EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER made this 22nd day of November, 2005 by and among
Biostem, Inc., a Nevada corporation ("Pubco"), Biostem Acquisition Company,
Inc., a Delaware corporation ("Acquisition Company") and CRYOBANKS
INTERNATIONAL, INC., a Delaware corporation (the "Company").
Recitals:
A. The respective Boards of Directors of Pubco, Pubco's wholly owned
subsidiary, Acquisition Company and the Company have determined that a merger of
the Company with and into Acquisition Company (the "Merger"), upon the terms and
subject to the conditions set forth in this Agreement, would be fair and in the
best interests of their respective shareholders, and such Boards of Directors
have approved such Merger, pursuant to which shares of Common Stock, Series A
and Preferred Stock, Series B Preferred Stock and warrants of the Company
(collectively "Company Stock") issued and outstanding immediately prior to the
Effective Time of the Merger (as defined in Section 1.03) will be converted into
the right to receive Common Stock, warrants and Preferred Stock of Pubco ("Pubco
Stock") other than Dissenting Shares (as defined in Section 2.01(d)).
B. Pubco, and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
C. For federal income tax purposes, the parties intend that the Merger shall
qualify as a reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the representations, warranties, covenants
and agreements contained in this Agreement, the parties agree as follows:
ARTICLE I
The Merger
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1.01 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law and
the Nevada General Corporation Law (the "Merger Statutes"), the Company shall be
merged with and into Acquisition Company at the Effective Time of the Merger.
At the Effective Time of the Merger, the separate existence of the Company shall
cease, and Acquisition Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall continue under the name Cryobanks
International, Inc.
1.02 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.01 and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the closing of the Merger (the "Closing") will take place at 10:00
a.m. on the business day after satisfaction of the conditions set forth in
Article VI (or as soon as practicable thereafter following satisfaction or
waiver of the conditions set forth in Article VI) (the "Closing Date"), at the
offices of Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx, LLP 00000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, unless another date,
time or place is agreed to in writing by the parties hereto.
1.03 Effective Time of Merger. As soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VI, the parties
shall file articles of merger (the "Articles of Merger") executed in accordance
with the relevant provisions of the Merger Statutes and Pubco and shall make all
other filings or recordings required under the Merger Statutes. The Merger
shall become effective at such time as the Articles of Merger are duly filed
with the Secretaries of State of Delaware, and Nevada , respectively, or at such
other time as is permissible in accordance with the Merger Statutes and as Pubco
and the Company shall agree should be specified in the Articles of Merger (the
time the Merger becomes effective being the "Effective Time of the Merger").
Pubco shall use reasonable efforts to have the Closing Date and the Effective
Time of the Merger to be the same day.
1.04 Effects of the Merger. The Merger shall have the effects set forth in
the applicable provisions of the Merger Statutes.
1.05 Articles of Incorporation; Bylaws; Purposes.
(a) The Articles of Incorporation of the Surviving Corporation in
effect immediately prior to the Effective Time of the Merger shall be the
Articles of Incorporation of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law. The Articles of
Incorporation of Pubco shall be set forth in Exhibit A-1 hereto.
(b) The Bylaws of the Surviving Corporation in effect at the Effective
Time of the Merger shall be the Bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
(c) The purposes of the Surviving Corporation and the total number of
its authorized capital stock shall be as set forth in the Articles of
Incorporation of the Surviving Corporation in effect immediately prior to the
Effective Time of the Merger until such time as such purposes and such number
may be amended as provided in the Articles of Incorporation of the Surviving
Corporation and by applicable law.
1.06 Directors. The directors of the Company at the Effective Time of the
Merger shall be the director of Pubco and of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
1.07 Officers. The officers of the Company at the Effective Time of the
Merger shall be the officers of Pubco and of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE II
Effect of the Merger
on the Capital Stock
of the Constituent Corporations
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2.01 Effect on Capital Stock. As of the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the holders of shares
of Company Stock:
(a) Reduction in Common Stock and Securities of Pubco . The aggregate
shares of common stock of Pubco issued and outstanding immediately prior to the
Effective Time of the Merger shall be no more than 15,650,000 shares of Common
Stock of Pubco. As of immediately prior to the Effective Time there shall be no
more than warrants to purchase an aggregate of 2,000,000 shares of Common Stock
of Pubco outstanding, at an exercise price of $1.00 per share and no other
securities of any kind outstanding.
(b) Conversion of Company Stock. Except as otherwise provided herein,
all the issued and outstanding shares of Company Common Stock and warrants of
the Company, exclusive of the Series A Preferred Stock and Series B Preferred
Stock shall be converted into shares of Pubco Common Stock at the exchange ratio
set forth below and each of the 7,000,000 shares (or lesser amount as may then
be outstanding after giving effect to the redemption referred to below) of
Series A Preferred Stock shall be converted into a like amount of Series A
Preferred Stock of Pubco at an exercise ratio of 1:1 having substantially
similar rights, preferences and of characteristics as the Company's Series A
Preferred Stock; each of the Company's shares of Series B Preferred Stock shall
be converted into one share of Common Stock of Pubco at an exchange rate of 1:1
and, each of the warrants issued in the Private Placement (described below) to
purchase shares of Common Stock of the Company shall be converted at an exchange
ratio of 1:1 into a like warrant to purchase one share of Common Stock of Pubco
at $1.10 per share. The exchange ratio ("Exchange Ratio") by which a share of
Common Stock of the Company or a warrant of the Company (exclusive of the Series
A Preferred Stock and Series B Preferred Stock and securities and warrants
issued in the Private Placement) shall at the Effective Time be converted into a
share of Pubco Common Stock shall be 0.852578, meaning that for each share of
Company Common Stock the holder shall be entitled to 0.852578 shares of Pubco
Common Stock at the Effective Time and for each warrant (exclusive of the
warrants issued in the Private Placement) for one share of Common Stock of the
Company, the holder shall be entitled to a like warrant to purchase 0.852578
Pubco shares of Common Stock. The shares of Common Stock, the shares of Pubco
Series A Preferred Stock and the Pubco warrants described above to be issued in
exchange for the Company's Common Stock, existing warrants, the Series A
Preferred Stock and the Series B Preferred Stock and warrants to be issued in
the Private Placement, is sometime referred to collectively as the "Merger
Consideration." In the event of a change in the capitalization of the Company,
prior to the Effective Date, the applicable Exchange Ratio shall be adjusted by
dividing 120,000,000 by the sum of the then outstanding Company Common Stock and
warrants.
(c) Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Company Stock issued and outstanding immediately prior
to the Effective Time of the Merger held by a holder (if any) who has the right
to demand payment for and an appraisal of such shares in accordance with Merger
Statutes ("Dissenting Shares") shall not be converted into a right to receive
Merger Consideration unless such holder fails to perfect or otherwise loses such
holder's right to such payment or appraisal, if any. If, after the Effective
Time of the Merger, such holder fails to perfect or loses any such right to
appraisal, each such share of such holder shall be treated as a share that had
been converted as of the Effective Time of the Merger into the right to receive
Merger Consideration in accordance with this Section 2.01. The Company shall
give prompt notice to Pubco of any demands received by the Company for appraisal
of shares of Company Common Stock, and Pubco shall have the right to participate
in all negotiations and proceedings with respect to such demands. The Company
shall not, except with the prior written consent of Pubco, make any payment with
respect to, or settle or offer to settle, any such demands. In the event
dissenters rights apply to the shareholders of Pubco, similar provisions shall
govern as required by law.
(d) Cancellation and Retirement of Company Common Stock, Warrants and
Preferred Stock. As of the Effective Time of the Merger, all shares of Company
Common Stock, warrants and Preferred Stock issued and outstanding immediately
prior to the Effective Time of the Merger, shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares of Company Common Stock,
Warrants and Preferred Stock shall cease to have any rights with respect
thereto, except the right to receive the applicable Merger Consideration to be
issued in consideration therefore upon surrender of such certificate in
accordance with Section 2.01 (b).
2.02 Convertible Notes. All convertible notes of the Company shall be
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converted into Common Stock of the Company prior to the Effective Time of the
Merger.
2.03 Warrants
(a) Assumption. At the Effective Time of the Merger, all warrants to
purchase Company Common Stock then outstanding including the warrants issued in
the Private Placement shall be assumed by Pubco in accordance with Section
2.03(b) hereof.
(b) Mechanics of Assumption. Each Company warrant including the
Private Placement warrants so assumed by Pubco under this Agreement will
continue to have, and be subject to, the same terms and conditions of such
warrants immediately prior to the Effective Time of the Merger (including,
without limitation, registration rights any repurchase rights or vesting
provisions and provisions regarding the acceleration of vesting on certain
transactions), except that (i) each warrant for Company Stock (except the
Private Placement warrants) will be exercisable for that number of whole shares
of Pubco Common Stock equal to the product of the number of Company shares that
were issuable upon exercise or conversion of such Company warrant immediately
prior to the Effective Time of the Merger multiplied by the applicable Exchange
Ratio, set forth in Section 2.01(b) above rounded down to the nearest whole
number of shares of Pubco Common Stock if the said product is equal to or less
than the fraction of one-half (.5) of one Pubco Common Stock or rounded up to
the nearest whole number of shares of Pubco Common Stock if the said product is
greater than the fraction of one-half (.5) of one Pubco Common Stock, and (ii)
the per share exercise price for the shares of Pubco Common Stock issuable upon
exercise of such assumed warrant, other than the Private Placement warrants,
will be equal to the quotient determined by dividing the exercise price per
Company share at which such Company warrant was exercisable immediately prior to
the Effective Time of the Merger by the applicable Exchange Ratio, rounded up to
the nearest whole cent provided however that in the case of the Private
Placement warrants, the exercise price shall be at $1.10 per Pubco share, and
exercisable for one share of Pubco Common Stock on a 1:1 basis. In addition,
Pubco shall adopt a PubCo Stock Option Plan qualified for tax treatment under
Section 424(b) of the Internal Revenue Code on or about the Effective Time of
the Merger covering at least 10% of the number of Pubco shares of Common Stock
to be outstanding after the Effective Time of the Merger to be available for
grant to employees, directors and consultants of the Surviving Corporation, from
time to time, as determined by the Board of Directors of the Surviving
Corporation. Pubco shall take all corporate actions necessary to reserve for
issuance a sufficient number of shares of Pubco Common Stock for delivery upon
exercise of all such Pubco Stock Options, on the terms set forth in this Section
2.03(b). Pubco will use its reasonable efforts to promptly file after the
Effective Date, a registration statement on Form S-8, so as to register the
shares of Pubco Common Stock, covered by the Stock Option Plan and such other
warrant as are eligible for registration under Form S-8 and shall use its best
efforts to effect such registration. Notwithstanding the foregoing, any such
warrants, options and underlying Common Stock, shall be restricted from public
re-sale for one year as elsewhere provided herein
ARTICLE III
Representations and Warranties
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3.01 Representations and Warranties of the Company. Except as set forth in
the herein and in the attached Schedules and Exhibits, the Company represents
and warrants to Pubco as follows:
(a) Organization, Standing and Corporate Power. The Company is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to carry on its
business as now being conducted. The Company is duly qualified or licensed to
do business and is in good standing in Florida and each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a material adverse effect (as defined in Section 9.02)
with respect to the Company.
(b) Subsidiaries. The Company does not own, directly or indirectly,
any capital stock or other ownership interest in any corporation, partnership,
business association, joint venture or other entity.
(c) Capital Structure. The authorized capital stock of the Company is
as set forth in the Cap Table Schedule 3.01(c). Except as set forth therein, no
shares of capital stock or other equity securities of the Company are issued,
reserved for issuance or outstanding. All outstanding shares of capital stock
of the Company are duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. There are no outstanding bonds,
debentures, notes or other indebtedness or other securities of the Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which shareholders of the Company
may vote other than as set forth in the Cap Table. There are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company is a party or by
which it is bound obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other equity
or voting securities of the Company or obligating the Company to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking other than as set forth in the
Cap Table. The outstanding indebtedness for borrowed money of the Company is
set forth on Schedule 3.02(c) of the Disclosure Schedule. Other than as set
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forth in the Cap Table, there are no outstanding contractual obligations,
commitments, understandings or arrangements of the Company to repurchase, redeem
or otherwise acquire or make any payment in respect of any shares of capital
stock of the Company. Schedule 3.01(c) of the Disclosure Schedule sets forth
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the ownership of the capital stock of the Company. There are no agreements or
arrangements pursuant to which the Company is or could be required to register
shares of Company Common Stock or other securities under the Securities Act of
1933, as amended (the "Securities Act") or other agreements or arrangements with
or among any security holders of the Company with respect to securities of the
Company, other than as set forth in the Cap Table.
(d) Authority; Noncontravention. The Company has the requisite
corporate and other power and authority to enter into this Agreement and to
consummate the Merger. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions hereof will
not, conflict with, or result in any breach or violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of or "put" right with respect to any
obligation or to loss of a material benefit under, or result in the creation of
any lien upon any of the properties or assets of the Company under, (i) the
Articles of Incorporation or Bylaws of the Company, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company,
its properties or assets, or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule, regulation or arbitration award applicable to the
Company, its properties or assets. No consent, approval, order or authorization
of, or registration, declaration or filing with, or notice to, any federal,
state or local government or any court, administrative agency or commission or
other governmental authority, agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby, except, with respect to
this Agreement, for the filing of the Articles of Merger with the Secretaries of
State of Nevada and Delaware.
(e) Absence of Certain Changes or Events. Since September 30, 2005,
the Company has conducted its business only in the ordinary course consistent
with past practice, and there is not and has not been: (i) any material adverse
change with respect to the Company; (ii) any condition, event or occurrence
which individually or in the aggregate could reasonably be expected to have a
material adverse effect or give rise to a material adverse change with respect
to the Company; (iii) any event which, if it had taken place following the
execution of this Agreement, would not have been permitted by Section 4.01
without prior consent of Pubco; or (iv) any condition, event or occurrence which
could reasonably be expected to prevent, hinder or materially delay the ability
of the Company to consummate the transactions contemplated by this Agreement.
(f) Litigation; Labor Matters; Compliance with Laws.
(i) There is no suit, action or proceeding or investigation pending or
threatened against or affecting the Company or any basis for any such suit,
action, proceeding or investigation that, individually or in the aggregate,
could reasonably be expected to have a material adverse effect with respect
to the Company or prevent, hinder or materially delay the ability of the
Company to consummate the transactions contemplated by this Agreement, nor
is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company having,
or which, insofar as reasonably could be foreseen by the Company, in the
future could have, any such effect.
(ii) The Company is not a party to, or bound by, any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is it the subject of any proceeding asserting that it
has committed an unfair labor practice or seeking to compel it to bargain with
any labor organization as to wages or conditions of employment nor is there any
strike, work stoppage or other labor dispute involving it pending or, to its
knowledge, threatened, any of which could have a material adverse effect with
respect to the Company.
(iii) The conduct of the business of the Company complies with all
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees
or arbitration awards applicable thereto.
(g) Benefit Plans. The Company is not a party to any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding (whether or
not legally binding) under which the Company currently has an obligation to
provide benefits to any current or former employee, officer or director of the
Company (collectively, "Benefit Plans"), other than standard employee health
benefits plans or 401(k) Plans or similar plans.
(h) Certain Employee Payments. The Company is not a party to any
employment agreement which could result in the payment to any current, former or
future director or employee of the Company of any money or other property or
rights or accelerate or provide any other rights or benefits to any such
employee or director as a result of the transactions contemplated by this
Agreement (excluding a finders fee payable to Xxxxxx X. Xxxxxxxxxx), whether or
not (i) such payment, acceleration or provision would constitute a "parachute
payment" (within the meaning of Section 280G of the Code), or (ii) some other
subsequent action or event would be required to cause such payment, acceleration
or provision to be triggered.
(i) Tax Returns and Tax Payments. The Company has timely filed all Tax
Returns required to be filed by it, has paid all Taxes shown thereon to be due
and has provided adequate reserves in its financial statements for any Taxes
that have not been paid, whether or not shown as being due on any returns. No
material claim for unpaid Taxes has been made or become a lien against the
property of the Company or is being asserted against the Company, no audit of
any Tax Return of the Company is being conducted by a tax authority, and no
extension of the statute of limitations on the assessment of any Taxes has been
granted by the Company and is currently in effect. As used herein, "taxes"
shall mean all taxes of any kind, including, without limitation, those on or
measured by or referred to as income, gross receipts, sales, use, ad valorem,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium value added, property or windfall profits
taxes, customs, duties or similar fees,, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority, domestic or foreign.
As used herein, "Tax Return" shall mean any return, report or statement required
to be filed with any governmental authority with respect to Taxes.
(j) Environmental Matters. The Company is in compliance with all
applicable Environmental Laws. "Environmental Laws" means all applicable
federal, state and local statutes, rules, regulations, ordinances, orders,
decrees and common law relating in any manner to contamination, pollution or
protection of human health or the environment, and similar state laws.
(k) Material Contract Defaults. The Company has provided or made
available to Pubco copies of all material contracts, agreements, commitments,
arrangements, leases, policies or other instruments to which it is a party or by
which it is bound ("Material Contracts"). Except as set forth on Schedule
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3.01(k) of the Disclosure Schedule, the Company is not, or has not, received any
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notice or has any knowledge that any other party is, in default in any respect
under any Material Contract; and there has not occurred any event that with the
lapse of time or the giving of notice or both would constitute such a material
default. For purposes of this Agreement, a Material Contract means any
contract, agreement or commitment not in the ordinary course of business to
which the Company is a party (i) with expected receipts or expenditures in
excess of $10,000, (ii) requiring the Company to indemnify any person, (iii)
granting exclusive rights to any party, (iv) evidencing indebtedness for
borrowed or loaned money in excess of $10,000 or more, including guarantees of
such indebtedness, or (v) which, if breached by the Company in such a manner
would (A) permit any other party to cancel or terminate the same (with or
without notice of passage of time) or (B) provide a basis for any other party to
claim money damages (either individually or in the aggregate with all other such
claims under that contract) from the Company or (C) give rise to a right of
acceleration of any material obligation or loss of any material benefit under
any such contract, agreement or commitment. Notwithstanding the foregoing
definition, a Material Contract shall not include any contract with a fair
market valuation equal to or less than $10,000.
(l) Properties. The Company has good, clear and marketable title to
all the tangible properties and tangible assets reflected in the latest balance
sheet as being owned by the Company or acquired after the date thereof which
are, individually or in the aggregate, material to the Company's business
(except properties sold or otherwise disposed of since the date thereof in the
ordinary course of business), free and clear of all liens.
(m) Trademarks and Related Contracts. To the knowledge of the Company:
(i) As used in this Agreement, the term "Trademarks" means trademarks,
service marks, trade names, Internet domain names, designs, slogans, and
general intangibles of like nature; the term "Trade Secrets" means
technology; trade secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models, and methodologies; the
term "Intellectual Property" means patents, copyrights, Trademarks,
applications for any of the foregoing, and Trade Secrets; the term "Company
License Agreements" means any license agreements granting any right to use
or practice any rights under any Intellectual Property (except for such
agreements for shrink-wrap or click wrap software or other off-the-shelf
products that are generally available for less than $25,000), and any
written settlements relating to any Intellectual Property, to which the
Company is a party or otherwise bound; and the term "Software" means any
and all computer programs, including any and all software implementations
of algorithms, models and methodologies, whether in source code or object
code.
(ii) Schedule 3.01(m) of the Disclosure Schedule sets forth, for the
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Intellectual Property owned by the Company, a complete and accurate list of
all U.S. and foreign (1) patents and patent applications; (2) Trademark
registrations (including Internet domain registrations) and applications
and material unregistered Trademarks; (3) copyright registrations and
applications, indicating for each, the applicable jurisdiction,
registration number (or application number), and date issued (or date
filed). Schedule 3.01(m) of the Disclosure Schedule sets forth a list of
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all third party Software that is incorporated in any Software sold,
licensed, leased or otherwise distributed by the Company, indicating for
each the title, owner/licensor of the Software. Third party Software tools
that are used to create the Software sold, licensed, leased or otherwise
distributed by the Company but are not incorporated therein are
specifically excluded from this list.
(iii) The Intellectual Property owned by the Company is listed in the
records of the appropriate United States, state or foreign agency as the
sole owner of record for each application and registration listed in
Schedule 3.01(m) of the Disclosure Schedule.
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(iv) The patents owned by the Company are valid and enforceable, in
full force and effect, and have not been canceled, expired, or abandoned.
There is no pending or threatened opposition, interference or cancellation
proceeding before any court or registration authority in any jurisdiction
against any Intellectual Property licensed to the Company.
(v) The conduct of the Company's business as currently conducted does
not infringe upon any Intellectual Property rights owned or controlled by
any third party (either directly or indirectly such as through contributory
infringement or inducement to infringe). Schedule 3.01(m) of the Disclosure
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Schedule lists all U.S. and foreign patents for which: (i) the Company has
obtained written opinion of counsel; or (ii) the Company has received
written notice of infringement or license offer outside the ordinary course
of business. There are no claims or suits pending or threatened against the
Company, and the Company has not received any notice of a third party claim
or suit against the Company (1) alleging that its activities or the conduct
of its businesses infringes upon, violates, or constitutes the unauthorized
use of the Intellectual Property rights of any third party or (2)
challenging the ownership, use, validity or enforceability of any
Intellectual Property.
(vi) There are no settlements, forbearances to xxx, consents,
judgments, or orders or similar obligations to which the Company is bound
which (1) restrict the Company's rights to use any Intellectual Property,
(2) restrict the Company's business in order to accommodate a third party's
Intellectual Property or (3) permit third parties to use any Intellectual
Property owned by the Company. There exists no event or condition, which
will result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default by the Company or any other
party under any such Company License Agreement.
(vii) The Company takes reasonable measures to protect the
confidentiality of Trade Secrets, including requiring its employees and
independent contractors having access thereto to execute written
non-disclosure agreements. No Trade Secret of the Company has been
disclosed or authorized to be disclosed to any third party other than
pursuant to a non-disclosure agreement that protects the Company's
proprietary interests in and to such Trade Secrets. Neither the Company nor
any other party to any non-disclosure agreement relating to the Company's
Trade Secrets is in breach or default thereof.
(viii) The consummation of the transactions contemplated hereby will
not result in the loss or impairment of the Company's right to own or use
any of the Intellectual Property, nor will require the consent of any
governmental authority or third party in respect of any such Intellectual
Property.
(ix) Schedule 3.01(m) of the Disclosure Schedule lists all Software
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sold, licensed, leased or otherwise distributed by the Company to any third
party, and identifies which Software is sold, licensed, leased, or
otherwise distributed as the case may be. With respect to the Software set
forth in Schedule 3.01(m) of the Disclosure Schedule which the Company
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purports to own, such Software was either developed (1) by employees of the
Company within the scope of their employment; or (2) by independent
contractors who have assigned all of their rights in such Software to the
Company pursuant to written agreements.
(n) Board Recommendation. The Board of Directors of the Company has
unanimously determined that the terms of the Merger are fair to and in the best
interests of the shareholders of the Company and recommended that the holders of
the shares of Company Common Stock approve the Merger. The Board of Directors
of the Company has approved this Agreement and the contemplated transactions.
(o) Required Company Vote. The affirmative vote of a majority of the
shares of each of the Company Common Stock is the only vote of the holders of
any class or series of the Company's securities necessary to approve the Merger
(the "Company Shareholder Approval"). The Company has obtained the agreement of
its largest shareholder, which represents more than fifty percent (50%) of the
total outstanding shares of the Company, to approve of and consent to this
Agreement and the transactions contemplated herein.
3.02 Representations and Warranties of Pubco. Pubco represents and warrant
to the Company as follows:
(a) Organization, Standing and Corporate Power. Pubco is (or at
Closing will be) duly organized, validly existing and in good standing under the
laws of the State of Nevada, as is applicable, and has the requisite corporate
power and authority to carry on its business as now being conducted. Pubco is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse effect with
respect to Pubco. Pubco has delivered to the Company complete and correct
copies of its Certificate of Incorporation and Bylaws and the articles of
incorporation (or other organization documents) and bylaws of Pubco and, to the
extent in the possession and control of Pubco, its complete and accurate Minute
Book and its contents (the "Pubco Disclosure Schedule").
(b) Subsidiaries. The only direct or indirect subsidiaries of Pubco
are ABS Holding Company, Inc. and BH Holding Company, Inc. (the "Pubco
Subsidiaries"). All the outstanding shares of capital stock of each such Pubco
Subsidiary which is a corporation have been validly issued and are fully paid
and nonassessable and, are owned (of record and beneficially) by Pubco, free and
clear of all Liens. Except for the capital stock of its subsidiaries, which are
corporations, Pubco does not own, directly or indirectly, any capital stock or
other ownership interest in any corporation, partnership, business association,
joint venture or other entity.
All such Pubco subsidiaries shall be spun-off, divested, transferred, sold or
assigned as of the Effective Time and Pubco shall have no further interest,
investment or liability in connection with such Pubco Subsidiaries.
(c) Capital Structure. The authorized capital stock of Pubco consists
of 300,000,000 shares of Pubco Common Stock, $.001 par value, of which
175,218,044 shares of Pubco Common Stock are issued and outstanding and
4,000,000 shares of Pubco Common Stock are issuable upon the exercise of
outstanding warrants. Also authorized are 10,000,000 shares of preferred stock,
$.001 par value, none of which is issued and outstanding. Except as set forth
above, no shares of capital stock or other equity securities of Pubco are
issued, reserved for issuance or outstanding. As of immediately prior to the
Effective Time there shall be nor more than 15,650,000 shares of Pubco Common
Stock outstanding and no more than warrants to purchase 2,000,000 shares of
Pubco Common Stock outstanding at $1.00 per share. All outstanding shares of
capital stock of Pubco are, and all shares which may be issued pursuant to this
Agreement will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and, not subject to preemptive rights, and issued in compliance
with all applicable state and federal laws concerning the issuance of
securities. Except as set forth in Schedule 3.02(c), there are no outstanding
bonds, debentures, notes or other indebtedness or other securities of Pubco
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which shareholders of Pubco may
vote. Except as set forth above, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which Pubco is a party or by which it is bound obligating Pubco
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity securities of Pubco or obligating Pubco
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity securities of Pubco obligating Pubco to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. There are no
outstanding contractual obligations, commitments, understandings or arrangements
of Pubco to repurchase, redeem or otherwise acquire or make any payment in
respect of any shares of capital stock of Pubco or to register any securities
with the Securities and Exchange Commission. Pubco will take all necessary
action to insure that on or before the Effective Date that the Pubco
Subsidiaries are divested in such a manner as to relieve Pubco from any further
claim, liability, involvement or interest in such Pubco Subsidiaries, in a
manner consistent with all applicable laws, including corporate fiduciary and
contractual obligations and securities laws and in a manner which does not
subject Pubco, the Company or the shareholders of Pubco or the Company with any
liabilities pertaining to such Pubco Subsidiaries, either pre-existing,
resulting from the divesture, the merger, or resulting from the reduction in the
outstanding capital stock of Pubco as set forth in his paragraph (c).
(d) Authority; Noncontravention. Pubco has all requisite corporate
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
Pubco and the consummation by Pubco of the transactions contemplated by this
Agreement have been (or at Closing will have been) duly authorized by all
necessary corporate action on the part of Pubco. This Agreement has been duly
executed and delivered by and constitutes a valid and binding obligation of
Pubco, enforceable against each such party in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any breach or violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of or "put" right
with respect to any obligation or to loss of a material benefit under, or result
in the creation of any lien upon any of the properties or assets of Pubco or any
of its subsidiaries under, (i) the articles of incorporation or bylaws of Pubco
or the comparable charter or organizational documents of any other subsidiary of
Pubco, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise or license
applicable to Pubco or any other subsidiary of Pubco or their respective
properties or assets, or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule, regulation or arbitration award applicable to
Pubco or any other subsidiary of Pubco or their respective properties or assets,
other than, in the case of clauses (ii) and (iii), any such conflicts, breaches,
violations, defaults, rights, losses or liens that individually or in the
aggregate could not have a material adverse effect with respect to Pubco or
could not prevent, hinder or materially delay the ability of Pubco to consummate
the transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, or notice to, any
Governmental Entity is required by or with respect to Pubco or any other
subsidiary of Pubco in connection with the execution and delivery of this
Agreement by Pubco or the consummation by Pubco be, of any of the transactions
contemplated by this Agreement, except for the filing of the Articles of Merger
with the Secretaries of State of Nevada and Delaware and such other consents,
approvals, orders, authorizations, registrations, declarations, filings or
notices as may be required under the "blue sky" laws of various states.
(e) S.E.C. Documents; Undisclosed Liabilities. Pubco has filed all
reports, schedules, forms, statements and other documents as required by the
Securities and Exchange Commission (the "S.E.C.") and Pubco has delivered or
made available to the Company all reports, schedules, forms, statements and
other documents filed with the S.E.C. (collectively, and in each case including
all exhibits and schedules thereto and documents incorporated by reference
therein, the "Pubco S.E.C. Documents"). As of their respective dates, the Pubco
S.E.C. Documents complied in all material respects with the requirements of the
Securities Act or the Securities Exchange Act of 1934, as the case may be, and
the rules and regulations of the S.E.C. promulgated thereunder applicable to
such Pubco S.E.C. documents, and none of the Pubco S.E.C. Documents (including
any and all consolidated financial statements included therein) as of such date
contained any untrue statement of a material fact or omitted 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 Schedule 3.02(e) of the Pubco
----------------
Disclosure Schedule and except to the extent revised or superseded by a
subsequent filing with the S.E.C. (a copy of which has been provided to the
Company prior to the date of this Agreement), none of the Pubco S.E.C. Documents
contains any untrue statement of a material fact or omits to state any material
fact or omitted 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. The consolidated financial
statements of Pubco included in such Pubco S.E.C. Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the S.E.C. with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited consolidated quarterly statements, as permitted by Form 10-Q of the
S.E.C.) applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto) and fairly present the consolidated financial
position of Pubco and its consolidated subsidiaries as of the dates thereof and
the consolidated results of operations and changes in cash flows for the periods
then ended (subject, in the case of unaudited quarterly statements, to normal
year-end audit adjustments as determined by Pubco's independent accountants).
Except as set forth in the Pubco S.E.C. Documents, at the date of the most
recent audited financial statements of Pubco included in the Pubco S.E.C.
Documents, neither Pubco nor any of its subsidiaries had, and since such date
neither Pubco nor any of such subsidiaries has incurred, any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which, individually or in the aggregate, could reasonably be expected to have a
material adverse effect with respect to Pubco.
(f) Absence of Certain Changes or Events. Except as disclosed in the
Pubco S.E.C. Documents, since the date of the most recent financial statements
included in the Pubco S.E.C. Documents, Pubco has conducted its business only in
the ordinary course consistent with past practice in light of its current
business circumstances, and there is not and has not been: (i) any material
adverse change with respect to Pubco; (ii) any condition, event or occurrence
which, individually or in the aggregate, could reasonably be expected to have a
material adverse effect or give rise to a material adverse change with respect
to Pubco; (iii) any event which, if it had taken place following the execution
of this Agreement, would not have been permitted by Section 4.02 without the
prior consent of the Company; or (iv) any condition, event or occurrence which
could reasonably be expected to prevent, hinder or materially delay the ability
of Pubco to consummate the transactions contemplated by this Agreement.
(g) Foreign Corrupt Practices Act. Neither Pubco, nor any director,
officer, agent, employee or other person associated with or acting on behalf of
Pubco, has used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity; made any
direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds, violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment.
(h) Sarbanes Oxley Compliance. Pubco is in compliance with all
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002.
(i) Board Recommendation. The Board of Directors of PubCo has
unanimously determined that the terms of the Merger are fair to and in the best
interests of the shareholders of PubCo and recommended that the holders of the
shares of PubCo Common Stock approve the Merger. The Board of Directors of
PubCo has approved this Agreement and the contemplated transactions.
(j) Required Shareholder Vote. The affirmative vote of a majority of
the shares of PubCo Common Stock is the only vote of the holders of any class or
series of PubCo's securities necessary to approve the Merger (the "PubCo
Shareholder Approval"). PubCo has obtained the agreement of its largest
shareholder, which represents more than fifty percent (50%) of the total
outstanding shares of PubCo, to approve of and consent to this Agreement and the
transactions contemplated herein.
(k) Pro-Forma. As of the Effective Time, Pubco will not have any
liabilities, contracts or commitments except for accrued payables not to exceed
$25,000, and except for warrants to purchase 2,000,000 shares of Pubco Common
Stock at $1.00 per share and two Consulting Agreements.
ARTICLE IV
Covenants Relating to
Conduct of Business Prior to Merger
-----------------------------------
4.01 Conduct of Company and Pubco. From the date of this Agreement and
until the Effective Time, or until the prior termination of this Agreement,
Company and Pubco shall not, unless mutually agreed to in writing:
(a) engage in any transaction, except in the normal and ordinary course
of business, or create or suffer to exist any Lien or other encumbrance upon any
of their respective assets or which will not be discharged in full prior to the
Effective Time;
(b) sell, assign or otherwise transfer any of their assets, or cancel
or compromise any debts or claims relating to their assets, other than for fair
value, in the ordinary course of business, and consistent with past practice
except that as provided herein above, Pubco shall reduce its outstanding capital
stock;
(c) fail to use reasonable efforts to preserve intact their present
business organizations, keep available the services of their employees and
preserve its material relationships with customers, suppliers, licensors,
licensees, distributors and others, to the end that its good will and on-going
business not be impaired prior to the Effective Time;
(d) except for matters related to complaints by former employees
related to wages, suffer or permit any material adverse change to occur with
respect to Company and Pubco or their business or assets; or
(e) make any material change with respect to their business in
accounting or bookkeeping methods, principles or practices, except as required
by GAAP.
(f) change its capital structure, or Capitalization except as
contemplated herein and except that the Company shall raise a minimum of
$10,000,000 in a Private Placement (the "Private Placement") to accredited
investors (the 'Private Placement Investors") and issue to such Private
Placement Investors, 10,000,000 shares of Series B Preferred Stock at $1.00 per
share and warrants to purchase 3,000,000 shares of Common Stock, exercisable at
$1.10 per share, on or before the Effective Date, or such different amount and
terms as Company chooses, with the proviso that if the Company sells more than
10,000,000 shares of Series B Preferred Stock, the number of warrants issued in
connection with such sale shall be 30% of the number of shares sold.
ARTICLE V
Additional Agreements
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5.01 Shareholders Meetings; 14C filing. The Company will, as promptly as
practicable following the execution of this Agreement, call, give notice of,
convene and hold a meeting of its shareholders (the "Shareholders Meeting") for
the purpose of approving this Agreement and the transactions contemplated by
this Agreement or obtain the requisite written consent of its shareholders for
the same aforementioned purpose and if required by the Nevada General
Corporation Law, Pubco will likewise promptly seek shareholder approval as
aforesaid and file a 14C Information Statement with the SEC in connection
therewith.
5.02 Access to Information; Confidentiality.
(a) The Company shall, and shall cause its officers, employees,
counsel, financial advisors and other representatives to, afford to Pubco and
its representatives reasonable access during normal business hours during the
period prior to the Effective Time of the Merger to its properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall, and shall cause its officers, employees and representatives to,
furnish promptly to Pubco all information concerning its business, properties,
financial condition, operations and personnel as such other party may from time
to time reasonably request. For the purposes of determining the accuracy of the
representations and warranties of the Company set forth herein and compliance by
the Company of its obligations hereunder, during the period prior to the
Effective Time of the Merger, Pubco shall provide the Company and its
representatives with reasonable access during normal business hours to its
properties, books, contracts, commitments, personnel and records as may be
necessary to enable the Company to confirm the accuracy of the representations
and warranties of Pubco set forth herein and compliance by Pubco of its
obligations hereunder, and, during such period, Pubco shall, and shall cause its
subsidiaries, officers, employees and representatives to, furnish promptly to
the Company upon its request (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (ii) all other information
concerning its business, properties, financial condition, operations and
personnel as such other party may from time to time reasonably request. Except
as required by law, each of the Company, and Pubco will hold, and will cause its
respective directors, officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any nonpublic
information in confidence.
(b) No investigation pursuant to this Section 5.02 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
5.03 Best Efforts. Upon the terms and subject to the conditions set forth
in this Agreement, each of the parties agrees to use its 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 other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement. Pubco and the Company will use their best efforts and cooperate with
one another (i) in promptly determining whether any filings are required to be
made or consents, approvals, waivers, permits or authorizations are required to
be obtained (or, which if not obtained, would result in an event of default,
termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any governmental
authorities or third parties, including parties to loan agreements or other debt
instruments and including such consents, approvals, waivers, permits or
authorizations as may be required to transfer the assets and related liabilities
of the Company to the Surviving Corporation in the Merger, in connection with
the transactions contemplated by this Agreement, and (ii) in promptly making any
such filings, in furnishing information required in connection therewith and in
timely seeking to obtain any such consents, approvals, permits or
authorizations. Pubco and the Company shall mutually cooperate in order to
facilitate the achievement of the benefits reasonably anticipated from the
Merger.
5.04 Public Announcements. Pubco and the Company, will consult with each
other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law or court process. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement shall be mutually agreed upon prior to the issuance thereof;
provided, that nothing herein shall prevent or prohibit PubCo from filing a
current report on Form 8-K within the time required by SEC regulations, and
include therein any information deemed required or desirable to fully inform
PubCo's shareholders as required by law. Notwithstanding the foregoing, Company
may disclose the contemplated Merger in letters to the Company's stockholders.
5.05 Expenses. Except as provided above, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
5.06 Directorships. Upon the Effective Time of the Merger, Pubco shall take
all action to cause its Board of Directors to consist of the Board of Directors
of the Company.
5.07 No Solicitation. Except as previously agreed to in writing by the
other party, neither Company or Pubco shall authorize or permit any of its
officers, directors, agents, representatives, or advisors to (a) solicit,
initiate or encourage or take any action to facilitate the submission of
inquiries, proposals or offers from any person relating to any matter concerning
any merger, consolidation, business combination, recapitalization or similar
transaction involving Company or Pubco, respectively, other than the transaction
contemplated by this Agreement or any other transaction the consummation of
which would or could reasonably be expected to impede, interfere with, prevent
or delay the Merger or which would or could be expected to dilute the benefits
to the Company of the transactions contemplated hereby. Company or Pubco will
immediately cease and cause to be terminated any existing activities,
discussions and negotiations with any parties conducted heretofore with respect
to any of the foregoing.
5.08 Registration. It is contemplated that Pubco will file an S-4
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registration statement covering the Merger Consideration to be issued to the
Company security holders. Shares held by Company shareholders, warrant holders
and Pubco shareholders or warrant holders which are not eligible for resale
without a registration statement, or eligible for sale under Rule 144(k), at the
Effective Time, shall be included a resale registration statement under Form
SB-2, including, if necessary with respect to the shares of the Private
Placement Investors pursuant to the terms of the Registration Rights Agreement
to be entered into with the Private Placement Investors if required.
Notwithstanding anything herein to the contrary, all Pubco shares of Common
Stock issued as Merger Consideration (except for shares issued upon conversion
of a convertible note as referenced in Section 2.02) to the holders of
securities of the Company shall automatically, without any separate agreement by
such persons be deemed restricted as if such persons signed a lock-up agreement,
and such shares of Pubco Common Stock may not be sold until the date which is
one year following the effective date of the S-4 registration statement covering
the shares of Pubco Common Stock comprising the Merger Consideration except in
case of shares held by Kazi Management or its assignees, or transferees of its
shares, which shall be restricted for six months from the effectiveness of the
S-4. All certificates representing such shares shall contain a legend
referencing this lock-up provision.
ARTICLE VI
Conditions Precedent
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6.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. The Company Shareholder and Pubco Approval
shall have been obtained, if required. The Company hereby represents that its
majority shareholder has given such approval, and PubCo represents that it has
obtained the written consent of its majority shareholder. Pubco shall have filed
the 14C Information Statement with the SEC, and the SEC shall either have not
issued a comment letter, or, if PubCo has received a comment letter, PubCo shall
diligently make such responses and amendments as are necessary to satisfy the
suggestions, comments or demands of the SEC until the SEC shall not object to
the Information Statement being effective.
(b) OTCBB Clearance. The shares of Pubco Common Stock shall have been
cleared for quotation on the Over-the-Counter Bulletin Board, reflecting the
merger of the Company into Pubco.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect.
(d) No Dissent. Holders of no more than twenty percent (20%) of the
Company's or Pubco's Common Stock shall have dissented to the Merger.
6.02 Conditions to Obligations of Pubco. The obligations of Pubco to effect
the Merger are further subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date. Pubco shall have
received a certificate signed on behalf of the Company by the president of the
Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed the obligations required to be performed by it under this Agreement at
or prior to the Closing Date (except for such failures to perform as have not
had or could not reasonably be expected, either individually or in the
aggregate, to have a material adverse effect with respect to the Company or
adversely affect the ability of the Company to consummate the transactions
herein contemplated or perform its obligations hereunder), and Pubco shall have
received a certificate signed on behalf of the Company by the president of the
Company to such effect.
(c) Consents, etc. Pubco shall have received evidence, in form and
substance reasonably satisfactory to it, that such licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties as necessary in connection with the transactions
contemplated hereby have been obtained.
(d) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (or by any other person any
suit, action or proceeding which has a reasonable likelihood of success), (i)
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement or seeking to
obtain from Pubco or any of its subsidiaries any damages that are material in
relation to Pubco and its subsidiaries taken as a whole, (ii) seeking to
prohibit or limit the ownership or operation by the Company, Pubco or any of its
subsidiaries of any material portion of the business or assets of the Company,
Pubco or any of its subsidiaries, or to dispose of or hold separate any material
portion of the business or assets of the Company, Pubco or any of its
subsidiaries, as a result of the Merger or any of the other transactions
contemplated by this Agreement, (iii) seeking to impose limitations on the
ability of Pubco to acquire or hold, or exercise full rights of ownership of,
any shares of Company Common Stock or Common Stock of the Surviving Corporation,
including, without limitation, the right to vote the Company Common Stock or
Common Stock of the Surviving Corporation on all matters properly presented to
the shareholders of the Company or the Surviving Corporation, respectively, or
(iv) seeking to prohibit Pubco or any of its subsidiaries from effectively
controlling in any material respect the business or operations of the Company.
(e) Financial Statements. The Company shall have delivered to Pubco
audited financial statements for each of the years ended December 31, 2002, 2003
and 2004 and unaudited financial statements for the period from January 1, 2005
through the end of the second calendar quarter of 2005.
6.03 Conditions to Obligation of the Company. The obligation of the Company
to effect the Merger is further subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Pubco set forth in this Agreement shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date. The Company shall have
received a certificate signed on behalf of Pubco by the president of Pubco to
such effect.
(b) Performance of Obligations of Pubco. Pubco shall have performed
the obligations required to be performed by them under this Agreement at or
prior to the Closing Date (except for such failures to perform as have not had
or could not reasonably be expected, either individually or in the aggregate, to
have a material adverse effect with respect to Pubco or adversely affect the
ability of Pubco to consummate the transactions herein contemplated or perform
its obligations hereunder), and the Company shall have received a certificate
signed on behalf of Pubco by the president of Pubco to such effect.
(c) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (or by any other person, any
suit, action or proceeding which has a reasonable likelihood of success), which
could reasonably be expected, if adversely determined, to result in criminal or
material uninsured and unindemnified or unindemnifiable personal liability on
the part of one or more directors of the Company, (i) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or (ii) seeking to prohibit or limit
the ownership or operation by the Company, Pubco or any of its subsidiaries, or
to dispose of or hold separate any material portion of the business or assets of
the Company, Pubco or of its any subsidiaries, as a result of the Merger.
(d) Consents, etc. Company shall have received evidence, in form and
substance reasonably satisfactory to it, that such licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties as necessary in connection with the transactions
contemplated hereby have been obtained.
(e) Filing of Merger Agreement. Pubco shall have filed or will
promptly file after the Closing Date in the office of the Secretary of State or
other office of each jurisdiction in which such filings are required for the
Merger to become effective.
(f) Private Placement. The Company shall have received gross proceeds
of not less than $10,000,000 from the Private Placement. It is agreed that
$5,000,000 of such proceeds shall be used to redeem $5,000,000 of the Company's
Series A Preferred Stock. If the proceeds of an equity financing are greater
than $10,000,000 in a six month period, in one or more financings, the excess
over $10,000,000 of gross proceeds will be used to redeem the Series A Preferred
Stock until all such shares are redeemed.
ARTICLE VII
Termination, Amendment and Waiver
---------------------------------
7.01 Termination. This Agreement may be terminated and abandoned at any
time prior to the Effective Time of the Merger:
(a) by mutual written consent of Pubco and the Company;
(b) by either Pubco or the Company if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable;
(c) by either Pubco or the Company if the Merger shall not have been
consummated on or before March 1, 2006 (other than as a result of the failure of
the party seeking to terminate this Agreement to perform its obligations under
this Agreement required to be performed at or prior to the Effective Time of the
Merger);
(d) by Pubco, if a material adverse change shall have occurred relative
to the Company, which constitutes as a material breach and is not curable, or if
curable, is not cured within thirty (30) days after written notice of such
breach is given by Pubco to Company;
(e) by Pubco, if the Company willfully fails to perform in any material
respect any of its material obligations under this Agreement, which constitutes
as a material breach and is not curable, or if curable, is not cured within
thirty (30) days after written notice of such breach is given by Pubco to
Company; or
(f) by the Company, if Pubco willfully fails to perform in any material
respect any of their respective material obligations under this Agreement, which
constitutes as a material breach and is not curable, or if curable, is not cured
within thirty (30) days after written notice of such breach is given by Company
to Pubco.
7.02 Effect of Termination. In the event of termination of this Agreement
by either the Company or Pubco provided in Section 7.01, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Pubco or the Company, other than the provisions of the last sentence
of Section 5.02(a) and this Section 7.02. Nothing contained in this Section
shall relieve any party for any breach of the representations, warranties,
covenants or agreements set forth in this Agreement.
7.03 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
7.04 Extension; Waiver. Subject to Section 7.01(c), at any time prior to
the Effective Time of the Merger, the parties may (a) extend the time for the
performance of any of the obligations or other acts of the other parties, (b)
waive any inaccuracies in the representations and warranties contained in this
Agreement or in any document delivered pursuant to this Agreement, or (c) waive
compliance with any of the agreements or conditions contained in this Agreement.
Any agreement on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
7.05 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver of this Agreement
pursuant to Section 7.04 shall, in order to be effective, require in the case of
Pubco or the Company, action by its Board of Directors.
7.06 Return of Company's Documents. In the event of termination of this
Agreement for any reason, Pubco and Company will return to the other party all
of the other party's documents, work papers, and other materials (including
copies) relating to the transactions contemplated in this Agreement, whether
obtained before or after execution of this Agreement. Pubco or Company will not
use any information so obtained from the other party for any purpose and will
take all reasonable steps to have such other party's information kept
confidential.
ARTICLE VIII
Indemnification and Related Matters
-----------------------------------
8.01 Survival of Representations and Warranties. The representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time of the Merger.
8.02 Indemnification.
Irrespective of any due diligence investigation conducted by Pubco or
Company with regard the transactions contemplated hereby, each party shall
indemnify and hold the other and each of their officers, directors, employees,
affiliates, or agents harmless from and against any and all liabilities,
obligations, damages, losses, deficiencies, costs, penalties, interest and
expenses (collectively, "Losses") arising out of, based upon, attributable to or
resulting from any and all Losses incurred or suffered by such party resulting
from or arising out of any breach of a representation, warranty or covenant made
by the other as set forth herein.
8.03 Notice of Indemnification. In the event any legal proceeding (an
"Indemnity Claim") shall be threatened or instituted or any claim or demand
shall be asserted by any person in respect of which payment may be sought under
the provisions of this Article VIII, (the "Indemnitee") shall promptly cause
written notice of the assertion of any such claim of which it has knowledge
which is covered by this indemnity to be forwarded to the other (the
"Indemnitor"). Any notice of a claim by reason of any of the representations,
warranties or covenants contained in this Agreement shall state specifically the
representation, warranty or covenant with respect to which the Indemnity Claim
is made, the facts giving rise to an alleged basis for the Claim, and the amount
of the liability asserted against the Indemnitor by reason of the Indemnity
Claim. Within ten (10) days of the receipt of such written notice, the
Indemnitor shall notify the Indemnitee in writing of its intent to contest its
obligation to indemnify or reimburse under this Agreement (a "Contest") or to
accept liability hereunder. If the Indemnitor does not respond within ten (10)
days to such written notice, the Indemnitor will be deemed to accept liability.
In the event of a Contest, within ten (10) days of the receipt of the written
notice thereof, the parties will select arbitrators and submit the dispute to
binding arbitration in California. The arbitrators shall be selected by the
mutual agreement of the parties. If the parties can not agree on the
arbitrator, each may select one arbitrator and the two designated arbitrators
shall select the third arbitrator. If the third arbitrator can not be agreed
upon, the Federal District Court in the Company's jurisdiction shall select the
third arbitrator. A decision by the individual arbitrator or a majority
decision by the three arbitrators shall be final and binding upon the parties.
Such arbitration shall follow the rules of the American Arbitration Association
and must be resolved by the arbitrators within thirty (30) days after the mater
is submitted to arbitration.
ARTICLE IX
General Provisions
------------------
9.01 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by facsimile, electronic mail, or
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Pubco to:
BioStem, Inc.
000 Xxxxxxx Xxxx Xxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx
Fax: (000) 000 0000
(b) if to the Company, to:
Cryobanks International, Inc.
000 X. Xxxxx Xxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxxxx Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxxx
Fax: (000) 000-0000
9.02 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "material adverse change" or "material adverse effect" means, when
used in connection with the Company or Pubco, any change or effect that either
individually or in the aggregate with all other such changes or effects is
materially adverse to the business, assets, properties, condition (financial or
otherwise) or results of operations of such party and its subsidiaries taken as
a whole (after giving effect in the case of Pubco to the consummation of the
Merger);
(c) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity; and
(d) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its board of Directors or
other governing body (or, if there are no such voting interests, fifty percent
(50%) or more of the equity interests of which) is owned directly or indirectly
by such first person.
9.03 Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
9.04 Entire Agreement; No Third-Party Beneficiaries. This Agreement and the
other agreements referred to herein constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement. This
Agreement is not intended to confer upon any person other than the parties any
rights or remedies, except as set forth with regarding to the registration
obligations in Section 5.08 above.
9.05 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
9.06 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
9.07 Enforcement. The parties 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 an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or Florida, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of the
local courts in said jurisdiction in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement to the
extent such courts would have subject matter jurisdiction with respect to such
dispute, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction or venue by motion or other request for leave from any such court,
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any state court other
than such court.
9.08 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
9.09 Counterparts. This Agreement may be executed in one or more identical
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more such counterparts shall have been
executed by each of the parties and delivered to the other parties.
IN WITNESS WHEREOF, the undersigned have caused their duly authorized
officers to execute this Agreement as of the date first above written.
PUBCO
BIOSTEM, INC.
By: /s/ Xxxx Xxxxxxxx
---------------------------------
Name: Xxxx Xxxxxxxx
---------------------------
Title: Chief Executive Officer
--------------------------
Attest:
/s/ Xxxxxxxxx Xxxxxxxx
------------------------------------
Xxxxxxxxx Xxxxxxxx , Secretary
------------------------
CRYOBANKS INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxxxx
