SECURITIES EXCHANGE AGREEMENT
This
Securities Exchange Agreement (the “Agreement”) dated as of the ____ day of
February 2008, by and among Acheron, Inc., a Nevada corporation having its
offices at 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxx 00000 (the “Company”),
Xxxxx Xxx Enterprises Limited, a corporation organized under the laws of Samoa
(“Xxxxx Xxx”), the shareholders of Xxxxx Xxx named on the signature page of this
Agreement (collectively, the “Shareholders” and each, individually, a
“Shareholder”) and the other parties named on the signature page of this
Agreement (collectively, the “Bridge Investors”).
WITNESSETH:
WHEREAS,
the Shareholders are the holders of all of the issued and outstanding capital
stock (the “Xxxxx Xxx Shares”) of Xxxxx Xxx;
WHEREAS,
the Shareholders are acquiring a controlling interest in the Company;
WHEREAS,
the Company is willing to issue shares of its common stock, par value $0.001
per
share (the “Common Stock”), to the Shareholders in consideration for all of the
issued and outstanding capital stock of Xxxxx Xxx.
WHEREAS,
in a recent bridge financing by Xxxxx Xxx (the “Bridge Financing”), the Bridge
Investors were issued secured convertible promissory notes in the principal
amount of $2,250,000 payable by Xxxxx Xxx (the “Notes”) and warrants to purchase
2,250,000 shares of common stock of Xxxxx Xxx (the “Bridge Warrants”);
WHEREAS,
the placement agent for the Bridge Financing (the “Placement Agent”) received
warrants to purchase up to 450,000 shares of common stock of Xxxxx Xxx (the
“Placement Agent Warrants,” and together with the Bridge Warrants, the
“Warrants”); and
WHEREAS,
under the terms of the financing documents executed in connection with the
Bridge Financing (the “Bridge Financing Documents”) upon consummation of the
transaction contemplated by this Agreement, the Notes will be automatically
converted into shares of Common Stock and the Warrants will be exchanged for
warrants to purchase shares of Common Stock
NOW,
THEREFORE, for the mutual consideration set out herein, the parties agree as
follows:
1.
Exchange
of Shares and Issuance to Bridge Investors.
(a)
Issuance
of Shares by the Company.
On and
subject to the conditions set forth in this Agreement, the Company will issue
to
the Shareholders, in exchange for 4,000,000 Xxxxx Xxx Shares, which represents
all of the issued and outstanding capital stock of Xxxxx Xxx, an aggregate
of
16,000,000 shares of Common Stock of which 1,000,000 shares will be deposited
into escrow and which will be released to the Shareholders upon meeting certain
conditions as set forth in a separate letter agreement between the Company
and
the Shareholders. The Common Stock will be issued to the Shareholders in the
amounts set forth after their respective names in Schedule I to this
Agreement.
(b)
Transfer
of Xxxxx Xxx Shares by the Shareholders.
On and
subject to the conditions set forth in this Agreement, the Shareholders will
transfer to the Company all of the Xxxxx Xxx Shares in exchange for shares
of
Common Stock. Each Shareholder holds the number of Xxxxx Xxx Shares set forth
after his or her name in Schedule I to this Agreement.
(c)
Issuance
of Shares and Warrants to Bridge Investors and Placement Agent.
On and
subject to the conditions set forth in this Agreement, the Company will issue
to
the Bridge Investors,
| (i) |
in
exchange for the Notes, an aggregate of 4,567,500 shares of Common
Stock
as full and final payment and satisfaction of all principal amounts
plus
accrued and unpaid interest due under the Notes through the date
hereof
(the “Investor Shares”),
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| (ii) |
in
exchange for the Bridge Warrants, warrants to purchase an aggregate
of
2,250,000 shares of Common Stock on the exact same terms as the terms
contained in the Bridge Warrants,
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and
to
the Placement Agent in exchange for the Placement Agent Warrants, warrants
to
purchase an aggregate of 450,000 shares of Common Stock on the exact same terms
as the terms contained in the Placement Agent Warrants (collectively with the
warrants to be issued to the Bridge Investors, the “Exchange
Warrants”).
The
Investor Shares and the Exchange Warrants, respectively, will be issued to
the
Bridge Investors and the Placement Agent in the amounts set forth after their
respective names in Schedule II of this Agreement. The shares of common stock
to
be issued hereunder, the Investor Shares, the Exchange Warrants and the shares
issuable upon exercise of the Exchange Warrants are herein collectively referred
to as the “Securities.”
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(d)
Registration
Rights.
The
parties understand that the Company is contemplating a Financing (as defined
in
the Bridge Financing Documents) and under the terms of the Bridge Financing
Documents, the Investor Shares and the shares issuable upon exercise of the
Exchange Warrants are to be included in a registration statement for the resale
of any securities to be issued in the Financing. Accordingly, the Company hereby
undertakes to include (i) the Investor Shares, (ii) the shares issuable upon
exercise of the Exchange Warrants and (iii) up to 413,178 shares issued
previously by the Company to the parties set forth on Schedule III (“Company
Shareholders”) in such registration statement. If the Financing is not completed
for any reason, and the Company at any time shall determine to prepare and
file
with the Securities and Exchange Commission a registration statement relating
to
an offering for its own account or the account of others of any of its equity
securities, other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with the Company’s stock option or other employee benefit plans, then
the Company shall deliver to the Placement Agent, the Company Shareholders
and
to each Bridge Investor a written notice of such determination and, if within
fifteen days after the date of the delivery of such notice, the Placement Agent,
any Company Shareholder or any Bridge Investor shall so request in writing,
the
Company shall include in such registration statement all or any part of such
shares that any such party requests to be registered; provided,
however, that the Company shall not be required to register any such shares
to
the extent that they are eligible for resale without limitation pursuant to
Rule
144 promulgated under the Securities Act of 1933, as amended. Notwithstanding
the foregoing, the Placement Agent may request that the parties granted
registration rights pursuant to this Section 1(d) agree to a restriction on
the
sale of such shareholders’ shares for a period not to exceed 90 days after the
effective date of such registration statement (the “Lock-Up”). The Company shall
not be required to register the shares of any party that fails to execute such
Lock-Up.
(e)
Closing.
The
issuance of the Common Stock to the Shareholders, the transfer of the Xxxxx
Xxx
Shares to the Company, the issuance of Investor Shares, the surrender of the
Notes, and the issuance of the Exchange Warrants and the transfer of the
Warrants will take place at a closing (the “Closing”) to be held at the office
of Sichenzia Xxxx Xxxxxxxx Xxxxxxx, LLP, 00 Xxxxxxxx, 00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000 as soon as possible after or contemporaneously with
the
satisfaction or waiver of all of the conditions to closing set forth in Section
6 of this Agreement (the “Closing Date”).
2.
Representations
and Warranties of the Company.
The
Company hereby represents, warrants, covenants and agrees as
follows:
(a)
Organization
and Authority.
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(ii)
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Complete
and correct copies of the Company’s certificate of incorporation and
by-laws are available for review on the XXXXX system maintained by
the
U.S. Securities and Exchange Commission (the
“Commission”).
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(iii)
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The
Company has full power and authority to carry out the transactions
provided for in this Agreement, and this Agreement constitutes the
legal,
valid and binding obligations of the Company, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency and other laws of general application affecting the enforcement
of creditor’s rights and except that any remedies in the nature of
equitable relief are in the discretion of the court. All necessary
action
required to be taken by the Company for the consummation of the
transactions contemplated by this Agreement has been
taken.
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(iv)
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The
execution and performance of this Agreement will not constitute a
breach
of any agreement, indenture, mortgage, license or other instrument
or
document to which the Company is a party or by which its assets and
properties are bound, and will not violate any judgment, decree,
order,
writ, rule, statute, or regulation applicable to the Company or its
properties. The execution and performance of this Agreement will
not
violate or conflict with any provision of the certificate of incorporation
or by-laws of the Company.
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(v)
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The
Securities, when issued pursuant to this Agreement (and in the case
of the
shares to be issued upon exercise of the Exchange Warrants), will
be duly
and validly authorized and issued, fully paid and non-assessable.
The
issuance of the Securities to Shareholders and to the Bridge Investors
is
exempt from the registration requirements of the Securities Act of
1933,
as amended (the “Securities Act”), pursuant to an exemption provided by
Section 4(2) and Rule 506 promulgated
thereunder.
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(vi)
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The
authorized capital stock of the Company consists of 40,000,000 shares
of
Common Stock, of which 8,560,000 shares are presently outstanding
and
5,000,000 shares of preferred stock, none of which have been designated
or
issued. Except as provided in, contemplated by, or set forth in this
Agreement or the Company SEC Documents (as defined below), the Company
has
no outstanding or authorized warrants, options, other rights to purchase
or otherwise acquire capital stock or any other securities of the
Company,
preemptive rights, rights of first refusal, registration rights or
related
commitments of any nature. All issued and outstanding shares were
either
(i) registered under the Securities Act, or (ii) issued pursuant
to valid
exemptions from registration thereunder.
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(vii)
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No
consent, approval or agreement of any person, party, court, governmental
authority, or entity is required to be obtained by the Company in
connection with the execution and performance by the Company of this
Agreement or the execution and performance by the Company of any
agreements, instruments or other obligations entered into in connection
with this Agreement.
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4
| (b) |
SEC
Documents.
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(i)
|
The
Company is registered pursuant to Section 12 of the Exchange Act
and it is
current with its reporting obligations under the Securities Exchange
Act
of 1934, as amended (the “Exchange Act”). None of the Company’s filings
made pursuant to the Exchange Act (collectively, the “Company SEC
Documents”) contains any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
to make
the statements therein, in light of the circumstances under which
they
were made, not misleading. The Company SEC Documents, as of their
respective dates, complied in all material respects with the requirements
of the Exchange Act, and the rules and regulations of the Commission
thereunder, and are available on the Commission’s XXXXX
system.
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(ii)
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The
Company SEC Documents include the Company’s audited
consolidated financial statements for the fiscal years ended December
31,
2007 and 2006 (collectively, the “Financial Statements”), including, in
each case, a balance sheet and the related statements of income,
stockholders’ equity and cash flows for the period then ended, together
with the related notes. The Audited Financial Statements have been
certified by Xxxxxxxxx,
Xxxxx & Xxxxx, P.C. (“PSH”).
The Financial Statements are in accordance with all books, records
and
accounts of the Company, are true, correct and complete and have
been
prepared in accordance with GAAP, consistently applied. PSH is independent
as to the Company under the rules of the Commission pursuant to the
Securities Act and is registered with the PCAOB. The Financial Statements
present fairly the financial position of the Company at the respective
balance sheet dates, and fairly present the results of the Company’s
operations, changes in stockholders’ equity and cash flows for the periods
covered.
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(iii)
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At
the close of business on December 31, 2007, the Company did not have
any
material liabilities, absolute or contingent, of the type required
to be
reflected on balance sheets prepared in accordance with GAAP which
are not
fully reflected, reserved against or disclosed on the December 31,
2007
balance sheet. The Company has not guaranteed or assumed or incurred
any
obligation with respect to any debt or obligations of any Person,
except
endorsements made in the ordinary course of business in connection
with
the deposit of items for collection. The Company does not have any
debts,
contracts, guaranty, standby, indemnity or hold harmless commitments,
liabilities or obligations of any kind, character or description,
whether
accrued, absolute, contingent or otherwise, or due or to become due
except
to the extent set forth or noted in the Financial Statements, and
not
heretofore paid or discharged.
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(c)
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Absence
of Changes.
Since December 31, 2007, except as set forth in the Company SEC Documents,
to the best of Company’s knowledge, there have not
been:
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5
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(i)
|
any
change in the consolidated assets, liabilities, or financial condition
of
the Company, except changes in the ordinary course of business which
do
not and will not have a material adverse effect on the
Company;
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(ii)
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any
damage, destruction, or loss, whether or not covered by insurance,
materially and adversely affecting the assets or financial condition
of
the Company (as conducted and as proposed to be
conducted);
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(iii)
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any
change or amendment to a material contract, charter document or
arrangement not in the ordinary course of business to which the Company
is
a party other than contracts which are to be terminated at or prior
to the
Closing;
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(iv)
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any
loans made by the Company to any of affiliate of the Company or any
of the
Company’s employees, officers, directors, shareholders or any of its
affiliates;
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(v)
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any
declaration or payment of any dividend or other distribution or any
redemption of any capital stock of the
Company;
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(vi)
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any
sale, transfer, or lease of any of the Company’s assets other than in the
ordinary course of business;
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(vii)
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any
other event or condition of any character which might have a material
adverse effect on the Company;
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(viii)
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any
satisfaction or discharge of any lien, claim or encumbrance or payment
of
any obligation by Company except in the ordinary course of business
and
that is not material to the assets or financial condition of the
Company;
or
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(ix)
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any
agreement or commitment by the Company to do any of the things described
in this Section 2(c).
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(d)
Property.
Except
as set forth in the Company SEC Documents, the Company does not own any real
estate and is not a party to any lease agreement.
(e)
Taxes.
The
Company has filed all federal, state, county and local income, excise,
franchise, property and other tax, governmental and/or related returns, forms,
or reports, which are due or required to be filed by it prior to the date
hereof, except where the failure to do so would have no material adverse impact
on the Company, and has paid or made adequate provision in the financial
statement included in the Company SEC Documents for the payment of all taxes,
fees, or assessments which have or may become due pursuant to such returns
or
pursuant to any assessments received. The Company is not delinquent or obligated
for any tax, penalty, interest, delinquency or charge.
6
(f)
Contracts
and Commitments.
Except
as contemplated under this Agreement or set forth in the Company SEC Documents,
the Company is not a party to any contract or agreement.
(g)
No
Adverse Change.
Since
December 31, 2007, there has not been any Material Adverse Change in the
financial condition of the Company, although Shareholders recognize that the
Company has continued not to generate any revenue and has continued to operate
at a loss as a result of ongoing expenses, including expenses relating to this
Agreement and the consummation of the transactions contemplated hereby. A
Material Adverse Change shall mean a material adverse change in the business,
financial condition, operations or prospects of a person.
(h)
No
Defaults.
The
Company is not in violation of its certificate of incorporation or by-laws
or
any judgment, decree or order, applicable to it.
(i)
Litigation.
There
are no material (i.e., claims which, if adversely determined based on the
amounts claimed, would exceed five thousand dollars ($5,000) in the aggregate)
claims, actions, suits, proceedings, inquiries, labor disputes or investigations
(whether or not purportedly on behalf of the Company) pending or, to Company’s
knowledge, threatened against the Company or any of its assets, at law or in
equity or by or before any governmental entity or in arbitration or mediation.
(j)
Compliance
with Laws.
The
Company, to its knowledge, is in full compliance with all laws applicable to
it
(including, without limitation, with respect to zoning, building, wages, hours,
hiring, firing, promotion, equal opportunity, pension and other benefit,
immigration, nondiscrimination, warranties, advertising or sale of products,
trade regulations, anti-trust or control and foreign exchange or, to the
Company’s knowledge, environmental, health and safety
requirements).
(k)
Contracts
and Commitments.
The
Company is not a party to any contract of agreement other than agreements that
will be terminated at or prior to the Closing.
(l)
Intellectual
Property.
The
Company has no intellectual property rights.
(m)
No
Broker.
Except
for Primary Capital LLC, neither the Company nor any of its agents or employees
has employed or engaged any broker or finder or incurred any liability for
any
brokerage fees, commissions or finders’ fees in connection with the transactions
contemplated by this Agreement. The Company shall indemnify and hold the
Shareholders harmless against any loss, damage, liability or expense, including
reasonable fees and expenses of counsel, as a result of any brokerage fees,
commissions or finders’ fees which are due as a result of the consummation of
the transaction contemplated by this Agreement.
7
(n)
Reliance
by Shareholders.
The
representations and warranties set forth in this Section 2 taken together,
do
not contain any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein and therein, when taken
together, not misleading, and there is no fact which materially and adversely
affects the business, operations or financial condition of the Company.
Shareholders may rely on the representations set forth in this Section 2
notwithstanding any investigation it may have made.
3.
Representations
and Warranties of Xxxxx Xxx.
Xxxxx
Xxx hereby represents, warrants, covenants and agrees as follows:
(a)
Organization
and Authority.
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(i)
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Xxxxx
Xxx is a corporation duly organized, validly existing and in good
standing
under the laws of Samoa.
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(ii)
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Xxxxx
Xxx has full power and authority to carry out the transactions provided
for in this Agreement, and this Agreement constitutes the legal,
valid and
binding obligations of Xxxxx Xxx, enforceable in accordance with
its
terms, except as enforceability may be limited by bankruptcy, insolvency
and other laws of general application affecting the enforcement of
creditor’s rights and except that any remedies in the nature of equitable
relief are in the discretion of the court. All necessary action required
to be taken by Xxxxx Xxx for the consummation of the transactions
contemplated by this Agreement has been
taken.
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(iii)
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The
execution and performance of this Agreement will not constitute a
breach
of any agreement, indenture, mortgage, license or other instrument
or
document to which Xxxxx Xxx is a party or by which its assets and
properties are bound, and will not violate any judgment, decree,
order,
writ, rule, statute, or regulation applicable to Xxxxx Xxx or its
properties. The execution and performance of this Agreement will
not
violate or conflict with any provision of the certificate of incorporation
or by-laws of Xxxxx Xxx.
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(iv)
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The
authorized capital of Xxxxx Xxx consists of 4,000,000 shares, par
value
$1.00, all of which have been issued and are outstanding. Except
as
provided in, contemplated by, or set forth in this Agreement, Xxxxx
Xxx
has no outstanding or authorized warrants, options, other rights
to
purchase or otherwise acquire capital stock or any other Xxxxx Xxx
securities, preemptive rights, rights of first refusal, registration
rights or related commitments of any nature.
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(v)
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No
consent, approval or agreement of any person, party, court, governmental
authority, or entity is required to be obtained by Xxxxx Xxx in connection
with the execution and performance by Xxxxx Xxx of this Agreement
or the
execution and performance by Xxxxx Xxx of any agreements, instruments
or
other obligations entered into in connection with this
Agreement.
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(b) Absence
of Changes.
Since
September 30, 2007, to the best of Xxxxx Xxx’x knowledge, there have not
been:
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(i)
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any
change in the consolidated assets, liabilities, or financial condition
of
Xxxxx Xxx, except changes in the ordinary course of business which
do not
and will not have a material adverse effect on Xxxxx
Xxx;
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(ii)
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any
damage, destruction, or loss, whether or not covered by insurance,
materially and adversely affecting the assets or financial condition
of
Xxxxx Xxx (as conducted and as proposed to be
conducted);
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(iii)
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any
change or amendment to a material contract, charter document or
arrangement not in the ordinary course of business to which Xxxxx
Xxx is a
party other than contracts which are to be terminated at or prior
to the
Closing;
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(iv)
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any
loans made by Xxxxx Xxx to any of affiliate of Xxxxx Xxx or any of
Xxxxx
Xxx’x employees, officers, directors, shareholders or any of its
affiliates;
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(v)
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any
declaration or payment of any dividend or other distribution or any
redemption of any capital stock of Xxxxx
Xxx;
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(vi)
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any
sale, transfer, or lease of any of Xxxxx Xxx’x assets other than in the
ordinary course of business;
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(vii)
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any
other event or condition of any character which might have a material
adverse effect on Xxxxx Xxx;
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(viii)
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any
satisfaction or discharge of any lien, claim or encumbrance or payment
of
any obligation by Xxxxx Xxx except in the ordinary course of business
and
that is not material to the assets or financial condition of Xxxxx
Xxx;
or
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(ix)
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any
agreement or commitment by Xxxxx Xxx to do any of the things described
in
this Section 3(b)).
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9
(c)
Taxes.
Xxxxx
Xxx has filed all applicable income, excise, franchise, property and other
tax,
governmental and/or related returns, forms, or reports, which are due or
required to be filed by it prior to the date hereof, except where the failure
to
do so would have no material adverse impact on Xxxxx Xxx, and has paid or made
adequate provision in its financial statements for the payment of all taxes,
fees, or assessments which have or may become due pursuant to such returns
or
pursuant to any assessments received. Xxxxx Xxx is not delinquent or obligated
for any tax, penalty, interest, delinquency or charge.
(d)
No
Adverse Change.
Since
September 30, 2007, except for the restructuring of Xxxxx Xxx and its
subsidiaries, there has not been any Material Adverse Change in the financial
condition of Xxxxx Xxx.
(e)
No
Defaults.
Xxxxx
Xxx is not in violation of its certificate of incorporation or by-laws or any
judgment, decree or order, applicable to it.
(f)
Litigation.
There
are no material (i.e., claims which, if adversely determined based on the
amounts claimed, would exceed ten thousand dollars ($10,000)) claims, actions,
suits, proceedings, inquiries, labor disputes or investigations (whether or
not
purportedly on behalf of Xxxxx Xxx) pending or, to Xxxxx Xxx’x knowledge,
threatened against Xxxxx Xxx or any of its assets, at law or in equity or by
or
before any governmental entity or in arbitration or mediation.
(g)
Compliance
with Laws.
Xxxxx
Xxx, to its knowledge, is in full compliance with all laws applicable to it
(including, without limitation, with respect to zoning, building, wages, hours,
hiring, firing, promotion, equal opportunity, pension and other benefit,
immigration, nondiscrimination, warranties, advertising or sale of products,
trade regulations, anti-trust or control and foreign exchange or, to Xxxxx
Xxx’x
knowledge, environmental, health and safety requirements).
4.
Representations
and Warranties of Shareholders.
Each
Shareholder hereby severally and not jointly warrants, covenants and agrees
as
follows:
(a)
Such Shareholder understands that the offer and sale of the
Securities is being made only by means of this Agreement and understands that
the Company has not authorized the use of, and the Shareholder confirms that
he
or she is not relying upon, any other information, written or oral, other than
material contained in this Agreement. Such Shareholder is aware that the
purchase of the Securities involves a high degree of risk and that such
Shareholder may sustain, and has the financial ability to sustain, the loss
of
his or her entire investment, understands that no assurance can be given that
the Company will be profitable in the future, that there is no public market
for
the Securities, and the Company can give no assurance that there will ever
be a
public market for the Securities. Furthermore, in subscribing for the
Securities, such Shareholder acknowledges it is not relying upon any projections
or any statements of any kind relating to future revenue, earnings, operations
or cash flow in making an investment in the Securities.
10
(b)
Such Shareholder severally represents to the Company that he or
she
(A) is
an
accredited investor within the meaning of Rule 501 of the Commission under
the
Securities Act of 1933, as amended (the “Securities Act”) and it understands the
meaning of the term “accredited investor.” The requirements for an accredited
investor are as set forth in Exhibit A. Such Shareholder further represents
that
he or she has such knowledge and experience in financial and business matters
as
to enable the Shareholder to understand the nature and extent of the risks
involved in purchasing the Securities. Such Shareholder is fully aware that
such
investments can and sometimes do result in the loss of the entire investment.
Such Shareholder has engaged his or her own counsel and accountants to the
extent that the Shareholder deems it necessary; or
(B) is
not
acquiring the Securities for the account or benefit of, directly or indirectly,
any U.S. Person. The Shareholder is not a U.S. person. The Shareholder is
acquiring the Securities for investment only and not with a view to resale
or
distribution and, in particular, it has no intention to distribute either
directly or indirectly any of the Securities in the United States or to U.S.
Persons. The Shareholder acknowledges that the Shareholder has not acquired
the
Securities as a result of, and will not itself engage in, any "directed selling
efforts" (as defined in Regulation S under the 0000 Xxx) in the United States
in
respect of the Securities which would include any activities undertaken for
the
purpose of, or that could reasonably be expected to have the effect of,
conditioning the market in the United States for the resale of the Securities;
provided, however, that the Shareholder may sell or otherwise dispose of the
Securities pursuant to registration of the Securities pursuant to the 1933
Act
and any applicable state and provincial securities laws or under an exemption
from such registration requirements and as otherwise provided.
(c)
All of the information provided by such Shareholder in his or her
Confidential Questionnaire is true and correct in all material
respects.
(d)
Such Shareholder is acquiring the Shares pursuant to this Agreement
for his or her own account, for investment and not with a view to the sale
or
distribution thereof, for the Shareholder’s own account and not on behalf of
others; has not granted any other person any interest or participation in or
right or option to purchase all or any portion of the Shares; is aware that
the
Shares are restricted securities within the meaning of Rule 144 of the
Commission under the Securities Act, and may not be sold or otherwise
transferred other than pursuant to an effective registration statement or an
exemption from registration; and understands and agrees that the certificates
for the Shares shall bear the Company’s standard investment legend. The
Shareholder understands the meaning of these restrictions.
(e)
The Shareholder will not transfer any Shares except in compliance
with all applicable federal and state securities laws and regulations, and,
in
such connection, the Company may request an opinion of counsel reasonably
acceptable to the Company as to the availability of any exemption.
11
(f)
Except as set forth on Schedule 4(f), such Shareholder represents
and warrants that no broker or finder was involved directly or indirectly in
connection with his or her purchase of the Shares pursuant to this Agreement.
Such Shareholder shall indemnify the Company and hold it harmless from and
against any manner of loss, liability, damage or expense, including fees and
expenses of counsel, resulting from a breach of the Shareholder’s warranty
contained in this Paragraph 4(f).
(g)
Such Shareholder understands that he or she has no registration
rights with respect to the Securities.
(h)
Such Shareholder represents and warrants that the address set forth
on Schedule I to this Agreement is its true and correct address, and understands
that the Company will rely on this representation in making filings under state
securities or blue sky laws.
(i)
Such
Shareholder is the record and beneficial owner of the Xxxxx Xxx Shares, free
and
clear of any and all Liens. Such Shareholder has the power and authority to
sell, transfer, assign and deliver the Xxxxx Xxx Shares as provided in this
Agreement, and such delivery will convey to the Company good and marketable
title to such Xxxxx Xxx Shares, free and clear of any and all liens
5.
Closing
Deliveries.
(a)
On
the Closing Date, the Company shall deliver or cause to be delivered to each
Shareholder:
(i)
a
certificate registered in the name of each Shareholder representing the number
of shares of Common Stock set forth on Schedule I;
(ii)
a
legal opinion of counsel to the Company acceptable to the Shareholders;
and
(iii)
undated letters of resignation from each of the directors and officers of the
Company.
(b)
On
the Closing Date, each Shareholder shall deliver or cause to be delivered to
the
Company:
(i)
the
certificate representing such Shareholder’s shares of Xxxxx Xxx stock, or if the
shares were issued in uncertificated form, a written representation executed
by
an officer of Xxxxx Xxx that such Shareholder was issued the number of shares
set forth next to its name on Schedule I.
12
(c)
On
the
Closing Date, the Company shall cause to be delivered to each Bridge Investor
and the Placement Agent:
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(i)
|
a
certificate registered in the name of each Bridge Investor representing
the number of shares of Common Stock set forth on Schedule II;
and
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(ii)
|
a
certificate registered in the name of each Bridge Investor and the
Placement Agent, respectively, representing
Exchange Warrants to purchase the number of shares of Common Stock
set
forth on Schedule II;
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(iii)
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a
certificate registered in the name of the Placement Agent for 1,383,778
shares of Common Stock.
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(d)
On
the Closing Date, each Bridge Investor shall deliver or cause to be delivered
to
the Company:
|
(i)
|
(A)
the Notes held by each;
|
|
(B)
|
the
Bridge Warrants held by each; or
|
|
(C)
|
the
certification in the form of Exhibit B;
and
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(ii)
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a
certification as to the matters set forth on Exhibit A attached
hereto.
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(e)
On
the Closing Date, the Placement Agent shall deliver or cause to be delivered
to
the Company:
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(iii)
|
the
Placement Agent Warrants, or such other documentation as is reasonably
requested by the Company or its counsel evidencing the termination
of the
Placement Agent’s rights under the Placement Agent Warrants;
and
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(iv)
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a
certification as to the matters set forth on Exhibit A attached
hereto.
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6.
Conditions
to the Obligation of the Shareholders to Close.
The
obligations of Shareholders under this Agreement are subject to the satisfaction
of the following conditions unless waived by Shareholders:
(a) Representations
and Warranties.
On the
Closing Date, the representations and warranties of the Company shall be true
and correct in all material respects on and as of the Closing Date with the
same
force and effect as if made on such date, and the Company shall have performed
all of their respective obligations required to be performed by them pursuant
to
this Agreement at or prior to the Closing Date, and Shareholders shall have
received a certificate of the Company to such effect and as to any other matters
set forth in this Agreement.
(b) No
Material Adverse Change.
No
Material Adverse Change in the business or financial condition of the Company
shall have occurred or be threatened since the date of this Agreement, and
no
action, suit or proceedings shall be threatened or pending before any court
of
governmental agency or authority or regulatory body seeking to restraint,
prohibition or the obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated by this Agreement
or that, if adversely decided, has or may have a Material Adverse
Effect.
13
(c) Liabilities.
On the
Closing Date, the Company’s total liabilities shall not exceed
$5,000.
(d) Legal
Opinion.
The
Shareholders shall have received a legal opinion from the Company’s legal
counsel, acceptable to the Shareholders
(e) Resignations.
All
officers and directors of the Company shall have tendered an undated letter
of
resignation.
(f) Shares
Outstanding.
The
Company shall have 457,056 shares of
Common
Stock outstanding without giving effect to the issuances contemplated under
this
Agreement.
(g) Primary
Capital LLC Agreement.
The
Company shall have assumed the obligations of Xxxxx Xxx under that certain
agreement dated November 15, 2007 between Xxxxx Xxx and Primary Capital LLC
regarding financial advisory and investment banking services, including any
amendments and modifications thereof (in form and substance reasonably
satisfactory to Primary Capital LLC) after that date.
(h) Agreement
as to Payment of Liabilities.
The
Company shall have caused Xxxxxx Xxxxx, sole director and principal officer
of
the Company, to enter into an agreement with Primary Capital LLC regarding,
among other things, the payment of liabilities in form and substance
satisfactory to Primary Capital LLC.
7.
Conditions
to the Obligation of the Company to Close.
The
obligations of the Company under this Agreement are subject to the satisfaction
of the following conditions unless waived by the Company:
(a)
Representations
and Warranties.
On the
Closing Date, the representations and warranties of Xxxxx Xxx shall be true
and
correct in all material respects on and as of the Closing Date with the same
force and effect as if made on such date, and Xxxxx Xxx shall have performed
all
of its obligations required to be performed by it pursuant to this Agreement
at
or prior to the Closing Date, and the Company shall have received a certificate
of Xxxxx Xxx to such effect.
(b)
No
Material Adverse Change.
No
Material Adverse Change in the business or financial condition of Xxxxx Xxx
shall have occurred or be threatened since the date of this Agreement, and
no
action, suit or proceedings shall be threatened or pending before any court
of
governmental agency or authority or regulatory body seeking to restraint,
prohibition or the obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated by this Agreement
or that, if adversely decided, has or may have a Material Adverse
Effect.
14
8. Indemnification
Xxxxxx
Xxxxx, the Company’s President sole director and largest shareholder, hereby
acknowledges that he will gain significant benefits from the transactions
contemplated hereunder. In consideration for the consummation of the
transactions contemplated by this Agreement, Xxxxxx Xxxxx hereby agrees to
indemnify and hold harmless the Company, the Shareholders, the Bridge Investors
and the Placement Agent, from and against any and all liabilities, losses,
damages, judgments, costs and charges, including reasonable attorney fees and
expenses, as a result of any liabilities of the Company that were incurred
by
the Company or arose from its actions or omissions prior to the Closing Date.
The provisions of this Section 8 shall survive the consummation of the
transactions contemplated hereunder, and is intended to benefit the Company
,
the Shareholders, the Bridge Investors and the Placement Agent and their
respective heirs, personal representatives, successors and assigns.
9.
Miscellaneous.
(a)
This Agreement constitutes the entire agreement between the parties
relating to the subject matter hereof, superseding any and all prior or
contemporaneous oral and prior written agreements, understandings and letters
of
intent. This Agreement may not be modified or amended nor may any right be
waived except by a writing which expressly refers to this Agreement, states
that
it is a modification, amendment or waiver and is signed by all parties with
respect to a modification or amendment or the party granting the waiver with
respect to a waiver. No course of conduct or dealing and no trade custom or
usage shall modify any provisions of this Agreement.
(b)
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to
be
performed entirely within such State.
(c)
This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted
assigns.
(d)
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute
one
and the same document.
(e)
The various representations, warranties, and covenants set forth in
this Agreement or in any other writing delivered in connection therewith shall
survive the issuance of the Shares.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
15
IN
WITNESS WHEREOF, the parties have executed this Securities Exchange Agreement
the day and year first above written.
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By:
XXXXX
XXX ENTERPRISES LIMITED
By:
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Agreed
as
to Sections 8 and 9 only:
Xxxxxx
Xxxxx
16
SHAREHOLDER
SIGNATURE PAGE TO
XXXXX
XXX/ACHERON SECURITIES EXCHANGE AGREEMENT
17
BRIDGE
INVESTOR SIGNATURE PAGE TO
XXXXX
XXX/ACHERON SECURITIES EXCHANGE AGREEMENT
18
Exhibit
A
Accredited
investors
A
Person
who meets any one of the following tests is an accredited investor:
(a)
The Person is an individual who has a net worth, or joint net worth with
the Person’s spouse, of at least $1,000,000.
(b)
The Person is an individual who had individual income of more than
$200,000 (or $300,000 jointly with the Person’s spouse) for the past two years,
and the Person has a reasonable expectation of having income of at least
$200,000 (or $300,000 jointly with the Person’s spouse) for the current
year.
(c)
The Person is an officer or director of the Company.
(d)
The Person is a bank as defined in section 3(a)(2) of the Securities Act
or any savings and loan association or other institution as defined in section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity.
(e)
The Person is a broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934.
(f)
The Person is an insurance company as defined in section 2(13) of the
Securities
Act.
(g)
The Person is an investment company registered under the Investment
Company Act of 1940 or a business development company as defined in section
2(a)(48) of that Act.
(h)
The Person is a small Business Investment Company licensed by the U.S.
Small Business Administration under section 301(c) or (d) of the Small Business
Investment Act of 1958.
(i)
The Person is an employee benefit plan within the meaning of Title I of
the Employee Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in section 3(21) of such Act, which
is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors.
(j)
The Person is a private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of 1940.
19
(k)
The Person is an organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust,
or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000.
(l)
The Person is a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of the Commission under the Securities Act.
(m)
The Person is an entity in which all of the equity owners are accredited
investors (i.e., all of the equity owners meet one of the tests for an
accredited investor).
If
an
individual Person qualifies as an accredited investor, such individual may
purchase the Shares in the name of his or her individual retirement account
(“XXX”).
20
