EXECUTION COPY
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AGREEMENT OF MERGER AND
PLAN OF REORGANIZATION
among
LIONS GATE INVESTMENT LIMITED,
DOBI ACQUISITION CORP. and
DOBI MEDICAL SYSTEMS, INC.
December 8, 2003
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TABLE OF CONTENTS
Page
1. The Merger...............................................................................................2
1.1 Merger..........................................................................................2
1.2 Effective Time..................................................................................2
1.3 Certificate of Incorporation, By-laws, Directors and Officers...................................2
1.4 Assets and Liabilities..........................................................................2
1.5 Manner and Basis of Converting Shares...........................................................3
1.6 Surrender and Exchange of Certificates..........................................................4
1.7 Stock Options and Warrants......................................................................4
1.8 Unconverted Series 1 Notes......................................................................6
1.9 Parent Common Stock.............................................................................6
1.10 Further Assurances..............................................................................6
2. Representations and Warranties of the Company............................................................7
2.1 Organization, Standing, Etc.....................................................................7
2.2 Qualification...................................................................................7
2.3 Capitalization of Company.......................................................................7
2.4 Indebtedness....................................................................................8
2.5 Company Stockholders............................................................................8
2.6 Corporate Acts and Proceedings..................................................................8
2.7 Compliance with Laws and Instruments............................................................8
2.8 Binding Obligations.............................................................................9
2.9 Broker's and Finder's Fees......................................................................9
2.10 Financial Statements............................................................................9
2.11 Absence of Undisclosed Liabilities..............................................................9
2.12 Changes.........................................................................................9
2.13 Schedule of Assets and Contracts...............................................................10
2.14 Employees......................................................................................12
2.15 Tax Returns and Audits.........................................................................12
2.16 Patents and Other Intangible Assets............................................................12
2.17 Employee Benefit Plans; ERISA..................................................................13
2.19 Insurance Coverage.............................................................................14
2.20 Litigation....................................................................................14
2.21 Licenses.......................................................................................14
2.22 Interested Party Transactions..................................................................14
2.23 Hazardous Waste................................................................................14
2.24 Customers, Suppliers and Independent Contractors...............................................14
2.25 Questionable Payments..........................................................................14
2.26 Obligations to or by Stockholders..............................................................15
2.27 Disclosure.....................................................................................15
3. Representations and Warranties of Parent and Acquisition Corp...........................................15
3.1 Organization and Standing......................................................................15
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3.2 Corporate Authority............................................................................15
3.3 Broker's and Finder's Fees.....................................................................16
3.4 Capitalization of Parent.......................................................................16
3.5 Indebtedness...................................................................................16
3.6 Acquisition Corp...............................................................................16
3.7 Validity of Shares.............................................................................16
3.8 SEC Reporting and Compliance...................................................................17
3.9 Financial Statements...........................................................................17
3.10 Governmental Consents..........................................................................18
3.11 Compliance with Laws and Other Instruments.....................................................18
3.12 Binding Obligations............................................................................18
3.13 No General Solicitation........................................................................18
3.14 Absence of Undisclosed Liabilities.............................................................19
3.15 Changes........................................................................................19
3.16 Tax Returns and Audits.........................................................................20
3.17 Employee Benefit Plans; ERISA..................................................................20
3.18 Litigation.....................................................................................21
3.19 Interested Party Transactions..................................................................21
3.20 Questionable Payments..........................................................................21
3.21 Obligations to or by Stockholders..............................................................21
3.22 Disclosure.....................................................................................21
4. Additional Representations, Warranties and Covenants of the Stockholders................................21
5. Additional Agreements...................................................................................22
5.1 Access and Information.........................................................................22
5.2 Additional Agreements..........................................................................23
5.3 Publicity......................................................................................23
5.4 Appointment of Directors.......................................................................23
5.5 Parent Name Change and Exchange Listing........................................................23
5.6 Registration Rights Agreement..................................................................23
5.7 Strategic Consulting Agreement.................................................................24
5.8 Investor Relations Agreement...................................................................24
5.9 Lock-Up Letters................................................................................24
5.10 Stock Incentive Plan...........................................................................24
5.11 Private Placement of Parent Common Stock.......................................................24
5.12 Conversion of Class A Preferred Stock, Series 1 Notes and Series 2 Notes.......................24
5.13 Approval of Certain Expenditures...............................................................25
6. Closing; Deliveries.....................................................................................25
6.1 Closing; Effective Date........................................................................25
6.2 Closing Deliveries of the Company..............................................................25
6.3 Deliveries of Parent and Acquisition Corp......................................................27
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7. Non-Survival of Representations and Warranties..........................................................29
8. Amendment of Agreement..................................................................................29
9. Definitions.............................................................................................29
10. Miscellaneous...........................................................................................33
10.1 Notices........................................................................................33
10.2 Entire Agreement...............................................................................33
10.3 Expenses.......................................................................................33
10.4 Time...........................................................................................34
10.5 Severability...................................................................................34
10.6 Successors and Assigns.........................................................................34
10.7 No Third Parties Benefited.....................................................................34
10.8 Counterparts...................................................................................34
10.9 Recitals, Schedules and Exhibits...............................................................34
10.10 Section Headings and Gender....................................................................34
10.11 Governing Law..................................................................................34
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LIST OF EXHIBITS AND DISCLOSURE SCHEDULES
Exhibits
A Certificate of Merger
B Certificate of Incorporation of the Company
C By-laws of the Company
D Directors and Officers of the Surviving Corporation and Parent
E Letter of Transmittal
F Registration Rights Agreement
G Strategic Consulting Agreement with Verus
H Investor Relations Agreement with Strategic Initiatives, Inc.
I Form of Lock-Up Letter
J Form of Opinion of Company's Counsel
K Form of Opinion of Parent's Counsel
L Form of Releases of Xxxxx and Xxxxx
M Indemnification Agreement
Company Disclosure Schedules
1.5 Holders of Parent Common Stock Post-Merger
1.7(a) Treatment of Options
1.7(b)(i) Treatment of Company Warrants
1.7(b)(ii) Treatment of Series 1 Warrants
2.3 Capitalization of Company
2.5 Company Stockholders
2.7 Compliance with Laws
2.9 Company Broker's and Finder's Fees
2.10 Financial Statements
2.11 Undisclosed Liabilities
2.12 Changes/Indebtedness
2.13(a) Schedule of Leased Real and Personal Property
2.13(b) Material Agreements
2.13(c) Schedule of Insurance
2.13(d) Schedule of Patents and Other Intangible Assets
2.14 Employees
2.16 Ownership of Intellectual Property
2.17 Schedule of Employee Benefit Plans
2.20 Litigation
2.22 Interested Party Transactions
2.26 Obligations to or by Stockholders
Parent Disclosure Schedules
3.3 Parent Broker's and Finder's Fees
3.4 Capitalization of Parent
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3.8 SEC Reporting
3.11 Compliance with Laws
3.19 Interested Party Transactions
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AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION is made and entered
into on December 8, 2003, by and among LIONS GATE INVESTMENT LIMITED, a Nevada
corporation ("Parent"), DOBI ACQUISITION CORP., a Delaware corporation
("Acquisition Corp."), which is a wholly-owned subsidiary of Parent, and DOBI
MEDICAL SYSTEMS, INC., a Delaware corporation (the "Company").
W I T N E S S E T H :
WHEREAS, the Board of Directors of each of Acquisition Corp., Parent and
the Company have each determined that it is fair to and in the best interests of
their respective corporations and stockholders for Acquisition Corp. to be
merged with and into the Company (the "Merger") upon the terms and subject to
the conditions set forth herein;
WHEREAS, the Board of Directors of Acquisition Corp. and the Board of
Directors of the Company have approved the merger of Acquisition Corp. with and
into the Company in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), and upon the terms and subject to the conditions set
forth herein and in the Certificate of Merger (the "Certificate of Merger")
attached as Exhibit A hereto; and the Board of Directors of Parent also has
approved this Agreement and the Certificate of Merger;
WHEREAS, the requisite Stockholders (as such term is defined in Section 9
hereof) have approved by written consent pursuant to Section 228 of the DGCL
this Agreement and the Certificate of Merger and the transactions contemplated
hereby and thereby, including the Merger, and Parent, as the sole stockholder of
Acquisition Corp., has approved this Agreement, the Certificate of Merger and
the transactions contemplated hereby and thereby, including the Merger;
WHEREAS, simultaneously with the Closing (as such term is defined herein),
Parent (as it will exist as of the closing of the Merger) is selling shares of
its common stock, par value $.0001 per share ("Parent Common Stock"), and
detachable warrants to purchase shares of Parent Common Stock ("Parent
Warrants"), in the first of two tranches of a private placement to accredited
investors (the "Private Placement"), pursuant to the terms of a Confidential
Private Placement Memorandum, dated October 22, 2003, as supplemented by the
First Supplement thereto, dated November 20, 2003 (the "Memorandum"), for the
purpose of expanding the business of the Surviving Corporation following the
Merger; and
WHEREAS, in anticipation of the Merger and Private Placement, effective on
December 8, 2003, the Company effected a 1.53846-for-1 reverse stock split as to
all the outstanding shares of Company Common Stock (as such term is defined
herein).
NOW, THEREFORE, in consideration of the mutual agreements and covenants
hereinafter set forth, the parties hereto agree as follows:
1. The Merger.
1.1 Merger. Subject to the terms and conditions of this Agreement and
the Certificate of Merger, Acquisition Corp. shall be merged with and into the
Company in accordance with Section 251 of the DGCL. At the Effective Time (as
hereinafter defined), the separate legal existence of Acquisition Corp. shall
cease, and the Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Delaware under
the name "DOBI Medical Systems, Inc."
1.2 Effective Time. The Merger shall become effective on the date and
at the time the Certificate of Merger is filed with the Secretary of State of
the State of Delaware in accordance with Section 251 of the DGCL. The time at
which the Merger shall become effective as aforesaid is referred to hereinafter
as the "Effective Time," and the filing of the Certificate of Merger as set
forth in the first sentence of this Section 1.2 shall occur concurrently with
the release of the proceeds from the initial tranche of the Private Placement
to the Company.
1.3 Certificate of Incorporation, By-laws, Directors and Officers.
(a) The Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, attached as Exhibit B hereto, shall be
the Certificate of Incorporation of the Surviving Corporation from and after the
Effective Time until further amended in accordance with applicable law.
(b) The By-laws of the Company, as in effect immediately prior to
the Effective Time, attached as Exhibit C hereto, shall be the By-laws of the
Surviving Corporation from and after the Effective Time until amended in
accordance with applicable law, the Certificate of Incorporation and such
By-laws.
(c) The directors, officers and key employees listed in Exhibit D
hereto shall be the directors, officers and key employees of the Surviving
Corporation, and each shall hold his respective office or offices from and after
the Effective Time until his successor shall have been elected and shall have
qualified in accordance with applicable law, or as otherwise provided in the
Certificate of Incorporation or By-laws of the Surviving Corporation.
1.4 Assets and Liabilities. At the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of a
public as well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the constituent corporations; and all the
rights, privileges, powers and franchises of each of the constituent
corporations, and all property, real, personal and mixed, and all debts due to
any of the constituent corporations on whatever account, as well for stock
subscriptions as all other things in action or belonging to each of the
constituent corporations, shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectively the property of the Surviving
Corporation as they were of the several and respective constituent corporations,
and the title to any real estate vested by deed or otherwise in any of such
constituent corporations shall not revert or be in any way impaired by the
Merger; but all rights of creditors and all liens upon any property of any of
the
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constituent corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the respective constituent corporations shall
thenceforth attach to the Surviving Corporation, and may be enforced against it
to the same extent as if said debts, liabilities and duties had been incurred or
contracted by it.
1.5 Manner and Basis of Converting Shares.
(a) At the Effective Time:
(i) each share of common stock, par value $.01 per share, of
Acquisition Corp. that shall be outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive ten (10) shares of common
stock, par value $.001 per share, of the Surviving Corporation, so that at the
Effective Time, Parent shall be the holder of all of the issued and outstanding
shares of the Surviving Corporation;
(ii) (A) the shares of common stock, par value $.001 per
share, of the Company (the "Company Common Stock"), and Class A 4% Redeemable
Convertible Preferred Stock, par value $.001 per share, of the Company (the
"Class A Preferred Stock"), which shares constitute all of the issued and
outstanding shares of capital stock of the Company, and (B) the shares of
Company Common Stock into which the Company's Series 1 Convertible 8% Promissory
Notes (the "Series 1 Notes") and Series 2 Subordinated Convertible 12%
Promissory Notes (the "Series 2 Notes") may be converted (the Company Common
Stock, Class A Preferred Stock and the shares of Company Common Stock into which
the Series 1 Notes and the Series 2 Notes may be converted being referred to
herein collectively as the "Company Stock"), beneficially owned by the
Stockholders listed in Schedule 2.5 (other than shares of Company Stock as to
which appraisal rights are perfected pursuant to the applicable provisions of
the DGCL and not withdrawn or otherwise forfeited), shall, by virtue of the
Merger and without any action on the part of the holders thereof, be converted
into the right to receive the number of shares of Parent Common Stock specified
in Schedule 1.5 for each of the Stockholders; and
(iii) each share of Company Stock held in the treasury of the
Company immediately prior to the Effective Time shall be cancelled in the Merger
and cease to exist.
(b) After the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Stock that were outstanding immediately
prior to the Effective Time.
(c) At the Effective Time, all issued and outstanding shares of
Class A Preferred Stock not theretofore converted into shares of Company Common
Stock shall, without any action on the part of the holder of any shares of Class
A Preferred Stock, be converted into that number of shares of Parent Common
Stock that such holder would have been entitled to receive in the Merger had
such holder converted its shares of Class A Preferred Stock into Company Common
Stock prior to the Effective Time. Without limiting the generality of the
foregoing, at or prior to the Effective Time, the Company shall (x) obtain the
consent from the
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holders of a majority of the issued and outstanding shares of Class A Preferred
Stock and Company Common Stock to the amendment of that portion of the Company's
Certificate of Incorporation governing the rights and preferences of the Class A
Preferred Stock to provide for the automatic conversion of all outstanding
shares of Class A Preferred Stock directly into Parent Common Stock at the
Effective Time, all in order to effectuate the transactions contemplated by this
Section 1.5(c).
1.6 Surrender and Exchange of Certificates. Promptly after the Effective
Time and upon (i) surrender of a certificate or certificates representing shares
of Company Stock that were outstanding immediately prior to the Effective Time
and (ii) delivery of a Letter of Transmittal (as described in Section 4 hereof),
Parent shall issue to the record holder of the Company Stock surrendering such
certificate or certificates and Letter of Transmittal, a certificate or
certificates registered in the name of such Stockholder representing the number
of shares of Parent Stock that such Stockholder shall be entitled to receive as
set forth in Section 1.5(a)(ii) hereof. Until the certificate or certificates
are surrendered together with the Letter of Transmittal as contemplated by this
Section 1.6 and Section 4 hereof, each certificate that immediately prior to the
Effective Time represented any outstanding shares of Company Common Stock shall
be deemed at and after the Effective Time to represent only the right to receive
upon surrender as aforesaid the Parent Common Stock specified in Schedule 1.5
hereof for the holder thereof or to perfect any rights of appraisal which such
holder may have pursuant to the applicable provisions of the DGCL.
1.7 Stock Options and Warrants.
(a) At the Effective Time, the terms of each outstanding employee
stock option granted by the Company to purchase shares of Company Common Stock
(a "Company Stock Option") under the 2000 Stock Incentive Plan of the Company
(the "Company Incentive Plan"), whether vested or unvested, shall be amended by
action of the Board of Directors of the Company to provide that, at the
Effective Time, each Company Stock Option outstanding immediately prior to the
Effective Time shall be deemed to constitute and shall become an option to
acquire, on the same terms and conditions as were applicable under such Company
Stock Option, the same number of shares of Parent Common Stock (the "Parent
Stock Options") as the holder of such Company Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such
Company Stock Option in full immediately prior to the Effective Time, at a price
per share of Parent Common Stock equal to (i) the aggregate exercise price for
the shares of Company Common Stock otherwise purchasable pursuant to such
Company Stock Option divided by (ii) the aggregate number of shares of Parent
Common Stock deemed purchasable pursuant to such Company Stock Option; provided,
however, that, after aggregating all the shares of a holder subject to Company
Stock Options, any fractional share of Parent Common Stock resulting from such
calculation for such holder shall be rounded up to the nearest whole share; and
provided, further, that in the case of any stock option to which Section 421 of
the Code applies by reason of its qualification under any of Sections 422
through 424 of the Code ("incentive stock options"), the option price, the
number of shares purchasable pursuant to such option, and the terms and
conditions of exercise of such option shall be determined in order to comply
with Section 424 of the Code. Schedule 1.7(a) attached hereto sets forth the
name of each holder of Company Stock Options, the aggregate number of shares of
Company Common Stock which each such person may purchase pursuant to his or her
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Company Stock Options and the aggregate number of shares of Parent Common Stock
which each such person may purchase pursuant to the operation of this Section
1.7(a). In connection with the implementation of this Section 1.7(a), prior to
the Closing, the Board of Directors of the Company has, pursuant to authority
granted to it under the Company Incentive Plan, adopted a resolution modifying
the terms and conditions of the Company Stock Options to provide that, following
the Effective Time, such options shall be exercisable for shares of Parent
Common Stock, in accordance with the provisions of this Section 1.7(a). In
furtherance of the foregoing, Parent agrees to assume at the Effective Time all
the obligations of the Company under the Company Incentive Plan, including,
without limitation, the outstanding Company Stock Options and the obligation to
issue the number of shares of Parent Common Stock set forth on Schedule 1.7(a)
upon the exercise of the Company Stock Options.
(b) (i) At the Effective Time, pursuant to consents from the
requisite percentage of holders thereof obtained by the Company prior to the
Closing, all outstanding warrants issued by the Company to purchase shares of
Company Common Stock which are not Series 1 Warrants (the "Company Warrants"),
will either be exchanged for, converted into or amended to provide that, at the
Effective Time, each Company Warrant so exchanged, converted or amended shall
become, in each case, a warrant to acquire shares of Parent Common Stock on the
same terms and conditions as warrants issued by the Company in the Private
Placement, at a price equal to $1.54 per share of Parent Common Stock (the
"Parent Warrants"). Schedule 1.7(b)(i) attached hereto sets forth the name of
each holder of Company Warrants, the type of Company Warrant held by such
holder, the aggregate number of shares of Company Common Stock which each such
person may purchase pursuant to the exercise of his or her Company Warrants and
the aggregate number of shares of Parent Common Stock which each such person may
purchase upon exercise of Parent Warrants acquired upon such exchange,
conversion or amendment. By its signature hereunder, Parent expressly assumes
(a) the obligation to deliver Parent Warrants at the Effective Time to the
holders of Company Warrants who have exchanged their Company Warrants for Parent
Warrants and (b) the obligation to issue Parent Common Stock to the holders of
Parent Warrants, all in accordance with the provisions of this Section
1.7(b)(i).
(ii) Promptly following the Effective Time, the Company shall
use its best efforts to ensure that each outstanding Series 1 Warrant issued by
the Company to purchase shares of Company Common Stock outstanding immediately
prior to the Effective Time shall be exchanged for a warrant to acquire that
number of Parent Warrants which is equal to the same number of shares of Parent
Common Stock as the holder of such Series 1 Warrant would have been entitled to
receive pursuant to the Merger had such holder exercised such Series 1 Warrant
in full immediately prior to the Effective Time. The Company represents and
warrants that it has received, prior to the Effective Time, written consents
from four holders of Series 1 Warrants to an exchange of such Series 1 Warrants
for Parent Warrants. Schedule 1.7(b)(ii) attached hereto sets forth the name of
each holder of Series 1 Warrants, the aggregate number of shares of Company
Common Stock which each such person may purchase pursuant to the exercise of
such Person's Series 1 Warrants and the aggregate number of shares of Parent
Common Stock which each such Person may purchase upon exercise of Parent
Warrants acquired upon such exchange. By its signature hereunder, Parent
expressly assumes (a) the obligation to deliver Parent Warrants at the Effective
Time to the holders of Series 1 Warrants who have exchanged their Series 1
Warrants for Parent Warrants and (b) the obligation to issue
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Parent Common Stock to the holders of Parent Warrants, all in accordance with
the provisions of this Section 1.7(b)(ii).
(iii) Without limiting the generality of the foregoing, the
Company shall take all corporate actions as may be necessary and desirable in
order to effectuate the transactions contemplated by this Section 1.7(b).
(c) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of: (i) Company Stock Options appropriate notices setting
forth such holders' rights pursuant to the Company Incentive Plan and the
agreements evidencing the grants of such Company Stock Options and that such
Company Stock Options and agreements shall be assumed by Parent and shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 1.7 after giving effect to the Merger); and (ii)
Company Warrants new warrant agreements and/or warrants evidencing such holders'
rights to purchase shares of Parent Common Stock upon the exercise of the Parent
Warrants.
(d) Parent shall take all action necessary and appropriate, on or
prior to the Effective Time, to authorize and reserve a number of shares of
Parent Common Stock sufficient for issuance upon the exercise of Parent Stock
Options and Parent Warrants following the Effective Time as contemplated by this
Section 1.7.
(e) Other than the Company Stock Options and the Company Warrants,
all options, warrants and rights to purchase Company Stock outstanding as of the
Effective Date will be exercised or terminated prior to or effective upon the
Effective Time, and neither Parent nor Acquisition Corp. shall assume or have
any obligation with respect to such options, warrants or rights. 1.8 Unconverted
Series 1 Notes. In the event that any holder of Series 1 Notes shall decline to
convert such notes into Parent Common Stock at the Effective Time, then the
Series 1 Notes shall remain outstanding debt obligations of the Surviving
Corporation following the Closing.
1.9 Parent Common Stock. Parent agrees that it will cause the Parent
Common Stock into which the Company Stock is converted at the Effective Time
pursuant to Section 1.5(a)(ii) to be available for such purpose. Parent further
covenants that, immediately prior to the Effective Time, there will be 8,461,538
shares of Parent Common Stock issued and outstanding, not including the shares
of Parent Common Stock to be issued in the Private Placement.
1.10 Further Assurances. From time to time, from and after the Effective
Time, as and when requested by Parent, Acquisition Corp. or their respective
successors or assigns, the proper officers and directors of the Company as of
the Effective Time shall, for and on behalf and in the name of the Company or
otherwise, shall execute and deliver all such deeds, bills of sale, assignments
and other instruments and shall take or cause to be taken such further actions
as Parent, Acquisition Corp. or their respective successors or assigns may deem
necessary or desirable in order to confirm or record or otherwise transfer to
the Surviving Corporation title to and possession of all of the properties,
rights, privileges, powers, franchises and immunities of
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the Company or otherwise to carry out fully the provisions and purposes of this
Agreement and the Certificate of Merger.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Acquisition Corp. that, except as set
forth on the Company Disclosure Schedules attached hereto, the disclosure of
which on any Schedule shall be deemed adequate disclosure with respect to any
other Schedule:
2.1 Organization, Standing, Etc. The Company is a corporation duly
organized and existing in good standing under the laws of the State of Delaware,
and has all requisite power and authority (corporate and other) to carry on its
business, to own or lease its properties and assets, to enter into this
Agreement and the Certificate of Merger and to carry out the terms hereof and
thereof. Copies of the Certificate of Incorporation and By-laws of the Company
that have been delivered to Parent and Acquisition Corp. prior to the execution
of this Agreement are true and complete and have not since been amended or
repealed. The Company has no subsidiaries or direct or indirect interest (by way
of stock ownership or otherwise) in any firm, corporation, limited liability
company, partnership, association or business.
2.2 Qualification. The Company is duly qualified to conduct business as
a foreign corporation and is in good standing in each jurisdiction wherein the
nature of its activities or its properties owned or leased makes such
qualification necessary, except where the failure to be so qualified could not
reasonably be expected to have a material adverse effect on the properties,
assets, liabilities or results of operations of the Company taken as a whole
("Material Adverse Effect"). Schedule 2.2 sets forth a list of the jurisdictions
in which the Company is so qualified to conduct business.
2.3 Capitalization of Company. The authorized capital stock of the
Company consists of 70,000,000 shares of Company Common Stock and 2,500,000
shares of Class A Preferred Stock, and the Company has no authority to issue any
other capital stock. There are 25,524,467 shares of Company Common Stock issued
and outstanding and 982,884 shares of Class A Preferred Stock issued and
outstanding, and such shares are duly authorized, validly issued, fully paid and
nonassessable, and none of such shares have been issued in violation of the
preemptive rights of any person. After the conversion into shares of Company
Common Stock of the outstanding shares of Class A Preferred Stock, the
outstanding balance owed under the Series 2 Notes and substantially all of the
indebtedness outstanding under the Series 1 Notes, and in the case of the Series
1 and Series 2 Notes, accrued interest as applicable, the Company has
approximately 36,271,014 shares of Company Common Stock outstanding. As of the
Effective Time, there is not more than $270,000 in aggregate principal amount of
indebtedness, plus approximately $23,465 of accrued interest thereon, under the
Series 1 Notes outstanding. Except as disclosed on Schedule 2.3, the offer,
issuance and sale of such shares of Company Stock were (a) exempt from the
registration requirements of the Securities Act, (b) registered or qualified (or
were exempt from registration or qualification) under the registration or
qualification requirements of all applicable state securities laws and (c)
accomplished in conformity with all other applicable securities laws. Except as
disclosed in Schedule 2.3, none of such shares of Company Stock are subject to a
right of withdrawal or a right of rescission under any federal or state
securities or blue sky law. Except as disclosed in Schedule 2.5, the Company has
no outstanding options, rights or commitments to issue Company Stock or other
Equity Securities of
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the Company, and there are no outstanding securities convertible or exercisable
into or exchangeable for Company Stock or other Equity Securities of the
Company. The Company has received written waivers executed by each of the
holders of Class A Preferred Stock providing for the waiver of payment of any
and all accrued but unpaid dividends under the terms of the Class A Preferred
Stock.
2.4 Indebtedness. The Company has no Indebtedness for Borrowed Money,
except as disclosed on the Balance Sheet and Schedule 2.12.
2.5 Company Stockholders. Schedule 2.5 hereto contains a true and
complete list of the names and addresses of the record owner of all of the
outstanding Company Stock and other Equity Securities of the Company, together
with the number and percentage of securities held. To the best knowledge of the
Company, except as described in Schedule 2.5, there is no voting trust,
agreement or arrangement among any of the beneficial holders of Company Stock
affecting the nomination or election of directors or the exercise of the voting
rights of Company Stock.
2.6 Corporate Acts and Proceedings. The execution, delivery and
performance of this Agreement and the Certificate of Merger (together, the
"Merger Documents") have been duly authorized by the Board of Directors of the
Company and have been approved by the requisite vote of the Stockholders, and
all of the corporate acts and other proceedings required for the due and valid
authorization, execution, delivery and performance of the Merger Documents and
the consummation of the Merger have been validly and appropriately taken, except
for the filing referred to in Section 1.2.
2.7 Compliance with Laws and Instruments. The execution, delivery and
performance by the Company of the Merger Documents and the consummation by the
Company of the transactions contemplated by this Agreement: (a) will not require
any authorization, consent or approval of, or filing or registration with, any
court or governmental agency or instrumentality, except such as shall have been
obtained prior to the Closing or as set forth in Schedule 2.7, (b) will not
cause the Company to violate or contravene (i) any provision of law, (ii) any
rule or regulation of any agency or government, (iii) any order, judgment or
decree of any court, or (iv) any provision of the Certificate of Incorporation
or By-laws of the Company, (c) will not violate or be in conflict with, result
in a breach of or constitute (with or without notice or lapse of time, or both)
a default under, any indenture, loan or credit agreement, deed of trust,
mortgage, security agreement or other contract, agreement or instrument to which
the Company is a party or by which the Company or any of its properties is bound
or affected, except where any such violation, conflict, breach or default could
not reasonably be expected to have a Material Adverse Effect, and (d) will not
result in the creation or imposition of any Lien upon any property or asset of
the Company. The Company is not in violation of, or (with or without notice or
lapse of time, or both) in default under, any term or provision of its
Certificate of Incorporation or By-laws or any indenture, loan or credit
agreement, deed of trust, mortgage, security agreement, except as could not
reasonably be expected to have a Material Adverse Effect, or any other material
agreement or instrument to which the Company is a party or by which the Company
or any of its properties is bound or affected.
8
2.8 Binding Obligations. The Merger Documents constitute the legal,
valid and binding obligations of the Company and are enforceable against the
Company in accordance with their respective terms, except as such enforcement is
limited by bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity.
2.9 Broker's and Finder's Fees. No Person has, or as a result of the
transactions contemplated herein will have, any right or valid claim against the
Company, Parent, Acquisition Corp. or any Stockholder for any commission, fee or
other compensation as a finder or broker, or in any similar capacity, except as
disclosed in Schedule 2.9 hereto.
2.10 Financial Statements. Attached hereto as Schedule 2.10 are (a) the
Company's audited balance sheet (the "Balance Sheet") as of December 31, 2002
(the "Balance Sheet Date") and 2001, and the audited statements of operations,
members' (deficit) equity and cash flows for the years ended December 31, 2002
and 2001 and for the period from September 7, 1999 (inception) to December 31,
2002, together with the related independent auditors report of Ernst & Young LLP
and (b) the Company's unaudited balance sheets for the nine months ended
September 30, 2003 and September 30, 2002 and the unaudited statements of
operations, shareholders' (deficit) equity and cash flows for the nine months
ended September 30, 2003 and September 30, 2002. Such financial statements (i)
are in accordance with the books and records of the Company, (ii) present fairly
in all material respects the financial condition of the Company at the dates
therein specified and the results of its operations and changes in financial
position for the periods therein specified and (iii) have been prepared in
accordance with U.S. generally accepted accounting principles ("GAAP") applied
on a basis consistent with prior accounting periods.
2.11 Absence of Undisclosed Liabilities. The Company has no material
obligation or liability (whether accrued, absolute, contingent, liquidated or
otherwise, whether due or to become due), arising out of any transaction entered
into at or prior to the Closing, except (a) as disclosed in Schedule 2.11 and/or
Schedule 2.12 hereto, (b) to the extent set forth on or reserved against in the
Balance Sheet or the Notes to the Financial Statements, (c) current liabilities
incurred and obligations under agreements entered into in the usual and ordinary
course of business since the Balance Sheet Date, none of which (individually or
in the aggregate) materially and adversely affects the Condition of the Company,
and (d) by the specific terms of any written agreement, document or arrangement
identified in the Schedules hereto.
2.12 Changes. Since the Balance Sheet Date, except as disclosed in
Schedule 2.12 hereto, the Company has not (a) incurred any debts, obligations or
liabilities, absolute, accrued, or to the Company's knowledge, contingent,
whether due or to become due, except for fees, expenses and liabilities incurred
in connection with the Private Placement, the Merger and related transactions,
and current liabilities incurred in the usual and ordinary course of business,
(b) discharged or satisfied any Liens other than those securing, or paid any
obligation or liability other than, current liabilities shown on the Balance
Sheet and current liabilities incurred since the Balance Sheet Date, in each
case in the usual and ordinary course of business, (c) mortgaged, pledged or
subjected to Lien any of its assets, tangible or intangible, other than in the
usual and ordinary course of business, (d) sold, transferred or leased any of
its assets, except in the usual and ordinary course of business, (e) cancelled
or compromised any debt or claim, or waived or
9
released any right, of material value, (f) suffered any physical damage,
destruction or loss (whether or not covered by insurance) which could reasonably
be expected to have a Material Adverse Effect, (g) entered into any transaction
other than in the usual and ordinary course of business, (h) encountered any
labor union difficulties, (i) made or granted any wage or salary increase or
made any increase in the amounts payable under any profit sharing, bonus,
deferred compensation, severance pay, insurance, pension, retirement or other
employee benefit plan, agreement or arrangement, other than in the ordinary
course of business consistent with past practice, or entered into any employment
agreement, (j) issued or sold any shares of capital stock, bonds, notes,
debentures or other securities or granted any options (including employee stock
options), warrants or other rights with respect thereto, (k) declared or paid
any dividends on or made any other distributions with respect to, or purchased
or redeemed, any of its outstanding capital stock, (l) suffered or experienced
any change in, or condition affecting, the financial condition of the Company
other than changes, events or conditions in the usual and ordinary course of its
business, none of which (either by itself or in conjunction with all such other
changes, events and conditions) could reasonably be expected to have a Material
Adverse Effect, (m) made any change in the accounting principles, methods or
practices followed by it or depreciation or amortization policies or rates
theretofore adopted, (n) made or permitted any amendment or termination of any
material contract, agreement or license to which it is a party, (o) suffered any
material loss not reflected in the Balance Sheet or its statement of income for
the year ended on the Balance Sheet Date, (p) paid, or made any accrual or
arrangement for payment of, bonuses or special compensation of any kind or any
severance or termination pay to any present or former officer, director,
employee, stockholder or consultant, (q) made or agreed to make any charitable
contributions or incurred any non-business expenses in excess of $5,000 in the
aggregate, or (r) entered into any agreement, or otherwise obligated itself, to
do any of the foregoing.
2.13 Schedule of Assets and Contracts. Attached hereto as Schedules
2.13(a) through 2.13(d) are various schedules listing assets and contracts of
the Company, as described herein.
(a) Schedule 2.13(a) contains a true and complete list of all real
property leased by the Company, including a brief description of each item
thereof and of the nature of the Company's interest therein, and of all tangible
personal property owned or leased by the Company having a cost or fair market
value of greater than $10,000, including a brief description of each item and of
the nature of the interest of the Company therein. All the property listed in
Schedule 2.13(a) as being leased by the Company is held by the Company under
valid and enforceable leases having the rental terms, termination dates and
renewal and purchase options described in Schedule 2.13(a); and, to the
Company's knowledge, there is not, under any such lease, any existing default or
event of default or event which with notice or lapse of time, or both, would
constitute a default by the Company, and the Company has not received any notice
or claim of any such default. The Company does not own any real property.
(b) Except as expressly set forth in this Agreement, the Balance
Sheet or the notes thereto, or as disclosed in Schedule 2.13(b) hereto, the
Company is not a party to any written or oral agreement not made in the ordinary
course of business that is material to the Company. Except as disclosed in
Schedule 2.13(b) hereto, the Company is not a party to any written or oral (a)
agreement with any labor union, (b) agreement for the purchase of fixed assets
10
or for the purchase of materials, supplies or equipment in excess of normal
operating requirements, (c) agreement for the employment of any officer,
individual employee or other Person on a full-time basis or any agreement with
any Person for consulting services, (d) bonus, pension, profit sharing,
retirement, stock purchase, stock option, deferred compensation, medical,
hospitalization or life insurance or similar plan, contract or understanding
with respect to any or all of the employees of the Company or any other Person,
(e) indenture, loan or credit agreement, note agreement, deed of trust,
mortgage, security agreement, promissory note or other agreement or instrument
relating to or evidencing Indebtedness for Borrowed Money or subjecting any
asset or property of the Company to any Lien or evidencing any Indebtedness, (f)
guaranty of any Indebtedness, (g) other than as set forth in Schedule 2.13(a)
hereto, lease or agreement under which the Company is lessee of or holds or
operates any property, real or personal, owned by any other Person under which
payments to such Person exceed $20,000 per year or with an unexpired term
(including any period covered by an option to renew exercisable by any other
party) of more than 60 days, (h) lease or agreement under which the Company is
lessor or permits any Person to hold or operate any property, real or personal,
owned or controlled by the Company, (i) agreement granting any preemptive right,
right of first refusal or similar right to any Person, (j) agreement or
arrangement with any Affiliate or any "associate" (as such term is defined in
Rule 405 under the Securities Act) of the Company or any present or former
officer, director or stockholder of the Company, (k) agreement obligating the
Company to pay any royalty or similar charge for the use or exploitation of any
tangible or intangible property, (1) covenant not to compete or other
restriction on its ability to conduct a business or engage in any other
activity, (m) distributor, dealer, manufacturer's representative, sales agency,
franchise or advertising contract or commitment, (n) agreement to register
securities under the Securities Act, (o) collective bargaining agreement, or (p)
agreement or other commitment or arrangement with any Person continuing for a
period of more than three months from the Closing Date which involves an
expenditure or receipt by the Company in excess of $20,000. Except as disclosed
in Schedule 2.13(b), none of the agreements, contracts, leases, instruments or
other documents or arrangements listed in Schedules 2.13(a) through 2.13(d)
requires the consent of any of the parties thereto other than the Company to
permit the contract, agreement, lease, instrument or other document or
arrangement to remain effective following consummation of the Merger and the
transactions contemplated hereby.
(c) Schedule 2.13(c) contains a true and complete list and
description of all insurance policies and insurance coverage with respect to the
Company, its business, premises, properties, assets, employees and agents
including, without limitation, fire and casualty insurance, property and
liability insurance, product liability insurance, life insurance, medical and
hospital insurance and workers' compensation insurance.
(d) Schedule 2.13(d) contains a true and complete list of all
patents, patent applications, trade names, trademarks, trademark registrations
and applications, copyrights, copyright registrations and applications, and
grants of licenses, both domestic and foreign, presently owned, possessed, used
or held by the Company; and, except as set forth in Schedule 2.16, the Company
owns the entire right, title and interest in and to the same, free and clear of
all Liens and restrictions. Schedule 2.13(d) also contains a true and complete
list of all licenses granted to or by the Company with respect to the foregoing.
Except as disclosed in Schedule 2.13(d), none of the Company's patents, patent
applications, trade names, trademarks, trademark registrations and applications,
copyrights, copyright registrations and applications and
11
grants of licenses set forth in Schedule 2.13(d) are subject to any pending or,
to the knowledge of the Company, threatened challenge. Neither the execution nor
delivery of the Merger Documents, nor the consummation of the transactions
contemplated thereby will give any licensor or licensee of the Company any right
to change the terms or provisions of, terminate or cancel, any license to which
the Company is a party.
(e) The Company has furnished to Parent and Acquisition Corp. true
and complete copies of all agreements and other documents and a description of
all applicable oral agreements disclosed or referred to in Schedules 2.13(a)
through 2.13(d), as well as any additional agreements or documents, requested by
Parent or Acquisition Corp. The Company has in all material respects performed
all obligations required to be performed by it to date and is not in default in
any respect under any of the contracts, agreements, leases, documents,
commitments or other arrangements to which it is a party or by which it or any
of its property is otherwise bound or affected. To the best knowledge of the
Company, all parties having material contractual arrangements with the Company
are in substantial compliance therewith and none are in material default
thereunder. The Company does not have outstanding any power of attorney.
2.14 Employees. The Company has complied in all material respects with
all laws relating to the employment of labor, and the Company has encountered no
material labor union difficulties. Except as set forth in Schedule 2.14, and
other than pursuant to ordinary arrangements of employment compensation, the
Company is not under any obligation or liability to any officer, director or
employee of the Company.
2.15 Tax Returns and Audits. All required federal, state and local Tax
Returns of the Company have been accurately prepared in all material respects
and duly and timely filed, and all federal, state and local Taxes required to be
paid with respect to the periods covered by such returns have been paid to the
extent that the same are material and have become due, except where the failure
so to file or pay could not reasonably be expected to have a Material Adverse
Effect. To the knowledge of the Company, the Company is not and has not been
delinquent in the payment of any Tax. The Company has not had a Tax deficiency
assessed against it. None of the Company's federal income tax returns nor any
state or local income or franchise tax returns has been audited by governmental
authorities. The reserves for Taxes reflected on the Balance Sheet are
sufficient for the payment of all unpaid Taxes payable by the Company with
respect to the period ended on the Balance Sheet Date. There are no federal,
state, local or foreign audits, actions, suits, proceedings, investigations,
claims or administrative proceedings relating to Taxes or any Tax Returns of the
Company now pending, and the Company has not received any notice of any proposed
audits, investigations, claims or administrative proceedings relating to Taxes
or any Tax Returns.
2.16 Patents and Other Intangible Assets. (a) Except as set forth in
Schedule 2.16, the Company (i) owns or has the right to use, free and clear of
all Liens, claims and restrictions, all patents, trademarks, service marks,
trade names, copyrights, licenses and rights with respect to the foregoing used
in or necessary for the conduct of its business as now conducted or proposed to
be conducted without infringing upon a claimed right of any Person under or with
respect to any of the foregoing and (ii) is not obligated to make any payments
by way of royalties, fees or otherwise to any owner or licensor of, any patent,
trademark, service
12
xxxx, trade name, copyright or other intangible asset, with respect to the use
thereof or in connection with the conduct of its business.
(b) To the knowledge of the Company, the Company owns or has the
unrestricted right to use all trade secrets, if any, including know-how,
negative know-how, formulas, patterns, programs, devices, methods, techniques,
inventions, designs, processes, computer programs and technical data
(collectively, "intellectual property") required for the development, operation
and sale of its ComfortScan product, and all related technologies and products.
2.17 Employee Benefit Plans; ERISA. (a)Except as disclosed in Schedule
2.17 hereto, there are no "employee benefit plans" (within the meaning of
Section 3(3) of the ERISA) nor any other employee benefit or fringe benefit
arrangements, practices, contracts, policies or programs other than programs
merely involving the regular payment of wages, commissions, or bonuses
established, maintained or contributed to by the Company. The plans listed in
Schedule 2.17 hereto are hereinafter referred to as the "Employee Benefit
Plans."
(b) All current and prior material documents, including all
amendments thereto, with respect to each Employee Benefit Plan have been given
to Parent and Acquisition Corp. or their advisors.
(c) All Employee Benefit Plans are in material compliance with the
applicable requirements of ERISA, the Internal Revenue Code of 1986, as amended
(the "Code") and any other applicable state, federal or foreign law.
(d) There are no pending, or to the knowledge of the Company,
threatened, claims or lawsuits which have been asserted or instituted against
any Employee Benefit Plan, the assets of any of the trusts or funds under the
Employee Benefit Plans, the plan sponsor or the plan administrator of any of the
Employee Benefit Plans or against any fiduciary of an Employee Benefit Plan with
respect to the operation of such plan.
(e) There is no pending, or to the knowledge of the Company,
threatened, investigation or pending or possible enforcement action by the
Pension Benefit Guaranty Corporation, the Department of Labor, the Internal
Revenue Service or any other government agency with respect to any Employee
Benefit Plan.
(f) No actual, or to the knowledge of the Company contingent,
liability exists with respect to the funding of any Employee Benefit Plan or for
any other expense or obligation of any Employee Benefit Plan, except as
disclosed on the financial statements of the Company or the Schedules to this
Agreement, and to the knowledge of the Company, no contingent liability exists
under ERISA with respect to any "multi-employer plan," as defined in Section
3(37) or Section 4001(a)(3) of ERISA.
2.18 Title to Property and Encumbrances. The Company has good and valid
title to all properties and assets used in the conduct of its business free of
all Liens (except as set forth in Schedule 2.16) and other encumbrances, except
Permitted Liens and such ordinary and customary imperfections of title,
restrictions and encumbrances as could not reasonably be expected to have a
Material Adverse Effect.
13
2.19 Insurance Coverage. There is in full force and effect one or more
policies of insurance issued by insurers of recognized responsibility, insuring
the Company and its properties, products and business against such losses and
risks, and in such amounts, as are customary for corporations of established
reputation engaged in the same or similar business and similarly situated. No
suit, proceeding or action or threat of suit, proceeding or action has been
asserted or made against the Company within the last five years due to alleged
bodily injury, disease, medical condition, death or property damage arising out
of the function or malfunction of a product, procedure or service designed,
manufactured, sold or distributed by the Company.
2.20 Litigation. Except as disclosed in Schedule 2.20 hereto, there is
no legal action, suit, arbitration or other legal, administrative or other
governmental proceeding pending or, to the knowledge of the Company, threatened
against or affecting the Company or its properties, assets or business. To the
knowledge of the Company, Company is not in default with respect to any order,
writ, judgment, injunction, decree, determination or award of any court or any
governmental agency or instrumentality or arbitration authority.
2.21 Licenses. Other than governmental approvals for (i) the Company's
fifth module of its FDA pre-market approval application, and (ii) the
ComfortScan device as an adjunct to mammography, the Company possesses from all
appropriate governmental authorities (including, without limitation, the FDA)
all material licenses, permits, authorizations, approvals, franchises and rights
necessary for the Company to engage in the business currently conducted by it.
2.22 Interested Party Transactions. Except as disclosed in Schedule 2.22
hereto, no officer, director or stockholder of the Company or any Affiliate or
"associate" (as such term is defined in Rule 405 under the Securities Act) of
any such Person or the Company has or has had, either directly or indirectly,
(a) an interest in any Person that (i) furnishes or sells services or products
that are furnished or sold or are proposed to be furnished or sold by the
Company or (ii) purchases from or sells or furnishes to the Company any goods or
services, or (b) a beneficial interest in any contract or agreement to which the
Company is a party or by which it may be bound or affected.
2.23 Hazardous Waste. To the knowledge of the Company, there is no
substance or material defined or designated as hazardous or toxic waste,
material, substance or other similar term, by any environmental statute,
regulation or ordinance currently in effect, on, about, or in any of the real
property in which the Company now has or previously had any leasehold or
ownership interest.
2.24 Customers, Suppliers and Independent Contractors. Since the Balance
Sheet Date, the Company has not been advised that any customer, supplier or
independent contractor of the Company intends to terminate or materially curtail
its business relationship with the Company.
2.25 Questionable Payments. Neither the Company nor to the knowledge of
the Company, any director, officer, agent, employee or other Person associated
with or acting on behalf of the Company, has used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect
14
unlawful payments to government officials or employees from corporate funds;
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; made any false or fictitious entries on the books of record of any
such corporations; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
2.26 Obligations to or by Stockholders. Except as disclosed in Schedule
2.26, the Company has no liability or obligation or commitment to any
Stockholder or any Affiliate or "associate" (as such term is defined in Rule 405
under the Securities Act) of any Stockholder, nor does any Stockholder or any
such Affiliate or associate have any liability, obligation or commitment to the
Company.
2.27 Disclosure. No representation or warranty by the Company herein and
no information disclosed in the schedules or exhibits hereto by the Company or
in the Confidential Private Placement Memorandum, dated October 22, 2003, as
supplemented (except as to information relating to Parent or Acquisition Corp.)
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.
3. Representations and Warranties of Parent and Acquisition Corp. Parent
and Acquisition Corp. represent and warrant to the Company as follows:
3.1 Organization and Standing. Parent is a corporation duly organized
and existing in good standing under the laws of the State of Nevada. Acquisition
Corp. is a corporation duly organized and existing in good standing under the
laws of the State of Delaware. Parent and Acquisition Corp. have heretofore
delivered to the Company complete and correct copies of their respective
Certificates of Incorporation and By-laws as now in effect. Parent and
Acquisition Corp. have full corporate power and authority to carry on their
respective businesses as they are now being conducted and as now proposed to be
conducted and to own or lease their respective properties and assets. Neither
Parent nor Acquisition Corp. has any subsidiaries (except Parent's ownership of
Acquisition Corp.) or direct or indirect interest (by way of stock ownership or
otherwise) in any firm, corporation, limited liability company, partnership,
association or business. Parent owns all of the issued and outstanding capital
stock of Acquisition Corp. free and clear of all Liens, and Acquisition Corp.
has no outstanding options, warrants or rights to purchase capital stock or
other equity securities of Acquisition Corp., other than the capital stock owned
by Parent. Unless the content otherwise requires, all references in this Section
3 to the "Parent" shall be treated as being a reference to the Parent and
Acquisition Corp. taken together as one enterprise. Each of Parent and
Acquisition Corp. is, or as of the Effective Time, will be, duly qualified to
conduct business as a foreign corporation and is in good standing in each
jurisdiction wherein the nature of its activities or its properties owned or
leased makes such qualification necessary, except where the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect on
Parent or Acquisition Corp., as the case may be.
3.2 Corporate Authority. Each of Parent and/or Acquisition Corp. (as the
case may be) has full corporate power and authority to enter into the Merger
Documents and the other agreements to be made pursuant to the Merger Documents,
and to carry out the transactions contemplated hereby and thereby. All corporate
acts and proceedings required for the
15
authorization, execution, delivery and performance of the Merger Documents and
such other agreements and documents by Parent and/or Acquisition Corp. (as the
case may be) have been duly and validly taken or will have been so taken prior
to the Closing.
3.3 Broker's and Finder's Fees. No person, firm, corporation or other
entity is entitled by reason of any act or omission of Parent or Acquisition
Corp. to any broker's or finder's fees, commission or other similar compensation
with respect to the execution and delivery of this Agreement or the Certificate
of Merger, or with respect to the consummation of the transactions contemplated
hereby or thereby, except as disclosed in Schedule 3.3 hereto.
3.4 Capitalization of Parent. The authorized capital stock of Parent
consists of (a) 100,000,000 shares of common stock, par value $.0001 per share
(the "Parent Common Stock"), of which 8,461,538 shares are issued and
outstanding on the date hereof, prior to taking into consideration the issuance
of Parent Common Stock in the Private Placement and the Merger, and after taking
into consideration the cancellation of Parent Common Stock as indicated in
Section 6.3(i) hereof. Schedule 3.4 hereto contains a true and complete list of
the name and addresses of the record owners of all of the outstanding Parent
Common Stock and other Equity Securities of Parent as of the date hereof,
together with the number and percentage of securities held. Parent has no
outstanding options, rights or commitments to issue shares of Parent Common
Stock or any other Equity Security of Parent or Acquisition Corp., and there are
no outstanding securities convertible or exercisable into or exchangeable for
shares of Parent Common Stock or other any Equity Security of Parent or
Acquisition Corp To the best knowledge of Parent, there is no voting trust,
agreement or arrangement among any of the beneficial holders of Parent Common
Stock affecting the nomination or election of directors or the exercise of the
voting rights of Parent Common Stock. All outstanding shares of the capital
stock of Parent are validly issued and outstanding, fully paid and
nonassessable, and none of such shares have been issued in violation of the
preemptive rights of any person.
3.5 Indebtedness. Neither the Parent nor Acquisition Corp. has any
Indebtedness for Borrowed Money.
3.6 Acquisition Corp. Acquisition Corp. is a wholly-owned subsidiary of
Parent that was formed specifically for the purpose of the Merger and that has
not conducted any business or acquired any property, and will not conduct any
business or acquire any property, prior to the Closing Date, except in
preparation for and otherwise in connection with the transactions contemplated
by this Agreement, the Certificate of Merger and the other agreements to be made
pursuant to or in connection with this Agreement and the Certificate of Merger.
3.7 Validity of Shares. The 29,200,112 shares of Parent Common Stock to
be issued at the Closing pursuant to Section 1.5(a)(ii) hereof, when issued and
delivered in accordance with the terms hereof and of the Certificate of Merger,
shall be duly and validly issued, fully paid and nonassessable. Based in part on
the representations and warranties of the Stockholders as contemplated by
Section 4 hereof and assuming the accuracy thereof, the issuance of the Parent
Common Stock upon the Merger pursuant to Section 1.5(a)(ii) will be exempt from
the registration and prospectus delivery requirements of the Securities Act and
from the qualification or registration requirements of any applicable state blue
sky or securities laws.
16
3.8 SEC Reporting and Compliance.
(a) Parent filed a registration statement on Form SB-2 under the
Securities Act which became effective on February 1, 2002 and was not withdrawn,
and a registration statement on Form 10-SB under the Exchange Act, which became
effective on October 15, 2001. Since October 15, 2001 and except as set forth on
Schedule 3.8, Parent has timely filed with the Commission all registration
statements, proxy statements, information statements and reports required to be
filed pursuant to the Exchange Act. Parent has not filed with the Commission a
certificate on Form 15 pursuant to Rule 12h-3 of the Exchange Act.
(b) Parent has delivered to the Company true and complete copies of
the registration statements, information statements and other reports
(collectively, the "Parent SEC Documents") filed by the Parent with the
Commission. None of the Parent SEC Documents, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements contained therein not misleading.
(c) Except as set forth on Schedule 3.8, Parent has not filed, and
nothing has occurred with respect to which Parent would be required to file, any
report on Form 8-K since January 1, 2003. Prior to and until the Closing, Parent
will provide to the Company copies of any and all amendments or supplements to
the Parent SEC Documents filed with the Commission since January 1, 2003 and all
subsequent registration statements and reports filed by Parent subsequent to the
filing of the Parent SEC Documents with the Commission and any and all
subsequent information statements, proxy statements, reports or notices filed by
the Parent with the Commission or delivered to the stockholders of Parent.
(d) Parent is not an investment company within the meaning of
Section 3 of the Investment Company Act.
(e) The shares of Parent Common Stock are quoted on the
Over-the-Counter (OTC) Bulletin Board under the symbol "LGIV.OB," and Parent is
in compliance in all material respects with all rules and regulations of the OTC
Bulletin Board applicable to it and the Parent Stock.
(f) The Parent has complied in all material respects with the
Securities Act, Exchange Act and all other applicable federal and state
securities laws.
3.9 Financial Statements. The balance sheets, and statements of income,
changes in financial position and stockholders' equity contained in the Parent
SEC Documents (i) have been prepared in accordance with GAAP applied on a basis
consistent with prior periods (and, in the case of unaudited financial
information, on a basis consistent with year-end audits), (ii) are in accordance
with the books and records of the Parent, and (iii) present fairly in all
material respects the financial condition of the Parent at the dates therein
specified and the results of its operations and changes in financial position
for the periods therein specified. The financial statements included in the
Annual Report on Form 10-KSB for the fiscal year ended July 31, 2003 (the
"Parent Financial Statements") are audited by, and include the related opinions
of Xxxxx Xxxxxxxx Xxxxx Xxxxxx Ltd., Chartered Accountants, Parent's independent
17
certified public accountants. The financial information included in the
Quarterly Reports on Form 10-QSB for the quarters ended October 31, 2002,
January 31, 2003, April 30, 2003 and October 31, 2003 are unaudited, but reflect
all adjustments (including normally recurring accounts) that Parent considers
necessary for a fair presentation of such information in accordance with GAAP.
3.10 Governmental Consents. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with any federal or state governmental authority on the part of
Parent or Acquisition Corp. required in connection with the consummation of the
Merger shall have been obtained prior to, and be effective as of, the Closing.
3.11 Compliance with Laws and Other Instruments. The execution, delivery
and performance by Parent and/or Acquisition Corp. of the Merger Documents and
the consummation by them of the transactions contemplated by this Agreement: (a)
will not require any authorization, consent or approval of, or filing or
registration with, any court or governmental agency or instrumentality, except
(i) such as shall have been obtained prior to the Closing, (ii) the filing of
the Certificate of Merger with the State of Delaware, or (iii) as set forth in
Schedule 3.11; (b) will not cause the Parent and/or Acquisition Corp. to violate
or contravene (i) any provision of law, (ii) any rule or regulation of any
agency or government, (iii) any order, judgment or decree of any court, or (iv)
any provision of their respective Certificates of Incorporation or By-laws; (c)
will not violate or be in conflict with, result in a breach of or constitute
(with or without notice or lapse of time, or both) a default under, any
indenture, loan or credit agreement, deed of trust, mortgage, security agreement
or other material contract, agreement or instrument to which the Parent or
Acquisition Corp. is a party or by which the Parent or Acquisition Corp. or any
of their respective properties are bound or affected, except where any such
violation, conflict, breach or default could not reasonably be expected to have
a Material Adverse Effect; and (d) will not result in the creation or imposition
of any Lien upon any property or asset of the Parent or Acquisition Corp.
Neither Parent nor Acquisition Corp. is in violation of, or (with or without
notice or lapse of time, or both) in default under, any term or provision of
their respective Certificates of Incorporation or By-laws or any indenture, loan
or credit agreement, deed of trust, mortgage, security agreement, except as
could not reasonably be expected to have a Material Adverse Effect on the
Parent, or any other material agreement or instrument to which the Parent and/or
Acquisition Corp. is a party or by which they or any of their respective
properties are bound or affected.
3.12 Binding Obligations. The Merger Documents constitute the legal,
valid and binding obligations of the Parent and Acquisition Corp., and are
enforceable against the Parent and Acquisition Corp., in accordance with their
respective terms, except as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity.
3.13 No General Solicitation. In issuing Parent Common Stock in the
Merger and pursuant to the Private Placement, neither Parent nor, to its
knowledge, anyone acting on its behalf has offered to sell the Parent Common
Stock by any form of general solicitation or advertising.
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3.14 Absence of Undisclosed Liabilities. Neither Parent nor Acquisition
Corp. has any material obligation or liability (whether accrued, absolute,
contingent, liquidated or otherwise, whether due or to become due), arising out
of any transaction entered into at or prior to the Closing, except (a) as
disclosed in the Parent SEC Documents, (b) to the extent set forth on or
reserved against in the balance sheet of Parent as of July 31, 2003 (the "Parent
Balance Sheet") or the Notes to the Parent Financial Statements, (c) current
liabilities incurred and obligations under agreements entered into in the usual
and ordinary course of business since July 31, 2003 (the "Parent Balance Sheet
Date"), none of which (individually or in the aggregate) materially and
adversely affects the financial condition of the Parent or Acquisition Corp.,
and (d) by the specific terms of any written agreement, document or arrangement
attached as an exhibit to the Parent SEC Documents.
3.15 Changes. Since the Parent Balance Sheet Date, except as disclosed
in the Parent SEC Documents, the Parent has not (a) incurred any debts,
obligations or liabilities, absolute, accrued or, to the Parent's knowledge,
contingent, whether due or to become due, except for current liabilities
incurred in the usual and ordinary course of business, (b) discharged or
satisfied any Liens other than those securing, or paid any obligation or
liability other than, current liabilities shown on the Parent Balance Sheet and
current liabilities incurred since the Parent Balance Sheet Date, in each case
in the usual and ordinary course of business, (c) mortgaged, pledged or
subjected to Lien any of its assets, tangible or intangible, other than in the
usual and ordinary course of business, (d) sold, transferred or leased any of
its assets, except in the usual and ordinary course of business, (e) cancelled
or compromised any debt or claim, or waived or released any right of material
value, (f) suffered any physical damage, destruction or loss (whether or not
covered by insurance) which could reasonably be expected to have a Material
Adverse Effect on the Parent, (g) entered into any transaction other than in the
usual and ordinary course of business, (h) encountered any labor union
difficulties, (i) made or granted any wage or salary increase or made any
increase in the amounts payable under any profit sharing, bonus, deferred
compensation, severance pay, insurance, pension, retirement or other employee
benefit plan, agreement or arrangement, other than in the ordinary course of
business consistent with past practice, or entered into any employment
agreement, (j) issued or sold any shares of capital stock, bonds, notes,
debentures or other securities or granted any options (including employee stock
options), warrants or other rights with respect thereto, (k) declared or paid
any dividends on or made any other distributions with respect to, or purchased
or redeemed, any of its outstanding capital stock, (1) suffered or experienced
any change in, or condition affecting, the financial condition of the Parent
other than changes, events or conditions in the usual and ordinary course of its
business, none of which (either by itself or in conjunction with all such other
changes, events and conditions) could reasonably be expected to have a Material
Adverse Effect on the Parent, (m) made any change in the accounting principles,
methods or practices followed by it or depreciation or amortization policies or
rates theretofore adopted, (n) made or permitted any amendment or termination of
any material contract, agreement or license to which it is a party, (o) suffered
any material loss not reflected in the Parent Balance Sheet or its statement of
income for the year ended on the Parent Balance Sheet Date, (p) paid, or made
any accrual or arrangement for payment of, bonuses or special compensation of
any kind or any severance or termination pay to any present or former officer,
director, employee, stockholder or consultant, (q) made or agreed to make any
charitable contributions or incurred any non-business expenses in excess of
$5,000 in the aggregate, or (r) entered into any agreement, or otherwise
obligated itself, to do any of the foregoing.
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3.16 Tax Returns and Audits. All required federal, state and local Tax
Returns of the Parent have been accurately prepared in all material respects and
duly and timely filed, and all federal, state and local Taxes required to be
paid with respect to the periods covered by such returns have been paid to the
extent that the same are material and have become due, except where the failure
so to file or pay could not reasonably be expected to have a Material Adverse
Effect upon the Parent. The Parent is not and has not been delinquent in the
payment of any Tax. The Parent has not had a Tax deficiency assessed against it.
None of the Parent's federal income tax returns nor any state or local income or
franchise tax returns has been audited by governmental authorities. The reserves
for Taxes reflected on the Parent Balance Sheet are sufficient for the payment
of all unpaid Taxes payable by the Parent with respect to the period ended on
the Parent Balance Sheet Date. There are no federal, state, local or foreign
audits, actions, suits, proceedings, investigations, claims or administrative
proceedings relating to Taxes or any Tax Returns of the Parent now pending, and
the Parent has not received any notice of any proposed audits, investigations,
claims or administrative proceedings relating to Taxes or any Tax Returns.
3.17 Employee Benefit Plans; ERISA. (a) Except as disclosed in the
Parent SEC Documents, there are no "employee benefit plans" (within the meaning
of Section 3(3) of ERISA) nor any other employee benefit or fringe benefit
arrangements, practices, contracts, policies or programs other than programs
merely involving the regular payment of wages, commissions, or bonuses
established, maintained or contributed to by the Parent. Any plans listed in the
Parent SEC Documents are hereinafter referred to as the "Parent Employee Benefit
Plans."
(b) Any current and prior material documents, including all
amendments thereto, with respect to each Parent Employee Benefit Plan have been
given to the Company or its advisors.
(c) All Parent Employee Benefit Plans are in material compliance
with the applicable requirements of ERISA, the Code and any other applicable
state, federal or foreign law.
(d) There are no pending, or to the knowledge of the Parent,
threatened, claims or lawsuits which have been asserted or instituted against
any Parent Employee Benefit Plan, the assets of any of the trusts or funds under
the Parent Employee Benefit Plans, the plan sponsor or the plan administrator of
any of the Parent Employee Benefit Plans or against any fiduciary of a Parent
Employee Benefit Plan with respect to the operation of such plan.
(e) There is no pending, or to the knowledge of the Parent,
threatened, investigation or pending or possible enforcement action by the
Pension Benefit Guaranty Corporation, the Department of Labor, the Internal
Revenue Service or any other government agency with respect to any Parent
Employee Benefit Plan.
(f) No actual or contingent liability exists with respect to the
funding of any Parent Employee Benefit Plan or for any other expense or
obligation of any Parent Employee Benefit Plan, except as disclosed on the
financial statements of the Parent or the
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Parent SEC Documents, and to the knowledge of the Parent, no contingent
liability exists under ERISA with respect to any "multi-employer plan," as
defined in Section 3(37) or Section 4001(a)(3) of ERISA.
3.18 Litigation. Except as disclosed in the Parent SEC Documents, there
is no legal action, suit, arbitration or other legal, administrative or other
governmental proceeding pending or, to the knowledge of the Parent, threatened
against or affecting the Parent or Acquisition Corp. or their properties, assets
or business. To the knowledge of the Parent, neither Parent nor Acquisition
Corp. is in default with respect to any order, writ, judgment, injunction,
decree, determination or award of any court or any governmental agency or
instrumentality or arbitration authority.
3.19 Interested Party Transactions. Except as disclosed in the Parent
SEC Documents or on Schedule 3.19, no officer, director or stockholder of the
Parent or any Affiliate or "associate" (as such term is defined in Rule 405
under the Securities Act) of any such Person or the Parent has or has had,
either directly or indirectly, (a) an interest in any Person that (i) furnishes
or sells services or products that are furnished or sold or are proposed to be
furnished or sold by the Parent or (ii) purchases from or sells or furnishes to
the Parent any goods or services, or (b) a beneficial interest in any contract
or agreement to which the Parent is a party or by which it may be bound or
affected.
3.20 Questionable Payments. Neither the Parent, Acquisition Corp. nor to
the knowledge of the Parent, any director, officer, agent, employee or other
Person associated with or acting on behalf of the Parent or Acquisition Corp.,
has used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity; made any direct or
indirect unlawful payments to government officials or employees from corporate
funds; established or maintained any unlawful or unrecorded fund of corporate
monies or other assets; made any false or fictitious entries on the books of
record of any such corporations; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
3.21 Obligations to or by Stockholders. Except as disclosed in the
Parent SEC Documents or on Schedule 3.19, the Parent has no liability or
obligation or commitment to any stockholder of Parent or any Affiliate or
"associate" (as such term is defined in Rule 405 under the Securities Act) of
any stockholder of Parent, nor does any stockholder of Parent or any such
Affiliate or associate have any liability, obligation or commitment to the
Parent.
3.22 Disclosure. No representation or warranty by Parent herein and no
information disclosed in the schedules or exhibits hereto by Parent contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein misleading.
4. Additional Representations, Warranties and Covenants of the
Stockholders. Promptly after the Effective Time, Parent shall cause to be mailed
to each holder of record of Company Stock that was converted pursuant to Section
1.5 hereof into the right to receive Parent Common Stock a letter of transmittal
("Letter of Transmittal") in substantially the form attached hereto as Exhibit E
which shall contain the following representations, warranties and covenants of
such Stockholder, (i) such Stockholder has full right, power and authority to
deliver such
21
Company Stock and Letter of Transmittal, (ii) such Stockholder has good,
valid and marketable title to all shares of Company Stock indicated in such
Letter of Transmittal and that such Stockholder is not affected by any voting
trust, agreement or arrangement affecting the voting rights of such Company
Stock, (iii) such Stockholder is an "accredited investor," as such term is
defined in Regulation D under the Securities Act and that such Stockholder is
acquiring Parent Common Stock for investment purposes, and not with a view to
selling or otherwise distributing such Parent Common Stock in violation of the
Securities Act or the securities laws of any state, and (iv) such Stockholder
has had an opportunity to ask and receive answers to any questions such
Stockholder may have had concerning the terms and conditions of the Merger and
the Parent Common Stock and has obtained any additional information that such
Stockholder has requested. Delivery shall be effected, and risk of loss and
title to the Parent Common Stock shall pass, only upon delivery to the Parent
(or an agent of the Parent) of (x) certificates evidencing ownership thereof as
contemplated by Section 1.6 hereof (or affidavit of lost certificate), and (y)
the Letter of Transmittal containing the representations, warranties and
covenants contemplated by this Section 4.
5. Additional Agreements.
5.1 Access and Information. The Company, Parent and Acquisition Corp.
shall each afford to the other and to the other's accountants, counsel and other
representatives full access, during normal business hours throughout the period
prior to the Effective Time, to all of its properties, books, contracts,
commitments and records (including but not limited to tax returns) and during
such period, each shall furnish promptly to the other all information concerning
its business, properties and personnel as such other party may reasonably
request, provided that no investigation pursuant to this Section 6.1 shall
affect any representations or warranties made herein. Each party shall hold, and
shall cause its employees and agents to hold, in strict confidence, all such
information (other than such information which: (i) is already in such party's
possession; (ii) becomes generally available to the public other than as a
result of a disclosure by such party or its directors, officers, managers,
employees, agents or advisors; or (iii) becomes available to such party on a
non-confidential basis from a source other than a party hereto or its advisors
provided that such source is not known by such party to be bound by a
confidentiality agreement with or other obligation of secrecy to a party hereto
or another party until such time as such information is otherwise publicly
available; provided, however, that (A) any such information may be disclosed to
such party's directors, officers, employees and representatives of such party's
advisors who need to know such information for the purpose of evaluating the
transactions contemplated hereby (it being understood that such directors,
officers, employees and representatives shall be informed by such party of the
confidential nature of such information), (B) any disclosure of such information
may be made as to which the party hereto furnishing such information has
consented in writing, and (C) any such information may be disclosed pursuant to
a judicial, administrative or governmental order or request, provided, however,
that the requested party will promptly so notify the other party so that the
other party may seek a protective order or appropriate remedy and/or waive
compliance with this Agreement and if such protective order or other remedy is
not obtained or the other party waives compliance with this provision, the
requested party will furnish only that portion of such information which is
legally required and will exercise its best efforts to obtain a protective order
or other reliable assurance that confidential treatment will be accorded the
information furnished). If this Agreement is terminated, each party will deliver
to the other all documents and other materials
23
(including copies) obtained by such party or on its behalf from the other
party as a result of this Agreement or in connection herewith, whether so
obtained before or after the execution hereof.
5.2 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In order to obtain any necessary governmental or regulatory
action or non-action, waiver, consent, extension or approval, each of Parent,
Acquisition Corp. and the Company agrees to take all reasonable actions and to
enter into all reasonable agreements as may be necessary to obtain timely
governmental or regulatory approvals and to take such further action in
connection therewith as may be necessary. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and/or directors of Parent,
Acquisition Corp. and the Company shall take all such necessary action.
5.3 Publicity. No party shall issue any press release or public
announcement pertaining to the Merger that has not been agreed upon in advance
by Parent and the Company, except as Parent reasonably determines to be
necessary in order to comply with the rules of the Commission or of the
principal trading exchange or market for Parent Common Stock and after
reasonable advance notice to the Company.
5.4 Appointment of Directors. Immediately following the Effective Time,
(a) Parent shall increase the size of the Board of Directors of Parent to four
(4) members and cause the persons listed as the initial directors in Exhibit D
hereto to be elected to the Board of Directors of Parent, and (b) Parent shall
further increase the size of its Board of Directors to six (6) members and cause
the other persons listed as the directors in Exhibit D to become members of the
Board of Directors of Parent; provided, however, that the actions described in
clause (b) above shall take effect only upon compliance by Parent with the
provisions of Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. If Parent has not filed the information required pursuant to Rule
14f-1 with the Commission prior to the Effective Time it shall file such
information necessary to permit the election of all directors set forth on
Exhibit D attached hereto promptly following the Effective Time. At the first
annual meeting of Parent stockholders and thereafter, the affirmative vote of
the holders of a majority of the shares of Parent Common Stock present or
represented at each annual meeting of stockholders shall be required to elect
members of Parent's Board of Directors.
5.5 Parent Name Change and Exchange Listing. Promptly following the
Effective Time, Parent shall take all required legal actions to (a) change its
corporate name to DOBI Medical International, Inc. by means of a reincorporation
in the State of Delaware and (b) upon satisfaction of the original listing
requirements, list the Parent Stock for trading on the American Stock Exchange.
5.6 Registration Rights Agreement. As of the Effective Time, Parent
shall enter into a Registration Rights Agreement for the benefit of the
Stockholders, on substantially the terms set forth in the form of agreement
attached as Exhibit F.
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5.7 Strategic Consulting Agreement. As of the Effective Time, Parent
shall enter into a consulting agreement with Verus Support Services Inc. ("Verus
Support Services") for strategic advisory services, on substantially the terms
set forth in the form of agreement attached as Exhibit G.
5.8 Investor Relations Agreement. As of the Effective Time, Parent shall
enter into an investor relations agreement with Strategic Initiatives Inc.,
regarding the creation and execution of a capital markets plan on substantially
the terms set forth in the form of agreement attached as Exhibit H.
5.9 Lock-Up Letters. As of the Effective Time, lock-up letters, on
substantially the terms set forth in the form of lock-up letter attached as
Exhibit I hereto, shall have been executed by those Stockholders reasonably
requested to do so by Parent.
5.10 Stock Incentive Plan. Prior to the Effective Time, the Company
shall establish a new incentive stock option plan or amend the Company Incentive
Plan to add additional stock options so that the total number of shares of
Company Common Stock authorized for issuance under the Company Incentive Plan is
equal to 5,649,000. Such new incentive stock option plan or amended Company
Incentive Plan shall be assumed by Parent at the Effective Time. Stock options
issuable pursuant to the Company Incentive Plan shall be used for attracting and
retaining employees, directors and advisors and shall be granted from time to
time under the guidance and approval of Parent's Board of Directors.
5.11 Private Placement of Parent Common Stock. As of the Effective Time,
the Parent shall have completed a private placement of Parent Common Stock to
accredited investors only, through a registered broker-dealer, pursuant to
Regulation D and Rule 506 promulgated under the Securities Act. Assuming (a) all
offers and sales by Sterling Financial Investment Group, acting as exclusive
placement agent, have been or will be made only in a manner complying with the
terms of the Private Placement Subscription Agreement, the Memorandum and all
applicable state securities laws and similar laws, (b) the full and complete
performance of covenants of Sterling Financial Investment Group as set forth in
that certain Placement Agent Agreement dated October 22, 2003, between Sterling
Financial Investment Group and the Company, and (c) the accuracy and
completeness of the representations, warranties and information provided by
investors in the Private Placement Subscription Agreements, such Private
Placement shall be conducted in compliance with all federal and state securities
laws and other applicable laws.
5.12 Conversion of Class A Preferred Stock, Series 1 Notes and Series 2
Notes. As of the Effective Time, the holders of the outstanding shares of the
Company's Class A Preferred Stock, outstanding indebtedness under the Series 2
Notes, and substantially all of the indebtedness outstanding under the Series 1
Notes (such that not more than $500,000 of indebtedness under the Series 1 Notes
shall be outstanding at the Closing), shall either (i) have agreed and consented
to convert such securities into shares of Parent Common Stock or (ii) have had
such securities automatically converted into shares of Parent Common Stock
pursuant to the terms of such securities.
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5.13 Approval of Certain Expenditures. Parent shall not, from the
Effective Date until December 8, 2004, make any individual expenditure or
related series of expenditures greater than $100,000 that has not been approved
in advance by a majority of the Parent's independent directors; provided,
however, that the provisions of this Section 5.13 shall apply only if, in the
month prior to the month in which the expenditure is proposed to be made, there
exists a cumulative negative net income variance from the amount budgeted for
Parent for such cumulative period of greater than 10%. If the cumulative net
income variance from the amount budgeted for the prior month cannot be estimated
at the time of the expenditure, the cumulative net income variance from the
previous month shall be used to make such determination. Promptly following the
conclusion of each calendar month, the Parent shall make available to its Board
of Directors a report setting forth all variances between the Parent's budget
and actual expenditures.
6. Closing; Deliveries.
6.1 Closing; Effective Date. Subject to the terms and conditions set
forth herein, the closing of the transactions contemplated by this Agreement
(the "Closing") shall take place simultaneously with the execution and delivery
of this Agreement, the consummation of the Private Placement, and the Effective
Time (the "Closing Date"). All proceedings to be taken and all documents to be
executed at the Closing, including those in connection with the Private
Placement and this Agreement, shall be deemed to have been taken, delivered and
executed simultaneously, and no proceeding shall be deemed taken nor documents
deemed executed or delivered until all have been taken, delivered and executed.
The Closing shall occur at the offices of Xxxxxxxxx Xxxxxxx, LLP referred to in
Section 10.1 hereof. At the Closing, Parent shall present to the Transfer Agent
for delivery to each Stockholder the certificate representing the Parent Common
Stock to be issued pursuant to Section 1.5(a)(ii) hereof to them pursuant to
Sections 1.6 and 4 hereof. Such presentment for delivery shall be against
delivery to Parent and Acquisition Corp. of the certificates, opinions,
agreements and other instruments referred to in Section 6.1 below, and the
certificates representing all of the Company Common Stock issued and outstanding
immediately prior to the Effective Time. Parent will deliver at such Closing to
the Company the officers' certificate, agreements, instruments and opinion
referred to in Section 6.2 below. All of the other documents and certificates
and agreements referenced in this Section 6 will also be executed as described
therein. The Company and the Parent may waive compliance with any of the closing
deliveries specified in this Section 6.
6.2 Closing Deliveries of the Company. At Closing, the Company shall
deliver the following documents to the Parent and Acquisition Corp.:
(a) A certificate, dated the Closing Date, executed on the
Company's behalf by its Chief Executive Officer and Chief Financial Officer,
certifying the following:
(i) the representations and warranties of the Company under
this Agreement are true and correct in all material respects on the Closing
Date;
(ii) the Company has performed and complied in all material
respects with all agreements and conditions required by this Agreement to be
performed or complied with by it on or before the Closing Date; and
25
(iii) there does not exist on the Closing Date any Default or
Event of Default or any event or condition that, with the giving of notice or
lapse of time, or both, would constitute a Default or Event of Default, and
since the Balance Sheet Date, there has been no change that has or will have a
Material Adverse Effect on the Company, except as a result of the fees and
expenses incurred in connection with the Private Placement and the transactions
contemplated by this Agreement.
(b) An opinion of Xxxx Xxxxxxx, P.C., New York, New York, counsel
for the Company, to the effect set forth in Exhibit J hereto.
(c) A certificate, dated the Closing Date, executed by the
Company's Secretary, certifying that, except for the filing of the Certificate
of Merger: (i) all consents, authorizations, orders and approvals of, and
filings and registrations with, any court, governmental body or instrumentality
that are required for the execution and delivery of this Agreement and the
Certificate of Merger and the consummation of the Merger shall have been duly
made or obtained, and all material consents by third parties that are required
for the Merger have been obtained; and (ii) no action or proceeding before any
court, governmental body or agency has been threatened, asserted or instituted
to restrain or prohibit, or to obtain substantial damages in respect of, this
Agreement or the Certificate of Merger or the carrying out of the transactions
contemplated by the Merger Documents.
(d) Copies of resolutions of the Board of Directors and the
stockholders of the Company, certified by the Secretary of the Company,
authorizing and approving the execution, delivery and performance of this
Agreement, the Merger Documents and all other documents and instruments to be
delivered pursuant hereto and thereto.
(e) A certificate of incumbency executed by the Secretary of the
Company certifying the names, titles and signatures of the officers authorized
to execute this Agreement and any documents referred to herein, and further
certifying that the Certificate of Incorporation and By-laws of the Company
delivered to Parent and Acquisition Corp. at the time of the execution of this
Agreement have been validly adopted and have not been amended or modified.
(f) All written consents, satisfactory in form and substance to
Parent, from each party to the leases, contracts, instruments and other
documents listed in Schedules 2.13(a) through 2.13(d) consenting to the
assignment to the Surviving Corporation upon the effectiveness of the Merger, of
all of the rights and interests of the Company in and to such leases, contracts,
instruments and documents, except to the extent the failure to so obtain such
consents could not reasonably be expected to have a Material Adverse Effect.
(g) A certificate of the President and Chief Executive Officer of
the Company certifying the satisfaction of the matters set forth in Section 5.12
hereof.
(h) Evidence as of a recent date of the good standing and corporate
existence of the Company issued by the Secretary of State of the State of
Delaware and evidence that the Company is qualified to transact business as a
foreign corporation and is in good standing in each state of the United States
and in each other jurisdiction where the character of
26
the property owned or leased by it or the nature of its activities makes such
qualification necessary.
(i) Such additional supporting documentation and other
information with respect to the transactions contemplated hereby as Parent and
Acquisition Corp., or their counsel, may reasonably request.
6.3 Deliveries of Parent and Acquisition Corp. At Closing, the Parent
and Acquisition Corp. shall deliver the following documents to the Company:
(a) A certificate, dated the Closing Date, executed on their behalf
by their respective Presidents or other duly authorized officers, certifying the
following: (i) the representations and warranties of Parent and Acquisition
Corp. under this Agreement are true and correct in all material respects on the
Closing Date; (ii) Parent and Acquisition Corp. have performed and complied in
all material respects with all agreements and conditions required by this
Agreement to be performed or complied with by them on or before the Closing
Date; and (iii) there does not exist on the Closing Date any Default or Event of
Default or any event or condition, that with the giving of notice or lapse of
time, or both, would constitute a Default of Event of Default, and since the
Parent Balance Sheet Date, there has been no change that has or will have a
Material Adverse Effect on the Parent.
(b) An opinion of Xxxxxxxxx Traurig, LLP, New York, New York,
special counsel for Parent, to the effect set forth in Exhibit K hereto.
(c) A certificate, dated the Closing Date, executed by the
Secretary of each of the Parent and Acquisition Corp., certifying that, except
for the filing of the Certificate of Merger: (i) all consents, authorizations,
orders and approvals of, and filings and registrations with, any court,
governmental body or instrumentality that are required for the execution and
delivery of this Agreement and the Certificate of Merger and the consummation of
the Merger shall have been duly made or obtained, and all material consents by
third parties required for the Merger have been obtained; and (ii) no action or
proceeding before any court, governmental body or agency has been threatened,
asserted or instituted to restrain or prohibit, or to obtain substantial damages
in respect of, this Agreement or the Certificate of Merger or the carrying out
of the transactions contemplated by any of the Merger Documents.
(d) Copies of resolutions of Parent's and Acquisition Corp.'s
respective board of directors and the sole stockholder of Acquisition Corp.,
certified by their respective Secretaries, authorizing and approving the
execution, delivery and performance of this Agreement, the Merger Documents and
all other documents and instruments to be delivered by them pursuant hereto and
thereto.
(e) A certificate of incumbency executed by the respective
Secretaries of Parent and Acquisition Corp. certifying the names, titles and
signatures of the officers authorized to execute this Agreement and any
documents referred to herein, and further certifying that the certificates of
incorporation and by-laws of Parent and Acquisition Corp. appended thereto have
not been amended or modified.
27
(f) A certificate of Parent's transfer agent and registrar,
certifying as of the business day prior to the date any shares of Parent Common
Stock are first issued in the Private Placement, and before taking into
consideration the cancellation of Parent Common Stock as indicated in Section
6.3(i) hereof, a true and complete list of the names and addresses of the record
owners of all of the outstanding shares of Parent Common Stock, together with
the number of shares of Parent Common Stock held by each record owner.
(g) A letter from Parent's transfer agent and registrar setting
forth that the number of shares of Parent Common Stock that would be issued and
outstanding as of the Closing Date after taking into consideration the
cancellation of Parent Common Stock as indicated in Section 6.3(i) hereof, and
after taking into consideration the Closing of the Merger and the closing of the
Private Placement.
(h) An agreement in writing from Xxxxx Xxxxxxxx Xxxxx Xxxxxx Ltd.,
Chartered Accountants, Vancouver, B.C., Canada, in form and substance reasonably
satisfactory to the Company, to deliver copies of the audit opinions with
respect to any and all financial statements of Parent that had been audited by
such firm.
(i) (A) the executed resignations of N. Xxxxxxx Xxxxx ("Xxxxx") and
Xxxxx X. Xxxxx ("Xxxxx") as directors and officers of Parent, with the director
resignations to take effect only upon compliance by Parent with the provisions
of Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, (B)
executed releases from each of Xxxxx and Xxxxx in the form attached hereto as
Exhibit L, and (C) stock powers executed in blank (w) by Xxxxx evidencing the
cancellation of 1,000,000 shares of Parent Common Stock owned by him, (x) by
Xxxxxx Xxxxxxxx evidencing the cancellation of 400,000 shares of Parent Common
Stock owned by him, (y) by Xxxxxxx Xxxxxxx evidencing the cancellation of
200,000 shares of Parent Common Stock owned by her, and (z) by Xxxxxx Xxxxxxx
evidencing the cancellation of 138,462 shares of Parent Common Stock owned by
her. (j) Written evidence of the termination of the Assignment Agreement, dated
February 14, 2001, by Parent in favor of N. Xxxxxxx Xxxxx, and the cancellation
of 400,000 shares of Parent Common Stock owned by Xx. Xxxxx.
(k) Evidence as of a recent date of the good standing and corporate
existence of each of the Parent and Acquisition Corp. issued by the Secretary of
State of their respective states of incorporation and evidence that the Parent
and Acquisition Corp. are qualified to transact business as foreign corporations
and are in good standing in each state of the United States and in each other
jurisdiction where the character of the property owned or leased by them or the
nature of their activities makes such qualification necessary.
(l) An Indemnification Agreement from Verus International Group
Limited and its affiliates to Parent and the Company in the form attached hereto
as Exhibit M.
(m) Such additional supporting documentation and other information
with respect to the transactions contemplated hereby as the Company or its
counsel may reasonably request.
28
7. Non-Survival of Representations and Warranties. The representations and
warranties of the parties made in Sections 2 and 3 of this Agreement (including
the Schedules to the Agreement which are hereby incorporated by reference) shall
not survive beyond the Effective Time. This Section 7 shall not limit any claim
for fraud, gross negligence or willful misconduct. Nothing in this Section 7
shall impair or alter any covenant or agreement of the parties which by its
terms contemplates performance after the Effective Time.
8. Amendment of Agreement. This Agreement and the Certificate of Merger
may be amended or modified at any time in all respects by an instrument in
writing executed (i) in the case of this Agreement by the parties hereto and
(ii) in the case of the Certificate of Merger by the parties thereto.
9. Definitions. Unless the context otherwise requires, the terms defined
in this Section 9 shall have the meanings herein specified for all purposes of
this Agreement, applicable to both the singular and plural forms of any of the
terms herein defined.
"Acquisition Corp." means DOBI Acquisition Corp., a Delaware
corporation.
"Affiliate" shall mean any Person that directly or indirectly
controls, is controlled by, or is under common control with, the indicated
Person.
"Agreement" shall mean this Agreement.
"Balance Sheet" and "Balance Sheet Date" shall have the meanings
assigned to such terms in Section 2.10 hereof.
"Certificate of Merger" shall have the meaning assigned to it in the
second recital of this Agreement.
"Class A Preferred Stock" shall have the meaning assigned to such term
in Section 1.5(a)(ii) hereof.
"Closing" and "Closing Date" shall have the meanings assigned to such
terms in Section 11 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the U.S. Securities and Exchange Commission.
"Company Common Stock" shall mean the common stock, par value $.001
per share, of the Company.
"Company" shall mean DOBI Medical Systems, Inc., a Delaware
corporation.
29
"Company Incentive Plan" shall have the meaning assigned to it in
Section 1.7 hereof.
"Company Stock" shall mean the Company Common Stock and Class A
Preferred Stock.
"Company Warrants" shall have the meaning assigned to it in Section
1.7(b).
"Condition of Parent" shall have the meaning assigned to it in Section
3.2 hereof.
"Default" shall mean a default or failure in the due observance or
performance of any covenant, condition or agreement on the part of the Company
to be observed or performed under the terms of this Agreement if such default or
failure in performance shall remain unremedied for ten (10) days after receipt
of written notice of such default.
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"Effective Time" shall have the meaning assigned to it in Section 1.2
hereof.
"Employee Benefit Plans" shall have the meaning assigned to it in
Section 2.17 hereof.
"Equity Security" shall mean any stock or similar equity security of
an issuer or any security (whether stock or Indebtedness for Borrowed Money)
convertible, with or without consideration, into any stock or similar equity
security, or any security (whether stock or Indebtedness for Borrowed Money)
carrying any warrant or right to subscribe to or purchase any stock or similar
equity security, or any such warrant or right.
"ERISA" shall mean the Employee Retirement Income Securities Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Event of Default" shall mean (a) the failure of the Company to pay
any Indebtedness for Borrowed Money, or any interest or premium thereon, within
five (5) days after the same shall become due, whether such Indebtedness shall
become due by scheduled maturity, by required prepayment, by acceleration, by
demand or otherwise, (b) an event of default under any material agreement or
instrument evidencing or securing or relating to any such Indebtedness, or (c)
the failure of the Company to perform or observe any material term, covenant,
agreement or condition on its part to be performed or observed under any
agreement or instrument evidencing or securing or relating to any such
Indebtedness when such term, covenant or agreement is required to be performed
or observed.
"GAAP" shall mean generally accepted accounting principles in the
United States, as in effect from time to time.
"Indebtedness" shall mean any obligation of the Company which under
generally accepted accounting principles is required to be shown on the balance
sheet of the Company as a liability, excluding however, accounts payable,
accrued expenses and other short term liabilities.
30
"Indebtedness for Borrowed Money" shall mean (a) all Indebtedness in
respect of money borrowed including, without limitation, Indebtedness which
represents the unpaid amount of the purchase price of any property and is
incurred in lieu of borrowing money or using available funds to pay such amounts
and not constituting an account payable or expense accrual incurred or assumed
in the ordinary course of business of the Company, (b) all Indebtedness
evidenced by a promissory note, bond or similar written obligation to pay money,
or (c) all such Indebtedness guaranteed by the Company or for which the Company
is otherwise contingently liable.
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended.
"Letter of Transmittal" shall have the meaning assigned to it in
Section 4 hereof.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction and including any lien or charge
arising by statute or other law.
"Material Adverse Effect" shall have the meaning assigned to it in
Section 2.2 hereof.
"Merger" shall have the meaning assigned to it in Section 1.1 hereof.
"Merger Documents" shall have the meaning assigned to it in Section
2.6 hereof.
"Parent" shall mean Lions Gate Investment Limited, a Nevada
corporation.
"Parent Balance Sheet Date" shall have the meaning assigned to it in
Section 3.14 hereof.
"Parent Common Stock" shall mean the common stock, par value $.0001
per share, of Parent.
"Parent Employee Benefit Plans" shall have the meaning assigned to it
in Section 3.17 hereof.
"Parent Financial Statements" shall have the meaning assigned to it in
Section 3.9 hereof.
"Parent SEC Documents" shall have the meaning assigned to it in
Section 3.8 hereof.
"Parent Warrants" shall have the meaning assigned to it in Section
1.7(c) hereof.
"Permitted Liens" shall mean (a) Liens for taxes and assessments or
governmental charges or levies not at the time due or in respect of which the
validity thereof shall currently be
31
contested in good faith by appropriate proceedings; (b) Liens in respect of
pledges or deposits under workmen's compensation laws or similar legislation,
carriers', warehousemen's, mechanics', laborers' and materialmens' and similar
Liens, if the obligations secured by such Liens are not then delinquent or are
being contested in good faith by appropriate proceedings; and (c) Liens
incidental to the conduct of the business of the Company that were not incurred
in connection with the borrowing of money or the obtaining of advances or
credits and which do not in the aggregate materially detract from the value of
its property or materially impair the use made thereof by the Company in its
business.
"Person" shall include all natural persons, corporations, business
trusts, associations, limited liability companies, partnerships, joint ventures
and other entities and governments and agencies and political subdivisions.
"Private Placement" shall mean the private offering of shares of
Parent Stock pursuant to the terms of the Term Sheet.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series 1 Notes" and "Series 2 Notes" shall have the meanings assigned
to each of them in Section 1.5(a) (ii) hereof.
"Stockholders" shall mean all holders of capital stock or other
securities of the Company.
"Surviving Corporation" shall have the meaning assigned to it in
Section 1.1 hereof.
"Tax" or "Taxes" shall mean (a) any and all taxes, assessments,
customs, duties, levies, fees, tariffs, imposts, deficiencies and other
governmental charges of any kind whatsoever (including, but not limited to,
taxes on or with respect to net or gross income, franchise, profits, gross
receipts, capital, sales, use, ad valorem, value added, transfer, real property
transfer, transfer gains, transfer taxes, inventory, capital stock, license,
payroll, employment, social security, unemployment, severance, occupation, real
or personal property, estimated taxes, rent, excise, occupancy, recordation,
bulk transfer, intangibles, alternative minimum, doing business, withholding and
stamp), together with any interest thereon, penalties, fines, damages, costs,
fees, additions to tax or additional amounts with respect thereto, imposed by
the United States or other applicable jurisdiction; (b) any liability for the
payment of any amounts described in clause (a) as a result of being a member of
an affiliated, consolidated, combined, unitary or similar group or as a result
of transferor or successor liability, including, without limitation, by reason
of Regulation section 1.1502-6; and (c) any liability for the payments of any
amounts as a result of being a party to any Tax Sharing Agreement or as a result
of any express or implied obligation to indemnify any other Person with respect
to the payment of any amounts of the type described in clause (a) or (b).
"Tax Return" shall include all returns and reports (including
elections, declarations, disclosures, schedules, estimates and information
returns (including Form 1099 and partnership returns filed on Form 1065)
required to be supplied to a Tax authority relating to Taxes.
32
"Term Sheet" shall have the meaning assigned to it in Section 10.2
hereof.
10. Miscellaneous.
10.1 Notices. Any notice, request or other communication hereunder
shall be given in writing and shall be served either personally by overnight
delivery or delivered by mail, certified return receipt and addressed to the
following addresses:
If to Parent
or Acquisition Corp.: Lions Gate Investment Limited
P.O. Box 86020
0000-00xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx X0X 000, Xxxxxx
Attention: Xx. Xxxxx Xxxxx, Secretary
With a copy to: Xxxxxxxxx Traurig, LLP
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
If to the Company: DOBI Medical Systems, Inc.
0000 XxxXxxxxx Xxxxxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxx, Chief
Executive Officer
With a copy to: Xxxx Xxxxxxx, P.C.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Notices shall be deemed received at the earlier of actual receipt or
three (3) business days following mailing. Counsel for a party (or any
authorized representative) shall have authority to accept delivery of any notice
on behalf of such party.
10.2 Entire Agreement. This Agreement, including the schedules and
exhibits attached hereto and other documents referred to herein, contains the
entire understanding of the parties hereto with respect to the subject matter
hereof. Except for the Mutual Confidentiality and Non-Disclosure Agreement,
dated July 24, 2003, among the Company, Verus International Group Limited and
Verus Support Services Inc., this Agreement supersedes all prior agreements and
undertakings between the parties with respect to such subject matter, including,
without limitation, that certain Summary of Terms and Conditions for Merger and
Private Placement (the "Term Sheet"), dated August 5, 2003, between Verus
International Group Limited, Verus Support Services and the Company.
10.3 Expenses. Each party shall bear and pay all of the legal,
accounting and other expenses incurred by it in connection with the transactions
contemplated by this
33
Agreement; provided that the Company shall assume and pay out-of-pocket legal,
travel and printing fees and expenses for Parent and Verus, which shall not
exceed $250,000.
10.4 Time. Time is of the essence in the performance of the parties'
respective obligations herein contained.
10.5 Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns and heirs; provided, however, that the Company shall not directly or
indirectly transfer or assign any of its rights hereunder in whole or in part
without the written consent of Parent, which shall not be unreasonably withheld,
and any such transfer or assignment without said consent shall be void.
10.7 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto, their
successors, assigns and heirs, and no other Person shall have any right or
action under this Agreement.
10.8 Counterparts. This Agreement may be executed in one or more
counterparts, with the same effect as if all parties had signed the same
document. Each such counterpart shall be an original, but all such counterparts
together shall constitute a single agreement.
10.9 Recitals, Schedules and Exhibits. The Recitals, Schedules and
Exhibits to this Agreement are incorporated herein and, by this reference, made
a part hereof as if fully set forth herein.
10.10 Section Headings and Gender. The Section headings used herein
are inserted for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement. All personal pronouns used in this
Agreement shall include the other genders, whether used in the masculine,
feminine or neuter gender, and the singular shall include the plural, and vice
versa, whenever and as often as may be appropriate.
10.11 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware. This
Agreement and the transactions contemplated hereby shall be subject to the
exclusive jurisdiction of the courts of New Castle County, Delaware. The parties
to this Agreement agree that any breach of any term or condition of this
Agreement or the transactions contemplated hereby shall be deemed to be a breach
occurring in the State of Delaware by virtue of a failure to perform an act
required to be performed in the State of Delaware. The parties to this Agreement
irrevocably and expressly agree to submit to the jurisdiction of the courts of
the State of Delaware for the purpose of resolving any disputes among the
parties relating to this Agreement or the transactions contemplated hereby. The
parties irrevocably waive, to the fullest extent permitted by law, any objection
which they may now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Agreement and the transactions
contemplated hereby, or any judgment entered by any court in prospect hereof
brought in New Castle County, Delaware, and further irrevocably waive any claim
that any suit, action or
34
proceeding brought in New Castle County, Delaware has been brought in an
inconvenient forum. With respect to any action before the above courts, the
parties hereto agree to service of process by certified or registered United
States mail, postage prepaid, addressed to the party in question.
35
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be binding and effective as of the day and year first above written.
PARENT:
LIONS GATE INVESTMENT LIMITED
By:/s/Xxxxx X. Xxxxx
--------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Financial Officer,
Secretary and Treasurer
ACQUISITION CORP.:
DOBI ACQUISITION CORP.
By:/s/Xxxxx X. Xxxxx
--------------------------------
Name: Xxxxx X. Xxxxx
Title: President
THE COMPANY:
DOBI MEDICAL SYSTEMS, INC.
By:/s/Xxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
