VOLUNTARY SHARE EXCHANGE AGREEMENT
BY AND BETWEEN
SLW ENTERPRISES INC.
AND
HIENERGY MICRODEVICES, INC.
DATED AS OF MARCH 22, 2002
Voluntary Share Exchange Agreement i
TABLE OF CONTENTS
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VOLUNTARY SHARE EXCHANGE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . i
BY AND BETWEEN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
ARTICLE I: THE VOLUNTARY SHARE EXCHANGE . . . . . . . . . . . . . . . . . . . 1
1.1 The Voluntary Share Exchange. . . . . . . . . . . . . . . . . . . . . 1
1.2 Exempt Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Cancellation of HiEnergy Common Stock . . . . . . . . . . . . . . . . 2
1.4 Exchange of HiEnergy Common Stock . . . . . . . . . . . . . . . . . . 2
1.5 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 SLW to Provide Common Stock . . . . . . . . . . . . . . . . . . . . . 3
1.7 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II: REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 3
2.1 Representations and Warranties of HiEnergy. . . . . . . . . . . . . . 3
2.1.1 Organization, Standing and Power. . . . . . . . . . . . . . . 4
2.1.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . 4
2.1.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . 6
2.1.5 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . 6
2.1.6 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1.7 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . 7
2.1.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1.9 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1.10 No Violations . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1.11 Certain Agreements. . . . . . . . . . . . . . . . . . . . . . 8
2.1.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1.13 Interests of Officers or Shareholders . . . . . . . . . . . . 8
2.1.14 Technology and Intellectual Property Rights . . . . . . . . . 9
2.1.15 Leases in Effect. . . . . . . . . . . . . . . . . . . . . . . 10
2.1.16 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.17 Totality of Assets. . . . . . . . . . . . . . . . . . . . . . 10
2.1.18 Employment Agreements . . . . . . . . . . . . . . . . . . . . 10
2.1.19 Employee Matters and ERISA. . . . . . . . . . . . . . . . . . 10
2.1.20 No Vote Required. . . . . . . . . . . . . . . . . . . . . . . 12
2.1.21 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Voluntary Share Exchange Agreement ii
2.1.22 Environmental . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.23 Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Representations and Warranties of SLW . . . . . . . . . . . . . . . . 13
2.2.1 Organization; Standing and Power. . . . . . . . . . . . . . . 13
2.2.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . 14
2.2.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2.4 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2.5 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . 16
2.2.6 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.2.7 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . 16
2.2.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2.9 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2.10 No Violations . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2.11 Certain Agreements. . . . . . . . . . . . . . . . . . . . . . 17
2.2.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2.13 Interests of Officers or Shareholders . . . . . . . . . . . . 18
2.2.14 Technology and Intellectual Property Rights . . . . . . . . . 18
2.2.15 No Vote Required. . . . . . . . . . . . . . . . . . . . . . . 19
2.2.16 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.2.17 Leases in Effect. . . . . . . . . . . . . . . . . . . . . . . 19
2.2.18 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 19
2.2.19 Totality of Assets. . . . . . . . . . . . . . . . . . . . . . 20
2.2.20 Environmental . . . . . . . . . . . . . . . . . . . . . . . . 20
2.2.21 Employee Matters and ERISA. . . . . . . . . . . . . . . . . . 20
2.2.22 Contracts, Arrangements, Understandings or Relationships With
Respect to SLW Securities . . . . . . . . . . . . . . . . . . . . . . 22
2.2.23 Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.3 Disclosure Letters. . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE III : COVENANTS OF HIENERGY. . . . . . . . . . . . . . . . . . . . . . 22
3.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.1 Ordinary Course. . . . . . . . . . . . . . . . . . . . . . . . 22
3.1.2 Dividends: Changes in Stock. . . . . . . . . . . . . . . . . . 23
3.1.3 Issuance of Securities . . . . . . . . . . . . . . . . . . . . 23
3.1.4 Governing Documents. . . . . . . . . . . . . . . . . . . . . . 24
3.1.5 Exclusivity; Acquisition Proposals . . . . . . . . . . . . . . 24
3.1.6 No Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . 24
3.1.7 No Dispositions. . . . . . . . . . . . . . . . . . . . . . . . 24
3.1.8 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.1.9 HiEnergy Plans . . . . . . . . . . . . . . . . . . . . . . . . 24
3.1.10 Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.1.11 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.2 Breach of Representations and Warranties. . . . . . . . . . . . . . . 25
3.3 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.4 Commercially Reasonable Best Efforts. . . . . . . . . . . . . . . . . 25
3.5 Preparation of Audited Financial Statements . . . . . . . . . . . . . 25
Voluntary Share Exchange Agreement iii
3.6 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.7 Offering Memorandum; Cooperation as to Certain Matters. . . . . . . . 26
ARTICLE IV: COVENANTS OF SLW . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.1.1 Ordinary Course. . . . . . . . . . . . . . . . . . . . . . . . 26
4.1.2 Dividends: Changes in Stock. . . . . . . . . . . . . . . . . . 27
4.1.3 Issuance of Securities . . . . . . . . . . . . . . . . . . . . 27
4.1.4 Governing Documents. . . . . . . . . . . . . . . . . . . . . . 28
4.1.5 No Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . 28
4.1.6 No Dispositions. . . . . . . . . . . . . . . . . . . . . . . . 28
4.1.7 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.1.8 Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.1.9 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.1.10 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.2 Breach of Representations and Warranties. . . . . . . . . . . . . . . 28
4.3 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.4 Commercially Reasonable Best Efforts. . . . . . . . . . . . . . . . . 29
4.5 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE V : ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 29
5.1 Agreements Prior to the Closing Date. . . . . . . . . . . . . . . . . 29
5.1.1 Access to Information. . . . . . . . . . . . . . . . . . . . . 29
5.1.2 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 30
5.1.3 Legal Conditions to the Exchange . . . . . . . . . . . . . . . 30
5.1.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . 30
5.2 Agreements Continuing After the Closing Date. . . . . . . . . . . . . 31
5.2.1 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . 31
5.2.2 Appointment of New Directors and Officers. . . . . . . . . . . 31
5.2.3 Continuation of Xxxxxxxxxxxxxxx.xxx Business . . . . . . . . . 31
5.2.4 Merger of HiEnergy . . . . . . . . . . . . . . . . . . . . . . 31
5.2.5 HiEnergy Options and Warrants. . . . . . . . . . . . . . . . . 32
5.3 Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI : CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 32
6.1 Conditions to Each Party's Obligation to Effect the Exchange. . . . . 32
6.1.1 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.2 Conditions of Obligations of SLW. . . . . . . . . . . . . . . . . . . 33
6.2.1 Minimum Number of Shares to BeExchanged. . . . . . . . . . . . 33
6.2.2 Representations and Warranties of HiEnergy . . . . . . . . . . 33
6.2.3 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2.4 33
6.2.5 Transfer of Patents. . . . . . . . . . . . . . . . . . . . . . 33
6.2.6 Performance of Obligations of HiEnergy . . . . . . . . . . . . 33
Voluntary Share Exchange Agreement iv
6.2.7 Purchaser Representatives. . . . . . . . . . . . . . . . . . . 33
6.2.8 Receipt of Documents . . . . . . . . . . . . . . . . . . . . . 34
6.3 Conditions of Obligation of HiEnergy. . . . . . . . . . . . . . . . . 34
6.3.1 Representations and Warranties of SLW. . . . . . . . . . . . . 34
6.3.2 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . 34
6.3.3 Funds in Escrow. . . . . . . . . . . . . . . . . . . . . . . . 34
6.3.4 Receipt of Order to Cancel . . . . . . . . . . . . . . . . . . 34
6.3.5 Performance of Obligations of SLW. . . . . . . . . . . . . . . 34
6.3.6 Receipt of Documents . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII: TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . 35
7.1 Termination of Agreement. . . . . . . . . . . . . . . . . . . . . . . 35
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . 36
7.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.4 Extension, Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.5.1 By HiEnergy. . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.5.2 By SLW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.5.3 Notice of Claim. . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII: GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 38
8.1 Nonsurvival of Representations, Warranties and Agreements . . . . . . 38
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.3 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.5 Entire Agreement; No Third Party Beneficiaries. . . . . . . . . . . . 39
8.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.7 Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . . 40
8.8 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.10 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.11 Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . 40
Voluntary Share Exchange Agreement v
VOLUNTARY SHARE EXCHANGE AGREEMENT
VOLUNTARY SHARE EXCHANGE AGREEMENT ("Agreement"), dated as of March 22,
2002 ("Signing Date"), by and between SLW Enterprises Inc., a Washington
corporation ("SLW") located at 0000 Xxxx-Xxxx Xxxxx Xxxx, #0000, Xxxxxxx Xxxxx,
Xxxxxxx, 00000, and HiEnergy Microdevices, Inc., a Delaware corporation
("HiEnergy") located at 00 Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxx, 00000 (SLW and
HiEnergy together, the "Parties").
RECITALS
WHEREAS, SLW is a company duly incorporated in the State of Washington, is
in good standing and is a fully reporting company under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"); and
WHEREAS, HiEnergy is a private company duly incorporated in the State of
Delaware and is in good standing; and
WHEREAS, upon the terms and subject to the conditions of this Agreement,
the Parties have agreed to the acquisition of HiEnergy by SLW through a
voluntary share exchange whereby SLW will conduct an offering of its common
stock through a written offering memorandum provided to each shareholder of
HiEnergy giving them the option of exchanging their HiEnergy common stock for
SLW common stock; and
WHEREAS, the Parties expect that the acquisition of HiEnergy by SLW will
further certain of their business objectives; and
WHEREAS, the respective Boards of Directors of SLW and HiEnergy have
determined that the acquisition through a voluntary share exchange is advisable
and fair to, and in the best interests of, their respective corporations and
shareholders;
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained herein,
the Parties hereto hereby agree as follows:
ARTICLE I: THE VOLUNTARY SHARE EXCHANGE
1.1 The Voluntary Share Exchange
The Parties have deemed it advisable and in the best interests of SLW and
HiEnergy, respectively, that HiEnergy be acquired by SLW (the "Acquisition").
The Parties desire to accomplish the Acquisition by conducting a voluntary share
exchange (the "Exchange") between individual shareholders of HiEnergy (the
"HiEnergy Shareholders"), and SLW, whereby SLW will offer (the "SLW Offering"),
and authorize the issuance of, an aggregate of Eighteen Million Three Hundred
and Thirty Thousand (18,330,000) shares of SLW Common Stock (the "SLW Shares").
The SLW Shares shall be exchanged for shares of HiEnergy Common Stock (the
"HiEnergy Shares") on a fully diluted, as-exercised or as-converted basis, such
that every SLW Share would be issued only if both (a) each HiEnergy Shareholder
exchanged their shares of
Voluntary Share Exchange Agreement 1
HiEnergy Common Stock for SLW Shares and (b) each holder of HiEnergy securities
of the type referred to in Section 2.1.2(b) exercised, converted or otherwise
reduced their interest to HiEnergy Common Stock and then exchanged their shares
of HiEnergy Common Stock for SLW Shares. The holders of the securities set forth
in the preceding clauses (a) and (b) are herein referred to as the "HiEnergy
Security Holders".
1.2 Exempt Transaction
The SLW Shares to be issued in connection with the Exchange shall be
offered and issued pursuant to exemptions from applicable securities laws. To
provide SLW with assurance that appropriate exemptions are available, each
HiEnergy Shareholder must execute a Subscription Agreement, the form of which is
attached hereto as Exhibit A. HiEnergy shall use commercially reasonable best
efforts to obtain from each participating HiEnergy Shareholder a duly executed
copy of the Subscription Agreement. SLW and HiEnergy shall, with advice of
their respective counsel, provide to the HiEnergy Shareholders all required
disclosure under applicable corporate and securities laws, in connection with
the Exchange. If the information contained in any of the Subscription
Agreements executed by HiEnergy Shareholders is determined by SLW to be
inadequate to meet the requirements of Rule 506 of Regulation D under the
Securities Act of 1933, as amended (the "Securities Act"), prior to the Closing
Date, those HiEnergy Shareholders shall not be eligible to participate in the
Exchange.
1.3 Cancellation of HiEnergy Common Stock
All shares of HiEnergy Common Stock that are owned directly or indirectly
by HiEnergy or by any Subsidiary (as defined below) of HiEnergy immediately
prior to the commencement of the SLW Offering shall be canceled and no stock of
SLW or other consideration shall be delivered in exchange therefor. In this
Agreement, "Subsidiary" or "Subsidiaries" shall mean an entity of which an
amount of the voting securities, or other voting ownership or voting partnership
interests of which is sufficient to elect a majority of its board of directors
or other governing body (or, if there are no such interests, 50% or more of the
equity interests of which) is owned directly or indirectly by HiEnergy. All
Subsidiaries of HiEnergy are identified in the HiEnergy Disclosure Letter (as
defined in Section 2.1) and all Subsidiaries of SLW are identified in the SLW
Disclosure Letter (as defined in Section 2.2). All references to HiEnergy,
unless otherwise indicated, shall include each of HiEnergy's subsidiaries and
all references to SLW, unless otherwise indicated, shall include each of SLW's
subsidiaries.
1.4 Exchange of HiEnergy Common Stock
SLW, with the cooperation of HiEnergy, shall prepare an Offering Memorandum
pursuant to which it shall offer to each HiEnergy Shareholder the opportunity to
exchange each of their HiEnergy Shares for 22.3524 SLW Shares (the "Exchange
Rate"). All HiEnergy Shares that are exchanged for SLW Shares shall, on the
Closing Date, be transferred to SLW. No fractional shares of SLW Common Stock
shall be issued in connection with the Exchange.
1.5 Fractional Shares
A holder of HiEnergy Shares who would otherwise be entitled to receive a
fraction of a share of SLW Common Stock in the Exchange will be entitled to
receive from SLW the largest
Voluntary Share Exchange Agreement 2
number of whole shares of SLW Common Stock into which the shares of HiEnergy
Common Stock held by such holder could be exchanged, based upon the total number
of shares that are entitled to be exchanged by that holder, not upon each share
of HiEnergy Common Stock that is entitled to be exchanged, with any fractional
share resulting in such holder's total Shares of SLW Common Stock being rounded
up to the next whole number.
1.6 SLW to Provide Common Stock
On the Closing Date, SLW shall accept the subscriptions from, and direct
its Transfer Agent to prepare and deliver certificates representing the whole
shares of SLW Common Stock to be issued to, the HiEnergy Shareholders who were
determined by SLW to be eligible to participate in the Exchange.
1.7 Closing
The Exchange will close (the "Closing") on a date that is Twenty (20)
business days following the date of the commencement of the SLW Offering (the
"Closing Date") provided, however, that the Closing shall be subject to
satisfaction or waiver of the last to be fulfilled of the applicable conditions
set forth in ARTICLE VI. The Closing will take place at the offices of Xxxxx
Xxxxxx Xxxxxxx, PLLC, Seattle, Washington, or such other place as determined by
SLW.
1.8 Tax-Free Reorganization
The Exchange is intended to be a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"), and
this Agreement is intended to be a "plan of reorganization" within the meaning
of the regulations promulgated under Section 368 of the Code. Each party hereto
and its affiliates agree to treat the Exchange as a reorganization within the
meaning of Section 368 of the Code, and this Agreement is intended to be a "plan
of reorganization" within the meaning of the regulations promulgated under
Section 368 of the Code, unless and until there is a determination, within the
meaning of Section 1313 of the Code that such conclusions are wholly or
partially incorrect.
ARTICLE II: REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of HiEnergy
Except as disclosed in a Disclosure Letter which identifies by section
number the section and subsection to which such disclosure relates (provided,
however, that HiEnergy shall be deemed to have adequately disclosed with respect
to any section or subsection any matters that are clearly described elsewhere in
such document if a reader(s) who has not been actively involved in HiEnergy but
is generally familiar with HiEnergy's business can understand the applicability
of such disclosure to such non-referenced sections or subsections) and is
delivered by HiEnergy to SLW concurrently with the execution of this Agreement
(the "HiEnergy Disclosure Letter"), whether or not the HiEnergy Disclosure
Letter is referred to in a specific section or subsection and except as
specifically provided for in this Agreement or any agreement attached as an
Exhibit hereto, HiEnergy represents and warrants to SLW as follows:
Voluntary Share Exchange Agreement 3
2.1.1 Organization, Standing and Power
HiEnergy is an entity duly organized and validly existing under the laws of
its jurisdiction of incorporation, has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses as now being
conducted, and is duly qualified to do business in each jurisdiction in which it
owns, leases or operates its properties or conducts its businesses so as to
require such qualification, except where the failure to be so organized,
existing or qualified or to have such corporate or other applicable power and
authority have not had, and would not have, a Material Adverse Effect (as
hereinafter defined) on the Business Condition (as hereinafter defined) of
HiEnergy. As used in this Agreement, "Business Condition" with respect to any
entity shall mean the financial condition and results of operations (without
giving effect to the consequences of the transactions contemplated by this
Agreement) of such entity and its Subsidiaries taken as a whole. For the
purposes of this Agreement, the term "Material Adverse Effect" means material
adverse effect other than resulting from (i) changes attributable to conditions
affecting the HiEnergy Business generally or the remote detection industry
generally, (ii) changes in general economic, political or regulatory conditions,
(iii) changes attributable to the announcement or pendency of the Exchange, or
the other transactions contemplated hereby, or (iv) with respect to HiEnergy,
litigation arising from allegations of a breach of fiduciary duty relating to
this Agreement. HiEnergy has made available to SLW complete and correct copies
of the Certificate of Incorporation and Bylaws of HiEnergy as amended to the
date hereof. "HiEnergy Business" means the business generally related to the
development of remote detection technology together with all other HiEnergy
assets dedicated to such business.
2.1.2 Capital Structure
(a) Authorized and Outstanding Capital Stock
The authorized capital stock of HiEnergy consists of 1,500,000 shares of
HiEnergy Class A Common Stock, par value $0.0001 per share, of which, as of the
date hereof, 664,062 shares are issued and outstanding and 1,500 shares of
HiEnergy Class B Common Stock, par value $0.0001 per share, of which, as of the
date hereof, no shares are issued and outstanding. All of the issued and
outstanding shares of HiEnergy Common Stock are duly and validly issued and
outstanding, fully paid, non-assessable and not subject to any preemptive
rights, or to any agreement to which HiEnergy is a party or by which HiEnergy
may be bound.
(b) Other Securities Outstanding
HiEnergy has stock options outstanding as of the date hereof that are
exercisable (whether or not vested) for a total of 129,907 shares of HiEnergy
Class A Common Stock in exchange for total payments of $430,339. HiEnergy has
warrants outstanding as of the date hereof that are exercisable for a total of
32,947 shares of HiEnergy Class A Common Stock in exchange for total payments of
$116,769. Except as set forth in this Section 2.1.2, (i) there are no shares of
HiEnergy Common Stock or other equity securities of HiEnergy outstanding and no
outstanding options, warrants, rights to subscribe for, calls, or commitments of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of HiEnergy Common Stock or other capital stock of
HiEnergy or contracts, commitments,
Voluntary Share Exchange Agreement 4
understandings or arrangements by which HiEnergy is or may be obligated to issue
additional shares of its capital stock or options, warrants or rights to
purchase or acquire any additional shares of its capital stock, other than the
options and warrants referred to and addressed by Section 5.3 hereof, and (ii)
there are no outstanding stock appreciation, phantom stock or similar rights.
HiEnergy does not have outstanding any bonds, debentures, notes or other
indebtedness the holders of which have the right to vote (or convertible or
exercisable into securities having the right to vote) with holders of HiEnergy
Common Stock on any matter ("HiEnergy Voting Debt").
(c) HiEnergy Minute Books
The minute books of HiEnergy accurately reflect all corporate actions held
or taken by its shareholders and Board of Directors (including committees of the
Board of Directors) since HiEnergy's date of incorporation. True, complete and
correct copies of the minute books have been made available to SLW by HiEnergy.
(d) No Subsidiaries; No Joint Ventures
HiEnergy has no subsidiaries, is not a party to any joint venture (by
contract or otherwise) and has no investments in, or options to acquire the
stock, interests or assets of any other corporation, partnership or business
organization.
(e) Shareholders of Record
All of the shareholders of record of HiEnergy are fully listed in the
HiEnergy Disclosure Letter, including the number of shares they own and their
mailing addresses, with an indication as to whether they would be considered
either an accredited or sophisticated investor under Regulation D under the
Securities Act, that, to the knowledge of HiEnergy, is true, complete and
correct.
2.1.3 Authority
HiEnergy has all requisite corporate power and authority to enter into this
Agreement to consummate the transactions contemplated hereby. The execution and
delivery by HiEnergy of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of HiEnergy. This Agreement has been duly executed and delivered by
HiEnergy and assuming the due authorization, execution and delivery by SLW,
constitutes a valid and binding obligation of HiEnergy enforceable in accordance
with its terms, except that such enforceability may be subject to (a)
bankruptcy, insolvency, reorganization or other similar laws relating to
enforcement of creditors' rights generally and (b) general equitable principles.
Subject to the satisfaction of the conditions set forth in Sections 6.1 and 6.3,
the execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit under, or the creation of a
lien, pledge, security interest, charge or other encumbrance on assets (any such
conflict, violation, default, right, loss or creation being referred to herein
as a "Violation") pursuant to (x) any provision of the Certificate of
Incorporation or Bylaws of
Voluntary Share Exchange Agreement 5
HiEnergy or (y) any loan or credit agreement, note, bond, mortgage, indenture,
contract, lease, or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to HiEnergy or its properties or assets, other than any
such Violation which individually or in the aggregate would not have a Material
Adverse Effect on the Business Condition of HiEnergy. No consent, approval,
order or authorization of or registration, declaration or filing with or
exemption by (collectively "Consents"), any court, administrative agency or
commission or other governmental authority or instrumentality, whether domestic
or foreign (each a "Governmental Entity"), is required by or with respect to
HiEnergy in connection with the execution and delivery of this Agreement or the
consummation by HiEnergy of the transactions contemplated hereby, except for
such Consents which if not obtained or made would not have a Material Adverse
Effect on the Business Condition of HiEnergy.
2.1.4 Financial Statements
HiEnergy has provided SLW with the following financial statements
(collectively the "HiEnergy Financial Statements"): (i) balance sheets and
statements of income, changes in stockholders' equity, and cash flows as of and
for the fiscal years ended December 31, 2001 (the "Most Recent Financial
Statements") and 2000 and the period from inception through December 31, 2001.
The HiEnergy Financial Statements (including the notes thereto) have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods covered thereby, present
fairly the financial condition of HiEnergy as of such dates and the results of
operations of HiEnergy for such periods and are consistent with the books and
records of HiEnergy. There has been no change in HiEnergy's accounting policies
or the methods of making accounting estimates or changes in estimates that are
material to HiEnergy Financial Statements, except as described in the notes
thereto.
2.1.5 Absence of Changes
Since the Most Recent Financial Statements, through the date hereof,
HiEnergy has conducted its business in the ordinary course and there has not
been: (i) any Material Adverse Effect on the Business Condition of HiEnergy or
any development or combination of developments of which management of HiEnergy
has knowledge that is reasonably likely to result in such an effect; (ii) any
damage, destruction or loss, whether or not covered by insurance, having a
Material Adverse Effect on the Business Condition of HiEnergy; (iii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the capital stock of
HiEnergy; (iv) any material increase or change in the compensation or benefits
payable or to become payable by HiEnergy to its employees in the aggregate,
except in the ordinary course of business consistent with past practice; (v) any
acquisition or sale of a material amount of property of HiEnergy, except in the
ordinary course of business and which would not have a Material Adverse Effect
on the Business Condition of HiEnergy; (vi) any material increase or
modification in any bonus, pension, insurance or other employee benefit plan,
payment or arrangement made to, for, or with its employees in the aggregate; or
(vii) the granting of stock options, restricted stock awards, stock bonuses,
stock appreciation rights and similar equity based awards other than consistent
with HiEnergy's past practices and which will not result in a compensation
charge against earnings or the loss of deductions for federal or state income
tax purposes.
Voluntary Share Exchange Agreement 6
2.1.6 No Defaults
HiEnergy is not or has not received notice that it would be with the
passage of time, in default or violation of any term, condition or provision of
(i) the Certificate of Incorporation or Bylaws of HiEnergy, (ii) any judgment,
decree or order applicable to HiEnergy or (iii) any loan or credit agreement,
note, bond, mortgage, indenture, contract, agreement, lease, license or other
instrument to which HiEnergy is now a party or by which it or any of its
properties or assets may be bound, except for defaults and violations which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Business Condition of HiEnergy.
2.1.7 No Undisclosed Liabilities
To the knowledge of HiEnergy, HiEnergy does not have any liability,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated, and due or to become due, including any liability for taxes
and, to the knowledge of HiEnergy, there is no past or present fact, situation,
circumstance, condition or other basis for any present or future action, suit or
proceeding, hearing, charge, complaint, claim or demand against HiEnergy giving
rise to any such liability, except (i) for liabilities set forth in the HiEnergy
Financial Statements, (ii) normal fluctuation in the amount of the liabilities
referred to in clause (i) above occurring in the ordinary course of business of
HiEnergy, and (iii) liabilities that would not have a Material Adverse Effect on
the Business Condition of HiEnergy.
2.1.8 Litigation
There is no claim, action, suit or proceeding pending or, to the knowledge
of HiEnergy, threatened, which would, if adversely determined, individually or
in the aggregate, have a Material Adverse Effect on the Business Condition of
HiEnergy, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against HiEnergy having, or which,
insofar as reasonably can be foreseen, in the future would have, any Material
Adverse Effect on the Business Condition of HiEnergy. There is no investigation
pending or, to the knowledge of HiEnergy, threatened against HiEnergy, before
any foreign, federal, state, municipal or other governmental department,
commission, board, bureau, agency, instrumentality or other Governmental Entity
which would have a Material Adverse Effect on the Business Condition of
HiEnergy.
2.1.9 Reports
HiEnergy has filed all reports and statements, together with any amendments
required to be made with respect thereto, if any, that it was required to file
with any Governmental Entity with jurisdiction over HiEnergy, and has paid all
fees and assessments due and payable in connection therewith.
2.1.10 No Violations
The business of HiEnergy is not being conducted in violation of, or in a
manner which could cause liability under any applicable law, rule or regulation,
judgment, decree or order of any Governmental Entity, except for any violations
or practices, which, individually or in the
Voluntary Share Exchange Agreement 7
aggregate, have not had and will not have a Material Adverse Effect on the
Business Condition of HiEnergy.
2.1.11 Certain Agreements
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (i) result in any payment
(including, without limitation, severance, unemployment compensation, parachute
payment, bonus or otherwise) becoming due to any director, employee or
independent contractor of HiEnergy, from HiEnergy under any Plan (as hereinafter
defined), agreement or otherwise, (ii) materially increase any benefits
otherwise payable under any Plan or agreement, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
2.1.12 Taxes
For the purposes of this Agreement, the terms "tax" and "taxes" shall
include all federal, state, local and foreign taxes, assessments, duties,
tariffs, registration fees, and other governmental charges, including without
limitation all income, franchise, property, production, sales, use, payroll,
license, windfall profits, severance, withholding, excise, gross receipts and
other taxes, as well as any interest, additions or penalties relating thereto
and any interest in respect of such additions or penalties. HiEnergy has timely
filed (or caused to be filed), taking into account all extensions, all material
tax returns, reports and information statements ("Returns") required to be filed
by it, which Returns are true, correct and complete in all material respects,
and paid or accrued all material taxes shown as due on such returns, reports and
statements. HiEnergy has fully accrued in accordance with GAAP all material
unpaid taxes in respect of all periods (or the portion of any such periods)
subsequent to the periods covered by such Returns. HiEnergy has received no
written notice of any claimed, proposed or assessed material deficiencies or
adjustments for any tax, nor to the best of HiEnergy's knowledge, have any such
deficiencies or adjustments been threatened. HiEnergy is not subject to any
ongoing tax audit or examination nor, to the best of HiEnergy's knowledge, are
such audits or examinations pending or threatened, and HiEnergy has not waived
or entered into any other agreement with respect to any statute of limitation
with respect to the assessment of any tax. HiEnergy has no interests in real
estate in any state, the transfer or disposition of which would give rise to
state real estate excise taxes. HiEnergy has withheld all taxes required to be
withheld in respect of wages, salaries and other payments to all employees,
officers and directors and timely paid all such amounts withheld to the proper
taxing authority. HiEnergy covenants to provide to SLW at its reasonable
request true and correct copies of all tax returns, information, statements,
reports, work papers and other tax data as soon as practicable after the date
hereof.
2.1.13 Interests of Officers or Shareholders
None of HiEnergy's officers, directors or shareholders has any material
interest, directly or indirectly, in any property, real or personal, tangible or
intangible, including inventions, copyrights, trademarks or trade names, used in
or pertaining to the business of HiEnergy, or any supplier, distributor or
customer of HiEnergy.
Voluntary Share Exchange Agreement 8
2.1.14 Technology and Intellectual Property Rights
(a) Each item of the HiEnergy Intellectual Property (as defined below)
is either: (i) owned by HiEnergy, (ii) in the public domain, or (iii) rightfully
used by HiEnergy pursuant to a valid license or other agreement. HiEnergy has
all rights in the HiEnergy Intellectual Property reasonably necessary to carry
out HiEnergy's current, and anticipated future activities and has or had during
the relevant period all rights in the HiEnergy Intellectual Property reasonably
necessary to carry out HiEnergy's former activities. HiEnergy is not, nor as a
result of the execution or delivery of this Agreement, or performance of
HiEnergy's obligations hereunder, will HiEnergy be, in violation of any license,
sublicense or other agreement relating to the HiEnergy Intellectual Property or
of any non-disclosure agreement to which HiEnergy is a party or otherwise bound,
except for any such violations that would not have a Material Adverse Effect on
the Business Condition of HiEnergy. The HiEnergy Disclosure Letter lists all
HiEnergy Intellectual Property.
(b) Except pursuant to the terms of the agreements listed in the
HiEnergy Disclosure Letter, HiEnergy is not obligated to provide any financial
consideration or other material consideration to any third party, nor is any
third party otherwise entitled to any financial consideration or other material
consideration, with respect to any exercise of rights by HiEnergy or its
successors in the HiEnergy Intellectual Property contained in HiEnergy's current
products as listed on the HiEnergy Disclosure Letter.
(c) To the knowledge of HiEnergy, the use, reproduction, modification,
distribution, licensing, sublicensing, sale, or any other exercise of rights in
any HiEnergy Intellectual Property or any other authorized exercise of rights in
or to the HiEnergy Intellectual Property by HiEnergy or its licensees does not
infringe any copyright, patent, trade secret, trademark, service xxxx, trade
name, firm name, logo, trade dress, moral right, other intellectual property
right, right of privacy, right of publicity or right in personal or other data
of any person, except for any such violations that would not have a Material
Adverse Effect on the Business Condition of HiEnergy. No claims (i) challenging
the validity, enforceability, or ownership by HiEnergy of any of the HiEnergy
Intellectual Property or (ii) to the effect that the use, reproduction,
modification, manufacturing, distribution, licensing, sublicensing, sale or any
other exercise of rights in any HiEnergy Intellectual Property by HiEnergy or
its licensees infringes any intellectual property or other proprietary or
personal right of any person, have been asserted or, to the knowledge of
HiEnergy, are threatened by any person. To the knowledge of HiEnergy, there is
no unauthorized use, infringement or misappropriation of any of the HiEnergy
Intellectual Property by any third party, employee or former employee.
(d) "HiEnergy Intellectual Property" shall mean:
(i) all patents, trademarks, trade names, service marks, domain
names, copyrights and any renewal rights, applications and registrations
for any of the foregoing, and all trade dress, schematics, technology,
trade secrets, know-how, moral rights and computer software programs or
applications (in both source and object code form) owned by HiEnergy; and
Voluntary Share Exchange Agreement 9
(ii) all license rights in any third party intellectual property,
proprietary or personal rights, documentation, or tangible or intangible
property, including without limitation the types of intellectual property
and tangible and intangible proprietary information described in (i) above,
that are being, and/or have been, used in, or are currently under
development for use in, and are material to, the business of HiEnergy as it
has been, is currently or is currently anticipated to be conducted.
2.1.15 Leases in Effect
All real property leases and subleases as to which HiEnergy is a party and
any amendments or modifications thereof are valid, in full force and effect,
enforceable, and there are no existing defaults on the part of HiEnergy, and
HiEnergy has not received nor given notice of default or claimed default with
respect to any Lease, nor is there any event that with notice or lapse of time,
or both, would constitute a default thereunder, except for defaults, claimed
defaults or events that with notice or lapse of time, or both, would constitute
a default that have not had, and would not have, individually or in the
aggregate, a Material Adverse Effect on the Business Condition of HiEnergy.
2.1.16 Title to Assets
HiEnergy has good and marketable title to, or a valid leasehold interest
in, the properties and assets used by it, located on their premises, or shown on
HiEnergy's most recent balance sheet or acquired after the date thereof, free
and clear of all security interests, except for: (i) the security interests set
forth in the HiEnergy Disclosure Letter; and (ii) properties and assets disposed
of in the ordinary course of business since the date of the Most Recent
Financial Statements.
2.1.17 Totality of Assets
The assets of HiEnergy include all of the assets, rights and interests
necessary for the proper and efficient operation of the Business as now
conducted and as it is proposed to be conducted immediately after the Closing
Date (the "Assets"). There is no known unauthorized use of the Assets or any
portion thereof by any third party. The Assets and all portions thereof have not
been licensed for use by third parties.
2.1.18 Employment Agreements
HiEnergy has provided to SLW a list of each agreement, arrangement,
commitment or contract (whether written or oral) for the employment, election,
retention or engagement, or with respect to the severance, of any present or
former officer, employee, agent, consultant or other person or entity to which
HiEnergy is a party or bound by and which, by its terms, is not terminable by
HiEnergy on thirty (30) days written notice or less without the payment of any
amount by reason of such termination.
2.1.19 Employee Matters and ERISA
(a) HiEnergy has not entered into any collective bargaining agreement
with any labor organization with respect to any group of employees of HiEnergy
and, to the knowledge of
Voluntary Share Exchange Agreement 10
HiEnergy, there is no present effort nor existing proposal to attempt to
unionize any group of employees of HiEnergy.
(b) HiEnergy is and has been in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, any such laws
respecting employment discrimination and occupational safety and health
requirements. HiEnergy is not engaged in any unfair labor practice and confirms
that (i) there is no unfair labor practice complaint against HiEnergy pending
or, to the knowledge of HiEnergy, threatened before the National Labor Relations
Board, (iii) there is no labor dispute, strike, slowdown or stoppage actually
pending or, to the knowledge of HiEnergy, threatened against or directly
affecting HiEnergy, and (iii) HiEnergy has not experienced any work stoppage or
other labor difficulty during the past five (5) years.
(c) Each material employee benefit plan ("Plan") covering active,
former or retired employees of HiEnergy and any of its Subsidiaries that is
subject to U.S. law ("U.S. Plans") is listed in the HiEnergy Disclosure Letter.
With respect to each U.S. Plan, HiEnergy has provided to SLW a copy of each such
Plan, and where applicable, any related trust agreement, annuity or insurance
contract and, where applicable, all annual reports (Form 5500) filed with the
IRS. With respect to each Plan that is not subject to U.S. law ("Non-U.S.
Plans"), HiEnergy shall provide to SLW a copy of such Plan and, where
applicable, any related trust agreement, annuity or insurance contract, as soon
as practicable after the date hereof. To the extent applicable, each U.S. Plan
complies in all material respects with the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code, and
any U.S. Plan intended to be qualified under Section 401(a) of the Code has been
determined by the IRS to be so qualified and has remained tax-qualified to this
date and its related trust is tax-exempt and has been so since its creation. No
U.S. Plan is covered by Title IV of ERISA or Section 412 of the Code. No
material "prohibited transaction," as defined in ERISA Section 406 or Code
Section 4975 has occurred with respect to any U.S. Plan. Each U.S. Plan has been
maintained and administered in all material respects in compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations, including but not limited to ERISA and the Code, which
are applicable to such U.S. Plans. There are no pending or reasonably
anticipated material claims against or otherwise involving any of the U.S. Plans
and no suit, action or other litigation (excluding claims for benefits incurred
in the ordinary course of Plan activities) has been brought against or with
respect to any U.S. Plan. All material contributions, reserves or premium
payments to U.S. Plans, accrued to the date hereof have been made or provided
for. HiEnergy has not incurred any material liability under Subtitle C or D of
Title IV of ERISA with respect to any "single-employer plan," within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained by HiEnergy,
or any entity which is considered one employer with HiEnergy under Section 4001
of ERISA. HiEnergy has not incurred, and will not incur as a result of the
transactions contemplated by this Agreement, any withdrawal liability under
Subtitle E of Title IV of ERISA with respect to any "multiemployer plan," within
the meaning of Section 4001(a)(3) of ERISA. HiEnergy has no obligation for
retiree health and life benefits under any U.S. Plan, except as required to
avoid excise taxes under Section 4980(B) of the Code. There are no restrictions
on the rights of HiEnergy to amend or terminate any U.S. Plan without incurring
any liability thereunder (other than any liability for accrued benefits
thereunder). HiEnergy has not engaged in, nor is it a successor to, an entity
that has engaged in, a transaction described in ERISA Section 4069. There have
been no
Voluntary Share Exchange Agreement 11
amendments to, written interpretation of, or announcement (whether or not
written) by HiEnergy relating to, or change in employee participation or
coverage under, any U.S. Plan that would increase materially the expense of
maintaining such Plan above the level of expense incurred in respect thereof for
the year ended December 31, 1998. Neither HiEnergy nor any of its ERISA
affiliates have any current or projected liability in respect of post-employment
or post-retirement welfare benefits for retired or former employees of HiEnergy.
No tax under Section 4980B of the Code has been incurred in respect of any U.S.
Plan that is a group health plan, as defined in Section 5000(b)(1) of the Code.
Each Non-U.S. Plan has been maintained and administered in all material respects
in compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations that are applicable to such Non-U.S.
Plan. Each Non-U.S. Plan that is required by contract or under applicable local
law to be funded has been funded to the extent required and if and to the extent
any Non-U.S. Plan is not funded, the unfunded obligations under such Non-U.S.
Plan are reflected on the books and records of the entity maintaining the plan.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement (either
alone or upon the occurrence of any additional acts or events) would result in
any payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director,
officer or employee of HiEnergy from HiEnergy.
2.1.20 No Vote Required
No vote of the shareholders of HiEnergy is required by law, HiEnergy's
Certificate of Incorporation or Bylaws or otherwise in order for HiEnergy to
execute this Exchange and consummate the transactions contemplated hereby.
2.1.21 Brokerage
There are no existing claims or agreements for brokerage commissions,
finders' fees, or similar compensation in connection with the transactions
contemplated by this Agreement payable by HiEnergy.
2.1.22 Environmental
(a) There has not been a discharge or release on any real property at
the time it was owned or leased by HiEnergy (the "HiEnergy Real Property") of
any Hazardous Material (as defined below), including without limitation
contamination of soil, groundwater or the environment, generation, handling,
storage, transportation or disposal of Hazardous Materials or exposure to
Hazardous Materials, except for those that would not, individually or in the
aggregate have a Material Adverse Effect on the Business Condition of HiEnergy;
(b) No Hazardous Material has been used by HiEnergy in the operation of
HiEnergy's business in amounts that would have a Material Adverse Effect on the
Business Condition of HiEnergy; and
(c) HiEnergy has not received from any Governmental Entity or third
party any written request for information, notice of claim, demand letter, or
other notification, notice or
Voluntary Share Exchange Agreement 12
information that HiEnergy is or may be potentially subject to or responsible for
any investigation or clean-up or other remediation of Hazardous Material present
on any HiEnergy Real Property or at any other location.
"Hazardous Material" means (a) "hazardous waste" as defined by the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of
1976 (42 U.S.C. Section 6901 et seq.), including any future amendments thereto,
and regulations promulgated thereunder; (b) "hazardous substance" as defined by
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C. Section 9601 et seq.), including any future amendments thereto, and
regulations promulgated thereunder; (c) asbestos; (d) polychlorinated biphenyls;
(e) underground storage tanks, whether empty or filled or partially filled with
any substance; (f) any substance the presence of which is or becomes prohibited
by any federal, state, or local law, ordinance, rule, or regulation; and (g) any
hazardous or toxic substance, material, or waste which under any federal, state,
or local law, ordinance, rule, or regulation requires special handling or
notification in its collection, storage, treatment or disposal.
2.1.23 Reliance
The foregoing representations and warranties are made by HiEnergy with the
knowledge and expectation that SLW is placing reliance thereon.
2.2 Representations and Warranties of SLW
Except as disclosed in a Disclosure Letter which identifies by section
number the section and subsection to which such disclosure relates (provided,
however, that SLW shall be deemed to have adequately disclosed with respect to
any section or subsection any matters that are clearly described elsewhere in
such document if a reader(s) who has not been actively involved in SLW but is
generally familiar with SLW's business can understand the applicability of such
disclosure to such non-referenced sections or subsections) and is delivered by
SLW to HiEnergy concurrently with the execution of this Agreement (the "SLW
Disclosure Letter"), whether or not the SLW Disclosure Letter is referred to in
a specific section or subsection and except as specifically provided for in this
Agreement or any agreement attached as an Exhibit hereto, SLW represents and
warrants to HiEnergy as follows:
2.2.1 Organization; Standing and Power
SLW is a corporation duly organized, validly existing under the laws of its
jurisdiction of incorporation, has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses as now being
conducted, and is duly qualified to do business in each jurisdiction in which it
owns, leases or operates its properties or conducts its businesses so as to
require such qualification, except where the failure to be so organized,
existing or qualified or to have such corporate or other applicable power and
authority have not had, and would not have, a Material Adverse Effect on the
Business Condition of SLW. SLW has registered its stock pursuant to Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Voluntary Share Exchange Agreement 13
2.2.2 Capital Structure
(a) Authorized and Outstanding Capital Stock
The authorized capital stock of SLW consists of 120,000,000 shares, which
consists of 100,000,000 shares of SLW Common Stock, par value $0.0001 per share,
of which 16,042,002 are outstanding as of the date of this Agreement, and
20,000,000 shares of preferred stock, par value $0.0001 per share, none of which
is outstanding as of the date hereof. After the execution of this Agreement but
before the Closing Date, SLW intends to conduct a Private Placement Offering
(the "PPO"), the closing of which will be contingent upon the occurrence of the
Closing Date, pursuant to an offering memorandum dated February 20, 2002 (the
"PPM"), and any amendments thereto, pursuant to which it proposes to sell for
One and No/100 Dollars ($1.00) per share up to 1,500,000 shares of SLW Common
Stock. All of the issued and outstanding shares of SLW Common Stock are duly
and validly issued and outstanding, fully paid, nonassessable and not subject to
any preemptive rights, or to any agreement to which SLW is a party or by which
SLW may be bound. The shares of SLW Common Stock to be issued pursuant to the
Exchange will be duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights created by statute, SLW's Articles of
Incorporation or Bylaws or any agreement to which SLW is a party or is bound.
(b) Other Securities Outstanding
Except for the shares of SLW Common Stock issuable in connection with the
offering described in the preceding subsection, there are not any options,
warrants, calls, conversion rights, commitments, agreements, contracts,
understandings, restrictions, arrangements or rights of any character to which
SLW is a party or by which it may be bound obligating SLW to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the capital
stock of SLW or obligating SLW to grant, extend or enter into any such option,
warrant, call, conversion right, commitment, agreement, contract, understanding,
restriction, arrangement or right. SLW does not have outstanding any bonds,
debentures, notes or other indebtedness the holders of which have the right to
vote (or convertible or exercisable into securities having the right to vote)
with holders of SLW Common Stock on any matter ("SLW Voting Debt").
(c) SLW Minute Books
The minute books of SLW accurately reflect all corporate actions held or
taken by its shareholders and Board of Directors (including committees of the
Board of Directors) since the date of incorporation of SLW. True, complete and
correct copies of the minutes books have been made available to HiEnergy by SLW.
(d) Subsidiaries; No Joint Ventures
SLW has one wholly-owned subsidiary, is not a party to any joint venture
(by contract or otherwise) and has no investments in, or options to acquire the
stock, interests or assets of any other corporation, partnership or business
organization.
Voluntary Share Exchange Agreement 14
(e) Shareholders of Record
All of the shareholders of record of SLW are fully listed in the SLW
Disclosure Letter, including the number of shares they own and their mailing
addresses.
2.2.3 Authority
SLW has all requisite corporate power and authority to enter into this
Agreement to consummate the transactions contemplated hereby. The execution and
delivery by SLW of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of SLW. This Agreement has been duly executed and delivered by SLW
and assuming the due authorization, execution and delivery by HiEnergy,
constitutes a valid and binding obligation of SLW enforceable in accordance with
its terms, except that such enforceability may be subject to (a) bankruptcy,
insolvency, reorganization or other similar laws relating to enforcement of
creditors' rights generally and (b) general equitable principles. Subject to
satisfaction of the conditions set forth in Sections 6.1 and 6.2, the execution
and delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby will not, conflict with or result in any Violation of (x)
any provision of the Articles of Incorporation or Bylaws of SLW or (y) any loan
or credit agreement, note, bond, mortgage, indenture, contract, lease, or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to SLW or
its properties or assets, other than any such Violation, which individually or
in the aggregate would not have a Material Adverse Effect on the Business
Condition of SLW. No Consent is required by or with respect to SLW in
connection with the execution and delivery of this Agreement by SLW or the
consummation by SLW of the transactions contemplated hereby, except for such
Consents that would not have a Material Adverse Effect on the Business Condition
of SLW.
2.2.4 SEC Documents
SLW has made available to HiEnergy and its advisors, if any, all materials
relating to the business, finances and operations of SLW, including without
limitation, SLW's (1) Annual Report on Form 10-KSB for the fiscal year ended
April 30, 2001, (2) Quarterly Reports on Form 10-QSB for the fiscal quarters
ended July 31, 2001 and October 31, 2001 and (3) all other filings made by SLW
under the Exchange Act (the "SEC Documents"). Except as provided in the SLW
Disclosure Letter, none of the SEC Documents contained, at the time they were
filed, any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements made
therein in light of the circumstances under which they were made, not
misleading. SLW has since its inception filed all requisite forms, reports and
exhibits required to be filed with the SEC, including, without limitation, all
SLW filings required in connection with the acquisition of SLW stock by the SLW
shareholders, and none of which contained, at the time they were filed, any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements made therein
in light of the circumstances under which they were made, not misleading. SLW
agrees to promptly provide HiEnergy with copies of any subsequent SEC Documents
that it files with the United States Securities and Exchange Commission ("SEC")
prior to the Closing Date. Neither SLW nor any of its directors, officers or
shareholders have previously been investigated,
Voluntary Share Exchange Agreement 15
convicted or otherwise been subject to the determination by any governmental
authority, including but not limited to the SEC, for violation of any securities
law.
2.2.5 Absence of Changes
Since April 30, 2001, through the date hereof, SLW has conducted its
business in the ordinary course and there has not been: (i) any Material Adverse
Effect on the Business Condition of SLW or any development or combination of
developments of which management of SLW has knowledge that is reasonably likely
to result in such an effect; (ii) any damage, destruction or loss, whether or
not covered by insurance, having a Material Adverse Effect on the Business
Condition of SLW; (iii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to the capital stock of SLW; (iv) any material increase or change in the
compensation or benefits payable or to become payable by SLW to its employees in
the aggregate, except in the ordinary course of business consistent with past
practice; (v) any acquisition or sale of a material amount of property of SLW,
except in the ordinary course of business and which would not have a Material
Adverse Effect on the Business Condition of SLW; (vi) any material increase or
modification in any bonus, pension, insurance or other employee benefit plan,
payment or arrangement made to, for, or with the employees of SLW in the
aggregate; or (vii) the granting of stock options, restricted stock awards,
stock bonuses, stock appreciation rights and similar equity based awards other
than consistent with the past practices of SLW and which will not result in a
compensation charge against earnings or the loss of deductions for federal or
state income tax purposes.
2.2.6 No Defaults
SLW is not, or has not received notice that it would be with the passage of
time, in default or violation of any term, condition or provision of (i) its
Articles of Incorporation or Bylaws; (ii) any judgment, decree or order
applicable to SLW; or (iii) any loan or credit agreement, note, bond, mortgage,
indenture, contract, agreement, lease, license or other instrument to which SLW
is now a party or by which it or any of its properties or assets may be bound,
except for defaults and violations which, individually or in the aggregate,
would not have a Material Adverse Effect on the Business Condition of SLW.
2.2.7 No Undisclosed Liabilities
To the knowledge of SLW, SLW does not have any liability asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and due or to become due, including any liability for taxes and,
to the knowledge of SLW, there is no past or present fact, situation,
circumstance, condition or other basis for any present or future action, suit or
proceeding, hearing, charge, complaint, claim or demand against SLW giving rise
to any such liability, except (i) for liabilities set forth in the SEC
Documents, (ii) normal fluctuation in the amount of the liabilities referred to
in clause (i) above occurring in the ordinary course of business of SLW, and
(iii) liabilities that would not have a Material Adverse Effect on the Business
Condition of SLW.
Voluntary Share Exchange Agreement 16
2.2.8 Litigation
There is no claim, action, suit or proceeding pending or, to the knowledge
of SLW, threatened, which would, if adversely determined, individually or in the
aggregate, have a Material Adverse Effect on the Business Condition of SLW, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against SLW having, or which, insofar as
reasonably can be foreseen, in the future would have, any Material Adverse
Effect on the Business Condition of SLW. There is no investigation pending or,
to the knowledge of SLW, threatened against SLW, before any foreign, federal,
state, municipal or other governmental department, commission, board, bureau,
agency, instrumentality or other Governmental Entity which would have a Material
Adverse Effect on the Business Condition of SLW.
2.2.9 Reports
SLW has filed all reports and statements, together with any amendments
required to be made with respect thereto, if any, that they were required to
file with any Governmental Entity with jurisdiction over SLW, and have paid all
fees and assessments due and payable in connection therewith.
2.2.10 No Violations
The business of SLW is not being conducted in violation of, or in a manner
which could cause liability under any applicable law, rule or regulation,
judgment, decree or order of any Governmental Entity, except for any violations
or practices, which, individually or in the aggregate, have not had and will not
have a Material Adverse Effect on the Business Condition of SLW.
2.2.11 Certain Agreements
Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (i) result in any payment
(including, without limitation, severance, unemployment compensation, parachute
payment, bonus or otherwise) becoming due to any director, employee or
independent contractor of SLW, from SLW under any Plan (as hereinafter defined),
agreement or otherwise, (ii) materially increase any benefits otherwise payable
under any Plan or agreement, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
2.2.12 Taxes
SLW has timely filed (or caused to be filed), taking into account all
Returns (as defined in Section 2.1.12) required to be filed by it, which
Returns, if any, are true, correct and complete in all material respects, and
paid or accrued all material taxes (as defined in Section 2.1.12) shown as due
on such returns, reports and statements. SLW has fully accrued in accordance
with GAAP all material unpaid taxes, if any, in respect of all periods (or the
portion of any such periods) subsequent to the periods covered by such Returns.
SLW has not received any written notice of any claimed, proposed or assessed
material deficiencies or adjustments for any tax, nor to the best of SLW's
knowledge, have any such deficiencies or adjustments been threatened.
Voluntary Share Exchange Agreement 17
SLW is not subject to any ongoing tax audit or examination nor, to the best of
SLW's knowledge, are such audits or examinations pending or threatened, and
neither SLW has waived or entered into any other agreement with respect to any
statute of limitation with respect to the assessment of any tax. SLW does not
have any interests in real estate in any state, the transfer or disposition of
which would give rise to state real estate excise taxes. SLW has withheld all
taxes required to be withheld in respect of wages, salaries and other payments
to all employees, officers and directors and timely paid all such amounts
withheld to the proper taxing authority. SLW covenants to provide to HiEnergy at
its reasonable request true and correct copies of all tax returns, information,
statements, reports, work papers and other tax data as soon as practicable after
the date hereof.
2.2.13 Interests of Officers or Shareholders
None of the officers, directors or shareholders of SLW has any material
interest, directly or indirectly, in any property, real or personal, tangible or
intangible, including inventions, copyrights, trademarks or trade names, used in
or pertaining to the business of SLW, or any supplier, distributor or customer
of SLW.
2.2.14 Technology and Intellectual Property Rights
(a) Each item of the SLW Intellectual Property (as defined below) is
either: (i) owned by SLW, (ii) in the public domain, or (iii) rightfully used by
SLW pursuant to a valid license or other agreement. SLW has all rights in the
SLW Intellectual Property reasonably necessary to carry out SLW's current, and
anticipated future activities and has or had during the relevant period all
rights in the SLW Intellectual Property reasonably necessary to carry out SLW's
former activities. SLW is not, nor as a result of the execution or delivery of
this Agreement, or performance of SLW's obligations hereunder, will SLW be, in
violation of any license, sublicense or other agreement relating to the SLW
Intellectual Property or of any non-disclosure agreement to which SLW is a party
or otherwise bound, except for any such violations that would not have a
Material Adverse Effect on the Business Condition of SLW. The SLW Disclosure
Letter lists all SLW Intellectual Property.
(b) Except pursuant to the terms of the agreements listed in the SLW
Disclosure Letter, SLW is not obligated to provide any financial consideration
or other material consideration to any third party, nor is any third party
otherwise entitled to any financial consideration or other material
consideration, with respect to any exercise of rights by SLW or its successors
in the SLW Intellectual Property contained in SLW's current products as listed
on the SLW Disclosure Letter.
(c) To the knowledge of SLW, the use, reproduction, modification,
distribution, licensing, sublicensing, sale, or any other exercise of rights in
any SLW Intellectual Property or any other authorized exercise of rights in or
to the SLW Intellectual Property by SLW or its licensees does not infringe any
copyright, patent, trade secret, trademark, service xxxx, trade name, firm name,
logo, trade dress, moral right, other intellectual property right, right of
privacy, right of publicity or right in personal or other data of any person,
except for any such violations that would not have a Material Adverse Effect on
the Business Condition of SLW. No claims (i) challenging the validity,
enforceability, or ownership by SLW of any of the SLW Intellectual
Voluntary Share Exchange Agreement 18
Property or (ii) to the effect that the use, reproduction, modification,
manufacturing, distribution, licensing, sublicensing, sale or any other exercise
of rights in any SLW Intellectual Property by SLW or its licensees infringes any
intellectual property or other proprietary or personal right of any person, have
been asserted or, to the knowledge of SLW, are threatened by any person. To the
knowledge of SLW, there is no unauthorized use, infringement or misappropriation
of any of the SLW Intellectual Property by any third party, employee or former
employee.
(d) "SLW Intellectual Property" shall mean:
(i) all patents, trademarks, trade names, service marks, domain names,
copyrights and any renewal rights, applications and registrations for any
of the foregoing, and all trade dress, schematics, technology, trade
secrets, know-how, moral rights and computer software programs or
applications (in both source and object code form) owned by SLW; and
(ii) all license rights in any third party intellectual property,
proprietary or personal rights, documentation, or tangible or intangible
property, including without limitation the types of intellectual property
and tangible and intangible proprietary information described in (i) above;
that are being, and/or have been, used in, or are currently under
development for use in, and are material to, the business of SLW as it has
been, is currently or is currently anticipated to be conducted.
2.2.15 No Vote Required
No vote of the shareholders of SLW is required by law, SLW's Articles of
Incorporation or Bylaws or otherwise in order for SLW to consummate the Exchange
and the transactions contemplated hereby.
2.2.16 Brokerage
There are no existing claims or agreements for brokerage commissions,
finders' fees, or similar compensation in connection with the transactions
contemplated by this Agreement payable by SLW.
2.2.17 Leases in Effect
All real property leases and subleases as to which SLW is a party and any
amendments or modifications thereof are valid, in full force and effect,
enforceable, and there are no existing defaults on the part of SLW, and SLW has
not received nor given notice of default or claimed default with respect to any
Lease, nor is there any event that with notice or lapse of time, or both, would
constitute a default thereunder, except for defaults, claimed defaults or events
that with notice or lapse of time, or both, would constitute a default that have
not had, and would not have, individually or in the aggregate, a Material
Adverse Effect on the Business Condition of SLW.
2.2.18 Title to Assets
SLW has good and marketable title to, or a valid leasehold interest in, the
properties and assets used by it, located on their premises, or shown on SLW's
most recent balance sheet or
Voluntary Share Exchange Agreement 19
acquired after the date thereof, free and clear of all security interests,
except for: (i) the security interests set forth in the SLW Disclosure Letter;
and (ii) properties and assets disposed of in the ordinary course of business
since October 31, 2001.
2.2.19 Totality of Assets
The assets of SLW include all of the assets, rights and interests necessary
for the proper and efficient operation of the Business as now conducted and as
it is proposed to be conducted after the Closing Date (the "Assets"). There is
no known unauthorized use of the Assets or any portion thereof by any third
party. The Assets and all portions thereof have not been licensed for use by
third parties.
2.2.20 Environmental
(a) There has not been a discharge or release on any real property at
the time it was owned or leased by SLW (the "SLW Real Property") of any
Hazardous Material (as defined in Section 2.1.22), including without limitation
contamination of soil, groundwater or the environment, generation, handling,
storage, transportation or disposal of Hazardous Materials or exposure to
Hazardous Materials, except for those that would not, individually or in the
aggregate have a Material Adverse Effect on the Business Condition of SLW;
(b) No Hazardous Material has been used by SLW in the operation of
SLW's business in amounts that would have a Material Adverse Effect on the
Business Condition of SLW; and
(c) SLW has not received from any Governmental Entity or third party
any written request for information, notice of claim, demand letter, or other
notification, notice or information that SLW is or may be potentially subject to
or responsible for any investigation or clean-up or other remediation of
Hazardous Material present on any SLW Real Property or at any other location.
2.2.21 Employee Matters and ERISA
(a) SLW has not entered into any collective bargaining agreement with
any labor organization with respect to any group of employees of SLW and, to the
knowledge of SLW, there is no present effort nor existing proposal to attempt to
unionize any group of employees of SLW.
(b) SLW is and has been in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, any such laws
respecting employment discrimination and occupational safety and health
requirements. SLW is not engaged in any unfair labor practice and confirms that
(i) there is no unfair labor practice complaint against SLW pending or, to the
knowledge of SLW, threatened before the National Labor Relations Board, (iii)
there is no labor dispute, strike, slowdown or stoppage actually pending or, to
the knowledge of SLW, threatened against or directly affecting SLW, and (iii)
SLW has not experienced any work stoppage or other labor difficulty during the
past five (5) years.
Voluntary Share Exchange Agreement 20
(c) Each material employee benefit plan ("Plan") covering active,
former or retired employees of SLW and any of its Subsidiaries that is subject
to U.S. law ("U.S. Plans") is listed in the SLW Disclosure Letter. With respect
to each U.S. Plan, SLW has provided to HiEnergy a copy of each such Plan, and
where applicable, any related trust agreement, annuity or insurance contract
and, where applicable, all annual reports (Form 5500) filed with the IRS. With
respect to each Plan that is not subject to U.S. law ("Non-U.S. Plans"), SLW
shall provide to HiEnergy a copy of such Plan and, where applicable, any related
trust agreement, annuity or insurance contract, as soon as practicable after the
date hereof. To the extent applicable, each U.S. Plan complies in all material
respects with the requirements of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the Code, and any U.S. Plan intended to be
qualified under Section 401(a) of the Code has been determined by the IRS to be
so qualified and has remained tax-qualified to this date and its related trust
is tax-exempt and has been so since its creation. No U.S. Plan is covered by
Title IV of ERISA or Section 412 of the Code. No material "prohibited
transaction," as defined in ERISA Section 406 or Code Section 4975 has occurred
with respect to any U.S. Plan. Each U.S. Plan has been maintained and
administered in all material respects in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code, which are applicable to such
U.S. Plans. There are no pending or reasonably anticipated material claims
against or otherwise involving any of the U.S. Plans and no suit, action or
other litigation (excluding claims for benefits incurred in the ordinary course
of Plan activities) has been brought against or with respect to any U.S. Plan.
All material contributions, reserves or premium payments to U.S. Plans, accrued
to the date hereof have been made or provided for. SLW has not incurred any
material liability under Subtitle C or D of Title IV of ERISA with respect to
any "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by SLW, or any entity which is considered one
employer with SLW under Section 4001 of ERISA. SLW has not incurred, and will
not incur as a result of the transactions contemplated by this Agreement, any
withdrawal liability under Subtitle E of Title IV of ERISA with respect to any
"multiemployer plan," within the meaning of Section 4001(a)(3) of ERISA. SLW
has no obligation for retiree health and life benefits under any U.S. Plan,
except as required to avoid excise taxes under Section 4980(B) of the Code.
There are no restrictions on the rights of SLW to amend or terminate any U.S.
Plan without incurring any liability thereunder (other than any liability for
accrued benefits thereunder). SLW has not engaged in, nor is it a successor to,
an entity that has engaged in, a transaction described in ERISA Section 4069.
There have been no amendments to, written interpretation of, or announcement
(whether or not written) by HiEnergy relating to, or change in employee
participation or coverage under, any U.S. Plan that would increase materially
the expense of maintaining such Plan above the level of expense incurred in
respect thereof for the year ended December 31, 1998. Neither SLW nor any of
its ERISA affiliates have any current or projected liability in respect of
post-employment or post-retirement welfare benefits for retired or former
employees of SLW. No tax under Section 4980B of the Code has been incurred in
respect of any U.S. Plan that is a group health plan, as defined in Section
5000(b)(1) of the Code. Each Non-U.S. Plan has been maintained and administered
in all material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations that are
applicable to such Non-U.S. Plan. Each Non-U.S. Plan that is required by
contract or under applicable local law to be funded has been funded to the
extent required and if and to the extent any Non-U.S. Plan is not
Voluntary Share Exchange Agreement 21
funded, the unfunded obligations under such Non-U.S. Plan are reflected on the
books and records of the entity maintaining the plan.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement (either
alone or upon the occurrence of any additional acts or events) would result in
any payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director,
officer or employee of SLW from SLW.
2.2.22 Contracts, Arrangements, Understandings or Relationships
With Respect to SLW Securities
SLW does not have any contracts, arrangements, understandings or
relationships with respect to SLW securities other than those disclosed in this
Agreement, its SEC Documents or in the SLW Disclosure Letter.
2.2.23 Reliance
The foregoing representations and warranties are made by SLW with the
knowledge and expectation that HiEnergy is placing reliance thereon.
2.3 Disclosure Letters
Each party hereto acknowledges that the other party's inclusion of an
exception in its Disclosure Letter shall not be deemed an admission or
constitute evidence that such item constitutes a material departure from the
truth or accuracy of the relevant representation or warranty.
ARTICLE III: COVENANTS OF HIENERGY
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Closing Date, HiEnergy
agrees (except as expressly contemplated by this Agreement or with SLW's prior
written consent which will not be unreasonably withheld) that:
3.1 Conduct of Business
3.1.1 Ordinary Course
HiEnergy shall carry on its business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and, to the
extent consistent with such business, use all reasonable efforts consistent with
past practice and policies to preserve intact their present business
organizations, keep available the services of their present officers,
consultants, and employees and preserve their relationships with customers,
suppliers, distributors and others having business dealings with them. HiEnergy
shall promptly notify SLW of any event or occurrence or emergency not in the
ordinary course of business and material and adverse to the Business Condition
of HiEnergy. Except with the prior written consent of SLW, HiEnergy shall not:
Voluntary Share Exchange Agreement 22
(a) accelerate, amend or change the period of exercisability or vesting
of options, restricted stock, stock bonus or other awards granted under any
written compensation plan (including any discretionary acceleration of the
exercise periods by HiEnergy's Board of Directors permitted under such plans) or
authorize cash payments in exchange for any options, restricted stock, stock
bonus or other awards granted under any of such plans;
(b) except in the ordinary course of business consistent with past
practices, grant any severance or termination pay to any officer or director or
to any employee of HiEnergy;
(c) except in the ordinary course of business consistent with past
practices, transfer to any person or entity any rights to the HiEnergy
Intellectual Property Rights;
(d) enter into or amend any agreements pursuant to which any other
party is granted exclusive marketing or manufacturing rights of any type or
scope with respect to any products of HiEnergy;
(e) except in the ordinary course of business consistent with past
practices, commence a lawsuit other than: (i) for the routine collection of
bills; (ii) in such cases where HiEnergy in good faith determines that failure
to commence suit would result in a material impairment of a valuable aspect of
HiEnergy's business, provided HiEnergy consults with SLW prior to filing such
suit; or (iii) for a breach of this Agreement;
(f) enter into one or more leases which extend for a period of two (2)
years beyond the date of this Agreement and which obligate HiEnergy to pay
aggregate gross rent in excess of Ten Thousand Dollars ($10,000); and
(g) extend an offer of employment to a candidate for an officer
position without prior consultation with SLW.
3.1.2 Dividends: Changes in Stock
HiEnergy shall not (i) declare or pay any dividends on or make other
distributions (whether in cash, stock or property) in respect of any of its
capital stock; (ii) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of capital stock of HiEnergy; (iii) repurchase
or otherwise acquire, directly or indirectly, any shares of its capital stock
other than repurchase of vested stock from former employees; or (iv) propose any
of the foregoing.
3.1.3 Issuance of Securities
HiEnergy shall not issue, deliver, or sell, or authorize, propose or agree
to, or commit to the issuance, delivery, or sale of any shares of its capital
stock of any class, or any securities convertible into its capital stock or any
options, warrants, calls, conversion rights, commitments, agreements, contracts,
understandings, restrictions, arrangements or rights of any character obligating
it to issue any such shares, or other convertible securities. Any grant of
stock options or restricted stock shall require the prior written approval of
SLW.
Voluntary Share Exchange Agreement 23
3.1.4 Governing Documents
HiEnergy shall not amend its Certificate of Incorporation or Bylaws.
3.1.5 Exclusivity; Acquisition Proposals
HiEnergy shall not, and shall not authorize or permit any of its respective
officers, directors, employees or agents to, on or before the earlier of the
Closing Date or the date of termination of this Agreement, directly or
indirectly solicit, initiate or encourage or hold discussions or negotiations
with or provide any information to any person in connection with any proposal
from any person for the acquisition of all or any substantial portion of the
business, assets, shares of HiEnergy Common Stock or other securities of
HiEnergy. Notwithstanding the foregoing, restrictions under this Section 3.1.5
shall not apply to an action if the Board of Directors of HiEnergy concludes in
good faith, after consultation with outside legal counsel, that such action is
required in order for the Board of Directors to comply with its fiduciary
obligations to the shareholders of HiEnergy. HiEnergy shall promptly (which for
this purpose shall mean within twenty-four (24) hours) advise SLW of its receipt
of any such proposal or inquiry concerning any such proposal, the substance of
such proposal or inquiry, and the identity of such person.
3.1.6 No Acquisitions
Except as set forth in the HiEnergy Disclosure Letter, HiEnergy shall not
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the Business Condition of
HiEnergy.
3.1.7 No Dispositions
HiEnergy shall not sell, lease, license, transfer, mortgage, encumber or
otherwise dispose of any of their assets or cancel, release, or assign any
indebtedness or claim, except in the ordinary course of business or in amounts
which are not material, individually or in the aggregate, to the Business
Condition of HiEnergy.
3.1.8 Indebtedness
HiEnergy shall not incur any indebtedness for borrowed money by way of
direct loan, sale of debt securities, purchase money obligation, conditional
sale, guarantee, or otherwise in amounts which are material, individually or in
the aggregate, to the Business Condition of HiEnergy.
3.1.9 HiEnergy Plans
Except as set forth in the HiEnergy Disclosure Letter, HiEnergy shall not
adopt or amend in any material respect any Plan, or pay any pension or
retirement allowance not required by any existing Plan. Except in the ordinary
course of business consistent with past practices, HiEnergy shall not enter into
any employment contracts, pay any special bonuses or special remuneration
Voluntary Share Exchange Agreement 24
to officers, directors, or employees, or increase the salaries, wage rates or
fringe benefits of its officers or employees. Without the loss of any vested
benefits but without accelerating any unvested rights (except as required by
law), HiEnergy shall terminate or modify the Plans as mutually agreed between
the parties immediately prior to the Closing Date or take such action as
mutually agreed between the parties to merge such Plans with the SLW Plans
immediately following the Closing Date; provided, however, that any such
modification, termination or merger shall be contingent upon the occurrence of
the Closing Date.
3.1.10 Claims
Except as provided in this Section 3.1.10, HiEnergy shall not settle any
claim, action or proceeding, except in the ordinary course of business or in
amounts which are not material, individually or in the aggregate, to the
Business Condition of HiEnergy.
3.1.11 Agreement
HiEnergy shall not agree to take any of the actions prohibited by this
Section 3.1.
3.2 Breach of Representations and Warranties
HiEnergy will not knowingly take any action which would cause or constitute
a breach of any of the representations and warranties set forth in Section 2.1
or which would cause any of such representations and warranties to be inaccurate
in any material respect. In the event of, and promptly after becoming aware of,
the occurrence of or the pending or threatened occurrence of any event which
would cause or constitute such a breach or inaccuracy, HiEnergy will give
written notice thereof to SLW and will use commercially reasonable best efforts
to prevent or promptly remedy such breach or inaccuracy.
3.3 Consents
HiEnergy will promptly apply for or otherwise seek, and use commercially
reasonable best efforts to obtain, all Consents set forth in the HiEnergy
Disclosure Letter, and make all filings, required with respect to HiEnergy for
the consummation of the Exchange, except such Consents as SLW and HiEnergy agree
HiEnergy shall not seek to obtain.
3.4 Commercially Reasonable Best Efforts
HiEnergy will use commercially reasonable best efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement.
3.5 Preparation of Audited Financial Statements
On or before sixty (60) days after the Closing Date, HiEnergy shall prepare
(i) audited financial statements for the two (2) most recent fiscal years ended
and the period from inception through the most recent fiscal year ended and (ii)
reviewed financial statements for each calendar quarter thereafter
(collectively, the "Audited Financial Statements"). The Audited Financial
Statements shall be prepared in accordance with GAAP, applied on a consistent
basis and shall
Voluntary Share Exchange Agreement 25
present fairly the financial condition of HiEnergy as of such dates and the
results of operations of HiEnergy for such periods, consistent with the books
and records of HiEnergy.
3.6 Tax Matters
HiEnergy shall fully accrue in accordance with GAAP all material unpaid
taxes in respect of all periods (or the portion of any such periods) presented
in the Audited Financial Statements. HiEnergy shall (a) notify SLW as promptly
as practicable if it receives notice of any tax audit, the assessment of any
tax, the assertion of any tax lien, or any request, notice or demand for taxes
by any taxing authority, (b) provide SLW a description of any such matter in
reasonable detail (including a copy of any written materials received from the
taxing authority), and (c) take no action with respect to such matter without
the consent of SLW. HiEnergy shall not (x) make or revoke any tax election
which may affect HiEnergy, (y) execute any waiver of restrictions on assessment
of any tax without the approval of SLW, or (z) enter into any agreement or
settlement with respect to any tax without the approval of SLW which shall not
be unreasonably withheld.
3.7 Offering Memorandum; Cooperation as to Certain Matters
HiEnergy agrees to assist SLW with the preparation and distribution to the
HiEnergy Shareholders of the Offering Memorandum. In connection with the
preparation of the Offering Memorandum, HiEnergy will provide SLW with a written
document containing information that would be included in an offering memorandum
if HiEnergy were conducting the voluntary share exchange offering. HiEnergy
consents to the distribution of the Offering Memorandum, in its final form, as
an exhibit to the PPM, as defined in Section 2.2.2, to the accredited investors
in connection with the PPO, as defined in 2.2.2. HiEnergy also agrees to assist
in the preparation of any required filings, including SEC and blue sky filings,
in any manner reasonably requested by SLW.
ARTICLE IV: COVENANTS OF SLW
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Closing Date, SLW agrees
(except as expressly contemplated by this Agreement or with HiEnergy's prior
written consent which will not be unreasonably withheld) that:
4.1 Conduct of Business
4.1.1 Ordinary Course
SLW shall carry on its business in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent with such business, use all reasonable efforts consistent with past
practice and policies to preserve intact their present business organizations,
keep available the services of their present officers, consultants, and
employees and preserve their relationships with customers, suppliers,
distributors and others having business dealings with them. SLW shall promptly
notify HiEnergy of any event or occurrence or emergency not in the ordinary
course of business and material and adverse to the Business Condition of SLW.
Except with the prior written consent of HiEnergy, SLW shall not:
Voluntary Share Exchange Agreement 26
(a) accelerate, amend or change the period of exercisability or vesting
of options, restricted stock, stock bonus or other awards granted under any
written compensation plan (including any discretionary acceleration of the
exercise periods by SLW's Board of Directors permitted under such plans) or
authorize cash payments in exchange for any options, restricted stock, stock
bonus or other awards granted under any of such plans;
(b) except in the ordinary course of business consistent with past
practices, grant any severance or termination pay to any officer or director of
SLW;
(c) except in the ordinary course of business consistent with past
practices, transfer to any person or entity any rights to the SLW Intellectual
Property Rights;
(d) enter into or amend any agreements pursuant to which any other
party is granted exclusive marketing or manufacturing rights of any type or
scope with respect to any products of SLW;
(e) except in the ordinary course of business consistent with past
practices, commence a lawsuit other than: (i) for the routine collection of
bills; (ii) in such cases where SLW in good faith determines that failure to
commence suit would result in a material impairment of a valuable aspect of
SLW's business, provided SLW consults with HiEnergy prior to filing such suit;
or (iii) for a breach of this Agreement;
(f) enter into one or more leases which extend for a period of two (2)
years beyond the date of this Agreement and which obligate SLW to pay aggregate
gross rent in excess of Ten Thousand Dollars ($10,000); and
(g) extend an offer of employment to a candidate for an officer
position without prior consultation with HiEnergy.
4.1.2 Dividends: Changes in Stock
Except as provided in Section 2.2.2 or in the SLW Disclosure Letter, SLW
shall not (i) declare or pay any dividends on or make other distributions
(whether in cash, stock or property) in respect of any of its capital stock;
(ii) split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of capital stock of HiEnergy; (iii) repurchase or
otherwise acquire, directly or indirectly, any shares of its capital stock other
than repurchase of vested stock from former employees; or (iv) propose any of
the foregoing.
4.1.3 Issuance of Securities
Except as provided in Section 2.2.2 or in the SLW Disclosure Letter, SLW
shall not issue, deliver, or sell, or authorize, propose or agree to, or commit
to the issuance, delivery, or sale of any shares of its capital stock of any
class, or any securities convertible into its capital stock or any options,
warrants, calls, conversion rights, commitments, agreements, contracts,
understandings, restrictions, arrangements or rights of any character obligating
it to issue any such shares, or other convertible securities. Any grant of
stock options or restricted stock shall require the prior written approval of
HiEnergy.
Voluntary Share Exchange Agreement 27
4.1.4 Governing Documents
SLW shall not amend its Articles of Incorporation or Bylaws.
4.1.5 No Acquisitions
Except as set forth in the SLW Disclosure Letter, SLW shall not acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the Business Condition of SLW.
4.1.6 No Dispositions
SLW shall not sell, lease, license, transfer, mortgage, encumber or
otherwise dispose of any of their assets or cancel, release, or assign any
indebtedness or claim, except in the ordinary course of business or in amounts
which are not material, individually or in the aggregate, to the Business
Condition of SLW.
4.1.7 Indebtedness
SLW shall not incur any indebtedness for borrowed money by way of direct
loan, sale of debt securities, purchase money obligation, conditional sale,
guarantee, or otherwise in amounts which are material, individually or in the
aggregate, to the Business Condition of SLW.
4.1.8 Plans
Except as set forth in the SLW Disclosure Letter, SLW shall not adopt or
amend in any material respect any Plan, or pay any pension or retirement
allowance not required by any existing Plan. Except in the ordinary course of
business consistent with past practices, SLW shall not enter into any employment
contracts, pay any special bonuses or special remuneration to officers,
directors, or employees, or increase the salaries, wage rates or fringe benefits
of its officers or employees.
4.1.9 Claims
Except as provided in this Section 4.1.9, SLW shall not settle any claim,
action or proceeding, except in the ordinary course of business or in amounts
which are not material, individually or in the aggregate, to the Business
Condition of SLW.
4.1.10 Agreement
SLW shall not agree to take any of the actions prohibited by this Section
4.1.10.
4.2 Breach of Representations and Warranties
SLW will not knowingly take any action which would cause or constitute a
breach of any of the representations and warranties set forth in Section 2.2 or
which would cause any of such
Voluntary Share Exchange Agreement 28
representations and warranties to be inaccurate in any material respect. In the
event of, and promptly after becoming aware of, the occurrence of or the pending
or threatened occurrence of any event which would cause or constitute such a
breach or inaccuracy, SLW will give written notice thereof to HiEnergy and will
use its commercially reasonable best efforts to prevent or promptly remedy such
breach or inaccuracy.
4.3 Consents
SLW will promptly apply for or otherwise seek, and use commercially
reasonable best efforts to obtain, all consents and approvals identified in the
Disclosure Letter, and make all filings, required for the consummation of the
business combination.
4.4 Commercially Reasonable Best Efforts
SLW will use commercially reasonable best efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement.
4.5 SEC Filings
SLW will file a report on Form 8-K with the SEC within 15 days following
the execution of this Agreement.
ARTICLE V: ADDITIONAL AGREEMENTS
5.1 Agreements Prior to the Closing Date
In addition to the foregoing, SLW and HiEnergy each agree to take the
following actions after the execution of this Agreement and prior to the Closing
Date.
5.1.1 Access to Information
Subject to appropriate restrictions on access to information which HiEnergy
determines in good faith to be proprietary or competitively sensitive, HiEnergy
and SLW shall, subject to applicable law, each afford the other and their
respective accountants, counsel and other representatives, reasonable access
during normal business hours during the period prior to the Closing Date to (a)
all of their properties, books, contracts, commitments and records, and (b) all
other information concerning the business, properties and personnel of HiEnergy
and SLW, as the other party may reasonably request which is necessary to
complete the transaction and prepare for an orderly transition to operations
after the Closing Date. HiEnergy and SLW agree to provide to the other and
their respective accountants, counsel and representatives copies of internal
financial statements promptly upon the request therefore. Any information or
knowledge obtained in any investigation pursuant to this Section 5.1.1 shall be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Exchange.
Voluntary Share Exchange Agreement 29
5.1.2 Confidentiality
For purposes of this Agreement, the term "Confidential Information" shall
mean information exchanged between the parties which is not publicly known
relating to the business activities and operations of HiEnergy and/or SLW and
shall include all information exchanged by the parties except information which
is either (a) expressly designated as non-confidential by either party, or (b)
information now in the public domain, or that becomes part of the public domain
through no fault of the disclosing party prior to the date of any disclosure.
HiEnergy and SLW will exchange such information concerning their respective
operations as outlined in Section 5.1.1 and elsewhere throughout the Agreement.
Confidential Information may only be used for purposes of developing and
implementing the Exchange and may not be used for any other purpose. HiEnergy
and SLW shall maintain all Confidential Information gained from each other in
strict confidence, and shall take all precautions necessary to prevent
disclosure, access to, or transmission of the Confidential Information, or any
part thereof, to any third party, except to those officers, directors, trustees,
employees, consultants, or agents of the party who have a legitimate need for
the information for the purpose of evaluating, planning or executing the
Exchange or this Agreement, or by order of a court or administrative agency with
applicable jurisdiction, but only after supplying the other party notice in time
to permit it to seek a protective order. If the Exchange and/or this Agreement
is terminated, (i) all originals and copies of Confidential Information, whether
in written, magnetic, or other form, shall be promptly returned to the party who
produced it or, if requested by the party who produced it, destroyed in such
fashion as to render the information unusable by any party (ii) neither party
shall retain any copies, extracts or other reproductions in whole or in part of
such confidential Information, and (iii) each party shall destroy all memoranda,
notes and other writings prepared based on the Confidential Information. The
obligations contained in this Section 5.1.2 shall survive the termination of
this Agreement.
5.1.3 Legal Conditions to the Exchange
Each of SLW and HiEnergy will take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on any of them
with respect to the Exchange and will promptly cooperate with and furnish
information to each other in connection with any such requirements imposed upon
the other. Each of SLW and HiEnergy will take all reasonable actions to obtain
(and to cooperate with the other parties in obtaining) any consent, approval,
order or authorization of, or any exemption by, any Governmental Entity, or
other third party, required to be obtained or made by HiEnergy or SLW in
connection with the Exchange or the taking of any action contemplated thereby or
by this Agreement.
5.1.4 Public Announcements
SLW and HiEnergy shall cooperate with each other in releasing information
concerning this Agreement and the transactions contemplated herein. Where
practicable each of the parties shall furnish to the other drafts of all
releases prior to publication. Nothing contained herein shall prevent either
party at any time from furnishing any information to any governmental agency or
from issuing any release when it believes it is legally required to do so.
Voluntary Share Exchange Agreement 30
5.2 Agreements Continuing After the Closing Date
Upon execution of this Agreement and continuing after the Closing Date, SLW
and HiEnergy agree to take the following actions:
5.2.1 Capital Structure
Immediately following the Closing Date of the Exchange, the following will
approximate the resulting share ownership of SLW assuming that all of the
HiEnergy Security Holders are eligible and take appropriate action to
participate in the Exchange and exchange their interests in HiEnergy securities
on a fully diluted, as-exercised or as-converted basis:
Name No. Shares % Ownership
---- ----------- ------------
1. Current SLW Shareholders 6,470,000 24.88%
2. PPO Investors 1,200,000 4.62%
3. HiEnergy Security Holders 18,330,000 70.5%
To achieve this capital structure, Xxxxx Xxxx agrees to execute and deliver
to SLW, along with the appropriate stock certificate(s), an Irrevocable Order to
Cancel 9,572,000 shares of SLW Common Stock held by him on the Closing Date.
5.2.2 Appointment of New Directors and Officers
SLW and HiEnergy and their affiliates shall cooperate to execute an SLW
unanimous written consent of its Board of Directors effecting the following: (i)
appointing new directors of SLW, to serve until the next annual meeting of
shareholders of SLW and the election and qualification of their successors; (ii)
accepting the resignation of the directors and officers of SLW; and (iii)
appointing new officers of SLW, to serve at the pleasure of the Board of
Directors and until the election and qualification of their successors.
5.2.3 Continuation of Xxxxxxxxxxxxxxx.xxx Business
The Parties agree that SLW shall continue to implement its
Xxxxxxxxxxxxxxx.xxx business and, in connection therewith, shall execute a
consulting agreement with Xxxxx Xxxx, which will contain the following terms: a
six month term; compensation based on commission at a rate of ten percent (10%)
of the operating profit of the Xxxxxxxxxxxxxxx.xxx business payable on a monthly
basis; and a requirement that Xxxxx Xxxx produce and submit a monthly status
report of the results of the Xxxxxxxxxxxxxxx.xxx business and a report at the
end of the six month term setting forth his evaluation of the continued
viability of the Xxxxxxxxxxxxxxx.xxx business.
5.2.4 Merger of HiEnergy
SLW agrees that in the event of any merger or other consolidation of
HiEnergy into SLW, each remaining HiEnergy Shareholder shall receive as
consideration for such merger or
Voluntary Share Exchange Agreement 31
consolidation the greater of the fair market value of each of his, her or its
HiEnergy Shares or the Exchange Rate as set forth herein.
5.2.5 HiEnergy Options and Warrants
HiEnergy shall promptly take commercially reasonable steps to comply with
the terms of all outstanding options and warrants in respect of rights that
holders of options and warrants may have as a result of the pendency of the
transactions contemplated by this Agreement. HiEnergy shall further take
commercially reasonable steps to notify any other holders of options and
warrants of the pendency of the transactions contemplated by this Agreement.
During the pendency of the offering contemplated by this Agreement, (a) HiEnergy
shall supply the holders of its warrants and options with any disclosure
necessary to ensure that exercises or conversions are accomplished in accordance
with applicable securities laws, including without limitation supplying such
holders with a copy of the offering materials delivered to HiEnergy Shareholders
in connection with the offering contemplated by this Agreement; and (b) SLW
shall exchange its shares, according to the procedures set forth in ARTICLE I,
with any sophisticated HiEnergy shareholder that acquires their shares and
receives disclosure of the offering contemplated by this Agreement at least two
(2) days prior to the Closing Date of the SLW Offering. SLW shall retain sole
and absolute discretion to determine whether a HiEnergy Shareholder is
"sophisticated", as that term is used for purposes of Rule 506 of Regulation D
under the Securities Act. SLW shall be under no obligation to exchange its
shares with any HiEnergy Shareholder that does not acquire their shares and
receive disclosure of the offering contemplated by this Agreement at least two
(2) days prior to the Closing Date of the offering.
5.3 Additional Agreements
In case at any time after the Closing Date any further action is reasonably
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each corporation which is a party to this Agreement
shall take all such necessary action.
ARTICLE VI: CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Exchange
The respective obligation of each party to effect the Exchange shall be
subject to the satisfaction on or before the Closing Date of the following
conditions:
6.1.1 Consents
All Consents legally required for the consummation of the Exchange and the
transactions contemplated by this Agreement shall have been filed, occurred, or
been obtained, other than such Consents, the failure of which to obtain would
not have a Material Adverse Effect on the consummation of the Exchange or the
other transactions contemplated hereby or on the Business Condition of SLW or
HiEnergy.
Voluntary Share Exchange Agreement 32
6.2 Conditions of Obligations of SLW
The obligation of SLW to effect an exchange on the Closing Date is subject
to the satisfaction of the following conditions, unless waived by SLW:
6.2.1 Minimum Number of Shares to BeExchanged
HiEnergy Shareholders holding 80% or more of the issued and outstanding
shares of Common Stock of HiEnergy shall have elected to exchange their HiEnergy
Shares for SLW Shares.
6.2.2 Representations and Warranties of HiEnergy
The representations and warranties of HiEnergy set forth in this Agreement
shall be true and correct as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, except: (i) as otherwise
contemplated by this Agreement (but excluding from this exception any breach
made unknowingly pursuant to Section 3.1), or (ii) in respects that do not have
a Material Adverse Effect on HiEnergy's or SLW's Business Condition. SLW shall
have received a certificate signed on behalf of HiEnergy by the chief executive
officer or the chief financial officer of HiEnergy to such effect on the Closing
Date.
6.2.3 Board Approval
This Agreement and the transactions contemplated hereby shall have been
approved and adopted by the Board of Directors of HiEnergy.
6.2.4 Transfer of Patents
An agreement shall have been executed by and between Xx. Xxxxxx X. Xxxxxxx
and HiEnergy transferring any patents pertaining to the SuperSenzor and the
MicroSenzor from Xx. Xxxxxxx to HiEnergy.
6.2.5 Performance of Obligations of HiEnergy
HiEnergy shall have performed all agreements and covenants required to be
performed by it under this Agreement prior to the Closing Date, except for
breaches that do not have a Material Adverse Effect on HiEnergy's Business
Condition. SLW shall have received a certificate signed on behalf of HiEnergy by
the chief executive officer or the chief financial officer of HiEnergy to such
effect.
6.2.6 Purchaser Representatives
HiEnergy shall certify to SLW in writing (a) any material relationship
between any purchaser representative, or an affiliate of that purchaser
representative, and HiEnergy, or its affiliates, of which it has knowledge and
(b) that each such purchaser representative has
Voluntary Share Exchange Agreement 33
disclosed in writing a reasonable time prior to the Closing such material
relationships to investors he or she has advised in connection with the
Exchange.
6.2.7 Receipt of Documents
SLW shall have received all documents required to be received in order to
consummate the Exchange on or prior to the Closing Date, all in form and
substance reasonably satisfactory to SLW, including (i) executed copies of the
Subscription Agreement, the form of which is attached hereto as Exhibit A, by
each HiEnergy Shareholder who is deemed eligible to participate in the Exchange
and (ii) the related HiEnergy Common Stock Certificates with appropriate stock
powers.
6.3 Conditions of Obligation of HiEnergy
The obligation of HiEnergy to effect an exchange on the Closing Date is
subject to the satisfaction of the following conditions, unless waived by
HiEnergy:
6.3.1 Representations and Warranties of SLW
The representations and warranties of SLW set forth in this Agreement shall
be true and correct as of the date of this Agreement and as of the Closing Date
as though made on and as of the Closing Date, except: (i) as otherwise
contemplated by this Agreement (but excluding from this exception any breach
made unknowingly pursuant to Section 4.1), or (ii) in respects that do not have
a Material Adverse Effect on HiEnergy's or SLW's Business Condition. HiEnergy
shall have received a certificate signed on behalf of SLW by an authorized
executive officer of SLW to such effect on the Closing Date.
6.3.2 Board Approval
This Agreement and the transactions contemplated hereby shall have been
approved and adopted by the Board of Directors of SLW.
6.3.3 Funds in Escrow
SLW shall have in escrow $1,200,000.00 raised in connection with the
offering of SLW Common Stock to accredited investors through the PPO, as defined
in Section 2.2.2.
6.3.4 Receipt of Order to Cancel
SLW shall have received from Xxxxx Xxxx an Irrevocable Order to Cancel
9,572,000 shares of SLW Common Stock held by him along with the appropriate
stock certificate(s).
6.3.5 Performance of Obligations of SLW
SLW shall have performed all agreements and covenants required to be
performed by them under this Agreement prior to the Closing Date except for
breaches that do not have a Material Adverse Effect on SLW's Business Condition
and HiEnergy shall have received a certificate signed on behalf of SLW by an
authorized executive officer of SLW to such effect.
Voluntary Share Exchange Agreement 34
6.3.6 Receipt of Documents
HiEnergy shall have received all documents required to be received from SLW
on or prior to the Closing Date, all in form and substance reasonably
satisfactory to HiEnergy.
ARTICLE VII: TERMINATION, AMENDMENT AND WAIVER
7.1 Termination of Agreement
This Agreement may be terminated at any time prior to the Closing Date:
(a) by mutual consent of all Parties to this Agreement;
(b) by either SLW or HiEnergy (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or
agreement contained in this Agreement) if there has been a breach of any
representation, warranty, covenant or agreement which has a Material Adverse
Effect on the Business Condition of HiEnergy or SLW, as the case may be, and
such breach has not been cured, or commercially reasonable best efforts are not
being employed to cure such breach, within twenty (20) days after notice thereof
is given to the party committing such breach;
(c) by either SLW or HiEnergy if the Exchange contemplated herein shall
not have been consummated on or before April 30, 2002;
(d) by either SLW or HiEnergy if any permanent injunction or other
order of a court or other competent authority preventing the Exchange shall have
become final and not subject to appeal;
(e) by SLW if the Board of Directors of HiEnergy shall have withdrawn
or modified in a manner adverse to SLW its approval or recommendation of the
Exchange, this Agreement or the transactions contemplated hereby;
(f) by SLW if HiEnergy or any of the other persons or entities
described in Section 3.1.5 shall take any of the actions that would be
proscribed by Section 3.1.5 other than actions in exercise of the fiduciary
duties of HiEnergy's directors and satisfying all conditions of Section 3.1.5
and such actions have a Material Adverse Effect on the Business Condition of
HiEnergy; or
(h) by SLW if after review of the Subscription Agreements received from
the HiEnergy Shareholders and consultation with counsel, SLW concludes that the
Exchange may not be consummated pursuant to Rule 506 of Regulation D under the
Securities Act.
Where action is taken to terminate this Agreement pursuant to this Section
7.1, it shall be sufficient for such action to be authorized by the Board of
Directors of the party taking such action without any requirement to submit such
action to the shareholders of such party.
Voluntary Share Exchange Agreement 35
7.2 Effect of Termination
In the event of termination of this Agreement by either HiEnergy or SLW as
provided in Section 7.1, this Agreement shall forthwith become void and have no
effect, and there shall be no liability or obligation on the part of SLW or
HiEnergy or their respective officers or directors, except that (i) all of
Sections 5.1.2, 7.2, and ARTICLE VIII shall survive any such termination and
abandonment, and (ii) no party shall be released or relieved from any liability
arising from the breach by such party of any of its representations, warranties,
covenants or agreements as set forth in this Agreement.
7.3 Amendment
This Agreement may be amended by HiEnergy or SLW, by action taken by their
respective Board of Directors, at any time before the Closing Date. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
7.4 Extension, Waiver
At any time prior to the Closing Date, any party hereto, by action taken by
its Board of Directors may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements, covenants or conditions for
the benefit of such party contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party.
7.5 Indemnification
7.5.1 By HiEnergy
In connection with any offer and issuance of SLW securities under the
Securities Act pursuant to this Agreement, HiEnergy shall indemnify and hold
harmless SLW, each director or officer of SLW, or any other person acting on
behalf of SLW and each other person, if any, who controls any of the foregoing
persons within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several (or actions in respect thereof), to
which any of the foregoing persons may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact by HiEnergy contained in this
Agreement, the HiEnergy Disclosure Letter, the Offering Memorandum or any other
written statements under which SLW Common Stock is being offered and issued
under the Securities Act, any amendment or supplement thereto, or any document
or written statement from HiEnergy incident to the issuance of SLW Common Stock
(the "HiEnergy Documents"), or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
HiEnergy of the Securities Act or state securities or "blue sky"
Voluntary Share Exchange Agreement 36
laws applicable to HiEnergy shareholders and relating to action or inaction
required of HiEnergy or HiEnergy shareholders in connection with such offering
and issuance of securities under such state securities or "blue sky" laws; and
shall reimburse SLW or such other person acting on behalf of SLW for any legal
or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that HiEnergy shall not be obligated to indemnify in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the HiEnergy Documents incident to the
offer or issuance of any SLW Common Stock in reliance upon and in conformity
with written information furnished by SLW specifically for use in the
preparation thereof.
7.5.2 By SLW
In connection with any offer and issuance of SLW securities under the
Securities Act pursuant to this Agreement, SLW shall indemnify and hold harmless
HiEnergy, each director and officer of HiEnergy, or any other person acting on
behalf of HiEnergy and each other person, if any, who controls any of the
foregoing persons within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several (or actions in respect
thereof), to which any of the foregoing persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact by SLW contained
in this Agreement, the SLW Disclosure Letter, the SEC Documents or any other
written statements under which SLW Common Stock is being offered and issued
under the Securities Act, any amendment or supplement thereto, or any document
or written statement incident to the issuance of SLW Common Stock (the "SLW
Documents"), or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation by SLW of the
Securities Act or state securities or "blue sky" laws applicable to SLW and
relating to action or inaction required of SLW in connection with such offering
and issuance of securities under such state securities or "blue sky" laws; and
shall reimburse HiEnergy or such other person acting on behalf of HiEnergy for
any legal or other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that SLW shall not be obligated to indemnify in any
such case to the extent that any such loss, claim, damage, liability or action
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the SLW Documents incident to the offer
or issuance of any SLW Common Stock in reliance upon and in conformity with
written information furnished by HiEnergy specifically for use in the
preparation thereof.
7.5.3 Notice of Claim
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 7.5, such indemnified party will, if a claim in
respect thereof is made against an indemnifying party, give written notice to
the latter of the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party shall not be responsible for any legal or other expenses
Voluntary Share Exchange Agreement 37
subsequently incurred by the latter in connection with the defense thereof;
provided, however, that if any indemnified party shall have reasonably concluded
that there may be one or more legal or equitable defenses available to such
indemnified party which are additional to or conflict with those available to
the indemnifying party, or that such claim or litigation involves or could have
an effect upon matters beyond the scope of the indemnity agreement provided in
this Section 7.5, the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party and such indemnifying
party shall reimburse such indemnified party and any person controlling such
indemnified party for that portion of the reasonable fees and expenses of any
counsel retained by the indemnified party which is reasonably related to the
matters covered by the indemnity agreement provided in this Section 7.5.
ARTICLE VIII: GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and Agreements
All representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to be conditions
to the Exchange and shall not survive the Closing Date, except for the
agreements contained in ARTICLE I and in Sections, 5.2, 5.3, 7.5 and the
agreements delivered pursuant to this Agreement.
8.2 Notices
Any notice or other communication between the parties under the Agreement
shall be in writing and shall be considered given when accomplished by any of
the following methods: (i) if by personal delivery, when such delivery occurs,
(ii) if by reputable overnight courier service, when such courier indicates
delivery was made, or (iii) if sent by U.S. mail, return receipt requested, on
the earlier of actual receipt or the date five (5) business days after mailing.
Such notice shall be delivered:
(a) If to SLW:
SLW Enterprises Inc.
0000 Xxxx-Xxxx Xxxxx Xxxx, #0000
Xxxxxxx Xxxxx, XX 00000
Attn: President
With a copy to:
(which shall not constitute notice)
Xxxxx X. Xxxxxxxxx
Xxxxx Xxxxxx Xxxxxxx, P.L.L.C.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Voluntary Share Exchange Agreement 38
(b) If to HiEnergy:
HiEnergy Microdevices, Inc.
00 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: President
With a copy to:
(which shall not constitute notice)
Xxxxx Xxxxxx
Xxxxxxxxx Xxxxxxx Xxxxx Xxxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
No change of address shall be valid unless it is communicated in writing to
the other party with at least five business days notice.
8.3 Interpretation
When a reference is made in this Agreement to Sections or Exhibits, such
reference shall be to a section or exhibit to this Agreement unless otherwise
indicated. The words "include," "includes," and "including" when used therein
shall be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The "knowledge of," "the best of knowledge of," or other
derivations of "know" with respect to SLW or HiEnergy will mean the actual
knowledge of the executive officers and directors of SLW or HiEnergy or the
other parties hereto. This Agreement has been negotiated by the respective
parties hereto and their attorneys and the language hereof will not be construed
for or against either party.
8.4 Counterparts
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to each of the other parties, it being understood that all parties need not sign
the same counterpart. Signatures transmitted by facsimile shall be deemed valid
execution of this Agreement, binding on the parties.
8.5 Entire Agreement; No Third Party Beneficiaries
This Agreement and the documents referred to herein (a) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof; (b) is not intended to
confer upon any other person any rights or remedies hereunder (except as
otherwise expressly provided herein and except that Section 5.2 is for the
benefit of investors and founders of HiEnergy set forth in such Section, and
said Section is intended to
Voluntary Share Exchange Agreement 39
confer rights on such persons); and (c) shall not be assigned by operation of
law or otherwise except as otherwise specifically provided.
8.6 Governing Law
This Agreement shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of California, without
regard to the conflicts of laws provisions of such law; provided, however that
the party's actions related to corporate governance shall be governed by
applicable law of the state in which such party is organized. HiEnergy and SLW
consent to jurisdiction and venue in the state and federal courts in Orange
County, California.
8.7 Specific Performance
The parties hereto agree that irreparable damage would occur in the event
that any provision of this Agreement were not performed in accordance with the
terms hereof and that the parties shall be entitled to specific performance of
the terms hereof, in addition to any other remedy at law or in equity.
8.8 Expenses
The parties hereto shall bear their own costs and expenses (including legal
fees and expenses) incurred in connection with this Agreement and transactions
contemplated hereby.
8.9 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.
8.10 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.
8.11 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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
Voluntary Share Exchange Agreement 40
IN WITNESS WHEREOF, the Parties have entered into this Agreement as of the
date first set forth above.
SLW ENTERPRISES INC., HIENERGY MICRODEVICES, INC.,
a Washington corporation a Delaware corporation
----------------------------- -------------------------------
By: Xxxxx Xxxxx By: Xxxx Xxxxxxx
Its: President Its: President
Voluntary Share Exchange Agreement 41
