EXHIBIT 2.1
SECURITIES EXCHANGE AGREEMENT
BY AND AMONG
SUNCREST GLOBAL ENERGY CORP.
BEACON ENTERPRISE SOLUTIONS GROUP, INC.
AND
THE BEACON HOLDERS
DATED AS OF DECEMBER 20, 2007
SECURITIES EXCHANGE AGREEMENT
This SECURITIES EXCHANGE AGREEMENT (this "Agreement") is made and entered
into as of December 20, 2007, by and among SUNCREST GLOBAL ENERGY CORP., a
Nevada corporation (the "Company"), BEACON ENTERPRISE SOLUTIONS GROUP, INC., an
Indiana corporation ("Beacon"), and the persons listed on Annex A hereto (the
"Beacon Holders").
RECITALS
A. Immediately prior to the Initial Closing (as defined below), the Beacon
Holders will collectively own (i) 9,194,900 shares of common stock, no par
value, of Beacon (the "Beacon Common Stock"), (ii) [2,500] shares of Series A
Convertible Preferred Stock, no par value, of Beacon, collectively convertible
into an aggregate of [3,333,333] shares of Beacon Common Stock (the "Beacon
Preferred Stock"), out of [4,000] shares of Beacon Preferred Stock (collectively
convertible into an aggregate of 5,333,333 shares of Beacon Common Stock) that
may be issued in the Equity Financing, (iii) $700,000 aggregate principal amount
of Beacon convertible promissory notes (the "Beacon Notes"), convertible into up
to 1,166,664 shares of Beacon Common Stock, and (iv) warrants to purchase up to
[5,517,667] shares of Beacon Common Stock at a price of $1.00 per share (the
"Beacon Warrants");
B. The number and/or amount of Beacon Common Stock, Beacon Preferred
Stock, Beacon Notes and Beacon Warrants (collectively, the "Beacon Securities")
held by the Beacon Holders shall be set forth on Annex A hereto and shall
constitute all of the issued and outstanding securities of Beacon, as of the
date hereof and the Initial Closing;
C. The Beacon Holders desire to (i) exchange their respective Beacon
Common Stock, Beacon Notes and Beacon Warrants for Company Common Stock (as
defined below), respectively, at the Initial Closing (the "Exchange"), and (ii)
Beacon Preferred Stock for Company Preferred Stock (as defined below) following
the Company's adoption and filing with the Secretary of State of Nevada, of the
Restated Articles (as defined below), which will occur subsequent to the
Exchange (the "Preferred Exchange," and, together with the Exchange,
collectively, the "Securities Exchange");
D. The Company's current shareholders will have as of the Initial Closing
and prior to the Exchange, 1,273,121 shares of common stock, par value $0.01 per
share (the "Company Common Stock") issued and outstanding and no other
securities issued and outstanding;
E. The Board of Directors of the Company and the Board of Directors of
Beacon have determined that the Securities Exchange is fair to, and in the best
interests of, their respective corporations and their respective shareholders;
F. Following the Securities Exchange, (I) the Company will have issued and
outstanding (i) 10,468,021 shares of Company Common Stock (of which (a)
1,273,121 shares will be owned by persons who are the current shareholders of
the Company immediately prior to the Exchange; and (b) 9,194,900 shares will be
owned by former holders of Beacon Common Stock who will exchange such shares for
Company Common Stock in the Exchange; (2) 1,666,664 shares will be reserved for
issuance upon conversion of the Company Notes issued to
the holders of Beacon Notes in exchange for their Beacon Notes in the Exchange,
(3) 5,333,333 shares reserved for issuance upon conversion of the Company
Preferred Stock issued to the Beacon Holders in exchange for their Beacon
Preferred Stock in the Preferred Exchange; and (4) up to 5,171,667 shares
issuable upon exercise of Company Warrants, at a price of $1.00 per common
share, issued to Beacon Holders in exchange for their Beacon Warrants in the
Exchange; (II) the officers and directors of the Company shall have resigned and
new Company officers and directors shall have been appointed or elected; (III)
Beacon shall be a wholly-owned subsidiary of the Company and shall have
completed the Four Beacon Acquisitions (as defined below); and (IV) the Company
shall have changed its name to "Beacon Enterprise Solutions Group, Inc."
G. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Code").
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 SECURITIES EXCHANGE
1.1 Exchange of Beacon Securities. Subject to and upon the terms and
conditions of this Agreement, the Company agrees to issue to each Beacon Holder
(a) at the applicable Closing, in exchange for each (i) share of Beacon Common
Stock held by such Beacon Holder, one (1) share of Company Common Stock, (ii)
Beacon Note, a convertible promissory note of the Company in the same principal
amount and accrued interest and with equivalent provisions to the Beacon Note
being exchanged by the Beacon Holder (a "Company Note"), and (iii) Beacon
Warrant, a warrant to purchase the equivalent number of shares of Company Common
Stock as the Beacon Warrant being exchanged by such Beacon Holder (a "Company
Warrant"), and (b) In the Preferred Exchange, immediately following the filing
of the First Amended and Restated Articles of Incorporation of the Company
attached hereto as Annex B (the "Restated Articles"), for each share of Beacon
Preferred Stock held by such Beacon Holder, one (1) share of Series A
Convertible Preferred Stock of the Company, having the designations, terms,
rights and limitations as set forth in the Restated Articles (the "Company
Preferred Stock"). The Securities Exchange, and the other transactions
contemplated by this Agreement, are hereinafter sometimes referred to as the
"Transactions."
1.2 Closings. Unless this Agreement shall have been terminated pursuant to
Section 8.1, the closing of the Exchange (each a "Closing") shall take place at
the offices of the Company at a time and date to be specified by the parties.
The initial Closing (the "Initial Closing") shall be no later than the second
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
(the "Initial Closing Date").
-2-
1.3 Exchange Requirements.
(a) Restrictions on Beacon Securities. If any Beacon Securities
outstanding immediately prior to the Initial Closing 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 Beacon,
then the Company Securities issued in exchange for such Beacon Securities will
also be unvested or subject to the same repurchase option, risk of forfeiture or
other condition, and the certificates representing such Company Securities may
accordingly be marked with appropriate legends and notices to the Company's
transfer of such restrictions also. The Company shall take all action that may
be necessary to ensure that, from and after the Initial Closing, the Company is
entitled to exercise any such repurchase option or other right set forth in any
such restricted securities agreement or other agreement.
(b) Transfers of Ownership. If certificates representing any Company
Securities issued in the Securities Exchange are to be issued in a name other
than that in which the certificates representing the Beacon Securities
surrendered in exchange therefore are registered, it will be a condition of the
issuance thereof that the certificates representing the Beacon Securities so
surrendered will be properly endorsed and otherwise in proper form for transfer
and that the persons requesting such exchange will have paid to the Company or
any agent designated by it any transfer or other taxes required by reason of the
issuance of certificates representing Company Securities in any name other than
that of the registered holder of the certificates surrendered, or established to
the satisfaction of the Company or any agent designated by it that such tax has
been paid or is not payable.
(c) Limited Power of Attorney. Each Beacon Holder hereby expressly
and irrevocably grants to the Chief Executive Officer of Beacon a limited
special power of attorney constituting and appointing such officer as the
attorney-in-fact for such Beacon Holder, with power and authority to act in his
name and on his behalf, enter into and execute such documents, instruments and
agreements, endorse for transfer any and all certificates or documents
evidencing Beacon Securities, and to take such other reasonable actions as may
be necessary to accomplish the Exchange and the Preferred Exchange, all in the
name of and on behalf of each such Beacon Holder. Such limited power of attorney
shall expire on February 29, 2008.
1.4 Procedure for the Securities Exchange.
(a) Standard Registrar and Transfer, the Company's transfer agent
and registrar, shall be designated by the parties hereto to act as the exchange
agent (the "Exchange Agent") in the Share Exchange.
(b) Prior to the Initial Closing Date, the Company shall make
available to the Exchange Agent the shares of Company Common Stock, Company
Notes and Company Warrants to be issued in the Exchange in exchange for the
corresponding Beacon Securities, in accordance with the terms of this Agreement
and as provided in Schedule 1.4(b) hereto.
(c) Immediately following the filing of the Restated Articles with
the Secretary of State of Nevada, the Company shall make available to the
Exchange Agent the Company Preferred Stock to be issued in the Preferred
Exchange in exchange for the
-3-
corresponding Beacon Preferred Stock in accordance with the terms of this
Agreement and as provided in Schedule 1.4(c) hereto.
(d) Upon surrender to the Exchange Agent of the certificate or
documents evidencing Beacon Securities, along with such other documents as the
Exchange Agent may reasonably request in connection with the Exchange and the
Preferred Exchange, the Exchange Agent shall deliver the appropriate Company
Common Stock, Company Preferred Stock, Company Notes and Company Warrants
(collectively, the "Company Securities") to such Beacon Holder in accordance
with Section 1.1 hereof.
1.5 Tax Consequences. It is intended by the parties hereto that the
Exchange 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.
1.6 Investment Representation. All Company Securities issued in accordance
with the terms hereof shall, when issued, be restricted securities and may not
be sold, transferred or otherwise disposed of by the holders thereof without
registration under the Securities Act of 1933, as amended (the "Securities Act")
or an available exemption from registration under the Securities Act. The
certificates or other documents representing the Company Securities issued in
accordance with the terms hereof will contain the appropriate restrictive
legends.
By execution of this Agreement, each of the Beacon Holders expressly
represents and warrants to the Company and Beacon that he, she or it is an
"accredited investor" (as defined under the Securities Act), except that up to
35 Beacon Holders may be permitted to not make such representation, and that:
(a) Each holder has and shall transfer, good and marketable title to
the Beacon Securities 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 (the "Liens").
(b) Each holder is acquiring the Company Securities 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
Company Securities.
(c) Each holder understands that Company Securities are not
registered under the Securities Act, that the issuance of Company Securities is
intended to be exempt from registration under the Securities Act pursuant to
Section 4(2) thereof or such other available exemptions under the Securities
Act, and that the Company's reliance on such exemption is predicated on the
holder's representations set forth herein. Each holder represents and warrants
that: (i) he can bear the economic risk of his respective investments, and (ii)
he possesses such
-4-
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of the investment in Company Securities.
(d) Holders acknowledge that neither the Securities and Exchange
Commission (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
Company Securities. To the full satisfaction of each holder, he has been
furnished all materials that he has requested relating to Company and the
issuance of Company Securities hereunder, and each holder has been afforded the
opportunity to ask questions of Company'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 the Company set forth in this Agreement, on which each of the
holders has relied in making an exchange of his Company Securities.
(f) Each of the Beacon Holders understands that Company Securities
may not be sold, transferred, or otherwise disposed of without registration
under the Securities Act or an available exemption therefrom, and that in the
absence of an effective registration statement covering Company Securities or
any available exemption from registration under the Securities Act, the Company
Securities may have to be held indefinitely.
(g) The representations, warranties and agreements of each holder
contained in this Agreement shall survive the closing of the Transactions.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF BEACON
Beacon hereby represents and warrants to, and covenants with, the Company,
as follows:
2.1 Organization and Qualification.
(a) Beacon is a corporation duly incorporated or organized, validly
existing and in good standing under the laws of the State of Indiana 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 Beacon to be conducted. Beacon is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates, approvals
and orders (the "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 Beacon 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 Beacon. Complete and correct
copies of the articles of incorporation or organization and by-laws (or other
comparable governing instruments with different names) (collectively referred to
herein as "Charter Documents") of Beacon, as amended and currently in effect,
have been heretofore
-5-
delivered to the Company. Beacon is not in violation of any of the provisions of
its Charter Documents.
(b) Beacon 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
Beacon.
(c) The minute books of Beacon 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 Beacon's organization.
Copies of such Corporate Records of Beacon have been heretofore delivered to the
Company.
(d) The stock transfer and ownership records of Beacon 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 Beacon since the time
of Beacon's organization. Copies of such stock records of Beacon have been
heretofore delivered to the Company.
2.2 Subsidiaries. Beacon has a wholly-owned subsidiary, BH Acquisition
Sub, Inc., a Nevada corporation, which has no operating assets or liabilities.
2.3 Capitalization.
(a) As of the Initial Closing Date, the authorized capital stock of
Beacon shall consist of 25,000,000 shares of Beacon Common Stock and 4,500
shares of Beacon Preferred Stock. As of November 7, 2007 (i) 5,969,900 shares of
Beacon Common Stock were issued and outstanding, all of which are validly
issued, fully paid and nonassessable; (ii) 3,225,000 shares of Beacon Common
Stock were reserved for issuance upon the completion of Beacon's four (4)
pending acquisitions (the "Four Beacon Acquisitions"), (iii) 1,166,664 shares of
Beacon Common Stock were reserved for issuance upon the conversion of
outstanding Beacon Notes in the aggregate principal amount of $700,000 (the
"Beacon Conversion Shares"); and (iv) 5,333,333 shares of Beacon Common Stock
have been reserved for issuance by Beacon upon the conversion of the 4,000
shares of Beacon Preferred Stock to be sold in the Equity Financing ("Preferred
Conversion Shares"). In addition, as of the Initial Closing Date, there will be
Beacon Warrants with a duration of five years to purchase an aggregate of up to
5,517,667 shares of Beacon Common Stock at a price of $1.00 per share. All
shares of Beacon 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 Beacon is bound obligating Beacon to
accelerate the vesting of any Beacon Stock Option as a result of the
Transactions. All outstanding securities of Beacon 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 (as defined below). Beacon has heretofore
delivered to the Company
-6-
true, complete and accurate copies of Beacon Warrants and Beacon Notes,
including any and all documents and agreements relating thereto.
(b) Except as set forth in Schedule 2.3 hereto, there are no equity
securities or similar ownership interests of any class of any equity security of
Beacon, or any securities exchangeable or convertible into or exercisable for
such equity securities or similar ownership interests, issued, reserved for
issuance or outstanding. Except as set forth in Schedule 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 Beacon is a party or by
which it is bound obligating Beacon 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 or
similar ownership interests of Beacon or obligating Beacon to grant, extend,
accelerate the vesting of or enter into any such subscription, option, warrant,
equity security, call, right, commitment or agreement.
(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 Beacon is a party or by which Beacon is bound with
respect to any equity security of any class of Beacon.
2.4 Authority Relative to this Agreement. Beacon 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 Transactions). The execution and delivery of
this Agreement and the consummation by Beacon of the transactions contemplated
hereby (including the Transactions) have been duly and validly authorized by all
necessary corporate action on the part of Beacon (including the approval by its
Board of Directors), and no other corporate proceedings on the part of Beacon
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby, other than the approval of this Agreement and the
Transactions by the holders of a majority of the outstanding shares of Beacon
Common Stock. This Agreement has been duly and validly executed and delivered by
Beacon and, assuming the due authorization, execution and delivery thereof by
the other parties hereto, constitutes the legal and binding obligation of
Beacon, enforceable against Beacon 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.
(a) The execution and delivery of this Agreement by Beacon does not,
and the performance of this Agreement by Beacon shall not, (i) conflict with or
violate Beacon's Charter Documents, (ii) subject to obtaining the adoption of
this Agreement and the Transactions by the stockholders of Beacon, conflict with
or violate any Legal Requirements (as defined below), 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 Beacon'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
-7-
properties or assets of Beacon 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 Beacon.
(b) The execution and delivery of this Agreement by Beacon 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
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 Exchange Act, state securities
laws (the "Blue Sky Laws"), and the rules and regulations thereunder, and
appropriate documents with the relevant authorities of other jurisdictions in
which Beacon 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 Beacon or, after the Initial
Closing, the Company, or prevent consummation of the Transactions or otherwise
prevent the parties hereto from performing their obligations under this
Agreement.
2.6 Compliance. To the knowledge of Beacon, 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 Beacon. To
Beacon's knowledge, the businesses and activities of Beacon have not been and
are not being conducted in violation of any Legal Requirements. Beacon is not in
default or violation of any term, condition or provision of any applicable
Charter Documents or Contracts. Except as set forth on Schedule 2.6, to Beacon's
knowledge no written notice of non-compliance with any Legal Requirements has
been received by Beacon (and Beacon has no knowledge of any such notice
delivered to any other Person). Except as set forth on Schedule 2.6, Beacon 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) Beacon has provided to the Company a correct and complete copy
of the audited financial statements (including, in each case, any related notes
thereto) of Beacon for the fiscal years ended December 31, 2005 and 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), were audited
in accordance with the auditing standards of the Public Company Accounting
Oversight Board ("PCAOB") by an independent accountant registered with PCAOB,
and each fairly presents in all material respects the financial position of
Beacon 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.
-8-
(b) Beacon has provided to the Company a correct and complete copy
of the unaudited financial statements (including, in each case, any related
notes thereto) of Beacon for the nine-month period ending September 30, 2007,
which complied as to form in all material respects with, and were prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the period
involved (except as may be indicated in the notes thereto), and were reviewed by
an independent accountant registered with PCAOB, and such statements fairly
present in all material respects the financial position of each at the 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 Beacon.
(c) The books of account and other financial records of Beacon have
been maintained in accordance with good business practice.
2.8 No Undisclosed Liabilities. Except as set forth in Schedule 2.8
hereto, Beacon 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 Beacon, except: (i) liabilities provided
for in or otherwise disclosed in the interim balance sheets of Beacon as of
September 30, 2007 prepared in accordance with U.S. GAAP, which have been
delivered to the Company, and (ii) such liabilities arising in the ordinary
course of Beacon's business since September 30, 2007, none of which would have a
Material Adverse Effect on Beacon.
2.9 Absence of Certain Changes or Events. Except as set forth in Schedule
2.9 hereto or in the interim balance sheets of Beacon as of September 30, 2007
(including the notes thereto), since September 30, 2007, there has not been: (i)
any Material Adverse Effect on Beacon, (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 Beacon's stock, or any purchase, redemption or
other acquisition by Beacon of any of Beacon's capital stock or any other
securities of Beacon or any options, warrants, calls or rights to acquire any
such shares or other securities, (iii) any split, combination or
reclassification of any of Beacon's capital stock, or any amendment or
modification of the terms of any options, warrants or convertible securities of
Beacon, (iv) any granting by Beacon 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 Beacon of
any bonus, except for bonuses made in the ordinary course of business consistent
with past practice, or any granting by Beacon of any increase in severance or
termination pay or any entry by Beacon 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 Beacon of the nature contemplated
hereby, (v) entry by Beacon 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 Beacon with respect to any
Governmental Entity, (vi) any material change by Beacon in its accounting
methods, principles or practices, (vii) any change in the auditors of Beacon,
(vii) any issuance of capital stock, options or warrants of Beacon, or (viii)
any
-9-
revaluation by Beacon of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or accounts
receivable or any sale of assets of Beacon other than in the ordinary course of
business.
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 Beacon,
threatened against Beacon, before any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator that seeks
to restrain or enjoin the consummation of the Transactions 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 Beacon or
have a Material Adverse Effect on the ability of the parties hereto to
consummate the Transactions.
2.11 Employee Benefit Plans.
(a) Except as disclosed on Schedule 2.11, 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 Beacon, or any trade or
business (whether or not incorporated) which is under common control with
Beacon, with respect to which Beacon 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 Beacon. 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 Beacon is threatened, against or with respect to any such
Plan. There are no audits, inquiries or proceedings pending or, to the knowledge
of Beacon, threatened by any governmental agency with respect to any Plans.
Except as disclosed on Schedule 2.11, 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. Except as disclosed on Schedule 2.11, Beacon 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
Beacon 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
Initial Closing in accordance with its terms, without liability to Beacon (other
than ordinary administration expenses and expenses for benefits accrued but not
yet paid).
(b) Except as disclosed on Schedule 2.11 hereto or set forth herein
in Section 2.9, 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 Beacon
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, Beacon is
not a party to any collective bargaining agreement or other labor union contract
applicable to persons
-10-
employed by Beacon nor does Beacon know of any activities or proceedings of any
labor union to organize any such employees.
2.13 Restrictions on Business Activities. Except as disclosed on Schedule
2.13 hereto, to Beacon's knowledge there is no agreement, commitment, judgment,
injunction, order or decree binding upon Beacon or to which Beacon is a party
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of Beacon, any acquisition of
property by Beacon or the conduct of business by Beacon 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
Beacon.
2.14 Title to Property.
(a) Beacon does not own or lease real property (the "Real
Property"). There are no options or other contracts under which Beacon has a
right to acquire any interest in real property.
(b) All leases of real property held by Beacon and all personal
property and other property and assets of Beacon (other than Real Property)
owned, used or held for use in connection with the business of Beacon (the
"Personal Property") are shown or reflected on the interim balance sheets of
Beacon prepared in accordance with U.S. GAAP. Beacon 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 financial statements of Beacon 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 Beacon.
(c) All leases pursuant to which Beacon leases from others material
Real Property 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 Beacon or, to Beacon'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 Beacon.
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.
-11-
(c) Except as set forth in Schedule 2.15 hereto:
(i) Beacon has timely filed all federal, state, local and
foreign returns, estimates, information statements and reports
relating to Taxes (the "Returns") required to be filed by Beacon
with any Tax authority prior to the date hereof, except such Returns
which are not material to Beacon. All such Returns are true, correct
and complete in all material respects. Beacon has paid all Taxes
shown to be due on such Returns.
(ii) All Taxes that Beacon 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) Beacon has not been delinquent in the payment of any
material Tax nor is there any material Tax deficiency outstanding,
proposed or assessed against Beacon, nor has Beacon 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 Beacon by
any Tax authority is presently in progress, nor has Beacon been
notified of any request for such an audit or other examination.
(v) No adjustment relating to any Returns filed by Beacon has
been proposed in writing, formally or informally, by any Tax
authority to Beacon or any representative thereof.
(vi) Beacon has no liability for any material unpaid Taxes
which have not been accrued for or reserved on Beacon'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 Beacon, 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 Beacon in the ordinary course of business, none of which is
material to the business, results of operations or financial
condition of Beacon.
(vii) Beacon has not taken any action and does not know of any
fact, agreement, plan or other circumstance that is reasonably
likely to prevent the Transactions from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
2.16 Environmental Matters.
(a) 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 to Beacon's knowledge: (i) Beacon has complied
with all applicable Environmental Laws; (ii) the properties currently owned or
operated by Beacon (including soils, groundwater, surface water, buildings or
other structures) are not contaminated with any Hazardous Substances; (iii) the
properties formerly owned or operated by Beacon were not contaminated with
Hazardous
-12-
Substances during the period of ownership or operation by Beacon; (iv) Beacon is
not subject to liability for any Hazardous Substance disposal or contamination
on any third party property; (v) Beacon has not been associated with any release
or threat of release of any Hazardous Substance; (vi) Beacon has not received
any notice, demand, letter, claim or request for information alleging that
Beacon may be in violation of or liable under any Environmental Law; and (vii)
Beacon 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.
(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 disclosed on Schedule 2.17,
and defined in Section 5.9, and except as payable under the Placement Agreement
(as defined herein), (i) Beacon has not incurred, nor will it 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; and (ii) no shares of common stock, options, warrants or
other securities of Beacon are payable to any third party by Beacon as a result
of the Transactions.
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 therefore and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof ("Patents"); (ii) inventions (whether
patentable or not), invention disclosures, 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) industrial designs and
any registrations 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
-13-
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).
"Beacon Intellectual Property" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, Beacon.
"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.
"Beacon Registered Intellectual Property" means all of the
Registered Intellectual Property owned by, or filed in the name of,
Beacon.
"Beacon Products" means all current versions of products or service
offerings of Beacon.
(a) Except as disclosed on Schedule 2.18, to Beacon's knowledge,
Beacon Intellectual Property and Beacon Products are 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 Beacon, or which may affect the validity, use or enforceability of such
Beacon Intellectual Property or Beacon Products, which in any such case could
reasonably be expected to have a Material Adverse Effect on Beacon.
(b) Except as disclosed on Schedule 2.18 hereto, Beacon owns and has
good and exclusive title to each material item of Beacon Intellectual Property
owned by it free and clear of any Liens (excluding non-exclusive licenses and
related restrictions granted in the ordinary course); and Beacon is the
exclusive owner of all material Beacon Registered Intellectual Property used in
connection with the operation or conduct of the business of Beacon including the
sale of any products or the provision of any services by Beacon.
(c) Except as disclosed on Schedule 2.18, the operation of the
business of Beacon as such business currently is conducted, including (i) the
design, development, manufacture, distribution, reproduction, marketing or sale
of the products or services of Beacon (including Beacon Products) and (ii)
Beacon's use of any product, device or process, to Beacon'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. (a) 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 Beacon is a party or by or to which any of the
properties or assets of Beacon may be bound, subject or affected (including
without limitation notes or other instruments payable to Beacon)
-14-
and (ii) the term "Material Contracts" shall mean (x) each Contract (I)
providing for payments (past, present or future) to Beacon in excess of $50,000
in the aggregate or (II) under which or in respect of which Beacon 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 Beacon 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 Beacon, or any officer, director or 5% or more
stockholder (the "Insider") of Beacon;
(ii) any guaranty, direct or indirect, by Beacon or any Insider of
Beacon 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 Beacon 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 Beacon;
(iv) any obligation to register any shares of the capital stock or
other securities of Beacon 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 Beacon 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 Beacon is a party.
(b) Except as set forth on Schedule 2.19, 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 Beacon has have been heretofore delivered to the Company.
(c) Except as set forth in Schedule 2.19, neither Beacon nor to the
best of Beacon'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
-15-
breach, default or event, which, individually or in the aggregate, are
reasonably likely to have a Material Adverse Effect on Beacon. Each agreement,
contract or commitment to which Beacon are 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 Beacon.
2.20 Insurance. Schedule 2.20 sets forth Beacon's insurance policies and
fidelity bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors (collectively, the "Insurance Policies") of
Beacon which Beacon reasonably believes are adequate in amount and scope for the
Business in which they are engaged.
2.21 Governmental Actions/Filings. Beacon has been granted and holds, and
has made, all Governmental Actions/Filings necessary to the conduct by Beacon of
its businesses (as presently conducted and as presently proposed to be
conducted) or used or held for use by Beacon, all of which are listed in
Schedule 2.21 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 2.21 hereto,
will not expire prior to December 31, 2007, and Beacon 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 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 Beacon's
knowledge no Governmental Action/Filing is necessary to be obtained, secured or
made by Beacon to enable it to continue to conduct its businesses and operations
and use its properties after the Initial Closing in a manner which is consistent
with current practice.
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.
2.22 Interested Party Transactions. Except as set forth in the Schedule
2.22 hereto, no employee, officer, director or stockholder of Beacon or a member
of his or her immediate family is indebted to Beacon, nor is Beacon 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 Beacon, and (iii) for other employee
benefits made generally available to all employees. Except as set forth in
Schedule 2.22, to Beacon's knowledge, none of such individuals has any direct or
indirect ownership interest in any Person with whom Beacon is affiliated or with
whom Beacon has a contractual relationship, or any Person that competes with
Beacon, except that each employee, stockholder, officer or director of Beacon
and members of their respective immediate families may own less than 5% of the
outstanding stock in publicly traded companies that may compete with Beacon.
Except as set forth in Schedule 2.22, to the knowledge of Beacon, no officer,
director or stockholder or any member of their immediate families is, directly
or indirectly, interested in any material contract with Beacon (other than such
contracts as relate to any such individual ownership of capital stock or other
securities of Beacon).
-16-
2.23 Board Approval. The board of directors of Beacon 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 Transactions.
2.24 Representations and Warranties Complete. The representations and
warranties of Beacon 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 III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to, and covenants with, Beacon, as
follows:
3.1 Organization and Qualification.
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Nevada 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 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 on the Company. Complete and correct copies of the
Charter Documents of the Company, as amended and currently in effect, have been
heretofore delivered to Beacon. The Company is not in violation of any of the
provisions of the Company's Charter Documents.
(b) The Company is duly qualified 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 Corporate Records, since the time of the Company's organization. Copies
of such Corporate Records of the Company have been heretofore delivered to
Beacon.
(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
-17-
organization. Copies of such Stock Records of the Company have been heretofore
delivered to Beacon.
3.2 Subsidiaries. The Company has no Subsidiaries.
3.3 Capitalization.
(a) The authorized capital stock of the Company shall consist of
70,000,000 shares of Company Common Stock and 5,000,000 shares of Company
Preferred Stock. At the close of business on the Initial Closing Date, (i)
1,273,121 shares of the Company Common Stock will be issued and outstanding, all
of which are validly issued, fully paid and nonassessable (ii) no shares of the
Company Preferred Stock will be issued and outstanding; (iii) no shares of the
Company Common Stock will be reserved for issuance upon the exercise of
outstanding options to purchase Company Common Stock granted to certain
employees of Company or other parties (the "Company Stock Options"); (iv) no
shares of the Company Common Stock will be reserved for issuance upon the
exercise of outstanding warrants to purchase the Company Common Stock; and (v)
no shares of the Company Common Stock will be reserved for issuance upon the
conversion of any outstanding convertible notes, debentures or securities. 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. All outstanding shares of the Company 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.
(b) 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. 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 (or other) security, call, right,
commitment or agreement.
(c) There are no registration rights, rights of first refusal,
anti-dilution rights and/or similar 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 it is bound with respect to any equity security
of any class of the Company.
3.4 Authority Relative to this Agreement. The Company has full corporate
power and authority to: (i) execute, deliver and perform this Agreement, and
each ancillary document which the Company has executed or delivered or is to
execute or deliver pursuant to this Agreement, and (ii) carry out the Company's
obligations hereunder and thereunder and, to
-18-
consummate the transactions contemplated hereby (including the Transactions).
The execution and delivery of this Agreement and the consummation by the Company
of the transactions contemplated hereby (including the Transactions) 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 Transactions 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.
3.5 No Conflict; Required Filings and Consents.
(a) 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's 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 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 Company.
(b) The execution and delivery of this Agreement by the Company 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 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 prevent consummation of the Transactions or otherwise prevent the
parties hereto from performing their obligations under this Agreement.
3.6 Compliance. To the Company's knowledge, the Company 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 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. the
Company is not in default or violation of any term, condition or provision of
its Charter Documents. To the Company's knowledge, no written notice of
non-compliance with any Legal Requirements has been received by the Company.
-19-
3.7 SEC Filings; Financial Statements; Bulletin Board.
(a) The Company has made available to Beacon a correct and complete
copy of each report, registration statement and definitive proxy statement filed
by the Company with the SEC for the 36 months prior to the date of this
Agreement (the "Company SEC Reports"), which, to the Company's knowledge, are
all the forms, reports and documents required to be filed by the Company with
the SEC for the 36 months prior to the date of this Agreement. As of their
respective dates, to the Company's knowledge, the Company 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 the Company
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, the Company makes no representation or warranty
whatsoever concerning the Company SEC Reports as of any time other than the time
they were filed.
(b) To the Company's knowledge, each set of financial statements
(including, in each case, any related notes thereto) contained in the Company
SEC Reports 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 the Company 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 the Company taken as a whole.
(c) The Company has previously furnished to Beacon 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 the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
(d) The Company Stock is currently subject to quotation on the FINRA
Over-the-Counter Bulletin Board ("OTC BB") and has received no notice that such
quotation will be discontinued.
3.8 No Undisclosed Liabilities. The Company 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 the Company,
except (i) liabilities provided for in or otherwise disclosed in the Company SEC
Reports filed prior to the date hereof, (ii) liabilities incurred since
September 30, 2007 in the
-▇▇-
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ of which would have a Material Adverse Effect
on the Company, and (iii) those liabilities and obligations specifically set
forth in Section 5.8.
3.9 Absence of Certain Changes or Events. Except as set forth in the
Company SEC Reports filed prior to the date of this Agreement, and except as
contemplated by this Agreement, since December 31, 2006, there has not been: (i)
any Material Adverse Effect on the Company, (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 capital 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 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 of any
bonus, except for bonuses made in the ordinary course of business consistent
with past practice, or any granting by the Company of any increase in severance
or termination pay or any entry by the Company 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 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 the Company with respect to any
Governmental Entity, (vi) any material change by the Company in its accounting
methods, principles or practices, except as required by concurrent changes in
U.S. GAAP, (vii) any change in the auditors of the Company, (vii) any issuance
of capital stock of the Company, or (viii) any revaluation by the Company 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 other than in the ordinary course of business.
3.10 Litigation. Except as set forth in the Company SEC Reports, there are
no claims, suits, actions or proceedings pending or, to the Company's knowledge,
threatened against the Company, 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 Transactions.
3.11 Employee Benefit Plans. The Company 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 the Company, or (ii) result in the acceleration of the time of
payment or vesting of any such benefits.
-21-
3.12 Labor Matters. The Company is not a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company, nor does the Company know of any activities or
proceedings of any labor union to organize any such employees.
3.13 Restrictions on Business Activities. To the Company's knowledge,
there is no agreement, commitment, judgment, injunction, order or decree binding
upon the Company or to which the Company 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, any acquisition of property by the Company
or the conduct of business by the Company 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.
3.14 Title to Property. The Company does not own or lease any Real
Property or Personal Property. There are no options or other contracts under
which the Company has a right or obligation to acquire or lease any interest in
Real Property.
3.15 Taxes. To the Company's knowledge:
(a) The Company has timely filed all Returns required to be filed by
the Company with any Tax authority prior to the date hereof, except such Returns
which are not material to the Company. All such Returns are true, correct and
complete in all material respects. The Company has paid all Taxes shown to be
due on such Returns.
(b) The Company has no liability for any material unpaid Taxes and
has net operating loss carry forwards available to offset future taxable income.
(c) The Company has not taken any action and does not know of any
fact, agreement, plan or other circumstance that is reasonably likely to prevent
the Transactions from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
3.16 Environmental Matters. To the Company's knowledge it has complied
with all applicable Environmental Laws. The Company does not own and has not
owned any real properties subject to Environmental Laws and has not conducted
operations subject to Environmental Laws.
3.17 Brokers. Except for the obligations for the Closing Payment (as
defined in Section 5.9), the Company 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. The Company does not own, license or otherwise
have any right, title or interest in any Intellectual Property or Registered
Intellectual Property.
3.19 Agreements, Contracts and Commitments.
(a) Except for the Closing Payment, the agreements with Transfer
Agent, and as set forth in the Company SEC Reports, to the Company's knowledge,
there are no contracts,
-22-
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 is a
party or by or to which any of the properties or assets of the Company may be
bound, subject or affected, which either (a) creates or imposes a liability
greater than $5,000, or (b) may not be cancelled by the Company on less than 30
days' or less prior notice (the "Company Contracts").
(b) Each Company 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 the Company Contracts (or written summaries in the case of oral
the Company Contracts) and of all outstanding offers or proposals of the Company
have been heretofore delivered to Beacon.
(c) Neither the Company nor, to the knowledge of the Company, 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 Company Contract, and no party to any Company 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 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
the Company.
3.20 Insurance. The Company does not maintain any Insurance Policies.
3.21 Governmental Actions/Filings. The Company has been granted and holds,
and has made, all Governmental Actions/Filings necessary to the conduct by the
Company of its businesses (as presently conducted) or used or held for use by
the Company, and true, complete and correct copies of which have heretofore been
delivered to Beacon. Each such Governmental Action/Filing is in full force and
effect and the Company 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. To the
Company's knowledge, no Governmental Action/Filing is necessary to be obtained,
secured or made by the Company to enable it to continue to conduct its
businesses and operations and use its properties after the Initial Closing in a
manner which is consistent with current practice.
3.22 Interested Party Transactions. Except as set forth in the Company's
SEC Reports, no employee, officer, director or stockholder of the Company or a
member of his or her immediate family is indebted to the Company, nor is the
Company 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, and
(iii) for other employee benefits made generally available to all employees.
-23-
Except as set forth in the Company's SEC Reports, to the Company's knowledge,
none of such individuals has any direct or indirect ownership interest in any
Person with whom the Company is affiliated or with whom the Company has a
material contractual relationship, or any Person that competes with the Company,
except that each employee, stockholder, officer or director of the Company 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. To the Company's knowledge, no officer, director or stockholder or any
member of their immediate families is, directly or indirectly, interested in any
material contract with the Company (other than such contracts as relate to any
such individual ownership of capital stock or other securities of the Company).
3.23 Indebtedness; Company Assets. Except as set forth in the Company's
SEC Reports, the Company has no indebtedness for borrowed money. Any
indebtedness for borrowed money shall be paid in full or otherwise satisfied
prior to or at the Initial Closing. Immediately prior to the Initial Closing,
the Company will have no assets.
3.24 Exchange Act Reporting. The Company is in compliance with, and
current in, all of the reporting, filing and other requirements under the
Exchange Act, the shares of the Company's common stock have been duly and
properly registered under Section 12(g) of the Exchange Act, and the Company is
in compliance with all of the requirements under, and imposed by, Section 12(g)
of the Exchange Act, except where a failure to so comply is not reasonably
likely to have a Material Adverse Effect on the Company.
3.25 Board Approval. The Board of Directors of the Company (including any
required committee or subgroup of the Board of Directors of the Company) has, as
of the date of this Agreement, unanimously (i) declared the advisability of the
Transactions and approved this Agreement and the transactions contemplated
hereby, and (ii) determined that the Transactions are in the best interests of
the stockholders of the Company.
3.26 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.
ARTICLE IV
CONDUCT PRIOR TO THE INITIAL CLOSING
4.1 Conduct of Business by Company and Beacon. 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 Initial Closing, each of the Company
and Beacon 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
-24-
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 Initial Closing, each of the Company and Beacon shall not do
any of the following:
(a) Except as disclosed on Schedule 4.1(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
Beacon, as applicable, or enter into grants 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 Beacon
license on an exclusive basis or sell any Intellectual Property of the Company,
or Beacon as applicable;
(d) 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, or amend or modify the terms of any
options, warrants or convertible securities;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of the Company and Beacon, 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) Except for the Equity Financing, 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;
-25-
(g) Amend its Charter Documents;
(h) Except as contemplated by Schedule 6.1(f) 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 Beacon 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;
(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) Incur any indebtedness for borrowed money in excess of $10,000
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 Beacon 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) 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 Beacon or of the Company included in the Company 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 Beacon is a party or of which Beacon is a beneficiary,
as applicable;
(m) Except in the ordinary course of business consistent with past
practices, modify, amend or terminate any Contract of the Company, or Beacon, as
applicable, or other
-26-
material contract or material agreement to which the Company, or Beacon 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;
(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
$10,000 in any 12 month period;
(p) Engage in any action that could reasonably be expected to cause
the Transactions to fail to qualify as a "reorganization" under Section 368(a)
of the Code;
(q) Except as contemplated by Article V herein or 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;
(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 Sections 4.1 (a) through (t) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Required Actions.
(a) At the time of Initial Closing and effective upon the Share
Exchange, the Company's current board of directors and officers will resign,
effective upon the designation of designees of Beacon as the Company's new board
members and officers.
(b) Beacon shall prepare and deliver to the Company no later than at
the Initial Closing, a current report on Form 8-K announcing the Initial
Closing, which shall include all information required by such form, including
without limitation the information required by Form 10-SB with respect to
Beacon, the U.S. GAAP Financial Statements and the Company Pro Forma Financial
Statements (as defined below) ("Transaction Form 8-K"), which shall be in a form
reasonably acceptable to the Company. Prior to the Initial Closing, Beacon shall
prepare a
-27-
press release announcing the consummation of the Transactions hereunder (the
"Press Release"). Following the Initial Closing, the Company shall file the
Transaction Form 8-K with the SEC and distribute the Press Release.
(c) Prior to Initial Closing, Beacon shall deliver to the Company
the audited financial statements of Beacon for the fiscal year ended December
31, 2005 and 2006, which financial statements shall comply in all material
respects with the published rules and regulations of the SEC, shall be prepared
in accordance with U.S. GAAP applied on a consistent basis throughout the period
involved, were audited in accordance with the auditing standards of the PCAOB by
an independent accountant registered with PCAOB (the "Accountant"), and such
statements fairly present in all material respects the financial position of
Beacon at the dates thereof and the results of its operations and cash flows for
the periods indicated, and (ii) (collectively, the "U.S. GAAP Financial
Statements"). As soon as practical following the date hereof, Beacon shall
deliver to the Company the unaudited financial statements (including, in each
case, any related notes thereto) of Beacon for the nine month period ended
September 30, 2007, which financial statements shall comply in all material
respects with the published rules and regulations of the SEC, shall be prepared
in accordance with U.S. GAAP applied on a consistent basis throughout the period
involved (except as may be indicated in the notes thereto), were reviewed by an
independent accountant registered with PCAOB, and such statements fairly present
in all material respects the financial position of each at the 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 Beacon ("Interim Financial Statements").
(d) The annual financial statements included in the U.S. GAAP
Financial Statements and the Interim Financial Statements shall have been
audited and reviewed, respectively, by the Accountant, and Beacon shall provide
the Company with its permission, and shall cause the Accountant to provide its
permission, to include such financial statements in any SEC filings by the
Company or Beacon in a timely manner ("Permissions").
(e) As soon as practical following the date hereof, Beacon shall
deliver to the Company pro forma consolidated financial statements for Beacon
and the Company giving effect to the Transactions, 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 the Initial Closing with respect to the
Transactions, 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.
(f) As soon as practicable after the Initial Closing, the Company,
with the assistance of Beacon, shall prepare an information statement pursuant
to Rule 14(c) promulgated under Section 14A of the Exchange Act (together with
any amendments or supplements thereto, the "Information Statement") in
connection with the matters addressed in the Restated Articles as contemplated
by Section 5.1(g) ("Stockholder Matters"). Beacon shall reasonably cooperate
with the Company and provide such information available to it as may be
necessary or required, in the reasonable determination of counsel to the Company
and Beacon, for the Company to
-28-
prepare the Information Statement including, without limitation, the delivery of
the U.S. GAAP Financial Statements (as defined below). As soon as practicable
after the Initial Closing, the Company shall obtain the written consent of such
stockholders of the Company as necessary to approve 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, the Company 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 the Company's securities entitled to vote at a meeting of
stockholders. In the event the Information Statement is reviewed by the SEC, the
Company shall respond promptly to any comments of the SEC or its staff with
respect to the Information Statement and use its reasonable best efforts to have
the Information Statement cleared by the SEC as soon as practicable after its
filing.
(g) Immediately following the effectiveness of the Information
Statement, the Company will file the Restated Articles with the Nevada Secretary
of State.
The Company and Beacon shall further cooperate with each other and use
their respective reasonable best 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
Transactions 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 Transactions 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 Beacon 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 Transactions and the other
transactions contemplated hereby. In exercising the foregoing right, each of the
Company and Beacon shall act reasonably and as promptly as practicable.
5.2 Required Information. In connection with the preparation of the
Transaction Form 8-K, the Information Statement, and Press Release, and for such
other reasonable purposes, the Company and Beacon each shall, upon request by
the other, furnish the other with all information concerning themselves, their
respective directors, officers and stockholders and such other matters as may be
reasonably necessary or advisable in connection with the Transactions, or any
other statement, filing, notice or application made by or on behalf of the
Company and Beacon to any third party and/or any Governmental Entity in
connection with the Transactions 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.
-29-
5.3 Confidentiality; Access to Information.
(a) Any confidentiality agreement previously executed by the parties
shall be superseded in its entirety 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 Transactions contemplated hereby.
(b) Access to Information.
(i) The Company will afford Beacon 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 during the
period prior to the Initial Closing to obtain all information
concerning the business, including the status of product development
efforts, properties, results of operations and personnel of the
Company, as Beacon may reasonably request. No information or
knowledge obtained by Beacon in any investigation pursuant to this
Section 5.3 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 Transactions.
(ii) Beacon 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 Beacon during the period prior to the Initial Closing to obtain
all information concerning the business, including the status of
product development efforts, properties, results of operations and
personnel of Beacon, as the Company may reasonably request. No
information or knowledge obtained by the Company in any
investigation pursuant to this Section 5.3 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
Transactions.
5.4 No Solicitation. Other than with respect to the Transactions, each of
the Company and Beacon agrees that neither it nor any of its officers and
directors shall, and that it shall direct and use its reasonable best efforts to
cause its 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 it, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or purchase of all or substantially all of
the assets or equity securities of, it and its Subsidiaries, taken as a whole,
in a single transaction or series of related transactions, or (iii) any tender
offer
-30-
or exchange offer for 20% or more of the outstanding shares of Beacon Common
Stock or the Company Common Stock (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"). Each of the Company and Beacon
further agrees that neither such party nor any officers or director of such
party shall, and that each such party shall direct and use its reasonable best
efforts to cause its 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. Each of the Company and Beacon agrees that it will
immediately cease and cause to be terminated any existing discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Each of the Company and Beacon agrees that it 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 5.4.
5.5 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 the Initial Closing, no party shall
issue any statement or communication to the public regarding the Transactions
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 Transactions, it shall, if possible,
immediately notify the other party prior to such disclosure. Notwithstanding the
foregoing, the parties hereto agree that the Company will prepare and file a
Current Report on Form 8-K pursuant to the Exchange Act to report the execution
of this Agreement and that the Company's stockholders may file any reports as
required by the Exchange Act including, without limitation, any reports on
Schedule 13D.
5.6 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 Transactions 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,
Beacon and its board of
-31-
directors and the Company and its board of directors shall, if any state
takeover statute or similar statute or regulation is or becomes applicable to
the Transactions, this Agreement or any of the transactions contemplated by this
Agreement, use its commercially reasonable efforts to enable the Transactions
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 Beacon or the Company to agree to any divestiture by itself
or any of its affiliates of shares of capital stock 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.
(b) The Company shall give prompt notice to Beacon 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 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.
(c) Beacon 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 Beacon 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.
5.7 Treatment as a Reorganization. Neither Beacon nor the Company shall
take any action prior to or following the Transactions that could reasonably be
expected to cause the Share Exchange to fail to qualify as a "reorganization"
within the meaning of Section 368(a) of the Code.
5.8 Absence of Material Liabilities. Immediately prior to the Initial
Closing, the Company shall have no liabilities or obligations requiring the
payment of monies, other than obligations under or with respect to: (i) any
agreement with the Transfer Agent, (ii) the Company Contracts disclosed under
Section 3.19 hereto, (iii) liabilities and obligations to be paid at or prior to
the Initial Closing, and (iv) accounts payable, accrued expenses and other
liabilities of the Company with respect to the period prior to the Initial
Closing to be paid in full. Following the Initial Closing, Beacon shall pay and
satisfy the Company's obligations under the agreement with the Transfer Agent,
and the remaining Company Contracts.
5.9 Cash Payments at the Initial Closing. At the Initial Closing, Beacon
will pay fees totaling $305,000 relating to the closing of this transaction,
(such applicable sum being referred to herein, as the "Closing Payment").
-32-
5.10 Business Records. At the Initial Closing, the Company shall cause to
be delivered to the Company all records and documents relating to the Company,
which the Company possesses, including, without limitation, books, records,
government or regulatory filings and correspondence (including state blue sky
and Federal securities filings and FINRA or SEC comment letters and related
correspondence), Returns, Charter Documents, consent decrees, orders, and
correspondence, director and stockholder minutes and resolutions, stock
ownership records, financial information and records, and other documents used
in or associated with the Company (the "Business Records").
5.11 Delivery of Stock Records. Within 5 days after the date of this
Agreement, the Company shall deliver to Beacon a certified complete and current
listing of the holders of all Company Common Stock from the Company's transfer
agent.
ARTICLE VI
CONDITIONS TO THE TRANSACTION
6.1 Conditions to Obligations of Each Party to Effect the Transactions.
The respective obligations of each party to this Agreement to effect the
Transactions shall be subject to the satisfaction at or prior to the Initial
Closing Date of the following conditions, unless waived by both the Company and
Beacon:
(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 Transactions illegal
or otherwise prohibiting consummation of the Transactions, substantially on the
terms contemplated by this Agreement. All waiting periods, if any, under any
foreign law in any jurisdiction in which the Company or Beacon has material
operations relating to the transactions contemplated hereby will have expired or
terminated early and all material foreign antitrust approvals required to be
obtained prior to the Transactions in connection with the transactions
contemplated hereby shall have been obtained.
(b) Information Statements. As soon as applicable after the date
hereof, the surviving Company shall have filed the definitive Information
Statement with the SEC, and the Company shall have mailed the definitive
Information Statement to each of the Company's stockholders, and the Company
shall have otherwise complied with all of the provisions under Rule 14c under
the Exchange Act.
(c) Transaction 8-K. Transaction Form 8-K shall have been created by
Beacon and filed by the Company's new officers and directors with the SEC at the
Initial Closing, and the Press Release shall have been distributed.
(d) Blue Sky Laws. The issuance of Company Securities 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 Beacon and
its respective counsels.
(e) Equity Financing. Signed subscriptions shall have been received
by Beacon to purchase shares of Beacon Preferred Stock (together with an
attached five-year
-33-
warrant to purchase one additional share of Beacon Common Stock for each share
purchased in the Equity Financing) in a private placement offering exempt from
registration under the Securities Act pursuant to Regulation D and Regulations
promulgated thereunder, which subscriptions shall represent gross proceeds of
not less than $4,000,000, with such gross proceeds having been fully funded into
an escrow account established for the Equity Financing, the release of which to
Beacon is conditioned only upon the Initial Closing of the Share Exchange. At or
prior to the Initial Closing, Beacon's Board of Directors shall approve the
Equity Financing, and the subscriptions received shall have been accepted by
Beacon, subject only to the closing of the Share Exchange.
(f) Acquisitions. Beacon shall have consummated the Four Beacon
Acquisitions, which shall have audited combined revenue of $10.2 million for the
year ending December 31, 2006.
6.2 Additional Conditions to Obligations of Beacon. The obligations of
Beacon to consummate and effect the Transactions shall be subject to the
satisfaction at or prior to the Initial Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Beacon:
(a) Representations and Warranties. Each representation and warranty
of the Company contained in this Agreement (i) shall have been true and correct
as of the date of this Agreement and (ii) shall be true and correct on and as of
the Initial Closing Date with the same force and effect as if made on the
Initial Closing Date. Beacon 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").
(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 on or prior to the
Initial 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 with
respect to the Company, and Beacon shall have received the Company Closing
Certificate to such effect.
(c) Consents. The Company 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 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) No Financial Obligations. Immediately prior to the Initial
Closing, the Company shall have no material liabilities or obligations, other
than as set forth in Section 5.10 hereof.
(f) SEC Compliance. Immediately prior to the Initial Closing, the
Company shall be in compliance with the reporting requirements under the
Exchange Act.
-34-
(g) Business Records. The Company shall have delivered to Beacon the
Business Records.
(h) Resignations. The Company shall have received the resignations
of all of the officers and directors of the Company.
(i) Other Deliveries. At or prior to the Initial Closing, the
Company shall have delivered to Beacon (i) copies of resolutions and actions
taken by 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
Beacon and its counsel in order to consummate the transactions contemplated
hereunder.
6.3 Additional Conditions to the Obligations of the Company. The
obligations of the Company to consummate and effect the Transactions shall be
subject to the satisfaction at or prior to the Initial Closing Date of each of
the following conditions, any of which may be waived, in writing, exclusively by
the Company:
(a) Representations and Warranties. Each representation and warranty
of Beacon contained in this Agreement (i) shall have been true and correct as of
the date of this Agreement and (ii) shall be true and correct on and as of the
Initial Closing Date with the same force and effect as if made on and as of the
Initial Closing. The Company shall have received a certificate with respect to
the foregoing signed on behalf of Beacon by an authorized officer of Beacon (the
"Beacon Closing Certificate").
(b) Agreements and Covenants. Beacon 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
Initial 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 Beacon)
does not, or will not, constitute a Material Adverse Effect on Beacon, and
Beacon shall have received the Beacon Closing Certificate to such effect.
(c) Consents. Beacon 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 Beacon.
(d) Material Adverse Effect. No Material Adverse Effect with respect
to Beacon shall have occurred since the date of this Agreement.
(e) Beacon Financial Statements. Beacon shall have delivered to the
Company the U.S. GAAP Financial Statements, the Interim Financial Statements,
the Pro Forma Financial Statements and the Permissions.
(f) Closing Payment. The Closing Payment shall have been disbursed
as provided in Section 5.9.
-35-
(g) Other Deliveries. At or prior to the Initial Closing, Beacon
shall have delivered to the Company: (i) copies of resolutions and actions taken
by Beacon's board of directors and stockholders (if required) 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.
ARTICLE VII
SURVIVAL
Except as specifically set forth in Sections 1.6, 5.1(f), 5.7, 5.9, 5.10,
5.11, 8.3 and 9.1, and except where the performance of any covenant or agreement
by Beacon following the Initial Closing is contemplated under this Agreement
(collectively, the "Surviving Provisions"), 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 Initial
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 Initial Closing.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Initial Closing:
(a) by mutual written agreement of Beacon and the Company at any
time;
(b) by either Beacon or the Company if the Transactions shall not
have been consummated by December 31, 2007 (the "Expiration Date") 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 Transactions
to occur on or before such date and such action or failure to act constitutes a
breach of this Agreement (c) by either Beacon 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 Transactions, which order, decree, ruling or other action is
final and nonappealable;
(d) by the Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of Beacon set forth in this
Agreement, or if any representation or warranty of Beacon 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 Beacon's representations and warranties or breach by Beacon is
curable by Beacon prior to the Initial 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 Beacon of such breach, provided
Beacon continues to exercise commercially reasonable efforts to cure such breach
(it being understood that the Company may not terminate this Agreement pursuant
to this
-36-
Section 8.1(d) if the Company shall have materially breached this Agreement or
if such breach by Beacon is cured during such thirty (30)-day period); and
(e) by Beacon, 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 the Company's representations and warranties or breach by the
Company is curable by the Company prior to the Initial Closing Date, then Beacon
may not terminate this Agreement under this Section 8.1(e) for thirty (30) days
after delivery of written notice from Beacon to the Company of such breach,
provided the Company continues to exercise commercially reasonable efforts to
cure such breach (it being understood that Beacon 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 provision
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 Transactions 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, and (ii)
nothing herein shall relieve any party from liability for any intentional or
willful breach of this Agreement.
8.3 Fees and Expenses. Except as otherwise provided herein, 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 Transactions are consummated. The parties further agree that, whether
or not the Transactions are consummated, Beacon shall be responsible for any and
costs and expenses incurred by it 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), and costs and expenses incurred by it
in connection with the preparation of the Information Statement and the filing
and mailing thereof.
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 Initial 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.
-37-
ARTICLE IX
POST-CLOSING COVENANTS
9.1 Post-Closing Covenants. During the period beginning upon the Initial
Closing and ending on the second (2nd) anniversary of the Initial Closing, the
Company agrees to satisfy, perform and comply with, 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.
(b) Within forty-five days following the Initial Closing, the
Company's Board of Directors shall satisfy the independence, audit and
compensation committee and other corporate governance requirements under the SOX
Act, the rules and regulations promulgated by the SEC, and the requirements of
either Nasdaq or AMEX as selected by the Company, whether or not Company's
Common Stock is listed or quoted, or qualifies for listing or quotation, on
Nasdaq or AMEX.
(c) 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 Company's securities are listed or traded, and responds in a timely
manner, and to the satisfaction of the SEC, to any review or inquiry by the SEC
to the Transaction Form 8-K and the U.S. GAAP Financial Statements contained
therein.
(d) In the event Beacon's certified public accountants resign or are
terminated for any reason, promptly engage a new certified public accountant
registered with PCAOB.
(e) Duly adopt audit and compensation committee charters and
schedule regular meetings for the audit and compensation committee meetings are
scheduled, with notice to all directors, and such committee meetings are
properly held as scheduled.
(f) Duly adopt, cause its management to comply with, proper
disclosure, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and code of ethics policies as adopted by Beacon's
board.
(g) Use its commercially reasonable efforts to obtain and maintain a
quotation of its shares of Company Common Stock on the OTC BB, Nasdaq or AMEX,
and cooperate with or assist any FINRA member firm in the filing of Form 211
under Rule 15c2-11 promulgated under the Exchange Act for the commencement or
maintenance of quotation of Company Common Stock on the OTC BB, Nasdaq or AMEX.
(h) Take all actions necessary to consummate the Preferred Exchange.
(i) Take all actions necessary for holders of shares of Company
Common Stock to sell such shares under Rule 144 promulgated under the Securities
Act, including, delivery of requisite legal opinions by the Company's counsel at
the Company's expense.
-38-
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 Initial Closing.
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 the Company, to:
Suncrest Global Energy Corp.
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇, President
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, #▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ (telephone)
(b) if to Beacon, to:
Beacon Enterprise Solutions Group, Inc.
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Executive Officer
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ LLC
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇.▇▇▇.▇▇▇▇ (telephone)
502.581.1087 (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
-39-
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.
(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 Company or
Beacon 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 2.19).
(d) For purposes of this Agreement, the term "Subsidiary" shall mean
any Person in which the Company or Beacon 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
-40-
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 Beacon and the Company
dated August 29, 2007 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).
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 Commonwealth of Kentucky, 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.
-41-
[The remainder of this page has been intentionally left blank.]
-42-
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Exchange Agreement to be executed as of the date first written above.
SUNCREST GLOBAL ENERGY CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
BEACON ENTERPRISE SOLUTIONS
GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Chief Executive Officer
-43-
Index of Exhibits and Schedules
ANNEX B
FIRST AMENDED AND RESTATED ARTICLES OF INCORPORATION
-▇▇-
▇▇▇▇▇▇▇▇
-▇▇-
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ Disclosure Schedules
-46-
Schedules
Suncrest Disclosure Schedules
-47-