EXCHANGE AGREEMENT
BY AND AMONG
MARINE JET TECHNOLOGY CORP.,
ANTIK DENIM, LLC,
AND EACH MEMBER OF ANTIK DENIM, LLC
DATED AS OF APRIL 14, 2005
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is made and entered into as
of April 14, 2005, by and among Marine Jet Technology Corp., a Nevada
corporation ("Marine"), Antik Denim, LLC, a California limited liability company
("Company"), and each of the persons listed under the caption "Members" on the
signature page hereof, together with each person becoming a Member prior to the
closing of the transactions contemplated hereunder who shall execute a
counterpart signature of this Agreement, such persons being all of the members
of the Company. The Members shall be referred to herein collectively as the
"Members" and individually as the "Member".
RECITALS
A. The Members own all of the Interests (as defined in Section 1.1) of the
Company.
X. Xxxxxxx Reverse Merger Fund, LLC, a Delaware limited liability company ("KRM
Fund") owns the majority of the outstanding shares of common stock of Marine. C.
Marine desires to acquire all of the Interests of the Members in exchange for
certain of Marine's equity securities, and the Members desire to contribute all
of the Interests to Marine in exchange for certain equity securities of Marine,
on the terms and conditions hereinafter set forth.
D. As a condition and inducement to Marine's willingness to enter into
this Agreement, at or prior to Closing (as defined in Section 1.2), KRM Fund and
each Member will enter into a voting agreement in substantially the form
attached hereto as Exhibit A (the "Voting Agreement").
E. The parties intend, by executing this Agreement, to implement a
tax-deferred exchange of property governed by Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
EXCHANGE OF INTERESTS
1.1 Exchange. At the Closing and subject to and upon the terms and
conditions of this Agreement, the Members agree to contribute, transfer, assign
and deliver to Marine, and Marine agrees to acquire from the Members, all of the
outstanding membership interests of the Company ("Interests") owned by the
Members as specifically set forth on Schedule 1.1 hereto. As of Closing, the
Interests shall constitute all of the issued and outstanding Interests of the
Company. The exchange of Interests contemplated hereunder and the other
transactions contemplated hereunder shall be referred to herein as the
"Transaction" or the "Transactions".
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1.2 Closing. Unless this Agreement shall have been terminated pursuant
to Article IX hereof, the closing of the Transaction (the "Closing") shall take
place at the offices of Xxxxxx Xxxxxxxx & Markiles, LLP, 00000 Xxxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxxx, XX 00000 at a time and date to be specified by the
parties, which shall be no later than the third business day after the
satisfaction or waiver of the conditions set forth in Article VII, or at such
other time, date and location as the parties hereto agree in writing (the
"Closing Date").
1.3 Exchange Consideration. In exchange for the Interests, Marine shall
issue 843,027 shares of Series A Convertible Preferred Stock, par value $0.001
per share, of Marine ("Marine's Preferred Shares"), which shall be convertible
into 708,984,875 shares of Marine's Common Stock ("Conversion Shares"), subject
to Stockholder Approval as defined in Section 4.3(a) hereof. The Conversion
Shares shall represent 95.8% of the issued and outstanding shares of common
stock of Marine, on an as converted basis and fully diluted basis immediately
following the Closing, after giving effect to: (i) any Interests, ownership
interests, equity securities, convertible securities, warrants, options, or
other derivative securities of Company issued prior to or in connection with the
Transactions, and (ii) any Interests, ownership interests, equity securities,
convertible securities, warrants, options, or other derivative securities of
Marine or Company issued or to be issued to any Person (as defined herein), or
assumed or to be assumed by Marine, in connection with or following the
Transactions (including any shares of Marine's common stock to be issued to Xxxx
Xxxxx for his services as a finder).
1.4 Allocation of Marine's Preferred Shares. At the Closing, Marine's
Preferred Shares to be issued to the Members in exchange for the Interests shall
be issued to the respective Members in proportion to their respective ownership
of the Interests as described in Schedule 1.1 hereto.
1.5 Delivery of Assignment of Interests. At Closing, the Company shall
deliver to Marine a certificate duly executed and authorized by each of its
managers and/or managing members certifying to the ownership of the Interests by
each Member as set forth on Schedule 1.1 hereof, and each Member shall deliver
an assignment or other acceptable instrument of transfer of the Interests owned
by such Member, duly executed by such Member with (i) all such other documents
as may be reasonably requested to vest in Marine good and marketable title to
the Interests free and clear of any and all Liens (as defined in Section 2.3
hereof) and (ii) all reasonably necessary other documentary stamps. The Company
shall record the transfer of the Interests described in this Section 1.5 on its
transfer books.
1.6 Issuance of Certificates Representing Marine's Preferred Shares. At
Closing, Marine will issue Marine's Preferred Shares to the Members as provided
in Section 1.4 above. Marine's Preferred Shares, when issued, shall be
restricted shares and may not be sold, transferred or otherwise disposed of by
the Members without registration under the Securities Act of 1933, as amended
("Securities Act") or an available exemption from registration under the
Securities Act. The certificates representing Marine's Preferred Shares will
contain the appropriate restrictive legends.
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1.7 Tax Consequences. It is intended by the parties hereto that the
Member's contribution and transfer of the Interests to Marine in exchange for
Marine's Preferred Shares constitutes a tax-deferred exchange within the meaning
of Section 351 of the Code.
1.8 Taking of Necessary Action; Further Action. If, at any time after
the Closing, any further action is necessary or desirable to carry out the
purposes of this Agreement, including qualifying the Transaction as a
tax-deferred exchange within the meaning of Section 351 of the Code, and to vest
Marine with full right, title and possession to the Interests, the Members and
Marine will take all such lawful and necessary action.
1.9 Transaction Deposit. Marine and Company hereby acknowledge
Company's prior payment to Marine of a $50,000 deposit ("Deposit").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MEMBERS WITH RESPECT TO INTERESTS
Each Member for himself only, and not with respect to any other Member,
hereby severally represents and warrants to, and covenants with, Marine with
respect to such Member as follows:
2.1 Ownership of Interests. Each Member is both the record and
beneficial owner of the Interests set forth beside such Member's name on
Schedule 1.1 hereto. Each Member is not the record or beneficial owner of any
other Interests. The information set forth on Schedule 1.1 with respect to each
Member is accurate and complete.
2.2 Authority of Members. Each Member that is a natural person has full
power and authority and is competent to (i) execute, deliver and perform this
Agreement, and each ancillary document which each such Member has executed or
delivered or is to execute or deliver pursuant to this Agreement (including the
Voting Agreement), and (ii) carry out each such Member's obligations hereunder
and thereunder, without the need for any Governmental Action/Filing (as defined
herein). The execution, delivery and performance by each Member of this
Agreement and each ancillary document does not and will not conflict with,
result in a breach of, or constitute a default or require a consent or action
under, any agreement or other instrument to or by which such Member is a party
or is bound or to which any of the Interests of such Member are subject, or, to
such Member's knowledge, any Legal Requirement (as defined herein) to which such
Member is subject, or result in the creation of any Lien (as defined in Section
2.3) on the Interests. This Agreement, and each Member's ancillary documents to
be executed and delivered by such Member at the Closing, has been duly executed
and delivered by such Member (and each ancillary document to be executed and
delivered by such Member at or after the Closing will be duly executed and
delivered by such Member), and this Agreement constitutes, and each ancillary
document, when executed and delivered by such Member will constitute, and
assuming the due authorization, execution and delivery thereof by the other
parties hereto and thereto, as applicable, such Member's legal, valid and
binding obligation, enforceable against such Member in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity and public policy. For purposes of this
Agreement, (x) the term "Governmental Action/Filing" shall mean any franchise,
license, certificate of compliance, authorization, consent, order, permit,
approval, consent or other action of, or any filing, registration or
qualification with, any federal, state, municipal, foreign or other
governmental, administrative or judicial body, agency or authority, and (y) the
term "Legal Requirements" means any federal, state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity (as defined in Section 3.5(b)),
and all requirements set forth in applicable Contracts (as defined in Section
3.19(a)).
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2.3 Title To Interests. Each Member has and shall transfer to Marine at
the Closing, good and marketable title to the Interests shown as owned of record
by such Member on Schedule 1.1 to this Agreement, free and clear of all liens,
claims, charges, encumbrances, pledges, mortgages, security interests, options,
rights to acquire, proxies, voting trusts or similar agreements, restrictions on
transfer or adverse claims of any nature whatsoever ("Liens").
2.4 Pre-emptive and Conversion Rights. At Closing, no Member has any
pre-emptive rights or rights to acquire any Interests that have not been waived
or exercised.
2.5 Acquisition of Marine's Preferred Shares for Investment.
(a) Each Member is acquiring Marine's Preferred Shares for investment
for Member's own account and not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and each Member has no present
intention of selling, granting any participation in, or otherwise distributing
the same. Each Member further represents that he does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of
Marine's Preferred Shares.
(b) Each Member understands that Marine's Preferred Shares are not
registered under the Securities Act, that the issuance of Marine's Preferred
Shares is intended to be exempt from registration under the Securities Act
pursuant to Section 4(2) thereof, and that Marine's reliance on such exemption
is predicated on the Member's representations set forth herein. Each Member
represents and warrants that: (i) he is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D under the Act, (ii) he can bear the
economic risk of his respective investments, and (iii) he possesses such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of the investment in Marine's Preferred Shares.
(c) Each Member acknowledges that neither the U.S. Securities and
Exchange Commission ("SEC"), nor the securities regulatory body of any state or
other jurisdiction, has received, considered or passed upon the accuracy or
adequacy of the information and representations made in this Agreement.
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(d) Each Member acknowledges that he has carefully reviewed such
information as he has deemed necessary to evaluate an investment in Marine's
Preferred Shares. To the full satisfaction of each Member, he has been furnished
all materials that he has requested relating to Marine and the issuance of
Marine's Preferred Shares hereunder, and each Member has been afforded the
opportunity to ask questions of Marine's representatives to obtain any
information necessary to verify the accuracy of any representations or
information made or given to the Members. Notwithstanding the foregoing, nothing
herein shall derogate from or otherwise modify the representations and
warranties of Marine set forth in this Agreement, on which each of the Members
have relied in making an exchange of his Interests for Marine's Preferred
Shares.
(e) Each Member understands that Marine's Preferred Shares may not be
sold, transferred, or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering Marine's Preferred Shares or any
available exemption from registration under the Securities Act, Marine's
Preferred Shares may have to be held indefinitely. Each Member further
acknowledges that Marine's Preferred Shares may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of Rule 144
are satisfied (including, without limitation, Marine's compliance with the
reporting requirements under the Securities Exchange Act of 1934, as amended
("Exchange Act")).
ARTICLE III
REPRESENTATIONS AND WARRANTIES BY COMPANY WITH RESPECT TO COMPANY
The Company, hereby represents and warrants to, and covenants with,
Marine and KRM Fund, as follows:
3.1 Organization and Qualification.
(a) Company is a limited liability company duly formed or
organized, validly existing and in good standing under the laws of the State of
California and has the requisite power and authority to own, lease and operate
its assets and properties and to carry on its business as it is now being or
currently planned by Company to be conducted. To its knowledge, Company is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("Approvals") necessary
to own, lease and operate the properties it purports to own, operate or lease
and to carry on its business as it is now being conducted, except where the
failure to have such Approvals could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect (as defined in Section
11.2(b)) on Company. Complete and correct copies of the articles of organization
and operating agreement (collectively referred to herein as "Charter Documents")
of Company, as amended and currently in effect, have been heretofore delivered
to Marine. Company is not in violation of any of the provisions of the Company's
Charter Documents.
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(b) Company is duly qualified or licensed to do business as a
foreign company and is in good standing in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Company.
(c) Except as set forth in the Charter Documents, the Company
does not maintain minute books or the equivalent records of meetings or records
of consents in lieu of meetings of its managers and managing members (and any
committees thereof), similar governing bodies and members ("Corporate Records").
(d) Except as set forth in the Charter Documents, the Company
does not maintain ownership records of Company' Interests or of the transfers of
such Interests ("Interests Records").
3.2 Subsidiaries. The Company has no subsidiaries.
3.3 Capitalization.
(a) At the close of business on the business day prior to the
date hereof, Schedule 1.1 hereto contains all of the outstanding Interests of
the Company. All Interests on Schedule 1.1 have been validly issued, fully paid
and are nonassessable. Except as set forth in Schedule 1.1 and Schedule 3.3,
there are no outstanding securities, convertible securities, options, warrants
or derivative securities, and there are no agreements or commitments obligating
the Company to issue or grant any of the foregoing, including any pre-emptive or
similar rights. All outstanding Interests, options, warrants and other
securities of the Company have been issued in compliance with (i) all applicable
securities laws and (in all material respects) other applicable laws and
regulations, and (ii) all requirements set forth in any applicable contracts.
Except as described in Schedule 3.3 hereto, there are no commitments or
agreements of any character to which Company is bound obligating Company to
accelerate the vesting of any options or warrants as a result of the
Transactions. Company has heretofore delivered to Marine true, complete and
accurate copies of all options, warrants and other securities of the Company, if
any, including any and all documents and agreements relating thereto.
(b) Except as set forth in Schedule 3.3 hereto, there are no
equity securities, partnership interests or similar ownership interests of any
class of any equity security of Company, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in Schedule 3.3 hereof, there are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which Company is a party or by
which it is bound obligating Company to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition of, any Interests, shares of capital
stock, partnership interests or similar ownership interests of Company or
obligating Company to grant, extend, accelerate the vesting of or enter into any
such subscription, option, warrant, equity security, call, right, commitment or
agreement.
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(c) Except as contemplated by this Agreement and except as set
forth in Schedule 3.3 hereto, there are no registration rights, and there is no
voting trust, proxy, rights plan, antitakeover plan or other agreement or
understanding to which Company is a party or by which Company is bound with
respect to any Interests, equity securities, partnership interests or similar
ownership interests of any class of the Company, and there are no agreements to
which the Company is a party, or which the Company has knowledge of, which
conflict with this Agreement or the transactions contemplated herein or
otherwise prohibit the consummation of the transactions contemplated hereunder.
3.4 Authority Relative to this Agreement. Company has all necessary
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder and, to consummate the transactions contemplated hereby
(including the Transaction). The execution and delivery of this Agreement and
the consummation by Company of the transactions contemplated hereby (including
the Transaction) have been duly and validly authorized by all necessary action
on the part of Company (including the approval by its managers or managing
members), and no other proceedings on the part of Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Company and,
assuming the due authorization, execution and delivery thereof by the other
parties hereto, constitutes the legal and binding obligation of Company,
enforceable against Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity and public policy.
3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company shall
not, (i) conflict with or violate the Company's Charter Documents, (ii) to its
knowledge, conflict with or violate any Legal Requirements, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or materially impair Company's
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the properties or
assets of the Company pursuant to, any Material Contracts (as defined below),
except, with respect to clauses (ii) or (iii), for any such conflicts,
violations, breaches, defaults or other occurrences that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company.
(b) The execution and delivery of this Agreement by Company
does not, and the performance of its obligations hereunder will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any court, administrative agency, commission, governmental or regulatory
authority, domestic or foreign (a "Governmental Entity"), except (i) for
applicable requirements, if any, of the Securities Act, the Exchange Act, state
securities laws ("Blue Sky Laws"), and the rules and regulations thereunder, and
appropriate documents with the relevant authorities of other jurisdictions in
which Company is qualified to do business, and (ii) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Company or, after the Closing,
Marine, or prevent consummation of the Transaction or otherwise prevent the
parties hereto from performing their obligations under this Agreement.
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3.6 Compliance. To the knowledge of the Company, it has complied with
and is not in violation of any Legal Requirements with respect to the conduct of
its business, or the ownership or operation of its business, except for failures
to comply or violations which, individually or in the aggregate, have not had
and are not reasonably likely to have a Material Adverse Effect on Company. To
Company's knowledge, the businesses and activities of Company have not been and
are not being conducted in violation of any Legal Requirements. Company is not
in default or violation of any term, condition or provision of any applicable
Charter Documents or Contracts. Except as set forth on Schedule 3.6, to the
Company's knowledge, no written notice of non-compliance with any Legal
Requirements relating or with respect to the business of the Company has been
received by Company (and the Company has no knowledge of any material such
notice delivered to any other Person). To the Company's knowledge, the Company
is not in violation of any material term of any contract or covenant relating to
employment, patents, proprietary information disclosure, non-competition or
non-solicitation.
3.7 Financial Statements.
(a) Company has provided to Marine a correct and complete copy
of the audited financial statements (including, in each case, any related notes
thereto) of Company for the fiscal period from inception (September 13, 2004) to
and including December 31, 2004, which statements were prepared in accordance
with generally accepted accounting principles of the United States ("U.S. GAAP")
applied on a consistent basis throughout the period involved (except as may be
indicated in the notes thereto), and such statements fairly present in all
material respects the financial position of Company at the date thereof and the
results of its operations and cash flows for the period indicated, and does not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Company has provided to Marine a correct and complete copy
of the unaudited financial statements (including, in each case, any related
notes thereto) of Company for the three-month period ended March 31, 2005,
complied as to form in all material respects with, and prepared in accordance
with U.S. GAAP applied on a consistent basis throughout the period involved
(except as may be indicated in the notes thereto), and such statements fairly
present in all material respects the financial position of Company at the date
thereof and the results of its operations and cash flows for the period
indicated, except that the unaudited interim financial statements were or are
subject to normal adjustments which were not or are not expected to have a
Material Adverse Effect on Company.
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(c) To Company's knowledge, the books of account and other
financial records of Company have been maintained in accordance with good
business practice.
3.8 No Undisclosed Liabilities. Except as set forth in Schedule 3.8
hereto, Company has no liabilities individually in excess of $50,000 and in the
aggregate in excess of $250,000 (absolute, accrued, contingent or otherwise) of
a nature required to be disclosed on a balance sheet or in the related notes to
the financial statements prepared in accordance with U.S. GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Company, except: (i) liabilities provided
for in or otherwise disclosed in the balance sheets of Company as of December
31, 2004 prepared in accordance with U.S. GAAP, which have been delivered to
Marine, and (ii) such liabilities arising in the ordinary course of Company's
business since December 31, 2004, none of which would have a Material Adverse
Effect on the Company.
3.9 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.9 hereto or in the interim balance sheets of Company as of December
31, 2004, since December 31, 2004, there has not been: (i) any Material Adverse
Effect on Company, (ii) any declaration, setting aside or payment of any
dividend on, or other distribution (whether in cash, securities or property) in
respect of, any of Company's Interests, or any purchase, redemption or other
acquisition by the Company of any of Company's Interests or any other securities
of Company or any options, warrants, calls or rights to acquire any such
Interests or other securities, (iii) any split, combination or reclassification
of any of Company's capital, (iv) any granting by Company of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Company of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting by Company of
any increase in severance or termination pay or any entry by Company into any
currently effective employment, severance, termination or indemnification
agreement or any agreement the benefits of which are contingent or the terms of
which are materially altered upon the occurrence of a transaction involving
Company of the nature contemplated hereby, (v) entry by Company into any
licensing or other agreement with regard to the acquisition or disposition of
any Intellectual Property (as defined in Section 3.18 hereof) other than
licenses in the ordinary course of business consistent with past practice or any
amendment or consent with respect to any licensing agreement filed or required
to be filed by Company with respect to any Governmental Entity, (vi) any
material change by Company in its accounting methods, principles or practices,
(vii) any change in the auditors of Company, (vii) any issuance of Interests or
other securities of Company, or (viii) any revaluation by Company of any of
their respective assets, including, without limitation, writing down the value
of capitalized inventory or writing off notes or accounts receivable or any sale
of assets of Company other than in the ordinary course of business.
3.10 Litigation. Except as disclosed in Schedule 3.10 hereto, there are
no claims, suits, actions or proceedings pending, or to the knowledge of Company
threatened against Company, before any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator that seeks
to restrain or enjoin the consummation of the transactions contemplated by this
Agreement or which could reasonably be expected, either individually or in the
aggregate with all such claims, actions or proceedings, to have a Material
Adverse Effect on Company or have a Material Adverse Effect on the ability of
the parties hereto to consummate the Transaction.
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3.11 Employee Benefit Plans. The Company has no written employee
compensation, incentive, fringe or benefit plans, programs, policies,
commitments or other arrangements covering any active or former employee,
director or consultant of Company, or any trade or business (whether or not
incorporated) which is under common control with Company (collectively, the
"Plans").
3.12 Labor Matters. Except as disclosed in Schedule 3.12 hereto,
Company is not a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by Company nor does the Company
know of any activities or proceedings of any labor union to organize any such
employees.
3.13 Restrictions on Business Activities. Except as disclosed on
Schedule 3.13 hereto, to the Company's knowledge there is no agreement,
commitment, judgment, injunction, order or decree binding upon Company or to
which Company is a party which has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of Company,
any acquisition of property by Company or the conduct of business by Company as
currently conducted other than such effects, individually or in the aggregate,
which have not had and could not reasonably be expected to have a Material
Adverse Effect on Company.
3.14 Title to Property.
(a) All leases of real property held by Company and all
personal property and other property and assets of Company (other than real
property) owned, used or held for use in connection with the business of Company
(the "Personal Property") obligating the Company to make annual payments in
excess of $15,000 are shown or reflected on the balance sheets of Company
prepared in accordance with U.S. GAAP or in Schedule 3.14. To its knowledge,
Company owns and has good and marketable title to the Personal Property, and all
such assets and properties are in each case held free and clear of all Liens,
except for Liens disclosed in the financial statements of Company prepared in
accordance with U.S. GAAP or in Schedule 3.14 hereto, none of which Liens has or
will have, individually or in the aggregate, a Material Adverse Effect on such
property or on the present or contemplated use of such property in the
businesses of Company.
(b) To Company's knowledge, all leases pursuant to which
Company leases from others material real or personal property are valid and
effective in accordance with their respective terms, and there is not, under any
of such leases, any existing material default or event of default of Company or,
to Company's knowledge, any other party (or any event which with notice or lapse
of time, or both, would constitute a material default), except where the lack of
such validity and effectiveness or the existence of such default or event of
default could not reasonably be expected to have a Material Adverse Effect on
Company.
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3.15 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or "Taxes" refers to any and all federal, state, local and foreign taxes,
including, without limitation, gross receipts, income, profits, sales, use,
occupation, value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, assessments, governmental
charges and duties together with all interest, penalties and additions imposed
with respect to any such amounts and any obligations under any agreements or
arrangements with any other person with respect to any such amounts and
including any liability of a predecessor entity for any such amounts.
(b) Tax Returns and Audits. Except as set forth in Schedule
3.15 hereto, to Company's knowledge:
(i) Company has timely filed all federal, state, local
and foreign returns, estimates, information statements and reports
relating to Taxes ("Returns") required to be filed by Company with any Tax
authority prior to the date hereof, except such Returns which are not material
to Company. All such Returns are true, correct and complete in all material
respects. Company has paid all Taxes shown to be due on such Returns.
(ii) All Taxes that Company is required by law to
withhold or collect have been duly
withheld or collected, and have been timely paid over to the proper governmental
authorities to the extent due and payable.
(iii) No audit or other examination of any Return of
Company by any Tax authority is
presently in progress, nor has Company been notified of any request for such an
audit or other examination.
(iv) Company has not taken any action and does not know
of any fact, agreement, plan or
other circumstance that is reasonably likely to prevent the Transaction from
qualifying as a tax-deferred exchange within the meaning of Section 351 of the
Code.
3.16 Environmental Matters. Except as disclosed in Schedule 3.16 hereto
and except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect, to Company's knowledge: (i)
Company has complied with all applicable Environmental Laws; (ii) the properties
currently owned or operated by Company (including soils, groundwater, surface
water, buildings or other structures) are not contaminated with any Hazardous
Substances; (iii) the properties formerly owned or operated by Company were not
contaminated with Hazardous Substances during the period of ownership or
operation by Company; (iv) Company is not subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) Company has
not been associated with any release or threat of release of any Hazardous
Substance; (vi) Company has not received any notice, demand, letter, claim or
request for information alleging that Company may be in violation of or liable
under any Environmental Law; and (vii) Company is not subject to any orders,
decrees, injunctions or other arrangements with any Governmental Entity or
subject to any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances.
11
As used in this Agreement, the term "Environmental Law" means
any federal, state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to: (A) the
protection, investigation or restoration of the environment, health and safety,
or natural resources; (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
As used in this Agreement, the term "Hazardous Substance"
means any substance that is: (i) listed, classified or regulated pursuant to any
Environmental Law; (ii) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (iii) any other substance which is the
subject of regulatory action by any Governmental Entity pursuant to any
Environmental Law
3.17 Brokers; Third Party Expenses. Except for Xxxx Xxxxx who is acting
as a finder for Company, neither Company nor, to Company's knowledge, any Member
has incurred, nor will they incur, directly or indirectly, any liability for
brokerage, finders' fees, agent's commissions or any similar charges in
connection with this Agreement or any transactions contemplated hereby. Except
as disclosed on Schedule 3.17, no membership interests, ownership interests,
equity securities, convertible securities, warrants, options, or other
derivative securities of Company or Marine are payable to any third party by
Company or any Member as a result of this Transaction.
3.18 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the
following: (i) patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof ("Patents") worldwide; (ii) inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) registered copyrights and applications
therefor, and all other rights corresponding thereto, worldwide; (iv) material
domain names, uniform resource locators ("URLs") and other names and locators
associated with the Internet ("Domain Names"); (v) registered industrial designs
and applications therefor, worldwide; (vi) registered trade names, logos,
trademarks and service marks, and any applications therefor (collectively,
"Trademarks"), worldwide; (vii) all databases and data collections and all
rights therein; and (viii) all moral and economic rights of authors and
inventors, however denominated.
"Company Intellectual Property" shall mean any Intellectual
Property that is owned by, or licensed to, Company.
"Company Products" means all current versions of products of
Company.
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(a) Except as disclosed on Schedule 3.18, to the Company's
knowledge, the Company Intellectual Property and Company Products are not
subject to any material proceeding or outstanding decree, order, judgment,
contract, license, agreement or stipulation restricting in any manner the use,
transfer or licensing thereof by Company, or which may affect the validity, use
or enforceability of such Company Intellectual Property or Company Product,
which in any such case could reasonably be expected to have a Material Adverse
Effect on Company.
(b) Except as disclosed on Schedule 3.18 hereto, to the
Company's knowledge, Company either owns and has good and marketable title to
each material item of Company Intellectual Property owned by it free and clear
of any Liens (excluding licenses and related restrictions granted in the
ordinary course) or has one or more licenses sufficient for Company's use of
Company Intellectual Property; and Company is the owner or licensee of all
material Trademarks used in connection with the operation or conduct of the
business of Company including the sale of any products by Company.
(c) The operation of the business of Company as such business
currently is conducted, including (i) the design, development, manufacture,
distribution, reproduction, marketing or sale of the products of Company
(including Company Products) and (ii) Company's use of any product, device or
process, to the Company's knowledge and except as could not reasonably be
expected to have a Material Adverse Effect, has not and does not infringe or
misappropriate the Intellectual Property of any third party or constitute unfair
competition or trade practices under the laws of any jurisdiction.
(d) Except as set forth on Schedule 3.18 hereto, the Company
owns all right, title and interest in and to the Trademarks for "Antik Denim" or
any derivations thereof in the jurisdictions set forth on Schedule 3.18 hereto.
3.19 Agreements, Contracts and Commitments.
(a) Schedule 3.19 hereto sets forth a complete and accurate
list of all Material Contracts (as hereinafter defined), specifying the parties
thereto. For purposes of this Agreement, (i) the term "Contracts" shall mean all
written contracts, agreements, leases, mortgages, indentures, notes, bonds,
liens, licenses, arbitration awards, judgments, decrees, orders, documents,
instruments, understandings and commitments to which Company is a party or by or
to which any of the properties or assets of Company may be bound, subject or
affected (including without limitation notes or other instruments payable to
Company), and (ii) the term "Material Contracts" shall mean (x) each Contract
(I) providing for payments (present or future) to Company in excess of $50,000
in the aggregate, or (II) under which or in respect of which Company presently
has any liability or obligation of any nature whatsoever (absolute, contingent
or otherwise) in excess of $50,000, and (y) without limitation of subclause (x),
each of the following Contracts:
(i) any mortgage, indenture, note, installment
obligation or other instrument, agreement or arrangement for or relating to any
borrowing of money by or from Company;
13
(ii) any guaranty, direct or indirect, by Company or
any officer, director or 5% or more stockholder ("Insider") of Company of any
obligation of the Company for borrowings, or otherwise, excluding endorsements
made for collection in the ordinary course of business;
(iii) any Contract made other than in the ordinary
course of business or (x) providing for the grant of any preferential rights to
purchase or lease any asset of Company or (y) providing for any right (exclusive
or non-exclusive) to sell or distribute, or otherwise relating to the sale or
distribution of, any product or service of Company;
(iv) any obligation to register any shares of the
capital stock or other securities of Company with any Governmental Entity;
(v) any obligation to make payments, contingent or
otherwise, arising out of the prior acquisition of the business, assets or stock
of other Persons;
(vi) any collective bargaining agreement with any
labor union;
(vii) any lease or similar arrangement for the use by
Company of personal property;
(viii) any Contract granting or purporting to grant,
or otherwise in any way relating to, any mineral rights or any other interest
(including, without limitation, a leasehold interest) in real property; and
(ix) any Contract with the Company to which any
Insider of Company is a party.
(b) Each Material Contract was entered into at arms' length
and in the ordinary course, is in full force and effect and, to the Company's
knowledge, is valid and binding upon and enforceable against each of the parties
thereto. True, correct and complete copies of all Material Contracts have been
heretofore delivered to Marine.
(c) Except as set forth in Schedule 3.19, neither Company nor
to the Company's knowledge, any other party thereto, is in breach of or in
default under, and no event has occurred which with notice or lapse of time or
both would become a breach of or default under, any Material Contract, which
breach, individually or in the aggregate, could be reasonably likely to have a
Material Adverse Effect on Company, and no party to any Material Contract has
given any written notice of any claim of any such breach, default or event,
which, individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect on Company. Each Material Contract to which the Company
is a party or by which it is bound that has not expired by its terms is in full
force and effect, except where such failure to be in full force and effect is
not reasonably likely to have a Material Adverse Effect on Company.
14
3.20 Insurance. Schedule 3.20 sets forth the Company's insurance
policies covering the assets, business, equipment, properties, operations,
employees, officers, directors, managers and managing members (collectively, the
"Insurance Policies") of Company which Company reasonably believes are adequate
in amount and scope for the business in which it is engaged.
3.21 Governmental Actions/Filings. To the knowledge of Company, Company
holds, and has made, all Governmental Actions/Filings reasonably necessary to
the conduct by Company of its business (as presently conducted), except with
respect to any Governmental Actions/Filings the failure of which to hold or make
would not reasonably be likely to have a Material Adverse Effect on Company.
For purposes of this Agreement, the term "Governmental Action/Filing"
shall mean any franchise, license, certificate of compliance, authorization,
consent, order, permit, approval, consent or other action of, or any filing,
registration or qualification with, any federal, state, municipal, foreign or
other governmental, administrative or judicial body, agency or authority.
3.22 Intentionally Omitted.
3.23 Manager Approval. The Manager of Company or similar governing body
has, as of the date of this Agreement, unanimously approved, subject to the
approval of all of the Members, this Agreement and the transactions contemplated
hereby, and resolved to seek the Members' approval and adoption of this
Agreement and approval of the Transaction as provided in Company's Charter
Documents.
3.24 Management. During the past five year period, to Company's
knowledge, no current or former manager, managing member or Member of Company
has been the subject of:
(a) a petition under the Federal bankruptcy laws or any other
insolvency or moratorium law or has a receiver, fiscal agent or similar officer
been appointed by a court for such person, or any partnership in which such
person was a general partner at or within two years before the time of such
filing, or any corporation or business association of which such person was an
executive officer at or within two years before the time of such filing;
(b) a conviction in a criminal proceeding or a named subject
of a pending criminal proceeding (excluding traffic violations that do not
relate to driving while intoxicated or driving under the influence);
(c) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining any such person from, or otherwise limiting, the following
activities:
(i) Acting as a futures commission merchant,
introducing broker, commodity trading advisor, commodity pool operator,
floor broker, leverage transaction merchant, any other person regulated
by the United States Commodity Futures Trading Commission or an
associated person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliated
person, director or employee of any investment company, bank, savings
and loan association or insurance company, or engaging in or continuing
any conduct or practice in connection with such activity;
(ii) Engaging in any type of business practice; or
15
(iii) Engaging in any activity in connection with
the purchase or sale of any security or commodity or in connection with
any violation of Federal, state or other securities laws or commodities
laws;
(d) any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any Federal, state or local authority barring,
suspending or otherwise limiting for more than 60 days the right of any such
person to engage in any activity described in the preceding sub-paragraph, or to
be associated with persons engaged in any such activity;
(e) a finding by a court of competent jurisdiction in a civil
action or by the U.S. Securities and Exchange Commission ("SEC") to have
violated any securities law, regulation or decree and the judgment in such civil
action or finding by the SEC has not been subsequently reversed, suspended or
vacated; or
(f) a finding by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or finding has
not been subsequently reversed, suspended or vacated.
3.25 Representations and Warranties Complete. The representations and
warranties of Company included in this Agreement and any Schedule provided
pursuant to this Agreement, are true and complete in all material respects and
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading, under the circumstance under which they were
made. Any disclosure on one schedule will be deemed notice of and disclosure by
Company in respect of any other representation and warranty of Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MARINE
Marine represents and warrants to, and covenants with, Company, as
follows:
4.1 Organization and Qualification.
(a) Marine is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Nevada and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being or currently planned
by Marine to be conducted. To its knowledge, Marine is in possession of all
Approvals necessary to own, lease and operate the properties it purports to own,
operate or lease and to carry on its business as it is now being or currently
planned by Marine to be conducted, except where the failure to have such
Approvals could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Marine. Complete and correct copies of the
Charter Documents of Marine, as amended and currently in effect, have been
heretofore delivered to Company. Marine is not in violation of any of the
provisions of Marine's Charter Documents.
16
(b) Marine is duly qualified or licensed to do business as a
foreign corporation and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Marine.
4.2 Subsidiaries. As of the date of this Agreement, Marine has no
Subsidiaries and does not own, directly or indirectly, any ownership, equity,
profits or voting interest in any Person and, other than this Agreement, has no
agreement or commitment to purchase any such interest, and Marine has not agreed
and is not obligated to make nor is bound by any written, oral or other
agreement, contract, subcontract, lease, binding understanding, instrument,
note, option, warranty, purchase order, license, sublicense, insurance policy,
benefit plan, commitment or undertaking of any nature, as of the date hereof or
as may hereafter be in effect under which it may become obligated to make, any
future investment in or capital contribution to any other entity.
4.3 Capitalization.
(a) The authorized capital stock of Marine consists of
45,000,000 shares of common stock, par value $0.001 per share ("Marine Common
Stock") and 5,000,000 shares of preferred stock, par value $0.001 per share, of
which 850,000 shares will be designated as Series A Convertible Preferred Stock
pursuant to the Certificate of Designations of Series A Convertible Preferred
Stock attached hereto as Exhibit B ("Marine Preferred Stock"). At the close of
business on the business day prior to the date hereof, (i) 28,122,570 shares of
Marine Common Stock were issued and outstanding, all of which are validly
issued, fully paid and nonassessable; (ii) no shares of Marine Preferred Stock
were issued and outstanding; (iii) no shares of Marine Common Stock were
reserved for issuance upon the exercise of outstanding options to purchase
Company Common Stock granted to certain employees of Company or other parties
("Company Stock Options"); (iv) no shares of Marine Common Stock were reserved
for issuance upon the exercise of outstanding warrants to purchase Marine Common
Stock ("Marine Warrants"); (v) no shares of Marine Preferred Stock were reserved
for issuance to any party (other than the Members in accordance with this
Agreement); and (vi) no shares of Marine Common Stock were reserved for issuance
upon the conversion of Marine Preferred Stock or any outstanding convertible
notes, debentures or securities ("Convertible Securities"). All outstanding
shares of Marine Common Stock have been issued and granted in compliance with
(i) all applicable securities laws and (in all material respects) other
applicable laws and regulations, and (ii) all requirements set forth in any
applicable Contracts. Prior to Closing, there will be an aggregate of 850,000
shares of authorized but unissued shares of Series A Convertible Preferred
Stock, par value $0.001 per share ("Series A Preferred Stock"), which, subject
to the approval of Marine's stockholders to effect the Reverse Split and to
increase the number of authorized capital stock of Marine, which in any case
shall be required to have occurred subsequent to the Closing ("Stockholder
Approval"): (i) shall be convertible into 714,849,162 shares of Common Stock on
a pre-Reverse Split basis, based on a conversion rate of 841 shares of Common
Stock on a pre-Reverse Split basis for each share of Series A Preferred Stock.
Upon the issuance of the shares of the Series A Preferred Stock, and, subject to
the Stockholder Approval, the Conversion Shares issuable upon conversion
thereof, when issued, will be validly issued, fully paid and non-assessable. The
term "Reverse Split" is defined in Section 6.16(a) hereof. Immediately following
the Transaction, the Members will own 95.80% of the total combined voting power
of all classes of Marine stock entitled to vote.
17
(b) There are no equity securities, partnership interests or
similar ownership interests of any class of any equity security of Marine, or
any securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except for this Agreement or as set forth
in Schedule 4.3, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which Marine is a party or by which it is bound obligating Marine to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests of
Marine or obligating Marine to grant, extend, accelerate the vesting of or enter
into any such subscription, option, warrant, equity security, call, right,
commitment or agreement. To Marine's knowledge, there is no plan or arrangement
to issue Marine Common Stock or Marine Preferred Stock except as set forth in
this Agreement. Except as contemplated by this Agreement and except as set forth
in Schedule 4.3 hereto, there are no registration rights, and there is no voting
trust, proxy, rights plan, antitakeover plan or other agreement or understanding
to which Marine is a party or by which it is bound with respect to any equity
security of any class of Marine.
4.4 Authority Relative to this Agreement. Marine has full corporate
power and authority to: (i) execute, deliver and perform this Agreement, and
each ancillary document which Marine has executed or delivered or is to execute
or deliver pursuant to this Agreement, and (ii) carry out Marine's obligations
hereunder and thereunder and, to consummate the transactions contemplated hereby
(including the Transaction). The execution and delivery of this Agreement and
the consummation by Marine of the transactions contemplated hereby (including
the Transaction) have been duly and validly authorized by all necessary
corporate action on the part of Marine (including the approval by its Board of
Directors), and no other corporate proceedings on the part of Marine are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Marine and, assuming the due authorization, execution and delivery
thereof by the other parties hereto, constitutes the legal and binding
obligation of Marine, enforceable against Marine in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity and public policy. Upon the Stockholder Approval,
which in any case shall be required to have occurred subsequent to the Closing,
the Series A Preferred Stock will be convertible into duly authorized, validly
issued, fully paid and nonassessable shares of Marine's Common Stock.
18
4.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Marine and
the execution and delivery of each ancillary document to be delivered by Marine
hereunder do not, and the performance of this Agreement and each such ancillary
document by Marine shall not: (i) conflict with or violate Marine's Charter
Documents, (ii) conflict with or violate any Legal Requirements, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or materially impair Marine's
rights or alter the rights or obligations of any third party under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the properties or
assets of Marine pursuant to, any Contracts, except, with respect to clauses
(ii) or (iii), for any such conflicts, violations, breaches, defaults or other
occurrences that would not, individually or in the aggregate, have a Material
Adverse Effect on Marine.
(b) Except for: (i) the filing of the Certificate of
Designations for the Series A Preferred Stock ("Certificate of Designations")
with the appropriate authorities and pursuant to the laws of the State of
Nevada, and (ii) the requirement to obtain the Stockholder Approval which in any
case shall be required to have occurred subsequent to the Closing, the execution
and delivery of this Agreement by Marine does not, and the performance of its
obligations hereunder will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity, except
(i) for applicable requirements, if any, of the Securities Act, the Exchange
Act, Blue Sky Laws, and the rules and regulations thereunder, and appropriate
documents with the relevant authorities of other jurisdictions in which Marine
is qualified to do business, and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Marine, or prevent consummation of the Transaction or
otherwise prevent the parties hereto from performing their obligations under
this Agreement.
4.6 Compliance. To Marine's knowledge, Marine has complied with, and is
not in violation of, any Legal Requirements with respect to the conduct of its
business, or the ownership or operation of its business, except for failures to
comply or violations which, individually or in the aggregate, have not had and
are not reasonably likely to have a Material Adverse Effect on Marine. To
Marine's knowledge, the businesses and activities of Marine have not been and
are not being conducted in violation of any Legal Requirements. Marine is not in
default or violation of any material term, condition or provision of its Charter
Documents. Except as set forth on Schedule 4.6, to Marine's knowledge, no
written notice of non-compliance with any Legal Requirements has been received
by Marine.
4.7 SEC Filings; Financial Statements.
(a) Marine has made available to Company a correct and
complete copy, or there has been available on XXXXX copies, of each report,
registration statement and definitive proxy statement filed by Marine with the
SEC for the 36 months prior to the date of this Agreement (the "Marine SEC
Reports"), which, to Marine's knowledge, are all the forms, reports and
documents required to be filed by Marine with the SEC for the 36 months prior to
the date of this Agreement. As of their respective dates, to Marine's knowledge,
the Marine SEC Reports: (i) were prepared in accordance and complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Marine SEC Reports, and (ii) did not at the time they were
filed (and if amended or superseded by a filing prior to the date of this
Agreement then on the date of such filing and as so amended or superceded)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent set forth in the preceding sentence, Marine
makes no representation or warranty whatsoever concerning the Marine SEC Reports
as of any time other than the time they were filed.
19
(b) To Marine's knowledge, each set of financial statements
(including, in each case, any related notes thereto) contained in the Marine SEC
Reports for each of the 12 month periods prior to and including December 31,
2002 and December 31, 2003, respectively, comply as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with U.S. GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, do not contain footnotes as
permitted by Form 10-QSB of the Exchange Act) and each fairly presents in all
material respects the financial position of Marine at the respective dates
thereof and the results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal adjustments which were not or are not expected to have a
Material Adverse Effect on Marine taken as a whole. Each set of financial
statements (including, in each case, any related notes thereto) contained in the
Marine SEC Reports for the 12 month period prior to and including December 31,
2004, and in each Marine SEC Report filed after the date hereof until the
Closing, comply, or shall comply, as applicable, as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared, or will be prepared, as applicable, in accordance with
U.S. GAAP applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto or, in the case of unaudited
statements, do not contain footnotes as permitted by Form 10-QSB of the Exchange
Act) and each fairly presents, or will present, as applicable, in all material
respects the financial position of Marine at the respective dates thereof and
the results of its operations and cash flows for the periods indicated, except
that the unaudited interim financial statements were or are subject to normal
adjustments which were not or are not expected to have a Material Adverse Effect
on Marine taken as a whole.
(c) Marine has previously furnished to Company a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Marine with the SEC
pursuant to the Securities Act or the Exchange Act.
4.8 No Undisclosed Liabilities. Except as set forth in Schedule 4.8
hereto, Marine has no liabilities (absolute, accrued, contingent or otherwise)
of a nature required to be disclosed on a balance sheet or in the related notes
to the financial statements prepared in accordance with U.S. GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Marine, except (i) liabilities provided for
in or otherwise disclosed in Marine SEC Reports filed prior to the date hereof,
(ii) liabilities incurred since December 31, 2004 in the ordinary course of
business, none of which would have a Material Adverse Effect on Marine, and
(iii) those liabilities and obligations specifically set forth in Section 6.11.
20
4.9 Absence of Certain Changes or Events. Except as set forth in
Schedule 4.9 hereto or in Marine SEC Reports filed prior to the date of this
Agreement, and except as contemplated by this Agreement, since December 31,
2004, there has not been: (i) any Material Adverse Effect on Marine, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of Marine's capital
stock, or any purchase, redemption or other acquisition by Marine of any of
Marine's capital stock or any other securities of Marine or any options,
warrants, calls or rights to acquire any such shares or other securities, (iii)
except for the designation of the Series A Preferred Stock, any split,
combination or reclassification of any of Marine's capital stock, (iv) any
granting by Marine of any increase in compensation or fringe benefits, except
for normal increases of cash compensation in the ordinary course of business
consistent with past practice, or any payment by Marine of any bonus, except for
bonuses made in the ordinary course of business consistent with past practice,
or any granting by Marine of any increase in severance or termination pay or any
entry by Marine into any currently effective employment, severance, termination
or indemnification agreement or any agreement the benefits of which are
contingent or the terms of which are materially altered upon the occurrence of a
transaction involving Marine of the nature contemplated hereby, (v) entry by
Marine into any licensing or other agreement with regard to the acquisition or
disposition of any Intellectual Property other than licenses in the ordinary
course of business consistent with past practice or any amendment or consent
with respect to any licensing agreement filed or required to be filed by Marine
with respect to any Governmental Entity, (vi) any material change by Marine in
its accounting methods, principles or practices, except as required by
concurrent changes in U.S. GAAP, (vii) any change in the auditors of Marine,
(vii) any issuance of capital stock of Marine, or (viii) any revaluation by
Marine of any of their respective assets, including, without limitation, writing
down the value of, or any sale of, assets of Marine other than in the ordinary
course of business.
4.10 Litigation. Except as set forth on Schedule 4.10 hereto or in
Marine SEC Reports, there are no claims, suits, actions or proceedings pending
or to Marine's knowledge, threatened against Marine, before any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either individually or in the aggregate with all such claims, actions
or proceedings, to have a Material Adverse Effect on Marine or have a Material
Adverse Effect on the ability of the parties hereto to consummate the
Transaction.
4.11 Employee Benefit Plans. Except as disclosed on Schedule 4.11
hereto, Marine does not maintain, and has no liability under, any Plan, and
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any stockholder, director or employee of Marine, or (ii) result
in the acceleration of the time of payment or vesting of any such benefits.
21
4.12 Labor Matters. Marine is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by
Marine, nor does Marine know of any activities or proceedings of any labor union
to organize any such employees.
4.13 Restrictions on Business Activities. To Marine's knowledge, there
is no agreement, commitment, judgment, injunction, order or decree binding upon
Marine or to which Marine is a party which has or could reasonably be expected
to have the effect of prohibiting or materially impairing any business practice
of Marine, any acquisition of property by Marine or the conduct of business by
Marine as currently conducted other than such effects, individually or in the
aggregate, which have not had and could not reasonably be expected to have, a
Material Adverse Effect on Marine.
4.14 Title to Property. Marine does not own or lease any Real Property
or Personal Property. There are no options or other contracts under which Marine
has a right or obligation to acquire or lease any interest in Real Property or
Personal Property.
4.15 Taxes. Except as set forth in Schedule 4.15 hereto, to Marine's
knowledge:
(a) Marine has timely filed all Returns required to be filed
by Marine with any Tax authority prior to the date hereof, except such Returns
which are not material to Marine. All such Returns are true, correct and
complete in all material respects. Marine has paid all Taxes shown to be due on
such Returns.
(b) All Taxes that Marine is required by law to withhold or
collect have been duly withheld or collected, and have been timely paid over to
the proper governmental authorities to the extent due and payable.
(c) Marine has not been delinquent in the payment of any
material Tax nor is there any material Tax deficiency outstanding, proposed or
assessed against Marine, nor has Marine executed any unexpired waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(d) No audit or other examination of any Return of Marine by
any Tax authority is presently in progress, nor has Marine been notified of any
request for such an audit or other examination.
(e) No adjustment relating to any Returns filed by Marine has
been proposed in writing, formally or informally, by any Tax authority to Marine
or any representative thereof.
(f) Marine has no liability for any material unpaid Taxes
which have not been accrued for or reserved on Marine's balance sheets included
in the audited financial statements for the most recent fiscal year ended,
whether asserted or unasserted, contingent or otherwise, other than any
liability for unpaid Taxes that may have accrued since the end of the most
recent fiscal year in connection with the operation of the business of Marine in
the ordinary course of business.
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(g) Marine has not taken any action and does not know of any
fact, agreement, plan or other circumstance that is reasonably likely to prevent
the Transaction from qualifying as a tax-deferred exchange within the meaning of
Section 351 of the Code. Marine is not an investment company within the meaning
of Section 351(e) of the Code.
4.16 Environmental Matters. Except as disclosed in Schedule 4.16 hereto
and except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect, to Marine's knowledge: (i)
Marine has complied with all applicable Environmental Laws; (ii) the properties
currently owned or operated by Marine (including soils, groundwater, surface
water, buildings or other structures) are not contaminated with any Hazardous
Substances; (iii) the properties formerly owned or operated by Marine were not
contaminated with Hazardous Substances during the period of ownership or
operation by Marine; (iv) Marine is not subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) Marine has
not been associated with any release or threat of release of any Hazardous
Substance; (vi) Marine has not received any notice, demand, letter, claim or
request for information alleging that Marine may be in violation of or liable
under any Environmental Law; and (vii) Marine is not subject to any orders,
decrees, injunctions or other arrangements with any Governmental Entity or
subject to any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances.
4.17 Brokers. Except for Marine's obligations under the Financial
Advisory Agreement (as defined in Section 6.11), Marine has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agent's commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
4.18 Intellectual Property. Marine does not own, license or otherwise
have any right, title or interest in any Intellectual Property.
4.19 Agreements, Contracts and Commitments.
(a) Except for the Financial Advisory Agreement, any agreement
with Pacific Stock Transfer Company ("Transfer Agent"), the agreement with Vero
Management, LLC which will be terminated prior to Closing, or as set forth on
Schedule 4.19 or in Marine SEC Reports, to Marine's knowledge, there are no
contracts, agreements, leases, mortgages, indentures, note, bond, liens,
license, arbitration awards, judgments, decrees, orders, documents, instruments,
understandings and commitments, to which Marine is a party or by or to which any
of the properties or assets of Marine may be bound, subject or affected ("Marine
Contracts").
(b) To Marine's knowledge, each Marine Contract was entered
into at arms' length and in the ordinary course, is in full force and effect and
is valid and binding upon and enforceable against each of the parties thereto.
True, correct and complete copies of all Marine Contracts (or written summaries
in the case of oral Marine Contracts) and of all outstanding offers or proposals
of Marine have been heretofore delivered to Company.
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(c) Neither Marine nor, to the knowledge of Marine, any other
party thereto is in breach of or in default under, and no event has occurred
which with notice or lapse of time or both would become a breach of or default
under, any Marine Contract, and no party to any Marine Contract has given any
written notice of any claim of any such breach, default or event, which,
individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect on Marine. Each agreement, contract or commitment to which Marine
is a party or by which it is bound that has not expired by its terms is in full
force and effect, except where such failure to be in full force and effect is
not reasonably likely to have a Material Adverse Effect on Marine.
4.20 Insurance. Marine does not maintain any Insurance Policies.
4.21 Governmental Actions/Filings. To its knowledge, Marine has been
granted and holds, and has made, all Governmental Actions/Filings necessary to
the conduct by Marine of its businesses (as presently conducted) or used or held
for use by Marine, all of which are listed in Schedule 4.21 hereto, and true,
complete and correct copies of which have heretofore been delivered to Company.
Each such Governmental Action/Filing is in full force and effect and, expect as
disclosed in Schedule 4.21 hereto, will not expire prior to December 31, 2005,
and Marine is in compliance with all of its obligations with respect thereto. To
Marine's knowledge, no event has occurred and is continuing which requires or
permits, or after notice or lapse of time or both would require or permit, and
consummation of the transactions contemplated by this Agreement or the ancillary
documents will not require or permit (with or without notice or lapse of time,
or both), any modification or termination of any such Governmental
Actions/Filings. Except as set forth in Schedule 4.21, to Marine's knowledge, no
Governmental Action/Filing is necessary to be obtained, secured or made by
Marine to enable it to continue to conduct its businesses and operations and use
its properties after the Closing in a manner which is consistent with current
practice.
4.22 Interested Party Transactions. Except as set forth in the Schedule
4.22 hereto or in Marine's SEC Reports, no employee, officer, director or
stockholder of Marine or a member of his or her immediate family is indebted to
Marine, nor is Marine indebted (or committed to make loans or extend or
guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of Marine, and (iii) for other employee benefits made generally available to all
employees. Except as set forth in Schedule 4.22, to Marine's knowledge, none of
such individuals has any direct or indirect ownership interest in any Person
with whom Marine is affiliated or with whom Marine has a material contractual
relationship, or any Person that competes with Marine, except that each
employee, stockholder, officer or director of Marine and members of their
respective immediate families may own less than 5% of the outstanding stock in
publicly traded companies that may compete with Marine. Except as set forth in
Schedule 4.22, to Marine's knowledge, no officer, director or stockholder or any
member of their immediate families is, directly or indirectly, interested in any
material contract with Marine (other than such contracts as relate to any such
individual ownership of capital stock or other securities of Marine).
4.23 Indebtedness; Marine Assets. Except as set forth on Schedule 4.23,
Marine has no indebtedness for borrowed money. Immediately prior to the Closing,
Marine will have no assets, except for cash reserves earmarked for the payment
of certain accounts payable and accrued expenses of Marine with respect to the
period prior to Closing which remain unpaid, which Marine shall be responsible
for payment following the Closing pursuant to Section 6.11 hereof ("Cash
Reserve").
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4.24 Over-the-Counter Bulletin Board Quotation. Marine Common Stock is
quoted on the Over-the-Counter Bulletin Board ("OTC BB"). There is no action or
proceeding pending or, to Marine's knowledge, threatened against Marine by
NASDAQ or NASD, Inc. ("NASD") with respect to any intention by such entities to
prohibit or terminate the quotation of Marine Common Stock on the OTC BB.
4.25 Exchange Act Compliance. The Company is in compliance with, and
current in, all of the reporting, filing and other requirements under the
Exchange Act, the shares of the Company's common stock have been duly and
properly registered under Section 12(g) of the Exchange Act, and the Company is
in compliance with all of the requirements under, and imposed by, Section 12(g)
of the Exchange Act, except where a failure to so comply is not reasonably
likely to have a Material Adverse Effect on Marine.
4.26 Board Approval. The Board of Directors of Marine (including any
required committee or subgroup of the Board of Directors of Marine) has, as of
the date of this Agreement, unanimously approved this Agreement and the
transactions contemplated hereby.
4.27 Representations and Warranties Complete. The representations and
warranties of Marine included in this Agreement and any Schedule provided
pursuant to this Agreement or delivered hereunder, are true and complete in all
material respects and do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading, under the circumstance under
which they were made. Any disclosure on one schedule will be deemed notice of
and disclosure by Marine in respect of any other representation and warranty of
Marine.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 Conduct of Business by Company and Marine. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement pursuant to its terms or the Closing, the Company and Marine
shall, except to the extent that the other party shall otherwise consent in
writing, carry on its business in the usual, regular and ordinary course
consistent with past practices, in substantially the same manner as heretofore
conducted and in compliance with all applicable laws and regulations (except
where noncompliance would not have a Material Adverse Effect), pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to (i) preserve
substantially intact its present business organization, (ii) keep available the
services of its present officers, managers and employees, and (iii) preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others with which it has significant business dealings. In addition, except as
permitted or required by the terms of this Agreement or set forth on the
Schedule 5.1 hereto, without the prior written consent of the other party,
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms or the
Closing, each of Company and Marine shall not do any of the following: (a) Waive
any stock repurchase rights, accelerate, amend or (except as specifically
provided for herein) change the period of exercisability of options or
restricted stock, or reprice options granted under any employee, consultant,
director or other stock plans or authorize cash payments in exchange for any
options granted under any of such plans;
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(b) Grant any severance or termination pay to any officer,
manager or employee except pursuant to applicable law, written agreements
outstanding, or policies existing on the date hereof and as previously or
concurrently disclosed in writing or made available to the other party, or adopt
any new severance plan, or amend or modify or alter in any manner any severance
plan, agreement or arrangement existing on the date hereof;
(c) Transfer or license to any person or otherwise extend,
amend or modify any material rights to any Intellectual Property of Company or
Marine, as applicable, or enter into grants to transfer or license to any person
future patent rights, other than in the ordinary course of business consistent
with past practices provided that in no event shall Company or Marine license on
an exclusive basis or sell any Intellectual Property of Company or Marine, as
applicable;
(d) Except for employment agreements in the ordinary course or
otherwise scheduled or set forth in this Agreement, declare, set aside or pay
any dividends on or make any other distributions (whether in cash, stock, equity
securities or property) in respect of any capital stock, membership interests or
ownership interests, or split, combine or reclassify any capital stock,
membership interests or ownership interests, or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for any
capital stock, membership interests or ownership interests;
(e) Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock, membership interests or ownership
interests of Company and Marine, as applicable, except repurchases of unvested
shares, membership interests or ownership interests at cost in connection with
the termination of the employment relationship with any employee pursuant to
stock option or purchase agreements in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise
encumber, or agree to any of the foregoing with respect to, any shares of
capital stock, membership interests or ownership interests or any securities
convertible into or exchangeable for shares of capital stock, membership
interests or ownership interests, or subscriptions, rights, warrants or options
to acquire any shares of capital stock, membership interests or ownership
interests or any securities convertible into or exchangeable for shares of
capital stock, membership interests or ownership interests, or enter into other
agreements or commitments of any character obligating it to issue any such
shares, membership interests, ownership interests or convertible or exchangeable
securities (except relating to employment and similar agreements);
(g) Amend its Charter Documents;
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(h) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the business of Marine or Company, as applicable, or enter into
any joint ventures, strategic partnerships or alliances or other arrangements
that provide for exclusivity of territory or otherwise restrict such party's
ability to compete or to offer or sell any products or services;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets, except sales of inventory in the ordinary course of
business consistent with past practice and, except for the sale, lease or
disposition (other than through licensing) of property or assets which are not
material, individually or in the aggregate, to the business of such party;
(j) Incur any indebtedness for borrowed money in excess of
$100,000 in the aggregate or guarantee any such indebtedness of another person,
issue or sell any debt securities or options, warrants, calls or other rights to
acquire any debt securities of Marine or Company, as applicable, enter into any
"keep well" or other agreement to maintain any financial statement condition or
enter into any arrangement having the economic effect of any of the foregoing
other than purchase agreements relating to preparing for production, marketing
and selling Company product and services;
(k) Adopt or amend any employee benefit plan, policy or
arrangement, any employee stock purchase or employee stock option plan, or enter
into any employment contract or collective bargaining agreement (other than
offer letters and agreements entered into in the ordinary course of business
consistent with past practice), pay any special bonus or special remuneration to
any director or employee, or increase the salaries or wage rates or fringe
benefits (including rights to severance or indemnification) of its directors,
officers, employees or consultants, except in the ordinary course of business
consistent with past practices and other than for new hires in the ordinary
course;
(l) Pay, discharge, settle or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or litigation (whether or not commenced prior to the date of this
Agreement) other than the payment, discharge, settlement or satisfaction, in the
ordinary course of business consistent with past practices or in accordance with
their terms, or liabilities recognized or disclosed in the most recent financial
statements (or the notes thereto) of Company or of Marine, as applicable, or
incurred since the date of such financial statements, or waive the benefits of,
agree to modify in any manner, terminate, release any person from or knowingly
fail to enforce any confidentiality or similar agreement to which Company is a
party or of which Company is a beneficiary or to which Marine is a party or of
which Marine is a beneficiary, as applicable;
(m) Except in the ordinary course of business consistent with
past practices, modify, amend or terminate any Material Contract of Company or
Marine, as applicable, or waive, delay the exercise of, release or assign any
material rights or claims thereunder;
27
(n) Except as required by U.S. GAAP, revalue any of its assets
or make any change in accounting methods, principles or practices;
(o) Incur or enter into any agreement, contract or commitment
requiring such party to pay in excess of $100,000 in any 12 month period, other
than in the ordinary course or otherwise provided in this Agreement and
employment agreements which may be entered into by the Company;
(p) Engage in any action that could reasonably be expected to
cause the Transaction to fail to qualify as a tax-deferred exchange under
Section 351 of the Code;
(q) Settle any litigation;
(r) Make or rescind any Tax elections that, individually or in
the aggregate, could be reasonably likely to adversely affect in any material
respect the Tax liability or Tax attributes of such party, settle or compromise
any material income tax liability or, except as required by applicable law,
materially change any method of accounting for Tax purposes or prepare or file
any Return in a manner inconsistent with past practice;
(s) Form, establish or acquire any Subsidiary;
(t) Permit any Person to exercise any of its discretionary
rights under any Plan to provide for the automatic acceleration of any
outstanding options, the termination of any outstanding repurchase rights or the
termination of any cancellation rights issued pursuant to such plans; or
(u) Agree in writing or otherwise agree, commit or resolve to
take any of the actions described in Section 5.1 (a) through (t) above.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Board of Directors of Marine. At Closing, the current board of
directors of Marine shall deliver duly adopted resolutions to: (a) set the size
of Marine's board of directors to between three (3) and five (5) members
effective as of the Closing, the actual number to be determined by resolution of
Marine's board of directors and to initially equal three (3) members effective
as of the Closing; and (b) elect the following persons to Marine's board of
directors effective as of the Closing: (i) Xxxx Xxxx, who shall be a management
member of Marine's board of directors ("Management Member"); (ii) one member
designated by KRM Fund, which person shall be an independent director, qualified
and available to serve on Marine's audit and compensation committee, and
otherwise acceptable to the Members ("Marine Designated Member"); and (iii) one
person who shall have been selected by Xxxx Xxxx and shall be an independent
director ("Independent Member"); and (c) accepting the resignations of the
current officers and directors of Marine effective as of the Closing
("Resolutions"). At Closing, the current officers and director of Marine shall
deliver their resignations, as appropriate, as officers and directors of Marine
to be effective upon the Closing (the "Resignations"). Prior to Closing, Company
shall deliver or cause to be delivered to Marine completed and signed director
and officer questionnaires ("Questionnaires") in the English language for the
Management Member, Marine Designated Member, Independent Member and each officer
to be appointed by Marine following Closing. The foregoing designations of the
Management Member and Independent Member (and the officers to be appointed by
Marine following Closing) shall be subject to Marine's receipt of the completed
and signed Questionnaires ("D&O Information"). Each Member shall execute and
deliver at Closing the Voting Agreement which shall provide, among other things,
that such Members will vote their Marine's Preferred Shares (or in the event of
conversion, the Conversion Shares) to elect a Marine Designated Member to
Marine's board of directors for a period of one year following the Closing.
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6.2 Undertaking by Company Accountant. On or before the Closing,
Company shall obtain, and deliver to Marine, an undertaking from Xxxxxxxx & Co.
("Accountant"), in a form and substance satisfactory to Marine, providing that:
(i) the Accountant has agreed to an engagement with Marine to serve as its
certified public accountants following the Closing for purposes of auditing and
reviewing the financial statements of Marine and Company to comply with Marine's
ongoing reporting requirements under the Exchange Act including, without
limitation, the filing of Forms 10-Q, 10-K, and 8-K, (ii) the transaction
contemplated hereunder will not disqualify or otherwise prohibit the Accountant
from rendering the foregoing engagement services or from undertaking such
services in a timely manner, (iii) the Accountant is duly registered with the
U.S. Public Company Accounting Oversight Board ("PCAOB"), (iv) the Accountant
shall provide its consent to the use of their audited financial statements and
accompanying reports for Marine and Company, as applicable, in any regulatory
filing by Marine prior to or following the Closing, and (v) consenting to the
use of its name and the disclosure of its engagement by Marine in the Change of
Accountant Form 8-K (as defined in Section 6.3) ("Accountant Undertaking"). A
signed copy of the engagement letter between Marine and Accountant shall be
attached to the Accountant Undertaking.
6.3 Change of Accountants. At Closing, Marine shall prepare the Form
8-K announcing the change in Marine's certifying accountants from Xx Xxxx &
Company ("Marine's Accountant") to the Accountant effective as of the Closing
("Change of Accountant Form 8-K"), in a form acceptable to Company and in a
format acceptable for XXXXX filing. The Change of Accountant Form 8-K shall be
filed with the SEC at or within four (4) business days following Closing, and
prior to the filing thereof, Marine's Accountant shall have issued its
resignation letter to Marine resigning from the engagement and consenting to the
use of its name and the disclosure of its resignation in the Change of
Accountant Form 8-K ("Resignation Letter").
6.4 Other Actions.
(a) At least ten (10) days prior to Closing, Marine shall
prepare the information statement required by Rule 14f-1 promulgated under the
Exchange Act ("14f-1 Information Statement"), and Marine shall file the 14f-1
Information Statement with the SEC and mail the same to each of Marine's
stockholders.
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(b) At least five (5) days prior to Closing, Company shall
prepare the Form 8-K announcing the Closing, which shall include all information
required by such form, as determined by counsel to the Company, the Company U.S.
GAAP Financial Statements and the Company Pro Forma Financial Statements
(defined below) ("Transaction Form 8-K"), which shall be in a form reasonably
acceptable to Marine and in a format acceptable for XXXXX filing. Prior to
Closing, the Company shall prepare the press release announcing the consummation
of the Transaction hereunder ("Press Release"). At the Closing, Marine shall
file the Transaction Form 8-K with the SEC and distribute the Press Release.
(c) At least five (5) days prior to the Closing, Company shall
deliver to Marine audited financial statements for Company for the period from
inception (September 13, 2004) through and including December 31, 2004, on a
consolidated basis, which financials statements shall comply in all material
respects with the published rules and regulations of the SEC, shall be prepared
in accordance with U.S. GAAP applied on a consistent basis throughout the period
involved, and shall fairly present in all material respects the financial
position of Company at the respective date thereof and the results of its
operations and cash flows for the period indicated ("Company U.S. GAAP Financial
Statements").
(d) The Company U.S. GAAP Financial Statements shall have been
audited by the Accountant, except for any interim financial statements which
shall have been reviewed by the Accountant.
(e) At least five (5) days prior to the Closing, Company shall
deliver to Marine pro forma financial statements for the Company and Marine, on
a consolidated basis, giving effect to the Transaction, for such periods as
required by the SEC through and including December 31, 2004, to be included in a
Form 8-K or any other report or form required to be filed with the SEC at or
after Closing with respect to the Transaction, all prepared in all material
respects with the published rules and regulations of the SEC and in accordance
with U.S. GAAP applied on a consistent basis throughout the periods involved
("Company Pro Forma Financial Statements"). The Company Pro Forma Financial
Statements shall have been reviewed by, the Accountant and shall be in a format
acceptable for inclusion on the Transaction 8-K.
Company and Marine shall cooperate with each other and use their
respective commercially reasonable efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on its part under this Agreement and applicable laws to consummate the
Transaction and the other transactions contemplated hereby as soon as
practicable, including preparing and filing as soon as practicable all
documentation to effect all necessary notices, reports and other filings and to
obtain as soon as practicable all consents, registrations, approvals, permits
and authorizations necessary or advisable to be obtained from any third party
and/or any Governmental Entity in order to consummate the Transaction or any of
the other transactions contemplated hereby. Subject to applicable laws relating
to the exchange of information and the preservation of any applicable
attorney-client privilege, work-product doctrine, self-audit privilege or other
similar privilege, each of Company and Marine shall have the right to review and
comment on in advance, and to the extent practicable each will consult the other
on, all the information relating to such party, and any of Company's
Subsidiaries, that appear in any filing made with, or written materials
submitted to, any third party and/or any Governmental Entity in connection with
the Transaction and the other transactions contemplated hereby. In exercising
the foregoing right, each of Company and Marine shall act reasonably and as
promptly as practicable.
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6.5 Required Information. In connection with the preparation of the
Transaction Form 8-K, 14f-1 Information Statement, and Press Release, and for
such other reasonable purposes, Company and Marine each shall, upon request by
the other, furnish the other with all information concerning themselves, their
respective subsidiaries, directors, officers, managers, managing members,
stockholders and Members (including the directors and officers of Marine to be
elected effective as of the Closing pursuant to Section 6.1 hereof) and such
other matters as may be reasonably necessary or advisable in connection with the
Transaction, or any other statement, filing, notice or application made by or on
behalf of Company and Marine or any of their respective subsidiaries to any
third party and/or any Governmental Entity in connection with the Transaction
and the other transactions contemplated hereby. Each party warrants and
represents to the other party that all such information shall be true and
correct in all material respects and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
6.6 Confidentiality; Access to Information.
(a) Any confidentiality agreement or letter of intent
previously executed by the parties shall be superseded in its entirety by the
provisions of this Agreement. Each party agrees to maintain in confidence any
non-public information received from the other party, and to use such non-public
information only for purposes of consummating the transactions contemplated by
this Agreement. Such confidentiality obligations will not apply to (i)
information which was known to the one party or their respective agents prior to
receipt from the other party; (ii) information which is or becomes generally
known; (iii) information acquired by a party or their respective agents from a
third party who was not bound to an obligation of confidentiality; and (iv)
disclosure required by law. In the event this Agreement is terminated as
provided in Article IX hereof, each party will return or cause to be returned to
the other all documents and other material obtained from the other in connection
with the Transaction contemplated hereby.
(b) Access to Information.
(i) Company will afford Marine and its financial
advisors, accountants, counsel and other representatives reasonable access
during normal business hours, upon reasonable notice, to the properties, books,
records and personnel of Company during the period prior to the Closing to
obtain all information concerning the business, including the status of product
development efforts, properties, results of operations and personnel of Company,
as Marine may reasonably request. No information or knowledge obtained by Marine
in any investigation pursuant to this Section 6.6 will affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Transaction.
(ii) Marine will afford Company and its financial
advisors, underwriters, accountants, counsel and other representatives
reasonable access during normal business hours, upon reasonable notice, to the
properties, books, records and personnel of Marine during the period prior to
the Closing to obtain all information concerning the business, including the
status of product development efforts, properties, results of operations and
personnel of Marine, as Company may reasonably request. No information or
knowledge obtained by Company in any investigation pursuant to this Section 6.6
will affect or be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of the parties to consummate the
Transaction.
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6.7 No Solicitation. Other than with respect to the Transaction, each
of Company and Marine agrees that neither it nor any of its officers, directors,
managers, or managing members shall, and that it shall direct and use its
reasonable best efforts to cause its and its agents and other representatives
(including any investment banker, attorney or accountant retained by it) not to,
directly or indirectly, initiate, solicit, encourage or otherwise facilitate any
inquiries or the making of any proposal or offer with respect to (i) a merger,
reorganization, share exchange, consolidation or similar transaction involving
it, (ii) any sale, lease, exchange, mortgage, pledge, transfer or purchase of
all or substantially all of the assets or equity securities of it, taken as a
whole, in a single transaction or series of related transactions or (iii) any
tender offer or exchange offer for 20% or more of the outstanding shares of
Marine Common Stock or Company's Interests (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"). Each of Company and
Marine further agrees that neither it nor of its officers, directors, managers,
or managing members shall, and that it shall direct and use its reasonable best
efforts to cause its agents and representatives not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. Each of the Company and Marine agrees that it will
immediately cease and cause to be terminated any existing discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Each of the Company and Marine agrees that it will take
the necessary steps to promptly inform the individuals or entities referred to
in the first sentence hereof of the obligations undertaken in this Section 6.7.
Notwithstanding anything contained in this Agreement to the contrary,
nothing contained in this Agreement shall prevent the board of directors of
Marine, or their respective representatives from, prior to the Closing (A)
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal, if applicable, or otherwise complying with the Exchange
Act; (B) providing information in response to a request therefore by a person
who has made a bona fide unsolicited Acquisition Proposal; (C) engaging in any
negotiations or discussions with any person who has made a bona fide unsolicited
Acquisition Proposal or otherwise facilitating any effort or attempt to
implement an Acquisition Proposal; or (D) withdrawing or modifying the approval
or recommendation by Marine's board of directors of this Agreement, approving or
recommending any Acquisition Proposal or causing the applicable party to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement relating to any Acquisition Proposal, if, and only to
the extent that in each such case referred to in clause (B), (C) or (D) above,
Marine's board of directors determines in good faith, after consultation with
outside legal counsel that such action is necessary to act in a manner
consistent with the directors' fiduciary duties under applicable law and
determines in good faith after consultation with its financial advisors that the
person or group making such Acquisition Proposal has adequate sources of
financing to consummate such Acquisition Proposal and that such Acquisition
Proposal, if consummated as proposed, is materially more favorable to the
stockholders of Marine from a financial point of view (any such more favorable
Acquisition Proposal being referred to as a "Superior Proposal") and determines
in good faith that such Superior Proposal is reasonably capable of being
consummated, taking into account legal, financial, regulatory and other aspects
of the proposal and the person making the proposal.
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6.8 Public Disclosure. Except to the extent previously disclosed or to
the extent the parties believe that they are required by applicable law or
regulation to make disclosure, prior to Closing, no party shall issue any
statement or communication to the public regarding the Transaction without the
consent of the other party, which consent shall not be unreasonably withheld. To
the extent a party hereto believes it is required by law or regulation to make
disclosure regarding the Transaction, it shall, if possible, immediately notify
the other party prior to such disclosure. Notwithstanding the foregoing, the
parties hereto agree that Marine will prepare and file a Current Report on Form
8-K pursuant to the Exchange Act reasonably acceptable to the Company to report
the execution of this Agreement and that any party hereto may file any reports
as required by the Exchange Act including, without limitation, any reports on
Schedule 13D.
6.9 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Transaction and the other transactions
contemplated by this Agreement, including using commercially reasonable efforts
to accomplish the following: (i) the taking of all reasonable acts necessary to
cause the conditions precedent set forth in Article VII to be satisfied, (ii)
the obtaining of all necessary actions or nonactions, waivers, consents,
approvals, orders and authorizations from Governmental Entities and the making
of all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any) and
the taking of all reasonable steps as may be necessary to avoid any suit, claim,
action, investigation or proceeding by any Governmental Entity, (iii) the
obtaining of all consents, approvals or waivers from third parties required as a
result of the transactions contemplated in this Agreement, (iv) the defending of
any suits, claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (v) the execution or delivery of any additional
instruments reasonably necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. In connection with and
without limiting the foregoing, Marine and its board of directors and Company
and its Manager or Members shall, if any state takeover statute or similar
statute or regulation is or becomes applicable to the Transaction, this
Agreement or any of the transactions contemplated by this Agreement, use its
commercially reasonable efforts to enable the Transaction and the other
transactions contemplated by this Agreement to be consummated as promptly as
practicable on the terms contemplated by this Agreement. Notwithstanding
anything herein to the contrary, nothing in this Agreement shall be deemed to
require Marine or Company to agree to any divestiture by itself or any of its
affiliates of shares of capital stock, membership interests or ownership
interest or of any business, assets or property, or the imposition of any
material limitation on the ability of any of them to conduct their business or
to own or exercise control of such assets, properties and stock.
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(b) Company and Members shall give prompt notice to Marine
upon becoming aware that any representation or warranty made by them contained
in this Agreement has become untrue or inaccurate, or of any failure of Company
or Members to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by them under this
Agreement, in each case, such that the conditions set forth in Article VII would
not be satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(c) Marine shall give prompt notice to Company and Members
upon becoming aware that any representation or warranty made by it contained in
this Agreement has become untrue or inaccurate, or of any failure of Marine to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in each
case, such that the conditions set forth in Article VII would not be satisfied;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
6.10 Treatment as a Tax-Deferred Exchange. Neither Marine nor Company
nor Members shall take any action prior to or following the Transaction that
could reasonably be expected to cause the Transaction to fail to qualify as a
tax-deferred exchange within the meaning of Section 351 of the Code. The Company
and the Members agree to report the Transaction as a tax-deferred exchange
within the meaning of section 351 of the Code for Federal income tax purposes.
6.11 Absence of Material Liabilities. Immediately prior to Closing,
Marine shall have no liabilities or obligations requiring the payment of monies,
other than obligations under or with respect to: (i) a certain Financial
Advisory Agreement, in the form attached hereto as Exhibit C ("Financial
Advisory Agreement"), (ii) any agreement with the Transfer Agent, (iii) Marine
Contracts disclosed under Section 4.19 hereto, and (iv) accounts payable and
accrued expenses of Marine with respect to the period prior to Closing. Marine
will establish the Cash Reserve provided for in Section 4.23 in an amount equal
to the monetary obligations of Marine prior to Closing due to the Transfer
Agent, pursuant to Marine Contracts disclosed under Section 4.19 (other than the
Financial Advisory Agreement) and in respect of all unpaid accounts payable and
accrued expenses of Marine as of Closing (collectively, the "Pre-Closing Cash
Obligations"). Upon Closing, to the extent not satisfied by Marine prior to or
at Closing, the Pre-Closing Cash Obligations will be paid in full from the Cash
Reserve. Following the Closing, Company shall pay and satisfy Marine's
obligations under the agreement with the Transfer Agent, and the remaining
Marine Contracts shall be terminated.
6.12 Cash Payments at Closing for Financial Advisory Agreement. At
Closing, Company shall pay the reverse merger fees under the Financial Advisory
Agreement less the amount of the Deposit made under Section 1.9 (such sum being
referred to herein, as the "Company Closing Payment"). At Closing, the Deposit
made under Section 1.9 shall be paid to Xxxxxxx Securities, LLC ("Xxxxxxx
Securities") by Marine in partial payment of the reverse merger fees under the
Financial Advisory Agreement ("Marine Closing Payment").
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6.13 Business Records. At Closing, Marine shall cause to be delivered
to Company all records and documents relating to Marine, which Marine possesses,
including, without limitation, books, records, government filings, Returns,
Charter Documents, Corporate Records, Stock Records, consent decrees, orders,
and correspondence, director and stockholder minutes and resolutions, stock
ownership records, financial information and records, electronic files
containing any financial information and records, and other documents used in or
associated with Marine ("Business Records").
6.14 Registration Statements; Registration Rights. In addition to any
registration rights agreements currently in existence between Marine and any
current stockholder of Marine as set forth in Schedule 4.3 granting piggyback
registration rights with respect the securities held by them, Marine and Company
hereby agree that, effective as of the Closing, all shares of Marine's Common
Stock currently owned by KRM Fund shall be granted piggyback registration
rights. KRM Fund shall be a third-party beneficiary of the provisions of this
Section and may enforce the same as if it was a party to this Agreement.
6.15 Consolidated Stockholders' Equity. In the event that Marine's
stockholders' equity on a consolidated basis (including the accounts of Marine
and Company) as reported in Marine's first periodic report filed with the SEC
following the Closing, and after, and not including, its Quarterly Report on
Form 10-Q for the quarter ended March 31, 2005 (the "Consolidated Equity"), is
less than $5,000,000, the Members shall contribute, within fifteen (15) days
following the filing of such periodic report, equity capital to Marine in an
amount equal to the difference between $5,000,000 and the actual Consolidated
Equity reported in such periodic report ("Required Contribution"). In the case
of such Required Contribution, Marine and each of the Members agree that no
additional shares of Marine Common Stock or Marine Preferred Stock shall be
issued to the contributing Members in consideration of such Required
Contribution. The parties hereto acknowledge and agree that KRM Fund is a third
party beneficiary to the provisions set forth in this Section 6.15 and KRM Fund
has the right to enforce such provisions as if it were a signatory to this
Agreement.
6.16 Information Statement. As soon as practicable after the date of
this Agreement, and in no event later than five (5) business days prior to the
Closing, Marine shall prepare and deliver to Company, an information statement
pursuant to Rule 14(c) promulgated under Section 14A of the Exchange Act
(together with any amendments or supplements thereto, the "Information
Statement") in connection with the approval and adoption of the following
matters (the "Stockholder Matters"):
(a) To approve a 1 for 29 reverse stock split with special treatment
for certain of Marine's stockholders to preserve round lot stockholders
("Reverse Split");
(b) To approve the change of the name of Marine to a name selected by
the Members;
(c) To approve an increase in the number of authorized common stock of
Marine from 45,000,000 to 75,000,000;
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(d) To approve the adoption of a stock incentive plan ("Stock Plan");
and
(e) All such other actions as shall be necessary or desirable in
connection with or related to the foregoing actions in (a) through (d) above.
The Information Statement shall comply as to form and substance in all material
respects with the provisions of the Exchange Act and the rules and regulations
promulgated thereunder. Company shall provide such information as may be
necessary or required, in the reasonable determination of counsel to the Company
and to Marine, for Marine to prepare and deliver the Information Statement to
Company (including, without limitation, all information, proposals and
documentation related to the Stock Plan).
As soon as practicable following the Closing, Marine shall obtain the
written consent of each Member and KRM Fund approving the Stockholder Matters,
such consent to be effective twenty (20) days following the filing of the
definitive Information Statement with the SEC. Upon receipt of such written
consent, Marine will file the Information Statement with the SEC and shall cause
such Information Statement to become definitive and to be mailed to the holders
of Marine's securities entitled to vote at a meeting of stockholders.
In the event the Information Statement is reviewed by the SEC, Marine
shall respond promptly to any comments of the SEC or its staff with respect to
the Information Statement and use its reasonable best efforts to have the
Information Statement cleared by the SEC as soon as practicable after its
filing, provided, however, in the event that the substance of any review by the
SEC involves or inquires with respect to information, filings, reports,
financial statements or other circumstances of Marine occurring, reported or
filed prior to the Closing (the "Pre-Closing Period"), KRM Fund shall, upon
request of Company or Marine, and at its sole cost and expense, use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the Company and Marine in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Information
Statement, including, without limitation, providing such information, addressing
such comments, and otherwise resolving such matters as may relate to the
Pre-Closing Period and any SEC comments relating thereto or any SEC inquiry
thereof.
ARTICLE VII
CONDITIONS TO THE TRANSACTION
7.1 Conditions to Obligations of Each Party to Effect the Transaction.
The respective obligations of each party to this Agreement to effect the
Transaction shall be subject to the satisfaction at or prior to the Closing Date
of the following conditions:
(a) No Order. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Transaction illegal or otherwise prohibiting consummation of the
Transaction, substantially on the terms contemplated by this Agreement. All
waiting periods, if any, under any law in any jurisdiction in which the Company
or Marine has material operations relating to the transactions contemplated
hereby has expired or terminated early and all material approvals required to be
obtained prior to the Transaction in connection with the transactions
contemplated hereby shall have been obtained. The parties expressly acknowledge
and agree that any SEC rulemaking requiring enhanced disclosure of reverse
merger transactions with a public shell will not be a reason for either party to
terminate this Agreement or deemed a failure of any condition set forth herein.
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(b) Debt Holder Consents. The lenders under any Company credit
facilities, secured loans, mortgages and other indebtedness for borrowed money
shall have consented in writing to the Transaction (if such consent is required
in connection with this Transaction).
(c) Required Approvals. This Agreement and the Transaction
have been duly approved and adopted, by the requisite vote of the Members under
the laws of the State of California and the Company Charter Documents, and by
the requisite actions of the Board of Directors of Marine under the laws of the
State of Nevada and Marine Charter Documents.
(d) Certificate of Designations. Prior to Closing, the Board
of Directors of Marine shall have adopted, and Marine shall have filed with, and
had accepted by, the Secretary of State of the State of Nevada, the Certificate
of Designations attached hereto as Exhibit B.
(e) 14f-1 Information Statement. At least ten (10) days prior
to Closing, Marine shall have filed the 14f-1 Information Statement with the
SEC, and Marine shall have mailed the 14f-1 Information Statement to each of the
stockholders of Marine, and Marine shall have otherwise complied with all of the
provisions under Rule 14f-1 under the Exchange Act.
(f) Agreement of All Members. All Members owning any
membership interests or ownership interests in the Company prior to or at
Closing shall have executed this Agreement evidencing his agreement to exchange
the membership or ownership interests of Company into Marine's Preferred Shares
on the same terms and conditions as each other Member. To the extent applicable,
Company shall have obtained modification agreements to all options, warrants,
and other agreements eliminating any and all rights to acquire securities of the
Company and terminating all pre-emptive rights.
(g) Financial Statements; Transaction Form 8-K. Company shall
have delivered to Marine the Company U.S. GAAP Financial Statements and the
Company Pro Forma Financial Statements as required by Sections 6.4(c) and 6.4(e)
and the Transaction Form 8-K as required by Section 6.4(b). Marine shall have
filed the Transaction Form 8-K with the SEC at Closing.
(h) Vero Termination Agreement. Marine shall have terminated
its agreement with Vero Management, LLC, effective at Closing.
(i) Voting Agreement. KRM Fund and each Member shall have
executed and delivered the Voting Agreement by and between the Members and KRM
Fund, in the form attached hereto as Exhibit A.
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(j) Blue Sky Laws. Marine's Preferred Stock to be issued under
this Agreement are exempt from, or have been qualified under, the Blue Sky Laws
of each appropriate jurisdiction to the satisfaction of Marine and Company and
their respective counsels.
7.2 Additional Conditions to Obligations of Members and Company. The
obligations of Company and Members to consummate and effect the Transaction
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, exclusively
and only by the Company:
(a) Representations and Warranties. Each representation and
warranty of Marine contained in this Agreement (i) shall have been true and
correct as of the date of this Agreement and (ii) shall be true and correct on
and as of the Closing Date with the same force and effect as if made on the
Closing Date. Company and Members shall have received a certificate with respect
to the foregoing signed on behalf of Marine by an authorized officer of Marine
("Marine Closing Certificate").
(b) Agreements and Covenants. Marine shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) Director and Officer Resignations and Appointments. Marine
shall have delivered to Company the Resignations and Resolutions in a form
satisfactory to Company, effective as of the Closing. Marine shall also have
delivered to Company evidence satisfactory to Company of the appointment of new
directors of Marine in accordance with Section 6.1 hereof.
(d) Consents. Marine shall have obtained all consents, waivers
and approvals required in connection with the consummation of the transactions
contemplated hereby, other than consents, waivers and approvals the absence of
which, either alone or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on Marine taken as a whole.
(e) Material Adverse Effect. No Material Adverse Effect with
respect to Marine shall have occurred since the date of this Agreement.
(f) No Financial Obligations. Immediately prior to the
Closing, Marine shall have no liabilities or obligations, other than as set
forth in Section 6.11 hereof.
(g) SEC Compliance; OTC BB Quotation. Immediately prior to
Closing, Marine shall be in compliance with the reporting requirements under the
Exchange Act and shall be quoted on the OTC BB.
(h) Business Records; Resignation Letter. Marine shall have
delivered to Company the Business Records and the Resignation Letter from
Marine's Accountants.
(i) Legal Opinion. Marine's counsel shall have delivered a
legal opinion that the transactions contemplated under this Agreement have been
duly authorized and approved by all necessary corporate action.
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(j) Tax Opinion. Prior to the Closing, Company shall have
received a written opinion from its tax counsel, in form and substance
reasonably satisfactory to Company, to the effect that the Transaction will
constitute a tax-deferred exchange within the meaning of Section 351 of the Code
and such opinions shall not have been withdrawn prior to the implementation of
the Transaction. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
(k) Information Statement. Company shall have received a draft
of the Information Statement from Marine in accordance with Section 6.16 hereof.
(l) Other Deliveries. At Closing, Marine shall have delivered
to Company and/or Members: (i) certificates representing Marine's Preferred
Shares to Members as set forth in Schedule 1.1 hereof and in accordance with
Section 1.6, (ii) copies of resolutions and actions taken by Marine's board of
directors in connection with the approval of this Agreement and the transactions
contemplated hereunder, and (iii) such other documents or certificates as shall
reasonably be required by Company and its counsel in order to consummate the
transactions contemplated hereunder.
7.3 Additional Conditions to the Obligations of Marine. The obligations
of Marine to consummate and effect the Transaction shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Marine:
(a) Representations and Warranties. Each representation and
warranty of Company and Members contained in this Agreement (i) shall have been
true and correct as of the date of this Agreement and (ii) shall be true and
correct on and as of the Closing Date with the same force and effect as if made
on and as of the Closing. Marine shall have received a certificate with respect
to the foregoing signed on behalf of Company by an authorized officer of Company
and by each Member with respect to the foregoing ("Closing Certificate")
(b) Agreements and Covenants. Company and Members shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them at or prior
to the Closing Date.
(c) Consents. Company shall have obtained all consents,
waivers and approvals required in connection with the consummation of the
transactions contemplated hereby, other than consents, waivers and approvals the
absence of which, either alone or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on Company.
(d) Material Adverse Effect. No Material Adverse Effect with
respect to Company shall have occurred since the date of this Agreement.
(e) Accountant Undertaking. Company shall have delivered to
Marine in a timely manner the Accountant Undertaking, in a form satisfactory to
Marine.
39
(f) Closing Payments. Company shall have made the Company
Closing Payment required by Section 6.12, and Marine shall have made the Marine
Closing Payment required by Section 6.12 hereof.
(g) D&O Information. Company shall have delivered the
Questionnaires in a timely manner, and the D&O Information shall be acceptable
to Marine.
(h) Change of Accountant Form 8-K; Press Release. Company
shall have delivered the Change of Accountant Form 8-K and Press Release to
Marine, each in a form acceptable to Marine.
(i) Financial Advisory Agreement. The Financial Advisory
Agreement between Marine and Xxxxxxx Securities, LLC, in the form of Exhibit C
hereto, has been duly executed by the parties and authorized and approved by
Marine's board of directors.
(l) Legal Opinion. Company's counsel shall have delivered a
legal opinion that the transactions contemplated under this Agreement have been
duly authorized and approved by all necessary action.
(l) Other Deliveries. At Closing, Company and/or Members shall
have delivered to Marine: (i) documents evidencing the exchange of Interests
owned by Members, in accordance with Section 1.5, (ii) copies of resolutions and
actions taken Company's board of managers or comparable governing body in
connection with the approval of this Agreement and the transactions contemplated
hereunder, and (iii) such other documents or certificates as shall reasonably be
required by Marine and its counsel in order to consummate the transactions
contemplated hereunder.
ARTICLE VIII
SURVIVAL
Except as specifically set forth in Sections 6.16 and 10.1, all
representations, warranties, agreements and covenants contained in or made
pursuant to this Agreement by any party hereto or contained in any Schedule
hereto shall not survive the Closing, and no claims made by virtue of such
representations, warranties, agreements and covenants shall be made or commenced
by any party hereto from and after the Closing.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written agreement of Marine and Company;
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(b) by either Marine or Company if the Transaction shall not
have been consummated by May 31, 2005 for any reason; provided, however, that
the right to terminate this Agreement under this Section 9.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Transaction to occur on or before such date
and such action or failure to act constitutes a breach of this Agreement;
(c) by either Marine or Company if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Transaction, which order, decree, ruling or other action is final and
nonappealable;
(d) by Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of Marine set forth in this
Agreement, or if any representation or warranty of Marine shall have become
materially untrue, in either case such that the conditions set forth in Section
7.1 or Section 7.2 would not be satisfied as of the time of such breach or as of
the time such representation or warranty shall have become untrue, provided,
that if such inaccuracy in Marine's representations and warranties or breach by
Marine is curable by Marine prior to the Closing Date, then the Company may not
terminate this Agreement under this Section 9.1(d) for thirty (30) days after
delivery of written notice from Company to Marine of such breach, provided
Marine continues to exercise commercially reasonable efforts to cure such breach
(it being understood that Company may not terminate this Agreement pursuant to
this Section 9.1(d) if it shall have materially breached this Agreement or if
such breach by Marine is cured during such thirty (30)-day period); or
(e) by Marine, upon a material breach of any representation,
warranty, covenant or agreement on the part of Company or Members set forth in
this Agreement, or if any representation or warranty of Company or Members shall
have become materially untrue, in either case such that the conditions set forth
in Section 7.1 or Section 7.3 would not be satisfied as of the time of such
breach or as of the time such representation or warranty shall have become
untrue, provided, that if such inaccuracy in Company's or Members'
representations and warranties or breach by Company or Members is curable by
Company or Members prior to the Closing Date, then Marine may not terminate this
Agreement under this Section 9.1(e) for thirty (30) days after delivery of
written notice from Marine to Company and Members of such breach, provided
Company and Members continues to exercise commercially reasonable efforts to
cure such breach (it being understood that Marine may not terminate this
Agreement pursuant to this Section 9.1(e) if it shall have materially breached
this Agreement or if such breach by Company or Members is cured during such
thirty (30)-day period).
9.2 Notice of Termination; Effect of Termination. Any termination of
this Agreement under Section 9.1 above will be effective immediately upon (or,
if the termination is pursuant to Section 9.1(d) or Section 9.1(e) and the
proviso therein is applicable, thirty (30) days after) the delivery of written
notice of the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 9.1, this Agreement shall
be of no further force or effect and the Transaction shall be abandoned, except
(i) as set forth in this Section 9.2, Section 9.3 and Article XI (General
Provisions), each of which shall survive the termination of this Agreement, (ii)
if this Agreement is terminated by Marine under Section 9.1(b), (c) or (e), a
portion of the Deposit made pursuant to Section 1.9, equal to Marine's expenses
actually and reasonably incurred up to a maximum of $10,000, shall be retained
by Marine as liquidated damages and as its sole source of damages for any breach
or termination hereof, and (iii) if this Agreement is terminated by Company
under Section 9.1(b), (c) or (d), a portion of the Deposit made pursuant to
Section 1.9, equal to Marine's expenses actually and reasonably incurred up to a
maximum of $10,000, shall be returned by Marine to Company. The Deposit, or the
remaining portion thereof ($40,000), shall be delivered by Marine to Company no
later than ten (10) days following a party's receipt of notice of termination
hereunder.
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9.3 Fees and Expenses. Except as provided in Sections 6.11 and
6.12, and Section 9.2 in respect of the Deposit, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses whether or not the Transaction is
consummated. The parties further agree that, whether or not the Transaction is
consummated, the Company shall be responsible for any and all costs and expenses
incurred in connection with the preparation and filing of the Transaction Form
8-K (including the Company Financial Statements and Proforma Financial
Statements contained therein).
9.4 Amendment. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of each of
Marine, Company and each Member.
9.5 Extension; Waiver. At any time prior to the Closing, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE X
POST-CLOSING COVENANTS
10.1 Company acknowledges that the agreements contained in this Section
10.1 are an integral part of the transactions contemplated by this Agreement and
that, without these agreements, Marine would not enter into this Agreement. The
parties hereto acknowledge and agree that the failure by Marine or Company to
satisfy, perform and comply with the covenants set forth in this Section 10.1
("Post-Closing Covenants") following the Closing will have a material adverse
effect on Marine and the investment of KRM Fund in Marine. During the period
beginning upon the Closing and ending on the first anniversary of the Closing,
Marine agrees to utilize its commercially reasonable efforts to, and Company
agrees to utilize its commercially reasonable efforts to cause Marine to, remain
a Section 12(g) reporting company in compliance with and current in its
reporting requirements under the Exchange Act, and to remain quoted on, at a
minimum, the OTC BB.
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10.2 Other Provisions. Notwithstanding anything contained herein to the
contrary, the provisions of this Article X shall survive (and not be affected in
any respect by) the Closing.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Marine, to:
Marine Jet Technology Corp.
000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 00
Xxxx Xxxxx, XX XXX 00000
Attn: Xxxxx X. Xxxxxxx, President
(000) 000-0000 telephone
(000) 000-0000 telecopy
(b) if to Company or Members, to:
Antik Denim, LLC
0000 X. Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxx, Manager
000-000-0000 telephone
000-000-0000 telecopy
with a copy to:
Xxxxxx Xxxxxxxx & Markiles, LLP
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx, Esq.
(000) 000-0000 telephone
(000) 000-0000 telecopy
43
11.2 Interpretation.
(a) When a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement. Unless otherwise indicated
the words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to "the business of" an entity, such
reference shall be deemed to include the business of all direct and indirect
subsidiaries of such entity. References to the Company shall be deemed to
include the Company and all of its direct or indirect subsidiaries.
(b) For purposes of this Agreement, the term "Material Adverse
Effect" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or effect, individually or when aggregated
with other changes, events, violations, inaccuracies, circumstances or effects,
that is materially adverse to the business, assets (including intangible
assets), revenues, financial condition or results of operations of such entity
and its Subsidiaries, if any, taken as a whole (it being understood that neither
of the following alone or in combination shall be deemed, in and of itself, to
constitute a Material Adverse Effect: (a) changes attributable to the public
announcement or pendency of the transactions contemplated hereby, (b) changes in
general national or regional economic conditions, (c) changes affecting the
industry generally in which Company or Marine operates, or (d) any SEC
rulemaking requiring enhanced disclosure of reverse merger transactions with a
public shell.
(c) For purposes of this Agreement, the term "Person" shall
mean any individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
(b) For purposes of this Agreement, all monetary amounts set forth herein are
referenced in United States dollars, unless otherwise noted.
11.3 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 counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
11.4 Entire Agreement; Third Party Beneficiaries. This Agreement and
the documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Schedules hereto (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
it being understood that the Letter of Intent between Marine and Company shall
terminate upon the execution of this Agreement; and (b) are not intended to
confer upon any other person any rights or remedies hereunder (except as
specifically provided in this Agreement). KRM Fund is a third-party beneficiary
of the certain provisions contained herein to which KRM Fund derives a benefit
and, with respect to such provisions, KRM Fund has the right to enforce them as
if it were a signatory to this Agreement.
44
11.5 Severability. In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
11.6 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
11.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada, USA, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
11.8 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
11.9 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties. Subject to the first sentence of this Section
11.9, this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
45
11.10 Arbitration. Any disputes or claims arising under or in
connection with this Agreement or the transactions contemplated hereunder shall
be resolved by binding arbitration. Notice of a demand to arbitrate a dispute by
either party shall be given in writing to the other at their last known address.
Arbitration shall be commenced by the filing by a party of an arbitration demand
with the American Arbitration Association ("AAA") in its office in Los Angeles,
California USA. The arbitration and resolution of the dispute shall be resolved
by a single arbitrator appointed by the AAA pursuant to AAA rules. The
arbitration shall in all respects be governed and conducted by applicable AAA
rules, and any award and/or decision shall be conclusive and binding on the
parties. The arbitration shall be conducted in Los Angeles, California USA. The
arbitrator shall supply a written opinion supporting any award, and judgment may
be entered on the award in any court of competent jurisdiction. Each party shall
pay its own fees and expenses for the arbitration, except that any costs and
charges imposed by the AAA and any fees of the arbitrator for his services shall
be assessed against the losing party by the arbitrator. In the event that
preliminary or permanent injunctive relief is necessary or desirable in order to
prevent a party from acting contrary to this Agreement or to prevent irreparable
harm prior to a confirmation of an arbitration award, then either party is
authorized and entitled to commence a lawsuit solely to obtain equitable relief
against the other pending the completion of the arbitration in a court having
jurisdiction over the parties. All rights and remedies of the parties shall be
cumulative and in addition to any other rights and remedies obtainable from
arbitration.
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46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
MARINE JET TECHNOLOGY CORP.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Xxxxx X. Xxxxxxx, President
ANTIK DENIM, LLC
By: /s/ Xxxx Xxxx
---------------------------
Xxxx Xxxx, Manager
MEMBERS:
/s/ Xxxx Xxxx
---------------------------
Xxxx Xxxx, Individually
/s/ Meyer Abbou
---------------------------
Meyer Abbou, Individually
/s/ Xxxxxxxx Xxxxxx
---------------------------
Xxxxxxxx Xxxxxx, Individually
/s/ Alex Caugant
---------------------------
Alex Caugant, Individually
ACKNOWLEDGED AND AGREED
WITH RESPECT TO OBLIGATIONS
UNDER SECTION 6.16 HEREOF:
Xxxxxxx Reverse Merger Fund, LLC,
a Delaware limited liability company
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------
Xxxxxxx X. Xxxxxxx, Manager
47
Index of Exhibits and Schedules
Exhibits
--------
Exhibit A - Voting Agreement
Exhibit B - Certificate of Designations of Series A Preferred Stock
Exhibit C - Financial Advisory Agreement
Schedules
---------
Schedule 1.1 - Company Members and Interests Ownership
Company Disclosure Schedules
Marine Disclosure Schedules
48
