EXHIBIT 2.1
MERGER AGREEMENT AND PLAN OF REORGANIZATION
THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
dated as of April 22, 2002, by and among ALD SERVICES, INC., a Nevada
corporation ("ALD"), ALD SERVICES MERGER SUBSIDIARY, INC., a Delaware
corporation ("Merger Sub") and MICROISLET, INC., a Delaware corporation
("MicroIslet").
RECITALS:
WHEREAS, the Boards of Directors of ALD, Merger Sub and MicroIslet have
each approved the merger of Merger Sub into MicroIslet (the "Merger"), pursuant
to the Certificate of Merger set forth in Exhibit A hereto ("Merger
Certificate") and the transactions contemplated hereby, in accordance with the
applicable provisions of the statutes of the state of Delaware, which permit
such a merger, contingent upon satisfaction prior to closing of all of the terms
and conditions of this Agreement; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with completion of the Merger.
NOW, THEREFORE, in consideration of the foregoing recitals, which shall
be considered an integral part of this Agreement, and the covenants, conditions,
representations and warranties hereinafter set forth, the parties hereby agree
as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. At the Effective Time (as hereinafter defined), and
subject to the terms and conditions of this Agreement and the Merger
Certificate, Merger Sub will be merged with and into MicroIslet, and MicroIslet
will be the Surviving Corporation. (The term "Surviving Corporation" appearing
in this Agreement denotes MicroIslet after consummation of the Merger.)
MicroIslet's corporate name, existence, and all its purposes, powers, and
objectives will continue unaffected and unimpaired by the Merger, and as the
Surviving Corporation it will be governed by the laws of the State of Delaware
and succeed to all of Merger Sub's rights, assets, liabilities, and obligations
in accordance with the Delaware General Corporation Law (the "DGCL"). For
federal income tax purposes, it is intended that the Merger shall constitute a
tax-free reorganization within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code").
1.2 CLOSING AND EFFECTIVE TIME. Subject to the provisions of this
Agreement, the parties shall hold a closing (the "Closing") on (i) the first
business day on which the last of the conditions set forth in Article V to be
fulfilled prior to the Closing is fulfilled or waived or (ii) such other date as
the parties hereto may agree (the "Closing Date"), at such time and place as the
parties hereto may agree. Immediately upon the Closing, the parties will cause
the Merger Certificate to be filed with the office of the Secretary of State of
Delaware as provided in Section 252 of the DGCL. Subject to and in accordance
with the DGCL, the Merger will become effective at the date and time the
Certificate of Merger is filed with the office of the Secretary of State of the
State of Delaware (the "Effective Time").
1.3 CONVERSION OF SHARES IN THE MERGER. Pursuant to the Merger
Certificate, at the Effective Time, by virtue of the Merger and without any
action on the part of any holder of any capital stock of Merger Sub or
MicroIslet:
(a) Merger Sub Common Stock. Each share of Merger Sub's common stock,
$0.0001 par value, issued and outstanding immediately prior to the
Effective Time will be converted into one share of common stock, par
value $0.001, of the Surviving Corporation.
(b) MicroIslet Common Stock. Each share of common stock, par value
$0.001, of MicroIslet ("MicroIslet Common Stock"), other than
MicroIslet Dissenting Shares (as defined in Section 1.8 hereof), shall,
subject to Section 1.7 hereof, be converted into, and become
exchangeable for, one (1) share of validly issued, fully paid and
nonassessable common stock, $0.001 par value, of ALD ("ALD Common
Stock").
(c) MicroIslet Preferred Stock. Each share of Series A Preferred Stock,
$0.001 par value, of MicroIslet ("MicroIslet Preferred Stock"), other
than MicroIslet Dissenting Shares (as defined in Section 1.8 hereof),
shall, subject to Section 1.7 hereof, be converted into, and become
exchangeable for, 15.627538 shares of validly issued, fully paid
non-assessable ALD Common Stock.
The shares of ALD Common Stock to be issued pursuant to Sections 1.3(b) and
1.3(c) are referred to herein as the "Merger Shares."
1.4 OPTIONS OF MICROISLET. At the Effective Time, ALD will assume and
continue all of MicroIslet's stock option plans and agreements in existence at
the Effective Time, including but not limited to the 2000 Stock Option Plan (the
"Plan"), and the outstanding and unexercised portions of all options and
warrants to purchase MicroIslet Common Stock, including without limitation all
options outstanding under such stock option plans and any other outstanding
options and warrants, shall become options and warrants to purchase one share of
ALD Common Stock at the same per share exercise price of the MicroIslet option
or warrant applicable at the Effective Time, and with no other changes in the
terms and conditions of such options and warrants. Effective at the Effective
Time, ALD hereby assumes the outstanding and unexercised portions of such
options and warrants and the obligations of MicroIslet with respect thereto.
1.5 CANCELLATION OF MERGER SUB SHARES. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of any capital
stock of Merger Sub, each issued and outstanding share of capital stock of
Merger Sub shall be cancelled.
1.6 STOCK CERTIFICATES. At and after the Effective Time, each holder of
outstanding certificates which prior to that time represented shares of
MicroIslet Common Stock or MicroIslet Preferred Stock, other than MicroIslet
Dissenting Shares, shall be entitled to receive in exchange therefor, upon
surrender thereof to _______________ (the "Exchange Agent"), a certificate or
certificates representing the number of whole shares of ALD Common Stock into
which such holder's shares of MicroIslet Common Stock or MicroIslet Preferred
Stock were converted pursuant to Section 1.3. At and after the Effective Time,
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ALD shall be entitled to treat all of the outstanding certificates which prior
to that time represented shares of MicroIslet Common Stock or MicroIslet
Preferred Stock, other than MicroIslet Dissenting Shares, and which have not
been surrendered for exchange as evidencing the ownership of the number of whole
shares of ALD Common Stock into which the shares of MicroIslet represented by
such certificates have been converted as herein provided, and notwithstanding
the failure to surrender such certificates. However, notwithstanding any other
provision of this Agreement, until holders or transferees of certificates which
immediately prior to the Effective Time represented shares of MicroIslet Common
Stock or MicroIslet Preferred Stock have surrendered them for exchange as
provided herein, no dividends shall be paid with respect to any shares
represented by such certificates. Upon surrender of a certificate which
immediately prior to the Effective Time represented outstanding shares of
MicroIslet Common Stock or MicroIslet Preferred Stock, there shall be paid to
the holder of such certificate the amount of any dividends which theretofore
became payable, but which were not paid by reason of the foregoing, with respect
to the number of whole shares of ALD Common Stock represented by the certificate
or certificates issued upon such surrender. If any certificate for shares of
MicroIslet Common Stock or MicroIslet Preferred Stock is to be issued in a name
other than that in which the certificate, which immediately prior to the
Effective Time represented shares of MicroIslet Common Stock or MicroIslet
Preferred Stock, surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the person requesting such exchange (i) shall
pay any transfer or other taxes or fees required by reason of the issuance of
certificates for such shares of ALD Common Stock in a name other than that of
the registered holder of any such certificate surrendered and (ii) shall comply
with the provisions of any restricted legend set forth on such certificate
surrendered.
1.7 FRACTIONAL SHARES. No fractional shares of ALD Common Stock shall
be issued in connection with the Merger. In lieu of such fractional shares, any
holder who would otherwise be entitled to receive a fraction of a share of ALD
Common Stock (after separately aggregating all fractional shares of stock
issuable to such holder), shall be issued one (1) whole share of ALD Common
Stock.
1.8 DISSENTING SHARES. Despite anything in this Agreement to the
contrary, (i) a "dissenting shareholder" who holds any of MicroIslet's
"dissenting shares" (as those terms are defined in California Corporations Code
section 1300), outstanding immediately before the Effective Time, and who has
made and perfected a demand for payment of the value of the shares ("payment")
in accordance with California Corporations Code sections 1300-1312 ("California
Dissenters' Rights Statutes"), and who has not effectively withdrawn or lost the
right to such payment, or (ii) any MicroIslet stockholder making a proper and
timely demand for appraisal as provided in Section 262 of the DGCL (the
"Delaware Appraisal Statute") with respect to the MicroIslet Common Stock or
MicroIslet Preferred Stock, and who has not effectively withdrawn or lost the
right to such appraisal, shall be deemed for purposes of this Agreement to hold
"MicroIslet Dissenting Shares" rather than MicroIslet Common Stock or MicroIslet
Preferred Stock. A holder of MicroIslet Dissenting Shares will have, by virtue
of the Merger and without further action on the holder's part, the right to
receive and be paid the amounts due under the California Dissenters' Rights
Statutes or the Delaware Appraisal Statute, but not both, and no further rights
other than those provided by the California Dissenters' Rights Statutes or the
Delaware Appraisal Statute. If any holder of MicroIslet Dissenting Shares fails
to perfect or effectively withdraws or loses such holder's rights under both the
California Dissenters' Rights Statutes and the Delaware Appraisal Statute, such
holder's MicroIslet Dissenting Shares shall thereupon be deemed to have been
converted into ALD Common Shares in accordance with Section 1.3 as of the
Effective Time.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF ALD. ALD represents and warrants
to MicroIslet as follows:
(a) ORGANIZATION, STANDING AND POWER. ALD is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada, has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being
conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification necessary.
(b) CAPITAL STRUCTURE. The authorized capital stock of ALD consists of
25,000,000 shares of common stock with a par value of $0.001 per share.
As of the close of business on April 15, 2002, 3,408,398 shares of ALD
Common Stock were issued and outstanding. All outstanding shares of ALD
Common Stock are validly issued, fully paid and nonassessable and not
subject to preemptive rights or other restrictions on transfer. All of
the issued and outstanding shares of ALD were issued in compliance with
all applicable securities laws. The shares of ALD Common Stock to be
issued pursuant to this Agreement will be, when issued pursuant to the
terms of the resolution of the Board of Directors of ALD approving such
issuance, validly issued, fully paid and nonassessable and not subject
to preemptive rights. Except for warrants to purchase an aggregate of
1,500,000 shares of ALD Common Stock described in ALD's Form 8-K filed
with the Securities and Exchange Commission ("SEC") on March 6, 2002,
and except as provided in the disclosure letter delivered by ALD
concurrently with the execution hereof (the "ALD Disclosure Letter"),
as of the date of execution of this Agreement, there are no other
options, warrants, calls, agreements or other rights to purchase or
otherwise acquire from ALD at any time, or upon the happening of any
stated event, any shares of the capital stock of ALD whether or not
presently issued or outstanding.
(c) CERTIFICATE OF INCORPORATION, BYLAWS, AND MINUTE BOOKS. The copies
of the Articles of Incorporation and of the Bylaws of ALD which have
been delivered to MicroIslet are true, correct and complete copies
thereof. To the best of ALD's knowledge, the minutes book of ALD, which
has been made available for inspection, contains accurate minutes of
all meetings and accurate consents in lieu of meetings of the Board of
Directors (and any committee thereof) and of the shareholders of ALD
since the date of incorporation and accurately reflects all
transactions referred to in such minutes and consents in lieu of
meetings.
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(d) AUTHORITY. ALD has all requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the
Board of Directors of ALD. No other corporate or shareholder
proceedings on the part of ALD are necessary to authorize the Merger,
or the other transactions contemplated hereby.
(e) CONFLICT WITH OTHER AGREEMENTS; APPROVALS. The execution and
delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not result in any violation of,
or default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit under, or the creation
of a lien, pledge, security interest or other encumbrance on assets
(any such conflict, violation, default, right of termination,
cancellation or acceleration, loss or creation, a "violation") pursuant
to any provision of the Articles of Incorporation or Bylaws or any
organizational document of ALD or, result in any violation of any loan
or credit agreement, note, mortgage, indenture, lease, benefit plan or
other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to ALD which violation would have a material
adverse effect on ALD taken as a whole. Except for filings with the SEC
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity") is
required by or with respect to ALD in connection with the execution and
delivery of this Agreement by ALD or the consummation by ALD of the
transactions contemplated hereby.
(f) BOOKS AND RECORDS. ALD has made and will make available for
inspection by MicroIslet upon reasonable request all the books of ALD
relating to the business of ALD. Such books of ALD have been maintained
in the ordinary course of business. All documents furnished or caused
to be furnished to MicroIslet by ALD are true and correct copies, and
there are no amendments or modifications thereto except as set forth in
such documents.
(g) COMPLIANCE WITH LAWS. ALD is and has been in compliance in all
material respects with all laws, regulations, rules, orders, judgments,
decrees and other requirements and policies imposed by any Governmental
Entity applicable to it, its properties or the operation of its
businesses.
(h) SEC FILINGS. ALD filed a registration statement on Form 10-SB under
the Exchange Act on August 13, 1999, which, in accordance with Section
12(g) under the Exchange Act became effective on or about October 12,
1999. On or about October 8, 1999, ALD filed an amended registration
statement on Form 10-SB/A in response to a comment letter from the SEC.
To the best of ALD's knowledge, the filing on Form 10-SB/A fully
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responded to all SEC comments. Thereafter, ALD has filed all periodic
reports required to be filed with the SEC on a timely basis and as of
the date hereof, is current in its filing obligations. ALD's Form
10-KSB filed with the Securities and Exchange Commission on April 5,
2002 (the "Form 10-KSB") contains all material information concerning
ALD, updated to the latest practicable date prior to filing, required
by SEC rules to be disclosed in such form, and does not make any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(i) FINANCIAL STATEMENTS AND TAX RETURNS. Copies of ALD's audited
balance sheet as of December 31, 2001 (the "ALD Balance Sheet") and its
statements of operations, cash flows and shareholders' equity for the
years ended December 31, 2001 and 2000 (collectively, the "ALD
Financial Statements") have been delivered to MicroIslet. The ALD
Financial Statements and notes fairly present the financial condition
and the results of operations, changes in stockholders' equity, and
cash flow of ALD as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with
Generally Accepted Accounting Principals ("GAAP"). No financial
statements of any person or entity other than Merger Sub are required
by GAAP to be included in the consolidated financial statements of ALD.
(j) LITIGATION. There is no suit, action or proceeding pending, or, to
the knowledge of ALD, threatened against or affecting ALD which is
reasonably likely to have a material adverse effect on ALD, nor is
there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against ALD having, or
which, insofar as reasonably can be foreseen, in the future could have,
any such effect.
(k) TAX RETURNS. Except as set forth in the ALD Disclosure Letter, ALD
has duly filed any tax reports and returns required to be filed by it
and has fully paid all taxes and other charges claimed to be due from
it by any federal, state or local taxing authorities. There are not now
any pending questions relating to, or claims asserted for, taxes or
assessments asserted upon ALD. Except as set forth in the ALD
Disclosure Letter, ALD has provided to MicroIslet copies of its tax
returns filed for the tax years ended December 31, 2001 and 2000.
(l) NO UNDISCLOSED LIABILITIES. Except as set forth in the ALD
Financial Statements or in the ALD Disclosure Letter, ALD has no
liabilities or obligations of any nature (whether absolute, accrued,
contingent, or otherwise) and current liabilities incurred in the
ordinary course of business since the respective dates thereof, all of
which shall be paid in full at the Effective Time.
(m) NO MATERIAL ADVERSE CHANGE. Except as set forth in the Form 10-KSB,
since December 31, 2001, there has not been any material adverse change
with regard to ALD, and no event has occurred or circumstance exists
that may result in such a material adverse change.
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(n) CALIFORNIA CORPORATIONS CODE SECTION 2115. ALD is not subject to
the requirements of subsection (b) of California Corporations Code
Section 2115.
(o) NO CONTRACTS OR INSURANCE POLICIES. Except as set forth in the ALD
Disclosure Letter, ALD is not a party to any contracts or insurance
policies. All contracts and insurance policies set forth in the ALD
Disclosure Letter are terminable by ALD without advance notice or
penalty to the other party.
(p) NO EMPLOYEES. ALD has no employees, and has never had any
employees.
(q) FULL DISCLOSURE. No representation or warranty of ALD in this
Agreement omits to state a material fact necessary to make the
statements herein, in light of the circumstances in which they were
made, not misleading. There is no fact known to ALD that has specific
application to MicroIslet and that materially adversely affects or, as
far as ALD can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of
ALD that has not been set forth in this Agreement or the Form 10-KSB.
(r) NO BROKERS. ALD has incurred no obligation or liability, contingent
or otherwise, for brokerage or finders' fees or agents' commissions or
other similar payment in connection with this Agreement.
2.2 REPRESENTATIONS AND WARRANTIES OF MERGER SUB. Merger Sub represents
and warrants to MicroIslet as follows:
(a) ORGANIZATION, STANDING AND POWER. Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being
conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification necessary.
(b) CAPITAL STRUCTURE. The authorized capital stock of Merger Sub
consists of 1,000,000 shares of Common Stock with a par value of
$0.0001 per share. As of the close of business on April 22, 2002, 100
shares of Merger Sub common stock were issued and outstanding. There
are no other options, warrants, calls, agreements or other rights to
purchase or otherwise acquire from Merger Sub at any time, or upon the
happening of any stated event, any shares of the capital stock of
Merger Sub whether or not presently issued or outstanding.
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(c) CERTIFICATE OF INCORPORATION AND MINUTE BOOKS. The copy of the
Certificate of Incorporation of Merger Sub which has been delivered to
MicroIslet is a true, correct and complete copy thereof. Merger Sub has
no bylaws. The minute book of Merger Sub, which has been made available
for inspection, contains accurate minutes of all meetings and accurate
consents in lieu of meetings of the Board of Directors (and any
committee thereof) and of the shareholders of Merger Sub since the date
of incorporation and accurately reflects all transactions referred to
in such minutes and consents in lieu of meetings.
(d) AUTHORITY. Merger Sub has all requisite power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of Merger Sub. No other corporate
or shareholder proceedings on the part of Merger Sub are necessary to
authorize the Merger, or the other transactions contemplated hereby.
(e) CONFLICT WITH OTHER AGREEMENTS; APPROVALS. The execution and
delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not result in any violation of,
or default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit under, or the creation
of a lien, pledge, security interest or other encumbrance on assets
(any such conflict, violation, default, right of termination,
cancellation or acceleration, loss or creation, a "violation") pursuant
to any provision of the Certificate of Incorporation or any
organizational document of Merger Sub or, result in any violation of
any loan or credit agreement, note, mortgage, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Merger Sub which violation would have
a material adverse effect on Merger Sub taken as a whole. No consent,
approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to
Merger Sub in connection with the execution and delivery of this
Agreement by Merger Sub or the consummation by Merger Sub of the
transactions contemplated hereby.
(f) BOOKS AND RECORDS. Merger Sub has made and will make available for
inspection by MicroIslet upon reasonable request all the books of
Merger Sub relating to the business of Merger Sub. Such books of Merger
Sub have been maintained in the ordinary course of business. All
documents furnished or caused to be furnished to MicroIslet by Merger
Sub are true and correct copies, and there are no amendments or
modifications thereto except as set forth in such documents.
(g) COMPLIANCE WITH LAWS. Merger Sub is and has been in compliance in
all material respects with all laws, regulations, rules, orders,
judgments, decrees and other requirements and policies imposed by any
Governmental Entity applicable to it, its properties or the operation
of its businesses.
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(h) LITIGATION. There is no suit, action or proceeding pending, or, to
the knowledge of Merger Sub, threatened against or affecting Merger Sub
which is reasonably likely to have a material adverse effect on Merger
Sub, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against Merger Sub
having, or which, insofar as reasonably can be foreseen, in the future
could have, any such effect.
(i) NO UNDISCLOSED LIABILITIES. Merger Sub has no liabilities or
obligations of any nature (whether absolute, accrued, contingent, or
otherwise) which will not be fully discharged in connection with the
Closing.
(j) NO CONTRACTS OR INSURANCE POLICIES. Merger Sub is not a party to
any contracts or insurance policies.
(k) NO EMPLOYEES. Merger Sub has no employees, and has never had any
employees.
(l) FULL DISCLOSURE. No representation or warranty of Merger Sub in
this Agreement omits to state a material fact necessary to make the
statements herein, in light of the circumstances in which they were
made, not misleading. There is no fact known to Merger Sub that has
specific application to MicroIslet and that materially adversely
affects or, as far as Merger Sub can reasonably foresee, materially
threatens, the assets, business, prospects, financial condition, or
results of operations of Merger Sub that has not been set forth in this
Agreement.
(m) NO BROKERS. Merger Sub has incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
2.3 REPRESENTATIONS AND WARRANTIES OF MICROISLET. MicroIslet represents
and warrants to ALD as follows:
(a) ORGANIZATION, STANDING AND POWER. MicroIslet is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being
conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification necessary.
(b) CAPITAL STRUCTURE. The authorized capital stock of MicroIslet
consists of 30,000,000 shares of MicroIslet Common Stock and 10,000,000
shares of $0.001 par value preferred stock. As of the close of business
on April 15, 2002, it had a total of 17,526,295 shares of MicroIslet
Common Stock issued and outstanding and 82,889 shares of MicroIslet
Preferred Stock issued and outstanding. All outstanding shares of
MicroIslet stock are validly issued, fully paid and nonassessable and
not subject to preemptive rights or other restrictions on transfer. All
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of the issued and outstanding shares of MicroIslet were issued in
compliance with all applicable securities laws. MicroIslet has adopted
the Plan pursuant to which 4,000,000 shares of MicroIslet Common Stock
are reserved for issuance. Options to purchase 3,158,318 shares of
MicroIslet Common Stock are currently outstanding pursuant to the Plan.
Except as otherwise specified herein or in connection with the private
placement transaction described in ALD's Form 8-K filed with the SEC on
March 6, 2002, there are no options, warrants, calls, agreements or
other rights to purchase or otherwise acquire from MicroIslet at any
time, or upon the happening of any stated event, any shares of the
capital stock of MicroIslet.
(c) CERTIFICATE OF INCORPORATION, BYLAWS AND MINUTE BOOKS. The copies
of the Articles of Incorporation and of the other corporate documents
of MicroIslet which have been delivered to ALD are true, correct and
complete copies thereof. The minute books of MicroIslet which have been
made available for inspection contain accurate minutes of all meetings
and accurate consents in lieu of meetings of the Board of Directors
(and any committee thereof) and of the shareholders of MicroIslet since
the date of incorporation and accurately reflect all transactions
referred to in such minutes and consents in lieu of meetings.
(d) AUTHORITY. MicroIslet has all requisite power to enter into this
Agreement and, subject to approval of the proposed transaction by the
holders of at least a majority of all issued and outstanding shares of
MicroIslet Common Stock and MicroIslet Preferred Stock which are
entitled to vote to approve the Merger, voting as separate classes, has
the requisite power and authority to consummate the transactions
contemplated hereby. Except as specified herein, no other corporate or
shareholder proceedings on the part of MicroIslet are necessary to
authorize the Merger and the other transactions contemplated hereby.
(e) CONFLICT WITH AGREEMENTS; APPROVALS. The execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation
of any provision of the Certificate of Incorporation or Bylaws of
MicroIslet or of any loan or credit agreement, note, mortgage,
indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to
MicroIslet or its properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to MicroIslet in
connection with the execution and delivery of this Agreement by
MicroIslet, or the consummation by MicroIslet of the transactions
contemplated hereby.
(f) FINANCIAL STATEMENTS. Copies of MicroIslet's unaudited balance
sheet at December 31, 2000 and unaudited balance sheet at December 31,
2001 (the "MicroIslet Balance Sheet"), and statements of operations and
cash flows for the years ended December 31, 2001 and 2000
(collectively, the "MicroIslet Financial Statements") have been
delivered to ALD. The MicroIslet Financial Statements fairly present
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the financial condition and the results of operations and cash flow of
MicroIslet as at the respective dates of and for the periods referred
to in such financial statements, but have not necessarily been prepared
in accordance with GAAP and do not include explanatory notes. No
financial statements of any person or entity are required by GAAP to be
included in the consolidated financial statements of MicroIslet.
(g) BOOKS AND RECORDS. MicroIslet has made and will make available for
inspection by ALD upon reasonable request all the books of account,
relating to the business of MicroIslet. Such books of account of
MicroIslet have been maintained in the ordinary course of business. All
documents furnished or caused to be furnished to ALD by MicroIslet are
true and correct copies, and there are no amendments or modifications
thereto except as set forth in such documents.
(h) COMPLIANCE WITH LAWS. MicroIslet is and has been in compliance in
all material respects with all laws, regulations, rules, orders,
judgments, decrees and other requirements and policies imposed by any
Governmental Entity applicable to it, its properties or the operation
of its business.
(i) LIABILITIES AND OBLIGATIONS. MicroIslet has no material liabilities
or obligations (absolute, accrued, contingent or otherwise) except (i)
liabilities that are reflected and reserved against on the MicroIslet
Financial Statements that have not been paid or discharged since the
date thereof and (ii) liabilities incurred since the date of such
financial statements in the ordinary course of business consistent with
past practice and in accordance with this Agreement.
(j) LITIGATION. There is no suit, action or proceeding pending, or, to
the knowledge of MicroIslet threatened against or affecting MicroIslet,
which is reasonably likely to have a material adverse effect on
MicroIslet, nor is there any judgment, decree, injunction, rule or
order of any Governmental Entity or arbitrator outstanding against
MicroIslet having, or which, insofar as reasonably can be foreseen, in
the future could have, any such effect.
(k) TAXES. MicroIslet has filed or will file within the time prescribed
by law (including extension of time approved by the appropriate taxing
authority) all tax returns and reports required to be filed with all
other jurisdictions where such filing is required by law; and
MicroIslet has paid, or made adequate provision for the payment of all
taxes, interest, penalties, assessments or deficiencies due and payable
on, and with respect to such periods. MicroIslet knows of (i) no other
tax returns or reports which are required to be filed which have not
been so filed and (ii) no unpaid assessment for additional taxes for
any fiscal period or any basis therefor.
(l) LICENSES, PERMITS; INTELLECTUAL PROPERTY. MicroIslet owns or
possesses in the operation of its business all material authorizations
which are necessary for it to conduct its business as now conducted.
Neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated hereby will require any
notice or consent under or have any material adverse effect upon any
such authorizations.
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(m) NO MATERIAL ADVERSE CHANGE. There has not been any material adverse
change with regard to MicroIslet, and no event has occurred or
circumstance exists that may result in such a material adverse change.
(n) FULL DISCLOSURE. No representation or warranty of MicroIslet in
this Agreement omits to state a material fact necessary to make the
statements herein, in light of the circumstances in which they were
made, not misleading. There is no fact known to MicroIslet that has
specific application to MicroIslet and that materially adversely
affects or, as far as MicroIslet can reasonably foresee, materially
threatens, the assets, business, prospects, financial condition, or
results of operations of MicroIslet that has not been set forth in this
Agreement or in MicroIslet's Private Placement Memorandum dated
December 31, 2001, as supplemented (the "Private Placement
Memorandum").
(o) NO BROKERS. Except for commission disclosed in the Private
Placement Memorandum, MicroIslet has incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payment in connection with this
Agreement.
ARTICLE 3
COVENANTS RELATING TO CONDUCT OF BUSINESS
3.1 COVENANTS OF MICROISLET, MERGER SUB AND ALD. During the period from
the date of this Agreement and continuing until the Effective Time, MicroIslet,
Merger Sub and ALD each agree as to themselves and their related entities that
(except as expressly contemplated or permitted by this Agreement, or to the
extent that the other parties shall otherwise consent in writing):
(a) ORDINARY COURSE. Each party shall carry on its respective
businesses in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted.
(b) DIVIDENDS; CHANGES IN STOCK. No party shall (i) declare or pay any
dividends on or make other distributions in respect of any of its
capital stock, or (ii) repurchase or otherwise acquire, or permit any
subsidiary to purchase or otherwise acquire, any shares of its capital
stock.
(c) ISSUANCE OF SECURITIES. Simultaneously with Closing hereunder,
MicroIslet shall issue up to 1,666,667 shares of MicroIslet Common
Stock in a private placement offering pursuant to the terms of the
Private Placement Memorandum. Except for such securities, and options
issued by MicroIslet under the terms of the Plan, no party shall issue,
deliver or sell, or authorize or propose the issuance, delivery or sale
of, any shares of its capital stock of any class, any voting debt or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting debt or convertible securities.
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(d) GOVERNING DOCUMENTS. No party shall amend or propose to amend its
corporate charter or Bylaws, except that MicroIslet shall file a
Certificate of Correction with respect to its prior five share for one
share forward split approved November 7, 2000, and a Certificate of
Amendment with respect to its 3.1255 share for one share forward spit
approved October 18, 2001.
(e) NO DISPOSITIONS. Except for the transfer of assets in the ordinary
course of business consistent with prior practice, no party shall sell,
lease, encumber or otherwise dispose of, or agree to sell, lease,
encumber or otherwise dispose of, any of its assets, which are
material, individually or in the aggregate, to such party.
(f) INDEBTEDNESS. No party shall incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of such
party or guarantee any debt securities of others other than in each
case in the ordinary course of business consistent with prior practice.
3.2 OTHER ACTIONS. No party shall take any action that would or is
reasonably likely to result in any of its representations and warranties set
forth in this Agreement being untrue as of the date made (to the extent so
limited), or in any of the conditions to the Merger set forth in Article V not
being satisfied.
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1 RESTRICTED ALD SHARES. The Merger Shares will not be registered
under the Securities Act, but will be issued pursuant to an exemption from such
registration requirements for transactions not involving a public offering.
Accordingly, the Merger Shares will constitute "restricted securities" for
purposes of the Securities Act of 1933, as amended and applicable state
securities laws and the holders of Merger Shares will not be able to transfer
such shares except upon compliance with the registration requirements of the
Securities Act and applicable state securities laws or in reliance upon an
available exemption therefrom. The certificates evidencing the Merger Shares
shall contain a legend to the foregoing effect and the holders of such shares
shall deliver at or prior to Closing an Investment Letter acknowledging the fact
that the Merger Shares are restricted securities and agreeing to the foregoing
transfer restrictions, and representing and warranting certain facts which will
be relied upon by ALD to confirm the availability of the exemption from
registration requirements.
4.2 ACCESS TO INFORMATION. Upon reasonable notice, ALD, Merger Sub and
MicroIslet shall each afford to the officers, employees, accountants, counsel
and other representatives of the others, access to all their respective
properties, books, contracts, commitments and records and, during such period,
each of ALD, Merger Sub and MicroIslet shall furnish promptly to the others (a)
a copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of Federal or
state securities laws and (b) all other information concerning its business,
properties and personnel as the other parties may reasonably request. Unless
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otherwise required by law, the parties will hold any such information which is
nonpublic in confidence until such time as such information otherwise becomes
publicly available through no wrongful act of either party, and in the event of
termination of this Agreement for any reason each party shall promptly return
all nonpublic documents obtained from any other party, and any copies made of
such documents, to such other party.
4.3 LEGAL CONDITIONS TO MERGER. Each of ALD, Merger Sub and MicroIslet
shall take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to the Merger and will
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon any of them or upon any of their related
entities or subsidiaries in connection with the Merger. Each party shall take
all reasonable actions necessary to obtain (and will cooperate with each other
in obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party, required to
be obtained or made by ALD, Merger Sub or MicroIslet or any of their related
entities or subsidiaries in connection with the Merger or the taking of any
action contemplated thereby or by this Agreement.
4.4 ALD BOARD OF DIRECTORS AND OFFICERS. The current officers and
directors of ALD shall resign as of the Effective Time. Immediately prior to his
resignation, ALD's sole director shall take such actions as are necessary and
appropriate to expand the size of ALD's Board of Directors and to appoint to
ALD's Board of Directors those directors designated by MicroIslet.
4.5 MICROISLET AUDITED FINANCIAL STATEMENTS. MicroIslet shall provide
to ALD on or before the date which is 75 days after the Closing Date audited
financial statements meeting the requirements for filing in Item 7 of SEC Form
8-K, as required in connection with the Merger.
4.6 INVESTORS RIGHTS AGREEMENT. Upon the Closing, ALD shall assume the
obligations of MicroIslet pursuant to that certain Investors Rights Agreement
attached to Supplement No. 2 to the Private Placement Memorandum.
ARTICLE 5
CONDITIONS PRECEDENT
5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be conditional
upon the filing, occurring or obtainment of all authorizations, consents, orders
or approvals of, or declarations or filings with, or expirations of waiting
periods imposed by any governmental entity or by any applicable law, rule, or
regulation governing the transactions contemplated hereby.
5.2 CONDITIONS TO OBLIGATIONS OF ALD AND MERGER SUB. The obligations of
ALD and Merger Sub to effect the Merger are subject to the satisfaction of the
following conditions on or before the Closing Date unless waived by ALD and
Merger Sub:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of MicroIslet set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing
Date, except as otherwise contemplated by this Agreement, and ALD shall
have received a certificate signed on behalf of MicroIslet by the Chief
Executive Officer of MicroIslet to such effect.
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(b) PERFORMANCE OF OBLIGATIONS OF MICROISLET. MicroIslet shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior the Closing Date, and
ALD shall have received a certificate signed on behalf of MicroIslet by
the Chief Executive Officer to such effect.
(c) CLOSING DOCUMENTS. ALD and Merger Sub shall have received such
certificates and other closing documents as counsel for ALD and Merger
Sub shall reasonably request.
(d) CONSENTS. MicroIslet shall have obtained the consent or approval of
each person whose consent or approval shall be required in connection
with the transactions contemplated hereby under any loan or credit
agreement, note, mortgage, indenture, lease or other agreement or
instrument, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of ALD or Merger Sub,
individually or in the aggregate, have a material adverse effect on
MicroIslet and its subsidiaries and related entities taken as a whole
upon the consummation of the transactions contemplated hereby.
MicroIslet shall also have received the approval of its shareholders in
accordance with applicable law.
(e) DUE DILIGENCE REVIEW. ALD and Merger Sub shall have completed to
their reasonable satisfaction a review of the business, operations,
finances, assets and liabilities of MicroIslet and shall not have
determined that any of the representations or warranties of MicroIslet
contained herein are, as of the date hereof or the Closing Date,
inaccurate in any material respect or that MicroIslet is otherwise in
violation of any of the provisions of this Agreement.
(f) PENDING LITIGATION. There shall not be any litigation or other
proceeding pending or threatened to restrain or invalidate the
transactions contemplated by this Agreement, which, in the sole
reasonable judgment of ALD or Merger Sub, made in good faith, would
make the consummation of the Merger imprudent. In addition, there shall
not be any other litigation or other proceeding pending or threatened
against MicroIslet, the consequences of which, in the judgment of ALD
or Merger Sub, could be materially adverse to MicroIslet.
(g) MICROISLET SHAREHOLDER APPROVAL. The holders of at least ninety
percent (90%) of outstanding MicroIslet Common Stock and at least
ninety percent (90%) of outstanding MicroIslet Preferred Stock which
are entitled to vote to approve the Merger shall have consented to or
affirmatively voted in favor of completion of the Merger.
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5.3 CONDITIONS TO OBLIGATIONS OF MICROISLET. The obligation of
MicroIslet to effect the Merger is subject to the satisfaction of the following
conditions unless waived by MicroIslet:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of ALD and Merger Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
(except to the extent such representations speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date,
except as otherwise contemplated by this Agreement, and MicroIslet
shall have received a certificates signed on behalf of ALD and Merger
Sub by the President of each respective company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF ALD. ALD and Merger Sub shall have
performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date,
and MicroIslet shall have received certificates signed on behalf of ALD
and Merger Sub by the President of each respective company to such
effect.
(c) MINIMUM FUNDING REQUIREMENTS MET. MicroIslet shall have received a
minimum of $3,000,000 in gross offering proceeds from the private
placement offering of its shares pursuant to the terms of the Private
Placement Memorandum.
(d) SHAREHOLDER APPROVAL. The holders of at least ninety percent (90%)
of outstanding MicroIslet Common Stock and at least ninety percent
(90%) of outstanding MicroIslet Preferred Stock which are entitled to
vote to approve the Merger shall have consented to or affirmatively
voted in favor of completion of the Merger.
(e) OPINION OF COUNSEL FOR ALD. MicroIslet shall have received an
opinion dated the Closing Date from counsel for ALD and Merger Sub, in
form and substance reasonably satisfactory to MicroIslet and its
counsel relating to such matters as are customarily delivered in
connection with a Merger transaction, including an opinion that the
representation set forth in Section 2.1(n) is correct.
(f) CLOSING DOCUMENTS. MicroIslet shall have received such certificates
and other closing documents as counsel for MicroIslet shall reasonably
request.
(g) CONSENTS. ALD and Merger Sub shall have obtained the consent or
approval of each person whose consent or approval shall be required in
connection with the transactions contemplated hereby.
(h) DUE DILIGENCE REVIEW. MicroIslet shall have completed to its
reasonable satisfaction a review of the business, operations, finances,
assets and liabilities of ALD and Merger Sub and shall not have
determined that any of the representations or warranties of ALD or
Merger Sub contained herein are, as of the date hereof or the Closing
Date, inaccurate in any material respect or that ALD or Merger Sub is
otherwise in violation of any of the provisions of this Agreement.
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(i) PENDING LITIGATION. There shall not be any litigation or other
proceeding pending or threatened to restrain or invalidate the
transactions contemplated by this Agreement, which, in the sole
reasonable judgment of MicroIslet, made in good faith, would make the
consummation of the Merger imprudent. In addition, there shall not be
any other litigation or other proceeding pending or threatened against
ALD the consequences of which, in the judgment of MicroIslet, could be
materially adverse to ALD or Merger Sub.
ARTICLE 6
TERMINATION AND AMENDMENT
6.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual consent of ALD and MicroIslet;
(b) by ALD if there has been a material breach of any representation,
warranty, covenant or agreement on the part of MicroIslet set forth in
this Agreement, or by MicroIslet if there has been a material breach of
any representation, warranty, covenant or agreement on the part of ALD
or Merger Sub, which breach has not been cured within five (5) business
days following receipt by the breaching party of notice of such breach;
(c) by either ALD or MicroIslet if any permanent injunction or other
order of a court or other competent authority preventing the
consummation of the Merger shall have become final and non-appealable;
or
(d) by either ALD or MicroIslet if the Merger shall not have been
consummated on or before April 24, 2002.
6.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either MicroIslet or ALD as provided in Section 6.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of any party hereto. In such event, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
6.3 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, provided no
amendment shall be made which by law requires approval by the shareholders of
any party without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
6.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
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ARTICLE 7
GENERAL PROVISIONS
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Effective
Time, except with respect to fraudulent breaches thereof, claims for which shall
survive the Effective Time.
7.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) If to ALD Xxxxxx X. Xxxxxxx
or Merger Sub, to 00 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxxxxx, XX 00000
Facsimile: 000-000-0000
(b) if to MicroIslet, to Xxxx X. Steel IV
0000 Xxxx Xxxxxxxxx, Xxxxx X000
Xxx Xxxxx, XX 00000
Facsimile: 000-000-0000
7.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available.
7.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
7.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. This Agreement (including the documents and the instruments referred
to herein) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, and is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
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7.6 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to principles
of conflicts of law. Each party hereby irrevocably submits to the jurisdiction
of any California state court located in the county of San Diego, or any federal
court having subject matter jurisdiction and located in the county of San Diego,
California, in respect of any suit, action or proceeding arising out of or
relating to this Agreement, and irrevocably accept for themselves and in respect
of their property, generally and unconditionally, the jurisdiction of the
aforesaid courts.
7.7 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees that, should
any court or other competent authority hold any provision of this Agreement or
part hereof or thereof to be null, void or unenforceable, or order any party to
take any action inconsistent herewith or not to take any action required herein,
the other party shall not be entitled to specific performance of such provision
or part hereof or thereof or to any other remedy, including but not limited to
money damages, for breach hereof or thereof or of any other provision of this
Agreement or part hereof or thereof as a result of such holding or order.
7.8 PUBLICITY. Except as otherwise required by law or the rules of the
SEC, so long as this Agreement is in effect, no party shall issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without the written consent of
the other party, which consent shall not be unreasonably withheld.
7.9 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
[SIGNATURES FOLLOW ON NEXT PAGE]
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IN WITNESS WHEREOF, this Merger Agreement and Plan of Reorganization
has been signed by the parties set forth below as of the date set forth above.
ALD SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxx, President
ALD SERVICES MERGER SUBSIDIARY, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxx, President
MICROISLET, INC.
By: /s/ Xxxx X. Sttel, IV
------------------------------------
Xxxx X. Steel, IV, Chairman and
Chief Executive Officer
By: /s/ Xxxx Xxxxxxxxxx
------------------------------------
Xxxx Xxxxxxxxxx, President
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