AGREEMENT AND PLAN OF MERGER by and among Matinas BioPharma Holdings, Inc, Matinas Merger Sub, Inc., and MATINAS BIOPHARMA, INC. Dated as of July 11, 2013

 

 

 

  

AGREEMENT AND PLAN OF MERGER

 

by and among

 

Matinas BioPharma Holdings, Inc,

 

Matinas Merger Sub, Inc.,

 

and

 

MATINAS BIOPHARMA, INC.

 

 

 

 

Dated as of July 11, 2013

 

 

 

  

 
 

 

TABLE OF CONTENTS

 

    Page
     
ARTICLE I  
The Merger 1
1.01. The Merger 1
1.02. Closing; Effective Time 2
1.03. Effects of the Merger 2
1.04. Certificate of Incorporation; Bylaws 2
1.05. Directors and Officers 2
     
ARTICLE II  
Effect of the Merger on the Capital Stock of the Constituent Corporations 3
2.01. Effect on Capital Stock 3
2.02. Consideration 4
2.03. Aggregate Consideration Schedule 4
2.04. Lost, Stolen or Destroyed Certificates 4
2.05. Adjustments 5
2.06. Withholding 5
     
ARTICLE III  
Representations and Warranties Relating to the Company 5
3.01. Organization; Capitalization 5
3.02. Authority; Execution and Delivery; Enforceability 6
3.03. No Conflicts 7
3.04. Financial Statements 7
3.05. Indebtedness 8
3.06. Governmental Authorizations 8
3.07. Company Agreements 8
3.08. Intellectual Property 8
3.09. Employee Matters 9
3.10. Proceedings 9
3.11. Compliance 9
3.12. Related Party Transactions 9
3.13. Taxes 9
     
ARTICLE IV  
Representations and Warranties of Parent 10
4.01. Organization; Capitalization 10
4.02. Authority 11
4.03. No Conflicts 11
4.04. Governmental Authorizations 11
4.05. Proceedings 12

 

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TABLE OF CONTENTS

(Continued)

 

    Page
     
ARTICLE V  
Covenants 12
5.01. Conduct of Business Pending Closing 12
5.02. Prohibited Actions Pending Closing 12
5.03. Access to Information 13
5.04. Reasonable Efforts to Close 14
5.05. Stockholder Approval 14
5.06. Tax Matters 14
5.07. Publicity 15
5.08. Confidentiality 15
5.09. Resignations 16
5.10. Employment Agreements 16
5.11. Voting Agreements 16
5.12. Appointment of Directors and Officers of Parent 16
5.13. Further Assurances 16
     
ARTICLE VI  
Conditions to Closing 16
6.01. Conditions Precedent to Each Party’s Obligation to Effect the Merger 16
6.02. Conditions Precedent to Obligations of Parent and Merger Sub 17
6.03. Conditions Precedent to the Company’s Obligations 18
6.04. Frustration of Closing Conditions 19
     
ARTICLE VII  
Termination 19
7.01. Termination 19
7.02. Effect of Termination 20
     
ARTICLE VIII  
Survival 20
8.01. Survival of Representations and Warranties 20
     
ARTICLE IX  
General Provisions 20
9.01. Fees and Expenses 20
9.02. Stockholder Representative 20
9.03. Binding Effect; Assignment 21
9.04. No Third-Party Beneficiaries 21
9.05. Notices 21
9.06. Interpretation; Exhibits and Schedules; Certain Definitions 22
9.07. Entire Agreement; Amendments and Waivers 26
9.08. Severability 26
9.09. Jurisdiction; Waiver of Jury Trial 26
9.10. Governing Law 27
9.11. Counterparts 27

 

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AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER, dated as of July 11, 2013 (this “Agreement”), by and among Matinas BioPharma Holdings, Inc., a Delaware corporation (“Parent”), Matinas Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), Matinas BioPharma, Inc., a Delaware corporation (the “Company”), and Xxxxxx Xxxxxx, as Stockholder Representative (the “Stockholder Representative”).

 

WHEREAS, the parties intend that Merger Sub be merged with and into the Company (the “Merger”) with the Company surviving the Merger on the terms and subject to the conditions set forth in this Agreement;

 

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition to the Merger, each of the Company Stockholders (as defined herein) listed on Schedule 1 is entering into a voting agreement with Parent and the stockholders of Parent immediately prior to the Effective Time (as defined herein) (the “Voting Agreement”);

 

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent’s willingness to enter into this Agreement, Parent and the Company will enter into a Placement Agency Agreement with Aegis Capital Corp, dated the date hereof, pursuant to which Parent shall complete the closing of a private placement offering in the amount of at least Six Million Dollars ($6,000,000) (the “Private Placement”) concurrently with, and as a condition to, the Merger under this Agreement;

 

WHEREAS the Board of Directors of the Company has (i) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into this Agreement, (ii) approved this Agreement in accordance with the General Corporation Law of the State of Delaware (the “DGCL”), and (iii) resolved to recommend the adoption of this Agreement by the stockholders of the Company; and

 

WHEREAS, the Board of Directors of each of Parent and Merger Sub has approved and declared it advisable for Parent and Merger Sub, as the case may be, to enter into, this Agreement and consummate the Merger.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, the parties hereby agree as follows:

 

ARTICLE I
The Merger

 

1.01.      The Merger. On the terms and subject to the conditions of this Agreement and in accordance with the DGCL, at the Effective Time (as defined herein), Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the “Surviving Corporation”) and a wholly owned subsidiary of Parent.

 

 
 

 

1.02.      Closing; Effective Time.

 

(a)          The closing of the Merger (the “Closing”) shall take place at the offices of Xxxxxxxxxx Xxxxxxx LLP, 1251 Avenue of the Americas, New York, New York as soon as practicable after the satisfaction or waiver of the conditions set forth in ARTICLE VI (excluding conditions that, by their terms, cannot be satisfied until the Closing, but subject to the satisfaction or waiver of such conditions). The date on which the Closing actually occurs is hereinafter referred to as the “Closing Date.”

 

(b)          At the Closing, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, in such form as required by, and executed and filed in accordance with, the relevant provisions of the DGCL (the date and time of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, or such later time as is specified in the Certificate of Merger and as is agreed to by the parties hereto, being hereinafter referred to as the “Effective Time”), and shall make all other filings or recordings required under the DGCL in connection with the Merger.

 

1.03.      Effects of the Merger. The Merger shall have the effects set forth in this Agreement and the applicable provisions of the DGCL. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all the property, rights, privileges, immunities, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

 

1.04.      Certificate of Incorporation; Bylaws.

 

(a)          At the Effective Time, the certificate of incorporation of Merger Sub in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation as of the Effective Time until thereafter amended in accordance with the DGCL; provided, however, that at the Effective Time, Article I of the certificate of incorporation of the Surviving Corporation shall be amended and restated in its entirety to read as follows: “The name of the corporation is Matinas BioPharma, Inc.”

 

(b)          At the Effective Time, the bylaws of Merger Sub as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation as of the Effective Time until thereafter amended in accordance with the DGCL and as provided in the certificate of incorporation of the Surviving Corporation and such bylaws.

 

1.05.      Directors and Officers.

 

(a)          At the Effective Time, the directors of Merger Sub shall be the individuals set forth on Schedule 1.05(a), each to hold the office of a director of the Surviving Corporation in accordance with the DGCL and the certificate of incorporation and bylaws of the Surviving Corporation until his or her successor is duly elected and qualified.

 

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(b)          Immediately following the Effective Time, the directors of the Surviving Corporation as of the Effective Time, shall take all actions necessary to appoint the individuals set for on Schedule 1.05(b) as the officers of the Surviving Corporation, each to hold office in accordance with the provisions of the bylaws of the Surviving Corporation. The directors and officers of the Company immediately prior to the Effective Time shall submit their resignations to be effective as of the Effective Time, which resignations shall be a condition of the Merger.

 

ARTICLE II
Effect of the Merger on the Capital Stock of the Constituent Corporations

 

2.01.      Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or any Company Stockholder (as defined herein) of any of the following securities:

 

(a)          Conversion of Common Stock and Preferred Stock.

 

(i)          All of the outstanding shares of common stock, $0.0001 par value per share (the “Common Stock”) of the Company issued and outstanding immediately prior to the Effective Time (each, a “Common Share”), other than any Cancelled Shares (as defined herein), shall be converted into the right to receive, in the aggregate:

 

A.           7,593,746 shares of Parent common stock (the “Parent Common Stock”), par value $0.0001 (the “Common Stock Consideration”).

 

(ii)         All of the outstanding shares of Series A Preferred Stock, $0.0001 par value per share (the “Preferred Stock” and together with the Common Stock, the “Company Stock”) of the Company issued and outstanding immediately prior to the Effective Time (each, a “Preferred Share” and together with the Common Shares, the “Shares”), other than any Cancelled Shares, shall be converted into the right to receive, in the aggregate:

 

A.           1,406,254 shares of Parent Common Stock; and

 

B.           1,000,000 warrants, each warrant to purchase one share of Parent Common Stock over a five year period at an exercise price of $2.00 per share (the “Warrants” and together with the number of shares of Parent Common Stock set forth in Section 2.01(a)(ii)(A) the “Preferred Stock Consideration”).

 

Collectively, the Common Stock Consideration and the Preferred Stock Consideration are referred to as the “Merger Consideration.” The Merger Consideration shall be distributed in the manner provided by Section 2.02.

 

(b)          Conversion of Merger Sub Common Stock. Each share of capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.

 

(c)          Cancelled Shares. Each Share that is held in treasury by the Company immediately prior to the Effective Time (the “Cancelled Shares”) shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and shall cease to exist, and no consideration shall be delivered in exchange for such cancellation.

 

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(d)          Cancellation of Shares at Effective Time. At the Effective Time, all Shares issued and outstanding immediately prior to the Effective Time shall no longer be outstanding and such Shares shall be cancelled and retired and shall cease to exist, and each certificate (a “Certificate”) formerly representing any such Shares (other than such shares held by the Company) shall thereafter represent only the right to receive the applicable portion of the Merger Consideration.

 

2.02.      Consideration. At the Effective Time, Parent shall make the following distributions, in each case in accordance with the final Aggregate Consideration Schedule (the “Aggregate Consideration Schedule”) delivered pursuant to Section 2.03:

 

(a)          Parent shall issue or cause its transfer agent to issue to each Holder of Common Stock, shares of the Common Stock Consideration, as adjusted pursuant to this Agreement as set forth in the Aggregate Consideration Schedule.

 

(b)          Parent shall issue or cause its transfer agent to issue to each Holder of Preferred Stock, Shares of the Preferred Stock Consideration, as adjusted pursuant to this Agreement as set forth in the Aggregate Consideration Schedule.

 

(c)          Prior to any such disbursement and/or issuance to any Company Stockholder pursuant to Sections 2.02(a) and 2.02(b), such Company Stockholder shall have delivered to Parent such Company Stockholder’s Certificate (or in lieu thereof, such documentation as may be requested by Parent to comply with Section 2.04 below) and such Certificate shall forthwith be cancelled. All Merger Consideration issued upon the surrender for exchange of Certificates shall be deemed to have been issued in full satisfaction of all rights pertaining to the shares of Company Stock previously represented by such Certificates, and at the Effective Time the stock transfer books of the Company shall be closed and there shall be no further registration or transfers on the stock transfer books of the Surviving Company of the shares of Company Stock that were outstanding immediately prior to the Effective Time.

 

(d)          No certificates for fractional shares of Parent Common Stock or Warrants to purchase fractional shares of Parent Common Stock shall be issued. In lieu of any fractional shares or Warrants to purchase a fractional share to which the Company Stockholders would otherwise be entitled as a result of the distributions provided for herein, all stock issuances of Parent Common Stock or Warrant amounts shall be rounded up to the nearest whole share, so that no more than the whole number of shares of Warrants represented by the Merger Consideration, if any, shall be issued.

 

2.03.      Aggregate Consideration Schedule. Attached hereto as Exhibit A is the Aggregate Consideration Schedule setting forth the calculation of the amounts for distribution in accordance with Section 2.02.

 

2.04.      Lost, Stolen or Destroyed Certificates. In the event any Certificates shall have been lost, stolen or destroyed, the agent shall make such payment in exchange for such lost, stolen or destroyed Certificates upon the making of an affidavit of that fact by the holder thereof.

 

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2.05.      Adjustments. Without limiting the other provisions of this Agreement, if at any time during the period between the date of this Agreement and the Effective Time, any change in the number of outstanding Shares of Parent (or securities convertible or exchangeable into or exercisable for Shares) shall occur as a result of a reclassification, recapitalization, stock split (including a reverse stock split), or combination, exchange or readjustment of shares, merger or any stock dividend or stock distribution with a record date during such period, the Merger Consideration shall be correspondingly adjusted to reflect such change.

 

2.06.      Withholding. Notwithstanding any other provision in this Agreement, Parent, the Surviving Corporation or the agent (and any other Person that has any withholding obligation with respect to any payment made pursuant to this Agreement) shall be entitled to deduct and withhold, or cause to be deducted and withheld, from the consideration payable or otherwise deliverable to any Person pursuant to this Agreement such amounts as may be required to be deducted and withheld under any provisions of federal, local or foreign tax law or under any applicable legal requirements. To the extent that amounts are so deducted or withheld, such deducted or withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such deduction and withholding was made.

 

ARTICLE III
Representations and Warranties Relating to the Company

 

The Company represents and warrants to Parent as follows:

 

3.01.      Organization; Capitalization.

 

(a)          The Company is duly organized and validly existing in good standing under the laws of the jurisdiction in which it was formed, and has the requisite power and authority to own its properties and to carry on its business as now being conducted. The Company is not a party to any joint venture and does not directly or indirectly own or hold capital stock or an equity or similar interest in any entity. The Company is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect on the Company.

 

(b)          The authorized capital stock of the Company consists of (i) 19,200,000 shares of Common Stock, and (ii) 6,481,481 shares of Preferred Stock. As of the date of this Agreement and the Closing, there are (i) 10,000,000 Common Shares issued and outstanding; and (ii) 1,851,854 shares of Preferred Stock issued and outstanding. Schedule 3.01 sets forth (A) a complete and accurate list of all holders of Common Shares and shares of Preferred Stock, indicating the number of Common Shares and shares of Preferred Stock held by each holder; and (B) all stock option plans and other stock or equity-related plans of the Company.  All of the issued and outstanding Shares are duly authorized, validly issued, fully paid, nonassessable and free of all preemptive rights.  Other than as listed in Schedule 3.01, there are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Company is a party or which are binding upon the Company providing for the issuance or redemption of any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company.  Except as set forth in Schedule 3.01(b), there are no agreements to which the Company is a party or by which it is bound with respect to the voting (including without limitation voting trusts or proxies), registration under the Securities Act of 1933, as amended, or sale or transfer (including without limitation agreements relating to pre-emptive rights, rights of first refusal, co-sale rights or “drag-along” rights) of any securities of the Company.  To the knowledge of the Company, there are no agreements among other parties, to which the Company is not a party and by which it is not bound, with respect to the voting (including without limitation voting trusts or proxies) or sale or transfer (including without limitation agreements relating to rights of first refusal, co-sale rights or “drag-along” rights) of any securities of the Company.  All of the issued and outstanding Company Shares were issued in compliance with applicable federal and state securities laws.

 

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3.02.       Authority; Execution and Delivery; Enforceability.

 

(a)          The Company has all requisite power, authority and legal capacity to execute and deliver this Agreement and each Ancillary Agreement to which the Company is a party, to perform its obligations hereunder and thereunder and to consummate the Merger and the other transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Ancillary Agreements to which the Company is a party, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized and approved by all required action on the part of the Company and, except for (i) the adoption of this Agreement and the Ancillary Agreements and the transactions contemplated hereunder and thereunder by the holders of the Company Stock and (ii) the filing and recordation of appropriate merger documents as required by the DGCL, no other corporate or other proceedings on the part of the Company are necessary to authorize this Agreement, the Ancillary Agreements and the transactions contemplated hereby or thereby.

 

(b)          When received by the Company, the requisite consent of the Company Stockholders along with a completed questionnaire from each stockholder containing customary representations for a private placement in a manner reasonably acceptable to Parent (collectively, the “Stockholders’ Consent”) shall comply in all respects with the Company’s certificate of incorporation and bylaws and the DGCL; provided that the Stockholders’ Consent is signed by the holders of all of the outstanding shares of Company Stock entitled to vote thereon treating the outstanding shares of Common Stock and Preferred Stock together as a single class (treating each share of Preferred Stock as the number of shares of Common Stock into which it is convertible) and by the holders of all of the outstanding shares of Preferred Stock treating the outstanding shares of Preferred Stock as a single class (treating each share of Preferred Stock as the number of shares of Common Stock into which it is convertible), no other vote of or action by the stockholders of the Company is required to adopt and approve this Agreement or to consummate the Merger or the other transactions contemplated hereby.

 

(c)          This Agreement has been duly authorized, executed and delivered and constitutes, upon due execution and delivery, will constitute, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms (i) except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect related to laws affecting creditors’ rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers, and except that no representation is made herein regarding the enforceability of the Company’s obligations to provide indemnification and contribution remedies under the securities laws and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity).

 

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3.03.      No Conflicts. None of the execution and delivery of or performance by the Company under this Agreement or the consummation of the transactions herein contemplated conflicts with or violates, or will result in the creation or imposition of, any lien, charge or other encumbrance upon any of the assets of the Company under any agreement or other instrument to which the Company is a party or by which the Company or its assets may be bound, or any term of the certificate of incorporation or by-laws of the Company, or any license, permit, judgment, decree, order, statute, rule or regulation applicable to the Company or any of its assets, except in the case of a conflict, violation, lien, charge or other encumbrance (except with respect to the Company’s Certificate of Incorporation or By-laws) which would not reasonably be expected to, have an Material Adverse Effect on the Company.

 

3.04.      Financial Statements.

 

(a)          The Company’s audited financial statements as and for the period ended December 31, 2012 (the “Year-End Financials”) and the Company’s unaudited financial statements for the period ended March 31, 2013 (the “Interim Financials,” and together with the Year-End Financials, the “Financial Statements”), together with the related notes, if any, present fairly, in all material respects, the financial position of the Company as of the dates specified and the results of operations for the periods covered thereby. Such Financial Statements and related notes were prepared substantially in accordance with United States generally accepted accounting principles applied on a consistent basis throughout the periods indicated, except that the unaudited financial statements omit full notes, and except for normal year-end adjustments. Except as set forth in such Financial Statements, the Company has no known material liabilities of any kind, whether accrued, absolute, contingent, or otherwise. All other financial and statistical information provided to the Parent by the Company with respect to the Company present fairly in all material respects the information shown therein on a basis consistent with the Financial Statements of the Company. The Company does not know of any facts, circumstances or conditions which could materially adversely affect its operations, earnings or prospects except as set forth on Schedule 3.04(a).

 

(b)          Except as set forth on Schedule 3.04(b), since the date of the Company’s most recent Financial Statements, there has been no Material Adverse Effect on the Company. Except as set forth on Schedule 3.04(b), since the date of the Company’s most recent Financial Statements, the Company has not (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, in excess of $75,000 outside of the ordinary course of business or (iii) had capital expenditures, individually or in the aggregate, in excess of $75,000. The Company has not taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.

 

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3.05.      Indebtedness. Except as set forth on Schedule 3.05, the Company (i) has no outstanding Indebtedness (as defined herein) in excess of $75,000, (ii) is not a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument would result in a Material Adverse Effect, or (iii) is not in violation of any term of or in default under any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect.

 

3.06.      Governmental Authorizations. The conduct of business by the Company as presently, and proposed to be conducted, is not subject to continuing oversight, supervision, regulation or examination by any governmental official or body of the United States, or any other jurisdiction wherein the Company conducts, or proposes to conduct, such business, except as set forth on Schedule 3.06. The Company has obtained all material licenses, permits and other governmental authorizations necessary to conduct its business as presently conducted. The Company has not received any notice of any violation of, or noncompliance with, any federal, state, local or foreign laws, ordinances, regulations and orders (including, without limitation, those relating to environmental protection, occupational safety and health, securities laws, equal employment opportunity, consumer protection, credit reporting, “truth-in-lending”, and warranties and trade practices) applicable to its business, the violation of, or noncompliance with, would have an Material Adverse Effect on the Company, and the Company knows of no facts or set of circumstances which could give rise to such a notice.

 

3.07.      Company Agreements. No default by the Company or, to the knowledge of the Company, any other party, exists in the due performance under any material agreement to which the Company is a party or to which any of its assets is subject (collectively, the “Company Agreements”). The Company Agreements are in full force and effect in accordance with their respective terms, subject to any applicable bankruptcy, insolvency or other laws affecting the rights of creditors generally and to general equitable principles and the availability of specific performance.

 

3.08.      Intellectual Property. The Company owns all right, title and interest in, or possesses adequate and enforceable rights to use, all patents, patent applications, trademarks, service marks, copyrights, rights, licenses, franchises, trade secrets, confidential information, processes and formulations necessary for the conduct of its business as now conducted (collectively, the “Intellectual Property”). To the knowledge of the Company, the Company has not infringed upon the rights of others with respect to the Intellectual Property and, except as set forth on Schedule 3.08, the Company has not received notice that it has or may have infringed or is infringing upon the rights of others with respect to the Intellectual Property, or any written notice of conflict with the asserted rights of others with respect to the Intellectual Property. To the knowledge of the Company, no others have infringed upon the rights of the Company with respect to the Intellectual Property. Except as set forth on Schedule 3.08, none of the Company’s Intellectual Property have expired or terminated, or are expected to expire or terminate, within three years from the date of this Agreement.

 

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3.09.      Employee Matters. The Company is not a party to any collective bargaining agreement nor does it employ any member of a union. No executive officer of the Company (as defined in Rule 501(f) of the Act) has notified the Company that such officer intends to leave the Company or otherwise terminate such officer's employment with the Company. No executive officer of the Company, to the knowledge of the Company, is in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company to any liability with respect to any of the foregoing matters. The Company is in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on the Company.

 

3.10.      Proceedings. Except as set forth on Schedule 3.10, there are no actions, suits, claims, hearings or proceedings pending before any court or governmental authority or, to the knowledge of the Company, threatened, against the Company, or involving its assets or any of its officers or directors (in their capacity as such) which, if determined adversely to the Company or such officer or director, could reasonably be expected to have a Material Adverse Effect on the Company or adversely affect the transactions contemplated by this Agreement or the enforceability thereof.

 

3.11.      Compliance. The Company is not: (i) in violation of its Certificate of Incorporation or By-laws; (ii) in default of any indenture, mortgage, deed of trust, note or other agreement or instrument to which the Company is a party or by which it is or may be bound or to which any of its assets may be subject, the default of which could reasonably be expected to have a Material Adverse Effect on the Company; (iii) in violation of any statute, rule or regulation applicable to the Company, the violation of which would have a Material Adverse Effect on the Company; or (iv) in violation of any judgment, decree or order of any court or governmental body having jurisdiction over the Company and specifically naming the Company, which violation or violations individually, or in the aggregate, could reasonably be expected to have a Material Adverse Effect on the Company.

 

3.12.      Related Party Transactions. Except as set forth on Schedule 3.12, as of the date of this Agreement, no current or former stockholder, director, officer or employee of the Company, nor, to the knowledge of the Company, any affiliate of any such person is presently, directly or indirectly through his affiliation with any other person or entity, a party to any loan from the Company or any other transaction (other than as an employee) with the Company providing for the furnishing of services by, or rental of any personal property from, or otherwise requiring cash payments to any such person.

 

3.13.      Taxes. Except as set forth on Schedule 3.13, the Company has filed, on a timely basis, each federal, state, local and foreign tax return, report and declarations that were required to be filed, or has requested an extension therefor and has paid all taxes and all related assessments, charges, penalties and interest to the extent that the same have become due. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. To the Company’ knowledge, none of the Company’ tax returns are presently being audited by any taxing authority. No liens have been filed and no claims are being asserted by or against the Company with respect to any taxes (other than liens for taxes not yet due and payable). The Company has not received notice of assessment or proposed assessment of any taxes claimed to be owed by it or any other Person on its behalf. The Company is not a party to any tax sharing or tax indemnity agreement or any other agreement of a similar nature that remains in effect. The Company has complied in all material respects with all applicable legal requirements relating to the payment and withholding of taxes and, within the time and in the manner prescribed by law, has withheld from wages, fees and other payments and paid over to the proper governmental or regulatory authorities all amounts required.

 

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ARTICLE IV
Representations and Warranties of Parent

 

Parent hereby represents and warrants to the Company as follows:

 

4.01.      Organization; Capitalization.

 

(a)          Each of Parent and Merger Sub is duly organized and validly existing in good standing under the laws of the jurisdiction in which it was formed, and has the requisite power and authority to own its properties and to carry on its business as now being conducted. Neither Parent nor Merger Sub is a party to any joint venture and neither directly or indirectly own or hold capital stock or an equity or similar interest in any entity. Each of Parent and Merger Sub is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect on Parent or Merger Sub, as applicable. Each of Parent and Merger Sub owns, directly or indirectly, all of the capital stock or other equity interests of each subsidiary free and clear of any liens (other than Permitted Encumbrances), and all the issued and outstanding securities of capital stock of each subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

 

(b)          The authorized capital stock of the Parent consists of 160,000,000 shares of Parent Common Stock, of which 7,500,000 shares were issued and outstanding as of the date of this Agreement, and 10,000,000 shares of preferred stock, par value $0.0001 per share, none of which was issued and outstanding as of the date of this Agreement.   All of the issued and outstanding shares of Parent Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of all preemptive rights.  Except as contemplated by the Private Placement, this Agreement or the Ancillary Agreements, there are 4,000,000 warrants to purchase 4,000,000 shares of Parent Common Stock outstanding and there are no outstanding other authorized options, warrants, rights, agreements or commitments to which the Parent is a party or which are binding upon the Parent providing for the issuance or redemption of any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Parent.  There are no agreements to which the Parent is a party or by which it is bound with respect to the voting (including without limitation voting trusts or proxies), registration under the Securities Act of 1933, as amended, or sale or transfer (including without limitation agreements relating to pre-emptive rights, rights of first refusal, co-sale rights or “drag-along” rights) of any securities of the Parent.  There are no agreements among other parties, to which the Parent is not a party and by which it is not bound, with respect to the voting (including without limitation voting trusts or proxies) or sale or transfer (including without limitation agreements relating to rights of first refusal, co-sale rights or “drag-along” rights) of any securities of the Parent.  All of the issued and outstanding shares of Parent Common Stock were issued in compliance with applicable federal and state securities laws.  The approximately 9,000,000 shares of Parent Common Stock to be issued at the Closing, when issued and delivered in accordance with the terms hereof and of the Certificate of Merger, shall be duly and validly issued, fully paid and nonassessable and free of all preemptive rights and will be issued in compliance with applicable federal and state securities laws. Furthermore, the 1,000,000 shares of Parent Common Stock underlying the Warrants to be issued at the Closing have been duly and validly authorized and reserved for issuance, and when issued in accordance with the terms of the Warrants, shall be duly and validly issued, fully paid and nonassessable and free of all preemptive rights and will be issued in compliance with applicable federal and state securities laws. Immediately after the Closing, without giving effect to the Merger, there will be 7,500,000 shares of Parent Common Stock issued and outstanding.

 

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4.02.      Authority. Each of Parent and Merger Sub has all requisite corporate power and authority to conduct its business as presently conducted and as proposed to be conducted, to enter into and perform its obligations under this Agreement and the Ancillary Agreements. This Agreement has been duly authorized, executed and delivered and constitutes upon due execution and delivery, will constitute, valid and binding obligations of Parent or Merger Sub, as applicable, enforceable against each of Parent or Merger Sub, as applicable, in accordance with their respective terms (i) except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect related to laws affecting creditors’ rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers, and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity).

 

4.03.      No Conflicts. Neither the execution and delivery of, or performance by Parent or Merger Sub under this Agreement or any of the other Ancillary Agreements nor the consummation of the transactions herein or therein contemplated conflicts with or violates, or will result in the creation or imposition of, any lien, charge or other encumbrance upon any of the assets of Parent under any agreement or other instrument to which Parent is a party or by which Parent or its assets may be bound, or any term of the certificate of incorporation or by-laws of Parent, or any license, permit, judgment, decree, order, statute, rule or regulation applicable to Parent or any of its assets, except in the case of a conflict, violation, lien, charge or other encumbrance (except with respect to Parent’s certificate of incorporation or by-laws) which would not, or could not reasonably be expected to, have a Material Adverse Effect on Parent or Merger Sub, as applicable.

 

4.04.      Governmental Authorizations. No consent, authorization or filing of or with any court or governmental authority is required in connection with the issuance or the consummation of the transactions contemplated herein or in the Ancillary Agreements.

 

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4.05.      Proceedings. There are no actions, suits, claims, hearings or proceedings pending before any court or governmental authority or, to the knowledge of Parent, threatened, against Parent or Merger Sub, or involving its assets or any of its officers or directors (in their capacity as such) which, if determined adversely to Parent, Merger Sub or their respective officers or directors, could not reasonably be expected to have a Material Adverse Effect on Parent or Merger Sub, as applicable or adversely affect the transactions contemplated by this Agreement or the enforceability thereof.

 

4.01.      No Operations. Since its date of formation and as of the date hereof, Parent has not conducted any business or operations other than negotiating and executing such definitive documentation necessary to duly form and capitalize Parent.

 

ARTICLE V
Covenants

 

5.01.      Conduct of Business Pending Closing. From the date hereof until the Closing, the Company will:

 

(a)          maintain its existence in good standing;

 

(b)          maintain the general character of its business and properties and conduct its business in the Ordinary Course of Business, except as otherwise expressly permitted by this Agreement;

 

(c)          maintain its business and accounting records consistent with past practices;

 

(d)          file on a timely basis with the appropriate taxing authorities all tax returns required to be filed, and pay all taxes due, before the Closing Date; and

 

(e)          use commercially reasonable efforts to (i) preserve its business intact, and (ii) keep available to the Company the services of its present officers and employees.

 

5.02.      Prohibited Actions Pending Closing. Unless otherwise expressly permitted herein or approved by Parent in writing, from the date hereof until the Closing, the Company shall not:

 

(a)          declare, set aside or pay any dividend or other distribution in respect of any shares of capital stock of the Company or repurchase, redeem or acquire any outstanding shares of capital stock or other securities of, or other ownership interest in, the Company;

 

(b)          merge, consolidate or adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization involving the Company, other than the Merger;

 

(c)          split, combine or reclassify any shares of capital stock of the Company or other securities of the Company or amend the terms of any such stock or securities;

 

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(d)          change accounting or tax reporting principles, methods or policies of the Company;

 

(e)          make, change or rescind any material election concerning taxes or tax returns, file any amended tax return, enter into any closing agreement with respect to taxes, settle or compromise any material tax claim or assessment or surrender any right to claim a refund of taxes or obtain any tax ruling;

 

(f)          enter into any transaction other than in the Ordinary Course of Business;

 

(g)          make any loans, advances or capital contributions to, or investments in, any Person or pay any fees to any director, officer, partner or Affiliate thereof or to any Company Stockholder (who is not a director, officer or partner) or Affiliate of any Company Stockholder (other than business expenses incurred in the Ordinary Course of Business);

 

(h)          (i) mortgage, pledge or subject to any lien any of its assets, or (ii) acquire any assets or sell, assign, transfer, convey, lease or otherwise dispose of any assets of the Company, except, in the case of clause (ii), in the Ordinary Course of Business;

 

(i)          cancel or compromise any Indebtedness or amend, cancel, terminate, relinquish, waive or release any contract or right, in each case, except in the Ordinary Course of Business, and which, in the aggregate, would not be material to the Company taken as a whole;

 

(j)          make or commit to make any capital expenditures or capital additions or betterments in excess of $30,000 individually or $75,000 in the aggregate;

 

(k)          issue, create, incur, assume, guarantee, endorse or otherwise become liable or responsible with respect to (whether directly, contingently, or otherwise) any Indebtedness where such Indebtedness of the Company exceeds, in the aggregate, $100,000 other than legal fees and expenses in connection with the Merger and the Private Placement;

 

(l)          institute or settle any legal proceeding; and

 

(m)          agree, commit, arrange or enter into any understanding to do anything set forth in this Section 5.02.

 

5.03.      Access to Information. The Company shall, and shall cause its officers, directors, employees and agents to, afford the officers, employees and agents of Parent complete access at all reasonable times, from the date hereof to the Effective Time, to its officers, employees, agents, properties, books and records, and shall furnish Parent all financial, operating and other data and information as Parent, through its officers, employees or agents, may reasonably request. Parent shall keep all information discovered in the course of such investigation confidential.

 

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5.04.      Reasonable Efforts to Close. Subject to the terms and conditions provided in this Agreement, each of the parties hereto shall use reasonable best efforts to take promptly, or cause to be taken promptly, all actions, and to do promptly, or cause to be done promptly, all things necessary, proper or advisable under applicable Law to consummate and make effective the Merger and the other transactions contemplated hereby as promptly as practicable, including by using commercially reasonable efforts to take all action necessary to satisfy all of the conditions to the obligations of the other party or parties hereto to effect the Merger set forth in ARTICLE VI, to obtain all necessary waivers, consents, approvals and other documents required to be delivered hereunder and to effect all necessary registrations and filings and to remove any injunctions or other impediments or delays, legal or otherwise, in each case in order to consummate and make effective the Merger and the other transactions contemplated by this Agreement for the purpose of securing to the parties hereto the benefits contemplated by this Agreement.

 

5.05.      Stockholder Approval.

 

(a)          Immediately following the execution of this Agreement, the Company shall obtain the Stockholders’ Consent through the execution of a unanimous written consent in the form attached hereto as Exhibit B (the “Stockholder Written Consent”).

 

(b)          Immediately following the execution of this Agreement, Merger Sub shall deliver a written consent evidencing stockholder consent (“Parent’s Consent”).

 

5.06.      Tax Matters. The following provisions shall govern the allocation of responsibility between Parent and the Company Stockholders for certain tax matters following the Closing Date.

 

(a)          Responsibility for Filing Tax Returns. The Stockholder Representative shall timely file all tax returns required to be filed by the Company in respect of any pre-closing tax period and shall pay or cause to be paid all taxes shown due thereon. All such tax returns shall be prepared in a manner consistent with the Company’s prior practice. The Stockholder Representative shall provide Parent with copies of such completed tax returns at least twenty (20) days prior to the due date for filing thereof, along with supporting work papers, for Parent’s review and approval. The Stockholder Representative and Parent shall attempt in good faith to resolve any disagreements regarding such tax returns prior to the due date for filing. In no event shall the Stockholder Representative file any tax return relating to the Company without the prior approval of Parent, which shall not be unreasonably withheld or delayed.

 

(b)          Cooperation on Tax Matters.

 

(i)          The parties hereto shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of tax returns pursuant to Section 5.06(a) (including signing any such tax returns) above and any audit or legal proceeding with respect to taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such audit or legal proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

 

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(ii)         Parent and the Stockholder Representative, on behalf of the Company Stockholders, further agree, upon request, to use their respective best efforts to obtain any certificate or other document from any taxing authority or any other Person as may be necessary to mitigate, reduce, or eliminate any tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby).

 

(c)          Certain Taxes.  The Stockholder Representative shall, at the Parent’s expense, file all necessary tax returns and other documentation with respect to all transfer, documentary, sales, use, stamp, registration and other such taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with the consummation of the transactions contemplated by this Agreement, and, if required by applicable Law, Parent will join in the execution of any such tax returns and other documentation.

 

(d)          Survival of Obligations. Notwithstanding any other provision in this Agreement to the contrary, the obligations of the parties set forth in this Section 5.06 shall be unconditional and absolute and shall remain in effect without limitation as to time or amount.

 

(e)          Reorganization. It is intended that the transactions contemplated by this Agreement qualify and be treated as a “reorganization” within the meaning of section 368(a) of the Internal Revenue Code of 1986, as amended (“Code”), by reason of Code section 368(a)(2)(E). Unless applicable law or a governmental authority requires otherwise, the parties agree for income tax purposes to report the transaction consistently with the preceding sentence.

 

5.07.      Publicity. No party to this Agreement shall directly or indirectly make any public announcement or statement regarding this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby without the prior consent of Parent and the Company, such consent not to be unreasonably withheld, except as such release or announcement may be required by Law or the rules or regulations of any United States or foreign securities exchange or automated quotation system, in which case the party required to make the release or announcement shall allow the other party reasonable time to comment on such release or announcement in advance of such issuance

 

5.08.      Confidentiality. Each of the Company Stockholders and Parent shall (and shall cause each of its respective representatives to) maintain in confidence and not directly or indirectly, use, disseminate, disclose or publish, or use for such Company Stockholder’s benefit or the benefit of any person, firm, corporation or other entity any confidential or proprietary information of or relating to the Company, the transactions contemplated by this Agreement or the Ancillary Agreements or the Merger Consideration (collectively, the “Confidential Information”), or deliver to any person, firm, corporation or other entity any document, record, notebook, computer program or similar repository of or containing any such Confidential Information. Each of the Company Stockholders, Merger Sub and Parent hereby stipulate and agree that as between them, the Confidential Information is important, material and affects the successful conduct of the business of the Company as currently conducted and as contemplated to be conducted by the Surviving Corporation following the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements.

 

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5.09.      Resignations. On the Closing Date, the Company shall cause to be delivered to Parent duly executed resignations, effective as of the Effective Time, of all directors and officers of the Company and shall take such other action as is necessary to accomplish the foregoing.

 

5.10.      Employment Agreements and Non-Disclosure and Invention Assignment Agreements (“NDIAs”). On or prior to the Closing Date, Parent shall enter into employment agreements and NDIAs with each of Xx. Xxxxxxx Xxxxxx, Xx. Xxxxxx Xxxxxxx and Xx. Xxxxx Xxxxx (each an “Employment Agreement Recipient”).

 

5.11.      Voting Agreements. On or prior to the Closing Date, the Company Stockholders and the stockholders of Parent shall enter into the Voting Agreement in the form and substance of the agreement annexed hereto as Exhibit C.

 

5.12.      Appointment of Directors and Officers of Parent.

 

(a)          On or prior to the Closing Date, Parent shall cause the board of directors to constitute the individuals set forth on Schedule 1.05(a) effective as of the Effective Time (the “Effective Time Parent Board”) and shall take such other action as is necessary to accomplish the foregoing.

 

(b)          On or prior to the Closing Date, Parent shall cause the Effective Time Parent Board to appoint the individuals to the offices set forth opposite their respective names on Schedule 1.05(b) effective as of the Effective Time (the “Effective Time Parent Officers”) and shall take such other action as is necessary to accomplish the foregoing.

 

5.13.      Further Assurances. From time to time, as and when requested by any party, each party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions, as such other party may reasonably deem necessary or desirable to consummate the transactions contemplated by this Agreement.

 

ARTICLE VI
Conditions to Closing

 

6.01.      Conditions Precedent to Each Party’s Obligation to Effect the Merger. The respective obligations of each party hereto to effect the Merger shall be subject to the fulfillment or satisfaction, prior to or on the Closing Date of the following conditions:

 

(a)          Completion of the Private Placement. On or before the Closing Date, Parent shall have closed on at least Six Million Dollars ($6,000,000) in the Private Placement.

 

(b)          Stockholder Approval. The Company shall have obtained the Stockholders’ Consent to the Merger and the other transactions contemplated by this Agreement.

 

(c)          Parent Consent. Merger Sub shall have obtained Parent’s Consent to the Merger and the other transactions contemplated by this Agreement pursuant to the Parent Written Consent delivered to the Company.

 

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(d)          No Legal Impediments. As of the Closing Date, there shall not be any suit, action or proceeding by any Governmental Entity before any court or Governmental Entity seeking to restrain or prohibit the consummation of this Agreement or any of the other transactions contemplated by this Agreement.

 

(e)          Other Consents. On or before the Closing Date, Parent, Merger Sub and the Company have each obtained and delivered, as applicable, all necessary board, shareholder and third party consents required pursuant to this Agreement.

 

(f)          Completion of Due Diligence. Each of Parent and the Company, in its reasonable discretion, shall have completed all necessary technical and legal due diligence.

 

6.02.      Conditions Precedent to Obligations of Parent and Merger Sub. All obligations of Parent and Merger Sub under this Agreement are further subject to the fulfillment, satisfaction or (to the extent permitted by Law) waiver by Parent, prior to or on the Closing Date, of each of the following conditions precedent:

 

(a)          Representations and Warranties. Each of the Company’s representations and warranties contained in ARTICLE III of this Agreement shall be true and correct in all respects on and as of the Closing Date with the same effect as though such representations and warranties were made on and as of the Closing Date, except to the extent that any representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be evaluated as of such earlier date.

 

(b)          Covenants. The Company shall have performed and complied in all material respects with all covenants and obligations under this Agreement required to be performed and complied with by the Company prior to the Closing. The Company shall have delivered to Parent all certificates and other documents that it is required to deliver to Parent pursuant to this Agreement prior to the Closing.

 

(c)          Officer’s Certificate. Parent shall have received a certificate from the Company, validly executed by the Chief Executive Officer of the Company for and on the Company’s behalf, to the effect that, as of the Closing the conditions set forth in Sections 6.02(a) and 6.02(b) have been satisfied.

 

(d)          No Material Indebtedness. Parent shall have received a certificate from the Company, validly executed by the Company’s Chief Financial Officer certifying that as of the Closing Date, the Company’s liabilities do not exceed One Hundred Thousand Dollars ($100,000) in the form of accounts payable and accrued expenses, other than legal and accounting expenses in connection with the Merger and the Private Placement. The Company shall not be a party to or bound by instrument or agreement relating to any material indebtedness that would limit the issuance or cancellation of any securities pursuant to this Agreement.

 

(e)          Employment Agreements and NDIAs. Parent shall have received executed copies of the employment agreements and NDIAs from each of the Employment Agreement Recipients.

 

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(f)          Equity Plan. Parent shall have adopted an equity incentive plan providing for the grant of awards to qualified participants of up to fifteen percent (15%) of Parent’s fully-diluted capitalization, assuming the maximum offering contemplated by the Private Placement, is sold.

 

(g)          Voting Agreement. Parent shall have received executed counterparts of the Voting Agreement from the Company Stockholders set forth on Schedule 6.02(g).

 

(h)          No Material Adverse Effect on the Company. As of the Closing Date, there shall not have occurred any event and no circumstance shall exist which, alone or together with any one or more other events or circumstances has had, is having or would reasonably be expected to have a Material Adverse Effect on the Company.

 

6.03.      Conditions Precedent to the Company’s Obligations. All obligations of the Company under this Agreement are further subject to the fulfillment, satisfaction, or (to the extent permitted by Law) waiver by the Company prior to or on the Closing Date, of each of the following conditions precedent:

 

(a)          Representations and Warranties. Each of Parent’s and Merger Sub’s representations and warranties contained in ARTICLE IV of this Agreement shall be true and correct in all respects on and as of the Closing with the same effect as though such representations and warranties were made on and as of the Closing, except to the extent that any representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be evaluated as of such earlier date.

 

(b)          Covenants. Each of Parent and Merger Sub shall have performed and complied in all material respects with all covenants and obligations under this Agreement required to be performed and complied with by the Company prior to the Closing. Parent shall have delivered to Parent all certificates and other documents that it is required to deliver to Parent pursuant to this Agreement prior to the Closing.

 

(c)          Officer’s Certificate. The Company shall have received a certificate from Parent, validly executed by the Chief Executive Officer of Parent for and on the Parent’s and Merger Sub’s behalf, to the effect that, as of the Closing the conditions set forth in Sections 6.03(a) and 6.03(b), have been satisfied.

 

(d)          No Indebtedness. The Company shall have received a certificate from Parent, validly executed by Parent’s Chief Financial Officer, certifying that as of the Closing Date, neither Parent nor Merger Sub has any liabilities and is are not a party to or bound by an instrument or agreement relating to indebtedness of Parent or Merger Sub.

 

(e)          Voting Agreement. The Company shall have received executed counterparts of the Voting Agreement from Parent and the stockholders of Parent set forth on Schedule 6.03(e).

 

(f)          Employment Agreements and NDIAs. As of the Closing Date, each Employment Agreement Recipient shall have received an executed copy of his employment agreement and NDIA, validly executed by Parent.

 

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(g)          Effective Time Parent Board. As of the Closing Date, the Company shall have received evidence that the Effective Time Parent Board constitutes the board of Directors of Parent, which shall not be changed, modified or amended by Parent as of the Effective Time.

 

(h)          Effective Time Parent Officers. As of the Closing Date, the Company shall have received evidence that the Effective Time Parent Officers have been duly appointed by the Effective Time Parent Board, which shall not be changed, modified or amended by Parent as of the Effective Time.

 

6.04.      Frustration of Closing Conditions. None of the Company, Parent or Merger Sub may rely on the failure of any condition set forth in Sections 6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was caused by such party’s failure to use reasonable best efforts to consummate the Merger and the other transactions contemplated by this Agreement, as required by and subject to Section 5.04.

 

ARTICLE VII
Termination

 

7.01.      Termination. This Agreement may be terminated, and the Merger may be abandoned, at any time prior to the Effective Time whether before or after the approval and adoption of this Agreement and the transactions contemplated hereby by the stockholders of the Company or the stockholder of Merger Sub:

 

(a)          by the mutual agreement of Parent and the Company;

 

(b)          by Parent or Merger Sub, in the event the Company fails to deliver the Stockholder Written Consent to Parent on or before July 25, 2013;

 

(c)          by Parent or Merger Sub, in the event the Company materially breaches or fails to perform any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement unless such breach or failure is cured within fifteen (15) days after written notice to the Company by Parent or Merger Sub;

 

(d)          by Company, in the event that either Parent or Merger Sub materially breaches or fails to perform any representation, warranty, covenant or agreement on the part of either Parent or Merger Sub, as applicable, set forth in this Agreement unless such breach or failure is cured within fifteen (15) days after written notice to Parent or Merger Sub, as applicable; or

 

(e)          by Parent, Merger Sub or the Company if (i) the Effective Time shall not have occurred by September 9, 2013, 2013, which date may be extended by Parent, Merger Sub and the Company in their joint discretion until October 9, 2013; provided that the right to terminate this Agreement under this Section 7.01(d) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date; or (ii) any court of competent jurisdiction in the United States or other Governmental Entity shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable.

 

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7.02.      Effect of Termination. In the event of the termination of this Agreement as provided in Section 7.01, written notice shall be given by the terminating party to the other parties hereto and this Agreement shall forthwith become void and there shall be no liability on the part of Parent, Merger Sub or the Company, except that nothing herein will relieve any party from liability for fraud or for any willful breach of any representation or warranty or any willful breach prior to such termination of any covenant or agreement contained herein or be deemed to waive any rights of specific performance of this Agreement available to a party by reason of any breach by the other party or parties of this Agreement.

 

ARTICLE VIII
Survival

 

8.01.      Survival of Representations and Warranties. The representations and warranties of the parties contained in this Agreement, any certificate delivered pursuant hereto or any Ancillary Agreement shall survive the Closing for a period of four years from the earlier to occur of the final closing of the Private Placement (as contemplated by the transaction documents governing the Private Placement) or the termination of the Private Placement.

 

ARTICLE IX
General Provisions

 

9.01.      Fees and Expenses. All costs and expenses incurred in connection with this Agreement and the Ancillary Agreements and the transactions contemplated hereby and thereby (including without limitation brokers' fees, legal and accounting fees) shall be paid from the proceeds of the Private Placement.

 

9.02.      Stockholder Representative.

 

(a)          Xxxxxx Xxxxxx is hereby appointed as representative, attorney-in-fact and agent, with full power of substitution to act in the name, place and stead of each Company Stockholders to take all actions necessary or appropriate in the judgment of the Stockholder Representative for the accomplishment of the terms of this Agreement, and to act on behalf of each Company Stockholder in any amendment of or litigation or arbitration involving this Agreement or any Ancillary Agreement and to do or refrain from doing all such further acts and things, and to execute all such documents, as such Stockholder Representative shall deem necessary or appropriate in conjunction with any of the transactions contemplated by this Agreement, including the power:

 

(i)          to take all action necessary or desirable in connection with the waiver of any condition to the obligations of the Company Stockholders to consummate the transactions contemplated by this Agreement and the Ancillary Agreements;

 

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(ii)         to negotiate, execute and deliver all statements, certificates, statements, notices, approvals, extensions, waivers, undertakings, amendments and other documents required or permitted to be given in connection with the consummation of the transactions contemplated by this Agreement (it being understood that a Company Stockholder shall execute and deliver any such documents which the Stockholder Representative agrees to execute);

 

(iii)        to give and receive all notices and communications to be given or received under this Agreement and to receive service of process in connection with the any claims under this Agreement, including service of process in connection with arbitration; and

 

(iv)        to take all actions or refrain from doing any further act or deed on behalf of the Company Stockholders which the Stockholder Representative deems necessary or appropriate in his sole discretion relating to the subject matter of this Agreement as fully and completely as a Company Stockholder could do if personally present.

 

(b)          If Xxxxxx Xxxxxx becomes unable to serve as Stockholder Representative, Xxxxxx Xxxxxx, or such other Person or Persons as may be designated by a majority-in-interest of the Company Stockholders, shall succeed as the Stockholder Representative.

 

9.03.      Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person or entity not a party to this Agreement except as provided below. No assignment of this Agreement or of any rights or obligations hereunder may be made by either party without the prior written consent of the other party and any attempted assignment without the required consent shall be void.

 

9.04.      No Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein expressed or implied shall give or be construed to give to any person, other than the parties hereto and such assigns, any legal or equitable rights hereunder. Notwithstanding the foregoing, it is expressly agreed that Aegis Capital Corp. is a third party beneficiary with respect to Sections 3 and 4 of this Agreement.

 

9.05.      Notices. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent by facsimile or sent, postage prepaid, by registered, certified or express mail or overnight courier service and shall be deemed given when received. All notices hereunder must be delivered as set forth below, or pursuant to instructions as may be designated in writing by the party to receive such notice:

 

if to Parent,

 

Matinas BioPharma Holdings, Inc.

X/X Xxxxxxx Xxxxxxxxxx

000 Xxxx Xxxxxxxxxx Pike, Ste 400

Plymouth Meeting, PA 19462

Attention: Xxxxxxx X. Xxxxxxxxxx, Chief Executive Officer

 

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with a copy to:

 

Fox Rothschild LLP

0000 Xxxxxx Xxxxxx, 00xx Xxxxx

Xxxxxxxxxxxx, XX 00000-0000

Attention: Xxxxxxx X. Xxxxx, Esq.

Fax: (000) 000-0000

 

if to the Company,

 

Matinas BioPharma, Inc.

000 Xxxxxxxxxx Xxxx Xxxx

Xxxxxx Xxxxxxx, XX 00000

Attention: President and Chief Executive Officer

E-mail: xxxxxxx@xxxxxxxxxxxxxxxx.xxx

 

with a copy to:

 

Xxxxxxxxxx Xxxxxxx LLP

1251 Avenue of the Xxxxxxxx, 00xx Xxxxx

Xxx Xxxx, Xxx Xxxx 00000

Attention: Xxxxxxx X. Xxxxxx

Fax: 000-000-0000

 

and

 

if to the Stockholder Representative,

 

Matinas BioPharma, Inc.

000 Xxxxxxxxxx Xxxx Xxxx

Xxxxxx Xxxxxxx, XX 00000

Attention: President and Chief Executive Officer

E-mail: xxxxxxx@xxxxxxxxxxxxxxxx.xxx

 

with a copy to:

 

Xxxxxxxxxx Xxxxxxx LLP

1251 Avenue of the Xxxxxxxx, 00xx Xxxxx

Xxx Xxxx, Xxx Xxxx 00000

Attention: Xxxxxxx X. Xxxxxx

Fax: 000-000-0000

 

9.06.       Interpretation; Exhibits and Schedules; Certain Definitions.

 

-22-
 

 

(a)          The headings contained in this Agreement, in any Exhibit or Schedule hereto and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any matter disclosed in any provision, section or subsection of any Schedule shall be deemed disclosed only for all purposes of such provision, section or subsection. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein shall have the meaning as defined in this Agreement. When a reference is made in this Agreement to a Section, Exhibit or Schedule, such reference shall be to a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated.

 

(b)          For all purposes hereof:

 

“Affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person.

 

“Ancillary Agreements” means the Voting Agreement and the transaction documents entered into among Parent, the Company and the other parties thereto in connection with the Private Placement.

 

“Business Day” means any day of the year on which national banking institutions in New York are open to the public for conducting business and are not required or authorized to close.

 

“Company Stockholder” means each person who is a holder of capital stock of the Company as of the Effective Time.

 

“Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

 

“GAAP” means United States generally accepted accounting principles applied on a consistent basis throughout the periods indicated as in effect as of the date hereof.

 

“Governmental Entity” means any legislative, executive, judicial, regulatory or administrative unit of any governmental entity (multinational, foreign, federal, state or local) or any department, commission, board, agency, bureau, ministry, official, arbitrator (public) or other similar body exercising executive, legislative, regulatory, administrative or judicial authority or functions of or pertaining to government, including any authority or other quasi-governmental entity established by any of the foregoing to perform any such functions.

 

“including” means including, without limitation.

 

-23-
 

 

“Indebtedness” means with respect to any Person without duplication, (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services including (without limitation) “Capital Leases” (as defined under GAAP) (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) except for obligations owed to service providers of the Company in connection with this Agreement and the transactions contemplated herein, all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above of at least $75,000.

 

“Liability” means any debt, loss, damage, adverse claim, fines, penalties, liability or obligation (whether direct or indirect, absolute or contingent, accrued or unaccrued, matured or unmatured, determined or determinable, liquidated or unliquidated, or due or to become due, and whether in contract, tort, strict liability or otherwise), and including all costs and expenses relating thereto including all fees, disbursements and expenses of legal counsel, experts, engineers and consultants and costs of investigation).

 

“Material Adverse Effect” means, with respect to each party, a material adverse effect on (i) the financial condition, business, assets, prospects or results of operations of the party, taken as a whole, (ii) the ability of the party to perform its obligations under this Agreement or (iii) the ability of the party to consummate the Merger and the other transactions contemplated hereby; provided, however, that in no event shall any change resulting from conditions affecting the industry in which such party operates or from changes in general business or economic conditions be taken into account in determining whether there has been a Material Adverse Effect except to the extent such change has a disproportionate impact on the applicable party relative to other businesses operating in the same industry.

 

“Ordinary Course of Business” means the ordinary and usual course of day-to-day operations of the business of the Company through the date hereof consistent with past practice.

 

“Permitted Encumbrances” shall means (a) mechanic’s, materialmen’s, and similar liens, securing payment of sums not yet due and payable and for which an appropriate reserve has been established, (b) liens for taxes not yet delinquent or for taxes that the taxpayer is contesting in good faith through appropriate proceedings and for which an appropriate reserve has been established in the financial statements of such taxpayer, (c) purchase money liens and liens securing rental payments under capital lease arrangements, and (d) other liens arising in the ordinary course of business and not incurred in connection with the borrowing of money.

 

-24-
 

 

“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.The following terms, when used in this Agreement, shall have the meanings assigned to such terms in the Sections set forth below:

 

Terms   Section
     
Affiliate   10.06(b)
Aggregate Consideration Schedule   2.02
Agreement   Preamble
Ancillary Agreements   10.06(b)
Business Day   10.06(b)
Cancelled Shares   2.01(c)
Certificates   2.01(d)
Certificate of Merger   1.02(b)
Closing   1.02(a)
Closing Date   1.02(a)
Common Share   2.01(a)(i)
Common Stock   2.01(a)(i)
Common Stock Consideration   2.01(a)(i)(A)
Company   Preamble
Company Stock   2.01(a)(ii)
Company Stockholder   10.06(b)
Confidential Information   5.07
DGCL   Recitals
Effective Time   1.02(b)
Employment Agreement Recipient   5.10
Governmental Entity   10.06(b)
Indebtedness   10.06(b)
Liability   10.06(b)
Merger   Recitals
Merger Consideration   2.01(a)
Merger Sub   Preamble
NDIA   5.10
Ordinary Course of Business   10.06(b)
Parent   Preamble
Person   10.06(b)
Preferred Share   2.01(a)(ii)
Preferred Stock   2.01(a)(ii)
Preferred Stock Consideration   2.01(a)(ii)(B)
Private Placement   Recitals
Stockholders’ Consent   3.02(b)
Shares   2.01(a)(ii)

 

-25-
 

  

Terms   Section
     
Stockholder Representative   Preamble
Stockholder Written Consent   5.05
Surviving Corporation   1.01
Warrants   2.01(a)(ii)(B)

 

9.07.      Entire Agreement; Amendments and Waivers. This Agreement (including the Schedules and Exhibits hereto), together with the Ancillary Agreements represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, arrangements and undertakings, both written and oral, between the parties, or any of them, with respect to the subject matter of this Agreement. This Agreement may be amended by the parties at any time before or after receipt of the Stockholders’ Consent; provided, that after receipt of the Stockholders’ Consent, there shall be made no amendment that by Law requires further approval by such stockholders without the further approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties. At any time prior to the Effective Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) to the fullest extent permitted by Law, waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.

 

9.08.      Severability. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any Law or public policy, all other terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

 

9.09.      Jurisdiction; Waiver of Jury Trial.

 

(a)          Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York located in the borough of Manhattan in the City of New York, or if such court does not have jurisdiction, the Supreme Court of the State of New York, New York County, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the parties hereto further agrees that service of any process, summons, notice or document by registered mail to such party’s respective address set forth in Section 9.05 (or to such other address for notices as provided by such party pursuant to Section 9.05) or in any other manner permitted by Law shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the United States District Court for the Southern District of New York or (ii) the Supreme Court of the State of New York, New York Count, and hereby further irrevocably and unconditionally waives and agrees not to please or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

 

-26-
 

 

(b)          EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY OF THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

9.10.      Governing Law. This Agreement and the rights and duties of the parties hereto shall be governed by and construed in accordance with the internal laws of the State of New York and shall be governed as to validity, interpretation, construction, affect and in all other respects by the internal laws of the State of New York.

 

9.11.      Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

-27-
 

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement and Plan of Merger as of the date first written above.

 

  COMPANY:
   
  MATINAS BIOPHARMA, INC.
       
  By: /s/ Xxxxxx Xxxxxx
      Name:   Xxxxxx Xxxxxx
      Title: Chief Executive Officer
       
  PARENT:
   
  MATINAS BIOPHARMA HOLDINGS, INC
       
  By: /s/ Xxxxxxx X. Xxxxxxxxxx
      Name:   Xxxxxxx X. Xxxxxxxxxx
      Title: President
       
  MERGER SUB:
   
  MATINAS MERGER SUB, INC.
       
  By: /s/ Xxxxxxx X. Xxxxxxxxxx
  Name: Xxxxxxx X. Xxxxxxxxxx
  Title: President
       
  STOCKHOLDER REPRESENTATIVE:
       
  By: /s/ Xxxxxx Xxxxxx
    Xxxxxx Xxxxxx

 

[Signature Page to Merger Agreement]

 

 
 

 

Exhibit A

Aggregate Consideration Schedule

 

(See Attached)

 

[Signature Page to Stock Purchase Agreement]

 

 
 

 

AGGREGATE MERGER CONSIDERATION SCHEDULE

 

Stockholder Name  Shares of Common Stock
of
Matinas BioPharma, Inc.
(Pre-Merger)		   Shares of
Series A Preferred Stock
of
Matinas BioPharma, Inc.
(Pre-Merger)		   Warrants
of
Matinas BioPharma
Holdings, Inc.
 (Post-Merger)		   Shares
of
Matinas BioPharma
Holdings, Inc.
(Post-Merger)		 
Xxxxxx Xxxxxx   4,500,000    0    0    3,417,186 
Xxxxx X. Xxxxx   2,250,000    0    0    1,708,593 
Xxxxxx Xxxxxxx   1,000,000    0    0    759,374 
Xxxxxx Xxxxxxx   900,000    0    0    683,437 
Xxxxx Xxxxxxx   900,000    0    0    683,438 
Xxxxxxx Xxxxx   225,000    0    0    170,859 
Xxxxx Xxxxxxx   225,000    0    0    170,859 
Xxxxxxx Xxxxxx   0    462,963    250,000    351,563 
1010 Holdings LLC   0    462,963    250,000    351,563 
Xxxxxxx Ventures, LLC   0    185,186    100,000    140,626 
Xxxxxx X. Xxxxx   0    92,593    50,000    70,313 
Plank 2010 Family Trust   0    92,593    50,000    70,313 
Vidonia Holdings, LLC   0    185,185    100,000    140,625 
Xxxxxx Estates LLC   0    185,185    100,000    140,625 
Xxxxx Xxxxxx   0    185,186    100,000    140,626 

 

 
 

 

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Filed: February 7th, 2014
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