AGREEMENT AND PLAN OF REORGANIZATION
Exhibit 2.1
This
AGREEMENT AND PLAN OF REORGANIZATION (this “Agreement”), dated as of
December 1, is by and among Majesco Entertainment
Company., a Delaware
corporation (the “Parent”), Majesco
Acquisition Corp., a Nevada corporation and wholly-owned subsidiary
of Parent (“Merger
Sub”), Polarityte, Inc., a Nevada Corporation (the
“Company”), and Denver
Lough, the owner of 100% of the issued and outstanding shares of
capital stock of Company (the “Seller”). Each of the
parties to this Agreement is individually referred to herein as a
“Party”
and collectively as the “Parties.”
BACKGROUND AND RECITALS
The
Company has Ten Thousand (10,000) shares of common stock, par value
$0.001 per share (the “Company Shares ”)
outstanding, all of which are held by Seller. In connection with a
recapitalization of Parent, and subject to the terms and conditions
of this Agreement, including without limitation the closing of the
Transactions (as defined below) and execution and delivery of the
Constituent Agreements (as defined below), the parties hereto have
agreed to effect the merger of Merger Sub with and into the Company
(the “Merger”) pursuant to the
terms of this Agreement.
As a
result of the Merger, among other effects, the Company Shares will
be canceled and exchanged for an aggregate of 7,050 shares of
Series E Preferred Stock (the “Preferred E Stock”)
pursuant to a Certificate of Designation substantially in the form
of Exhibit A hereto,
convertible into seven million fifty thousand
(7,050,000) newly issued shares
of common stock (the “Parent Stock”), par value
$0.001 per share, of the Parent, (the “Parent Common Stock”) and
the Company will be the entity surviving the Merger, with such
Preferred E Stock having a right to vote on all matters put to vote
of the shareholders of the Company on the basis of 2 votes for
every 1 share of Common Stock into which such Preferred E Stock
shall then be convertible, as adjusted for stock splits,
recapitalization, stock dividends and similar events affecting the
rights of stockholders equally.
The
Merger is intended to constitute a reorganization within the
meaning of the Internal Revenue Code of 1986, as amended (the
“Code”), or such other tax
free reorganization or restructuring provisions as may be available
under the Code:
A.
Seller is the owner of that certain
invention described more fully below, and which relates to
“Methods for Development and Use of Minimally Polarized
Functions Cell Micro-Aggregate Units in Tissue Applications Using
LGR4, LGR5 and LGR6 Expressing Epithelial Stem Cells”, (a.k.a
the Purchased Patents); and
B.
Seller has assigned the application
for the Purchased Patents, together with all related intellectual
property, (a.k.a. the Purchased Intellectual Property) to the
Company which is contemplated to be acquired by Parent by virtue of
the transactions contemplated herein, upon satisfaction of the
conditions to Closing set forth herein and in the Transaction
Documents; and
C.
Seller has agreed Company will
merge with Merger Sub, with Company as the surviving entity;
and
D.
Seller and Company acknowledge that the
transactions contemplated hereby are subject to various actions and
events that are not under the control of Seller and Company: (i)
the Parent obtaining approval from its stockholders by the
affirmative approval of the Merger and issuance of the Preferred E
Stock; (ii) acquisition of appropriate laboratory and other
equipment for the business of the Company and the development of
the technology; (iii) leasing of new commercial space for use in
the business of the Company for testing, laboratory work, and other
operational space; (iv) the negotiation and execution by the Parent
of executive employment agreements with certain key employees of
the Company; and (v) raising of additional capital to be used by
the Company in the development of the Patent and the related
intellectual property and for corporate and general working capital
purposes.
E.
Seller intends
that the Merger of Company and Merger Sub, and the Closing of all
related transactions, will proceed if and
when the conditions described above and the other conditions of
Closing set forth herein,
have been met.
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The
Board of Directors of each of the Parent and the Company has
determined that it is desirable to effect this plan of
reorganization and Merger.
Concurrent with and
as a condition to the closing of the Merger, the Parent will enter
into employment agreements with each of Denver Lough and Xxxxxx
Xxxxxxx (collectively the “Executives”), in the
forms attached as Exhibit B
and Exhibit C, respectively,
to serve as Chairman and Chief Executive Officer/Chief Scientific
Officer and President, respectively, of Parent (collectively, the
“Employment
Agreements”), the Seller, Company and Executives shall
execute a stockholders agreement, in the form attached hereto as
Exhibit D (the
“Stockholder
Agreement”) and certain holders of Parent capital
stock shall execute a voting agreement, in the form attached hereto
as Exhibit E (the
“Voting
Agreements”) and the Parent shall have obtained the
affirmative vote of its stockholders approving the transactions in
accordance with NASDAQ Rules which require stockholder approval in
a transaction intended to be tax-free as an “A”
Reorganization of the Company or other exempt transaction. The
Employment Agreements, the Stockholder Agreement and the Voting
Agreements shall collectively be referred to herein as the
“Constituent
Agreements”.
Concurrent with and
as a condition to the Merger, Parent will issue authorized but
unissued shares of Preferred E Stock in conjunction with the Merger
and the transactions and recapitalization discussed herein
(collectively the “Transactions”).
The
Parties intend for the Transactions to occur at a concurrent
closing upon execution and delivery of this Agreement and the
Constituent Agreements and for the Parent Stock issuable upon
conversion of the Preferred E Stock issued pursuant to the Merger
to represent immediately after the Closing of the Merger 50% issued
and outstanding shares of Parent Common Stock after giving effect
to the Transactions.
Terms
not otherwise defined herein shall have the meanings ascribed to
such terms on Schedule
A hereto.
AGREEMENT
NOW
THEREFORE, based on the foregoing premises and for good and
valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the Parties hereto intending to be legally
bound hereby agree as follows:
ARTICLE
I
Exchange of Shares
SECTION
1.01 The Merger. At
the Closing (as defined in Section 1.02), subject to the terms and
conditions of this Agreement, Merger Sub shall merge with and into
the Company in accordance with applicable provisions of the
Delaware General Corporation law (“DGCL”) and the Nevada
Revised Statutes (“NRS”), the separate
existence of Merger Sub shall cease and the Company shall survive
and continue to exist as a corporation under the NRS (the
“Surviving
Company”) under the name “Polarityte,
Inc.”. The Articles of Incorporation of Surviving Entity as
on file with the Nevada Secretary of State, as in force and effect
immediately prior to the Effective Time of the Merger, shall
continue to be the Articles of Incorporation of Surviving Entity
until duly amended in accordance with the provisions thereof and
applicable law. The managers and officers of the Company shall be
the managers and officers of the Surviving Company. Upon
consummation of the Merger, the Seller, directors and officers of
the Surviving Entity shall take all necessary action to reflect the
Parent as the sole stockholder of the Surviving
Entity.
SECTION
1.02 Effect of the
Merger. At the Effective Time of the Merger (as defined
herein), the effect of the Merger shall be as provided in the NRS.
Without limiting the generality of the foregoing, at the Effective
Time of the Merger all the property, rights, privileges, powers and
franchise of the Merger Sub shall vest in the Surviving Company,
and all debts, liabilities and duties of the Merger Sub shall
become the debts, liabilities and duties of the Surviving
Company.
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SECTION
1.03 Effective Time of the
Merger. The parties shall cause a Certificate of Merger
required by the NRS relating to the Merger in the form attached
hereto as Exhibit F to be
filed with the Secretary of State of the State of Nevada pursuant
to the NRS on the Closing Date and such other documentation and
filings to be filed with the Secretary of State of the State of
Delaware pursuant to the DGCL. The Merger provided for herein shall
become effective upon such filings or on such date as may be
specified therein (the “Effective Time of the
Merger”).
SECTION
1.04 Conversion of Company
Shares. At the Effective Time of the Merger, automatically
by virtue of the Merger and without any action on the part of any
Person: (i) each share of Merger Sub that is issued and outstanding
immediately prior to the Effective Time of the Merger shall, by
virtue of the Merger, be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving
Company; and (ii) all of the shares of common stock of the Company
shall be converted by virtue of the Merger, into the Preferred E
Stock, as provided herein. A certificate representing the Preferred
E Stock shall be delivered to Seller at the Effective Time of the
Merger pursuant to the terms of this Agreement.
SECTION
1.05 Closing. The
closing (the “Closing”) of the
Transactions shall take place on such date, time and location as
shall be mutually determined by the Company and Parent upon the
satisfaction of all conditions set forth herein (the
“Closing
Date”).
ARTICLE
II
Representations and Warranties of Seller
Except
as may be disclosed in Seller’s Disclosure Letter
(“Seller Disclosure
Schedule”), (it being understood and agreed that
disclosure of any event, item or occurrence set forth in the Seller
Disclosure Schedule shall apply to, qualify or modify the Section
or subsection to which it corresponds and each of the other
Sections of this Agreement to the extent the relevance of such
disclosure to such other Section or subsection is reasonably
apparent from the text and nature of such disclosure) Seller hereby
represents and warrants to the Parent, as follows:
SECTION
2.01 Good Title.
Seller is the record and beneficial owner of, and has good and
marketable title to the Company Shares. Seller owns the Company
Shares free and clear of any and all liens, claims, encumbrances,
preemptive rights, right of first refusal and adverse interests of
any kind. Upon registering of the Parent as the new owner of such
Company Shares in the register of the Company, the Parent will
receive good title to such Company Shares, free and clear of all
liens, security interests, pledges, equities and claims of any
kind, voting trusts, agreements among members and other
encumbrances (collectively, “Liens”). The Company
Shares are and will be at Closing, all of the Company Shares of the
Company.
SECTION
2.02 Power and
Authority. Seller has the requisite power and authority to
enter into this Agreement. Seller has obtained all requisite
approvals to enter into this Agreement and consummate the
Transactions contemplated by this Agreement. This Agreement
constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar Laws relating to or affecting
the enforcement of creditors’ rights in general and by
general principles of equity (regardless of whether enforcement is
sought in equity or at law). No consent, approval or agreement of
any individual or entity is required to be obtained by Seller in
connection with the execution and performance by Seller of this
Agreement or the execution and performance by Seller of any
agreements, instruments or other obligations entered into in
connection with this Agreement.
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SECTION
2.03 No Conflicts.
The execution and delivery of this Agreement by Seller and the
performance by Seller of its obligations hereunder in accordance
with the terms hereof: (i) will not require the consent of any
third party (other than its members) or any federal, state, local
or foreign government or any court of competent jurisdiction,
administrative agency or commission or other governmental authority
or instrumentality, domestic or foreign (“Governmental Entity”)
under any statutes, laws, ordinances, rules, regulations, orders,
writs, injunctions, judgments, or decrees (collectively,
“Laws”); (ii) will not
violate any Laws applicable to the Seller.
SECTION
2.04 No Finder’s
Fee. Neither Seller nor the Company has created any
obligation for any finder’s, investment banker’s,
financial advisory, or broker’s fee in connection with the
Transactions that the Company or the Parent will be responsible
for.
SECTION
2.05 Purchase Entirely for
Own Account. The Preferred E Stock and underlying Parent
Stock proposed to be acquired by Seller hereunder will be acquired
for investment for its own accounts, and not with a view to the
resale or distribution of any part thereof, and Seller has no
present intention of selling or otherwise distributing the
Preferred E Stock or underlying Parent Stock except in compliance
with applicable securities laws.
SECTION
2.06 Available
Information. Seller has such knowledge and experience in
financial and business matters that it is capable of evaluating the
merits and risks of an investment in the Parent.
SECTION
2.07 Non-Registration. Seller
understands that the shares of Preferred E Stock and underlying
Parent Stock have not been registered under the Securities Act of
1933, as amended (the “Securities Act”) and, if
issued in accordance with the provisions of this Agreement, will be
issued by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent and the
accuracy of Seller’s representations as expressed
herein.
SECTION
2.08 Restricted
Securities. Seller understands that the Preferred E Stock
and underlying Parent Stock is characterized as “restricted
securities” under the Securities Act inasmuch as this
Agreement contemplates that, if acquired by Seller pursuant hereto,
the Preferred E Stock and underlying Parent Stock would be acquired
in a transaction not involving a public offering. Seller further
acknowledges that if the Preferred E Stock and underlying Parent
Stock is issued to Seller in accordance with the provisions of this
Agreement, such Preferred E Stock and underlying Parent Stock may
not be resold without registration under the Securities Act or the
existence of an exemption therefrom. Seller represents that it is
familiar with Rule 144 promulgated under the Securities Act, as
presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.
SECTION
2.09 Legends. It is
understood that the shares of Preferred E Stock and underlying
Parent Stock will bear the following legend or another legend that
is similar to the following:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO
THE COMPANY.
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THESE
SECURITIES ARE SUBJECT TO THE TERMS OF A STOCKHOLDERS AGREEMENT AND
MAY NOT BE TRANSFERRED, SOLD OR ASSIGNED OTHER THAN AS PERMITTED
THEREIN, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
and any
legend required by the “blue sky” laws of any state to
the extent such laws are applicable to the securities represented
by the certificate so legended.
SECTION
2.10 Accredited
Investor. Seller is or upon Closing will be an
“accredited investor” within the meaning of Rule 501
under the Securities Act. Seller and Company have been
furnished with or have had access to such information and materials
as have been requested by Seller and Company. In addition,
Seller and Company may have received in writing from Parent such
other information concerning its operations, financial condition
prospects and other matters as Seller and Company have requested in
writing, (such other information is collectively, the "Other Written Information"), and
considered all factors Seller and Company deem material in deciding
on the advisability of entering into the transactions contemplated
herein including investing in the Preferred E Stock and the
underlying Parent Stock.
Information on Seller and
Company. Seller and Company are experienced in
investments and business matters, have made investments of a
speculative nature and have purchased securities of United States
publicly-owned companies in private placements in the past and,
alone or with their representatives, have such knowledge and
experience in financial, tax and other business matters as to
enable Seller and Company to utilize the information made available
by the Parent and Merger Sub to evaluate the merits and risks of
and to make an informed investment decision with respect to the
proposed purchase and other transactions contemplated herein, which
represents a speculative investment. Seller and Company have
the authority and are duly and legally qualified to purchase and
own the Preferred E Stock and underlying Parent Stock. Seller and
Company are able to bear the risk of such investment for an
indefinite period and to afford a complete loss
thereof.
SECTION
2.11 Litigation.
There is no private or governmental action, suit, proceeding,
claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to Seller’s
knowledge, threatened against the Company, or any of the
Company’s assets or properties. There is no judgment, decree
or order against Seller or the Company that could prevent, enjoin,
alter or delay any of the transactions contemplated by this
Agreement. There are no material claims, actions, suits,
proceedings, inquiries, labor disputes or investigations pending
or, to Seller’s or Company’s knowledge, threatened
against Seller or the Company or any of the Company's assets, at
law or in equity or by or before any governmental entity or in
arbitration or mediation. No bankruptcy, receivership or debtor
relief proceedings are pending or, to Seller’s knowledge,
threatened against the Company. The Company has complied with, is
not in violation of, and has not received any notices of violation
with respect to, any federal, state, local or foreign Law,
judgment, decree, injunction or order, applicable to it, the
conduct of its business, or the ownership or operation of its
business the violation of which would cause or would reasonably
likely cause a Company Material Adverse Effect (as defined below).
The Seller and Company have access to and has reviewed the
Parent’s filings with the Securities and Exchange Commission,
at XXX.XXX.XXX, including the “Risk Factors” contained
therein.
SECTION
2.12 Stockholder
Agreement. At Closing, the Seller, Parent, Company and any
other persons or entities receiving securities of the Parent issued
at or in connection with Closing shall execute and deliver a
Stockholder Agreement in the form attached hereto as Exhibit E, to the Parent and such other
persons identified therein.
SECTION
2.13 Intellectual Property
Matters.
(a)
Inventor. The
inventor listed on the face of the Purchased Patent is the sole
inventor with respect to the Purchased Intellectual
Property.
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(b)
Ownership. Company
exclusively owns all right, title and interest in and to the
Purchased Intellectual Property, including the Patent Technology,
free of all liens, claims, licenses, covenants, encumbrances and
interests. There exist no facts or circumstances that are likely to
give rise to any defect, lien, or encumbrances on the Purchased
Intellectual Property;
(c)
No Rights Granted.
No right or license has been or is authorized or required to be
granted under or to any Purchased Intellectual Property, and
neither the Seller nor the Company has granted any right, license,
covenant, consent, or privilege to any third party with respect to
the Purchased Intellectual Property, or otherwise undertaken any
action which would conflict in any respect with the rights granted
to Merger Sub set forth in this Agreement;
(d)
Standards Setting
Organizations. There exists no standards setting
organizations of which Seller or Company, is or was a member or has
participated and which may have intellectual property terms,
conditions or policies that may impact one or more Purchased
Patents;
(e)
Governmental
Rights. No governmental entity, governmental agency or
university has any right, title, or interest in or to any of the
Purchased Intellectual Property. No governmental entity,
governmental agency or university funding was received, or
resources or facilities from any governmental entity, governmental
agency or university was used, in connection with the conception,
development or reduction to practice of any invention disclosed in
any Purchased Intellectual Property, including any Purchased
Patents;
(f)
Lawsuits and Other
Proceedings. No Purchased Intellectual Property has been
involved in any past or pending action, suit, investigation, claim
or proceeding (including any reexamination, derivation, or
revocation proceeding), nor to the knowledge of Seller has any
Purchased Intellectual Property been threatened with any such
action, suit, investigation, claim or proceeding, nor do grounds
exist for such action, suit, investigation, claim or proceeding,
other than those set forth in Seller’s Disclosure
Schedules;
(g)
Statutory Bars. No
acts of Seller or the Company, or any party acting on behalf of or
at the direction of Seller or the Company, have invalidated or will
invalidate any Purchased Patent under the laws of any jurisdiction
(including under 35 U.S.C. §102) including through (i)
disclosure of the invention or circulation of a printed publication
that describes the claimed invention, (ii) public use of the
claimed invention, or (iii) sale or offer for sale of the claimed
invention more than one year prior to the application for such
patent;
(h)
Invalidity and
Unenforceability. Neither the Company nor the Seller has
received any information, notice, or claim challenging or
questioning the validity or enforceability or alleging the misuse
of any Purchased Patent that has not been disclosed, in writing, to
Seller or the Company. No acts of Seller, Company or Seller’s
or Company’s respective representatives have committed fraud
upon the United States Patent and Trademark Office or any other
patent office with regard to any Purchased Patent. Neither the
Seller nor the Company has any information qualifying as prior art
that would invalidate any of the Purchased Patents. Neither the
Seller nor the Company has committed any illegal tying, illegal
term extension, patent misuse, other illegal anti-competition
activities, laches, estoppel, waiver, inequitable conduct in
violation of 35 CFR 1.56 or other law, in each case, that, if
litigated, would result in the unenforceability or invalidity of
any Purchased Patents;
(i)
No Misappropriation or
Infringement of Purchased Intellectual Property. No third
party has infringed or misappropriated any Purchased Intellectual
Property. Neither the Seller nor the Company has put any third
party on notice of actual or potential infringement of any
Purchased Intellectual Property, other than those set forth in
Seller’s Disclosure
Schedules;
(j)
All Rights
Transferred. There are no intellectual property or other
rights of Seller or Company that are not assigned hereunder and are
necessary to make, have made, use, sell, offer to sell,
export
or import or otherwise exploit, or transfer physical possession of
or title in the Patent Technology; and
(k)
Freedom to Operate.
No claim or litigation has been brought or to the knowledge of
Seller, is threatened to be brought by any third party alleging
that use of the Purchased Intellectual Property infringes or
otherwise conflicts or interferes with any intellectual property or
proprietary right of any third party.
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(l)
Docket. The docket
and other Patent Documents provided by Seller are true and correct
in all material respects;
(m)
Fees. All
maintenance, renewal, application, legal, expert, patent agent and
other fees required to prepare and file or maintain the validity of
the Patent has been paid in full until the date sixty days after
the Closing Date and Seller will indemnify and hold harmless Parent
and Merger Sub for any and all claims;
(n)
Small Entity
Status. No “small entity” or “micro
entity” fees were paid for any Patent where such fees were
not available for such Patent at such time under applicable
law;
(o)
Upcoming Required
Actions. There are no known actions that must be taken
within 120 days after the Closing Date, including the payment of
any filing, registration, maintenance or renewal fees or the filing
of any responses to office actions, documents, applications or
certificates for the purposes of obtaining, maintaining, perfecting
or preserving or renewing any Patent;
(p)
Royalties. There
are no royalties or honoraria payable by Seller or Company to any
third party by reason of the ownership, use, possession, license,
sale, or disposition of any Patent;
(q)
Broker’s
Fees. Neither Seller, the Company nor any of their
respective Affiliates has knowledge of, and has taken no action
which would give rise to, any claim for a broker’s or
finder’s fee to be paid by Merger Sub in connection with the
consummation of the transactions provided for
hereunder.
(r)
All Rights
Transferred. There are no intellectual property or other
rights of Seller that are not assigned hereunder and are necessary
to make, have made, use, sell, offer to sell, export or import or
otherwise exploit, or transfer physical possession of or title in
the Purchased Intellectual Property.
ARTICLE
III
Representations and Warranties of the Company and
Seller
The
Company and Seller, jointly and severally, represent and warrant to
the Parent as provided below, except as set forth in a schedule
(the “Company
Disclosure Schedule”) (it being understood and agreed
that disclosure of any event, item or occurrence set forth in the
Company Disclosure Letter shall apply to, qualify or modify the
Section or subsection to which it corresponds and each of the other
Sections of this Agreement to the extent the relevance of such
disclosure to such other Section or subsection is reasonably
apparent from the text and nature of such disclosure). For purposes
of this Agreement a “Company Material Adverse Effect”
shall mean a sustained material adverse change or event in the
business, results of operations, or financial condition of the
Company or adversely affecting the ability of the Company to
perform its obligations under this Agreement or on the ability of
the Company to consummate the Transactions. For purposes of this
clause, a “Company Material Adverse Effect” shall not
include any effects, events, developments or changes arising out of
or resulting from (A) changes or conditions in the U.S. or global
economy or capital or financial markets generally, including
changes in interest or exchange rates, (B) changes in the
industries in which the Company operates, (C) changes in general
legal, tax, regulatory, political or general economic conditions
affecting the Company in each case, proposed, adopted or enacted
after the date hereof, or the interpretation or enforcement
thereof, with the exception of any law that would prevent the
business of the Company to be concluded in the ordinary course and
in accordance with past practice or that
would prevent or substantially impair the consummation of the
Transactions, (D) natural disasters, (E) the commencement,
occurrence, continuation or intensification of any war, sabotage,
armed hostilities or acts of terrorism, (F) any action taken by
Parent or its affiliates in bad faith or in violation of this
Agreement, or (G) any matter fully, fairly, and specifically
disclosed in the Company Disclosure Schedule.
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SECTION
3.01 Organization,
Standing and Power. The Company is duly organized, validly
existing and in good standing under the laws of the State of Nevada
and has the requisite organizational power and authority and
possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to own, lease
or otherwise hold its properties and assets and to conduct its
businesses as presently conducted, other than such franchises,
licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect on the
Company. The Company is duly qualified to do business in each
jurisdiction where the nature of its business or its ownership or
leasing of its properties make such qualification necessary, except
where the failure to so qualify would not reasonably be expected to
have a Company Material Adverse Effect. The Company has delivered
to the Parent true and complete copies of the articles of
incorporation and bylaws of the Company, each as amended to the
date of this Agreement (as so amended, the “Company Charter
Documents”). The Company
owns or controls, directly or indirectly, all of the capital stock
or comparable equity interests of each subsidiary (each, a
“Subsidiary”)
listed in the Company Disclosure Schedule, free and clear of any
lien, and all issued and outstanding shares of capital stock or
comparable equity interest of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and
similar rights.
SECTION
3.02 Capital
Structure. The authorized capital structure of the Company
consists of Ten Thousand (10,000) shares of common stock par value
$0.001 per share, all of which are outstanding and owned by Seller.
No other shares of capital stock of the Company are issued,
reserved for issuance or outstanding. All outstanding shares of
capital stock of the Company are duly authorized, validly issued,
fully paid and non-assessable and not subject to or issued in
violation of any purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar right
under any provision of the applicable corporate laws of its state
of formation, the Company Charter Documents or any Contract (as
defined in Section 3.04) to which the Company is a party or
otherwise bound. There are no bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right
to vote) on any matters on which holders of shares of capital stock
of the Company may vote (“Voting Company Debt”).
Except as otherwise set forth herein, as of the date of this
Agreement, there are no options, warrants, rights, convertible or
exchangeable securities, “phantom” stock rights, stock
appreciation rights, stock-based performance units, commitments,
Contracts, arrangements or undertakings of any kind to which the
Company is a party or by which the Company is bound (i) obligating
the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional capital stock or other equity
interests in, or any security convertible or exercisable for or
exchangeable into any capital stock or other equity interest in,
the Company or any Voting Company Debt, (ii) obligating the Company
to issue, grant, extend or enter into any such option, warrant,
call, right, security, commitment, Contract, arrangement or
undertaking or (iii) that give any person the right to receive any
economic benefit or right similar to or derived from the economic
benefits and rights occurring to holders of capital stock of the
Company.
SECTION
3.03 Authority; Execution
and Delivery; Enforceability. The Company has all requisite
corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution and
delivery by the Company of this Agreement and the performance of
its obligations under this Agreement have been duly authorized and
approved by the Board of Directors of the Company and no other
proceedings on the part of the Company are necessary to authorize
this Agreement and the Transactions. When executed and delivered,
this Agreement will be enforceable against the Company in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar Laws relating to or affecting the enforcement of
creditors’ rights in general and by general principles of
equity (regardless of whether enforcement is sought in equity or at
law). No consent, approval or agreement of any individual or entity
is required to be obtained by the Company in connection with the
execution and performance by the Company of this Agreement or the
Constituent Agreements or the execution and performance by the
Company of any agreements, instruments or other obligations entered
into in connection with this Agreement.
-8-
SECTION
3.04 No Conflicts;
Consents.
(a) The
execution and delivery by the Company of this Agreement does not,
and the consummation of the Transactions and compliance with the
terms hereof and thereof 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 to loss of a
material benefit under, or result in the creation of any Lien upon
any of the properties or assets of the Company under any provision
of (i) the Company Charter Documents, (ii) any material contract,
lease, license, indenture, note, bond, agreement, permit,
concession, franchise or other instrument (a “Contract”) to which the
Company is a party or by which any of its respective properties or
assets is bound or (iii) subject to the filings and other matters
referred to in Section 3.04(b), any material judgment, order or
decree (“Judgment”) or material
Law applicable to the Company or its properties or assets, other
than, in the case of clauses (ii) and (iii) above, any such items
that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse
Effect.
(b)
Except for required filings with the Securities and Exchange
Commission (the “SEC”) and applicable
“Blue Sky” or state securities commissions, no material
consent, approval, license, permit, order or authorization
(“Consent”) of, or
registration, declaration or filing with, or permit from, any
Governmental Entity is required to be obtained or made by or with
respect to the Company in connection with the execution, delivery
and performance of this Agreement or the performance by the Company
of its obligations under this Agreement.
SECTION
3.05 Taxes.
(a) The
Company has timely filed, or has caused to be timely filed on its
behalf, all Tax Returns required to be filed by it, and all such
Tax Returns were correct and complete in all material respects
except to the extent any failure to file or any inaccuracies in any
filed Tax Returns, individually or in the aggregate, have not had
and would not reasonably be expected to have a Company Material
Adverse Effect. All Taxes shown to be due on such Tax Returns, or
otherwise owed, have been timely paid, except to the extent that
any failure to pay, individually or in the aggregate, has not had
and would not reasonably be expected to have a Company Material
Adverse Effect. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and
the officers of the Company know of no basis for any such
claim.
(b) If
applicable, the Company has established an adequate reserve
reflected on its financial statements for all Taxes payable by the
Company (in addition to any reserve for deferred Taxes to reflect
timing differences between book and Tax items) for all Taxable
periods and portions thereof through the date of such financial
statements. No deficiency with respect to any Taxes has been
proposed, asserted or assessed against the Company, and no requests
for waivers of the time to assess any such Taxes are pending,
except to the extent any such deficiency or request for waiver,
individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse
Effect.
(c) For
purposes of this Agreement:
“Taxes” includes all forms
of taxation, whenever created or imposed, and whether of the United
States or elsewhere, and whether imposed by a local, municipal,
governmental, state, foreign, federal or other Governmental Entity,
or in connection with any agreement with respect to Taxes,
including all interest, penalties and additions imposed with
respect to such amounts.
“Tax Return” means all
federal, state, local, provincial and foreign Tax returns,
declarations, statements, reports, schedules, forms and information
returns and any amended Tax return relating to Taxes.
-9-
SECTION
3.06 Benefit Plans.
Except as set forth in the Company Disclosure Schedule, the Company
does not have or maintain any collective bargaining agreement or
any bonus, pension, profit sharing, deferred compensation,
incentive compensation, share ownership, share purchase, share
option, phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, medical or other plan, arrangement
or understanding (whether or not legally binding) providing
benefits to any current or former employee, officer or director of
the Company (collectively, “Company Benefit Plans”).
As of the date of this Agreement, except as set forth in the
Company Disclosure Schedule, there are no employment, consulting,
indemnification, severance or termination agreements or
arrangements between the Company and any current or former
employee, officer or director of the Company, nor does the Company
have any general severance plan or policy.
SECTION
3.07 Litigation.
There is no action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting
the Company, or any of its properties before or by any court,
arbitrator, governmental or administrative agency, regulatory
authority (federal, state, county, local or foreign), stock market,
stock exchange or trading facility (“Action”). Neither the
Company nor any director or officer thereof (in his or her capacity
as such), is or has been the subject of any Action involving a
claim or violation of or liability under federal or state
securities laws or a claim of breach of fiduciary
duty.
SECTION
3.08 Compliance with
Applicable Laws. To the best of its knowledge, the Company
is in material compliance with all applicable Laws, except for
instances of noncompliance that, individually and in the aggregate,
have not had and would not reasonably be expected to have a Company
Material Adverse Effect. This Section 3.08 does not relate to
matters with respect to Taxes, which are the subject of Section
3.05.
SECTION
3.09 Brokers; Schedule of
Fees and Expenses. No broker, investment banker, financial
advisor or other person is entitled to any broker’s,
finder’s, financial advisor’s or other similar fee or
commission for which Parent or the Company is obligated in
connection with the Transactions based upon arrangements made by or
on behalf of the Company.
SECTION
3.10 Contracts.
Except as disclosed in the Company Disclosure Schedule, there are
no Contracts that are material to the business, properties, assets,
financial condition, results of operations or prospects of the
Company and its Subsidiaries taken as a whole. The Company is not
in violation of or in default under (nor does there exist any
condition which upon the passage of time or the giving of notice
would cause such a violation of or default under) any Contract to
which it is a party or by which it or any of its properties or
assets is bound, except for violations or defaults that would not,
individually or in the aggregate, reasonably be expected to result
in a Company Material Adverse Effect. The Company’s execution
of this Agreement and the consummation of the Transactions
contemplated herein would not violate any Contract to which the
Company or any of its Subsidiaries is a party nor will the
execution of this Agreement or the consummation of the Transactions
consummated hereby violate or trigger any “change in
control” provision or covenant in any Contract to which the
Company or any Subsidiary is a party.
SECTION
3.11 Title to
Properties. Except as set forth in the Company Disclosure
Schedule, the Company does not own any real property. The Company
has sufficient title to, or valid leasehold interests in, all of
its properties and assets used in the conduct of its businesses.
All such assets and properties, other than assets and properties in
which the Company has leasehold interests, are free and clear of
all Liens other than those Liens that, in the aggregate, do not and
will not materially interfere with the ability of the Company to
conduct business as currently conducted or result in or would
reasonably be expected to result in a Company Material Adverse
Effect.
SECTION
3.12 Intentionally
omitted.
SECTION
3.13 Insurance.
Except as set forth on the Company Disclosure Schedule, the Company
does not hold any insurance policy.
-10-
SECTION
3.14 Transactions With
Affiliates and Employees. Except as set forth in the Company
Disclosure Schedule, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees
of the Company is presently a party to any transaction with the
Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or
partner.
SECTION
3.15 Application of
Takeover Protections. The Company is not subject to any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company Charter Documents
or the laws of its state of incorporation that is or could become
applicable to Seller as a result of Seller, the Parent and the
Company fulfilling their obligations or exercising their rights
under this Agreement, including, without limitation, the issuance
of the Preferred E Stock and underlying Parent Stock and
Seller’ ownership of the Preferred E Stock and underlying
Parent Stock.
SECTION
3.16 Labor Matters.
Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or employs any member of a
union. The Company believes that its and its
Subsidiaries’ relations with their respective employees are
good. The Company and its Subsidiaries are in compliance with
all federal, state, local and foreign laws and regulations
respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except
where failure to be in compliance would not, either individually or
in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect.
SECTION
3.17 ERISA Compliance;
Excess Parachute Payments. The Company does not, and since
its inception never has, maintained, or contributed to any
“employee pension benefit plans” (as defined in Section
3(2) of ERISA), “employee welfare benefit plans” (as
defined in Section 3(1) of ERISA) or any other Company Benefit Plan
for the benefit of any current or former employees, consultants,
officers or directors of Company.
SECTION
3.18 No Additional
Agreements. The Company does not have any agreement or
understanding with Seller with respect to the Transactions other
than as specified in this Agreement.
SECTION
3.19 Investment
Company. The Company is not, and is not an affiliate of, and
immediately following the Closing will not have become, an
“investment company” within the meaning of the
Investment Company Act of 1940, as amended.
SECTION
3.20 Disclosure.
All disclosure provided to the Parent regarding the Company, its
business and the Transactions, furnished by or on behalf of the
Company (including the Seller’s and Company’s
representations and warranties set forth in this Agreement and the
Company Disclosure Schedule) are true and correct in all material
respects and do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which
they were made, not misleading.
SECTION
3.21 Absence of Certain
Changes or Events. Except in connection with the
Transactions and as disclosed in the Company Disclosure Schedule,
since inception, the Company has conducted its business only in the
ordinary course, and there has not been:
(a) any
change in the assets, liabilities, financial condition or operating
results of the Company, except changes in the ordinary course of
business that have not caused, in the aggregate, a Company Material
Adverse Effect;
-11-
(b) any
damage, destruction or loss, whether or not covered by insurance,
that would have a Company Material Adverse Effect;
(c) any
waiver or compromise by the Company of a valuable right or of a
material debt owed to it;
(d) any
satisfaction or discharge of any lien, claim, or encumbrance or
payment of any obligation by the Company, except in the ordinary
course of business and the satisfaction or discharge of which would
not have a Company Material Adverse Effect;
(e) any
material change to a material Contract by which the Company or any
of its assets is bound or subject;
(f) any
mortgage, pledge, transfer of a security interest in, or lien,
created by the Company, with respect to any of its material
properties or assets, except liens for taxes not yet due or payable
and liens that arise in the ordinary course of business and does
not materially impair the Company’s ownership or use of such
property or assets;
(g) any
loans or guarantees made by the Company to or for the benefit of
its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances
made in the ordinary course of its business;
(h) any
alteration of the Company’s method of accounting or the
identity of its auditors;
(i) any
declaration or payment of dividend or distribution of cash or other
property to Seller or any purchase, redemption or agreements to
purchase or redeem any Company Shares;
(j) any
issuance of equity securities to any officer, director or
affiliate; or
(k) any
arrangement or commitment by the Company to do any of the things
described in this Section.
SECTION
3.22 Foreign Corrupt
Practices. Neither the Company, nor, to the Company’s
knowledge, any director, officer, agent, employee or other person
acting on behalf of the Company has, in the course of its actions
for, or on behalf of, the Company (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; (iii) violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices
Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or
employee.
SECTION
3.23 Licenses and
Permits. The Company has obtained and maintains all federal,
state, local and foreign licenses, permits, consents, approvals,
registrations, memberships, authorizations and qualifications
required to be maintained in connection with the operations of the
Company as presently conducted and as proposed to be conducted the
absence of which has caused or is reasonably likely to cause a
Company Material Adverse Effect. The Company is not in default
under any of such licenses, permits, consents, approvals,
registrations, memberships, authorizations and qualifications
except for such defaults that have not caused or would not
reasonably be likely to result in a Company Material Adverse
Effect.
-12-
SECTION
3.24 Environmental
Laws. The Company and each Subsidiary (i) is in compliance
in all material respects with any and all Environmental Laws (as
hereinafter defined), (ii) has received all permits, licenses
or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) is in
compliance in all material respects with all terms and conditions
of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply
would be reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect. The term
“Environmental
Laws” means all federal, state, local or foreign laws
relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated
or approved thereunder.
SECTION
3.25 Indebtedness.
Except as disclosed in the Company Disclosure Schedule, neither the
Company nor any Subsidiary (i) has any outstanding Indebtedness (as
defined below), (ii) is in violation of any term of or is in
default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not
result, individually or in the aggregate, in a Company Material
Adverse Effect, and (iii) is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which,
in the judgment of the Company's officers, has or is expected to
have a Company Material Adverse Effect. For purposes of this
Agreement: (x) “Indebtedness” of any
Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed
as the deferred purchase price of property or services (other than
trade payables entered into in the ordinary course of business),
(C) all reimbursement or payment obligations with respect to
letters of credit, surety bonds and other similar instruments, (D)
all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses,
(E) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in
either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property), (F)
all monetary obligations under any leasing or similar arrangement
which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified
as a capital lease, (G) all indebtedness referred to in
clauses (A) through (F) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or
assets (including accounts and contract rights) owned by any
Person, even though the Person which owns such assets or property
has not assumed or become liable for the payment of such
indebtedness, and (H) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (A) through (G) above; (y) “Contingent Obligation”
means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person
if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid
or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto;
and (z) “Person” means an
individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, a
government or any department or agency thereof and any other legal
entity.
SECTION
3.26 Money
Laundering. The Company and its Subsidiaries are in
compliance with, and have not previously violated, the USA Patriot
Act of 2001 and all other applicable U.S. and non-U.S. anti-money
laundering laws and regulations, including, but not limited to, the
laws, regulations and Executive Orders and sanctions programs
administered by the U.S. Office of Foreign Assets Control,
including, but not limited, to (i) Executive Order 13224 of
September 23, 2001 entitled, “Blocking Property and
Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism”
(66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in
31 CFR, Subtitle B, Chapter V.
-13-
SECTION
3.27 Management.
During the past five year period, no current officer or director
or, to the knowledge of the Company, no former officer or director
or current ten percent (10%) or greater member of the Company or
any of its Subsidiaries has been the subject of:
(a) a
petition under bankruptcy laws or any other insolvency or
moratorium law or the appointment by a court of a receiver, fiscal
agent or similar officer for such Person, or any partnership in
which such person was a general partner at or within two years
before the filing of such petition or such appointment, or any
corporation or business association of which such person was an
executive officer at or within two years before the time of the
filing of such petition or such appointment;
(b) a
conviction in a criminal proceeding or a named subject of a pending
criminal proceeding (excluding traffic violations that do not
relate to driving while intoxicated or driving under the
influence);
(c) any
order, judgment or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining any such person from, or otherwise limiting,
the following activities:
(i)
Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
United States Commodity Futures Trading Commission or an associated
person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliated
person, director or employee of any investment company, bank,
savings and loan association or insurance company, or engaging in
or continuing any conduct or practice in connection with such
activity;
(ii)
Engaging in any type of business practice; or
(iii)
Engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of
securities laws or commodities laws;
(d) any
order, judgment or decree, not subsequently reversed, suspended or
vacated, of any authority barring, suspending or otherwise limiting
for more than 60 days the right of any such person to engage in any
activity described in the preceding sub paragraph, or to be
associated with persons engaged in any such activity;
(e) a
finding by a court of competent jurisdiction in a civil action or
by the SEC or other authority to have violated any securities law,
regulation or decree and the judgment in such civil action or
finding by the SEC or any other authority has not been subsequently
reversed, suspended or vacated; or
(f) a
finding by a court of competent jurisdiction in a civil action or
by the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or
finding has not been subsequently reversed, suspended or
vacated.
SECTION
3.28 Public Utility
Holding Act. None of the Company nor any of its Subsidiaries
is a “holding company,” or an “affiliate”
of a “holding company,” as such terms are defined in
the Public Utility Holding Act of 2005.
SECTION
3.29 Federal Power
Act. None of the Company nor any of its Subsidiaries is
subject to regulation as a “public utility” under the
Federal Power Act, as amended.
-14-
SECTION
3.30 No Undisclosed
Events, Liabilities, Developments or Circumstances. To the
best knowledge of the Company or the Seller, no event, liability,
development or circumstance has occurred or exists, or is
reasonably expected to exist or occur with respect to the Company,
any of its Subsidiaries or any of their respective businesses,
properties, liabilities, prospects, operations (including results
thereof) or condition (financial or otherwise), that in the
reasonable judgment of the Company (i) has not already been made
known to the Parent; or (ii) could have a Company Material Adverse
Effect. Except as set forth in the Company Disclosure Schedule, the
Company has no liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise). The Company Disclosure
Schedule sets forth all financial and contractual obligations and
liabilities (including any obligations to issue membership
interests or other securities of the Company) due after the date
hereof.
SECTION
3.31 No Other
Representations or Warranties. Except for the
representations and warranties contained in Article II and Article
III of this Agreement, neither Seller nor the Company has made any
representation or warranty, express or implied, concerning the
Company, its financial condition, results of operations, assets, or
prospects, and such representations and warranties supersede any
prior statements made by any person regarding the
Transactions.
ARTICLE
IV
Representations and Warranties of the Parent and Merger
Sub
Representations and Warranties of
Parent and Merger Sub. Parent and Merger Sub, jointly and
severally, represent and warrant to Seller that all of the
statements contained in this Article IV are true as of the date of
this Agreement (or, if made as of a specified date, as of such
date) except, in each case, as (a) set forth in Parent Disclosure
Schedules attached to this Agreement (the “Parent Disclosure Schedules”); or
(b) as otherwise provided in this Agreement. For purposes of the
representations and warranties of Parent contained in this Article
IV, disclosure in any SEC filing or report of Parent and disclosure
in any section of Parent Disclosure Schedules (which may reference
specific public reports of Parent which are applicable to the
particular section hereof) of any facts or circumstances shall be
deemed to be an adequate response and disclosure of such facts or
circumstances with respect to all representations or warranties by
Parent calling for disclosure of such information, whether or not
such disclosure is specifically associated with or purports to
respond to one or more or all of such representations or
warranties, if it is reasonably apparent on the face of Parent
Disclosure Schedules such disclosure is applicable. The inclusion
of any information in any section of Parent Disclosure Schedules by
Parent shall not be deemed to be an admission or evidence of
materiality of such item, nor shall it establish a standard of
materiality for any purpose whatsoever.
SECTION
4.01 Organization. Parent is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware and its wholly-owned
subsidiary, Merger Sub, is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Nevada. Parent and Merger Sub are referred to collectively in this
Agreement as the “Majesco
Entities.” Each of the Majesco Entities has the
corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and
orders of public authorities to own all of its properties and
assets and to carry on its business in all material respects as it
is now being conducted, and there are no other jurisdictions in
which it is not so qualified in which the character and location of
the assets owned by it or the nature of the material business
transacted by it requires qualification, except where failure to do
so would not have a material adverse effect on its business,
operations, properties, assets or condition. The execution and
delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement in accordance with the
terms hereof will not, violate any provision of the
articles/certificate of incorporation or bylaws of any of the
Majesco Entities or other agreement to which any Majesco Entity is
a party or by which it is bound. True, correct and complete copies
of the articles/certificate of Incorporation and Bylaws of each of
the Majesco Entities, each as amended or restated as of the date
hereof, have been provided to Seller and are included in Parent
Disclosure Schedules. Except for the ownership of Merger Sub by
Parent or as otherwise set forth in the Parent SEC
Documents, none of the Majesco Entities has any wholly or partially
owned subsidiaries, or owns any economic, voting or management
interests in any other person.
-15-
SECTION
4.02 Due Authorization. Subject to
approval by its stockholders, the Majesco Entities have full power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance by the Majesco Entities of this Agreement have been
duly and validly authorized by the board of directors of the
Majesco Entities, and, other than approval by its stockholders and
by The NASDAQ Stock Market of the listing of the Parent Stock
underlying the Preferred E Stock, which shall have occurred prior,
and as a condition to, the Closing, no other actions or proceedings
on the part of the Majesco Entities are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement
constitutes the legal, valid and binding obligation of each of the
Majesco Entities, enforceable in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization or
other laws from time to time in effect which affect
creditors’ rights generally and by general principles of
equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
SECTION
4.03 Capitalization of Parent. The
authorized capitalization of Parent consists of 250,000,000 shares
of common stock, $0.001 par value, of which 2,782,963 shares are
issued and outstanding as of the date of this Agreement and
10,000,000 shares of preferred stock, par value $0.001 of which, as
of the date of this Agreement: (i) 8,830,000 shares are designated
as Series A Convertible Preferred Stock of which 7,138,158 are
outstanding and convertible into 1,189,693 shares of Parent Stock;
(ii) 54,250 shares are designated as Series B Convertible Preferred
Stock of which 54,201.71 are outstanding and convertible into
903,362 shares of Parent Stock; (iii) 26,000 shares are designated
as Series C Convertible Preferred Stock of which 25,763.53 are
outstanding and convertible into 429,392 shares of Parent Stock;
and (iv) 170,000 shares are designated as Series D Convertible
Preferred Stock of which 156,332 are outstanding and convertible
into 260,553 shares of Parent Stock. All issued and outstanding
shares of Parent are legally issued, fully paid, and non-assessable
and not issued in violation of the preemptive or other right of any
person. There are no dividends or other amounts due or payable with
respect to any of the shares of capital stock of Parent. There are
no existing warrants, options, calls, or commitments of any nature
relating to the authorized and unissued shares of Parent to which
Parent is a party, except for (i) outstanding common stock purchase
warrants that entitle the holders to purchase up to 187,500 shares
of Parent common stock at an exercise price of $6.90 per share at
any time on or before April 19, 2018, which will be exercised prior
to Closing and (ii) outstanding options to purchase up to 390,346
shares of Parent Stock of which 171,349 of such options are
unvested as of the date hereof.
SECTION
4.04 SEC Reports; Financial
Statements.
(a)
Parent has filed all forms, reports and documents (including all
Exhibits) required to be filed by it with the SEC since it became
subject to the reporting requirements of section 13 or 15(d) of the
Exchange Act, including any amendments or supplements thereto
(collectively, including any such forms, reports and documents
filed after the date hereof, the “Parent SEC Reports”) and, with
respect to Parent SEC Reports filed by Parent after the execution
hereof and prior to the Closing Date, will deliver or make
available, to Seller all of its Parent SEC Reports in the form
filed with the SEC. Parent SEC Reports (i) were (and any Parent SEC
Reports filed after the execution hereof will be) in all material
respects prepared in accordance with the requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended
(the “Exchange
Act”), as the case may be, and the rules and
regulations promulgated thereunder, and (ii) as of their respective
filing dates, did not (and any Parent SEC Reports filed after the
execution hereof and prior to the Closing Date will not) contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under
which they were made, not misleading. On the Closing Date, Parent
shall be current in the filing of the Parent SEC
Reports.
(b) The
audited consolidated balance sheets of Parent as of October 31,
2015 and 2014, and the related audited consolidated statements of
operations, stockholders’ equity (deficit), and cash flows
for the fiscal years ended October 31, 2015 and 2014, including the
notes thereto, and the accompanying report of Parent’s
independent registered accountants are included in the SEC
Reports.
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(c) The
financial statements of Parent referenced in Section 4.04(b) have
been prepared in accordance with generally accepted accounting
principles applicable to issuers filing financial statements and
reports with the SEC in the United States (“US GAAP”),
consistently applied throughout the periods involved as explained
in the notes to such financial statements. The Parent financial
statements present fairly, in all material respects, as of their
respective dates, the financial condition of Parent. Parent did not
have, as of the date of any such financial statements, except as
and to the extent reflected or reserved against therein, any
liabilities or obligations (absolute or contingent) which should be
reflected in any financial statement or the notes thereto prepared
in accordance with US GAAP, and all assets reflected therein
present fairly the assets of Parent in accordance with US GAAP. The
statements of operations and cash flows present fairly the
financial position and results of operations of Parent as of their
respective dates and for the respective periods covered
thereby.
(d) The
books and records, financial and otherwise, of Parent are in all
material respects complete and correct and have been maintained in
accordance with sound business and bookkeeping practices so as to
accurately and fairly reflect, in reasonable detail, the
transactions and dispositions of the assets of Parent, and, except
as described in the Parent SEC Reports, Parent has maintained a
system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions have been and are
executed in accordance with management’s general or specific
authorization; (ii) transactions are recorded as necessary to
permit the preparation of financial statements in conformity with
generally accepted accounting principles or any other criteria
applicable to such statements and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals, and appropriate action is taken
with respect to any differences.
SECTION
4.05 Information. The information
concerning the Majesco Entities set forth in this Agreement and in
the Parent Disclosure Schedules is complete and accurate in all
material respects and does not contain any untrue statement of a
material fact or omit to state a material fact required to make the
statements made, in light of the circumstances under which they
were made, not misleading. The Majesco Entities shall cause the
Parent Disclosure Schedules to be updated after the execution
hereof up to and including the Closing Date.
SECTION
4.06 Absence of Certain Changes or
Events. Except as set forth in this Agreement, a subsequent
Parent SEC Report or the Parent Disclosure Schedules, since July
31, 2016:
(a)
There has not been (i) any adverse change in the business,
operations, properties, level of inventory, assets, or condition of
the Majesco Entities or (ii) any damage, destruction, or loss to
the Majesco Entities (whether or not covered by insurance)
adversely affecting the business, operations, properties, assets,
or condition of the Majesco Entities;
(b)
Except as set forth in the Parent Disclosure Schedules, none of the
Majesco Entities has (i) amended its articles/certificate of
incorporation or bylaws; (ii) declared or made, or agreed to
declare or make, any payment of dividends or distributions of any
assets of any kind whatsoever to stockholders or purchased or
redeemed, or agreed to purchase or redeem, any of its capital
stock; (iii) waived any rights of value which in the aggregate are
extraordinary or material considering the business of Parent; (iv)
made any change in its method of management, operation, or
accounting; (v) entered into any other transactions; (vi) made any
accrual or arrangement for or payment of bonuses or special
compensation of any kind or any severance or termination payment to
any present or former officer or employee; (vii) increased the rate
of compensation payable or to become payable by it to any of its
officers or directors or any of its employees; or (viii)
established any profit-sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan,
payment, or arrangement made to, for, or with its officers,
directors, or employees;
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(c)
Except as set forth in the Parent Disclosure Schedules, none of the
Majesco Entities has (i) granted or agreed to grant any options,
warrants, or other rights for its stocks, bonds, or other corporate
securities calling for the issuance thereof; (ii) borrowed or
agreed to borrow any funds or incurred, or become subject to, any
material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (iii) paid
any material obligation or liability (absolute or contingent) other
than current liabilities reflected in or shown on the most recent
Parent balance sheet and current liabilities incurred since that
date in the ordinary course of business; (iv) sold or transferred,
or agreed to sell or transfer, any of its assets, properties, or
rights; (v) canceled, or agreed to cancel, any debts or claims;
(vi) made or permitted any amendment or termination of any
contract, agreement, or license to which it is a party if such
amendment or termination is material, considering the business of
Parent; or (vii) issued, delivered, or agreed to issue or deliver
any stock, bonds, or other corporate securities including
debentures (whether authorized and unissued or held as treasury
stock); and
(d) The
Majesco Entities have not become subject to any law or regulation
which materially and adversely affects, or in the future would be
reasonably expected to adversely affect, the business, operations,
properties, assets, or condition of the Majesco
Entities.
SECTION 4.07 Title and Related Matters.
Except as provided herein or disclosed in the Parent balance sheet
and the notes thereto, the Majesco Entities have good and
marketable title to all of their properties, inventory, interests
in properties, and assets, which are reflected in the most recent
Parent balance sheet or acquired after that date (except
properties, interests in properties, and assets sold or otherwise
disposed of since such date in the ordinary course of business),
free and clear of all mortgages, liens, pledges, charges, or
encumbrances, except (i) statutory liens or claims not yet
delinquent; and (ii) such imperfections of title and easements as
do not, and will not, materially detract from, or interfere with,
the present or proposed use of the properties subject thereto or
affected thereby or otherwise materially impair present business
operations on such properties. To the best knowledge of the Majesco
Entities, other than as set forth in the Parent Disclosure
Schedules, the business of the Majesco Entities as currently
conducted does not infringe on the copyright, patent, trade secret,
know-how, or other proprietary right of any other person or entity
and comprises all such rights necessary to permit the operation of
the businesses of the Majesco Entities as now being conducted or as
contemplated.
SECTION 4.08 Litigation and Proceedings.
Except as set forth in the Parent Disclosure Schedules or the
Parent SEC Reports, there are no actions, suits, or administrative
or other proceedings pending or, threatened by or against the
Majesco Entities or adversely affecting the Majesco Entities or
their properties, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind. None of the Majesco Entities has
any knowledge of any default on the part of the Majesco Entities
with respect to any judgment, order, writ, injunction, decree,
award, rule, or regulation of any court, arbitrator, or
governmental agency or instrumentality.
SECTION 4.09 Contracts. Except as disclosed
in the Parent SEC Reports or the Parent Disclosure
Schedules:
(a)
There are no material contracts, agreements, franchises, license
agreements, or other commitments to which any of the Majesco
Entities is a party or by which any of the Majesco Entities or
their properties are bound;
(b) All
contracts, agreements, franchises, license agreements, and other
commitments to which any of the Majesco Entities is a party or by
which its properties are bound and which are material to the
consolidated operations or financial condition of Parent are valid
and enforceable by the Majesco Entities in all material
respects;
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(c) The
Majesco Entities are not a party to or bound by, and its properties
are not subject to, any material contract, agreement, other
commitment or instrument; any charter or other corporate
restriction; or any judgment, order, writ, injunction, decree, or
award which materially and adversely affects, or in the future may
(as far as Parent can now foresee) materially and adversely affect,
the business, operations, properties, assets, or condition of the
Majesco Entities; and
(d)
None of the Majesco Entities is a party to any oral or written (i)
contract for the employment of any officer, director, or employee
which is not terminable on 30 days (or less) notice; (ii)
profit-sharing, bonus, deferred compensation, stock option,
severance pay, pension benefit or retirement plan, agreement, or
arrangement covered by Title IV of the Employee Retirement Income
Security Act, as amended; (iii) agreement, contract, or indenture
relating to the borrowing of money; (iv) guarantee of any
obligation, other than one on which a Majesco Entity is a primary
obligor, for the borrowing of money or otherwise, excluding
endorsements made for collection and other guarantees of
obligations, which, in the aggregate do not exceed $5,000; (v)
consulting or other similar contract with an unexpired term of more
than one year or providing for payments in excess of $5,000 in the
aggregate; (vi) collective bargaining agreement; (vii) agreement
with any present or former officer or director of Parent or any
subsidiary; or (viii) contract, agreement, or other commitment
involving payments by it of more than $5,000 in the
aggregate.
SECTION 4.10 Material Contract Defaults.
None of the Majesco Entities is in default in any material respect
under the terms of any outstanding contract, agreement, lease, or
other commitment which is material to the business, operations,
properties, assets, or condition of the Majesco Entities considered
as whole, and there is no event of default or other event which,
with notice or lapse of time or both, would constitute a default in
any material respect under any such contract, agreement, lease, or
other commitment in respect of which the Majesco Entities have not
taken adequate steps to prevent such a default from
occurring.
SECTION 4.11 Intellectual Property. Except
as disclosed on the Parent Disclosure Schedules:
(a) All
of the Majesco Entities’ material Intellectual Property is
either licensed or owned by the Majesco Entities, in each case free
and clear of all liens other than any right of any third party as
owner or licensor or licensee under a contract affecting such
Intellectual Property, with royalties as set forth on Parent
Disclosure Schedules;
(b)
None of the Majesco Entities’ material Intellectual Property
is the subject of any pending or, to the knowledge of Parent,
threatened litigation or claim of infringement;
(c) The
Majesco Entities have not granted any license, or agreed to pay or
receive any royalty in respect of, any intellectual property except
as set forth on Parent Disclosure Schedule;
(d) No
material license or royalty agreement to which any Majesco Entity
is a party is in breach or default by such Majesco Entity or, to
the knowledge of Parent or its officers or directors, any other
party thereto; and no such license or royalty agreement is or has
been the subject of any notice of termination given or threatened
in writing by any person;
(e) The
Majesco Entities have not received any notice contesting their
rights to use any intellectual property as set forth on the Parent
Disclosure Schedules;
(f) No
Majesco Entity has granted any license or agreed to pay or receive
any royalty in respect of any material Intellectual Property except
as set forth on the Parent Disclosure Schedules; and
(g) No
Majesco Entity has knowingly violated the Intellectual Property
rights of any third party.
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SECTION 4.12 Tax Matters.
(a) The
Majesco Entities have complied in all material respects with all
applicable laws relating to taxes. The Majesco Entities have timely
filed all tax returns that they were required to file. All such tax
returns were true, correct, and complete in all material respects.
All taxes of the Majesco Entities due and payable with respect to
all tax returns have been paid in a timely manner.
(b)
There are no liens for taxes on any assets of the Majesco
Entities.
(c) The
Majesco Entities have properly withheld in a timely manner (i) all
required amounts from payments to its employees, agents,
contractors, nonresidents, shareholders, lenders, and other persons
and (ii) all sales, use, ad valorem, and value added taxes. The
Majesco Entities remitted in a timely manner all withheld taxes to
the proper governmental authority in accordance with all applicable
laws.
(d) No
audits or other legal proceedings are in progress, pending, or to
the knowledge of the Majesco Entities or their officers or
directors, threatened with regard to any taxes or tax returns of or
with respect to, the business, or any employee (including, but not
limited to, all key employees and retained employees). The Majesco
Entities have not received in the past five (5) years a written
notice from any governmental authority that either of the Majesco
Entities is required to pay taxes or file tax returns in a
jurisdiction in which such Majesco Entity does not file tax returns
or pays taxes.
(e) The
Majesco Entities have not executed or filed with any governmental
authority any agreement or other document extending or having the
effect of extending the statute of limitations for assessment,
collection or other imposition of any tax.
(f)
Neither of the Majesco Entities is a party to or bound by any
contract that could require it to share any tax benefits, and
neither of the Majesco Entities is party to or bound by any
contract that could require it to indemnify any other person with
respect to taxes.
(g)
Neither of the Majesco Entities (i) has ever been a member of any
group of entities that files a tax return as an affiliated,
consolidated, combined, or unitary group, and (ii) has any
liability for the taxes of any person as a result of successor
liability, transferee liability, joint or several liability
(including pursuant to Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local, or foreign law)), contractual
liability, or otherwise.
(h) The
Majesco Entities have provided to Seller true, correct, and
complete copies of (i) all material federal, state, local, and
foreign tax returns filed in the past three (3) years by either of
the Majesco Entities (or their affiliates) with respect to the
business of Parent or any employee, and (ii) all material notices,
correspondence, and similar material received by either of the
Majesco Entities Seller (or their affiliates) from any governmental
authority relating to the Business of Parent or any
employee.
(i) No
assets of either of the Majesco Entities are “tax-exempt use
property” within the meaning of Section 168(h)(1) of the
Code.
(j)
Neither of the Majesco Entities has participated in any listed
transaction required to be disclosed under Treasury Regulation
Section 1.6011-4.
(k) No
tax holiday or tax incentive or grant in any jurisdiction with
respect to taxes relating to the Business of Parent or any employee
will terminate (or be subject to a clawback or recapture that is
payable by either Parent or the Merger Sub or Seller) as a result
of any transaction contemplated by this Agreement.
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(l)
Parent’s “non-qualified deferred compensation
plans” are not expected to give rise to an acceleration of
income or an additional Tax under Section 409A of the Code as a
result of any transaction contemplated by this Agreement. Neither
of the Majesco Entities is obligated to pay, gross up, or otherwise
indemnify any contractor or employee for his or her taxes,
including taxes imposed under Section 409A of the
Code.
(m) The
Purchased Intellectual Property which are the subject of this
Agreement will not cause Parent to recognize an item of income, or
exclude a deduction, following the Closing Date as a result of (i)
an installment sale occurring prior to the Closing Date that was
governed by Section 453 of the Code (or similar provision of other
applicable laws); (ii) a sale occurring prior to the Closing that
was reported as an open transaction for any applicable laws; (iii)
a change of method of accounting requested or occurring prior to
the Closing Date (or required as a result of the transactions
contemplated by this Agreement); (iv) a “closing
agreement” or other agreement entered with a governmental
authority; (v) any prepaid amounts received on or prior to the
Closing Date; or (vi) an election under Section 108(i) of the Code
(or similar provision of other applicable Laws).
SECTION
4.13 No Conflict With Other
Instruments. The execution of this Agreement and the
consummation of the transactions contemplated by this Agreement
will not result in the breach of any term or provision of, or
constitute an event of default under, any indenture, mortgage, deed
of trust, or other contract, agreement, or instrument to which any
of the Majesco Entities is a party or to which any of its
properties or operations are subject.
SECTION
4.14 Governmental Authorizations.
The Majesco Entities have all licenses, franchises, permits, and
other governmental authorizations that are legally required to
enable them to conduct their business in all material respects as
conducted on the date of this Agreement. Except for compliance with
federal and state securities and corporation laws, as hereinafter
provided, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other
governmental body is required in connection with the execution and
delivery by Parent and/or Merger Sub of this Agreement and the
consummation by Parent and/or Merger Sub of the transactions
contemplated hereby.
SECTION
4.15 Compliance With Laws and
Regulations. The Majesco Entities have complied with all
applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that
noncompliance would not materially and adversely affect the
business, operations, properties, assets, or condition of the
Majesco Entities or except to the extent that noncompliance would
not result in the occurrence of any material liability for the
Majesco Entities.
SECTION
4.16 Insurance. All of the Majesco
Entities’ insurance policies are in full force and effect,
all premiums with respect thereto covering all periods up to and
including the Closing Date have been, or prior to the Closing Date,
will be, paid, and no notice of cancellation or termination has
been received with respect to any such policy. Such insurance
policies provide the types and amounts of insurance customarily
obtained by businesses of similar size and character of operations
to the businesses of the Majesco Entities. None of the Majesco
Entities has been refused any insurance with respect to its assets
or operations; and its insurance coverage has not been limited by
any insurance carrier to which it has applied for any such
insurance, or with which it has carried insurance, in each case
during the two years preceding the date hereof.
SECTION
4.17 Environmental. Each Majesco
Entity is in compliance in all material respects with all
applicable federal, state and local laws and regulations governing
the environment, public health and safety and employee health and
safety (including all provisions of the Occupational Safety and
Health Administration (“OSHA”) and no charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand or
notice has been filed or commenced against any Majesco Entity and,
to the knowledge of Parent and its officers and directors, no such
charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand or notice is pending or has been
threatened.
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SECTION
4.18 Employee Relations. Each of the
Majesco Entities has complied in all material respects with all
applicable laws, rules, and regulations that relate to prices,
wages, hours, harassment, disabled access, and discrimination in
employment and collective bargaining and to the operation of its
business and is not liable for any arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing. Parent
and its officers and directors believe that the relationships
between the Majesco Entities and their employees are
satisfactory.
SECTION
4.19 Officer, Director and Promoter’s
Information. Except as set forth on the Parent Disclosure
Schedules, during the past five (5) years, no Majesco Entity, nor
any of its respective officers, directors or promoters, has been
the subject of:
(a) a
bankruptcy petition filed by or against any business of which the
Majesco Entity or such other person was a general partner or
executive officer either at the time of the bankruptcy or within
two years prior to that time;
(b) a
conviction in a criminal proceeding or a pending criminal
proceeding (excluding traffic violations and other minor
offenses);
(c) any
order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting
the Majesco Entity or any such other person from involvement in any
type of business, securities or banking activities; or
(d) a
finding by a court of competent jurisdiction (in a civil action),
the SEC, or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.
SECTION
4.20 Broker Fees. The Majesco
Entities have not incurred, nor will they incur, directly or
indirectly, any liability for brokerage or finders’ fees or
agents’ commissions or investment bankers’ fees or any
similar charges in connection with this Agreement or any
transaction contemplated hereby.
SECTION
4.21 Board Approval. The board of
directors of both Parent and Merger Sub have duly adopted
resolutions: (a) approving and declaring advisable this Agreement
and the transactions contemplated hereby (such approvals having
been made in accordance with the Delaware General Corporation Law
and the Nevada Revised Statutes, respectively); (b) determining
that the terms of the transaction contemplated hereby are fair to
and in the best interests of Parent and its stockholders from a
financial point of view; and (c) recommending that the stockholders
of Parent approve and adopt this Agreement and the issuance of the
Preferred E Stock, which resolutions have not been modified,
supplemented or rescinded and remain in full force and
effect.
SECTION
4.22 Employee Benefit Plans and Material
Documents.
(a)
Parent Disclosure Schedules set forth a list of all Benefit Plans
with respect to which Parent has any obligation or liability or
which are maintained, contributed to or sponsored by Parent for the
benefit of any current or former employee, officer or director of
Parent. Except as disclosed in Parent Disclosure Schedules, Parent
does not have any obligation or liability with respect to any
Benefit Plan maintained, contributed to or sponsored by any ERISA
Affiliate for the benefit of any current or former employee,
officer or director of Parent or any ERISA Affiliate. With respect
to each Benefit Plan subject to ERISA which is maintained,
contributed to or sponsored by Parent or with respect to which
Parent has any obligation or liability, Parent has delivered or
made available to Seller a true and complete copy of each such
Benefit Plan (including all amendments thereto) and a true and
complete copy of each material document (including all amendments
thereto) prepared in connection with each such Benefit Plan
including (i) a copy of each trust or other funding arrangement,
(ii) each summary plan description and summary of material
modifications,
(iii) the most recently filed IRS Form 5500 for each such Benefit
Plan, if any, and (iv) the most recent determination letter, if
any. For purposes of this Agreement, “Benefit Plan” means any
employee benefit plan within the meaning of Section 3(3) of ERISA,
and any other plan, program, agreement, arrangement, policy,
contract, commitment or scheme, written or oral, statutory or
contractual, that provides for compensation or benefits, including
any deferred compensation, executive compensation, bonus or
incentive plan, any cafeteria plan or any holiday or vacation plan
or practice as currently in effect.
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(b)
Except as disclosed in Parent Disclosure Schedules, none of the
Benefit Plans is a plan that is or has ever been subject to Title
IV of ERISA, Section 302 of ERISA or Section 412 of the Code. None
of the Benefit Plans is a “multiemployer plan” as
defined in Section 3(37) of ERISA. Except as disclosed in Parent
Disclosure Schedules, none of the Benefit Plans provides for the
payment of separation, severance, termination or similar-type
benefits to any person or provides for or, except to the extent
required by law, promises retiree medical or life insurance
benefits to any current or former employee, officer or director of
Seller or any ERISA Affiliate. For purposes of this Agreement, the
term “ERISA Affiliate” means any person that, together
with Parent, would be considered a single employer within the
meaning of Section 4001 of ERISA or Section 414 of the Internal
Revenue Code of 1986, as amended (the
“Code”).
(c)
Except as disclosed in Parent Disclosure Schedules, each Benefit
Plan is in compliance in all material respects with, and has been
operated in accordance with, its terms and the requirements of all
applicable law, and Parent and the ERISA Affiliates have satisfied
in all material respects all of their statutory, regulatory and
contractual obligations with respect to each such Benefit Plan. No
legal action, suit or claim is pending or, to Seller’s
Knowledge, threatened with respect to any Benefit Plan (other than
claims for benefits in the ordinary course).
(d)
Except as disclosed in Parent Disclosure Schedules, each Benefit
Plan or trust which is intended to be qualified or exempt from
taxation under Section 401(a), 401(k) or 501(a) of the Code has
received a favorable determination letter from the IRS that it is
so qualified or exempt.
(e)
There has been no non-exempt prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with
respect to any Benefit Plan. Neither Parent nor any ERISA Affiliate
has incurred any liability for any excise tax arising under the
Code with respect to a Benefit Plan.
(f)
Except as disclosed in Parent Disclosure Schedules, no employee or
former employee of Parent will become entitled to any bonus,
retirement, severance, or similar benefit (including acceleration
of vesting or exercise of an incentive award) as a result of the
transactions contemplated by this Agreement.
SECTION
4.23 Other Employment
Matters.
(a)
Parent Disclosure Schedules contain a complete list of all
employees of Parent, including each employee on leave of absence or
layoff status (collectively, the “ ”), and all
officers and managers of Parent, with the following information for
each Parent Employee, officer and manager: name; job title; current
compensation paid or payable and any change in compensation since
the most recent balance sheet date; bonuses paid in the previous
twelve month period; vacation accrued as of a recent date; and
service credited as of a recent date for purposes of vesting and
eligibility to participate under any Benefit Plan of Parent; and
all bonuses and any other amounts to be paid by Parent at or in
connection with the Closing.
(b)
Except as set forth in Parent Disclosure Schedules, to the
knowledge of Parent and its officers and directors, no Parent
Employee, officer, or director of Parent is a party to, or is
otherwise bound by, any confidentiality, non-competition,
proprietary rights agreement or similar agreement that would affect
(i) the performance of his or her duties as an employee, officer or
director or (ii) the ability to conduct the business of Parent
after the Closing Date.
(c)
Parent is not a party to any labor or collective bargaining
agreement; there are no labor or collective bargaining agreements
which pertain to any Parent Employee; and no Parent Employee is
represented by any labor organization.
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(d) No
labor organization or group of Parent Employees has made a pending
demand for recognition, there are no representation proceedings or
petitions seeking a representation proceeding presently pending or,
to the knowledge of Parent and its officers and directors,
threatened to be brought or filed with the National Labor Relations
Board or other labor relations tribunal, and there is no organizing
activity involving Parent pending or, to the knowledge of Parent
and its officers and directors, threatened by any labor
organization or group of Parent Employees.
(e)
There are no (i) strikes, work stoppages, slow-downs, lockouts or
arbitrations or (ii) grievances or other labor disputes pending or,
to the knowledge of Parent and its officers and directors,
threatened against or involving Parent.
(f)
There are no complaints, charges or claims against Parent pending
or, to the knowledge of Parent and its officers and directors,
threatened to be brought or filed with any Governmental Authority
based on, arising out of, in connection with, or otherwise relating
to the employment by Parent, of any Parent Employee, including any
claim for workers’ compensation.
(g)
Parent is in compliance in all material respects with all laws and
orders in respect of employment and employment practices and the
terms and conditions of employment and wages and hours, and has
not, and is not, engaged in any unfair labor practice.
SECTION
4.24 Finders’ Fees. Except as
set forth in Parent Disclosure Schedule, there is no investment
banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of Parent or any of
the shareholders of Parent or Merger Sub who might be entitled to
any fee or other commission in connection with the transactions
contemplated by this Agreement or any of the Ancillary
Agreements.
ARTICLE
V
Deliveries
SECTION
5.01 Deliveries of
Seller. At Closing as a further condition thereof,
concurrently with the Closing, the Seller shall deliver or cause to
be delivered to the Parent:
(a)
this Agreement duly executed by an authorized signatory of the
Seller;
(b) a
certificate evidencing the Company Shares along with a duly
executed stock power for transfer to Parent or other evidence of
the Seller’s ownership of the Company Shares and that upon
Closing, Seller shall have the rights to receive the Preferred E
Stock and underlying Parent Stock and Seller shall be the only
owner of Company Shares (or any other ownership interest of any
class or character) of the Company;
(c) a
Stockholder Agreement, substantially in the form attached hereto as
Exhibit D executed by the
Seller;
(d) a
certificate, in a form reasonably acceptable to the Parent,
executed by the Seller, dated as of the Closing Date, certifying
the representations and warranties set forth in Article II are
true, complete and accurate in all material respects;
(e) the
Constituent Agreements, duly executed by the applicable signatories
thereto.
(f)
Evidence that, at Closing, the Company owns and possesses valid
title to each of the patents and applications set forth on the
Company Disclosure Schedule and all of the Intellectual
Property Rights and the
Seller shall deliver a certificate certified attesting to the
foregoing.
-24-
SECTION
5.02 Deliveries of the
Parent. At Closing, as a further condition thereof,
concurrently with the Closing, the Parent shall deliver to Seller
and the Company:
(a) a
certificate to the Company and Seller from the Parent, signed by
its Secretary or Assistant Secretary certifying that the attached
copies of the Parent Charter, Parent Bylaws and resolutions of the
Board of Directors of the Parent approving this Agreement and the
transactions contemplated hereunder, including any required
amendments to the Parent Charter, are all true, complete and
correct and remain in full force and effect;
(b) a
certificate executed by the Chief Executive Officer of the Parent,
dated as of the Closing Date, certifying the representations and
warranties set forth in Article IV are true, complete and accurate
in all material respects
(c) a
certificate representing the new shares of Preferred E Stock issued
to the Seller;
(d) the
Constituent Agreements, duly executed by the Parent (or such other
parties as are parties thereto);
(e)
Evidence of the resignations, to be effective on the eleventh day
following the date on which Parent meets its information
obligations under the Exchange Act (as applicable), of the
following officers and directors of the Parent: Xxxxx Xxxxx,
Xxxxxxx Xxxxxxx, Xxxxxx Xxxx, Xxxxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxxxx
Xxxxxx and Xxxxxxx Xxxxxxxx, _______________;
(f)
Evidence of termination of the employment agreements of Xxxxx
Xxxxx;
(g)
Evidence of the appointment of the following individuals as
officers of the Parent, at such positions as are set forth
below:
(i)
Denver Lough- Chairman, President and Chief Executive
Officer
(ii)
Xxxx Xxxxxxx- Chief Financial Officer
(iii)
Xxxxxxxxx Xxxxxxxxx- General Counsel
(iv)
Xxxxxx Xxxxxxx- Executive Vice President, Chief Operating Officer
and Secretary
(v)
Xxxxxxx Xxxxxxxxxx- Chief Medical Officer
(vi)
Xxxx Xxxx- Chief Strategist
(vii)
Xxxxx Xxxxxx- Director of Translational Medicine and Regulatory
Strategy
(viii)
Xxxx Xxxx- Office Manager and Clinical Research
Coordinator
(ix)
Xxxxxxx Xxxx- Laboratory Manager
(x)
Xxxxxx Xxxxxxxx- Clinical Research Coordinator
(h)
Evidence of the election of the following individuals to the
Parent’s Board of Directors, which shall become effective on
the eleventh day following the date on which Parent meets its
information obligations under the Exchange Act: Xxxx Xxxxxxx,
[TBD], Denver Lough, Xxxxxx Xxxxxxx, Xxxx Xxxx and Xxxxxxx
Xxxxxxxxxx.
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(i) A
pro-forma capitalization table as of the Closing reflecting the
capitalization of the Company on a fully-diluted and converted
basis after giving effect to the transactions contemplated in this
Agreement reflecting that the Preferred E Stock and underlying
Parent Stock issued to Seller in the Merger represents 50% of the
issued and outstanding shares of Parent Common Stock, on an
as-converted basis.
(j) A
pro-forma balance sheet of Parent immediately after the Closing
which reflects the sum of cash on hand plus the proceeds from the
private placement described in Section 7.03 less the payment or allocation
of funds for the payment of accounts payable as provided in Section
4.26 of not less than $1,500,000 (“Parent Closing Cash
Amount”); and no Indebtedness except as set forth on
the Parent Disclosure Schedule 406(c).
(k)
Bank statements as of the latest practical date evidencing
Parent’s cash balance of at least $7,500,000 or, in the
alternative, evidence or confirmation of proceeds from the sale of
the Parent Common Stock described in Section 7.03 that has been
wired to the Parent’s bank account that, when added to the
Parent’s current cash balance is equal to at least
$7,500,000.
(l) A
filed stamped copy of the Certificate of Designation of the
Preferred E Stock, as filed with the Secretary of State of the
State of Delaware.
SECTION
5.03 Deliveries of the
Company. At Closing, as a further condition thereof,
concurrently with the Closing, the Company shall
deliver:
(a) to
the Parent and Seller this Agreement executed by the
Company;
(b) to
the Parent, a certificate from the Company, signed by its Secretary
or Assistant Secretary certifying that the attached copies of the
Company’s Charter Documents and resolutions of the Board of
Directors or Manager of the Company approving this Agreement and
the Transactions, are all true, complete and correct and remain in
full force and effect;
(c)
certificate, in a form reasonably acceptable to the Parent,
executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, certifying the representations and warranties set
forth in Article III are true, complete and accurate in all
material respects;
(d) if
requested by the Parent, the results of UCC, judgment lien and tax
lien searches with respect to the Company, the results of which
indicate no liens on the assets of the Company; and
(e)
bank statement or other form of confirmation reasonably acceptable
to Parent confirming that Company has cash on hand or immediately
available funds as of the Closing Date in an amount equal to the
Parent Closing Cash Amount.
(f) A
pro-forma balance sheet of Company immediately after the Closing
which shall reflect immediately after the Closing only those
payables and Indebtedness disclosed in the Company Disclosure
Schedules and cash equal to the Parent Closing Cash
Amount.
ARTICLE
VI
Covenants
SECTION
6.01 Public
Announcements. The Parent and the Company will consult with
each other before issuing, and provide each other the opportunity
to review and comment upon, any press releases or other public
statements with respect to the Agreement, the Merger and the
Transactions and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be
required by applicable Law,
court process or by obligations pursuant to any listing agreement
with any national securities exchanges.
-26-
SECTION
6.02 Fees and
Expenses. All fees and expenses incurred in connection with
this Agreement shall be paid by the Party incurring such fees or
expenses, whether or not this Agreement is
consummated.
SECTION
6.03 Exclusivity.
The Company shall not (and shall not cause or permit any of their
affiliates to) engage in any discussions or negotiations with any
person or take any action that would be inconsistent with the
Transactions. The Company shall notify the Parent immediately if
any person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
SECTION
6.04 Audit of Company
Financial Statements. The Company shall cooperate and, if
required, assist Parent in compiling and preparing audited
financial statements for the Company’s most recently
completed last two fiscal years and unaudited financial statements
for any subsequent interim period no later than 30 days from the
Closing Date, which shall be prepared by Parent and the cost
thereof shall be borne by Parent, or such shorter period as Company
has been organized.
SECTION
6.05 Intentionally
omitted.
SECTION
6.06 NASDAQ
Approval. As soon as practicable following the execution of
this Agreement, and as condition to closing of the Merger, Parent
shall obtain approval by The NASDAQ Stock Market LLC of the listing
of the Parent Stock underlying the Preferred E Stock on The NASDAQ
Capital Market and the issuance of the Preferred E Stock pursuant
to this Agreement as well as evidence that The NASDAQ Stock Market
LLC has completed its review of the Listing of Additional Shares
application related to the Parent Stock underlying the Preferred E
Stock (collectively, “NASDAQ
Approval”).
SECTION
6.07 Stockholder
Action. As soon as practicable following the execution of
this Agreement, and as condition to closing of the Merger, Parent
shall obtain approval by its stockholders of the purchase of the
Purchased Patents, this Agreement, the issuance of the Preferred E
Stock , and the transactions contemplated hereby.
SECTION
6.08 Pre-Closing
Activities of Parent. From and after the
date of this Agreement until the Closing Date and except as set
forth in the respective schedules to be delivered by Parent
pursuant hereto or as permitted or contemplated by this Agreement,
Parent will:
(a)
Carry on its business in substantially the same manner as it has
heretofore;
(b)
Maintain in full force and effect insurance comparable in amount
and in scope of coverage to that now maintained by it;
(c)
Perform in all material respects all of its obligations under
material contracts, leases, and instruments relating to or
affecting its assets, properties, and business;
(d) Use
its best efforts to maintain and preserve its business organization
intact, to retain its key employees, and to maintain its
relationships with its material suppliers and
customers;
(e)
Duly and timely file for all taxable periods ending on or prior to
the Closing Date all federal, state, county, and local tax returns
required to be filed by or on behalf of such entity or for which
such entity may be held responsible and shall pay, or cause to pay,
all taxes required to be shown as due and payable on such returns,
as well as all installments of tax due and payable during the
period commencing on the date of this Agreement and ending on the
Closing Date; and
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(f)
Fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state laws
and all rules, regulations, and orders imposed by federal or state
governmental authorities.
From
and after the date of execution of this Agreement and except as
provided herein until the Closing Date, Parent will not, without
the prior written approval of Seller or as otherwise contemplated
or required in order to effectuate the intents and purposes of this
Agreement with respect to a-c and Seller with respect to
b-c:
(a)
Make any change in its certificate of incorporation or bylaws or
effect any recapitalization except as specifically provided
herein;
(b)
Enter into or amend any material contract, agreement, or other
instrument of any of the types described in the Parent Disclosure
Schedules, except that Parent may enter into or amend any contract,
agreement, or other instrument in the ordinary course of business;
or
(c)
Sell or enter into any agreement for the sale of Parent
securities.
SECTION
6.09 Notices of
Significant Events. From and after the date of the execution
of this Agreement until the Closing Date, each Party hereto shall
promptly notify the other Parties hereto of: (a) the occurrence, or
non-occurrence, of any event that would be likely to cause any
condition to the obligations of any party to effect the purchase of
the Purchased Intellectual Property or the issuance of the
Preferred E Stock, and the other transactions contemplated by this
Agreement not to be satisfied; or (b) the failure of Seller or
Parent or Merger Sub, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or
satisfied by it pursuant to this Agreement which would reasonably
be expected to result in any condition to the obligations of any
party to complete the purchase of the Purchased Patents and the
other transactions contemplated by this Agreement not to be
satisfied; provided, however, that the delivery of any notice
pursuant to this Section 6.09 shall not cure any breach of any
representation or warranty requiring disclosure of such matter
prior to the date of this Agreement or otherwise limit or affect
the remedies available hereunder to the party receiving such
notice.
SECTION
6.10 Consents and
Approvals. Parent shall use commercially reasonable efforts
to obtain all consents, approvals, certificates and other documents
required in connection with the performance by it of this Agreement
and the consummation of the transactions contemplated hereby.
Parent shall make all filings, applications, statements and reports
to all governmental authorities and other persons that are required
to be made prior to the Closing Date by or on behalf of Parent and
Merger Sub pursuant to applicable law or a material contract of
Parent in connection with this Agreement and the transactions
contemplated hereby.
SECTION
6.11 Indemnification. Parent will
indemnify and hold harmless Seller from and against any and all
losses, claims, damages, expenses, liabilities, or actions to which
Seller may become subject under applicable law (including the
Securities Act and the Exchange Act) and will reimburse Seller for
any legal or other expenses reasonably incurred by Seller in
connection with investigating or defending any claims or actions,
whether or not resulting in liability, insofar as such losses,
claims, damages, expenses, liabilities, or actions arise out of or
are based upon any untrue statement or alleged untrue statement of
a material fact contained in any application or statement filed
with a governmental body 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 in order to make the
statements therein not misleading, but only insofar as any such
statement or omission was made in reliance upon and in conformity
with information furnished in writing by Parent or Merger Sub
expressly for use therein. The indemnity agreement contained in
this Section 6.11 shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of
Seller and shall survive the consummation of the transactions
contemplated by this Agreement for a period of two (2)
years.
-28-
SECTION
6.12 The Acquisition of
Preferred E Common Stock. Parent and Seller understand and
agree that the consummation of this Agreement including the
issuance of the Preferred E Stock and Parent Stock to Seller in
consideration for the Merger as contemplated hereby, constitutes
the offer and sale of securities under the Securities Act and
applicable state statutes. Parent and Seller agree that such
transactions shall be consummated in reliance on exemptions from
the registration and prospectus delivery requirements of such
statutes which depend, among other items, on the circumstances
under which such securities are acquired.
(a) In
connection with the transaction contemplated by this Agreement,
Parent shall file, with the assistance of legal counsel, such
notices, applications, reports, or other instruments as may be
deemed by them to be necessary or appropriate in an effort to
document reliance on such exemptions, and the appropriate
regulatory authority in the state where Seller resides, all to the
extent and in the manner as may be deemed by Parent to be
appropriate.
(b) In
order to more fully document reliance on the exemptions as provided
herein, Merger Sub, Seller and Parent shall execute and deliver to
the other, at or prior to the Closing, such further letters of
representation, acknowledgment, suitability, or the like as Parent
or Seller and their respective counsel may reasonably request in
connection with reliance on exemptions from registration under such
securities laws.
ARTICLE
VII
Closing Conditions: Parent and Merger Sub Obligations.
The
obligations of Company and Seller under this Agreement are subject
to the satisfaction, at or before the Closing Date, of the
following conditions:
SECTION
7.01 Stockholder and NASDAQ
Approval. This Agreement, the issuances of the Preferred E
Stock and Parent Stock, and the transactions contemplated hereby
shall have been approved by the stockholders of Parent in the
manner required by the applicable laws of the state of Delaware and
Nevada and Parent shall have received NASDAQ Approval.
SECTION
7.02 Conversion of Outstanding Preferred
Stock into Common Stock. Prior to the Closing, Parent shall
have worked with the holders of all series of Parent’s
outstanding preferred stock to effectuate a conversion of those
shares of preferred stock into shares of Parent Stock, unless as a
result of any such conversion the holder would beneficially own 5%
or more of such Common stock in which case, the conversion may be
deferred and effected following Closing in accordance with the
terms of the certificate of designation governing such Preferred
Stock.
SECTION
7.03 Capital Raise of One Million Five
Hundred Thousand Dollars; Lease and Equipment. Prior to
Closing, Parent shall have raised a minimum of $1,500,000 in cash
and current assets as contemplated in the Term Sheet originally
executed between Parent and Seller; Parent or Merger Sub shall have
entered into one of more leases for commercial space suitable to
the business of the Company; and Parent or Merger Sub shall have
acquired or initiate the process of equipping a suitable laboratory
pursuant to specifications provided by Seller and/or
Company.
SECTION
7.04 Adoption and Approval of Stock Option
Plan. Parent shall have adopted a stock incentive plan (the
“Stock and Option
Plan”) and shall have received approval of the Stock
and Option Plan from Parent’s Board of Directors and
stockholders. At Closing, Parent shall issue ten year options to
those persons in those amounts as have been recommended by Seller
under the Stock and Option Plan, at market price pursuant to NASDAQ
rules.
-29-
SECTION
7.05 Accuracy of Representations.
The representations and warranties made by Parent and Merger Sub,
in this Agreement were true when made and shall be true at the
Closing Date with the same force and effect as if such
representations and warranties were made at and as of the Closing
Date (except for changes therein permitted by this Agreement), and
Parent and Merger Sub shall have performed or complied with all
covenants and conditions required by this Agreement to be performed
or complied with by Parent or Merger Sub prior to or at the
Closing. Seller shall be furnished with certificates, signed by
duly authorized officers of Parent and Merger Sub, and dated the
Closing Date, to the foregoing effect.
SECTION
7.06 Officer’s Certificates.
Seller shall have been furnished with certificates dated the
Closing Date and signed by the duly authorized chief executive
officer of Parent to the effect that to such officer’s
knowledge no litigation, proceeding, investigation, or inquiry is
pending or, to the best knowledge of Parent, threatened, which
might result in an action to enjoin or prevent the consummation of
the transactions contemplated by this Agreement. Furthermore, based
on certificates of good standing, representations of government
agencies, and Parent’s own documents and information, the
certificate shall represent, to the best knowledge of the officer,
that:
(a)
This Agreement has been duly approved by Parent’s board of
directors and stockholders and has been duly executed and delivered
in the name and on behalf of Parent by its duly authorized officers
pursuant to, and in compliance with, authority granted by the board
of directors of Parent pursuant to a unanimous
consent;
(b)
This Agreement has been duly approved by Merger Sub’s board
of directors and stockholders and has been duly executed and
delivered in the name and on behalf of Merger Sub by its duly
authorized officers pursuant to, and in compliance with, authority
granted by the board of directors of Merger Sub pursuant to a
unanimous consent;
(c)
There have been no material adverse changes in the financial
condition, business or operations of Parent or Merger Sub up to and
including the date of the certificate;
(d) All
conditions required by this Agreement have been met, satisfied, or
performed by Parent and Merger Sub;
(e) All
authorizations, consents, approvals, registrations, and/or filings
with any governmental body, agency, or court required in connection
with the execution and delivery of the documents by Parent and
Merger Sub have been obtained and are in full force and effect or,
if not required to have been obtained, will be in full force and
effect by such time as may be required; and
(f)
There is no material action, suit, proceeding, inquiry, or
investigation at law or in equity by any public board or body
pending or threatened against Parent or Merger Sub, wherein an
unfavorable decision, ruling, or finding could have an adverse
effect on the financial condition of Parent or Merger Sub, the
operation of Parent or Merger Sub or the acquisition of the
Purchased Intellectual Property contemplated herein, or any
agreement or instrument by which Parent or Merger Sub is bound or
in any way contests the existence of Parent or Merger
Sub.
SECTION
7.07 No Material Adverse Change.
Prior to the Closing Date, there shall not have occurred any
material adverse change in the financial condition, business, or
operations of Parent, nor shall any event have occurred which, with
the lapse of time or the giving of notice, may cause or create any
material adverse change in the financial condition, business, or
operations of Parent.
SECTION
7.08 Good Standing. Seller shall
have received a certificate of good standing from the secretary of
state of Delaware, dated as of the date within five days prior to
the Closing Date, certifying that Parent is in good standing as a
corporation in the State of Delaware.
SECTION
7.09 Actions or Proceedings. No
action or proceeding by any governmental authority or other person
shall have been instituted or threatened which: (a) is likely to
have a material adverse effect on the business or
operations of Parent; or (b) could enjoin, restrain or prohibit, or
could result in substantial damages in respect of, any provision of
this Agreement or the consummation of the transactions contemplated
hereby.
-30-
SECTION
7.10 Representations and Warranties True at
the Closing Date. All of the representations and warranties
of the Parent and the Merger Sub contained in this Agreement shall
have been true and correct in all material respects on and as of
the execution date hereof and shall be true and correct in all
material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made
on and as of such date (provided that those representations and
warranties that are specifically made as of a particular calendar
date or as of the date hereof shall be true, correct and complete
in all material respects as of such date. The Parent, Merger Sub
and Seller shall have executed and delivered to the a certificate
as of the Closing to such effect.
SECTION
7.11 Other Items. Seller shall have
received such further documents, certificates, or instruments
relating to the transactions contemplated hereby as Seller may
reasonably request.
ARTICLE
VIII
Closing Conditions: Seller Obligations
The
obligations of Parent and Merger Sub under this Agreement are
subject to the satisfaction, at or before the Closing Date, of the
following conditions:
SECTION
8.01 Accuracy of Representations.
The representations and warranties made by Seller in this Agreement
were true when made and shall be true at the Closing Date with the
same force and effect as if such representations and warranties
were made at and as of the Closing Date (except for changes therein
permitted by this Agreement), and Seller shall have performed or
complied with all covenants and conditions required by this
Agreement to be performed or complied with by Seller prior to or at
the Closing. Parent shall be furnished with a certificate, signed
by Seller and dated the Closing Date, to the foregoing
effect.
SECTION
8.02 Actions or Proceedings. No
action or proceeding by any governmental authority or other person
shall have been instituted or threatened which: (a) is likely to
have a material adverse effect on the Purchased Patents or the
ownership of the Purchased Patents by Seller; or (b) could enjoin,
restrain or prohibit, or could result in substantial damages in
respect of, any provision of this Agreement or the consummation of
the transactions contemplated hereby.
SECTION
8.03 Other Items. Parent shall have
received such further documents, certificates, or instruments
relating to the transactions contemplated hereby as Parent may
reasonably request.
ARTICLE
IX
Confidentiality,
Non-Solicitation and Non-Competition.
SECTION
9.01 Non-Disclosure. Except
as set forth in this Section 9.01, the receiving party shall not
disclose or use the disclosing party’s Confidential
Information. Each Party hereto may: (a) use the other
Party’s Confidential Information to the extent reasonably
necessary to perform its obligations hereunder; and (b) use the
other Party’s Confidential Information to the extent
reasonably necessary to (i) exercise the rights granted hereunder,
(ii) prosecute or defend litigation, or (iii) comply with
applicable laws, governmental regulations or court orders or
submitting information to tax or other governmental entities
(including the SEC); in each case, provided that if a Party is
required to make any such disclosure, other than pursuant to a
non-use and non-disclosure agreement, it will give reasonable
advance notice in writing to the other Party of such disclosure
requirement, will use reasonable efforts to secure confidential
treatment of such information (whether through protective order or
otherwise), except to the extent inappropriate with respect to
patent applications, and use reasonable efforts to permit the other
Party an opportunity to maintain confidentiality of its affected
Confidential Information. It is understood that either
Party may also disclose the Confidential Information of the other
Party upon receipt of the prior express written consent to such
disclosure by a duly authorized representative of
the other Party. Notwithstanding anything to the
contrary, upon assignment of the Purchased Patents to Merger Sub
hereunder, the Patent Documents to the extent that such documents
are not publicly available, will be deemed to be the Confidential
Information of Merger Sub and not the Confidential Information of
Seller, and Merger Sub shall be free to use and disclose all such
Patent Documents without restriction.
-31-
SECTION
9.02 Confidential
Agreement. Each Party shall not to disclose the
terms, but may disclose the existence, hereof to any third party
without the prior written consent of this other
Party. Each Party may disclose the terms hereof (a) to
such Party’s affiliates and to such Party’s attorneys,
accountants, advisors and others on a need to know basis under
circumstances that reasonably ensure the confidentiality thereof,
(b) to the extent required by law, (c) as necessary to exercise,
perfect or enforce this Agreement or rights hereunder, including
recordation by Merger Sub of assignments of the Purchased Patents,
(d) by Merger Sub in connection with a sale or license of any
Purchased Patent, (e) in connection with a merger, acquisition or
financing transaction or proposed merger, acquisition or financing
transaction, or the like, involving a Party to this Agreement or an
affiliate thereof and under circumstances that reasonably ensure
the confidentiality of such terms or (f) in a press release
substantially in the form exchanged by the Parties concurrently
with the execution of this Agreement.
SECTION
9.03 Further
Agreements by Seller. Seller hereby agrees that until the
later of one (1) year after separation of Seller as an employee or
consultant of the Surviving Entity or Parent, and two (2) years
from the Closing Date, it will not:
(a)
Engage, own, manage, operate, control, be employed by, consult for,
participate in, or be connected in any manner with the ownership,
management, operation or control of any business in competition
with the Business of Parent or the Surviving Company, as defined in
the next sentence. For purposes hereof, Parent/Surviving Company
Business shall mean research, development, techniques and
technology in any manner involving or related to regeneration of
functionally polarized tissue by use of Leucine-rich
repeat-containing G-protein coupled Receptor (LGR) expressing cells
and any and all inventions, technology and trade secrets related
thereto or a result of the Purchased Intellectual Property
hereunder, as well as all activities that involve the making, use
or licensing thereof. For the absence of doubt, the business shall
not involve technology or techniques not developed by the Company
or on its behalf, not relying on the inventions or technology
described in the Purchased Intellectual Property, nor any actions
or activities involving the practice of medicine and treatment of
patients as a physician even if reliant upon the Purchased
Intellectual Property involving the delivery of medical
services.
(b)
Recruit, solicit or hire, or attempt to recruit, solicit or hire,
any employee, or independent contractor, vendor, contract research
organization, officer or director of Parent or the Surviving
Company to leave the employment (or other relationship) thereof,
whether or not any such person or entity is party to an employment
agreement, for the purpose of competing with Parent/ Surviving
Company or providing services the same as or similar to that
provided to Parent or Surviving Company .
(c)
Attempt in any manner to solicit or accept from any customer of
Parent or the Surviving Company, business of the kind or
competitive with the business done by Parent or the Surviving
Company with such customer or to persuade or attempt to persuade
any such customer to cease to do business or to reduce the amount
of business which such customer has customarily done or might do
with Parent or the Surviving Company, or if any such customer
elects to move its business to a person other than Parent or
Surviving Company, provide any services of the kind or competitive
with the business of Parent or Surviving Company for such customer,
or have any discussions regarding any such service with such
customer, on behalf of such other person for the purpose of
competing with Parent/ Surviving Company Business; or
(d)
Interfere with any relationship, contractual or otherwise, between
Parent or the Surviving Company and any other party, including,
without limitation, any supplier, distributor, co-venturer or joint
venturer of Parent or the Surviving Company, for the purpose of
soliciting such other party to discontinue or reduce its business
with Parent or the Surviving Company for the purpose of competing
with Parent/ Surviving Company Business.
-32-
ARTICLE
X
Termination
SECTION
10.01 Termination. This
Agreement may be terminated at any time prior to the
Closing:
(a) by
the mutual written consent of Seller, the Company, Merger Sub and
Parent;
(b) by
Parent or Merger Sub by written notice to Seller and Company
if:
(i)
Merger Sub is not then in material breach of any provision of this
Agreement and there has been a breach, inaccuracy in or failure to
perform any representation, warranty, covenant or agreement made by
Seller or the Company pursuant to this Agreement that would give
rise to the failure of any of the conditions specified in Article
II or III and such breach, inaccuracy or failure has not been cured
by Seller or the Company, as the case may be, within ten (10) days
of Seller’s or the Company’s receipt of written notice
of such breach from Merger Sub or Parent; or
(ii)
any of the conditions set forth in Article VIII shall not have
been, or if it becomes apparent that any of such conditions will
not be, fulfilled by February 28, 2017, unless such failure shall
be due to the failure of Merger Sub to perform or comply with any
of the covenants, agreements or conditions hereof to be performed
or complied with by it prior to the Closing.
(c) by
Seller by written notice to Merger Sub and Parent if:
(i)
Seller is not then in material breach of any provision of this
Agreement and there has been a breach, inaccuracy in or failure to
perform any representation, warranty, covenant or agreement made by
Merger Sub pursuant to this Agreement that would give rise to the
failure of any of the conditions specified in Article III and such
breach, inaccuracy or failure has not been cured by Merger Sub
within ten (10) days of Merger Sub’s receipt of written
notice of such breach from Seller; or
(ii)
any of the conditions set forth in Article VII shall not have been,
or if it becomes apparent that any of such conditions will not be,
fulfilled by February 28, 2017, unless such failure shall be due to
the failure of Seller or the Company to perform or comply with any
of the covenants, agreements or conditions hereof to be performed
or complied with by it prior to the Closing.
(d) by
Merger Sub or Seller in the event that (i) there shall be any legal
requirement that makes consummation of the transactions
contemplated by this Agreement illegal or otherwise prohibited or
(ii) any Governmental authority shall have issued an order
restraining or enjoining the transactions contemplated by this
Agreement, and such Governmental order shall have become final and
non-appealable.
SECTION
10.02 Effect of
Termination. In the
event of the termination of this Agreement in accordance with this
Section, this Agreement shall forthwith become void and there shall
be no liability on the part of any party hereto
except:
(a) as
set forth in this Article 10 and Section 11.8 hereof;
and
(b)
that nothing herein shall relieve any party hereto from liability
for any willful breach of any provision hereof.
-33-
ARTICLE
XI
Miscellaneous
SECTION
11.01 Notices. All
notices, requests, claims, demands and other communications under
this Agreement shall be in writing and shall be deemed given upon
receipt by the Parties at the following addresses (or at such other
address for a Party as shall be specified by like
notice):
If to
the Parent or Merger Sub, to:
0000-X
Xxxxxx Xxxx
X.
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attn:
Chief Financial Officer
With a
copy to (which shall not constitute notice):
Sichenzia Xxxx
Xxxxxxx Xxxxxx, LLP.
00
Xxxxxxxx, 00xx Xxxxx
Xxx
Xxxx, XX 00000
Att:
Xxxxxx X. Xxxxxx, Esq.
xxxxxxx@xxxxxxx.xxx
212-930-9700
If to
the Seller or Company, to:
Polarityte,
Inc.
000 X.
Xxxxxx Xxxxxx
Xxxxxxxxx, XX
00000
With a
copy to (which shall not constitute notice):
Xxxxxx
XxXxxxxx
00 Xxxx
Xxxxx Xxxxxx, Xxxxx 000
Xxxx
Xxxx Xxxx, XX 00000
Attn:
Xxxx X. Xxxxxxx, Esq.
SECTION
11.02 Amendments; Waivers;
No Additional Consideration. No provision of this Agreement
may be waived or amended except in a written instrument signed by
the Company, Parent and Seller. No waiver of any default with
respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or
omission of any Party to exercise any right hereunder in any manner
impair the exercise of any such right.
-34-
SECTION
11.03 Replacement of
Securities. If any certificate or instrument evidencing any
Preferred E Stock and underlying Parent Stock is mutilated, lost,
stolen or destroyed, the Parent shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof, or
in lieu of and substitution therefore, a new certificate or
instrument, but only upon receipt of evidence reasonably
satisfactory to the Parent of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants
for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs associated with the
issuance of such replacement certificate or instrument. If a
replacement certificate or instrument evidencing any Preferred E
Stock and underlying Parent Stock is requested due to a mutilation
thereof, the Parent may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance
of a replacement.
SECTION
11.04 Remedies. In
addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, Seller, Parent
and the Company will be entitled to specific performance under this
Agreement. The Parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach
of obligations described in the foregoing sentence and hereby
agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be
adequate.
SECTION
11.05 Interpretation. When a
reference is made in this Agreement to an Article or Section, such
reference shall be to an Article or Section of this Agreement
unless otherwise indicated. Whenever the words
“include,” “includes” or
“including” are used in this Agreement, they shall be
deemed to be followed by the words “without
limitation.”
SECTION
11.06 Severability.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule or Law, or
public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the Transactions
contemplated hereby is not affected in any manner materially
adverse to any Party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced,
the Parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the Parties as closely as
possible in an acceptable manner to the end that Transactions
contemplated hereby are fulfilled to the extent
possible.
SECTION
11.07 Counterparts;
Facsimile Execution. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the
same agreement and shall become effective when one or more
counterparts have been signed by each of the Parties and delivered
to the other Parties. Facsimile execution and facsimile or
electronic delivery of this Agreement is legal, valid and binding
for all purposes.
SECTION
11.08 Entire Agreement;
Third Party Beneficiaries. This Agreement, taken together
with all exhibits attached hereto and the Company Disclosure
Schedule and the Parent Disclosure Schedule, (a) constitute the
entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the Parties with
respect to the Transactions and (b) are not intended to confer upon
any person other than the Parties any rights or remedies. The
representations and warranties of Seller and the Company contained
in this Agreement shall survive the Closing and the termination of this
Agreement.
SECTION
11.09 Governing
Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York,
without reference to principles of conflicts of laws. Any action or
proceeding brought for the purpose of enforcement of any term or
provision of this Agreement shall be brought only in the Federal or
state courts sitting in the Southern District of New York and the
parties hereby waive any and all rights to trial by
jury.
SECTION
11.10 Assignment.
Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the
Parties
without the prior written consent of the other Parties. Any
purported assignment without such consent shall be void. Subject to
the preceding sentences, this Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the Parties and their
respective successors and assigns.
-35-
IN
WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement and Plan of Reorganization as of the date first
above written.
|
|
The
Parent:
|
|
|
|
|
|
|
|
|
By:
________________________
Name: Xxxx Xxxxxxx
Title: Chief Financial Officer
|
|
|
The
Company:
|
POLARITYTE, INC.
By:
_________________________
Name:
Title:
|
|
|
The
Seller:
|
DENVER LOUGH
____________________________
|
|
|
Merger
Sub
|
By:____________________________
Name:
Address: |
-36-
Schedule
A
Definitions
“Affiliate” means, with
respect to any specified Person, any other Person that directly or
on directly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such specified
Person. “Person” means an association,
corporation, an individual, a partnership, a limited liability
company, a trust or any other entity or organization.
“Ancillary Agreements”
means, that certain Executive Employment Agreement between Parent
and Seller (the “Executive
Employment Agreement”), that certain Voting Agreement
among various stockholders of Parent (the “Voting Agreement”) and all other
documents related to the transactions contemplated by this
Agreement.
“Confidential Information”
means any information, whether in electronic, written, graphic,
oral, machine readable or other tangible or intangible form, that
is marked or identified at the time of disclosure as
“Confidential” or “Proprietary” or in some
other manner so as to clearly indicate its confidential
nature. In order to be treated as “Confidential
Information,” information that is disclosed orally must be
identified at the time of disclosure or promptly thereafter as
confidential or proprietary. The obligations under
Article 8 shall not apply to the extent that the disclosing party
establishes by competent proof that such information: (a) was
publicly known and made generally available in the public domain
prior to the time of disclosure by the disclosing party;
(b) becomes publicly known and made generally available after
disclosure by the disclosing party to the receiving party through
no act or omission of the receiving party; (c) was already in
the possession of the receiving party without confidentiality
obligations at the time of disclosure hereunder by the disclosing
party; (d) is obtained by the receiving party without
confidentiality obligations from a third party without a breach of
such third party’s obligations of confidentiality; or
(e) is independently developed by the receiving party without
use of or reference to the disclosing party’s Confidential
Information.
“Disclaimer Issue” means a
terminal disclaimer (including under 35 U.S.C. § 253 or 37 CFR
1.321 or the equivalent laws or regulation of any other patent
authority, a “Terminal
Disclaimer”) that exists or is or should reasonably be
required to be made in a patent or patent application to address a
double patenting issue, including such an issue raised in a
judicial or administrative proceeding (including any proceeding
with the U.S. Patent and Trademark Office or any corresponding
foreign patent authority).
“Patent Documents” means
documents, records and files relating to the Purchased Patents,
including (b) complete prosecution files and docketing reports
(including patent listing, current status, actions due and
deadlines), including materials filed with the U.S. Patent and
Trademark Office (or the equivalent authority in any other country)
with respect to such Purchased Patents, (c) originals (or, if the
original is not available, a copy) of all assignment agreements in
its possession relating to the Purchased Patents, including a
written assignment to Seller from each inventor for each Purchased
Patent, and (d) inventor notebooks and other documents (including,
but not limited to, those showing the conception and reduction to
practice of the inventions disclosed in the Purchased Patents or
related to the Patent Technology), and (e) any other materials or
information in the possession or control of, or known to, Seller
that, is material to the enforcement of such Purchased
Patents.
“Know-How” means all
technical information, know-how and data, including inventions
(whether patentable or not), discoveries, trade secrets,
specifications, regulatory filings and supporting documents,
instructions, processes, formulae, materials, expertise and other
technology applicable to compounds, formulations, compositions,
products or to their manufacture, development, registration, use or
commercialization or methods of assaying or testing them or
processes for their manufacture, formulations containing them,
compositions incorporating or comprising them and including all
biological, chemical, pharmacological, biochemical, toxicological,
pharmaceutical, physical and analytical, safety, quality control,
manufacturing, preclinical and clinical data, instructions,
processes, formulae, expertise and information, regulatory filings
and copies thereof, relevant to the development, manufacture, use
or commercialization of and/or which may be useful in studying,
testing, development, production or formulation of products, or
intermediates for the synthesis thereof.
“Patent Technology” refers
to the technology described and claimed in the Purchased Patents
and related technology directed to regeneration of functionally
polarized tissue by use of Leucine-rich repeat-containing G-protein
coupled Receptor (LGR) expressing cells, including, but not limited
to, that described in the Purchased Patents.
“Purchased Intellectual
Property” refers to the Patent Technology, the
Purchased Patents, the Patent Documents and the Know-How related to
the Patent Technology and the Purchased Patents.
A-1
“Purchased Patents” means
(a) the patents and patent applications identified in the preambles
hereto and on Exhibit G
(“Patents”) and the rights to
inventions in the Know-How including all applications and rights to
apply for and be granted, renewals or extensions of, and rights to
claim priority from, such rights and all similar or equivalent
rights or forms of protection which subsist or will subsist now or
in the future in any part of the world, (b) all reissues,
divisionals, continuations, continuations-in-part, extensions,
renewals, reexaminations and foreign counterparts thereof, and all
other patents, patent applications, certificates of invention and
other governmental grants resulting from the Patents, (c) all
patents and applications which claim priority to or have common
disclosure or common priority with any such patents or patent
applications (for the avoidance of doubt, patents which include
partial commonalities such as figures or patents whose features of
the inventions are different from those of Purchased Patents may be
excluded), (d) all paper and electronic versions of files,
documents, instruments, papers, books, ledgers, plans,
correspondence, memoranda, maps, diagrams, photographs, and
videotapes, to the extent related to the Purchased Patents; (e) all
goodwill related to the Purchased Intellectual Property, (f) all
claims, causes of action and other legal rights and remedies,
whether or not known as of the Closing Date, relating to the
Purchased Patents or Seller’s ownership of the Purchased
Patents but excluding causes of action and other legal rights and
remedies of Seller (1) against Merger Sub with respect to the
transactions contemplated by this Agreement; or (2) relating
exclusively to Seller’s liabilities not assigned hereunder;
and (g) all rights corresponding to any of the foregoing throughout
the world (including the right to claim the priority date of any of
such patents and patent applications and the right to xxx for and
recover damages for any past, present or future infringement of
such patents and patent applications); in each case, regardless of
whether in existence prior to, as of or after the Closing
Date.
“Transfer Documents” means
fully executed, original patent transfer documents, in a form
agreed to by the Parties and suitable for filing with the relevant
governmental entity, in each jurisdiction where the Purchased
Patents have been filed, as the case may be, in each case to record
the change of ownership of the Purchased Patents from Seller to
Merger Sub. Unless otherwise directed by Merger Sub,
Transfer Documents for U.S. Purchased Patents shall be provided in
the form of Exhibit
H.
A-2
