AGREEMENT AND PLAN OF MERGER BY AND AMONG LAURIER INTERNATIONAL, INC., ARNO THERAPEUTICS, INC. AND LAURIER ACQUISITION, INC.
EXHIBIT
2.1
AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
LAURIER
INTERNATIONAL, INC.,
ARNO
THERAPEUTICS, INC.
AND
LAURIER
ACQUISITION, INC.
This
AGREEMENT AND PLAN OF MERGER (this “Agreement”)
is
made and entered into as of March 5, 2008, among Laurier International, Inc.,
a
Delaware corporation (“Parent”),
Arno
Therapeutics, Inc., a Delaware corporation (“Arno”),
and
Laurier Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary
of Parent (“Merger
Sub”).
A. Upon
the
terms and subject to the conditions of this Agreement and in accordance with
the
Delaware General Corporation Law (“DGCL”),
Parent, Arno and Merger Sub intend to enter into a business combination
transaction.
B. The
Board
of Directors of Arno (i) has determined that the Merger (as defined in Section
1.1
below)
is consistent with and in furtherance of the long-term business strategy
of Arno
and fair to, and in the best interests of, Arno and its stockholders, (ii)
has
approved this Agreement, the Merger and the other transactions contemplated
by
this Agreement, (iii) has adopted a resolution declaring the Merger advisable,
and (iv) has determined to recommend that the stockholders of Arno adopt
this
Agreement.
C. The
Board
of Directors of Parent (i) has determined that the Merger is consistent with
and
in furtherance of the long-term business strategy of Parent and fair to,
and in
the best interests of, Parent and its stockholders, (ii) has approved this
Agreement, the Merger and the other transactions contemplated by this Agreement,
(iii) has adopted a resolution declaring the Merger advisable, and (iv) has
approved the issuance of shares of Parent Common Stock (as defined in Section
1.6(a)
below)
pursuant to the Merger (the “Share
Issuance”).
D. The
Board
of Directors of Merger Sub (i) has determined that the Merger is consistent
with
and in furtherance of the long-term business strategy of Merger Sub, and
fair to
and in the best interests of, Merger Sub and its stockholder, (ii) has approved
this Agreement, the Merger and the other transactions contemplated by this
Agreement, (iii) has adopted a resolution declaring the Merger advisable,
and
(iv) has determined to recommend that the sole stockholder of Merger Sub
adopt
this Agreement.
E. Prior
to
and as a condition to the Closing (as defined in Section 1.2
below),
Arno shall have raised a minimum of $12,500,000 through
the issuance of shares of Arno Common Stock (as defined in Section 1.6
below)
and the conversion of Arno’s outstanding indebtedness into shares of Arno Common
Stock and warrants to purchase shares of Arno Common Stock (the “Financing”).
ARTICLE
I
THE
MERGER
1.1. The
Merger.
At the
Effective Time (as defined in Section 1.2
hereof)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the DGCL, Merger Sub shall be merged with and into
Arno
(the “Merger”),
the
separate corporate existence of Merger Sub shall cease and Arno shall continue
as the surviving corporation and shall become a wholly-owned subsidiary of
Parent. The surviving corporation after the Merger is sometimes referred
to
hereinafter as the “Surviving
Corporation.”
1.2. Effective
Time.
Unless
this Agreement is earlier terminated pursuant to Article VII hereof, the
closing
of the Merger and the other transactions contemplated by this Agreement (the
“Closing”)
will
take place at the offices of Parent’s counsel, at a time and date to be
specified by the parties, but in no event later than two (2) business days
following satisfaction or waiver of the conditions set forth in Article VI
hereof. The date upon which the Closing actually occurs is herein referred
to as
the “Closing
Date.”
On
the
Closing Date, the parties hereto shall cause the Merger to be consummated
by
filing a Certificate of Merger in the form attached as Exhibit
A
hereto
or like instrument (a “Certificate
of Merger”)
with
the Secretary of State of the State of Delaware, in accordance with the relevant
provisions of the DGCL (the time at which the Merger has become fully effective
(or such later time as may be agreed in writing by Arno and specified in
the
Certificate of Merger) is referred to herein as the “Effective
Time”).
1.3. Effect
of the Merger.
(a) At
the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of the DGCL. Without limiting the generality of the foregoing,
and
subject thereto, at the Effective Time, except as provided herein, all the
property, rights, privileges, powers and franchises of Arno and Merger Sub
shall
vest in the Surviving Corporation, and all debts, liabilities and duties
of Arno
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
(b) Prior
to
or at the Effective Time, the properties and assets of Parent and Merger
Sub
will be free and clear of any and all encumbrances, charges, claims, equitable
interests, liens, options, pledges, security interests, mortgages, rights
of
first refusal or restrictions of any kind and nature (collectively, the
“Encumbrances”),
except for such liabilities, accounts payable, debts, adverse claims, duties,
responsibilities and obligations of every kind or nature, whether accrued
or
unaccrued, known or unknown, direct or indirect, absolute, contingent,
liquidated or unliquidated and whether arising under, pursuant to or in
connection with any contract, tort, strict liability or otherwise (collectively
the “Liabilities”)
of
Parent which are described in Sections 3.5(b)
and
3.7
hereof.
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1.4. Certificates
of Incorporation; Bylaws.
From
and after the Effective Time and until further amended in accordance with
applicable law, (i) the Certificate of Incorporation of Arno as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, and (ii) the Bylaws of Arno as
in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation.
1.5. Arno
Directors and Officers.
(a) Unless
otherwise determined by Arno prior to the Effective Time, the directors of
Arno
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation at and after the Effective Time, each to hold the office of a
director of the Surviving Corporation in accordance with the provisions of
the
DGCL and the Certificate of Incorporation and Bylaws of the Surviving
Corporation until their successors are duly elected and qualified.
(b) Unless
otherwise determined by Arno prior to the Effective Time, the officers of
Arno
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation at and after the Effective Time, each to hold office in accordance
with the provisions of the Bylaws of the Surviving Corporation.
1.6. Effect
on Capital Stock.
Subject
to the terms and conditions of this Agreement, at the Effective Time, by
virtue
of the Merger and without any action on the part of Parent, Arno and Merger
Sub
or the holders of any of the following securities, the following shall
occur:
(a) Conversion
of Arno Capital Stock.
At the
Effective Time, the Parent shall issue (or reserve for issuance upon exercise
or
conversion of Arno Convertible Securities (as defined below)) an aggregate
of
20,903,800 shares of common stock of Parent, par value $0.0001 per share
(the
“Parent Common Stock”) to the holders of Arno Common Stock on a Fully Diluted
Basis (as defined below) (the “Merger
Consideration”)
(See
Capitalization Schedule attached hereto as Schedule 2.6). Each share of common
stock, par value $0.001 per share, of Arno (the “Arno
Common Stock”)
issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares (as defined in Section 1.10 below)) will be automatically converted
(subject to Section 1.6(d)),
into a
number of shares of Parent Common Stock determined by multiplying each such
share of Arno Common Stock by the quotient determined by dividing (x) 20,903,800
by (y) the aggregate number of shares of Arno Common Stock issued and
outstanding immediately prior to the Effective Time, on a Fully Diluted Basis
(“Arno
Convertible Securities”)
(the
“Exchange
Ratio”),
such
aggregate shares of Parent Common Stock being referred to in this Agreement
as
the “Merger
Consideration”.
If any
shares of Arno Common Stock outstanding immediately prior to the Effective
Time
are unvested or are subject to a repurchase option, risk of forfeiture or
other
condition under any applicable restricted stock purchase agreement or other
agreement with Arno, then the shares of Parent Common Stock issued in exchange
for such shares of Arno Common Stock will also be unvested and subject to
the
same repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Common Stock may accordingly
be
marked with appropriate legends. For
purposes of this Agreement “Fully
Diluted Basis”
shall
mean the number of shares of Common Stock that would be outstanding upon
the
conversion of all outstanding shares of preferred stock of Arno outstanding
on
the date of the Closing, plus the shares of Common Stock issuable upon
conversion or exercise, as the case may be, of all securities of Arno
convertible into, exercisable for, or exchangeable for, directly or indirectly,
shares of Arno Common Stock.
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(b) Arno
Stock Options.
At the
Effective Time, the Arno Therapeutics, Inc. 2005 Stock Option Plan ( the
“Arno
Option Plan”),
including all options to purchase Arno Common Stock then outstanding thereunder
or otherwise, shall be assumed by Parent in accordance with Section 5.5(a)
hereof.
(c) Arno
Warrants.
At the
Effective Time, all warrants to purchase Arno Common Stock then outstanding
shall be assumed by Parent, and shall become exercisable for shares of Parent
Common Stock in accordance with Section 5.5(b)
hereof.
(d) Adjustments
to Merger Consideration.
Except
as described in Section 1.10, the Merger Consideration shall be adjusted
to
reflect appropriately the effect of any stock split, reverse stock split,
stock
dividend (including any dividend or distribution of securities convertible
into
or exercisable or exchangeable for Parent Common Stock or Arno Common Stock),
reorganization, recapitalization, reclassification, combination, exchange
of
shares or other like change with respect to Parent Common Stock or Arno Common
Stock occurring or having a record date on or after the date hereof and prior
to
the Effective Time.
(e) Fractional
Shares.
No
fraction of a share of Parent Common Stock will be issued by virtue of the
Merger. In lieu thereof any fractional share will be rounded to the nearest
whole share of Parent Common Stock (with 0.5 being rounded up).
1.7 Registration
Rights.
The
Parent shall include in the registration statement that it anticipates
filing with the Securities and Exchange Commission (the “SEC”)
under
the Securities Act on Form S-1, or any another appropriate form in accordance
herewith, in the sole discretion of the Parent (the "Registration
Statement"),
that
includes the shares sold in the Financing, the shares of each of the
stockholders set forth
on
Schedule 1.7 hereto (the "Parent
Stockholder Shares,"
and
each a “Parent
Stockholder”)
and
any of their permitted lawful transferees. If at any time following the
Closing,
the Parent shall determine to prepare and file with the SEC a registration
statement relating
to an offering for its own account or the account of others under the Securities
Act of any
of
its equity securities (a "Subsequent
Registration Statement"),
other
than on Form S-4 or Form
S-8
(each as promulgated under the Securities Act), and the Parent Stockholder
Shares are not
at
such time covered by an effective registration statement permitting their
resale, then the Parent shall include in the Subsequent Registration Statement
the Parent Stockholder Shares, unless
the inclusion of such Parent Stockholder Shares in such Subsequent Registration
Statement
is prohibited by a written agreement entered into between Parent and a third
party in connection with a capital raising transaction which obligates the
Parent to file such Subsequent Registration
Statement. The Parent shall use its reasonable efforts to provide in any
such
third party
agreement entered into in connection with a capital raising transaction for
the
specific inclusion of the Parent Stockholder Shares in any registration
statement filed in connection therewith.
If the Registration Statement is being filed pursuant to a third-party written
agreement obligating
the
Company to file the same, the holders of the Parent Stockholder Shares shall
be
entitled
to receive all notices and documents sent by the Parent to the third-party
whose
securities
are being registered pursuant to such Subsequent Registration Agreement.
The
obligations of the Parent set forth in this Section 1.7 to register the shares
of a Parent Stockholder shall be contingent upon that Parent Stockholder
promptly
furnishing in writing to the Parent such information as may be required in
connection with such registration, and required to be furnished by third
party
subscribers to such registration, including, without limitation, all such
information as may be requested by the SEC or the FINRA or any state securities
commission and all such information regarding the Parent Stockholder, the
Parent
Stockholder Shares the intended method of disposition of the Parent Stockholder
Shares.
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(a) On
and
after the Effective Date and until surrendered for exchange, each outstanding
stock certificate that immediately prior to the Effective Date represented
shares of Arno Common Stock (except Dissenting Shares and shares cancelled
or
extinguished pursuant to Section 1.11) shall be deemed for all purposes,
to
evidence ownership of and to represent the number of whole shares of Parent
Common Stock into which such shares of Arno Common Stock shall have been
converted pursuant to Section 1.6(a)
above.
The record holder of each such outstanding certificate representing shares
of
Arno Common Stock, shall, after the Effective Date, be entitled to vote the
shares of Parent Common Stock into which such shares of Arno Common Stock
shall
have been converted on any matters on which the holders of record of the
Parent
Common Stock, as of any date subsequent to the Effective Date, shall be entitled
to vote. In any matters relating to such certificates of Arno Common Stock,
Parent may rely conclusively upon the record of stockholders maintained by
Arno
containing the names and addresses of the holders of record of Arno Common
Stock
on the Effective Date.
(b) On
and
after the Effective Date, Parent shall reserve a sufficient number of authorized
but unissued shares of Parent Common Stock for issuance in connection with
(i)
the conversion of Arno Common Stock into Parent Common Stock and (ii) the
exercise of all options, warrants, and any other instrument convertible into,
or
exchangeable for, shares of Arno Common Stock, to purchase shares of Arno
Common
Stock outstanding immediately prior to the Effective Time.
(a) After
the
Effective Time, holders of certificates theretofore evidencing outstanding
shares of Arno Common Stock (except Dissenting Shares and shares cancelled
or
extinguished pursuant to Section 1.11), upon surrender of such certificates
to
the registrar or transfer agent for Parent Common Stock, shall be entitled
to
receive certificates representing the number of whole shares of Parent Common
Stock into which shares of Arno Common Stock theretofore represented by the
certificates so surrendered shall have been converted as provided in Section
(a)
hereof.
Parent shall not be obligated to deliver the Merger Consideration to which
any
former holder of shares of Arno Common Stock is entitled until such holder
surrenders the certificate or certificates representing such shares. Upon
surrender, each certificate evidencing Arno Common Stock shall be cancelled.
If
there is a transfer of Arno Common Stock ownership which is not registered
in
the transfer records of Arno, a certificate representing the proper number
of
shares of Parent Common Stock may be issued to a person other than the person
in
whose name the certificate so surrendered is registered if: (x) upon
presentation to the Secretary of Parent, such certificate shall be properly
endorsed or otherwise be in proper form for transfer, (y) the person requesting
such payment shall pay any transfer or other taxes required by reason of
the
issuance of shares of Parent Common Stock to a person other than the registered
holder of such certificate or establish to the reasonable satisfaction of
Parent
that such tax has been paid or is not applicable, and (z) the issuance of
such
Parent Common Stock shall not, in the sole discretion of Parent, violate
the
requirements of the Regulation D “safe harbor” of the Securities Act with
respect to the private placement of Parent Common Stock that will result
from
the Merger.
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(b) All
shares of Parent Common Stock issued upon the surrender for exchange of Arno
Common Stock in accordance with the above terms and conditions shall be deemed
to have been issued and paid in full satisfaction of all rights pertaining
to
such shares of Arno Common Stock.
(c)
No
holder surrendering a certificate representing shares of Arno Common Stock
will
be issued in exchange a certificate representing other than a whole number
of
shares of Parent Common Stock.
(d) Any
shares of Parent Common Stock issued in the Merger will not be transferable
except (1) pursuant to an effective registration statement under the
Securities Act or (2) upon receipt by Parent of a written opinion of
counsel reasonably satisfactory to Parent to the effect that the proposed
transfer is exempt from the registration requirements of the Securities Act
and
relevant state securities laws. Restrictive legends must be placed on all
certificates representing shares of Parent Common Stock issued in the Merger,
substantially as follows:
“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE,
NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
IN A
FORM REASONABLY ACCEPTABLE TO THE CORPORATION AND ITS LEGAL COUNSEL, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
TO RULE
144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.”
(e) In
the
event any certificate for Arno Common Stock shall have been lost, stolen
or
destroyed, Parent shall issue and pay in exchange for such lost, stolen or
destroyed certificate, upon the making of an affidavit of that fact by the
holder thereof, such shares of the Parent Common Stock and cash for fractional
shares, if any, as may be required pursuant to this Agreement; provided,
however,
that
Parent, in its discretion and as a condition precedent to the issuance and
payment thereof, may require the owner of such lost, stolen or destroyed
certificate to deliver a bond in such sum as it may direct as indemnity against
any claim that may be made against Parent or any other party with respect
to the
certificate alleged to have been lost, stolen or destroyed.
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1.10
Dissenting
Shares.
(a) Shares
of
capital stock of Arno held by stockholders of Arno who have not consented
to and
approved this agreement in writing and who have properly exercised and preserved
appraisal rights with respect to those shares in accordance with all of the
provisions of Section 262 of the DGCL (“Dissenting
Shares”)
shall
not be converted into or represent a right to receive shares of Parent Common
Stock pursuant to Section (a)
above,
but the holders thereof shall be entitled only to such rights as are granted
by
Section 262 of the DGCL. Each holder of Dissenting Shares who becomes entitled
to payment for such shares pursuant to Section 262 of the DGCL shall receive
payment therefor from the Surviving Corporation in accordance with such laws;
provided,
however,
that if
any such holder of Dissenting Shares shall have effectively withdrawn such
holder’s demand for appraisal of such shares or lost such holder’s right to
appraisal and payment of such shares under Section 262 of the DGCL, such
holder
or holders (as the case may be) shall forfeit the right to appraisal of such
shares and each such share shall thereupon be deemed to have been cancelled,
extinguished and converted, as of the Effective Time, into and represent
the
right to receive payment from Parent of shares of Parent Common Stock as
provided in Section (a)
above.
(b) Any
payments in respect of Dissenting Shares will be deemed made by the Surviving
Corporation.
1.11
No
Further Ownership Rights in Arno Common Stock.
All
shares of Parent Common Stock issued in accordance with the terms hereof
shall
be deemed to have been issued in full satisfaction of all rights pertaining
to
such shares of Arno Common Stock. After the Effective Time, there shall be
no
further registration of transfers on the records of Surviving Corporation
of
shares of Arno Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates are presented
to
Surviving Corporation for any reason, they shall be cancelled and exchanged
as
provided in this ARTICLE
I.
1.12
Tax
Treatment.
It is
intended by the parties hereto that the Merger shall constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986,
as
amended (the “Code”).
Each
of the parties hereto adopts this Agreement as a “plan of reorganization” within
the meaning of Section 1.368-2(g) of the United States Treasury Regulations
(the
“Regulations”).
Both
prior to and after the Closing, each party's books and records shall be
maintained, and all federal, state and local income tax returns and schedules
thereto shall be filed in a manner consistent with the Merger being qualified
as
a reverse triangular merger under Section 368(a)(2)(E) of the Code (and
comparable provisions of any applicable state or local laws), except to the
extent the Merger is determined in a final administrative or judicial decision
not to qualify as a reorganization within the meaning of Code Section
368(a).
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1.13 Payments
to Public Officials.
Notwithstanding anything to the contrary in this ARTICLE
I,
none of
Arno, Parent, Merger Sub or Surviving Corporation shall be liable to a holder
of
Arno Common Stock or Parent Common Stock for any amount properly paid to
a
public official pursuant to any applicable abandoned property, escheat or
similar applicable law.
1.14 Taking
of Necessary Action; Further Action.
If, at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation (and/or its successor in interest) with full right, title and
possession to all assets, property, rights, privileges, powers and franchises
of
Arno and Merger Sub, the officers and directors of Parent and the Surviving
Corporation shall be fully authorized (in the name of Merger Sub, Arno and
otherwise) to take all such necessary action.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF ARNO
Except
as
set forth in the schedules attached hereto, Arno hereby represents and warrants
to Parent that the statements contained in this ARTICLE
II
are true
and correct.
2.1. Organization,
Qualification and Subsidiaries.
Arno
is a
corporation duly organized, validly existing and in good standing under the
laws
of the State of Delaware.
Arno has no subsidiaries and does not have an equity interest in any other
firm,
partnership, association or other entity. Arno is duly qualified to transact
business as a foreign corporation and is in good standing under the applicable
laws of each jurisdiction where the location of its properties or the conduct
of
its business makes such qualification necessary, except where the failure
to be
so qualified would not have an Arno Material Adverse Effect (as defined in
Section 2.3
below).
2.2. Authorization,
Enforcement.
Arno
has the requisite corporate power and authority to conduct its business as
presently conducted and to enter into and to consummate the Merger. The
execution and delivery of this Agreement by Arno and the consummation by
it of
the transactions contemplated hereby have been duly authorized by all necessary
action on the part of Arno and no further consent or action is required by
Arno,
other than the Required Approvals (as defined in Section 3.2
below)
and the approval of Arno’s stockholders and the approval of the stockholders of
Merger Sub of the Merger and the amendments to their respective certificates
of
incorporation (the “Stockholder
Approvals”).
This
Agreement, when executed and delivered in accordance with the terms hereof,
will
constitute the valid and binding obligation of Arno enforceable against Arno
in
accordance with its terms, subject to the Stockholder Approvals, applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and
similar applicable laws affecting creditors’ rights and remedies generally and
general principles of equity.
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2.3. No
Conflicts.
The
execution, delivery and performance of this Agreement by Arno and the
consummation by Arno of the Merger do not and will not: (i) conflict with
or
violate any provision of Arno’s Certificate of Incorporation or Bylaws, or (ii)
subject to obtaining the Stockholder Approvals and the filing with the Secretary
of State of Delaware of the Certificate of Merger (collectively, the
“Required
Approvals”),
conflict with, or constitute a default (or an event that with notice or lapse
of
time or both would become a default) under, or give to others any rights
of
termination, amendment, acceleration or cancellation (with or without notice
or
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing Arno debt or otherwise) or other understanding to
which
Arno is a party or by which any material property or asset of Arno is bound
or
affected, or (iii) result in a violation of any applicable law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority as currently in effect to which Arno is subject
(including federal and state securities laws and regulations), or by which
any
material property or asset of Arno is bound or affected; except in the case
of
each of clauses (ii) and (iii), such as could not, individually or in the
aggregate (a) materially and adversely affect the legality, validity or
enforceability of the Merger, (b) have or result in a material adverse effect
on
the results of operations, assets, business or condition (financial or
otherwise) of Arno, taken as a whole, or (c) materially and adversely impair
Arno’s ability to perform fully on a timely basis its obligations under this
Agreement (any of (a), (b) or (c), a “Arno
Material Adverse Effect”);
provided,
however,
that
any adverse change, event or effect that is demonstrated to be caused primarily
by the conditions generally affecting the United States economy, or by
conditions generally effecting the biotechnology or pharmaceutical industries,
shall be deemed not to be an Arno Material Adverse Effect.
2.4. Filings,
Consents and Approvals.
Arno is
not required to obtain any consent, waiver, authorization or order of, give
any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection
with
the execution, delivery and performance by Arno of this Agreement, other
than
the Required Approvals.
2.5. Issuance
of the Shares.
The
Arno Common Stock issued in the Financing will be duly authorized and validly
issued, fully paid and nonassessable, free and clear of all liens at issuance.
Assuming the accuracy of the purchasers’ representations and warranties set
forth in the relevant subscription agreements, no registration under the
Securities Act is required for the offer and sale of the Arno Common Stock
by
Arno to the purchasers in the Financing.
2.6. Capitalization.
As of
the date of this Agreement, Arno’s authorized capital consists of 25,000,000
shares of Arno Common Stock and 5,000,000 shares of preferred stock. Arno’s
outstanding capital (i) as of the date of this Agreement and (ii) as of
immediately before the Effective Time, is set forth on Schedule
2.6.
Except
as described in Schedule
2.6,
there
are no outstanding options, warrants, scrip rights to subscribe to, calls
or
commitments of any character whatsoever relating to, or exchangeable for,
or
giving any Person any right to subscribe for or acquire, any shares of Arno
Common Stock, or contracts, commitments, understandings or arrangements by
which
Arno is or may become bound to issue additional shares of Arno Common Stock
or
rights convertible or exchangeable into shares of Arno Common
Stock.
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2.7. Contracts
and Commitments.
(a) Schedule
2.7
hereto
lists the following agreements, whether oral or written, to which Arno is
a
party, which are currently in effect, and which relate to the operation of
Arno’s business: (i) collective bargaining agreement or contract with any labor
union; (ii) bonus, pension, profit sharing, retirement or other form of deferred
compensation plan; (iii) hospitalization insurance or other welfare benefit
plan
or practice, whether formal or informal; (iv) stock purchase or stock option
plan; (v) contract for the employment of any officer, individual employee
or
other person on a full-time or consulting basis or relating to severance
pay for
any such person; (vi) contract, agreement or understanding relating to the
voting of Arno Common Stock or the election of directors of Arno; (vii)
agreement or indenture relating to the borrowing of money or to mortgaging,
pledging or otherwise placing a lien on any of the assets of Arno; (viii)
guaranty of any obligation for borrowed money or otherwise; (ix) lease or
agreement under which Arno is lessee of, or holds or operates any property,
real
or personal, owned by any other party, for which the annual rental exceeds
$25,000; (x) lease or agreement under which Arno is lessor of, or permits
any
third party to hold or operate, any property, real or personal, for which
the
annual rental exceeds $10,000; (xi) contract which prohibits Arno from freely
engaging in business anywhere in the world; (xii) license agreement or agreement
providing for the payment or receipt of royalties or other compensation by
Arno
in connection with intellectual property rights held by Arno; (xiii) contract
or
commitment for capital expenditures in excess of $50,000; (xiv) agreement
for
the sale of any capital asset; or (xvi) other agreement which is either material
to Arno’s business or was not entered into in the ordinary course of
business.
(b) To
Arno’s
knowledge, (i) Arno has performed all obligations required to be performed
by it
in connection with the contracts or commitments required to be disclosed
in
Schedule
2.7
hereto
and is not in receipt of any claim of default under any contract or commitment
required to be disclosed under such caption; (ii) Arno has no present
expectation or intention of not fully performing any material obligation
pursuant to any contract or commitment required to be disclosed under such
caption; and (iii) Arno has no knowledge of any breach or anticipated breach
by
any other party to any contract or commitment required to be disclosed under
such caption.
2.8. Affiliate
Transactions.
Except
as set forth in Schedule
2.8
hereto,
and other than pursuant to this Agreement, no officer, director or employee
of
Arno, or any member of the immediate family of any such officer, director
or
employee, or any entity in which any of such persons owns any beneficial
interest (other than any publicly-held corporation whose stock is traded
on a
national securities exchange or in the over-the-counter market and less than
five percent (5%) of the stock of which is beneficially owned by any of such
persons) (collectively “Arno
Insiders”),
has
any agreement with Arno (other than normal employment arrangements) or any
interest in any property, real, personal or mixed, tangible or intangible,
used
in or pertaining to the business of Arno (other than ownership of capital
stock
of Arno). Except as set forth on Schedule
2.8,
Arno is
not indebted to any Arno Insider (except for amounts due as normal salaries
and
bonuses and in reimbursement of ordinary business expenses) and no Arno Insider
is indebted to Arno (except for cash advances for ordinary business expenses).
None of the Arno Insiders has any direct or indirect interest in any competitor,
supplier or customer of Arno or in any person, firm or entity from whom or
to
whom Arno leases any property, or in any other person, firm or entity with
whom
Arno transacts business of any nature. For purposes of this Section 2.8,
the
members of the immediate family of an officer, director or employee shall
consist of the spouse, parents, children and siblings of such officer, director
or employee.
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2.9. Financial
Statements.
Arno
has provided the Parent and the Merger Sub with audited financial statements
for
the year ending December 31, 2007. The
audited financial statements of Arno, together with the related notes thereto,
present fairly, in all material respects, the financial position of Arno
as of
the dates specified and the results of its operations and changes in financial
position for the periods covered thereby. Such audited financial statements
and
related notes were prepared in accordance with United States Generally Accepted
Accounting Principles (“GAAP”)
throughout the period indicated except as may be disclosed in the notes thereto.
Except as required to be set forth in such financial statements, or on
Schedule
2.9,
Arno has
no material liabilities of any kind, whether accrued, absolute, contingent
or
otherwise or entered into any material transactions or commitments.
2.10. Taxes.
Arno
has
filed, on a timely basis, each Federal, state, local and foreign Tax Return
which is required to be filed by it, or has requested an extension therefore,
and has paid all Taxes and all related assessments, penalties and interest
shown
on such tax returns to the extent that the same have become due and are not
being contested in good faith.
2.11. Litigation.
Other
than as set forth on Schedule
2.11,
there
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of Arno, threatened against or affecting Arno
or
its properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local
or
foreign) (collectively, an “Action”)
which:
(i) materially adversely affects or challenges the legality, validity or
enforceability of this Agreement or (ii) would, if there were an unfavorable
decision, individually or in the aggregate, have or reasonably be expected
to
result in an Arno Material
Adverse Effect. Arno is not nor has it ever been the subject of any Action
involving a claim of violation of or liability under federal or state securities
laws. There
has
not been, and to the knowledge of Arno, there is not pending or contemplated,
any investigation by the SEC or any other governmental authority involving
Arno.
2.12. Compliance.
Arno is
not: (i) in violation of its
certificate of incorporation or by-laws;
(ii) in
default under or in violation of (and no event has occurred that has not
been
waived that, with notice or lapse of time or both, would result in a default
by
Arno under), nor has Arno received notice of a claim that it is in default
under
or that it is in violation of, any material indenture, loan or credit agreement
or any other material agreement or instrument to which it is a party or by
which
it or any of its properties is bound (whether or not such default or violation
has been waived), which default or violation would have or result in an
Arno Material
Adverse Effect; (iii) in violation of any order of any court, arbitrator
or
governmental body; or (iv) in violation of any statute, rule or regulation
of
any governmental authority, except in each case as would not, individually
or in
the aggregate, have or result in an Arno Material
Adverse Effect.
2.13. Regulatory
Permits.
Arno
possesses or has applied for all certificates, authorizations and permits
issued
by the appropriate federal, state, local or foreign regulatory authorities
necessary to conduct its business, except where the failure to possess such
permits would not, individually or in the aggregate, have an Arno Material
Adverse Effect (“Material
Permits”),
and
Arno has not received any notice of proceedings relating to the revocation
or
modification of any Material Permit.
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2.14. Properties.
Arno
does
not own any real property in fee simple, and Arno has good and marketable
title
to all property (personal, tangible and intangible) owned by it, free and
clear
of all security interests, liens and encumbrances, except those that (i)
do not
materially interfere with the use made of such property by Arno; (ii) for
such
imperfections of title and encumbrances that would not have an Arno Material
Adverse Effect; or (iii) for liens that are not yet due and payable.
2.15. Intellectual
Property.
Arno
owns all right, title and interest in, or possesses adequate and enforceable
rights to use, all patents, patent applications, trademarks, trade names,
service marks, copyrights, rights, licenses, franchises, trade secrets,
confidential information, processes, formulations, software and source and
object codes necessary for the conduct of Arno’s business (collectively, the
“Intangibles”),
except to the extent that the failure to own or possess adequate rights to
such
Intangibles would not have an Arno Material Adverse Effect. To the knowledge
of
Xxxx, Xxxx has not infringed upon the rights of others with respect to the
Intangibles and Arno has not received written notice that it has or may have
infringed or is infringing upon the rights of others with respect to the
Intangibles, or any written notice of conflict with the asserted rights of
others with respect to the Intangibles, which infringement or conflict, if
the
subject of an unfavorable decision, would have an Arno Material Adverse
Effect.
2.16. Insurance.
The
insurance policies owned and maintained by Arno that are material to Arno
are in
full force and effect, all premiums due and payable thereon have been paid
(other than retroactive or retrospective premium adjustments that Arno is
not
currently required, but may in the future be required, to pay with respect
to
any period ending prior to the date of this Agreement), and Arno has received
no
notice of cancellation or termination with respect to any such policy that
has
not been replaced on substantially similar terms prior to the date of such
cancellation.
2.17. No
Undisclosed Liabilities.
Except
as reflected in the audited balance sheet of December 31, 2007 (the
“Arno
Balance Sheet”)
contained in the audited financial statements referenced in Section 2.9,
or as
otherwise disclosed on Schedule
2.17,
Arno
has no liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise except liabilities which have arisen after the date of the Arno
Balance Sheet in the ordinary course of business (none of which is a material
uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit).
2.18. Environmental
Matters.
None of
the operations of Arno involves the generation, transportation, treatment,
storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts
260-270
or any state, local or foreign equivalent.
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2.19. Material
Changes.
Except
for the Financing, the transactions contemplated thereby and such other
transactions as are set forth on Schedule
2.19,
since
the date of the Arno Balance Sheet: (i) there has been no event, occurrence
or
development that has had an Arno Material Adverse Effect, (ii) Arno has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent
with
past practice, and (B) liabilities not required to be reflected in Arno’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the SEC, (iii) Arno has not altered its method of accounting or
the
identity of its auditors, (iv) Arno has not declared or made any dividend
or
distribution of cash or other property to its stockholders except in the
ordinary course of business consistent with prior practice, or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock except consistent with prior practice or pursuant to existing Arno
stock
option or similar plans, and (v) Arno has not issued any equity shares to
any
officer, director or affiliate, except pursuant to existing Arno stock option
or
similar plans or upon conversion or exercise of outstanding Arno
securities.
2.20. Lack
of Publicity.
Neither
Arno nor any person acting on its behalf has engaged or will engage in any
form
of general solicitation or general advertising as those terms are used in
Regulation D under the Securities Act in the United States with respect to
the
Financing or the securities that will be exchanged for Arno Common Stock
in the
Merger, including, without limitation, any article, notice, advertisement
or
other communication published in any newspaper, magazine or similar media
or
broadcast over television or radio, regarding the Financing, nor did any
such
person sponsor any seminar or meeting to which potential investors were invited
by, or any solicitation of a subscription by, a person not previously known
to
such investor in connection with investments in the Arno Common Stock generally.
Neither Arno nor any person acting on its or their behalf have engaged or
will
engage in any form of directed selling efforts (as that term is used in
Regulation S under the Securities Act) with respect to the securities that
will
be exchanged for Arno Common Stock in the Merger.
2.21. Full
Disclosure.
The
representations and warranties of Arno contained in this Agreement (and in
any
schedule, exhibit, certificate or other instrument to be delivered under
this
Agreement) are true and correct in all material respects, and such
representations and warranties do not omit any material fact necessary to
make
the statements contained therein, in light of the circumstances under which
they
were made, not misleading. There is no fact of which Arno has knowledge that
has
not been disclosed to Parent pursuant to this Agreement, including the schedules
hereto, all taken together as a whole, which has had or could reasonably
be
expected to have an Arno Material Adverse Effect or materially adversely
affect
the ability of Arno to consummate in a timely manner the transactions
contemplated hereby.
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ARTICLE
III
Each
of
Parent and Merger Sub, jointly and severally, hereby represents and warrants
to
Arno that the statements contained in this ARTICLE
III
are true
and correct.
3.1. Organization
of Parent and Merger Sub.
(a) Each
of
Parent and Merger Sub is a corporation duly organized, validly existing and
in
good standing under the laws of the jurisdiction of its incorporation; has
the
corporate power and authority to own, lease and operate its assets and property
and to carry on its business as now being conducted; and is duly qualified
to do
business and in good standing as a foreign corporation in each jurisdiction
in
which the failure to be so qualified would have a Parent Material Adverse
Effect. As used in this Agreement, the term “Parent
Material Adverse Effect”
means
a
material adverse effect on the condition (financial or otherwise), business,
assets or results of operations of Parent and Merger Sub as a whole or on
the
ability of Parent to consummate the transactions contemplated by this
Agreement;
provided, however,
that
any adverse change, event or effect that is demonstrated to be caused primarily
by the conditions generally affecting the United States economy shall be
deemed
not to be a Parent Material Adverse Effect.
(b) Parent
has no subsidiaries other than Merger Sub, a Delaware corporation and a
wholly-owned subsidiary of Parent, which is inactive.
(c) Parent
has delivered or made available to Arno a true and correct copy of the
Certificate of Incorporation and Bylaws of each of Parent and Merger Sub,
each
as amended to date, and each such instrument is in full force and effect.
Neither Parent nor Merger Sub is in violation of any of the provisions of
its
Certificate of Incorporation or Bylaws or equivalent governing
instruments.
3.2. Capital
Structure.
As of
the date of this Agreement, the authorized capital stock of Parent consists
of
80,000,000 shares of Parent Common Stock of which there were 5,501,000 shares
issued and outstanding as of the date hereof and 20,000,000 shares of blank
check preferred stock none of which are issued and outstanding. As of the
Closing, the authorized capital stock of Parent shall consist of 80,000,000
shares of Parent Common Stock and 20,000,000 shares of preferred stock and
there
shall be issued and outstanding such number of shares of Parent Common Stock
as
is required pursuant to Section 4.3
hereof
and no shares of preferred stock shall be issued and outstanding. The authorized
capital stock of Merger Sub consists of 1,000 shares of Common Stock, par
value
$0.001 per share (the “Merger
Sub Common Stock”),
all
of which were issued and outstanding as of the date hereof. All outstanding
shares of Parent and Merger Sub Common Stock are duly authorized, validly
issued, fully paid and nonassessable, were issued in compliance with applicable
securities laws and are not subject to preemptive rights created by statute,
the
Certificate of Incorporation or Bylaws of Parent and Merger Sub or any agreement
or document to which Parent or Merger Sub is a party or by which it is bound.
Other than as set forth on Schedule
3.2,
as of
the date hereof, Parent did not have any options or warrants to purchase
common
stock outstanding.
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3.3. Obligations
With Respect to Capital Stock.
Other
than as set forth on Schedule
3.3,
there
are no equity securities, partnership interests or similar ownership interests
of any class of Parent or Merger Sub, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests issued, reserved for issuance or
outstanding. There are no equity securities, partnership interests or similar
ownership interests of any class of Merger Sub of Parent, or any security
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests issued, reserved for
issuance or outstanding. There are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which Parent
or Merger Sub is a party or by which it is bound obligating Parent or Merger
Sub
to issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption
or
acquisition, of any shares of capital stock of Parent or Merger Sub or
obligating Parent or Merger Sub to grant, extend, accelerate the vesting
of or
enter into any such option, warrant, equity security, partnership interest
or
similar ownership interest, call, right, commitment or agreement. There are
no
registration rights and there are no voting trusts, proxies or other agreements
or understandings with respect to any equity security of any class of Parent
or
with respect to any equity security partnership interest or similar ownership
interest of any class of Merger Sub.
3.4. Authority.
(a) That
certain shares of Parent Common Stock have been registered under Section
12(g)
of the Exchange Act on Form 8-A filed with the SEC on July 26, 2006 (File
No.
000-52153).
(b) Each
of
Parent and Merger Sub has all requisite corporate 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 all necessary
corporate action on the part of each of Parent and Merger Sub, subject only
to
the adoption of this Agreement by Merger Sub’s stockholders and the filing and
recordation of the Certificate of Merger pursuant to the DGCL. This Agreement
has been duly executed and delivered by each of Parent and Merger Sub and,
assuming the due authorization, execution and delivery by Arno, constitutes
the
valid and binding obligation of each of Parent and Merger Sub, enforceable
in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws and general principles of equity.
(c)
The
execution and delivery of this Agreement by each of Parent and Merger Sub,
do
not, and the performance of this Agreement by each of Parent and Merger Sub,
will not (i) conflict with or violate the Certificate of Incorporation or
Bylaws
of Parent, or Merger Sub, respectively, (collectively, the “Parent
Charter Documents”);
(ii)
subject to compliance with the requirements set forth in Section 3.4(d)
below,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Parent or Merger Sub, respectively, or by which its or any
of
their respective properties is bound or affected; or (iii) result in any
breach
of, or constitute a default (or an event that with notice or lapse of time
or
both would become a default) under, or impair any of, Parent's or Merger
Sub's
rights or alter the rights or obligations of any third party under, or to
Parent's knowledge, give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Parent or Merger Sub,
respectively, pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which any of Parent or Merger Sub is a party or by which Parent or Merger
Sub, or any of their respective properties are bound or affected.
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(d) No
consent, approval, order or authorization of, or registration, declaration
or
filing with any Governmental Entity is required by or with respect to any
of
Parent or Merger Sub in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of the Certificate of Merger with the Secretary of State
of
Delaware, (ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and
state
securities laws (including under Regulation D) and (iii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained
or
made, individually or in the aggregate, would not be reasonably likely to
have a
Parent Material Adverse Effect.
3.5. Parent
SEC Filings; Parent Financial Statements.
(a) The
Parent has filed all forms, reports and documents required to be filed with
the
SEC. All such required forms, reports and documents (including the financial
statements, exhibits and schedules thereto and those documents that the Parent
may file subsequent to the date hereof) are collectively referred to herein
as
the “Parent
SEC Reports”
and
Parent has provided or made available to Arno copies thereof and of all
correspondence to or from the SEC with respect to the Parent. As of their
respective dates, the Parent SEC Reports (i) were prepared in accordance
with
the requirements of the Securities Act or the Securities Exchange Act of
1934,
as amended (the “Exchange
Act”),
as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such Parent SEC Reports, and (ii) did not at the time they were filed
(or if
amended or superseded by a filing prior to the date of this Agreement, then
on
the date of such filing) contain any untrue statement of a material fact
or omit
to state a material fact required to be stated therein or necessary in order
to
make the statements therein, in the light of the circumstances under which
they
were made, not misleading.
(b) Each
of
the financial statements (including, in each case, any related notes thereto)
contained in the Parent SEC Reports (the “Parent
Financials”),
including any Parent SEC Reports filed after the date hereof until the Closing,
as of their respective dates, (i) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto,
(ii)
was prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or,
in the
case of unaudited interim financial statements, as may be permitted by the
SEC
on Form 10-QSB under the Exchange Act) and (iii) fairly presented the financial
position of the Parent at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated, except
that
the unaudited interim financial statements were or are subject to normal
and
recurring year-end adjustments which were not, or are not expected to be,
material in amount. The balance sheet of the Parent as of December 31, 2007
is
hereinafter referred to as the “Parent
Balance Sheet.”
Except
as disclosed in the Parent Financials, the Parent does not have any liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually
or
in the aggregate, material to the business, results of operations or financial
condition of the Parent, except liabilities (i) provided for in the Parent
Balance Sheet, or (ii) incurred since the date of the Parent Balance Sheet
in
the ordinary course of business consistent with past practices. No
person
who has been suspended or barred from being associated with a registered
public
accounting firm, or who has failed to comply with any sanction pursuant to
Rule
5300 promulgated by the Public Company Accounting Oversight Board, has
participated in or otherwise aided the preparation of, or audited, any financial
statements, supporting schedules or other financial data filed by the Parent
with the SEC.
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3.6. Absence
of Certain Changes or Events.
Except
as disclosed in the Parent SEC Reports filed prior to the date hereof or
as
contemplated by this Agreement, since the date of the Parent Balance Sheet,
Parent has conducted business only in, and has not engaged in any material
transaction other than according to, the ordinary and usual course of such
businesses and there has not been (i) any change that individually or in
the
aggregate, has had or is reasonably likely to have a Parent Material Adverse
Effect; (ii) any material damage, destruction or other casualty loss with
respect to any material asset or property owned, leased or otherwise used
by
Parent or Merger Sub, whether or not covered by insurance; (iii) any
declaration, setting aside or payment of any dividend or other distribution
in
cash, stock or property in respect of the capital stock of Parent, except
for
dividends or other distributions on its capital stock publicly announced
prior
to the date hereof and except as expressly permitted hereby; (iv) any event
that
would constitute a violation of Section 4.1
or
Section 4.2
hereof,
if such event occurred after the date of this Agreement and prior to the
Effective Time; or (v) any change by Parent in accounting principles, practices
or methods.
3.7. No
Undisclosed Liabilities.
Except
as reflected in the Parent Financials or as otherwise disclosed on Schedule
3.7,
Parent
has no liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise except liabilities which have arisen after the date of the Parent
Financials in the ordinary course of business (none of which is a material
uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit).
3.8. Tax
Matters.
(a) There
have been duly and timely filed by Parent with the appropriate Taxing
Authorities all Tax Returns required to be filed before the Closing Date
and all
such Tax Returns were true, correct and complete in all material respects.
No
extension is in effect for Parent with respect to the filing of any Tax Return,
the payment of any Taxes, or any limitation period regarding the assessment
or
collection of any Taxes.
(b) Parent
has paid in full all Taxes which have become due and payable on or before
the
Closing Date (whether or not shown on any Tax Return). Adequate reserves
and
accruals have been established to provide for the payment of all Taxes which
are
not yet due and payable with respect to the Parent through the Closing Date.
(c) There
are
no liens for Taxes upon Parent or Merger Sub or any of their properties or
assets except for Taxes not yet due and payable.
(d) Neither
Parent nor Merger Sub has ever been a member of an affiliated, consolidated,
unitary or combined group filing a consolidated, unitary or combined Tax
Return.
Neither Parent nor Merger Sub has ever been a party to any tax allocation,
sharing or reimbursement agreement or arrangement.
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(e) Neither
Parent nor Merger Sub has any liability for the Taxes of any other person
under
Treasury Regulation Section 1.502-6 (or similar provisions of state, local
or
foreign tax law), as a transferee or successor, by contract, or
otherwise.
(f) Parent
does not have pending any ruling requests filed by it or on its behalf with
any
Taxing Authority and is not a party to any closing agreement described in
Internal Revenue Code Section 7121 (or similar provisions of state, local
or
foreign law).
(g) Parent
has delivered to Arno correct and complete copies of all income Tax Returns
and
all other material Tax Returns filed with respect to Parent for all completed
taxable years commencing on or after January 1, 2004, together with all
examination reports by any Taxing Authority, any statements of deficiencies
proposed or assessed against or agreed to by Parent, and any notices of proposed
adjustments received with respect to such years.
(h) No
deficiency or proposed adjustment for any amount of Tax has been proposed,
asserted, assessed or reassessed (as may be applicable) by any Taxing Authority
against Parent that has not been paid, settled or otherwise resolved. There
is
no action, suit, claim, examination, investigation, proceeding or audit now
pending, proposed or threatened against Parent with respect to any Taxes.
Parent
has not been notified by any Taxing Authority that any issues have been raised
with respect to any Tax Return.
(i) No
claim
has been made within the past five (5) calendar years by any Taxing Authority
in
a jurisdiction where Parent did not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
(j) Neither
Parent nor Merger Sub is an “investment company” within the meaning of Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
(k) As
used
in this Agreement, “Tax” means any federal, state, province, local or foreign
income taxes (including any tax on or based upon net income, or gross income,
or
income as specially defined, or earnings, or profits, or selected items of
income, earnings or profits) and all gross receipts, estimated, sales, use,
ad
valorem, transfer, franchise, license, withholding, payroll, employment,
excise,
capital stock, social security (or similar), unemployment, disability,
severance, stamp, gains, registration, value added, occupation, premium,
real
property, personal property, profits, windfall profits, environmental,
alternative or add-on minimum taxes, custom duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest
and
any penalties, additions to tax or additional amounts imposed by any Taxing
Authority whether disputed or not.
(l) As
used
in this Agreement, “Tax
Return”
is
defined as any return, declaration, report, claim for refund, information
return, statement or other document (including any related or supporting
information, schedule, attachment and any amendment thereof) filed or required
to be filed with any federal, state, province, local or foreign governmental
entity or other authority (a “Taxing
Authority”)
in
connection with the determination, assessment or collection of any Tax or
the
administration of any laws, regulations or administrative requirements relating
to any Tax.
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3.9. Contracts
and Commitments.
(a) Schedule
3.9
hereto
lists the following agreements, whether oral or written, to which Parent
or
Merger Sub is a party, which are currently in effect, and which relate to
the
operation of Parent’s business, or where applicable, the business of Merger Sub:
(i) collective bargaining agreement or contract with any labor union; (ii)
bonus, pension, profit sharing, retirement or other form of deferred
compensation plan; (iii) hospitalization insurance or other welfare benefit
plan
or practice, whether formal or informal; (iv) stock purchase or stock option
plan; (v) contract for the employment of any officer, individual employee
or
other person on a full-time or consulting basis or relating to severance
pay for
any such person; (vi) confidentiality agreement; (vii) contract, agreement
or
understanding relating to the voting of Parent Common Stock or the election
of
directors of Parent; (viii) agreement or indenture relating to the borrowing
of
money or to mortgaging, pledging or otherwise placing a lien on any of the
assets of Parent or Merger Sub; (ix) guaranty of any obligation for borrowed
money or otherwise; (x) lease or agreement under which Parent or Merger Sub
is
lessee of, or holds or operates any property, real or personal, owned by
any
other party, for which the annual rental exceeds $25,000; (xi) lease or
agreement under which Parent or Merger Sub is lessor of, or permits any third
party to hold or operate, any property, real or personal, for which the annual
rental exceeds $25,000; (xii) contract which prohibits Parent or Merger Sub
from
freely engaging in business anywhere in the world; (xiii) license agreement
or
agreement providing for the payment or receipt of royalties or other
compensation by Parent or Merger Sub in connection with any intellectual
property rights; (xiv) contract or commitment for capital expenditures in
excess
of $50,000; (xv) agreement for the sale of any capital asset; (xvi) contract
with Merger Sub any affiliate thereof which in any way relates to Parent
(other
than for employment on customary terms); or (xvii) other agreement which
is
either material to Parent’s business or was not entered into in the ordinary
course of business.
(b) To
Parent’s knowledge, Parent and Merger Sub has performed all obligations required
to be performed by them in connection with the contracts or commitments required
to be disclosed in Schedule
3.9
hereto
and is not in receipt of any claim of default under any contract or commitment
required to be disclosed under such caption, Parent and Merger Sub, where
applicable, have no present expectation or intention of not fully performing
any
material obligation pursuant to any contract or commitment required to be
disclosed under such caption, and Parent has no knowledge of any breach or
anticipated breach by any other party to any contract or commitment required
to
be disclosed under such caption.
3.10. Patents
and Trademarks.
Parent
has no patents, trademarks, licenses, sublicenses, or any agreement relating
to
the ownership of use of any intellectual property.
3.11. Compliance;
Permits; Restrictions.
(a) Neither
Parent nor Merger Sub is in conflict with, or in default or violation of
(i) any
law, rule, regulation, order, judgment or decree applicable to Parent or
Merger
Sub or by which it or any of its properties are bound or affected, or (ii)
any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or Merger Sub
is a
party or by which Parent or Merger Sub or its or any of their respective
properties is bound or affected except for those conflicts, defaults or
violations which would not be reasonably expected to have a Parent Material
Adverse Effect. To the knowledge of Parent, no investigation or review by
any
Governmental Entity is pending or threatened against Parent or Merger Sub,
nor
has any Governmental Entity indicated in writing an intention to conduct
the
same. There is no agreement, judgment, injunction, order or decree binding
upon
Parent or Merger Sub which has or would reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of Parent
or
Merger Sub, any acquisition of material property by Parent or Merger Sub
or the
conduct of business by Parent as currently conducted.
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(b) Parent
and Merger Sub hold all permits, licenses, variances, exemptions, orders
and
approvals from Governmental Entities which are necessary to the conduct of
the
business of Parent except those the absence of which would not, individually
or
in the aggregate, be reasonably likely to have a Parent Material Adverse
Effect,
(collectively, the “Parent
Permits”).
Parent and Merger Sub are in compliance in all material respects with the
terms
of the Parent Permits.
3.12. Litigation.
There
is no action, suit, proceeding, claim, arbitration or investigation pending,
including derivative suits brought by or on behalf of Parent, or as to which
Parent or Merger Sub has received any written notice of assertion nor, to
Parent's knowledge, is there a threatened action, suit, proceeding, claim,
arbitration or investigation against Parent or Merger Sub seeking to delay,
limit or enjoin the transactions contemplated by this Agreement or which
might
reasonably be expected to have a Parent Material Adverse Effect.
3.13. Brokers'
and Finders' Fees.
Parent
has not incurred, nor will it incur, directly or indirectly, any liability
for
brokerage or finders' fees or agents' commissions or any similar charges
in
connection with this Agreement or any transaction contemplated hereby, other
than finders’ fees, the payment for which will be the sole responsibility of
Parent.
3.14. Employees.
(a) The
Company does not now have, nor has it ever had at any time, any employees.
(b) Except
as
otherwise set forth in Schedule
3.14,
or as
contemplated by this Agreement, to the knowledge of Parent, neither any
executive employee of Parent nor any group of Parent’s employees has any plans
to terminate his, her or its employment; (b) Parent has no material labor
relations problem pending and its labor relations are satisfactory; (c) there
are no workers’ compensation claims pending against Parent nor is Parent aware
of any facts that would give rise to such a claim; (d) to the knowledge of
Parent, no employee of Parent is subject to any secrecy or non-competition
agreement or any other agreement or restriction of any kind that would impede
in
any way the ability of such employee to carry out fully all activities of
such
employee in furtherance of the business of Parent; and (f) no employee or
former
employee of Parent has any claim with respect to any intellectual property
rights of Parent.
3.15. Affiliate
Transactions.
Except
as set forth in Schedule
3.15
hereto,
and other than pursuant to this Agreement, no officer, director or employee
of
Parent, Merger Sub or any member of the immediate family of any such officer,
director or employee, or any entity in which any of such persons owns any
beneficial interest (other than any publicly-held corporation whose stock
is
traded on a national securities exchange or in the over-the-counter market
and
less than one percent of the stock of which is beneficially owned by any
of such
persons) (collectively “Parent
Insiders”),
has
any agreement with Parent (other than normal employment arrangements) or
any
interest in any property, real, personal or mixed, tangible or intangible,
used
in or pertaining to the business of Parent (other than ownership of capital
stock of Parent). Parent is not indebted to any Parent Insider (except for
amounts due as normal salaries and bonuses and in reimbursement of ordinary
business expenses) and no Parent Insider is indebted to Parent) except for
cash
advances for ordinary business expenses, in each case in an amount less than
$1,000). None of the insiders has any direct or indirect interest in any
competitor, supplier or customer of Parent or in any person, firm or entity
from
whom or to whom Parent leases any property, or in any other person, firm
or
entity with whom Parent transacts business of any nature. For purposes of
this
Section 3.15,
the
members of the immediate family of an officer, director or employee shall
consist of the spouse, parents and children of such officer, director or
employee.
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3.16. Books
and Records.
The
books of account, minute books, stock record books, and other records of
Parent,
all of which have been made available to Arno, have been properly kept and
contain no inaccuracies except for inaccuracies that would not, individually
or
in the aggregate, reasonably be expected to have a Material Adverse Effect
on
Parent. At the Closing, all of Parent’s records will be in the possession of
Parent.
3.17. Real
Property.
Neither
Parent nor Merger Sub owns any real property. Schedule 3.17 contains
an accurate list of all leaseholds and other interests of Parent and Merger
Sub
in any real property. Parent and Merger Sub have good and valid title to
those
leaseholds and other interests free and clear of all liens and encumbrances,
and
the real property to which those leasehold and other interests pertain
constitutes the only real property used in Parent’s business.
3.18. Insurance.
The
insurance policies owned and maintained by Parent that are material to Parent
are in full force and effect, all premiums due and payable thereon have been
paid (other than retroactive or retrospective premium adjustments that Parent
is
not currently required, but may in the future be required, to pay with respect
to any period ending prior to the date of this Agreement), and Parent has
received no notice of cancellation or termination with respect to any such
policy that has not been replaced on substantially similar terms prior to
the
date of such cancellation.
3.19. Environmental
Matters.
None of
the operations of Parent or any Merger Sub involves the generation,
transportation, treatment, storage or disposal of hazardous waste, as defined
under 40 C.F.R. Parts 260-270 or any state, local or foreign
equivalent.
3.20. Absence
of Liens and Encumbrances.
Each of
Parent and Merger Sub has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used in its business, free
and
clear of any liens and encumbrances except (i) as reflected in the Parent
Financial Statements, (ii) for liens for taxes not yet due and payable and
(iii)
for such imperfections of title and encumbrances, if any, which would not
be
reasonably expected to have a Parent Material Adverse Effect.
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3.21. Board
Approval.
The
Board of Directors of each of Parent and Merger Sub has (i) determined that
the
Merger is fair to, advisable and in the best interests of it and its
stockholders, (ii) has approved the Share Issuance and (iii) duly approved
the
Merger, this Agreement and the transactions contemplated hereby.
3.22. Valid
Issuances.
The
Merger Consideration to be issued by Parent in the Merger, when issued in
accordance with the provisions of this Agreement, will be duly authorized,
validly issued, full paid and non-assessable, free of all liens and encumbrances
and not subject to preemptive rights.
3.23. Disclosed
Information.
None of
the information supplied or to be supplied by Parent for inclusion in any
proxy
statement, or any amendments or supplements thereto, to be distributed to
the
shareholders of either Arno or the Surviving Corporation in connection with
a
meeting of such stockholders to vote upon this Agreement and the transactions
contemplated hereby, will, at the time of the mailing of such proxy statement
and the time of such meeting contain any untrue statement of a material fact
or
omit to state any material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under
which
they are made, not misleading.
3.24. Investigations
and Inquiries.
Nether
Parent nor any of its respective directors or officers is the subject of
any
investigation, inquiry or proceeding before the Securities Exchange Commission
or any state securities commission or administrative agency.
3.25. Foreign
Corrupt Practices.
Neither
the Parent, nor to the Parent’s knowledge, any director, officer, agent,
employee or other Person acting on behalf of the Parent or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the
Parent
(i) used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity; (ii) made any
direct
or indirect unlawful payment to any foreign or domestic government official
or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended;
or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
3.26. Xxxxxxxx-Xxxxx
Act.
Other
than as se forth on Schedule
3.26,
the
Parent is either in compliance with any and all applicable requirements of
the
Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date hereof, and
any and
all applicable rules and regulations promulgated by the SEC thereunder that
are
effective as of the date hereof or any elements of non-compliance.
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3.27. Patriot
Act.
To the
extent applicable, both the Parent and Merger Sub are in compliance, in all
material respects, with the (i) Trading with the Enemy Act, as amended, and
each
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (ii) Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept
and
Obstruct Terrorism (USA Patriot Act of 2001).
3.28. Off
Balance Sheet Arrangements.
There
is no transaction, arrangement, or other relationship between the Parent
and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Parent in its 1934 Act filings and is not so disclosed or
that
otherwise would be reasonably likely to have a Parent Material Adverse
Effect.
3.29. Investment
Company Status.
Neither
Parent nor the Merger Sub is, nor upon consummation of the sale of the
Securities will not be, an “investment company,” a company controlled by an
“investment company” or an “affiliated person” of, or “promoter” or “principal
underwriter” for, an “investment company” as such terms are defined in the
Investment Company Act of 1940, as amended.
3.30. Full
Disclosure.
The
representations and warranties of Parent and Merger Sub contained in this
Agreement (and in any schedule, exhibit, certificate or other instrument
to be
delivered under this Agreement) are true and correct in all material respects,
and such representations and warranties do not omit any material fact necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading. There is no fact of which Parent has
knowledge that has not been disclosed to Arno pursuant to this Agreement,
including the schedules hereto, all taken together as a whole, which has
had or
could reasonably be expected to have a Material Adverse Effect on Parent
or
Merger Sub or materially adversely affect the ability of Parent or Merger
Sub to
consummate in a timely manner the transactions contemplated hereby.
3.31. Lack
of Publicity.
Neither
Parent nor any person acting on its behalf has engaged or will engage in
any
form of general solicitation or general advertising as those terms are used
in
Regulation D under the Securities Act in the United States with respect to
the
Financing or the securities that will be exchanged in the Merger, including,
without limitation, any article, notice, advertisement or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, regarding the Financing, nor did any such person sponsor
any seminar or meeting to which potential investors were invited by, or any
solicitation of a subscription by, a person not previously known to such
investor in connection with investments in the securities of Arno generally.
Neither Parent nor any person acting on its or their behalf have engaged
or will
engage in any form of directed selling efforts (as that term is used in
Regulation S under the Securities Act) with respect to the securities that
will
be exchanged in the Merger.
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ARTICLE
IV
4.1. Conduct
of Business by the Parties.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement pursuant to ARTICLE VIII or the Effective
Time, except as contemplated by this Agreement, the Financing or the
transactions contemplated hereby and thereby, each of Arno, Merger Sub and
Parent shall conduct their respective businesses in the ordinary course and
in
substantial compliance with all applicable laws and regulations, pay their
respective debts and Taxes when due subject to good faith disputes over such
debts or Taxes, pay or perform other material obligations when due subject
to
good faith disputes over such obligations, and use their commercially reasonable
efforts consistent with past practices and policies to (i) preserve intact
their
present business organization; (ii) keep available the services of each of
their
present officers and employees, respectively; and (iii) preserve their
relationships with customers, suppliers, distributors, licensors, licensees
and
others with which each party has business dealings material to their respective
business.
4.2. Negative
Covenants of Parent.
Except
as permitted by the terms of this Agreement, without the prior written consent
of Arno, during the period from the date of this Agreement and continuing
until
the earlier of the termination of this Agreement pursuant to its terms or
the
Effective Time, Parent shall not do any of the following and shall not permit
Merger Sub to do any of the following:
(a) Except
as
required by applicable law, waive any stock repurchase rights, accelerate,
amend
or change the period of exercisability of options or restricted stock, or
reprise options granted under any employee, consultant, director or other
stock
plans or authorize cash payments in exchange for any options granted under
any
of such plans;
(b) Except
as
required by applicable law, grant any severance or termination pay to any
officer or employee except pursuant to written agreements outstanding, or
policies existing, on the date hereof and as previously disclosed in writing
or
made available to Arno, or adopt any new severance plan, or amend or modify
or
alter in any manner any severance plan, agreement or arrangement existing
on the
date hereof;
(c) Declare,
set aside or pay any dividends on or make any other distributions (whether
in
cash, stock, equity securities or property) in respect of any capital stock
or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any capital stock;
(d) Purchase,
redeem or otherwise acquire, directly or indirectly, any shares of capital
stock
of Parent or Merger Sub;
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(f) Cause,
permit or submit to a vote of Parent's stockholders any amendments to the
Parent
Charter Documents (or similar governing instruments of Merger Sub);
(g) Acquire
or agree to acquire by merging or consolidating with, or by purchasing any
equity interest in or a portion of the assets of, or by any other manner,
any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to enter
into
any joint ventures, strategic partnerships or strategic
investments;
(h) Sell,
lease, license, encumber or otherwise dispose of any properties or assets
except
in the ordinary course of business consistent with past practice, except
for the
sale, lease, licensing, encumbering or disposition of property or assets
which
are not material, individually or in the aggregate, to the business of Parent
and Merger Sub;
(i) Incur
any
indebtedness for borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or options, warrants, calls or
other
rights to acquire any debt securities of Parent;
(j) Adopt
or
amend any employee stock purchase or employee stock option plan, or enter
into
any employment contract or collective bargaining agreement (other than offer
letters and letter agreements entered into in the ordinary course of business
consistent with past practice with employees who are terminable “at will”), pay
any special bonus or special remuneration to any director or employee, or
increase the salaries, wage rates, compensation or other fringe benefits
(including rights to severance or indemnification) of its directors, officers,
employees or consultants except, in each case, as may be required by
law;
(k) Pay,
discharge, settle or satisfy any litigation (whether or not commenced prior
to
the date of this Agreement) or any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than
the payment, discharge, settlement or satisfaction, in the ordinary course
of
business consistent with past practice or in accordance with their terms,
of
liabilities recognized or disclosed in the Parent Balance Sheet or incurred
since the date of such financial statements, or (ii) waive the benefits of,
agree to modify in any manner, terminate, release any person from or knowingly
fail to enforce the confidentiality or nondisclosure provisions of any agreement
to which Parent or Merger Sub is a party or of which Parent or Merger Sub
is a
beneficiary;
(l) Except
in
the ordinary course of business consistent with past practice, materially
modify, amend or terminate any agreements or waive, delay the exercise of,
release or assign any material rights or claims thereunder without providing
prior notice to Parent;
(m) Except
as
required by GAAP, revalue any of its assets or make any change in accounting
methods, principles or practices;
(n) Make
any
Tax election or accounting method change (except as required by GAAP)
inconsistent with past practice that, individually or in the aggregate, is
reasonably likely to adversely affect in any material respect the Tax liability
or Tax attributes of Parent or Merger Sub, settle or compromise any material
Tax
liability or consent to any extension or waiver of any limitation period
with
respect to Taxes;
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(o) Take
any
action that would prevent the Merger from qualifying as a reorganization
under
Section 368(a) of the Code;
or
(p) Agree
in
writing or otherwise to take any of the actions described in Section
4.2(a)
through
4.2(o)
above.
4.3. Affirmative
Pre-Closing Covenants of Parent. Prior
to
the Closing, Parent shall take all actions required such that immediately
after
the Effective Time the holders of Parent Common Stock, or any securities
convertible into or exchangeable into shares of Parent Common Stock, including
any shares issuable to Section 6.2(h) hereof, shall own in the aggregate
1,100,200 shares of Parent Common Stock, which shall represent five percent
(5%)
of the fully diluted shares of Parent Common Stock immediately following
the
Effective Time (the “Parent
Recapitalization”).
4.4. Covenants
of Arno.
Except
as disclosed in Schedule
4.4
hereto,
permitted by the terms of this Agreement or in connection with the Financing
or
the transactions contemplated hereby and thereby, during the period from
the
date of this Agreement and continuing until the earlier of the termination
of
this Agreement pursuant to its terms or the Effective Time, Arno shall not
(i)
amend the Arno Charter Documents (other than as provided herein ); (ii) split,
combine or reclassify its outstanding shares of capital stock; (iii) declare,
set aside or pay any dividend payable in cash, stock or property in respect
of
any capital stock; (iv) take any action that would prevent the Merger from
qualifying as a reorganization under Section 368(a) of the Code or a qualifying
exchange under Section 351 of the Code; (v) conduct its business, other than
in
the ordinary course consistent with past practices; (vi) issue any capital
stock
or any options, warrants or other rights to subscribe for or purchase any
capital stock or any securities convertible into or exchangeable or exercisable
for, or rights to purchase or otherwise acquire, any shares of the capital
stock
of Arno; or (vii) directly or indirectly redeem, purchase, sell or otherwise
acquire any capital stock of Arno.
ARTICLE
V
5.1. Public
Disclosure; Securities Law Filings.
Parent
and Arno will consult with each other, and to the extent practicable, agree,
before issuing any press release or otherwise making any public statement
with
respect to the Merger or this Agreement and will not issue any such press
release or make any such public statement prior to such consultation, except
as
may be required by law, in which case reasonable efforts to consult with
the
other party will be made prior to such release or public statement. In addition,
Parent and Arno agree to cooperate in the preparation and filing of all filings
required by applicable securities laws, including, without limitation, the
Merger Form 8-K (as defined in Section 6.1
below),
periodic and other reports required by Section 13 of the Exchange Act, and
information required by Section 14(f) of the Exchange Act, including Rule
14f-1
promulgated thereunder.
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5.2. Expenses.
Except
as otherwise provided in this Agreement, all costs and expenses incurred
in
connection with this Agreement and the transactions contemplated hereby shall
be
paid by the party incurring such costs and expenses.
5.3. Commercially
Reasonable Efforts; Notification.
(a) Upon
the
terms and subject to the conditions set forth in this Agreement, each of
the
parties agrees to use commercially reasonable efforts to take, or cause to
be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable
to
consummate and make effective, in the most expeditious manner practicable,
the
Merger and the other transactions contemplated by this Agreement, including
to
accomplish the following: (i) causing the conditions precedent set forth
in
ARTICLE
IV
to be
satisfied; (ii) obtaining all necessary actions or non-actions, waivers,
consents, approvals, orders and authorizations from any federal, state, local
or
foreign governmental authority (collectively, “Governmental
Entities”
and
each a “Governmental
Entity”);
(iii)
making all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any);
(iv) avoiding any suit, claim, action, investigation or proceeding by any
Governmental Entity challenging the Merger or any other transaction contemplated
by this Agreement; (v) obtaining all consents, approvals or waivers from
third
parties required as a result of the transactions contemplated in this Agreement;
(vi) defending any suits, claims, actions, investigations or proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to
have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; and (vii) executing or delivering
any
additional instruments reasonably necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this
Agreement.
(b) Parent
shall give prompt notice to Arno upon becoming aware that any representation
or
warranty made by it or Merger Sub contained in this Agreement has become
untrue
or inaccurate, or of any failure of Parent or Merger Sub to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, in each case, where
the
conditions set forth in Section 6.2(a)
or
Section 6.2(b)
would
not be satisfied as a result thereof; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(c) Arno
shall give prompt notice to Parent upon becoming aware that any representation
or warranty made by it contained in this Agreement has become untrue or
inaccurate, or of any failure of Arno to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
by
it under this Agreement, in each case, where the conditions set forth in
Section
6.3(a)
or
Section 6.3(b)
would
not be satisfied as a result thereof; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
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5.4. Third
Party Consents.
On or
before the Closing Date, Parent and Arno will each use its commercially
reasonable efforts to obtain any consents, waivers and approvals under any
of
its respective agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated
hereby.
5.5. Arno
Stock Options and Warrants.
(a) At
the
Effective Time, the Arno Option Plan and each outstanding option to purchase
shares of Arno Common Stock (each, a “Arno
Stock Option”)
thereunder or otherwise, whether or not vested, shall, by virtue of the Merger,
be assumed by Parent. Each Arno Stock Option so assumed by Parent under this
Agreement will continue to have, and be subject to, the same terms and
conditions of such options immediately prior to the Effective Time (including,
without limitation, any repurchase rights or vesting provisions and provisions
regarding the acceleration of vesting and exercisability on certain
transactions), except that (i) each Arno Stock Option will be exercisable
(or
will become exercisable in accordance with its terms) for that number of
whole
shares of Parent Common Stock as determined by multiplying the number of
shares
of Arno Common Stock that were subject to such Arno Stock Option immediately
prior to the Effective Time by the Exchange Ratio determined pursuant to
Section
1.6(a),
and
rounding the resulting number down to the nearest whole number of shares
of
Parent Common Stock, and (ii) the per share exercise price for the shares
of
Parent Common Stock issuable upon exercise of such assumed Arno Stock Option
will be determined by dividing the exercise price per share of Arno Common
Stock
at which such Arno Stock Option was exercisable immediately prior to the
Effective Time, by the Exchange Ratio determined pursuant to Section
1.6(a)
and
rounding the resulting exercise price up to the nearest whole cent and that
such
number of shares of Parent Common Stock and exercise price shall be determined
in a manner consistent with the requirements of Section 409A of the Code.
No
vesting periods for Arno Stock Options will accelerate as a result of the
transaction contemplated hereby. At the Effective Time, (i) all references
in
the Arno Option Plans and related stock option agreements to Arno shall be
deemed to refer to Parent and (ii) Parent shall assume all of Arno's obligations
with respect to the Arno Option Plans and Arno's Stock Options as so
amended.
(b) At
the
Effective Time, each outstanding warrant to purchase shares of Arno Common
Stock
(each, a “Arno
Warrant”),
whether or not vested, shall, by virtue of the Merger, be assumed by Parent.
Each Arno Warrant so assumed by Parent under this Agreement will continue
to
have, and be subject to, the same terms and conditions of such options or
warrants immediately prior to the Effective Time (including, without limitation,
any repurchase rights or vesting provisions and provisions regarding the
acceleration of vesting and exercisability on certain transactions), except
that
(i) each Arno Warrant will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of Parent Common
Stock as determined pursuant to the Exercise Ratio set forth in Section
1.6(a),
and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Arno Warrant will be equal to the exercise
price
per share of Arno Common Stock at which such Arno Warrant was exercisable
immediately prior to the Effective Time, adjusted to give effect to the Exchange
Ratio determined pursuant to Section 1.6(a).
No
vesting periods for any Arno Warrants will accelerate as a result of the
transaction contemplated hereby. At the Effective Time, (i) all references
in
the related stock warrant agreements to Arno shall be deemed to refer to
Parent
and (ii) Parent shall assume all of Arno's obligations with respect to Arno's
Warrants as so amended.
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28
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(c) It
is
intended that the Arno Stock Options assumed by Parent shall qualify following
the Effective Time as incentive stock options as defined in Section 422 of
the
Code to the extent the Arno Stock Options qualified as incentive stock options
immediately prior to the Effective Time and the provisions of this Section
5.5
shall be
applied consistently with such intent.
5.6. Parent
Stock Options and Warrants.
At the
Effective Time, any outstanding options to purchase shares of Parent Common
Stock (each, a “Parent
Stock Option”),
whether or not vested, and any outstanding warrants to purchase shares of
Parent
Common Stock, whether or not then exercisable, shall, by virtue of the Merger,
be cancelled.
5.7. Parent
Board of Directors.
At the
Effective Time, the Board of Directors of Parent, in accordance with applicable
law and the Parent Charter Documents, shall take all necessary action (which
action may include the resignation of existing directors) to cause the Board
of
Directors of Parent, as of the Effective Time, to appoint the directors of
Arno
as directors of the Parent.
5.8. Parent
Management.
At the
Effective Time, the Board of Directors of Parent, in accordance with applicable
law and the Parent Charter Documents shall take all necessary action to appoint
the officers of Arno to the similar offices of Parent.
5.9. Private
Placement.
Each of
Arno and Parent shall take all necessary action on its part such that the
issuance of the Merger Consideration to Arno stockholders constitutes a valid
“private placement” under the Securities Act. Without limiting the generality of
the foregoing, Arno shall
(1) provide
each Arno stockholder with a stockholder qualification questionnaire in the
form
reasonably acceptable to both Parent and Arno (a “Stockholder
Questionnaire”)
and
(2) use
its best efforts to cause each Arno stockholder to attest that that stockholder
either
(A) is
an “accredited investor” as defined in Regulation D of the Securities Act,
(B) has
such knowledge and experience in financial and business matters that the
stockholder is capable of evaluating the merits and risks of receiving the
Merger Consideration, or (C) has appointed an appropriate person reasonably
acceptable to both Parent and Arno to act as the stockholder’s purchaser
representative in connection with evaluating the merits and risks of receiving
the Merger Consideration.
5.10. Arno
Stockholder Written Consent; Materials to Stockholders.
(a) Arno
shall use commercially reasonable efforts to obtain, in lieu of holding a
stockholder meeting, the written consent of the number of Arno stockholders
necessary under its Certificate of Incorporation, Bylaws, and the DGCL to
approve this agreement and the Merger.
(b) Arno
shall as promptly as practicable following the date of this agreement prepare
and mail to Arno stockholders all information as may required to comply with
the
DGCL and the Securities Act.
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29
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5.11. No
Negotiation.
Other
than as contemplated pursuant to the Financing, until the Effective Date,
or
such time, if any, as this Agreement is terminated pursuant to ARTICLE
VII
below,
neither Parent nor Arno shall, nor shall they permit any of their respective
affiliates, directors, officers, employees, investment bankers, attorneys
or
other agents, advisors or representatives to, directly or indirectly, (a)
sell,
offer or agree to sell its business, by sale of shares or assets, merger
or
otherwise (each an “Acquisition
Transaction”)
other
than pursuant to this Agreement, (b) solicit or initiate the submission of
any
proposal for an Acquisition Transaction, or (c) participate in any discussions
or negotiations with, or furnish any information concerning its business
to, any
corporation, person or other entity in connection with a possible Acquisition
Transaction other than pursuant to this Agreement.
If
either Parent or Arno is contacted or solicited by any third-party regarding
any
action contemplated in Sections 5.11(a), (b) or (c) above, such party must
promptly inform the other in writing.
5.12. Limitation
of Liability.
Notwithstanding anything to the contrary contained in this Agreement, except
as
a result of a fraud, or a material misstatement or omission hereunder,
perpetrated by any party to this agreement, or their respective successors
or
affiliates, shall have any liability hereunder from and after the Closing
Date.
5.13. Failure
to Fulfill Conditions. In
the
event that either of the parties hereto determines that a condition to its
respective obligations to consummate the transactions contemplated hereby
cannot
be fulfilled on or prior to the termination of this Agreement, it will promptly
notify the other party.
5.14. Notification
of Certain Matters. On
or
prior to the Effective Date, each party shall give prompt notice to the other
party of (i) the occurrence or failure to occur of any event or the discovery
of
any information, which occurrence, failure or discovery would be likely to
cause
any representation or warranty on its part contained in this Agreement to
be
untrue, inaccurate or incomplete after the date hereof in any material respect
or, in the case of any representation or warranty given as of a specific
date,
would be likely to cause any such representation or warranty on its part
contained in this Agreement to be untrue, inaccurate or incomplete in any
material respect as of such specific date, and (ii) any material failure
of such
party to comply with or satisfy any covenant or agreement to be complied
with or
satisfied by it hereunder.
5.15. Access
to Information.
Each of
Arno and Parent shall afford to the other and the other's accountants, counsel,
financial advisors and other representatives reasonable access during normal
business hours throughout the period prior to the Effective Time to all
properties, books, contracts, commitments and records (including, but not
limited to, tax returns) of it and, during such period, shall furnish promptly
(a) a copy of each report, schedule and other document filed or received
by it
during such period pursuant to the requirements of federal or state securities
laws or filed by it during such period with the SEC in connection with the
transactions contemplated by this Agreement or which may have a Parent Material
Adverse Effect or Arno Material Adverse Effect on it and (b) such other
information concerning its business, properties and personnel as the other
shall
reasonably request; provided, however, that no investigation pursuant to
this
Section shall affect any representation or warranty made herein or the
conditions to the obligations of the respective parties to consummate the
Merger. All non-public documents and information furnished to either Arno
or
Parent, as the case may be, in connection with the transactions contemplated
by
this Agreement shall be deemed to have been received, and shall be held by
the
recipient, in confidence, except that Arno and Parent, as applicable, may
disclose such information as may be required under applicable law or as may
be
necessary in connection with the preparation of the Proxy Statement. Each
party
shall promptly advise the others, in writing, of any change or the occurrence
of
any event after the date of this Agreement and prior to the Effective Time
having, or which, insofar as can reasonably be foreseen, in the future would
reasonably be expected to have, any Arno Material Adverse Effect or Parent
Material Adverse Effect on, as applicable.
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30
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ARTICLE
VI
6.1. Conditions
to Obligations of Each Party to Effect the Merger.
The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions, any of which may be waived if waived in writing by
both
Parent and Arno:
(a) No
Prohibitive Change of Law.
There
shall have been no law, statute, rule or regulation, domestic or foreign,
enacted or promulgated which would prohibit or make illegal the consummation
of
the transactions contemplated hereby.
(b) Stockholder
Approvals.
This
Agreement shall have been adopted and the Merger shall have been duly approved
by the stockholders of Arno by the requisite vote under applicable law and
in
accordance with the procedures set forth in its Certificate of Incorporation,
Bylaws and the DGCL.
(c) Dissenting
Shares.
Arno
stockholders holding in the aggregate not more than five percent (5%) of
the
Arno Common Stock shall have delivered to Arno a written demand for appraisal
in
accordance with Section 262(d) of the DGCL.
(d) No
Order.
No
Governmental Entity shall have enacted, issued, promulgated, enforced or
entered
any statute, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in effect and
which
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(e) Schedules.
Each of
the parties hereto shall have delivered to each other complete and accurate
Schedules to this Agreement and such Schedules shall have been approved by
the
recipient.
(f) Exhibits.
The
parties shall mutually agree upon the form and substance of all the Exhibits
to
this Agreement and the appropriate signatories thereto shall have executed
and
delivered each such document.
(g) Officers’
Certificate.
Each
party shall have furnished to the other a certificate of its Chief Executive
Officer dated as of the Effective Date, in which such officers shall certify
that, to their best knowledge, the conditions set forth in Section 6.2(a)
and
6.2(b)
or
6.3(a)
and
6.3(b)
(as
applicable) have been fulfilled and are true and correct.
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31
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(h) Arno
Financing. Arno
shall have closed on at least $12,500,000 of gross proceeds from the Financing.
(i) Readiness
of the Form 8-K.
The
Form 8-K announcing the Closing, together with, or incorporating by reference,
the financial statements prepared by Arno, and such other information (including
financial statements) that may be required to be disclosed with respect to
the
Merger in any report or form to be filed with the SEC (“Merger
Form 8-K”)
shall
be, in the opinion of the parties and their respective counsel, in a form
reasonably acceptable for filing with the SEC immediately following the
Closing.
The
Merger Form 8-K will be prepared by counsel for Arno, subject to review by
the
Parent’s counsel.
6.2. Additional
Conditions to Obligations of Arno.
The
obligation of Arno to effect the Merger shall be subject to the satisfaction
at
or prior to the Closing Date of each of the following conditions, any of
which
may be waived, in writing, exclusively by Arno:
(a) Representations
and Warranties.
The
representations and warranties of Parent and Merger Sub set forth in this
Agreement shall be true and correct as of the date of this Agreement and
as of
the Closing Date as if made on and as of the Closing Date (except to the
extent
any such representation and warranty expressly speaks only as of an earlier
date) and Arno shall have received a certificate signed on behalf of Parent
by
the Chief Executive Officer of Parent to such effect.
(b) Agreements
and Covenants.
Each of
Parent and Merger Sub shall have performed or complied with, in all material
respects, all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing Date, and Arno
shall have received a certificate to such effect signed on behalf of each
of
Parent and Merger Sub by an authorized officer of Arno.
(c) Consents
and Approvals.
Parent
and Merger Sub shall have obtained all consents and approvals necessary to
consummate the transactions contemplated by this Agreement in order that
the
transactions contemplated herein not constitute a breach or violation of,
or
result in a right of termination or acceleration of, or creation of any
encumbrance on any of Parent’s or Merger Sub’s assets pursuant to the provisions
of, any agreement, arrangement or undertaking of or affecting Parent or any
license, franchise or permit of or affecting Parent or Merger Sub.
(d) No
Closing Material Adverse Effect.
Since
the date hereof, there has not occurred a Parent Material Adverse Effect.
For
purposes of the preceding sentence and Section (a),
the
occurrence of any of the following events or circumstances, in and of themselves
and in combination with any of the others, shall not constitute a Parent
Material Adverse Effect:
(i) any
litigation or threat of litigation filed or made after the date hereof
challenging any of the transactions contemplated herein or any stockholder
litigation or threat of stockholder litigation filed or made after the date
hereof resulting from this Agreement or the transactions contemplated herein
unless Arno shall conclude that it has or could have a Parent Material Adverse
Effect on the Parent and the Surviving Corporation, taken as a whole; and
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32
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(ii) any
adverse change, event or effect that is demonstrated to be caused primarily
by
conditions generally affecting the United States economy.
(e) Corporate
Documents.
Arno
shall have received a copy of the Certificate of Incorporation of each of
the
Parent and Merger Sub, certified by the Secretary of State of the State of
Delaware evidencing the good standing of Parent and Merger Sub in such
jurisdiction.
(f) Other
Agreements and Resignations.
Each of
the officers and directors of Parent and Merger Sub immediately prior to
the
Closing Date shall deliver duly executed resignations from their positions
with
each such applicable corporation immediately upon the Effective
Time.
(g) Compliance
with Securities Law Requirements.
Parent
shall be in compliance in all material respects with all requirements of
applicable securities laws, including, without limitation, the filing of
reports
required by Section 13 of the Exchange Act, and shall have taken all actions
with respect thereto as shall be required or reasonably requested by Arno
in
connection therewith. Without limiting the generality of the foregoing, Parent
shall have filed with the SEC its annual report on Form 10-KSB or Form 10-K,
as
appropriate, for the year ended December 31, 2007, which report shall comply
in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC applicable to such report.
(h) Conversion
of Promissory Notes.
All
debt instruments or securities of Parent held or beneficially owned by
Fountainhead Capital Partners Limited and its affiliates shall be converted
into
shares of Parent Common Stock.
(i) Parent
Capitalization.
Parent
shall have not more than 1,100,200 shares of Parent Common Stock issued and
outstanding immediately prior to the Merger.
6.3. Additional
Conditions to the Obligations of Parent and Merger Sub.
The
obligations of Parent and Merger Sub to effect the Merger shall be subject
to
the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations
and Warranties.
The
representations and warranties of Arno set forth in this Agreement shall
be true
and correct as of the date of this Agreement and as of the Closing Date as
if
made on and as of the Closing Date (except to the extent any such representation
and warranty expressly speaks only as of an earlier date or to the extent
such
representation and warranty is no longer true on account of transactions
contemplated by this Agreement or the Financing) and Parent shall have received
a certificate signed on behalf of Arno by the Chief Executive Officer of
Arno to
such effect; provided, however, that notwithstanding anything herein to the
contrary, this Section 6.3(a)
shall be
deemed to have been satisfied even if such representations or warranties
are not
so true and correct unless the failure of such representations or warranties
to
be so true and correct, individually or in the aggregate, has had, or is
reasonably likely to have, an Arno Material Adverse Effect.
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(b) Agreements
and Covenants.
Arno
shall have performed or complied with, in all material respects, all agreements
and covenants required by this Agreement to be performed or complied with
by it
at or prior to the Closing Date, and Parent shall have received a certificate
to
such effect signed on behalf of Arno by an authorized officer of
Arno.
(c) No
Closing Material Adverse Effect.
Since
the date hereof, there shall not have occurred an Arno Material Adverse Effect.
For purposes of the preceding sentence and Section 6.3(a),
the
occurrence of any of the following events or circumstances, in and of themselves
and in combination with any of the others, shall not constitute an Arno Material
Adverse Effect:
(i) any
litigation or threat of litigation filed or made after the date hereof
challenging any of the transactions contemplated herein or any stockholder
litigation or threat of stockholder litigation filed or made after the date
hereof resulting from this Agreement or the transactions contemplated herein
unless Arno shall conclude that it has or could have an Arno Material Adverse
Effect on Arno and the Surviving Corporation, taken as a whole; and
(ii) any
adverse change, event or effect that is demonstrated to be caused primarily
by
conditions generally affecting the United States economy, or by conditions
generally affecting the biotechnology or pharmaceutical industries.
ARTICLE
VII
7.1. Termination.
This
Agreement may be terminated at any time prior to the Effective Time, whether
before or after the requisite approval of the stockholders of Arno:
(a) by
mutual
written consent duly authorized by the Boards of Directors of Parent and
Arno;
or
(b) by
either
Parent or Arno if the Merger shall not have been consummated by April 15,
2008,
which date will be automatically extended upon written notice by Arno to
the
Parent of such a need for up to 30 days if the expiration of the Financing
shall
have been extended (such date, being the “Outside
Date”)
for
any reason; provided, however, that the right to terminate this Agreement
under
this Section 7.1(b)
shall
not be available to any party whose action or failure to act has been a
principal cause of, or resulted in the failure of, the Merger to occur on
or
before such date if such action or failure to act constitutes a breach of
this
Agreement;
or
(c) by
either
Parent or Arno if a Governmental Entity shall have issued an order, decree
or
ruling or taken any other action, in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, which order,
decree,
ruling or other action shall have become final and non-appealable or any
law,
order, rule or regulation is in effect or is adopted or issued, which has
the
effect of prohibiting the Merger; or
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(d) by
Parent, on the one hand, or Arno, on the other, if any condition to the
obligation of any such party to consummate the Merger set forth in Section
6.2
(in the
case of Arno) or 6.3
(in the
case of Parent) becomes incapable of satisfaction prior to the Outside Date;
provided, however, that the failure of such condition is not the result of
a
breach of this Agreement by the party seeking to terminate this
Agreement.
7.2. Fees
and Expenses.
All
Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses whether
or not the Merger is consummated, provided that in the event the Merger is
consummated, Arno will pay the reasonable legal fees of Parent’s counsel in this
transaction up to $25,000. As used in this Agreement, “Expenses”
shall
include all reasonable out-of-pocket expenses (including, without limitation,
all fees and expenses of counsel, accountants, experts and consultants to
a
party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and all other matters relating
to
the closing of the Merger and the other transactions contemplated
hereby.
7.3. Amendment.
This
Agreement may be amended by the parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to the Effective
Time;
provided, however, that, after the approval and adoption of this Agreement
by
the stockholders of Arno, there shall not be any amendment that by applicable
law requires further approval by the stockholders of Arno without the further
approval of such stockholders. This Agreement may not be amended by the parties
hereto except by execution of an instrument in writing signed on behalf of
each
of Parent, Arno and Merger Sub.
7.4. Extension;
Waiver.
At any
time prior to the Effective Time, any party hereto may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations
or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in
any
document delivered pursuant hereto and (iii) waive compliance with any of
the
agreements or conditions for the benefit of such party contained herein.
Any
agreement on the part of a party hereto to any such extension or waiver shall
be
valid only if set forth in an instrument in writing signed on behalf of such
party. Delay in exercising any right under this Agreement shall not constitute
a
waiver of such right.
ARTICLE
VIII
After
the
Effective Time of the Merger, Parent, either directly or through Arno as
long as
Arno is within Parent’s “qualified group” within the meaning of Regulations
Section 1.368-1(d)(4)(ii) (the “Qualified
Group”),
will
continue at least one significant historic business line of Arno, or use
at
least a significant portion of Arno's historic business assets in a business,
in
each case within the meaning of Regulations Section 1.368-1(d), except that
Arno's historic business assets may be transferred (a) to a corporation
that is another member of Parent’s Qualified Group, or (b) to an entity
taxed as a partnership if (i) one or more members of Parent’s Qualified
Group have active and substantial management functions as a partner with
respect
to Parent’s historic business or (ii) members of Parent’s Qualified Group
in the aggregate own an interest in the partnership representing a significant
interest in Arno's historic business, in each case within the meaning of
Regulations Section 1.368-1(d)(4)(iii).
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35
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ARTICLE
IX
9.1. Notices.
All
notices and other communications hereunder shall be in writing and shall
be
deemed given on the day of delivery if delivered personally or sent via telecopy
(receipt confirmed) or on the second business day after being sent if delivered
by commercial delivery service, to the parties at the following addresses
or
telecopy numbers (or at such other address or telecopy numbers for a party
as
shall be specified by like notice):
| (a) |
if
to Parent or Merger Sub (prior to
Closing):
|
President
Laurier
International, Inc.
000
Xxxxx
Xxxx Xxxx.
Xxxxx
000
Xxxxx
Xxxxxx, XX 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
With
a
copy to:
Xxxxxx
X.
X. Xxxxxx
000
Xxxxx
Xxxx Xxxx.
Xxxxx
000
Xxxxx
Xxxxxx, XX 00000
Phone:
(000) 000-0000
Fax:
(000) 000-0000
| (b) |
if
to Arno or Merger Sub (or Parent subsequent to Closing),
to:
|
Arno
Therapeutics, Inc.
00
Xxx
Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Attention:
Chief Executive Officer
Phone:
(000) 000-0000
Fax:
(000) 000-0000
With
a
copy to:
Xxxxxx
Xxxxxxx Xxxxxx & Brand, LLP
00
Xxxxx
0xx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx,
XX 00000
Attention:
Xxxxxxxxxxx X. Xxxxxx
Tel:
(000) 000-0000
Fax:
(000) 000-0000
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9.2. Interpretation.
(a) When
a
reference is made in this Agreement to Exhibits, such reference shall be
to an
Exhibit to this Agreement unless otherwise indicated. When a reference is
made
in this Agreement to a Section, such reference shall be to a Section of this
Agreement. Unless otherwise indicated the words “include,” “includes” and
“including” when used herein shall be deemed in each case to be followed by the
words “without limitation.” The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the
meaning or interpretation of this Agreement. When reference is made herein
to
“the business of” an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference
to
the subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity.
(b) For
purposes of this Agreement, the term “knowledge” means with respect to a party
hereto, with respect to any matter in question, that any of the officers
of such
party has actual knowledge of such matter.
(c) For
purposes of this Agreement, the term “person” shall mean any individual,
corporation (including any non-profit corporation), general partnership,
limited
partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company),
firm
or other enterprise, association, organization, entity or Governmental
Entity.
(d) For
purposes of this Agreement, an “agreement,” “arrangement,” “contract,”
“commitment” or “plan” shall mean a legally binding, written agreement,
arrangement, contract, commitment or plan, as the case may be.
(e) As
used
in this Agreement, the following terms shall have the respective meanings
ascribed thereto in the respective sections of this Agreement set forth opposite
each such term below unless the context otherwise requires:
|
Term
|
Section
|
|
Acquisition
Transaction
|
5.11
|
|
Action
|
2.11
|
|
Agreement
|
Preamble
|
|
Arno
|
Preamble
|
|
Arno
Balance Sheet
|
2.17
|
|
Arno
Common Stock
|
1.6(a)
|
|
Arno
Insider
|
2.8
|
|
Arno
Preferred Stock
|
1.6(b)
|
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37
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|
Arno
Material Adverse Effect
|
2.3
|
|
Arno
Option Plans
|
1.6(b)
|
|
Arno
Stock Option
|
5.5(a)
|
|
Arno
Warrant
|
5.5(b)
|
|
Certificate
of Merger
|
1.2
|
|
Closing
|
1.2
|
|
Closing
Date
|
1.2
|
|
Code
|
0
|
|
DGCL
|
Recitals
|
|
Dissenting
Shares
|
|
|
Effective
Time
|
1.2
|
|
Encumbrances
|
1.3(b)
|
|
Exchange
Act
|
3.5(a)
|
|
Exchange
Ratio
|
1.6
|
|
Expenses
|
7.2
|
|
GAAP
|
2.9
|
|
Governmental
Entity
|
5.3(a)
|
|
Intangibles
|
2.15
|
|
Liabilities
|
1.3(b)
|
|
Material
Permits
|
2.13
|
|
Materials
Adverse Effect
|
2.3
|
|
Merger
|
1.1
|
|
Merger
Consideration
|
1.6(a)
|
|
Merger
Form 8-K
|
6.1(i)
|
|
Merger
Sub
|
Preamble
|
|
Merger
Sub Common Stock
|
3.2
|
|
Outside
Date
|
7.1(b)
|
|
Parent
|
Preamble
|
|
Parent
Balance Sheet
|
3.5(b)
|
|
Parent
Charter Documents
|
3.4(a)
|
|
Parent
Common Stock
|
1.6(a)
|
|
Parent
Financials
|
3.5(b)
|
|
Parent
Insiders
|
3.15
|
|
Parent
Material Adverse Effect
|
3.1(a)
|
|
Parent
Permits
|
3.11(b)
|
|
Parent
Recapitalization
|
4.3
|
|
Parent
SEC Reports
|
3.5(a)
|
|
Parent
Stockholder
|
1.7
|
|
Parent
Stockholder Shares
|
1.7
|
|
Parent
Stock Option
|
5.6
|
|
Qualified
Group
|
ARTICLE
VIII
|
|
Registration
Statement
|
0
|
|
Regulations
|
0
|
|
Required
Approvals
|
2.4
|
|
SEC
|
1.7
|
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-
|
Securities
Act
|
3.5(a)
|
|
Share
Issuance
|
Recitals
|
|
Stockholder
Approvals
|
2.2
|
|
Stockholder
Questionnaire
|
5.9
|
|
Subsequent
Registration Statement
|
0
|
|
Surviving
Corporation
|
1.1
|
|
Tax
Returns
|
3.8(l)
|
|
Tax
|
3.8(k)
|
|
Taxing
Authority
|
3.8(l)
|
9.3. Counterparts;
Execution.
This
Agreement may be executed in two or more counterparts, all of which when
taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered
to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format or other electronic data
file, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature page were an original
thereof.
9.4. Entire
Agreement; Third Party Beneficiaries.
This
Agreement and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral,
among
the parties with respect to the subject matter hereof. Nothing in this Agreement
is intended to or shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
Notwithstanding anything to the contrary contained herein, the parties agree
that the provisions of that certain Confidential Disclosure Agreement dated
February 6, 2008 between Parent and Arno shall survive the execution of this
Agreement.
9.5. 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 will continue in full force
and
effect and the application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties
hereto.
The parties further agree to replace such void or unenforceable provision
of
this Agreement with a valid and enforceable provision that will achieve,
to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
9.6. Other
Remedies; Specific Performance.
Except
as otherwise provided herein, any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of any other
remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one remedy will not preclude the exercise of any other
remedy.
The parties hereto agree that irreparable damage would occur in the event
that
any of the provisions of this Agreement were not performed in accordance
with
their specific terms or were otherwise breached. It is accordingly agreed
that
the parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction,
this
being in addition to any other remedy to which t they are entitled at law
or in
equity. In any action at law or suit in equity to enforce this Agreement
or the
rights of any of the parties hereunder, the prevailing party in such action
or
suit shall be entitled to receive a reasonable sum for its attorneys' fees
and
all other reasonable costs and expenses incurred in such action or
suit.
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9.7. Governing
Law; Jurisdiction.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated
hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert
in
any suit, action or proceeding, any claim that it is not personally subject
to
the jurisdiction of any such court, that such suit, action or proceeding
is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service
of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in
any
manner permitted by law.
9.8. Rules
of Construction.
The
parties hereto agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against
the
party drafting such agreement or document.
9.9. Assignment.
No
party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other parties.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
9.10. Waiver
of Jury Trial.
EACH OF
PARENT, ARNO AND MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
PARENT, Arno AND MERGER SUBIN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE
AND
ENFORCEMENT HEREOF.
9.11. Survival
of Representations and Warranties.
The
respective representations, warranties, obligations, agreements and promises
of
the parties contained in this Agreement and in any exhibit, schedule,
certificate or other document delivered pursuant to this Agreement, shall
survive for a period of one year following the Closing Date.
[Signature
Page Follows]
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40
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| ARNO THERAPEUTICS, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| LAURIER INTERNATIONAL, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| LAURIER ACQUISITION, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
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