, investigations or
claims now threatened or pending against Parent in respect of taxes,
governmental charges or assessments, asserted by any such authority, Parent
has
withheld from each payment made to any of its past and present creditors,
shareholders, officers, directors and employees the amount of all taxes,
including but not limited to income tax, and other deductions required to be
withheld therefrom and has paid the same to proper tax or other receiving
officers within the time required under any applicable tax
legislation.
Parent
hereby acknowledges that the Company is relying upon the aforesaid
representations and warranties in connection with the completion by the Company
of the transaction contemplated hereby.
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ARTICLE
IV
PRE-CLOSING
COVENANTS
Pre-Closing
Covenants of the Company
4.1 The
Company covenants as follows:
| b. |
the
Company shall make available to the counsel and/or representatives
of
Parent, all books, accounts, records and other data of Company,
including
all minute books, share certificate books, share registers and
other
corporate documents including the constating (organizational) documents
of
Company, and all other data which in the opinion of the representatives
of
Parent, in its sole discretion, are required to make an examination
of
Company; and
|
| c. |
the
business of Company will be carried on in the ordinary course after
the
date hereof and up to Closing.
|
Pre-Closing
Covenants of Parent
4.2 Parent
covenants as follows:
a. Parent
shall make available to the counsel and/or representatives of the Company,
all
books, accounts, records and other data of Parent including all minute books,
share certificate books, share registers and other corporate documents including
the constating documents of Parent, and all other data which in the opinion
of
the representatives of the Company, in their sole discretion, are required
to
make an examination of Parent; and
b. the
business of Parent will be carried on in the ordinary course after the date
hereof and up to Closing.
ARTICLE
V
CLOSING
CONDITIONS
5.1 The
obligations of Parent and Merger Sub to consummate and effect the Transaction
shall be subject to the satisfaction at or prior to the Closing Date of each
of
the following conditions, any of which may be waived, in writing, exclusively
by
Parent:
(a) The
Company will deliver to Parent at Closing, a legal opinion, in form satisfactory
to counsel and/or representatives of for Parent that: (i) based solely on
certificates issued by Nevada, Company has been duly incorporated and organized
and is validly subsisting under the laws of the Nevada; and (ii) this Agreement
has been duly authorized by Company;
(b) The
president of Company will furnish a certificate that certifies the
following:
12
(i).
all
necessary steps and corporate proceedings of Company shall be taken to permit
the Company to effect the Merger and the transactions contemplated thereby;
(ii) The
representations and warranties of Company in this Agreement shall be true and
correct in all material respects on and as of the date of this Agreement and
at
and as of the Closing as though such representations and warranties were made
on
and as of such time (except for such representations and warranties that speak
specifically as of the date hereof or as of another date, which shall be true
and correct as of such date).
(iii) The
Company shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or complied
with by them at or prior to the Closing Date except to the extent that any
failure to perform or comply (other than a willful failure to perform or comply
or failure to perform or comply with an agreement or covenant reasonably within
the control of the Company) does not, or will not, constitute a material adverse
effect on the Company.
(e) That
Parent shall be furnished with evidence satisfactory to it at Closing (which
may
be in the form of officers’ certificates or accounting or tax filings) that
there are no arrears of or liabilities for taxes (including taxes on income),
rates, assessments or other charges adversely affecting the assets of Company
except taxes, rates, assessments of other charges accruing in the ordinary
course of operations; and
(f) In
case
any of the foregoing conditions shall not be fulfilled at or before Closing,
Parent may, by notice to the Company, terminate this agreement at which time
all
obligations of both Parent and the Company shall be terminated and the parties
shall bear their own costs, including all legal fees. In such event, the parties
will be mutually released from all claims, demands, actions, and obligations
under this Agreement.
5.2 The
obligations of Company to consummate and effect the Transaction shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Company:
(a) Parent
will deliver to the Company at Closing a legal opinion in form satisfactory
to
(or counsel for) the Company that:
(i). Parent
has been duly incorporated and organized and is validly subsisting under the
state laws of Nevada, it has the corporate power to own and lease its property
and to carry on the business of Parent as now being conducted by it, and there
are no restrictions on the business which may be carried on by
Parent;
(ii). the
authorized and issued capital of Parent consists of 125,000,000 number of common
shares without par value, of which 26,442,123 shares are issued and outstanding
as of the Closing Date.. No person, firm or corporation now has, or at Closing
will have, any agreement or option or any right capable of becoming an agreement
for the purchase, subscription or issuance of any of the unissued shares in
the
capital of Parent other than as noted herein.
13
(iii). all
necessary corporate action and proceedings have been taken by Parent and
Parent’s shareholders to authorize the Transaction and various agreements and
covenants contemplated hereby, including, without limitation, the due and valid
issuance of the Parent Shares at Closing to the Company
Shareholders;
(iv). this
Agreement has been duly authorized executed and delivered by Parent and
constitutes legal, valid and binding obligations of Parent, enforceable in
accordance with its terms except as may be limited by bankruptcy, insolvency
and
other similar laws relating to creditors’ rights generally and except that
specific performance, injunction and other equitable remedies may only be
granted in the discretion of a Court of competent jurisdiction;
(v). as
to
such other matters incidental to the matters herein contemplated as the Company
and or its counsel may reasonably request.
(b) the
president of Parent will furnish a certificate certifying:
(i) that
each
of the covenants, representations and warranties of Parent set out in this
agreement are true and correct as at Closing and that Parent has performed
its
covenants contained herein, provided however that the receipt of such
certificates and the closing of the transaction contemplated by this Agreement
shall not be a waiver of the covenants, representations and warranties contained
in this Agreement, which covenants, representations and warranties shall survive
Closing and, notwithstanding the closing of the exchange of shares contemplated
by this Agreement, shall continue in full force and effect, subject to Article
V. Post Closing Conditions herein;
(ii) that
all
necessary steps and corporate proceedings, including the approval of the Board
of Directors and the shareholders of Parent, as approved by the Company (or
its
counsel), shall be taken to permit the Parent Shares to be duly and regularly
issued to the Company’s shareholders or its nominee(s);
(iii) that
the
Company Shareholders shall be furnished with evidence satisfactory to it at
Closing that there are no arrears of or liabilities for taxes (including taxes
on income), rates, assessments or other charges;
(iv) that
at
or before Closing, there shall have been obtained from the appropriate federal,
provincial, state, municipal or other governmental or administrative bodies
all
such approvals or consents as may be required- if applicable- to permit the
exchange of the Company Shares and the issuance of the Parent Shares herein
provided for to be completed; and
(v) Parent
shall have obtained a lease for the necessary acreage (not to exceed 50 acres),
on a ninety-nine year lease, at the Port of Helena, Arkansas location, for
permitting and construction of a 10,000 sq ft Biomass facility;
(vi) that
at
Closing, Parent shall hold all such licences and permits as may be requisite
for
the carrying on of its intended business contemplated by this
Agreement.
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In
case
any of the foregoing conditions shall not be fulfilled at or before Closing,
the
Company may, by notice to Parent, terminate this agreement at which time all
obligations of Parent and the Company Shareholders shall be terminated and
the
parties shall bear their own costs, including all legal fees. In such event,
the
parties will deliver mutual releases from all claims, demands, actions, and
obligations under this Agreement.
5.2 The
respective obligations of each party to this Agreement to effect the Transaction
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Required
Approvals.
This
Agreement and the Transaction have been duly approved and adopted, by the
requisite vote, if any, of the Company’s stockholders and by the requisite
actions of the Board of Directors of the Company under the laws of the State
of
Nevada and the Company Charter Documents, and by the requisite actions of the
Board of Directors of Parent and the stockholders of Parent under the laws
of
the State of Nevada and the Parent Charter Documents;
(b) Assumption
of Options and Warrants.
The
Company shall have taken all necessary steps to effectuate the provisions of
Sections 1.6(b) and (c), including obtaining all necessary consents and
releases, if any, from the holders of Company Stock Options and Company Common
Stock Warrants. The Company shall have obtained agreements terminating all
pre-emptive rights; and
(c) Blue
Sky Laws.
The
issuance of Parent Common Stock to be issued under this Agreement shall be
exempt from, or have been qualified under, the Blue Sky Laws of each appropriate
jurisdiction to the satisfaction of Parent and the Company and their respective
counsels;
(d) Both
Parent and Company shall have completed its due diligence of the other to the
reasonable satisfaction of each;
(e) Both
Parent and Company shall have performed and complied with all covenants,
agreements, covenants and conditions required by this Agreement to be performed
or complied with by it at or prior to Closing.
(f) neither
any event shall have occurred, nor any action, act or proceedings or litigation
of any kind whatsoever shall have been commenced which, in the opinion of the
Company, is directly related to the transactions contemplated hereunder and
is,
or may be, materially adverse to the Company;
(g) there
shall have been no material adverse change in the business, condition, assets,
liabilities, operations, or financial performance of Parent since the date
of
the Agreement.
In
case
any of the foregoing conditions shall not be fulfilled at or before Closing,
both Parent and Company may, by notice to to the other, terminate this agreement
at which time all obligations of Parent and the Company shall be terminated
and
the parties shall bear their own costs, including all legal fees. In such event,
the parties will be mutually released from all claims, demands, actions, and
obligations under this Agreement.
15
ARTICLE
VI
POST-CLOSING
COVENANTS
6.1 Post-Closing
Covenants.
The
parties hereto acknowledge and agree that the agreements contained in this
Section 9.1 are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, neither party would enter into
this Agreement. The parties hereto acknowledge and agree that the failure by
Parent or the Company to satisfy, perform and comply with the covenants set
forth in this Section 9.1 ("Post-Closing Covenants") following the Closing
will
have a material adverse effect on Surviving Corporation. During the period
beginning upon the Closing and, unless for a longer period indicated below,
ending on the second anniversary of the Closing, Parent agrees to, and the
Company agrees to cause Parent to, satisfy the following agreements and
covenants:
(a) Equity
Financing.
On or
before (i) May 30, 2007, on terms and conditions acceptable to all members
of
Parent’s Board of Directors, Parent shall have completed, closed and received
the proceeds from a private placement offering of its common stock, exempt
from
registration under the Securities Act pursuant to Regulation D promulgated
thereunder, with net proceeds of a minimum of $7,500,000, and (ii) April 30,
2008, on terms and conditions acceptable to all members of Parent’s Board of
Directors, Parent shall have completed, closed and received the proceeds from
a
private placement offering of its common stock, exempt from registration under
the Securities Act pursuant to Regulation D promulgated thereunder, with net
proceeds sufficient for the construction and implementation of the desired
facility and technologies.
(b) Reporting
Company.
On or
before September 1, 2007, merge with a Section 12(g) reporting company in
compliance with and current in its reporting requirements under the Exchange
Act, and to remain quoted on, at a minimum, a nationally-recognized stock in
the
United States. The parties hereto agree and acknowledge that the monetary cost
of the publicly traded shell and any dilution caused by the acquisition of
the
Parent shall be borne exclusively by the stockholders of the Parent immediately
prior to the Effective Date.
(c) Upon
completion of the merger with a Reporting Company under Section 9.1(b) of this
Agreement, Parent shall file within the statutory time limits any required
filings or notifications with the SEC, NASDAQ and any other federal, state
or
regulatory agency including any agency or organization with jurisdiction over
any exchange on which the Parent’s securities are listed or traded, and responds
in a timely manner, and to the satisfaction of the SEC, to any review or inquiry
by the SEC to the Transaction Form 8-K and the U.S. GAAP Financial Statements
contained therein.
(d) (i)
Certify in writing to any person holding restricted shares of Parent Common
Stock as of the date of this Agreement that Parent has filed all of the reports
required to be filed by it under the Exchange Act to enable such person to
sell
such person's restricted stock under Rule 144 or 145, as may be applicable
in
the circumstances, or will inform such person in writing that it has not filed
any such report or reports, upon being informed in writing by such person of
its
intent to sell any shares under Rule 144 or Rule 145 promulgated under the
Securities Act (including any rule adopted in substitution or replacement
thereof), (ii) if any certificate representing any restricted shares of Parent
Common Stock is presented to Parent’s Transfer Agent for registration of
transfer in connection with any sale theretofore made or to be made under Rule
144 or 145, provided such certificate is duly endorsed for transfer by the
appropriate person(s) or accompanied by a separate stock power duly executed
by
the appropriate person(s) in each case with reasonable assurances that such
endorsements are genuine and effective, and is accompanied by an opinion of
counsel satisfactory to Parent and its counsel that such transfer has complied
with the requirements of Rule 144 or 145 (“Opinion”), as the case may be,
promptly instruct the Transfer Agent to register such transfer and to issue
one
or more new certificates representing such shares to the transferee and, if
appropriate under the provisions of Rule 144 or 145, as the case may be, free
of
any stop transfer order or restrictive legend.
16
(e) The
Parent shall invite Sorrento Financial Partners, LLC to attend all meetings
of
the board or directors of Parent in a nonvoting observer capacity and, in this
respect, shall give Sorrento Financial Partners, LLC copies of all notices,
minutes, consents and other materials that it provides to members of the board
of directors.
(f) Post-Closing
Indemnification.
Parent
hereby agrees to hold harmless and indemnify the former officers and directors
of Parent and Company to the full extent authorized or permitted by the
provisions of the Nevada Revised Statues, as such may be amended from time
to
time, and the Company’s Bylaws, as such may be amended, for a period of five (5)
years from the Effective Date pursuant to the form of Indemnification Agreement
in substantially the form as attached hereto as Exhibit 5.1(e)..
(g) Directors
and Officers Liability Insurance Extended Reporting Endorsement. Parent
shall purchase at Parent’s expense an extended reporting endorsement, or a
"tail," for each claims-made insurance policy now in effect at the Company
to
provide continued coverage for any event or omission which may have occurred
during the policy period which could give rise to coverage under such policy
for
a period of five (5) years. Parent shall name Company and each of its current
and former officers and directors as additional insureds with respect to each
such extended reporting endorsement.
(h) Disposition
of Securities Held by Company.
Parent
agrees that it will not sell or otherwise dispose, or cause to be sold or
otherwise cause to be disposed, more than five thousand (5,000) shares of any
securities or “cash equivalents,” held in the name of the Company on the
Effective Date, in any five day period.
17
ARTICLE
VII
MISCELLANEOUS
7.1 Unless
herein otherwise expressly provided, any notice, request, direction, consent,
waiver, extension, agreement or other communication (a “Communication”) that is
or may be given or made hereunder shall be in writing addressed as
follows:
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to Company, at
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To
be
valid for the purposes of this Agreement, any Communication is to be written
and
either personally delivered to the addressee or sent by facsimile transmission
to the addressee, and a notice or communication which is:
a. personally
delivered, if delivered before 4:00 p.m. (local time at place of delivery)
on a
day other than a Saturday, Sunday or statutory holiday (a “Business Day”),
deemed to have been given and received on that day and, in any other case deemed
to have been given and received on the first Business Day after the day on
which
it is delivered; or
b. sent
by
facsimile transmission is, if sent before 4:00 p.m. (local time at place of
transmission) on a Business Day, deemed to have been given and received on
that
day and, in any other case, deemed to have been given and received on the first
Business Day after the day on which it is sent.
7.2 This
agreement supersedes all other prior discussions or agreements with respect
to
this transaction and any such discussions or agreements are hereby declared
to
be rescinded and are null and void.
7.3 This
Agreement shall be governed by the laws of the STATE OF NEVADA and the federal
laws of the U.S., applicable therein.
7.4 No
party
may assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other parties. Subject
to
the first sentence of this Section, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
18
7.5 This
Agreement may be signed in as many counterparts as may be necessary, each of
which so signed shall be deemed to be an original, and such counterparts
together shall constitute one and the same instrument and notwithstanding the
date of execution shall be deemed to bear the date as set forth above and
execution and delivery by facsimile (fax) transmission shall be deemed to be
good and sufficient execution and delivery.
7.6 Each
of
the parties represents and warrants that they have not authorized any broker,
finder or agent to represent them in connection with the negotiation of this
transaction. Each agrees to indemnify and save the others harmless from any
other claim, commission, finder’s or broker’s fee because of any act, omission,
or statement of such party which causes the incurring of any other claim,
commission, finder’s or broker’s fee.
7.7 All
parties agree to use their reasonable best efforts to cooperate, provide, or
enter into any agreements required to give effect to this transaction and to
satisfy the conditions of closing contained in this agreement.
7.8
Each
party has been advised to seek its own independent legal, tax, financial or
other professional advice and acknowledges that it has had the opportunity
to do
so. No party to this agreement is making any representation or warranty as
to
the tax consequences of the transfer contemplated hereby. Each party agrees
to
obtain and be guided by its own legal, tax and securities advisor. The Company
Shareholders has satisfied itself that the transactions contemplated herein
do
not contravene U.S securities laws and there is an appropriate securities
exemption to enable it to complete the transactions contemplated
herein.
7.9. Any
disputes or claims arising under or in connection with this Agreement or the
transactions contemplated hereunder shall be resolved by binding arbitration.
Notice of a demand to arbitrate a dispute by either party shall be given in
writing to the other at their last known address. Arbitration shall be commenced
by the filing by a party of an arbitration demand with the American Arbitration
Association (“AAA”) in its office in Las Vegas, Nevada USA. The arbitration and
resolution of the dispute shall be resolved by a single arbitrator appointed
by
the AAA pursuant to AAA rules. The arbitration shall in all respects be governed
and conducted by applicable AAA rules, and any award and/or decision shall
be
conclusive and binding on the parties. The arbitration shall be conducted in
Las
Vegas, Nevada. The arbitrator shall supply a written opinion supporting any
award, and judgment may be entered on the award in any court of competent
jurisdiction. Each party shall pay its own fees and expenses for the
arbitration, except that any costs and charges imposed by the AAA and any fees
of the arbitrator for his services shall be assessed against the losing party
by
the arbitrator. In the event that preliminary or permanent injunctive relief
is
necessary or desirable in order to prevent a party from acting contrary to
this
Agreement or to prevent irreparable harm prior to a confirmation of an
arbitration award, then either party is authorized and entitled to commence
a
lawsuit solely to obtain equitable relief against the other pending the
completion of the arbitration in a court having jurisdiction over the parties.
All rights and remedies of the parties shall be cumulative and in addition
to
any other rights and remedies obtainable from arbitration.
19
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the date first written above.
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BIOGOLD
FUELS CORPORATION
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By:
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BIO-GOLD
ACQUISITION, INC.
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By:
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▇▇▇▇▇▇▇▇, CHAIRMAN
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FULL
CIRCLE INDUSTRIES, INC.
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By:
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20