EXECUTION COPY
SHARE EXCHANGE
AGREEMENT
by and
among
FERO INDUSTRIES,
INC.,
PYRO PHARMACEUTICALS,
INC.
SHAREHOLDERS
and
THE
PRINCIPAL
Dated as of October 13,
2009
TABLE OF CONTENTS
ARTICLE I Exchange of Company
Shares
Exchange by Shareholders
Closing
ARTICLE II Representations and Warranties
of the Shareholders
Good Title
Power and Authority
No Conflicts
No Finder’s Fee
Purchase Entirely for Own
Account
Shareholder Status
Experience of Such Shareholder
Access to Information
Restricted Securities
Legends
No Derivatives
ARTICLE III Representations and
Warranties of the Company
Organization, Standing and
Power
Company Subsidiaries
Capital Structure
Authority; Execution and Delivery;
Enforceability
No Conflicts; Consents
Taxes
Benefit Plans
Litigation
Compliance with Applicable
Laws
Brokers
Contracts
Title to Properties
Intellectual Property
Labor Matters
Financial Statements
Undisclosed Liabilities
Transactions With Affiliates and
Employees
Internal Accounting Controls
Investment Company
Disclosure
Absence of Certain Changes or
Events
ARTICLE IV Representations and Warranties
of the Parent
Organization, Standing and
Power
Subsidiaries; Equity Interests
Capital Structure
Authority; Execution and Delivery;
Enforceability
No Conflicts; Consents
Financial Statements
SEC Documents; Undisclosed
Liabilities
Absence of Certain Changes or
Events
Taxes
Benefit Plans
ERISA Compliance; Excess Parachute
Payments
Litigation
Compliance with Applicable
Laws
Contracts
Title to Properties
Intellectual Property
Labor Matters
Market Makers
Transactions With Affiliates and
Employees
Internal Accounting Controls
Solvency
Application of Takeover
Protections
No Additional Agreements
Investment Company
Disclosure
Certain Registration Matters
Listing and Maintenance
Requirements
No Undisclosed Events, Liabilities,
Developments or Circumstances
Foreign Corrupt Practices
Information Supplied
ARTICLE V Deliveries
Deliveries of the Shareholders
Deliveries of the Parent
Deliveries of the Company
ARTICLE VI Conditions to Initial
Closing
Shareholder and Company Conditions
Precedent
Parent Conditions Precedent
ARTICLE VII Covenants
Preparation of 14f-1 Notice; Blue Sky
Laws
Public Announcements
Fees and Expenses
Continued Efforts
Exclusivity
Filing of Form 8-K and Press
Release
Furnishing of Information
Access
Preservation of Business
Financing
Directors and Officers
Company Options
ARTICLE VIII Indemnification
Survival of Representations and
Warranties
Indemnification by the
Principal
Procedures for Indemnification
Limitations on Indemnification
ARTICLE IX Miscellaneous
Notices
Amendments; Waivers; No Additional
Consideration
SECTION 9.03
Termination.
Replacement of Securities
Remedies
Independent Nature of Shareholders’
Obligations and Rights
Interpretation
Severability
Counterparts; Facsimile
Execution
Entire Agreement; Third Party
Beneficiaries
Governing Law
Assignment
EXHIBIT A - Shareholders and Ownership
Company Shares
i
EXECUTION COPY
SHARE EXCHANGE
AGREEMENT
This SHARE EXCHANGE AGREEMENT (this
“ Agreement ”), effective as of October 13,
2009, is entered into by and among Fero Industries, Inc., a
Colorado corporation (the “ Parent ”), Pyro
Pharmaceuticals, Inc., a Delaware corporation (the “
Company ”), the Shareholders of the Company (each a
“ Shareholder ” and collectively, the “
Shareholders ”) who have signed Exhibit A
attached hereto and, solely for the purposes of Article VIII
and Article IX of this Agreement, Kyle Schlosser, an
individual (the “ Principal ”). Each of
the parties to this Agreement are individually referred to herein
as a “ Party ” and collectively as the “
Parties .”
BACKGROUND
A.
The Company’s authorized equity
capital consists exclusively of 25,000,000 shares of common stock,
$0.001 par value (“ Company Common Stock ”) and
5,000,000 shares of preferred stock, $0.001 par value (“
Company Preferred Stock ”), of which 7,500,000 shares
of Company Common Stock and 5,000,000 shares of Company Preferred
Stock are issued and outstanding as of the date of this Agreement.
Prior to the Initial Closing (as defined in
Section 1.02), some or all of the 5,000,000 shares of Company
Preferred Stock may be converted into shares of Company Common
Stock on a one-for-one basis. (The 7,500,000 shares of
Company Common Stock issued and outstanding as of the date of this
Agreement and the 5,000,000 shares of Company Preferred Stock (or
any shares of Company Common Stock issued upon conversion of the
outstanding shares of Company Preferred Stock) are referred to
herein as the “ Company Shares ”). The
Shareholders are the record and beneficial owner of the number of
Company Shares set forth opposite such Shareholder’s name on
Exhibit A .
B.
Immediately following the effective time
of the Initial Closing and contingent only upon the occurrence of
such Initial Closing, the Parent shall consummate the private
placement of sale of up to One Million Five Hundred Thousand
Dollars ($1,500,000) of principal amount of five-year, 8%
convertible promissory notes of the Parent (“ Note
” or “ Notes ”), convertible into shares
of the common stock of the Parent, $.001 par value per share
(“ Parent Common Stock ”) at a conversion price
of $0.30 per share, for the minimum gross proceeds of $500,000 and
the maximum gross proceeds of up to $1,500,000, as contemplated by
hereof (the “ Financing ”).
C.
The Shareholders wish to transfer all of
their Company Shares in exchange for their portion, determined in
accordance with Section 1.01, of an aggregate of 38,250,000 shares
(“ Parent Shares ”) of Parent Common
Stock.
D.
The exchange of Company Shares for Parent
Common Stock is intended to constitute a non-taxable transfer to a
corporation controlled by the transferor within the meaning of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986 (the
“ Code ”), as amended or such other tax free
provisions that may be applicable under the Code.
E.
The Board of Directors of the Company and
the Board of Directors of the Parent have determined that it is
desirable and in the best interest of their respective stockholders
to effect this plan of reorganization and share
exchange.
AGREEMENT
NOW THEREFORE, in consideration of the
mutual promises herein, and for other good and valuable
consideration, the receipt and sufficiency of which the parties
agree as follows:
ARTICLE I
Exchange of Company Shares
SECTION
1.1
Exchange by
Shareholders
. At each Closing, each Shareholder
shall sell, transfer, convey, assign and deliver to the Parent all
of the Company Shares owned by such Shareholder free and clear of
all Liens (as defined in ) in exchange for each Shareholder’s
pro rata share of the Parent Shares. A Shareholder’s
pro rata share of the Parent Shares shall be determined by
multiplying the total number of Parent Shares by a fraction, the
numerator of which is the total number of Company Shares owned by
the Shareholder at the Initial Closing and the denominator of which
is the total number of Company Shares issued and outstanding at the
Initial Closing.
SECTION 1.2
Closing
. The initial closing (the
“Initial Closing”) of the transactions contemplated
hereby (the “Transactions”) shall take place at the
offices of Indeglia & Carney, 1900 Main Street, Suite 125,
Irvine, California 92614, commencing at 9:00 a.m. local time on the
first business day following the satisfaction or waiver of all
conditions to the obligations of the parties to consummate the
Transactions contemplated hereby (other than conditions with
respect to actions the respective parties will take at the Initial
Closing itself), or such other date and time as the parties may
mutually determine (the “ Initial Closing Date
”). At the Initial Closing, the Shareholders (“
Majority Shareholders ”) holding at least eighty
percent (80%) of the outstanding Company Shares shall deliver an
executed copy of this Agreement and the deliveries required by
Section 5.01. From time to time after the Initial
Closing, Parent and the Shareholders other than the Majority
Stockholders may effect additional exchanges of shares in
accordance with Section 1.01. The Initial Closing and each
additional closing is referred to herein as a “
Closing ” and the Initial Closing Date and the date of
each additional closing date is referred to herein as a “
Closing Date ”.
ARTICLE II
Representations and Warranties of the
Shareholders
Each Shareholder hereby severally
represents and warrants to Parent as of the date hereof and as of
the Closing Date upon which such Shareholder effects a Closing
pursuant to Article I that:
SECTION 2.1
Good Title
. The Shareholder is the record and
beneficial owner, and has good title to the Company Shares owned by
such Shareholder set forth on Exhibit A , with the
right and authority to sell and deliver such Company Shares to the
Parent. Following the exchange of the Shareholder’s
Company Shares pursuant to this Agreement, the Parent will receive
good title to such Company Shares, free and clear of all liens,
security interests, pledges, equities and claims of any kind,
voting trusts, stockholder agreements and other encumbrances other
than restrictions under the federal securities laws (collectively,
“ Liens ”).
SECTION
2.2
Power and Authority
. This Agreement constitutes the
legal, valid and binding obligation of the Shareholder, enforceable
against such Shareholder in accordance with the terms hereof,
except as may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equity principles related to
or limiting creditors’ rights generally and by general
principals of equity.
SECTION
2.3
No Conflicts
. The execution and delivery of
this Agreement by the Shareholder and the performance by the
Shareholder of its obligations hereunder in accordance with the
terms hereof: (i) will not require the consent of any third
party or any federal, state, local or foreign government or any
court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality,
domestic or foreign (“ Governmental Entity ”)
under any statutes, laws, ordinances, rules, regulations, orders,
writs, injunctions, judgments, or decrees (collectively, “
Laws ”); (ii) will not violate any Laws
applicable to such Shareholder and (iii) will not violate or
breach any contractual obligation to which such Shareholder is a
party.
SECTION
2.4
No Finder’s Fee
. No broker, investment banker,
financial advisor or other person is entitled to any
broker’s, finder’s, financial advisor’s or other
similar fee or commission in connection with the Transactions based
upon arrangements made by or on behalf of the
Shareholder.
SECTION
2.5
Purchase Entirely for Own
Account
. The Parent Shares proposed to be
acquired by the Shareholder hereunder will be acquired for
investment for its own account, and not with a view to the resale
or distribution of any part thereof, and the Shareholder has no
present intention of selling or otherwise distributing the Parent
Shares, except in compliance with applicable securities
laws.
SECTION
2.6
Shareholder Status
. The Shareholder has accurately
confirmed on Exhibit A attached hereto whether the
Shareholder meets the definition of “accredited
investor” set forth in Rule 501(a) under the Securities
Act of 1933, as amended (the “ Securities Act
”). The Shareholder is not required to be registered as
a broker-dealer under Section 15 of the Securities and
Exchange Act of 1934, as amended (the “ Exchange Act
”).
SECTION
2.7
Experience of Such
Shareholder
. The Shareholder, either alone or
together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so
as to be capable of evaluating the merits and risks of the
prospective investment in the Parent Shares and has so evaluated
the merits and risks of such investment. The Shareholder is
able to bear the economic risk of an investment in the Parent
Shares and, at the present time, is able to afford a complete loss
of such investment.
SECTION
2.8
Access to Information
. The Shareholder acknowledges that
it has received and had the opportunity to review the
Parent’s annual report on Form 10-K for the fiscal years
ended June 30, 2008 and June 30, 2009 and the Parent’s
quarterly report on Form 10-Q for the three month period ended
March 31, 2009, including the Parent Financial Statements (as
defined in ) (“ SEC Reports ”); the
Company’s Super 8-K (as defined in ), including the
Company’s Financial Statements (as defined in ); and
this Agreement and all exhibits hereto including the Parent
Disclosure Letter (as defined in the opening paragraph to Article
IV) and Company Disclosure Letter (as defined in the opening
paragraph in Article III). Such Shareholder further
acknowledges that it or its representatives have been afforded
(a) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the
Parent and the Company concerning the terms and conditions of the
reorganization contemplated by this Agreement and the offering of
the Parent Shares, the merits and risks of investing in the Parent
Shares, (b) access to information about the Parent and the
Company and the Parent’s and the Company’s financial
condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate the
reorganization contemplated by this Agreement and its investment in
the Parent Shares, and (c) the opportunity to obtain such
additional information which the Parent or the Company possesses or
can acquire without unreasonable effort or expense that is
necessary to verify the accuracy and completeness of the
information contained herein or otherwise provided to the
Shareholder.
SECTION
2.9
Restricted Securities
. The Shareholder understands that the
Parent Shares are characterized as “restricted
securities” under the Securities Act inasmuch as the Parent
Shares are being offered in a transaction not involving a public
offering. The Shareholder further acknowledges that the
Parent Shares may not be resold without registration under the
Securities Act or the existence of an exemption therefrom.
The Shareholder represents that it is familiar with
Rule 144 promulgated under the Securities Act, as presently in
effect, and understands the resale limitations imposed thereby and
by the Securities Act.
SECTION
2.10
Legends
. It is understood that the Parent
Shares will bear the following legend or one that is substantially
similar to the following legend:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT
”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.
SECTION
2.11
No Derivatives
.
Except for the Company Shares attributed to such Shareholder
on Exhibit A or as disclosed in the Company Disclosure Letter, the
Shareholder does not hold, nor is the Shareholder entitled to
receive, any options, warrants, rights, convertible or exchangeable
securities, “phantom” stock rights, stock appreciation
rights, stock-based performance units, commitments, Contracts (as
defined in Section 3.05 ), arrangements or undertakings of
any kind to which the Company is a party or by which any of them is
bound (i) obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional capital shares or
other equity interests in, or any security convertible or
exercisable for or exchangeable into any capital shares of or other
equity interest in, the Company or any Voting Company Debt (as
defined in Section 3.03 ), (ii) obligating the Company
to issue, grant, extend or enter into any such option, warrant,
call, right, security, commitment, Contract, arrangement or
undertaking or (iii) that give any person the right to receive
any economic benefit or right similar to or derived from the
economic benefits and rights occurring to holders of the capital
shares of the Company.
ARTICLE III
Representations and Warranties of the
Company
The Company represents and warrants to
the Parent as of the date hereof and as of the Initial Closing Date
that, except as set forth on Schedule 3 attached hereto
(the “ Company Disclosure Letter ”):
SECTION
3.1
Organization, Standing and
Power
. The Company is duly organized,
validly existing and in good standing under the laws of the State
of Delaware and has the corporate power and authority and possesses
all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold
its properties and assets and to conduct its businesses as
presently conducted, other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in
the aggregate, has not had and would not reasonably be expected to
have a material adverse effect on the Company, a material adverse
effect on the ability of the Company to perform its obligations
under this Agreement or on the ability of the Company to consummate
the Transactions (a “ Company Material Adverse Effect
”). The Company is duly qualified to do business in
each jurisdiction where the nature of its business or its ownership
or leasing of its properties make such qualification necessary
except where the failure to so qualify would not reasonably be
expected to have a Company Material Adverse Effect. The
Company has delivered to the Parent true and complete copies of the
Company’s certificate of incorporation and bylaws, each as
amended to the date of this Agreement (the “ Company
Constituent Instruments ”).
SECTION
3.2
Company Subsidiaries
. The Company does not own,
directly or indirectly, any capital stock, membership interest,
partnership interest, joint venture interest or other equity
interest in any person.
SECTION 3.3
Capital Structure
. The Company is authorized to
issue 25,000,000 shares of Company Common Stock and 5,000,000
shares of Company Preferred Stock. As of the date of this
Agreement, (A) 7,500,000 shares of Company Common Stock are issued
and outstanding, (B) 5,000,000 shares of Company Preferred Stock
are issued and outstanding, and (C) 3,125,000 shares of Company
Common Stock are subject to outstanding and unexercised options
(“ Company Options ”) issued pursuant to the
Company’s 2002 Stock Incentive Plan. Except for
issuances of shares of Company Common Stock pursuant to the Company
Options or conversion of the outstanding shares of Company
Preferred Stock, since the date of this Agreement the Company has
not issued any shares of Company Common Stock or Company Preferred
Stock. All outstanding capital shares of the Company are duly
authorized, validly issued, fully paid and nonassessable and not
subject to or issued in violation of any purchase option, call
option, right of first refusal, preemptive right, subscription
right or any similar right or any Contract to which the Company is
a party or otherwise bound. There are no bonds, debentures,
notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, capital shares having
the right to vote) on any matters on which holders of Company
Shares may vote (“ Voting Company Debt ”).
Except as set forth in the Company
Disclosure Letter, there are no options, warrants, rights,
convertible or exchangeable securities, “phantom” stock
rights, stock appreciation rights, stock-based performance units,
commitments, Contracts, arrangements or undertakings of any kind to
which the Company is a party or by which it is bound
(i) obligating the Company to issue, deliver or sell, or cause
to be issued, delivered or sold, additional capital shares or other
equity interests in, or any security convertible or exercisable for
or exchangeable into any capital shares or other equity interest
in, the Company or any Voting Company Debt, (ii) obligating
the Company to issue, grant, extend or enter into any such option,
warrant, call, right, security, commitment, Contract, arrangement
or undertaking or (iii) that give any person the right to
receive any economic benefit or right similar to or derived from
the economic benefits and rights occurring to holders of the
capital shares of the Company. As of the date of this
Agreement, there are no outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company.
SECTION
3.4
Authority; Execution and Delivery;
Enforceability
. The Company has all requisite
corporate power and authority to execute and deliver this Agreement
and to consummate the Transactions. The execution and
delivery by the Company of this Agreement and the consummation by
the Company of the Transactions have been duly authorized and
approved by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the Transactions. When executed
and delivered, this Agreement will be enforceable against the
Company in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equity principles related to or limiting
creditors’ rights generally and by general principals of
equity.
SECTION 3.5
No Conflicts; Consents
.
(a)
The execution and delivery by the Company
of this Agreement does not, and the consummation of the
Transactions and compliance with the terms hereof and thereof will
not, conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give rise to
a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of the
Company under, any provision of (i) the Company Constituent
Instruments, (ii) any material contract, lease, license,
indenture, note, bond, agreement, permit, concession, franchise or
other instrument (“ Contract ”) to which the
Company is a party or by which any of its properties or assets is
bound or (iii) subject to the filings and other matters
referred to in , any material judgment, order or decree (“
Judgment ”) or material Law applicable to the Company
or its properties or assets, other than, in the case of clauses
(ii) and (iii) above, any such items that, individually or in
the aggregate, have not had and would not reasonably be expected to
have a Company Material Adverse Effect.
(b)
Except for required filings with the
Securities and Exchange Commission (the “ SEC ”)
and applicable “Blue Sky” or state securities
commissions, no material consent, approval, license, permit, order
or authorization (“ Consent ”) of, or
registration, declaration or filing with, or permit from, any
Governmental Entity is required to be obtained or made by or with
respect to the Company in connection with the execution, delivery
and performance of this Agreement or the consummation of the
Transactions.
SECTION
3.6
Taxes
.
(a)
The Company has timely filed, has caused
to be timely filed on its behalf, or has qualified for an extension
for filing, all Tax Returns required to be filed by it, and all
such Tax Returns are true, complete and accurate, except to the
extent any failure to file or any inaccuracies in any filed Tax
Returns, individually or in the aggregate, have not had and would
not reasonably be expected to have a Company Material Adverse
Effect. All Taxes shown to be due on such Tax Returns, or
otherwise owed, have been timely paid, except to the extent that
any failure to pay, individually or in the aggregate, has not had
and would not reasonably be expected to have a Company Material
Adverse Effect. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for
any such claim.
(b)
The Company Financial Statements reflect
an adequate reserve for all Taxes payable by the Company (in
addition to any reserve for deferred Taxes to reflect timing
differences between book and Tax items) for all taxable periods and
portions thereof through the date of such financial statements.
No deficiency with respect to any Taxes has been proposed,
asserted or assessed against the Company, and no requests for
waivers of the time to assess any such Taxes are pending, except to
the extent any such deficiency or request for waiver, individually
or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(c)
For purposes of this
Agreement:
“ Taxes ” includes all
forms of taxation, whenever created or imposed, and whether of the
United States or elsewhere, and whether imposed by a local,
municipal, governmental, state, foreign, federal or other
Governmental Entity, or in connection with any agreement with
respect to Taxes, including all interest, penalties and additions
imposed with respect to such amounts.
“ Tax Return ” means
all federal, state, local, provincial and foreign Tax returns,
declarations, statements, reports, schedules, forms and information
returns and any amended Tax return relating to Taxes.
SECTION
3.7
Benefit Plans
. The Company does not have or
maintain any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation,
retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) providing benefits
to any current or former employee, officer or director of the
Company (collectively, “ Company Benefit Plans
”). As of the date of this Agreement there are no
severance or termination agreements or arrangements between the
Company and any current or former employee, officer, director or
manager of the Company, nor does the Company have any general
severance plan or policy.
SECTION
3.8
Litigation
. There is no action, suit,
inquiry, notice of violation, proceeding (including any partial
proceeding such as a deposition) or investigation pending or
threatened in writing against or affecting the Company or any of
its properties before or by any court, arbitrator, governmental or
administrative agency, regulatory authority (federal, state,
county, local or foreign), stock market, stock exchange or trading
facility (“ Action ”) which (i) adversely
affects or challenges the legality, validity or enforceability of
any of this Agreement or the Company Shares or (ii) could, if
there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Company
Material Adverse Effect. The Company, nor, to the
Company’s knowledge, any director, officer or manager thereof
(in his or her capacity as such), is or has been the subject of any
Action involving a claim or violation of or liability under federal
or state securities laws or a claim of breach of fiduciary
duty.
SECTION
3.9
Compliance with Applicable
Laws
. The Company is in compliance with
all applicable Laws, including those relating to occupational,
health and safety and the environment, except for instances of
noncompliance that, individually and in the aggregate, have not had
and would not reasonably be expected to have a Company Material
Adverse Effect. The Company has not received any written
communication during the past two years from a Governmental Entity
that alleges that the Company is not in compliance in any material
respect with any applicable Law.
SECTION
3.10
Brokers
. No broker, investment banker,
financial advisor or other person is entitled to any
broker’s, finder’s, financial advisor’s or other
similar fee or commission in connection with the Transactions based
upon arrangements made by or on behalf of the Company.
SECTION
3.11
Contracts
. Except as disclosed in the
Contracts that are material to the business, properties, assets,
condition (financial or otherwise), results of operations or
prospects of the Company taken as a whole, the Company is not in
violation of or in default under (nor does there exist any
condition which upon the passage of time or the giving of notice
would cause such a violation of or default under by the Company)
any Contract to which it is a party or by which it or any of its
properties or assets is bound, except for violations or defaults
that would not, individually or in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect.
SECTION
3.12
Title to Properties
. The Company does not own any real
property. The Company has sufficient title to, or valid
leasehold interests in, all of its properties and assets used in
the conduct of its businesses. All such assets and
properties, other than assets and properties in which the Company
has leasehold interests, are free and clear of all Liens except for
Liens that, in the aggregate, do not and will not materially
interfere with the ability of the Company to conduct business as
currently conducted.
SECTION
3.13
Intellectual Property
. The Company owns, or is validly
licensed or otherwise has the right to use, all patents, patent
rights, trademarks, trademark rights, trade names, trade name
rights, service marks, service mark rights, copyrights and other
proprietary intellectual property rights and computer programs
(collectively, “ Intellectual Property Rights ”)
which are material to the conduct of the business of the Company
taken as a whole. The Company Disclosure Letter sets forth a
description of all Intellectual Property Rights which are material
to the conduct of the business of the Company taken as a whole.
There are no claims pending or, to the knowledge of the
Company, threatened that the Company is infringing or otherwise
adversely affecting the rights of any person with regard to any
Intellectual Property Right. To the actual knowledge of the
officers, directors and managers of the Company, no person is
infringing the rights of the Company with respect to any
Intellectual Property Right.
SECTION
3.14
Labor Matters
. There are no collective
bargaining or other labor union agreements to which the Company is
a party or by which it is bound. No material labor dispute
exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company.
SECTION 3.15
Financial Statements
.
(a)
The Company has previously delivered to
the Parent its unaudited consolidated balance sheet as of June 30,
2009 and unaudited consolidated statements of operations,
stockholders’ equity and cash flows for the fiscal years
ended June 30, 2009 and 2008 and for the period from inception
(June 11, 2001) through June 30, 2009 (collectively, the “
Company Financial Statements ”). The Company
Financial Statements comply in all material respects with
applicable accounting requirements and the rules and regulations of
the SEC with respect thereto. The Company Financial
Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the
periods indicated (“ GAAP ”), except as may be
otherwise specified in such financial statements or the notes
thereto and except that the Company Financial Statements may not
contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company as of and
for the dates thereof and the results of operations and cash flows
for the periods then ended, subject, to normal, year-end audit
adjustments.
(b)
Prior to the Initial Closing, the Company
shall deliver to the Parent audited Company Financial Statements
and an accompanying audit report prepared by an independent audit
firm that is registered with the Public Company Accounting
Oversight Board. The Company Financial Statements delivered
pursuant to this subpart (b) shall not vary materially from
the Company Financial Statements delivered pursuant to
subpart (a) of this Section 3.15 and shall otherwise
comply with the requirements of subpart (a) above.
SECTION
3.16
Undisclosed Liabilities
. Except as set forth in the
Company Financial Statements, the Company does not have any
material liabilities or obligations, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of
business subsequent to June 30, 2009, and (ii) obligations
under Contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting
principles to be reflected in the Company Financial Statements,
which, in both cases, individually and in the aggregate would not
be reasonably expected to result in a Company Material Adverse
Effect.
SECTION
3.17
Transactions With Affiliates and
Employees
. Except as set forth in the
Company Financial Statements or the Company Options, none of the
officers, directors or managers of the Company and, to the
knowledge of the officers, directors and managers of the Company,
none of the employees of the Company is presently a party to any
transaction with the Company (other than for services as employees,
officers, directors and managers), including any Contract,
agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any
officer, director, manager or such employee or, to the knowledge of
the officers, directors and managers of the Company, any entity in
which any officer, director, manager or any such employee has a
substantial interest or is an officer, director, manager, trustee
or partner.
SECTION
3.18
Internal Accounting
Controls
. The Company maintains a system of
internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
SECTION
3.19
Investment Company
. The Company is not, and is not an
affiliate of, and immediately following the Initial Closing will
not have become, an “investment company” within the
meaning of the Investment Company Act of 1940, as
amended.
SECTION
3.20
Disclosure
. The Company’s
representations and warranties set forth in this Agreement do not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading.
SECTION 3.21
Absence of Certain Changes or
Events
. Except as disclosed in the
Company Financial Statements, since June 30, 2009, the Company has
conducted its business only in the ordinary course, and during such
period there has not been:
(a)
any change in the assets, liabilities,
financial condition or operating results of the Company, except
changes in the ordinary course of business that have not caused, in
the aggregate, a Company Material Adverse Effect;
(b)
any damage, destruction or loss, whether
or not covered by insurance, that would have a Company Material
Adverse Effect;
(c)
any waiver or compromise by the Company
of a valuable right or of a material debt owed to it;
(d)
any satisfaction or discharge of any
lien, claim, or encumbrance or payment of any obligation by the
Company, except in the ordinary course of business and the
satisfaction or discharge of which would not have a Company
Material Adverse Effect;
(e)
any material change to a material
Contract by which the Company or any of its assets is bound or
subject;
(f)
any mortgage, pledge, transfer of a
security interest in, or lien, created by the Company, with respect
to any of its material properties or assets, except liens for taxes
not yet due or payable and liens that arise in the ordinary course
of business and do not materially impair the Company’s
ownership or use of such property or assets;
(g)
any loans or guarantees made by the
Company to or for the benefit of its employees, officers or
directors, or any Shareholders of their immediate families, other
than travel advances and other advances made in the ordinary course
of its business;
(h)
any material alteration to the
Company’s method of accounting or the identity of its
auditors;
(i)
any declaration or payment of dividend or
distribution of cash or other property to the Shareholders or any
purchase, redemption or agreements to purchase or redeem any
capital shares;
(j)
any issuance of capital shares to any
officer, director, manager or affiliate; or
(k)
any arrangement or commitment by the
Company to do any of the things described in this .
ARTICLE IV
Representations and Warranties of the
Parent
The Parent represents and warrants to the
Shareholders and the Company as of the date hereof and as of the
Initial Closing Date that, except as set forth on
Schedule 4 (the “ Parent Disclosure Letter
”):
SECTION
4.1
Organization, Standing and
Power
. Parent is duly incorporated,
validly existing and in good standing under the laws of the State
of Colorado and has full corporate power and authority and
possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to own, lease
or otherwise hold its properties and assets and to conduct its
businesses as presently conducted, other than such franchises,
licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, has not had and would not
reasonably be expected to have a material adverse effect on Parent,
a material adverse effect on the ability of Parent to perform its
obligations under this Agreement or on the ability of Parent to
consummate the Transactions (a “ Parent Material Adverse
Effect ”). Parent is duly qualified to do business
in each jurisdiction where the nature of its business or its
ownership or leasing of its properties make such qualification
necessary and where the failure to so qualify would reasonably be
expected to have a Parent Material Adverse Effect. The Parent
has delivered to the Company true and complete copies of the
Parent’s certificate of incorporation and bylaws, each as
amended to the date of this Agreement (the “ Parent
Constituent Instruments ”).
SECTION
4.2
Subsidiaries; Equity
Interests
. Parent does not own, directly or
indirectly, any capital stock, membership interest, partnership
interest, joint venture interest or other equity interest in any
person.
SECTION 4.3
Capital Structure
. The authorized capital stock of
the Parent consists of 500,000,000 shares of Parent Common Stock
and 10,000,000 shares of preferred stock, $0.001 par value (“
Parent Preferred Stock ”). As of the date of
this Agreement, (A) 25,500,000 shares of Parent Common Stock are
issued and outstanding, and (B) no shares of Company Preferred
Stock are issued and outstanding. Since the date of this
Agreement, the Parent has not issued any shares of Parent Common
Stock or Parent Preferred Stock. Except as set forth above,
no shares of capital stock or other voting securities of Parent are
iss
