AGREEMENT AND PLAN OF MERGER BY AND AMONG AURIGA LABORATORIES, INC., MULTI-LINK TELECOMMUNICATIONS, INC., AND MULTI-LINK ACQUISITION, INC. DATED AS OF MAY 4, 2006
AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
AURIGA
LABORATORIES, INC.,
MULTI-LINK
TELECOMMUNICATIONS, INC.,
AND
MULTI-LINK
ACQUISITION, INC.
DATED
AS OF MAY 4, 2006
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER is made and entered into as of this 4th day of
May,
2006, by and among Auriga Laboratories, Inc., a Delaware corporation
("Company"), Multi-Link Telecommunications, Inc., a Colorado corporation
(“Parent”), and Multi-Link Acquisition, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent (“Merger Sub”).
RECITALS
A. Upon
the
terms and subject to the conditions of this Agreement (as defined in Section
1.2) and in accordance with the General Corporation Law of the State of Delaware
(the “DGCL”), 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 preferred stock of the Parent.
B. 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.
C. 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”).
D. KI
Equity
Partners I, LLC, a Delaware limited liability company (“KI Equity”) owns the
majority of the outstanding shares of common stock of Parent.
NOW,
THEREFORE, in consideration of the covenants, promises and representations
set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties 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 DGCL, 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 Delaware
in accordance with the relevant provisions of the DGCL a Certificate of Merger
(the “Certificate of Merger”) (the time of such filing with the Secretary of
State of the State of Delaware, or such later time as may be agreed in writing
by the Company and Parent and specified in the Certificate 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 pursuant to Section 8.1, the closing of
the
Merger (the “Closing”) shall take place at the offices of Stone,
▇▇▇▇▇▇▇▇▇▇ & Cha, PLC, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇▇ at
a time
and date to be specified by the parties, which shall be no later than the third
business day after the satisfaction or waiver of the conditions set forth in
Article VI, 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 DGCL. 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 Certificate
of Incorporation; Bylaws.
(a) At
the
Effective Time, the Certificate of Incorporation of the Company shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation.
(b) The
Bylaws of the Company 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
Company 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 Company immediately
prior
to 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 Common Stock.
Each
share of common stock, par value $0.0001 per share, of the Company (the “Company
Common Stock”) issued and outstanding immediately prior to the Effective Time,
other than any shares of Company Common Stock to be canceled pursuant to Section
1.6(g), will be automatically converted into the right to receive on the Closing
Date 0.0606392 shares of Series A Convertible Preferred Stock, par value $0.01
per share, of Parent (“Series A Preferred Stock”) (the “Common Exchange Ratio”)
upon surrender of the certificate representing such share of Company Common
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 Common 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 Series A Preferred Stock issued in exchange for
such
shares of Company Common 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 Series A Preferred 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 30.017392 (“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.
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(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) Further
Actions Regarding Options and Warrants.
Prior
to the Closing Date, the Company agrees to take all necessary steps to
effectuate the foregoing 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.
(e) Cancellation
of Parent-Owned Stock.
Each
share of Company Common Stock held by the Company or owned by Merger Sub, Parent
or any direct or indirect wholly-owned subsidiary of the Company or of Parent
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion or payment in respect thereof.
(f) 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, par value $0.0001 per share, 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.
(g) 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.
(h) Fractional
Shares.
Fractional shares of Series A Preferred Stock will be issued by virtue of the
Merger (rounded to the second decimal point).
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1.7 Surrender
of Certificates.
(a) Exchange
Agent.
Parent
or such other agent or agents as Parent 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 Series A Preferred 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 Series A Preferred 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).
(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 Common
Stock whose shares were converted into the right to receive shares of Parent
Preferred 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), (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Series A Preferred Stock and any dividends or other distributions pursuant
to
Section 1.7(d), and (iii) an investment representation letter containing such
warranties, representations and agreements by holder as set forth in Section
1.12. 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 and investment representation letter, 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 Series A Preferred Stock into which their
shares of Company Common 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 Series A Preferred Stock (or Common Stock issuable upon
conversion of Series A Preferred 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 Series A Preferred Stock (or Parent Common Stock
issuable upon conversion of Series A Preferred 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 Series A Preferred Stock (or Parent Common Stock
issuable upon conversion of Series A Preferred 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 and
investment representation letter, Parent shall promptly deliver to the record
holders thereof, without interest, certificates representing shares of Series
A
Preferred Stock issued in exchange therefor (or Parent Common Stock issuable
upon conversion of Series A Preferred Stock) 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.
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(e) Transfers
of Ownership.
If
certificates representing shares of Series A Preferred 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 Series A Preferred
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
Common 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.
(g) Termination
of Exchange Agent Funding.
Series
A Preferred Stock (or Parent Common Stock issuable upon conversion of Series
A
Preferred 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
Series A Preferred Stock (or Parent Common Stock issuable upon conversion of
Series A Preferred 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 Series A Preferred Stock (or
Parent Common Stock issuable upon conversion of Series A Preferred Stock) or
Company Common 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 Common Stock.
All
shares of Series A Preferred 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 Common Stock, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Company Common 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.
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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 Series A Preferred Stock (or
Parent Common Stock issuable upon conversion of Series A Preferred Stock) which
the shares of Company Common Stock formerly represented by such Certificates
were converted into the right to receive pursuant to Section 1.6 and any
dividends or distributions payable pursuant to Section 1.7(d); provided,
however, that Parent may, in its discretion and as a condition precedent to
the
issuance of such certificates representing shares of Series A Preferred Stock
(or Parent Common Stock issuable upon conversion of Series A Preferred Stock)
and other distributions, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged
to
have been lost, stolen or destroyed.
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.
1.12 Investment
Representation.
All
shares of Series A Preferred Stock issued in accordance with the terms hereof
(including Parent Common Stock issuable upon conversion of Series A Preferred
Stock) shall, when issued, be restricted shares and may not be sold, transferred
or otherwise disposed of by the holders thereof without registration under
the
Securities Act of 1933, as amended ("Securities Act") or an available exemption
from registration under the Securities Act. The certificates representing the
shares of Series A Preferred Stock issued in accordance with the terms hereof
(including Parent Common Stock issuable upon conversion of Series A Preferred
Stock) will contain the appropriate restrictive legends, and the Parent shall
issue appropriate stop-transfer instructions to the Exchange Agent with respect
to such shares of Series A Preferred Stock (including Parent Common Stock
issuable upon conversion of Series A Preferred Stock). Except for the
representation made in Section 1.12(c)(i) regarding "accredited investor”
status, as to which up to 35 holders may be permitted to not make such
representation, each holder of record (as of the Effective Time) of
Certificates, which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock whose shares were converted into
the
right to receive shares of Series A Preferred Stock pursuant to Section 1.6,
shall provide an investment representation letter containing, among other
things, the following:
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(a)
Each
holder has and shall transfer, good and marketable title to the shares of
Company Common Stock owned by such holder, free and clear of all liens, claims,
charges, encumbrances, pledges, mortgages, security interests, options, rights
to acquire, proxies, voting trusts or similar agreements, restrictions on
transfer or adverse claims of any nature whatsoever (“Liens”).
(b) Each
holder is acquiring the shares of Series A Preferred Stock (including Parent
Common Stock issuable upon conversion of Series A Preferred Stock) for
investment for holder's own account and not as a nominee or agent, and not
with
a view to the resale or distribution of any part thereof, and such holders
have
no present intention of selling, granting any participation in, or otherwise
distributing the same. Each holder further represents that he does not have
any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the shares of Series A Preferred Stock (including Parent
Common Stock issuable upon conversion of Series A Preferred Stock).
(c)
Each
holder understands that shares of Series A Preferred Stock (including Parent
Common Stock issuable upon conversion of Series A Preferred Stock) are not
registered under the Securities Act, that the issuance of shares of Series
A
Preferred Stock (including Parent Common Stock issuable upon conversion of
Series A Preferred Stock) is intended to be exempt from registration under
the
Securities Act pursuant to Section 4(2) thereof, and that Parent's reliance
on
such exemption is predicated on the holder's representations set forth herein.
Each holder represents and warrants that: (i) he is an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D under the Act, (ii) he
can
bear the economic risk of his respective investments, and (iii) he possesses
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the investment in shares of Series
A Preferred Stock (including Parent Common Stock issuable upon conversion of
Series A Preferred Stock).
(d)
Holders
acknowledge that neither the SEC, nor the securities regulatory body of any
state has received, considered or passed upon the accuracy or adequacy of the
information and representations made in this Agreement.
(e)
Holders
acknowledge that they have carefully reviewed such information as each of them
deemed necessary to evaluate an investment in shares of Series A Preferred
Stock
(including Parent Common Stock issuable upon conversion of Series A Preferred
Stock). To the full satisfaction of each holder, he has been furnished all
materials that he has requested relating to Parent and the issuance of shares
of
Series A Preferred Stock hereunder (including Parent Common Stock issuable
upon
conversion of Series A Preferred Stock), and each holder has been afforded
the
opportunity to ask questions of Parent's representatives to obtain any
information necessary to verify the accuracy of any representations or
information made or given to the holders. Notwithstanding the foregoing, nothing
herein shall derogate from or otherwise modify the representations and
warranties of Parent set forth in this Agreement, on which each of the holders
has relied in making an exchange of his shares of Series A Preferred Stock.
8
(f) Each
holder understands that shares of Series A Preferred Stock (including Parent
Common Stock issuable upon conversion of Series A Preferred Stock) may not
be
sold, transferred, or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering shares of Series A Preferred Stock
(including Parent Common Stock issuable upon conversion of Series A Preferred
Stock) or any available exemption from registration under the Securities Act,
the shares of Series A Preferred Stock (including Parent Common Stock issuable
upon conversion of Series A Preferred Stock) may have to be held indefinitely.
Each holder further acknowledges that shares of Series A Preferred Stock
(including Parent Common Stock issuable upon conversion of Series A Preferred
Stock) may not be sold pursuant to Rule 144 promulgated under the Securities
Act
unless all of the conditions of Rule 144 are satisfied (including, without
limitation, Parent's compliance with the reporting requirements under the
Exchange Act).
(g) The
representations, warranties and agreements of each holder contained in the
investment representation letter shall survive the Closing of the Transaction.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF COMPANY
Except
as
disclosed on the schedules prepared by the Company to be delivered to the Parent
in accordance with Section 6.3(j) (the "Company Schedules"), the Company hereby
represents and warrants to, and covenants with, Parent and Merger Sub, as
follows:
2.1 Organization
and Qualification.
(a) The
Company is a corporation duly incorporated or organized, validly existing and
in
good standing under the laws of the State of Delaware and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being or currently planned
by the Company to be conducted. The Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders (“Approvals”) necessary to own, lease and operate the
properties it purports to own, operate or lease and to carry on its business
as
it is now being or currently planned by the Company to be conducted, except
where the failure to have such Approvals could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect (as defined
in Section 10.2 (b)) on the Company. Complete and correct copies of the
certificate of incorporation or organization and by-laws (or other comparable
governing instruments with different names) (collectively referred to herein
as
"Company Charter Documents") of the Company, as amended and currently in effect,
have been heretofore delivered to Parent. The Company is not in violation of
any
of the provisions of the Company Charter Documents.
9
(b) The
Company is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities
makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that could not, individually
or
in the aggregate, reasonably be expected to have a Material Adverse Effect
on
the Company.
(c) The
minute books of the Company contain true, complete and accurate records of
all
meetings and consents in lieu of meetings of its Board of Directors (and any
committees thereof), similar governing bodies and stockholders ("Corporate
Records"), since the time of the Company's organization. Copies of such
Corporate Records of the Company have been heretofore delivered to Parent.
(d) The
stock
transfer and ownership records of the Company contain true, complete and
accurate records of the stock ownership as of the date of such records and
the
transfers involving the capital stock of the Company since the time of the
Company's organization. Copies of such Stock Records of the Company have been
heretofore delivered to Parent.
2.2 Subsidiaries.
Set
forth in Schedule
2.2
hereto
is a true and complete list of all Subsidiaries of the Company, stating, with
respect to each Subsidiary, its jurisdiction of incorporation or organization,
date of incorporation or organization, capitalization and equity ownership.
Each
Subsidiary is duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, has all requisite corporate power and authority to own, lease
and
operate its properties and to carry on its businesses as they are now being
conducted, and each Subsidiary is qualified to do business as a foreign
corporation in any other jurisdiction in which is so required to be qualified.
All of the outstanding shares of capital stock or equity interests of each
Subsidiary have been duly and validly authorized and issued, are fully paid
and
non-assessable, have not been issued in violation of any preemptive or other
right of stockholders (or any other Person) or of any Legal Requirements, and
are owned beneficially and of record by the Company as specified on Schedule
2.2,
free
and clear of any Lien. No Subsidiary is in violation of any of the provisions
of
its Charter Documents.
Except
as
described in Schedule
2.2
hereto,
neither the Company nor any Subsidiary owns, directly or indirectly, any
ownership, equity, profits or voting interest in any Person (other than the
Company or the Subsidiaries) or has any agreement or commitment to purchase
any
such interest, and the Company and its Subsidiaries have not agreed and are
not
obligated to make nor are bound by any written, oral or other agreement,
contract, subcontract, lease, binding understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan,
commitment or undertaking of any nature, as of the date hereof or any date
hereafter, under which any of them may be obligated to make any future
investment in or capital contribution to any other entity.
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For
purposes of this Agreement, (i) the term “Subsidiary”
shall
mean any Person in which the Company or any Subsidiary directly or indirectly,
owns beneficially securities or interests representing more than 50% of (x)
the
aggregate equity or profit interests, or (y) the combined voting power of voting
interests ordinarily entitled to vote for management or otherwise, and (ii)
the
term “Person”
shall
mean and include an individual, a corporation, a partnership (general or
limited), a joint venture, an association, a limited liability company, a trust
or any other organization or entity, including a government or political
subdivision or an agency or instrumentality thereof.
2.3 Capitalization.
(a) The
authorized capital stock of the Company consists of 50,000,000 shares of common
stock, par value $0.0001 per share ("Company Common Stock"). There are no shares
of preferred stock authorized. Except as disclosed on Schedule
2.3,
at
the
close of business on the business day prior to the date hereof, (i) 16,490,990
shares of Company Common Stock were issued and outstanding, all of which are
validly issued, fully paid and nonassessable, exclusive of 3,750,000 shares
of
Company Common Stock held in treasury stock which shall be retired at the
Closing, (ii) 2,866,000 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding Company Stock Options granted to
employees of the Company under the Company’s 2005 Stock Option Plan (“Plan”) at
exercise prices per share ranging from $0.85 to $1.85, (iii) 4,202,281 shares
of
Company Common Stock were reserved for issuance upon the exercise of outstanding
Company Common Stock Warrants at exercise prices per share ranging from $0.85
to
$2.50,
and (iv)
no shares of Company Common Stock were reserved for issuance upon the conversion
of any outstanding convertible notes, debentures or securities ("Convertible
Securities").
There
are currently 2,134,000 shares of Company Common Stock available for grant
under
the Plan. All
shares of Company Common Stock subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instrument pursuant to which they
are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except as described in Schedule
2.3
hereto,
there are no commitments or agreements of any character to which the Company
is
bound obligating the Company to accelerate the vesting of any Company Stock
Option or Company Common Stock Warrant as a result of the Transaction. All
outstanding shares of Company Common Stock and all outstanding Company Stock
Options and Company Common Stock Warrants have been issued and granted in
compliance with (i) all applicable securities laws and (in all material
respects) other applicable laws and regulations, and (ii) all requirements
set
forth in any applicable Contracts. The Company has heretofore delivered to
Parent true, complete an accurate copies of the Company Stock Options and
Company Common Stock Warrants including any and all documents and agreements
relating thereto.
(b) Except
as
set forth in Schedule
2.3
hereto
or in this Section 2.3, there are no equity securities, partnership interests
or
similar ownership interests of any class of any equity security of the Company,
or any securities exchangeable or convertible into or exercisable for such
equity securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Schedule
2.3
hereof
or Section 2.3 hereof, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which the Company is a party or by which it is bound obligating the Company
to
issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or acquisition
of, any shares of capital stock, partnership interests or similar ownership
interests of the Company or obligating the Company to grant, extend, accelerate
the vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement.
11
(c) Except
as
contemplated by this Agreement and except as set forth in Schedule
2.3
hereto,
there are no registration rights, and there is no voting trust, proxy, rights
plan, anti-takeover plan or other agreement or understanding to which the
Company is a party or by which the Company is bound with respect to any equity
security of any class of the Company.
2.4 Authority
Relative to this Agreement.
The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and, to consummate
the
transactions contemplated hereby (including the Transaction). The execution
and
delivery of this Agreement and the consummation by the Company of the
transactions contemplated hereby (including the Transaction) have been duly
and
validly authorized by all necessary corporate action on the part of the Company
(including the approval by its Board of Directors), and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby, other than the approval
of this Agreement and the Transaction by a majority of the Company’s
stockholders. This Agreement has been duly and validly executed and delivered
by
the Company and, assuming the due authorization, execution and delivery thereof
by the other parties hereto, constitutes the legal and binding obligation of
the
Company, enforceable against the Company in accordance with its terms, except
as
may be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity and public policy.
2.5 No
Conflict; Required Filings and Consents.
The
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company shall not, (i) conflict with or
violate the Company Charter Documents, (ii) subject to obtaining the adoption
of
this Agreement and the Transaction by the stockholders of the Company, conflict
with or violate any Legal Requirements, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or materially impair the Company’s rights or
alter the rights or obligations of any third party under, or give to others
any
rights of termination, amendment, acceleration or cancellation of, or result
in
the creation of a lien or encumbrance on any of the properties or assets of
the
Company pursuant to, any Contracts, except, with respect to clauses (ii) or
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences that would not, individually and in the aggregate, have a Material
Adverse Effect on the Company.
(a) The
execution and delivery of this Agreement by the Company does not, and the
performance of their obligations hereunder will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
court, administrative agency, commission, governmental or regulatory authority,
domestic or foreign (a “Governmental Entity”), except (i) for applicable
requirements, if any, of the Securities Act, the Securities Exchange Act of
1934, as amended (the “Exchange Act”), state securities laws (“Blue Sky Laws”),
and the rules and regulations thereunder, and appropriate documents with the
relevant authorities of other jurisdictions in which the Company is qualified
to
do business, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company or, after the Closing, the Parent, or prevent
consummation of the Transaction or otherwise prevent the parties hereto from
performing their obligations under this Agreement.
12
2.6 Compliance.
To the
knowledge of the Company, it has complied with and is not in violation of any
Legal Requirements with respect to the conduct of its business, or the ownership
or operation of its business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely
to
have a Material Adverse Effect on the Company. To the Company’s knowledge, the
businesses and activities of the Company have not been and are not being
conducted in violation of any Legal Requirements and the Company is not in
default or violation of any term, condition or provision of any applicable
Company Charter Documents or Contracts. Except as set forth on Schedule
2.6,
to the
Company’s knowledge, no written notice of non-compliance with any Legal
Requirements has been received by the Company (and the Company has no knowledge
of any such notice delivered to any other Person). The Company is not in
violation of any term of any contract or covenant relating to employment,
patents, proprietary information disclosure, non-competition or
non-solicitation.
2.7 Financial
Statements.
(a) The
Company has provided to Parent a correct and complete copy of the audited
financial statements (including, in each case, any related notes thereto) of
the
Company and its Subsidiaries for the fiscal years ended March 31, 2006, prepared
in accordance with the published rules and regulations of any applicable
Governmental Entity and with generally accepted accounting principles of the
United States (“U.S. GAAP”) applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and audited in
accordance with the auditing standards of the Public Company Accounting
Oversight Board (“PCAOB”) by an independent accountant registered with PCAOB,
and such statements fairly present in all material respects the financial
position of the Company and its Subsidiaries, on a consolidated basis, at the
respective dates thereof and the results of its operations and cash flows for
the periods indicated, and each does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The audited financial statements
described in this Section 2.7(a) are referred to herein as the “U.S. GAAP
Financial Statements.”
(b) The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization, and (iv) the recorded accountability for assets
is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
13
2.8 No
Undisclosed Liabilities.
Except
as set forth in Schedule
2.8
hereto,
the Company and is Subsidiaries have no liabilities individually in excess
of
$25,000 and in the aggregate in excess of $50,000 (absolute, accrued, contingent
or otherwise) of a nature required to be disclosed on a balance sheet or in
the
related notes to the financial statements prepared in accordance with U.S.
GAAP
which are, individually or in the aggregate, material to the business, results
of operations or financial condition of the Company and its Subsidiaries,
except: (i) liabilities provided for in or otherwise disclosed in the audited
consolidated balance sheets of the Company and its Subsidiaries as of March
31,
2006 prepared in accordance with U.S. GAAP, which have been delivered to Parent,
and (ii) such liabilities arising in the ordinary course of the business of
the
Company and its Subsidiaries since March 31, 2006, none of which would have
a
Material Adverse Effect on the Company.
2.9 Absence
of Certain Changes or Events.
Except
as set forth in Schedule
2.9
hereto
and except for the Transactions, since March 31, 2006, there has not been:
(i)
any Material Adverse Effect on the Company and its Subsidiaries, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of the Company’s stock,
or any purchase, redemption or other acquisition by the Company of any of the
Company’s capital stock or any other securities of the Company or any options,
warrants, calls or rights to acquire any such shares or other securities, (iii)
any split, combination or reclassification of any of the Company’s capital
stock, (iv) any granting by the Company or its Subsidiaries of any increase
in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by the Company or its Subsidiaries of any bonus, except for
bonuses made in the ordinary course of business consistent with past practice,
or any granting by the Company or its Subsidiaries of any increase in severance
or termination pay or any entry by the Company or its Subsidiaries into any
currently effective employment, severance, termination or indemnification
agreement or any agreement the benefits of which are contingent or the terms
of
which are materially altered upon the occurrence of a transaction involving
the
Company of the nature contemplated hereby, (v) entry by the Company or its
Subsidiaries into any licensing or other agreement with regard to the
acquisition or disposition of any Intellectual Property (as defined in Section
2.18 hereof) other than licenses in the ordinary course of business consistent
with past practice or any amendment or consent with respect to any licensing
agreement filed or required to be filed by the Company or its Subsidiaries
with
respect to any Governmental Entity, (vi) any material change by the Company
in
its accounting methods, principles or practices, (vii) any change in the
auditors of the Company, (viii) any issuance of capital stock of the Company
or
any other securities of the Company or any options, warrants, calls or rights
to
acquire any such shares or other securities, or (ix) any revaluation by the
Company or its Subsidiaries of any of their respective assets, including,
without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable or any sale of assets of the Company or its
Subsidiaries other than in the ordinary course of business.
14
2.10 Litigation.
Except
as disclosed in Schedule
2.10
hereto,
there are no claims, suits, actions or proceedings pending or, to the knowledge
of the Company or its Subsidiaries, threatened against the Company or its
Subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seeks to restrain or enjoin
the consummation of the transactions contemplated by this Agreement or which
could reasonably be expected, either singularly or in the aggregate with all
such claims, actions or proceedings, to have a Material Adverse Effect on the
Company or have a Material Adverse Effect on the ability of the parties hereto
to consummate the Transaction.
2.11 Employee
Benefit Plans.
(a) All
employee compensation, incentive, fringe or benefit plans, programs, policies,
commitments or other arrangements (whether or not set forth in a written
document) covering any active or former employee, director or consultant of
the
Company, or any trade or business (whether or not incorporated) which is under
common control with the Company, with respect to which the Company has liability
(collectively, the “Plans”) has been maintained and administered in all material
respects in compliance with its terms and with the requirements prescribed
by
any and all statutes, orders, rules and regulations which are applicable to
such
Plans, and all liabilities with respect to the Plans have been properly
reflected in the financial statements of the Company. No suit, action or other
litigation (excluding claims for benefits incurred in the ordinary course of
Plan activities) has been brought, or to the knowledge of the Company is
threatened, against or with respect to any such Plan. There are no audits,
inquiries or proceedings pending or, to the knowledge of the Company, threatened
by any governmental agency with respect to any Plans. All contributions,
reserves or premium payments required to be made or accrued as of the date
hereof to the Plans have been timely made or accrued. the Company does not
have
any plan or commitment to establish any new Plan, to modify any Plan (except
to
the extent required by law or to conform any such Plan to the requirements
of
any applicable law, in each case as previously disclosed to Parent in writing,
or as required by this Agreement), or to enter into any new Plan. Each Plan
can
be amended, terminated or otherwise discontinued after the Closing in accordance
with its terms, without liability to Parent Company (other than ordinary
administration expenses and expenses for benefits accrued but not yet paid).
(b) Except
as
disclosed on Schedule
2.11
hereto
or in Section 2.11, neither the execution and delivery of this Agreement nor
the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute,
bonus
or otherwise) becoming due to any stockholder, director or employee of the
Company under any Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any Plan, or (iii) result in the acceleration of the
time of payment or vesting of any such benefits.
2.12 Labor
Matters.
Except
as disclosed in Schedule
2.12
hereto,
the Company and its Subsidiaries are not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or its Subsidiaries nor does the Company know of any activities or
proceedings of any labor union to organize any such employees.
15
2.13 Restrictions
on Business Activities.
Except
as disclosed on Schedule
2.13
hereto,
to the Company’s knowledge, there is no agreement, commitment, judgment,
injunction, order or decree binding upon the Company or its Subsidiaries or
to
which the Company or its Subsidiaries is a party which has or could reasonably
be expected to have the effect of prohibiting or materially impairing any
business practice of the Company or its Subsidiaries, any acquisition of
property by the Company or its Subsidiaries or the conduct of business by the
Company or its Subsidiaries as currently conducted other than such effects,
individually or in the aggregate, which have not had and could not reasonably
be
expected to have a Material Adverse Effect on the Company.
2.14 Title
to Property.
(a) All
real
property owned by the Company or its Subsidiaries (including improvements and
fixtures thereon, easements and rights of way) (the “Real Property”) is shown or
reflected on the audited consolidated balance sheets of the Company as of March
31, 2006 prepared in accordance with U.S. GAAP. The Company or its Subsidiaries
has good, valid and marketable fee simple title to the Real Property, and except
as set forth in the audited consolidated financial statements of the Company
as
of March 31, 2006 prepared in accordance with U.S. GAAP or on Schedule
2.14
hereto,
all of the Real Property is held free and clear of (i) all leases, licenses
and
other rights to occupy or use the Real Property and (ii) all Liens, rights
of
way, easements, restrictions, exceptions, variances, reservations, covenants
or
other title defects or limitations of any kind, other than liens for taxes
not
yet due and payable and such liens or other imperfections of title, if any,
as
do not materially detract from the value of or materially interfere with the
present use of the property affected thereby. Schedule
2.14
hereto
is a list of all options or other contracts under which the Company has a right
to acquire any interest in real property.
(b) All
leases of real property held by the Company or its Subsidiaries and all personal
property and other property and assets of the Company or its Subsidiaries (other
than Real Property) owned, used or held for use in connection with the business
of the Company or its Subsidiaries (the “Personal Property”) are shown or
reflected on the audited consolidated balance sheets of the Company as of March
31, 2006 prepared in accordance with U.S. GAAP. The Company or its Subsidiaries
owns and has good and marketable title to the Personal Property, and all such
assets and properties are in each case held free and clear of all Liens, except
for Liens disclosed in the audited consolidated financial statements of the
Company as of March 31, 2006 prepared in accordance with U.S. GAAP or in
Schedule
2.14
hereto,
none of which Liens has or will have, individually or in the aggregate, a
Material Adverse Effect on such property or on the present or contemplated
use
of such property in the businesses of the Company.
(c) All
leases pursuant to which the Company or its Subsidiaries leases from others
material real or personal property are valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any existing
material default or event of default of the Company or its Subsidiaries or,
to
the Company's knowledge, any other party (or any event which with notice or
lapse of time, or both, would constitute a material default), except where
the
lack of such validity and effectiveness or the existence of such default or
event of default could not reasonably be expected to have a Material Adverse
Effect on the Company.
16
2.15 Taxes.
(a) Definition
of Taxes.
For the
purposes of this Agreement, “Tax” or “Taxes” refers to any and all federal,
state, local and foreign taxes, including, without limitation, gross receipts,
income, profits, sales, use, occupation, value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, assessments, governmental charges and duties together with all interest,
penalties and additions imposed with respect to any such amounts and any
obligations under any agreements or arrangements with any other person with
respect to any such amounts and including any liability of a predecessor entity
for any such amounts.
(b) Tax
Returns and Audits.
Except
as
set forth in Schedule
2.15
hereto,
to Company's knowledge:
(i) The
Company and its Subsidiaries have timely filed all federal, state, local and
foreign returns, estimates, information statements and reports relating to
Taxes
(“Returns”) required to be filed by them with any Tax authority prior to the
date hereof, except such Returns which are not material to the Company or its
Subsidiaries. All such Returns are true, correct and complete in all material
respects. The Company and its Subsidiaries have paid all Taxes shown to be
due
on such Returns.
(ii) All
Taxes
that the Company or its Subsidiaries is required by law to withhold or collect
have been duly withheld or collected, and have been timely paid over to the
proper governmental authorities to the extent due and payable.
(iii) The
Company and its Subsidiaries have not been delinquent in the payment of any
material Tax nor is there any material Tax deficiency outstanding, proposed
or
assessed against them, nor have they executed any unexpired waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No
audit
or other examination of any Return of the Company or its Subsidiaries by any
Tax
authority is presently in progress, nor has the Company or its Subsidiaries
been
notified of any request for such an audit or other examination.
(v) No
adjustment relating to any Returns filed by the Company or its Subsidiaries
has
been proposed in writing, formally or informally, by any Tax authority to the
Company or its Subsidiaries or any representative thereof.
(vi) The
Company and its Subsidiaries have no liability for any material unpaid Taxes
which have not been accrued for or reserved on the Company’s consolidated
balance sheets included in the audited financial statements for the most recent
fiscal year ended, whether asserted or unasserted, contingent or otherwise,
which is material to the Company, other than any liability for unpaid Taxes
that
may have accrued since the end of the most recent fiscal year in connection
with
the operation of the business in the ordinary course of business, none of which
is material to the business, results of operations or financial condition of
the
Company.
17
(vii) The
Company and its Subsidiaries have not taken any action and does not know of
any
fact, agreement, plan or other circumstance that is reasonably likely to prevent
the Transaction from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
2.16 Environmental
Matters.
Except
as
disclosed in Schedule
2.16
hereto
and except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on the Company, to the
Company’s knowledge: (i) the Company and its Subsidiaries have complied with all
applicable Environmental Laws; (ii) the properties currently owned or operated
by the Company and its Subsidiaries (including soils, groundwater, surface
water, buildings or other structures) are not contaminated with any Hazardous
Substances; (iii) the properties formerly owned or operated by the Company
or
its Subsidiaries were not contaminated with Hazardous Substances during the
period of ownership or operation by the Company or its Subsidiaries; (iv) the
Company and its Subsidiaries are not subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) the Company
and its Subsidiaries have not been associated with any release or threat of
release of any Hazardous Substance; (vi) the Company and its Subsidiaries have
not received any notice, demand, letter, claim or request for information
alleging that the Company and its Subsidiaries may be in violation of or liable
under any Environmental Law; and (vii) the Company and its Subsidiaries are
not
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances.
(b) As
used
in this Agreement, the term “Environmental Law” means any federal, state, local
or foreign law, regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to: (A) the protection, investigation
or restoration of the environment, health and safety, or natural resources;
(B)
the handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (C) noise, odor, wetlands, pollution, contamination
or
any injury or threat of injury to persons or property.
(c) As
used
in this Agreement, the term “Hazardous Substance” means any substance that is:
(i) listed, classified or regulated pursuant to any Environmental Law; (ii)
any
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, radioactive materials or radon;
or
(iii) any other substance which is the subject of regulatory action by any
Governmental Entity pursuant to any Environmental Law.
2.17 Brokers;
Third Party Expenses.
Except
as set forth in Schedule
2.17,
the
Company and its Subsidiaries have not incurred, nor will they incur, directly
or
indirectly, any liability for brokerage, finders' fees, agent’s commissions or
any similar charges in connection with this Agreement or any transactions
contemplated hereby, nor will the Company, its Subsidiaries or Parent be
required to issue any shares of common stock, options, warrants or other
securities of either the Company, its Subsidiaries or Parent to any third party
as result of this Transaction due to the provisions of any agreement entered
into by the Company or its Subsidiaries relating to brokerage, finders' fees,
agent’s commissions or similar agreements.
18
2.18 Intellectual
Property.
For the
purposes of this Agreement, the following terms have the following definitions:
“Intellectual
Property”
shall
mean any or all of the following and all worldwide common law and statutory
rights in, arising out of, or associated therewith: (i) patents and applications
therefor and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof (“Patents”); (ii) inventions
(whether patentable or not), invention disclosures, formulations, delivery
methods, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating
to
any of the foregoing; (iii) copyrights, copyrights registrations and
applications therefor, and all other rights corresponding thereto throughout
the
world; (iv) domain names, uniform resource locators (“URLs”) and other names and
locators associated with the Internet (“Domain Names”); (v) formulations and
delivery methods and any registrations, approvals and applications therefor;
(vi) trade names, logos, common law trademarks and service marks, trademark
and
service ▇▇▇▇ registrations and applications therefor (collectively,
“Trademarks”); (vii) all databases and data collections and all rights therein;
(viii) all moral and economic rights of authors and inventors, however
denominated, and (ix) any similar or equivalent rights to any of the foregoing
(as applicable).
“Company
Intellectual Property”
shall
mean any Intellectual Property that is owned by, or exclusively licensed to,
the
Company or its Subsidiaries.
“Registered
Intellectual Property”
means
all Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued, filed with, or recorded by any
private, state, government or other legal authority.
“Company
Registered Intellectual Property”
means
all of the Registered Intellectual Property owned by, or filed in the name
of,
the Company or its Subsidiaries.
“Company
Products”
means
all products (including formulations and delivery methods with respect thereto)
used, licensed, owned, sold, marketed or in development by the Company or its
Subsidiaries.
(a) Set
forth
on Schedule
2.18
is a
list identifying each Company Product and any Patents or Government
Action/Filing (as defined in Section 2.21) associated with each such Company
Product. The Company has heretofore provided Parent with a copy of each such
Patent or Government Action/Filing.
(b) Except
as
disclosed on Schedule
2.18,
to the
Company’s knowledge, Company Intellectual Property or Company Product is not
subject to any material proceeding or outstanding decree, order, judgment,
contract, license, agreement or stipulation restricting in any manner the use,
transfer or licensing thereof by the Company or its Subsidiaries, or which
may
affect the validity, use or enforceability of such Company Intellectual Property
or Company Product, which in any such case could reasonably be expected to
have
a Material Adverse Effect on the Company.
19
(c) Except
as
disclosed on Schedule
2.18
hereto,
the Company or its Subsidiaries owns and has good and exclusive title to each
material item of Company Intellectual Property owned by it free and clear of
any
Liens (excluding non-exclusive licenses and related restrictions granted in
the
ordinary course); and the Company or its Subsidiaries is the exclusive owner
of
all material registered Trademarks used in connection with the operation or
conduct of the business of the Company or its Subsidiaries including the sale
of
any products by the Company or its Subsidiaries.
(d) The
operation of the business of the Company and its Subsidiaries as such business
currently is conducted, including (i) the design, delivery method, formulation,
development, manufacture, distribution, reproduction, marketing or sale of
the
products or services of the Company and its Subsidiaries (including Company
Products) and (ii) the use of any product, device or process of the Company
or
its Subsidiaries, to the Company's knowledge and except as could not reasonably
be expected to have a Material Adverse Effect, has not and does not and will
not
infringe or misappropriate the Intellectual Property of any third party or
constitute unfair competition or trade practices under the laws of any
jurisdiction.
2.19 Agreements,
Contracts and Commitments. Schedule
2.19
hereto
sets forth a complete and accurate list of all Material Contracts (as
hereinafter defined), specifying the parties thereto. For purposes of this
Agreement, (i) the term “Contracts” shall mean all contracts, agreements,
leases, mortgages, indentures, note, bond, liens, license, permit, franchise,
purchase orders, sales orders, arbitration awards, judgments, decrees, orders,
documents, instruments, understandings and commitments, or other instrument
or
obligation (including without limitation outstanding offers or proposals) of
any
kind, whether written or oral, to which the Company or its Subsidiaries is
a
party or by or to which any of the properties or assets of the Company or its
Subsidiaries may be bound, subject or affected (including without limitation
notes or other instruments payable to the Company or its Subsidiaries) and
(ii)
the term “Material Contracts” shall mean (x) each Contract (I) providing for
payments (past, present or future) to the Company or its Subsidiaries in excess
of $50,000 in the aggregate or (II) under which or in respect of which the
Company or its Subsidiaries presently has any liability or obligation of any
nature whatsoever (absolute, contingent or otherwise) in excess of $50,000,
(y)
each Contract which otherwise is or may be material to the businesses,
operations, assets, condition (financial or otherwise) or prospects of the
Company or its Subsidiaries and (z) without limitation of subclause (x) or
subclause (y), each of the following Contracts:
(i) any
mortgage, indenture, note, installment obligation or other instrument, agreement
or arrangement for or relating to any borrowing of money by or from the Company
or its Subsidiaries, or any officer, director or 5% or more stockholder
("Insider") of the Company or its Subsidiaries;
(ii) any
guaranty, direct or indirect, by the Company or its Subsidiaries or any Insider
of the Company or its Subsidiaries of any obligation for borrowings, or
otherwise, excluding endorsements made for collection in the ordinary course
of
business;
(iii) any
Contract made other than in the ordinary course of business or (x) providing
for
the grant to any preferential rights to purchase or lease any asset of the
Company or its Subsidiaries or (y) providing for any right (exclusive or
non-exclusive) to sell or distribute, or otherwise relating to the sale or
distribution of, any product or service of the Company or its
Subsidiaries;
20
(iv) any
obligation to register any shares of the capital stock or other securities
of
the Company or its Subsidiaries with any Governmental Entity;
(v) any
obligation to make payments, contingent or otherwise, arising out of the prior
acquisition of the business, assets or stock of other Persons;
(vi) any
collective bargaining agreement with any labor union;
(vii) any
lease
or similar arrangement for the use by the Company or its Subsidiaries of
personal property;
(viii) any
Contract granting or purporting to grant, or otherwise in any way relating
to,
any mineral rights or any other interest (including, without limitation, a
leasehold interest) in real property; and
(ix) any
Contract to which any Insider of the Company or its Subsidiaries is a
party.
(b) Each
Contract was entered into at arms’ length and in the ordinary course, is in full
force and effect and is valid and binding upon and enforceable against each
of
the parties thereto. True, correct and complete copies of all Material Contracts
(or written summaries in the case of oral Material Contracts) and of all
outstanding offers or proposals of the Company or its Subsidiaries have been
heretofore delivered to Parent.
(c) Except
as
set forth in Schedule
2.19,
neither
the Company nor its Subsidiaries nor to the best of the Company’s knowledge any
other party thereto is in breach of or in default under, and no event has
occurred which with notice or lapse of time or both would become a breach of
or
default under, any Contract, and no party to any Contract has given any written
notice of any claim of any such breach, default or event, which, individually
or
in the aggregate, are reasonably likely to have a Material Adverse Effect on
the
Company. Each agreement, contract or commitment to which the Company or its
Subsidiaries is a party or by which they are bound that has not expired by
its
terms is in full force and effect, except where such failure to be in full
force
and effect is not reasonably likely to have a Material Adverse Effect on the
Company.
2.20 Insurance. Schedule
2.20
sets
forth the insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors
(collectively, the “Insurance Policies”) of the Company and its Subsidiaries.
2.21 Governmental
Actions/Filings.
The
Company and its Subsidiaries have been granted and hold, and have made, all
Governmental Actions/Filings (including, without limitation, the Governmental
Actions/Filings required for (i) emission or discharge of effluents and
pollutants into the air and the water and (ii) the manufacture and sale of
all
products manufactured and sold by it) necessary to the conduct the business
of
the Company and its Subsidiaries as presently conducted or used or held for
use
by the Company or its Subsidiaries, all of which are listed in Schedule
2.21
hereto,
and true, complete and correct copies of which have heretofore been delivered
to
Parent. Each such Governmental Action/Filing is in full force and effect and,
expect as disclosed in Schedule
2.21
hereto,
will not expire prior to December 31, 2006, and the Company and its Subsidiaries
are in compliance with all of its obligations with respect thereto. No event
has
occurred and is continuing which requires or permits, or after notice or lapse
of time or both would require or permit, and consummation of the transactions
contemplated by this Agreement or any ancillary documents will not require
or
permit (with or without notice or lapse of time, or both), any modification
or
termination of any such Governmental Actions/Filings. Except as set forth in
Schedule
2.21,
to the
Company’s knowledge, no Governmental Action/Filing is necessary to be obtained,
secured or made by the Company or its Subsidiaries to enable it to continue
to
conduct its businesses and operations and use its properties after the Closing
in a manner which is consistent with current practice.
21
For
purposes of this Agreement, the term “Governmental Action/Filing” shall mean any
franchise, license, certificate of compliance, authorization, consent, order,
permit, approval, consent or other action of, or any filing, registration or
qualification with, any federal, state, municipal, foreign or other
governmental, administrative or judicial body, agency or authority including,
without limitation the U.S. Food and Drug Administration.
2.22 Interested
Party Transactions.
Except
as set forth in the Schedule
2.22
hereto,
no employee, officer, director or Insider of the Company or its Subsidiaries
or
a member of his or her immediate family is indebted to the Company or its
Subsidiaries, nor is the Company or its Subsidiaries indebted (or committed
to
make loans or extend or guarantee credit) to any of them, other than (i) for
payment of salary for services rendered, (ii) reimbursement for reasonable
expenses incurred on behalf of the Company or its Subsidiaries, and (iii) for
other employee benefits made generally available to all employees. Except as
set
forth in Schedule
2.22,
to the
Company’s knowledge, none of such individuals has any direct or indirect
ownership interest in any Person with whom the Company or any Subsidiary is
affiliated or with whom the Company or any Subsidiary has a contractual
relationship, or any Person that competes with the Company or any Subsidiary,
except that each employee, Insider, officer or director of the Company and
its
Subsidiaries and members of their respective immediate families may own less
than 5% of the outstanding stock in publicly traded companies that may compete
with the Company or its Subsidiaries. Except as set forth in Schedule
2.22,
to the
knowledge of the Company, no officer, director or Insider or any member of
their
immediate families is, directly or indirectly, interested in any material
contract with the Company or its Subsidiaries (other than such contracts as
relate to any such individual ownership of capital stock or other securities
of
the Company or its Subsidiaries).
2.23 Board
Approval.
The
board of directors of the Company or similar governing body (including any
required committee or subgroup of thereof) has, as of the date of this
Agreement, unanimously approved, subject to the approval of stockholders, this
Agreement and the transactions contemplated hereby, and resolved to seek the
stockholders approval and adoption of this Agreement and approval of the
Transaction, if required.
22
2.24 Management.
During
the past five year period, to the Company’s knowledge, no current or former
director, executive officer or Insider of the Company or any Subsidiary has
been
the subject of: (a)
a
petition under the Federal bankruptcy laws or any other insolvency or moratorium
law or has a receiver, fiscal agent or similar officer been appointed by a
court
for such person, or any partnership in which such person was a general partner
at or within two years before the time of such filing, or any corporation or
business association of which such person was an executive officer at or within
two years before the time of such filing;
(b) a
conviction in a criminal proceeding or a named subject of a pending criminal
proceeding (excluding traffic violations that do not relate to driving while
intoxicated or driving under the influence); (c)
any
order, judgment or decree, not subsequently reversed, suspended or vacated,
of
any court of competent jurisdiction, permanently or temporarily enjoining any
such person from, or otherwise limiting, the following activities: (1) Acting
as
a futures commission merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage transaction merchant, any other
person regulated by the United States Commodity Futures Trading Commission
or an
associated person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or continuing any conduct
or
practice in connection with such activity;
(2)
Engaging in any type of business practice; or (3)
Engaging in any activity in connection with the purchase or sale of any security
or commodity or in connection with any violation of Federal, state or other
securities laws or commodities laws; (d)
any
order, judgment or decree, not subsequently reversed, suspended or vacated,
of
any Federal, state or local authority barring, suspending or otherwise limiting
for more than 60 days the right of any such person to engage in any activity
described in the preceding sub-paragraph, or to be associated with persons
engaged in any such activity; (e)
a
finding by a court of competent jurisdiction in a civil action or by the U.S.
Securities and Exchange Commission (the "Commission") to have violated any
securities law, regulation or decree and the judgment in such civil action
or
finding by the Commission has not been subsequently reversed, suspended or
vacated; or
(f) a
finding by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal commodities
law, and the judgment in such civil action or finding has not been subsequently
reversed, suspended or vacated.
2.25 Injunction.
Neither
the Company nor any of its Subsidiaries and affiliates is or has been subject
to
any order, judgment, or decree of any court of competent jurisdiction
temporarily, preliminarily, or permanently enjoining such person for failure
to
comply with Rule 503 under Regulation D
2.26 Representations
and Warranties Complete.
The
representations and warranties of the Company included in this Agreement and
any
list, statement, document or information set forth in, or attached to, any
Schedule provided pursuant to this Agreement or delivered hereunder, are true
and complete in all material respects and do not contain any untrue statement
of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading, under
the
circumstance under which they were made.
23
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF PARENT
AND
MERGER SUB
Except
as
disclosed on the schedules prepared by the Parent (the "Parent Schedules")
Parent represents and warrants to, and covenants with, the Company, as follows:
3.1 Organization
and Qualification.
(a) Parent
is
a corporation duly incorporated, validly existing and in good standing under
the
laws of the State of Colorado and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being or currently planned by Parent to be conducted.
Parent is in possession of all Approvals necessary to own, lease and operate
the
properties it purports to own, operate or lease and to carry on its business
as
it is now being or currently planned by Parent to be conducted, except where
the
failure to have such Approvals could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent. Complete
and
correct copies of the Parent Charter Documents, as amended and currently in
effect, have been heretofore delivered to the Company. Parent is not in
violation of any of the provisions of the Parent Charter Documents.
(b) Parent
is
duly qualified or licensed to do business as a foreign corporation and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that could not, individually or
in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent.
3.2 Subsidiaries.
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 interest, and Parent has not agreed and is not obligated
to
make nor is bound by any written, oral or other agreement, contract,
subcontract, lease, binding understanding, instrument, note, option, warranty,
purchase order, license, sublicense, insurance policy, benefit plan, commitment
or undertaking of any nature, as of the date hereof or as may hereafter be
in
effect under which it may become obligated to make, any future investment in
or
capital contribution to any other entity.
3.3 Capitalization.
(a) The
authorized capital stock of Parent consists of: (i) 150,000,000
shares of common stock, no par value per share (“Parent Common Stock”) and (ii)
5,000,000 shares of preferred stock, par value $0.01 per share (“Parent
Preferred Stock”) of which 1,200,000 shares
will be designated as Series A Convertible Preferred Stock (“Series A Preferred
Stock”) pursuant to the Certificate of Designations of Series A Preferred Stock
attached hereto as Exhibit
A
(“Certificate of Designations”). As of the close of business on the business day
immediately prior to the date hereof, Parent has: (i) 37,215,913 shares of
Parent Common Stock issued and outstanding, (ii) no shares of Parent Preferred
Stock were issued and outstanding; (iii) no shares of Parent Common Stock were
reserved for issuance upon the exercise of outstanding options and warrants
to
purchase Parent Common Stock ("Parent Warrants"); (iv) no shares of Parent
Preferred Stock were reserved for issuance to any party (other than the
issuances contemplated under this Agreement); and (v) no shares of Parent Common
Stock were reserved for issuance upon the conversion of Parent Preferred Stock
or any outstanding convertible notes, debentures or securities ("Convertible
Securities"). All outstanding shares of Parent Common Stock have been issued
and
granted in compliance with (i) all applicable securities laws and (in all
material respects) other applicable laws and regulations, and (ii) all
requirements set forth in any applicable Contracts. Prior to Closing, there
will
be an aggregate of 1,200,000 shares of authorized but unissued shares of Series
A Preferred Stock, which, subject to the approval of Parent’s stockholders to
effect the Reverse Split, which in any case shall be required to have occurred
subsequent to the Closing (“Stockholder Approval”): (i) shall be convertible
into 593,947,975 shares of Parent Common Stock on a pre-Reverse Split basis,
based on a conversion rate of 494.956646 shares of Parent Common Stock on a
pre-Reverse Split basis for each share of Series A Preferred Stock, and (ii)
shall be convertible into 39,596,532 shares of Parent Common Stock on a
post-Reverse Split basis. The term “Reverse
Split”
is
defined in Section 5.14 hereof. All outstanding shares of Parent Common Stock
have been issued and granted in compliance with (i) all applicable securities
laws and (in all material respects) other applicable laws and regulations,
and
(ii) all requirements set forth in any applicable Contracts.
24
(b) Except
as
contemplated by this Agreement, or as described on Schedule
3.3,
as of
the date hereof, there is no commitment by Parent to issue any shares of capital
stock, subscriptions, warrants, options, convertible securities, or other
similar rights to purchase or receive Parent securities or to distribute to
the
holders of any of its equity securities any evidence of indebtedness, cash,
or
other assets. Parent is under no obligation (contingent or otherwise) to
purchase, redeem, or otherwise acquire any of its equity or debt securities
or
any interest therein, and to Parent’s knowledge, there are no voting trusts or
similar agreements, stockholders’ agreements, pledge agreements, buy-sell
agreements, rights of first refusal, preemptive rights, or proxies relating
to
any securities of Parent
or
obligating Parent to grant, extend, accelerate the vesting of or enter into
any
such subscription, option, warrant, equity security, call, right, commitment
or
agreement. Except
as
contemplated by this Agreement and except as set forth in Schedule
3.3
hereto,
there are no registration rights, and there is no voting trust, proxy, rights
plan, anti-takeover plan or other agreement or understanding to which Parent
is
a party or by which it is bound with respect to any equity security of any
class
of Parent.
3.4 Authority
Relative to this Agreement.
Parent
has full corporate power and authority to: (i) execute, deliver and perform
this
Agreement, and each ancillary document which Parent has executed or delivered
or
is to execute or deliver pursuant to this Agreement, and (ii) carry out Parent's
obligations hereunder and thereunder and, to consummate the transactions
contemplated hereby (including the Transaction). The execution and delivery
of
this Agreement and the consummation by Parent of the transactions contemplated
hereby (including the Transaction) have been duly and validly authorized by
all
necessary corporate action on the part of Parent (including the approval by
its
Board of Directors), and no other corporate proceedings on the part of Parent
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and, assuming the due authorization, execution and delivery
thereof by the other parties hereto, constitutes the legal and binding
obligation of Parent, enforceable against Parent in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors’ rights generally and by
general principles of equity and public policy.
25
3.5 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by Parent does not, and the performance
of this Agreement by Parent shall not: (i) conflict with or violate Parent
Charter Documents, (ii) conflict with or violate any Legal Requirements, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or materially
impair Parent's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration
or
cancellation of, or result in the creation of a lien or encumbrance on any
of
the properties or assets of Parent pursuant to, any Contracts, except, with
respect to clauses (ii) or (iii), for any such conflicts, violations, breaches,
defaults or other occurrences that would not, individually and in the aggregate,
have a Material Adverse Effect on Parent.
(b) Except
for: (i) the filing of the Certificate of Designations with the appropriate
authorities and pursuant to the laws of the State of Colorado, (ii) the filing
of the articles of merger with the appropriate authorities and pursuant to
the
laws of the State of Delaware, and (iii) the requirement to obtain the
Stockholder Approval which in any case shall be required to have occurred
subsequent to the Closing, the execution and delivery of this Agreement by
Parent does not, and the performance of its obligations hereunder will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws,
and the rules and regulations thereunder, and appropriate documents with the
relevant authorities of other jurisdictions in which Parent is qualified to
do
business, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent, or prevent consummation of the Transaction or
otherwise prevent the parties hereto from performing their obligations under
this Agreement.
3.6 Compliance.
To
Parent's knowledge, Parent has complied with, is not in violation of, any Legal
Requirements with respect to the conduct of its business, or the ownership
or
operation of its business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely
to
have a Material Adverse Effect on Parent. To Parent's knowledge, the businesses
and activities of Parent have not been and are not being conducted in violation
of any Legal Requirements. Parent is not in default or violation of any term,
condition or provision of Parent Charter Documents. Except as set forth on
Schedule
3.6,
to
Parent's knowledge, no written notice of non-compliance with any Legal
Requirements has been received by the Parent Company (and the Parent has no
knowledge of any such notice delivered to any other Person). The Parent is
not
in violation of any term of any contract or covenant relating to employment,
patents, proprietary information disclosure, non-competition or
non-solicitation.
26
3.7 SEC
Filings; Financial Statements.
(a) Parent
has made available to the Company each report, registration statement and
definitive proxy statement filed by Parent with the SEC for the 36 months prior
to the date of this Agreement (the “Parent SEC Reports”), which, to Parent's
knowledge, are all the forms, reports, statements and documents required to
be
filed by Parent with the SEC for the 36 months prior to the date of this
Agreement. As of their respective dates (and with respect to Parent SEC Reports
filed prior to June 30, 2005, to the knowledge of Parent), the Parent SEC
Reports: (i) were prepared in accordance and complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case
may
be, and the rules and regulations of the SEC thereunder applicable to such
Parent SEC Reports, and (ii) did not at the time they were filed (and if amended
or superseded by a filing prior to the date of this Agreement then on the date
of such filing and as so amended or superceded) contain any untrue statement
of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
set forth in the preceding sentence, Parent makes no representation or warranty
whatsoever concerning the Parent SEC Reports as of any time other than the
time
they were filed.
(b) Each
set
of financial statements (including, in each case, any related notes thereto)
contained in Parent SEC Reports (and with respect to financial statements (and
notes thereto) contained in Parent SEC Reports filed prior to June 30, 2005,
to
the knowledge of Parent), complied as to form in all material respects with
the
published rules and regulations of the SEC with respect thereto, was prepared
in
accordance with U.S. GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, do not contain footnotes as permitted by Form 10-QSB
of
the Exchange Act) and each fairly presents in all material respects the
financial position of Parent at the respective dates thereof and the results
of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal adjustments
which were not or are not expected to have a Material Adverse Effect on Parent
taken as a whole.
(c) Parent
has previously furnished to Company a complete and correct copy of any
amendments or modifications, which have not yet been filed with the SEC but
which are required to be filed, to agreements, documents or other instruments
which previously had been filed by Parent with the SEC pursuant to the
Securities Act or the Exchange Act, each of which are listed on the Parent
Schedules.
3.8 No
Undisclosed Liabilities.
Except
as set forth in Schedule
3.8
hereto,
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
the financial statements prepared in accordance with U.S. GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Parent, except (i) liabilities provided
for
in or otherwise disclosed in the most recent financial statements in the Parent
SEC Reports filed prior to the date hereof, (ii) liabilities incurred since
March 31, 2006 in the ordinary course of business, none of which would have
a
Material Adverse Effect on Parent, and (iii) those liabilities and obligations
specifically set forth in Section 5.11.
27
3.9 Absence
of Certain Changes or Events.
Except
as set forth in Schedule
3.9
hereto,
and except as contemplated by this Agreement, since March 31, 2006, there has
not been: (i) any Material Adverse Effect on Parent, (ii) any declaration,
setting aside or payment of any dividend on, or other distribution (whether
in
cash, stock or property) in respect of, any of Parent's capital stock, or any
purchase, redemption or other acquisition by Parent of any of Parent's capital
stock or any other securities of Parent or any options, warrants, calls or
rights to acquire any such shares or other securities, (iii) except for the
Reverse Split contemplated following the Closing, any split, combination or
reclassification of any of Parent's capital stock, (iv) any granting by Parent
of any increase in compensation or fringe benefits, except for normal increases
of cash compensation in the ordinary course of business consistent with past
practice, or any payment by Parent of any bonus, except for bonuses made in
the
ordinary course of business consistent with past practice, or any granting
by
Parent of any increase in severance or termination pay or any entry by Parent
into any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving Parent of the nature contemplated hereby, (v) entry by
Parent into any licensing or other agreement with regard to the acquisition
or
disposition of any Intellectual Property other than licenses in the ordinary
course of business consistent with past practice or any amendment or consent
with respect to any licensing agreement filed or required to be filed by Parent
with respect to any Governmental Entity, (vi) any material change by Parent
in
its accounting methods, principles or practices, except as required by
concurrent changes in U.S. GAAP, (vii) any change in the auditors of Parent,
(vii) any issuance of, or agreement to issue, capital stock of Parent or any
other securities of Parent or any options, warrants, calls or rights to acquire
any such shares or other securities, or (viii) any revaluation by Parent of
any
of their respective assets, including, without limitation, writing down the
value of capitalized inventory or writing off notes or accounts receivable
or
any sale of assets of Parent other than in the ordinary course of business.
3.10 Litigation.
Except
as set forth on Schedule
3.10
hereto
or in the Parent's most recent report on Form 10-KSB or the Parent SEC Reports
subsequent thereto, there are no claims, suits, actions or proceedings pending
or to Parent's knowledge, threatened against Parent, before any court,
governmental department, commission, agency, instrumentality or authority,
or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either singularly or in the aggregate with all such claims, actions
or
proceedings, to have a Material Adverse Effect on Parent or have a Material
Adverse Effect on the ability of the parties hereto to consummate the
Transaction.
3.11 Employee
Benefit Plans.
Except
as disclosed on Schedule
3.11
hereto,
Parent does not maintain, and has no liability under, any Plan, and neither
the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any stockholder, director or employee of Parent, or (ii) result
in the acceleration of the time of payment or vesting of any such benefits.
28
3.12 Labor
Matters.
Parent
is not a party to any collective bargaining agreement or other labor union
contract applicable to persons employed by Parent, nor does Parent know of
any
activities or proceedings of any labor union to organize any such employees.
3.13 Restrictions
on Business Activities.
To
Parent's knowledge, there is no agreement, commitment, judgment, injunction,
order or decree binding upon Parent or to which Parent is a party which has
or
could reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of Parent, any acquisition of property by Parent
or the conduct of business by Parent as currently conducted other than such
effects, individually or in the aggregate, which have not had and could not
reasonably be expected to have, a Material Adverse Effect on
Parent.
3.14 Title
to Property.
Parent
does not own or lease any Real Property or Personal Property. There are no
options or other contracts under which Parent has a right or obligation to
acquire or lease any interest in Real Property or Personal Property.
3.15 Taxes.
Except
as set forth in Schedule
3.15
hereto,
to Parent's knowledge:
(a) Parent
has timely filed all Returns required to be filed by Parent with any Tax
authority prior to the date hereof, except such Returns which are not material
to Parent. All such Returns are true, correct and complete in all material
respects. Parent has paid all Taxes shown to be due on such Returns.
(b) All
Taxes
that Parent is required by law to withhold or collect have been duly withheld
or
collected, and have been timely paid over to the proper governmental authorities
to the extent due and payable.
(c) Parent
has not been delinquent in the payment of any material Tax nor is there any
material Tax deficiency outstanding, proposed or assessed against Parent, nor
has Parent executed any unexpired waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(d) No
audit
or other examination of any Return of Parent by any Tax authority is presently
in progress, nor has Parent been notified of any request for such an audit
or
other examination.
(e) No
adjustment relating to any Returns filed by Parent has been proposed in writing,
formally or informally, by any Tax authority to Parent or any representative
thereof.
(f) Parent
has no liability for any material unpaid Taxes which have not been accrued
for
or reserved on Parent's balance sheets included in the audited financial
statements for the most recent fiscal year ended, whether asserted or
unasserted, contingent or otherwise, which is material to Parent, other than
any
liability for unpaid Taxes that may have accrued since the end of the most
recent fiscal year in connection with the operation of the business of Parent
in
the ordinary course of business, none of which is material to the business,
results of operations or financial condition of Parent.
29
(g) Parent
has not taken any action and does not know of any fact, agreement, plan or
other
circumstance that is reasonably likely to prevent the Transaction from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
3.16 Environmental
Matters.
Except
as disclosed in Schedule
3.16
hereto
and except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect, to Parent's knowledge:
(i)
Parent has complied with all applicable Environmental Laws; (ii) the properties
currently owned or operated by Parent (including soils, groundwater, surface
water, buildings or other structures) are not contaminated with any Hazardous
Substances; (iii) the properties formerly owned or operated by Parent were
not
contaminated with Hazardous Substances during the period of ownership or
operation by Parent; (iv) Parent is not subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) Parent
has
not been associated with any release or threat of release of any Hazardous
Substance; (vi) Parent has not received any notice, demand, letter, claim or
request for information alleging that Parent may be in violation of or liable
under any Environmental Law; and (vii) Parent is not subject to any orders,
decrees, injunctions or other arrangements with any Governmental Entity or
subject to any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances.
3.17 Brokers.
Except
for Parent's obligations under the Financial Advisory Agreement (as defined
in
Section 5.11), Parent has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agent’s commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.18 Intellectual
Property.
Parent
does not own, license or otherwise have any right, title or interest in any
Intellectual Property or Registered Intellectual Property. To the knowledge
of
Parent, Parent has not, does not and will not infringe or misappropriate the
Intellectual Property of any third party or engage in activities constituting
unfair competition or trade practices under the laws of any
jurisdiction.
3.19 Agreements,
Contracts and Commitments.
(a) Except
for the Financial Advisory Agreement, the agreements with Computershare Trust
Company, Inc. (“Transfer Agent”), the agreement with Vero Management, LLC
(“Vero”) which will be terminated without liability to Parent prior to Closing,
and except as set forth on Schedule
3.19,
there
are no contracts, agreements, leases, mortgages, indentures, notes, bonds,
liens, licenses, permits, franchises, purchase orders, sales orders, arbitration
awards, judgments, decrees, orders, documents, instruments, understandings
and
commitments, or other instrument or obligation (including without limitation
outstanding offers or proposals) of any kind, whether written or oral, to which
Parent is a party or by or to which any of the properties or assets of Parent
may be bound, subject or affected, which either (a) creates or imposes a
liability greater than $5,000, or (b) may not be cancelled without penalty
or
further obligation or liability by the Company on less than 30 days' or less
prior notice ("Parent Contracts").
30
(b) Each
Parent Contract was entered into at arms’ length and in the ordinary course, is
in full force and effect and is valid and binding upon and enforceable against
each of the parties thereto. True, correct and complete copies of all Parent
Contracts (or written summaries in the case of oral Parent Contracts) and of
all
outstanding offers or proposals of Parent have been heretofore delivered to
the
Company.
(c) Neither
Parent nor, to the knowledge of Parent, any other party thereto is in breach
of
or in default under, and no event has occurred which with notice or lapse of
time or both would become a breach of or default under, any Parent Contract,
and
no party to any Parent Contract has given any written notice of any claim of
any
such breach, default or event, which, individually or in the aggregate, are
reasonably likely to have a Material Adverse Effect on Parent. Each agreement,
contract or commitment to which Parent is a party or by which it is bound that
has not expired by its terms is in full force and effect, except where such
failure to be in full force and effect is not reasonably likely to have a
Material Adverse Effect on Parent.
3.20 Insurance.
Parent
does not maintain any Insurance Policies.
3.21 Governmental
Actions/Filings.
Parent
has been granted and holds, and has made, all Governmental Actions/Filings
necessary to the conduct by Parent of its businesses (as presently conducted)
or
used or held for use by Parent, all of which are listed in Schedule
3.21
hereto,
and true, complete and correct copies of which have heretofore been delivered
to
the Company. Each such Governmental Action/Filing is in full force and effect
and, expect as disclosed in Schedule
3.21
hereto,
will not expire prior to December 31, 2006, and Parent is in compliance with
all
of its obligations with respect thereto. No event has occurred and is continuing
which requires or permits, or after notice or lapse of time or both would
require or permit, and consummation of the transactions contemplated by this
Agreement or the ancillary documents will not require or permit (with or without
notice or lapse of time, or both), any modification or termination of any such
Governmental Actions/Filings. Except as set forth in Schedule
3.21,
to
Parent's knowledge, no Governmental Action/Filing is necessary to be obtained,
secured or made by Parent to enable it to continue to conduct its businesses
and
operations and use its properties after the Closing in a manner which is
consistent with current practice.
3.22 Interested
Party Transactions.
Except
as set forth in the Schedule
3.22
hereto
or in the Parent's most recent report on Form 10-KSB or the Parent SEC Reports
subsequent thereto, no employee, officer, director or 5% or more stockholder
of
Parent or a member of his or her immediate family is indebted to Parent, nor
is
Parent indebted (or committed to make loans or extend or guarantee credit)
to
any of them, other than (i) for payment of salary for services rendered, (ii)
reimbursement for reasonable expenses incurred on behalf of Parent, and (iii)
for other employee benefits made generally available to all employees. Except
as
set forth in Schedule
3.22,
to
Parent's knowledge, none of such individuals has any direct or indirect
ownership interest in any Person with whom Parent is affiliated or with whom
Parent has a material contractual relationship, or any Person that competes
with
Parent, except that each employee, 5% or more stockholder, officer or director
of Parent and members of their respective immediate families may own less than
5% of the outstanding stock in publicly traded companies that may compete with
Parent. Except as set forth in Schedule
3.22,
to
Parent's knowledge, no officer, director or stockholder or any member of their
immediate families is, directly or indirectly, interested in any material
contract with Parent (other than such contracts as relate to any such individual
ownership of capital stock or other securities of Parent).
31
3.23 Indebtedness;
Parent Assets.
Except
as set forth on Schedule
3.23,
Parent
has no indebtedness for borrowed money. Immediately prior to the Closing, Parent
will have no assets, except for cash reserves earmarked for the payment of
certain accounts payable and accrued expenses of Parent with respect to the
period prior to Closing which remain unpaid, which Parent shall be responsible
for payment following the Closing pursuant to Section 5.11 hereof (“Cash
Reserve”).
3.24 Over-the-Counter
Bulletin Board Quotation.
Parent
Common Stock is quoted on the Over-the-Counter Bulletin Board ("OTC BB"). There
is no action or proceeding pending or, to Parent's knowledge, threatened against
Parent by NASDAQ or NASD, Inc. ("NASD") with respect to any intention by such
entities to prohibit or terminate the quotation of Parent Common Stock on the
OTC BB.
3.25 Board
Approval.
The
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.
3.26 Representations
and Warranties Complete.
The
representations and warranties of Parent included in this Agreement and any
list, statement, document or information set forth in, or attached to, any
Schedule provided pursuant to this Agreement or delivered hereunder, are true
and complete in all material respects and do not contain any untrue statement
of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading, under
the
circumstance under which they were made.
3.27 Representations
and Warranties of Merger Sub.
Merger
Sub hereby represents and warrants to, and covenants with, the Company as
follows:
(a) Organization. Merger
Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.
Complete and correct copies of the certificate of incorporation and bylaws
of
the Merger Sub, as currently in effect (the “Merger Sub Charter Documents”),
have been heretofore delivered to the Company. Merger Sub is not in violation
of
any of the provisions of the Merger Sub Charter Documents.
(b) Authority
Relative to this Agreement.
Merger
Sub has full corporate power and authority to: (i) execute, deliver and perform
this Agreement, and each ancillary document which Merger Sub has executed or
delivered or is to execute or deliver pursuant to this Agreement, and (ii)
carry
out Merger Sub's obligations hereunder and thereunder and, to consummate the
transactions contemplated hereby (including the Transaction). The execution
and
delivery of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby (including the Transaction) have been duly
and
validly authorized by all necessary corporate action on the part of Merger
Sub
(including the approval by its Board of Directors and by Parent as the sole
stockholder of Merger Sub), and no other corporate proceedings on the part
of
Merger Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Merger Sub and, assuming the due authorization,
execution and delivery thereof by the other parties hereto, constitutes the
legal and binding obligation of Merger Sub, enforceable against Merger Sub
in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors’
rights generally and by general principles of equity and public
policy.
32
(c) Business
of Merger Sub.
Merger
Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities
and
has conducted its operations only as contemplated by this
Agreement.
(d) Representations
and Warranties Complete.
The
representations and warranties of Merger Sub included in this Agreement and
any
list, statement, document or information set forth in, or attached to, any
Schedule provided pursuant to this Agreement or delivered hereunder, are true
and complete in all material respects and do not contain any untrue statement
of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading, under
the
circumstance under which they were made.
ARTICLE
IV
CONDUCT
PRIOR TO THE EFFECTIVE TIME
4.1 Conduct
of Business by Company and Parent.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement pursuant to its terms or the Closing, each
of
the Company, Parent and Merger Sub shall, except to the extent that the other
party shall otherwise consent in writing, carry on its business in the usual,
regular and ordinary course consistent with past practices, in substantially
the
same manner as heretofore conducted and in compliance with all applicable laws
and regulations (except where noncompliance would not have a Material Adverse
Effect), pay its debts and taxes when due subject to good faith disputes over
such debts or taxes, pay or perform other material obligations when due, and
use
its commercially reasonable efforts consistent with past practices and policies
to (i) preserve substantially intact its present business organization, (ii)
keep available the services of its present officers and employees and (iii)
preserve its relationships with customers, suppliers, distributors, licensors,
licensees, and others with which it has significant business dealings. In
addition, except as required or permitted by the terms of this Agreement,
without the prior written consent of the other party, during the period from
the
date of this Agreement and continuing until the earlier of the termination
of
this Agreement pursuant to its terms or the Closing, each of the Company and
its
Subsidiaries, Parent and Merger Sub shall not do any of the following:
33
(a) Waive
any
stock repurchase rights, accelerate, amend or (except as specifically provided
for herein) change the period of exercisability of options or restricted stock,
or reprice options granted under any employee, consultant, director or other
stock plans or authorize cash payments in exchange for any options granted
under
any of such plans;
(b) Grant
any
severance or termination pay to any officer or employee except pursuant to
applicable law, written agreements outstanding, or policies existing on the
date
hereof and as previously or concurrently disclosed in writing or made available
to the other party, or adopt any new severance plan, or amend or modify or
alter
in any manner any severance plan, agreement or arrangement existing on the
date
hereof;
(c) Transfer
or license to any person or otherwise extend, amend or modify any material
rights to any Intellectual Property of the Company or Parent, as applicable,
or
enter into any agreements to transfer or license to any person future patent
rights, other than in the ordinary course of business consistent with past
practices, provided that in no event shall the Company or Parent license on
an
exclusive basis or sell any Intellectual Property of the Company or Parent,
as
applicable;
(d) Except
for the Reverse Split by Parent to be completed following the Closing, declare,
set aside or pay any dividends on or make any other distributions (whether
in
cash, stock, equity securities or property) in respect of any capital stock
or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any capital stock;
(e) Except
as
set forth in Schedule
4.1(e)
hereof,
purchase, redeem or otherwise acquire, directly or indirectly, any shares of
capital stock of the Company and Parent, as applicable, except repurchases
of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(f) Issue,
deliver, sell, authorize, pledge or otherwise encumber, or agree to any of
the
foregoing with respect to, any shares of capital stock or any securities
convertible into or exchangeable for shares of capital stock, or subscriptions,
rights, warrants or options to acquire any shares of capital stock or any
securities convertible into or exchangeable for shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible or exchangeable securities;
(g) Amend
their respective Charter Documents except as contemplated by the filing of
the
Certificate of Designations to be filed by Parent prior to Closing;
(h) Except
as
disclosed in Schedule
4.1(h)
hereto,
acquire or agree to acquire by merging or consolidating with, or by purchasing
any equity interest in or a portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any
assets which are material, individually or in the aggregate, to the business
of
Parent or the Company as applicable, or enter into any joint ventures, strategic
partnerships or alliances or other arrangements that provide for exclusivity
of
territory or otherwise restrict such party’s ability to compete or to offer or
sell any products or services;
34
(i) Sell,
lease, license, encumber or otherwise dispose of any properties or assets,
except sales of inventory in the ordinary course of business consistent with
past practice and, except for the sale, lease or disposition (other than through
licensing) of property or assets which are not material, individually or in
the
aggregate, to the business of such party;
(j) Except
as
disclosed in Schedule
4.1(j)
hereto,
incur any indebtedness for borrowed money in excess of $50,000 in the aggregate
or guarantee any such indebtedness of another person, issue or sell any debt
securities or options, warrants, calls or other rights to acquire any debt
securities of Parent or the Company, as applicable, enter into any “keep well”
or other agreement to maintain any financial statement condition or enter into
any arrangement having the economic effect of any of the foregoing;
(k) Except
as
disclosed in Schedule
4.1(k)
hereto
or as contemplated by this Agreement, adopt or amend any employee benefit plan,
policy or arrangement, any employee stock purchase or employee stock option
plan, or enter into any employment contract or collective bargaining agreement
(other than offer letters and letter agreements entered into in the ordinary
course of business consistent with past practice with employees who are
terminable “at will”), pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its directors, officers,
employees or consultants, except in the ordinary course of business consistent
with past practices;
(l) Except
as
disclosed in Schedule
4.1(1)
hereto,
(i) pay, discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), or
litigation (whether or not commenced prior to the date of this Agreement) other
than the payment, discharge, settlement or satisfaction, in the ordinary course
of business consistent with past practices or in accordance with their terms,
or
liabilities recognized or disclosed in the most recent financial statements
(or
the notes thereto) of the Company or of Parent included in Parent SEC Reports,
as applicable, or incurred since the date of such financial statements, or
(ii)
waive the benefits of, agree to modify in any manner, terminate, release any
person from or knowingly fail to enforce any confidentiality or similar
agreement to which the Company is a party or of which the Company is a
beneficiary or to which Parent is a party or of which Parent is a beneficiary,
as applicable;
(m) Except
as
disclosed on Schedule
4.2(m)
and
except in the ordinary course of business consistent with past practices,
modify, amend or terminate any Contract of the Company, or Parent, as
applicable, or other material contract or material agreement to which the
Company, or Parent is a party or waive, delay the exercise of, release or assign
any material rights or claims thereunder;
(n) Except
as
required by U.S. GAAP, revalue any of its assets or make any change in
accounting methods, principles or practices;
35
(o) Except
as
set forth in Schedule
4.1(o)
hereto
or in the ordinary course of business consistent with past practices, incur
or
enter into any agreement, contract or commitment requiring such party to pay
in
excess of $50,000 in any 12 month period;
(p) Engage
in
any action that could reasonably be expected to cause the Transaction to fail
to
qualify as a “reorganization” under Section 368(a) of the Code;
(q) Except
as
set forth in Schedule
4.1(q)
hereto,
settle any litigation;
(r) Make
or
rescind any Tax elections that, individually or in the aggregate, could be
reasonably likely to adversely affect in any material respect the Tax liability
or Tax attributes of such party, settle or compromise any material income tax
liability or, except
as
required by applicable law, materially change any method of accounting for
Tax
purposes or prepare or file any Return in a manner inconsistent with past
practice;
(s) Form,
establish or acquire any Subsidiary except as contemplated by this
Agreement;
(t) Permit
any Person to exercise any of its discretionary rights under any Plan to provide
for the automatic acceleration of any outstanding options, the termination
of
any outstanding repurchase rights or the termination of any cancellation rights
issued pursuant to such plans; or
(u) Agree
in
writing or otherwise agree, commit or resolve to take any of the actions
described in Section 4.1 (a) through (t) above.
For
purposes of this Article IV, the term “Company” shall mean the Company and each
of its Subsidiaries.
ARTICLE
V
ADDITIONAL
AGREEMENTS
5.1 Board
of Directors of Parent.
At
Closing, the current board of directors of Parent shall deliver duly adopted
resolutions to: (a) set the size of Parent's board of directors at five (5)
members effective as of the Closing; and (b) appoint the following persons
to
Parent's board of directors effective as of the Closing: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇ and such other persons as may be designated by the Company prior to
Closing; and (c) accepting the resignations of the current officers and
directors of Parent effective as of the Closing ("Resolutions"). At Closing,
the
current officers and directors of Parent shall deliver their resignations,
as
appropriate, as officers and directors of Parent to be effective upon the
Closing (the "Resignations"). For
a
period of one year following the Closing, Parent hereby grants KI Equity the
right to send a representative (who need not be the same individual from meeting
to meeting) to observe each meeting or participate in telephone meetings of
Parent’s board of directors and receive all documents and written materials
provided to directors. Such representative
shall be
entitled to receive reimbursement for all reasonable costs incurred in attending
such meetings, including, but not limited to, food, lodging and transportation
and shall sign a non-disclosure agreement reasonably acceptable to Parent.
Prior
to
Closing, the Company shall deliver or cause to be delivered to Parent completed
and signed director and officer questionnaires (“Questionnaires”) for the new
directors and each officer to be appointed by Parent following Closing. The
foregoing designations of the new directors (and the officers to be appointed
by
Parent following Closing) shall be subject to Parent's receipt of the completed
and signed Questionnaires ("D&O Information").
36
5.2 Undertaking
by Company Accountant.
On or
before the Closing, the Company shall obtain, and deliver to Parent, an
undertaking from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇.▇. (“Accountant”), in a form and
substance satisfactory to Parent, providing that: (i) the Accountant has agreed
to an engagement with Parent to serve as its certified public accountants
following the Closing for purposes of auditing and reviewing the financial
statements of Parent and the Company to comply with Parent's ongoing reporting
requirements under the Exchange Act including, without limitation, the filing
of
Forms 10-Q, 10-K, and 8-K, (ii) the transaction contemplated hereunder will
not
disqualify or otherwise prohibit the Accountant from rendering the foregoing
engagement services or from undertaking such services in a timely manner, (iii)
the Accountant is duly registered with the PCAOB, (iv) the Accountant shall
provide its consent to the use of their audited financial statements and
accompanying reports for Parent and the Company, as applicable, in any
regulatory filing by Parent prior to or following the Closing, and (v)
consenting to the use of its name and the disclosure of its engagement by Parent
in the Change of Accountant Form 8-K (as defined in Section 5.3) ("Accountant
Undertaking"). A signed copy of the engagement letter between Parent and
Accountant shall be attached to the Accountant Undertaking.
5.3 Change
of Accountants.
At
Closing, Parent shall prepare the Form 8-K announcing the change in Parent’s
certifying accountants from Jaspers + Hall, PC (“Parent’s Accountant”) to the
Accountant effective not later than four business days after the Closing
(“Change of Accountant Form 8-K”), in a form acceptable to the Company and in a
format acceptable for ▇▇▇▇▇ filing. The Change of Accountant Form 8-K shall
be
filed with the SEC at or within four (4) business days following Closing, and
prior to the filing thereof, Parent’s Accountant shall have issued its
resignation letter to Parent resigning from the engagement and consenting to
the
use of its name and the disclosure of its resignation in the Change of
Accountant Form 8-K (“Resignation Letter”).
5.4 Other
Actions.
(a)
At least ten (10) days prior to Closing, Parent shall
prepare the information statement required by Rule 14f-1 promulgated under
the
Exchange Act ("14f-1 Information Statement"), and, after providing the Company
with a reasonable time to review and comment on the 14f-1 Information Statement,
Parent shall file the 14f-1 Information Statement with the SEC and mail the
same
to each of Parent's stockholders.
(b)
At least three (3) days prior to Closing, the Company
shall prepare the Form 8-K announcing the Closing in conformance with
regulations, which shall include all information required by such form,
including the information required by Form 10-SB with respect to the Company,
any other information required in connection with Parent ceasing to be a shell
company as a result of the Transaction, the U.S. GAAP Financial Statements
and
the Pro Forma Financial Statements (as defined below) ("Transaction Form 8-K"),
which shall be in a form reasonably acceptable to Parent and in a format
acceptable for ▇▇▇▇▇ filing. Prior to Closing, the Company shall prepare the
press release announcing the consummation of the Transaction hereunder ("Press
Release"). Parent shall file the Transaction Form 8-K with the SEC and
distribute the Press Release within the statutory time frame following the
Closing.
37
(c)
At least ten (10) days prior to the Closing, the
Company shall deliver to Parent pro forma consolidated financial statements
for
the Company, its Subsidiaries and Parent giving effect to the Transaction,
for
such periods as required by the SEC to be included in a Form 8-K or any other
report or form required to be filed with the SEC at or after Closing with
respect to the Transaction, all prepared in all material respects with the
published rules and regulations of the SEC and in accordance with U.S. GAAP
applied on a consistent basis throughout the periods involved (the "Pro Forma
Financial Statements"). The Pro Forma Financial Statements shall have been
reviewed by, the Accountant and shall be in a format acceptable for inclusion
on
the Transaction 8-K.
Each
of
the Company and Parent shall cooperate with each other and use their respective
commercially reasonable efforts to take or cause to be taken all actions, and
do
or cause to be done all things, necessary, proper or advisable on its part
under
this Agreement and applicable laws to consummate the Transaction and the other
transactions contemplated hereby as soon as practicable, including preparing
and
filing as soon as practicable all documentation to effect all necessary notices,
reports and other filings and to obtain as soon as practicable all consents,
registrations, approvals, permits and authorizations necessary or advisable
to
be obtained from any third party and/or any Governmental Entity in order to
consummate the Transaction or any of the other transactions contemplated hereby.
Subject to applicable laws relating to the exchange of information and the
preservation of any applicable attorney-client privilege, work-product doctrine,
self-audit privilege or other similar privilege, each of the Company and Parent
shall have the right to review and comment on in advance, and to the extent
practicable each will consult the other on, all the information relating to
such
party, that appear in any filing made with, or written materials submitted
to,
any third party and/or any Governmental Entity in connection with the
Transaction and the other transactions contemplated hereby. In exercising the
foregoing right, each Company and Parent shall act reasonably and as promptly
as
practicable.
5.5 Required
Information.
In
connection with the preparation of the Transaction Form 8-K, 14f-1 Information
Statement, and Press Release, and for such other reasonable purposes, each
of
the Company and Parent shall, upon request by the other, furnish the other
with
all information concerning themselves, their respective subsidiaries, directors,
officers, managers, managing members, stockholders and members (including the
directors and officers of Parent to be elected effective as of the Closing
pursuant to Section 5.1 hereof) and such other matters as may be reasonably
necessary or advisable in connection with the Transaction, or any other
statement, filing, notice or application made by or on behalf of each of the
Company and Parent to any third party and/or any Governmental Entity in
connection with the Transaction and the other transactions contemplated hereby.
Each party warrants and represents to the other party that all such information
shall be true and correct in all material respects and will not contain any
untrue statement of a material fact or omit to state a material fact required
to
be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not
misleading.
38
5.6 Confidentiality;
Access to Information.
(a) To
the
extent the provisions of this Agreement provide greater protection against
the
disclosure of confidential information by the parties than any confidentiality
agreement or letter of intent previously executed by the parties, such
provisions of such prior confidentiality agreement or letter of intent shall
be
superseded by the provisions of this Agreement. Each party agrees to maintain
in
confidence any non-public information received from the other party, and to
use
such non-public information only for purposes of consummating the transactions
contemplated by this Agreement. Such confidentiality obligations will not apply
to (i) information which was known to the one party or their respective agents
prior to receipt from the other party; (ii) information which is or becomes
generally known; (iii) information acquired by a party or their respective
agents from a third party who was not bound to an obligation of confidentiality;
and (iv) disclosure required by law. In the event this Agreement is terminated
as provided in Article VIII hereof, each party will return or cause to be
returned to the other all documents and other material obtained from the other
in connection with the Transaction contemplated hereby.
(b) Access
to Information.
(i) The
Company will afford Parent and its financial advisors, accountants, counsel
and
other representatives reasonable access during normal business hours, upon
reasonable notice, to the properties, books, records and personnel of the
Company and its Subsidiaries during the period prior to the Closing to obtain
all information concerning the business, including the status of product
development efforts, properties, results of operations and personnel of the
Company and its Subsidiaries, as Parent may reasonably request. No information
or knowledge obtained by Parent in any investigation pursuant to this Section
5.6 will affect or be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of the parties to consummate the
Transaction.
(ii) Parent
will afford the Company and its financial advisors, underwriters, accountants,
counsel and other representatives reasonable access during normal business
hours, upon reasonable notice, to the properties, books, records and personnel
of Parent during the period prior to the Closing to obtain all information
concerning the business, including the status of product development efforts,
properties, results of operations and personnel of Parent, as the Company may
reasonably request. No information or knowledge obtained by the Company in
any
investigation pursuant to this Section 5.6 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Transaction.
39
5.7 No
Solicitation.
Other
than with respect to the Transaction, the Company and Parent agree that neither
of them nor any of their officers, directors, managers, or managing members
shall, and that they shall cause their agents and other representatives
(including any investment banker, attorney or accountant retained by it) not
to,
directly or indirectly, initiate, solicit, encourage or otherwise facilitate
any
inquiries or the making of any proposal or offer with respect to (i) a merger,
reorganization, share exchange, consolidation or similar transaction involving
them, (ii) any sale, lease, exchange, mortgage, pledge, transfer or purchase
of
all or substantially all of the assets or equity securities of them, taken
as a
whole, in a single transaction or series of related transactions or (iii) any
tender offer or exchange offer for 20% or more of the outstanding shares of
Parent Common Stock or the Company’s capital stock (any such proposal or offer
being hereinafter referred to as an “Acquisition Proposal”). The Company and
Parent further agree that neither of them nor any of their officers, directors,
managers, or managing members shall, and that they shall direct and use their
reasonable best efforts to cause their agents and representatives not to,
directly or indirectly, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal. The Company and Parent
agree that they will immediately cease and cause to be terminated any existing
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. The Company and Parent agree that they will take
the necessary steps to promptly inform the individuals or entities referred
to
in the first sentence hereof of the obligations undertaken in this Section
5.7.
Notwithstanding
anything contained in this Agreement to the contrary, nothing contained in
this
Agreement shall prevent the board of directors of Parent, or their respective
representatives from, prior to the Closing (A) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal,
if
applicable, or otherwise complying with the Exchange Act; (B) providing
information in response to a request therefore by a person who has made a bona
fide unsolicited Acquisition Proposal; (C) engaging in any negotiations or
discussions with any person who has made a bona fide unsolicited Acquisition
Proposal or otherwise facilitating any effort or attempt to implement an
Acquisition Proposal; or (D) withdrawing or modifying the approval or
recommendation by Parent's board of directors of this Agreement, approving
or
recommending any unsolicited Acquisition Proposal or causing the applicable
party to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement relating to any unsolicited Acquisition
Proposal, if, and only to the extent that in each such case referred to in
clause (B), (C) or (D) above, Parent's board of directors determines in good
faith, after consultation with outside legal counsel that such action is
necessary to act in a manner consistent with the directors’ fiduciary duties
under applicable law and determines in good faith after consultation with its
financial advisors that the person or group making such Acquisition Proposal
has
adequate sources of financing to consummate such Acquisition Proposal and that
such Acquisition Proposal, if consummated as proposed, is materially more
favorable to the stockholders of Parent from a financial point of view (any
such
more favorable Acquisition Proposal being referred to as a “Superior Proposal”)
and determines in good faith that such Superior Proposal is reasonably capable
of being consummated, taking into account legal, financial, regulatory and
other
aspects of the proposal and the person making the proposal.
40
5.8 Public
Disclosure.
Except
to the extent previously disclosed or to the extent the parties believe that
they are required by applicable law or regulation to make disclosure, prior
to
Closing, no party shall issue any statement or communication to the public
regarding the Transaction without the consent of the other party, which consent
shall not be unreasonably withheld. To the extent a party hereto believes it
is
required by law or regulation to make disclosure regarding the Transaction,
it
shall, if possible, immediately notify the other party prior to such disclosure.
Notwithstanding the foregoing, the parties hereto agree that Parent will prepare
and file a Current Report on Form 8-K pursuant to the Exchange Act reasonably
acceptable to the Company to report the execution of this Agreement and that
any
party hereto may file any reports as required by the Exchange Act including,
without limitation, any reports on Schedule 13D.
5.9 Reasonable
Efforts; Notification.
(a) Upon
the
terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use its commercially reasonable efforts to take, or cause
to
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Transaction and the other transactions contemplated by this
Agreement, including using commercially reasonable efforts to accomplish the
following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VI to be satisfied, (ii) the obtaining
of all necessary actions or nonactions, waivers, consents, approvals, orders
and
authorizations from Governmental Entities and the making of all necessary
registrations, declarations and filings (including registrations, declarations
and filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to avoid any suit, claim, action, investigation or
proceeding by any Governmental Entity, (iii) the obtaining of all consents,
approvals or waivers from third parties required as a result of the transactions
contemplated in this Agreement, (iv) the defending of any suits, claims,
actions, investigations or proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed, and
(v)
the execution or delivery of any additional instruments reasonably necessary
to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement. In connection with and without limiting the foregoing,
Parent and its board of directors and the Company and its directors, officers
and stockholders shall, if any state takeover statute or similar statute or
regulation is or becomes applicable to the Transaction, this Agreement or any
of
the transactions contemplated by this Agreement, use their commercially
reasonable efforts to enable the Transaction and the other transactions
contemplated by this Agreement to be consummated as promptly as practicable
on
the terms contemplated by this Agreement. Notwithstanding anything herein to
the
contrary, nothing in this Agreement shall be deemed to require Parent or the
Company to agree to any divestiture by itself or any of its affiliates of shares
of capital stock, membership interests or ownership interest or of any business,
assets or property, or the imposition of any material limitation on the ability
of any of them to conduct their business or to own or exercise control of such
assets, properties and stock.
41
(b) The
Company shall give prompt notice to Parent upon becoming aware that any
representation or warranty made by them contained in this Agreement has become
untrue or inaccurate, or of any failure of the Company to comply with or satisfy
in any material respect any covenant, condition or agreement to be complied
with
or satisfied by them under this Agreement, in each case, such that the
conditions set forth in Article VI would not be satisfied; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations
of
the parties under this Agreement.
(c) Parent
shall give prompt notice to the Company upon becoming aware that any
representation or warranty made by it contained in this Agreement has become
untrue or inaccurate, or of any failure of Parent to comply with or satisfy
in
any material respect any covenant, condition or agreement to be complied with
or
satisfied by it under this Agreement, in each case, such that the conditions
set
forth in Article VI would not be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
5.10 Treatment
as a Reorganization.
Parent
and the Company shall not take any action that is reasonably likely to prevent
the Transaction from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
5.11 Absence
of Material Liabilities.
Immediately prior to Closing, Parent and Merger Sub shall have no liabilities
or
obligations requiring the payment of monies, other than obligations under or
with respect to: (i) a certain Financial Advisory Agreement by and between
▇▇▇▇▇▇▇ Securities, LLC (“▇▇▇▇▇▇▇”) and Parent in the form attached hereto as
Exhibit
B
("Financial Advisory Agreement"), (ii) any agreement with the Transfer Agent,
(iii) Parent Contracts disclosed under Section 3.19 hereto, and (iv) unpaid
accounts payable and accrued expenses of Parent shown on the balance sheet
of
Parent as of the Closing and delivered to the Company not less than three (3)
days prior to Closing (“Accounts Payable”). Parent shall establish the Cash
Reserve provided for in Section 3.23 in an amount equal to the Accounts Payable.
Following the Closing, to the extent not satisfied by Parent prior to or at
Closing, the Accounts Payable shall be paid in full from the Cash Reserve.
To
the extent that any Cash Reserve remains after payment of the Accounts Payable,
the remaining balance of the Cash Reserve shall be paid to Vero or its designees
as a final management fee. To the extent the Cash Reserve is not sufficient
to
pay and satisfy the Accounts Payable in full, KI Equity agrees to pay such
unpaid Accounts Payable and indemnify and hold Parent harmless from such unpaid
Accounts Payable for a period of one year following the Closing. Following
the
Closing, the Company shall pay and satisfy, or cause Parent to pay and satisfy,
all of Parent’s obligations under the agreement with the Transfer Agent.
5.12 Cash
Payments at Closing.
Parent
and Company hereby acknowledge Company’s prior payment to Parent of a $40,000
deposit (“Deposit”). At Closing, the Company shall pay to ▇▇▇▇▇▇▇ the reverse
merger fees of $340,000 under the Financial Advisory Agreement less the amount
of the Deposit (such sum being referred to herein, as the "Company Closing
Payment"). At Closing, the Deposit shall be paid to ▇▇▇▇▇▇▇ by Parent in partial
payment of the reverse merger fees under the Financial Advisory Agreement
(“Parent Closing Payment”).
42
5.13 Business
Records.
At
Closing, Parent shall cause to be delivered to the Company all
records and documents relating to Parent, which Parent possesses, including,
without limitation, books, records, government filings, Returns, Charter
Documents, Corporate Records, Stock Records, consent decrees, orders, and
correspondence, director and stockholder minutes and resolutions, stock
ownership records, financial information and records, electronic files
containing any financial information and records, and other documents used
in or
associated with Parent ("Business Records").
5.14 Proxy/Information
Statement.
As soon
as practicable after the Closing, Parent shall cause its shareholders to approve
and adopt of the following matters (the “Stockholder Matters”):
(a) To
approve a 1 for 15 reverse stock split with special treatment for certain of
Parent’s stockholders to preserve round lot stockholders (“Reverse
Split”);
(b) To
approve the change of the name of Parent to a name selected by the Board;
(c) Reincorporation
of the Parent in the State of Delaware;
(d) To
approve the adoption of a stock incentive plan (“Stock Plan”) reserving not more
than 7,000,000 shares of Parent Common Stock for issuance thereunder (on a
post-Reverse Split basis) which number includes outstanding Company Stock
Options to be assumed by Parent (on a post-Reverse Split basis);
and
(e) All
such
other actions as shall be necessary or desirable in connection with or related
to the foregoing actions in (a) through (d) above.
In
connection therewith, Parent shall either (i) notice a meeting of its
shareholders and with respect thereto prepare a proxy statement pursuant to
Regulation 14A promulgated under Section 14 of the Exchange Act (together with
any amendments or supplements thereto, the "Proxy Statement") or (ii) upon
receipt of the written consent of a sufficient number of its shareholders
prepare an information statement pursuant to Regulation 14C promulgated under
Section 14 of the Exchange Act (together with any amendments or supplements
thereto, the "Information Statement"). Following Closing, KI Equity shall
reasonably cooperate with Parent and provide such information available to
it as
may be necessary or required, in the reasonable determination of counsel to
the
Company and to Parent, for Parent to prepare the Proxy Statement or Information
Statement.
In
the
event Parent elects to solicit stockholder approval via a Proxy Statement,
as
soon as practicable following the Closing, but not later than ten (10) days
after the Closing, Parent shall file the Proxy Statement with the SEC and shall
cause such Proxy Statement to become definitive and to be mailed to the holders
of Parent’s securities entitled to vote at a meeting of
stockholders.
43
In
the
event Parent elects to use an Information Statement and does not solicit
stockholder approval via a Proxy Statement, as soon as practicable following
the
Closing, but not later than ten (10) days after the Closing, Parent shall obtain
the written consent of holders of the requisite number of voting securities
of
Parent approving the Stockholder Matters, such consent to be effective twenty
(20) days following the filing of the definitive Information Statement with
the
SEC. Upon receipt of such written consent, Parent will file the Information
Statement with the SEC and shall cause such Information Statement to become
definitive and to be mailed to the holders of Parent’s securities entitled to
vote at a meeting of stockholders.
In
the
event the Proxy Statement or Information Statement is reviewed by the SEC,
Parent shall respond promptly to any comments of the SEC or its staff with
respect to the Proxy Statement or Information Statement and use its reasonable
best efforts to have the Proxy Statement or Information Statement cleared by
the
SEC as soon as practicable after its filing, provided, however, in the event
that the substance of any review by the SEC involves or inquires with respect
to
information, filings, reports, financial statements or other circumstances
of
Parent occurring, reported or filed prior to the Closing (the “Pre-Closing
Period”), KI Equity shall, upon the reasonable request of the Company or Parent,
use its reasonable best efforts to take, or cause to be taken, all actions,
and
to do, or cause to be done, and to assist and cooperate with the Company and
Parent in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Proxy Statement
or Information Statement, including, without limitation, providing such
information, addressing such comments, and otherwise resolving such matters
as
may relate to the Pre-Closing Period and any SEC comments relating thereto
or
any SEC inquiry thereof.
As
a
condition to the Closing, the holders of the Company’s capital stock
representing not less than a majority of the Company’s voting power immediately
prior the Closing (“Majority Holders”) and KI Equity shall execute and deliver a
certain voting agreement (“Voting Agreement”) in the form attached hereto as
Exhibit
C
which
shall provide, among other things, that the Majority Holders will vote their
Series A Preferred Stock (or in the event of conversion, the Parent Common
Stock
issuable upon conversion) or Parent Common Stock, as the case may be, to approve
the Stockholder Matters.
ARTICLE
VI
CONDITIONS
TO THE TRANSACTION
6.1 Conditions
to Obligations of Each Party to Effect the Transaction.
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) No
Order.
No
Governmental Entity shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in effect and
which
has the effect of making the Transaction illegal or otherwise prohibiting
consummation of the Transaction, substantially on the terms contemplated by
this
Agreement. All waiting periods, if any, under any law in any jurisdiction in
which the Company or Parent has material operations relating to the transactions
contemplated hereby has expired or terminated early and all material approvals
required to be obtained prior to the Transaction in connection with the
transactions contemplated hereby shall have been obtained.
44
(b) Debt
Holder Consents.
The
lenders under any credit facilities, secured loans, mortgages and other
indebtedness of the Company or its Subsidiaries for borrowed money shall have
consented in writing to the Transaction (if such consent is required in
connection with this Transaction).
(c) 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
Delaware and the Company Charter Documents, and by the requisite actions of
the
Board of Directors of Parent under the laws of the State of Colorado and the
Parent Charter Documents.
(d) Certificate
of Designations.
Prior
to Closing, the Board of Directors of Parent shall have adopted, and Parent
shall have filed with, and had accepted by, the Secretary of State of the State
of Colorado, the Certificate of Designations in the form attached hereto as
Exhibit
A.
(e) 14f-1
Information Statement.
At
least ten (10) days prior to Closing, Parent shall have filed the 14f-1
Information Statement with the SEC, and Parent shall have mailed the 14f-1
Information Statement to each of the stockholders of Parent, and Parent shall
have otherwise complied with all of the provisions under Rule 14f-1 under the
Exchange Act.
(f) 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.
(g) Financial
Statements; Transaction Form 8-K.
The
Company shall have delivered to Parent the U.S. GAAP Financial Statements,
the
Pro Forma Financial Statements and the Transaction Form 8-K, each in a form
acceptable to Parent, which acceptance shall not be unreasonably withheld.
(h) Vero
Termination Agreement.
Parent
shall have terminated its agreement with Vero, effective at
Closing.
(i) Voting
Agreement.
KI
Equity and the Majority Holders shall have executed and delivered the Voting
Agreement, in the form attached hereto as Exhibit
C.
(j) Blue
Sky Laws.
The
issuance of Series A Preferred 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.
45
(k) Investment
Representation Letter.
The
Company shall have delivered to Parent the investment representation letters,
consistent with the provisions of Section 1.12 hereof, signed by each holder
of
record (as of the Effective Time) of Certificates, which immediately prior
to
the Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into the right to receive shares of Series A Preferred
Stock pursuant to Section 1.6 hereof.
(l) Dissenter’s
Rights.
Holders
of no more than 0.5% of the outstanding shares of Company Common Stock shall
have taken action to exercise their dissenter’s rights pursuant to Section 262
of the Delaware Business Corporation Law and the laws of the state of Georgia,
to the extent such laws are applicable to the Transaction.
6.2 Additional
Conditions to Obligations of the Company.
The
obligations of the 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
the
Company:
(a) Representations
and Warranties.
The
representations and warranties of Parent and Merger Sub in this Agreement shall
be true and correct in all 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), disregarding for the purposes of such
determination any “Material Adverse Effect” or other materiality qualifiers set
forth in such representations and warranties, except for such failures of such
representations and warranties to be so true and correct as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent. The Company shall have received a certificate with
respect to the foregoing signed on behalf of Parent by an authorized officer
of
Parent ("Parent Closing Certificate") and a certificate with respect to the
foregoing signed on behalf of merger Sub by an authorized officer of merger
Sub
(“Merger Sub Closing Certificate”)
(b) Agreements
and Covenants.
Parent
and Merger Sub 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 on 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 Parent and Merger Sub, respectively) does not, or will
not, constitute a Material Adverse Effect with respect to Parent, and the
Company shall have received Parent Closing Certificate and Merger Sub Closing
Certificate to such effect.
(c) Resignations
and Resolutions.
Parent
shall have delivered to the Company the Resignations and Resolutions, in a
form
reasonably satisfactory to the Company, effective as of the Closing. Parent
shall also have delivered to the Company evidence satisfactory to the Company
of
the appointment of new directors of Parent in accordance with Section 5.1
hereof.
46
(d) Consents.
Parent
shall have obtained all consents, waivers and approvals required in connection
with the consummation of the transactions contemplated hereby, other than
consents, waivers and approvals the absence of which, either alone or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect
on
Parent and Merger Sub.
(e) Material
Adverse Effect.
No
Material Adverse Effect with respect to Parent shall have occurred since the
date of this Agreement.
(f) No
Financial Obligations.
Immediately prior to the Closing, Parent shall have no material liabilities
or
obligations, other than as set forth in Section 5.11 hereof.
(g) SEC
Compliance.
Immediately prior to Closing, Parent shall be in compliance with the reporting
requirements under the Exchange Act and shall have filed with the SEC its
Quarterly Report on Form 10-QSB for the quarter ended March 31,
2006.
(h) Business
Records; Resignation Letter.
The
Parent shall have delivered to the Company the Business Records and the
Resignation Letter from Parent’s Accountant.
(i) OTC
Quotation.
The
Parent Common Stock at the Closing will be quoted on the OTC BB.
(j) Other
Deliveries.
At or
prior to Closing, Parent and Merger Sub shall have delivered to the Company
(i)
copies of resolutions and actions taken by Parent's board of directors and
Merger Sub’s board of directors, respectively, in connection with the approval
of this Agreement and the transactions contemplated hereunder, and (ii) such
other documents or certificates as shall reasonably be required by the Company
and its counsel in order to consummate the transactions contemplated hereunder.
(k) Financial
Advisory Agreement.
The
Financial Advisory Agreement between Parent and ▇▇▇▇▇▇▇, in the form of
Exhibit
B
hereto,
has been executed by the parties thereto and has been duly authorized and
approved by Parent's board of directors.
(l) Closing
Payments.
Parent
shall have made the Parent Closing Payment as required by Section
5.12.
6.3 Additional
Conditions to the Obligations of Parent and Merger Sub.
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) Representations
and Warranties.
The
representations and warranties of the Company in this Agreement shall be true
and correct in all 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), disregarding for the purposes of such
determination any “Material Adverse Effect” or other materiality qualifiers set
forth in such representations and warranties, except for such failures of such
representations and warranties to be so true and correct as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company. Parent shall have received a certificate with
respect to the foregoing signed on behalf of the Company by an authorized
officer of the Company ("Company Closing Certificate").
47
(b) Agreements
and Covenants.
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, and Parent shall have received the Company Closing
Certificate to such effect.
(c) Consents.
the
Company shall have obtained all consents, waivers, permits and approvals
required in connection with the consummation of the transactions contemplated
hereby, other than consents, waivers and approvals the absence of which, either
alone or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect on the Company.
(d) Material
Adverse Effect.
No
Material Adverse Effect with respect to the Company shall have occurred since
the date of this Agreement.
(e) Accountant
Undertaking;
The
Company shall have delivered to Parent the Accountant Undertaking in a form
satisfactory to Parent.
(f) D&O
Information.
The
Company shall have delivered the fully completed and signed Questionnaires,
and
the D&O Information shall be reasonably acceptable to Parent.
(g) Voting
Agreement.
The
Majority Holders and KI Equity shall have executed and delivered the Voting
Agreement, in the form attached hereto as Exhibit
C.
(h) Repayment
of Affiliate Obligations.
At the
Closing Date, all amounts owed to the Company or any Subsidiary by each officer,
director or stockholder of the Company or any Subsidiary (regardless of whether
such amounts are due and payable) shall have been paid in full.
(i) Closing
Payments.
The
Company shall have made the Company Closing Payment as required by Section
5.12.
(j) Company
Schedules.
The
Company shall have delivered the Company’s disclosure schedules to this
Agreement within five (5) days prior to Closing, which schedules shall be
acceptable to Parent.
(k) Transfer
Agent Authorization.
The
Company and its counsel shall have delivered the Transfer Agent Authorization
required by Section 9.1(d) to Transfer Agent, KI Equity and the other persons
to
whom such authorization involves.
48
(l) Other
Deliveries.
At or
prior to Closing, the Company shall have delivered to Parent: (i) copies of
resolutions and actions taken the Company's board of directors and stockholders
in connection with the approval of this Agreement and the transactions
contemplated hereunder, and (ii) such other documents or certificates as shall
reasonably be required by Parent and its counsel in order to consummate the
transactions contemplated hereunder.
ARTICLE
VII
SURVIVAL;
INDEMNIFICATION
Except
as
specifically set forth in Sections 1.12, 5.1, 5.11, 5.14 and 9.1, and such
other
provisions contained herein which specifically contemplates the performance
of
any agreement or covenant by any party hereto after the Closing, all
representations, warranties, agreements and covenants contained in or made
pursuant to this Agreement by any party hereto or contained in any Schedule
hereto shall not survive the Closing, and no claims made by virtue of such
representations, warranties, agreements and covenants shall be made or commenced
by any party hereto from and after the Closing.
ARTICLE
VIII
TERMINATION,
AMENDMENT AND WAIVER
8.1 Termination.
This
Agreement may be terminated at any time prior to the Closing:
(a) by
mutual
written agreement of Parent and the Company at any time;
(b) by
either
Parent or the Company if the Transaction shall not have been consummated by
May
31, 2006 for any reason; provided, however, that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose
action or failure to act has been a principal cause of or resulted in the
failure of the Transaction to occur on or before such date and such action
or
failure to act constitutes a breach of this Agreement;
(c) by
either
Parent or the Company if a Governmental Entity shall have issued an order,
decree or ruling or taken any other action, in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Transaction,
which order, decree, ruling or other action is final and nonappealable;
(d) by
Company, upon a material breach of any representation, warranty, covenant or
agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of Parent shall have become materially untrue, in
either case such that the conditions set forth in Article VI would not be
satisfied as of the time of such breach or as of the time such representation
or
warranty shall have become untrue, provided, that if such inaccuracy in Parent’s
representations and warranties or breach by Parent is curable by Parent prior
to
the Closing Date, then the Company may not terminate this Agreement under this
Section 8.1(d) for thirty (30) days after delivery of written notice from the
Company to Parent of such breach, provided Parent continues to exercise
commercially reasonable efforts to cure such breach (it being understood that
the Company may not terminate this Agreement pursuant to this Section 8.1(d)
if
it shall have materially breached this Agreement or if such breach by Parent
is
cured during such thirty (30)-day period);
49
(e) by
Parent, upon a material breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become materially untrue,
in either case such that the conditions set forth in Article VI would not be
satisfied as of the time of such breach or as of the time such representation
or
warranty shall have become untrue, provided, that if such inaccuracy in
Company’s representations and warranties or breach by the Company is curable by
the Company prior to the Closing Date, then Parent may not terminate this
Agreement under this Section 8.1(e) for thirty (30) days after delivery of
written notice from Parent to the Company of such breach, provided the Company
continues to exercise commercially reasonable efforts to cure such breach (it
being understood that Parent may not terminate this Agreement pursuant to this
Section 8.1(e) if it shall have materially breached this Agreement or if such
breach by the Company is cured during such thirty (30)-day period).
8.2 Notice
of Termination; Effect of Termination.
Any
termination of this Agreement under Section 8.1 above will be effective
immediately upon (or, if the termination is pursuant to Section 8.1(d) or
Section 8.1(e) and the proviso therein is applicable, thirty (30) days after)
the delivery of written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement as provided in Section
8.1, this Agreement shall be of no further force or effect and the Transaction
shall be abandoned, except for and subject to the following: (i) Section 8.2,
Section 8.3 and Article X (General Provisions) shall survive the termination
of
this Agreement, (ii) if this Agreement is terminated by Parent under Section
8.1(b), (c) or (e), as a result of the Company’s failure to satisfy the
conditions precedent to Closing that are applicable to it hereunder or as a
result of a breach or misrepresentation by Company under this Agreement, the
Deposit shall be retained by Parent as liquidated damages and as its sole source
of damages for any breach or termination of this Agreement, (iii) if this
Agreement is terminated for any reason other than for those set forth in (ii)
above, the Deposit shall be returned to the Company within three (3) business
days, and (iv) nothing herein shall relieve any party from liability for any
intentional or willful breach of this Agreement.
8.3 Fees
and Expenses.
All fees
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Transaction is consummated. The parties further agree that, whether
or not the Transaction is consummated, each party shall be responsible for
any
and costs and expenses incurred by them in connection with the preparation
of
the Transaction Form 8-K (including the U.S. GAAP Financial Statements and
Pro
Forma Financial Statements contained therein), the Information Statement, and
the 14f-1 Information Statement.
50
8.4 Amendment.
This
Agreement may be amended by the parties hereto at any time by execution of
an
instrument in writing signed on behalf of each of the parties hereto.
8.5 Extension;
Waiver.
At any
time prior to the Closing, any party hereto may, to the extent legally allowed,
(i) extend the time for the performance of any of the obligations or other
acts
of the other parties hereto, (ii) waive any inaccuracies in the representations
and warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on
the
part of a party hereto to any such extension or waiver shall be valid only
if
set forth in an instrument in writing signed on behalf of such party. Delay
in
exercising any right under this Agreement shall not constitute a waiver of
such
right.
ARTICLE
IX
POST-CLOSING
COVENANTS
9.1 Post-Closing
Covenants.
The
Company acknowledges 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, Parent would not 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 Parent and the investment of KI Equity in Parent. During the period
beginning upon the Closing and ending on the first anniversary of the Closing,
Parent agrees to utilize its commercially reasonable efforts to, and the Company
agrees to utilize its commercially reasonable efforts to cause Parent to,
satisfy the following agreements and covenants:
(a) Remain
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,
the
OTC BB.
(b) As
soon
as commercially practicable following the Closing, Parent’s board of directors
will satisfy the independence, audit and compensation committee and other
corporate governance requirements under the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the
"SOX
Act"), the rules and regulations promulgated by the SEC, and the requirements
of
either NASDAQ or American Stock Exchange (“AMEX”) as selected by Parent, whether
or not Parent Common Stock is listed or quoted, or qualifies for listing or
quotation, on such national exchanges.
(c) Parent
files 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.
51
(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, and (iii) in the event Parent’s
counsel is unwilling or unable to issue such Opinion, Parent hereby agrees
to
accept, and shall instruct its counsel to accept, an Opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
(New York, New York), and Parent and its counsel shall hereby authorize the
Transfer Agent to accept the opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (or such other
reasonable counsel selected by KI Equity) for such purposes (“Transfer Agent
Authorization”), which Transfer Agent Authorization shall be delivered to
Transfer Agent prior to Closing, with a copy to KI Equity.
(e) Within
sixty (60) days after the Closing, Parent shall have entered into an agreement
with an investors relation firm which provides for a comprehensive investors
relations and after market support program for a period of not less than one
year, which investors relations firm and program shall be subject to the
approval of KI Equity, which approval shall not be unreasonably withheld.
9.2 Other
Provisions.
Notwithstanding anything contained herein to the contrary, the provisions of
this Article IX shall survive (and not be affected in any respect by) the
Closing. KI Equity shall be a third party beneficiary to provisions contained
in
this Article IX.
ARTICLE
X
GENERAL
PROVISIONS
10.1 Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by commercial delivery service, or
sent
via telecopy (receipt confirmed) to the parties at the following addresses
or
telecopy numbers (or at such other address or telecopy numbers for a party
as
shall be specified by like notice):
(a) if
to
Parent (prior to Closing), to:
Multi-Link
Telecommunications, Inc.
Attn:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇▇▇
(▇▇▇)
▇▇▇-▇▇▇▇ telephone
(▇▇▇)
▇▇▇-▇▇▇▇ telecopy
52
(b) if
to the
Company or to Parent (after Closing), to:
▇▇▇▇▇▇
▇. ▇▇▇▇▇, CEO
Auriga
Laboratories, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
(▇▇▇)
▇▇▇-▇▇▇▇
(▇▇▇)
▇▇▇-▇▇▇▇ telecopy
with
a
copy to:
Stone,
▇▇▇▇▇▇▇▇▇▇ & Cha, PLC
Attn:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇)
▇▇▇-▇▇▇▇
(▇▇▇)
▇▇▇-▇▇▇▇ telecopy
(c) if
to KI
Equity, to:
▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager
KI
Equity
Partners I, LLC
▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇)
▇▇▇-▇▇▇▇ telephone
(▇▇▇)
▇▇▇-▇▇▇▇ telecopy
10.2 Interpretation.
(a) When
a
reference is made in this Agreement to Exhibits, such reference shall be to
an
Exhibit to this Agreement unless otherwise indicated. When a reference is made
in this Agreement to Sections, such reference shall be to a Section of this
Agreement. Unless otherwise indicated the words “include,” “includes” and
“including” when used herein shall be deemed in each case to be followed by the
words “without limitation.” The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. When reference is made herein
to
“the business of” an entity, such reference shall be deemed to include the
business of all direct and indirect Subsidiaries of such entity. Reference
to
the Subsidiaries of an entity shall be deemed to include all direct and indirect
Subsidiaries of such entity.
53
(b) For
purposes of this Agreement, the term “Material Adverse Effect” when used in
connection with an entity means any change, event, violation, inaccuracy,
circumstance or effect, individually or when aggregated with other changes,
events, violations, inaccuracies, circumstances or effects, that is materially
adverse to the business, assets (including intangible assets), revenues,
financial condition or results of operations of such entity (it being understood
that neither of the following alone or in combination shall be deemed, in and
of
itself, to constitute a Material Adverse Effect: (a) changes attributable to
the
public announcement or pendency of the transactions contemplated hereby, (b)
changes in general national or regional economic conditions, (c) changes
affecting the industry generally in which the Company or Parent operates),
or
(d) any SEC rulemaking requiring enhanced disclosure of reverse merger
transactions with a public shell.
(c) For
purposes of this Agreement, the term “Legal Requirements” means any federal,
state, local, municipal, foreign or other law, statute, constitution, principle
of common law, resolution, ordinance, code, edict, decree, rule, regulation,
ruling or requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Entity
(as defined in Section 2.5(b)), and all requirements set forth in applicable
Contracts (as defined in Section 2.21(a)).
(d) For
purposes of this Agreement, the term “Subsidiary” shall mean any Person in which
the Company or Parent or any subsidiary thereof directly or indirectly, owns
beneficially securities or interests representing 50% or more of (x) the
aggregate equity or profit interests, or (y) the combined voting power of voting
interests ordinarily entitled to vote for management or otherwise.
(e) For
purposes of this Agreement, the term “Person” shall mean any individual,
corporation (including any non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company), firm
or other enterprise, association, organization, entity or Governmental Entity.
(f) For
purposes of this Agreement, all monetary amounts set forth herein are referenced
in United States dollars, unless otherwise noted.
10.3 Counterparts.
This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to
the
other party, it being understood that all parties need not sign the same
counterpart. Signatures by facsimile or in electronic form shall be treated
the
same as if such signatures were original signatures of the parties.
10.4 Entire
Agreement; Third Party Beneficiaries.
This
Agreement and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein, including the Schedules
hereto (a) constitute the entire agreement among the parties with respect to
the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, it being understood that the letter of intent between Parent and Company
dated March 29, 2006 is hereby terminated in its entirety and shall be of no
further force and effect; and (b) are not intended to confer upon any other
person any rights or remedies hereunder (except as specifically provided in
this
Agreement). KI Equity is a third-party beneficiary of the certain provisions
contained herein to which KI Equity derives a benefit and, with respect to
such
provisions, KI Equity has the right to enforce them as if it were a signatory
to
this Agreement.
54
10.5 Severability.
In the
event that any provision of this Agreement, or the application thereof, becomes
or is declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in full force
and
effect and the application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to
the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
10.6 Other
Remedies; Specific Performance.
Except
as otherwise provided herein, any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of any other
remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one remedy will not preclude the exercise of any other remedy.
The parties hereto agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction,
this
being in addition to any other remedy to which they are entitled at law or
in
equity.
10.7 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware, USA, regardless of the laws that might otherwise govern
under
applicable principles of conflicts of law thereof.
10.8 Rules
of Construction.
The
parties hereto agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against
the
party drafting such agreement or document.
10.9 Assignment.
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 10.9, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
55
10.10 Arbitration.
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 Atlanta, Georgia 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
Atlanta, Georgia. 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.
[The
remainder of this page has been intentionally left
blank.]
56
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as
of the date first written above.
| MULTI-LINK TELECOMMUNICATIONS, INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President |
||
| MULTI-LINK ACQUISITION, INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President |
||
| AURIGA LABORATORIES, INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ | |
|
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, CEO |
||
| ACKNOWLEDGED
AND AGREED
WITH
RESPECT TO OBLIGATIONS
UNDER
SECTIONS 5.11 AND 5.14 HEREOF:
|
|||
| KI
Equity Partners I, LLC,
a
Delaware limited liability company
|
|||
| /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |||
|
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager |
|||
57
Index
of Exhibits and
Schedules
Exhibits
Exhibit
A –
Certificate of Designations
Exhibit
B - Financial Advisory Agreement
Exhibit
C – Voting Agreement
Schedules
Company
Disclosure Schedules
Parent
and Merger Sub Disclosure Schedules
58