AGREEMENT AND PLAN OF MERGER AND REORGANIZATION among ENUMERAL BIOMEDICAL HOLDINGS, INC. (formerly Cerulean Group, Inc.) ENUMERAL ACQUISITION CORP. and ENUMERAL BIOMEDICAL CORP AND WITH RESPECT TO SECTION 6.3(f), ARTHUR H. Tinkelenberg, as...
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
ENUMERAL BIOMEDICAL HOLDINGS, INC.
(formerly Cerulean Group, Inc.)
ENUMERAL ACQUISITION CORP.
and
ENUMERAL BIOMEDICAL CORP
AND WITH RESPECT TO SECTION 6.3(f),
XXXXXX X. Xxxxxxxxxxxx, as Indemnification Representative
July 31, 2014
TABLE OF CONTENTS
Page | ||
ARTICLE I | THE MERGER | 2 |
1.1 | The Merger | 2 |
1.2 | The Closing | 2 |
1.3 | Actions at the Closing | 2 |
1.4 | Additional Actions | 2 |
1.5 | Conversion of Company Securities | 3 |
1.6 | Dissenting Shares | 4 |
1.7 | Fractional Shares | 4 |
1.8 | Options and Warrants | 4 |
1.9 | Post-Closing Adjustment | 5 |
1.10 | Certificate of Incorporation and Bylaws | 6 |
1.11 | No Further Rights | 6 |
1.12 | Closing of Transfer Books | 6 |
1.13 | Exemption from Registration; Rule 144 | 7 |
1.14 | Adjustment to Parent Stockholders | 7 |
ARTICLE II | REPRESENTATIONS AND WARRANTIES OF THE COMPANY | 8 |
2.1 | Organization, Qualification and Corporate Power | 8 |
2.2 | Capitalization | 9 |
2.3 | Authorization of Transaction | 9 |
2.4 | Non-contravention | 10 |
2.5 | Subsidiaries | 10 |
2.6 | Compliance with Laws | 10 |
2.7 | Financial Statements | 11 |
2.8 | Absence of Certain Changes | 11 |
2.9 | Undisclosed Liabilities | 11 |
2.10 | Tax Matters | 12 |
2.11 | Assets | 13 |
2.12 | Owned Real Property | 13 |
2.13 | Real Property Leases | 13 |
2.14 | Contracts | 14 |
2.15 | Accounts Receivable | 15 |
2.16 | Powers of Attorney | 15 |
2.17 | Insurance | 16 |
2.18 | Warranties | 16 |
2.19 | Litigation | 16 |
2.20 | Employees | 16 |
2.21 | Employee Benefits | 16 |
2.22 | Environmental Matters | 19 |
2.23 | [Intentionally omitted] | 19 |
2.24 | Customers | 19 |
2.25 | Permits | 19 |
2.26 | Certain Business Relationships with Affiliates | 20 |
2.27 | Brokers’ Fees | 20 |
2.28 | Books and Records | 20 |
2.29 | Intellectual Property | 20 |
2.30 | Disclosure | 21 |
2.31 | Duty to Make Inquiry | 21 |
2.32 | Accountants | 21 |
2.33 | FDA and Related Matters | 22 |
3.35 | Board Action | 22 |
ARTICLE III | REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE ACQUISITION SUBSIDIARY | 22 |
3.1 | Organization, Qualification and Corporate Power | 23 |
3.2 | Capitalization | 23 |
3.3 | Authorization of Transaction | 24 |
3.4 | Noncontravention | 24 |
3.5 | Subsidiaries | 24 |
3.6 | Exchange Act Reports | 25 |
3.7 | Compliance with Laws | 26 |
3.8 | Financial Statements | 27 |
3.9 | Absence of Certain Changes | 27 |
3.10 | Undisclosed Liabilities | 27 |
3.11 | Off-Balance Sheet Arrangements | 27 |
3.12 | Tax Matters | 28 |
3.13 | Assets | 29 |
3.14 | Owned Real Property | 29 |
3.15 | Real Property Leases | 29 |
3.16 | Contracts | 30 |
3.17 | Accounts Receivable | 31 |
3.18 | Powers of Attorney | 31 |
3.19 | Insurance | 31 |
3.20 | Warranties | 31 |
3.21 | Litigation | 31 |
3.22 | Employees | 31 |
3.23 | Employee Benefits | 32 |
3.24 | Environmental Matters | 32 |
3.25 | Permits | 32 |
3.26 | Certain Business Relationships with Affiliates | 32 |
3.27 | Tax-Free Reorganization | 33 |
3.28 | Split-Off | 35 |
3.29 | Brokers’ Fees | 35 |
3.30 | Disclosure | 35 |
3.31 | Interested Party Transactions | 35 |
3.32 | Duty to Make Inquiry | 35 |
3.33 | Accountants | 35 |
3.34 | Minute Books | 36 |
3.35 | Board Action | 36 |
ARTICLE IV | COVENANTS | 36 |
4.1 | Closing Efforts | 36 |
4.2 | Governmental and Thirty Party Notices and Consents | 36 |
4.3 | Super 8-K | 37 |
4.4 | Operation of Company Business | 37 |
4.5 | Access to Company Information | 38 |
4.6 | Operation of Parent Business | 39 |
4.7 | Access to Parent Information | 40 |
4.8 | Expenses | 40 |
4.9 | Indemnification | 40 |
4.10 | Listing of Merger Shares | 41 |
4.11 | Name Change | 41 |
4.12 | Split-Off | 41 |
4.14 | Parent Board; Amendment of Charter Documents | 41 |
4.14 | Parent Equity Plan | 41 |
4.15 | Information Provided to Stockholders | 41 |
4.16 | No Registration | 42 |
ARTICLE V | CONDITIONS TO CONSUMMATION OF MERGER | 42 |
5.1 | Conditions to Each Party’s Obligations | 42 |
5.2 | Conditions to Obligations of the Parent and the Acquisition Subsidiary | 43 |
5.3 | Conditions to Obligations of the Company | 44 |
ARTICLE VI | INDEMNIFICATION | 46 |
6.1 | Indemnification by the Company Stockholders | 46 |
6.2 | Indemnification by the Parent | 47 |
6.3 | Indemnification Claims | 48 |
6.4 | Survival of Representations and Warranties | 49 |
6.5 | Limitations on Claims for Indemnification | 50 |
ARTICLE VII | DEFINITIONS | 51 |
ARTICLE VIII | TERMINATION | 53 |
8.1 | Termination by Mutual Agreement | 53 |
8.2 | Termination for Failure to Close | 53 |
8.2 | Termination by Operation of Law | 53 |
8.3 | Termination for Failure to Perform Covenants or Conditions | 54 |
8.4 | Effect of Termination or Default; Remedies | 54 |
8.5 | Remedies; Specific Performance | 54 |
ARTICLE IX | MISCELLANEOUS | 54 |
9.1 | Press Releases and Announcements | 54 |
9.2 | No Third Party Beneficiaries | 54 |
9.3 | Entire Agreement | 55 |
9.4 | Succession and Assignment | 55 |
9.5 | Counterparts and Facsimile Signature | 55 |
9.6 | Headings | 55 |
9.7 | Notices | 55 |
9.8 | Governing Law | 56 |
9.9 | Amendments and Waivers | 56 |
9.10 | Severability | 56 |
9.11 | Submission to Jurisdiction | 56 |
9.12 | Waiver of Jury Trial | 57 |
9.12 | Construction | 57 |
Exhibit A | Form of Split-Off Agreement |
Exhibit B | Form of General Release Agreement |
Exhibit C | Form of Indemnification Escrow Agreement |
Exhibit D | Form of 2014 Equity Incentive Plan |
Exhibit E | Form of Executive Employment Agreement |
Exhibit F-1 | Signatories to Lock-Up and No-Shorting Agreements |
Exhibit F-2 | Form of Lock-Up and No-Shorting Agreement |
Exhibit G | Form of Legal Opinion of Company Counsel |
Exhibit H | Form of Legal Opinion of Parent Counsel |
Exhibit I | Form of Voting Agreement |
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this “Agreement”), dated as of July 31, 2014, by and among Enumeral Biomedical Holdings, Inc. (formerly Cerulean Group, Inc.), a Delaware corporation (the “Parent”), Enumeral Acquisition Corp., a Delaware corporation (the “Acquisition Subsidiary”), Enumeral Biomedical Corp, a Delaware corporation (the “Company”), and solely with respect to Section 6.3(f), Xxxxxx X. Xxxxxxxxxxxx, as Indemnification Representative. The Parent, the Acquisition Subsidiary and the Company are each a “Party” and referred to collectively herein as the “Parties.”
WHEREAS, this Agreement contemplates a merger of the Acquisition Subsidiary with and into the Company, with the Company remaining as the surviving entity after the merger (the “Merger”), whereby the stockholders of the Company will receive Parent Common Stock (as defined below) in exchange for their capital stock of the Company; and
WHEREAS, simultaneously with the closing of the Merger, the Parent will complete a private placement offering (the “Private Placement Offering”) of a minimum of 10,000,000 Units (as defined below) (the “Minimum Amount”) of its securities, at a purchase price of $1.00 per Unit, each “Unit” consisting of one (1) share of the Parent’s common stock, par value $0.001 per share (the “Parent Common Stock”), and a warrant to purchase one (1) share of Common Stock at an exercise price of $2.00 per share for a term of five (5) years; and
WHEREAS, simultaneously with the closing of the Merger, the Parent shall split-off its existing business and its wholly owned subsidiary, Cerulean Operating Corp., a Delaware corporation (the “Split-Off Subsidiary”), through the assignment of all of the Parent’s assets and liabilities (other than those under this Agreement and the other related agreements and transactions contemplated hereby) to, and the sale of all of the outstanding capital stock of, the Split-Off Subsidiary (the “Split-Off”) upon the terms and conditions of a split-off agreement by and among the Parent, the Split-Off Subsidiary and Xxxxxx Xxxxxxx (the “Split-Off Purchaser”), substantially in the form of Exhibit A attached hereto (the “Split-Off Agreement”), which such split-off is not intended to qualify under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”); ; and
WHEREAS, simultaneously with the closing of the Merger, the Parent, Split-Off Subsidiary and Split-Off Purchaser shall enter into a general release agreement in substantially the form of Exhibit B attached hereto (the “General Release Agreement”); and
WHEREAS, the Parent, the Acquisition Subsidiary and the Company desire that the Merger qualify as a “reorganization” under Section 368(a) of the Code, and that this Agreement constitute a “plan of reorganization” within the meaning of Section 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulation and not subject the holders of equity securities of the Company to tax liability under the Code;
NOW, THEREFORE, in consideration of the representations, warranties and covenants herein contained, and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the Parties hereto, intending legally to be bound, agree as follows:
ARTICLE
I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions set forth in this Agreement, the Acquisition Subsidiary shall merge with and into the Company at the Effective Time (as defined below). From and after the Effective Time, the separate corporate existence of the Acquisition Subsidiary shall cease and the Company shall continue as the surviving corporation in the Merger (the “Surviving Corporation”). The “Effective Time” shall be the time at which a certificate of merger in proper form and duly executed, reflecting the Merger (the “Certificate of Merger”) pursuant to Section 251(c) of General Corporation Law of the State of Delaware (the “Delaware Act”) is filed with the Secretary of State of the State of Delaware. The Merger shall have the effects set forth herein and in the applicable provisions of the Delaware Act.
1.3 Actions at the Closing. At the Closing:
(a) the Company shall deliver to the Parent and the Acquisition Subsidiary the various certificates, instruments and documents to be delivered by the Company pursuant to Sections 5.1 and 5.2;
(b) the Parent and the Acquisition Subsidiary shall deliver to the Company the various certificates, instruments and documents to be delivered by the Parent and/or Acquisition Subsidiary pursuant to Sections 5.1 and 5.3;
(c) the Surviving Corporation shall file the Certificate of Merger with the Secretary of State of the State of Delaware;
(d) the Split-Off Purchaser shall surrender to the Parent 5,000,000 shares of Parent Common Stock (the “Share Contribution”) in connection with the Split-Off; and
(e) the Parent, Xxxxxx X. Xxxxxxxxxxxx, as indemnification representative (the “Indemnification Representative”), and Xxxxx Xxxxx Xxxxx LLP, as escrow agent (the “Indemnification Escrow Agent”), shall execute and deliver the Indemnification Shares Escrow Agreement, in substantially the form attached hereto as Exhibit C (the “Indemnification Escrow Agreement”), and the Parent shall deliver to the Indemnification Escrow Agent a certificate for the Indemnification Escrow Shares (as defined below) being placed in escrow on the Closing Date pursuant to the Indemnification Escrow Agreement.
2 |
(a) Each share of common stock, par value $0.001 per share, of the Company (“Company Common Stock”) and of each series of preferred stock, par value $0.001 per share, of the Company (“Company Preferred Stock” and, together with the Company Common Stock, the “Company Stock”) issued and outstanding immediately prior to the Effective Time (other than any Company Stock owned beneficially by the Parent or the Acquisition Subsidiary and other than Dissenting Shares (as defined below)), shall be converted into and represent the right to receive (subject to the provisions of Section 1.6) such number of shares of Parent Common Stock as is equal to the applicable “Conversion Ratio” specified with respect to such class or series on Schedule 1.5(a) hereto (the “Applicable Conversion Ratio”). An aggregate of 22,700,649 shares of Parent Common Stock (including Indemnification Escrow Shares (as defined below) and Dissenting Shares), subject to adjustment as necessary due to rounding as set forth in Section 1.5(b), shall be issuable to the stockholders of record of the Company immediately prior to the Effective Time (the “Company Stockholders”) in connection with the Merger. The shares of Parent Common Stock into which the shares of Company Common Stock are converted pursuant to this Section shall be referred to herein as the “Merger Shares.”
(b) Notwithstanding the foregoing, as of the Closing Date, the Company Stockholders shall be entitled to receive immediately only 98% of the shares of Parent Common Stock into which their shares of Company Stock were converted pursuant to Section 1.5(a) (the “Initial Shares”), pro rata in accordance with their respective holdings of Company Stock immediately prior to the Closing; and the remaining 2% of the shares of Parent Common Stock into which their shares of Company Stock were converted pursuant to Section 1.5(a), rounded up or down to the nearest whole number (with 0.5 shares rounded upward to the nearest whole number) (the “Indemnification Escrow Shares”), shall be deposited in escrow pursuant to the Indemnification Escrow Agreement and shall be held and released in accordance with the terms of the Indemnification Escrow Agreement.
(c) The Parent shall deliver certificates for the Initial Shares to each Company Stockholder entitled thereto who shall have presented a certificate that immediately prior to the Effective Time represented Company Stock to be converted into Merger Shares pursuant to this Section 1.5 (the “Company Stock Certificates”) to the Parent or the Surviving Corporation or the Parent’s transfer agent.
(d) Each issued and outstanding share of common stock, par value $.001 per share, of the Acquisition Subsidiary shall be converted into one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.
3 |
(a) For purposes of this Agreement, “Dissenting Shares” means shares of Company Common Stock or Company Preferred Stock held as of the Effective Time by a Company Stockholder who has not voted such Company Stock in favor of the adoption of this Agreement and the Merger and with respect to which appraisal shall have been duly demanded and perfected in accordance with Section 262 of the Delaware Act and not effectively withdrawn or forfeited prior to the Effective Time. Dissenting Shares shall not be converted into or represent the right to receive shares of Parent Common Stock unless such Company Stockholder’s right to appraisal shall have ceased in accordance with the Delaware Act. If such Company Stockholder has so forfeited or withdrawn his, her or its right to appraisal of Dissenting Shares, then (i) as of the occurrence of such event, such holder’s Dissenting Shares shall cease to be Dissenting Shares and shall be converted into and represent the right to receive the Merger Shares issuable in respect of such Company Common Stock or Company Preferred Stock, as the case may be, pursuant to Section 1.5(a), and (ii) promptly following the occurrence of such event and, if requested by Parent, the proper surrender of such person’s Company Stock Certificate, the Parent shall deliver to such Company Stockholder a certificate representing the Initial Shares to which such holder is entitled pursuant to Section 1.5(a) and shall deliver to the Indemnification Escrow Agent a certificate representing the remaining 2% of the Merger Shares to which such holder is entitled pursuant to Section 1.5(b) (which shares shall be considered Indemnification Escrow Shares for all purposes of this Agreement).
(b) The Company shall give the Parent prompt notice of any written demands for appraisal of any Company Stock, withdrawals of such demands, and any other instruments that relate to such demands received by the Company. The Company shall not, except with the prior written consent of the Parent, make any payment with respect to any demands for appraisal of Company Stock or offer to settle or settle any such demands unless required by the court of the State of Delaware having jurisdiction thereof.
(a) As of the Effective Time, all outstanding Company Options (as defined below) that remain unexercised, whether vested or unvested, shall be canceled and exchanged for options to purchase shares of Parent Common Stock (“Parent Options”) under the Parent Equity Plan (as defined below) without further action by the holder thereof. Each Parent Option shall constitute an option to acquire such number of shares of Parent Common Stock as is equal to the number of shares of Company Common Stock subject to the unexercised portion of the Company Option multiplied by the Applicable Conversion Ratio for Company Common Stock (with any fraction resulting from such multiplication to be rounded up or down to the nearest whole number, and with 0.5 shares rounded upward to the nearest whole number (unless such Company Option provides for different treatment of fractions of a share in such circumstances, in which case the terms of such Company Option pertaining to the treatment of a fraction of a cent shall control)). The exercise price per share of each Parent Option shall be equal to the exercise price of the Company Option prior to conversion divided by the Applicable Conversion Ratio (rounded up or down to the nearest whole cent, and with $0.005 rounded upward to the nearest whole cent (unless such Company Option provides for different treatment of fractions of a cent in such circumstance, in which case the terms of such Company Option pertaining to the treatment of a fraction of a cent shall control)), and the vesting schedule shall be the same as that of the Company Option that is exchanged for the Parent Option.
4 |
(b) As soon as practicable after the Effective Time, the Parent or the Surviving Corporation shall take appropriate actions (i) to collect the Options and the agreements evidencing the Options, which shall be deemed to be canceled but shall entitle the holder to exchange the Options for Parent Options in the Parent, and (ii) to issue in lieu thereof new Parent Options pursuant to Section 1.8(a), including the delivery by the Parent to such holders of new option agreements.
(c) As of the Effective Time, all outstanding Company Warrants (as defined below) that remain unexercised shall terminate as of the Effective Date, and the Parent shall issue new warrants (the “Parent Warrants”) in substitution for the Company Warrants, on substantially the same terms and conditions of the Company Warrants, but representing the right to acquire such number of shares of Parent Common Stock as is equal to the number of shares of Company Common Stock or Company Preferred Stock, as the case may be, subject to the unexercised portion of the Company Warrant multiplied by the Applicable Conversion Ratio for the class or series of Company Stock for which such Company Warrant is exercisable (with any fraction resulting from such multiplication to be rounded up or down to the nearest whole number, and with 0.5 shares rounded upward to the nearest whole number (unless such Company Warrant provides for different treatment of fractions of a share in such circumstance, in which case the terms of such Company Warrant pertaining to the treatment of a fraction of a cent shall control)). The exercise price per share of each Parent Warrant shall be equal to the exercise price of the Warrant prior to substitution divided by the Applicable Conversion Ratio (rounded to the nearest whole cent, and with $0.005 rounded upward to the nearest whole cent (unless such Company Warrant provides for different treatment of fractions of a cent in such circumstance, in which case the terms of such Company Warrant pertaining to the treatment of a fraction of a cent shall control)).
(d) The Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery upon exercise of (i) the Parent Options to be issued for the Company Options and (ii) the Parent Warrants to be issued for the Company Warrants, in accordance with this Section 1.8.
(a) In the event that, during the period commencing from the Closing Date and ending eighteen (18) months after the Closing Date, (i) the Parent or the Surviving Corporation incurs any Damages (as defined below) with respect to, in connection with, or arising from any Parent Liabilities (as defined below), or (ii) a Company Stockholder shall be entitled to be indemnified for Damages under Article VI hereof, then, in the case of clause (i) above, promptly following the filing by the Parent with the Securities and Exchange Commission (the “SEC”) of an annual or quarterly report covering the completed fiscal quarter in which such Damages were incurred, or, in the case of clause (ii) above, promptly after such Company Stockholder becomes entitled to receive payment for such indemnification pursuant to ARTICLE VI, the Parent shall issue to, in the case of clause (i) above, all of the Company Stockholders and/or their designees, or, in the case of clause (ii) above, such Company Stockholder so entitled to indemnification and/or his designees, such number of shares of Parent Common Stock (in addition to the Merger Shares to which any such person was or is entitled) as would result from dividing (x) the whole dollar amount of such Damages by (y) $1.00 (subject to equitable adjustment in the event of any stock split, stock dividend, reverse stock split or similar event affecting the Parent Common Stock after the Effective Time), rounded up or down to the nearest whole number (with 0.5 shares rounded upwards to the nearest whole number). Notwithstanding the foregoing, the limit on the aggregate number of shares of Parent Common Stock issuable under this Section shall be 500,000 shares. Any shares of Parent Common Stock that are issuable under clause (i) above shall be issued to the Company Stockholders pro rata in accordance with their respective holdings of Company Stock immediately prior to the Closing.
5 |
(b) As used in this Section, “Parent Liabilities” shall mean all liabilities, obligations or indebtedness of any nature whatsoever (i) of the Split-Off Subsidiary, whenever accruing, and (ii) of the Parent or the Acquisition Subsidiary, accruing prior to the Effective Time and not set forth in the Parent Disclosure Schedule (as defined below), including, but not limited to (A) any breach by the Parent or the Acquisition Subsidiary of any of their respective representations or warranties set forth in Article III herein, (B) any litigation threatened, pending or for which a basis exists; (C) any and all outstanding debts, (D) any and all employee-related disputes, arbitrations or administrative proceedings threatened, pending or otherwise outstanding, (E) any and all liens, foreclosures, settlements, or other threatened, pending or otherwise outstanding financial, legal or similar obligations of the Parent or the Acquisition Subsidiary, (F) any and all Taxes for which Parent or the Acquisition Subsidiary or any of their direct or indirect assets may be liable or subject, for any taxable period (or portion thereof) ending on or before the Closing Date, including, without limitation, any and all Taxes resulting from or attributable to Parent’s ownership or operation of the Split-Off Subsidiary’s assets, (G) any and all Taxes (as defined below) for which Parent or its direct or indirect assets may be liable or subject (including, without limitation, the interests and assets of the Surviving Corporation and any Parent Subsidiary) as a consequence of Parent’s acquisition, formation, capitalization, ownership, and Split-Off of the Split-Off Subsidiary, whether related to a taxable period (or portion thereof) ending on or after the Closing Date, and (H) all fees and expenses incurred in connection with effecting the adjustments contemplated by this Section, as such Parent Liabilities are reflected in the Parent’s consolidated financial statements reviewed or audited by its independent auditors.
1.10 Certificate of Incorporation and Bylaws.
(a) The certificate of incorporation of the Acquisition Subsidiary in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation until duly amended or repealed, and the Surviving Corporation may make any necessary filings in the State of Delaware as shall be necessary or appropriate to effectuate or carry out fully the purpose of this Section 1.10(a).
(b) The bylaws of the Acquisition Subsidiary in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until duly amended or repealed.
6 |
1.13 Exemption from Registration; Rule 144.
(a) The Parent and the Company intend that the shares of Parent Common Stock to be issued pursuant to Section 1.5 hereof (including the Indemnification Escrow Shares) or upon exercise of Parent Options and Parent Warrants granted pursuant to Section 1.8 hereof, and any shares of Parent Common Stock that may be issued pursuant to Section 1.9 hereof (if any), in connection with the Merger will be issued in a transaction exempt from registration under the Securities Act of 1933, as amended (“Securities Act”), by reason of Section 4(2) of the Securities Act, Rule 506 of Regulation D promulgated by the SEC thereunder and/or Regulation S promulgated by the SEC. The shares of Parent Common Stock to be issued pursuant to Section 1.5 hereof (including the Indemnification Escrow Shares) or upon exercise of Parent Options and Parent Warrants granted pursuant to Section 1.8 hereof, and any shares of Parent Common Stock that may be issued pursuant to Section 1.9 hereof, will be “restricted securities” within the meaning of Rule 144 under the Securities Act and may not be offered, sold, pledged, assigned or otherwise transferred unless (a) a registration statement with respect thereto is effective under the Securities Act and any applicable state securities laws, or (b) an exemption from such registration exists and if requested, the Parent receives an opinion of counsel to the holder of such securities, which counsel and opinion are satisfactory to the Parent, that such securities may be offered, sold, pledged, assigned or transferred in the manner contemplated without an effective registration statement under the Securities Act or applicable state securities laws, or the holder complies with the requirements of Regulation S, if applicable; and the certificates representing such shares of Parent Common Stock will bear an appropriate legend and restriction on the books of the Parent’s transfer agent to that effect.
(b) The Parent is a “shell company” as defined in Rule 12b-2 under the Exchange Act of 1934). The Company acknowledges that pursuant to Rule 144(i), securities issued by a former shell company (such as the Merger Shares) that otherwise meet the holding period and other requirements of Rule 144 nevertheless cannot be sold in reliance on Rule 144 until one year after the Company (a) is no longer a shell company; and (b) has filed current “Form 10 information“ (as defined in Rule 144(i)) with the SEC reflecting that it is no longer a shell company, and provided that at the time of a proposed sale pursuant to Rule 144, the Parent is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act and has filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports. As a result, the restrictive legends on certificates for the Merger Shares cannot be removed except in connection with an actual sale meeting the foregoing requirements or pursuant to an effective registration statement.
1.14 Adjustment to Parent Stockholders
(a) In the event that the aggregate number of Units sold in the Private Placement Offering after the final closing thereof is less than 15,000,000, the holders of Parent Common Stock immediately prior to the Effective Time (after giving effect to the Split-Off) (who, in the aggregate, will hold 5,497,804 shares of Parent Common Stock immediately prior to the Effective Time, not including any shares of Parent Common Stock any of them may purchase in the Private Placement Offering) shall surrender to the Parent, pro rata in accordance with their respective holdings of Parent Common Stock immediately prior to the Effective Time (not including any shares of Parent Common Stock purchased by any of them in the Private Placement Offering), without any consideration, an aggregate number of shares of Parent Common Stock equal to 1/5 of difference between (i) the number Units sold in the Private Placement Offering after the final closing thereof and (ii) 15,000,000, up to a maximum number of shares of Parent Common Stock to be so surrendered of 1,000,000 shares.
(b) In the event that the aggregate number of Units sold in the Private Placement Offering after the final closing thereof exceeds 15,000,000, the Parent shall, promptly after the final closing of the Private Placement Offering, issue to the holders of Parent Common Stock immediately prior to the Effective Time (after giving effect to the Split-Off), pro rata in accordance with their respective holdings of Parent Common Stock immediately prior to the Effective Time, without any additional consideration, a number of shares of Parent Common Stock equal to twice the Anti-Dilution Amount. The “Anti-Dilution Amount” means a number of shares of Parent Common Stock as shall be necessary to cause the sum of (a) the number of shares of Parent Common held by such holders immediately prior to the Effective Time plus (b) the number of additional shares of Parent Common Stock so issued to such holders (together, the “Parent Holders’ Stock”) to equal 12.4% of the sum of (x) the number of shares of Parent Holders’ Stock plus (y) the number of Units issued in the Private Placement Offering in excess of 15,000,000 plus (z) 44,304,686. For avoidance of doubt, the Parent Holders’ Stock shall not include any shares of Parent Common Stock purchased in the Private Placement Offering. Notwithstanding the foregoing, the number of additional shares of Parent Common Stock issuable pursuant to this Section 1.14(b) shall be reduced by one-third (1/3) with respect to the issuance of any Units in excess of 20,000,000 and shall be allocated in such manner as shall be determined by Montrose Capital Limited .
7 |
ARTICLE
II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent that the statements contained in this Article II are true and correct, except as set forth in the disclosure schedule provided by the Company to the Parent on the date hereof (the “Company Disclosure Schedule”). The Company Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article II; and to the extent that it is clear from the context thereof that such disclosure also applies to any other numbered paragraph contained in this Article II, the disclosures in any numbered paragraph of the Disclosure Schedule shall qualify such other corresponding numbered paragraph in this Article II. For purposes of this Article II, the phrase “to the knowledge of the Company” or any phrase of similar import shall be deemed to refer to the actual knowledge of any officer of the Company as well as any other knowledge which such person would have possessed had such person made reasonable inquiry of appropriate officers, directors and key employees of the Company and the accountants and attorneys of the Company.
8 |
9 |
2.5 Subsidiaries. The Company has no subsidiaries.
(a) The Company and the conduct and operations of its business are in compliance with each Law applicable to the Company or any of its properties or assets, except for any violations or defaults that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
10 |
(b) The Company has complied with all federal and state securities laws and regulations, including being current in all of its reporting obligations under such federal and state securities laws and regulations except for any violations or defaults that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
(c) The Company has not, and the past and present officers, directors and Affiliates of the Company have not, been the subject of, nor does any officer or director of the Company have any reason to believe that the Company or any of its officers, directors or Affiliates will be the subject of, any civil or criminal proceeding or investigation by any federal or state agency alleging a violation of securities laws.
(d) The Company has not been the subject of any voluntary or involuntary bankruptcy proceeding, nor has it been a party to any material litigation.
(e) The Company has not, and the past and present officers, directors and Affiliates have not, been the subject of, nor does any officer or director of the Company have any reason to believe that the Company or any of its officers, directors or Affiliates will be the subject of, any civil, criminal or administrative investigation or proceeding brought by any federal or state agency having regulatory authority over such entity or person; and
(f) The Company is not a “blank check company” as such term is defined by Rule 419 of the Securities Act.
11 |
(a) For purposes of this Agreement, the following terms shall have the following meanings:
(i) “Taxes” means all taxes, charges, fees, levies or other similar assessments or liabilities, including without limitation income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment, unemployment insurance, social security, business license, business organization, environmental, workers compensation, payroll, profits, license, lease, service, service use, severance, stamp, occupation, windfall profits, customs, duties, franchise and other taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof.
(ii) “Tax Returns” means all United States of America, state, local or foreign government reports, returns, declarations, statements or other information required to be supplied to a taxing authority in connection with the Taxes.
(b) Except as set forth in Section 2.10 of the Company Disclosure Schedule, the Company has filed on a timely basis (taking into account any valid extensions) all material Tax Returns that it was required to file, and all such Tax Returns were complete and accurate in all material respects. The Company has never been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns. The Company has paid on a timely basis all Taxes that were due and payable in accordance with the Tax Returns. The unpaid Taxes of the Company for tax periods through the Company Balance Sheet Date do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Company Balance Sheet. The Company does not have any actual or potential liability for any Tax obligation of any taxpayer other than the Company (including without limitation any affiliated group of corporations or other entities that included the Company during a prior period). All Taxes that the Company is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Entity.
(c) Except as set forth in Section 2.10 of the Company Disclosure Schedule, the Company has delivered or made available to the Parent complete and accurate copies of all federal income Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by the Company since the date of the Company’s incorporation (the “Organization Date”). No examination or audit of any Tax Return of the Company by any Governmental Entity is currently in progress or, to the knowledge of the Company, threatened or contemplated. The Company has not been informed by any jurisdiction that the jurisdiction believes that the Company was required to file any Tax Return that was not filed. The Company has not waived any statute of limitations with respect to Taxes or agreed to an extension of time with respect to a Tax assessment or deficiency.
12 |
(d) The Company (i) is not a “consenting corporation” within the meaning of Section 341(f) of the Code, and none of the assets of the Company are subject to an election under Section 341(f) of the Code; (ii) has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code; (iii) has not made any payments, is obligated to make any payments, or is a party to any agreement that could obligate it to make any payments that may be treated as an “excess parachute payment” under Section 280G of the Code; (iv) does not have any actual or potential liability for any Taxes of any person (other than the Company and the Company Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of federal, state, local, or foreign law), or as a transferee or successor, by contract, or otherwise; or (v) is not or has not been required to make a basis reduction pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(e) The Company has not undergone a change in its method of accounting resulting in an adjustment to its taxable income pursuant to Section 481 of the Code.
(f) No state or federal “net operating loss” of the Company determined as of the Closing Date is subject to limitation on its use pursuant to Section 382 of the Code or comparable provisions of state law as a result of any “ownership change” within the meaning of Section 382(g) of the Code or comparable provisions of any state law occurring prior to the Closing Date.
2.12 Owned Real Property. The Company does not own any real property.
(a) the lease or sublease is a legal, valid, binding and enforceable obligation of the Company and is in full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding, enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing, and the Closing will not result in a breach or default by the Company or, to the knowledge of the Company, any other party under such lease or sublease;
(c) neither the Company nor, to the knowledge of the Company, any other party, is in breach or violation of, or default under, any such lease or sublease, and to the knowledge of the Company, no event has occurred, is pending or is threatened, which, after the giving of notice, with lapse of time or both, would constitute a breach or default by the Company or, to the knowledge of the Company, any other party under such lease or sublease, except for any breach, violation or default that has not had and would not reasonably be anticipated to have a Company Material Adverse Effect;
13 |
(d) the Company has not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold; and
(a) Section 2.14 of the Company Disclosure Schedule lists the following agreements (written or oral) to which the Company is a party as of the date of this Agreement (other than the Transaction Documentation (as hereinafter defined)):
(i) any agreement (or group of related agreements) for the lease of personal property from or to third parties (A) which provides for lease payments in excess of $75,000 per annum or (B) which has a remaining term longer than 12 months and is not cancellable without penalty by the Company on sixty (60) days or less prior written notice;
(ii) any agreement (or group of related agreements) for the purchase or sale of products or for the furnishing or receipt of services (A) which calls for performance over a period of more than one year, is not cancellable without penalty by the Company on sixty (60) days or less prior written notice and involves more than the sum of $75,000, or (B) in which the Company has granted manufacturing rights, “most favored nation” pricing provisions or exclusive marketing or distribution rights relating to any products or territory or has agreed to purchase a minimum quantity of goods or services or has agreed to purchase goods or services exclusively from a certain party;
(iii) any agreement which, to the knowledge of the Company, is a material joint venture or legal partnership;
(iv) any agreement (or group of related agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including capitalized lease obligations) involving more than $75,000 or under which it has imposed (or may impose) a Security Interest on any of its assets, tangible or intangible;
(v) any agreement that purports to limit in any material respect the right of the Company to engage in any line of business, or to compete with any person or operate in any geographical location;
(vi) any employment agreement or consulting agreement which provides for payments in excess of $50,000 per annum (other than employment or consulting agreements terminable on less than thirty (30) days’ notice);
(vii) any agreement involving any officer, director or stockholder of the Company or any affiliate (as defined in Rule 12b-2 under the Exchange Act) thereof (an “Affiliate”) (other than stock subscription, stock option, restricted stock, warrant or stock purchase agreements the forms of which have been made available to Parent);
(viii) any agreement or commitment for capital expenditures in excess of $25,000, for a single project (it being represented and warranted that the liability under all undisclosed agreements and commitments for capital expenditures does not exceed $100,000 in the aggregate for all projects);
14 |
(ix) any agreement which contains any provisions requiring the Company to indemnify any other party thereto (excluding indemnities contained in agreements for the purchase, sale or license of products entered into in the Ordinary Course of Business);
(x) any agreement, other than as contemplated by this Agreement, relating to the future sales of securities of the Company other than outstanding stock option, restricted stock, warrant or stock purchase agreements the forms of which have been made available to Parent ; and
(xi) any other agreement (or group of related agreements) (A) under which the Company is obligated to make payments or incur costs in excess of $75,000 in any year or (B) not entered into in the Ordinary Course of Business, in each case which is not otherwise described in clauses (i) through (xi).
(b) The Company has delivered or made available to the Parent a complete and accurate copy of each agreement listed in Section 2.14 of the Company Disclosure Schedule. With respect to each agreement so listed, and except as set forth in Section 2.14 of the Company Disclosure Schedule: (i) the agreement is a legal, valid, binding and enforceable obligation of the Company and in full force and effect, except as such enforceability may be limited under applicable bankruptcy, insolvency and similar laws, rules or regulations affecting creditors’ rights and remedies generally and to general principles of equity, whether applied in a court of law or a court of equity; (ii) the agreement will continue to be legal, valid, binding and enforceable obligation of the Company, except as such enforceability may be limited under applicable bankruptcy, insolvency and similar laws, rules or regulations affecting creditors’ rights and remedies generally and to general principles of equity, whether applied in a court of law or a court of equity and will be in full force and effect immediately following the Effective Time in accordance with the terms thereof as in effect immediately prior to the Effective Time; and (iii) neither the Company nor, to the knowledge of the Company, any other party, is in breach or violation of, or default under, any such agreement, and no event has occurred, is pending or, to the knowledge of the Company, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a breach or default by the Company or, to the knowledge of the Company, any other party under such contract, except for any breach, violation or default that has not had a Company Material Adverse Effect.
15 |
(a) Section 2.20 of the Company Disclosure Schedule contains a list of all employees of the Company whose annual rate of compensation exceeds $50,000 per year, along with the position of each such person. Each such person is a party to a non-disclosure and assignment of inventions agreement with the Company. To the knowledge of the Company, no key employee (within the meaning of Section 416 of the Code) or group of employees acting in concert has any plans to terminate employment with the Company .
(b) The Company is not a party to or bound by any collective bargaining agreement, nor has any of them experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes. To the knowledge of the Company, (i) no organizational effort has been made or threatened, either currently or within the past two years, by or on behalf of any labor union with respect to employees of the Company , and (ii) to the Company’s knowledge, there are no circumstances or facts which could individually or collectively give rise to a suit against the Company by any current or former employee or applicant for employment based on discrimination prohibited by fair employment practices laws.
(a) For purposes of this Agreement, the following terms shall have the following meanings:
(i) “Employee Benefit Plan” means any “employee pension benefit plan” (as defined in Section 3(2) of ERISA), any “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), and any other written or oral plan, agreement or arrangement providing direct or indirect compensation for services rendered, including without limitation insurance coverage, severance benefits, disability benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation.
16 |
(ii) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
(iii) “ERISA Affiliate” means any entity which is, or at any applicable time was, a member of (1) a controlled group of corporations (as defined in Section 414(b) of the Code), (2) a group of trades or businesses under common control (as defined in Section 414(c) of the Code), or (3) an affiliated service group (as defined under Section 414(m) of the Code or the regulations under Section 414(o) of the Code), any of which includes or included the Company.
(b) Section 2.21(b) of the Company Disclosure Schedule contains a complete and accurate list of all Employee Benefit Plans maintained, or contributed to, by the Company or any ERISA Affiliate (collectively, the “Company Benefit Plans”). Complete and accurate copies of (i) all Company Benefit Plans which have been reduced to writing, (ii) written summaries of all unwritten Company Benefit Plans, (iii) all related trust agreements, insurance contracts and summary plan descriptions, and (iv) all annual reports filed on Form 5500 Series and (for all funded plans) all plan financial statements for the last three plan years for each Company Benefit Plan that is required to file an annual report, have been made available to the Parent. Except as set forth on Section 2.21(b) of the Company Disclosure Schedule, each Company Benefit Plan has been administered in all material respects in accordance with its terms and each of the Company and the ERISA Affiliates has in all material respects met its obligations with respect to such Company Benefit Plan and has made all required contributions thereto not later than the due date therefor (including extensions). The Company, each ERISA Affiliate and each Company Benefit Plan are in compliance in all material respects with the currently applicable provisions of ERISA and the Code and the regulations thereunder (including without limitation Section 4980B of the Code, Subtitle K, Chapter 100 of the Code and Sections 601 through 608 and Section 701 et seq. of ERISA). All filings and reports as to each Company Benefit Plan required to have been submitted to the Internal Revenue Service or to the United States Department of Labor have been duly submitted.
(c) To the knowledge of the Company, there are no Legal Proceedings (except claims for benefits payable in the normal operation of the Company Benefit Plans and proceedings with respect to qualified domestic relations orders, qualified medical support orders or similar benefit directives) against or involving any Company Benefit Plan or asserting any rights or claims to benefits under any Company Benefit Plan that could give rise to any material liability.
(d) All the Company Benefit Plans that are intended to be qualified under Section 401(a) of the Code have received a determination, advisory or opinion letter from the Internal Revenue Service to the effect that such Company Benefit Plans are qualified and the plans and the trusts related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, no such determination letter has been revoked and revocation has not been threatened, and no such Company Benefit Plan has been amended since the date of its most recent determination letter or application therefor in any respect (other than amendments required by law or which are not reasonably expected to result in loss of such plan’s qualified status), and no act or omission has occurred, that would adversely affect its qualification or materially increase its cost. Each Company Benefit Plan which is required to satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for compliance with, and satisfies the requirements of, Section 401(k)(3) and Section 401(m)(2) of the Code for each plan year ending prior to the Closing Date.
(e) Neither the Company nor any ERISA Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.
17 |
(f) At no time has the Company or any ERISA Affiliate been obligated to contribute to any “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Company Benefit Plan providing benefits after termination of employment to any employee of the Company (or to any beneficiary of any such employee), including but not limited to retiree health coverage and deferred compensation, but excluding continuation of health coverage required to be continued under Section 4980B of the Code or other applicable Law and insurance conversion privileges under state law. The assets of each Company Benefit Plan which is funded are reported at their fair market value on the books and records of such Company Benefit Plan.
(h) No act or omission has occurred and no condition exists with respect to any Company Benefit Plan maintained by the Company or any ERISA Affiliate that would subject the Company or any ERISA Affiliate to (i) any material fine, penalty, tax or liability of any kind imposed under ERISA or the Code or (ii) any contractual indemnification or contribution obligation protecting any fiduciary, insurer or service provider with respect to any Company Benefit Plan.
(i) No Company Benefit Plan is funded by, associated with or related to a “voluntary employee’s beneficiary association” within the meaning of Section 501(c)(9) of the Code.
(j) Each Company Benefit Plan is amendable and terminable unilaterally by the Company at any time without liability to the Company as a result thereof and no Company Benefit Plan, plan documentation or agreement, summary plan description or other written communication distributed generally to employees by its terms prohibits the Company from amending or terminating any such Company Benefit Plan.
(k) Section 2.14 and Section 2.21(k) of the Company Disclosure Schedule discloses each: (i) agreement with any stockholder, director, executive officer or other key employee of the Company (A) the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving the Company of the nature of any of the transactions contemplated by this Agreement, (B) providing any term of employment or compensation guarantee or (C) providing severance benefits or other benefits after the termination of employment of such director, executive officer or key employee; (ii) agreement, plan or arrangement under which any person may receive payments from the Company that may be subject to the tax imposed by Section 4999 of the Code or included in the determination of such person’s “parachute payment” under Section 280G of the Code; and (iii) agreement or plan binding the Company , including without limitation any stock option plan, stock appreciation right plan, restricted stock plan, stock purchase plan, severance benefit plan or Company Benefit Plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. The accruals for vacation, sickness and disability expenses are accounted for on the Company Interim Balance Sheet and are adequate and materially reflect the expenses associated therewith in accordance with GAAP.
18 |
(a) To its knowledge, the Company has complied with all applicable Environmental Laws (as defined below), except for violations of Environmental Laws that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. There is no pending or, to the knowledge of the Company, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law involving the Company , except for litigation, notices of violations, formal administrative proceedings or investigations, inquiries or information requests that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. For purposes of this Agreement, “Environmental Law” means any Law relating to the environment, including without limitation any Law pertaining to (i) treatment, storage, disposal, generation and transportation of industrial, toxic or hazardous materials or substances or solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater and soil contamination; (iv) the release or threatened release into the environment of industrial, toxic or hazardous materials or substances, or solid or hazardous waste, including without limitation emissions, discharges, injections, spills, escapes or dumping of pollutants, contaminants or chemicals; (v) the protection of wild life, marine life and wetlands, including without limitation all endangered and threatened species; (vi) storage tanks, vessels, containers, abandoned or discarded barrels, and other closed receptacles; (vii) the reclamation of mines; and (viii) manufacturing, processing, using, distributing, treating, storing, disposing, transporting or handling of materials regulated under any law as pollutants, contaminants, toxic or hazardous materials or substances or oil or petroleum products or solid or hazardous waste. As used above, the terms “release” and “environment” shall have the meaning set forth in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”).
(b) To the knowledge of the Company, without independent investigation, there are no documents that contain any environmental reports, investigations or audits relating to premises currently or previously owned or operated by the Company (whether conducted by or on behalf of the Company or a third party, and whether done at the initiative of the Company or directed by a Governmental Entity or other third party) which were issued or conducted during the past five years and which the Company has possession of.
(c) The Company has not been notified that there is any material environmental liability with respect to any solid or hazardous waste transporter or treatment, storage or disposal facility that has been used by the Company .
2.23 [Intentionally omitted ].
19 |
2.27 Brokers’ Fees. Other than obligations arising under the Placement Agency Agreement, dated July 3, 2014, between the Company and EDI Financial, Inc. (the “Placement Agent”), as amended by Amendment No. 1 thereto dated July 21, 2014 and the Placement Agency Agreement, dated as of July 25, 2014, between the Company and Katalyst Securities LLC, and except as listed in Section 2.27 of the Company Disclosure Schedule, the Company has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.
(a) The Company owns, is licensed or otherwise possesses legally enforceable rights to use, license and exploit all issued patents (“Patent Rights”), copyrights, trademarks, service marks, trade names, trade secrets, and registered domain names and all applications for registration therefor (collectively, the “Intellectual Property Rights”) and all computer programs and other computer software, databases, know-how, proprietary technology, formulae, and development tools, together with all goodwill related to any of the foregoing (collectively, the “Intellectual Property”), as is necessary to conduct its businesses as presently conducted, the absence of which would be considered reasonably likely to result in a Company Material Adverse Effect.
(b) Section 2.29(b) of the Company Disclosure Schedule sets forth, with respect to all issued patents and all registered copyrights, trademarks, service marks and domain names registered with any Governmental Entity by the Company or for which an application for registration has been filed with any Governmental Entity by the Company, (i) the registration or application number, the date filed and the title, if applicable, of the registration or application and (ii) the names of the jurisdictions covered by the applicable registration or application. Section 2.27(b) of the Company Disclosure Schedule identifies each agreement currently in effect containing any ongoing royalty or payment obligations of the Company in excess of $25,000 per annum with respect to Intellectual Property Rights and Intellectual Property that are licensed or otherwise made available to the Company.
(c) Except as set forth on Section 2.29(c) of the Company Disclosure Schedule, all Intellectual Property Rights of the Company that have been registered by it with any Governmental Entity are valid and subsisting, except as would not reasonably be expected to have a Company Material Adverse Effect. As of the Effective Date, in connection with such registered Intellectual Property Rights, all necessary registration, maintenance and renewal fees will have been paid and all necessary documents and certificates will have been filed with the relevant Governmental Entities. The Company has not filed for registration of any Intellectual Property rights other than with respect to patents.
20 |
(d) The Company is not, nor will as a result of the consummation of the Merger or other transactions contemplated by this Agreement be, in breach in any material respect of any license, sublicense or other agreement relating to the Intellectual Property Rights of the Company and the Company Subsidiaries, or any licenses, sublicenses or other agreements as to which the Company is a party and pursuant to which the Company uses any patents, copyrights (including software), trademarks or other intellectual property rights of or owned by third parties (the “Third Party Intellectual Property Rights”), the breach of which would be reasonably likely to result in a Company Material Adverse Effect.
(e) Except as set forth on Section 2.29(e) of the Company Disclosure Schedule, the Company has not been named as a defendant in any suit, action or proceeding which involves a claim of infringement or misappropriation of any Third Party Intellectual Property Right and neither the Company n has received any notice or other communication (in writing or otherwise) of any actual or alleged infringement, misappropriation or unlawful or unauthorized use of any Third Party Intellectual Property Right.
(f) The Company has received no written notice that any person is infringing, misappropriating or making any unlawful or unauthorized use of any Intellectual Property Rights of the Company in a manner that has a material impact on the business of the Company, except for such infringement, misappropriation or unlawful or unauthorized use as would not be reasonably expected to have a Company Material Adverse.
2.30 Disclosure. No representation or warranty by the Company contained in this Agreement, and no statement contained in the Company Disclosure Schedule, the Company’s final Confidential Private Placement Memorandum dated July 3, 2014, as amended and supplemented by Supplement No. 1 thereto dated July 25, 2014 and the draft, dated July 25, 2014, of the Form 8-K of the Parent, or any other document, certificate or other instrument delivered or to be delivered by or on behalf of the Company pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading.
21 |
ARTICLE
III
REPRESENTATIONS AND WARRANTIES OF THE PARENT
AND THE ACQUISITION SUBSIDIARY
The Parent represents and warrants to the Company that the statements contained in this Article III are, after giving effect to the Split-Off (unless otherwise stated to the contrary), true and correct, except as set forth in the disclosure schedule provided by the Parent to the Company on the date hereof (the “Parent Disclosure Schedule”). The Parent Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article III; and to the extent that it is clear from the context thereof that such disclosure also applies to any other numbered paragraph contained in this Article III, the disclosures in any numbered paragraph of the Disclosure Schedule shall qualify such other corresponding numbered paragraph in this Article III. For purposes of this Article III, the phrase “to the knowledge of the Parent” or any phrase of similar import shall be deemed to refer to the actual knowledge of any officer or director of the Parent as well as any other knowledge which such person would have possessed had such person made reasonable inquiry of appropriate officers, directors, key employees, accountants and attorneys of the Parent with respect to the matter in question.
22 |
23 |
(a) The Parent has no Subsidiaries other than the Acquisition Subsidiary and the Split-Off Subsidiary. Each of the Acquisition Subsidiary and the Split-Off Subsidiary is an entity duly organized, validly existing and in corporate and tax good standing under the laws of the jurisdiction of its organization. The Acquisition Subsidiary was formed solely to effectuate the Merger, the Split-Off Subsidiary was formed solely to effectuate the Split-Off, and neither of them has conducted any business operations since its organization. The Parent has delivered or made available to the Company complete and accurate copies of the charter, bylaws or other organizational documents of the Acquisition Subsidiary and the Split-Off Subsidiary. The Acquisition Subsidiary has no assets other than minimal paid-in capital, has no liabilities or other obligations, and is not in default under or in violation of any provision of its charter, bylaws or other organizational documents. All of the issued and outstanding shares of capital stock of the Acquisition Subsidiary are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. All shares of the Acquisition Subsidiary are owned by the Parent free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), claims, Security Interests, options, warrants, rights, contracts, calls, commitments, equities and demands. There are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Parent or the Acquisition Subsidiary is a party or which are binding on any of them providing for the issuance, disposition or acquisition of any capital stock of the Parent, the Acquisition Subsidiary or the Split-Off Subsidiary (except as contemplated by this Agreement and the Split-Off Agreement). There are no outstanding stock appreciation, phantom stock or similar rights with respect to the Acquisition Subsidiary. There are no voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock of the Acquisition Subsidiary.
24 |
(b) At all times from February 27, 2012 (inception) through the date of this Agreement, the business and operations of the Parent have been conducted exclusively through the Parent.
(c) The Parent does not control directly or indirectly or have any direct or indirect participation or similar interest in any corporation, partnership, limited liability company, joint venture, trust or other business association which is not a Subsidiary.
(a) The Parent has furnished or made available to the Company complete and accurate copies, as amended or supplemented, of its (a) Annual Report on Form 10-K for the fiscal year ended October 31, 2013, as filed with the SEC, which contained audited balance sheets of the Parent as of October 31, 2013 and 2012, and the related statements of operation, changes in shareholders’ equity and cash flows for the years then ended; (b) Quarterly Reports on Form 10-Q for the quarterly periods ended January 31, 2014 and 2013 and April 30, 2014 and 2013, and (c) all other reports filed by the Parent under Section 13, subsections (a) or (c) of Section 14, or Section 15(d) of the Exchange Act with the SEC (such reports are collectively referred to herein as the “Parent Reports”). The Parent Reports constitute all of the documents required to be filed or furnished by the Parent with the SEC, including under Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act, through the date of this Agreement. The Parent Reports complied in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder when filed. As of the date hereof, there are no outstanding or unresolved comments in comment letters received from the staff of the SEC with respect to any of the Parent Reports. As of their respective dates, the Parent Reports, including any financial statements, schedules or exhibits included or incorporated by reference therein, did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the Parent Subsidiaries is required to file or furnish any forms, reports or other documents with the SEC.
(b) The Parent and each of its Subsidiaries has established and maintains a system of "internal controls over financial reporting" (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that is sufficient to provide reasonable assurance (i) regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, (ii) that receipts and expenditures of the Parent and its Subsidiaries are being made only in accordance with authorizations of management and the Board of Directors of the Parent, and (iii) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of the Parent’s and its Subsidiaries' assets that could have a material effect on the Parent’s financial statements.
25 |
(c) The Parent’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are designed to ensure that all information (both financial and non-financial) required to be disclosed by the Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such information is accumulated and communicated to the Parent’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the chief executive officer and chief financial officer of the Parent required under the Exchange Act with respect to such reports. The Parent has disclosed, based on its most recent evaluation of such disclosure controls and procedures prior to the date of this Agreement, to the Parent’s auditors and the audit committee of the Board of Directors of the Parent and on Section 3.6(c) of the Parent Disclosure Schedule (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that could adversely affect in any material respect the Parent’s ability to record, process, summarize and report financial information, and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Parent’s internal controls over financial reporting. For purposes of this Agreement, the terms “significant deficiency” and “material weakness” shall have the meaning assigned to them in Public Company Accounting Oversight Board Auditing Standard 2, as in effect on the date of this Agreement.
(d) Each of the principal executive officer and the principal financial officer of the Parent (or each former principal executive officer and each former principal financial officer of the Parent, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002 (including the rules and regulations promulgated thereunder, the “Xxxxxxxx-Xxxxx Act”) with respect to the Parent Reports, and the statements contained in such certifications are true and accurate in all material respects. For purposes of this Agreement, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Xxxxxxxx-Xxxxx Act. Neither the Parent nor any of its Subsidiaries has outstanding (nor has arranged or modified since the enactment of the Xxxxxxxx-Xxxxx Act) any “extensions of credit” (within the meaning of Section 402 of the Xxxxxxxx-Xxxxx Act) to directors or executive officers (as defined in Rule 3b-7 under the Exchange Act) of the Parent or any of its Subsidiaries. The Parent is otherwise in compliance with all applicable provisions of the Xxxxxxxx-Xxxxx Act, except for any non-compliance that would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
3.7 Compliance with Laws. Each of the Parent and its Subsidiaries:
(a) and the conduct and operations of their respective businesses, are in compliance with each Law applicable to the Parent, any Parent Subsidiary or any of their properties or assets, except for any violations or defaults that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect;
(b) has complied with all federal and state securities laws and regulations, including being current in all of its reporting obligations under such federal and state securities laws and regulations;
(c) has not, and the past and present officers, directors and Affiliates of the Parent have not, been the subject of, nor does any officer or director of the Parent have any reason to believe that the Parent or any of its officers, directors or Affiliates will be the subject of, any civil or criminal proceeding or investigation by any federal or state agency alleging a violation of securities laws;
26 |
(d) has not been the subject of any voluntary or involuntary bankruptcy proceeding, nor has it been a party to any material litigation;
(e) has not, and the past and present officers, directors and Affiliates have not, been the subject of, nor does any officer or director of the Parent have any reason to believe that the Parent or any of its officers, directors or Affiliates will be the subject of, any civil, criminal or administrative investigation or proceeding brought by any federal or state agency having regulatory authority over such entity or person;
(f) does not and will not on the Closing, have any liabilities, contingent or otherwise, including but not limited to notes payable and accounts payable, and is not a party to any executory agreements; and
(g) is not a “blank check company” as such term is defined by Rule 419 of the Securities Act.
27 |
(a) Each of the Parent and its Subsidiaries has filed on a timely basis all Tax Returns that it was required to file, and all such Tax Returns were complete and accurate in all material respects. Neither the Parent nor any of its Subsidiaries is or has ever been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns, other than a group of which only the Parent and its Subsidiaries are or were members. Each of the Parent and its Subsidiaries has paid on a timely basis all Taxes that were due and payable. The unpaid Taxes of the Parent and its Subsidiaries for tax periods through the date of the balance sheet contained in the most recent Parent Report do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on such balance sheet. Neither the Parent nor any of its Subsidiaries has any actual or potential liability for any Tax obligation of any taxpayer (including without limitation any affiliated group of corporations or other entities that included the Parent or any of its Subsidiaries during a prior period) other than the Parent and its Subsidiaries. All Taxes that the Parent or any of its Subsidiaries is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Entity.
(b) The Parent has delivered or made available to the Company complete and accurate copies of all federal income Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by the Parent or any of its Subsidiaries since February 27, 2012 (which was the date of the Parent’s incorporation). No examination or audit of any Tax Return of the Parent or any of its Subsidiaries by any Governmental Entity is currently in progress or, to the knowledge of the Parent, threatened or contemplated. Neither the Parent nor any of its Subsidiaries has been informed by any jurisdiction that the jurisdiction believes that the Parent or its Subsidiaries was required to file any Tax Return that was not filed. Neither the Parent nor any of its Subsidiaries has waived any statute of limitations with respect to Taxes or agreed to an extension of time with respect to a Tax assessment or deficiency.
(c) Neither the Parent nor any of its Subsidiaries: (i) has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code; (ii) has made any payments, is obligated to make any payments, or is a party to any agreement that could obligate it to make any payments that may be treated as an “excess parachute payment” under Section 280G of the Code; (iii) has any actual or potential liability for any Taxes of any person (other than the Parent and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of federal, state, local or foreign law), or as a transferee or successor, by contract or otherwise; or (iv) is or has been required to make a basis reduction pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(d) None of the assets of the Parent or any of its Subsidiaries: (i) is property that is required to be treated as being owned by any other person pursuant to the provisions of former Section 168(f)(8) of the Code; (ii) is “tax-exempt use property” within the meaning of Section 168(h) of the Code; or (iii) directly or indirectly secures any debt the interest of which is tax exempt under Section 103(a) of the Code.
(e) Neither the Parent nor any of its Subsidiaries has undergone a change in its method of accounting resulting in an adjustment to its taxable income pursuant to Section 481 of the Code.
(f) No state or federal “net operating loss” of the Parent determined as of the Closing Date is subject to limitation on its use pursuant to Section 382 of the Code or comparable provisions of state law as a result of any “ownership change” within the meaning of Section 382(g) of the Code or comparable provisions of any state law occurring prior to the Closing Date.
28 |
3.14 Owned Real Property. Neither the Parent nor any of its Subsidiaries owns any real property.
(a) the lease or sublease is legal, valid, binding, enforceable and in full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding, enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing, and the Closing will not, after the giving of notice, with lapse of time, or otherwise, result in a breach or default by the Parent or any of its Subsidiaries or, to the knowledge of the Parent, any other party under such lease or sublease;
(c) neither the Parent nor any of its Subsidiaries nor, to the knowledge of the Parent, any other party, is in breach or violation of, or default under, any such lease or sublease, and no event has occurred, is pending or, to the knowledge of the Parent, is threatened, which, after the giving of notice, with lapse of time or otherwise, would constitute a breach or default by the Parent or any of its Subsidiaries or, to the knowledge of the Parent, any other party under such lease or sublease;
(d) neither the Parent nor any of its Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold; and
(e) to the knowledge of the Parent, there is no Security Interest, easement, covenant or other restriction applicable to the real property subject to such lease, except for recorded easements, covenants and other restrictions which do not materially impair the current uses or the occupancy by the Parent or any of its Subsidiaries of the property subject thereto.
29 |
(a) Section 3.16 of the Parent Disclosure Schedule lists all of the agreements (written or oral) to which the Parent or any of its Subsidiaries is a party as of the date of this Agreement, including without limitation:
(i) any agreement (or group of related agreements) for the lease of personal property from or to third parties;
(ii) any agreement (or group of related agreements) for the purchase or sale of products or for the furnishing or receipt of services;
(iii) any agreement establishing a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including capitalized lease obligations) or under which it has imposed (or may impose) a Security Interest on any of its assets, tangible or intangible;
(v) any agreement that purports to limit in any material respect the right of the Company to engage in any line of business, or to compete with any person or operate in any geographical location;
(vi) any employment or consulting agreement;
(vii) any agreement involving any current or former officer, director or stockholder of the Parent or any Affiliate thereof;
(viii) any agreement under which the consequences of a default or termination would reasonably be expected to have a Parent Material Adverse Effect;
(ix) any agreement which contains any provisions requiring the Parent or any of its Subsidiaries to indemnify any other party thereto (excluding indemnities contained in agreements for the purchase, sale or license of products entered into in the Ordinary Course of Business);
(x) any agreement, other than as contemplated by this Agreement and the Split-Off, relating to the sales of securities of the Parent or any of its Subsidiaries to which the Parent or such Subsidiary is a party.
(b) The Parent has delivered or made available to the Company a complete and accurate copy of each agreement listed in Section 3.16 of the Parent Disclosure Schedule. With respect to each agreement so listed: (i) the agreement is legal, valid, binding and enforceable and in full force and effect; (ii) the agreement will continue to be legal, valid, binding and enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing; and (iii) neither the Parent nor any of its Subsidiaries nor, to the knowledge of the Parent, any other party, is in breach or violation of, or default under, any such agreement, and no event has occurred, is pending or, to the knowledge of the Parent, is threatened, which, after the giving of notice, with lapse of time or otherwise, would constitute a breach or default by the Parent or any of its Subsidiaries or, to the knowledge of the Parent, any other party under such contract.
30 |
(a) The Parent and Parent Subsidiaries have no and have never had any employees.
(b) Neither the Parent nor any of its Subsidiaries is a party to or bound by any collective bargaining agreement, nor have any of them experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes. The Parent has no knowledge of any organizational effort made or threatened, either currently or since the date of organization of the Parent, by or on behalf of any labor union with respect to employees of the Parent or any of its Subsidiaries.
31 |
(a) Each of the Parent and its Subsidiaries has complied with all applicable Environmental Laws, except for violations of Environmental Laws that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. There is no pending or, to the knowledge of the Parent, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law involving the Parent or any of its Subsidiaries, except for litigation, notices of violations, formal administrative proceedings or investigations, inquiries or information requests that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(b) Set forth in Section 3.24(b) of the Parent Disclosure Schedule is a list of all documents (whether in hard copy or electronic form) that contain any environmental reports, investigations and audits relating to premises currently or previously owned or operated by the Parent or any of its Subsidiaries (whether conducted by or on behalf of the Parent or its Subsidiaries or a third party, and whether done at the initiative of the Parent or any of its Subsidiaries or directed by a Governmental Entity or other third party) which were issued or conducted during the past five years and which the Parent has possession of or access to. A complete and accurate copy of each such document has been provided to the Company.
(c) The Parent is not aware of any material environmental liability of any solid or hazardous waste transporter or treatment, storage or disposal facility that has been used by the Parent or any of its Subsidiaries.
32 |
(a) The Merger will be consummated in compliance with the material terms of this Agreement and none of the material terms and conditions in this Agreement will be waived or modified by the Parent or the Acquisition Subsidiary.
(b) The Applicable Conversion Ratio was negotiated through arm’s length bargaining and, accordingly, the fair market value of the Parent Common Stock to be received by the Company Shareholders in the Merger will be approximately equal to the fair market value of the Company Common Stock and the Company Preferred Stock surrendered by such Company Shareholders in the Merger.
(c) Neither the Parent nor any “related person” with respect to the Parent within the meaning of Treasury Regulation section 1.368-1(e)(4): (i) has purchased or will purchase any Company Common Stock or Company Preferred Stock with consideration other than Parent Common Stock or has furnished cash or other property directly or indirectly in connection with redemptions of Company Common Stock or Company Preferred Stock or distributions by the Company to the Company Shareholders, in connection with or in contemplation of the Merger, or (ii) has any present plan or intention to reacquire any of the Merger Shares..
(d) Each of the Parent and the Acquisition Subsidiary will pay its respective expenses incurred in connection with the Merger and neither the Parent nor the Acquisition Subsidiary will pay any of the expenses of the Company Shareholders incurred in connection with the Merger.
(e) There is no inter-corporate indebtedness existing between the Parent and the Company or between the Acquisition Subsidiary and the Company that was issued, acquired or will be settled at a discount.
(f) Neither the Parent nor the Acquisition Subsidiary is or will be under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(2)(F)(iii) and (iv) of the Code.
(g) On the date of the Merger, the fair market value of the assets of the Company will exceed the sum of its liabilities (including any liabilities to which such assets are subject).
(h) None of the compensation received by any stockholder-employee of the Company pursuant to any employment, consulting or similar agreement is or will be separate consideration for, or allocable to, any of his or her Company Common Stock or Company Preferred Stock. None of the Merger Shares received by any stockholder-employee of the Company pursuant to the Merger (other than any such shares received in connection with the termination in the Merger of certain stock options to purchase Company Common Stock or Company Preferred Stock) are or will be separate consideration for, or allocable to, any such employment, consulting or similar arrangement. The compensation paid to any stockholder-employee of the Company pursuant to such employment, consulting or similar agreement is or will be for service actually rendered and will be commensurate with amounts paid to third parties bargaining at arm’s length for such services.
33 |
(i) The Parent (i) is not an “investment company” as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code; (ii) has no present plan or intention to liquidate the Surviving Corporation or to merge the Surviving Corporation with or into any other corporation or entity, or to sell or otherwise dispose of the stock of the Surviving Corporation which the Parent will acquire in the Merger, or to cause the Surviving Corporation to sell or otherwise dispose of its assets, all except in the ordinary course of business or if such liquidation, merger or disposition is described in Section 368(a)(2)(C) or Treasury Regulation Section 1.368-2(d)(4) or Section 1.368-2(k); and (iii) has no present plan or intention, following the Merger, to issue any additional shares of stock of the Surviving Corporation or to create any new class of stock of the Surviving Corporation.
(j) The Acquisition Subsidiary is a wholly-owned subsidiary of the Parent, formed solely for the purpose of engaging in the Merger, and will carry on no business prior to the Merger.
(k) Immediately prior to the Merger, the Parent will be in control of Acquisition Subsidiary within the meaning of Section 368(c) of the Code.
(l) Immediately following the Merger, the Surviving Corporation will hold at least 90% of the fair market value of the net assets and at least 70% of the fair market value of the gross assets held by the Company immediately prior to the Merger (for purposes of this representation, amounts used by the Company to pay reorganization expenses, if any, will be included as assets of the Company held immediately prior to the Merger).
(m) The Acquisition Subsidiary will have no liabilities assumed by the Surviving Corporation and will not transfer to the Surviving Corporation any assets subject to liabilities in the Merger.
(n) Following the Merger, the Surviving Corporation will continue the Company’s historic business or use a significant portion of the Company’s historic business assets in a business as required by Section 368 of the Code and the Treasury Regulations promulgated thereunder.
(o) Each of the Split-Off Agreement and the General Release Agreement will constitute a legally binding obligation among the Parent, the Split-Off Subsidiary and the Split-Off Purchaser prior to the Effective Time; immediately following consummation of the Merger, the Parent will distribute the stock of the Split-Off Subsidiary to the Split-Off Purchaser in cancellation of the Purchase Price Securities (as such term is defined in the Split-Off Agreement); no property other than the capital stock of Split-Off Subsidiary will be distributed by the Parent to the Split-Off Purchaser in connection with or following the Merger; upon execution and delivery of the Split-Off Agreement and the General Release Agreement, the Split-Off Purchaser will have no right to sell or transfer the Purchase Price Securities to any person without the Parent’s prior written consent, and the Parent will not consent (nor will it permit others to consent) to any such sale or transfer; upon execution of the Split-Off Agreement and the General Release Agreement, there will be no other plan, arrangement, agreement, contract, intention or understanding, whether written or verbal and whether or not enforceable in law or equity, that would permit the Split-Off Purchaser to vote the Purchase Price Securities or receive any property or other distributions from the Parent with respect to the Purchase Price Securities other than the capital stock of the Split-Off Subsidiary.
34 |
35 |
ARTICLE
IV
COVENANTS
4.2 Governmental and Third-Party Notices and Consents.
(a) Each Party shall use its Reasonable Best Efforts to obtain, at its expense, all waivers, permits, consents, approvals or other authorizations from Governmental Entities, and to effect all registrations, filings and notices with or to Governmental Entities, as may be required for such Party to consummate the transactions contemplated by this Agreement and to otherwise comply with all applicable Laws in connection with the consummation of the transactions contemplated by this Agreement.
(b) The Company shall use its Reasonable Best Efforts to obtain, at its expense, all such waivers, consents or approvals from third parties, and to give all such notices to third parties, as are required to be listed in Section 2.4 of the Company Disclosure Schedule.
(c) The Parent shall use its Reasonable Best Efforts to obtain, at its expense, all such waivers, consents or approvals from third parties, and to give all such notices to third parties, as are required to be listed in Section 3.25 of the Parent Disclosure Schedule
36 |
(a) except as contemplated by the Private Placement Offering, issue or sell, or redeem or repurchase, any stock or other securities of the Company or any warrants, options or other rights to acquire any such stock or other securities (except pursuant to the conversion or exercise of outstanding convertible securities or Company Options or Company Warrants outstanding on the date hereof), or amend any of the terms of (including without limitation the vesting of) any such convertible securities or options or warrants;
(b) split, combine or reclassify any shares of its capital stock; declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock;
(c) create, incur or assume any indebtedness for borrowed money (including obligations in respect of capital leases) except in the Ordinary Course of Business or in connection with the transactions contemplated by this Agreement; assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person or entity; or make any loans, advances or capital contributions to, or investments in, any other person or entity;
(d) enter into, adopt or amend any Employee Benefit Plan or any employment or severance agreement or arrangement or (except for normal increases in the Ordinary Course of Business for employees who are not Affiliates) increase in any manner the compensation or fringe benefits of, or materially modify the employment terms of, its directors, officers or employees, generally or individually, or pay any bonus or other benefit to its directors, officers or employees;
(e) acquire, sell, lease, license or dispose of any assets or property (including without limitation any shares or other equity interests in or securities of any corporation, partnership, association or other business organization or division thereof), other than purchases and sales of assets in the Ordinary Course of Business;
37 |
(f) mortgage or pledge any of its property or assets (including without limitation any shares or other equity interests in or securities of any corporation, partnership, association or other business organization or division thereof), or subject any such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any obligation or liability other than in the Ordinary Course of Business;
(h) amend its charter, by-laws or other organizational documents;
(i) change in any material respect its accounting methods, principles or practices, except insofar as may be required by a generally applicable change in GAAP;
(j) enter into, amend, terminate, take or omit to take any action that would constitute a violation of or default under, or waive any rights under, any material contract or agreement;
(k) institute or settle any Legal Proceeding;
(l) take any action or fail to take any action permitted by this Agreement with the knowledge that such action or failure to take action would result in (i) any of the representations and warranties of the Company set forth in this Agreement becoming untrue in any material respect or (ii) any of the conditions to the Merger set forth in Article V not being satisfied; or
(m) agree in writing or otherwise to take any of the foregoing actions.
4.5 Access to Company Information.
(a) The Company shall permit representatives of the Parent to have full access (at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Company) to all premises, properties, financial and accounting records, contracts, other records and documents, and personnel, of or pertaining to the Company.
(b) The Parent and each of its Subsidiaries (i) shall treat and hold as confidential any Company Confidential Information (as defined below), (ii) shall not use any of the Company Confidential Information except in connection with this Agreement, and (iii) if this Agreement is terminated for any reason whatsoever, shall return to the Company all tangible embodiments (and all copies) thereof which are in its possession. For purposes of this Agreement, “Company Confidential Information” means any information of the Company that is furnished to the Parent or any of its Subsidiaries by the Company in connection with this Agreement; provided, however, that it shall not include any information (A) which, at the time of disclosure, is available publicly other than as a result of non-permitted disclosure by the Parent, any of its Subsidiaries or their respective directors, officers, or employees, (B) which, after disclosure, becomes available publicly through no fault of the Parent, any of its Subsidiaries or their respective directors, officers, or employees, (C) which the Parent or any of its Subsidiaries knew or to which the Parent or any of its Subsidiaries had access prior to disclosure, provided that the source of such information is not known by the Parent or any of its Subsidiaries to be bound by a confidentiality obligation to the Company , or (D) which the Parent or any of its Subsidiaries rightfully obtains from a source other than the Company, provided that the source of such information is not known by the Parent or any of its Subsidiaries to be bound by a confidentiality obligation to the Company .
38 |
(a) issue or sell, or redeem or repurchase, any stock or other securities of the Parent or any rights, warrants or options to acquire any such stock or other securities, except as contemplated by, and in connection with, the Merger, the Split-Off and the Private Placement Offering;
(b) split, combine or reclassify any shares of its capital stock; declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock;
(c) create, incur or assume any indebtedness (including obligations in respect of capital leases); assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person or entity; or make any loans, advances or capital contributions to, or investments in, any other person or entity;
(d) enter into, adopt or amend any Parent Benefit Plan or any employment or severance agreement or arrangement or increase in any manner the compensation or fringe benefits of, or materially modify the employment terms of, its directors, officers or employees, generally or individually, or pay any bonus or other benefit to its directors, officers or employees, except the adoption of the Parent Equity Plan and entry into the Executive Employment Agreements (as defined below);
(e) acquire, sell, lease, license or dispose of any assets or property (including without limitation any shares or other equity interests in or securities of any Subsidiary of the Parent or any corporation, partnership, association or other business organization or division thereof), except as contemplated by, and in connection with, the Split-Off;
(f) mortgage or pledge any of its property or assets or subject any such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any obligation or liability other than in the Ordinary Course of Business;
(h) amend its charter, by-laws or other organizational documents (except as contemplated hereby);
(i) change in any material respect its accounting methods, principles or practices, except insofar as may be required by a generally applicable change in GAAP;
(j) enter into, amend, terminate, take or omit to take any action that would constitute a violation of or default under, or waive any rights under, any contract or agreement;
(k) institute or settle any Legal Proceeding;
(l) take any action or fail to take any action permitted by this Agreement with the knowledge that such action or failure to take action would result in (i) any of the representations and warranties of the Parent and/or the Acquisition Subsidiary set forth in this Agreement becoming untrue in any material respect or (ii) any of the conditions to the Merger set forth in Article V not being satisfied; or
39 |
(m) agree in writing or otherwise to take any of the foregoing actions.
4.7 Access to Parent Information.
(a) The Parent shall (and shall cause the Acquisition Subsidiary to) permit representatives of the Company to have full access (at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Parent and the Acquisition Subsidiary) to all premises, properties, financial and accounting records, contracts, other records and documents, and personnel of or pertaining to the Parent, the Acquisition Subsidiary and the Split-Off Subsidiary.
(b) The Company (i) shall treat and hold as confidential any Parent Confidential Information (as defined below), (ii) shall not use any of the Parent Confidential Information except in connection with this Agreement, and (iii) if this Agreement is terminated for any reason whatsoever, shall return to the Parent all tangible embodiments (and all copies) thereof which are in its possession. For purposes of this Agreement, “Parent Confidential Information” means any information of the Parent or any Parent Subsidiary that is furnished to the Company by the Parent or its Subsidiaries in connection with this Agreement; provided, however, that it shall not include any information (A) which, at the time of disclosure, is available publicly other than as a result of non-permitted disclosure by the Company or its respective directors, officers, or employees, (B) which, after disclosure, becomes available publicly through no fault of the Company or their respective directors, officers, or employees, (C) which the Company knew or to which the Company had access prior to disclosure, provided that the source of such information is not known by the Company to be bound by a confidentiality obligation to the Parent or any Subsidiary of the Parent or (D) which the Company rightfully obtains from a source other than the Parent or a Subsidiary of the Parent, provided that the source of such information is not known by the Company to be bound by a confidentiality obligation to the Parent or any Subsidiary of the Parent.
(a) The Parent shall not, after the Effective Time, take any action to alter or impair any exculpatory or indemnification provisions now existing in the certificate of incorporation or bylaws of the Company for the benefit of any individual who served as a director or officer of the Company at any time prior to the Effective Time, except for any changes which may be required to conform with changes in applicable Law and any changes which do not affect the application of such provisions to acts or omissions of such individuals prior to the Effective Time.
(b) From and after the Effective Time, the Parent agrees that it will, and will cause the Surviving Corporation to, indemnify and hold harmless each present and former director and officer of the Company (the “Indemnified Executives”) against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in settlement incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted under Delaware law (and the Parent and the Surviving Corporation shall also advance expenses as incurred to the fullest extent permitted under Delaware law, provided the Indemnified Executive to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Indemnified Executive is not entitled to indemnification).
40 |
41 |
ARTICLE
V
CONDITIONS TO CONSUMMATION OF MERGER
(a) the Company shall have obtained (and shall have provided copies thereof to the Parent) the written consents of (i) all of the members of its Board of Directors, (ii) Company Stockholders holding shares of Company Stock representing a majority of the votes represented by the outstanding shares of Company Stock entitled to vote on this Agreement and the Merger, to approve the execution, delivery and performance by the Company of this Agreement and the other Transaction Documentation to which it is a party, in form and substance satisfactory to the Parent;
(b) the Parent, the Indemnification Representative and the Indemnification Escrow Agent, shall have executed and delivered the Indemnification Shares Escrow Agreement;
(c) the Parent, Split-Off Subsidiary and the Split-Off Purchaser shall have executed and delivered the Split-Off Agreement and a General Release Agreement, and all other documents anticipated by such agreements, and the Split-Off shall be effective simultaneous with the Effective Time;
(d) the Split-Off Purchaser shall have surrendered to the Parent the certificates for Parent Common Stock representing the Share Contribution, duly endorsed to the Parent or in blank, with signatures guaranteed by a member of one of the “Medallion” guarantee programs (Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP), or New York Stock Exchange Medallion Signature Program (MSP));
(e) the Parent shall have delivered to the Split-Off Purchaser certificates representing the Shares (as defined in the Split-Off Agreement) of stock of Split-Off Subsidiary deliverable to the Split-Off Purchaser under the Split-Off Agreement, duly registered in the name of the Split-Off Purchaser or as directed by the Split-Off Purchaser;
42 |
(f) the closing of at least the Minimum Amount of the Private Placement Offering shall have occurred, or shall occur simultaneously with the Closing.
(a) the number of Dissenting Shares shall not exceed 10% of the number of outstanding shares of Company Stock as of the Effective Time;
(b) the Company shall have obtained (and shall have provided copies thereof to the Parent) all other waivers, permits, consents, approvals or other authorizations, and effected all of the registrations, filings and notices, referred to in Section 4.2 which are required on the part of the Company , except such waivers, permits, consents, approvals or other authorizations the failure of which to obtain or effect does not, individually or in the aggregate, have a Company Material Adverse Effect or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(c) the representations and warranties of the Company set forth in this Agreement (when read without regard to any qualification as to materiality or Company Material Adverse Effect contained therein) shall be true and correct as of the date of this Agreement and shall be true and correct as of the Effective Time as though made as of the Effective Time (provided, however, that to the extent such representation and warranty expressly relates to an earlier date, such representation and warranty shall be true and correct as of such earlier date), except for any untrue or incorrect representations and warranties that, individually or in the aggregate, do not have a Company Material Adverse Effect or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(d) the Company shall have performed or complied with its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Effective Time, except for such non-performance or non-compliance as does not have a Company Material Adverse Effect or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(e) no Legal Proceeding shall be pending wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation of any of the transactions contemplated by this Agreement or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, and no such judgment, order, decree, stipulation or injunction shall be in effect;
(f) the Company shall have delivered to the Parent and the Acquisition Subsidiary a copy of each written consent received from a Company Stockholder consenting to the Merger together with a certification from each such Company Stockholder that such person is either an “accredited investor” or not a “U.S. Person” as such terms are defined in Regulation D and Regulation S, respectively, under the Securities Act; provided, however, that up to 35 Company stockholders need not be accredited investors.
43 |
(g) the Company shall have delivered to the Parent and the Acquisition Subsidiary a certificate (the “Company Certificate”) to the effect that each of the conditions specified in clauses (a) of Section 5.1 and clauses (a) through (e) (insofar as clause (e) relates to Legal Proceedings involving the Company) of this Section 5.2 is satisfied in all respects, and covering such other matters as the Parent shall reasonably request;
(h) each of the individuals set forth on Exhibit F-1 to this Agreement shall have executed and delivered to the Parent an agreement substantially in the form of Exhibit F-2 attached hereto (the “Lock-Up and No-Shorting Agreements”);
(i) the Company shall have delivered to the Parent evidence that the one (1) independent member of the Parent’s Board of Directors designated by the Placement Agent is acceptable to the Company-appointed directors;
(j) the Company shall have delivered to the Parent audited and interim unaudited financial statements of the Company pro forma the Merger, compliant with applicable SEC regulations for inclusion under Item 2.01 (f) and/or 5.01(a)(8) of Form 8-K; and
(k) the Parent shall have received from Xxxxx Xxxxxx LLP, counsel to the Company, an opinion on the matters set forth in Exhibit G attached hereto, addressed to the Parent and dated as of the Closing Date.
(a) the Parent shall have obtained (and shall have provided copies thereof to the Company) the written consents of (i) all of the members of its Board of Directors, (ii) all of the members of the Board of Directors of Acquisition Subsidiary, (iii) the sole stockholder of Acquisition Subsidiary, (iv) all of the members of the Board of Directors of Split-Off Subsidiary, (v) the sole stockholder of Split-Off Subsidiary, and (vi) holders of more than 50% of the Parent Common Stock outstanding immediately prior to the Effective Time, in each case to the execution, delivery and performance by the each such entity of this Agreement and/or the other Transaction Documentation to which each such entity a party, in form and substance satisfactory to the Parent;
(b) the Parent shall have obtained (and shall have provided copies thereof to the Company) all of the other waivers, permits, consents, approvals or other authorizations, and effected all of the registrations, filings and notices, referred to in Section 4.2 which are required on the part of the Parent or any of its Subsidiaries, except for waivers, permits, consents, approvals or other authorizations the failure of which to obtain or effect does not, individually or in the aggregate, have a Parent Material Adverse Effect or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(c) the representations and warranties of the Parent set forth in this Agreement (when read without regard to any qualification as to materiality or Parent Material Adverse Effect contained therein) shall be true and correct as of the date of this Agreement and shall be true and correct as of the Effective Time as though made as of the Effective Time (provided, however, that to the extent such representation and warranty expressly relates to an earlier date, such representation and warranty shall be true and correct as of such earlier date), except for any untrue or incorrect representations and warranties that, individually or in the aggregate, do not have a Parent Material Adverse Effect or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
44 |
(d) each of the Parent and the Acquisition Subsidiary shall have performed or complied with its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Effective Time, except for such non-performance or non-compliance as does not have a Parent Material Adverse Effect or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(e) no Legal Proceeding shall be pending wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation of any of the transactions contemplated by this Agreement or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, and no such judgment, order, decree, stipulation or injunction shall be in effect;
(f) the Board of Directors of the Parent shall have adopted, and the stockholders of the Parent shall have approved, the Parent Equity Plan and approved the issuance of the options described in Section 4(f) of the Executive Employment Agreements;
(g) the Parent shall have delivered to the Company a certificate (the “Parent Certificate”) to the effect that each of the conditions specified in clauses (a) of Section 5.1 and clauses (a) through (f) (insofar as clause (e) relates to Legal Proceedings involving the Parent or the Acquisition Subsidiary) of this Section 5.3 is satisfied in all respects, and covering such other matters as the Company shall reasonably request;
(h) the Company shall have received a certificate of Parent’s transfer agent and registrar certifying that as of the Closing Date there are 28,597,804 shares of Parent Common Stock issued and outstanding (without giving effect to the retirement of 23,100,000 shares of Parent Common Stock in connection with the Share Contribution);
(i) the Parent shall have delivered to the Company (i) evidence that the Parent’s Board of Directors is authorized to consist of seven (7) individuals, (ii) evidence of the resignations of all individuals who served as directors and/or officers of the Parent immediately prior to the Effective Time, which resignations shall be effective as of the Effective Time, (iii) evidence of the appointment of the following five (5) directors to serve immediately following the Effective Time: Xxxxxx X. Xxxxxxxxxxxx, Xxxx X. Xxxxxxxxx, Xxxxx Xxxxxxxxx, Xxxxx Xxxxxxxx, and Xxxxxx Xxxxx and (iv) evidence of the appointment of such executive officers of the Parent to serve immediately following the Effective Time as shall have been designated by the Company, including Xxxx X. Xxxxxxxxx as Executive Chairman, and Xxxxxx X. Xxxxxxxxxxxx as Chief Executive Officer
(j) The Parent shall have assumed the Executive Employment Agreements.
(k) the Company shall have received from Xxxxx Xxxxx Xxxxx LLP, counsel to the Parent and the Acquisition Subsidiary, an opinion with respect to the matters set forth in Exhibit H attached hereto, addressed to the Company and dated as of the Closing Date; and
(l) the Parent, each Parent Company Stockholder and each investor in the Private Placement Offering shall have executed and delivered to the Company the Voting Agreement in substantially the form of Exhibit I attached hereto.
45 |
ARTICLE
VI
INDEMNIFICATION
(a) any misrepresentation or breach of warranty by, or failure to perform any covenant or agreement of, the Company contained in this Agreement or the Company Certificate;
(b) any claim by a stockholder or former stockholder of the Company, or any other person or entity, seeking to assert, or based upon: (i) ownership or rights to ownership of any shares of stock of the Company prior to the Effective Time; (ii) any rights of a stockholder prior to the Effective Time (in the case of both (i) and (ii), other than the right to receive the Merger Shares pursuant to this Agreement or appraisal rights under the applicable provisions of the Delaware Act), including any option, preemptive rights or rights to notice or to vote; (iii) any rights under the certificate of incorporation or bylaws of the Company prior to the Effective Time; or (iv) any claim that his, her or its shares were wrongfully repurchased by the Company prior to the Effective Time; and
(c) any claim for brokers’ or finders’ fees or agents’ commissions arising from or through the Company, any of its pre-Merger Affiliates or any Company Stockholder in connection with the negotiation or consummation of the transactions contemplated by this Agreement, except for claims arising under the Placement Agency Agreement with the Placement Agent or the agreements listed in Section 2.27 of the Company Disclosure Schedule.
(d) any violation of, or any liability under, any Environmental Law (an “Environmental Claim”) relating to or arising from the activities and operations of the Company or any of its Subsidiaries prior to the Effective Time, regardless of when the environmental hazard giving rise to such Environmental Claim is discovered, and any liability in regards to any Mining Interests, for any all obligations, whether arising under contract, applicable Laws or otherwise, to abandon mines and close, decommission, dismantle and remove structures, buildings, equipment and other facilities and to restore and reclaim the sites for any of the foregoing and any lands used to gain access thereto (collectively, “Abandonment and Reclamation Liabilities”) of the Company or any of its Subsidiaries (or their respective successors) relating to any mines, structures, buildings, equipment and other facilities or any lands that were, or were required pursuant to applicable Law to have been, abandoned, decommissioned or reclaimed, as the case may be, prior to the Effective Time.
Notwithstanding the foregoing, except with respect to any fraud or willful misconduct by the Company in connection with this Agreement, the Parent’s sole and exclusive right to collect any Damages with respect to claims resulting from or relating to any misrepresentation or breach of warranty of or failure to perform any covenant or agreement by the Company Stockholders contained in this Agreement shall be pursuant to a sale, in the manner set forth in the Indemnification Escrow Agreement, of Indemnification Escrow Shares issued to such Indemnifying Stockholder by the Parent pursuant to Section 1.5(b) above. Notwithstanding anything to the contrary contained herein, except with respect to any fraud or willful misconduct by an Indemnifying Stockholder in connection with this Agreement, the indemnification of Parent by the Indemnifying Stockholders shall be without personal liability of or personal recourse against any Indemnifying Stockholder and the sole recourse of Parent and the Surviving Company against any Company Stockholder shall be the Indemnification Escrow Shares pursuant to the Indemnification Escrow Agreement.
46 |
(a) any misrepresentation or breach of warranty by or failure to perform any covenant or agreement of the Parent or the Acquisition Subsidiary contained in this Agreement or the Parent Certificate;
(b) any claim by a stockholder or former stockholder of the Parent, or any other person or entity, seeking to assert, or based upon: (i) ownership or rights to ownership of any shares of stock of the Parent prior to the Effective Time; (ii) any rights of a stockholder prior to the Effective Time, including any option, preemptive rights or rights to notice or to vote; (iii) any rights under the certificate of incorporation or bylaws of the Parent prior to the Effective Time or (iv) any claim that his, her or its shares were wrongfully repurchased by the Company prior to the Effective Time; and
(c) any claim for brokers’ or finders’ fees or agents’ commissions arising from or through the Parent or any of its pre-Merger Affiliates in connection with the negotiation or consummation of the transactions contemplated by this Agreement; and
(d) any Environmental Claim relating to or arising from the activities and operations of the Company, the Surviving Corporation or any of their Subsidiaries after the Effective Time, regardless of when the environmental hazard giving rise to such Environmental Claim is discovered, and any liability for any Abandonment and Reclamation Obligations of the Company, the Surviving Corporation or any of their Subsidiaries (or their respective successors) other than those relating to any mines, structures, buildings, equipment and other facilities or any lands that were, or were required pursuant to applicable Law to have been, abandoned, decommissioned or reclaimed, as the case may be, prior to the Effective Time.
Notwithstanding the foregoing, except with respect to any fraud or willful misconduct by the Parent or any of its Affiliates in connection with this Agreement, the post-Closing adjustment mechanism set forth in Section 1.9 shall be the exclusive means for the Company Stockholders to collect any Damages for which they are entitled to indemnification under this Article VI.
47 |
(a) In the event the Parent or the Company Stockholders are entitled, or seek to assert rights, to indemnification under this Article VI, the Parent or the Company Stockholders (as the case may be) shall give written notification to the Company Stockholders or the Parent (as the case may be) of the commencement of any suit or proceeding relating to a third party claim for which indemnification pursuant to this Article VI may be sought. Such notification shall be given within 20 Business Days after receipt by the party seeking indemnification of notice of such suit or proceeding, and shall describe in reasonable detail (to the extent known by the party seeking indemnification) the facts constituting the basis for such suit or proceeding and the amount of the claimed damages; provided, however, that no delay on the part of the party seeking indemnification in notifying the indemnifying party shall relieve the indemnifying party of any liability or obligation hereunder except to the extent of any damage or liability caused by or arising out of such failure. Within 20 days after delivery of such notification, the indemnifying party may, upon written notice thereof to the party seeking indemnification, assume control of the defense of such suit or proceeding with counsel reasonably satisfactory to the party seeking indemnification; provided that the indemnifying party may not assume control of the defense of a suit or proceeding involving criminal liability or in which equitable relief is sought against the party seeking indemnification. If the indemnifying party does not so assume control of such defense, the party seeking indemnification shall control such defense. The party not controlling such defense (the “Non-Controlling Party”) may participate therein at its own expense; provided that if the indemnifying party assumes control of such defense and the party seeking indemnification reasonably concludes that the indemnifying party and the party seeking indemnification have conflicting interests or different defenses available with respect to such suit or proceeding, the reasonable fees and expenses of counsel to the party seeking indemnification shall be considered “Damages” for purposes of this Agreement. The party controlling such defense (the “Controlling Party”) shall keep the Non-Controlling Party advised of the status of such suit or proceeding and the defense thereof and shall consider in good faith recommendations made by the Non-Controlling Party with respect thereto. The Non-Controlling Party shall furnish the Controlling Party with such information as it may have with respect to such suit or proceeding (including copies of any summons, complaint or other pleading which may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same) and shall otherwise cooperate with and assist the Controlling Party in the defense of such suit or proceeding. The indemnifying party shall not agree to any settlement of, or the entry of any judgment arising from, any such suit or proceeding without the prior written consent of the party seeking indemnification, which shall not be unreasonably withheld or delayed; provided that the consent of the party seeking indemnification shall not be required if the indemnifying party agrees in writing to pay any amounts payable pursuant to such settlement or judgment and such settlement or judgment includes a complete release of the party seeking indemnification from further liability and has no other materially adverse effect on the party seeking indemnification. The party seeking indemnification shall not agree to any settlement of, or the entry of any judgment arising from, any such suit or proceeding without the prior written consent of the indemnifying party, which shall not be unreasonably withheld or delayed.
(b) In order to seek indemnification under this Article VI, the party seeking indemnification shall give written notification (a “Claim Notice”) to the indemnifying party which contains (i) a description and the amount (the “Claimed Amount”) of any Damages incurred or reasonably expected to be incurred by the party seeking indemnification, (ii) a statement that the party seeking indemnification is entitled to indemnification under this Article VI for such Damages and a reasonable explanation of the basis therefor, and (iii) a demand for payment (in the manner provided in paragraph (c) below) in the amount of the Claimed Amount.
(c) Within 20 days after delivery of a Claim Notice, the indemnifying party shall deliver to the party seeking indemnification a written response (the “Response”) in which the indemnifying party shall: (i) agree that the party seeking indemnification is entitled to receive all of the Claimed Amount, (ii) agree that the party seeking indemnification is entitled to receive part, but not all, of the Claimed Amount (the “Agreed Amount”) or (iii) dispute that the party seeking indemnification is entitled to receive any of the Claimed Amount. If the indemnifying party in the Response disputes its liability for all or part of the Claimed Amount, the indemnifying party and the party seeking indemnification shall follow the procedures set forth in Section 6.3(d) for the resolution of such dispute (a “Dispute”).
48 |
(d) During the 60-day period following the delivery of a Response that reflects a Dispute, the indemnifying party and the party seeking indemnification shall use good faith efforts to resolve the Dispute. If the Dispute is not resolved within such 60-day period, the indemnifying party and the party seeking indemnification shall discuss in good faith the submission of the Dispute to a mutually acceptable alternative dispute resolution procedure (which may be non-binding or binding upon the parties, as they agree in advance) (the “ADR Procedure”). In the event the indemnifying party and the party seeking indemnification agree upon an ADR Procedure, such parties shall, in consultation with the chosen dispute resolution service (the “ADR Service”), promptly agree upon a format and timetable for the ADR Procedure, agree upon the rules applicable to the ADR Procedure, and promptly undertake the ADR Procedure. The provisions of this Section 6.3(d) shall not obligate the indemnifying party and the party seeking indemnification to pursue an ADR Procedure or prevent either such Party from pursuing the Dispute in a court of competent jurisdiction; provided that, if the indemnifying party and the party seeking indemnification agree to pursue an ADR Procedure, neither the indemnifying party nor the party seeking indemnification may commence litigation or seek other remedies with respect to the Dispute prior to the completion of such ADR Procedure. Any ADR Procedure undertaken by the indemnifying party and the party seeking indemnification shall be considered a compromise negotiation for purposes of federal and state rules of evidence, and all statements, offers, opinions and disclosures (whether written or oral) made in the course of the ADR Procedure by or on behalf of the indemnifying party, the party seeking indemnification or the ADR Service shall be treated as confidential and, where appropriate, as privileged work product. Such statements, offers, opinions and disclosures shall not be discoverable or admissible for any purposes in any litigation or other proceeding relating to the Dispute (provided that this sentence shall not be construed to exclude from discovery or admission any matter that is otherwise discoverable or admissible). The fees and expenses of any ADR Service used by the indemnifying party and the party seeking indemnification shall be considered to be Damages; provided, that if the indemnifying party are determined not to be liable for Damages in connection with such Dispute, the party seeking indemnification shall pay all such fees and expenses.
Notwithstanding the other provisions of this Section 6.3, if a third party asserts (other than by means of a lawsuit) that the Parent, the Surviving Corporation or any of their Subsidiaries is liable to such third party for a monetary or other obligation which may constitute or result in Damages for which the Parent may be entitled to indemnification pursuant to this Article VI, and the Parent reasonably determines that the Surviving Corporation or any of their Subsidiaries has a valid business reason to fulfill such obligation, then (i) the Parent shall be entitled to satisfy such obligation, with prior notice to but without prior consent from the Indemnifying Stockholders, (ii) the Parent may subsequently make a claim for indemnification in accordance with the provisions of this Article VI, and (iii) the Parent shall be reimbursed, in accordance with the provisions of this Article VI, for any such Damages for which it is entitled to indemnification pursuant to this Article VI (subject to the right of the Indemnifying Stockholders to dispute the Parent’s entitlement to indemnification, or the amount for which it is entitled to indemnification, under the terms of this Article VI).
(e) For purposes of this Section 6.3 and the last two sentences of Section 6.4, any references to the Company Stockholders or the Indemnifying Stockholders (except provisions relating to an obligation to make, or a right to receive, any payments provided for in Section 6.3 or Section 6.4) shall be deemed to refer to the Indemnification Representative.
(f) The Indemnification Representative shall have full power and authority on behalf of each Company Stockholder or Indemnifying Stockholder to take any and all actions on behalf of, execute any and all instruments on behalf of, and execute or waive any and all rights of, the Company Stockholders or Indemnifying Stockholders under this Article VI. The Indemnification Representative shall have no liability to any Company Stockholder or Indemnifying Stockholder for any action taken or omitted on behalf of the Company Stockholders or Indemnifying Stockholders pursuant to this Article VI.
49 |
6.5 Limitations on Claims for Indemnification.
(a) (i) Notwithstanding anything to the contrary herein, the Parent shall not be entitled to recover, or be indemnified for, Damages under this Article VI unless and until the aggregate of all such Damages paid or payable by the Indemnifying Stockholders collectively exceeds $50,000 (the “Damages Threshold”) and then, if such aggregate Damages Threshold is reached, the Parent shall only be entitled to recover for Damages in excess of such Damages Threshold.
(ii) Except with respect to claims based on fraud or willful misconduct, after the Closing, the rights of the Parent under this Article VI shall be the exclusive remedy of the Parent with respect to claims resulting from or relating to any misrepresentation or breach of warranty of or failure to perform any covenant or agreement by the Company Stockholders contained in this Agreement.
(iii) The Parent shall only have the right to recover any Damages to which it is entitled from any Indemnifying Stockholder under this Article VI, in whole or in part, pursuant to a sale, in the manner set forth in the Indemnification Escrow Agreement, of Indemnification Escrow Shares issued to such Indemnifying Stockholder by the Parent pursuant to Section 1.5 above.
(b) (i) Notwithstanding anything to the contrary herein, the Company Stockholders shall not be entitled to recover, or be indemnified for, Damages under this Article VI unless and until the aggregate of all such Damages paid or payable by the Parent collectively exceeds the Damages Threshold and then, if such aggregate Damages Threshold is reached, the Company Stockholders shall only be entitled to recover for Damages in excess of such Damages Threshold.
(ii) Except with respect to claims based on fraud or willful misconduct, after the Closing, the rights of the Company Stockholders under this Article VI shall be the exclusive remedy of the Company Stockholders with respect to claims resulting from or relating to any misrepresentation or breach of warranty of or failure to perform any covenant or agreement by the Parent contained in this Agreement.
(iii) Notwithstanding anything in this Agreement to the contrary, except with respect to any fraud or willful misconduct by the Parent or its Affiliates in connection with this Agreement, the delivery to a Company Stockholder entitled to indemnification by the Parent under this Article VI of shares of Parent Common Stock pursuant to Section 1.9 shall be the exclusive means for the Company Stockholders to collect any Damages for which they are entitled to indemnification under this Article VI.
50 |
(c) No Indemnifying Stockholder shall have any right of contribution against the Surviving Corporation with respect to any breach by the Company of any of its representations, warranties, covenants or agreements. The amount of Damages recoverable by the Parent under this Article VI with respect to an indemnity claim shall be reduced by (i) any proceeds received by the Parent with respect to the Damages to which such indemnity claim relates, from an insurance carrier and (ii) the amount of any tax savings actually realized by the Parent, for the tax year in which such Damages are incurred, which are clearly attributable to the Damages to which such indemnity claim relates (net of any increased tax liability which may result from the receipt of the indemnity payment or any insurance proceeds relating to such Damages).
ARTICLE
VII
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is defined in the Section of this Agreement indicated below.
Defined Term | Section | |
Abandonment and Reclamation Obligations | 6.1(d) | |
Acquisition Subsidiary | Introduction | |
ADR Procedure | 6.3(d) | |
ADR Service | 6.3(d) | |
Affiliate | 2.12(a)(vii) | |
Agreed Amount | 6.3(c) | |
Agreement | Introduction | |
Anti-Dilution Amount | 1.14(b) | |
Applicable Conversion Ratio | 1.5(a) | |
Business Day | 1.2 | |
CERCLA | 2.20 | |
Certificate of Merger | 1.1 | |
Claim Notice | 6.3(b) | |
Claimed Amount | 6.3(b) | |
Closing | 1.2 | |
Closing Date | 1.2 | |
Code | Introduction | |
Company | Introduction | |
Company Auditor | 2.30 | |
Company Balance Sheet | 2.6 | |
Company Balance Sheet Date | 2.6 | |
Company Benefit Plans | 2.19(b) | |
Company Certificate | 5.2(e) | |
Company Common Stock | 1.5(a) | |
Company Confidential Information | 4.5(b) | |
Company Consents | 2.3 | |
Company Disclosure Schedule | Article II | |
Company Equity Plan | 2.2 | |
Company Financial Statements | 2.6 | |
Company Interim Balance Sheet | 2.6 | |
Company Interim Balance Sheet Date | 2.6 | |
Company Interim Financial Statements | 2.6 | |
Company Material Adverse Effect | 2.1 | |
Company Options | 2.2 | |
Company Preferred Stock | 1.5(a) |
51 |
Defined Term | Section | |
Company Stock | 1.5(a) | |
Company Stockholders | 1.5(a) | |
Company Stock Certificate | 1.5(c) | |
Company Warrants | 2.2 | |
Company Year-End Financial Statements | 2.6 | |
Contemplated Transactions | 8.3 | |
Controlling Party | 6.3(a) | |
Damages | 6.1 | |
Damages Threshold | 6.5(a) | |
Defaulting Party | 8.6 | |
Delaware Act | 1.1 | |
Dispute | 6.3(c) | |
Dissenting Shares | 1.6(a) | |
Effective Time | 1.1 | |
Employee Benefit Plan | 2.19(a)(i) | |
Environmental Law | 2.20(a) | |
ERISA | 2.19(a)(ii) | |
ERISA Affiliate | 2.19(a)(iii) | |
Exchange Act | 2.6 | |
Expected Claim Notice | 6.4 | |
FDA | 2.31 | |
FDCA | 2.31 | |
GAAP | 2.6 | |
Governmental Entity | 2.4 | |
Indemnification Escrow Agreement | 1.3(e) | |
Indemnification Escrow Agent | 1.3(e) | |
Indemnification Escrow Shares | 1.3(e) | |
Indemnification Representative | 6.3(f) | |
Indemnified Executives | 4.9(b) | |
Indemnifying Stockholders | 6.1 | |
Initial Shares | 1.5(b) | |
Intellectual Property | 2.27(a) | |
Intellectual Property Rights | 2.27(a) | |
Laws | 2.4 | |
Legal Proceeding | 2.17 | |
Merger | Introduction | |
Merger Shares | 1.5(a) | |
Minimum Amount | Introduction | |
Non-Controlling Party | 6.3(a) | |
Non-Defaulting Party | 8.6 | |
Notes | Introduction | |
Ordinary Course of Business | 2.4 | |
Organization Date | 2.9(c) | |
Parent | Introduction | |
Parent Certificate | 5.3(e) | |
Parent Common Stock | Introduction | |
Parent Confidential Information | 4.7(b) | |
Parent Disclosure Schedule | Article III | |
Parent Equity Plan | 4.14 |
52 |
Defined Term | Section | |
Parent Financial Statements | 3.8 | |
Parent Material Adverse Effect | 3.1 | |
Parent Options | 1.8(a) | |
Parent Permits | 3.24 | |
Parent Benefit Plans | 3.22(a) | |
Parent Liabilities | 1.9 | |
Parent Reports | 3.6 | |
Parent Preferred Stock | 1.5(a) | |
Parent Subsidiary | 2.5(a) | |
Parent Warrants | 1.8(c) | |
Party | Introduction | |
Permits | 2.23 | |
Placement Agent | 2.25 | |
Private Placement Offering | Introduction | |
Reasonable Best Efforts | 4.1 | |
Response | 6.3(c) | |
SEC | 1.9(a) | |
Securities Act | 1.12 | |
Security Interest | 2.4 | |
Share Contribution | 3.2 | |
Split-Off | Introduction | |
Split-Off Agreement | Introduction | |
Split-Off Purchaser | Introduction | |
Split-Off Subsidiary | Introduction | |
Subsidiary | 2.5(a) | |
Super 8-K | 4.3 | |
Surviving Corporation | 1.1 | |
Tax Returns | 2.9(a)(ii) | |
Taxes | 2.9(a)(i) | |
Third Party Intellectual Property Rights | 2.27(d) | |
Transaction Documentation | 3.3 | |
Units | Introduction |
ARTICLE
VIII
TERMINATION
53 |
(a) by the Parent and the Acquisition Subsidiary if: (i) any of the conditions set forth in Section 5.2 hereof have not been fulfilled in all material respects by the Closing Date; (ii) the Company shall have breached or failed to observe or perform in any material respect any of its covenants or obligations under this Agreement if such breach is not cured within ten (10) days of written notice of such breach from Parent (to the extent such breach is curable) or (iii) as otherwise set forth herein; or
(b) by the Company if: (i) any of the conditions set forth in Section 5.3 hereof have not been fulfilled in all material respects by the Closing Date; (ii) the Parent or the Acquisition Subsidiary shall have breached or failed to observe or perform in any material respect any of its covenants or obligations under this Agreement if such breach is not cured within ten (10) days of written notice of such breach from the Company (to the extent such breach is curable) or (iii) as otherwise set forth herein.
ARTICLE
IX
MISCELLANEOUS
54 |
If to the Company or the Company Stockholders: | Copy to (which copy shall not constitute notice hereunder): | |
Enumeral Biomedical Corp | Xxxxx Xxxxxx LLP | |
One Xxxxxxx Square | 000 Xxxx Xxxxxx, Xxxxx 0000 | |
Building 000 Xxxxxx Xxxxx | Xxxxxx, XX 00000-0000 | |
Xxxxxxxxx, XX 00000 | ||
Attention Xxxxxxxx Xxxxxx, Esq. | ||
Attn: Xxxxxx Xxxxxxxxxxxx, CEO | Facsimile: 000-000-0000 |
55 |
If to the Parent or the Acquisition Subsidiary (prior to the Closing): | Copy to (which copy shall not constitute notice hereunder): | |
Enumeral Biomedical Holdings, Inc. | Xxxxx Xxxxx Xxxxx LLP | |
Krizikova 22 | 488 Madison Avenue, 12th Xxxxx | |
Xxxxxx 0, 00000, Xxxxx Xxxxxxxx | Xxx Xxxx, XX 00000 | |
Attn: Xxxxxx Xxxxxxx, CEO | Attn: Xxxxxxx X. XxXxxxx | |
Facsimile: (000) 000-0000 |
Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.
56 |
(a) The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.
[SIGNATURE PAGE FOLLOWS]
57 |
PARENT: | |||
ENUMERAL BIOMEDICAL HOLDINGS, INC. | |||
By: | /s/ Xxxxxx Xxxxxxx | ||
Name: | Xxxxxx Xxxxxxx | ||
Title: | President | ||
ACQUISITION SUBSIDIARY: | |||
ENUMERAL ACQUISITION CORP. | |||
By: | /s/ Xxxxxx Xxxxxxx | ||
Name: | Xxxxxx Xxxxxxx | ||
Title: | President | ||
COMPANY: | |||
ENUMERAL BIOMEDICAL CORP. | |||
By: | /s/ Xxxxxx X. Xxxxxxxxxxxx | ||
Name: | Xxxxxx X. Xxxxxxxxxxxx | ||
Title: | Chief Executive Officer | ||
Solely with respect to Section 6.3(f): | |||
/s/ Xxxxxx X. Xxxxxxxxxxxx | |||
Xxxxxx X. Xxxxxxxxxxxx, as Indemnification Representative |
Exhibit A
Form of Split-Off Agreement
Exhibit B
Form of General Release Agreement
Exhibit C
Form of Indemnification Escrow Agreement
Exhibit D
Form of 2014 Equity Incentive Plan
Exhibit E
Form of Executive Employment Agreement
Exhibit F-1
Signatories to Lock-Up and No-Shorting Agreements
Name | Title | |
Xxxx X. Xxxxxxxxx | Chairman of the Board | |
Xxxxxx X. Xxxxxxxxxxxx | Chief, Executive Officer, President and a director | |
Xxxxx Xxxxxxxxx | Director | |
Xxxxx Xxxxxxxx | Director | |
Xxxxxx Xxxxx | Director | |
Xxxxx Xxxxx | Vice President of Business Development | |
Xxxxx Xxxxxx | Vice President of Research and Development | |
Xxxxxx & Xxxxxx Group, Inc. | 5% Stockholder |
Exhibit F-2
Form of Lock-Up and No-Shorting Agreement
Exhibit G
Form of Legal Opinion of Company Counsel
Exhibit H
Form of Legal Opinion of Parent Counsel
Exhibit I
Form of Voting Agreement
Schedule 1.5(a)
Class or Series of Company Stock | Conversion Ratio | |
Common | 1.102121 | |
Series A Preferred | 1.598075 | |
Series A-1 Preferred | 1.790947 | |
Series A-2 Preferred | 1.997594 | |
Series B Preferred | 2.927509 |
Disclosure Schedules
DISCLOSURE SCHEDULE
TO
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
ENUMERAL BIOMEDICAL HOLDINGS, INC.
ENUMERAL ACQUISITION CORP.,
ENUMERAL BIOMEDICAL CORP.
AND
WITH RESPECT TO SECTION 6.3(f) ONLY
XXXXXX X. XXXXXXXXXXXX, AS INDEMNIFICATION REPRESENTATIVE
Dated as of July 31, 2014
This DISCLOSURE SCHEDULE (this “Disclosure Schedule”) is being delivered in connection with that certain Agreement and Plan of Merger and Reorganization (the “Agreement”), dated as of July 31, 2014, by and among Enumeral Biomedical Holdings, Inc. (formerly Cerulean Group, Inc.) a Nevada corporation (“Parent”), Enumeral Acquisition Corp., a Delaware corporation (“Acquisition Subsidiary“), Enumeral Biomedical Corp, a Delaware corporation, (“Company”), and solely with respect to Section 6.3(f), Xxxxxx X. Xxxxxxxxxxxx, as Indemnification Representative.
The section and subsection numbers in this Disclosure Schedule correspond to the section and subsection numbers in the Agreement. The information provided in any section of this Disclosure Schedule shall constitute disclosure for purposes of the corresponding section of the Agreement and any other sections of the Agreement, regardless of whether or not a specific cross reference is made thereto, to the extent that the relevance of any such disclosure is reasonably apparent from the text of such disclosure in such Schedule notwithstanding the absence of a cross-reference. The headings contained in this Disclosure Schedule are for reference purposes only and shall not affect in any way the reading or interpretation of this Disclosure Schedule or the Agreement. References to contracts or agreements in this Disclosure Schedule shall include any and all exhibits, schedules, appendices, annexes or attached thereto, incorporated therein, appended thereby or otherwise referenced therein.
This Disclosure Schedule (including all of the individual sections and subsections hereof and all the attachments hereto) are qualified in their entirety by reference to specific provisions of the Agreement, and are not intended to constitute, and shall not be construed as constituting, representations or warranties of any party to the Agreement, except as and to the extent provided in the Agreement. This Disclosure Schedule and the information and disclosures contained herein are intended only to qualify and limit the representations, warranties, and covenants contained in the Agreement, and shall not be deemed to expand in any way the scope or effect of any such representations, warranties, or covenants.
Section 2.2
Capitalization
Class or Series of Company Stock | Issued | Issuable | ||||||
Common | 4,482,948 | |||||||
Common Options | 948,567 | |||||||
Common Warrants | 694,443 | |||||||
Convertible Note to Common Stock | 2,931,502 | |||||||
Series A Preferred | 2,766,926 | |||||||
Series A Preferred Warrants | 41,659 | |||||||
Series A-1 Preferred | 2,047,207 | |||||||
Series A-2 Preferred | 1,833,798 | |||||||
Series B Preferred | 948,823 | |||||||
Series B Preferred Warrants | 144,140 | |||||||
Totals | 12,079,702 | 4,760,311 |
2 |
Section 2.3
Company Consents
1. | Loan and Security Agreement, dated December 5, 2011, as amended, by and between Square 1 Bank and Enumeral Biomedical Corp. Company has obtained consent from Square 1 Bank. |
3 |
Section 2.4
Section 2.4(b) – Governmental Approvals
None.
Section 2.4(c) – Notices, Conflicts, and Acceleration
1. | Exclusive Patent License Agreement, dated April 15, 2011, as amended, by and between Massachusetts Institute of Technology and Enumeral Biomedical Corp. Company has provided notice of the Merger to Massachusetts Institute of Technology |
2. | Company has provided notice to each of Novartis, Sanofi Aventis, Celgene, Massachusetts Institute of Technology and Crucell with respect to the filing of redacted agreements with each of them with the Securities Exchange Commission in connection with the Super 8-K. |
3. | Lease Agreement, dated July 16, 2012, by and between XX Xxxxxxx Fee, LLC and Enumeral Biomedical Corp. Company has provided notice to XX Xxxxxxx Fee, LLC, the landlord of One Xxxxxxx Square, as required under the applicable Lease Agreement |
4. | If the Company raises in excess of $15 Million in the Private Placement Offering, the Company may trigger a change of control provision in the following agreement: |
a. | Loan and Security Agreement, dated December 5, 2011, as amended, by and between Square 1 Bank and Enumeral Biomedical Corp. Company has obtained consent from Square 1 Bank. |
4 |
Section 2.8
1. | On April 23, 2014, the Company amended the articles of incorporation to increase the number of authorized shares of common stock to 23,111,202 and to increase the number of authorized shares of preferred stock to 11,788,288 and designated a new class of Series B Preferred Stock. |
2. | In April 2014, the Company issued options to two executive officers to purchase 105,881 underlying shares of convertible preferred series B shares in connection with the Company’s Series B financing. These options were issued in relation to these executives taking a salary reduction prior to the Series B round of financing. |
3. | In April 2014, the Company issued 948,822 shares of Series B Convertible Preferred Stock at an issue price of $2.125 per share for proceeds of $1,769,220 net of issuance costs of $274,027. In connection with the offering, the Company compensated the placement agent through the payment of $81,000 and the issuance of a warrant with respect to 38,259 Series B shares exercisable at $2.125 per share for a term of 5 years. |
4. | In June 2014, the Company revised the terms of their Loan and Security Agreement with Square 1 Bank, whereby the Company extended their deadline to complete an equity financing for gross cash proceeds of $4.0 million to August 1, 2014. Additionally, the Company amended their minimum cash requirement beginning June 26, 2014 through August 1, 2014, whereas, the Company is required to maintain a minimum of $300,000 in unrestricted cash. |
5. | In July 2014, the Company amended and restated the employment agreements of Xxxxxx X. Xxxxxxxxxxxx and Xxxx X. Xxxxxxxxx. |
6. | In July 2014, the Company issued stock options to the following individuals: |
a. | Najmia Amirina |
b. | Xxxxxxx Xxxxx |
c. | Xxxxxxxx Xxxxxxx-Xxxx |
x. | Xxxxxx XxXxxxx |
e. | Xxxxxxx Xxxxxxxxx |
f. | Xxxxx Xxxxx |
g. | Xxxxx Xxxxxx |
h. | Najmia Amirina |
i. | Xxxxxxx Xxxxx |
j. | Xxxxxxxx Xxxxxxx-Xxxx |
x. | Xxxxxx Xxxx |
l. | Xxxxx Xxxxxxxxx |
m. | Xxxxxxxxxx Xxxxx |
7. | If the Company raises $20 million in the Private Placement Offering, the Company may trigger a change of control provision in the following agreements: |
a. | Loan and Security Agreement, dated December 5, 2011, as amended, by and between Square 1 Bank and Enumeral Biomedical Corp. |
5 |
Section 2.9
The Company has incurred professional fees, such as legal and accounting, in connection with the Merger which will exceed $100,000 in aggregate.
6 |
Section 2.10
Section 2.10 (b) - Tax Returns
The Company has filed for extensions for 2013 taxes.
7 |
Section 2.11
Square 1 Bank has a lien on all personal property of the Company except for intellectual property; with respect to intellectual property, however, Square 1 Bank has a lien on all accounts and general intangibles that consists of rights to payment and proceeds from the sale, licensing, and disposition of all or any part of the rights in the intellectual property.
Square 1 Bank also holds two outstanding warrants to purchase the Company’s Series A Convertible Preferred Stock.
8 |
Section 2.13
Agreement | Property | Term | Extension/ Expansion Options |
Rent | |
License Agreement, dated April 24, 2013, by and between Xxx Suites I, LLC and Enumeral Biomedical Corp. |
0000 Xxxxxxxx, Xxxxx 000, Xxx Xxxx, XX 00000 | June 1, 2013 to May 30, 2014 (“Initial Term”) | Automatic renewals for the same period of time as the Initial Term, unless earlier terminated by either party | $1,775 monthly | |
Lease Agreement, dated July 16, 2012, by and between XX Xxxxxxx Fee, LLC and Enumeral Biomedical Corp. | One Xxxxxxx Square, Building 400, 4th Floor, Cambridge, MA | October 1, 2012 to November 30, 2015 | Option to extend for one 3-year term | Time Period | Yearly Rent |
10/1/12 – 9/30/13 | $224,754.00 | ||||
10/1/13 – 9/30/14 | $229,536.00 | ||||
10/1/14 – 9/30/15 | $248,664.00 | ||||
10/1/15 – 11/30/15 | $253,446.00 |
9 |
Section 2.14
Contracts
Section 2.14(a)(ii)(A) - Purchase Orders and Service Receipts
1. | Exclusive Patent License Agreement, dated April 15, 2011, as amended, by and between Massachusetts Institute of Technology and Enumeral Biomedical Corp. |
Section 2.14(a)(iii) – Joint Venture and Partnership Agreements
1. | Research Agreement, dated June 18, 2012, by and between sanofi-aventis U.S. Inc. and Enumeral Biomedical Corp. |
Section 2.14(a)(iv) – Indebtedness Agreements
1. | Loan and Security Agreement (including warrants), dated December 5, 2011, as amended, by and between Square 1 Bank and Enumeral Biomedical Corp. |
2. | The Company has issued Convertible Promissory Notes in the principal amount of $750,000 at an annual interest rate of 12%, which upon closing of the Merger, the principal and interest on the Notes will be converted into shares of Company Common Stock. – |
Section 2.14(a)(v) – Restricting Line of Business Agreements
1. | Research Agreement, dated June 18, 2012, by and between sanofi-aventis U.S. Inc. and Enumeral Biomedical Corp. |
Section 2.14(a)(vi) – Employment and Consulting Agreements
1. | Amended and Restated Employment Agreement, dated July 21, 2014, by and between Xxxxxx X. Xxxxxxxxxxxx and Enumeral Biomedical Corp. |
2. | Amended and Restated Employment Agreement, dated July 21, 2014, by and between Xxxx X. Xxxxxxxxx and Enumeral Biomedical Corp. |
3. | Employment Agreement, dated May 19, 2011, by and between Xxxxx Xxxxx and Enumeral Biomedical Corp. |
Section 2.14(a)(vii) – Officer, Director, and Stockholder Agreements
4. | Amended and Restated Employment Agreement, dated July 21, 2014, by and between Xxxxxx X. Xxxxxxxxxxxx and Enumeral Biomedical Corp. |
10 |
5. | Amended and Restated Employment Agreement, dated July 21, 2014, by and between Xxxx X. Xxxxxxxxx and Enumeral Biomedical Corp. |
6. | Employment Agreement, dated May 19, 2011, by and between Xxxxx Xxxxx and Enumeral Biomedical Corp. |
7. | Offer Letter, dated December 17, 2011, by and between Xxxxx Xxxxxx and Enumeral Biomedical Corp. |
8. | Consulting Agreement, dated September 30, 2013, by and among Xxxxx Xxxxxxxxx, Xxxxxx Xxxxxxxxx, and Enumeral Biomedical Corp. (Terminated at Closing) |
Section 2.14(a)(viii) – Capital Expenditures
1. | Master Service Provider Agreement, dated March 14, 2012, by and between Anthrogenesis Corporation (dba Celgene Cellular Therapeutics) and Enumeral Biomedical Corp. |
2. | Services Agreement, dated October 8, 2013, by and between Novartis Pharma AG and Enumeral Biomedical Corporation |
3. | Exclusive Patent License Agreement, dated April 15, 2011, as amended, by and between Massachusetts Institute of Technology and Enumeral Biomedical Corp. |
Section 2.14(a)(ix) – Material Agreements
1. | Research Agreement, dated June 18, 2012, by and between sanofi-aventis U.S. Inc. and Enumeral Biomedical Corp. |
2. | Loan and Security Agreement, dated December 5, 2011, as amended, by and between Square 1 Bank and Enumeral Biomedical Corp. |
3. | Exclusive Patent License Agreement, dated April 15, 2011, as amended, by and between Massachusetts Institute of Technology and Enumeral Biomedical Corp. |
4. | Master Service Provider Agreement, dated March 14, 2012, by and between Anthrogenesis Corporation (dba Celgene Cellular Therapeutics) and Enumeral Biomedical Corp. |
5. | Services Agreement, dated October 8, 2013, by and between Novartis Pharma AG and Enumeral Biomedical Corporation |
6. | Lease Agreement, dated July 16, 2012, by and between XX Xxxxxxx Fee, LLC and Enumeral Biomedical Corp. |
7. | Amended and Restated Employment Agreement, dated July 21, 2014, by and between Xxxxxx X. Xxxxxxxxxxxx and Enumeral Biomedical Corp. |
11 |
8. | Amended and Restated Employment Agreement, dated July 21, 2014, by and between Xxxx X. Xxxxxxxxx and Enumeral Biomedical Corp. |
9. | If the Company raises $20 million in the Private Placement Offering, the Company may trigger a change of control provision in the following agreement: |
a. | Loan and Security Agreement, dated December 5, 2011, as amended, by and between Square 1 Bank and Enumeral Biomedical Corp. |
10. | The Company has entered into Non-Disclosure Agreements |
11. | The Company has entered into Confidentiality Agreements |
12. | The Company has entered into the standard form of Employment Agreements |
13. | The Company has entered into Consulting Agreements |
Section 2.14(a)(x) – Indemnification Agreements
Employment Agreements contain indemnity provisions. The Directors have rights to indemnity under Indemnity Agreements and the Bylaws. Each of the Agreements into which the Company has entered into referred to paragraphs 1-9 above contain indemnification provisions.
Section 2.14(a)(xi) – Agreement Relating to the Future Sales of Company Securities
Convertible Notes issued on or about February 2014.
Section 2.14(b) – Agreements Not Provided to Parent
1. | The Company has entered into Non-Disclosure Agreements, which are not provided |
2. | The Company has entered into Confidentiality Agreements, which are not provided |
3. | The Company has entered into the standard form of Employment Agreements, which are not provided |
4. | The Company has entered into Consulting Agreements, which are not provided |
12 |
Section 2.17
Insurance
Summary of Insurance Coverages 02/06/2014
VENDOR NAME / COVERAGE
St. Xxxx Travelers/St. Xxxx Fire & Marine
Commercial coverage 4/25/13 - 4/25/14
commercial coverage 4/25/12 - 4/25/13
Auto coverage 4/25/13 - 4/25/14
Workers Comp 4/25/13 - 4/25/14
Total
Illinois Union
Directors & officers coverage 7/26/13 - 7/26/14
13 |
Section 2.19
Litigation
None.
14 |
Section 2.20(a)
List of Employees
1. | Xxxxxx X. Xxxxxxxxxxxx | President & CEO of the company |
2. | Xxxx X. Xxxxxxxxx | Executive Chairman; Treasurer |
3. | Xxxxx Xxxxx | Director of Business Development |
4. | Xxxxxx Xxxx | Scientist I |
5. | Xxxxx Xxxxx | Laboratory Operations Manager |
6. | Ancho Xxxxxx | Director of Research & Development |
7. | Xxxxxxx Xxxxx | Research Assistant |
8. | Xxxxxxxx Xxxxxxx Yoon | Scientist II |
9. | Najmia Amirina | Research Associate |
15 |
Section 2.21
Section 2.21(b) - Employee Benefit Plans
1. | Enumeral Biomedical Employee Handbook (includes transit and parking plan, and vacation plan) |
2. | Enumeral Cafeteria Plan, administered through AdminPro, Inc. |
3. | UnitedHealthCare/Oxford: Oxford USA Freedom Plan Direct |
4. | Enumeral Dental PPO Benefit Summary |
5. | 2009 Equity Incentive Plan |
Section 2.21(k)(i) - Agreements
1. | Amended and Restated Employment Agreement, dated July 21, 2014, by and between Xxxxxx X. Xxxxxxxxxxxx and Enumeral Biomedical Corp. |
2. | Amended and Restated Employment Agreement, dated July 21, 2014, by and between Xxxx X. Xxxxxxxxx and Enumeral Biomedical Corp. |
3. | Employment Agreement, dated May 19, 2011, by and between Xxxxx Xxxxx and Enumeral Biomedical Corp. |
Section 2.21(k)(ii) - Employee Agreements
Employment Agreements with Messrs. Tinkelenberg, Brand and Xxxxxxxxx provide for Change of Control payments including vesting and acceleration of options and restricted stock.
Section 2.21(k)(iii) –Other Agreements Affected by the Transaction
1. | Section 2.14(a)(vii) is incorporated herein by reference. |
2. | 2009 Equity Incentive Plan |
3. | Standard Form of Stock Option Agreement and stock option agreements with the option holders set forth in Section 2.2 |
4. | The Company Enumeral has outstanding $750,000 principal amount of 12% Convertible Promissory Notes due July 1, 2015 (the “Notes”), which upon closing of the Merger, the principal and interest on the Notes will be converted into shares of Company Common Stock. |
5. | Loan and Security Agreement, dated December 5, 2011, as amended, by and between Square 1 Bank and Enumeral Biomedical Corp. |
16 |
6. | The Company has granted warrants to the following: |
a. | Square 1 Bank (2) warrants |
b. | Xxxxx X. Xxxxx |
x. | Xxxxxx & Xxxxxx Group, Inc. |
d. | Xxxxxxxx Xxxxxx |
e. | Xxxxx Xxxxxxxxx |
f. | Normal Xxxxxxxxx |
g. | Xxxxxxx X. Xxxxx |
h. | Xxxxxx X. Tinkeleberg |
i. | Blackbook Capital LLC |
17 |
Section 2.24
Customers
Customer/Partner | 2013 Revenue | |||
sanofi-aventis U.S. Inc. | $ | 50,000 | ||
Crucell Holland B.V.* | $ | 62,500 | ||
Celgene Cellular Therapeutics | $ | 50,000 | ||
National Cancer Institute | $ | 149,875 | ||
Total Revenue 2013 | $ | 377,375 |
* The Contract Research Agreement, dated February 28, 2012, between Crucell Holland B.V. and Enumeral Biomedical Corp., (the “Agreement”) is no longer in effect, however, certain provisions of the Agreement survive the termination.
18 |
Section 2.25
Permits
1. | Laboratory Biosafety Permit No. 172 from Cambridge Public Health Dept. - expires February 28, 2015 |
2. | 2014 Flammable Materials Permit No. 672 from City of Cambridge Fire Dept. - expires December 31, 2014 |
3. | General Permit No. 09403913 for Low Flow and Low Pollutant Discharges from MA Water Resources Auth. - expires 11/15/2017 |
4. | The Company has the authority to do business in Delaware, New York, and Massachusetts. |
5. | Studies involving the collection of patient samples from participating clinical sites are subject to IRB approval, which the Company has obtained. |
19 |
Section 2.26
Certain Business Relationships with Affiliates
None.
20 |
Section 2.27
Simultaneously with the closing of the Merger, the Company will issue to Xxxxx Xxxxx, a number of shares of the Company’s common stock that will be exchangeable for 150,000 shares of Company’s common stock.
21 |
Section 2.29
Intellectual Property
Section 2.29 (b) – Company Registered IP
The following intellectual property is licensed from MIT and, in some cases, related institutions:
Title | Licensor | Document Number |
Jurisdictions | Status | Summary |
MICROARRAY WITH MICROCHANNELS | Massachusetts Institute of Technology | 8,569,046 | US | Patented | Issued patent that provides device claims directed to a microarray of microwells with a lattice of microchannels. |
MICROARRAY WITH MICROCHANNELS | Massachusetts Institute of Technology | National stages of WO2010/096652 | Australia Canada China Europe Hong Kong India Israel Japan Korea Russia Singapore |
AU
– Accepted CA - Pending CN - Allowed EP - Pending HK - Pending IN- Pending IL – Claims found allowable JP - Patented KR - Pending RU - Pending SG - Patented |
Applications that provide device claims directed to a microarray of microwells with a lattice of microchannels. |
22 |
Title | Licensor | Document Number |
Jurisdictions | Status | Summary |
SCREENING ASSAYS AND METHODS | Harvard University | 7,776,553 | US | Patented | Issued patent with claims directed to a microengraving method to screen monoclonal antibodies. |
SCREENING ASSAYS AND METHODS | Harvard University | 20110281764 | US | Pending | Continuation of ‘553; claims directed to a microarray of cell-derived products of single cells. |
SCREENING ASSAYS AND METHODS | Harvard University | 20110281745 | US | Allowed | Continuation of ‘553; claims directed to a method to make a microarray by capturing cell derived products of single cells on a solid substrate. |
SCREENING ASSAYS AND METHODS | Harvard University | 20140011709 | US | Allowed | Continuation of 20110281764; claims directed to a method of producing a microarray of secreted antibodies. |
SCREENING ASSAYS AND METHODS | Harvard University | 20130338047 | US | Allowed | Continuation of 20110281764; claims directed to an apparatus comprising a moldable slab with antibody producing cells, sealed to a substrate. |
SCREENING ASSAYS AND METHODS |
Harvard University | 8,772,049 | US | Patented | Continuation of 20110281764; claims directed to a method for screening antibodies produced by a single or a few cell(s). |
23 |
Title | Licensor | Document Number |
Jurisdictions | Status | Summary |
METHOD FOR DIAGNOSING ALLERGIC REACTIONS | Massachusetts Institute of Technology | 20120015824 | US | Pending | Application with method claims directed to use of microengraving to determine cytokine profile of a single or a few T cell(s) over time. |
METHOD FOR DIAGNOSING ALLERGIC REACTIONS | Massachusetts Institute of Technology | National stages of WO2010/065929 | Australia Canada China Europe Hong Kong India Israel Japan Korea Russia Singapore |
AU - Pending CA - Pending CN - Pending EP - Pending HK - Pending IN- Pending IL - Pending JP - Pending KR - Pending RU - Pending SG - Pending |
Applications with method claims directed to use of microengraving to determine profiles of secreted products of single cells over time. |
COMPOSITIONS AND METHODS FOR SPATIAL SEPARATION AND SCREENING OF CELLS | Massachusetts Institute of Technology | 20110124520 | US | Pending | Application with method claims directed to evaluating activity in solution of enzymes secreted by single cells. |
COMPOSITIONS AND METHODS FOR SPATIAL SEPARATION AND SCREENING OF CELLS | Massachusetts Institute of Technology | National stages of WO2009/145925 | Canada China Europe India Japan |
CA
- Pending CN - Pending EP - Pending IN - Pending JP - Pending |
Applications with method claims directed to evaluating activity in solution over time of enzymes secreted by single cells. |
24 |
Title | Licensor | Document Number |
Jurisdictions | Status | Summary |
COMPOSITIONS AND METHODS FOR ASSESSING CYTOTOXICITY OF SINGLE CELLS | Massachusetts Institute of Technology | 20120149592 | US | Pending | Application with method claims directed to monitoring cell lysis by single effector cells while profiling secreted products. |
COMPOSITIONS AND METHODS FOR ASSESSING CYTOTOXICITY OF SINGLE CELLS | Massachusetts Institute of Technology | National stages of WO2010/085275 | Australia Canada China Europe Hong Kong India Israel Japan Korea Russia Singapore |
AU - Pending CA - Pending CN - Pending EP - Pending HK - Pending IN - Pending IL - Pending JP - Pending KR - Pending RU – Grant Fee Paid SG - Patented; Divisional Filed |
Applications with method claims directed to monitoring cell lysis by single effector cells while profiling secreted products. |
METHOD FOR DETECTING ACTIVE AND LATENT VIRALLY INFECTED CELLS | Massachusetts Institute of Technology | 20110111981 | US | Pending | Application with method claims directed to performing cell lysis and RT-PCR on one or a few cell(s) in a sealed microwell. |
25 |
1. | Exclusive Patent License Agreement, dated April 15, 2011, as amended, by and between Massachusetts Institute of Technology and Enumeral Biomedical Corp. |
Section 2.29 (c) – IP Status
1. | Section 2.29(b) is incorporated herein by reference. |
Section 2.29 (e) – IP Litigation
None.
Section 2.29(f) - Third Party’s Infringement on Company IP
None.
26 |