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EXHIBIT 10.1
MERGER AGREEMENT
This merger agreement is entered into as of
January 30th, 2007, between Velcera Pharmaceuticals,
Inc. , a Delaware corporation ("
Velcera "), Denali Sciences, Inc.,
a Delaware corporation (" Denali "),
and Denali
Acquisition Corp. , a Delaware
corporation (" MergerCo ").
The Boards of Directors of Velcera, Denali and
MergerCo have determined that it is in the best interests of those
corporations and their respective stockholders to consummate the
merger of MergerCo with and into Velcera with Velcera as the
surviving corporation (the " Merger ");
Denali, as the sole stockholder of MergerCo, has
approved this agreement, the Merger and the transactions
contemplated by this agreement pursuant to action taken by written
consent in accordance with the requirements of the Delaware General
Corporation Law (" DGCL ") and the Bylaws of
MergerCo;
Pursuant to the Merger, among other things, the
outstanding shares of Velcera common stock shall be converted into
an identical number of shares of Denali common stock upon the
Effective Time (as defined herein);
The parties to this agreement intend to adopt
this agreement as a plan of reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended
(the " Code ") and the regulations promulgated thereunder,
and intend that the Merger and the transactions contemplated by
this agreement be undertaken pursuant to that plan; and
The parties to this agreement intend that the
Merger qualify as a "reorganization," within the meaning of Section
368(a) of the Code, and that Denali, MergerCo and Velcera will each
be a "party to a reorganization," within the meaning of Section
368(b) of the Code, with respect to the Merger.
The parties therefore agree as
follows:
ARTICLE I
MERGER
Subject to the satisfaction or waiver of the
conditions set forth in Article VI
, at the Effective Time, (i) MergerCo will merge
with and into Velcera, and (ii) Velcera will become a wholly-owned
subsidiary of Denali. The term " Surviving Company " as used
herein shall mean Velcera, as a wholly-owned subsidiary of Denali
after giving effect to the Merger. The Merger will be effected
pursuant to a certificate of merger in accordance with the
provisions of, and with the effect provided in, Section 251 of the
DGCL. The Merger shall be effective when a certificate of merger,
in substantially the form attached hereto as Exhibit A , is
filed with the Delaware Secretary of State (the " Effective
Time "). As used herein, the term " Effective Date "
shall mean the date on which the certificate of merger is filed
with the Delaware Secretary of State.
1.1 Effects of
Merger.
(a) From and after
the Effective Time and until further amended in accordance with
law, (i) the Certificate of Incorporation of Velcera as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Company, and (ii) the Bylaws of
Velcera as in effect immediately prior to the Effective Time shall
be the Bylaws of the Surviving Company.
(b) Denali, Velcera
and MergerCo shall each use their best efforts to take all such
action as may be necessary or appropriate to effectuate the Merger
in accordance with the DGCL at the Effective Time. If at any time
after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this agreement and to vest
the Surviving Company with full right, title and possession to all
properties, rights, privileges, immunities, powers and franchises
of either Velcera or MergerCo, the officers of the Surviving
Company are fully authorized in the name of Denali, Velcera and
MergerCo or otherwise to take, and shall take, all such lawful and
necessary action.
(c) Subject to the
provisions of Article VI and Article VII hereof, the closing of the transactions contemplated hereby
(the " Closing ") shall take place on or before March 31,
2007, at 787 Seventh Avenue, 48th Floor, New York, New York, or
such other time and place as Velcera and Denali mutually agree (the
" Closing Date "). On the Closing Date, to effect the
Merger, the parties hereto will cause the Certificate of Merger to
be filed with the Delaware Secretary of State in accordance with
the DGCL.
1.2 Effect on Velcera Capital
Stock and MergerCo Capital Stock. To
effectuate the Merger, and subject to the terms of this agreement,
at the Effective Time:
(a) Each share of
Velcera common stock issued and outstanding immediately prior to
the Effective Time (other than Dissenting Shares) shall
automatically be converted into the same number of shares of Denali
common stock;
(b) All shares of
common stock of MergerCo issued and outstanding immediately prior
to the Effective Time will be converted into and become one validly
issued, fully paid and nonassessable share of common stock of the
Surviving Company.
(c) On the Effective
Date, Denali shall assume all of Velcera’s rights and
obligations with respect to outstanding stock options (the "
Options ") issued pursuant to Velcera’s 2003 Stock
Incentive Plan (the " Stock Incentive Plan "). Each Option
shall, from and after the Effective Time, evidence the right to
purchase a number of shares of Denali common stock equal to the
same number of shares of Velcera common stock into which such
Option is exercisable immediately prior to the Effective
Date.
(d) On the Effective
Date, Denali shall assume the rights and obligations with respect
to outstanding warrants (the " Warrants "), to purchase
shares of Velcera common stock. Each Warrant shall, from and after
the Effective Time, evidence the right to purchase a number of
shares of Denali common stock equal to the same number of shares of
Velcera common stock into which such Warrant is exercisable
immediately prior to the Effective Date.
1.3 Rights of Holders of Velcera
Common Stock.
On and after the Effective Date and until
surrendered for exchange, each outstanding stock certificate that
immediately prior to the Effective Date represented shares of
Velcera common stock (except Dissenting Shares) shall be deemed for
all purposes, to evidence ownership of and to represent the same
number of shares of Denali common stock into which such shares of
Velcera common Stock shall have been converted pursuant to this
agreement. The record holder of each such outstanding certificate
representing shares of Velcera common stock, shall, after the
Effective Date, be entitled to vote the shares of Denali common
stock into which such shares of Velcera common stock shall have
been converted on any matters on which the holders of record of
Denali common stock, as of any date subsequent to the Effective
Date, shall be entitled to vote. In any matters relating to such
certificates of Velcera common stock, Denali may rely conclusively
upon the record of stockholders maintained by Velcera containing
the names and addresses of the holders of record of Velcera common
stock on the Effective Date.
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1.4 Procedure for Exchange of
Velcera Common Stock.
(a) After the
Effective Time, holders of certificates evidencing outstanding
shares of Velcera common stock (except Dissenting Shares), upon
surrender of such certificates to the Secretary of Denali, shall be
entitled to receive certificates representing the number of shares
of Denali common stock. Denali shall not be obligated to deliver
any such shares of Denali common stock to which any former holder
of shares of Velcera common stock is entitled until such holder
surrenders the certificate or certificates representing such
shares. Upon surrender, each certificate evidencing Velcera common
stock shall be canceled. If there is a transfer of Velcera common
stock ownership which is not registered in the transfer records of
Velcera, a certificate representing the proper number of shares of
Denali common stock may be issued to a person other than the person
in whose name the certificate so surrendered is registered if: (1)
upon presentation to the Secretary of Denali, such certificate
shall be properly endorsed or otherwise be in proper form for
transfer, (2) the person requesting such payment shall pay any
transfer or other taxes required by reason of the issuance of
shares of Denali common stock to a person other than the registered
holder of such certificate or establish to the reasonable
satisfaction of Denali that such tax has been paid or is not
applicable, and (3) the issuance of such Denali common stock shall
not, in the sole discretion of Denali, violate the requirements of
the Regulation D "safe harbor" of the Securities Act of 1933, as
amended, including the rules and regulations promulgated thereunder
(the " Securities Act ") with respect to the private
placement of Denali common stock that precedes from the
Merger.
(b) All shares of
Denali common stock issued upon the surrender of Velcera common
stock in accordance with the above terms shall be deemed to have
been issued and paid in full satisfaction of all rights pertaining
to such shares of Velcera common stock.
(c) Shares of Denali
common stock issued pursuant to the Merger will not be transferable
except (1) pursuant to an effective registration statement
under the Securities Act or (2) upon receipt by Denali of a
written opinion of counsel for the holder reasonably satisfactory
to Denali to the effect that the proposed transfer is exempt from
the registration requirements of the Securities Act and relevant
state securities laws. Restrictive legends shall be placed on all
certificates representing shares of Denali common stock containing
the identical language to the restrictive legend placed on each
corresponding Velcera common stock certificate being surrendered.
The rights and obligations, including without limitation, the
restrictions on transferability, of Velcera set forth in the
subscription agreements between Velcera and the Velcera
stockholders who purchased common stock pursuant to Velcera’s
2004 private placement offering of 2,031,626 shares of common stock
will inure to the benefit of Denali.
(d) In the event any
certificate for Velcera common stock has been lost, stolen or
destroyed, Denali shall issue and pay in exchange for such lost,
stolen or destroyed certificate, promptly following its receipt of
an affidavit of that fact by the holder thereof, such shares of the
Denali common stock.
1.5 Dissenting Shares.
Shares of common stock of Velcera held by
stockholders of Velcera who have properly exercised and preserved
appraisal rights with respect to those shares in accordance with
Section 262 of the DGCL (" Dissenting Shares ") shall not be
converted into shares of Denali common stock pursuant to
Section 1.2 above, and the holders
thereof shall be entitled only to such rights as are granted by
Section 262 of the DGCL. Each holder of Dissenting Shares who
becomes entitled to payment for such shares pursuant to Section 262
of the DGCL shall receive payment from the Surviving Company in
accordance with such laws; provided, however
, that if any holder of Dissenting Shares shall have
effectively withdrawn such holder’s demand for appraisal of
such shares or lost such holder’s right to appraisal and
payment of such shares under Section 262 of the DGCL, such holder
shall forfeit the right to appraisal of such shares and each such
share shall thereupon be deemed to have been canceled, exchanged,
as of the Effective Time, into one share of Denali common stock as
provided in Section 1.2 above. Any payments with respect of Dissenting Shares will be
deemed made by the Surviving Company.
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1.6 Directors and Officers of
the Surviving Corporation. From and after
the Effective Time, the directors and officers of the Surviving
Company shall be the persons who were directors and officers of
Velcera immediately prior to the Effective Time, respectively.
These directors and officers of the Surviving Company shall hold
office for the term specified in, and subject to the provisions
contained in, the Certificate of Incorporation and Bylaws of the
Surviving Company and applicable law.
1.7 Directors and Officers of
Denali. At the Closing, the board of
directors of Denali shall, subject to compliance with Section 14(f)
of the Securities Exchange Act of 1934, as amended, including the
rules and regulations promulgated thereunder (the " Exchange
Act "), take the following action, to be effective upon the
Effective Time: (i) increase the size of the Board of Directors of
Denali to seven (7) persons; (ii) elect to the board of directors
of Denali the persons who were directors of Velcera immediately
prior to the Closing; and (iii) appoint as the officers of Denali
those who were the officers of Velcera immediately prior to the
Closing, or, in either case with regard to clauses (ii) and (iii),
such other persons designated by Velcera. All of the persons
serving as directors of Denali immediately prior to the Closing
shall resign immediately following the election of the new
directors, and the officers of Denali immediately prior to the
Closing shall resign at the Closing from all of their positions
with Denali, all subject to compliance with Rule 14f-1 promulgated
under the Exchange Act. Subject to applicable law, Denali shall
take all action reasonably requested by Velcera, but consistent
with the Certificate of Incorporation and Bylaws of Denali, that is
reasonably necessary to effect any such election or appointment of
the designees of Velcera to Denali’s board of directors,
including promptly hereafter mailing to Denali’s stockholders
an information statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. Velcera shall supply Denali all information with
respect to it and its nominees, officers, directors and Affiliates
required by such Section 14(f) and Rule 14f-1. The provisions of
this Section 1.7 are in
addition to and shall not limit any rights which Velcera or any of
its Affiliates may have as a holder or beneficial owner of shares
of capital stock of Denali as a matter of law with respect to the
election of directors or otherwise. " Affiliate " has the
meaning as defined in Rule 12b-2 promulgated under the Exchange
Act, as such regulation is in effect on the date hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF DENALI AND
MERGERCO
Denali and MergerCo hereby represent and warrant
to Velcera as follows:
2.1 Organization and
Qualification
. Denali and MergerCo each are,
and on the Effective Date will be, corporations duly organized,
validly existing and in good standing under the laws of the State
of Delaware, and each has, and on the Effective Date will have, the
requisite corporate power to carry on their respective businesses
as now conducted. The copies of the Certificate of Incorporation
and Bylaws of Denali and MergerCo that have been made available to
Velcera on or prior to the date of this agreement are correct and
complete copies of such documents as in effect as of the date
hereof, and shall be in effect on the Effective Date.
2.2 Authority Relative to this
Agreement; Non-Contravention. Each of
Denali and MergerCo has the requisite corporate power and authority
to enter into this agreement, and to carry out its obligations
hereunder. The execution and delivery of this agreement by Denali
and MergerCo, and the consummation by Denali and MergerCo of the
transactions contemplated hereby have been duly authorized by the
boards of directors of Denali and MergerCo. No further corporate
proceedings on the part of Denali or MergerCo are necessary to
authorize the execution and delivery of this agreement and the
consummation of the transactions contemplated hereby. This
agreement has been duly executed and delivered by Denali and
MergerCo and, assuming it is a valid and binding obligation of
Velcera, constitutes a valid and binding obligation of Denali and
MergerCo enforceable in accordance with its terms except as
enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors’ rights and
remedies generally. Except for (a) approvals under applicable Blue
Sky laws and the filing of Form D with the Securities and Exchange
Commission (" SEC ") and (b) the filing of the Certificate
of Merger with the Delaware Secretary of State, no authorization,
consent or approval of, or filing with, any public body, court or
authority is necessary on the part of Denali or MergerCo for the
consummation by Denali or MergerCo of the transactions contemplated
by this agreement, except for such authorizations, consents,
approvals and filings as to which the failure to obtain or make the
same would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect on Denali or MergerCo, or adversely affect
the consummation of the transactions contemplated hereby. For the
purposes of this agreement " Material Adverse Effect "
shall, with respect to an entity, mean a material adverse effect on
the business, operations, results of operations or financial
condition of such entity on a consolidated basis.
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2.3 No Conflicts.
Neither Denali nor MergerCo is subject to, or
obligated under, any provision of (a) their respective Certificates
of Incorporation or Bylaws, (b) any agreement, arrangement or
understanding, (c) any license, franchise or permit, nor (d) any
law, regulation, order, judgment or decree, which would conflict
with, be breached or violated, or in respect of which a right of
termination or acceleration or any security interest, charge or
encumbrance on any of their respective assets would be created, by
the execution, delivery or performance of this agreement or the
consummation of the transactions contemplated hereby, other than
any such conflicts, breaches, violations, rights of termination or
acceleration or security interests, charges or encumbrances which,
in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on Denali or MergerCo.
2.4 Capitalization.
(a) As of the date
hereof, Denali is, and on the Effective Date will be, authorized to
issue 75,000,000 shares of common stock, par value $.001 per share,
and 10,000,000 shares of preferred stock, par value $.001 per
share, of which 125,000 shares of common stock and no shares of
preferred stock are currently issued and outstanding. The issued
and outstanding shares of common stock of Denali are, and on the
Effective Date will be, duly authorized, validly issued, fully paid
and nonassessable and not issued in violation of any preemptive
rights and, to Denali’s Knowledge (as defined below), free
from any restrictions on transfer (other than restrictions under
the Securities Act or state securities laws) or any option, lien,
pledge, security interest, encumbrance or charge of any kind.
Denali has, and on the Effective Date will have, no other equity
securities or securities containing any equity features authorized,
issued or outstanding. There are no agreements or other rights or
arrangements existing which provide for the sale or issuance of
capital stock by Denali and there are no rights, subscriptions,
warrants, options, conversion rights or agreements of any kind
outstanding to purchase or otherwise acquire from Denali any shares
of capital stock or other securities of Denali of any kind, and
there will not be any such agreements prior to or on the Effective
Date. There are, and on the Effective Date there will be, no
agreements or other obligations (contingent or otherwise) which may
require Denali to repurchase or otherwise acquire any shares of its
capital stock other than the Redemption Agreement (as defined
below). For the purposes of this agreement, " Knowledge "
means, with respect to an individual, that such individual is
actually aware of a particular fact or other matter, with no
obligation to conduct any inquiry or other investigation to
determine the accuracy of such fact or other matter. A Person other
than an individual shall be deemed to have Knowledge of a
particular fact or other matter if the officers, directors or other
management personnel of such Person had Knowledge of such fact or
other matter. " Person " means any individual, corporation
(including any non-profit corporation), general or limited
partnership, limited liability company, joint venture, estate,
trust, association, organization, labor union, governmental
authority or other entity.
(b) Denali is not a
party to, and, to Denali’s Knowledge, there do not exist, any
voting trusts, proxies, or other contracts with respect to the
voting of shares of capital stock of Denali.
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(c) The authorized
capital of MergerCo consists of 1,000 shares of common stock, par
value $.001 per share, all of which are, and on the Effective Date
will be, issued and outstanding and held of record by Denali. The
issued and outstanding shares of capital stock of MergerCo are, and
on the Effective Date will be, duly authorized, validly issued,
fully paid and nonassessable and have not been issued in violation
of any preemptive rights, and, to Denali’s Knowledge, free
from any restrictions on transfer (other than restrictions under
the Securities Act or state securities laws) or any option, lien,
pledge, security interest, encumbrance or charge of any kind. There
are no rights, subscriptions, warrants, options, conversion rights
or agreements of any kind outstanding to purchase or otherwise
acquire from MergerCo any shares of capital stock or other
securities of MergerCo of any kind, and there will not be any such
agreements prior to or on the Effective Date. There are, and on the
Effective Date there will be, no agreements or other obligations
(contingent or otherwise) which may require MergerCo to repurchase
or otherwise acquire any shares of its capital stock.
2.5 Exchange Act
Reports. Prior to the date of this
agreement, Velcera has reviewed (a) Denali’s Registration
Statement on Form 10-SB/A as filed with the SEC on December 30,
2005 (b) Denali’s Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2005, and (c) Denali’s Quarterly
Reports on Form 10-QSB for the quarters ended March 31, 2006, June
30, 2006, and September 30, 2006, as filed with the SEC
(collectively, the " Denali SEC Filings "). As of their
respective dates or as subsequently amended prior to the date
hereof, each of the Denali SEC Filings (i) did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading and (ii) complied as to form in all
material respects with the applicable rules and regulations of the
SEC. Since its Form 10-SB/A, Denali has timely filed all reports
that it has been required to file with the SEC pursuant to Section
13(a), 14(a), 14(c) and 15(d) of the Exchange Act. The financial
statements (including footnotes thereto) included in or
incorporated by reference into the Denali SEC Filings have been
prepared in accordance with United States generally accepted
accounting principles as in effect from time to time ("
GA
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