AGREEMENT AND PLAN OF MERGER BY AND AMONG DRAGON PHARMACEUTICAL INC., CHIEF RESPECT LIMITED, DATONG INVESTMENT INC. AND YANLIN HAN Dated as of March 26, 2010
APPENDIX
A
AGREEMENT
AND PLAN OF MERGER
BY AND
AMONG
CHIEF
RESPECT LIMITED,
DATONG
INVESTMENT INC.
AND
XXXXXX
XXX
Dated as
of March 26, 2010
TABLE OF
CONTENTS
|
Page
|
||
ARTICLE
I
|
|||
Section
1.01
|
Definitions
|
1
|
|
Section
1.02
|
Other
Defined Terms
|
5
|
|
ARTICLE
II
|
THE
MERGER
|
||
Section
2.01
|
Merger
|
8
|
|
Section
2.02
|
Tax
Characterization
|
8
|
|
Section
2.03
|
Organizational
Documents
|
8
|
|
Section
2.04
|
Effective
Time
|
9
|
|
Section
2.05
|
Closing
|
9
|
|
Section
2.06
|
Directors
and Officers of Surviving Corporation
|
9
|
|
Section
2.07
|
Further
Assurances
|
9
|
|
ARTICLE
III
|
|||
Section
3.01
|
Effects
on Shares
|
9
|
|
Section
3.02
|
Exchange
of Certificates; Paying Agents
|
11
|
|
Section
3.03
|
Withholding
Rights
|
13
|
|
Section
3.04
|
Dissenters’
Shares
|
13
|
|
ARTICLE
IV
|
|||
Section
4.01
|
Organization
and Qualification; Subsidiaries; Authority
|
14
|
|
Section
4.02
|
Organizational
Documents
|
14
|
|
Section
4.03
|
Capitalization
|
14
|
|
Section
4.04
|
Authority;
Validity and Effect of Agreements
|
15
|
|
Section
4.05
|
No
Conflict; Required Filings and Consents
|
15
|
|
Section
4.06
|
Permits;
Compliance with Laws
|
16
|
|
Section
4.07
|
SEC
Filings; Financial Statements
|
16
|
|
Section
4.08
|
Absence
of Certain Changes or Events
|
17
|
|
Section
4.09
|
Taxes
|
18
|
|
Section
4.10
|
Title
to Property
|
19
|
|
Section
4.11
|
Intellectual
Property
|
19
|
|
Section
4.12
|
Proxy
Statement
|
20
|
|
Section
4.13
|
Restriction
on Business Activities
|
20
|
|
Section
4.14
|
Governmental
Authorizations
|
20
|
|
Section
4.15
|
Litigation
|
20
|
|
Section
4.16
|
Compliance
with Laws
|
20
|
|
Section
4.17
|
Environmental
Matters
|
21
|
|
Section
4.18
|
Brokers’
and Finders’ Fees
|
21
|
|
Section
4.19
|
Opinion
of Company Financial Advisor
|
21
|
|
Section
4.20
|
Transactions
with Affiliates
|
21
|
|
Section
4.21
|
Employee
Benefit Plans and Compensation
|
21
|
|
Section
4.22
|
Insurance
|
22
|
|
Section
4.23
|
Investment
Company Act of 1940
|
22
|
|
Section
4.24
|
Contracts
|
22
|
|
Section
4.25
|
Takeover
Statutes
|
22
|
|
Section
4.26
|
No
Other Representations or Warranties
|
22
|
A-i
Page
|
|||
ARTICLE
V
|
|||
Section
5.01
|
Due
Incorporation Good Standing and Operations
|
22
|
|
Section
5.02
|
Authorization;
Binding Agreement
|
23
|
|
Section
5.03
|
Governmental
Approvals
|
23
|
|
Section
5.04
|
No
Violations
|
23
|
|
Section
5.05
|
Proxy
Statement
|
23
|
|
Section
5.06
|
Financing
|
24
|
|
Section
5.07
|
Brokers’
and Finders’ Fees
|
24
|
|
Section
5.08
|
Control
and Management
|
24
|
|
Section
5.09
|
No
Other Representations or Warranties
|
24
|
|
Section
5.10
|
Takeover
Statutes
|
24
|
|
ARTICLE
VI
|
CONDUCT
OF BUSINESS PENDING THE MERGER
|
||
Section
6.01
|
Conduct
of Business by Company Pending the Merger
|
25
|
|
ARTICLE
VII
|
ADDITIONAL
AGREEMENTS
|
||
Section
7.01
|
Preparation
of Proxy Statement; Shareholders’ Meeting
|
26
|
|
Section
7.02
|
Access
to Information; Confidentiality
|
27
|
|
Section
7.03
|
Acquisition
Proposals
|
28
|
|
Section
7.04
|
Employee
Benefits Matters
|
30
|
|
Section
7.05
|
Directors’
and Officers’ Indemnification
|
30
|
|
Section
7.06
|
Further
Action; Reasonable Efforts
|
32
|
|
Section
7.07
|
Transfer
Taxes
|
32
|
|
Section
7.08
|
Public
Announcements
|
33
|
|
Section
7.09
|
Termination
of OTCBB Quotation
|
33
|
|
Section
7.10
|
Company’s
Expenses & Obligations
|
33
|
|
Section
7.11
|
Resignations
|
33
|
|
Section
7.12
|
Voting
Commitment
|
33
|
|
Section
7.13
|
SEC
Filings
|
33
|
|
ARTICLE
VIII
|
CONDITIONS
TO THE MERGER
|
||
Section
8.01
|
Conditions
to the Obligations of Each Party
|
34
|
|
Section
8.02
|
Additional
Conditions to Obligations of Parent and MergerSub
|
34
|
|
Section
8.03
|
Additional
Conditions to Obligations of the Company
|
35
|
|
ARTICLE
IX
|
TERMINATION,
AMENDMENT AND WAIVER
|
||
Section
9.01
|
Termination
|
35
|
|
Section
9.02
|
Effect
of Termination
|
36
|
|
Section
9.03
|
Fees
and Expenses
|
36
|
|
Section
9.04
|
Waiver
|
37
|
|
ARTICLE
X
|
GENERAL
PROVISIONS
|
||
Section
10.01
|
Non-Survival
of Representations and Warranties
|
38
|
|
Section
10.02
|
Notices
|
38
|
|
Section
10.03
|
Severability
|
39
|
|
Section
10.04
|
Amendment
|
39
|
|
Section
10.05
|
Entire
Agreement; Assignment
|
39
|
A-ii
Page
|
|||
Section
10.06
|
Specific
Performance
|
39
|
|
Section
10.07
|
Parties
in Interest
|
39
|
|
Section
10.08
|
Obligations
of Parent and of the Company
|
39
|
|
Section
10.09
|
Governing
Law; Enforcement and Forum
|
39
|
|
Section
10.10
|
Headings
|
40
|
|
Section
10.11
|
Counterparts
|
40
|
|
Section
10.12
|
Waiver
|
40
|
|
Section
10.13
|
Waiver
of Jury Trial
|
40
|
|
Section
10.14
|
Remedies
Cumulative
|
40
|
|
Section
10.15
|
Arbitration
|
40
|
A-iii
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER, dated as March 26, 2010 (this “Agreement”), is made
and entered into by and among Dragon Pharmaceutical Inc., a Florida corporation
(the “Company”), Chief
Respect Limited, a Hong Kong corporation (“Parent”), Datong
Investment Inc., a Florida corporation and a subsidiary of Parent (“MergerSub”), and Xx.
Xxxxxx Xxx, an individual (“Xx. Xxx”) solely with
respect to Sections 5.06, 7.01(c), 7.08, 8.03(b), 9.03(c) and (d).
WHEREAS,
the respective Boards of Directors of Parent, MergerSub and the Company have
approved and declared advisable this Agreement and the merger of MergerSub with
and into the Company (the “Merger”) upon the
terms and subject to the conditions of this Agreement and in accordance with the
Florida Business Corporation Act (the “FBCA”), with the
Company surviving the Merger, as a subsidiary of the Parent, and each share of
the Company’s common stock, par value $0.001 per share (the “Company Common
Stock”) outstanding immediately prior to the Effective Time (other than
(i) Company Common Stock held by holders who comply with the provisions of the
FBCA regarding the right of shareholders to dissent from the Merger and require
appraisal of their shares and (ii) Company Common Stock owned by Xx. Xxx
immediately prior to the Effective Time which shall remain issued and
outstanding and otherwise unaffected by the Merger) will thereupon be canceled
and converted into the right to receive the Company Common Stock Merger
Consideration, on the terms and subject to the conditions set forth
herein;
A-1
ARTICLE
I
DEFINITIONS
Section
1.01 Definitions.
“Acquisition Proposal”
means any good faith proposal or offer from any Person or group for, whether in
one transaction or a series of related transactions, any (a) merger,
consolidation or similar transaction involving the Company or any Subsidiary of
the Company that would constitute a “significant subsidiary” (as defined in Rule
1-02 of Regulation S-X) but substituting the reference of 10% therein to 50.1%,
(b) sale or other disposition, directly or indirectly, by merger, consolidation,
combination, reorganization, share exchange or any similar transaction, of any
assets of the Company or any of its Subsidiaries representing 50.1%
or more of the consolidated assets of the Company and or any of its
Subsidiaries, (c) issue, sale or other disposition by the Company of (including
by way of merger, consolidation, share exchange or any similar transaction)
securities (or options, rights or warrants to purchase, or securities
convertible into, such securities) representing 50.1% or more of the votes
associated with the outstanding voting equity securities of the Company, (d)
tender offer or exchange offer in which any Person or “group” (as such term is
defined under the Exchange Act) shall acquire beneficial ownership (as such term
is defined in Rule 13d-3 under the Exchange Act), or the right to acquire
beneficial ownership, of 50.1% or more of the outstanding Company Common Stock,
or (e) transaction which is similar in form, substance or purpose to any of the
foregoing transactions; provided, however, that the
term “Acquisition Proposal” shall not include (i) the Merger or any of the other
transactions contemplated by this Agreement, or (ii) any merger, consolidation,
business combination, recapitalization or similar transaction solely among the
Company and one or more wholly owned Subsidiaries or among wholly owned
Subsidiaries.
“Action” means any
claim, action, suit, proceeding, arbitration, mediation or other
investigation.
“Affiliate” or “affiliate” of a
specified person means a person who, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such specified Person.
“Beneficial owner”,
with respect to any Company Common Stock, has the meaning ascribed to such term
under Rule 13d-3(a) of the Exchange Act.
“Business Day” or
“business day”
means any day other than a Saturday, Sunday or any day which the Company is
closed for business or is a legal holiday under the laws of the U.S. or is a day
on which banking institutions in the U.S. are authorized or obligated by Law or
other governmental action to close.
“Certificate” or
“Certificates”
means any certificate representing Company Common Stock.
“Code” means the
Internal Revenue Code of 1986, as amended.
“Company Bylaws” means
the Bylaws of Dragon Pharmaceutical Inc., as amended.
“Company Charter”
means the articles of incorporation of Dragon Pharmaceutical Inc., as
amended.
“Company Common Stock Merger
Consideration” means cash in the amount equal to $.82 per share, less any
amounts due to the Company to the extent applicable.
“Company Material Adverse
Effect” means, with respect to the Company, an Effect that, individually
or in the aggregate, (1) is materially adverse to the assets,
business, results of operations or condition (financial or other) of the Company
and its Subsidiaries, taken as a whole, or (2) prevents, or materially hinders
the consummation of the Merger or any of the other transactions contemplated by
this Agreement other than, in each case, any Effect arising out of or resulting
from (a) any decrease in the market price of the Company Common Stock (but
not any Effect underlying such decrease to the extent that such Effect would
otherwise constitute a Company Material Adverse Effect), (b) changes in
conditions in the U.S. or global economy (except to the extent such Effect
affects the Company and its Subsidiaries in a materially disproportionate
manner), (c) changes in conditions in the industry in which the Company and
its Subsidiaries operate (except to the extent such Effect affects the Company
and its Subsidiaries in a materially disproportionate manner), (d) any Effect
resulting from the announcement or pendency of the Merger, (e) changes in Laws,
(f) changes in GAAP, (g) failure by the Company to meet internal budgets or
projections, whether or not publicly disclosed, or financial analyst
projections, (h) acts of war, armed hostilities, sabotage or terrorism, or any
escalation or worsening of any such acts of war, armed hostilities, sabotage or
terrorism threatened or underway as of the date of this Agreement (except to the
extent such Effect affects the Company and its Subsidiaries in a materially
disproportionate manner as compared to other persons or participants in the
industries in which the Company and its Subsidiaries conduct their business and
that operate in the geographic regions affected by such Effect, (i) any
action taken by the Company or its Subsidiaries at the written request or with
the written consent of Parent, or (j) any matter set forth on Section 1.01 of
the Disclosure Schedules, if any.
A-2
“Company Products”
shall mean all products and services developed or under development, owned,
made, provided, distributed, imported, sold or licensed by or on behalf of the
Company and any of its Subsidiaries.
“Consent” means any
consent, approval, waiver or authorization of, notice to or declaration or
filing.
“Contract” shall mean
any written or oral agreement, contract, commitment, arrangement or
understanding of any nature, as in effect as of the date hereof or as may
hereinafter be enforceable against the Company or its Subsidiaries.
“Control” (including
the terms “controlled
by” and “under
common control with”) means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise.
“Disclosure Schedule”
means the disclosure schedule, if any, delivered by the Company to
Parent concurrently with the execution of this Agreement, which
disclosure schedule is arranged in paragraphs corresponding to the numbered and
lettered sections contained in this Agreement, provided, however, that the
disclosure of any fact or item in any section of the Disclosure Schedule shall,
should the existence of such fact or item be relevant to any other section, be
deemed to be disclosed with respect to that other section so long as the
relevance of such disclosure to such other section is reasonably apparent from
the nature of such disclosure. The disclosure of any fact or item in
any section of the Disclosure Schedule that corresponds to a representation or
warranty qualified by materiality or “Company Material Adverse Effect” is not
intended to vary the definition of “Company Material Adverse Effect” or to imply
that the item so included, or other items, are material. Nothing in
the Disclosure Schedule is intended to broaden the scope of any representation
or warranty contained in this Agreement.
“Effect” means any
effect, event, fact, development, condition or change.
“Enforceability
Exceptions” means any exceptions to the enforceability of any agreement
under applicable bankruptcy, insolvency, reorganization or other similar Laws
affecting the enforcement of creditors’ rights generally or under principles of
equity regarding the availability of remedies.
“Environmental Claim”
means any claim, action, cause of action, suit, proceeding, investigation,
order, demand or notice (in each instance in writing) by any Person alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (a) the presence, or release into the
environment, of, or exposure to, any Material of Environmental Concern at any
location, whether or not owned or operated by the Company or any of its
Subsidiaries or (b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
A-3
“Environmental Laws”
mean all applicable federal, state, local and foreign laws, regulations,
ordinances, and common law relating to pollution or protection of human health
(to the extent relating to exposure to Materials of Environmental Concern) or
protection of the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata, and natural
resources), including, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of, or exposure to,
Materials of Environmental Concern.
“Expenses” means all
out-of-pocket expenses, including all fees and expenses of accountants,
investment bankers, legal counsel, financing sources and consultants incurred by
a party or on its behalf in connection with or related to the transactions
contemplated by this Agreement.
“FINRA” means
Financial Industry Regulatory Authority.
“GAAP” means generally
accepted accounting principles as applied in the U.S.
“Governmental
Authority” means any government, governmental, regulatory or
administrative authority, agency, instrumentality or commission or any court,
tribunal, or judicial or arbitral body of any nature; or anybody exercising, or
entitled to exercise, any administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power of any
nature, whether federal, state, local, domestic or
foreign.
“Knowledge of the
Company” means the actual knowledge of the executive officers of the
Company without independent investigation.
“Law” means any
federal, state, local or foreign statute, law, ordinance, regulation, rule,
code, executive order, injunction, judgment, decree or other order of any
Governmental Authority.
“Liens” means any of
the following: mortgage, lien (statutory or other) or other security agreement,
security arrangement or security interest, hypothecation, pledge or other
deposit arrangement, assignment; charge, levy, executory seizure by a
Governmental Authority, attachment, garnishment, encumbrance (including any
easement, exception, reservation or limitation, right of way, or the like),
conditional sale, title retention or other similar agreement, arrangement,
device or restriction, any financing lease involving substantially the same
economic effect as any of the foregoing, the filing of any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction, or
restriction on sale, transfer, assignment, disposition or other
alienation.
“Materials of Environmental
Concern” means hazardous chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum and petroleum products,
asbestos or asbestos-containing materials or products, polychlorinated
biphenyls, lead or lead-based paints or materials, radon, toxic fungus, toxic
mold, mycotoxins or other hazardous substances that would reasonably be expected
to have an adverse effect on human health or the environment.
“Ordinary Course”
means any action taken by the Company or any of its Subsidiaries that is
consistent in nature, scope and magnitude with the past practices of the Company
or any of its Subsidiaries or is taken in the ordinary course of the normal,
day-to-day operations of the Company or any of its Subsidiaries.
“OTCBB” means the Over
the Counter Bulletin Board.
A-4
“Parent or MergerSub Material
Adverse Effect” means any Effect that prevents or materially hinders
Parent or MergerSub from consummating the Merger or any of the other
transactions contemplated by this Agreement.
“Persons” or “Person” means an
individual, corporation, partnership, limited partnership, limited liability
company, joint venture syndicate, person (including a “person” as defined in
Section 13(d)(3) of the Exchange Act), trust, association or entity or
government, political subdivision, agency or instrumentality of a government,
including Governmental Authorities.
“Related Party” means
any of the following: (a) a director or executive officer of the Company, (b)
any holder of more than 5% of Company Common Stock, (c) any child, stepchild,
parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law of such director, executive
officer or shareholder, and (d) any person (other than a tenant or employee)
sharing the household of such director, executive officer or
shareholder.
“Subsidiary” or “Subsidiaries” of the
Company, Parent or MergerSub or any other person means a corporation,
limited liability company, partnership, joint venture, trust or other entity or
organization of which: (a) such party or any other subsidiary of such party is a
general partner; (b) voting power to elect a majority of the board of
directors or others performing similar functions with respect to such
organization is held by such party or by any one or more of such party’s
subsidiaries; (c) at least 50% of the equity interests is controlled by such
party, or (d) is or would be consolidated in such party’s financial statements
pursuant to GAAP.
“Superior Proposal”
shall mean a bona fide written Acquisition Proposal made by a third party (a) on
terms which the Company Board or a duly authorized committee thereof determines
in good faith (after consultation with outside legal counsel and financial
advisors) to be more favorable to the shareholders of the Company (in their
capacity as shareholders) as compared to the transactions contemplated hereby
(after giving effect to any alternative proposed by Parent in accordance with
Section 7.03(d)), (b) the material conditions to the consummation of which are
capable of being satisfied in the reasonable judgment of the Company Board
(taking into account, among other things, all legal, financial, regulatory, and
other aspects of the proposal, including any conditions, and the identity of the
offeror and the timing and certainty of closing) and (c) in respect of which any
required financing is then committed, provided, however, that any
such Acquisition Proposal that is contingent upon such third party obtaining
financing shall be deemed not to be a Superior Proposal.
“U.S.” means the
United States.
“U.S. Dollars” and the
sign “$” shall
each mean the lawful currency of the U.S. of America.
Section
1.02 Other Defined
Terms. The
following terms have the meaning set forth in the Sections set forth
below:
Defined Term
|
|
Location of
Definition
|
Act
|
§
10.15
|
|
Agreement
|
Preamble
|
|
Articles
of Merger
|
§
2.04
|
A-5
Defined
Term
|
Location of
Definition
|
|
Claim
|
§
7.05(a)
|
|
Closing
|
§
2.05
|
|
Closing
Date
|
§
2.05
|
|
Company
|
Preamble
|
|
Company
Adverse Recommendation Change
|
§
7.03(a)
|
|
Company
Balance Sheet
|
§
4.07(b)
|
|
Company
Board
|
Recitals
|
|
Company
Closing Obligations and Expenses
|
§
7.10
|
|
Company
Common Stock
|
Recitals
|
|
Company
Financial Advisor
|
§4.18
|
|
Company
Financials
|
§4.07(b)
|
|
Company
Intellectual Property
|
§4.11(a)
|
|
Company
Material Contract
|
§4.24
|
|
Company
SEC Documents
|
§
4.07(a)
|
|
Company
Shareholder Approval
|
§
4.04
|
|
Company
Shareholders Meeting
|
§
7.01(a)
|
|
Company
Stock Options
|
§
3.01(d)
|
|
Company
Termination Fee
|
§
9.03(b)(ii)
|
|
D&O
Expenses
|
§
7.05(a)
|
|
Deposit
|
§
5.06(a)
|
|
Dissenting
Shares
|
§
3.01(c)
|
|
Dissenting
Shareholder
|
§
3.04(a)
|
|
Effective
Time
|
§
2.04
|
|
ERISA
|
§
4.21
|
|
Exchange
Act
|
§
4.05(b)
|
A-6
Defined
Term
|
Location of
Definition
|
|
Exchange
Fund
|
§
3.02(a)
|
|
FBCA
|
Recitals
|
|
Governmental
Authorizations
|
§
4.14
|
|
Governmental
Order
|
§
8.01(c)
|
|
Incentive
Plans
|
§
4.03(a)
|
|
Indemnified
Parties
|
§
7.05(a)
|
|
Lease
Documents
|
§
4.10(a)
|
|
Merger
|
Recitals
|
|
Merger
Recommendation
|
§
7.01(a)
|
|
MergerSub
|
Preamble
|
|
MI
61-101
|
§
4.05(b)
|
|
Xx.
Xxx
|
Preamble
|
|
Xx.
Xxx’x Shares
|
§
3.01(b)
|
|
Xx.
Xxx Termination Fee
|
§
9.03(c)
|
|
No
Shop Period
|
§
7.03(a)
|
|
Option
Merger Consideration
|
§
3.01(d)
|
|
Outside
Date
|
§
9.01(b)
|
|
Parent
|
Preamble
|
|
Paying
Agent and China Paying Agent
|
§
3.02(a)
|
|
Permits
|
§
4.06(a)
|
|
Permitted
Liens
|
§
4.10(b)
|
|
Plans
|
§
4.21
|
|
Proxy
Statement
|
§
4.05(b)
|
|
Releases
|
§
7.08
|
|
Representative(s)
|
§
7.03(a)
|
A-7
Defined
Term
|
Location of
Definition
|
|
Returns
|
§
4.09(b)
|
|
Xxxxxxxx-Xxxxx
Act
|
§
4.07(a)
|
|
Section
16
|
§
7.04
|
|
Superior
Offer Termination Fee
|
§
9.03(b)(i)
|
|
Supporting
Agreement
|
§
7.12
|
|
Supporting
Shareholder
|
§
7.12
|
|
Surviving
Corporation
|
§
2.01
|
|
Tax
or Taxes
|
§
4.09(a)
|
|
Termination
Date
|
§
9.01
|
|
Transfer
Taxes
|
§
7.07
|
|
Unaffiliated
Shareholders
|
§
4.19
|
ARTICLE
II
Section
2.01 Merger.
Subject
to the terms and conditions of this Agreement, and in accordance with the FBCA,
at the Effective Time, MergerSub and the Company shall consummate the Merger
pursuant to which (i) MergerSub shall be merged with and into the Company and
the separate existence of MergerSub shall thereupon cease and (ii) the Company
shall be the surviving corporation in the Merger (“Surviving
Corporation”). The Merger shall have the effects specified in
the FBCA.
Section
2.02 Tax
Characterization. Parent,
MergerSub and the Company intend that, for U.S. federal and state income tax
purposes, the Merger shall, in the case of each holder of Company Common Stock
that receives the Company Common Stock Merger Consideration in exchange for such
holder’s Company Common Stock, be treated as a taxable purchase of Company
Common Stock.
Section
2.03 Organizational
Documents. At the Effective Time, the Company Charter shall be
amended and restated in its entirety to be identical to the articles of
incorporation of MergerSub, as in effect immediately prior to the Effective
Time, until thereafter changed or amended as provided therein or in accordance
with the FBCA and the articles of incorporation, provided however, at the
Effective Time, Article I of the articles of incorporation of the Surviving
Corporation shall be amended and restated in its entirety to read as follows:
“The name of the corporation is Dragon Pharmaceutical Inc.” At the
Effective Time, the Company Bylaws shall be amended and restated in their
entirety to be identical to the Bylaws of MergerSub, as in effect immediately
prior to the Effective Time, and the name of the Bylaws will be changed to
Dragon Pharmaceutical Inc. Thereafter, the Bylaws will remain the
same until thereafter changed or amended as provided therein or in accordance
with the FBCA and as provided by the Bylaws.
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Section
2.04 Effective Time.
At the Closing, MergerSub and the Company shall duly execute and file a articles
of merger, in a form that complies with the FBCA(the “Articles of Merger”),
with the Secretary of State of the State of Florida in accordance with the
FBCA. The Merger shall become effective upon such time as the
Articles of Merger has been accepted for record by the Secretary of State of the
State of Florida, or such later time which the parties hereto shall have agreed
upon and designated in such filing in accordance with the FBCA as the effective
time of the Merger but not to exceed thirty (30) days after the Articles of
Merger has been accepted for record by the Secretary of State of the State of
Florida (the “Effective
Time”).
Section
2.05
Closing. The
closing of the Merger (the “Closing”) shall occur
as promptly as practicable after all of the conditions set forth in Article VIII
(other than conditions which by their terms are required to be satisfied or
waived at the Closing) shall have been satisfied or waived by the party entitled
to the benefit of the same, and, subject to the foregoing, shall take place at
such time and on a date to be specified by the parties (the “Closing
Date”). The Closing shall take place at the offices of Lang
Xxxxxxxx, 0000 Xxxx Xxxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0, or at such
other place as agreed to by the parties hereto; provided, however, the parties
agree that they will endeavor to close the transaction, to the extent reasonably
practicable, by facsimile, electronic document and funds transfer, courier and
similar modes of communication without the necessity of personal attendance of
the parties’ respective signatories and representatives.
Section
2.06
Directors and Officers
of Surviving Corporation. The directors and officers of
MergerSub immediately prior to the Effective Time, shall be the initial
directors and officers, respectively, of Surviving Corporation, each to hold
office in accordance with the terms of the articles of incorporation and bylaws
of Surviving Corporation and the FBCA. All directors and
executive officers of the Company serving as such immediately prior to the
Effective Time shall resign.
ARTICLE
III
(a) Each
share of the stock of MergerSub issued and outstanding immediately prior to the
Effective Time shall be cancelled and shall be converted automatically into the
right to receive one duly authorized, validly issued, fully paid and
nonassessable share of common stock, $0.001 par value per share, of
Surviving Corporation, so that, after the Effective Time, Parent and Xx. Xxx
shall be the only holders of all of the issued and outstanding common stock of
Surviving Corporation.
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(b) Each
share of Company Common Stock that is owned by Xx. Xxx immediately prior to the
Effective Time (“Xx.
Xxx’x Shares”) shall, remain issued and outstanding and treated as issued
and outstanding shares of common stock of the Surviving Corporation after the
Effective Time.
(c) Each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than (i) shares that are owned by shareholders who have
perfected and not withdrawn a demand for appraisal rights pursuant to Sections
607.1301 to 607.1333 of the FBCA (“Dissenting Shares”)
and (ii) Xx. Xxx’x Shares, which shall remain issued and outstanding and
unaffected by the Merger), shall automatically be converted into, and canceled
in exchange for, the right to receive the Company Common Stock Merger
Consideration. At any time prior to the date of the Company
Shareholder Meeting, Parent, may, in its sole and absolute discretion, increase
the Company Common Stock Merger Consideration without the consent of the
Company.
(d) The
Company shall take all necessary and appropriate actions so that, at the
Effective Time, each outstanding qualified or nonqualified option to purchase
Company Common Stock (“Company Stock
Options”) under the Company’s 2001 Stock Option Plan and 2005 Stock
Option Plan or any other employee share option or compensation plan, agreement
or arrangement of the Company shall become fully exercisable and
vested; and shall be canceled and only entitle the holder thereof to
receive, as soon as reasonably practicable after the Effective Time, a cash
payment, less any applicable withholding taxes, equal to the product of (i) the
number of shares of Company Common Stock subject to such Company Stock Option
immediately prior to the Effective Time, to the extent such Company Stock Option
is vested and exercisable, and (ii) the excess, if any, of the Company
Common Stock Merger Consideration over the exercise price per share of such
Company Stock Option (the “Option Merger
Consideration”). The Company shall take all necessary
and appropriate actions so that all Company Stock Options with an exercise price
per share of Company Common Stock that is equal to or greater than the Company
Common Stock Merger Consideration, shall be canceled at the Effective Time
without any cash payment being made in respect thereof and without any other
consideration.
(e) At
the Effective Time, all Company Common Stock (other than Dissenting Shares and
Xx. Xxx’x Shares) shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a Certificate
shall cease to have any rights with respect thereto, except the right to receive
the Company Common Stock Merger Consideration (without interest) to be paid in
consideration therefor upon the surrender of such Certificates in
accordance with Section 3.02.
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Section
3.03
Withholding
Rights. Parent, Surviving Corporation or the Paying Agent, as
applicable, shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Company Common
Stock or Company Stock Options such amounts as it is required to deduct and
withhold with respect to the making of such payment under the Code, and the
rules and regulations promulgated thereunder, or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by
Surviving Corporation or the Paying Agent, as applicable, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of Company Common Stock or Company Stock Options in respect of which such
deduction and withholding was made by Parent, Surviving Corporation or the
Paying Agent, as applicable.
(a) No
holder of Company Common Stock that has perfected a demand for appraisal rights
with respect to its Company Common Stock pursuant to Sections 607.1301 to
607.1333 of the FBCA (a “Dissenting
Shareholder”) shall be entitled to receive the Company Common Stock
Merger Consideration with respect to the Company Common Shares owned by such
Dissenting Shareholder unless and until such Dissenting Shareholder shall have
effectively withdrawn or lost such Dissenting Shareholder’s right to appraisal
under the FBCA. Each Dissenting Shareholder shall be entitled to receive only
the payment provided by Sections 607.1301 to 607.1333 of the FBCA with respect
to Dissenting Shares. Any portion of the Company Common Stock Merger
Consideration made available to the Paying Agent pursuant to Section 3.02 to pay
for shares of Company Common Stock for which appraisal rights have been
perfected shall be returned to Parent upon demand.
(b) Notwithstanding
the provisions of this Section 3.04, if any holder of Company Common Stock who
asserts appraisal rights shall effectively withdraw or lose (through failure to
perfect or otherwise) its rights of appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder’s shares of Company
Common Stock shall no longer be Dissenting Shares and shall automatically be
converted into and represent only the right to receive the Company Common Stock
Merger Consideration, without any interest thereon and less any required
withholding Taxes.
(c) The
Company shall give Parent (i) prompt notice upon receipt by the Company of any
written demands for appraisal, attempted withdrawals of such demands, any other
instruments served pursuant to applicable Law that are received by the Company
relating to shareholders’ rights of appraisal and (ii) the opportunity to direct
all negotiations and proceedings with respect to any demand for appraisal under
the FBCA. The Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for appraisal
of Dissenting Shares, offer to settle or settle any such demands or approve any
withdrawal of any such demands.
ARTICLE
IV
Except as
set forth in the Disclosure Schedule, if any, and the Company SEC Documents, the
Company hereby represents and warrants to Parent and MergerSub as
follows:
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Section
4.01 Organization and
Qualification; Subsidiaries; Authority.
(a) The
Company is a corporation duly organized, validly existing and in the State of
Florida, and
(b) Each
of the Subsidiaries has the requisite corporate, limited partnership, limited
liability company or similar power and authority to carry on its business as it
is now being conducted, except where the failure to have such power and
authority would not, individually or in the aggregate, be reasonably expected to
have a Company Material Adverse Effect. Each of the Subsidiaries is
duly qualified or licensed to do business, and is in good standing (to the
extent applicable), in each jurisdiction where the character of the properties
owned, leased or operated by it or the conduct or nature of its business makes
such qualification or licensing necessary, except for jurisdictions in which the
failure to be so qualified, licensed or in good standing would not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect. The Company owns, directly or indirectly, all of the
outstanding capital stock and equity interests of its Subsidiaries.
Section
4.02 Organizational
Documents. The Company has previously provided or made
available complete copies of the Company Charter and the Company Bylaws (and in
each case, all amendments thereto) and all such documents, are in full force and
effect and no dissolution by the Company or any of the Company’s Subsidiaries,
revocation or forfeiture proceedings regarding the Company or any of the
Company’s Subsidiaries have been commenced. The Company is not in
default or violation (and no event has occurred which, with notice or the lapse
of time or both, would constitute a default or violation) of any term, condition
or provision of the Company Charter or Company Bylaws and each of the Company’s
Subsidiaries is not in default or violation (and no event has occurred which,
with notice or the lapse of time or both, would constitute a default or
violation) of any term, condition or provision of its charter, bylaws or other
organizational documents which individually or in the aggregate would reasonably
be expected to have a Company Material Adverse Effect.
Section
4.03 Capitalization.
(a) The
authorized shares of stock of the Company consist of 200,000,000 shares of
Company Common Stock, par value $0.001 per share, of the Company. As
of the date hereof, (i) 67,066,418 shares of Company Common Stock were issued
and outstanding (excluding shares of Company Common Stock held by the Company in
its treasury), (ii) 15,000,000 shares of Company Common Stock have been reserved
for issuance pursuant to the 2001 Stock Option Plan and the 2005 Stock Option
Plan (“Incentive
Plans”), and (iii) Company Stock Options entitling the owners thereof to
purchase 7,960,000 shares of Company Common Stock were
outstanding. As of the date of this Agreement, the Company had no
Company Common Stock, or any other securities reserved for issuance or required
to be reserved for issuance other than as described above. All such
issued and outstanding shares of the Company and its Subsidiaries are, and all
shares subject to issuance as specified above, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be, when issued, duly authorized, validly issued, fully paid, nonassessable
and free of any preemptive rights purchase option, call option, right of first
refusal, subscription agreement, or any other similar right under the Company
Charter, the Company Bylaws or any agreement to which the Company is party or by
which it is bound.
(b) Except
for the Company Stock Options, there are no existing options, warrants, calls,
subscription rights, exercisable, convertible or exchangeable securities or
other rights, agreements or commitments (contingent or otherwise) that obligate
the Company to issue, transfer or sell any Company Common Stock or any
investment that is convertible into or exercisable or exchangeable for any such
shares.
A-14
(c) The
Company has not issued any share appreciation rights, dividend equivalent
rights, performance awards, restricted stock unit awards or “phantom”
shares.
(d) There
are no agreements or understandings to which the Company is a party with respect
to the voting of any securities of the Company or which restrict the transfer of
any such shares, nor does the Company have knowledge of any third party
agreements or understandings with respect to the voting of any such shares or
which restrict the transfer of such shares.
Section
4.04 Authority; Validity and
Effect of Agreements. The Company has all necessary corporate
power and authority to execute and deliver this Agreement and all documents and
agreements contemplated by this Agreement, to perform its obligations under this
Agreement and to consummate the transactions contemplated by this
Agreement. The execution, delivery and performance by the Company of
this Agreement and the consummation of the transactions contemplated by this
Agreement have been duly and validly authorized by all necessary corporate
action on behalf of the Company. No other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement other than (i) the
Company’s Shareholder Meeting, (ii) the vote of at least a majority of the
outstanding shares of Company Common Stock entitled to vote for the approval and
adoption of this Agreement (the “Company Shareholder
Approval”) and (iii) the filing and recordation of appropriate merger
documents as required by the FBCA. This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by each of Parent and
MergerSub, constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by the Enforceability Exceptions.
(a) Subject
to the receipt of the Company Shareholder Approval, the execution and delivery
by the Company of this Agreement and all documents and agreements contemplated
by this Agreement, including the Merger, do not, and the performance of its
obligations hereunder and thereunder will not, (i) conflict with or violate the
Company Charter or the Company Bylaws, or (ii) assuming that all consents,
approvals, authorizations and other actions described in this Section 4.05 have
been obtained and all filings and obligations described in this Section 4.05
have been made, conflict with or violate any Law applicable to the Company or
any of its Subsidiaries or by which any property or asset of the Company or any
of its Subsidiaries, is bound.
(b) The
execution and delivery by the Company of this Agreement does not, and the
performance of its obligations hereunder will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, except (i) for (A) applicable requirements, if any,
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (B)
applicable requirements, if any, of the Toronto Stock Exchange, (C) compliance
with Multilateral Instrument 61-101 (“MI 61-101”) of the
Canadian Securities Administrators, unless exempted, (D) the filing with the SEC
of a proxy statement (as amended or supplemented from time to time the “Proxy Statement”),
and other written communications that may be deemed “soliciting materials” under
Rule 14a-12, (E) the filing with the SEC of Schedule 13E-3 and amendments
thereto, (F) the filing of the Articles of Merger with, and the acceptance for
record thereof by, and the Secretary of State of the State of Florida, and (G)
other filings as may be required in connection with state or local transfer
Taxes, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications would not,
individually or in the aggregate, (A) prevent or materially delay consummation
of the Merger and the other transactions contemplated by this Agreement or (B)
reasonably be expected to have a Company Material Adverse Effect.
A-15
(c) As
of the date hereof, the Company Board, at a meeting duly called and held at
which a quorum of the directors of the Company Board were present in person or
by telephone in compliance with the applicable provisions of the FBCA and the
Company Bylaws, duly adopted resolutions (i) declaring that this Agreement and
the transactions contemplated hereby, including the Merger, are advisable and in
the best interest of the Company and its shareholders, (ii) adopting and
approving this Agreement and the transactions contemplated hereby, including the
Merger, in accordance the requirements of the FBCA, and (iii) subject to the
terms and conditions set forth herein, recommending approval and adoption of
this Agreement and the Merger by its shareholders, (iv) taking all corporate
action required to be taken by the Company Board to authorize and approve the
consummation of the Merger and the transactions contemplated hereby, and (v)
electing, to the extent permitted by applicable Laws, to make inapplicable all
state takeover laws or similar Laws, to the extent they might otherwise apply to
the execution, delivery, performance or consummation of this Agreement or the
transactions contemplated hereby, and none of the aforesaid actions by the
Company Board has been amended, rescinded or modified as of the date
hereof. No further corporate action is required by the Company Board
in order for the Company to approve this Agreement or the transactions
contemplated hereby, including the Merger.
(a) The
Company and its Subsidiaries are in possession of all material franchises,
grants, authorizations, licenses, permits, consents, certificates, approvals and
orders of any Governmental Authority necessary for them to carry on their
business as it is now being conducted (collectively, the “Permits”).
(b) Neither
the Company nor any of its Subsidiaries is in conflict with, or in default,
breach or violation of, (i) any Laws applicable to the Company or any of its
Subsidiaries, or by which any property or asset of the Company or any of its
Subsidiaries is bound, or (ii) any Permit, in either case which individually or
in the aggregate would reasonably be expected to have a Company Material Adverse
Effect.
A-16
(a) any
Company Material Adverse Effect;
(b) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of the Company’s or any
of its Subsidiaries’ capital stock, or any purchase, redemption or other
acquisition by the Company or any of its Subsidiaries of any of the Company’s or
any of its Subsidiaries’ capital stock or any other securities of the Company or
any options, warrants, calls or rights to acquire any such shares or other
securities except for repurchases from Employees following their termination
pursuant to the terms of their pre-existing agreements;
(c) any
split, combination or reclassification of any of the Company’s or any of its
Subsidiaries’ capital stock;
(d) any
granting by the Company or any of its Subsidiaries, whether orally or in
writing, of any material increase in compensation or fringe benefits payable (i)
to officers or senior management of the Company or any of its Subsidiaries or
(ii) to any non-officer and non-senior management employees of the Company or
any of its Subsidiaries other than in the Ordinary Course or any amendment,
modification or waiver of any provisions of any benefit plan or policy of
the Company or any of its Subsidiaries (or the adoption of any new benefit plan
or policy by the Company or any of its Subsidiaries);
A-17
(e) any
change by the Company or any of its Subsidiaries of severance, termination or
bonus policies and practices (excluding sales commissions) or any entry by the
Company or any of its Subsidiaries into any currently effective employment,
severance, termination or indemnification agreement or any agreement 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
contemplated hereby (either alone or upon the occurrence of additional or
subsequent events);
(f) any
adoption of a plan of complete or partial liquidation or dissolution or adoption
of resolutions providing for or authorizing such liquidation or dissolution;
or
(g) any
material change by the Company in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP.
(1) The
Company and each of its Subsidiaries have (a) timely filed or caused to be
filed all federal, state, local and foreign returns, estimates, information
statements and reports (“Returns”) relating to
Taxes concerning or attributable to the Company or any of its Subsidiaries, and
such Returns are true, correct, and complete in all material respects and have
been completed in accordance with applicable Laws and (b) timely paid or
withheld (and timely paid over any withheld amounts to the appropriate
Governmental Authority) all Taxes required to be paid or withheld whether or not
shown as due on any Return. To the Knowledge of the Company, no claim
has ever been asserted in writing by any Governmental Authority to the Company
or any of its Subsidiaries in a jurisdiction where the Company or any of its
Subsidiaries does not file a Tax Return that the Company or any of its
Subsidiaries is or may be subject to taxation by that jurisdiction which has
resulted or would reasonably be expected to result in an obligation to pay
material Taxes. Except as set forth in Section 4.09(b) of the
Disclosure Schedule, there are no liens for material Taxes (other than Taxes not
yet due and payable) upon any of the assets of the Company or any of its
Subsidiaries.
(2) Neither
the Company nor any of its Subsidiaries has any Tax deficiency outstanding,
assessed or proposed against the Company or any of its Subsidiaries, nor has the
Company or any of its Subsidiaries executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
A-18
(3) No
audit or other examination of any Return of the Company or any of its
Subsidiaries is presently in progress, nor has the Company or any of its
Subsidiaries been notified in writing of any request for such an audit or other
examination.
(4) No
adjustment relating to any Return filed by the Company or any of its
Subsidiaries has been proposed by any Tax authority to the Company or any of its
Subsidiaries or any representative thereof that remains unpaid.
(a) To
the Knowledge of the Company, the Company or its Subsidiaries own, and/or are
licensed or otherwise possess rights to use the entire right, title and interest
to: (i) all patents and patent applications existing, trademarks and service
marks (registered or unregistered), trade dress, trade names and other names and
slogans embodying business goodwill or indications of origin, all applications
or registrations in any jurisdiction pertaining to the foregoing and all
goodwill associated therewith; (ii) inventions, technology, computer programs
and software; (iii) trade secrets, including confidential and other non-public
information; (iv) writings, designs, copyrights, software programs, mask works
or other works, applications or registrations in any jurisdiction for the
foregoing and all moral rights related thereto; (v) databases and all database
rights; (vi) internet websites, domain names and applications and registrations
pertaining thereto; and (vii) other intellectual property rights (collectively,
“Company Intellectual
Property”), that are used in the businesses of the Company and its
Subsidiaries as currently conducted.
(b) To
the Knowledge of the Company, there are no infringements of any Company
Intellectual Property by any third party and the conduct of the businesses of
the Company and its Subsidiaries as currently conducted does not infringe in any
material respect any proprietary right of a third party. There are no actions
pending or, to the Knowledge of the Company, threatened that assert the
invalidity, misuse, infringement or unenforceability of any of the Company
Intellectual Property.
A-19
A-20
A-21
ARTICLE
V
Parent
and MergerSub hereby jointly and severally represent and warrant to the Company
as follows:
Section
5.01 Due Incorporation Good
Standing and Operations. The Parent is a company
duly organized, validly existing and in good standing under the laws of Hong
Kong and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted. MergerSub is a corporation duly incorporated,
validly existing and in good standing under the Laws of Florida and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Each
of Parent and MergerSub has been formed solely for the purpose of entering into
this Agreement and engaging in the transactions contemplated by this
Agreement. As of the date hereof, neither Parent nor MergerSub has
incurred any liabilities other than as contemplated by this
Agreement.
A-22
Section
5.03 Governmental
Approvals. The execution and delivery by Parent and
MergerSub of this Agreement does not, and the performance of its
obligations hereunder will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority, except
(i) for (A) the filing of the Articles of Merger with, and the acceptance for
record thereof by, the Secretary of State of the State of Florida, and (B) other
filings as may be required in connection with state or local transfer Taxes, and
(ii) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications would not, individually or in
the aggregate, (A) prevent or materially delay consummation of the Merger and
the other transactions contemplated by this Agreement or (B) reasonably be
expected to have a Parent or MergerSub Material Adverse
Effect.
A-23
(a) At
or prior to the Closing, Parent and MergerSub will have sufficient cash and cash
equivalents available to perform its obligations hereunder, including payment of
the aggregate of the Company Common Stock Merger Consideration and the Option
Merger Consideration pursuant to the Merger. The Parent agrees to deposit
an aggregate amount of $3,000,000 in cash into a segregated account directed by
the Company to be used as part of the payment of the Company Common Stock Merger
Consideration and Option Merger Consideration as follows: $1,000,000 upon
signing of this Agreement and $2,000,000 upon the filing of the Definitive Proxy
Statement with the SEC (the “Deposit”). Xx.
Xxx on behalf of himself and Xx. Xxxx, Chief Operating Officer, or Xx. Xxxx,
Chief Financial Officer, on behalf of the Company shall have joint control over
such segregated account. As of the Effective Time, Parent shall have
sufficient funds in cash to enable Parent to make all payments in respect of its
obligations pursuant to this Agreement and to pay fees and expenses related to
this Agreement, and the transactions contemplated hereby. The parties
may agree to use the Deposit under this Section 5.06 as part of the Exchange
Fund.
In the event this Agreement is
terminated pursuant to Sections 9.01 (a), (b), (c), (d), (e), or (f), then the
Deposit will be returned to Xx. Xxx. In the event that this Agreement
is terminated pursuant to Section 9.01(g), then Parent will pay from the Deposit
the Xx. Xxx Termination Fee set forth in Section 9.03(c) and any remaining
balance shall be returned to Parent.
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ARTICLE
VI
CONDUCT
OF BUSINESS PENDING THE MERGER
(a) take
any action that would have been required to be disclosed under Section 4.08 if
such action had been taken prior to the date hereof;
(b) amend
or otherwise change any provision of the Company Charter, Company Bylaws, or
similar organizational or governance documents;
(c) authorize
for issuance, issue or sell or agree or commit to issue or sell any shares of
any class of capital stock of the Company or any of its Subsidiaries or any
options, warrants, convertible securities or other rights of any kind to acquire
any shares of such capital stock, or any other ownership interest, of the
Company or any of its Subsidiaries, other than the issuance of Company Common
Stock upon exercise of Company Stock Options outstanding on the date of this
Agreement; (ii) adopt any new incentive plan or any equity based compensation
plan; (iii) repurchase, redeem or otherwise acquire any securities or equity
equivalents except in connection with the exercise of Company Stock Options;
(iv) reclassify, combine, split, or subdivide any stock of the Company or any of
its Subsidiaries; or (v) set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of the capital stock of the Company or any of its Subsidiaries.
(d)
(i) materially amend or terminate, or waive compliance with the material terms
of or material breaches under, any Company Material Contract, or (ii) fail to
comply, in any material respect, with the terms of any Company Material
Contract, or (iii) enter into any new Contract or agreement that, if entered
into prior to the date of this Agreement, would have been a Company Material
Contract;
(e) pre-pay
any long-term debt, except in the Ordinary Course (which shall be deemed to
include, without limitation, pre-payments or repayments of lines of credit
facilities or other similar lines of credit, payments made in respect of any
termination or settlement of any interest rate swap or other similar hedging
instrument relating thereto in accordance with their terms, as such loans become
due and payable), or pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise),
except in the Ordinary Course;
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(f) waive,
release, assign, settle or compromise any material litigation other than
settlements of, or compromises for, any litigation where (i) the amounts paid or
to be paid are covered by insurance coverage maintained by the Company and (ii)
the settlement or compromise involves, directly or indirectly, only the payment
of money damages and will not otherwise, directly or indirectly, materially and
adversely affect the conduct of the business of the Company going
forward; provided, however, the Company
shall not, without Parent’s consent, waive, release, assign, settle or
compromise (A) any litigation where Company is adverse to a Related Party, (B)
any of the claims, liabilities or obligations listed on Section 6.01(e) of the
Disclosure Schedule, or (C) any material litigation first filed after the date
hereof, except to the extent permitted by Section 6.01(e).
(g)
except as
provided in Section 7.03, take any action that would reasonably be expected to
result in any of the conditions to the Merger set forth in Article VIII not
being satisfied or that would reasonably be expected to materially delay
the consummation of, or materially impair the ability of the Company to
consummate the Merger or any other transaction contemplated by this Agreement in
accordance with the terms hereof; and
(h) except
as provided in Section 7.03, announce an intention, enter into any agreement or
otherwise make a commitment, to do any of the foregoing.
In
connection with the continued operation of the Company and its Subsidiaries, the
Company will confer in good faith with one or more representatives of Parent
designated to the Company regarding operational matters and the general status
of ongoing operations at such times reasonably requested by Parent and will
notify Parent promptly of any event or occurrence that has had or may reasonably
be expected to have a Company Material Adverse Effect.
ARTICLE
VII
ADDITIONAL
AGREEMENTS
Section
7.01 Preparation of Proxy
Statement; Shareholders’ Meeting.
(a) As
soon as reasonably practicable following the date of this Agreement, the
Company, acting through the Company Board, shall in accordance with applicable
Law, the Company Charter, and the Company Bylaws: (i) duly call, give notice of,
convene and hold a meeting of its shareholders as promptly as practicable
following no further comments from the SEC of the Proxy Statement for the
purpose of securing the Company Shareholder Approval (such meeting, and any
postponement or adjournment thereof, the “Company Shareholders
Meeting”), (ii) except to the extent that the Company Board has effected
or effects a Company Adverse Recommendation Change in accordance with the terms of Section 7.03(d),
the Company shall, through the Company Board, advise and recommend to its
shareholders the approval of the Merger (the “Merger
Recommendation”) and shall include such recommendation in the Proxy
Statement and (iii) use its commercially reasonable efforts to solicit from
holders of shares of Company Common Stock proxies in favor of the adoption of
this Agreement and take all other action necessary or advisable to secure, at
the Company Shareholders’ Meeting, the Company Shareholder
Approval.
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(b) As
soon as reasonably practicable following the date of this Agreement, the Company
shall (i) prepare and file with the SEC the preliminary Proxy Statement and
Schedule 13E-3, which filing shall be no later than 30 days following the date
of this Agreement, (ii) mail to its shareholders the Proxy Statement a
sufficient time prior to the Company Shareholders Meeting, which shall be held
no later than 60 days after the date that the Company is able to file its
definitive Proxy Statement with the SEC, and (iii) otherwise comply in all
material respects with all legal requirements applicable to the Company
Shareholders Meeting. Parent, MergerSub and the Company will
cooperate and consult with each other in the preparation of the Proxy
Statement. Without limiting the generality of the foregoing, Parent
and MergerSub will furnish as soon as reasonably practicable to the Company the
information relating to it required by the Exchange Act and the rules and
regulations promulgated thereunder to be set forth in the Proxy
Statement. The Company shall use its commercially reasonable efforts
to resolve all SEC comments (in consultation with Parent ) with respect to the
Proxy Statement as promptly as practicable after receipt thereof and to cause
the Proxy Statement to be mailed to the holders of Company Common Stock as
promptly as practicable after the Proxy Statement is cleared with the
SEC. Notwithstanding anything to the contrary stated above, prior to
filing or mailing the Proxy Statement (or any amendment or supplement thereto)
or responding to any comments of the SEC with respect thereto, the Company shall
provide Parent and MergerSub with a reasonable opportunity to review and comment
on the Proxy Statement or such response and shall include in such documents or
response comments reasonably proposed by Parent and MergerSub. Parent, MergerSub
and the Company agree to correct as soon as reasonably practicable any
information provided by it for use in the Proxy Statement which shall have
become false or misleading. If at any time prior to the Effective
Time, any information should be discovered by any party which should be set
forth in an amendment or supplement to the Proxy Statement so that the Proxy
Statement would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and,
to the extent required by applicable Law, an appropriate amendment or supplement
describing such information shall be promptly filed by the Company with the
SEC and disseminated by the Company to the shareholders of the
Company. The Company shall as promptly as practicable (i) notify
Parent and MergerSub of the receipt of any oral or written comments from the SEC
with respect to the Proxy Statement and any request by the SEC for any amendment
to the Proxy Statement or for additional information and (ii) provide Parent and
MergerSub with copies of all written correspondence between the Company and its
Representatives, on the one hand, and the SEC, on the other hand, with respect
to the Proxy Statement.
(c) At
the Company Shareholders’ Meeting, each of Xx. Xxx and Parent shall
vote, and Parent shall cause its Subsidiaries to vote, all shares of Company
Common Stock Beneficially owned by each of Xx. Xxx, Parent and Parent’s
Subsidiaries in favor of the adoption and approval of this Agreement and the
Merger.
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(a) Subject
to Sections 7.03(b), 7.03(c) and 7.03(d), from the date of this Agreement to any
time prior to obtaining the Company Shareholder Approval (“No Shop Period”),
none of the Company or any of its Subsidiaries shall, nor shall any of them
authorize or permit, directly or indirectly, any of their respective officers,
trustees, directors, employees, investment bankers, financial advisors,
accountants, attorneys, brokers, finders or other agents, advisors or
representatives (each, a “Representative”) to,
directly or indirectly: (i) initiate, solicit, encourage or knowingly take any
other action to facilitate (including by way of furnishing information (other
than public information widely disseminated through Company SEC Documents, press
releases or other similar means) or assistance) any inquiries or the making of
any proposal or other action that constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal; (ii) initiate or participate in any
discussions or negotiations, or furnish to any Person not a party to this
Agreement any information in furtherance of any inquiries that could reasonably
be expected to lead to an Acquisition Proposal; (iii) enter into any agreement,
arrangement or understanding with respect to any Acquisition Proposal (including
any letter of intent, agreement in principle, memorandum of understanding,
expense reimbursement agreement, merger agreement, acquisition agreement, option
agreement, joint venture agreement, partnership agreement or other agreement
constituting or related to, or intended to, or that would reasonably be expected
to lead to, any Acquisition Proposal (other than a confidentiality agreement),
or that is intended or that could reasonably be expected to result in the
abandonment, termination or failure to consummate the Merger or any other
transaction contemplated by this Agreement); or (iv) fail to make, withdraw or
modify in a manner adverse to Parent or publicly propose to withdraw
or modify in a manner adverse to Parent the Merger
Recommendation (it being understood that, subject to and without limitation of
Section 7.03(e), taking a neutral position or no position with respect to any
Acquisition Proposal shall be considered an adverse modification), or
recommend, adopt or approve, or publicly propose to recommend, adopt or approve,
a Acquisition Proposal, or take any action or make any statement inconsistent
with the Merger Recommendation (any of the foregoing in this clause (iv), a
“Company
Adverse Recommendation Change”). As of the date of this
Agreement, the Company shall, and shall cause its Subsidiaries and
Representatives to, immediately cease and cause to be terminated immediately any
discussions, negotiations or communications with any party or parties that are
currently ongoing with respect to, or that could reasonably be expected to lead
to, an Acquisition Proposal.
(b) The
Company shall promptly notify Parent in writing (as soon as is
reasonably practicable, but in any event no later than two Business Days from
initial receipt or occurrence) of any Acquisition Proposal or any communications
(written or oral) with respect to any Acquisition Proposal (including the
material terms and conditions thereof and the identity of the Person making the
Acquisition Proposal) which any of the Company or any of its Subsidiaries or any
such Representative may receive after the date hereof, and the Company shall
promptly provide to Parent copies of any written materials received
and a written summary of any other communications made in connection with the
foregoing, and shall keep Parent informed on a prompt basis as to the
status, material terms and conditions and any material developments regarding
any such proposal.
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(c) Notwithstanding Section
7.03(a) and Section 7.03(b) or any other provision of this Agreement to the
contrary, following the receipt by the Company or any of its Subsidiaries,
during the No Shop Period, of an Acquisition Proposal (that was not solicited,
encouraged or facilitated in violation of Section 7.03(a) or Section 7.03(b)),
the Company Board may (directly or through Representatives) contact such Person
and its advisors solely for the purpose of clarifying the Acquisition Proposal,
or the material terms thereof, the conditions to and its likelihood of
consummation, so as to determine whether the Acquisition Proposal is reasonably
likely to lead to a Superior Proposal. If the Company Board
determines in good faith (after consultation with outside legal counsel and
financial advisors) that such Acquisition Proposal constitutes or is reasonably
likely to lead to a Superior Proposal, the Company Board may, if the Company
Board determines in good faith (after consulting with outside legal counsel)
that failure to take such action would be inconsistent with its duties under
applicable Law, (A) furnish non-public information with respect to the Company
and its Subsidiaries to the Person who made such Acquisition Proposal provided, however, that the
Company (1) concurrently furnishes such information to Parent and (2)
furnishes such information pursuant to a confidentiality agreement, (B)
discloses to its shareholders any information required to be disclosed under
applicable Law and (C) participates in negotiations regarding such Acquisition
Proposal. Notwithstanding anything in this Section 7.03 to the contrary, the
Company shall not be required to provide to Parent any information which the
Company deems in good faith to be not appropriate for disclosure to Parent due
to competitive concerns, or if the exchange of such information, as reasonably
determined by the Company’s outside legal counsel, would be reasonably likely to
result in the Company or the Merger violating applicable anti-trust
Laws.
(d) Notwithstanding
anything in this Agreement to the contrary, at any time prior to obtaining the
Company Shareholder Approval, if (1) the Company has received an Acquisition
Proposal that has not been withdrawn or abandoned, and the Company Board or a
duly authorized committee thereof determines in good faith (after consultation
with outside legal counsel and financial advisors) that such Acquisition
Proposal is a Superior Proposal, or (2) in the absence of an Acquisition
Proposal, the Company Board or a duly authorized committee thereof determines in
good faith (after consultation with outside legal counsel and financial
advisors) that the failure to do so would be inconsistent with its fiduciary
duties under applicable Law, then the Company Board may make a Company Adverse
Recommendation Change; provided, however, that (A) no
Company Adverse Recommendation Change shall be made until after the third (3rd)
Business Day following Parent ‘s receipt of written notice from the Company (i)
advising Parent that the Company Board has determined that the
Company Board intends to make a Company Adverse Recommendation Change, (ii) if
the basis of the proposed Company Adverse Recommendation Change is a Superior
Proposal, advising Parent of the material terms and conditions of any
Superior Proposal that is the basis of the proposed action by the Company Board
(it being understood and agreed that any amendment to the financial terms or any
other material term of such Superior Proposal shall require a new written notice
be provided to Parent and a new three (3) Business Day period),
and (iii) if the basis of the proposed Company Adverse Recommendation Change is
a Superior Proposal, representing that the Company has complied with this
Section 7.03, (B) during such three (3) Business Day period, the Company, if
requested by Parent , shall negotiate with Parent in good faith to
make such adjustments to the terms and conditions of this Agreement as would
enable the Company Board to proceed with its Merger Recommendation, and not make
a Company Adverse Recommendation Change, and (C) the Company shall not make a
Company Adverse Recommendation Change if, prior to the expiration of such three
(3) Business Day period, Parent delivers a definitive proposal to
adjust the terms and conditions of this Agreement such that the Company Board
determines in good faith (after consultation with outside legal counsel and
financial advisors) that its fiduciary duties no longer require it to make a
Company Adverse Recommendation Change.
(e) Nothing
in this Section 7.03 or elsewhere in this Agreement shall prevent the Company
Board from taking and disclosing to its shareholders a position contemplated by
Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act with respect to
an Acquisition Proposal; provided, however, that
compliance by the Company with such obligations shall not relieve the Company of
any of its obligations under the provisions of this Section 7.03. In
addition, it is understood and agreed that, for purposes of this Agreement (including Article VIII),
a factually accurate public statement by the Company that describes the
Company’s receipt of an Acquisition Proposal and the operation of this Agreement
with respect thereto shall not in and of itself be deemed a Company Adverse
Recommendation Change.
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(a) Without
limiting any additional rights that any director, officer, trustee, employee,
agent, or fiduciary may have under any employment or indemnification agreement
or under the Company Charter, the Company Bylaws or this Agreement or, if
applicable, similar organizational documents or agreements of any of the
Company’s Subsidiaries, from and after the Effective Time, Parent and
Surviving Corporation shall: (i) indemnify and hold harmless each person who is
at the date hereof or during the period from the date hereof through the
Effective Time serving as a director, officer, trustee, or fiduciary of the
Company or its Subsidiaries (collectively, the “Indemnified Parties”)
to the fullest extent authorized or permitted by applicable Law, as now or
hereafter in effect, in connection with any Claim and any judgments, fines,
penalties and amounts paid in settlement (including all interest, assessments
and other charges paid or payable in connection with or in respect of such
judgments, fines, penalties or amounts paid in settlement) resulting therefrom;
(ii) at Parent and Surviving Corporation’s own expense and with their
own counsel, defend or settle such Claim on behalf of the Indemnified
Parties; provided, however, that (x) the Parent and
Surviving Corporation shall keep the Indemnified Parties informed of all
material developments and events relating to such Claim, (y) the Indemnified
Parties shall have the right to participate, and (z) the Parent and
Surviving Corporation shall not settle such Claim without the prior written
consent of the Indemnified Parties; provided further however, that if there is a
conflict between the Indemnified Parties, Parent and Surviving Corporation, and
counsel of the Parent and Surviving Corporation cannot represent Indemnified
Parties, then the Indemnified Parties shall have the right to be represented by
a separate counsel of his or her choice, subject to the approval of the Parent
and Surviving Corporation, which consent shall not be unreasonably withheld, and
in which event Parent and Surviving Corporation shall promptly pay counsel for
the Indemnified Parties, including any request for advancement of expenses of up
to $10,000 for Indemnified Parties; and (iii) promptly pay on behalf of the
Indemnified Parties to the fullest extent authorized or permitted by applicable
law, as now or hereafter in effect, any D&O Expenses incurred in defending,
serving as a witness with respect to or otherwise participating in any Claim in
advance of the final disposition of such Claim, including payment on behalf of
or advancement to the Indemnified Party of any D&O Expenses incurred by such
Indemnified Party in connection with enforcing any rights with respect to such
indemnification and/or advancement, in each case without the requirement of any
bond or other security (but subject to Parent ‘s or Surviving Corporation’s, as
applicable, receipt of a written undertaking by or on behalf of such Indemnified
Party, if required by applicable Law, to repay such D&O Expenses if it is
ultimately determined under applicable Law that such Indemnified Party is not
entitled to be indemnified). The indemnification and advancement
obligations of Parent and Surviving Corporation pursuant to this
Section 7.05(a) shall extend to acts or omissions occurring at or before the
Effective Time and any Claim relating thereto (including with respect to any
acts or omissions occurring in connection with the approval of this Agreement
and the consummation of the transactions contemplated hereby, including the
consideration and approval thereof and the process undertaken in connection
therewith and any Claim relating thereto), and all rights to indemnification and
advancement conferred hereunder shall continue as to a person who has
ceased to be a director, officer, trustee, employee, agent, or fiduciary of the
Company or its Subsidiaries after the date hereof and shall inure to the benefit
of such person’s heirs, executors and personal and legal
representatives. As used in this Section 7.05(a): (1) the
term “Claim”
means any threatened, asserted, pending or completed Action, suit or proceeding,
or any inquiry or investigation, whether instituted by any party hereto, any
Governmental Authority or any other party, that any Indemnified Party in good
faith believes might lead to the institution of any such Action, suit or
proceeding, whether civil, criminal, administrative, investigative or other,
including any arbitration or other alternative dispute resolution mechanism,
arising out of or pertaining to matters that relate to such Indemnified Party’s
duties or service as a director, officer, trustee, employee, agent, or fiduciary
of the Company, any of its Subsidiaries, or any employee benefit plan (within
the meaning of Section 3(3) of ERISA) maintained by any of the foregoing or any
other person at or prior to the Effective Time at the request of the Company or
any of its Subsidiaries; and (2) the term “D&O Expenses”
means reasonable attorneys’ fees and all other reasonable costs, expenses and
obligations (including, without limitation, experts’ fees, travel expenses,
court costs, retainers, transcript fees, duplicating, printing and binding
costs, as well as telecommunications, postage and courier charges) paid or
incurred in connection with investigating, defending, being a witness in or
participating in (including on appeal), or preparing to investigate, defend, be
a witness in or participate in, any Claim for which indemnification is
authorized pursuant to this Section 7.05(a), including any Action relating to a
claim for indemnification or advancement brought by an Indemnified
Party. Neither Parent nor Surviving Corporation shall
settle, compromise or consent to the entry of any judgment in any actual or
threatened claim, demand, Action, suit, proceeding, inquiry or investigation in
respect of which indemnification has been or could be sought by such Indemnified
Party hereunder unless such settlement, compromise or judgment includes an
unconditional release of such Indemnified Party from all liability arising out
of such claim, demand, Action, suit, proceeding, inquiry or investigation or
such Indemnified Party otherwise consents thereto.
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(b) Without
limiting the foregoing, Parent and MergerSub agree that all rights to
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time now existing in favor of the current or former
directors, officers, trustees, employees, agents, or fiduciaries of the Company
or any of its Subsidiaries as provided in the Company Charter and Company Bylaws
(or, as applicable, the charter, bylaws, partnership agreement, limited
liability company agreement, or other organizational documents of any of the
Company’s Subsidiaries) and indemnification agreements of the Company or any of
its Subsidiaries shall be assumed by Surviving Corporation in the Merger,
without further action, at the Effective Time and shall survive the Merger and
shall continue in full force and effect in accordance with their
terms.
(c) From
the Effective Time, the articles of incorporation of Surviving Corporation shall
contain provisions no less favorable with respect to indemnification than are
set forth in the Company Charter and Company Bylaws, which provisions shall not
be amended, repealed or otherwise modified in any manner that would affect
adversely the rights thereunder of individuals who, at or prior to the Effective
Time, were directors, officers, trustees, employees, agents, or fiduciaries of
the Company or any of its Subsidiaries, unless such modification shall be
required by Law and then only to the minimum extent required by
Law.
(d) If
Surviving Corporation or any of its respective successors or assigns (i)
consolidates with or merges with or into any other person and shall not be the
continuing or surviving limited liability company, partnership or other entity
of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in each
such case, proper provision shall be made so that the successors and assigns of
Surviving Corporation assume the obligations set forth in this Section
7.05.
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(e) Parent
shall cause Surviving Corporation to perform all of the obligations of Surviving
Corporation under this Section 7.05 and the parties acknowledge and agree that
Parent guarantees the payment and performance of Surviving
Corporation’s obligations pursuant to this Section 7.05.
(f) This
Section 7.05 is intended for the irrevocable benefit of, and to grant third
party rights to, the Indemnified Parties and shall be binding on all successors
and assigns of the Company, Parent and Surviving Corporation. Each of
the Indemnified Parties shall be entitled to enforce the covenants contained in
this Section 7.05.
(a) Upon
the terms and subject to the conditions of this Agreement, each of the parties
hereto shall (i) use its commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws to consummate and make
effective the Merger, including using its commercially reasonable efforts to
obtain all Permits, Consents, exemptions, qualifications and orders of
Governmental Authorities and parties to contracts with the Company and its
Subsidiaries as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Merger, and
(ii) execute and deliver any additional documents or instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement.
(b) The
parties hereto agree to cooperate and assist one another in connection with all
actions to be taken pursuant to this Section 7.06(b), including the preparation
and making of the filings referred to therein and, if requested, amending or
furnishing additional information thereunder, including, subject to applicable
Law, providing copies of all related documents to the non-filing party and their
advisors prior to filing, and, to the extent practicable, neither of the parties
will file any such document or have any communication with any Governmental
Authority without prior consultation with the other party. Each party
shall keep the other apprised of the content and status of any communications
with, and communications from, any Governmental Authority with respect to the
transactions contemplated by this Agreement. To the extent
practicable and permitted by a Governmental Authority, each party hereto shall
permit representatives of the other party to participate in meetings and calls
with such Governmental Authority.
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ARTICLE
VIII
CONDITIONS
TO THE MERGER
(a) The
Company shall have obtained the Company Shareholder Approval;
(b) The
Company shall have obtained approval of the merger by a majority of the
outstanding shares of our common stock excluding shares held by Xx. Xxx,
and
(c) No
Governmental Authority shall have enacted, issued, promulgated, enforced or
entered any injunction, order, decree, ruling or other legal restraint or
prohibition (whether temporary, preliminary or permanent) or taken any other
action (including the failure to have taken an action) which, in any such case,
has become final and non-appealable and has the effect of enjoining,
restraining, preventing or prohibiting the consummation of the Merger or making
the consummation of the Merger illegal (“Governmental
Order”).
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ARTICLE
IX
(a) by
mutual written consent of Parent and the Company;
(b) by
either Parent or the Company, if 270 days (the “Outside Date”) shall
have occurred and the Merger shall not have been consummated;
provided, that the right to terminate this Agreement under this Section 9.01(b)
shall not be available to a party whose failure to fulfill any obligation
under this Agreement was the primary cause of, or resulted in, the failure of
the Merger to be consummated on or before the Outside Date;
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(c) by
either Parent or the Company if any Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any Governmental Order; provided,
however, that the terms of this Section 9.01(c) shall not be available to any
party unless such party shall have used its commercially reasonable efforts to
oppose any such Governmental Order or to have such Governmental Order vacated or
made inapplicable to the Merger;
(d) by
Parent, if the Company shall have breached or failed to perform any of its
representations, warranties, covenants or agreements set forth in this
Agreement, which breach or failure to perform (i) would give rise to the failure
of a condition set forth in Section 8.02(a) or (b), and (ii) is either
incurable, or if curable, is not cured by the Company by the earlier of (x) 30
days following receipt by the Company of written notice of such breach or
failure and (y) the Outside Date; provided, at the time of the delivery of such
written notice, Parent shall not be in material breach of its
obligations under this Agreement;
(e) by
Parent, if a Company Adverse Recommendation Change shall have
occurred;
(f) by
the Company, if prior to obtaining the Company Shareholder Approval, (i) the
Special Committee or the Company Board has concluded in good faith, after
consultation with the Special Committee’s or the Company’s outside legal counsel
and the Company Financial Advisor, that, in light of a Superior Proposal,
failure to terminate this Agreement would be inconsistent with the directors’
exercise of their fiduciary obligations to the Company’s shareholders (other
than the holders of Xx. Xxx’x Shares) under applicable Law, (ii) the Company has
complied in all material respects with Section 7.03, and (iii) concurrent with
such termination, the Company enters into a definitive agreement with respect to
such Superior Proposal; or
(g) by
the Company, if Xx. Xxx, Parent or MergerSub shall have breached or failed to
perform any of their representations, warranties, covenants or agreements set
forth in this Agreement, including but not limited to Section 5.06, which breach
or failure to perform (i) would give rise to the failure of a condition set
forth in Section 8.03(a) or (b), and (ii) is either incurable, or if curable, is
not cured by Parent or MergerSub by the earlier of (x) 30 days following receipt
by Parent of written notice of such breach or failure and (y) the Outside Date,
provided, at the time of the delivery of such written notice, the Company shall
not be in material breach of its obligations under this Agreement.
(a) Except
as otherwise set forth in this Section 9.03, all expenses incurred in connection
with this Agreement shall be paid by the party incurring such expenses, whether
or not the Merger is consummated, except that out-of-pocket costs and expenses
incurred in connection with printing and mailing the Proxy Statement shall be
borne by the Company.
(b) The
Company agrees that if this Agreement is terminated:
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(i) pursuant
to Section 9.01(e) and (A) at any time after the date hereof and prior to
obtaining the Company Shareholder Approval, an Acquisition Proposal shall have
been publicly announced prior to such Termination Date (and such Acquisition
Proposal was not withdrawn before the Termination Date), and (B) concurrently
with such termination or within twelve (12) months following the termination of
this Agreement, the Company enters into an agreement with respect to an
Acquisition Proposal, or an Acquisition Proposal is consummated, then the
Company shall pay to Parent, if and when consummation of such Acquisition
Proposal occurs, an amount equal to $1,000,000 (the “Superior Offer Termination
Fee”);
(ii) pursuant
to Section 9.01(f), then the Company shall pay to Parent the Superior Offer
Termination Fee; or
(iii) pursuant
to Section 9.01(d) then the Company shall pay to Parent $400,000 (the “Company Termination
Fee”).
The
Company Superior Offer Termination Fee or Termination Fee shall be paid by the
Company as directed by Parent in writing in immediately available funds as soon
as is reasonably practicable, but in any event no more than three (3) Business
Days following the event giving rise to the obligation to make such
payment. Upon payment of the Company Superior Termination Fee or
Termination Fee, the Company shall have no further liability to Xx. Xxx, Parent
and MergerSub at law or in equity with respect to such termination, this
Agreement or otherwise.
(c) Xx.
Xxx agrees that if this Agreement is terminated pursuant to Section
9.01(g), then Xx. Xxx shall pay to the Company an amount equal to $400,000
(“Xx. Xxx Termination
Fee”). Xx. Xxx Termination Fee shall be paid by Xx. Xxx as
directed by the Company in writing in immediately available funds as soon as is
reasonably practicable, but in any event no more than three (3) Business Days
following such termination. Payment by Xx. Xxx of Xx. Xxx Termination
Fee shall be the Company’s sole and exclusive remedy against Xx. Xxx, Parent and
MergerSub for failure to consummate the Merger and performance under this
Agreement and shall be in lieu of all other relief. It is understood
and agreed that payment of the Parent Termination Fee represents the reasonable
estimate of actual damages by the Company, Xx. Xxx, Parent and MergerSub and
does not constitute a penalty. Upon payment of the Xx. Xxx
Termination Fee, Xx. Xxx, Parent and MergerSub shall have no further
liability to the Company at law or in equity with respect to such termination,
this Agreement or otherwise.
(d) Each
of the Company, Parent and Xx. Xxx acknowledges that the agreements contained in
this Section 9.03 are an integral part of the transactions contemplated by
this Agreement. In the event that the Company shall fail to pay the
Company Termination Fee when due, the Company shall reimburse Parent for all
reasonable costs and expenses actually incurred or accrued by Parent (including
reasonable fees and expenses of counsel) in connection with the collection under
and enforcement of this Section 9.03. In the event that Xx. Xxx shall
fail to pay Xx. Xxx Termination Fee when due, Xx. Xxx shall reimburse
the Company for all reasonable costs and expenses actually incurred or accrued
by the Company (including reasonable fees and expenses of counsel) in connection
with the collection under and enforcement of this Section 9.03.
A-37
ARTICLE
X
if to
Parent, MergerSub or Xx. Xxx:
Xx.
Xxxxxx Xxx
x/x Xxxx
& Xxxxxxxx
00 Xxxxx,
Xxxxx X, Xxx Xxxx International Plaza
317 Xian
Xxx Xxxx
Xxxxxxxx,
000000 Xxxxx
Direct:
x00 00 0000 0000
Fax: x00
00 0000 0000
Attention
: Xxxxx X. Xxxx
if to the
Company:
Suite 310
- 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx,
XX Xxxxxx X0X 0X0
Telephone
No: (000) 000-0000
Facsimile
No: (000) 000-0000
Attention: Xx.
Xxxxx Xxx, Chairperson of the Special Committee of the Board of
Directors
with
copies to:
Bullivant
House Xxxxxx PC
000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxxxx, XX 00000
Telephone
No: (000) 000-0000
Facsimile
No: (000) 000-0000
Attention: Xxxxxx
X. Eng
Lang
Xxxxxxxx LLP
1500
Royal Centre P.O. Box 11117
0000 Xxxx
Xxxxxxx Xxxxxx
Xxxxxxxxx,
XX X0X 0X0
Phone:
000-000-0000
Fax: 000-000-0000
Attention: Xxx
Xxxxxx
A-38
Section
10.05 Entire Agreement;
Assignment. This Agreement, together with the Disclosure
Schedule, constitute the entire agreement among the parties with respect to the
subject matter hereof, and supersede all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof. This Agreement shall not be assigned (whether pursuant
to a merger, by operation of law or otherwise).
A-39
If within 30 days after either party
gives notice to the other of a dispute the parties agree upon a single
arbitrator, the arbitration will be held before that arbitrator, otherwise the
arbitration will be before a board of three arbitrators comprising one appointed
by the Company, one appointed by Parent, and one appointed by the two
arbitrators so appointed.
If the Company and Parent fail, after
14 days’ notice, to appoint an arbitrator, or if the two arbitrators fail to
appoint a third arbitrator within 14 days from the later of their own
appointments, then upon application by either party, the arbitrator or third
arbitrator, as the case may be, will be selected in the manner provided in the
Act.
The decision of the arbitrator (where a
single arbitrator has been agreed upon) or a majority of the arbitrators (where
three arbitrators have been appointed) will be final and binding on the
parties. The arbitrator(s) will be required to render his, her or
their written decision within 60 days of the conclusion of the arbitration
proceedings.
A-40
The place of arbitration will be
Vancouver, British Columbia and the language of arbitration will be
English.
[SIGNATURE
PAGE FOLLOWS]
A-41
Chief
Respect Limited, a Hong Kong Company
|
|
By:
|
/a/ Xxxxxx Xxx
|
Yanlin,
Han/Chief Executive Officer
|
|
Datong
Investment Inc., a Florida corporation
|
|
By:
|
/s/ Xxxxxx Xxx
|
Xxxxxx
Xxx/Chief Executive Officer
|
|
a
Florida corporation
|
|
By:
|
/s/ Xxxxx Xxx
|
Xxxxx
Xxx, Special Committee Chairman
|
|
Xx.
Xxxxxx Xxx , an individual, as to Sections 5.06,
7.01(c),
7.08, 8.03(b), 9.03(c) and (d) only
|
|
/s/ Xxxxxx
Xxx
|
A-42
EXHIBIT
A
SUPPORT
AGREEMENT
A-43
Exhibit
A
SUPPORT
AGREEMENT
THIS AGREEMENT made as of
March 26, 2010,
BETWEEN:
[u insert name], of [u insert address]
(the
“Holder”)
AND:
CHIEF RESPECT LIMITED, a
company incorporated under the laws of Hong Kong having an office at 00/X, XXX
Xxxxxx, 000 Xxxxxxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx
(the
“Purchaser”)
(A)
|
The
Purchaser, Datong Investment Inc. (a wholly-owned subsidiary of the
Purchaser), Xx. Xxxxxx Xxx and Dragon Pharmaceuticals, Inc. (the
“Company”) have entered into an Agreement and Plan of Merger dated March
26, 2010 (the “Merger Agreement”) in respect of the proposed acquisition
of all of the issued and outstanding common shares of the Company
(“Company Shares”) by way of a merger under the Florida Business
Corporation Act (the “Merger”) at a price payable in cash of $0.82 per
Company Share;
|
(B)
|
Holder
beneficially owns or controls the number of Company Shares, and options to
purchase Company Shares, set forth in Schedule “A” to this Agreement
(collectively, the “Company Securities”);
and
|
(C)
|
Holder
has agreed, among other things, to support the Merger and to vote the
Company Securities and all additional Company Shares and options to
purchase Company Shares that the Holder acquires beneficially during the
period from the date of this Agreement through the Effective Time (the
“Additional Securities,” and together with the Company Securities, the
“Subject Securities”) beneficially owned by the Holder in favour of the
shareholder resolution approving the
Merger;
|
NOW THEREFORE the parties
hereby agree that, in consideration of the premises, covenants and agreements
herein contained, the sum of $1.00 and for other good and valuable consideration
(the receipt and sufficiency of which is hereby acknowledged), the parties agree
as follows
1.
|
Any
capitalized terms used herein but not otherwise defined will have the
meaning ascribed to them in the Merger
Agreement.
|
2.
|
Holder
hereby covenants and agrees that from the date hereof until the
termination of this Agreement, that the Holder will not, except in
accordance with the terms of this Agreement or with the prior written
consent of Purchaser:
|
A-44
(a)
|
grant
or agree to grant any proxy or other right to vote the Subject Securities,
or enter into any voting trust or pooling agreement or arrangement or
enter into or subject any of such Subject Securities to any other
agreement, arrangement, understanding or commitment, formal or informal,
with respect to or relating to the voting
thereof;
|
|
(b)
|
option,
sell, assign, dispose of, pledge, encumber, grant a security interest in,
transfer, or otherwise convey or relinquish the Holder’s right to vote the
Subject Securities or agree to do any of the foregoing except that the
Holder may exercise options to purchase Company Shares provided that any
Company Shares that result from the exercise will be Additional Securities
that will be subject to this
Agreement;
|
|
(c)
|
exercise
any rights of dissent provided under any applicable Laws or otherwise in
connection with the Merger; and
|
|
(d)
|
do
indirectly that which it may not do directly in respect of the
restrictions on its rights with respect to the Subject Securities pursuant
to this paragraph, including, but not limited to, the sale of any direct
or indirect holding company or entity or the granting of a proxy on the
Subject Securities or the securities of any direct or indirect holding
company which would have, indirectly, the effect prohibited by this
paragraph.
|
3. Holder
hereby agrees that from the date hereof until the termination of this Agreement,
the Holder will:
|
(a)
|
vote
(or direct the voting of) all of the Subject Securities over which he has
the right or power to vote or cause to be voted at every meeting of the
holders of Company Shares, and at every adjournment or postponement
thereof, and in any action by written consent of the holders of Company
Shares (unless and only then to the extent prohibited by
law):
|
|
(i)
|
in
favour of the approval, consent, ratification and adoption of the
shareholder resolution approving the Merger (and any actions required in
furtherance thereof) and all other resolutions to be put to the meeting of
holders of Company Shares in respect of the Merger as contained in the
Merger Agreement;
|
|
(ii)
|
against
any proposed action by the Company, the shareholders of the Company or any
other Person: (a) in respect of any Acquisition Proposal; (b) which would
reasonably be regarded as being directed towards or likely to prevent,
impede, interfere with, postpone, discourage or delay the Merger or the
successful completion of the Merger, including without limitation any
amendment to the constating documents or by-laws of the Company or its
corporate structure; and
|
|
(iii)
|
which
would reasonably be expected to result in a Company Material Adverse
Effect.
|
|
(b)
|
to
the extent Holder has the right to grant a proxy in respect of any of the
Subject Securities, upon the request or direction of Purchaser, execute
and deliver to Purchaser within two Business Days following such request a
proxy in respect of any resolution referred to in this paragraph 3, and
have such Subject Securities counted or not counted (as directed by
Purchaser) as part of a quorum in connection with any meeting of holders
of Company Shares relating to matters set forth in paragraph 3(a)(ii);
and
|
A-45
|
(c)
|
for
greater certainty, in connection with any matter referred to in paragraph
3(a)(ii), consult with Purchaser prior to exercising any voting rights
attached to the Subject Securities and exercise or procure the exercise of
such voting rights as Purchaser will instruct, including without
limitation the delivery to Purchaser, upon its request or direction, of a
proxy in respect of any such
resolution.
|
4.
|
Nothing
herein will prevent Holder, if a member of the Board, from exercising the
Holder’s fiduciary duties and engaging, in his capacity as a director of
Company, in discussions or negotiations with, or furnishing information
to, a Person who proposes an Acquisition Proposal that did not result from
a breach of the Merger Agreement.
|
5.
|
Holder,
by acceptance hereof, represents and warrants as follows and acknowledges
that Purchaser is relying upon such representations and warranties in
connection with entering into this Agreement and the Merger
Agreement:
|
|
(a)
|
Holder
has the sole right to vote or direct the voting of the Subject Securities
and sole power to agree to all of the matters set forth in this Agreement,
with no limitation, qualifications or restrictions on such
rights;
|
|
(b)
|
Holder
is the beneficial owner of the Subject Securities set forth in Schedule
“A”, all of which are free and clear of any Liens, and does not own,
beneficially or otherwise, any Subject Securities other than the Subject
Securities listed on Schedule “A”;
|
|
(c)
|
this
Agreement has been duly executed and delivered by Holder and constitutes a
legal, valid and binding obligation of Holder, enforceable against the
Holder in accordance with its terms, subject to bankruptcy, insolvency and
other applicable Laws affecting creditors’ rights generally, and to
general principles of equity; and
|
|
(d)
|
Holder
(i) is not a joint actor of, or involved, directly or indirectly, with the
Purchaser in respect of the Merger, (ii) is not receiving any
consideration for the Subject Securities other than what is being offered
under the Merger Agreement, (iii) has full knowledge and access to
information concerning the Company and its securities, (iv) any factors
that were considered relevant by the Holder in assessing the consideration
offered under the Merger Agreement did not have the effect of reducing the
price that would otherwise have been considered acceptable by the
Holder.
|
6.
|
Purchaser
represents and warrants as follows and acknowledges that Holder is relying
upon such representations and warranties in connection with the entering
into of this Agreement:
|
|
(a)
|
Purchaser
(including its shareholders) is not aware of any material information in
respect of the Company or its securities that has not been generally
disclosed or if generally disclosed, could have reasonably been expected
to increase the consideration being offered in the
Merger;
|
A-46
|
(b)
|
Purchaser
is a corporation duly organized under the laws of Hong Kong, is
validly existing and has all necessary corporate power and authority to
own its property and assets and to carry on its business as currently
owned and conducted;
|
|
(c)
|
Purchaser
has the necessary corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement by Purchaser and the consummation by Purchaser
of the Merger have been duly authorized and no other corporate proceedings
on its part are necessary to authorize this Agreement or the Merger
Agreement. This Agreement has been duly executed and delivered
by Purchaser and constitutes a legal, valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency and other applicable Laws affecting creditors’
rights generally, and to general principles of equity;
and
|
|
(d)
|
the
authorization of this Agreement, the execution and delivery by Purchaser
of this Agreement and the performance by it of its obligations under this
Agreement and the Merger Agreement, will not result (with or without
notice or the passage of time) in a violation or breach of or constitute a
default under any provision of (i) its constating documents or by-laws;
(ii) any applicable Laws; (iii) any note, bond, mortgage, indenture or
contract or agreement to which Purchaser is party or by which it is bound;
or (iv) any judgement, decree, order or award of any Governmental
Authority or arbitrator.
|
7.
|
The
Purchaser and Holder covenant to advise the other, and the Company, if
they become aware of any material information in respect of the Company or
its securities that has not been generally disclosed and if generally
disclosed could reasonably be expected to increase the consideration
offered under the Merger Agreement.
|
8.
|
This
Agreement will terminate and be of no further force or effect upon the
earliest of
|
|
(a)
|
such
date and time as the Merger Agreement will have been terminated pursuant
to Article IX thereof (which includes in circumstances where the Company
terminates the Merger Agreement as a result of a Superior
Proposal),
|
|
(b)
|
the
Effective Time, and
|
|
(c)
|
the
Purchaser or Holder providing the advice referred to under paragraph
7.
|
9.
|
Notwithstanding
paragraph 8, this Agreement will terminate immediately upon any material
adverse amendment being made to the Merger Agreement or the Articles of
Merger after the date hereof, without the consent of the Holder. The
determination of whether an amendment to the Merger Agreement or the
Articles of Merger is a material adverse amendment will be from the
perspective of the Holder. Such a material adverse amendment
would be an amendment prejudicial to the Holder that would include, but is
not limited to, any amendment providing for decreased consideration
payable to the Holder under the terms of the Merger Agreement or the
Articles of Merger. In no event will such a material adverse
amendment include amendments made solely for the purpose of correcting
clerical errors. Upon any such termination in accordance with
this provision, this Agreement will immediately be deemed to have been
revoked by such Holder and will be of no further force or
effect. Notwithstanding anything in this Agreement to the
contrary, the termination of this Agreement will not prejudice the right
of either party hereto in respect of any breach hereof by the other
party.
|
A-47
10.
|
Holder
recognizes and acknowledges that this Agreement is an integral part of
Purchaser entering into the Merger Agreement, and that Purchaser would not
contemplate proceeding with the Merger unless this Agreement was entered
into by Holder, and that a breach by Holder of any covenants or other
commitments contained in this Agreement will cause Purchaser to sustain
injury for which it would not have an adequate remedy at law for money
damages. Therefore, Holder agrees that, in the event of any such breach,
Purchaser will be entitled to the remedy of specific performance of such
covenants or commitments and preliminary and permanent injunctive and
other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
|
11.
|
In
this Agreement, unless otherwise expressly stated or the context otherwise
requires:
|
|
(a)
|
references
to “herein”, “hereby”, “hereunder”, “hereof” and similar expressions are
references to this Agreement and not to any particular paragraph or
Schedule of to this Agreement;
|
|
(b)
|
references
to a “paragraph” or “Schedule” is a reference to a paragraph or Schedule
of this Agreement;
|
|
(c)
|
words
importing the singular will include the plural and vice versa, and words
importing gender will include the masculine, feminine and neuter
genders;
|
|
(d)
|
the
use of headings is for convenience of reference only and will not affect
the construction or interpretation hereof;
and
|
|
(e)
|
wherever
the term “includes” or “including” is used, it will be deemed to mean
“includes, without limitation” or “including, without limitation”,
respectively.
|
12.
|
In
the event of any increase or decrease or other change in the Subject
Securities by reason of stock dividend, stock split, recapitalization,
combination, exchange of shares or the like, the number of Subject
Securities subject to this Agreement will be adjusted appropriately and
equitably.
|
13.
|
The
parties waive the application of any rule of Law which otherwise would be
applicable in connection with the construction of this Agreement that
ambiguous or conflicting terms or provisions should be construed against
the party who (or whose counsel) prepared the executed agreement or any
earlier draft of the same.
|
14.
|
Holder
hereby consents to the disclosure of the substance of this Agreement in
any press release or any circular relating to the Company Shareholders
Meeting and to the filing of this Agreement as may be required pursuant to
applicable securities Laws. The parties will co-ordinate in the making and
dissemination of any public announcement relating to the subject matter of
this Agreement. A copy of this Agreement may be provided to the directors
of Company.
|
15.
|
This
Agreement will be binding upon and will enure to the benefit of and be
enforceable by each of the parties hereto and their respective successors,
assigns, heirs, executors and personal representatives. This Agreement
will not be assignable by any party without the prior written consent of
the other parties.
|
16.
|
Time
will be of the essence of this
Agreement.
|
A-48
17.
|
If
any term, provision, covenant or restriction of this Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement will remain in full force and effect and will in no way be
affected, impaired or invalidated and the parties will negotiate in good
faith to modify the agreement to preserve each party’s anticipated
benefits under this Agreement.
|
18.
|
All
notices and other communications given or made pursuant hereto will be in
writing and will be deemed to have been duly given or made as of the date
delivered or sent if delivered personally or sent by electronic mail, or
as of the following Business Day if sent by prepaid overnight courier, to
the parties at the following addresses (or at such other addresses as will
be specified by either party by notice to the other given in accordance
with these provisions):
|
|
(a)
|
in
the case of Holder to:
|
|
[u Insert
Name]
|
|
[u Insert
address]
|
|
Attention:
|
|
Email:
|
|
(b)
|
in
the case of Purchaser to:
|
|
00/X,
XXX Xxxxxx, 000 Xxxxxxxxxx Xxxx
|
|
Xxxxxxx,
Xxxx Xxxx
|
Attention:
|
Xx.
Xxxxxx Xxx
|
|
Email:
|
xxxxxxxxx@xxx.xxxx.xxx
|
19.
|
This
Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all other agreements
and undertakings, both written and oral, among the parties with respect to
the subject matter hereof.
|
20.
|
This
Agreement will be governed in all respects, including validity,
interpretation and effect, by the laws of British Columbia and the laws of
Canada applicable therein, without giving effect to any principles of
conflict of Laws thereof which would result in the application of the Laws
of any other jurisdiction, and all actions and proceedings arising out of
or relating to this Agreement will be heard and determined exclusively in
the courts of British Columbia.
|
21.
|
Each
party hereto will pay its own expenses incurred in connection with this
Agreement.
|
22.
|
This
Agreement may be amended by the parties hereto, and the terms and
conditions hereof may be waived, only by an instrument in writing signed
on behalf of each of the parties hereto, or, in the case of a waiver, by
an instrument signed on behalf of the party waiving compliance with any of
the terms or conditions of this
Agreement.
|
A-49
23.
|
This
Agreement may be executed in any number of counterparts, each of which
will be deemed to be original and all of which taken together will be
deemed to constitute one and the same instrument, and it will not be
necessary in making proof of this Agreement to produce more than one
counterpart.
|
IN WITNESS WHEREOF the parties
hereto have duly executed this Agreement as of the date first above
written.
CHIEF
RESPECT LIMITED
|
||
By:
|
|
|
Name:
|
||
Title:
|
[signature
page of Holder to follow]
A-50
Accepted
and agreed to this 26 day of March, 2010.
Witness
|
[u Insert Name of
Holder]
|
A-51
SCHEDULE
A
SUBJECT
SECURITIES
Name
|
|
Company
Shares beneficially
owned or controlled
|
|
Registered
holder if different
from beneficial owner
|
|
Company
Shares issuable upon
exercise of Options
|
[u insert]
|
|
[u
insert]
|
|
[u
insert]
|
|
[u
insert]
|
A-52