Agreement and Plan of Merger By and Among Sycamore Films, Inc., Sweet Spot Productions, Inc., JRT Productions, Inc., Red Cat Productions, Inc., Joseph Takats, Donald J. Scotti, and ImaRx Therapeutics, Inc. Dated As of March 17, 2010
Execution Version
Exhibit 10.2
Agreement and Plan of Merger
By and Among
Sycamore Films, Inc.,
Sweet Spot Productions, Inc.,
JRT Productions, Inc.,
Red Cat Productions, Inc.,
Xxxxxx Xxxxxx,
Xxxxxx X. Xxxxxx,
and
ImaRx Therapeutics, Inc.
Dated As of March 17, 2010
TABLE OF CONTENTS
Page(s) | ||||||
ARTICLE 1 Definitions | 2 | |||||
ARTICLE 2 The Merger | 8 | |||||
Section 2.1. |
Transaction | 8 | ||||
Section 2.2. |
Closing | 8 | ||||
Section 2.3. |
Effective Time | 9 | ||||
Section 2.4. |
Effect of Merger | 9 | ||||
Section 2.5. |
Directors and Officers | 9 | ||||
(a) |
Board of Directors of Surviving Corporation | 9 | ||||
(b) |
Officers of Surviving Corporation | 9 | ||||
Section 2.6. |
Surviving Charter | 10 | ||||
Section 2.7. |
Surviving Bylaws | 10 | ||||
Section 2.8. |
Capital Structure of the Surviving Corporation | 10 | ||||
ARTICLE 3 The Consideration | 10 | |||||
Section 3.1. |
Purchase Price | 10 | ||||
Section 3.2. |
Promissory Notes | 10 | ||||
Section 3.3. |
Subsidiary Stock | 10 | ||||
Section 3.4. |
Registration Rights | 11 | ||||
Section 3.5. |
Put Rights | 11 | ||||
Section 3.6. |
Limited Suspension of Rights During Fundraising | 11 | ||||
ARTICLE 4 Representations and Warranties of Target | 12 | |||||
Section 4.1. |
Organization | 12 | ||||
Section 4.2. |
Capitalization; No Derivative Securities | 12 | ||||
(a) |
Capitalization | 12 | ||||
(b) |
Derivative Securities | 12 | ||||
Section 4.3. |
Material Contracts | 13 |
i
TABLE OF CONTENTS
(continued)
(continued)
Page(s) | ||||||
Section 4.4. |
Litigation | 13 | ||||
Section 4.5. |
No Undisclosed Liabilities | 13 | ||||
Section 4.6. |
No Material Adverse Change | 13 | ||||
Section 4.7. |
Brokers | 14 | ||||
Section 4.8. |
Representations in Stock Exchange Agreement | 14 | ||||
ARTICLE 5 Representations and Warranties of Purchaser and Subsidiary | 14 | |||||
Section 5.1. |
Organization | 14 | ||||
Section 5.2. |
Authority | 14 | ||||
Section 5.3. |
Capitalization | 15 | ||||
(a) |
Purchaser | 15 | ||||
(b) |
Subsidiary | 15 | ||||
Section 5.4. |
Investment Intent | 16 | ||||
Section 5.5. |
Capital Resources | 16 | ||||
Section 5.6. |
Liabilities | 16 | ||||
Section 5.7. |
Material Contracts | 16 | ||||
Section 5.8. |
Compliance with Law | 16 | ||||
Section 5.9. |
Brokers | 17 | ||||
Section 5.10. |
Representations in Stock Exchange Agreement | 17 | ||||
ARTICLE 6 Covenants | 17 | |||||
Section 6.1. |
Acquisition Transaction | 17 | ||||
Section 6.2. |
Conduct of Business Prior to the Effective Time | 17 | ||||
(a) |
Business in Ordinary Course | 17 | ||||
(b) |
Amendment of Corporate Documents and Shareholders Rights | 17 | ||||
(c) |
Stock Changes | 17 |
ii
TABLE OF CONTENTS
(continued)
(continued)
Page(s) | ||||||
(d) |
Additional Liabilities | 18 | ||||
(e) |
Employee Compensation | 18 | ||||
(f) |
Asset Disposition | 18 | ||||
(g) |
Material Contracts | 18 | ||||
(h) |
Taxes | 18 | ||||
(i) |
Compliance with Laws | 18 | ||||
Section 6.3. |
Access to Information | 18 | ||||
Section 6.4. |
Post-Closing 8-K Report | 19 | ||||
Section 6.5. |
Director and Officer Liability | 19 | ||||
(a) |
Directors’ and Officers’ Liability Insurance. | 19 | ||||
(b) |
Directors’ and Officers’ Indemnification | 19 | ||||
(c) |
Continuity of Insurance and Indemnification Obligations | 19 | ||||
Section 6.6. |
Updating of Disclosure Documents | 20 | ||||
Section 6.7. |
Rescission of Merger | 20 | ||||
ARTICLE 7 Closing Conditions | 20 | |||||
Section 7.1. |
Conditions to Each Party’s Obligation | 20 | ||||
(a) |
No Legal Barriers | 20 | ||||
(b) |
Third Party Consents Obtained | 20 | ||||
Section 7.2. |
Conditions to the Obligations of Target, Sellers and Seller Shareholders | 21 | ||||
(a) |
Officer Certificate Regarding Representation and Warranties | 21 | ||||
(b) |
Issuance and Delivery of Shares | 21 | ||||
(c) |
Capital Resources | 21 | ||||
(d) |
Ancillary Documents | 21 | ||||
(e) |
Budget Approval | 21 |
iii
TABLE OF CONTENTS
(continued)
(continued)
Page(s) | ||||||
(f) |
Surviving Charter and Bylaws Approval | 21 | ||||
(g) |
Surviving Board and Officers Appointments | 22 | ||||
(h) |
Covenants Fulfilled | 22 | ||||
Section 7.3. |
Conditions to the Obligations of Subsidiary and Purchaser | 22 | ||||
(a) |
Officer Certificate regarding Representations and Warranties | 22 | ||||
(b) |
Covenants Fulfilled | 22 | ||||
ARTICLE 8 Indemnification | 22 | |||||
Section 8.1. |
Survival of Representations and Warranties | 22 | ||||
Section 8.2. |
Indemnification by Purchaser and Subsidiary | 23 | ||||
Section 8.3. |
Indemnification by Sellers | 23 | ||||
Section 8.4. |
Notice | 23 | ||||
Section 8.5. |
Limitation on Indemnification | 23 | ||||
Section 8.6. |
Calculation of Damages | 23 | ||||
ARTICLE 9 Termination | 24 | |||||
Section 9.1. |
Termination | 24 | ||||
(a) |
by mutual written consent of Target, Subsidiary, and Purchaser | 24 | ||||
(b) |
by any party | 24 | ||||
Section 9.2. |
Effect of Termination | 24 | ||||
ARTICLE 10 General Provisions | 24 | |||||
Section 10.1. |
Entire Agreement | 25 | ||||
Section 10.2. |
Notices | 25 | ||||
Section 10.3. |
Governing Law | 25 | ||||
Section 10.4. |
Descriptive Headings | 26 | ||||
Section 10.5. |
No Third-Party Beneficiaries | 26 |
iv
TABLE OF CONTENTS
(continued)
(continued)
Page(s) | ||||||
Section 10.6. |
No Strict Construction | 26 | ||||
Section 10.7. |
Counterparts | 26 | ||||
Section 10.8. |
Amendment | 26 | ||||
Section 10.9. |
Severability | 26 |
v
EXHIBITS
Exhibit A
|
Budget | |
Exhibit B
|
Form of Employment Agreement — Xxxxxx | |
Exhibit C
|
Form of Employment Agreement — Takats | |
Exhibit D
|
Form of Opinion — Xxxxxxxx Xxxxxxxxxx & Xxxxx, LLP | |
Exhibit E
|
Form of Opinion — Xxxxx Law Corporation / Stoel Rives LLP | |
Exhibit F
|
Form of Pledge and Security Agreement | |
Exhibit G
|
Form of Promissory Note | |
Exhibit H
|
Form of Registration Rights Agreement | |
Exhibit I
|
Form of Shareholders Agreement | |
[Exhibit J
|
Form of Surviving Bylaws] | |
[Exhibit K
|
Form of Surviving Charter] |
DISCLOSURE SCHEDULES
Target Disclosure Document
Purchaser and Subsidiary Disclosure Document
Execution Version
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the “Agreement”), dated as of March 17, 2010, is by and
among Sycamore Films, Inc., a Nevada corporation (“Subsidiary”); Sweet Spot Productions, Inc., a
California corporation (“Target”); JRT Productions, Inc., a California corporation (“JRT”); Red Cat
Productions, Inc., a California corporation (“Red Cat” and collectively with JRT, “Sellers,” and
each individually, a “Seller”); Xxxxxx Xxxxxx (“Xxxxxx”), and Xxxxxx X. Xxxxxx (“Xxxxxx,” and
collectively with Takats, “Seller Shareholders,” and each individually, a “Seller Shareholder”);
and ImaRx Therapeutics, Inc., a Delaware corporation (“Purchaser”).
RECITALS
WHEREAS, Target and Subsidiary have executed that certain Term Sheet dated as of January 21,
2010, and Purchaser and Subsidiary have executed that certain Letter of Intent dated as of February
5, 2010.
WHEREAS, Purchaser is a reporting issuer pursuant to the provisions of the Securities Exchange
Act of 1934 (the “Exchange Act”);
WHEREAS, JRT and Red Cat each own 50% of the issued and outstanding stock of the Target;
WHEREAS, Takats is the holder of 100% of the issued and outstanding shares of stock of JRT;
WHEREAS, Xxxxxx is the holder of 100% of the issued and outstanding shares of stock of Red
Cat;
WHEREAS, Purchaser, Subsidiary, Sellers, Seller Shareholders and Target propose to merge
Target with and into Subsidiary in exchange for shares of Subsidiary common stock and certain
Promissory Notes, as defined herein, (the “Merger”), on the condition that immediately following
the Closing of the Merger, Subsidiary shall enter into that certain Agreement for the Purchase and
Sale of Stock with Purchaser (the “Stock Exchange Agreement”), whereby Purchaser shall acquire all
of the issued and outstanding shares of Subsidiary common stock $0.001 par value in exchange for
the issuance by Purchaser to Sycamore Shareholders (then including Sellers) of an aggregate of
79,376,735 shares of Purchaser’s $0.0001 par value common stock and certain other rights granted to
Sellers as provided herein (the “Acquisition”); and
WHEREAS, the parties intend that the Merger will be treated for income tax purposes as a
forward triangular merger pursuant to Section 368(a)(2)(D) of the Code (as defined below).
1
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the respective covenants and
promises contained herein and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
Definitions
As used herein, the terms below shall have the following meanings. Any of such terms, unless
the context otherwise requires, may be used in the singular or plural, depending upon the
reference.
“Action” means any action, claim, suit, litigation, proceeding, labor dispute, arbitral
action, governmental audit, inquiry, criminal prosecution, investigation, charge or complaint.
“Acquisition” means the transaction contemplated by the Stock Exchange Agreement.
“Affiliate” means, with respect to any Person (as defined below), any other Person which
directly or indirectly controls, is controlled by or is under common control with such Person.
“Ancillary Documents” means the Employment Agreements, Promissory Notes, Pledge and Security
Agreements, Opinions of Counsel, Registration Rights Agreement, Shareholders Agreement, and Stock
Powers (each as defined below).
“approval by” Seller Shareholders or Sellers means unanimous approval by Xxxxxx and Xxxxxx or
JRT and Red Cat, as the case may be.
“Articles of Merger” means fully completed and executed Articles of Merger Form 92A as
provided by the Office of Nevada Secretary of State, accompanied by appropriate filing fees,
designating Subsidiary as the “surviving entity” and Target as the “merging entity.”
“Assets” means all of Target’s right, title and interest in and to the business, properties,
assets and rights of any kind, whether tangible or intangible, real or personal, and constituting,
or used in connection with, or related to, the Business (as defined below) or in which Target has
any interest.
“Audited Financial Statements” means the balance sheet, income statement, statement of
stockholders equity, and statement of cash flows or, in each instance, equivalent statements of the
Purchaser as of December 31, 2009, and for the two (2) years then ended, and Target as of October
31, 2009, and for the two (2) years then ended, as the case may be, as reported on by the Auditors
and as commonly provided to shareholders.
2
“Auditors” means independent certified public accountants currently retained by Purchaser and
Target, as the case may be, for the purpose of auditing their respective financial statements.
“Budget” means the budget for the first twelve (12) months of operations of Purchaser and
Surviving Corporation (as defined below), as approved by Xxxxxx and Takats, attached hereto as
Exhibit A.
“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are
required or authorized by Law (as defined below) to be closed in the State of California.
“Business” means Target’s business of conceiving, developing and producing advertising and
trade campaigns promoting feature films and videogames, including film trailers, teasers, TV and
radio spots, Internet advertising and cross-platform/new media marketing, and activities ancillary
thereto.
“Claim Notice” has a meaning ascribed to it in Section 8.4 of this Agreement.
“Closing Date” means the date which is specified in Section 2.2 of this Agreement.
“Closing” means the completion of the Transaction, to occur as contemplated by Section 2.2 of
this Agreement.
“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
“Common Stock” means the $.0001 par value common stock of Purchaser.
“Court Order” means any judgment, decision, consent decree, injunction, ruling, assessment,
writ or order of any Governmental Entity (as defined below) that is binding on any Person or its
property under applicable Law.
“Covenanting Party” means each Target, Subsidiary and Purchaser (collectively, “Covenanting
Parties”).
“Damages” means any Action, cost, damage, expense, disbursement, expense, Liability (as
defined below) (other than unknown contingent or unmatured Liabilities), loss, deficiency,
diminution in value, obligation, penalty or settlement of any kind or nature, including but not
limited to, interest or other carrying costs, penalties, reasonable legal, accounting and other
professional fees and expenses incurred in the investigation, collection, prosecution and defense
of claims and amounts paid in settlement, that may be imposed on or otherwise incurred or suffered
by the specified Person; provided, however, that damages shall not include any punitive,
consequential or incidental damages relating to any claim for which such party may be entitled to
recover under this Agreement.
3
“Default” means (a) any breach or default; (b) the occurrence of an act or event that, with
the passage of time or the giving of notice or both, would constitute a breach or default; or (c)
the occurrence of any act or event that, with or without the passage of time or the giving of
notice or both, would give rise to a right of termination, renegotiation or acceleration.
“Effective Time” means the time specified in Section 2.3 of this Agreement.
“Employment Agreements” means the Employment Agreements by and between Purchaser and each
Xxxxxx and Xxxxxx, executed in the form reasonably satisfactory to Takats and Xxxxxx, in
substantially the form of Exhibit B and Exhibit C attached hereto.
“Exchange Act” means the Securities Exchange Act of 1934.
“GAAP” means accounting principles generally accepted in the United States.
“Governmental Entity” means any government or any agency, bureau, board, commission, court,
department, official, political subdivision, tribunal or other instrumentality of any government,
whether federal, state or local, domestic or foreign.
“Indemnified Party” has a meaning ascribed to it in Section 8.4 of this Agreement.
“Indemnified Purchaser Party” has a meaning ascribed to it in Section 8.3 of this Agreement.
“Indemnified Seller Party” has the meaning ascribed to it in Section 8.2 of this Agreement.
“Indemnitor” has a meaning ascribed to it in Section 8.4 of this Agreement.
“ImaRx Shareholders” means all holders of $.0001 par value common stock of Purchaser
immediately prior to the consummation of the transaction contemplated by the Stock Exchange
Agreement.
“IRS” means the Internal Revenue Service of the United States of America.
“JRT Collateral” means 50% of the issued and outstanding shares of the $.001 par value common
stock of Subsidiary securing the JRT Note Indebtedness pursuant to the terms of the JRT Note and
JRT Security Agreement (as defined below).
“JRT Note Indebtedness” means the total amount due under the terms of the JRT Note (as defined
below).
“JRT Note” means the Promissory Note executed in favor of JRT.
“JRT Security Agreement” means the Pledge and Security Agreement (as defined below) securing
JRT Note Indebtedness.
4
“Knowledge of Purchaser” means the actual knowledge of the members of the board of directors
on the Closing Date of Purchaser of a particular fact, circumstance, event or matter, or knowledge
of such fact, circumstance, event or matter that would have been obtained after making reasonable
inquiry.
“Knowledge of Subsidiary” means the actual knowledge of Xxxxxx Xxxxxx, Xxxxx Xxxxxx, or
Xxxxxxx Xxxxx of a particular fact, circumstance, event or matter, or knowledge of such fact,
circumstance, event or matter that would have been obtained after making reasonable inquiry.
“Knowledge of Target” means the actual knowledge of Takats or Xxxxxx of a particular fact,
circumstance, event or matter, or knowledge of such fact, circumstance, event or matter that would
have been obtained after making reasonable inquiry.
“Laws” means any laws, statutes, ordinances, regulations, rules, notice requirements, court
decisions, agency guidelines, principles of law and common law, and orders of any Governmental
Entity.
“Liability” means any direct or indirect liability, indebtedness, obligation, commitment,
expense, claim, deficiency, guaranty or endorsement of or by any Person of any type, whether known
or unknown, and whether accrued, absolute, contingent, matured or unmatured.
“Material Adverse Change” means any material adverse change in the financial condition,
business, results of operations, assets, Liabilities or operations of Purchaser, Subsidiary or
Target, or the ability of Purchaser, Subsidiary or Target, to consummate the transactions
contemplated by this Agreement and the Stock Exchange Agreement, or any event or condition which
would, with the passage of time, constitute a “Material Adverse Change”; provided, however, that
the foregoing definition excludes the effects of (i) changes that are generally applicable to the
industry and markets in which Target operates; (ii) changes that are generally applicable to the
United States economy or securities markets or the world economy or international securities
markets; (iii) any change arising in connection with earthquakes, acts of war, sabotage or
terrorism, military actions or the escalation thereof; or (iv) any other effect of the public
announcement of this Agreement, the transactions contemplated hereby or the consummation of such
transactions.
“Opinions” means the legal opinions of Xxxxxxxx, Xxxxxxxxxx & Xxxxx, LLP, and Xxxxx Law
Corporation, in substantially the form of Exhibit D and Exhibit E,
correspondingly, attached hereto.
“Ordinary Course of Business” or “Ordinary Course” or any similar phrase means the ordinary
and usual course of conduct of the Business, consistent with the past practice of Target.
“Permits” means all licenses, permits, franchises, approvals, authorizations, certifications,
consents or orders of, or filings with (or any waiver of the foregoing), any Governmental Entity,
or any other Person (including, without limitation, federal and state agencies regulating food
safety).
5
“Person” means any person or entity, whether an individual, trustee, corporation, partnership,
limited partnership, limited liability company, trust, unincorporated organization, business
association, firm, joint venture, or Governmental Entity.
“Personal Property” means all machinery, equipment, furniture, fixtures, motor vehicles, other
miscellaneous supplies, tools, fixed assets and other tangible personal property owned or leased by
or used, or intended by Target for use, in connection with the Business.
“Pledge and Security Agreements” refers to the JRT Security Agreement and the Red Cat Security
Agreement executed by and between Purchaser, Subsidiary and Sellers granting to each Seller,
respectively, a first priority security interest in the JRT Collateral and the Red Cat Collateral,
respectively, pursuant to Section 3.2 of this Agreement, in the form reasonably satisfactory to
Takats and Xxxxxx, in substantially the form of Exhibit F attached hereto.
“Promissory Notes” refers to the JRT Note and Red Cat Note (as defined below) executed in
favor of each Seller, respectively, as a part of the Purchase Price (as defined below) payment
pursuant to Section 3.2 of this Agreement, in the form reasonably satisfactory to Takats and Xxxxxx
in substantially the form of Exhibit G attached hereto.
“Purchase Price” means the total amount of the consideration paid for Target Shares (as
defined below), as specified in detail in Section 3.1 of this Agreement.
“Purchaser” means ImaRx Therapeutics, Inc., a Delaware corporation.
“Purchaser Disclosure Document” means the Company Disclosure Document (each as defined by the
Stock Exchange Agreement), with such additional disclosures and exceptions to representations and
warranties made by Purchaser under this Agreement.
“Purchaser Financial Statements” refers to the Company Audited Financial Statements and
Company Unaudited Financial Statements (each as defined in the Stock Exchange Agreement).
“Put Right” means the option to put Purchaser Stock as defined in Section 3.5 of this
Agreement.
“Red Cat Collateral” means 50% of the issued and outstanding $.001 par value common stock of
Subsidiary securing Red Cat Note Indebtedness pursuant to the terms of the Red Cat Note and Red Cat
Security Agreement (as defined below).
“Red Cat Note Indebtedness” means the total amount due under the terms of the Red Cat Note.
“Red Cat Note” means the Promissory Note executed in favor of Red Cat.
“Red Cat Security Agreement” means the Pledge and Security Agreement securing Red Cat Note
Indebtedness.
6
“Registration Rights Agreement” means the Registration Rights Agreement by and between
Purchaser and Sellers, in the form reasonably satisfactory to Takats and Xxxxxx, in substantially
the form of Exhibit H attached hereto.
“Reverse Stock Split” means a one-for-two (1:2) reverse stock split of the issued and
outstanding shares of the Common Stock that Purchaser shall cause to occur as soon as practicable
after the Acquisition pursuant to the Stock Exchange Agreement.
“SEC” means the Securities Exchange Commission.
“Securities Act” means the Securities Act of 1933.
“Seller Shareholders” means Xxxxxx and Takas.
“Shareholders Agreement” means the Shareholders Agreement or similar agreement satisfactory to
Xxxxxx and Xxxxxx in substantially the form of Exhibit I attached hereto.
“Stock Exchange Agreement” means the Agreement for the Purchase and Sale of Stock, dated as of
March
________, 2010, by and among Surviving Corporation and Purchaser, to be closed immediately after
the Closing of the Merger, whereby Surviving Corporation shall became a wholly owned subsidiary of
Purchaser.
“Stock Powers” means stock powers executed by Subsidiary and Purchaser in connection with the
Pledge and Security Agreements with respect to the $.001 par value common stock of Surviving
Corporation.
“Subsidiary” means Sycamore Films, Inc., a Nevada corporation.
“Subsidiary Disclosure Document” means the Sycamore Disclosure Document (each as defined by
the Stock Exchange Agreement), with such additional disclosures and exceptions to representations
and warranties made by Subsidiary under this Agreement.
“Surviving Bylaws” means the bylaws of Surviving Corporation, in substantially the form of
Exhibit J attached hereto.
“Surviving Charter” means the Articles of Incorporation of Surviving Corporation, in
substantially the form of Exhibit K attached hereto.
“Surviving Corporation” means Subsidiary, Sycamore Films, Inc., a Nevada corporation,
immediately after the Effective Time (as defined below) of the Merger (as defined below).
“Sycamore Shareholders” means Xxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxxxx Xxxxx and all other persons
specified on the Sellers Schedule to the Stock Exchange Agreement.
“Target Balance Sheet” means the most recent balance sheet included in the Unaudited Financial
Statements of Target.
7
“Target Disclosure Document” means the Sweet Spot Disclosure Document (as defined by the Stock
Exchange Agreement) with such additional disclosures and exceptions to representations and
warranties made by Target under this Agreement.
“Target Shares” means all of the issued and outstanding no par value common stock of Target.
“Target Unaudited Financial Statements” means balance sheet, income statement, statement of
stockholders’ equity and statement of cash flows or equivalent statements of Target as commonly
prepared, as of December 31, 2009.
“Target” means Sweet Spot Productions, Inc., a California corporation.
“Transaction” means the consummation of the Merger and the Acquisition as provided by this
Agreement and the Stock Exchange Agreement.
“UCC” means the Uniform Commercial Code currently in effect in the State of California;
provided, however, in the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of security interest in any collateral referenced to in the
Promissory Notes and Pledge and Security Agreements is governed by the Uniform Commercial Code as
in effect in a jurisdiction other than the State of California, the term “UCC” shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection or priority and for purposes of definitions related
to such provisions.
ARTICLE 2
The Merger
The Merger
Section 2.1. Transaction. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance
with provisions of Chapter 78 and Chapter 92A of the Nevada Revised Statutes, at the Effective
Time, (a) Target shall be merged with and into Subsidiary, (b) the separate corporate existence of
Target shall cease, all Target Shares shall be cancelled and extinguished, and (c) Target and
Subsidiary shall continue their corporate existence under Nevada law as Surviving Corporation (the
“Merger”). Immediately upon the execution of this Agreement, Surviving Corporation shall enter
into the Stock Exchange Agreement with the Purchaser for the purpose of becoming a wholly-owned
subsidiary thereof (the “Acquisition,” and collectively with the Merger, the “Transaction”). The
parties understand that the principal purpose of this Agreement is to complete the Transaction, and
that such principal purpose will be frustrated if the Acquisition subsequent to the Merger does not
occur.
Section 2.2. Closing. Subject to the satisfaction or waiver of all of the conditions to closing contained in
ARTICLE 7 of this Agreement, the closing of the Merger (the “Closing”) shall take place (a) at the
offices of Xxxxxxxx Xxxxxxxxxx & Xxxxx LLP, 00000 Xxxx Xxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
00000, at 10:00 a.m. on the Closing Date (as defined below) determined by the parties, but not
later than April 20, 2010, or (b) at such other place and time or on such other date as Purchaser,
Subsidiary and Target may agree in writing (the “Closing Date”). Not later than
three (3) Business Days before the Closing, (a) Subsidiary
8
shall have delivered to CT Corp or
similar institution satisfactory to Purchaser the Articles of Merger for presentation to an
appropriate representative of the Nevada Secretary of State, with instructions that the Articles of
Merger are not to be filed until the parties so direct at the Closing telephone conference call;
(b) to the extent possible, the representative of the Nevada Secretary of State shall conduct a
preliminary review of the Articles of Merger to ensure that the Articles of Merger are in proper
form; and (c) Purchaser shall have previously provided a transfer agent of its choice with
instructions to issue, upon Purchaser’s subsequent authorization, shares of the Common Stock to
Sellers and Sycamore Shareholders, as provided by the Stock Exchange Agreement. The parties shall
schedule a telephone conference call with the Nevada Secretary of State representative and such
transfer agent to occur at the Closing. During that conference call, Subsidiary and Target, or
their counsel, shall give an oral authorization to the Nevada Secretary of State to file the
Articles of Merger. Immediately upon confirmation by the Nevada Secretary of State that the
Articles of Merger have been filed, Purchaser, or its counsel, shall authorize and instruct
Purchaser’s transfer agent to issue and deliver shares of the Common Stock to Sellers and other
Sycamore Shareholders in accordance with the terms of the Stock Exchange Agreement.
Section 2.3. Effective Time. The Merger shall become effective upon the filing of the Articles of Merger with the Nevada
Secretary of State in accordance with Section 92A.200 of the Nevada Revised Statutes (“Effective
Time”). Promptly after the Effective Time, Surviving Corporation or the Purchaser shall file such
document as it deems necessary pursuant to Section 1108(d) of the California Corporations Code.
Section 2.4. Effect of Merger. The Merger shall have the effects set forth in Section 2.1 of this Agreement. Without
limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of Target and Subsidiary shall vest in
Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and
duties of Target and Subsidiary shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of Surviving Corporation.
Section 2.5. Directors and Officers.
(a) Board of Directors of Surviving Corporation. The board of directors of Surviving Corporation shall consist of five (5) directors (the
“Surviving Board”). On the Closing Date, (a) Xxxxxx Xxxxxx, Xxxxx Xxxxxx, and Xxxxxxx Xxxxx, and
each of them, being the current directors of Subsidiary, shall continue as the directors on the
Surviving Board; and (b) Xxxxxx and Takats shall be appointed as additional directors on the
Surviving Board and will serve as such until their successors are appointed or elected and duly
qualified.
(b) Officers of Surviving Corporation. On the Closing Date, Xxxxxx shall become the President of the Surviving Corporation, and
Takats shall become the Senior Executive Vice President and Treasurer of the Surviving
Corporation, and both shall serve in these capacities on the terms and conditions set forth in
the respective Employment Agreements.
9
Section 2.6. Surviving Charter. The Articles of Incorporation of Subsidiary, in the form attached as Exhibit K
hereto, shall be from and after the Effective Time, the Surviving Charter until amended as
provided in the Surviving Charter or by applicable Laws.
Section 2.7. Surviving Bylaws. Subsidiary shall take all requisite action to amend its Bylaws, in a manner satisfactory to
the Seller Shareholders, and Subsidiary’s Bylaws in effect immediately prior to the Effective Time
shall be, from and after the Effective Time, the Surviving Bylaws, attached hereto as Exhibit
J, until amended as provided in the Surviving Charter, the Surviving Bylaws or by applicable
Laws.
Section 2.8. Capital Structure of the Surviving Corporation. At the Closing, Subsidiary shall issue or cause to be issued 2,500,000 shares of common
stock to each of the Sellers. Immediately following the Closing, the issued and outstanding shares
of Subsidiary’s $.001 par value common stock shall be as follows:
Number of Shares of that | ||||||||
Name of Shareholder | Percentage Ownership | Common Stock | ||||||
JRT |
2.907 | % | 2,500,000 | |||||
Red Cat |
2.907 | % | 2,500,000 | |||||
Sycamore Shareholders |
94.186 | % | 81,000,000 | |||||
Total: |
100 | % | 86,000,000 |
ARTICLE 3
The Consideration
The Consideration
Section 3.1. Purchase Price. The Purchase Price for the Target Shares and the other acts and agreements of the Seller
Shareholders shall be One Million Two Hundred Thousand Dollars ($1,200,000.00). The consideration
paid to Sellers for the Target Shares shall consist of the Promissory Notes, Subsidiary Stock,
registration rights and Put Rights.
Section 3.2. Promissory Notes. Four Hundred Thousand Dollars ($400,000.00) of the Purchase Price shall be paid at the
Closing by delivery by Purchaser to the Sellers of the Promissory Notes, each in the principal
amount of Two Hundred Thousand Dollars ($200,000.00).
Section 3.3. Subsidiary Stock. On the Closing Date, Subsidiary shall issue or cause to be issued to each Seller such
number of shares of Subsidiary’s $.001 par value common stock that, upon the closing of the
Acquisition, shall entitle each Seller to 21/2% of the total number of shares of the Common
Stock issued and outstanding at the closing of the Acquisition.
Section 3.4. Registration Rights. Until such time as Sellers may sell the shares of the Common Stock received by each on the
Closing Date freely and without restrictions regarding quantity or manner of sale, Sellers shall be
provided with registration rights
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with respect to such shares of the Common Stock as set forth in
the Registration Rights Agreements to be executed and delivered by Purchaser to Sellers on or prior
to the Closing Date.
Section 3.5. Put Rights. Beginning on that date which is six (6) months after the Closing Date, and continuing for a
two year period immediately thereafter (the “Put Period”), each Seller shall have the right to
require that, during any 90-day period following the first day of the Put Period, Purchaser
purchase from that Seller up to 25% of the Common Stock received by that Seller on the Closing Date
(“Put Right”). A Seller may exercise the Put Right, in whole or in part, at any time or from time
to time during the Put Period, by delivering to Purchaser a thirty (30) day written notice of such
Seller’s intent to exercise its Put Right, which notice shall specify the number of shares of the
Common Stock to be purchased by Purchaser. If during any 90-day period a Seller elects not to
exercise the Put Right with respect to any of 25% of the Common Stock which that Seller is entitled
to put, such Common Stock may be put during the following 90-day period in addition to 25% of the
Common Stock that such Seller is entitled to put during such 90-day period. As such, at the
beginning of the fourth 90-day period each Seller shall have the right to exercise the Put Right
with respect to any and all of the Common Stock held by that Seller as of the Closing Date. The
price at which Purchaser shall be required to purchase shares of the Common Stock shall equal (i)
$0.16 per share, in the event that the Put Right is exercised prior to the Reverse Stock Split, and
(ii) $0.32 per share, in the event that the Put Right is exercised after the Reverse Stock Split.
The purchase price for the Common Stock so put shall be paid by Purchaser within ten (10) Business
Days following the expiration of the 30-day notice period.
Section 3.6. Limited Suspension of Rights During Fundraising. The provisions of Section 3.5 of this Agreement notwithstanding, if at any time during the
Put Period Purchaser decides to raise funds for a particular project, whether by a public or
private sale of shares of the Common Stock or by any other form of financing transaction, and
determines in good faith that Sellers’ exercise of Put Rights may interfere with such fundraising
efforts, Purchaser may suspend Sellers’ rights to exercise their Put Rights by delivering to
Sellers a written notice of suspension, which notice shall set forth the planned fundraising
activity and the anticipated duration of the suspension period. The Put Period shall be extended
for the duration of such suspension period. Upon Sellers’ receipt of the notice of suspension and
during the suspension period, the Sellers (i) shall not exercise their Put Rights, and (ii) shall
not exercise rights granted under the Registration Rights Agreements at a time or in a manner that
will interfere with the efforts of Purchaser to raise funds. The suspension period shall terminate
and the Sellers shall be able to exercise the suspended rights to the full extent provided by this
Agreement and the Ancillary Documents upon the earlier of (i) completion of Purchaser’s fundraising
campaign including such reasonable period thereafter as requested by an underwriter or financial
advisor participating in the fund raising not to exceed six (6) months from the date of closing of
the fund raising including the exercise of any over allotment option granted to such
underwriters or financial advisors; or (ii) Purchaser’s determination that the necessary funds
cannot be raised within the immediate future, not to exceed twelve (12) months.
ARTICLE 4
Representations and Warranties of Target
Representations and Warranties of Target
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Except as otherwise set forth in writing in the Target Disclosure Document delivered by the
Target to Subsidiary in connection with this Agreement, Target hereby represents and warrants to
Subsidiary and Purchaser as follows:
Section 4.1. Organization. Target is duly organized, validly existing and in good standing under the Laws of the State
of California with full power and authority to conduct and carry on the Business as it is presently
being conducted and to own or lease, as applicable, the Assets, which it currently owns or leases.
Target is duly qualified or licensed to do business as a foreign entity and is in good standing in
each jurisdiction where the character of its properties owned or leased or the nature of its
activities make such qualification necessary. Target Disclosure Document correctly lists the
current directors, managers and executive officers of Target.
Section 4.2. Capitalization; No Derivative Securities.
(a) Capitalization. On the Closing Date, the total authorized capital of the Target consists of one million
(1,000,000) shares of no par value common stock, all of which are issued and outstanding and
constitute the Target Shares. Immediately prior to the Closing, the ownership of the Target Shares
is as follows:
Number of Shares of | ||||||||
Shareholder | Percentage Ownership | Common Stock | ||||||
JRT |
50 | % | 500,000 | |||||
Red Cat |
50 | % | 500,000 | |||||
Total: |
100 | % | 1,000,000 |
All of the Target Shares have been duly authorized and validly issued in accordance with
applicable Laws and are fully paid and non-assessable. None of the Target Shares were issued in
violation of any preemptive right.
(b) Derivative Securities. On the Closing Date, there will be no (i) outstanding options, warrants, agreements,
convertible or exchangeable securities or other arrangements or commitments pursuant to which the
holders thereof shall have the right to sell, transfer, purchase, return, redeem, or otherwise
acquire shares of Target’s no par value common stock; (ii) shares of Target’s no par value common
stock reserved for any purpose; (iii) agreements pursuant to which registration rights in the
Target Shares have been granted; (iv) agreements, whether written or oral, among any current
and former stockholders or members of Target or Sellers; (v) statutory or contractual
preemptive rights or rights of first refusal with respect to the Target Shares; (vi) declared or
accrued dividends on any of the Target Shares; or (vii) any other voting trust, voting agreement,
stockholders agreement, pledge agreement, buy-sell agreement, or similar agreement affecting or
relating to ownership interests in Target
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Section 4.3. Material Contracts. Target Disclosure Document discloses all material agreements, contracts, arrangements,
commitments, obligations, bonds, franchises, indemnities, indentures, instruments, leases, licenses
and understandings, whether or not in writing, (collectively referred to as “Material Contracts”),
with a brief summary of each such Material Contract. To the Knowledge of Target, (i) each such
Material Contract is legal, valid, binding, enforceable and in full force and effect; and (ii) no
party is in breach or default, and no event has occurred that with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or acceleration, under any
such Material Contract; and (iii) no party has repudiated any provision of any such Material
Contract.
Section 4.4. Litigation. Except as set forth in Target Disclosure Document, there is no Action pending or, to the
Knowledge of the Target, threatened against the Target, any of its Affiliates or any of the Assets
which, individually or in the aggregate, (i) involves monetary claims for more than $25,000; (ii)
involves any requests for injunctive relief; or (iii) or challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement. Except as set forth in
the Target Disclosure Document, neither the Target, any Seller, nor any Asset is subject to any
outstanding Court Order. Target has not commenced any Action and is not contemplating commencing
any Action against any Person.
Section 4.5. No Undisclosed Liabilities. Target does not have, to the Knowledge of the Target, any material Liabilities, whether
accrued, absolute, contingent or otherwise, and whether due or to become due, probable of assertion
or not, except (i) those reflected or otherwise reserved against in the Target Financial Statements
in amounts that have been established on a basis consistent with past practices of Target and in
accordance with GAAP; (ii) those arising subsequent to the Target Financial Statements in the
Ordinary Course of Business, none of which constitute or would constitute a violation or breach of
any condition or covenant in this Agreement; (iii) those not required to be reflected on, or
disclosed in the footnotes to, the Target Financial Statements under GAAP; (iv) executory
obligations under the Material Contracts and executory obligations under contracts not required to
be disclosed as Material Contracts; and (v) other Liabilities of which Purchaser and Subsidiary
have Knowledge.
Section 4.6. No Material Adverse Change. Except as contemplated or caused by this Agreement, there has not been (i) any Material
Adverse Change in the Business, (financial or otherwise), operations, or prospects of Target; (ii)
any damage, destruction, or loss, whether covered by insurance or not, having a material adverse
effect on the Business, (financial or otherwise), operations or prospects of Target; (iii) any
entry into or termination of any material commitment, contract, agreement, or transaction
(including, without limitation, any material borrowing or capital expenditure or sale
or other disposition of any material asset or assets) by or involving Target, other than this
Agreement, and agreements executed in the Ordinary Course of Business; (iv) any redemption,
repurchase, or other acquisition for value of its capital stock by Target, or any dividend or
distribution declared, set aside, or paid on capital stock of Target; (v) any transfer of any right
granted pursuant to any material lease, license, agreement, patent, trademark, trade name, or
copyright of Target; (vi) any sale or other disposition of any Asset, or any mortgage, pledge, or
13
imposition of any lien or other encumbrance on any Asset, other than in the Ordinary Course of
Business, or any agreement relating to any of the foregoing; of (vii) any default or breach by
Target in any material respect pursuant to any contract, license or permit. Since the date of the
Target Balance Sheet, Target has conducted the Business only in the ordinary and usual course, and,
without limiting the foregoing, no changes have been made in (i) executive compensation amounts,
(ii) the manner in which other employees of Target are compensated, (iii) supplemental benefits
provided to any such executives or other employees, or (iv) inventory amounts in relation to sales
amounts, except, in any such event, in the Ordinary Course of Business and, in any event, without
material adverse effect on the business, condition (financial or otherwise), operations, or
prospects of causing a Material Adverse Change with respect to Target.
Section 4.7. Brokers. No broker, finder, or investment banker is entitled to any brokerage, finder’s, or other fee
or commission in connection with this Agreement or any related transaction based upon any
agreements, written or oral, made by or on behalf of Target.
Section 4.8. Representations in Stock Exchange Agreement. To the extent applicable to this Agreement, Target’s representations and warranties under
Article IV of the Stock Exchange Agreement are incorporated by reference herein.
ARTICLE 5
Representations and Warranties of Purchaser and Subsidiary
Representations and Warranties of Purchaser and Subsidiary
Except as otherwise set forth in writing in the respective Purchaser and the Subsidiary
Disclosure Documents delivered by Purchaser and Subsidiary to Sellers in connection with this
Agreement, Purchaser and Subsidiary, severally, for itself only, except for the representation and
warranty set forth in Section 5.5 which is made solely by Subsidiary, hereby represent and warrant
to Sellers and Target as follows:
Section 5.1. Organization. Purchaser and Subsidiary are duly organized, validly existing and in good standing under
the Laws of the jurisdictions of their organization with full corporate power and authority to
conduct their businesses as they are presently being conducted and to own or lease, as applicable,
their assets. Purchaser and Subsidiary are duly qualified to do business as foreign entities and
are in good standing in each jurisdiction where the nature of the transactions contemplated by this
Agreement make such qualification necessary.
Section 5.2. Authority. Purchaser and Subsidiary have all requisite corporate power and corporate authority, and
have taken all corporate actions necessary, to execute, deliver and perform this Agreement, the
Ancillary Documents and the Stock Exchange Agreement, to consummate the transactions
contemplated hereby and thereby and to perform their obligations hereunder and thereunder.
The execution and delivery by Purchaser and Subsidiary of this Agreement, the Ancillary Documents
and the Stock Exchange Agreement, and the consummation by Purchaser and Subsidiary of the
transactions contemplated hereby and thereby have been duly and validly authorized by the
respective boards of directors of Purchaser and Subsidiary, and Purchaser and Subsidiary have taken
all other corporate actions necessary to authorize this Agreement, the Ancillary Documents and the
Stock Exchange Agreement, and the
14
transactions contemplated hereby and thereby. This Agreement has
been duly and properly executed and delivered by Purchaser and Subsidiary and, is the legal, valid
and binding obligations of Purchaser and Subsidiary, enforceable against each in accordance with
its terms.
Section 5.3. Capitalization.
(a) Purchaser. On the Closing Date, the total authorized capital of Purchaser consists of (a) one hundred
million (100,000,000) shares of $.0001 par value common stock, of which, at the Closing of the
Merger eleven million six hundred and sixty-five thousand seven hundred thirty-three (11,665,733)
shares are issued and outstanding, and (b) five million (5,000,000) shares of $.0001 par value
preferred stock, of which at the Closing of the Merger zero (0) shares are issued and outstanding.
The rights, privileges and preferences of Purchaser’s capital stock are as stated in Purchaser’s
Certificate of Incorporation, as amended to date. All outstanding shares of the Common Stock are
duly authorized, validly issued, fully paid and non-assessable. Except as disclosed in the Stock
Exchange Agreement, as of the Closing Date, there are no outstanding or authorized capital stock,
options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require Purchaser to issue, sell, or otherwise cause to
become outstanding any of its capital stock; and, except as provided in ARTICLE 3 of this
Agreement, there are no outstanding contracts, commitments or rights of any kind that could require
Purchaser to repurchase, redeem or otherwise acquire any outstanding shares of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit participation or
similar rights with respect to Purchaser.
(b) Subsidiary. On the Closing Date, the total authorized capital of Subsidiary consists of one hundred
million (100,000,000) shares of $.001 par value common stock, of which eighty six million
(86,000,000) shares are issued and outstanding. The rights, privileges and preferences of
Subsidiary’s $.001 par value common stock are as stated in Subsidiary’s Certificate of
Incorporation, as amended to date. All of the outstanding shares of Subsidiary’s $.001 par value
common stock are duly authorized, validly issued, fully paid and non-assessable. There are no
outstanding or authorized capital stock, options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that could require Subsidiary
to issue, sell, or otherwise cause to become outstanding any of its capital stock, and there are no
outstanding contracts, commitments or rights of any kind that could require Subsidiary to
repurchase, redeem or otherwise acquire any outstanding shares of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights
with respect to Subsidiary.
Section 5.4. Investment Intent Subsidiary is acquiring the Target Shares for its own account and not with a view to their
distribution within the meaning of Section 2(a)(11) of the Securities Act, in any manner that would
be in violation of the Securities Act. Subsidiary has not, directly or indirectly, offered the
Target Shares to anyone or solicited any offer to buy the Target Shares from anyone, so as to
bring the offer and sale of the Target Shares within the registration requirements of the
Securities Act.
15
Section 5.5. Capital Resources. Purchaser and Subsidiary have, and will have at the Effective Time, commitments for
sufficient funds, in the form of capital contributions or loan proceeds, or both, to pay (i)
Purchaser’s obligations under this Agreement and Ancillary Documents to which Purchaser and
Subsidiary are parties; and (ii) the amount of $1,800,000.00, which amount has been approved by
Seller Shareholders on or prior to the Closing Date as being adequate to finance the operations of
Purchaser and Surviving Corporation for the first twelve (12) months following the Closing in a
manner consistent with the Budget.
Section 5.6. Liabilities. Purchaser does not have any material Liabilities, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, probable of assertion or not, except (i) those
reflected or otherwise reserved against in the Purchaser Financial Statements in amounts that have
been established on a basis consistent with past practices of Purchaser and in accordance with
GAAP; (ii) those arising subsequent to the Purchaser Financial Statements in the Ordinary Course of
Business, none of which constitute or would constitute a violation or breach of any condition or
covenant in this Agreement; (iii) those not required to be reflected on, or disclosed in the
footnotes to, the Purchaser Financial Statements under GAAP; and (iv) other Liabilities of which
Target has Knowledge. Subsidiary has no material Liabilities, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, probable of assertion or not.
16
Section 5.7. Material Contracts. The Purchaser and the Subsidiary Disclosure Documents specify all material contracts,
agreements, or understandings, whether express or implied, written or verbal, to which either
Purchaser or Subsidiary is a party, with a brief summary of each such material contract, agreement
or understanding. To the Knowledge of the Purchaser and the Subsidiary, (i) each such contract is
legal, valid, binding, enforceable and in full force and effect; and (ii) no party is in breach or
default, and no event has occurred that with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under any such contract; and (iii)
no party has repudiated any provision of any such contract.
Section 5.8. Compliance with Law. Purchaser and Subsidiary are in compliance with all Laws and Court Orders which would affect
their ability to perform their obligations hereunder. There is no Action pending or threatened
against Purchaser or Subsidiary that would affect its ability to perform its obligations hereunder.
Section 5.9. Brokers. No broker, finder, or investment banker is entitled to any brokerage, finder’s, or other fee
or commission in connection with this Agreement or any related transaction based upon any
agreements, written or oral, made by or on behalf of Purchaser or Subsidiary.
Section 5.10. Representations in Stock Exchange Agreement. To the extent applicable to this Agreement, Subsidiary’s and Purchaser’s representations and
warranties set forth in Article III and Article V of the Stock Exchange Agreement are incorporated
by reference herein.
ARTICLE 6
Covenants
Covenants
Section 6.1. Acquisition Transaction. Immediately following the Closing of the Merger, Purchaser and Surviving Corporation shall
enter into the Stock Exchange Agreement. Purchaser and the Surviving Corporation shall perform in
all material respects each of its agreements and obligations specified in the Stock Exchange
Agreement and required to be performed on or prior to the closing of the Acquisition. Purchaser
and Surviving Corporation shall comply with all material requirements, rules, and regulations of
all regulatory authorities having jurisdiction relating to the Acquisition.
Section 6.2. Conduct of Business Prior to the Effective Time. Except as expressly contemplated or permitted by this Agreement or the Stock Exchange
Agreement, or as required by applicable Law, during the period from the date of this Agreement to
the Effective Time, each Target, Subsidiary, and Purchaser (“Covenanting Parties”) shall comply
with each of the following:
(a) Business in Ordinary Course. The business of each Covenanting Party shall be conducted only in the ordinary and usual
course, each Covenanting Party shall use reasonable efforts to keep intact its business
organization and goodwill, keep available the services of its officers and employees and maintain
good relationships with suppliers, lenders, creditors, distributors, employees, customers, and
other persons having business or financial relationships with such Covenanting Party, and each
Covenanting Party shall immediately notify the other
17
Covenanting Parties of any event or occurrence
or emergency material to, and not in the Ordinary Course of Business of, the notifying Covenanting
Party.
(b) Amendment of Corporate Documents and Shareholders Rights. Covenanting Parties shall not (i) amend their Articles of Incorporation (or similar charter
document) or Bylaws (or similar governing document), or (ii) split, combine, or reclassify any of
their outstanding securities or declare, set aside, or pay any dividend or other distribution on or
make or agree or commit to make any exchange for or redemption of any such securities payable in
cash, stock, or property.
(c) Stock Changes. Covenanting Parties shall not (i) issue or agree to issue any additional shares of, or
rights of any kind to acquire any shares of, their capital stock of any class, or (ii) enter into
any contract, agreement, commitment, or arrangement with respect to any of the foregoing.
(d) Additional Liabilities. Covenanting Parties shall not create, incur, or assume any long-term or short-term
indebtedness for money borrowed or make any capital expenditures or commitment for capital
expenditures, except in their Ordinary Course of Business and consistent with past practices.
(e) Employee Compensation. Covenanting Parties shall not (i) adopt, enter into, or amend any bonus, profit-sharing,
compensation, stock option, warrant, pension, retirement, deferred compensation, employment,
severance, termination, or other employee benefit plan, agreement, trust fund, or arrangement for
the benefit or welfare of any officer, director or employee; or (ii) agree to any material (in
relation to historical compensation) increase in the compensation payable or to become payable to,
or any increase in the contractual term of employment of, any officer, director, or employee,
except, with respect to employees who are not officers or directors, in the Ordinary Course of
Business in accordance with past practice.
(f) Asset Disposition. Covenanting Parties shall not sell, lease, mortgage, encumber, or otherwise dispose of or
grant any interest in any of their assets or properties, except for sales, encumbrances, and other
dispositions or grants in the Ordinary Course of Business and consistent with past practice and
except for liens for taxes not yet due or liens or encumbrances that are not material in amount or
effect and do not impair the use of such property, or as specifically provided for or permitted in
this Agreement and the Stock Exchange Agreement.
(g) Material Contracts. Covenanting Parties shall not enter into, or terminate, any material contract, agreement,
commitment, or understanding.
(h) Taxes. Each Covenanting Party will file properly and promptly when due all federal, state, local,
foreign and other tax returns, reports, and declarations required to be filed by such Covenanting
Party and will pay, or make full and adequate provision for the payment of, all taxes and
governmental charges due from or payable by such Covenanting Party.
(i) Compliance with Laws. Each Covenanting Party will comply with all laws and regulations applicable to such
Covenanting Party and such Covenanting Party’s operations.
18
Section 6.3. Access to Information. Each Covenanting Party shall provide to each other Covenanting Party and to their
accountants, counsel and other representatives reasonable access during normal business hours
during the period prior to the Closing to all of its properties, books, contracts, commitments,
records (including, but not limited to, tax returns), and personnel, and, during such period, each
Covenanting Party shall furnish promptly to the other Covenanting Parties as requested (i) all
written communications to its directors or to its shareholders generally; (ii) internal monthly
financial statements when and as available; and (iii) all other information concerning its
business, properties, and personnel, but no investigation pursuant to this section shall affect any
representations or warranties of any Covenanting Party, or the conditions to the obligations of
any Covenanting Party to consummate the Transaction. In the event of the termination of this
Agreement, each Covenanting Party will, and will cause its representatives to, deliver to the other
Covenanting Parties or destroy all documents, work papers, and other material, and all copies
thereof, obtained by each Covenanting Party from other Covenanting Parties as a result of this
Agreement or in connection with this Agreement, whether so obtained before or after the execution
of this Agreement, and each Covenanting Party will hold in confidence all confidential information,
that has been designated as such in writing or by appropriate and obvious notation, and will not
use any such confidential information, except in connection with the Transaction, until such time
as such information is otherwise publicly available. Each Covenanting Party and their
representatives shall assert their rights pursuant to this Agreement in such manner as to minimize
interference with the business of other Covenanting Parties.
Section 6.4. Post-Closing 8-K Report. Purchaser shall prepare and, within four (4) Business Days following the Closing Date, cause
to be filed with the SEC a Current Report on Form 8-K regarding the Transaction, as required under
the Exchange Act and Rule 13a-11 of the Exchange Act.
Section 6.5. Director and Officer Liability.
(a) Directors’ and Officers’ Liability Insurance. Beginning the Effective Time, Surviving Corporation shall obtain and maintain officers’ and
directors’ liability insurance or insurance “tail” or other insurance policies in respect to acts
or omissions occurring prior to the Effective Time covering present and former directors and
officers of Target on such terms and in such amounts with respect to coverage as is presently
available to Target’s officers and directors for a period of at least six years from the Closing
Date. Surviving Corporation shall maintain such policies in full force and effect for their full
term, and continue to honor the obligations thereunder.
(b) Directors’ and Officers’ Indemnification. Beginning the Effective Time, Purchaser’s Certificate of Incorporation and Bylaws, and the
Surviving Charter and the Surviving Bylaws shall contain, or Subsidiary shall cause the Surviving
Charter and the Surviving Bylaws to so contain, such provisions with respect to indemnification,
advancement of expenses and exculpation of present and former directors and officers of Target as
shall be reasonably satisfactory to Xxxxxx and Xxxxxx, and such provisions shall not be amended,
repealed, or otherwise modified in any manner that could adversely affect the rights thereunder of
any indemnified directors and officers benefited by such provisions.
19
(c) Continuity of Insurance and Indemnification Obligations. If Purchaser, Surviving Corporation or any of their successors or assigns (i) consolidates
with or merges into any other Person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of
their properties and assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Purchaser or the Surviving
Corporation, as the case may be, shall assume the obligations set forth in this Section 6.5.
Section 6.6. Updating of Disclosure Documents. Each Covenanting Party shall notify the other Covenanting Parties of any changes, additions
or events which may cause any change in or addition to such Covenanting Party’s Disclosure Document
promptly after the occurrence of the same and at the Closing by the delivery of appropriate updates
to the respective Disclosure Document. No notification made pursuant to this section shall be
deemed to cure any breach of any representation or warranty made in this Agreement, unless all
Covenanting Parties specifically agree thereto in writing nor shall any such notification be
considered to constitute or result in a waiver by any Covenanting Party of any condition set forth
in this Agreement.
Section 6.7. Rescission of Merger. In case the Acquisition does not close, as contemplated by the Stock Exchange Agreement, within
thirty (30) days after the Closing of the Merger, the Merger shall be rescinded, and this Agreement
and all documents, securities and other instruments executed and delivered in connection hereto
shall be shall be cancelled and rendered null and void ab initio. The Covenanting Parties, and
each of them, shall take all necessary actions to effectuate such rescission, including, without
limitation, executing appropriate documents and causing appropriate filings with appropriate
offices of Secretary of State, so as to restore each party to this Agreement to their respective
positions occupied immediately prior to the Closing of the Merger.
Section 6.8. Further Assurances. Covenanting Parties shall use their commercially reasonable efforts to do and
perform or cause to be done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments or documents as any other party may
reasonably request in order to carry out the intent and purposes of this Agreement and the
consummation of the transactions contemplated hereby.
ARTICLE 7
Closing Conditions
Closing Conditions
Section 7.1. Conditions to Each Party’s Obligation. The respective obligations of each party hereto to effect the transactions contemplated
hereby are subject to the satisfaction, on or prior to the Closing Date, of the following
conditions:
(a) No Legal Barriers. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or enforced by any governmental entity which prohibits, restrains,
enjoins or restricts the consummation of the transactions contemplated by this Agreement and the
Stock Exchange Agreement; and
20
(b) Third Party Consents Obtained. All authorizations, consents, orders or approvals of, or declarations or filings with, or
expiration of waiting periods imposed by, any Governmental Entity necessary for the consummation of
the transactions contemplated by this Agreement and the Stock Exchange Agreement have been filed,
occurred or been obtained.
Section 7.2. Conditions to the Obligations of Target, Sellers and Seller
Shareholders. The respective obligations of Target, Sellers and Seller Shareholders to effect the
transactions contemplated hereby are subject to the satisfaction, on or prior to the Closing Date,
of the following conditions:
(a) Officer Certificate Regarding Representation and Warranties. The representations and warranties of Subsidiary and Purchaser contained in this Agreement
or in any other document delivered pursuant hereto shall be true and correct in all material
respects at and as of the Closing Date with the same effect as if made at and as of the Closing
Date (except to the extent such representations and warranties specifically relate to an earlier
date, in which case such representations and warranties shall be true and correct as of such
earlier date) and, at the Closing, Subsidiary and Purchaser shall have delivered to the Sellers
certificates of appropriate officers to that effect;
(b) Issuance and Delivery of Shares. Subsidiary has issued or caused to be issued shares of Subsidiary’s $.001 par value common
stock in the amount specified in Section 3.3 of this Agreement and delivered or caused to be
delivered to the Sellers certificates representing such shares of Subsidiary’s $.001 par value
common stock, each accompanied by an instrument of transfer of such shares of Subsidiary’s $.001
par value common stock.
(c) Capital Resources. Purchaser and Subsidiary have presented to Seller Shareholders satisfactory evidence of the
commitments for those funds provided in Section 5.5 of this Agreement.
(d) Ancillary Documents. Purchaser and Subsidiary, as appropriate, have executed and delivered to Sellers, in a form
satisfactory to each Seller, the following Ancillary Documents:
(i) Employment Agreements;
(ii) Opinions of Counsel;
(iii) Pledge and Security Agreements;
(iv) Promissory Notes;
(v) Registration Rights Agreements;
(vi) Shareholders Agreements; and
(vii) Stock Powers.
(ii) Opinions of Counsel;
(iii) Pledge and Security Agreements;
(iv) Promissory Notes;
(v) Registration Rights Agreements;
(vi) Shareholders Agreements; and
(vii) Stock Powers.
(e) Budget Approval. The Budget has been presented to and approved by the Seller Shareholders.
(f) Surviving Charter and Bylaws Approval. The Articles of Incorporation and Bylaws of Subsidiary have been amended in a manner
satisfactory to Sellers, and the Surviving Charter and Surviving Bylaws have been approved by the
Seller Shareholders.
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(g) Surviving Board and Officers Appointments. Subsidiary has caused to be prepared and executed all appropriate consents and resolutions
appointing Xxxxxx and Xxxxxx directors on the Surviving Board as provided by Section 2.5(a) of this
Agreement. Subsidiary and its board of directors have caused to be prepared and executed all
appropriate board of directors resolutions appointing Xxxxxx the President and Takats the Senior
Executive Vice President and Treasurer of Surviving Corporation as provided by Section 2.5(b) of
this Agreement.
(h) Covenants Fulfilled. Subsidiary and Purchaser have otherwise performed in all material respects each of their
agreements and obligations specified in this Agreement and required to be performed on or prior to
the Closing and shall have complied with all material requirements, rules, and regulations of all
regulatory authorities having jurisdiction relating to the Merger and the Acquisition.
Section 7.3. Conditions to the Obligations of Subsidiary and Purchaser. The obligation of Subsidiary and Purchaser to effect the transactions contemplated hereby is
subject to the satisfaction, on or prior to the Closing Date, of the following conditions:
(a) Officer Certificate regarding Representations and Warranties. The representations and warranties of Target and Seller Shareholders contained in this
Agreement or in any other document delivered pursuant hereto shall be true and correct in all
material respects at and as of the Closing Date with the same effect as if made at and as of the
Closing Date (except to the extent such representations and warranties specifically relate to an
earlier date, in which case such representations and warranties shall be true and correct as of
such earlier date) and, at the Closing, Target shall have delivered to Purchaser and Subsidiary
certificates of an appropriate officer to that effect.
(b) Covenants Fulfilled. Target has otherwise performed in all material respects each of its agreements and
obligations specified in this Agreement and required to be performed on or prior to the Closing,
and shall have complied with all material requirements, rules, and regulations of all regulatory
authorities having jurisdiction relating to the Merger and the Acquisition.
ARTICLE 8
Indemnification
Indemnification
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Section 8.1. Survival of Representations and Warranties. The representations and warranties of the parties contained herein or in any agreement,
certificate or other instrument delivered pursuant to this Agreement shall survive the Closing Date
until eighteen (18) months after the Closing Date. Any claims under this Agreement with respect to
a breach of a representation and warranty must be asserted by written notice within the applicable
survival period contemplated by this Section 8.1, and, if such a notice is given, the survival
period for such representation and warranty shall continue until the claim is fully resolved.
Section 8.2. Indemnification by Purchaser and Subsidiary. Subject to limitations below, Purchaser and Subsidiary agree to indemnify, defend and hold
Sellers, Seller Shareholders and their assigns (“Indemnified Seller Parties”) harmless from and
against any and all Damages that Indemnified Seller Parties may suffer, sustain, incur or become
subject to arising out of or due to (a) any inaccuracy of any representation of Purchaser or
Subsidiary in this Agreement or Ancillary Documents; (b) any breach of any warranty of Purchaser or
Subsidiary in this Agreement or Ancillary Documents; (c) breach of any covenant, undertaking,
agreement or other obligation of Purchaser or Subsidiary under this Agreement or Ancillary
Documents; (d) any Action of any nature arising out of any act performed, transaction entered into,
or state of facts caused to exist by Purchaser prior or subsequent to the Closing Date; and (e) any
costs and expenses (including attorneys’ fees) which Indemnified Seller Parties may suffer or
sustain in seeking to enforce the indemnification obligations of Purchaser hereunder.
Section 8.3. Indemnification by Sellers. Sellers agree to indemnify, defend and hold Purchaser and Subsidiary (“Indemnified
Purchaser Parties”) harmless from and against any and all Damages that Indemnified Purchaser
Parties may suffer, sustain, incur or become subject to arising out of or due to (a) any inaccuracy
of any representation of Target in this Agreement or Ancillary Documents; (b) any breach of any
warranty of Target in this Agreement or Ancillary Documents; (c) breach of any covenant,
undertaking, agreement or other obligation of Target under this Agreement or Ancillary Documents;
(d) any Action of any nature arising out of any act performed, transaction entered into, or state
of facts cause to exist by Target prior to the Closing Date; and (e) any costs and expenses
(including attorneys’ fees) which Indemnified Purchaser Parties may suffer or sustain in seeking to
enforce the indemnification obligations of Sellers.
Section 8.4. Notice. Any Indemnified Purchaser Party or Indemnified Seller Party seeking indemnification
hereunder (the “Indemnified Party”) shall give to the party obligated to provide indemnification to
such Indemnified Party (the “Indemnitor”) a prompt written notice (a “Claim Notice”) describing, to
the extent reasonably practical to do so, in reasonable detail the facts giving rise to any claims
for indemnification hereunder and shall include in such Claim Notice (if then known) the amount or
the method of computation of the amount of such claim, and a reference to the provision of this
Agreement or any agreement, certificate or instrument executed pursuant hereto or in connection
herewith upon which such claim is based; provided that failure to give such Claim Notice shall not
relieve the Indemnitor of its obligations hereunder, except to the extent it shall have been
prejudiced by such failure.
Section 8.5. Limitation on Indemnification. Notwithstanding the foregoing, no Indemnified Party shall have the right to indemnification
pursuant to Section 8.2 or
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Section 8.3 of this Agreement, unless and until the aggregate of all
Damages suffered by such Indemnified Party hereunder exceeds $30,000.
Section 8.6. Calculation of Damages. The amount of any Damage for which indemnification is provided shall be net of any amounts
recovered by the Indemnified Party or paid for its benefit under insurance policies with respect to
such Damage. In the event that any claim for indemnification asserted hereunder is, or
may be, the subject of any insurance coverage or other right to indemnification or
contribution from any third Person, the Indemnified Party expressly agrees to promptly notify the
applicable insurance carrier of any such claim or loss and tender defense thereof to such carrier,
and shall also promptly notify any potential third party indemnitor or contributor which may be
liable for any portion of such losses or claims. In the event that any claim asserted hereunder is
not subject of any insurance coverage or right to indemnification, the amount of the Damage shall
be limited to the amount of the Indemnified Party’s out-of-pocket expenses.
ARTICLE 9
Termination
Termination
Section 9.1. Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned
at any time prior to the Effective Time:
(a) by mutual written consent of Target, Subsidiary, and Purchaser;
(b) by any party:
(i) | if any Governmental Entity of competent jurisdiction issues an order, judgment, decision, opinion, decree or ruling or takes any other action (which the party seeking to terminate this Agreement shall have used its commercially reasonable efforts to resist, resolve, annul, quash or lift, as applicable) permanently restraining, enjoining or otherwise prohibiting the Merger and such order, judgment, decision, opinion, decree or ruling or other action shall have become final and non-appealable; or | ||
(ii) | if any other party shall have breached or failed to perform in any material respect any of its representations, warranties or covenants contained in this Agreement, which breach or failure to perform is (A) incapable of being cured or is not cured within ten (10) Business Days following written notice to the breaching party and (B) would result in a failure of any condition set forth in ARTICLE 7 of this Agreement. |
Section 9.2. Effect of Termination. If this Agreement is terminated pursuant to Section 9.1 of this Agreement, this
Agreement shall become void and of no effect without liability of any party (or any stockholder,
director, officer, employee, agent, consultant or representative of such party) to each other party
hereto.
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ARTICLE 10
General Provisions
General Provisions
Section 10.1. Entire Agreement. This Agreement (including the Exhibits and the Disclosure Schedules), together with
Ancillary Documents, constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and understandings both written and
oral between the parties with respect to the subject matter hereof.
Section 10.2. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given
on (i) the date of delivery, if delivered personally or by commercial delivery service, or (ii) on
the date of confirmation of receipt (or the next Business Day, if the date of confirmation of
receipt is not a Business Day), if sent via facsimile (with confirmation of receipt), to the
parties hereto at the following address (or at such other address for a party as shall be specified
by like notice):
If to Purchaser: |
ImaRx Therapeutics, Inc. | |
c/o Stoel Rives LLP | ||
000 X. Xxxx Xxxxxx | ||
Xxxxx 0000 | ||
Xxxx Xxxx Xxxx, Xxxx 00000-0000 | ||
Facsimile Machine: 801.578.6999 | ||
xxxxxxxxxxx@xxxxx.xxx | ||
If to Subsidiary: |
Sycamore Films, Inc. | |
c/x Xxxxx Law Corporation | ||
00000 Xxxxxxxxx Xxxxxxxxx | ||
Xxxxx 000 | ||
Xxxxxx, Xxxxxxxxxx 00000 | ||
Facsimile Machine: 949.660.9010 | ||
xxx@xxxxxxxxxxxxx.xxx | ||
With a copy to: |
xxxxxxxxxxxx@xxxxx.xxx | |
xxxxx.xxxxxx@xxxxx.xxx | ||
If to Target or Sellers: |
Xxxxxxxx Xxxxxxxxxx & Xxxxx LLP | |
00000 Xxxx Xxxxxxx Xxxxxxxxx | ||
Xxx Xxxxxxx, Xxxxxxxxxx 00000 | ||
xxx@xxx.xxx | ||
xxx@xxx.xxx | ||
With a copy to: |
xxx@xxxxxxxxxxxx.xxx | |
xxxxxxx@xxxxxxxxxxxx.xxx |
Section 10.3. Governing Law. This Agreement shall be construed, interpreted and the rights of the parties determined in
accordance with the Laws of the State of California, as applied to agreements among California
residents entered into and wholly to be
25
performed within the State of California
(without reference to any choice of law rules that would require the application of the Laws
of any other jurisdiction).
Section 10.4. Descriptive Headings. The descriptive headings herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this Agreement.
Section 10.5. No Third-Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of each party hereto
and his, her or its successors and permitted assigns and nothing in this Agreement express or
implied is intended to or shall confer upon any other Person any rights, benefits or remedies of
any nature whatsoever under or by reason of this Agreement.
Section 10.6. No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
Section 10.7. Counterparts. This Agreement may be executed by facsimile in one or more counterparts, each of which
shall be deemed to be an original but all of which shall constitute one and the same agreement.
Section 10.8. Amendment. This Agreement may be amended, supplemented or modified only by an instrument in writing
signed on behalf of the parties hereto.
Section 10.9. Severability. In the event that any provision of this Agreement, or the application thereof, becomes or
is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of this Agreement shall continue in full force and effect and the application of such
provision to other persons or circumstances shall be interpreted so as reasonably to effect the
intent of the parties hereto. The parties hereto further agree to use their commercially reasonable
efforts to replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that shall achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly executed on its
behalf as of the day and year first above written.
SWEET SPOT, INC. |
||||
By: | ||||
Name: | Xxxxxx Xxxxxx | |||
Title: | President | |||
JRT PRODUCTIONS, INC. |
||||
By: | ||||
Name: | Xxxxxx Xxxxxx | |||
Title: | President | |||
RED CAT PRODUCTIONS, INC. |
||||
By: | ||||
Name: | Xxxxxx Xxxxxx | |||
Title: | President | |||
TAKATS |
||||
By: | ||||
Xxxxxx Xxxxxx | ||||
XXXXXX |
||||
By: | ||||
Xxxxxx Xxxxxx | ||||
IMARX THERAPEUTICS INC. |
||||
By: | ||||
Name: | Xxxxxxx Xxxx | |||
Title: | Chairman of the Board | |||
SYCAMORE FILMS INC. |
||||
By: | ||||
Name: | Xxxxx Xxxxxx | |||
Title: | President | |||
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