EXHIBIT 10.17
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AMONG
OXFORD VENTURES, INC.,
ULURU ACQUISITION CORP.
AND
ULURU, INC.
October 12, 2005
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TABLE OF CONTENTS
ARTICLE I THE MERGER.................................................................................1
1.1 The Merger.....................................................................................1
1.2 The Closing....................................................................................1
1.3 Actions at the Closing.........................................................................2
1.4 Additional Actions.............................................................................2
1.5 Conversion of Shares...........................................................................3
1.6 Dissenting Shares..............................................................................4
1.7 Fractional Shares..............................................................................4
1.8 Options and Warrants...........................................................................5
1.9 Escrow.........................................................................................5
1.10 Articles of Incorporation and ByLaws...........................................................5
1.11 No Further Rights..............................................................................5
1.12 Closing of Transfer Books......................................................................5
1.13 Post-Closing Adjustment........................................................................5
1.14 Exemption From Registration....................................................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................................7
2.1 Organization, Qualification and Corporate Power................................................7
2.2 Capitalization.................................................................................7
2.3 Authorization of Transaction...................................................................8
2.4 Noncontravention...............................................................................8
2.5 Subsidiaries...................................................................................9
2.6 Financial Statements...........................................................................9
2.7 Absence of Certain Changes.....................................................................9
2.8 Undisclosed Liabilities........................................................................9
2.9 Tax Matters...................................................................................10
2.10 Assets........................................................................................10
2.11 Owned Real Property...........................................................................11
2.12 Real Property Leases..........................................................................11
2.13 Intellectual Property.........................................................................11
2.14 Contracts.....................................................................................12
2.15 Accounts Receivable...........................................................................13
2.16 Powers of Attorney............................................................................13
2.17 Insurance.....................................................................................13
2.18 Litigation....................................................................................14
2.19 Warranties....................................................................................14
2.20 Employees.....................................................................................14
2.21 Employee Benefits.............................................................................14
2.22 Environmental Matters.........................................................................17
2.23 Legal Compliance..............................................................................18
2.24 Customers and Suppliers.......................................................................18
2.25 Permits.......................................................................................18
2.26 Certain Business Relationships With Affiliates................................................18
2.27 Compliance with Laws..........................................................................18
2.28 Brokers' Fees.................................................................................19
2.29 Books and Records.............................................................................19
2.30 Disclosure....................................................................................19
2.31 Duty to Make Inquiry..........................................................................19
2.32 Board Actions.................................................................................19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE ACQUISITION SUBSIDIARY...............20
3.1 Organization, Qualification and Corporate Power...............................................20
3.2 Capitalization................................................................................20
3.3 Authorization of Transaction..................................................................21
3.4 Noncontravention..............................................................................21
3.5 Subsidiaires..................................................................................21
3.6 Exchange Act Reports..........................................................................21
3.7 Compliance with Laws..........................................................................22
3.8 Financial Statements..........................................................................22
3.9 Absence of Certain Changes....................................................................23
3.10 Litigation....................................................................................23
3.11 Undisclosed Liabilities.......................................................................23
3.12 Tax Matters...................................................................................23
3.13 Assets........................................................................................24
3.14 Owned Real Property...........................................................................24
3.15 Real Property Leases..........................................................................24
3.16 Contracts.....................................................................................25
3.17 Accounts Receivable...........................................................................26
3.18 Powers of Attorney............................................................................26
3.19 Insurance.....................................................................................26
3.20 Warranties....................................................................................27
3.21 Employees.....................................................................................27
3.22 Employee Benefits.............................................................................27
3.23 Environmental Matters.........................................................................30
3.24 Permits.......................................................................................30
3.25 Certain Business Relationships With Affiliates................................................31
3.26 Tax-Free Reorganization.......................................................................31
3.27 Brokers' Fees.................................................................................32
3.28 Disclosure....................................................................................32
3.29 Interested Party Transactions.................................................................32
3.30 Duty to Make Inquiry..........................................................................32
3.31 Accountants...................................................................................32
3.32 Minute Books..................................................................................33
3.33 Board Action..................................................................................33
ARTICLE IV COVENANTS.................................................................................33
4.1 Closing Efforts...............................................................................33
4.2 Governmental and Thirty Party Notices and Consents............................................33
4.3 Current Report................................................................................34
4.4 Operation of Business.........................................................................34
4.5 Access to Information.........................................................................35
4.6 Operation of Business.........................................................................36
4.7 Access to Information.........................................................................37
4.8 Expenses......................................................................................38
4.9 Indemntification..............................................................................38
4.10 Listing of Merger Shares......................................................................38
4.11 Name Change...................................................................................38
4.12 Breakup.......................................................................................39
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER......................................................39
5.1 Conditions to Each Party's Obliations.........................................................39
5.2 Conditions to Obligations of the Parent and the Acquisition Subsidiary........................39
5.3 Conditions to Obligations of the Company......................................................40
ARTICLE VI INDEMNIFICATION...........................................................................41
6.1 Indemnification by the Company Shareholders...................................................41
6.2 Indemnification by the Parent.................................................................42
6.3 Indemnification Claims by the Parent..........................................................42
6.4 Survival of Representations and Warranties....................................................45
ARTICLE VII LEFT INTENTIONALLY BLANK..................................................................47
ARTICLE VIII TERMINATION...............................................................................48
8.1 Termination by Mutual Agreement...............................................................48
8.2 Termination for Failure to Close..............................................................48
8.3 Termination by Operation of Law...............................................................48
8.4 Termination for Failure to Perform Covenants or Conditions....................................48
8.5 Effect of Termination or Default; Remedies....................................................48
8.6 Remedies; Specific Performance................................................................49
ARTICLE IX MISCILLANEOUS.............................................................................49
9.1 Press Releases and Announcements..............................................................49
9.2 No Third Party Beneficiaries..................................................................49
9.3 Entire Agreement..............................................................................49
9.4 Succession and Assignment.....................................................................49
9.5 Counterparts and Facsimile Signature..........................................................49
9.6 Headings......................................................................................50
9.7 Notices.......................................................................................50
9.8 Governing Law.................................................................................51
9.9 Amendments and Waivers........................................................................51
9.10 Severability..................................................................................51
9.11 Submission to Jurisdiction....................................................................51
9.12 Construction..................................................................................52
EXHIBITS
Exhibit A Form Escrow Agreement
Exhibit B Opinion of Counsel to the Company
Exhibit C Opinion of Counsel to the Parent and the Acquisition Subsidiary
Exhibit D Assets to be Purchased by Company from Access Pharmaceutical, Inc.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October __,
2005, by and among Oxford Ventures, Inc., a Nevada corporation (the "Parent"),
Uluru Acquisition Corp., a Nevada corporation (the "Acquisition Subsidiary") and
Uluru Inc., a Delaware corporation (the "Company"). The Parent, the Acquisition
Subsidiary and the Company are each referred to individually as a "Party" and
referred to collectively herein as the "Parties."
WHEREAS, this Agreement contemplates a merger of the Acquisition
Subsidiary with and into the Company with the Company as the surviving entity
(the "Merger"). In the Merger, the shareholders of the Company will receive
common stock of the Parent in exchange for their capital stock of the Company.
WHEREAS, pursuant to the terms of a certain Securities Purchase Agreement,
dated as of October [--], 2005 (the "Bridge Loan Agreement"), and related
documents (collectively with the Bridge Loan Agreement, the "Bridge Loan
Documents"), the Parent has loaned and will loan (the "Bridge Loan") an
aggregate of $10,700,000 to the Company, which will be deemed repaid in full at
the Effective Time (as defined below).
WHEREAS, Parent, Acquisition Subsidiary, and the Company desire that the
Merger qualifies as a "plan of reorganization" under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and not subject the
holders of equity securities of the Company to tax liability under the Code.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants herein contained, and for other good and valuable consideration the
receipt, adequacy and sufficiency of which are hereby acknowledged, the Parties
hereto, intending legally to be bound, agree as follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
Agreement, the Acquisition Subsidiary shall merge with and into the Company at
the Effective Time (as defined below). From and after the Effective Time, the
separate corporate existence of the Acquisition Subsidiary shall cease and the
Company shall continue as the surviving corporation in the Merger (the
"Surviving Corporation"). The "Effective Time" shall be the later to occur of
the time at which articles of merger and other appropriate or required documents
prepared and executed in accordance with Nevada Revised Statutes Chapter 92A
(the "Articles of Merger") are filed with the Secretary of State of Nevada and
the time at which a copy thereof is filed in accordance with the relevant
provisions of the Delaware General Corporation Law (the "DGCL") with the
Secretary of State of Delaware. The Merger shall have the effects set forth in
Section 92A.250 of the Nevada Revised Statutes and Section 252 of the DGCL.
1.2 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Gottbetter &
Partners, LLP in New York, New York commencing at 9:00 a.m. local time on
November [--], 2005, or, if all of the conditions to the obligations of the
Parties to consummate the transactions contemplated hereby have not been
satisfied or waived by such date, on such mutually agreeable later date as soon
as practicable (and in any event not later than three (3) business days) after
the satisfaction or waiver of all conditions (excluding the delivery of any
documents to be delivered at the Closing by any of the Parties) set forth in
Article V hereof (the "Closing Date").
1.3 Actions at the Closing. At the Closing:
(a) the Company shall deliver to the Parent and the Acquisition
Subsidiary the various certificates, instruments and documents referred to in
Section 5.2;
(b) the Parent and the Acquisition Subsidiary shall deliver to the
Company the various certificates, instruments and documents referred to in
Section 5.3;
(c) the Surviving Corporation shall file with the Secretary of State
of the States of Delaware and Nevada the Articles of Merger;
(d) each of the shareholders of record of the Company immediately
prior to the Effective Time (the "Company Shareholders") shall deliver to the
Parent the certificate(s) representing his, her or its Company Shares (as
defined below);
(e) the Parent shall deliver certificates for the Initial Shares (as
defined below) to each Company Shareholder in accordance with Section 1.5;
(f) the Parent shall deliver to the Company (i) evidence that the
Parent's Board of Directors is authorized to consist of five individuals, (ii)
the resignations of all individuals who served as directors and/or officers of
the Parent immediately prior to the Closing Date, (iii) evidence of the
appointment of five directors to serve immediately following the Closing Date,
four of whom shall have been designated by the Company and one of whom shall
have been designated by Highgate House Funds, Ltd. and Prentice Capital
Management, LP, and (v) evidence of the appointment of such executive officers
of the Parent to serve immediately following the Closing Date as shall have been
designated by the Company; and
(g) the Parent, ▇▇▇▇▇ ▇▇▇▇ (the "Indemnification Representative")
and Gottbetter & Partners, LLP (the "Escrow Agent") shall execute and deliver
the Escrow Agreement in substantially the form attached hereto as Exhibit A (the
"Escrow Agreement") and the Parent shall deliver to the Escrow Agent a
certificate for the Escrow Shares (as defined below) being placed in escrow on
the Closing Date pursuant to Section 1.9.
1.4 Additional Actions. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either the
Company or Acquisition Subsidiary or (b) otherwise to carry out the purposes of
this Agreement, the Surviving Corporation and its proper officers and directors
or their designees shall be authorized (to the fullest extent allowed under
applicable law) to execute and deliver, in the name and on behalf of either the
Company or Acquisition Subsidiary, all such deeds, bills of sale, assignments
and assurances and do, in the name and on behalf of the Company or Acquisition
Subsidiary, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of the Company or
Acquisition Subsidiary, as applicable, and otherwise to carry out the purposes
of this Agreement.
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1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of any Party or the holder of any of the
following securities:
(a) Each share of common stock, $.01 par value per share, of the
Company ("Company Shares") issued and outstanding immediately prior to the
Effective Time (other than Company Shares owned beneficially by the Parent or
the Acquisition Subsidiary and Dissenting Shares (as defined below)) shall be
converted into and represent the right to receive (subject to the provisions of
Section 1.9) such number of shares of common stock, $0.001 par value per share,
of the Parent ("Parent Common Stock") as is equal to the Common Conversion Ratio
(as defined below). An aggregate of 11,000,000 shares (the "Merger Shares") of
Parent Common Stock shall be issued to the shareholders of the Company in
connection with the Merger. Any reverse splits that occur prior to the Effective
Time shall not affect the amount of the Merger Shares.
(b) The "Common Conversion Ratio" shall be obtained by dividing (i)
11,000,000 shares of Parent Common Stock by (ii) the total number of outstanding
Company Shares immediately prior to the Effective Time on a diluted basis after
giving effect to the exercise of all outstanding options, warrants of
convertible securities, if any. Shareholders of record of the Company as of
October [--], 2005 (the "Indemnifying Shareholders") shall be entitled to
receive immediately 95% of the shares of Parent Common Stock into which their
Company Shares were converted pursuant to this Section 1.5 (the "Initial
Shares"); the remaining 5% of the shares of Parent Common Stock into which their
Company Shares were converted pursuant to this Section 1.5, rounded to the
nearest whole number (with .5 shares rounded upward to the nearest whole number)
(the "Escrow Shares"), shall be deposited in escrow pursuant to Section 1.9 and
shall be held and disposed of in accordance with the terms of the Escrow
Agreement. The Initial Shares and the Escrow Shares shall together be referred
to herein as the "Merger Shares."
(c) Each issued and outstanding share of Acquisition Subsidiary
common stock shall be converted into one validly issued, fully paid and
nonassessable share of Surviving Corporation common stock.
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1.6 Dissenting Shares.
(a) For purposes of this Agreement, "Dissenting Shares" means
Company Shares held as of the Effective Time by a Company Shareholder who has
not voted such Company Shares in favor of the adoption of this Agreement and the
Merger and with respect to which appraisal shall have been duly demanded and
perfected in accordance with Section 262 of the DGCL and not effectively
withdrawn or forfeited prior to the Effective Time. Dissenting Shares shall not
be converted into or represent the right to receive the Merger Shares, unless
such Company Shareholder's right to appraisal shall have ceased in accordance
with Section 262 of the DGCL. If such Company Shareholder has so forfeited or
withdrawn his, her or its right to appraisal of Dissenting Shares, then, (i) as
of the occurrence of such event, such holder's Dissenting Shares shall cease to
be Dissenting Shares and shall be converted into and represent the right to
receive the Merger Shares issuable in respect of such Company Shares pursuant to
Section 1.5, and (ii) promptly following the occurrence of such event, the
Parent shall deliver to such Company Shareholder a certificate representing 95%
of the Merger Shares to which such holder is entitled pursuant to Section 1.5
(which shares shall be considered Initial Shares for all purposes of this
Agreement) and shall deliver to the Escrow Agent a certificate representing the
remaining 5% of the Merger Shares to which such holder is entitled pursuant to
Section 1.5 (which shares shall be considered Escrow Shares for all purposes of
this Agreement).
(b) The Company shall give the Parent prompt notice of any written
demands for appraisal of any Company Shares, withdrawals of such demands, and
any other instruments that relate to such demands received by the Company. The
Company shall not, except with the prior written consent of the Parent, make any
payment with respect to any demands for appraisal of Company Shares or offer to
settle or settle any such demands.
1.7 Fractional Shares. No certificates or scrip representing fractional
Initial Shares shall be issued to Company Shareholders on the surrender for
exchange of certificates that immediately prior to the Effective Time
represented Company Shares converted into Merger Shares pursuant to Section 1.5
("Certificates") and such Company Shareholders shall not be entitled to any
voting rights, rights to receive any dividends or distributions or other rights
as a stockholder of the Parent with respect to any fractional Initial Shares
that would have otherwise been issued to such Company Shareholders. In lieu of
any fractional Initial Shares that would have otherwise been issued, each former
Company Shareholder that would have been entitled to receive a fractional
Initial Share shall, on proper surrender of such person's Certificates, receive
such whole number of Initial Shares as is equal to the precise number of Initial
Shares to which such Company Shareholder would be entitled, rounded up or down
to the nearest whole number (with a fractional interest equal to .5 rounded
upward to the nearest whole number); provided that each such Company Shareholder
shall receive at least one Initial Share.
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1.8 Options and Warrants. The Company shall cause the termination, as of
the Effective Time, of any and all outstanding warrants and options to purchase
capital stock of the Company which remain unexercised (each "Options" or
"Warrants").
1.9 Escrow. On the Closing Date, the Parent shall deliver to the Escrow
Agent a certificate (issued in the name of the Escrow Agent or its nominee)
representing the Escrow Shares, as described in Section 1.5, for the purpose of
securing the indemnification obligations of the Indemnifying Shareholders set
forth in this Agreement. The Escrow Shares shall be held by the Escrow Agent
under the Escrow Agreement, in substantially the form set forth in Exhibit A
attached hereto, pursuant to the terms thereof. The Escrow Shares shall be held
as a trust fund and shall not be subject to any lien, attachment, trustee
process or any other judicial process of any creditor of any party, and shall be
held and disbursed solely for the purposes and in accordance with the terms of
the Escrow Agreement.
1.10 Certificate of Incorporation and Bylaws.
(a) The Certificate of Incorporation of the Company in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until duly amended or repealed.
(b) The Bylaws of the Company in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
1.11 No Further Rights. From and after the Effective Time, no Company
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided herein or by
law.
1.12 Closing of Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of Company Shares shall
thereafter be made. If, after the Effective Time, Certificates are presented to
the Parent or the Surviving Corporation, they shall be cancelled and exchanged
for Initial Shares in accordance with Section 1.5, subject to Section 1.9 and to
applicable law in the case of Dissenting Shares.
1.13 Post-Closing Adjustment. In the event that, during the period
commencing from the Closing Date and ending on the second anniversary of the
Closing Date, the Company (or its controlling shareholders immediately prior to
the Merger) (the "Controlling Company Shareholders") incurs any Loss with
respect to, in connection with, or arising from any Parent Liabilities, then
promptly following the filing by the Parent with the Securities and Exchange
Commission (the "SEC") of a quarterly report relating to the most recent
completed quarter for which such determination has been made, the Parent shall
issue to the Company Shareholders and/or their designees such number of shares
of Parent Common Stock as would result from dividing (x) the whole dollar amount
representing such Losses by (y) the VWAP of the Company's common stock for the
five (5) Trading Days immediately prior to the date such Loss is incurred. The
limit on the aggregate number of shares of Parent Common Stock issuable under
this Section 1.13 shall be 2,000,000 shares. As used in this Section 1.13: (a)
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"Loss" shall mean any and all costs and expenses, including reasonable
attorneys' fees, court costs, reasonable accountants' fees, and damages and
losses, net of any insurance proceeds actually received by the party suffering
the Loss with respect thereto; (b) "Claims" shall include, but are not limited
to, any claim, notice, suit, action, investigation, other proceedings (whether
actual or threatened); and (c) "Parent Liabilities" shall mean all Claims
against and liabilities, obligations or indebtedness of any nature whatsoever of
the Parent, accruing on or before the Closing Date (whether primary, secondary,
direct, indirect, liquidated, unliquidated or contingent, matured or unmatured),
including, but not limited to (i) any breach by the Parent or the Acquisition
Subsidiary of any of their respective representations or warranties set forth in
Article III herein, (ii) any litigation threatened, pending or for which a basis
exists, that has resulted or may result in the entry of judgment in damages or
otherwise against the Parent or any Subsidiary; (iii) any and all outstanding
debts owed by the Parent or any Subsidiary; (iv) any and all internal or
employee related disputes, arbitrations or administrative proceedings
threatened, pending or otherwise outstanding, (v) any and all liens,
foreclosures, settlements, or other threatened, pending or otherwise outstanding
financial, legal or similar obligations of the Parent or any Subsidiary, as such
Liabilities are determined by the Parent's independent auditors, on a quarterly
basis, and (vi) all fees and expenses incurred in connection with effecting the
adjustments contemplated by this Section 1.13.
"Trading Day" means any day on which the Parent Common Stock is listed or quoted
for trading on a Trading Market.
"Trading Market" means the following markets or exchanges on which the Parent
Common Stock are listed or quoted for trading on the date in question: the OTC
Bulletin Board, the Nasdaq Capital Market, the American Stock Exchange, the New
York Stock Exchange or the Nasdaq National Market.
"VWAP" means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Parent Common Stock are then listed or quoted
on a Trading Market, the daily volume weighted average price of the Parent
Common Stock for such date (or the nearest preceding date) on the Trading Market
on which the Parent Common Stock are then listed or quoted as reported by
Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to
4:02 p.m. Eastern Time); (b) if the Parent Common Stock are not then listed or
quoted on a Trading Market and if prices for the Parent Common Stock are then
quoted on the OTC Bulletin Board, the volume weighted average price of the
Parent Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board; (c) if the Parent Common Stock are not then listed or quoted on
the OTC Bulletin Board and if prices for the Parent Common Stock are then
reported in the "Pink Sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Parent Common
Stock so reported; or (d) in all other cases, the fair market value of a share
of Parent Common Stock as determined by an independent appraiser selected in
good faith by the Parties.
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1.14 Exemption From Registration. Parent and the Company intend that the
shares of Parent Common Stock to be issued pursuant to Section 1.5 hereof or
upon exercise of options exchanged pursuant to Section 1.8 hereof in each case
in connection with the Merger will be issued in a transaction exempt from
registration under the Securities Act by reason of section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") and/or Rule 506 of
Regulation D promulgated by the SEC thereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule provided by the Company to the Parent on the date hereof and
accepted in writing by the Parent (the "Disclosure Schedule"). The Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article II, and except to the extent that
it is clear from the context thereof that such disclosure also applies to any
other paragraph, the disclosures in any paragraph of the Disclosure Schedule
shall qualify only the corresponding paragraph in this Article II. For purposes
of this Article II, the phrase "to the knowledge of the Company" or any phrase
of similar import shall be deemed to refer to the actual knowledge of ▇▇▇▇▇ ▇.
▇▇▇▇, as well as any other knowledge which ▇▇▇▇▇ ▇. ▇▇▇▇ would have possessed
had he made reasonable inquiry with respect to the matter in question.
2.1 Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. The Company is duly qualified
to conduct business and is in corporate and tax good standing under the laws of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification, except where the failure
to be so qualified or in good standing, individually or in the aggregate, has
not had and would not reasonably be expected to have a Company Material Adverse
Effect (as defined below). The Company has all requisite corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. The Company has furnished or made available
to the Parent complete and accurate copies of its Certificate of Incorporation
and Bylaws. The Company is not in default under or in violation of any provision
of its Certificate of Incorporation, as amended to date, or its Bylaws, as
amended to date. For purposes of this Agreement, "Company Material Adverse
Effect" means a material adverse effect on the assets, business, condition
(financial or otherwise), results of operations or future prospects of the
Company.
2.2 Capitalization. The authorized capital stock of the Company consists
of (a) 3,000 shares of common stock, $.01 par value ("Company Shares"). As of
the date of this Agreement, 2,200 Company Shares were issued and outstanding,
and no Company Shares were held in the treasury of the Company. Section 2.2 of
the Disclosure Schedule sets forth a complete and accurate list of (i) all
shareholders of the Company, indicating the number and class of Company Shares
held by each shareholder, (ii) all outstanding Options and Warrants, indicating
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(A) the holder thereof, (B) the number of Company Shares subject to each Option
and Warrant, (C) the exercise price, date of grant, vesting schedule and
expiration date for each Option or Warrant, and (D) any terms regarding the
acceleration of vesting, and (iii) all stock option plans and other stock or
equity-related plans of the Company. All of the issued and outstanding Company
Shares are, and all Company Shares that may be issued upon exercise of Options
or Warrants will be (upon issuance in accordance with their terms), duly
authorized, validly issued, fully paid, nonassessable and free of all preemptive
rights. Other than the Options and Warrants listed in Section 2.2 of the
Disclosure Schedule, there are no outstanding or authorized options, warrants,
rights, agreements or commitments to which the Company is a party or which are
binding upon the Company providing for the issuance or redemption of any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company. There are no
agreements to which the Company is a party or by which it is bound with respect
to the voting (including without limitation voting trusts or proxies),
registration under the Securities Act, or sale or transfer (including without
limitation agreements relating to pre-emptive rights, rights of first refusal,
co-sale rights or "drag-along" rights) of any securities of the Company. To the
knowledge of the Company, there are no agreements among other parties, to which
the Company is not a party and by which it is not bound, with respect to the
voting (including without limitation voting trusts or proxies) or sale or
transfer (including without limitation agreements relating to rights of first
refusal, co-sale rights or "drag-along" rights) of any securities of the
Company. All of the issued and outstanding Company Shares were issued in
compliance with applicable federal and state securities laws.
2.3 Authorization of Transaction. The Company has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by the Company of this Agreement and,
subject to the adoption of this Agreement and the approval of the Merger by a
majority of the votes represented by the outstanding Company Shares entitled to
vote on this Agreement and the Merger (the "Requisite Company Shareholder
Approval"), the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of the Company. Without limiting the generality of the foregoing,
the Board of Directors of the Company (i) determined that the Merger is fair and
in the best interests of the Company and its shareholders, (ii) adopted this
Agreement in accordance with the provisions of the DGCL, and (iii) directed that
this Agreement and the Merger be submitted to the shareholders of the Company
for their adoption and approval and resolved to recommend that the shareholders
of Company vote in favor of the adoption of this Agreement and the approval of
the Merger. This Agreement has been duly and validly executed and delivered by
the Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
2.4 Noncontravention. Subject to the filing of the Articles of Merger as
required by the DGCL and the Nevada Revised Statutes, neither the execution and
delivery by the Company of this Agreement, nor the consummation by the Company
of the transactions contemplated hereby, will (a) conflict with or violate any
provision of the Certificate of Incorporation or Bylaws of the Company, as
-8-
amended to date, Bylaws or other organizational document of any Subsidiary (as
defined below), (b) require on the part of the Company or any Subsidiary any
filing with, or any permit, authorization, consent or approval of, any court,
arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (a "Governmental Entity"), (c)
conflict with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party the right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or to which any of their assets is subject, except for (i)
any conflict, breach, default, acceleration, termination, modification or
cancellation which, individually or in the aggregate, would not have a Company
Material Adverse Effect and would not adversely affect the consummation of the
transactions contemplated hereby or (ii) any notice, consent or waiver the
absence of which, individually or in the aggregate, would not have a Company
Material Adverse Effect and would not adversely affect the consummation of the
transactions contemplated hereby, (d) result in the imposition of any Security
Interest (as defined below) upon any assets of the Company or any Subsidiary or
(e) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, any Subsidiary or any of their properties or assets.
For purposes of this Agreement: "Security Interest" means any mortgage, pledge,
security interest, encumbrance, charge or other lien (whether arising by
contract or by operation of law), other than (i) mechanic's, materialmen's, and
similar liens, (ii) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation, and (iii) liens
on goods in transit incurred pursuant to documentary letters of credit, in each
case arising in the Ordinary Course of Business (as defined below) of the
Company and not material to the Company; and "Ordinary Course of Business" means
the ordinary course of the Company's business, consistent with past custom and
practice (including with respect to frequency and amount).
2.5 Subsidiaries.
(a) There is no corporation, partnership, joint venture or other
entity in which the Company has, directly or indirectly, an equity interest
representing 50% or more of the capital stock thereof or other equity interests
therein (a "Subsidiary").
(b) The Company does not control directly or indirectly or have any
direct or indirect equity participation or similar interest in any corporation,
partnership, limited liability company, joint venture, trust or other business
association which is not a Subsidiary.
2.6 Intentionally Left Blank..
2.7 Intentionally Left Blank..
2.8 Undisclosed Liabilities. The Company has no liability (whether known
or unknown, whether absolute or contingent, whether liquidated or unliquidated
and whether due or to become due), except for contractual and other liabilities
in connection with the acquisition of certain assets from Access Pharmaceuticals
Inc. pursuant to transactions expected in connection herewith or incurred in the
Ordinary Course of Business which are not required by GAAP to be reflected on a
balance sheet.
-9-
2.9 Tax Matters.
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Taxes" means all taxes, charges, fees, levies or other similar
assessments or liabilities, including without limitation income, gross
receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, transfer, withholding, employment,
unemployment insurance, social security, business license, business
organization, environmental, workers compensation, payroll, profits,
license, lease, service, service use, severance, stamp, occupation,
windfall profits, customs, duties, franchise and other taxes imposed by
the United States of America or any state, local or foreign government, or
any agency thereof, or other political subdivision of the United States or
any such government, and any interest, fines, penalties, assessments or
additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof.
(ii) "Tax Returns" means all reports, returns, declarations,
statements or other information required to be supplied to a taxing
authority in connection with Taxes.
(b) The Company is a start-up entity and has not yet filed nor has
it been required to file any Tax Returns. The Company has no actual or potential
liability for any Tax obligation of any taxpayer (including without limitation
any affiliated group of corporations or other entities that included the Company
during a prior period) other than the Company. All Taxes that the Company is or
was required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Entity.
(c) The Company has not been informed by any jurisdiction that the
jurisdiction believes that the Company was required to file any Tax Return that
was not filed. The Company has not waived any statute of limitations with
respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency.
(d) The Company has not taken any action or knows of any fact,
agreement, plan or other circumstances that could reasonably be expected to
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
2.10 Assets. The Company owns or leases all tangible assets necessary for
the conduct of its businesses as presently conducted and as presently proposed
to be conducted. Each such tangible asset is free from material defects, has
been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear) and is suitable
for the purposes for which it presently is used. No asset of the Company
(tangible or intangible) is subject to any Security Interest, except as
otherwise listed in Section 2.10 of the Disclosure Schedule.
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2.11 Owned Real Property. The Company does not own any real property.
2.12 Real Property Leases. Section 2.12 of the Disclosure Schedule lists
all real property leased or subleased to or by the Company or any Subsidiary and
lists the term of such lease, any extension and expansion options, and the rent
payable thereunder. The Company has delivered or made available to the Parent
complete and accurate copies of the leases and subleases listed in Section 2.12
of the Disclosure Schedule. With respect to each lease and sublease listed in
Section 2.12 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable and
in full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect immediately prior to the Closing;
(c) neither the Company nor any Subsidiary nor, to the knowledge of
the Company, any other party, is in breach or violation of, or default under,
any such lease or sublease, and no event has occurred, is pending or, to the
knowledge of the Company, is threatened, which, after the giving of notice, with
lapse of time, or otherwise, would constitute a breach or default by the Company
or any Subsidiary or, to the knowledge of the Company, any other party under
such lease or sublease;
(d) neither the Company nor any Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold; and
(e) the Company is not aware of any Security Interest, easement,
covenant or other restriction applicable to the real property subject to such
lease, except for recorded easements, covenants and other restrictions which do
not materially impair the current uses or the occupancy by the Company or a
Subsidiary of the property subject thereto.
2.13 Intellectual Property.
The Company owns or has the right to use all Intellectual Property (as
defined below) necessary (i) to use, manufacture, market and distribute the
products manufactured, marketed, sold or licensed, and to provide the services
provided, by the Company to other parties (together, the "Customer
Deliverables") and (ii) to operate the internal systems of the Company that are
material to its business or operations, including, without limitation, computer
hardware systems, software applications and embedded systems (the "Internal
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Systems"; the Intellectual Property owned by or licensed to the Company and
incorporated in or underlying the Customer Deliverables or the Internal Systems
is referred to herein as the "Company Intellectual Property"). Each item of
Company Intellectual Property will be owned or available for use by the
Surviving Corporation immediately following the Closing on substantially
identical terms and conditions as it was immediately prior to the Closing. The
Company has taken all reasonable measures to protect the proprietary nature of
each item of Company Intellectual Property. To the knowledge of the Company, (a)
no other person or entity has any rights to any of the Company Intellectual
Property owned by the Company except pursuant to agreements or licenses entered
into by the Company and such person in the ordinary course, and (b) no other
person or entity is infringing, violating or misappropriating any of the Company
Intellectual Property. For purposes of this Agreement, "Intellectual Property"
means all (i) patents and patent applications, (ii) copyrights and registrations
thereof, (iii) computer software, data and documentation, (iv) trade secrets and
confidential business information, whether patentable or unpatentable and
whether or not reduced to practice, know-how, manufacturing and production
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and information,
(v) trademarks, service marks, trade names, domain names and applications and
registrations therefor and (vi) other proprietary rights relating to any of the
foregoing.
2.14 Contracts.
(a) Section 2.14 of the Disclosure Schedule lists the following
agreements (written or oral) to which the Company is a party as of the date of
this Agreement:
(i) any agreement (or group of related agreements) for the lease of
personal property from or to third parties providing for lease payments in
excess of $50,000 per annum or having a remaining term longer than 12
months;
(ii) any agreement (or group of related agreements) for the purchase
or sale of products or for the furnishing or receipt of services (A) which
calls for performance over a period of more than one year, (B) which
involves more than the sum of $50,000, or (C) in which the Company has
granted manufacturing rights, "most favored nation" pricing provisions or
exclusive marketing or distribution rights relating to any products or
territory or has agreed to purchase a minimum quantity of goods or
services or has agreed to purchase goods or services exclusively from a
certain party;
(iii) any agreement establishing a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it
has created, incurred, assumed or guaranteed (or may create, incur, assume
or guarantee) indebtedness (including capitalized lease obligations)
involving more than $50,000 or under which it has imposed (or may impose)
a Security Interest on any of its assets, tangible or intangible;
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(v) any agreement concerning confidentiality or noncompetition;
(vi) any employment or consulting agreement;
(vii) any agreement involving any officer, director or stockholder
of the Company or any affiliate (an "Affiliate"), as defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), thereof;
(viii) any agreement under which the consequences of a default or
termination would reasonably be expected to have a Company Material
Adverse Effect;
(ix) any agreement which contains any provisions requiring the
Company to indemnify any other party thereto (excluding indemnities
contained in agreements for the purchase, sale or license of products
entered into in the Ordinary Course of Business); and
(x) any other agreement (or group of related agreements) either
involving more than $50,000 or not entered into in the Ordinary Course of
Business.
(b) The Company has delivered or made available to the Parent a
complete and accurate copy of each agreement listed in Section 2.14 of the
Disclosure Schedule. With respect to each agreement so listed: (i) the agreement
is legal, valid, binding and enforceable and in full force and effect; (ii) the
agreement will continue to be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing; and (iii) neither the
Company nor, to the knowledge of the Company, any other party, is in breach or
violation of, or default under, any such agreement, and no event has occurred,
is pending or, to the knowledge of the Company, is threatened, which, after the
giving of notice, with lapse of time, or otherwise, would constitute a breach or
default by the Company or any Subsidiary or, to the knowledge of the Company,
any other party under such contract.
2.15 Accounts Receivable. The Company has no accounts receivable.
2.16 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
2.17 Insurance. Section 2.17 of the Disclosure Schedule lists each
insurance policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which the
Company or any Subsidiary is a party. Such insurance policies are of the type
and in amounts customarily carried by organizations conducting businesses or
owning assets similar to those of the Company and the Subsidiaries. There is no
material claim pending under any such policy as to which coverage has been
questioned, denied or disputed by the underwriter of such policy. All premiums
due and payable under all such policies have been paid, neither the Company nor
any Subsidiary may be liable for retroactive premiums or similar payments, and
the Company and the Subsidiaries are otherwise in compliance in all material
respects with the terms of such policies. The Company has no knowledge of any
threatened termination of, or material premium increase with respect to, any
such policy. Each such policy will continue to be enforceable and in full force
and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing.
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2.18 Litigation. As of the date of this Agreement, there is no action,
suit, proceeding, claim, arbitration or investigation before any Governmental
Entity or before any arbitrator (a "Legal Proceeding") which is pending or has
been threatened in writing against the Company which (a) seeks either damages or
equitable relief or (b) if determined adversely to the Company could have,
individually or in the aggregate, a Company Material Adverse Effect.
2.19 Warranties. No service sold or delivered by the Company or any
Subsidiary is subject to any guaranty, warranty, right of credit or other
indemnity other than the applicable standard terms and conditions of sale of the
Company or the appropriate Subsidiary.
2.20 Employees.
(a) Section 2.20 of the Disclosure Schedule contains a list of all
employees of the Company along with the position and the annual rate of
compensation of each such person. Each current employee of the Company has
entered into a confidentiality/ assignment of inventions agreement with the
Company, a copy or form of which has previously been delivered to the Parent.
Section 2.20 of the Disclosure Schedule contains a list of all employees of the
Company who are a party to a non-competition agreement with the Company; copies
of such agreements have previously been delivered to the Parent. To the
knowledge of the Company, no key employee or group of employees has any plans to
terminate employment with the Company.
(b) The Company is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes, grievances, claims of
unfair labor practices or other collective bargaining disputes. The Company has
no knowledge of any organizational effort made or threatened, either currently
or within the past two years, by or on behalf of any labor union with respect to
employees of the Company. To the knowledge of the Company there are no
circumstances or facts which could individually or collectively give rise to a
suit based on discrimination of any kind.
2.21 Employee Benefits.
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Employee Benefit Plan" means any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), any "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA), and any other written or oral
plan, agreement or arrangement involving direct or indirect compensation,
including without limitation insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation.
-14-
(ii) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(iii) "ERISA Affiliate" means any entity which is, or at any
applicable time was, a member of (1) a controlled group of corporations
(as defined in Section 414(b) of the Code), (2) a group of trades or
businesses under common control (as defined in Section 414(c) of the
Code), or (3) an affiliated service group (as defined under Section 414(m)
of the Code or the regulations under Section 414(o) of the Code), any of
which includes or included the Company.
(b) Section 2.21(b) of the Disclosure Schedule contains a complete
and accurate list of all Employee Benefit Plans maintained, or contributed to,
by the Company or any ERISA Affiliate. Complete and accurate copies of (i) all
Employee Benefit Plans which have been reduced to writing, (ii) written
summaries of all unwritten Employee Benefit Plans, (iii) all related trust
agreements, insurance contracts and summary plan descriptions, and (iv) all
annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded plans)
all plan financial statements for the last five plan years for each Employee
Benefit Plan, have been delivered or made available to the Parent. Each Employee
Benefit Plan has been administered in all material respects in accordance with
its terms and each of the Company and the ERISA Affiliates has in all material
respects met its obligations with respect to such Employee Benefit Plan and has
made all required contributions thereto. The Company, each ERISA Affiliate and
each Employee Benefit Plan are in compliance in all material respects with the
currently applicable provisions of ERISA and the Code and the regulations
thereunder (including without limitation Section 4980 B of the Code, Subtitle K,
Chapter 100 of the Code and Sections 601 through 608 and Section 701 et seq. of
ERISA). All filings and reports as to each Employee Benefit Plan required to
have been submitted to the Internal Revenue Service or to the United States
Department of Labor have been duly submitted.
(c) To the knowledge of the Company, there are no Legal Proceedings
(except claims for benefits payable in the normal operation of the Employee
Benefit Plans and proceedings with respect to qualified domestic relations
orders) against or involving any Employee Benefit Plan or asserting any rights
or claims to benefits under any Employee Benefit Plan that could give rise to
any material liability.
(d) All the Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended since the date of
its most recent determination letter or application therefor in any respect, and
no act or omission has occurred, that would adversely affect its qualification
or materially increase its cost. Each Employee Benefit Plan which is required to
satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for
compliance with, and satisfies the requirements of, Section 401(k)(3) and
Section 401(m)(2) of the Code for each plan year ending prior to the Closing
Date.
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(e) Neither the Company nor any ERISA Affiliate has ever maintained
an Employee Benefit Plan subject to Section 412 of the Code or Title IV of
ERISA.
(f) At no time has the Company or any ERISA Affiliate been obligated
to contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
(g) There are no unfunded obligations under any Employee Benefit
Plan providing benefits after termination of employment to any employee of the
Company (or to any beneficiary of any such employee), including but not limited
to retiree health coverage and deferred compensation, but excluding continuation
of health coverage required to be continued under Section 4980B of the Code or
other applicable law and insurance conversion privileges under state law. The
assets of each Employee Benefit Plan which is funded are reported at their fair
market value on the books and records of such Employee Benefit Plan.
(h) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by the Company or any ERISA
Affiliate that would subject the Company or any ERISA Affiliate to (i) any
material fine, penalty, tax or liability of any kind imposed under ERISA or the
Code or (ii) any contractual indemnification or contribution obligation
protecting any fiduciary, insurer or service provider with respect to any
Employee Benefit Plan.
(i) No Employee Benefit Plan is funded by, associated with or
related to a "voluntary employee's beneficiary association" within the meaning
of Section 501(c)(9) of the Code.
(j) Each Employee Benefit Plan is amendable and terminable
unilaterally by the Company at any time without liability to the Company as a
result thereof and no Employee Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally to
employees by its terms prohibits the Company from amending or terminating any
such Employee Benefit Plan.
(k) Section 2.21(k) of the Disclosure Schedule discloses each: (i)
agreement with any shareholder, director, executive officer or other key
employee of the Company or any Subsidiary (A) 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 of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or other benefits
after the termination of employment of such director, executive officer or key
employee; (ii) agreement, plan or arrangement under which any person may receive
payments from the Company that may be subject to the tax imposed by Section 4999
of the Code or included in the determination of such person's "parachute
payment" under Section 280G of the Code; and (iii) agreement or plan binding the
Company, including without limitation any stock option plan, stock appreciation
right plan, restricted stock plan, stock purchase plan, severance benefit plan
or Employee Benefit Plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
-16-
2.22 Environmental Matters.
(a) The Company has complied with all applicable Environmental Laws
(as defined below), except for violations of Environmental Laws that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect. There is no pending or, to
the knowledge of the Company, threatened civil or criminal litigation, written
notice of violation, formal administrative proceeding, or investigation, inquiry
or information request by any Governmental Entity, relating to any Environmental
Law involving the Company, except for litigation, notices of violations, formal
administrative proceedings or investigations, inquiries or information requests
that, individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect. For purposes of this
Agreement, "Environmental Law" means any federal, state or local law, statute,
rule or regulation or the common law relating to the environment or occupational
health and safety, including without limitation any statute, regulation,
administrative decision or order pertaining to (i) treatment, storage, disposal,
generation and transportation of industrial, toxic or hazardous materials or
substances or solid or hazardous waste; (ii) air, water and noise pollution;
(iii) groundwater and soil contamination; (iv) the release or threatened release
into the environment of industrial, toxic or hazardous materials or substances,
or solid or hazardous waste, including without limitation emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants or chemicals;
(v) the protection of wild life, marine life and wetlands, including without
limitation all endangered and threatened species; (vi) storage tanks, vessels,
containers, abandoned or discarded barrels, and other closed receptacles; (vii)
health and safety of employees and other persons; and (viii) manufacturing,
processing, using, distributing, treating, storing, disposing, transporting or
handling of materials regulated under any law as pollutants, contaminants, toxic
or hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used above, the terms "release" and "environment" shall have
the meaning set forth in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA").
(b) To the knowledge of the Company there is no material
environmental liability with respect to any solid or hazardous waste transporter
or treatment, storage or disposal facility that has been used by the Company or
any Subsidiary.
-17-
2.23 Legal Compliance. The Company and the conduct and operations of its
businesses, are in compliance with each applicable law (including rules and
regulations thereunder) of any federal, state, local or foreign government, or
any Governmental Entity, except for any violations or defaults that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
2.24 Customers and Suppliers. The Company has no customers or suppliers.
2.25 Permits. Section 2.25 of the Disclosure Schedule sets forth a list of
all permits, licenses, registrations, certificates, orders or approvals from any
Governmental Entity (including without limitation those issued or required under
Environmental Laws and those relating to the occupancy or use of owned or leased
real property) ("Permits") issued to or held by the Company. Such listed Permits
are the only Permits that are required for the Company to conduct its businesses
as presently conducted except for those the absence of which, individually or in
the aggregate, have not had and would not reasonably be expected to have a
Company Material Adverse Effect. Each such Permit is in full force and effect
and, to the knowledge of the Company, no suspension or cancellation of such
Permit is threatened and there is no basis for believing that such Permit will
not be renewable upon expiration. Each such Permit will continue in full force
and effect immediately following the Closing.
2.26 Certain Business Relationships With Affiliates. Except as listed in
Section 2.26 of the Disclosure Schedule, no Affiliate of the Company (a) owns
any property or right, tangible or intangible, which is used in the business of
the Company, (b) has any claim or cause of action against the Company, or (c)
owes any money to, or is owed any money by, the Company. Section 2.26 of the
Disclosure Schedule describes any transactions involving the receipt or payment
in any fiscal year between the Company and any Affiliate thereof. To the
knowledge of the Company, no officer, director or stockholder of Company or any
"affiliate" (as such term is defined in Rule 12b-2 under the Exchange Act) or
"associate" (as such term is defined in Rule 405 under the Securities Act) of
any such person has had, either directly or indirectly, (a) an interest in any
person that (i) furnishes or sells services or products that are furnished or
sold or are proposed to be furnished or sold by the Company or (ii) purchases
from or sells or furnishes to the Company any goods or services, or (b) a
beneficial interest in any contract or agreement to which Company is a party or
by which it may be bound or affected. The Company has not extended or maintained
credit, arranged for the extension of credit, or renewed an extension of credit,
in the form of a personal loan to or for any director or executive officer (or
equivalent thereof) of the Company.
2.27 Compliance with Laws. The Company:
(a) has not, and the past and present officers, directors and
Affiliates of the Company have not, been the subject of, nor does any officer or
director of the Company have any reason to believe that Company or any of its
officers, directors or Affiliates will be the subject of, any civil or criminal
proceeding or investigation by any federal or state agency alleging a violation
of securities laws;
-18-
(b) has not been the subject of any voluntary or involuntary
bankruptcy proceeding, nor has it been a party to any material litigation;
(c) has not, and the past and present officers, directors and
Affiliates have not, been the subject of, nor does any officer or director of
the Company have any reason to believe that the Company or any of its officers,
directors or affiliates will be the subject of, any civil, criminal or
administrative investigation or proceeding brought by any federal or state
agency having regulatory authority over such entity or person;
2.28 Brokers' Fees. The Company has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement, except as listed in Section 2.28 of
the Disclosure Schedule.
2.29 Books and Records. The minute books and other similar records of the
Company contain complete and accurate records of all actions taken at any
meetings of the Company's shareholders, Board of Directors or any committee
thereof and of all written consents executed in lieu of the holding of any such
meeting. The books and records of the Company accurately reflect in all material
respects the assets, liabilities, business, financial condition and results of
operations of the Company and have been maintained in accordance with good
business and bookkeeping practices.
2.30 Disclosure. No representation or warranty by the Company contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered or to be delivered by
or on behalf of the Company pursuant to this Agreement, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
The Company has disclosed to the Parent all material information relating to the
business of the Company or any Subsidiary or the transactions contemplated by
this Agreement.
2.31 Duty to Make Inquiry. To the extent that any of the representations
or warranties in this Section 2 are qualified by "knowledge" or "belief," the
Company represents and warrants that it has made due and reasonable inquiry and
investigation concerning the matters to which such representations and
warranties relate, including, but not limited to, diligent inquiry by its
directors, officers and key personnel.
2.32 Board Actions. The Company's Board of Directors (a) has unanimously
determined that the Merger is fair and in the best interests of the Company
shareholders and is on terms that are fair to such Company shareholders and has
recommended the Merger to the Company shareholders, and (b) shall submit the
Merger and this Agreement to the vote and approval of the Company shareholders
or the approval of the Company shareholders by written consent.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT
AND THE ACQUISITION SUBSIDIARY
Each of the Parent and the Acquisition Subsidiary represents and warrants
to the Company that the statements contained in this Article III are true and
correct, except as set forth in the Parent Disclosure Schedule provided by the
Parent and the Acquisition Subsidiary to the Company on the date hereof and
accepted in writing by the Parent (the "Parent Disclosure Schedule"). The Parent
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article III, and except to
the extent that it is clear from the context thereof that such disclosure also
applies to any other paragraph, the disclosures in any paragraph of the Parent
Disclosure Schedule shall qualify only the corresponding paragraph in this
Article III. For purposes of this Article III, the phrase "to the knowledge of
the Parent" or any phrase of similar import shall be deemed to refer to the
actual knowledge of the executive officers of the Parent, as well as any other
knowledge which such executive officers would have possessed had they made
reasonable inquiry with respect to the matter in question.
3.1 Organization, Qualification and Corporate Power. The Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and the Acquisition Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Nevada. The Parent is duly qualified to conduct business and is in corporate and
tax good standing under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified or in good standing
would not have a Parent Material Adverse Effect (as defined below). The Parent
has all requisite corporate power and authority to carry on the businesses in
which it is engaged and to own and use the properties owned and used by it. The
Parent has furnished or made available to the Company complete and accurate
copies of its Certificate of Incorporation and Bylaws. For purposes of this
Agreement, "Parent Material Adverse Effect" means a material adverse effect on
the assets, business, condition (financial or otherwise), results of operations
or future prospects of the Parent and its subsidiaries, taken as a whole.
3.2 Capitalization. The authorized capital stock of the Parent consists of
(a) 400,000,000 shares of Parent Common Stock, of which shares were issued and
outstanding as of the date of this Agreement, of which 399,999,704 shares are
issued or outstanding. The Parent Common Stock is presently eligible for
quotation on the NASD Over-the-Counter Bulletin Board. All of the issued and
outstanding shares of Parent Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. All of the Merger
Shares and all shares of Parent Common Stock issued pursuant to the Subscription
Agreement will be, when issued in accordance with this Agreement or the
Subscription Agreement, duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights.
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3.3 Authorization of Transaction. Each of the Parent and the Acquisition
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and (in the case of the Parent) the Escrow Agreement and to perform
its obligations hereunder and thereunder. The execution and delivery by the
Parent and the Acquisition Subsidiary of this Agreement and (in the case of the
Parent) the Subscription Agreement, and the agreements contemplated hereby and
thereby (collectively, the "Transaction Documentation") and the consummation by
the Parent and the Acquisition Subsidiary of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of the Parent and Acquisition Subsidiary,
respectively. This Agreement has been duly and validly executed and delivered by
the Parent and the Acquisition Subsidiary and constitutes a valid and binding
obligation of the Parent and the Acquisition Subsidiary, enforceable against
them in accordance with its terms.
3.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act and the filing of the Certificate of Merger and the Articles of
Merger as required respectively by the DGCL and the Nevada Revised Statutes,
neither the execution and delivery by the Parent or the Acquisition Subsidiary
of this Agreement or the Transaction Documentation, nor the consummation by the
Parent or the Acquisition Subsidiary of the transactions contemplated hereby or
thereby, will (a) conflict with or violate any provision of the Certificate of
Incorporation or Bylaws of the Parent or the Acquisition Subsidiary, (b) require
on the part of the Parent or the Acquisition Subsidiary any filing with, or
permit, authorization, consent or approval of, any Governmental Entity, (c)
conflict with, result in breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party any right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument to
which the Parent or the Acquisition Subsidiary is a party or by which either is
bound or to which any of their assets are subject, except for (i) any conflict,
breach, default, acceleration, termination, modification or cancellation which
would not adversely affect the consummation of the transactions contemplated
hereby or (ii) any notice, consent or waiver the absence of which would not
adversely affect the consummation of the transactions contemplated hereby, or
(d) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Parent or the Acquisition Subsidiary or any of their
properties or assets.
3.5 Subsidiaries. The Parent does not control directly or indirectly or
have any direct or indirect equity participation or similar interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business association, excluding its interest in Acquisition Subsidiary.
3.6 Exchange Act Reports. The Parent has furnished or made available to
the Company through the SEC's website complete and accurate copies, as amended
or supplemented, of its (a) Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2004, as filed with the SEC, and (b) all other reports filed
by the Parent under Section 13 or subsections (a) or (c) of Section 14 of the
Exchange Act with the SEC since April 19, 2002 (such reports are collectively
referred to herein as the "Parent Reports"). The Parent Reports constitute all
of the documents required to be filed by the Parent under Section 13 or
subsections (a) or (c) of Section 14 of the Exchange Act with the SEC from
October 17, 2001 through the date of this Agreement. The Parent Reports complied
in all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder when filed. As of their respective dates, the Parent
Reports did 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 therein, in light of the circumstances under which they were made,
not misleading.
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3.7 Compliance with Laws. Each of the Parent and its Subsidiaries:
(a) and the conduct and operations of their respective businesses,
are in compliance with each applicable law (including rules and regulations
thereunder) of any federal, state, local or foreign government, or any
Governmental Entity, except for any violations or defaults that, individually or
in the aggregate, have not had and would not reasonably be expected to have a
Parent Material Adverse Effect;
(b) has complied with all federal and state securities laws and
regulations, including being current in all of its reporting obligations under
such federal and state securities laws and regulations;
(c) has not, and the past and present officers, directors and
Affiliates of the Parent have not, been the subject of, nor does any officer or
director of the Parent have any reason to believe that Parent or any of its
officers, directors or Affiliates will be the subject of, any civil or criminal
proceeding or investigation by any federal or state agency alleging a violation
of securities laws;
(d) has not been the subject of any voluntary or involuntary
bankruptcy proceeding, nor has it been a party to any material litigation;
(e) has not, and the past and present officers, directors and
Affiliates have not, been the subject of, nor does any officer or director of
the Parent have any reason to believe that the Parent or any of its officers,
directors or affiliates will be the subject of, any civil, criminal or
administrative investigation or proceeding brought by any federal or state
agency having regulatory authority over such entity or person;
(f) does not and will not on the Closing, have any liabilities,
contingent or otherwise, including but not limited to notes payable and accounts
payable, and is not a party to any executory agreements; and
(g) is not a "blank check company" as such term is defined by Rule
419 of the Securities Act.
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3.8 Financial Statements. The Parent has provided or made available to the
Company the unaudited and consolidated balance sheet (the "Parent Interim
Balance Sheet") as of and for each of the two months ended August 31, 2005 (the
"Parent Interim Balance Sheet Date") and related statements of operations and
cash flows (collectively, the "Parent Interim Financial Statements. The audited
financial statements and unaudited interim financial statements of the Parent
included in the Parent Reports and the Parent Interim Financial Statements
(collectively, the "Parent Financial Statements") (i) complied as to form in all
material respects with applicable accounting requirements and, as appropriate,
the published rules and regulations of the SEC with respect thereto when filed,
(ii) were prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby (except as may be indicated therein or in
the notes thereto, and in the case of quarterly financial statements, as
permitted by Form 10-QSB under the Exchange Act), (iii) fairly present the
consolidated financial condition, results of operations and cash flows of the
Parent as of the respective dates thereof and for the periods referred to
therein, and (iv) are consistent with the books and records of the Parent.
3.9 Absence of Certain Changes. Since the Parent Interim Balance Sheet
Date, there has occurred no event or development which, individually or in the
aggregate, has had, or could reasonably be expected to have in the future, a
Parent Material Adverse Effect.
3.10 Litigation. Except as disclosed in the Parent Reports, as of the date
of this Agreement, there is no Legal Proceeding which is pending or, to the
Parent's knowledge, threatened against the Parent or any subsidiary of the
Parent which, if determined adversely to the Parent or such subsidiary, could
have, individually or in the aggregate, a Parent Material Adverse Effect or
which in any manner challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.
3.11 Undisclosed Liabilities. None of the Parent and its Subsidiaries has
any liability (whether known or unknown, whether absolute or contingent, whether
liquidated or unliquidated and whether due or to become due), except for (a)
liabilities shown on the Parent Interim Balance Sheet, (b) liabilities which
have arisen since the Parent Interim Balance Sheet Date in the Ordinary Course
of Business and (c) contractual and other liabilities incurred in the Ordinary
Course of Business which are not required by GAAP to be reflected on a balance
sheet.
3.12 Tax Matters.
(a) The Parent and Acquisition Subsidiary have filed on a timely
basis all Tax Returns that it was required to file, and all such Tax Returns
were complete and accurate in all material respects. Each of the Parent and
Acquisition Subsidiary has paid on a timely basis all Taxes that were due and
payable. The unpaid Taxes of the Parent and Acquisition Subsidiary for tax
periods through the Parent Interim Balance Sheet Date do not exceed the accruals
and reserves for Taxes (excluding accruals and reserves for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the Parent Interim Balance Sheet. Neither the Parent nor any Acquisition
Subsidiary has any actual or potential liability for any Tax obligation of any
taxpayer (including without limitation any affiliated group of corporations or
other entities that included the Parent or Acquisition Subsidiary during a prior
period) other than the Parent and the Acquisition Subsidiary. All Taxes that the
Parent or the Acquisition Subsidiary are or were required by law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Entity.
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(b) The Parent has delivered or made available to the Company
complete and accurate copies of all federal income Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by the
Parent or any Parent Subsidiary since January 1, 2002. No examination or audit
of any Tax Return of the Parent or any Parent Subsidiary by any Governmental
Entity is currently in progress or, to the knowledge of the Parent, threatened
or contemplated. Neither the Parent nor the Parent Subsidiary has been informed
by any jurisdiction that the jurisdiction believes that the Parent or the Parent
Subsidiary was required to file any Tax Return that was not filed. Neither the
Parent nor the Parent Subsidiary has waived any statute of limitations with
respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency.
(c) The Parent has not taken any action or knows of any fact,
agreement, plan or other circumstances that could reasonably be expected to
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
3.13 Assets. Each of the Parent and the Subsidiaries owns or leases all
tangible assets necessary for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. Each such tangible asset is
free from material defects, has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear) and is suitable for the purposes for which it presently is used.
No asset of the Parent or any Subsidiary (tangible or intangible) is subject to
any Security Interest except as set forth in Parent Disclosure Schedule 3.13.
3.14 Owned Real Property. Neither the Parent nor any Subsidiary owns any
real property.
3.15 Real Property Leases. Section 3.15 of the Parent Disclosure Schedule
lists all real property leased or subleased to or by the Parent or any
Subsidiary and lists the term of such lease, any extension and expansion
options, and the rent payable thereunder. The Parent has delivered or made
available to the Company complete and accurate copies of the leases and
subleases listed in Section 3.15 of the Parent Disclosure Schedule. With respect
to each lease and sublease listed in Section 3.15 of the Parent Disclosure
Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable and
in full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect immediately prior to the Closing;
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(c) neither the Parent nor any Subsidiary nor, to the knowledge of
the Parent, any other party, is in breach or violation of, or default under, any
such lease or sublease, and no event has occurred, is pending or, to the
knowledge of the Parent, is threatened, which, after the giving of notice, with
lapse of time, or otherwise, would constitute a breach or default by the Parent
or any Subsidiary or, to the knowledge of the Parent, any other party under such
lease or sublease;
(d) neither the Parent nor any Subsidiary has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold
or subleasehold; and
(e) the Parent is not aware of any Security Interest, easement,
covenant or other restriction applicable to the real property subject to such
lease, except for recorded easements, covenants and other restrictions which do
not materially impair the current uses or the occupancy by the Parent or a
Subsidiary of the property subject thereto.
3.16 Contracts.
(a) Section 3.16 of the Parent Disclosure Schedule lists the
following agreements (written or oral) to which the Parent or any Subsidiary is
a party as of the date of this Agreement:
(i) any agreement (or group of related agreements) for the
lease of personal property from or to third parties;
(ii) any agreement (or group of related agreements) for the
purchase or sale of products or for the furnishing or receipt of
services (A) which calls for performance over a period of more than
one year, (B) which involves more than the sum of $10,000, or (C) in
which the Parent or any Subsidiary has granted manufacturing rights,
"most favored nation" pricing provisions or exclusive marketing or
distribution rights relating to any products or territory or has
agreed to purchase a minimum quantity of goods or services or has
agreed to purchase goods or services exclusively from a certain
party;
(iii) any agreement establishing a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed or guaranteed (or may
create, incur, assume or guarantee) indebtedness (including
capitalized lease obligations) involving more than $10,000 or under
which it has imposed (or may impose) a Security Interest on any of
its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any employment or consulting agreement;
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(vii) any agreement involving any officer, director or
stockholder of the Parent or any Affiliate thereof;
(viii) any agreement under which the consequences of a default
or termination would reasonably be expected to have a Parent
Material Adverse Effect;
(ix) any agreement which contains any provisions requiring the
Parent or any Subsidiary to indemnify any other party thereto
(excluding indemnities contained in agreements for the purchase,
sale or license of products entered into in the Ordinary Course of
Business); and
(x) any other agreement (or group of related agreements)
either involving more than $10,000 or not entered into in the
Ordinary Course of Business.
(b) The Parent has delivered or made available to the Company a
complete and accurate copy of each agreement listed in Section 3.16 of the
Parent Disclosure Schedule. With respect to each agreement so listed: (i) the
agreement is legal, valid, binding and enforceable and in full force and effect;
(ii) the agreement will continue to be legal, valid, binding and enforceable and
in full force and effect immediately following the Closing in accordance with
the terms thereof as in effect immediately prior to the Closing; and (iii)
neither the Parent nor any Subsidiary nor, to the knowledge of the Parent, any
other party, is in breach or violation of, or default under, any such agreement,
and no event has occurred, is pending or, to the knowledge of the Parent, is
threatened, which, after the giving of notice, with lapse of time, or otherwise,
would constitute a breach or default by the Parent or any Subsidiary or, to the
knowledge of the Parent, any other party under such contract.
3.17 Accounts Receivable. All accounts receivable of the Parent and the
Subsidiaries reflected on the Parent Interim Balance Sheet are valid receivables
subject to no setoffs or counterclaims and are current and collectible (within
90 days after the date on which it first became due and payable), net of the
applicable reserve for bad debts on the Parent Interim Balance Sheet. All
accounts receivable reflected in the financial or accounting records of the
Parent that have arisen since the Parent Interim Balance Sheet Date are valid
receivables subject to no setoffs or counterclaims and are collectible (within
90 days after the date on which it first became due and payable), net of a
reserve for bad debts in an amount proportionate to the reserve shown on the
Parent Interim Balance Sheet Date.
3.18 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Parent or any Subsidiary.
3.19 Insurance. Section 3.19 of the Parent Disclosure Schedule lists each
insurance policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which the
Parent or any Subsidiary is a party. Such insurance policies are of the type and
in amounts customarily carried by organizations conducting businesses or owning
assets similar to those of the Parent and the Subsidiaries. There is no material
claim pending under any such policy as to which coverage has been questioned,
denied or disputed by the underwriter of such policy. All premiums due and
payable under all such policies have been paid, neither the Parent nor any
Subsidiary may be liable for retroactive premiums or similar payments, and the
Parent and the Subsidiaries are otherwise in compliance in all material respects
with the terms of such policies. The Parent has no knowledge of any threatened
termination of, or material premium increase with respect to, any such policy.
Each such policy will continue to be enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as in
effect immediately prior to the Closing.
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3.20 Warranties. No service sold or delivered by the Parent or any
Subsidiary is subject to any guaranty, warranty, right of credit or other
indemnity other than the applicable standard terms and conditions of sale of the
Parent or the appropriate Subsidiary.
3.21 Employees.
(a) Section 3.21 of the Parent Disclosure Schedule contains a list
of all employees of the Parent and each Subsidiary along with the position and
the annual rate of compensation of each such person. Section 3.21 of the Parent
Disclosure Schedule contains a list of all employees of the Parent or any
Subsidiary who are a party to a non-competition agreement with the Parent or any
Subsidiary; copies of such agreements have previously been delivered to the
Company.
(b) Neither the Parent nor any Subsidiary is a party to or bound by
any collective bargaining agreement, nor has any of them experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Parent has no knowledge of any organizational effort
made or threatened, either currently or within the past two years, by or on
behalf of any labor union with respect to employees of the Parent or any
Subsidiary.
3.22 Employee Benefits.
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of ERISA), any "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA), and any
other written or oral plan, agreement or arrangement involving
direct or indirect compensation, including without limitation
insurance coverage, severance benefits, disability benefits,
deferred compensation, bonuses, stock options, stock purchase,
phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation.
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(ii) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(iii) "ERISA Affiliate" means any entity which is, or at any
applicable time was, a member of (1) a controlled group of
corporations (as defined in Section 414(b) of the Code), (2) a group
of trades or businesses under common control (as defined in Section
414(c) of the Code), or (3) an affiliated service group (as defined
under Section 414(m) of the Code or the regulations under Section
414(o) of the Code), any of which includes or included the Company
or a Subsidiary.
(b) Section 3.22(b) of the Parent Disclosure Schedule contains a
complete and accurate list of all Employee Benefit Plans maintained, or
contributed to, by the Parent, any Subsidiary or any ERISA Affiliate. Complete
and accurate copies of (i) all Employee Benefit Plans which have been reduced to
writing, (ii) written summaries of all unwritten Employee Benefit Plans, (iii)
all related trust agreements, insurance contracts and summary plan descriptions,
and (iv) all annual reports filed on IRS Form 5500, 5500C or 5500R and (for all
funded plans) all plan financial statements for the last five plan years for
each Employee Benefit Plan, have been delivered or made available to the Parent.
Each Employee Benefit Plan has been administered in all material respects in
accordance with its terms and each of the Parent, the Subsidiaries and the ERISA
Affiliates has in all material respects met its obligations with respect to such
Employee Benefit Plan and has made all required contributions thereto. The
Parent, each Subsidiary, each ERISA Affiliate and each Employee Benefit Plan are
in compliance in all material respects with the currently applicable provisions
of ERISA and the Code and the regulations thereunder (including without
limitation Section 4980 B of the Code, Subtitle K, Chapter 100 of the Code and
Sections 601 through 608 and Section 701 et seq. of ERISA). All filings and
reports as to each Employee Benefit Plan required to have been submitted to the
Internal Revenue Service or to the United States Department of Labor have been
duly submitted.
(c) To the knowledge of the Parent, there are no Legal Proceedings
(except claims for benefits payable in the normal operation of the Employee
Benefit Plans and proceedings with respect to qualified domestic relations
orders) against or involving any Employee Benefit Plan or asserting any rights
or claims to benefits under any Employee Benefit Plan that could give rise to
any material liability.
(d) All the Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended since the date of
its most recent determination letter or application therefor in any respect, and
no act or omission has occurred, that would adversely affect its qualification
or materially increase its cost. Each Employee Benefit Plan which is required to
satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for
compliance with, and satisfies the requirements of, Section 401(k)(3) and
Section 401(m)(2) of the Code for each plan year ending prior to the Closing
Date.
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(e) Neither the Parent, any Subsidiary, nor any ERISA Affiliate has
ever maintained an Employee Benefit Plan subject to Section 412 of the Code or
Title IV of ERISA.
(f) At no time has the Parent, any Subsidiary or any ERISA Affiliate
been obligated to contribute to any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Employee Benefit
Plan providing benefits after termination of employment to any employee of the
Parent or any Subsidiary (or to any beneficiary of any such employee), including
but not limited to retiree health coverage and deferred compensation, but
excluding continuation of health coverage required to be continued under Section
4980B of the Code or other applicable law and insurance conversion privileges
under state law. The assets of each Employee Benefit Plan which is funded are
reported at their fair market value on the books and records of such Employee
Benefit Plan.
(h) No act or omission has occurred and no condition exists with
respect to any Employee Benefit Plan maintained by the Parent, any Subsidiary or
any ERISA Affiliate that would subject the Parent, any Subsidiary or any ERISA
Affiliate to (i) any material fine, penalty, tax or liability of any kind
imposed under ERISA or the Code or (ii) any contractual indemnification or
contribution obligation protecting any fiduciary, insurer or service provider
with respect to any Employee Benefit Plan.
(i) No Employee Benefit Plan is funded by, associated with or
related to a "voluntary employee's beneficiary association" within the meaning
of Section 501(c)(9) of the Code.
(j) Each Employee Benefit Plan is amendable and terminable
unilaterally by the Parent at any time without liability to the Parent as a
result thereof and no Employee Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally to
employees by its terms prohibits the Parent from amending or terminating any
such Employee Benefit Plan.
(k) Section 3.22(k) of the Parent Disclosure Schedule discloses
each: (i) agreement with any stockholder, director, executive officer or other
key employee of the Parent or any Subsidiary (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Parent or any Subsidiary of the nature of any of the
transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such director, executive
officer or key employee; (ii) agreement, plan or arrangement under which any
person may receive payments from the Parent or any Subsidiary that may be
subject to the tax imposed by Section 4999 of the Code or included in the
determination of such person's "parachute payment" under Section 280G of the
Code; and (iii) agreement or plan binding the Parent or any Subsidiary,
including without limitation any stock option plan, stock appreciation right
plan, restricted stock plan, stock purchase plan, severance benefit plan or
Employee Benefit Plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. The accruals for vacation, sickness and
disability expenses are accounted for on the Most Recent Balance Sheet and are
adequate and properly reflect the expenses associated therewith in accordance
with generally accepted accounting principles.
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3.23 Environmental Matters.
(a) Each of the Parent and the Subsidiaries has complied with all
applicable Environmental Laws, except for violations of Environmental Laws that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Parent Material Adverse Effect. There is no pending or, to
the knowledge of the Parent, threatened civil or criminal litigation, written
notice of violation, formal administrative proceeding, or investigation, inquiry
or information request by any Governmental Entity, relating to any Environmental
Law involving the Parent or any Subsidiary, except for litigation, notices of
violations, formal administrative proceedings or investigations, inquiries or
information requests that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Parent Material Adverse Effect.
(b) Set forth in Section 3.23(b) of the Parent Disclosure Schedule
is a list of all documents (whether in hard copy or electronic form) that
contain any environmental reports, investigations and audits relating to
premises currently or previously owned or operated by the Parent or a Subsidiary
(whether conducted by or on behalf of the Parent or a Subsidiary or a third
party, and whether done at the initiative of the Parent or a Subsidiary or
directed by a Governmental Entity or other third party) which were issued or
conducted during the past five years and which the Parent has possession of or
access to. A complete and accurate copy of each such document has been provided
to the Parent.
(c) The Parent is not aware of any material environmental liability
of any solid or hazardous waste transporter or treatment, storage or disposal
facility that has been used by the Parent or any Subsidiary.
3.24 Permits. Section 3.24 of the Parent Disclosure Schedule sets forth a
list of all permits, licenses, registrations, certificates, orders or approvals
from any Governmental Entity (including without limitation those issued or
required under Environmental Laws and those relating to the occupancy or use of
owned or leased real property) ("Parent Permits") issued to or held by the
Parent or any Subsidiary. Such listed Permits are the only Parent Permits that
are required for the Parent and the Subsidiaries to conduct their respective
businesses as presently conducted except for those the absence of which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Parent Material Adverse Effect. Each such Parent Permit is in
full force and effect and, to the knowledge of the Parent, no suspension or
cancellation of such Parent Permit is threatened and there is no basis for
believing that such Parent Permit will not be renewable upon expiration. Each
such Parent Permit will continue in full force and effect immediately following
the Closing.
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3.25 Certain Business Relationships With Affiliates. No Affiliate of the
Parent or of any Subsidiary (a) owns any property or right, tangible or
intangible, which is used in the business of the Parent or any Subsidiary, (b)
has any claim or cause of action against the Parent or any Subsidiary, or (c)
owes any money to, or is owed any money by, the Parent or any Subsidiary.
Section 3.25 of the Parent Disclosure Schedule describes any transactions
involving the receipt or payment in excess of $5,000 in any fiscal year between
the Parent or a Subsidiary and any Affiliate thereof which have occurred or
existed since the beginning of the time period covered by the Parent Financial
Statements, other than employment agreements.
3.26 Tax-Free Reorganization.
(a) The Parent (i) is not an "investment company" as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code; (ii) has no present plan or
intention to liquidate the Surviving Corporation or to merge the Surviving
Corporation with or into any other corporation or entity, or to sell or
otherwise dispose of the stock of the Surviving Corporation which Parent will
acquire in the Merger, or to cause the Surviving Corporation to sell or
otherwise dispose of its assets, all except in the ordinary course of business
or if such liquidation, merger, disposition is described in Section 368(a)(2)(C)
or Treasury Regulation Section 1.368-2(d)(4) or Section 1368-2(k); (iii) has no
present plan or intention, following the Merger, to issue any additional shares
of stock of the Surviving Corporation or to create any new class of stock of the
Surviving Corporation.
(b) The Acquisition Subsidiary is a wholly-owned subsidiary of the
Parent, formed solely for the purpose of engaging in the Merger, and will carry
on no business prior to the Merger.
(c) Immediately prior to the Merger, the Parent will be in control
of Acquisition Subsidiary within the meaning of Section 368(c) of the Code.
(d) Immediately following the Merger, the Surviving Corporation will
hold at least 90% of the fair market value of the net assets and at least 70% of
the fair market value of the gross assets held by the Company immediately prior
to the Merger (for purposes of this representation, amounts used by the Company
to pay reorganization expenses, if any, will be included as assets of the
Company held immediately prior to the Merger).
(e) The Parent has no present plan or intention to reacquire any of
the Merger Shares.
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(f) The Acquisition Subsidiary will have no liabilities assumed by
the Surviving Corporation and will not transfer to the Surviving Corporation any
assets subject to liabilities in the Merger. (g) Following the Merger, the
Surviving Corporation will continue the Company's historic business or use a
significant portion of the Company's historic business assets in a business as
required by Section 368 of the Code and the Treasury Regulations promulgated
thereunder.
3.27 Brokers' Fees. Neither the Parent nor the Acquisition Subsidiary has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement.
3.28 Disclosure. No representation or warranty by the Parent contained in
this Agreement or in any of the Transaction Documentation, and no statement
contained in the any document, certificate or other instrument delivered or to
be delivered by or on behalf of the Parent pursuant to this Agreement or
therein, contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading. The Parent has disclosed to the
Company all material information relating to the business of the Parent or any
Subsidiary or the transactions contemplated by this Agreement.
3.29 Interested Party Transactions. To the knowledge of the Parent, no
officer, director or stockholder of Parent or any "affiliate" (as such term is
defined in Rule 12b-2 under the Exchange Act) or "associate" (as such term is
defined in Rule 405 under the Securities Act) of any such person has had, either
directly or indirectly, (a) an interest in any person that (i) furnishes or
sells services or products that are furnished or sold or are proposed to be
furnished or sold by Parent or any Subsidiary or (ii) purchases from or sells or
furnishes to Parent or any Subsidiary any goods or services, or (b) a beneficial
interest in any contract or agreement to which Parent or any Subsidiary is a
party or by which it may be bound or affected. Neither Parent or any Subsidiary
has extended or maintained credit, arranged for the extension of credit, or
renewed an extension of credit, in the form of a personal loan to or for any
director or executive officer (or equivalent thereof) of the Parent or any
Subsidiary.
3.30 Duty to Make Inquiry. To the extent that any of the representations
or warranties in this Section 3 are qualified by "knowledge" or "belief," Parent
represents and warrants that it has made due and reasonable inquiry and
investigation concerning the matters to which such representations and
warranties relate, including, but not limited to, diligent inquiry by its
directors, officers and key personnel.
3.31 Accountants. ▇▇▇▇▇▇▇▇▇ International, P.C. is and has been throughout
the periods covered by such financial statements (a) a registered public
accounting firm (as defined in Section 2(a)(12) of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of
2002, (b) "independent" with respect to Parent within the meaning of Regulation
S-X and (c) in compliance with subsections (g) through (l) of Section 10A of the
Exchange Act and the related rules of the Commission and the Public Company
Accounting Oversight Board. Schedule 3.31 lists all non-audit services performed
by ▇▇▇▇▇▇▇▇▇ International, P.C. for Parent and/or any of Subsidiary since
January 1, 2001. None of the reports of ▇▇▇▇▇▇▇▇▇ International, P.C. on the
financial statements of Parent for either of the past two fiscal years contained
an adverse opinion or a disclaimer of opinion, or was qualified as to
uncertainty, audit scope, or accounting principles. During Parent's two most
recent fiscal years and the subsequent interim periods, there were no
disagreements with ▇▇▇▇▇▇▇▇▇ International, P.C. on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures. None of the reportable events listed in Item 304(a)(1)(iv) of
Regulation S-B occurred with respect to ▇▇▇▇▇▇▇▇▇ International, P.C.
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3.32 Minute Books. The minute books, if any, of Parent and each Subsidiary
contain, in all material respects, a complete and accurate summary of all
meetings of directors and stockholders or actions by written resolutions since
the time of organization of each such corporation through the date of this
Agreement, and reflect all transactions referred to in such minutes and
resolutions accurately, except for omissions which are not material. Parent has
provided true and complete copies of all such minute books, if any, to the
Company's representatives.
3.33 Board Action. The Parent's Board of Directors (a) has unanimously
determined that the Merger is advisable and in the best interests of the
Parent's stockholders and is on terms that are fair to such Parent stockholders
and (b) has caused the Parent, in its capacity as the sole shareholder of the
Acquisition Subsidiary, and the Board of Directors of the Acquisition
Subsidiary, to approve the Merger and this Agreement by written consent.
ARTICLE IV
COVENANTS
4.1 Closing Efforts. Each of the Parties shall use its best efforts, to
the extent commercially reasonable ("Reasonable Best Efforts"), to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including without limitation using
its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Parties to
consummate the Merger are satisfied.
4.2 Governmental and Third-Party Notices and Consents.
(a) Each Party shall use its Reasonable Best Efforts to obtain, at
its expense, all waivers, permits, consents, approvals or other authorizations
from Governmental Entities, and to effect all registrations, filings and notices
with or to Governmental Entities, as may be required for such Party to
consummate the transactions contemplated by this Agreement and to otherwise
comply with all applicable laws and regulations in connection with the
consummation of the transactions contemplated by this Agreement.
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(b) The Company shall use its Reasonable Best Efforts to obtain, at
its expense, all such waivers, consents or approvals from third parties, and to
give all such notices to third parties, as are required to be listed in Section
2.4 of the Disclosure Schedule.
4.3 Current Report.
(a) As soon as reasonably practicable after the execution of this
Agreement, the Parties shall prepare a current report on Form 8-K relating to
this Agreement and the transactions contemplated hereby (the "Current Report").
Each of the Company and Parent shall use its reasonable efforts to cause the
Current Report to be filed with the SEC within four business days of the
execution of this Agreement and to otherwise comply with all requirements of
applicable federal and state securities laws. Further, the Parties shall prepare
and file with the SEC an amendment to the Current Report within four business
days after the Closing Date.
4.4 Operation of Business. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, the
Company shall (and shall cause each Subsidiary to) conduct its operations in the
Ordinary Course of Business and in compliance with all applicable laws and
regulations and, to the extent consistent therewith, use its Reasonable Best
Efforts to preserve intact its current business organization, keep its physical
assets in good working condition, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it to the end that its goodwill and
ongoing business shall not be impaired in any material respect. Without limiting
the generality of the foregoing, prior to the Effective Time, the Company shall
not (and shall cause each Subsidiary not to), without the written consent of the
Parent:
(a) issue or sell, or redeem or repurchase, any stock or other
securities of the Company or any rights, warrants or options to acquire any such
stock or other securities (except pursuant to the conversion or exercise of
convertible securities or Options or Warrants outstanding on the date hereof),
or amend any of the terms of (including without limitation the vesting of) any
such convertible securities or Options or Warrants;
(b) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock;
(c) create, incur or assume any indebtedness (including obligations
in respect of capital leases); assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person or entity; or make any loans, advances or
capital contributions to, or investments in, any other person or entity;
(d) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement or (except for normal increases
in the Ordinary Course of Business for employees who are not Affiliates)
increase in any manner the compensation or fringe benefits of, or materially
modify the employment terms of, its directors, officers or employees, generally
or individually, or pay any bonus or other benefit to its directors, officers or
employees;
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(e) acquire, sell, lease, license or dispose of any assets or
property (including without limitation any shares or other equity interests in
or securities of any Subsidiary or any corporation, partnership, association or
other business organization or division thereof), other than purchases and sales
of assets in the Ordinary Course of Business;
(f) mortgage or pledge any of its property or assets or subject any
such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any obligation
or liability other than in the Ordinary Course of Business;
(h) amend its charter, by-laws or other organizational documents;
(i) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP;
(j) enter into, amend, terminate, take or omit to take any action
that would constitute a violation of or default under, or waive any rights
under, any material contract or agreement;
(k) institute or settle any Legal Proceeding;
(l) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of the Company set forth
in this Agreement becoming untrue or (ii) any of the conditions to the Merger
set forth in Article V not being satisfied; or
(m) agree in writing or otherwise to take any of the foregoing
actions.
4.5 Access to Information.
(a) The Company shall (and shall cause each Subsidiary to) permit
representatives of the Parent to have full access (at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Company and the Subsidiaries) to all premises, properties, financial and
accounting records, contracts, other records and documents, and personnel, of or
pertaining to the Company and each Subsidiary.
(b) Each of the Parent and the Acquisition Subsidiary (i) shall
treat and hold as confidential any Company Confidential Information (as defined
below), (ii) shall not use any of the Company Confidential Information except in
connection with this Agreement, and (iii) if this Agreement is terminated for
any reason whatsoever, shall return to the Company all tangible embodiments (and
all copies) thereof which are in its possession. For purposes of this Agreement,
"Company Confidential Information" means any confidential or proprietary
information of the Company or any Subsidiary that is furnished in writing to the
Parent or the Acquisition Subsidiary by the Company or any Subsidiary in
connection with this Agreement and is labeled confidential or proprietary;
provided, however, that it shall not include any information (A) which, at the
time of disclosure, is available publicly, (B) which, after disclosure, becomes
available publicly through no fault of the Parent or the Acquisition Subsidiary,
(C) which the Parent or the Acquisition Subsidiary knew or to which the Parent
or the Acquisition Subsidiary had access prior to disclosure, (D) which the
Parent or the Acquisition Subsidiary rightfully obtains from a source other than
the Company or a Subsidiary or (E) which either party is required to disclose as
a matter of law.
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4.6 Operation of Business. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, the
Parent shall (and shall cause each Subsidiary to) conduct its operations in the
Ordinary Course of Business and in compliance with all applicable laws and
regulations and, to the extent consistent therewith, use its Reasonable Best
Efforts to preserve intact its current business organization, keep its physical
assets in good working condition, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it to the end that its goodwill and
ongoing business shall not be impaired in any material respect. Without limiting
the generality of the foregoing, prior to the Effective Time, the Parent shall
not (and shall cause each Subsidiary not to), without the written consent of the
Company:
(a) issue or sell, or redeem or repurchase, any stock or other
securities or any rights, warrants or options to acquire any such stock or other
securities (except pursuant to the conversion or exercise of convertible
securities or Options or Warrants outstanding on the date hereof), or amend any
of the terms of (including without limitation the vesting of) any such
convertible securities or Options or Warrants, except as contemplated by, and in
connection with, the Bridge Loan Documents;
(b) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
excluding any split to reduce the Parent's issued and outstanding shares of
Common Stock to 1,000,000;
(c) create, incur or assume any indebtedness (including obligations
in respect of capital leases); assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person or entity; or make any loans, advances or
capital contributions to, or investments in, any other person or entity;
(d) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement or (except for normal increases
in the Ordinary Course of Business for employees who are not Affiliates)
increase in any manner the compensation or fringe benefits of, or materially
modify the employment terms of, its directors, officers or employees, generally
or individually, or pay any bonus or other benefit to its directors, officers or
employees;
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(e) acquire, sell, lease, license or dispose of any assets or
property (including without limitation any shares or other equity interests in
or securities of any Subsidiary or any corporation, partnership, association or
other business organization or division thereof), other than purchases and sales
of assets in the Ordinary Course of Business;
(f) mortgage or pledge any of its property or assets or subject any
such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any obligation
or liability other than in the Ordinary Course of Business;
(h) amend its charter, by-laws or other organizational documents;
(i) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP;
(j) enter into, amend, terminate, take or omit to take any action
that would constitute a violation of or default under, or waive any rights
under, any material contract or agreement;
(k) institute or settle any Legal Proceeding;
(l) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of the Parent and/or the
Acquisition Subsidiary set forth in this Agreement becoming untrue or (ii) any
of the conditions to the Merger set forth in Article V not being satisfied; or
(m) agree in writing or otherwise to take any of the foregoing
actions.
4.7 Access to Information.
(a) The Parent shall (and shall cause each Subsidiary to) permit
representatives of the Company to have full access (at all reasonable times, and
in a manner so as not to interfere with the normal business operations of the
Parent and the Subsidiaries) to all premises, properties, financial and
accounting records, contracts, other records and documents, and personnel, of or
pertaining to the Parent and each Subsidiary.
(b) The Company (i) shall treat and hold as confidential any Parent
Confidential Information (as defined below), (ii) shall not use any of the
Parent Confidential Information except in connection with this Agreement, and
(iii) if this Agreement is terminated for any reason whatsoever, shall return to
the Parent all tangible embodiments (and all copies) thereof which are in its
possession. For purposes of this Agreement, "Parent Confidential Information"
means any confidential or proprietary information of the Parent or any
Subsidiary that is furnished in writing to the Company by the Parent or the
Acquisition Subsidiary in connection with this Agreement and is labeled
confidential or proprietary; provided, however, that it shall not include any
information (A) which, at the time of disclosure, is available publicly, (B)
which, after disclosure, becomes available publicly through no fault of the
Company, (C) which the Company knew or to which the Company had access prior to
disclosure or (D) which the Company rightfully obtains from a source other than
the Parent or the Acquisition Subsidiary or (E) which either party is required
to disclose as a matter of law.
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4.8 Expenses. The costs and expenses (including legal fees and expenses of
Parent and the Company) incurred in connection with this Agreement and the
transactions contemplated hereby shall be payable at Closing from the proceeds
of a bridge loan financing of an aggregate of $15,000,000 to the Parent from
Highgate House Funds, Ltd. and Prentice Capital Management, LP (the "OXFV Bridge
Loan").
4.9 Indemnification.
(a) The Parent shall not, for a period of three years after the
Effective Time, take any action to alter or impair any exculpatory or
indemnification provisions now existing in the Certificate of Incorporation or
Bylaws of the Company for the benefit of any individual who served as a director
or officer of the Company at any time prior to the Effective Time, except for
any changes which may be required to conform with changes in applicable law and
any changes which do not affect the application of such provisions to acts or
omissions of such individuals prior to the Effective Time.
(b) From and after the Effective Time, the Parent agrees that it
will, and will cause the Surviving Corporation to, indemnify and hold harmless
each present and former director and officer of the Company (the "Indemnified
Executives") against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent permitted under the DGCL and Nevada law (and the
Parent and the Surviving Corporation shall also advance expenses as incurred to
the fullest extent permitted under DGCL and Nevada law, provided the Indemnified
Executive to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Indemnified Executive is not
entitled to indemnification).
4.10 Listing of Merger Shares. The Parent shall take whatever steps are
necessary to cause the Merger Shares to be eligible for quotation on the NASD's
OTC Bulletin Board.
4.11 Name Change. As soon as practicable following the Effective Time, the
Parent shall take whatever steps are necessary to enable it to change its
corporate name to Uluru, Inc. or such other name as the Company shall determine.
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4.12 Breakup. In recognition of the time energy and effort of the Parent
in negotiating, drafting and working towards a Closing, the Company agrees to
pay a breakup fee to the Parent if the Closing does not occur by the Closing
Date. The breakup fee shall consist of $1.44 million and is payable upon demand.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party's Obligations. The respective obligations of
each Party to consummate the Merger are subject to the satisfaction of the
following conditions:
(a) this Agreement and the Merger shall have received the Requisite
Company Shareholder Approval;
(b) the completion of up to $13,000,000 in financing under the
Bridge Loan;
(c) the completion of up to $10,700,000 in financing under the OXFV
Bridge Loan;
(d) the completion of the sale of certain pharmaceutical assets, as
set forth in Exhibit D, to the Company from Access Pharmaceuticals, Inc.; and
(e) satisfactory completion by Parent and Company of all necessary
legal due diligence.
5.2 Conditions to Obligations of the Parent and the Acquisition
Subsidiary. The obligation of each of the Parent and the Acquisition Subsidiary
to consummate the Merger is subject to the satisfaction (or waiver by the
Parent) of the following additional conditions, except for any the failure of
which to obtain or effect would not have a Company Material Adverse Effect or
affect on the ability of the Parties to consummate the transactions contemplated
by this Agreement:
(a) the number of Dissenting Shares shall not exceed 10% of the
number of outstanding Company Shares as of the Effective Time;
(b) the Company and the Subsidiaries shall have obtained (and shall
have provided copies thereof to the Parent) all of the waivers, permits,
consents, approvals or other authorizations, and effected all of the
registrations, filings and notices, referred to in Section 4.2 which are
required on the part of the Company or the Subsidiaries;
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(c) the representations and warranties of the Company set forth in
this Agreement shall be true and correct as of the date of this Agreement and
shall be true and correct as of the Effective Time as though made as of the
Effective Time, except to the extent that the inaccuracy of any such
representation or warranty is the result of events or circumstances occurring
subsequent to the date of this Agreement and any such inaccuracies, individually
or in the aggregate, would not have a Company Material Adverse Effect or a
material adverse effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement (it being agreed that any
materiality qualifications in particular representations and warranties shall be
disregarded in determining whether any such inaccuracies would have a Company
Material Adverse Effect for purposes of this Section 5.2(c));
(d) the Company shall have performed or complied in all material
respects with its agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Effective Time;
(e) no Legal Proceeding shall be pending wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation or (iii) have, individually or in the aggregate, a
Company Material Adverse Effect, and no such judgment, order, decree,
stipulation or injunction shall be in effect;
(f) the Company shall have delivered to the Parent and the
Acquisition Subsidiary a certificate (the "Company Certificate") to the effect
that each of the conditions specified in clauses (a) and (c) of Section 5.1 and
clauses (a) through (e) (insofar as clause (e) relates to Legal Proceedings
involving the Company or a Subsidiary) of this Section 5.2 is satisfied in all
respects; and
(g) the Parent shall have received from McGuireWoods LLP, counsel to
the Company, an opinion with respect to the matters set forth in Exhibit B
attached hereto, addressed to the Parent and dated as of the Closing Date.
5.3 Conditions to Obligations of the Company. The obligation of the
Company to consummate the Merger is subject to the satisfaction of the following
additional conditions, except for any the failure of which to obtain or effect
would not have a Parent Material Adverse Effect or affect on the ability of the
Parties to consummate the transactions contemplated by this Agreement:
(a) the Parent shall have effected all of the registrations, filings
and notices referred to in Section 4.2 which are required on the part of the
Parent;
(b) the representations and warranties of the Parent set forth in
this Agreement shall be true and correct as of the date of this Agreement and
shall be true and correct as of the Effective Time as though made as of the
Effective Time, except to the extent that the inaccuracy of any such
representation or warranty is the result of events or circumstances occurring
subsequent to the date of this Agreement and any such inaccuracies, individually
or in the aggregate, would not have a Parent Material Adverse Effect or a
material adverse effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement (it being agreed that any
materiality qualifications in particular representations and warranties shall be
disregarded in determining whether any such inaccuracies would have a Parent
Material Adverse Effect for purposes of this Section 5.3(b));
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(c) each of the Parent and the Acquisition Subsidiary shall have
performed or complied with its agreements and covenants required to be performed
or complied with under this Agreement as of or prior to the Effective Time;
(d) no Legal Proceeding shall be pending wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation or (iii) have, individually or in the aggregate, a Parent
Material Adverse Effect, and no such judgment, order, decree, stipulation or
injunction shall be in effect;
(e) the Parent shall have delivered to the Company a certificate
(the "Parent Certificate") to the effect that each of the conditions specified
in clauses (a) through (d) (insofar as clause (d) relates to Legal Proceedings
involving the Parent) of this Section 5.3 is satisfied in all respects;
(f) the Company shall have received from Gottbetter & Partners, LLP,
counsel to the Parent and the Acquisition Subsidiary, an opinion with respect to
the matters set forth in Exhibit C attached hereto, addressed to the Company and
dated as of the Closing Date;
(g) the Parent shall have declared and enacted a split of its shares
of Common Stock such that the total number of shares of Parent Common Stock
issued and outstanding immediately prior to the Effective Time shall equal
1,000,000 and the number of shares of Parent Common Stock issued and outstanding
immediately following the Effective Time shall equal 12,000,000
(h) ▇▇▇▇▇ ▇. ▇▇▇▇ shall have executed an employment agreement
reasonably satisfactory to ▇▇▇▇▇ ▇. ▇▇▇▇; and
(i) the Company shall have received a certificate of Parent's
transfer agent and registrar certifying that as of the Closing Date there are
1,000,000 shares of Common Stock issued and outstanding.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Company Shareholders. The Indemnifying
Shareholders receiving the Merger Shares pursuant to Section 1.5 shall indemnify
the Parent in respect of, and hold it harmless against, any and all debts,
obligations and other liabilities (whether absolute, accrued, contingent, fixed
or otherwise, or whether known or unknown, or due or to become due or
otherwise), monetary damages, fines, fees, penalties, interest obligations,
deficiencies, losses and expenses (including without limitation amounts paid in
settlement, interest, court costs, costs of investigators, fees and expenses of
attorneys, accountants, financial advisors and other experts, and other expenses
of litigation) ("Damages") incurred or suffered by the Surviving Corporation or
the Parent or any Affiliate thereof resulting from, relating to or constituting:
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(a) any misrepresentation, breach of warranty or failure to perform
any covenant or agreement of the Company contained in this Agreement or the
Company Certificate;
(b) any failure of any Company Shareholder to have good, valid and
marketable title to the issued and outstanding Company Shares issued in the name
of such Company Shareholder, free and clear of all Security Interests; or
(c) any claim by a shareholder or former shareholder of the Company,
or any other person or entity, seeking to assert, or based upon: (i) ownership
or rights to ownership of any shares of stock of the Company; (ii) any rights of
a shareholder (other than the right to receive the Merger Shares pursuant to
this Agreement or appraisal rights under the applicable provisions of the DGCL),
including any option, preemptive rights or rights to notice or to vote; (iii)
any rights under the Certificate of Incorporation or Bylaws of the Company; or
(iv) any claim that his, her or its shares were wrongfully repurchased by the
Company.
6.2 Indemnification by the Parent.
(a) The Parent shall indemnify the Indemnifying Shareholders in
respect of, and hold them harmless against, any and all Damages incurred or
suffered by the Indemnifying Shareholders resulting from, relating to or
constituting any misrepresentation, breach of warranty or failure to perform any
covenant or agreement of the Parent or the Acquisition Subsidiary contained in
this Agreement or the Parent Certificate.
(b) The post-Closing adjustment mechanism set forth in Section 1.13
is intended to secure the indemnification obligations of the Parent under this
Agreement and shall be the exclusive means for the Indemnifying Shareholders to
collect any Damages for which they are entitled to indemnification under this
Article VI.
6.3 Indemnification Claims by the Parent.
(a) In the event the Parent is entitled, or seeks to assert rights,
to indemnification under Section 6.1, Parent shall give written notification to
the Indemnifying Shareholders of the commencement of any suit or proceeding
relating to a third party claim for which indemnification pursuant to this
Article VI may be sought. Such notification shall be given within 20 business
days after receipt by the Parent of notice of such suit or proceeding, and shall
describe in reasonable detail (to the extent known by the Parent) the facts
constituting the basis for such suit or proceeding and the amount of the claimed
damages; provided, however, that no delay on the part of the Parent in notifying
the Indemnifying Shareholders shall relieve the Indemnifying Shareholders of any
-42-
liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnifying Shareholders may, upon written
notice thereof to the Parent, assume control of the defense of such suit or
proceeding with counsel reasonably satisfactory to the Parent; provided that (i)
the Indemnifying Shareholders may only assume control of such defense if (A) it
acknowledges in writing to the Parent that any damages, fines, costs or other
liabilities that may be assessed against the Parent in connection with such suit
or proceeding constitute Damages for which the Parent shall be indemnified
pursuant to this Article VI and (B) the ad damnum is less than or equal to the
amount of Damages for which the Indemnifying Shareholders is liable under this
Article VI and (ii) the Indemnifying Shareholders may not assume control of the
defense of a suit or proceeding involving criminal liability or in which
equitable relief is sought against the Parent. If the Indemnifying Shareholders
do not so assume control of such defense, the Parent shall control such defense.
The party not controlling such defense (the "Non-controlling Party") may
participate therein at its own expense; provided that if the Indemnifying
Shareholders assume control of such defense and the Parent reasonably concludes
that the Indemnifying Shareholders and the Parent have conflicting interests or
different defenses available with respect to such suit or proceeding, the
reasonable fees and expenses of counsel to the Parent shall be considered
"Damages" for purposes of this Agreement. The party controlling such defense
(the "Controlling Party") shall keep the Non-controlling Party advised of the
status of such suit or proceeding and the defense thereof and shall consider in
good faith recommendations made by the Non-controlling Party with respect
thereto. The Non-controlling Party shall furnish the Controlling Party with such
information as it may have with respect to such suit or proceeding (including
copies of any summons, complaint or other pleading which may have been served on
such party and any written claim, demand, invoice, billing or other document
evidencing or asserting the same) and shall otherwise cooperate with and assist
the Controlling Party in the defense of such suit or proceeding. The
Indemnifying Shareholders shall not agree to any settlement of, or the entry of
any judgment arising from, any such suit or proceeding without the prior written
consent of the Parent, which shall not be unreasonably withheld or delayed;
provided that the consent of the Parent shall not be required if the
Indemnifying Shareholders agree in writing to pay any amounts payable pursuant
to such settlement or judgment and such settlement or judgment includes a
complete release of the Parent from further liability and has no other adverse
effect on the Parent. The Parent shall not agree to any settlement of, or the
entry of any judgment arising from, any such suit or proceeding without the
prior written consent of the Indemnifying Shareholders, which shall not be
unreasonably withheld or delayed.
(b) In order to seek indemnification under this Article VI, Parent
shall give written notification (a "Claim Notice") to the Indemnifying
Shareholders which contains (i) a description and the amount (the "Claimed
Amount") of any Damages incurred or reasonably expected to be incurred by the
Parent, (ii) a statement that the Parent is entitled to indemnification under
this Article VI for such Damages and a reasonable explanation of the basis
therefor, and (iii) a demand for payment (in the manner provided in paragraph
(c) below) in the amount of such Damages. The Indemnifying Shareholders shall
deliver a copy of the Claim Notice to the Escrow Agent.
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(c) Within 20 days after delivery of a Claim Notice, the
Indemnifying Shareholders shall deliver to the Parent a written response (the
"Response") in which the Indemnifying Shareholders shall: (i) agree that the
Parent is entitled to receive all of the Claimed Amount (in which case the
Indemnifying Shareholders and the Parent shall deliver to the Escrow Agent,
within three days following the delivery of the Response, a written notice
executed by both parties instructing the Escrow Agent to distribute to the
Parent such number of Escrow Shares as have an aggregate Value (as defined
below) equal to the Claimed Amount), (ii) agree that the Parent is entitled to
receive part, but not all, of the Claimed Amount (the "Agreed Amount") (in which
case the Indemnifying Shareholders and the Parent shall deliver to the Escrow
Agent, within three days following the delivery of the Response, a written
notice executed by both parties instructing the Escrow Agent to distribute to
the Parent such number of Escrow Shares as have an aggregate Value (as defined
below) equal to the Agreed Amount) or (iii) dispute that the Parent is entitled
to receive any of the Claimed Amount. If the Indemnifying Shareholders in the
Response disputes its liability for all or part of the Claimed Amount, the
Indemnifying Shareholders and the Parent shall follow the procedures set forth
in Section 6.3(d) for the resolution of such dispute (a "Dispute"). For purposes
of this Article VI, the "Value" of any Escrow Shares delivered in satisfaction
of an indemnity claim shall be $1.00 per Escrow Share (subject to equitable
adjustment in the event of any stock split, stock dividend, reverse stock split
or similar event affecting the Parent Common Stock since the Closing Date),
multiplied by the number of such Escrow Shares.
(d) During the 60-day period following the delivery of a Response
that reflects a Dispute, the Indemnifying Shareholders and the Parent shall use
good faith efforts to resolve the Dispute. If the Dispute is not resolved within
such 60-day period, the Indemnifying Shareholders and the Parent shall discuss
in good faith the submission of the Dispute to a mutually acceptable alternative
dispute resolution procedure (which may be non-binding or binding upon the
parties, as they agree in advance) (the "ADR Procedure"). In the event the
Indemnifying Shareholders and the Parent agree upon an ADR Procedure, such
parties shall, in consultation with the chosen dispute resolution service (the
"ADR Service"), promptly agree upon a format and timetable for the ADR
Procedure, agree upon the rules applicable to the ADR Procedure, and promptly
undertake the ADR Procedure. The provisions of this Section 6.3(d) shall not
obligate the Indemnifying Shareholders and the Parent to pursue an ADR Procedure
or prevent either such party from pursuing the Dispute in a court of competent
jurisdiction; provided that, if the Indemnifying Shareholders and the Parent
agree to pursue an ADR Procedure, neither the Indemnifying Shareholders nor the
Parent may commence litigation or seek other remedies with respect to the
Dispute prior to the completion of such ADR Procedure. Any ADR Procedure
undertaken by the Indemnifying Shareholders and the Parent shall be considered a
compromise negotiation for purposes of federal and state rules of evidence, and
all statements, offers, opinions and disclosures (whether written or oral) made
in the course of the ADR Procedure by or on behalf of the Indemnifying
Shareholders, the Parent or the ADR Service shall be treated as confidential
and, where appropriate, as privileged work product. Such statements, offers,
opinions and disclosures shall not be discoverable or admissible for any
purposes in any litigation or other proceeding relating to the Dispute (provided
that this sentence shall not be construed to exclude from discovery or admission
any matter that is otherwise discoverable or admissible). The fees and expenses
of any ADR Service used by the Indemnifying Shareholders and the Parent shall be
shared equally by the Indemnifying Shareholders and the Parent. The Parent and
the Indemnifying Shareholders shall deliver to the Escrow Agent, promptly
following the resolution of the Dispute (whether by mutual agreement, pursuant
to an ADR Procedure, as a result of a judicial decision or otherwise), a written
notice executed by both parties instructing the Escrow Agent as to what (if any)
portion of the Escrow Shares shall be distributed to the Parent (which notice
shall be consistent with the terms of the resolution of the Dispute).
-44-
(e) Notwithstanding the other provisions of this Section 6.3, if a
third party asserts (other than by means of a lawsuit) that the Parent is liable
to such third party for a monetary or other obligation which may constitute or
result in Damages for which such Parent may be entitled to indemnification
pursuant to this Article VI, and the Parent reasonably determines that it has a
valid business reason to fulfill such obligation, then (i) Parent shall be
entitled to satisfy such obligation, without prior notice to or consent from the
Indemnifying Shareholders, (ii) Parent may subsequently make a claim for
indemnification in accordance with the provisions of this Article VI, and (iii)
Parent shall be reimbursed, in accordance with the provisions of this Article
VI, for any such Damages for which it is entitled to indemnification pursuant to
this Article VI (subject to the right of the Indemnifying Shareholders to
dispute the Parent's entitlement to indemnification, or the amount for which it
is entitled to indemnification, under the terms of this Article VI).
(f) For purposes of this Section 6.3 and the last two sentences of
Section 6.4, any references to the Indemnifying Shareholders (except provisions
relating to an obligation to make or a right to receive any payments provided
for in Section 6.3 or Section 6.4) shall be deemed to refer to the
Indemnification Representatives. The Indemnification Representatives shall have
full power and authority on behalf of each Indemnifying Stockholder to take any
and all actions on behalf of, execute any and all instruments on behalf of, and
execute or waive any and all rights of, the Indemnifying Shareholders under this
Article VI. The Indemnification Representatives shall have no liability to any
Indemnifying Stockholder for any action taken or omitted on behalf of the
Indemnifying Shareholders pursuant to this Article VI.
(g) The limit on the aggregate number of shares of the Company's
common stock that the Parent can seek to receive as indemnification under this
Section 6.3 is limited to 1,200,000 shares, including the Escrow Shares.
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6.4 Survival of Representations and Warranties. All representations and
warranties contained in this Agreement, the Company Certificate or the Parent
Certificate shall (a) survive the Closing and any investigation at any time made
by or on behalf of Parent or the Indemnifying Shareholders and (b) shall expire
on the date two years following the Closing Date. If Parent delivers to an
Indemnifying Shareholders, before expiration of a representation or warranty,
either a Claim Notice based upon a breach of such representation or warranty, or
a notice that, as a result a legal proceeding instituted by or written claim
made by a third party, the Parent reasonably expects to incur Damages as a
result of a breach of such representation or warranty (an "Expected Claim
Notice"), then such representation or warranty shall survive until, but only for
purposes of, the resolution of the matter covered by such notice. If the legal
proceeding or written claim with respect to which an Expected Claim Notice has
been given is definitively withdrawn or resolved in favor of the Parent, the
Parent shall promptly so notify the Indemnifying Shareholders; and if the Parent
has delivered a copy of the Expected Claim Notice to the Escrow Agent and Escrow
Shares have been retained in escrow after the Termination Date (as defined in
the Escrow Agreement) with respect to such Expected Claim Notice, the
Indemnifying Shareholders and the Parent shall promptly deliver to the Escrow
Agent a written notice executed by both parties instructing the Escrow Agent to
distribute such retained Escrow Shares to the Indemnifying Shareholders in
accordance with the terms of the Escrow Agreement.
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ARTICLE VII
[INTENTIONALLY LEFT BLANK]
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ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Agreement. This Agreement may be terminated at
any time by mutual consent of the parties hereto, provided that such consent to
terminate is in writing and is signed by each of the parties hereto.
8.2 Termination for Failure to Close. This Agreement shall be
automatically terminated if the Closing Date shall not have occurred by December
6, 2005.
8.3 Termination by Operation of Law. This Agreement may be terminated by
any party hereto if there shall be any statute, rule or regulation that renders
consummation of the transactions contemplated by this Agreement (the
"Contemplated Transactions) illegal or otherwise prohibited, or a court of
competent jurisdiction or any government (or governmental authority) shall have
issued an order, decree or ruling, or has taken any other action restraining,
enjoining or otherwise prohibiting the consummation of such transactions and
such order, decree, ruling or other action shall have become final and
nonappealable.
8.4 Termination for Failure to Perform Covenants or Conditions. This
Agreement may be terminated prior to the Effective Time:
(a) by the Parent and the Acquisition Subsidiary if: (i) any of the
representations and warranties made in this Agreement by the Company shall not
be materially true and correct, when made or at any time prior to consummation
of the Contemplated Transactions as if made at and as of such time; (ii) any of
the conditions set forth in Section 5.2 hereof have not been fulfilled in all
material respects by the Closing Date; (iii) the Company shall have failed to
observe or perform any of its material obligations under this Agreement; or (iv)
as otherwise set forth herein; or
(b) by the Company if: (i) any of the representations and warranties
of the Parent or the Acquisition Subsidiary shall not be materially true and
correct when made or at any time prior to consummation of the Contemplated
Transactions as if made at and as of such time; (ii) any of the conditions set
forth in Section 5.3 hereof have not been fulfilled in all material respects by
the Closing Date; (iii) the Parent or the Acquisition Subsidiary shall have
failed to observe or perform any of their material respective obligations under
this Agreement; or (iv) as otherwise set forth herein.
8.5 Effect of Termination or Default; Remedies. In the event of
termination of this Agreement as set forth above, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto,
provided that such party is a Non-Defaulting Party (as defined below). The
foregoing shall not relieve any party from liability for damages actually
incurred as a result of such party's breach of any term or provision of this
Agreement.
-48-
8.6 Remedies; Specific Performance. In the event that any party shall fail
or refuse to consummate the Contemplated Transactions or if any default under or
beach of any representation, warranty, covenant or condition of this Agreement
on the part of any party (the "Defaulting Party") shall have occurred that
results in the failure to consummate the Contemplated Transactions, then in
addition to the other remedies provided herein, the non-defaulting party (the
"Non-Defaulting Party") shall be entitled to seek and obtain money damages from
the Defaulting Party, or may seek to obtain an order of specific performance
thereof against the Defaulting Party from a court of competent jurisdiction,
provided that the Non-Defaulting Party seeking such protection must file its
request with such court within forty-five (45) days after it becomes aware of
the Defaulting Party's failure, refusal, default or breach. In addition, the
Non-Defaulting Party shall be entitled to obtain from the Defaulting Party court
costs and reasonable attorneys' fees incurred in connection with or in pursuit
of enforcing the rights and remedies provided hereunder.
ARTICLE IX
MISCELLANEOUS
9.1 Press Releases and Announcements. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by applicable law, regulation or stock market rule (in which case the disclosing
Party shall use reasonable efforts to advise the other Parties and provide them
with a copy of the proposed disclosure prior to making the disclosure).
9.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that (a) the provisions in
Article I concerning issuance of the Merger Shares and Article VI concerning
indemnification are intended for the benefit of the Company Shareholders and (b)
the provisions in Section 4.9 concerning indemnification are intended for the
benefit of the individuals specified therein and their successors and assigns.
9.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof.
9.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. 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; provided that the Acquisition Subsidiary may assign its
rights, interests and obligations hereunder to an Affiliate of the Parent.
-49-
9.5 Counterparts and Facsimile Signature. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
9.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next business day
delivery via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:
If to the Company, to: Uluru Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (972) 6363
With a copy to: McGuireWoods LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Parent, to: Oxford Ventures, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copy to: Gottbetter & Partners, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
-50-
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of laws of any
jurisdictions other than those of the State of Delaware.
9.9 Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time; provided, however,
that any amendment effected subsequent to the Requisite Parent Stockholder
Approval shall be subject to any restrictions contained in the Nevada Revised
Statutes. No amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by all of the Parties. No waiver of any
right or remedy hereunder shall be valid unless the same shall be in writing and
signed by the Party giving such waiver. No waiver by any Party with respect to
any default, misrepresentation or breach of warranty or covenant hereunder shall
be deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
9.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
9.11 Submission to Jurisdiction. Each of the Parties (a) submits to the
jurisdiction of any state or federal court sitting in the County of Los Angeles
in the State of Delaware in any action or proceeding arising out of or relating
to this Agreement, (b) agrees that all claims in respect of such action or
proceeding may be heard and determined in any such court, and (c) agrees not to
bring any action or proceeding arising out of or relating to this Agreement in
any other court. Each of the Parties waives any defense of inconvenient forum to
the maintenance of any action or proceeding so brought and waives any bond,
surety or other security that might be required of any other Party with respect
thereto. Any Party may make service on another Party by sending or delivering a
copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in Section 9.7. Nothing in this Section 9.11,
however, shall affect the right of any Party to serve legal process in any other
manner permitted by law.
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9.12 Construction.
(a) The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
PARENT
OXFORD VENTURES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
ACQUISITION SUBSIDIARY
ULURU ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
COMPANY
ULURU, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
-53-
EXHIBIT B
1. Uluru is a corporation, duly incorporated, validly existing and in good
standing under the laws of Delaware, with the requisite corporate power
and authority to own and use its properties and assets and to carry on its
business as currently conducted. To our knowledge and as of the Closing
(as defined in the Agreement), Uluru has no subsidiaries. Uluru is duly
qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would
not individually or in the aggregate reasonably be expected to have a
material adverse effect on its business or financial condition (a
"Material Adverse Effect").
2. The authorized capital stock of Uluru consists of 3,000 shares of Common
Stock, par value $0.001 per share. As of the date of this letter, 2,220
shares of Common Stock were issued and outstanding. All of the issued and
outstanding shares of capital stock of Uluru are duly authorized, validly
issued, fully paid, non-assessable and free of all preemptive rights.
Except as set forth in the Agreement, to the best of our knowledge, there
are no outstanding or authorized options, warrants, rights, agreements or
commitments to which Uluru is a party or which are binding upon Uluru
providing for the issuance or redemption of any of its capital stock. All
of the issued and outstanding shares of capital stock of Uluru were issued
in compliance with the registration requirements (or valid exemptions
therefrom) under the Securities Act of 1933, as amended.
3. Uluru has all requisite power and authority to execute and deliver the
Agreement and to perform its obligations thereunder. The execution and
delivery by Uluru of the Agreement and the consummation by Uluru of the
transactions contemplated thereby have been duly and validly authorized by
all necessary corporate action on the part of Uluru. The Agreement has
been duly and validly executed and delivered by Uluru and constitutes a
valid and binding obligation of Uluru, enforceable against Uluru in
accordance with its terms, subject to bankruptcy, insolvency and similar
laws affecting the rights of creditors generally.
4. Except as set forth in the Agreement, neither the execution and delivery
by Uluru of the Agreement, nor the consummation by Uluru of the
transactions contemplated thereby, conflicts with or violates any
provision of the Certificate of Incorporation or Bylaws of Uluru.
5. Except as set forth in the Agreement, to the best of our knowledge, there
is no litigation or legal proceeding pending or threatened against a)
Uluru that could have, individually or in the aggregate, a Material
Adverse Effect on Uluru or b) any affiliate of Uluru, which litigation or
legal proceeding could have a Material Adverse Effect on Uluru or wherein
such affiliate has an interest in the litigation or proceeding that is
adverse to Uluru's interest.
B-1
EXHIBIT C
1. Oxford is a corporation, duly incorporated, validly existing and in good
standing under the laws of Nevada, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. Oxford is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in
which the nature of the business conducted or property owned by it makes
such qualification necessary, except where the failure to be so qualified
or in good standing, as the case may be, would not individually or in the
aggregate reasonably be expected to have a material adverse effect on its
business or financial condition (a "Material Adverse Effect").
2. Uluru Acquisition is a corporation, duly incorporated, validly existing
and in good standing under the laws of Delaware, with the requisite
corporate power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Uluru Acquisition is duly
qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would
not individually or in the aggregate reasonably be expected to have a
material adverse effect on its business or financial condition (a
"Material Adverse Effect").
3. Oxford is a "reporting issuer" as that term is defined under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder. To our knowledge, Oxford has
filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as Oxford was required
by law to file such material) (collectively, the "Disclosure Documents")
on a timely basis, or has received a valid extension of such time of
filing.
4. The authorized capital stock of Oxford consists of 400,000,000 of Common
Stock, par value $0.001 per share. As of the date of this Letter,
399,99,704 shares of Common Stock were issued and outstanding. Except as
set forth in the Agreement, to the best of our knowledge, there are no
outstanding or authorized options, warrants, rights, agreements or
commitments to which Oxford is a party or which are binding upon Oxford
providing for the issuance or redemption of any of its capital stock.
5. Each of Oxford and Uluru Acquisition has all requisite power and authority
to execute and deliver the Agreement and to perform its respective
obligations thereunder. The execution and delivery by each of Oxford and
Uluru Acquisition of the Agreement and the consummation by each of Oxford
and Uluru Acquisition of the transactions contemplated thereby have been
duly and validly authorized by all necessary corporate action on the part
of Oxford and Uluru Acquisition respectively. The Agreement has been duly
and validly executed and delivered by each of Oxford and Uluru Acquisition
and constitutes a valid and binding obligation of each of Oxford and Uluru
Acquisition, enforceable against each of Oxford and Uluru Acquisition in
accordance with its terms, subject to bankruptcy, insolvency and similar
laws affecting the rights of creditors generally.
C-1
6. Except as set forth in the Agreement, neither the execution and delivery
by each of Oxford and Uluru Acquisition of the Agreement, nor the
consummation by each of Oxford and Uluru Acquisition of the transactions
contemplated thereby, conflicts with or violates any provision of the
respective Articles of Incorporation or Bylaws of Oxford and Uluru
Acquisition.
7. Except as set forth in the Agreement, to the best of our knowledge, there
is no litigation or legal proceeding pending or threatened against a) each
of Oxford and Uluru Acquisition that could have, individually or in the
aggregate, a Material Adverse Effect on Oxford or b) any affiliate of
Oxford, which litigation or legal proceeding could have a Material Adverse
Effect on Oxford or wherein such affiliate has an interest in the
litigation or proceeding that is adverse to Oxford's interest.
8. To the best of our knowledge, since the date of its most recently audited
year-end balance sheets, there have been no a) changes in financial
condition, assets, liabilities or the business of Oxford, b) damages,
destruction or losses of or to property of Oxford, payments of any
dividend or other distribution in respect of any class of stock of Oxford
and c) obligations of any kind incurred as to anyone.
9. The shares of Common Stock of Oxford to be issued pursuant to the
Agreement will, when so issued, be validly issued, fully paid and
non-assessable.
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