SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: October 27, 2004
LIFELINE THERAPEUTICS, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 000-30489 84-1097796
--------------------------- ---------------------- -----------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
6400 South Fiddler's Green Circle, Englewood, CO 80111
------------------------------------------ --------
(New address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (720) 488-1711
YAAK RIVER RESOURCES, INC.
-----------------------------------------------------------
(former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 1 - Registrant's Business and Operations
Item 1.01 Entry into a Material Definitive Agreement
Lifeline Therapeutics, Inc. (the "Company") has entered into employment
agreements to be with new management as approved by the Company's existing board
of directors. The employment agreements will provide for a term of two years,
will be terminable for cause or upon a change of control, and will provide for
base salaries as follows:
William Driscoll -- $180,000 per year
Paul Myhill -- $120,000 per year
Daniel W. Streets -- $120,000 per year
Following the completion of the reorganization, the Company expects to
obtain normal employee benefits (such as health insurance and life insurance),
and may provide its executives and other employees additional benefits.
Item 1.02 Termination of a Material Definitive Agreement
None
Item 1.03 Bankruptcy or Receivership
None
Section 2 - Financial Information
Item 2.01 Completion of Acquisition or Disposition of Assets
On October 26, 2004, the Company has completed the reorganization by which it
acquired approximately 81% of the outstanding capital stock of Lifeline
Nutraceuticals Corporation ("Lifeline Nutraceuticals") pursuant to a Plan of
Reorganization that was previously announced. The Company also assumed $240,000
of convertible indebtedness and $559,000 of bridge capital financing that had
previously been issued by Lifeline Nutraceuticals.
The following table sets forth (and as adjusted for the issuance of shares to
shareholders of Lifeline Nutraceuticals holding 81% of the outstanding Lifeline
Nutraceuticals common stock), certain information with respect to the common
stock beneficially owned by: (i) each Director, nominee and executive officer of
the Company; (ii) each person who owns beneficially more than 5% of the common
stock; and (iii) all Directors, nominees and executive officers as a group. If
the Company acquires more than 80% of the outstanding shares, the ownership
interests of each of the named persons will be diluted.
(i) each Director, nominee and executive officer of the Company:
Name and Address of Pre-Transaction Amount Post Post Transaction
Beneficial Owner and nature of Number of Transaction % of Class
Beneficial Ownership
Shares
Blaize N. Kaduru (1) 0 0 0%
423 Baybridge Drive
Sugarland, TX 77478
Robert Pike (1) 10,000 10,000 .06%
423 Baybridge Drive
Sugarland, TX 77478
William Driscoll (2) 0 5,623,800 34.34%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
Paul Myhill (2) 0 4,699,890 28.70%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
Daniel W. Streets (2)(3) 0 2,008,500 12.27%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
Christopher J. Micklatcher (2) 0 562,380 3.43%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
(1) Resigning Director
(2) New Director
(3) Does not includes shares that may be acquired by Mr. Streets' wife's Roth
IRA if she should chose to convert the $82,000 she has invested through Bridge
Loan financing into the Private Placement or exercise the warrants attached to
the Private Placement or the warrants attached to the Bridge Loan financing.
Conversion price and the exercise price of the attached warrants cannot be
determined until the Private Placement share price is determined.
All of the above disclaim any beneficial ownership in shares of the Company
owned by other family members.
(ii) each person who owns beneficially more than 5% of the common stock
(based on the Company acquiring approximately 81% of the outstanding common
stock of Lifeline Nutraceuticals as described above):
Name and Address of Pre-Transaction Amount and Post Transaction Post Transaction
Beneficial Owner and nature of Number of % of Class
Beneficial Ownership
Shares (post-reverse split)
Eric Sunsvold 98,450 98,450 .60%
423 Baybridge Drive
Sugarland, TX 77478
Donald J. Smith 405,617 (1) 456,618 2.80%
2501 E. Third Street
Casper, WY 82609
Darrell Benjamin 63,603 63,603 .39%
6658 S. Starlight Rd.
Morrison, CO 80465
William Driscoll (2) 0 5,623,800 34.34%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
Paul Myhill (2) 0 4,699,890 28.70%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
Daniel Streets(2) 0 2,008,500 12.27%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
Joseph McCord 0 1,928,160 11.78%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
(1) The figure shown includes 147 shares held in the name of Suvo Corp. Mr.
Smith is the beneficial owner of Suvo Corp.
(2) New Director
As a result of the completion of the reorganization, the Company will be engaged
in the business of marketing unique antioxidant therapies involving the body's
first line of defense against oxidative stress - its three primary antioxidant
enzymes: Superoxide Dismutase (SOD), Catalase (CAT) and Glutathione Peroxidase
(GPX.) The Company is in the process of developing, testing and acquiring
technologies that target these three enzymes.
Item 2.02 Results of Operations and Financial Condition
None
Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an
Off-Balance Sheet Arrangement of a Registrant
None
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation Under and Off-Balance Sheet Arrangement
None
Item 2.05 Costs Associated with Exit or Disposal Activities
None
Item 2.06 Material Impairments
None
Section 3 - Securities Trading Markets
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or
Standard; Transfer of Listing
None
Item 3.02 - Unregistered Sales of Equity Securities
(a)(1) On October 26, 2004, the Company completed a Plan and Agreement with
Lifeline Nutraceuticals Corporation whereby the shareholders holding
approximately 81% of the outstanding stock of Lifeline Nutraceuticals exchanged
their stock in Lifeline Nutraceuticals for 15,385,110 shares of newly issued
stock in the Company. The newly issued shares represent approximately 94% of the
outstanding stock of the Company.
(2) In addition the Company exchanged $240,000 in new promissory notes for a
like amount of convertible debt obligations of Lifeline Nutraceuticals. The new
promissory notes contain the same privilege as the original notes to convert to
shares of stock in the Company at the rate of fifty cents per share. These notes
bear a 10% rate of interest and mature December 15, 2005, if not earlier
converted.
(3) The Company also exchanged $559,000 in new promissory notes for a like
amount of bridge note obligations of Lifeline Nutraceuticals. The bridge notes
bear interest at 10% per annum and are due the earlier of six months from the
date of the exchange or the closing of the first $1,000,000 of the Company's
proposed private placement offering. The bridge note holder shall also receive
warrants to purchase common stock to be issued in the private placement equal to
the principal amount divided by the per-share offering price, with an exercise
price equal to the offering pricing. The warrants shall be exercisable for a
period of one year after the closing of the offering. By way of example, if the
bridge note is for $100,000 and the private placement offering occurs at $2.00
per share (of which there can be no assurance), then the bridge note holder
would have a warrant allowing for the purchase of 50,000 shares of Lifeline
Therapeutics, Inc. common stock at $2.00.
(b) The Company used no underwriter to complete this transaction. No finders'
fee, commission, or other compensation was paid. The persons who received the
Company's securities are all persons who represented to the Company that they
were accredited investors and who were previously securities holders associated
with Lifeline Nutraceuticals.
(c) None of the securities were sold for cash, but were issued in exchange for
other securities in the reorganization described above.
(d) The Company relied on the exemption from registration provided by Sections
4(2) and 4(6) under the Securities Act of 1933 for this transaction. The Company
did not engage in any public advertising or general solicitation in connection
with this transaction. The Company provided the accredited investor with
disclosure of all aspects of our business, including providing the accredited
investor with the Company's reports filed with the Securities and Exchange
Commission, press releases, access to the Company's auditors, and other
financial, business, and corporate information. Based on the Company's
investigation, the Company believes that the accredited investors obtained all
information regarding the Company they requested, received answers to all
questions the posed, and otherwise understood the risks of accepting the
Company's securities for investment purposes.
(e) The common stock issued is not convertible or exchangeable. The notes issued
by the Company are convertible into common stock on the terms described above in
paragraphs (a)(2) and (a)(3).
(f) Since the Company received no cash proceeds from the issuance of the
securities, there is no use of proceeds to report.
Item 3.03 Material Modification to Rights of Security Holders
None
Section 4 - Matters Related to Accountants and Financial Statements
Item 4.01 Changes in Registrant's Certifying Accountants
None
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review
None.
Section 5 - Corporate Governance and Management
Item 5.01 Changes in Control of Registrant
Subject to compliance with Section 14(f) of the Securities and Exchange Act
of 1934, Blaize N. Kaduru and Robert Pike acknowledged their intention to submit
their resignations from the Board of Directors of the Company. Notice to
Shareholders pursuant to Section 14(f) was mailed on October 20, 2004. The
Company anticipates that the resignations will be executed and shall be
effective ten days after the Schedule 14(f) notification was mailed to
shareholders. Upon the closing of the plan of reorganization, Mr. Kaduru and Mr.
Pike expanded the Company's board of directors to four persons and they
appointed William Driscoll and Paul Myhill. Upon the effectiveness of the
resignations, Messrs. Driscoll and Myhill will appoint Daniel W. Streets and
Christopher J. Micklatcher to fill the two vacancies created by Messrs. Kaduru's
and Pike's resignation.
Stock ownership of New Directors:
William Driscoll 5,623,800 34.34%
Paul Myhill 4,699,890 28.70%
Daniel W. Streets 2,008,500 12.27%
Christopher J. Micklatcher 562,380 3.43%
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers
The following sets forth the names and ages of the current Directors, nominees
for directors and executive officers of the Company, the principal positions
with the Company held by such persons and the date such persons became a
Director or executive officer. The Directors serve one year terms or until their
successors are elected. The Company has not had standing audit, nominating or
compensation committees of the Board of Directors or committees performing
similar functions. All such applicable functions have been by the Board of
Directors as a whole. During the fiscal year ended December 31, 2003, the Board
of Directors held no formal meeting. There are no family relationships among any
of the Directors, nominees or executive officers.
BLAIZE N. KADURU. Mr. Kaduru is an Adjunct Professor, teaching economics and
business related college courses at Wharton Junior College in Sugarland, Texas,
since January 2003. Previously, he was Executive Vice President of Business
Development for Wireless Communications Technology, Inc., a spin-off of Prodigy
Communications Inc. in Houston, Texas. Mr. Kaduru will resign as CEO, President
and Secretary/Treasurer of Yaak River Resources, Inc. at the completion of the
transactions contemplated in the Plan and Agreement of Reorganization and will
resign as Director effective 10 days after the Notice to Shareholders is mailed,
in compliance with Section 14f of the Securities Exchange Act of 1934.
ROBERT PIKE. Mr. Pike has been Vice President and a Director of the Company
since December 21, 1999. Mr. Pike is a retired banker. For more than the past
five years, he has been an investor. Also for more than the past five years, Mr.
Pike has been President and sole owner of Bob Pike Associates, Inc., a real
estate consulting and inspection firm, based in Englewood, Colorado, that serves
financial institutions. Mr. Pike will resign as Vice President of Yaak River
Resources, Inc. at the completion of the transactions contemplated in the Plan
and Agreement of Reorganization and will resign as Director effective 10 days
after the Notice to Shareholders is mailed, in compliance with Section 14f of
the Securities Exchange Act of 1934.
WILLIAM J. DRISCOLL, will become PRESIDENT AND a DIRECTOR. Mr. William Driscoll
has a background in management and marketing. At 25 he was the plant manager or
United Solder Wrap and became the President of Union Petroleum in 1987. He
entered the financial industry in 1988 and within three years was promoted to
branch manager, regional manager and finally national sales manager of L. F.
Thomson.
Mr. Driscoll has worked at such nationally-respected firms as Dean Witter and
Merrill Lynch. Mr. Driscoll has held speaking engagements at several Fortune 500
companies including American Airlines, Alcatel, E Systems, 3M and Rockwell
International. From 1998 until 2003 he was President of Destiny Advisors, a
"Strategic Management" consulting firm who assisted companies with writing
business plans and news releases, in addition to recruiting key personnel for
client companies, including CEO's, CFO's, directors and qualified marketing
persons.
PAUL R. MYHILL, will become VICE PRESIDENT and a DIRECTOR. Paul Myhill received
his MBA from the University of Texas at Austin in 1990, in Marketing Brand
Management). As a self-employed entrepreneur and consultant since 1989, he has
been involved in planning, funding, and launching business ventures. During that
period, he has led six different business ventures which all required
significant capital investment and bottom-line management. Mr. Myhill's
specialization is in the area of business and product marketing. He is the
former owner of an advertising and media placement agency, USAboards, Inc.,
co-owner of a financial public relations firm, Fair Market Value, LLC, and
founder and President of NABO, Inc., a specialty distribution business with
multiple warehouse operations. Mr. Myhill has developed and overseen many
marketing and product distribution plans. Mr. Myhill filed for personal
bankruptcy in Texas in November 1997, and received a discharge in April 1998.
The personal bankruptcy resulted from the failure of a business he was managing
where personal and business funds and expenses were co-mingled.
Mr. Myhill has served on numerous corporate boards (for-profit and non-profit)
and presently sits on the board of directors for Brookstone Christian Academy of
Colorado as an organizational and promotional advisor. From December of 1998 to
April of 2002 Mr. Myhill was Director of Missions at Bent Tree Bible Fellowship
and then from April of 2002 to November of 2002 he became Director of Projects
at Chinese Children's Charities. In November of 2002 he was Pastor of Missions
and Membership at Faith Baptist Church until September of 2003.
CHRISTOPHER J. MICKLATCHER, will become a DIRECTOR. Mr. Micklatcher has been a
certified public accountant and attorney practicing in the state of Michigan
since 1990. Mr. Micklatcher graduated from the University of Michigan in 1980
with a BBA in Finance and Accounting, and (in 1984) from Wayne State Law School
with a J.D. specializing in Tax Law. He is currently licensed as both a
certified Public Accountant and Attorney. Mr. Micklatcher has specialized in
implementing accounting, compliance and tax systems for clients ranging from
Fortune 100 companies to small start up operations. He is the President of
Alternative Tax Solutions, a full service legal, accounting, tax preparation and
consulting practice specializing in assisting small businesses and individuals.
Mr. Micklatcher is a member of the American Institute of Certified Public
Accountants as well as the Michigan Bar Association. Mr. Micklatcher was
Director of Triad Innovations, Inc. (2001-2002) and President in 2002.
DANIEL W. STREETS, will become SECRETARY, TREASURER and a DIRECTOR. Mr. Streets
was a Manager of KPMG Peat Marwick (from June 1975 to June 1983) and has served
as the CFO of six corporations, including high-volume companies with annual
revenues in excess of $400,000,000. A few of these companies include Vista
Travel Ventures from May of 1999 to February of 2001 and Sopris Development
Group from May 2001 to December of 2003. Mr. Streets graduated from The Ohio
State University in 1975 with a bachelor's degree in business administration.
The Company does not have an audit committee, nominating committee, or other
committees of the board. Since the Company has not historically had a nominating
committee, all directors participated in determining who the nominees to the
board of directors would be. All directors review the financial statements and
interact with the Company's auditors. The new board of directors believes that
at this current stage of development and financial capability, it would be cost
prohibitive to establish a nominating committee or an audit committee.
Consequently the entire board of directors will continue to perform those
functions.
The board of directors has established a process to communicate with the
directors. All communications should be sent to one of the named directors at
the Company's address, Lifeline Therapeutics, Inc., Suite 1750, 6400 South
Fiddler's Green Circle, Englewood, CO 80111.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year
The Board has approved amended and restated articles of incorporation which
will be presented to the shareholders for approval at a meeting expected to be
held in January or February 2005.
The Board has also approved amended and restated bylaws that became
effective on approval.
Item 5.04 Temporary Suspension of Trading Under Registrant's Employee Benefit
Plans
None
Item 5.05 Amendments to the Registrant's Code of Ethics, or Waiver of a Provi-
sion of the Code of Ethics.
None
Section 6 - [Reserved]
Section 7 - Reulation FD
Item 7.01 Regulation FD Disclosure
None
Section 8 - Other Events
Item 8.01 Other Events
None
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired. (b) Pro Forma financial
information.
Audited Financial Statements for Lifeline Nutraceuticals Corporation
as of and for the year ended June 30, 2004 as well as unaudited proforma
combined financials for Lifeline Nutraceuticals Corporation and Lifeline
Therapeutics, Inc. as of and for the year ended June 30, 2004 will be filed
within 71 days by amendment to this Form 8-K.
(c) Exhibits
The following exhibits are included with this filing.
3.01 Amended and restated articles of incorporation (not yet effective,
subject to shareholder approval)
3.02 Amended and restated bylaws of Lifeline Therapeutics, Inc.
10.01 Employment contract between William Driscoll and Lifeline
Therapeutics, Inc.
10.02 Employment contract between Paul Myhill and Lifeline Therapeutics,
Inc.
10.03 Employment contract between Dan Streets and Lifeline Therapeutics,
Inc.
10.04 Agreement and Plan of Reorganization Among Yaak River Resources, Inc.
(A Colorado Corporation) and Lifeline Nutraceuticals Corporation
(A Colorado Corporation) As Of September 21, 2004
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: October 27, 2004
LIFELINE THERAPEUTICS, INC.
By: /s/ William J. Driscoll
-------------------------------
William J. Driscoll,
CEO/President
Exhibit 3.01
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF LIFELINE THERAPEUTICS CORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
Articles of Incorporation of Lifeline Therapeutics Corporation (the
"Corporation") are hereby amended and restated in their entirety.
The amendment was recommended by a Statement of Consent approved by the
Corporation's Board of Directors on October 25, 2004 and by its shareholders on
________, 2005. The number of votes for approval was sufficient.
The following sets forth the amended and restated articles of incorporation
of Lifeline Therapeutics Corporation and shall be effective from the time that
these amended and restated articles of incorporation are accepted for filing by
the Secretary of State of Colorado:
Article I Corporate Name
The name of this Corporation is: Lifeline Therapeutics Corporation
Article II Period of Duration
The duration of this Corporation shall be perpetual.
Article III Principal Office and Registered Agent
The address of the Corporation's principal office is: 7609 Ralston Road,
Arvada, CO 80002
The registered agent of the Corporation is Michael A. Littman at the
Corporation's principal office as set forth above.
Article IV Corporate Powers
The purpose of this Corporation is to engage in any lawful act or activity
for which a Corporation may be organized under the laws of Colorado. Article V
Capital Stock
Section 1. Capital Stock. The authorized capital stock of the Corporation
is two hundred, fifty million (250,000,000) shares of Series A Common Stock at a
par value of $.001 per share and shall be voting stock; two hundred fifty
million (250,000,000) shares of Series B Common Stock at a par value of $.0001
per share and shall be non-voting shares; and fifty million (50,000,000) shares
of preferred stock at a par value of $.0001, which shall be non-voting shares,
and which may, at the discretion of the Board of Directors, be issued in
alphanumerical series with the rights and preference designated at the time of
issue by the board of Directors.
Section 2. Share Options and Other Rights. The Corporation may create and
issue share options and other rights, as that term is defined in Section
7-106-205 of the Colorado Business Corporation Act, and shall determine the
rights, form and content, and the consideration, if any, for which shares or
fractions of shares, assets, debts or other obligations of the Corporation are
to be issued pursuant to such share options and other rights.
Section 3. Share Transfer Restrictions. The Board of Directors may impose
transfer restrictions on the Corporation's outstanding securities, and may
require that certificates be issued to reflect that the shares bear an
appropriate legend. These restrictions may include, but are not limited to any
restrictions required by federal or applicable state securities laws.
Section 4. Quorum Requirements. The quorum for any meeting of shareholders
of the Corporation shall be one-third of the total number of shares entitled to
vote at such meeting, or if there are separate voting groups, one-third of the
total number of shares entitled to vote in each voting group shall constitute a
quorum.
Article VI No Cumulative Voting
Cumulative voting of shares of stock is not authorized.
Article VII No Preemptive Rights
No shareholder of any stock in the Corporation shall be entitled, as a matter of
right, to purchase, subscribe for or otherwise acquire any new or additional
shares of stock of the Corporation of any class, or any options or warrants to
purchase, subscribe for or otherwise acquire any such new or additional shares,
bonds, debentures or other securities convertible into or carrying options or
warrants to purchase, subscribe for or otherwise acquire any new or additional
shares.
Article VIII Board of Directors
Section 1. Board of Directors. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the Corporation shall
be managed under the direction of the Board of Directors. The number of
directors authorized to serve on the Board of Directors shall be established by
the Board of Directors, but will be no fewer than one person.
Section 2. Staggered Terms. When there are more than five members of the
Board of Directors, the Board of Directors shall divide the membership into
three groups of directors, each group containing one-third of the total, as near
as may be possible and shall propose the directors for election to those groups
by the shareholders. In that case, the term of the first group expires at the
next annual meeting following the annual meeting at which the shareholders
elected the first group; the term of the second group expires at the second
annual meeting after their election by the shareholders; and the term of the
third group expires at the third annual meeting after their election by the
shareholders. Upon the expiration of the initial staggered terms, directors
shall be elected for terms of three years to succeed those whose terms expire.
Article IX Amendment of Bylaws
In furtherance and not in limitation of the powers conferred by the
Colorado Business Corporation Act, the Board of Directors is expressly
authorized to make, alter or repeal the Bylaws of the Corporation.
Article X Indemnification of Directors, Officers, Employees, Fiduciaries
and Agents
Section 1. Mandatory Indemnification. The Corporation shall indemnify, to
the fullest extent permitted by applicable law in effect from time to time, any
person, and the estate and personal representative of any such person, against
all liability and expense (including attorneys' fees) incurred by reason of the
fact that he/she is or was a director or officer of the Corporation or, while
serving as a director or officer of the Corporation as a director, officer,
trustee, employee, fiduciary, or agent of or in any similar managerial or
fiduciary position of another domestic or foreign Corporation or other
individual or entity or of an employee benefit plan.
Section 2. Indemnification by Resolution or Contract. The Corporation also
shall indemnify any person who is serving or has served the Corporation as a
director, officer, employee, fiduciary, or agent and that person's estate and
personal representative, to the extent and in the manner provided in any bylaw,
resolution of the shareholders or directors, contract or otherwise, so long as
such provision is legally permissible.
Section 3. Indemnification Rights Not Exclusive. The foregoing rights of
indemnification shall not be exclusive of other rights to which he/she may be
entitled to under applicable state law.
Section 4. Effect of Repeal or Modification. Any repeal or modification of
this Article X by the shareholders of the Corporation shall not adversely affect
any right or protection of any person entitled to indemnification under this
Article X as in effect immediately prior to the repeal or modification, with
respect to any liability that would have accrued, but for this Article X, prior
to the repeal or modification.
Article XI Limitations of Liability
Section 1. Limitation of Liability. A director of the Corporation shall not
be personally liable to the Corporation or its shareholders for monetary damages
for breach of fiduciary duty as a director; except that this provision shall not
eliminate or limit the liability of a director to the Corporation or its
shareholders for monetary damages otherwise existing for:
(a) any breach of the director's duty of loyalty to the Corporation to its
shareholders;
(b) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(c) acts specified in Section 7-108-403 of the Colorado Business
Corporation Act; or
(d) any transaction from which the director directly or indirectly derived
any improper personal benefit.
Section 2. Further Amendment. If the Colorado Business Corporation Act is
hereafter amended to eliminate or limit further the liability of a director,
then, in addition to the elimination and limitation of liability provided by the
preceding sentence, the liability of each director shall be eliminated or
limited to the fullest extent permitted by the Colorado Business Corporation Act
as so amended.
Section 3. Effect of Repeal or Modification. Any repeal or modification of
this Article XI by the shareholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation under this
Article XI as in effect immediately prior to the repeal or modification, with
respect to any liability that would have accrued, but for this Article XI, prior
to the repeal or modification.
Exhibit 3.02
AMENDED AND RESTATED BYLAWS
OF
LIFELINE THERAPUTICS CORPORATION
Article I
SHAREHOLDERS
1. ANNUAL SHAREHOLDERS' MEETING. The annual shareholders' meeting shall be
held on the date and at the time and place fixed from time to time by the board
of directors.
2. SPECIAL SHAREHOLDERS' MEETING. A special shareholders' meeting for any
purpose or purposes, may be called by the board of directors or the president.
The Corporation shall also hold a special shareholders' meeting in the event it
receives, in the manner specified in Article VII, Section 3, one or more written
demands for the meeting, stating the purpose or purposes for which it is to be
held, signed and dated by the holders of shares representing not less than
one-tenth of all of the votes entitled to be cast on any issue at the meeting.
Special meetings shall be held at the principal office of the Corporation or at
such other place as the board of directors or the president may determine.
3. RECORD DATE FOR DETERMINATION OF SHAREHOLDERS.
(a) In order to make a determination of shareholders (1) entitled to
notice of or to vote at any shareholders' meeting or at any adjournment of
a shareholders' meeting, (2) entitled to demand a special shareholders'
meeting, (3) entitled to take any other action, (4) entitled to receive
payment of a share dividend or a distribution, or (5) for any other
purpose, the board of directors may fix a future date as the record date
for such determination of shareholders. The record date may be fixed not
more than seventy days before the date of the proposed action.
(b) Unless otherwise specified when the record date is fixed, the time
of day for determination of shareholders shall be as of the Corporation's
close of business on the record date.
(c) A determination of shareholders entitled to be given notice of or
to vote at a shareholders' meeting is effective for any adjournment of the
meeting unless the board of directors fixes a new record date, which the
board shall do if the meeting is adjourned to a date more than one hundred
twenty days after the date fixed for the original meeting.
(d) If no record date is otherwise fixed, the record date for
determining shareholders entitled to be given notice of and to vote at an
annual or special shareholders' meeting is the day before the first notice
is given to shareholders.
(e) The record date for determining shareholders entitled to take
action without a meeting pursuant to Article I, Section 10 is the date a
writing upon which the action is taken is first received by the
Corporation.
4. VOTING LIST.
(a) After a record date is fixed for a shareholders' meeting, the
secretary shall prepare a list of the names of all its shareholders who are
entitled to be given notice of the meeting. The list shall be arranged by
voting groups and within each voting group by class or series of shares,
shall be alphabetical within each class or series, and shall show the
address of, and the number of shares of each such class and series that are
held by, each shareholder.
(b) The shareholders' list shall be available for inspection by any
shareholder, beginning the earlier of ten days before the meeting for which
the list was prepared or two business days after notice of the meeting is
given and continuing through the meeting, and any adjournment thereof, at
the Corporation's principal office or at a place identified in the notice
of the meeting in the city where the meeting will be held.
(c) The secretary shall make the shareholders' list available at the
meeting, and any shareholder or agent or attorney of a shareholder is
entitled to inspect the list at any time during the meeting or any
adjournment.
5. NOTICE TO SHAREHOLDERS.
(a) The secretary shall give notice to shareholders of the date, time,
and place of each annual and special shareholders' meeting no fewer than
ten nor more than sixty days before the date of the meeting; except that,
if the articles of incorporation are to be amended to increase the number
of authorized shares, at least thirty days' notice shall be given. Except
as otherwise required by the Colorado Business Corporation Act, the
secretary shall be required to give such notice only to shareholders
entitled to vote at the meeting.
(b) Notice of an annual shareholders' meeting need not include a
description of the purpose or purposes for which the meeting is called
unless a purpose of the meeting is to consider an amendment to the articles
of incorporation, a restatement of the articles of incorporation, a plan of
merger or share exchange, disposition of substantially all of the property
of the Corporation, consent by the Corporation to the disposition of
property by another entity, or dissolution of the Corporation.
(c) Notice of a special shareholders' meeting shall include a
description of the purpose or purposes for which the meeting is called.
(d) Notice of a shareholders' meeting shall be in writing and shall be
given
(1) by deposit in the United States mail, properly addressed to
the shareholder's address shown in the Corporation's current record of
shareholders, first class postage prepaid, and, if so given, shall be
effective when mailed; or
(2) by telegraph, teletype, electronically transmitted facsimile,
electronic mail, mail, or private carrier or by personal delivery to
the shareholder, and, if so given, shall be effective when actually
received by the shareholder.
(e) If an annual or special shareholders' meeting is adjourned to a
different date, time, or place, notice need not be given of the new date,
time, or place if the new date, time, or place is announced at the meeting
before adjournment; provided, however, that, if a new record date for the
adjourned meeting is fixed pursuant to Article I, Section 3(c), notice of
the adjourned meeting shall be given to persons who are shareholders as of
the new record date.
(f) If three successive notices are given by the Corporation, whether
with respect to a shareholders' meeting or otherwise, to a shareholder and
are returned as undeliverable, no further notices to such shareholder shall
be necessary until another address for the shareholder is made known to the
Corporation.
6. QUORUM. Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. One-third of the votes entitled to be cast on the matter
by the voting group shall constitute a quorum of that voting group for action on
the matter. If a quorum does not exist with respect to any voting group, the
president or any shareholder or proxy that is present at the meeting, whether or
not a member of that voting group, may adjourn the meeting to a different date,
time, or place, and (subject to the next sentence) notice need not be given of
the new date, time, or place if the new date, time, or place is announced at the
meeting before adjournment. If a new record date for the adjourned meeting is or
must be fixed pursuant to Article I, Section 3(c), notice of the adjourned
meeting shall be given pursuant to Article I, Section 5 to persons who are
shareholders as of the new record date. At any adjourned meeting at which a
quorum exists, any matter may be acted upon that could have been acted upon at
the meeting originally called; provided, however, that, if new notice is given
of the adjourned meeting, then such notice shall state the purpose or purposes
of the adjourned meeting sufficiently to permit action on such matters. Once a
share is represented for any purpose at a meeting, including the purpose of
determining that a quorum exists, it is deemed present for quorum purposes for
the remainder of the meeting and for any adjournment of that meeting unless a
new record date is or shall be set for that adjourned meeting.
7. VOTING ENTITLEMENT OF SHARES. Except as stated in the articles of
incorporation, each outstanding share, regardless of class, is entitled to one
vote, and each fractional share is entitled to a corresponding fractional vote,
on each matter voted on at a shareholders' meeting.
8. PROXIES; ACCEPTANCE OF VOTES AND CONSENTS.
(a) A shareholder may vote either in person or by proxy.
(b) An appointment of a proxy is not effective against the Corporation
until the appointment is received by the Corporation. An appointment is
valid for eleven months unless a different period is expressly provided in
the appointment form.
(c) The Corporation may accept or reject any appointment of a proxy,
revocation of appointment of a proxy, vote, consent, waiver, or other
writing purportedly signed by or for a shareholder, if such acceptance or
rejection is in accordance with the provisions of the Colorado Business
Corporation Act.
9. WAIVER OF NOTICE.
(a) A shareholder may waive any notice required by the Colorado
Business Corporation Act, the articles of incorporation or these bylaws,
whether before or after the date or time stated in the notice as the date
or time when any action will occur or has occurred. The waiver shall be in
writing, be signed by the shareholder entitled to the notice, and be
delivered to the Corporation for inclusion in the minutes or filing with
the corporate records, but such delivery and filing shall not be conditions
of the effectiveness of the waiver.
(b) A shareholder's attendance at a meeting waives objection to lack
of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting
business at the meeting because of lack of notice or defective notice, and
waives objection to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice,
unless the shareholder objects to considering the matter when it is
presented.
10. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action required or
permitted to be taken at a shareholders' meeting may be taken without a meeting
if all of the shareholders entitled to vote thereon consent to such action in
writing. Action taken pursuant to this section shall be effective when the
Corporation has received writings that describe and consent to the action,
signed by all of the shareholders entitled to vote thereon. Action taken
pursuant to this section shall be effective as of the date the last writing
necessary to effect the action is received by the Corporation, unless all of the
writings necessary to effect the action specify another date, which may be
before or after the date the writings are received by the Corporation. Such
action shall have the same effect as action taken at a meeting of shareholders
and may be described as such in any document. Any shareholder who has signed a
writing describing and consenting to action taken pursuant to this section may
revoke such consent by a writing signed by the shareholder describing the action
and stating that the shareholder's prior consent thereto is revoked, if such
writing is received by the Corporation before the effectiveness of the action.
11. MEETINGS BY TELECOMMUNICATIONS. To the extent provided by resolution of
the Board of Directors or in the notice of the meeting, any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during the
meeting. A shareholder participating in a meeting by this means is deemed to be
present in person at the meeting.
Article II
DIRECTORS
1. AUTHORITY OF THE BOARD OF DIRECTORS. The corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed under the direction of, a board of directors.
2. NUMBER. Subject to the provisions of the Articles of Incorporation, the
number of directors shall be fixed by resolution of the board of directors from
time to time and may be increased or decreased by resolution adopted by the
board of directors from time to time, but no decrease in the number of directors
shall have the effect of shortening the term of any incumbent director.
3. QUALIFICATION. Directors shall be natural persons at least eighteen
years old but need not be residents of the State of Colorado or shareholders of
the Corporation.
4. ELECTION. The board of directors shall be elected at the annual meeting
of the shareholders or at a special meeting called for that purpose.
5. TERM. Each director shall be elected to hold office until the next
annual meeting of shareholders and until the director's successor is elected and
qualified unless the directors are appointed to staggered terms as provided in
the Articles of Incorporation. In such case, the terms of the directors shall
expire as set forth in the Articles of Incorporation
6. RESIGNATION. A director may resign at any time by giving written notice
of his or her resignation to any other director or (if the director is not also
the secretary) to the secretary. The resignation shall be effective when it is
received by the other director or secretary, as the case may be, unless the
notice of resignation specifies a later effective date. Acceptance of such
resignation shall not be necessary to make it effective unless the notice so
provides.
7. REMOVAL. Any director may be removed by the shareholders of the voting
group that elected the director, with or without cause at a meeting called for
that purpose. The notice of the meeting shall state that the purpose, or one of
the purposes, of the meeting is removal of the director. A director may be
removed only if the number of votes cast in favor of removal exceeds the number
of votes cast against removal.
8. VACANCIES.
(a) If a vacancy occurs on the board of directors, including a vacancy
resulting from an increase in the number of directors:
(1) The shareholders may fill the vacancy at the next annual
meeting or at a special meeting called for that purpose; or
(2) The board of directors may fill the vacancy; or
(3) If the directors remaining in office constitute fewer than a
quorum of the board, they may fill the vacancy by the affirmative vote
of a majority of all the directors remaining in office.
(b) Notwithstanding Article II, Section 8(a), if the vacant office was
held by a director elected by a voting group of shareholders, then, if one
or more of the remaining directors were elected by the same voting group,
only such directors are entitled to vote to fill the vacancy if it is
filled by directors, and they may do so by the affirmative vote of a
majority of such directors remaining in office; and only the holders of
shares of that voting group are entitled to vote to fill the vacancy if it
is filled by the shareholders.
(c) A vacancy that will occur at a specific later date, by reason of a
resignation that will become effective at a later date under Article II,
Section 6 or otherwise, may be filled before the vacancy occurs, but the
new director may not take office until the vacancy occurs.
9. MEETINGS. The board of directors may hold regular or special
meetings in or out of Colorado. A regular meeting shall be held in the
principal office of the Corporation on such date or dates, and at such
time, as may be established by resolution of the board of directors. If the
board shall establish a date and time for a regular meeting of the board, such
meeting may be held without notice of the date, time, place, or purpose of the
meeting The board of directors may, by resolution, establish other dates, times
and places for additional regular meetings, which may thereafter be held without
further notice. Special meetings may be called by the president or by any two
directors and shall be held at the principal office of the Corporation unless
another place is consented to by every director. At any time when the board
consists of a single director, that director may act at any time, date, or place
without notice.
10. NOTICE OF SPECIAL MEETING. Notice of a special meeting shall be given
to every director at least twenty four hours before the time of the meeting,
stating the date, time, and place of the meeting. The notice need not describe
the purpose of the meeting. Notice may be given orally to the director,
personally or by telephone or other wire or wireless communication. Notice may
also be given in writing by telegraph, teletype, electronically transmitted
facsimile, electronic mail, mail, or private carrier. Notice shall be effective
at the earliest of the time it is received; five days after it is deposited in
the United States mail, properly addressed to the last address for the director
shown on the records of the Corporation, first class postage prepaid; or the
date shown on the return receipt if mailed by registered or certified mail,
return receipt requested, postage prepaid, in the United States mail and if the
return receipt is signed by the director to which the notice is addressed.
11. QUORUM. Except as provided in Article II, Section 8, a majority of the
number of directors fixed in accordance with these Bylaws shall constitute a
quorum for the transaction of business at all meetings of the board of
directors. The act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the board of directors, except as
otherwise specifically required by law.
12. WAIVER OF NOTICE.
(a) A director may waive any notice of a meeting before or after the
time and date of the meeting stated in the notice. Except as provided by
Article II, Section 12(b), the waiver shall be in writing and shall be
signed by the director. Such waiver shall be delivered to the secretary for
filing with the corporate records, but such delivery and filing shall not
be conditions of the effectiveness of the waiver.
(b) A director's attendance at or participation in a meeting waives
any required notice to him or her of the meeting unless, at the beginning
of the meeting or promptly upon his or her later arrival, the director
objects to holding the meeting or transacting business at the meeting
because of lack of notice or defective notice and does not thereafter vote
for or assent to action taken at the meeting.
13. ATTENDANCE BY TELEPHONE. One or more directors may participate in a
regular or special meeting by, or conduct the meeting through the use of, any
means of communication by which all directors participating may hear each other
during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.
14. DEEMED ASSENT TO ACTION. A director who is present at a meeting of the
board of directors when corporate action is taken shall be deemed to have
assented to all action taken at the meeting unless:
(1) The director objects at the beginning of the meeting, or
promptly upon his or her arrival, to holding the meeting or
transacting business at the meeting and does not thereafter vote for
or assent to any action taken at the meeting;
(2) The director contemporaneously requests that his or her
dissent or abstention as to any specific action taken be entered in
the minutes of the meeting; or
(3) The director causes written notice of his or her dissent or
abstention as to any specific action to be received by the presiding
officer of the meeting before adjournment of the meeting or by the
secretary (or, if the director is the secretary, by another director)
promptly after adjournment of the meeting.
The right of dissent or abstention pursuant to this Article II, Section 14 as to
a specific action is not available to a director who votes in favor of the
action taken.
15. ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or permitted
by law to be taken at a board of directors' meeting may be taken without a
meeting if all members of the board consent to such action in writing. Action
shall be deemed to have been so taken by the board at the time the last director
signs a writing describing the action taken, unless, before such time, any
director has revoked his or her consent by a writing signed by the director and
received by the secretary or any other person authorized by the bylaws or the
board of directors to receive such a revocation. Such action shall be effective
at the time and date it is so taken unless the directors establish a different
effective time or date. Such action has the same effect as action taken at a
meeting of directors and may be described as such in any document.
16. NOMINATIONS OF DIRECTORS.
(a) The Board of Directors may nominate persons to stand for election
to the board of directors at any time prior to a meeting of shareholders at
which directors are to be elected.
(b) Any shareholder may nominate a person to stand for election to the
Board of Directors provided such shareholder provides written notification
of the intention to nominate such persons at the next shareholder meeting
not less than 90 days in advance of such meeting, and provided further such
notice is accompanied by information regarding the proposed nominee meeting
the requirements of part III of SEC Regulation SB or Regulation SK and
information regarding all direct and indirect business or personal
relationships between the shareholder and the proposed nominee.
Article III
COMMITTEES OF THE BOARD OF DIRECTORS
1. COMMITTEES OF THE BOARD OF DIRECTORS.
(a) Subject to the provisions of the Colorado Business Corporation
Act, the board of directors may create one or more committees and appoint
one or more members of the board of directors to serve on them. The
creation of a committee and appointment of members to it shall require the
approval of a majority of all the directors in office when the action is
taken, whether or not those directors constitute a quorum of the board.
(b) The provisions of these bylaws governing meetings, action without
meeting, notice, waiver of notice, and quorum and voting requirements of
the board of directors apply to committees and their members as well.
(c) To the extent specified by resolution adopted from time to time by
a majority of all the directors in office when the resolution is adopted,
whether or not those directors constitute a quorum of the board, each
committee shall exercise the authority of the board of directors with
respect to the corporate powers and the management of the business and
affairs of the Corporation; except that a committee shall not:
(1) Authorize distributions;
(2) Approve or propose to shareholders action that the Colorado
Business Corporation Act requires to be approved by shareholders;
(3) Fill vacancies on the board of directors or on any of its
committees;
(4) Amend the articles of incorporation pursuant to the Colorado
Business Corporation Act;
(5) Adopt, amend, or repeal bylaws;
(6) Approve a plan of merger not requiring shareholder approval;
(7) Authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the board of directors;
or
(8) Authorize or approve the issuance or sale of shares, or a
contract for the sale of shares, or determine the designation and
relative rights, preferences, and limitations of a class or series of
shares; except that the board of directors may authorize a committee
or an officer to do so within limits specifically prescribed by the
board of directors.
(d) The creation of, delegation of authority to, or action by, a
committee does not alone constitute compliance by a director with
applicable standards of conduct.
Article IV
OFFICERS
1. GENERAL.
(a) The Corporation shall have as officers a president and a
secretary, each of whom who shall be appointed by the board of directors.
The board of directors may appoint as additional officers a chairman and
other officers of the board.
(b) The board of directors, the president, and such other subordinate
officers as the board of directors may authorize from time to time, acting
singly, may appoint as additional officers one or more vice presidents,
assistant secretaries, assistant treasurers, and such other subordinate
officers as the board of directors, the president, or such other appointing
officers deem necessary or appropriate.
(c) The officers of the Corporation shall hold their offices for such
terms and shall exercise such authority and perform such duties as shall be
determined from time to time by these Bylaws, the board of directors, or
(with respect to officers whom are appointed by the president or other
appointing officers) the persons appointing them; provided, however, that
the board of directors may change the term of offices and the authority of
any officer appointed by the president or other appointing officers.
(d) Any two or more offices may be held by the same person. The
officers of the Corporation shall be natural persons at least eighteen
years old.
2. TERM. Each officer shall hold office from the time of appointment until
the time of removal or resignation pursuant to Article IV, Section 3 or until
the officer's death.
3. REMOVAL AND RESIGNATION. Any officer appointed by the board of directors
may be removed at any time by the board of directors. Any officer appointed by
the president or other appointing officer may be removed at any time by the
board of directors or by the person appointing the officer. Any officer may
resign at any time by giving written notice of resignation to any director (or
to any director other than the resigning officer if the officer is also a
director), to the president, to the secretary, or to the officer who appointed
the officer. Acceptance of such resignation shall not be necessary to make it
effective, unless the notice so provides.
4. PRESIDENT. The president shall preside at all meetings of shareholders,
and shall also preside at all meetings of the board of directors unless the
board of directors has appointed a chairman, vice chairman, or other officer of
the board and has authorized such person to preside at meetings of the board of
directors instead of the president. Subject to the direction and control of the
board of directors, the president of the Corporation shall have general and
active management of the business of the Corporation and shall see that all
orders and resolutions of the board of directors are carried into effect. The
president may negotiate, enter into, and execute contracts, deeds, and other
instruments on behalf of the Corporation as are necessary and appropriate to the
conduct to the business and affairs of the Corporation or as are approved by the
board of directors. The president shall have such additional authority and
duties as are appropriate and customary for the office of president, except as
the same may be expanded or limited by the board of directors from time to time.
5. VICE PRESIDENT. The vice president, if any, or, if there are more than
one, the vice presidents in the order determined by the board of directors or
the president (or, if no such determination is made, in the order of their
appointment), shall be the officer or officers next in seniority after the
president. Each vice president shall have such authority and duties as are
prescribed by the board of directors or president. Upon the death, absence, or
disability of the president, the vice president, if any, or, if there are more
than one, the vice presidents in the order determined by the board of directors
or the president, shall have the authority and duties of the president.
6. SECRETARY. The secretary shall be responsible for the preparation and
maintenance of minutes of the meetings of the board of directors and of the
shareholders and of the other records and information required to be kept by the
Corporation under the Colorado Business Corporation Act and for authenticating
records of the corporation. The secretary shall also give, or cause to be given,
notice of all meetings of the shareholders and special meetings of the board of
directors, keep the minutes of such meetings, have charge of the corporate seal,
if any, and have authority to affix the corporate seal to any instrument
requiring it (and, when so affixed, it may be attested by the secretary's
signature), be responsible for the maintenance of all other corporate records
and files and for the preparation and filing of reports to governmental agencies
(other than tax returns), and have such other authority and duties as are
appropriate and customary for the office of secretary, except as the same may be
expanded or limited by the board of directors from time to time.
7. ASSISTANT SECRETARY. The assistant secretary, if any, or, if there are
more than one, the assistant secretaries in the order determined by the board of
directors or the secretary (or, if no such determination is made, in the order
of their appointment) shall, under the supervision of the secretary, perform
such duties and have such authority as may be prescribed from time to time by
the board of directors or the secretary. Upon the death, absence, or disability
of the secretary, the assistant secretary, if any, or, if there are more than
one, the assistant secretaries in the order designated by the board of directors
or the secretary (or, if no such determination is made, in the order of their
appointment), shall have the authority and duties of the secretary.
8. TREASURER. The treasurer, if any, shall have control of the funds and
the care and custody of all stocks, bonds, and other securities owned by the
Corporation, and shall be responsible for the preparation and filing of tax
returns. The treasurer shall receive all moneys paid to the Corporation and,
subject to any limits imposed by the board of directors, shall have authority to
give receipts and vouchers, to sign and endorse checks and warrants in the
Corporation's name and on the Corporation's behalf, and give full discharge for
the same. The treasurer shall also have charge of disbursement of funds of the
Corporation, shall keep full and accurate records of the receipts and
disbursements, and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as shall be
designated by the board of directors. The treasurer shall have such additional
authority and duties as are appropriate and customary for the office of
treasurer, except as the same may be expanded or limited by the board of
directors from time to time.
9. COMPENSATION. Officers shall receive such compensation for their
services as may be authorized or ratified by the board of directors. Election or
appointment of an officer shall not of itself create a contractual right to
compensation for services performed as such officer.
Article V
INDEMNIFICATION
1. DEFINITIONS. As used in this article:
(a) "Corporation" includes any domestic or foreign entity that is a
predecessor of the Corporation by reason of a merger or other transaction
in which the predecessor's existence ceased upon consummation of the
transaction.
(b) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is
or was serving at the Corporation's request as a director, officer,
partner, trustee, employee, fiduciary, or agent of another domestic or
foreign corporation or other person or of an employee benefit plan. A
director is considered to be serving an employee benefit plan at the
Corporation's request if his or her duties to the Corporation also impose
duties on, or otherwise involve services by, the director to the plan or to
participants in or beneficiaries of the plan. "Director" includes, unless
the context requires otherwise, the estate or personal representative of a
director.
(c) "Expenses" includes counsel fees.
(d) "Liability" means the obligation incurred with respect to a
proceeding to pay a judgment, settlement, penalty, fine, including an
excise tax assessed with respect to an employee benefit plan, or reasonable
expenses.
(e) "Official capacity" means, when used with respect to a director,
the office of director in the Corporation and, when used with respect to a
person other than a director as contemplated in Article V, Section 2(a),
the office in the Corporation held by the officer or the employment,
fiduciary, or agency relationship undertaken by the employee, fiduciary, or
agent on behalf of the Corporation. "Official capacity" does not include
service for any other domestic or foreign corporation or other person or
employee benefit plan.
(f) "Party" includes a person who was, is, or is threatened to be made
a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
2. AUTHORITY TO INDEMNIFY DIRECTORS.
(a) Except as provided in Article V, Section 2(d), the Corporation may
indemnify a person made a party to a proceeding because the person is or
was a director against liability incurred in the proceeding if:
(1) The person conducted himself or herself in good faith; and
(2) The person reasonably believed:
(A) In the case of conduct in an official capacity with the
Corporation, that his or her conduct was in the Corporation's
best interests; and
(B) In all other cases, that his or her conduct was at least
not opposed to the Corporation's best interests; and
(3) In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan for
a purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirement of Article V, Section 2(a)(2)(B). A director's conduct with
respect to an employee benefit plan for a purpose that the director did not
reasonably believe to be in the interests of the participants in or
beneficiaries of the plan shall be deemed not to satisfy the requirements
of Article V, Section 2(a)(1).
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of
conduct described in this Article V, Section 2.
(d) The Corporation may not indemnify a director under this Article V,
Section 2:
(1) In connection with a proceeding by or in the right of the
Corporation in which the director was adjudged liable to the
Corporation; or
(2) In connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not
involving action in an official capacity, in which proceeding the
director was adjudged liable on the basis that he or she derived an
improper personal benefit.
(e) Indemnification permitted under this Article V, Section 2 in
connection with a proceeding by or in the right of the Corporation is
limited to reasonable expenses incurred in connection with the proceeding.
3. MANDATORY INDEMNIFICATION OF DIRECTORS. The Corporation shall indemnify
a person who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which the person was a party because the person is or was a
director, against reasonable expenses incurred by him or her in connection with
the proceeding.
4. ADVANCE OF EXPENSES TO DIRECTORS.
(a) The Corporation may pay for or reimburse the reasonable
expenses incurred by a director who is a party to a proceeding in
advance of final disposition of the proceeding if:
(1) The director furnishes to the Corporation a
written affirmation of the director's good faith belief that
he or she has met the standard of conduct described in Article
V, Section 2.
(2) The director furnishes to the Corporation a
written undertaking, executed personally or on the director's
behalf, to repay the advance if it is ultimately determined
that he or she did not meet the standard of conduct; and
(3) A determination is made that the facts then known
to those making the determination would not preclude
indemnification under this article.
(b) The undertaking required by Article V, Section 4(a)(2)
shall be an unlimited general obligation of the director but need not
be secured and may be accepted without reference to financial ability
to make repayment.
(c) Determinations and authorizations of payments under this
Article V, Section 4 shall be made in the manner specified in Article
V, Section 6.
5. COURT-ORDERED INDEMNIFICATION OF DIRECTORS. A director who is or was a
party to a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court considers necessary,
may order indemnification in the following manner:
(1) If it determines that the director is entitled to mandatory
indemnification under Article V, Section 3, the court shall order
indemnification, in which case the court shall also order the
Corporation to pay the director's reasonable expenses incurred to
obtain court-ordered indemnification.
(2) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances,
whether or not the director met the standard of conduct set forth in
Article V, Section 2(a) or was adjudged liable in the circumstances
described in Article V, Section 2(d), the court may order such
indemnification as the court deems proper; except that the
indemnification with respect to any proceeding in which liability
shall have been adjudged in the circumstances described in Article V,
Section 2(d) is limited to reasonable expenses incurred in connection
with the proceeding and reasonable expenses incurred to obtain
court-ordered indemnification.
6. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION OF DIRECTORS.
(a) The Corporation may not indemnify a director under Article V,
Section 2 unless authorized in the specific case after a determination has
been made that indemnification of the director is permissible in the
circumstances because the director has met the standard of conduct set
forth in Article V, Section 2. The Corporation shall not advance expenses
to a director under Article V, Section 4 unless authorized in the specific
case after the written affirmation and undertaking required by Article V,
Section 4(a)(1) and 4(a)(2) are received and the determination required by
Article V, Section 4(a)(3) has been made.
(b) The determinations required by Article V, Section 6(a) shall be
made:
(1) By the board of directors by a majority vote of those present
at a meeting at which a quorum is present, and only those directors
not parties to the proceeding shall be counted in satisfying the
quorum; or
(2) If a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated by the board of
directors, which committee shall consist of two or more directors not
parties to the proceeding; except that directors who are parties to
the proceeding may participate in the designation of directors for the
committee.
(c) If a quorum cannot be obtained as contemplated in Article V,
Section 6(b)(1), and a committee cannot be established under Article V,
Section 6(b)(2) if a quorum is obtained or a committee is designated, if a
majority of the directors constituting such quorum or such committee so
directs, the determination required to be made by Article V, Section 6(a)
shall be made:
(1) By independent legal counsel selected by a vote of the board
of directors or the committee in the manner specified in Article V,
Section 6(b)(1) or 6(b)(2), or, if a quorum of the full board cannot
be obtained and a committee cannot be established, by independent
legal counsel selected by a majority vote of the full board of
directors; or
(2) By the shareholders.
(d) Authorization of indemnification and advance of expenses shall be
made in the same manner as the determination that indemnification or
advance of expenses is permissible; except that, if the determination that
indemnification or advance of expenses is permissible is made by
independent legal counsel, authorization of indemnification and advance of
expenses shall be made by the body that selected such counsel.
7. INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND AGENTS.
(a) An officer is entitled to mandatory indemnification under Article
V, Section 3 and is entitled to apply for court-ordered indemnification
under Article V, Section 5, in each case to the same extent as a director;
(b) The Corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the Corporation to the same extent as to a
director; and
(c) The Corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a greater
extent than is provided in these bylaws, if not inconsistent with public
policy, and if provided for by general or specific action of its board of
directors or shareholders or by contract.
8. INSURANCE. The Corporation may purchase and maintain insurance on behalf
of a person who is or was a director, officer, employee, fiduciary, or agent of
the Corporation, or who, while a director, officer, employee, fiduciary, or
agent of the Corporation, is or was serving at the request of the Corporation as
a director, officer, partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an employee benefit plan,
against liability asserted against or incurred by the person in that capacity or
arising from his or her status as a director, officer, employee, fiduciary, or
agent, whether or not the Corporation would have power to indemnify the person
against the same liability under Article V, Sections 2, 3, or 7. Any such
insurance may be procured from any insurance company designated by the board of
directors, whether such insurance company is formed under the laws of this state
or any other jurisdiction of the United States or elsewhere, including any
insurance company in which the Corporation has an equity or any other interest
through stock ownership or otherwise.
9. NOTICE TO SHAREHOLDERS OF INDEMNIFICATION OF DIRECTOR. If the
Corporation indemnifies or advances expenses to a director under this article in
connection with a proceeding by or in the right of the Corporation, the
Corporation shall give written notice of the indemnification or advance to the
shareholders with or before the notice of the next shareholders' meeting. If the
next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
Article VI
SHARES
1. CERTIFICATES. Certificates representing shares of the capital stock of
the Corporation shall be in such form as is approved by the board of directors
and shall be signed by the chairman or vice chairman of the board of directors
(if any), or the president and by the secretary or an assistant secretary or the
treasurer or an assistant treasurer. All certificates shall be consecutively
numbered, and the names of the owners, the number of shares, and the date of
issue shall be entered on the books of the Corporation. Each certificate
representing shares shall state upon its face
(a) That the Corporation is organized under the laws of the State of
Colorado;
(b) The name of the person to whom issued;
(c) The number and class of the shares and the designation of the
series, if any, that the certificate represents;
(d) The par value, if any, of each share represented by the
certificate;
(e) Any restrictions imposed by the Corporation upon the transfer of
the shares represented by the certificate; and
(f) Other matters required to be stated on the certificates by the
Colorado Business Corporation Act, ss.7-106-206 and other applicable
sections.
2. FACSIMILE SIGNATURES. Where a certificate is signed
(a) By a transfer agent other than the Corporation or its employee, or
(b) By a registrar other than the Corporation or its employee, any or
all of the officers' signatures on the certificate required by Article VI,
Section 1 may be facsimile. If any officer, transfer agent or registrar who
has signed, or whose facsimile signature or signatures have been placed
upon, any certificate, shall cease to be such officer, transfer agent, or
registrar, whether because of death, resignation, or otherwise, before the
certificate is issued by the Corporation, it may nevertheless be issued by
the Corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.
3. TRANSFERS OF SHARES. Transfers of shares shall be made on the books of
the Corporation only upon presentation of the certificate or certificates
representing such shares properly endorsed by the person or persons appearing
upon the face of such certificate to be the owner, or accompanied by a proper
transfer or assignment separate from the certificate, except as may otherwise be
expressly provided by the statutes of the State of Colorado or by order of a
court of competent jurisdiction. The officers or transfer agents of the
Corporation may, in their discretion, require a signature guaranty before making
any transfer. The Corporation shall be entitled to treat the person in whose
name any shares are registered on its books as the owner of those shares for all
purposes and shall not be bound to recognize any equitable or other claim or
interest in the shares on the part of any other person, whether or not the
Corporation shall have notice of such claim or interest.
4. SHARES HELD FOR ACCOUNT OF ANOTHER. The board of directors may adopt by
resolution a procedure whereby a shareholder of the Corporation may certify in
writing to the Corporation that all or a portion of the shares registered in the
name of such shareholder are held for the account of a specified person or
persons. The resolution shall set forth
(a) The classification of shareholders who may certify;
(b) The purpose or purposes for which the certification may be made;
(c) The form of certification and information to be contained herein;
(d) If the certification is with respect to a record date or closing
of the stock transfer books, the time after the record date or the closing
of the stock transfer books within which the certification must be received
by the Corporation; and
(e) Such other provisions with respect to the procedure as are deemed
necessary or desirable. Upon receipt by the Corporation of a certification
complying with the procedure, the persons specified in the certification
shall be deemed, for the purpose or purposes set forth in the
certification, to be the holders of record of the number of shares
specified in place of the shareholder making the certification.
Article VII
MISCELLANEOUS
1. CORPORATE SEAL. The board of directors may adopt a seal, circular in
form and bearing the name of the Corporation and the words "SEAL" and
"COLORADO," which, when adopted, shall constitute the seal of the Corporation.
The seal may be used by causing it or a facsimile of it to be impressed,
affixed, manually reproduced, or rubber stamped with indelible ink. Even if the
Corporation has adopted a corporate seal, properly authorized actions of the
Corporation are effective whether or not any writing evidencing such action is
sealed.
2. FISCAL YEAR. The board of directors may, by resolution, adopt a fiscal
year for the Corporation.
3. RECEIPT OF NOTICES BY THE CORPORATION. Notices, shareholder writings
consenting to action, and other documents or writings shall be deemed to have
been received by the Corporation when they are received
(a) At the registered office of the Corporation in the State of
Colorado;
(b) At the principal office of the Corporation (as that office is
designated in the most recent document filed by the Corporation with the
Secretary of State for the State of Colorado designating a principal
office) addressed to the attention of the secretary of the Corporation;
(c) By the secretary of the corporation wherever the secretary may be
found; or
(d) By any other person authorized from time to time by the board of
directors, the president, or the secretary to receive such writings,
wherever such person is found.
4. FACSIMILE SIGNATURE. Where, under these Bylaws or under the Colorado
Business Corporation Act, as amended, a signature of a director, officer or
shareholder of the Corporation is required, such signature may be presented
either in original form or by a facsimile copy thereof, to the extent permitted
by law.
5. AMENDMENT OF BYLAWS. These Bylaws may at any time and from time to time
be amended, supplemented, or repealed by the board of directors.
Exhibit 10.01
EMPLOYMENT AGREEMENT
FOR THE PRESIDENT and CHIEF EXECUTIVE OFFICER OF
LIFELINE THERAPEUTICS, INC.
This AGREEMENT, dated as of October 12, 2004, by and between LIFELINE
THERAPEUTICS, INC., a Colorado corporation, referred to herein as the
"Company"), and William Driscoll presently residing in Denver, Colorado
("Executive").
WITNESSETH:
WHEREAS, Company hires Executive as the President and Chief Executive
Officer of the Company;
WHEREAS, the Board of Directors ("Board") recognizes that the Executive
will contribute significantly to the growth and success of the Company;
WHEREAS, the Board desires the attention and dedication of the Executive as
a member of the Company's management, and has determined it is in the best
interest of the Company to employ Executive; and
WHEREAS, the Executive is willing to commit himself to serving the Company,
on the terms and conditions herein provided.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the parties hereto hereby agree as
follows:
1. Employment. The Company hereby agrees to employ the Executive as the
President and Chief Executive Officer of the Company during the Employment
Term (as defined in Section 3), and the Executive hereby accepts such
employment and agrees to serve the Company subject to the general
supervision, advice and direction of the Board of Directors and upon the
terms and conditions set forth in this Agreement.
2. Duties. During the Employment Term, the Executive shall be the President
and Chief Executive Officer of the Company with such authority and duties
as is customary for the officer of a corporation in such position, and
shall perform such other services and duties as the Board may from time to
time designate consistent with such position, including, without
limitation, the right to hire and fire employees of the Company, including
officers. The Executive shall devote his full time, best efforts and
undivided attention to the business and affairs of the Company except for
vacations, personal time to which he is entitled pursuant to the terms of
this Agreement and except for illness or incapacity; provided, however,
that the Executive may serve, or continue to serve, on the boards of
directors of, and hold any other offices or positions in, companies or
organizations which, in such Board's judgment, will not present any
1
conflict of interest with the Company, or materially affect the performance
of the Executive's duties pursuant to this Agreement as long as the
Executive discloses in writing each such position to the Board.
3. Employment Term.
(a) The Executive shall be employed under this Agreement for a term (the
"Employment Term") commencing on October 16, 2004 ("Commencement
Date") and terminating on the close of business on April 15, 2005,
unless sooner terminated as provided in Section 6 hereof; provided
that upon expiration of the initial term on April 15, 2005, this
Agreement shall thereafter automatically be renewed from year to year
(or such shorter period until the Executive's retirement) unless
either party provides written notification to the other of its
intention not to so renew which notice must be given no later than
April 30 of each such year. Neither the expiration of this Agreement,
its termination by reason of the Executive's retirement, nor the
giving of notice by the Company that it does not wish to renew the
Employment Term shall constitute a breach of this Agreement or
termination of the Executive for the purposes of Section 6 or 7 of
this Agreement.
(b) Notwithstanding the provisions of Section 3(a), the Employment Term
shall be extended automatically for a period of two years from the
month in which a Change of Control (as such term is hereafter defined)
occurs (or such shorter period ending on the Executive's retirement).
(c) The date on which the Employment Term (including any one year renewal
period then in effect) is scheduled to terminate under Sections 3(a)
or 3(b) shall hereinafter be referred to as the "Scheduled Termination
Date".
(d) If there is a Change in Control then the Executive's monthly salary
shall be accelerated and paid within thirty (30) days of said Change
of Control for the full amount due through the termination date of
said employment agreement according to the terms set forth in 3(b)
above.
4. Compensation.
(a) Base Salary. The Company shall pay the Executive an annual base salary
as compensation for his services hereunder of $180,000 ("Base
Salary"), payable in equal semi-monthly installments in accordance
with the ordinary payroll practices of the Company for management
employees.
(b) Supplemental or Incentive Compensation. During the Employment Term,
the Executive may receive supplemental or incentive compensation based
on the criteria the Board deems appropriate consistent with the
Company's strategic plan. Any supplemental or incentive compensation
shall be paid in cash.
2
(c) Additional Benefits. During the Employment Term, the Executive shall
be entitled to paid time off (PTO) and to participate in any employee
benefit plans, including any incentive plans, any pension or group
life health, hospitalization, short-term disability and other
disability insurance plans and other employee welfare benefits made
available generally to management employees of the Company.
5. Reimbursement of Expenses. In addition to the compensation provided for
under Section 4 of this Agreement, upon submission of proper vouchers and
in accordance with the policies and procedures established by the Company
in effect from time to time, the Company shall pay or reimburse the
Executive for all normal and reasonable expenses, including travel
expenses, incurred by the Executive during the Employment Term in
connection with the Executive's responsibilities to the Company.
6. Termination. Notwithstanding Section 3 hereof, the Employment Term shall
terminate prior to the Scheduled Termination Date upon the occurrence of
any of the following events:
(a) Death. The Employment Term shall terminate upon the death of the
Executive.
(b) Disability. The Employment Term shall terminate as a result of the
Executive's Permanent Disability (as such term is defined in Section
6(f)).
(c) Termination Without Cause. The Employment Term shall terminate upon
the Executive's Termination Without Cause (as such term is defined in
Section 6(f)).
(d) Termination By Executive. The Employment Term shall terminate upon a
Voluntary Termination (as such term is defined in Section 6(f)) by the
Executive of his employment hereunder with the Company.
(e) Termination For Cause. The Employment Term shall terminate upon the
Executive's Termination For Cause (as defined in Section 6(f)).
(f) Definitions. For purposes of this Agreement:
(i) "Permanent Disability" shall mean that by reason of a physical or
mental disability or infirmity which has continued for a period
of at least six months, the Executive is unable substantially to
perform the duties contemplated by this Agreement on a regular
basis. The determination of Permanent Disability shall be made by
a medical board certified physician mutually acceptable to the
Company and the Executive (or the Executive's legal
3
representative, if one has been appointed). The Executive agrees
to submit such medical evidence regarding such disability or
infirmity as is reasonably requested by the Company.
(ii) "Termination For Cause" shall mean any termination of the
employment of the Executive for "Cause." For purposes of this
Agreement, the termination of the Executive's employment shall be
deemed to have been for Cause only:
(A) if termination of his employment shall have been the result
of the Executive's willful engaging in dishonest, unethical,
illegal or fraudulent actions resulting or intended to
result directly or indirectly in any demonstrable material
harm to the Company or its shareholders, or
(B) if there has been a willful and continued failure by the
Executive during the Employment Term (except by reason of
incapacity due to physical or mental illness) to comply with
the provisions of this Agreement, and the Executive shall
have either failed to remedy such alleged breach within ten
days from his receipt of written notice from the Company
demanding that he remedy such alleged breach or shall have
failed to take all reasonable steps to that end during such
ten day period and thereafter; or
(C) if the Executive has failed to comply with the provisions of
this Agreement on two or more prior occasions, even if the
Executive remedied the conduct as provided in Section
6(f)(ii)(B); or
(D) if there has been a breach of fiduciary duty involving
personal profit to the Executive; provided that there shall
have been delivered to the Executive at least ten days prior
to the effective date of Termination for Cause a Notice of
Termination (as defined in this Section 6(f)) and a
certified copy of a resolution of the Board adopted by the
affirmative vote of not less than a majority of the entire
membership of the Board (other than the Executive if he is a
member of the Board at such time) at a meeting called and
held for that purpose and at which the Executive was given
an opportunity, together with the Executive's counsel, to be
heard, finding that the Executive had engaged in conduct set
forth in subsection (A), (B), (C) or (D) above based on
reasonable evidence, specifying the particulars thereof in
detail.
If the Executive's employment shall be terminated by the
Company during the Employment Term for Cause, the Executive
4
shall have the right to contest such termination only in
accordance with the rules set forth in Section 14 of this
Agreement.
(iii) "Voluntary Termination" shall mean any voluntary termination by
the Executive of his employment with the Company or termination
as a result of retirement at or after age 65.
(iv) "Termination Without Cause" shall mean any termination of the
employment of the Executive by the Company other than Voluntary
Termination, Termination For Cause or upon death, or Permanent
Disability. Termination Without Cause pursuant to the preceding
sentence may occur only upon the affirmative vote of at least a
majority of the entire membership of the Board (not counting the
Executive, who may not vote if he is then a member of the Board)
at a meeting called and held for that purpose.
(v) Any termination of the Executive's employment by the Company or
by the Executive (other than termination pursuant to Section
6(a)) shall be communicated by written "Notice of Termination" to
the other party to this Agreement. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated.
(vi) The "Date of Termination" shall mean (A) if the Executive is
terminated by his death, the date of his death, (B) if the
Executive's employment is terminated due to a Permanent
Disability, 30 days after Notice of Termination is given, (C) if
the Executive's employment is terminated pursuant to a
Termination For Cause, the date specified in the Notice of
Termination, (D) if the Executive's employment is terminated due
to his retirement, the date specified in the Notice of
Termination and (E) if the Executive's employment is terminated
for any other reason, the date specified in the Notice of
Termination.
7. Termination Benefits.
(a) Death. If the Executive's employment is terminated by his death, the
Company shall pay to his surviving spouse, or if he leaves no spouse,
to his estate, any compensation, pro rata incentive compensation, and
benefits earned by the Executive or vested under Section 4 of this
Agreement through the Executive's Date of Termination; provided,
however, that no death benefits attributable to a period after the
5
Scheduled Termination Date in effect at the time of the Executive's
death shall be payable.
(b) Permanent Disability. If the Executive's employment is terminated as a
result of his Permanent Disability, the Company shall pay the
Executive through the Executive's Date of Termination, any
compensation and benefits earned or vested by the Executive under
Section 4 of this Agreement; provided, however, that no payments shall
be made under this Section 7(b) following the Scheduled Termination
Date in effect at the time of the Executive's Permanent Disability.
Further, if the Executive receives disability benefits under any
disability plan paid for by the Company, including disability
insurance, the amount otherwise payable by the Company to the
Executive shall be reduced (but not below zero) by the amount of such
disability benefits received by him. To the extent permitted under the
life, medical, dental and disability plans then maintained by the
Company for similarly situated active management employees, at the
Executive's option and expense, the Company shall cause to be
continued benefits under such plans to the Executive at coverage not
less than the coverage maintained by the Company for the Executive
immediately prior to the Permanent Disability, which shall run
concurrently with the Executive's COBRA period. Such coverage shall
cease upon the earlier of (i) in the case of medical and dental
benefits, the expiration of the Executive's COBRA rights, (ii) the
Executive's death, or (iii) the Executive's full-time employment by
another employer.
(c) Termination For Cause or Voluntary Termination. In the case of a
termination of the Executive pursuant to Section 6(f)(ii) or Section
6(f)(iii) of this Agreement, the Company's obligations to the
Executive shall cease the day after the Executive's Date of
Termination and the Company shall not be liable to pay the Executive's
Base Salary or supplemental compensation nor shall the Executive have
any rights to further participate in employee benefit plans of the
Company pursuant to Section 4, except the Executive shall be entitled
to any rights or benefits that have become vested prior to the Date of
Termination (unless the plan pursuant to which such benefits are
provided states to the contrary). The Company shall pay the Executive
his Base Salary and any other compensation or benefits earned or
vested through the Date of Termination at the rate in effect at the
time the Notice of Termination is given in a lump sum within thirty
(30) days of the Date of Termination.
(d) Termination Without Cause or Termination With Good Reason. If during
the Employment Term, the Executive shall be terminated from employment
based on a Termination Without Cause or Termination With Good Reason
6
as defined in Section 8(c) of the Agreement, the Executive shall be
entitled to receive the following payments and benefits:
(i) Salary. In the event of any termination under this Section 7(d),
the Executive's Base Salary earned through the Date of
Termination at the rate in effect at the time the Notice of
Termination is given.
(ii) Severance Payment. In the event of any termination under this
Section 7(d), in lieu of any further payments to the Executive
including any payments to which the Executive would be entitled
under any severance plan or arrangement of the Company, the
Company shall pay as severance pay to the Executive an amount
equal to two times the Executive's Base Salary but not less than
the amount due during the remaining term of the Agreement. Such
payments are payable in a single sum, within 30 days following
the Executive's Termination Date. Notwithstanding the foregoing,
in lieu of such severance, at the option of the Company, the
Company and the Executive may enter into a written consulting
agreement pursuant to which, for services rendered by the
Executive, the Executive would receive consideration in an amount
equal to the severance payment otherwise to be made pursuant to
this Section 7(d)(ii).
(iii) Release. The payments provided under this Section 7(d) upon
termination shall be in lieu of any other payments or causes of
action available to the Executive pursuant to this Agreement. As
a condition to receipt of payments under Section 7(d) of this
Agreement, the Executive shall execute a Release and Settlement
Agreement acceptable to the Company, pursuant to which the
Executive shall waive any and all claims resulting from
employment at or termination from the Company other than payments
or benefits which are expressly provided for in this Agreement.
(e) Retirement. The Executive shall not be entitled to any Severance
Payment pursuant to this Section 7 in the event that this Agreement is
terminated prior to its Scheduled Termination Date or as of any
Scheduled Termination Date due to the Executive's retirement.
7
8. Change of Control.
(a) No benefit shall be payable under this Section 8 unless there shall
have been a Change of Control of the Company. (b) For purposes of this
Agreement, a Change of Control of the Company ("Change of Control")
shall be deemed to have occurred if the event set forth in any one of
the following paragraphs shall have occurred:
(i) there is consummated a merger, consolidation or other
reorganization of the Company with any other for- or non-profit
corporation; or
(ii) the Board of Trustees of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets; or
(iii) a merger of Company in which Company does not survive (other
than a merger with a subsidiary of which Company had control for
more than six months prior to the merger), or consolidation of
Company through a change of its members or any other transaction
after which a third party has the right to appoint a majority of
the Board of Trustees of Company.
(c) Good Reason. For purposes of Section 7 and this Section 8 of the
Agreement, Good Reason shall mean the occurrence (without the
Executive's written consent) after any Change of Control or within 90
days prior to a Change of Control of any one of the following acts by
the Company, or failures by the Company to act, unless, such act or
failure to act is corrected prior to the Date of Termination specified
in the Notice of Termination given in respect thereof.
(i) (1) the assignment to the Executive of any duties inconsistent
with the Executive's positions, duties, responsibilities and
status with the Company immediately prior to the Change of
Control; (2) a significant adverse alteration in the nature of
the Executive's reporting responsibilities, titles, or offices as
in effect immediately prior to the Change of Control; (3) the
removal of the Executive from, or any failure to reelect the
Executive to, any such position, except in connection with a
termination of the employment of the Executive due to a Voluntary
Termination, Termination For Cause, or upon death or Permanent
Disability; or (4) any significant diminution in the Executive's
Base Salary from that immediately before the Change of Control,
as the case may be; or
(ii) the requirement by the Company that the Executive's principal
place of employment be relocated more than 45 miles from his
existing place of employment; or
8
(iii) the Company's failure to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as
contemplated in Section 12(a) of this Agreement.
(iv) the failure by the Company to continue in effect any compensation
plan in which the Executive participated immediately prior to the
Change of Control, as the case may be, which is material to the
Executive's total compensation, unless an arrangement (embodied
in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue
the Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as
existed at the time of the Change of Control; or
(v) the failure by the Company to continue to provide the Executive
with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating at the time of the Change of Control
or the taking of any action by the Company that would directly or
indirectly materially reduce any of such benefits enjoyed by the
Executive at the time of the Change of Control.
(f) If, within 90 days prior to the Change of Control, the Executive's
employment with the Company (i) is terminated by the Company for any
reason other than Death, Disability, Cause or retirement or (ii) is
terminated by the Executive for Good Reason, the Executive shall
receive the compensation otherwise payable to the Executive pursuant
to Section 7(d).
9. Protected Information; Prohibited Competition.
(a) The Executive recognizes and acknowledges that during the course of
the Executive's employment by the Company, the Company has disclosed
and shall furnish, disclose or make available to the Executive
confidential or proprietary information related to the Company's
business, including, without limitation, customer lists, ideas,
processes, inventions and devices, that such confidential or
proprietary information has been developed and will be developed
through the expenditure by the Company of substantial time and money
and that all such confidential information could be used by the
Executive and others to compete with the Company. The Executive agrees
that all such confidential or proprietary information shall constitute
9
trade secrets, and further agrees to use such confidential or
proprietary information only for the purpose of carrying out his
duties with the Company and not otherwise to disclose such
information. For purposes of this Agreement, information shall be
deemed confidential notwithstanding any prior unauthorized disclosure
by any person. The obligations imposed by this Section 9(a) shall not
apply to any information that: (a) was known to Executive prior
Executive's employment by the Company; or (b) is now or becomes
generally known or available to the public through no act of the
Executive.
(b) The Executive agrees that during his employment and for a period of
two years following the termination of his employment under Section 6
(except for Termination With Good Reason or Termination Without
Cause):
(i) he will not (except on behalf of or with the prior written
consent of the Company) within any geographic area in which the
Company is located or does business or the Executive knows the
Company intends to do business, either directly or indirectly,
consult with, manage, own, operate, control or participate in or
be employed by any entity that competes with the Company
("Competing Business") or any entity planning to engage in a
business that would compete with the Company; and
(ii) he will not (except on behalf of or with the prior written
consent of the Company), either directly or indirectly, on his
own behalf or in the service or on behalf of any third person,
solicit, divert or appropriate to any Competing Business or
attempt to solicit, divert or appropriate to any Competing
Business any business from any customer or client or actively
sought prospective customer or client of the Company or any of
its subsidiaries with whom the Executive has dealt, whose
dealings with the Company have been supervised by the Executive
or about whom the Executive has acquired proprietary information
during the course of his employment with the Company; and
(iii) he will not (except on behalf of or with the prior written
consent of the Company), either directly or indirectly, on his
own behalf or in the service or on behalf of any third person,
solicit, divert or hire away, or attempt to solicit, divert or
hire away, any person employed by the Company or any of its
subsidiaries with whom the Executive had regular contact in the
course of his employment with the Company, whether or not such
employee is a full-time or a temporary employee, whether or not
10
such employment is pursuant to a written agreement and whether or
not such employment is for a specified period or at will.
(c) Service by the Executive on the Board of Directors of any
not-for-profit or for-profit organization shall not be deemed a
violation of this Section 9(b).
(d) The restrictions in this Section 9 shall survive the termination of
this Agreement and shall be in addition to any restrictions imposed on
the Executive by statute or at common law.
10. Inventions.
(a) The Executive agrees that all Subject Inventions (defined below in
this Section 10) conceived or first practiced by the Executive during
his employment by the Company, and all patent rights and copyrights to
the Subject Inventions are or shall become the property of the Company
immediately upon such conception or practice, and the Executive hereby
irrevocably assigns to the Company all of the Executive's rights to
all Subject Inventions.
(b) The Executive agrees that if he conceives an Invention during his
employment and there is a reasonable basis to believe that the
Invention is a Subject Invention, the Executive will promptly provide
a written description of the Invention to the Company adequate to
allow evaluation for a determination as to whether the Invention is a
Subject Invention. It is agreed that all notebooks maintained by the
Executive relating (directly or indirectly) to Subject Inventions and
written disclosures are the property of the Company.
(c) If, upon commencement of the Executive's employment with the Company,
the Executive has previously conceived any Invention or acquired any
ownership interest in any Invention, which: (i) is the Executive's
property, or of which the Executive is a joint owner with another
person or company; (ii) is not described in any issued patent as of
the commencement of the Executive's employment with Company; and (iii)
would be a Subject Invention if such Invention was made while a
Company employee; then the Executive must, at the Executive's
election, either: (A) provide the Company with a written description
of the Invention on Exhibit A hereto, in which case no rights to the
Invention shall become the property of the Company; or (B) provide the
Company with the license described in Section 10(d) of this Agreement.
(d) If the Executive has previously conceived or acquired any ownership
interest in an Invention described above in Section 10(c) and the
Executive elects not to disclose the same to the Company as provided
above, then the Executive hereby grants to the Company an irrevocable
11
nonexclusive, paid up, royalty-free license to use and practice the
Invention, including a license under all patents to issue in any
country which pertain to the Invention.
(e) The Executive owns no patents, individually or jointly with others,
except those described on Exhibit B hereto.
(f) Definitions.
(i) "Invention" means any discovery, whether or not patentable,
including, but not limited to, any useful process, method,
formula, technique, machine, manufacture or composition of
matter, as well as improvements thereto, which is new or which
the Executive has a reasonable basis to believe may be new.
(ii) "Proprietary Information" means (i) information related to the
Company or its subsidiaries (A) which derives economic value,
actual or potential, from not being generally known to or readily
ascertainable by other persons who can obtain economic value from
its disclosure or use; and (B) which is the subject of efforts
that are reasonable under the circumstances to maintain its
secrecy and (ii) all tangible reproductions of the information.
Proprietary Information includes, but is not limited to,
technical and nontechnical data related to the formulas,
patterns, designs, compilations, programs, Inventions, methods,
techniques, drawings, processes, finances, actual or potential
customers and suppliers, existing and future products, and
employees of the Company or its subsidiaries. Proprietary
Information also includes information which has been disclosed to
the Company or its subsidiaries by a third party and which the
Company or any of its subsidiaries is obligated to treat as
confidential.
(iii) "Subject Invention" means any Invention that is conceived by the
Executive, alone or in a joint effort with others, during the
Executive's employment by the Company which (i) may be reasonably
expected to be used in a product of the Company, or a product
similar to a Company product, (ii) results from work that the
Executive has been assigned as part of his duties as an employee
of the Company, (iii) is in an area of technology which is the
same or substantially related to the areas of technology with
which the Executive is involved in the performance of his duties
12
as an employee of the Company, or (iv) is useful, or which the
Executive reasonably expects may be useful, in any process or
product of the Company.
11. Patent Applications.
(a) The Executive agrees that should the Company elect to file an
application for patent protection, either in the United States or in
any foreign country on a Subject Invention of which the Executive was
an inventor, the Executive will execute all necessary documentation
relating to the patent applications, including formal assignments to
the Company.
(b) The Executive further agrees that he will cooperate with attorneys or
other persons designated by the Company by explaining the nature of
any Subject Invention for which the Company elects to file an
application for patent protection, reviewing applications and other
papers and providing any other cooperation reasonably required for
orderly prosecution of such patent applications. The Company will be
responsible for all expenses incurred for the preparation and
prosecution of all patent applications on Subject Inventions assigned
to the Company.
12. Copyrights.
(a) The Executive agrees that any Works (defined below in this Section 12)
created by the Executive in the course of the Executive's duties as an
employee of the Company are subject to the "Work for Hire" provisions
contained in Sections 101 and 201 of the United States Copyright Law,
Title 17 of the United States Code. To the extent such Works are not
governed by the foregoing, the Executive hereby irrevocably assigns to
the Company all of the Executive's rights to all Works.
(b) The Executive must disclose to the Company all Works referred to in
Section 12(a) and shall execute and deliver all applications,
registrations and documents relating to the copyrights to the Works
and shall provide assistance to secure the Company's title to the
copyrights in the Works. The Company shall be responsible for all
expenses incurred in connection with the registration of all such
copyrights.
13
(c) The Executive claims no ownership rights in any Works, either
individually or jointly with others, except those described on Exhibit
C hereto.
(d) "Work" means a copyrightable work of authorship, including, without
limitation, any technical descriptions for products, users guides,
illustrations, advertising materials, computer programs (including the
contents of read only memories) and any contribution to such
materials.
13. Indemnification. The Company shall indemnify the Executive to the fullest
extent permitted by the Colorado Business Corporation Act.
14. Injunctive Relief. The Executive expressly acknowledges that any breach or
threatened breach by the Executive of any of the terms set forth in
Sections 9, 10, 11 and 12 of this Agreement may result in significant and
continuing injury to the Company, the monetary value of which would be
impossible to establish. Therefore, the Executive agrees that,
notwithstanding any provision in Section 18 of this Agreement to the
contrary, the Company shall be entitled to seek injunctive relief from a
court of appropriate jurisdiction without the posting of a bond or other
security in the event of any breach or threatened breach of the terms of
either of such sections. Nothing in this Agreement will be construed as
prohibiting the Company from pursuing any other remedies available to the
Company for such breach or threatened breach, including the recovery of
damages from the Executive. The provisions of this Section 14 shall survive
the termination of this Agreement.
15. Successors; Binding Agreement.
(a) The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform this Agreement if no such succession had taken place. Failure
of the Company to obtain such agreement prior to or on the effective
date of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as he would be entitled to receive
hereunder if he terminated his employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
14
succession becomes effective shall be deemed the Date of Termination.
As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets
as aforesaid, which successor executes and delivers the agreement
provided for in this Section 15 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
(b) This Agreement and all rights of the Executive under this Agreement
shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the
Executive should die after the Termination Date but before all amounts
payable to him under this Agreement have been paid, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
16. Notices. Any notice required or permitted by this Agreement shall be in
writing, sent by registered or certified mail, return receipt requested,
addressed to the Board and the Company at the Company's then principal
office, or to the Executive at the address set forth beneath his signature,
as the case may be, or to such other address or addresses as any party
hereto may from time to time specify in writing in a notice given to the
other parties in compliance with this Section 14. Notices shall be deemed
given when received or, if sent by registered or certified mail, three
business days after such notice was placed in the mail, correctly addressed
with postage prepaid, whichever is earlier.
17. Disputes. Any claim, controversy or dispute arising out of or relating to
this Agreement (including employment of Executive), or the breach,
performance, termination, enforceability or validity thereof including the
determination of the scope or applicability of this agreement to arbitrate,
shall be determined by arbitration pursuant to this Section 17 if good
faith negotiations among the parties do not resolve such claim, dispute or
controversy within 60 days after such claim is presented in writing to
Company. Such arbitration shall be conducted in Denver, Colorado, and shall
proceed in accordance with the Employment Arbitration Rules of the American
Arbitration Association then in effect, to the extent that such Arbitration
Rules are not inconsistent with the provisions of this Agreement; provided,
however, that such Arbitration Rules may be modified as shall be required
to provide procedural fairness mandated by state or federal law in a
proceeding involving arbitration of claims arising under federal or state
civil rights statutes. Such arbitration shall be heard by one arbitrator,
who, unless otherwise agreed to by the parties, shall be an impartial
attorney at law who has had training and experience as an arbitrator and
who has practiced law for at least 15 years as an attorney concentrating in
either general litigation or employment matters. If the parties to the
dispute are unable to agree on the selection of an arbitrator, the parties
15
shall alternately strike arbitrators from a panel of arbitrators provided
by the American Arbitration Association until a sole arbitrator is
selected. Reasonable discovery shall be allowed in the arbitration and each
party may be represented by counsel. The arbitrator shall base his award on
applicable law and judicial precedent and include in such award a written
statement of the reasons upon which the award is based, including findings
of fact and conclusions of law. The arbitrator may award any remedies
allowed by law if liability and damages are proven. The award rendered by
the arbitrator shall be final and binding, and judgment may be entered in
accordance with applicable law in any court having jurisdiction thereof.
The costs and fees in the arbitration shall be shared equally by the
parties to the arbitration, except as expressly required otherwise under
the applicable federal or state civil rights statutes in any proceeding
arising thereunder. Notwithstanding anything to the contrary contained in
this Section 17, but without limiting the power of the arbitrator to grant
similar remedies that may be requested by a party in a dispute, Company
shall have the right to proceed in any court of proper jurisdiction to
obtain injunctive relief as provided in Section 14 of this Agreement.
18. Nonalienation of Benefits. Except in so far as this provision may be
contrary to applicable law, no sale, transfer, alienation, assignment,
pledge, collateralization or attachment of any benefits under this
Agreement shall be valid or recognized by the Company.
19. ERISA. This Agreement is an unfunded compensation arrangement for a member
of a select group of the Company's management and any exemptions under
ERISA, as applicable to such an arrangement, shall be applicable to this
Agreement.
20. Reporting and Disclosure. The Company, from time to time, shall provide
government agencies with such reports concerning this Agreement as may be
required by law, and the Company shall provide the Executive with such
disclosure concerning this Agreement as may be required by law or as the
Company may deem appropriate.
21. Effect on Prior Agreements and Existing Benefits Plans. This Agreement
contains the entire agreement of the parties relating to the subject matter
hereof and supersedes any prior written or oral agreements or
understandings relating to the subject matter hereof.
22. Modification and Waiver. No modification or amendment of this Agreement
shall be valid unless in writing and signed by or on behalf of the parties
to this Agreement. A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any subsequent
breach of the same or any other term or condition.
23. Severability. This Agreement is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the
application thereof to any person or circumstance, shall, for any reason
16
and to any extent, be held invalid or unenforceable, such provision shall
be modified to the extent necessary to make such provision fully
enforceable. To the extent modification will not remedy such invalidity or
unenforceability, such provision shall be stricken from this Agreement and
shall not affect the remaining provisions hereof and the application of
such provisions to other persons or circumstances, all of which shall be
enforced to the greatest extent permitted by law.
24. Withholding. The compensation provided to the Executive pursuant to this
Agreement shall be subject to any withholdings and deductions required by
any applicable tax laws. In the event the Company fails to withhold such
sums for any reason, it may require the Executive to promptly remit to the
Company sufficient cash to satisfy applicable income and employment
withholding taxes.
25. Headings. The headings in this Agreement are inserted for convenience of
reference only and shall not be a part of or control or affect the meaning
of any provision hereof.
26. Consult With Attorney. The Executive has had an opportunity to consult with
an attorney of his choosing prior to executing this Agreement. The
Executive acknowledges and agrees that Burns, Figa & Will, P.C. has not
provided any legal, tax, or other advice to the employee with respect to
this Agreement.
27. Governing Law. To the extent not governed by Federal law, this Agreement
shall be governed by and construed and enforced in accordance with the laws
of the State of Colorado.
17
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the day and year first above written.
LIFELINE THERAPEUTICS, INC.
COMPANY
By:
----------------------------
Title:
-------------------------
EXECUTIVE
tax id number:
------------------------- ------------------------
Address:
---------------------------
-----------------------------------
18
Exhibit 10.02
EMPLOYMENT AGREEMENT
FOR THE VICE PRESIDENT and DIRECTOR OF MARKETING AND
GLOBAL OUTREACH OF
LIFELINE THERAPEUTICS, INC.
This AGREEMENT, dated as of October 16 2004, by and between LIFELINE
THERAPEUTICS, INC., a Colorado corporation, referred to herein as the
"Company"), and Paul R. Myhill presently residing in Denver, Colorado
("Executive").
WITNESSETH:
WHEREAS, Company hires Executive as the Vice President and Director of
Marketing and Global Outreach of the Company;
WHEREAS, the Board of Directors ("Board") recognizes that the Executive
will contribute significantly to the growth and success of the Company;
WHEREAS, the Board desires the attention and dedication of the Executive as
a member of the Company's management, and has determined it is in the best
interest of the Company to employ Executive; and
WHEREAS, the Executive is willing to commit himself to serving the Company,
on the terms and conditions herein provided.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the parties hereto hereby agree as
follows:
1. Employment. The Company hereby agrees to employ the Executive as the Vice
President and Director of Marketing and Global Outreach of the Company
during the Employment Term (as defined in Section 3), and the Executive
hereby accepts such employment and agrees to serve the Company subject to
the general supervision, advice and direction of the President and the
Board of Directors and upon the terms and conditions set forth in this
Agreement.
2. Duties. During the Employment Term, the Executive shall be the Vice
President and Director of Marketing and Global Outreach of the Company with
such authority and duties as is customary for the officer of a corporation
in such position, and shall perform such other services and duties as the
Board may from time to time designate consistent with such position. The
Executive shall devote his full time, best efforts and undivided attention
to the business and affairs of the Company except for vacations, personal
time to which he is entitled pursuant to the terms of this Agreement and
except for illness or incapacity; provided, however, that the Executive may
serve, or continue to serve, on the boards of directors of, and hold any
other offices or positions in, companies or organizations which, in such
Board's judgment, will not present any conflict of interest with the
Company, or materially affect the performance of the Executive's duties
pursuant to this Agreement as long as the Executive discloses in writing
each such position to the Board.
3. Employment Term.
(a) The Executive shall be employed under this Agreement for a term (the
"Employment Term") commencing on October 16, 2004 ("Commencement
Date") and terminating on the close of business on April 15, 2005,
unless sooner terminated as provided in Section 6 hereof; provided
that upon expiration of the initial term on April 15, 2005, this
Agreement shall thereafter automatically be renewed from year to year
(or such shorter period until the Executive's retirement) unless
either party provides written notification to the other of its
intention not to so renew which notice must be given no later than
April 30 of each such year. Neither the expiration of this Agreement,
its termination by reason of the Executive's retirement, nor the
giving of notice by the Company that it does not wish to renew the
Employment Term shall constitute a breach of this Agreement or
termination of the Executive for the purposes of Section 6 or 7 of
this Agreement.
(b) Notwithstanding the provisions of Section 3(a), the Employment Term
shall be extended automatically for a period of two years from the
month in which a Change of Control (as such term is hereafter defined)
occurs (or such shorter period ending on the Executive's retirement).
(c) The date on which the Employment Term (including any one year renewal
period then in effect) is scheduled to terminate under Sections 3(a)
or 3(b) shall hereinafter be referred to as the "Scheduled Termination
Date".
(d) If there is a Change in Control then the Executive's monthly salary
shall be accelerated and paid within thirty (30) days of said Change
of Control for the full amount due through the termination date of
said employment agreement according to the terms set forth in 3(b)
above.
4. Compensation.
(a) Base Salary. The Company shall pay the Executive an annual base salary
as compensation for his services hereunder of $120,000 ("Base
Salary"), payable in equal monthly installments in accordance with the
ordinary payroll practices of the Company for management employees.
(b) Supplemental or Incentive Compensation. During the Employment Term,
the Executive may receive supplemental or incentive compensation based
on the criteria the Board deems appropriate consistent with the
Company's strategic plan. Any supplemental or incentive compensation
shall be paid in cash.
2
(c) Additional Benefits. During the Employment Term, the Executive shall
be entitled to paid time off (PTO) and to participate in any employee
benefit plans, including any incentive plans, any pension or group
life health, hospitalization, short-term disability and other
disability insurance plans and other employee welfare benefits made
available generally to management employees of the Company.
5. Reimbursement of Expenses. In addition to the compensation provided for
under Section 4 of this Agreement, upon submission of proper vouchers and
in accordance with the policies and procedures established by the Company
in effect from time to time, the Company shall pay or reimburse the
Executive for all normal and reasonable expenses, including travel
expenses, incurred by the Executive during the Employment Term in
connection with the Executive's responsibilities to the Company.
6. Termination. Notwithstanding Section 3 hereof, the Employment Term shall
terminate prior to the Scheduled Termination Date upon the occurrence of
any of the following events:
(a) Death. The Employment Term shall terminate upon the death of the
Executive.
(b) Disability. The Employment Term shall terminate as a result of the
Executive's Permanent Disability (as such term is defined in Section
6(f)).
(c) Termination Without Cause. The Employment Term shall terminate upon
the Executive's Termination Without Cause (as such term is defined in
Section 6(f)).
(d) Termination By Executive. The Employment Term shall terminate upon a
Voluntary Termination (as such term is defined in Section 6(f)) by the
Executive of his employment hereunder with the Company.
(e) Termination For Cause. The Employment Term shall terminate upon the
Executive's Termination For Cause (as defined in Section 6(f)).
(f) Definitions. For purposes of this Agreement:
(i) "Permanent Disability" shall mean that by reason of a physical or
mental disability or infirmity which has continued for a period
of at least six months, the Executive is unable substantially to
perform the duties contemplated by this Agreement on a regular
basis. The determination of Permanent Disability shall be made by
a medical board certified physician mutually acceptable to the
Company and the Executive (or the Executive's legal
3
representative, if one has been appointed). The Executive agrees
to submit such medical evidence regarding such disability or
infirmity as is reasonably requested by the Company.
(ii) "Termination For Cause" shall mean any termination of the
employment of the Executive for "Cause." For purposes of this
Agreement, the termination of the Executive's employment shall be
deemed to have been for Cause only:
(A) if termination of his employment shall have been the result
of the Executive's willful engaging in dishonest, unethical,
`illegal or fraudulent actions resulting or intended to
result directly or indirectly in any demonstrable material
harm to the Company or its shareholders, or
(B) if there has been a willful and continued failure by the
Executive during the Employment Term (except by reason of
incapacity due to physical or mental illness) to comply with
the provisions of this Agreement, and the Executive shall
have either failed to remedy such alleged breach within ten
days from his receipt of written notice from the Company
demanding that he remedy such alleged breach or shall have
failed to take all reasonable steps to that end during such
ten day period and thereafter; or
(C) if the Executive has failed to comply with the provisions of
this Agreement on two or more prior occasions, even if the
Executive remedied the conduct as provided in Section
6(f)(ii)(B); or
(D) if there has been a breach of fiduciary duty involving
personal profit to the Executive;
provided that there shall have been delivered to the
Executive at least ten days prior to the effective date of
Termination for Cause a Notice of Termination (as defined in
this Section 6(f)) and a certified copy of a resolution of
the Board adopted by the affirmative vote of not less than a
majority of the entire membership of the Board (other than
the Executive if he is a member of the Board at such time)
at a meeting called and held for that purpose and at which
the Executive was given an opportunity, together with the
Executive's counsel, to be heard, finding that the Executive
had engaged in conduct set forth in subsection (A), (B), (C)
or (D) above based on reasonable evidence, specifying the
particulars thereof in detail.
If the Executive's employment shall be terminated by the
Company during the Employment Term for Cause, the Executive
shall have the right to contest such termination only in
accordance with the rules set forth in Section 14 of this
Agreement.
(iii)"Voluntary Termination" shall mean any voluntary termination by
the Executive of his employment with the Company or termination
as a result of retirement at or after age 65.
(iv) "Termination Without Cause" shall mean any termination of the
employment of the Executive by the Company other than Voluntary
Termination, Termination For Cause or upon death, or Permanent
Disability. Termination Without Cause pursuant to the preceding
sentence may occur only upon the affirmative vote of at least a
majority of the entire membership of the Board (not counting the
Executive, who may not vote if he is then a member of the Board)
at a meeting called and held for that purpose.
(v) Any termination of the Executive's employment by the Company or
by the Executive (other than termination pursuant to Section
6(a)) shall be communicated by written "Notice of Termination" to
the other party to this Agreement. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated.
(vi) The "Date of Termination" shall mean (A) if the Executive is
terminated by his death, the date of his death, (B) if the
Executive's employment is terminated due to a Permanent
Disability, 30 days after Notice of Termination is given, (C) if
the Executive's employment is terminated pursuant to a
Termination For Cause, the date specified in the Notice of
Termination, (D) if the Executive's employment is terminated due
to his retirement, the date specified in the Notice of
Termination and (E) if the Executive's employment is terminated
for any other reason, the date specified in the Notice of
Termination.
7. Termination Benefits.
(a) Death. If the Executive's employment is terminated by his death, the
Company shall pay to his surviving spouse, or if he leaves no spouse,
to his estate, any compensation, pro rata incentive compensation, and
benefits earned by the Executive or vested under Section 4 of this
Agreement through the Executive's Date of Termination; provided,
5
however, that no death benefits attributable to a period after the
Scheduled Termination Date in effect at the time of the Executive's
death shall be payable.
(b) Permanent Disability. If the Executive's employment is terminated as a
result of his Permanent Disability, the Company shall pay the
Executive through the Executive's Date of Termination, any
compensation and benefits earned or vested by the Executive under
Section 4 of this Agreement; provided, however, that no payments shall
be made under this Section 7(b) following the Scheduled Termination
Date in effect at the time of the Executive's Permanent Disability.
Further, if the Executive receives disability benefits under any
disability plan paid for by the Company, including disability
insurance, the amount otherwise payable by the Company to the
Executive shall be reduced (but not below zero) by the amount of such
disability benefits received by him. To the extent permitted under the
life, medical, dental and disability plans then maintained by the
Company for similarly situated active management employees, at the
Executive's option and expense, the Company shall cause to be
continued benefits under such plans to the Executive at coverage not
less than the coverage maintained by the Company for the Executive
immediately prior to the Permanent Disability, which shall run
concurrently with the Executive's COBRA period. Such coverage shall
cease upon the earlier of (i) in the case of medical and dental
benefits, the expiration of the Executive's COBRA rights, (ii) the
Executive's death, or (iii) the Executive's full-time employment by
another employer.
(c) Termination For Cause or Voluntary Termination. In the case of a
termination of the Executive pursuant to Section 6(f)(ii) or Section
6(f)(iii) of this Agreement, the Company's obligations to the
Executive shall cease the day after the Executive's Date of
Termination and the Company shall not be liable to pay the Executive's
Base Salary or supplemental compensation nor shall the Executive have
any rights to further participate in employee benefit plans of the
Company pursuant to Section 4, except the Executive shall be entitled
to any rights or benefits that have become vested prior to the Date of
Termination (unless the plan pursuant to which such benefits are
provided states to the contrary). The Company shall pay the Executive
his Base Salary and any other compensation or benefits earned or
vested through the Date of Termination at the rate in effect at the
time the Notice of Termination is given in a lump sum within thirty
(30) days of the Date of Termination.
6
(d) Termination Without Cause or Termination With Good Reason. If
during the Employment Term, the Executive shall be terminated from
employment based on a Termination Without Cause or Termination
With Good Reason as defined in Section 8(c) of the Agreement, the
Executive shall be entitled to receive the following payments and
benefits:
(i) Salary. In the event of any termination under this Section
7(d), the Executive's Base Salary earned through the Date of
Termination at the rate in effect at the time the Notice of
Termination is given.
(ii) Severance Payment. In the event of any termination under
this Section 7(d), in lieu of any further payments to the
Executive including any payments to which the Executive
would be entitled under any severance plan or arrangement of
the Company, the Company shall pay as severance pay to the
Executive an amount equal to two times the Executive's Base
Salary but not less than the amount due during the remaining
term of the Agreement. Such payments are payable in a single
sum, within 30 days following the Executive's Termination
Date. Notwithstanding the foregoing, in lieu of such
severance, at the option of the Company, the Company and the
Executive may enter into a written consulting agreement
pursuant to which, for services rendered by the Executive,
the Executive would receive consideration in an amount equal
to the severance payment otherwise to be made pursuant to
this Section 7(d)(ii).
(iii) Release. The payments provided under this Section 7(d) upon
termination shall be in lieu of any other payments or causes
of action available to the Executive pursuant to this
Agreement. As a condition to receipt of payments under
Section 7(d) of this Agreement, the Executive shall execute
a Release and Settlement Agreement acceptable to the
Company, pursuant to which the Executive shall waive any and
all claims resulting from employment at or termination from
the Company other than payments or benefits which are
expressly provided for in this Agreement.
(e) Retirement. The Executive shall not be entitled to any Severance
Payment pursuant to this Section 7 in the event that this
Agreement is terminated prior to its Scheduled Termination Date or
as of any Scheduled Termination Date due to the Executive's
retirement.
7
8. Change of Control.
(a) No benefit shall be payable under this Section 8 unless there shall
have been a Change of Control of the Company.
(b) For purposes of this Agreement, a Change of Control of the Company
("Change of Control") shall be deemed to have occurred if the event
set forth in any one of the following paragraphs shall have occurred:
(i) there is consummated a merger, consolidation or other
reorganization of the Company with any other for- or non-profit
corporation; or
(ii) the Board of Trustees of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets; or
(iii) a merger of Company in which Company does not survive (other
than a merger with a subsidiary of which Company had control for
more than six months prior to the merger), or consolidation of
Company through a change of its members or any other transaction
after which a third party has the right to appoint a majority of
the Board of Trustees of Company.
(c) Good Reason. For purposes of Section 7 and this Section 8 of the
Agreement, Good Reason shall mean the occurrence (without the
Executive's written consent) after any Change of Control or within 90
days prior to a Change of Control of any one of the following acts by
the Company, or failures by the Company to act, unless, such act or
failure to act is corrected prior to the Date of Termination specified
in the Notice of Termination given in respect thereof.
(i) (1) the assignment to the Executive of any duties inconsistent
with the Executive's positions, duties, responsibilities and
status with the Company immediately prior to the Change of
Control; (2) a significant adverse alteration in the nature of
the Executive's reporting responsibilities, titles, or offices as
in effect immediately prior to the Change of Control; (3) the
removal of the Executive from, or any failure to reelect the
Executive to, any such position, except in connection with a
termination of the employment of the Executive due to a Voluntary
Termination, Termination For Cause, or upon death or Permanent
Disability; or (4) any significant diminution in the Executive's
Base Salary from that immediately before the Change of Control,
as the case may be; or
(ii) the requirement by the Company that the Executive's principal
place of employment be relocated more than 45 miles from his
existing place of employment; or
8
(iii) the Company's failure to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as
contemplated in Section 12(a) of this Agreement.
(iv) the failure by the Company to continue in effect any compensation
plan in which the Executive participated immediately prior to the
Change of Control, as the case may be, which is material to the
Executive's total compensation, unless an arrangement (embodied
in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue
the Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as
existed at the time of the Change of Control; or
(v) the failure by the Company to continue to provide the Executive
with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating at the time of the Change of Control
or the taking of any action by the Company that would directly or
indirectly materially reduce any of such benefits enjoyed by the
Executive at the time of the Change of Control.
(f) If, within 90 days prior to the Change of Control, the Executive's
employment with the Company (i) is terminated by the Company for any
reason other than Death, Disability, Cause or retirement or (ii) is
terminated by the Executive for Good Reason, the Executive shall
receive the compensation otherwise payable to the Executive pursuant
to Section 7(d).
9. Protected Information; Prohibited Competition.
(a) The Executive recognizes and acknowledges that during the course of
the Executive's employment by the Company, the Company has disclosed
and shall furnish, disclose or make available to the Executive
confidential or proprietary information related to the Company's
business, including, without limitation, customer lists, ideas,
processes, inventions and devices, that such confidential or
proprietary information has been developed and will be developed
through the expenditure by the Company of substantial time and money
and that all such confidential information could be used by the
Executive and others to compete with the Company. The Executive agrees
that all such confidential or proprietary information shall constitute
trade secrets, and further agrees to use such confidential or
proprietary information only for the purpose of carrying out his
9
duties with the Company and not otherwise to disclose such
information. For purposes of this Agreement, information shall be
deemed confidential notwithstanding any prior unauthorized disclosure
by any person. The obligations imposed by this Section 9(a) shall not
apply to any information that: (a) was known to Executive prior
Executive's employment by the Company; or (b) is now or becomes
generally known or available to the public through no act of the
Executive.
(b) The Executive agrees that during his employment and for a period of
two years following the termination of his employment under Section 6
(except for Termination With Good Reason or Termination Without
Cause):
(i) he will not (except on behalf of or with the prior written
consent of the Company) within any geographic area in which the
Company is located or does business or the Executive knows the
Company intends to do business, either directly or indirectly,
consult with, manage, own, operate, control or participate in or
be employed by any entity that competes with the Company
("Competing Business") or any entity planning to engage in a
business that would compete with the Company; and
(ii) he will not (except on behalf of or with the prior written
consent of the Company), either directly or indirectly, on his
own behalf or in the service or on behalf of any third person,
solicit, divert or appropriate to any Competing Business or
attempt to solicit, divert or appropriate to any Competing
Business any business from any customer or client or actively
sought prospective customer or client of the Company or any of
its subsidiaries with whom the Executive has dealt, whose
dealings with the Company have been supervised by the Executive
or about whom the Executive has acquired proprietary information
during the course of his employment with the Company; and
(iii) he will not (except on behalf of or with the prior written
consent of the Company), either directly or indirectly, on his
own behalf or in the service or on behalf of any third person,
solicit, divert or hire away, or attempt to solicit, divert or
hire away, any person employed by the Company or any of its
subsidiaries with whom the Executive had regular contact in the
course of his employment with the Company, whether or not such
employee is a full-time or a temporary employee, whether or not
such employment is pursuant to a written agreement and whether or
not such employment is for a specified period or at will.
10
(c) Service by the Executive on the Board of Directors of any
not-for-profit or for-profit organization shall not be deemed a
violation of this Section 9(b).
(d) The restrictions in this Section 9 shall survive the termination of
this Agreement and shall be in addition to any restrictions imposed on
the Executive by statute or at common law.
10. Inventions.
(a) The Executive agrees that all Subject Inventions (defined below in
this Section 10) conceived or first practiced by the Executive during
his employment by the Company, and all patent rights and copyrights to
the Subject Inventions are or shall become the property of the Company
immediately upon such conception or practice, and the Executive hereby
irrevocably assigns to the Company all of the Executive's rights to
all Subject Inventions.
(b) The Executive agrees that if he conceives an Invention during his
employment and there is a reasonable basis to believe that the
Invention is a Subject Invention, the Executive will promptly provide
a written description of the Invention to the Company adequate to
allow evaluation for a determination as to whether the Invention is a
Subject Invention. It is agreed that all notebooks maintained by the
Executive relating (directly or indirectly) to Subject Inventions and
written disclosures are the property of the Company.
(c) If, upon commencement of the Executive's employment with the Company,
the Executive has previously conceived any Invention or acquired any
ownership interest in any Invention, which: (i) is the Executive's
property, or of which the Executive is a joint owner with another
person or company; (ii) is not described in any issued patent as of
the commencement of the Executive's employment with Company; and (iii)
would be a Subject Invention if such Invention was made while a
Company employee; then the Executive must, at the Executive's
election, either: (A) provide the Company with a written description
of the Invention on Exhibit A hereto, in which case no rights to the
Invention shall become the property of the Company; or (B) provide the
Company with the license described in Section 10(d) of this Agreement.
(d) If the Executive has previously conceived or acquired any ownership
interest in an Invention described above in Section 10(c) and the
Executive elects not to disclose the same to the Company as provided
above, then the Executive hereby grants to the Company an irrevocable
nonexclusive, paid up, royalty-free license to use and practice the
Invention, including a license under all patents to issue in any
country which pertain to the Invention.
12
(e) The Executive owns no patents, individually or jointly with others,
except those described on Exhibit B hereto.
(f) Definitions.
(i) "Invention" means any discovery, whether or not patentable,
including, but not limited to, any useful process, method,
formula, technique, machine, manufacture or composition of
matter, as well as improvements thereto, which is new or which
the Executive has a reasonable basis to believe may be new.
(ii) "Proprietary Information" means (i) information related to the
Company or its subsidiaries (A) which derives economic value,
actual or potential, from not being generally known to or readily
ascertainable by other persons who can obtain economic value from
its disclosure or use; and (B) which is the subject of efforts
that are reasonable under the circumstances to maintain its
secrecy and (ii) all tangible reproductions of the information.
Proprietary Information includes, but is not limited to,
technical and nontechnical data related to the formulas,
patterns, designs, compilations, programs, Inventions, methods,
techniques, drawings, processes, finances, actual or potential
customers and suppliers, existing and future products, and
employees of the Company or its subsidiaries. Proprietary
Information also includes information which has been disclosed to
the Company or its subsidiaries by a third party and which the
Company or any of its subsidiaries is obligated to treat as
confidential.
(iii) "Subject Invention" means any Invention that is conceived by the
Executive, alone or in a joint effort with others, during the
Executive's employment by the Company which (i) may be reasonably
expected to be used in a product of the Company, or a product
similar to a Company product, (ii) results from work that the
Executive has been assigned as part of his duties as an employee
of the Company, (iii) is in an area of technology which is the
same or substantially related to the areas of technology with
which the Executive is involved in the performance of his duties
as an employee of the Company, or (iv) is useful, or which the
Executive reasonably expects may be useful, in any process or
product of the Company.
12
11. Patent Applications.
-------------------
(a) The Executive agrees that should the Company elect to file an
application for patent protection, either in the United States or in
any foreign country on a Subject Invention of which the Executive was
an inventor, the Executive will execute all necessary documentation
relating to the patent applications, including formal assignments to
the Company.
(b) The Executive further agrees that he will cooperate with attorneys or
other persons designated by the Company by explaining the nature of
any Subject Invention for which the Company elects to file an
application for patent protection, reviewing applications and other
papers and providing any other cooperation reasonably required for
orderly prosecution of such patent applications. The Company will be
responsible for all expenses incurred for the preparation and
prosecution of all patent applications on Subject Inventions assigned
to the Company.
12. Copyrights.
----------
(a) The Executive agrees that any Works (defined below in this Section 12)
created by the Executive in the course of the Executive's duties as an
employee of the Company are subject to the "Work for Hire" provisions
contained in Sections 101 and 201 of the United States Copyright Law,
Title 17 of the United States Code. To the extent such Works are not
governed by the foregoing, the Executive hereby irrevocably assigns to
the Company all of the Executive's rights to all Works.
(b) The Executive must disclose to the Company all Works referred to in
Section 12(a) and shall execute and deliver all applications,
registrations and documents relating to the copyrights to the Works
and shall provide assistance to secure the Company's title to the
copyrights in the Works. The Company shall be responsible for all
expenses incurred in connection with the registration of all such
copyrights.
(c) The Executive claims no ownership rights in any Works, either
individually or jointly with others, except those described on Exhibit
C hereto.
(d) "Work" means a copyrightable work of authorship, including, without
limitation, any technical descriptions for products, users guides,
illustrations, advertising materials, computer programs (including the
contents of read only memories) and any contribution to such
materials.
13
13. Indemnification. The Company shall indemnify the Executive to the fullest
extent permitted by the Colorado Business Corporation Act.
14. Injunctive Relief. The Executive expressly acknowledges that any breach or
threatened breach by the Executive of any of the terms set forth in
Sections 9, 10, 11 and 12 of this Agreement may result in significant and
continuing injury to the Company, the monetary value of which would be
impossible to establish. Therefore, the Executive agrees that,
notwithstanding any provision in Section 18 of this Agreement to the
contrary, the Company shall be entitled to seek injunctive relief from a
court of appropriate jurisdiction without the posting of a bond or other
security in the event of any breach or threatened breach of the terms of
either of such sections. Nothing in this Agreement will be construed as
prohibiting the Company from pursuing any other remedies available to the
Company for such breach or threatened breach, including the recovery of
damages from the Executive. The provisions of this Section 14 shall survive
the termination of this Agreement.
15. Successors; Binding Agreement.
(a) The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform this Agreement if no such succession had taken place. Failure
of the Company to obtain such agreement prior to or on the effective
date of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as he would be entitled to receive
hereunder if he terminated his employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.
As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets
as aforesaid, which successor executes and delivers the agreement
provided for in this Section 15 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
14
(b) This Agreement and all rights of the Executive under this Agreement
shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the
Executive should die after the Termination Date but before all amounts
payable to him under this Agreement have been paid, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
16. Notices. Any notice required or permitted by this Agreement shall be in
writing, sent by registered or certified mail, return receipt requested,
addressed to the Board and the Company at the Company's then principal
office, or to the Executive at the address set forth beneath his signature,
as the case may be, or to such other address or addresses as any party
hereto may from time to time specify in writing in a notice given to the
other parties in compliance with this Section 14. Notices shall be deemed
given when received or, if sent by registered or certified mail, three
business days after such notice was placed in the mail, correctly addressed
with postage prepaid, whichever is earlier.
17. Disputes. Any claim, controversy or dispute arising out of or relating to
this Agreement (including employment of Executive), or the breach,
performance, termination, enforceability or validity thereof including the
determination of the scope or applicability of this agreement to arbitrate,
shall be determined by arbitration pursuant to this Section 17 if good
faith negotiations among the parties do not resolve such claim, dispute or
controversy within 60 days after such claim is presented in writing to
Company. Such arbitration shall be conducted in Denver, Colorado, and shall
proceed in accordance with the Employment Arbitration Rules of the American
Arbitration Association then in effect, to the extent that such Arbitration
Rules are not inconsistent with the provisions of this Agreement; provided,
however, that such Arbitration Rules may be modified as shall be required
to provide procedural fairness mandated by state or federal law in a
proceeding involving arbitration of claims arising under federal or state
civil rights statutes. Such arbitration shall be heard by one arbitrator,
who, unless otherwise agreed to by the parties, shall be an impartial
attorney at law who has had training and experience as an arbitrator and
who has practiced law for at least 15 years as an attorney concentrating in
either general litigation or employment matters. If the parties to the
dispute are unable to agree on the selection of an arbitrator, the parties
shall alternately strike arbitrators from a panel of arbitrators provided
by the American Arbitration Association until a sole arbitrator is
selected. Reasonable discovery shall be allowed in the arbitration and each
party may be represented by counsel. The arbitrator shall base his award on
applicable law and judicial precedent and include in such award a written
15
statement of the reasons upon which the award is based, including findings
of fact and conclusions of law. The arbitrator may award any remedies
allowed by law if liability and damages are proven. The award rendered by
the arbitrator shall be final and binding, and judgment may be entered in
accordance with applicable law in any court having jurisdiction thereof.
The costs and fees in the arbitration shall be shared equally by the
parties to the arbitration, except as expressly required otherwise under
the applicable federal or state civil rights statutes in any proceeding
arising thereunder. Notwithstanding anything to the contrary contained in
this Section 17, but without limiting the power of the arbitrator to grant
similar remedies that may be requested by a party in a dispute, Company
shall have the right to proceed in any court of proper jurisdiction to
obtain injunctive relief as provided in Section 14 of this Agreement.
18. Nonalienation of Benefits. Except in so far as this provision may be
contrary to applicable law, no sale, transfer, alienation, assignment,
pledge, collateralization or attachment of any benefits under this
Agreement shall be valid or recognized by the Company.
19. ERISA. This Agreement is an unfunded compensation arrangement for a member
of a select group of the Company's management and any exemptions under
ERISA, as applicable to such an arrangement, shall be applicable to this
Agreement.
20. Reporting and Disclosure. The Company, from time to time, shall provide
government agencies with such reports concerning this Agreement as may be
required by law, and the Company shall provide the Executive with such
disclosure concerning this Agreement as may be required by law or as the
Company may deem appropriate.
21. Effect on Prior Agreements and Existing Benefits Plans. This Agreement
contains the entire agreement of the parties relating to the subject matter
hereof and supersedes any prior written or oral agreements or
understandings relating to the subject matter hereof.
22. Modification and Waiver. No modification or amendment of this Agreement
shall be valid unless in writing and signed by or on behalf of the parties
to this Agreement. A waiver of the breach of any term or condition of this
Agreement shall not be deemed to constitute a waiver of any subsequent
breach of the same or any other term or condition.
23. Severability. This Agreement is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the
application thereof to any person or circumstance, shall, for any reason
and to any extent, be held invalid or unenforceable, such provision shall
be modified to the extent necessary to make such provision fully
enforceable. To the extent modification will not remedy such invalidity or
unenforceability, such provision shall be stricken from this Agreement and
shall not affect the remaining provisions hereof and the application of
such provisions to other persons or circumstances, all of which shall be
enforced to the greatest extent permitted by law.
16
24. Withholding. The compensation provided to the Executive pursuant to this
Agreement shall be subject to any withholdings and deductions required by
any applicable tax laws. In the event the Company fails to withhold such
sums for any reason, it may require the Executive to promptly remit to the
Company sufficient cash to satisfy applicable income and employment
withholding taxes.
25. Headings. The headings in this Agreement are inserted for convenience of
reference only and shall not be a part of or control or affect the meaning
of any provision hereof.
26. Consult With Attorney. The Executive has had an opportunity to consult with
an attorney of his choosing prior to executing this Agreement. The
Executive acknowledges and agrees that Burns, Figa & Will, P.C. has not
provided any legal, tax, or other advice to the employee with respect to
this Agreement.
27. Governing Law. To the extent not governed by Federal law, this Agreement
shall be governed by and construed and enforced in accordance with the laws
of the State of Colorado.
17
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the day and year first above written.
LIFELINE THERAPEUTICS, INC.
COMPANY
By:________________________
Title: ______________________
EXECUTIVE
___________________________ tax id number: __________________
Address: __________________________
___________________________________
Exhibit 10.03
EMPLOYMENT AGREEMENT
FOR THE SECRETARY/TREASURER, CHIEF OPERATING OFFICER
and CHIEF FINANCIAL OFFICER OF LIFELINE THERAPEUTICS, INC.
This AGREEMENT, dated as of October 16, 2004, by and between LIFELINE
THERAPEUTICS, INC., a Colorado corporation, referred to herein as the
"Company"), and Daniel W. Streets presently residing in Denver, Colorado
("Executive").
WITNESSETH:
WHEREAS, Company hires Executive as the Secretary/Treasurer Chief Operating
Officer and Chief Financial Officer of the Company;
WHEREAS, the Board of Directors ("Board") recognizes that the Executive
will contribute significantly to the growth and success of the Company;
WHEREAS, the Board desires the attention and dedication of the Executive as
a member of the Company's management, and has determined it is in the best
interest of the Company to employ Executive; and
WHEREAS, the Executive is willing to commit himself to serving the Company,
on the terms and conditions herein provided.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the parties hereto hereby agree as
follows:
1. Employment. The Company hereby agrees to employ the Executive as the
Secretary/Treasurer, Chief Operating Officer and Chief Financial Officer of
the Company during the Employment Term (as defined in Section 3), and the
Executive hereby accepts such employment and agrees to serve the Company
subject to the general supervision, advice and direction of the President
and the Board of Directors and upon the terms and conditions set forth in
this Agreement.
2. Duties. During the Employment Term, the Executive shall be the
Secretary/Treasurer, Chief Operating Officer and Chief Financial Officer of
the Company with such authority and duties as is customary for the officer
of a corporation in such position, and shall perform such other services
and duties as the Board may from time to time designate consistent with
such position. The Executive shall devote his full time, best efforts and
undivided attention to the business and affairs of the Company except for
vacations, personal time to which he is entitled pursuant to the terms of
this Agreement and except for illness or incapacity; provided, however,
that the Executive may serve, or continue to serve, on the boards of
1
directors of, and hold any other offices or positions in, companies or
organizations which, in such Board's judgment, will not present any
conflict of interest with the Company, or materially affect the performance
of the Executive's duties pursuant to this Agreement as long as the
Executive discloses in writing each such position to the Board.
3. Employment Term.
(a) The Executive shall be employed under this Agreement for a term (the
"Employment Term") commencing on October 16, 2004 ("Commencement
Date") and terminating on the close of business on April 15, 2005,
unless sooner terminated as provided in Section 6 hereof; provided
that upon expiration of the initial term on April 15, 2005, this
Agreement shall thereafter automatically be renewed from year to year
(or such shorter period until the Executive's retirement) unless
either party provides written notification to the other of its
intention not to so renew which notice must be given no later than
April 30 of each such year. Neither the expiration of this Agreement,
its termination by reason of the Executive's retirement, nor the
giving of notice by the Company that it does not wish to renew the
Employment Term shall constitute a breach of this Agreement or
termination of the Executive for the purposes of Section 6 or 7 of
this Agreement.
(b) Notwithstanding the provisions of Section 3(a), the Employment Term
shall be extended automatically for a period of two years from the
month in which a Change of Control (as such term is hereafter defined)
occurs (or such shorter period ending on the Executive's retirement).
(c) The date on which the Employment Term (including any one year renewal
period then in effect) is scheduled to terminate under Sections 3(a)
or 3(b) shall hereinafter be referred to as the "Scheduled Termination
Date".
(d) If there is a Change in Control then the Executive's monthly salary
shall be accelerated and paid within thirty (30) days of said Change
of Control for the full amount due through the termination date of
said employment agreement according to the terms set forth in 3(b)
above.
4. Compensation.
(a) Base Salary. The Company shall pay the Executive an annual base salary
as compensation for his services hereunder of $120,000 ("Base
Salary"), payable in equal monthly installments in accordance with the
ordinary payroll practices of the Company for management employees.
(b) Supplemental or Incentive Compensation. During the Employment Term,
the Executive may receive supplemental or incentive compensation based
on the criteria the Board deems appropriate consistent with the
2
Company's strategic plan. Any supplemental or incentive compensation
shall be paid in cash.
(c) Additional Benefits. During the Employment Term, the Executive
shall be entitled to paid time off (PTO) and to participate in any
employee benefit plans, including any incentive plans, any pension
or group life health, hospitalization, short-term disability and
other disability insurance plans and other employee welfare
benefits made available generally to management employees of the
Company.
5. Reimbursement of Expenses. In addition to the compensation provided for
under Section 4 of this Agreement, upon submission of proper vouchers and
in accordance with the policies and procedures established by the Company
in effect from time to time, the Company shall pay or reimburse the
Executive for all normal and reasonable expenses, including travel
expenses, incurred by the Executive during the Employment Term in
connection with the Executive's responsibilities to the Company.
6. Termination. Notwithstanding Section 3 hereof, the Employment Term shall
terminate prior to the Scheduled Termination Date upon the occurrence of
any of the following events:
(a) Death. The Employment Term shall terminate upon the death of the
Executive.
(b) Disability. The Employment Term shall terminate as a result of the
Executive's Permanent Disability (as such term is defined in Section
6(f)).
(c) Termination Without Cause. The Employment Term shall terminate upon
the Executive's Termination Without Cause (as such term is defined in
Section 6(f)).
(d) Termination By Executive. The Employment Term shall terminate upon a
Voluntary Termination (as such term is defined in Section 6(f)) by the
Executive of his employment hereunder with the Company.
(e) Termination For Cause. The Employment Term shall terminate upon the
Executive's Termination For Cause (as defined in Section 6(f)).
(f) Definitions. For purposes of this Agreement:
(i) "Permanent Disability" shall mean that by reason of a physical or
mental disability or infirmity which has continued for a period
of at least six months, the Executive is unable substantially to
perform the duties contemplated by this Agreement on a regular
basis. The determination of Permanent Disability shall be made by
a medical board certified physician mutually acceptable to the
3
Company and the Executive (or the Executive's legal
representative, if one has been appointed). The Executive agrees
to submit such medical evidence regarding such disability or
infirmity as is reasonably requested by the Company.
(ii) "Termination For Cause" shall mean any termination of the
employment of the Executive for "Cause." For purposes of this
Agreement, the termination of the Executive's employment shall be
deemed to have been for Cause only:
(A) if termination of his employment shall have been the result
of the Executive's willful engaging in dishonest, unethical,
`illegal or fraudulent actions resulting or intended to
result directly or indirectly in any demonstrable material
harm to the Company or its shareholders, or
(B) if there has been a willful and continued failure by the
Executive during the Employment Term (except by reason of
incapacity due to physical or mental illness) to comply with
the provisions of this Agreement, and the Executive shall
have either failed to remedy such alleged breach within ten
days from his receipt of written notice from the Company
demanding that he remedy such alleged breach or shall have
failed to take all reasonable steps to that end during such
ten day period and thereafter; or
(C) if the Executive has failed to comply with the provisions of
this Agreement on two or more prior occasions, even if the
Executive remedied the conduct as provided in Section
6(f)(ii)(B); or
(D) if there has been a breach of fiduciary duty involving
personal profit to the Executive;
provided that there shall have been delivered to the
Executive at least ten days prior to the effective date of
Termination for Cause a Notice of Termination (as defined in
this Section 6(f)) and a certified copy of a resolution of
the Board adopted by the affirmative vote of not less than a
majority of the entire membership of the Board (other than
the Executive if he is a member of the Board at such time)
at a meeting called and held for that purpose and at which
the Executive was given an opportunity, together with the
Executive's counsel, to be heard, finding that the Executive
had engaged in conduct set forth in subsection (A), (B), (C)
or (D) above based on reasonable evidence, specifying the
particulars thereof in detail.
4
If the Executive's employment shall be terminated by the
Company during the Employment Term for Cause, the Executive
shall have the right to contest such termination only in
accordance with the rules set forth in Section 14 of this
Agreement.
(iii) "Voluntary Termination" shall mean any voluntary termination by the
Executive of his employment with the Company or termination as a
result of retirement at or after age 65.
(iv) "Termination Without Cause" shall mean any termination of the
employment of the Executive by the Company other than Voluntary
Termination, Termination For Cause or upon death, or Permanent
Disability. Termination Without Cause pursuant to the preceding
sentence may occur only upon the affirmative vote of at least a
majority of the entire membership of the Board (not counting the
Executive, who may not vote if he is then a member of the Board) at a
meeting called and held for that purpose.
(v) Any termination of the Executive's employment by the Company or by the
Executive (other than termination pursuant to Section 6(a)) shall be
communicated by written "Notice of Termination" to the other party to
this Agreement. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under
the provision so indicated.
(vi) The "Date of Termination" shall mean (A) if the Executive is
terminated by his death, the date of his death, (B) if the Executive's
employment is terminated due to a Permanent Disability, 30 days after
Notice of Termination is given, (C) if the Executive's employment is
terminated pursuant to a Termination For Cause, the date specified in
the Notice of Termination, (D) if the Executive's employment is
terminated due to his retirement, the date specified in the Notice of
Termination and (E) if the Executive's employment is terminated for
any other reason, the date specified in the Notice of Termination.
5
7. Termination Benefits.
(a) Death. If the Executive's employment is terminated by his death, the
Company shall pay to his surviving spouse, or if he leaves no spouse,
to his estate, any compensation, pro rata incentive compensation, and
benefits earned by the Executive or vested under Section 4 of this
Agreement through the Executive's Date of Termination; provided,
however, that no death benefits attributable to a period after the
Scheduled Termination Date in effect at the time of the Executive's
death shall be payable.
(b) Permanent Disability. If the Executive's employment is terminated as a
result of his Permanent Disability, the Company shall pay the
Executive through the Executive's Date of Termination, any
compensation and benefits earned or vested by the Executive under
Section 4 of this Agreement; provided, however, that no payments shall
be made under this Section 7(b) following the Scheduled Termination
Date in effect at the time of the Executive's Permanent Disability.
Further, if the Executive receives disability benefits under any
disability plan paid for by the Company, including disability
insurance, the amount otherwise payable by the Company to the
Executive shall be reduced (but not below zero) by the amount of such
disability benefits received by him. To the extent permitted under the
life, medical, dental and disability plans then maintained by the
Company for similarly situated active management employees, at the
Executive's option and expense, the Company shall cause to be
continued benefits under such plans to the Executive at coverage not
less than the coverage maintained by the Company for the Executive
immediately prior to the Permanent Disability, which shall run
concurrently with the Executive's COBRA period. Such coverage shall
cease upon the earlier of (i) in the case of medical and dental
benefits, the expiration of the Executive's COBRA rights, (ii) the
Executive's death, or (iii) the Executive's full-time employment by
another employer.
(c) Termination For Cause or Voluntary Termination. In the case of a
termination of the Executive pursuant to Section 6(f)(ii) or Section
6(f)(iii) of this Agreement, the Company's obligations to the
Executive shall cease the day after the Executive's Date of
Termination and the Company shall not be liable to pay the Executive's
Base Salary or supplemental compensation nor shall the Executive have
any rights to further participate in employee benefit plans of the
Company pursuant to Section 4, except the Executive shall be entitled
to any rights or benefits that have become vested prior to the Date of
Termination (unless the plan pursuant to which such benefits are
6
provided states to the contrary). The Company shall pay the Executive
his Base Salary and any other compensation or benefits earned or
vested through the Date of Termination at the rate in effect at the
time the Notice of Termination is given in a lump sum within thirty
(30) days of the Date of Termination.
(d) Termination Without Cause or Termination With Good Reason. If during
the Employment Term, the Executive shall be terminated from employment
based on a Termination Without Cause or Termination With Good Reason
as defined in Section 8(c) of the Agreement, the Executive shall be
entitled to receive the following payments and benefits: (i) Salary.
In the event of any termination under this Section 7(d), the
Executive's Base Salary earned through the Date of Termination at the
rate in effect at the time the Notice of Termination is given.
(ii) Severance Payment. In the event of any termination under this
Section 7(d), in lieu of any further payments to the Executive
including any payments to which the Executive would be entitled
under any severance plan or arrangement of the Company, the
Company shall pay as severance pay to the Executive an amount
equal to two times the Executive's Base Salary but not less than
the amount due during the remaining term of the Agreement. Such
payments are payable in a single sum, within 30 days following
the Executive's Termination Date. Notwithstanding the foregoing,
in lieu of such severance, at the option of the Company, the
Company and the Executive may enter into a written consulting
agreement pursuant to which, for services rendered by the
Executive, the Executive would receive consideration in an amount
equal to the severance payment otherwise to be made pursuant to
this Section 7(d)(ii).
(iii) Release. The payments provided under this Section 7(d) upon
termination shall be in lieu of any other payments or causes of
action available to the Executive pursuant to this Agreement. As
a condition to receipt of payments under Section 7(d) of this
Agreement, the Executive shall execute a Release and Settlement
Agreement acceptable to the Company, pursuant to which the
Executive shall waive any and all claims resulting from
employment at or termination from the Company other than payments
or benefits which are expressly provided for in this Agreement.
(e) Retirement. The Executive shall not be entitled to any Severance
Payment pursuant to this Section 7 in the event that this Agreement is
terminated prior to its Scheduled Termination Date or as of any
Scheduled Termination Date due to the Executive's retirement.
7
8. Change of Control.
(a) No benefit shall be payable under this Section 8 unless there shall
have been a Change of Control of the Company. (b) For purposes of this
Agreement, a Change of Control of the Company ("Change of Control")
shall be deemed to have occurred if the event set forth in any one of
the following paragraphs shall have occurred:
(i) there is consummated a merger, consolidation or other
reorganization of the Company with any other for- or non-profit
corporation; or
(ii) the Board of Trustees of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets; or
(iii) a merger of Company in which Company does not survive (other
than a merger with a subsidiary of which Company had control for
more than six months prior to the merger), or consolidation of
Company through a change of its members or any other transaction
after which a third party has the right to appoint a majority of
the Board of Trustees of Company.
(c) Good Reason. For purposes of Section 7 and this Section 8 of the
Agreement, Good Reason shall mean the occurrence (without the
Executive's written consent) after any Change of Control or within 90
days prior to a Change of Control of any one of the following acts by
the Company, or failures by the Company to act, unless, such act or
failure to act is corrected prior to the Date of Termination specified
in the Notice of Termination given in respect thereof.
(i) (1) the assignment to the Executive of any duties inconsistent
with the Executive's positions, duties, responsibilities and
status with the Company immediately prior to the Change of
Control; (2) a significant adverse alteration in the nature of
the Executive's reporting responsibilities, titles, or offices as
in effect immediately prior to the Change of Control; (3) the
removal of the Executive from, or any failure to reelect the
Executive to, any such position, except in connection with a
termination of the employment of the Executive due to a Voluntary
Termination, Termination For Cause, or upon death or Permanent
Disability; or (4) any significant diminution in the Executive's
Base Salary from that immediately before the Change of Control,
as the case may be; or
(ii) the requirement by the Company that the Executive's principal
place of employment be relocated more than 45 miles from his
existing place of employment; or
8
(iii) the Company's failure to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as
contemplated in Section 12(a) of this Agreement.
(iv) the failure by the Company to continue in effect any compensation
plan in which the Executive participated immediately prior to the
Change of Control, as the case may be, which is material to the
Executive's total compensation, unless an arrangement (embodied
in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue
the Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as
existed at the time of the Change of Control; or
(v) the failure by the Company to continue to provide the Executive
with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating at the time of the Change of Control
or the taking of any action by the Company that would directly or
indirectly materially reduce any of such benefits enjoyed by the
Executive at the time of the Change of Control.
(f) If, within 90 days prior to the Change of Control, the Executive's
employment with the Company (i) is terminated by the Company for any
reason other than Death, Disability, Cause or retirement or (ii) is
terminated by the Executive for Good Reason, the Executive shall
receive the compensation otherwise payable to the Executive pursuant
to Section 7(d).
9. Protected Information; Prohibited Competition.
(a) The Executive recognizes and acknowledges that during the course of
the Executive's employment by the Company, the Company has disclosed
and shall furnish, disclose or make available to the Executive
confidential or proprietary information related to the Company's
business, including, without limitation, customer lists, ideas,
processes, inventions and devices, that such confidential or
proprietary information has been developed and will be developed
through the expenditure by the Company of substantial time and money
and that all such confidential information could be used by the
Executive and others to compete with the Company. The Executive agrees
that all such confidential or proprietary information shall constitute
trade secrets, and further agrees to use such confidential or
9
proprietary information only for the purpose of carrying out his
duties with the Company and not otherwise to disclose such
information. For purposes of this Agreement, information shall be
deemed confidential notwithstanding any prior unauthorized disclosure
by any person. The obligations imposed by this Section 9(a) shall not
apply to any information that: (a) was known to Executive prior
Executive's employment by the Company; or (b) is now or becomes
generally known or available to the public through no act of the
Executive.
(b) The Executive agrees that during his employment and for a period of
two years following the termination of his employment under Section 6
(except for Termination With Good Reason or Termination Without
Cause):
(i) he will not (except on behalf of or with the prior written
consent of the Company) within any geographic area in which the
Company is located or does business or the Executive knows the
Company intends to do business, either directly or indirectly,
consult with, manage, own, operate, control or participate in or
be employed by any entity that competes with the Company
("Competing Business") or any entity planning to engage in a
business that would compete with the Company; and
(ii) he will not (except on behalf of or with the prior written
consent of the Company), either directly or indirectly, on his
own behalf or in the service or on behalf of any third person,
solicit, divert or appropriate to any Competing Business or
attempt to solicit, divert or appropriate to any Competing
Business any business from any customer or client or actively
sought prospective customer or client of the Company or any of
its subsidiaries with whom the Executive has dealt, whose
dealings with the Company have been supervised by the Executive
or about whom the Executive has acquired proprietary information
during the course of his employment with the Company; and
(iii) he will not (except on behalf of or with the prior written
consent of the Company), either directly or indirectly, on his
own behalf or in the service or on behalf of any third person,
solicit, divert or hire away, or attempt to solicit, divert or
hire away, any person employed by the Company or any of its
subsidiaries with whom the Executive had regular contact in the
course of his employment with the Company, whether or not such
employee is a full-time or a temporary employee, whether or not
10
such employment is pursuant to a written agreement and whether or
not such employment is for a specified period or at will.
(c) Service by the Executive on the Board of Directors of any
not-for-profit or for-profit organization shall not be deemed a
violation of this Section 9(b).
(d) The restrictions in this Section 9 shall survive the termination of
this Agreement and shall be in addition to any restrictions imposed on
the Executive by statute or at common law.
10. Inventions.
(a) The Executive agrees that all Subject Inventions (defined below in
this Section 10) conceived or first practiced by the Executive during
his employment by the Company, and all patent rights and copyrights to
the Subject Inventions are or shall become the property of the Company
immediately upon such conception or practice, and the Executive hereby
irrevocably assigns to the Company all of the Executive's rights to
all Subject Inventions.
(b) The Executive agrees that if he conceives an Invention during his
employment and there is a reasonable basis to believe that the
Invention is a Subject Invention, the Executive will promptly provide
a written description of the Invention to the Company adequate to
allow evaluation for a determination as to whether the Invention is a
Subject Invention. It is agreed that all notebooks maintained by the
Executive relating (directly or indirectly) to Subject Inventions and
written disclosures are the property of the Company.
(c) If, upon commencement of the Executive's employment with the Company,
the Executive has previously conceived any Invention or acquired any
ownership interest in any Invention, which: (i) is the Executive's
property, or of which the Executive is a joint owner with another
person or company; (ii) is not described in any issued patent as of
the commencement of the Executive's employment with Company; and (iii)
would be a Subject Invention if such Invention was made while a
Company employee; then the Executive must, at the Executive's
election, either: (A) provide the Company with a written description
of the Invention on Exhibit A hereto, in which case no rights to the
Invention shall become the property of the Company; or (B) provide the
Company with the license described in Section 10(d) of this Agreement.
(d) If the Executive has previously conceived or acquired any ownership
interest in an Invention described above in Section 10(c) and the
11
Executive elects not to disclose the same to the Company as provided
above, then the Executive hereby grants to the Company an irrevocable
nonexclusive, paid up, royalty-free license to use and practice the
Invention, including a license under all patents to issue in any
country which pertain to the Invention.
(e) The Executive owns no patents, individually or jointly with others,
except those described on Exhibit B hereto.
(f) Definitions.
(i) "Invention" means any discovery, whether or not patentable,
including, but not limited to, any useful process, method,
formula, technique, machine, manufacture or composition of
matter, as well as improvements thereto, which is new or which
the Executive has a reasonable basis to believe may be new.
(ii) "Proprietary Information" means (i) information related to the
Company or its subsidiaries (A) which derives economic value,
actual or potential, from not being generally known to or readily
ascertainable by other persons who can obtain economic value from
its disclosure or use; and (B) which is the subject of efforts
that are reasonable under the circumstances to maintain its
secrecy and (ii) all tangible reproductions of the information.
Proprietary Information includes, but is not limited to,
technical and nontechnical data related to the formulas,
patterns, designs, compilations, programs, Inventions, methods,
techniques, drawings, processes, finances, actual or potential
customers and suppliers, existing and future products, and
employees of the Company or its subsidiaries. Proprietary
Information also includes information which has been disclosed to
the Company or its subsidiaries by a third party and which the
Company or any of its subsidiaries is obligated to treat as
confidential.
(iii) "Subject Invention" means any Invention that is conceived by the
Executive, alone or in a joint effort with others, during the
Executive's employment by the Company which (i) may be reasonably
expected to be used in a product of the Company, or a product
similar to a Company product, (ii) results from work that the
Executive has been assigned as part of his duties as an employee
of the Company, (iii) is in an area of technology which is the
same or substantially related to the areas of technology with
which the Executive is involved in the performance of his duties
12
as an employee of the Company, or (iv) is useful, or which the
Executive reasonably expects may be useful, in any process or
product of the Company.
11. Patent Applications.
(a) The Executive agrees that should the Company elect to file an
application for patent protection, either in the United States or in
any foreign country on a Subject Invention of which the Executive was
an inventor, the Executive will execute all necessary documentation
relating to the patent applications, including formal assignments to
the Company.
(b) The Executive further agrees that he will cooperate with attorneys or
other persons designated by the Company by explaining the nature of
any Subject Invention for which the Company elects to file an
application for patent protection, reviewing applications and other
papers and providing any other cooperation reasonably required for
orderly prosecution of such patent applications. The Company will be
responsible for all expenses incurred for the preparation and
prosecution of all patent applications on Subject Inventions assigned
to the Company.
12. Copyrights.
(a) The Executive agrees that any Works (defined below in this Section 12)
created by the Executive in the course of the Executive's duties as an
employee of the Company are subject to the "Work for Hire" provisions
contained in Sections 101 and 201 of the United States Copyright Law,
Title 17 of the United States Code. To the extent such Works are not
governed by the foregoing, the Executive hereby irrevocably assigns to
the Company all of the Executive's rights to all Works.
(b) The Executive must disclose to the Company all Works referred to in
Section 12(a) and shall execute and deliver all applications,
registrations and documents relating to the copyrights to the Works
and shall provide assistance to secure the Company's title to the
copyrights in the Works. The Company shall be responsible for all
expenses incurred in connection with the registration of all such
copyrights.
(c) The Executive claims no ownership rights in any Works, either
individually or jointly with others, except those described on Exhibit
C hereto.
(d) "Work" means a copyrightable work of authorship, including, without
limitation, any technical descriptions for products, users guides,
13
illustrations, advertising materials, computer programs (including the
contents of read only memories) and any contribution to such
materials.
13. Indemnification. The Company shall indemnify the Executive to the fullest
extent permitted by the Colorado Business Corporation Act.
14. Injunctive Relief. The Executive expressly acknowledges that any breach or
threatened breach by the Executive of any of the terms set forth in
Sections 9, 10, 11 and 12 of this Agreement may result in significant and
continuing injury to the Company, the monetary value of which would be
impossible to establish. Therefore, the Executive agrees that,
notwithstanding any provision in Section 18 of this Agreement to the
contrary, the Company shall be entitled to seek injunctive relief from a
court of appropriate jurisdiction without the posting of a bond or other
security in the event of any breach or threatened breach of the terms of
either of such sections. Nothing in this Agreement will be construed as
prohibiting the Company from pursuing any other remedies available to the
Company for such breach or threatened breach, including the recovery of
damages from the Executive. The provisions of this Section 14 shall survive
the termination of this Agreement.
15. Successors; Binding Agreement.
(a) The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform this Agreement if no such succession had taken place. Failure
of the Company to obtain such agreement prior to or on the effective
date of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as he would be entitled to receive
hereunder if he terminated his employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.
As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets
as aforesaid, which successor executes and delivers the agreement
provided for in this Section 15 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
14
(b) This Agreement and all rights of the Executive under this Agreement
shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the
Executive should die after the Termination Date but before all amounts
payable to him under this Agreement have been paid, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
16. Notices. Any notice required or permitted by this Agreement shall be in
writing, sent by registered or certified mail, return receipt requested,
addressed to the Board and the Company at the Company's then principal
office, or to the Executive at the address set forth beneath his signature,
as the case may be, or to such other address or addresses as any party
hereto may from time to time specify in writing in a notice given to the
other parties in compliance with this Section 14. Notices shall be deemed
given when received or, if sent by registered or certified mail, three
business days after such notice was placed in the mail, correctly addressed
with postage prepaid, whichever is earlier.
17. Disputes. Any claim, controversy or dispute arising out of or relating to
this Agreement (including employment of Executive), or the breach,
performance, termination, enforceability or validity thereof including the
determination of the scope or applicability of this agreement to arbitrate,
shall be determined by arbitration pursuant to this Section 17 if good
faith negotiations among the parties do not resolve such claim, dispute or
controversy within 60 days after such claim is presented in writing to
Company. Such arbitration shall be conducted in Denver, Colorado, and shall
proceed in accordance with the Employment Arbitration Rules of the American
Arbitration Association then in effect, to the extent that such Arbitration
Rules are not inconsistent with the provisions of this Agreement; provided,
however, that such Arbitration Rules may be modified as shall be required
to provide procedural fairness mandated by state or federal law in a
proceeding involving arbitration of claims arising under federal or state
civil rights statutes. Such arbitration shall be heard by one arbitrator,
who, unless otherwise agreed to by the parties, shall be an impartial
attorney at law who has had training and experience as an arbitrator and
who has practiced law for at least 15 years as an attorney concentrating in
either general litigation or employment matters. If the parties to the
dispute are unable to agree on the selection of an arbitrator, the parties
shall alternately strike arbitrators from a panel of arbitrators provided
by the American Arbitration Association until a sole arbitrator is
selected. Reasonable discovery shall be allowed in the arbitration and each
party may be represented by counsel. The arbitrator shall base his award on
applicable law and judicial precedent and include in such award a written
15
statement of the reasons upon which the award is based, including findings
of fact and conclusions of law. The arbitrator may award any remedies
allowed by law if liability and damages are proven. The award rendered by
the arbitrator shall be final and binding, and judgment may be entered in
accordance with applicable law in any court having jurisdiction thereof.
The costs and fees in the arbitration shall be shared equally by the
parties to the arbitration, except as expressly required otherwise under
the applicable federal or state civil rights statutes in any proceeding
arising thereunder. Notwithstanding anything to the contrary contained in
this Section 17, but without limiting the power of the arbitrator to grant
similar remedies that may be requested by a party in a dispute, Company
shall have the right to proceed in any court of proper jurisdiction to
obtain injunctive relief as provided in Section 14 of this Agreement.
18. Nonalienation of Benefits. Except in so far as this provision may be
contrary to applicable law, no sale, transfer, alienation, assignment,
pledge, collateralization or attachment of any benefits under this
Agreement shall be valid or recognized by the Company.
19. ERISA. This Agreement is an unfunded compensation arrangement for a member
of a select group of the Company's management and any exemptions under
ERISA, as applicable to such an arrangement, shall be applicable to this
Agreement.
20. Reporting and Disclosure. The Company, from time to time, shall provide
government agencies with such reports concerning this Agreement as may be
required by law, and the Company shall provide the Executive with such
disclosure concerning this Agreement as may be required by law or as the
Company may deem appropriate.
21. Effect on Prior Agreements and Existing Benefits Plans. This Agreement
contains the entire agreement of the parties relating to the subject
matter hereof and supersedes any prior written or oral agreements or
understandings relating to the subject matter hereof.
22. Modification and Waiver. No modification or amendment of this Agreement
shall be valid unless in writing and signed by or on behalf of the
parties to this Agreement. A waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute a waiver of
any subsequent breach of the same or any other term or condition.
23. Severability. This Agreement is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the
application thereof to any person or circumstance, shall, for any reason
and to any extent, be held invalid or unenforceable, such provision shall
be modified to the extent necessary to make such provision fully
enforceable. To the extent modification will not remedy such invalidity or
unenforceability, such provision shall be stricken from this Agreement and
shall not affect the remaining provisions hereof and the application of
16
such provisions to other persons or circumstances, all of which shall be
enforced to the greatest extent permitted by law.
24. Withholding. The compensation provided to the Executive pursuant to this
Agreement shall be subject to any withholdings and deductions required by
any applicable tax laws. In the event the Company fails to withhold such
sums for any reason, it may require the Executive to promptly remit to the
Company sufficient cash to satisfy applicable income and employment
withholding taxes.
25. Headings. The headings in this Agreement are inserted for convenience of
reference only and shall not be a part of or control or affect the meaning
of any provision hereof.
26. Consult With Attorney. The Executive has had an opportunity to consult with
an attorney of his choosing prior to executing this Agreement. The
Executive acknowledges and agrees that Burns, Figa & Will, P.C. has not
provided any legal, tax, or other advice to the employee with respect to
this Agreement.
27. Governing Law. To the extent not governed by Federal law, this Agreement
shall be governed by and construed and enforced in accordance with the laws
of the State of Colorado.
17
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the day and year first above written.
LIFELINE THERAPEUTICS, INC.
COMPANY
By:
---------------------------
Title:
------------------------
EXECUTIVE
tax id number:
-------------------- -----------------------------
Address:
---------------------------
-----------------------------------
18
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
YAAK RIVER RESOURCES, INC. (A Colorado Corporation)
AND
LIFELINE NUTRACEUTICALS CORPORATION (A Colorado Corporation)
AS OF September 21, 2004
This Agreement and Plan of Reorganization (the "Agreement") is made as of
the 21st day of September, 2004, among YAAK River Resources, Inc., a Colorado
corporation (the "Acquiring Company") and Lifeline Nutraceuticals Corporation, a
Colorado corporation ("Target"). The Acquiring Company and Target may
collectively be referred to herein as the "Parties" or individually as a
"Party."
RECITALS
--------
The Boards of Directors of the Acquiring Company and Target each have
determined that it is in the best interests of their respective stockholders for
the Acquiring Company to acquire Target by offering to exchange the Acquiring
Company's Series A Common Stock (the "Series A Stock") for a sufficient number
of the outstanding shares of the Target's common stock to qualify for a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, upon the terms and conditions set forth herein.
The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Code.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and certain other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto covenant and
agree as follows:
ARTICLE 1
The Transaction
---------------
1.1 Acquisition and Consideration. At the Effective Date (as defined in
Section 1.3), the Acquiring Company shall acquire from the holders of the Target
Common Stock shares of the Target Common Stock in exchange for shares of Series
A Stock in a manner that constitutes a tax-free reorganization under the Code
(the "Transaction") following the satisfaction or waiver, if permissible, of the
conditions set forth in Articles 6 and 7.
(a) There currently are 67,308,857 shares of Series A Stock outstanding.
Immediately prior to the completion of the Transaction, the Acquiring Company
will complete a 68:1 reverse stock split, resulting in approximately 989,836
shares of Series A Stock outstanding after the completion of the reverse stock
split.
(b) Subject to, and following the completion of the reverse stock split
contemplated in Paragraph 1.1(a), the Acquiring Company will offer to issue
shares of its Series A Stock to stockholders of the Target at an exchange ratio
of .8034 shares of Acquiring Company for each share of the Target Common Stock
owned by such stockholder (the "Per Share Consideration"), subject to adjustment
as set forth in Section 3.7(a)(i), below.
Agreement and Plan of Reorganization Page 1
(c) Following the completion of this Transaction, the Acquiring Company
will issue notes ("Acquiring Company Notes") to all of the holders of notes that
previously had been issued by the Target ("Target Notes") and are in existence
on the date of the Closing, as hereinafter defined.
(d) As identified on Schedule 3.7C, certain outstanding Target Notes grant
warrants to the noteholders ("Target Note Warrants"). Pursuant to the terms of
the Target Note Warrants, the exercise price of the underlying warrant is
dependent upon the offering price of a private investment in a public entity
transaction ("PIPE"). Following the occurrence of the PIPE by the Acquiring
Company and at the option of the noteholder, any Target Note Warrant may convert
to an investment in the PIPE. The conversion rate is to be the same rate of the
PIPE offering made by the Acquiring Company to accredited investors. Thus, upon
electing to convert his or her Target Note Warrant to an investment in the PIPE,
the noteholder will receive from the Acquiring Company warrants ("Acquiring
Company Note Warrants") equal to the Target Note Warrants held by such
noteholder with an exercise price equal to the PIPE offering price. The
Acquiring Company Note Warrants will be exercisable for a period of one year
after closing the PIPE transaction.
(e) The Per Share Consideration payable to all holders of the Target Common
Stock, the Target Notes, and the Target Note Warrants is collectively referred
to as the "Total Consideration."
1.2 Continuing Corporate Existence. Except as may otherwise be set forth
herein, the corporate existence and identity of Target and the Acquiring
Company, with all its purposes, powers, franchises, privileges, rights and
immunities, shall continue unaffected and unimpaired by the Transaction at the
Effective Date.
1.3 Effective Date. The Transaction shall become effective at the Closing
as defined in Section 1.5, below. The date and time when the Transaction shall
become effective is hereinafter referred to as the "Effective Date."
1.4 Corporate Governance of the Acquiring Company.
(a) The Articles of Incorporation of the Acquiring Company, as such may
be amended at or prior to the Effective Date, shall continue in full force and
effect.
(b) The Bylaws of the Acquiring Company, as such may be amended at or
prior to the Effective Date, shall continue in full force and effect.
(c) Immediately prior to the Closing, the Board of Directors of the
Acquiring Company will appoint the following persons to the Board of Directors
of the Acquiring Company and will immediately thereafter resign: Paul Myhill and
Daniel W. Streets. Following the Closing, the Directors of the Acquiring
Company, except Paul Myhill and Daniel W. Streets, shall resign.
Agreement and Plan of Reorganization Page 2
(d) Immediately following the Effective Date, the Board of Directors of
the Acquiring Company will appoint the officers of the Acquiring Company.
1.5 Closing. Completion of the Transaction (the "Closing") shall take place
at the offices of Burns, Figa & Will, P.C. at 2:00 pm on September ___, 2004 (or
at such other place, time and date as shall be fixed by mutual agreement between
the Acquiring Company and the Target), provided all of the conditions set forth
in Articles 6 and 7 have been fulfilled or waived in writing. The day on which
the Closing shall occur is referred to herein as the "Closing Date."
(a) Each party will cause to be prepared, executed and delivered all
appropriate and customary documents as any party or its counsel may reasonably
request for the purpose of completing the Transaction.
(b) Without limitation of the foregoing, the Acquiring Company shall
have certificates representing the Per Share Consideration available at the
Closing to deliver to each consenting Target stockholder against delivery at the
Closing (or thereafter) of certificates representing the Target Common Stock. In
each case, the certificates representing the Per Share Consideration will bear
all appropriate restrictive legends.
(c) All actions taken at the Closing shall be deemed to have been taken
simultaneously at the time the last of any such actions is taken or completed.
1.6 Tax Consequences. It is intended by the parties hereto that the
Transaction shall constitute a reorganization within the meaning of Section
368(a)(1)(B) of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Income Tax Regulations.
ARTICLE 2
Exchange of Shares, Notes and Warrants
--------------------------------------
2.1 Exchange of Shares; Payment of the Per Share Consideration. At the
Effective Date, by virtue of the Transaction and without any action on the part
of the holder thereof (except for such holder's consent (which must be in
writing)), each share of Target Common Stock which shall be outstanding
immediately prior to the Effective Date (which share is held by a person who has
been offered the right to exchange his share of Target Common Stock for the Per
Share Consideration and who has accepted that offer) shall at the Effective Date
be converted into and represent the right to receive the Per Share
Consideration.
2.2. Exchange of Target Notes. Following the completion of this
Transaction, the Acquiring Company will issue Acquiring Company Notes in
exchange for all issued and outstanding Target Notes that are in existence on
the date of the Closing to the extent the holders of the Target Notes elect to
exchange the Target Notes. The terms and conditions of the Acquiring Company
Agreement and Plan of Reorganization Page 3
Notes shall be identical to the terms and conditions of the Target Notes except
that the Acquiring Company will be the obligor. Upon the issuance of the
Acquiring Company Notes, the Target Notes then will be cancelled by the Target
2.3. Exchange of Target Note Warrants. Following the completion of this
Transaction, the Acquiring Company will issue Acquiring Company Note Warrants to
all holders of Target Note Warrants previously issued and in existence on the
date of the Closing to the extent the holders of the Target Note Warrants elect
to exchange the Target Note Warrants. The terms and conditions of the Acquiring
Company Note Warrants shall be identical to the terms and conditions of the
Target Note Warrants except that the Acquiring Company Note Warrants will be
exercisable to acquire shares of Series A Stock. Upon the issuance of the
Acquiring Company Note Warrants, the Target Note Warrants then will be cancelled
by the Target.
2.4 Adjustment. If, between the date of this Agreement and the Closing Date
or the Effective Date, as the case may be, the outstanding shares of the Target
Common Stock or the common stock of the Acquiring Company shall have been
changed into a different number of shares or a different class by reason of any
classification, recapitalization, split-up, combination, exchange of shares, or
readjustment or a stock dividend thereon shall be declared with a record date
within such period (not including the reverse stock split to be completed
immediately prior to the Effective Date as described in Paragraph 1.1(a),
above), then the Total Consideration (and each component thereof) shall be
adjusted to accurately reflect such change.
ARTICLE 3
Representations and Warranties of Target
----------------------------------------
Target represents and warrants to the Acquiring Company that the statements
contained in Article 3 are true and correct in all material respects and will be
true and correct as of the Closing Date and the Effective Date, except as set
forth in the schedules attached hereto. As used in this Article 3 and elsewhere
in this Agreement, the phrases "to Target's knowledge" or "to Target's actual
knowledge" shall mean to the actual and personal knowledge the Chief Executive
Officer and the Chief Financial Officer of Target.
3.1 Organization and Good Standing of Target. Target is a corporation duly
organized, validly existing and in good standing under the laws of Colorado.
Target represents that it is in the process of adopting an amended and restated
articles of incorporation and amended bylaws which will govern the Target at the
Effective Date.
3.2 No Subsidiaries or Investments. Target owns no equity or debt interest
in any subsidiary corporation, limited liability company, partnership, or other
business entity.
3.3 Foreign Qualification. Target is not conducting business and is not
qualified to do business in any jurisdiction but Colorado.
Agreement and Plan of Reorganization Page 4
3.4 Company Power and Authority. Target has the corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as currently being conducted. Target has the corporate power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement and to complete the Transaction as described herein. The
execution, delivery and performance by Target of this Agreement has been duly
authorized by all necessary corporate action.
3.5 Binding Effect. This Agreement has been duly executed and delivered by
Target and is the legal, valid and binding obligation of Target enforceable in
accordance with its terms except that:
(a) enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights;
(b) the availability of equitable remedies may be limited by equitable
principles of general applicability; and
(c) rights to indemnification may be limited by considerations of
public policy.
3.6 Absence of Restrictions and Conflicts. The execution, delivery and
performance of this Agreement and the completion of the Transaction and the
fulfillment of and compliance with the terms and conditions of this Agreement do
not and will not, with the passing of time or the giving of notice or both,
violate or conflict with, constitute a breach of or default under, result in the
loss of any material benefit under, or permit the acceleration of any obligation
under, (a) any term or provision of the articles of incorporation or bylaws of
Target, (b) any "Material Contract" (as defined in Section 3.13), (c) any
judgment, decree or order of any court or governmental authority or agency to
which Target is a party or by which Target or any of its properties is bound, or
(d) any statute, law, regulation or rule applicable to Target other than such
violations, conflicts, breaches or defaults which would not have a Target
Material Adverse Effect. Except for the approval of the stockholders of Target
and blue sky qualification by the Acquiring Company, no consent, approval, order
or authorization of, or registration, declaration or filing with, any
governmental agency or public or regulatory unit, agency, body or authority with
respect to Target is required in connection with the execution, delivery or
performance of this Agreement by Target or the completion of the transactions
contemplated hereby. For the purposes of this Agreement, the term "Target
Material Adverse Effect" means any event, contract, transaction or circumstance
that would result in a capital expenditure or expense to the Target (either
individually or together with other events, contracts, transactions or other
circumstances) greater than $10,000 over any twelve month period, not including
those events, contracts, transactions, or circumstances specifically
contemplated in this Agreement or the schedules hereto.
Agreement and Plan of Reorganization Page 5
3.7 Capitalization of Target.
(a) The authorized capital stock of Target consists of 50,000,000
shares of common stock and 10,000,000 shares of preferred stock (which has not
been established in any series). As of the date hereof:
(i) There were 23,650,000 shares of Target Common Stock issued and
outstanding as illustrated on Schedule 3.7A. To the extent the number of shares
of Target Common Stock changes between the date of this Agreement and the
completion of the Transactions contemplated hereby, the Per Share Consideration
will be adjusted so that the holders of Target Common Stock (if all holders
tender their shares to the Acquiring Company for exchange) will own 95% of the
Acquiring Company Common Stock;
(ii) There were no shares of preferred stock of the Target Company (or
any series thereof) issued or outstanding; and
(iii) There were no shares of Target Common Stock or preferred stock
(or any series thereof) reserved for issuance upon the exercise of any options,
warrants, or other rights to acquire shares of capital stock except 480,000
shares of Target Common Stock issuable upon conversion of certain of the Target
Notes (with a principal amount of $240,000) as shown on Schedule 3.7B, and
shares of Target Common Stock, in an amount to be determined as described in
Section 1.1(d) above, issuable upon conversion of Target Note Warrants as shown
on Schedule 3.7C (which underlie other Target Notes with a principal amount of
$250,000, as of August 31, 2004, which amount may be increased due to the
receipt of additional funds, as shown on Schedule 3.7B).
(b) All of the issued and outstanding shares of Target Common Stock
have been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights.
(c) There are no voting trusts, stockholder agreements or other voting
arrangements by the stockholders of Target.
3.8 Target Information. Target has made or will make available to the
Acquiring Company all information that Target has available (including all tax
returns, financial statements given to any other person, contracts, payroll
schedules, financial books and records, and all other information regarding
Target, its business, its customers, its management, and its financial condition
which the Acquiring Company may have requested (all such information being
referred to herein as the "Target Information"). As of their respective dates,
the Target Information 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.
Agreement and Plan of Reorganization Page 6
3.9 Financial Statements and Records of Target. The unaudited financial
statements Target attached hereto as Schedule 3.9 (the "Target Financial
Statements") have been prepared from, and are in accordance with, the books and
records of Target and present fairly, in all material respects, the consolidated
financial position of Target as of the dates thereof and the results of
operations and cash flows thereof for the periods then ended, in each case in
conformity with generally accepted accounting principles, consistently applied,
except as noted therein. Adequate reserves are set forth on the Target Financial
Statements. Since the date of the Target Financial Statements, there has been no
change in accounting principles applicable to, or methods of accounting utilized
by, Target except as noted in the Target Financial Statements. The books and
records of Target have been and are being maintained in accordance with good
business practice, reflect only valid transactions, are complete and correct in
all material respects and present fairly in all material respects the basis for
the financial position and results of operations of Target as set forth on the
Target Financial Statements.
3.10 Absence of Certain Changes. Since the date of the Target Financial
Statements, and except as otherwise set forth in the Target Information or the
Target Financial Statements, and except for the adoption of amended and restated
articles of incorporation and bylaws, Target has not:
(a) suffered any adverse change in the business, operations, assets,
or financial condition, except for such changes that would not result in a
Target Material Adverse Effect;
(b) suffered any material damage or destruction to or loss of the
assets of Target, whether or not covered by insurance, which property or assets
are material to the operations or business of Target;
(c) settled, forgiven, compromised, canceled, released, waived or
permitted to lapse any material rights or claims other than in the ordinary
course of business;
(d) entered into or terminated any material agreement, commitment or
transaction, or agreed or made any changes in material leases or agreements,
other than renewals or extensions thereof and leases, agreements, transactions
and commitments entered into or terminated in the ordinary course of business
except relating to the launch of Protandim CF and the and the issuance of
additional Target Notes in its ongoing bridge capital financing and the
underlying Target Note Warrants;
(e) written up, written down or written off the book value of any
material amount of assets other than in the ordinary course of business;
(f) declared, paid or set aside for payment any dividend or
distribution with respect to Target's capital stock;
(g) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of Target's capital stock or
securities or any rights to acquire such capital stock or securities, or agreed
Agreement and Plan of Reorganization Page 7
to changes in the terms and conditions of any such rights outstanding as of the
date of this Agreement except related to the issuance of additional Target Notes
related to the ongoing bridge financing and the underlying Target Note Warrants;
(h) increased the compensation of or paid any bonuses to any employees
or contributed to any employee benefit plan;
(i) entered into any employment, consulting or compensation agreement
with any person or group;
(j) entered into any collective bargaining agreement with any person
or group;
(k) entered into, adopted or amended any employee benefit plan; or
(l) entered into any agreement to do any of the foregoing.
3.11 No Material Undisclosed Liabilities. There are no material liabilities
or obligations of Target of any nature, whether absolute, accrued, contingent,
or otherwise, other than:
(a) the liabilities and obligations that are reflected, accrued or
reserved against on the Target Financial Statements, or referred to in the
footnotes to the Target Financial Statements or incurred in the ordinary course
of business and consistent with past practices since June 30, 2004 (the date of
the most recent audited Target Financial Statements);
(b) liabilities and obligations which in the aggregate would not
result in a Target Material Adverse Effect; or
(c) Target Notes and the underlying Target Note Warrants.
3.12 Tax Returns; Taxes. Target has duly filed all U.S. federal and
material state, county, local and foreign tax returns and reports required to be
filed by it, including those with respect to income, payroll, property,
withholding, social security, unemployment, franchise, excise and sales taxes
and all such returns and reports are correct in all material respects; has
either paid in full all taxes that have become due as reflected on any return or
report and any interest and penalties with respect thereto or has fully accrued
on its books or have established adequate reserves for all taxes payable but not
yet due; and has made cash deposits with appropriate governmental authorities
representing estimated payments of taxes, including income taxes and employee
withholding tax obligations. No extension or waiver of any statute of
limitations or time within which to file any return has been granted to or
requested by Target with respect to any tax. No unsatisfied deficiency,
delinquency or default for any tax, assessment or governmental charge has been
claimed, proposed or assessed against Target, nor has Target received notice of
any such deficiency, delinquency or default. Target has no material tax
Agreement and Plan of Reorganization Page 8
liabilities other than those reflected on the Target Financial Statements, and
those arising in the ordinary course of business since the date thereof. Target
will make available to the Acquiring Company true, complete and correct copies
of Target's consolidated U.S. federal tax returns since its incorporation and
make available such other tax returns requested by the Acquiring Company. There
is no dispute or claim concerning any tax liability of Target or any of its
subsidiaries either: (a) raised by any taxing authority in writing; (b) as to
which Target has received notice concerning a potential audit of any return
filed by Target; and (c) there is no outstanding audit or pending audit of any
tax return filed by Target.
3.13 Material Contracts. Target has furnished or made available to the
Acquiring Company accurate and complete copies of the Material Contracts (as
defined herein) applicable to Target. Except as set forth on Schedule 3.13,
there is not under any of the Material Contracts any existing breach, default or
event of default by Target nor event that with notice or lapse of time or both
would constitute a breach, default or event of default by Target other than
breaches, defaults or events of default which would not have a Target Material
Adverse Effect nor does Target know of, and Target has not received notice of,
or made a claim with respect to, any breach or default by any other party
thereto which would, severally or in the aggregate, have a Target Material
Adverse Effect. As used herein, the term "Material Contracts" shall mean all
contracts and agreements providing for expenditures or commitments by Target in
excess of $10,000 over not more than a 12 month period.
3.14 Litigation and Government Claims. Except as disclosed in the Target
Information, there is no pending suit, claim, action or litigation, or
administrative, arbitration or other proceeding or governmental investigation or
inquiry against Target to which its businesses or assets are subject which
would, severally or in the aggregate, reasonably be expected to result in a
Target Material Adverse Effect. To the knowledge of Target, and except as
disclosed in the Target Information, there are no such proceedings threatened or
contemplated which would, severally or in the aggregate, have a Target Material
Adverse Effect. Target is not subject to any judgment, decree, injunction, rule
or order of any court, or, to the knowledge of Target, any governmental
restriction applicable to Target which is reasonably likely (a) to have a Target
Material Adverse Effect or (b) to cause a material limitation on the ability to
operate the business of Target (as it is currently operated) after the Closing.
3.15 Compliance With Laws. Target has all material authorizations,
approvals, licenses and orders to carry on its business as it is now being
conducted, to own or hold under lease the properties and assets it owns or holds
under lease and to perform all of its obligations under the agreements to which
its is a party, except for instances which would not have a Target Material
Adverse Effect. Target has been and is, to the knowledge of Target, in
compliance with all applicable laws (including those referenced in the Target
Information), regulations and administrative orders of any country, state or
municipality or of any subdivision of any thereof to which its business and its
employment of labor or its use or occupancy of properties or any part hereof are
subject, the violation of which would have a Target Material Adverse Effect.
Agreement and Plan of Reorganization Page 9
3.16 Employee Benefit Plans. Target has no employee benefit plan, as such
term is defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") except the following: Target has a Client Service
Agreement with Administaff Companies II, L.P., a professional employer
organization, serving as an off-site, full service human resource department, as
disclosed in Schedule 3.13.
3.17 Employment Agreements; Labor Relations.
(a) Target is not a party to any employee benefit or compensation
plans, agreements and arrangements except agreements that will be cancelled as
of the Closing Date or as set forth on Schedule 3.17.
(b) Target is in compliance in all material respects with all laws
(including Federal and state laws) respecting employment and employment
practices, terms and conditions of employment, wages and hours, and is not
engaged in any unfair labor or unlawful employment practice. To Target's
knowledge, there is no unlawful employment practice discrimination charge
pending before the EEOC or EEOC recognized state "referral agency." Except as
would not have a Target Material Adverse Effect, there is no unfair labor
practice charge or complaint against Target pending before the National Labor
Review Board. There is no labor strike, dispute, slowdown or stoppage actually
pending or, to the knowledge of Target, threatened against or involving or
affecting Target and no National Labor Review Board representation question
exists respecting their respective employees. Except as would not have a Target
Material Adverse Effect, no grievances or arbitration proceeding is pending and
no written claim therefor exists. There is no collective bargaining agreement
that is binding on Target.
3.18 Intellectual Property. Target owns or has valid, binding and
enforceable rights to use all material patents, trademarks, trade names, service
marks, service names, copyrights, applications therefor and licenses or other
rights in respect thereof ("Intellectual Property") used or held for use in
connection with the business of Target, without any known conflict with the
rights of others, except for such conflicts as do not have a Target Material
Adverse Effect. Target has not received any notice from any other person
pertaining to or challenging the right of Target to use any Intellectual
Property or any trade secrets, proprietary information, inventions, know-how,
processes and procedures owned or used or licensed to Target, except with
respect to rights the loss of which, individually or in the aggregate, would not
have a Target Material Adverse Effect.
3.19 Title to Properties and Related Matters.
(a) Target has a valid leasehold interest in the only real estate that
it has under lease (the "Leasehold Interest") and Target owns no other interest
in any real estate, and its Leasehold Interest is free and clear of any lien,
claim or encumbrance, except that the Leasehold Interest is subject to the lease
for such property, and except for:
Agreement and Plan of Reorganization Page 10
(i) liens for taxes, assessments or other governmental charges not
yet due and payable or the validity of which are being contested in good faith
by appropriate proceedings;
(ii) statutory liens incurred in the ordinary course of business
that are not yet due and payable or the validity of which are being contested in
good faith by appropriate proceedings;
(iii) landlord liens contained in leases entered in the ordinary
course of business; and
(iv) other liens, claims or encumbrances that, in the aggregate,
do not materially subtract from the value of, or materially interfere with, the
present use of, the Leasehold Interest.
(b) Target has received no notice of, and has no actual knowledge of,
any material violation of any zoning, building, health, fire, water use or
similar statute, ordinance, law, regulation or code in connection with the
Leasehold Interest.
(c) To Target's knowledge, no hazardous or toxic material (as
hereinafter defined) exists in any structure located on, or exists on or under
the surface of, the Leasehold Interest which is, in any case, in material
violation of applicable environmental law. For purposes of this Agreement,
"hazardous or toxic material" shall mean waste, substance, materials, smoke, gas
or particulate matter designated as hazardous, toxic or dangerous under any
applicable environmental law. For purposes of this Agreement, "environmental
law" shall include the Comprehensive Environmental Response Compensation and
Liability Act, the Clean Air Act, the Clean Water Act and any other applicable
federal, state or local environmental, health or safety law, rule or regulation
relating to or imposing liability or standards concerning or in connection with
hazardous, toxic or dangerous waste, substance, materials, smoke, gas or
particulate matter.
3.20 Brokers and Finders. No broker, finder, agent or similar intermediary
has acted for or on behalf of Target in connection with this Agreement, and no
broker, finder, agent or similar intermediary is entitled to any broker's,
finder's or similar fee or other commission in connection therewith based on any
agreement, arrangement or understanding with Target.
3.21 Accuracy and Completeness of Documents. All documents delivered by or
on behalf of Target in connection with the transactions contemplated hereby are,
as of the date thereof, true, complete, accurate, and authentic in all material
respects. No representation or warranty of Target contained in this Agreement
contains, and no document delivered or to be delivered at the Closing will
contain, as of the date hereof or thereof (with respect to such documents), an
untrue statement of a material fact or will omit to state a material fact
required to be stated therein or necessary to make the statements made, in the
context in which made, not materially false or misleading. Target does not have
any actual knowledge that any representation, warranty, or statement of the
Acquiring Company contained herein or delivered to Target contains any untrue
Agreement and Plan of Reorganization Page 11
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements made, in the context in which
made, not materially false or misleading.
ARTICLE 4
Representations and Warranties of
---------------------------------
the Acquiring Company
---------------------
Acquiring Company represents and warrants to the Target that the statements
contained in Article 4 are true and correct in all material respects and will be
true and correct as of the Closing Date and the Effective Date, except as set
forth in the schedules attached hereto. As used in this Article 4 and elsewhere
in this Agreement, the phrases "to Acquiring Company's knowledge" or "to
Acquiring Company's actual knowledge" shall mean to the actual and personal
knowledge the Chief Executive Officer and the Chief Financial Officer of
Acquiring Company.
4.1 Organization and Good Standing of Acquiring Company. Acquiring Company
is a corporation duly organized, validly existing and in good standing under the
laws of Colorado. Acquiring Company represents that it has approved for adoption
by its stockholders amended and restated articles of incorporation in the form
attached as Schedule 4.1a and has approved amended bylaws in the form attached
as Schedule 4.1b.
4.2 No Subsidiaries or Investments. Acquiring Company owns no equity or
debt interest in any subsidiary corporation, limited liability company,
partnership, or other business entity.
4.3 Foreign Qualification. Acquiring Company is not conducting business and
is not qualified to do business in any jurisdiction but Colorado.
4.4 Company Power and Authority. Acquiring Company has the corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as currently being conducted. Acquiring Company has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations under this Agreement and to complete the Transaction as
described herein. The execution, delivery and performance by Acquiring Company
of this Agreement has been duly authorized by all necessary corporate action.
4.5 Binding Effect. This Agreement has been duly executed and delivered by
Acquiring Company and is the legal, valid and binding obligation of Acquiring
Company enforceable in accordance with its terms except that:
(a) enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights;
(b) the availability of equitable remedies may be limited by equitable
principles of general applicability; and
Agreement and Plan of Reorganization Page 12
(c) rights to indemnification may be limited by considerations of
public policy.
4.6 Absence of Restrictions and Conflicts. The execution, delivery and
performance of this Agreement and the completion of the Transaction and the
fulfillment of and compliance with the terms and conditions of this Agreement do
not and will not, with the passing of time or the giving of notice or both,
violate or conflict with, constitute a breach of or default under, result in the
loss of any material benefit under, or permit the acceleration of any obligation
under, (a) any term or provision of the articles of incorporation or bylaws of
Acquiring Company, (b) any "Material Contract" (as defined in Section 3.13), (c)
any judgment, decree or order of any court or governmental authority or agency
to which Acquiring Company is a party or by which Acquiring Company or any of
its properties is bound, or (d) any statute, law, regulation or rule applicable
to Acquiring Company other than such violations, conflicts, breaches or defaults
which would not have an Acquiring Company Material Adverse Effect. Except for
blue sky qualification, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental agency or public or
regulatory unit, agency, body or authority with respect to Acquiring Company is
required in connection with the execution, delivery or performance of this
Agreement by Acquiring Company or the completion of the transactions
contemplated hereby. For the purposes of this Agreement, the term "Acquiring
Company Material Adverse Effect" means any event, contract, transaction or
circumstance that would result in a capital expenditure or expense to the
Acquiring Company (either individually or together with other events, contracts,
transactions or other circumstances) greater than $10,000 over any twelve month
period, not including those events, contracts, transactions, or circumstances
specifically contemplated in this Agreement or the schedules hereto.
4.7 Capitalization of Acquiring Company.
(a) The authorized capital stock of Acquiring Company consists of
250,000,000 shares of $.001 par value Series A common stock which is voting
stock (the "Series A Stock"), 250,000,000 shares of $.001 par value non-voting
Series B common stock, and 50,000,000 shares of $.001 par value preferred stock
(which has not been established in any series). As of the date hereof:
(i) There were 67,308,857 shares of Series A Stock issued and
outstanding;
(ii) There were no shares of Series B common stock issued and
outstanding;
(iii) There were no shares of preferred stock (or any series thereof)
issued or outstanding; and
(iv) There were no shares of Series A Stock, Series B common stock, or
preferred stock (or any series thereof) reserved for issuance upon the exercise
of any options, warrants, or other rights to acquire shares of capital stock.
Agreement and Plan of Reorganization Page 13
(b) All of the issued and outstanding shares of Series A Stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights.
(c) There are no voting trusts, stockholder agreements or other voting
arrangements by the stockholders of Acquiring Company.
4.8 Acquiring Company Information. Acquiring Company has made or will make
available to the Target all information that Acquiring Company has available
(including all tax returns, financial statements given to any other person,
contracts, payroll schedules, financial books and records, and all other
information regarding Acquiring Company, its business, its customers, its
management, and its financial condition which the Target may have requested (all
such information being referred to herein as the "Acquiring Company
Information")). As of their respective dates, the Acquiring Company Information
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.
4.9 Financial Statements and Records of Acquiring Company. The financial
statements Acquiring Company attached hereto as Schedule 4.9 (the "Acquiring
Company Financial Statements") have been prepared from, and are in accordance
with, the books and records of Acquiring Company and present fairly, in all
material respects, the consolidated financial position of Acquiring Company as
of the dates thereof and the results of operations and cash flows thereof for
the periods then ended, in each case in conformity with generally accepted
accounting principles, consistently applied, except as noted therein. Adequate
reserves are set forth on the Acquiring Company Financial Statements. Since the
date of the Acquiring Company Financial Statements, there has been no change in
accounting principles applicable to, or methods of accounting utilized by,
Acquiring Company except as noted in the Acquiring Company Financial Statements.
The books and records of Acquiring Company have been and are being maintained in
accordance with good business practice, reflect only valid transactions, are
complete and correct in all material respects and present fairly in all material
respects the basis for the financial position and results of operations of
Acquiring Company as set forth in the Acquiring Company Financial Statements.
4.10 Absence of Certain Changes. Since the date of the Acquiring Company
Financial Statements, and except as otherwise set forth in the Acquiring Company
Information or the Acquiring Company Financial Statements, and except for the
adoption of amended and restated articles of incorporation and bylaws, Acquiring
Company has not:
(a) suffered any adverse change in the business, operations, assets,
or financial condition, except for such changes that would not result in an
Acquiring Company Material Adverse Effect;
(b) suffered any material damage or destruction to or loss of the
assets of Acquiring Company, whether or not covered by insurance, which property
or assets are material to the operations or business of Acquiring Company;
Agreement and Plan of Reorganization Page 14
(c) settled, forgiven, compromised, canceled, released, waived or
permitted to lapse any material rights or claims other than in the ordinary
course of business;
(d) entered into or terminated any material agreement, commitment or
transaction, or agreed or made any changes in material leases or agreements,
other than renewals or extensions thereof and leases, agreements, transactions
and commitments entered into or terminated in the ordinary course of business;
(e) written up, written down or written off the book value of any
material amount of assets other than in the ordinary course of business;
(f) declared, paid or set aside for payment any dividend or
distribution with respect to Acquiring Company's capital stock;
(g) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of Acquiring Company's
capital stock or securities or any rights to acquire such capital stock or
securities, or agreed to changes in the terms and conditions of any such rights
outstanding as of the date of this Agreement;
(h) increased the compensation of or paid any bonuses to any employees
or contributed to any employee benefit plan;
(i) entered into any employment, consulting or compensation agreement
with any person or group;
(j) entered into any collective bargaining agreement with any person
or group;
(k) entered into, adopted or amended any employee benefit plan; or
(l) entered into any agreement to do any of the foregoing.
4.11 No Material Undisclosed Liabilities. There are no material liabilities
or obligations of Acquiring Company of any nature, whether absolute, accrued,
contingent, or otherwise, other than:
(a) the liabilities and obligations that are reflected, accrued or
reserved against on the Acquiring Company Financial Statements, or referred to
in the footnotes to the Acquiring Company Financial Statements or incurred in
the ordinary course of business and consistent with past practices since June
30, 2004; or
(b) liabilities and obligations which in the aggregate would not
result in an Acquiring Company Material Adverse Effect.
Agreement and Plan of Reorganization Page 15
4.12 Tax Returns; Taxes. Acquiring Company has duly filed all U.S. federal
and material state, county, local and foreign tax returns and reports required
to be filed by it, including those with respect to income, payroll, property,
withholding, social security, unemployment, franchise, excise and sales taxes
and all such returns and reports are correct in all material respects; has
either paid in full all taxes that have become due as reflected on any return or
report and any interest and penalties with respect thereto or has fully accrued
on its books or have established adequate reserves for all taxes payable but not
yet due; and has made cash deposits with appropriate governmental authorities
representing estimated payments of taxes, including income taxes and employee
withholding tax obligations. No extension or waiver of any statute of
limitations or time within which to file any return has been granted to or
requested by Acquiring Company with respect to any tax. No unsatisfied
deficiency, delinquency or default for any tax, assessment or governmental
charge has been claimed, proposed or assessed against Acquiring Company, nor has
Acquiring Company received notice of any such deficiency, delinquency or
default. Acquiring Company has no material tax liabilities other than those
reflected on the Acquiring Company Financial Statements, and those arising in
the ordinary course of business since the date thereof. Acquiring Company will
make available to the Target true, complete and correct copies of Acquiring
Company's consolidated U.S. federal tax returns since its incorporation and make
available such other tax returns requested by the Target. There is no dispute or
claim concerning any tax liability of Acquiring Company or any of its
subsidiaries either: (a) raised by any taxing authority in writing; (b) as to
which Acquiring Company has received notice concerning a potential audit of any
return filed by Acquiring Company; and (c) there is no outstanding audit or
pending audit of any tax return filed by Acquiring Company.
4.13 Material Contracts. Acquiring Company has furnished or made available
to the Target accurate and complete copies of the Material Contracts (as defined
herein) applicable to Acquiring Company. Except as set forth on Schedule 4.13,
there is not under any of the Material Contracts any existing breach, default or
event of default by Acquiring Company nor event that with notice or lapse of
time or both would constitute a breach, default or event of default by Acquiring
Company other than breaches, defaults or events of default which would not have
an Acquiring Company Material Adverse Effect nor does Acquiring Company know of,
and Acquiring Company has not received notice of, or made a claim with respect
to, any breach or default by any other party thereto which would, severally or
in the aggregate, have an Acquiring Company Material Adverse Effect. As used
herein, the term "Material Contracts" shall mean all contracts and agreements
providing for expenditures or commitments by Acquiring Company in excess of
$1,000 over not more than a 12 month period.
4.14 Litigation and Government Claims. Except as disclosed in the Acquiring
Company Information, there is no pending suit, claim, action or litigation, or
administrative, arbitration or other proceeding or governmental investigation or
inquiry against Acquiring Company to which its businesses or assets are subject
which would, severally or in the aggregate, reasonably be expected to result in
an Acquiring Company Material Adverse Effect. To the knowledge of Acquiring
Company, and except as disclosed in the Acquiring Company Information, there are
no such proceedings threatened or contemplated which would, severally or in the
Agreement and Plan of Reorganization Page 16
aggregate, have an Acquiring Company Material Adverse Effect. Acquiring Company
is not subject to any judgment, decree, injunction, rule or order of any court,
or, to the knowledge of Acquiring Company, any governmental restriction
applicable to Acquiring Company which is reasonably likely (a) to have an
Acquiring Company Material Adverse Effect or (b) to cause a material limitation
on the ability to operate the business of Acquiring Company (as it is currently
operated) after the Closing.
4.15 Compliance With Laws. Acquiring Company has all material
authorizations, approvals, licenses and orders to carry on its business as it is
now being conducted, to own or hold under lease the properties and assets it
owns or holds under lease and to perform all of its obligations under the
agreements to which its is a party, except for instances which would not have an
Acquiring Company Material Adverse Effect. Acquiring Company has been and is, to
the knowledge of Acquiring Company, in compliance with all applicable laws
(including those referenced in the Acquiring Company Information), regulations
and administrative orders of any country, state or municipality or of any
subdivision of any thereof to which its business and its employment of labor or
its use or occupancy of properties or any part hereof are subject, the violation
of which would have an Acquiring Company Material Adverse Effect.
4.16 Employee Benefit Plans. Acquiring Company has no employee benefit
plan, as such term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
4.17 Employment Agreements; Labor Relations.
(a) Acquiring Company is not a party to any employee benefit or
compensation plans, agreements and arrangements except agreements that will be
cancelled as of the Closing Date or as set forth on Schedule 4.17.
(b) Acquiring Company is in compliance in all material respects with
all laws (including Federal and state laws) respecting employment and employment
practices, terms and conditions of employment, wages and hours, and is not
engaged in any unfair labor or unlawful employment practice. To Acquiring
Company's knowledge, there is no unlawful employment practice discrimination
charge pending before the EEOC or EEOC recognized state "referral agency."
Except as would not have an Acquiring Company Material Adverse Effect, there is
no unfair labor practice charge or complaint against Acquiring Company pending
before the National Labor Review Board. There is no labor strike, dispute,
slowdown or stoppage actually pending or, to the knowledge of Acquiring Company,
threatened against or involving or affecting Acquiring Company and no National
Labor Review Board representation question exists respecting their respective
employees. Except as would not have an Acquiring Company Material Adverse
Effect, no grievances or arbitration proceeding is pending and no written claim
therefor exists. There is no collective bargaining agreement that is binding on
Acquiring Company.
Agreement and Plan of Reorganization Page 17
4.18 Intellectual Property. Acquiring Company owns or has valid, binding
and enforceable rights to use all material patents, trademarks, trade names,
service marks, service names, copyrights, applications therefor and licenses or
other rights in respect thereof ("Intellectual Property") used or held for use
in connection with the business of Acquiring Company, without any known conflict
with the rights of others, except for such conflicts as do not have an Acquiring
Company Material Adverse Effect. Acquiring Company has not received any notice
from any other person pertaining to or challenging the right of Acquiring
Company to use any Intellectual Property or any trade secrets, proprietary
information, inventions, know-how, processes and procedures owned or used or
licensed to Acquiring Company, except with respect to rights the loss of which,
individually or in the aggregate, would not have an Acquiring Company Material
Adverse Effect.
4.19 Title to Properties and Related Matters.
(a) Acquiring Company owns that certain real property described on
Schedule 4.19a (the "Real Property") free and clear of all liens and
encumbrances, and has marketable title thereto, subject only to:
(i)an agreement with Donald J. Smith to convey Mr. Smith the Real
Property by quitclaim deed in full satisfaction of all amounts that the
Acquiring Company owes to Mr. Smith, without recourse to the Acquiring Company
on the part of Mr. Smith. The Acquiring Company has made, and will make, no
warranty of title to Mr. Smith. The agreement between the Acquiring Company and
Mr. Smith shall contain an indemnification provision relating to environmental
claims. The agreement between the Acquiring Company and Mr. Smith is subject to
the Acquiring Company's stockholder approval.
(ii) liens for taxes, assessments or other governmental charges
not yet due and payable or the validity of which are being contested in good
faith by appropriate proceedings;
(iii) statutory liens incurred in the ordinary course of business
that are not yet due and payable or the validity of which are being contested in
good faith by appropriate proceedings; and
(iv) other liens, claims or encumbrances that, in the aggregate,
do not materially subtract from the value of, or materially interfere with, the
present use of, the Real Property.
(b) Acquiring Company has a valid leasehold interest in the only real
estate that it has under lease as described in Schedule 4.19b (the "Leasehold
Interest") and Acquiring Company owns no other interest in any real estate, and
its Leasehold Interest is free and clear of any lien, claim or encumbrance,
except that the Leasehold Interest is subject to the lease for such property,
and except for:
Agreement and Plan of Reorganization Page 18
(i) liens for taxes, assessments or other governmental charges not
yet due and payable or the validity of which are being contested in good faith
by appropriate proceedings;
(ii) statutory liens incurred in the ordinary course of business
that are not yet due and payable or the validity of which are being contested in
good faith by appropriate proceedings;
(iii) landlord liens contained in leases entered in the
ordinary course of business; and
(iv) other liens, claims or encumbrances that, in the aggregate,
do not materially subtract from the value of, or materially interfere with, the
present use of, the Leasehold Interest.
(c) Acquiring Company has received no notice of, and has no actual
knowledge of, any material violation of any zoning, building, health, fire,
water use or similar statute, ordinance, law, regulation or code in connection
with the Leasehold Interest or Real Property.
(d) To Acquiring Company's knowledge, no hazardous or toxic material
(as hereinafter defined) exists in any structure located on, or exists on or
under the surface of, the Real Property or the Leasehold Interest which is, in
any case, in material violation of applicable environmental law. For purposes of
this Agreement, "hazardous or toxic material" shall mean waste, substance,
materials, smoke, gas or particulate matter designated as hazardous, toxic or
dangerous under any applicable environmental law. For purposes of this
Agreement, "environmental law" shall include the Comprehensive Environmental
Response Compensation and Liability Act, the Clean Air Act, the Clean Water Act
and any other applicable federal, state or local environmental, health or safety
law, rule or regulation relating to or imposing liability or standards
concerning or in connection with hazardous, toxic or dangerous waste, substance,
materials, smoke, gas or particulate matter.
4.20 Brokers and Finders. No broker, finder, agent or similar intermediary
has acted for or on behalf of Acquiring Company in connection with this
Agreement, and no broker, finder, agent or similar intermediary is entitled to
any broker's, finder's or similar fee or other commission in connection
therewith based on any agreement, arrangement or understanding with Acquiring
Company.
4.21 Accuracy and Completeness of Documents. All documents delivered by or
on behalf of Acquiring Company in connection with the transactions contemplated
hereby, and each document filed by the Acquiring Company with the Securities and
Exchange Commission are, as of the date thereof, true, complete, accurate, and
authentic in all material respects. No representation or warranty of Acquiring
Company contained in this Agreement contains, and no document delivered or to be
delivered at the Closing will contain, as of the date hereof or thereof (with
respect to such documents), an untrue statement of a material fact or will omit
to state a material fact required to be stated therein or necessary to make the
statements made, in the context in which made, not materially false or
Agreement and Plan of Reorganization Page 19
misleading. Acquiring Company does not have any actual knowledge that any
representation, warranty, or statement of the Target contained herein or
delivered to Acquiring Company contains any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements made, in the context in which made, not materially false or
misleading.
ARTICLE 5
Certain Covenants and Agreements
--------------------------------
5.1 Conduct of Business by Target. From the date hereof to the Effective
Date, Target will, except as required in connection with the Transaction and the
other transactions contemplated by this Agreement and except as otherwise
disclosed on the schedules hereto or consented to in writing by the Acquiring
Company:
(a) carry on its business in the ordinary and regular course in
substantially the same manner as heretofore conducted and not engage in any new
line of business, or enter into any material agreement, transaction or activity
or make any material commitment except those in the ordinary and regular course
of business and not otherwise prohibited under this Section 5.1 with the
exceptions of the planned product launch and the continuing bridge financing
which will result in the issuance of additional Target Notes and underlying
Target Note Warrants;
(b) neither change nor amend its Articles of Incorporation or Bylaws;
(c) not issue or sell shares of capital stock of Target or issue, sell
or grant options, warrants or rights to purchase or subscribe to, or enter into
any arrangement or contract with respect to the issuance or sale of any of the
capital stock of Target or rights or obligations convertible into or
exchangeable for any shares of the capital stock of Target or make any changes
(by split-up, combination, reorganization or otherwise) in the capital structure
of Target;
(d) not declare, pay or set aside for payment any dividend or other
distribution in respect of the capital stock or other equity securities of
Target and not redeem, purchase or otherwise acquire any shares of the capital
stock or other securities of Target or rights or obligations convertible into or
exchangeable for any shares of the capital stock or other securities of Target
or obligations convertible into such, or any options, warrants or other rights
to purchase or subscribe to any of the foregoing;
(e) not acquire or enter into any agreement to acquire, by merger,
consolidation or purchase of stock or assets, any business or entity;
(f) use its best efforts to preserve intact the corporate existence,
goodwill, and business organization of Target, to keep the officers and
employees of Target available to Target and to preserve the relationships of
Target with suppliers, customers and others having business relations with
Target, and preserve, maintain and enforce all of Target's material licenses,
permits, and similar rights, except for such instances which would not have a
Target Material Adverse Effect;
Agreement and Plan of Reorganization Page 20
(g) Not (i) enter into, modify or extend in any manner the terms of any
employment, severance or similar agreements with officers and directors, (ii)
grant any increase in the compensation of officers or directors, whether now or
hereafter payable or (iii) grant any increase in the compensation of any other
employees (it being understood by the parties hereto that for the purposes of
(ii) and (iii) above increases in compensation shall include any increase
pursuant to any option, bonus, stock purchase, pension, profit-sharing, deferred
compensation, retirement or other plan, arrangement, contract or commitment);
(h) except in instances which would not have a Target Material Adverse
Effect, perform all of its obligations under all Material Contracts (except
those being contested in good faith) and not enter into, assume or amend any
contract or commitment that would be a Material Contract other than contracts to
provide services entered into in the ordinary course of business;
(i) except in instances which would not have a Target Material Adverse
Effect, prepare and file all federal, state, local and foreign returns for taxes
and other tax reports, filings and amendments thereto required to be filed by
it, and allow the Acquiring Company to review all such returns, reports, filings
and amendments at Target's offices prior to the filing thereof, which review
shall not interfere with the timely filing of such returns; and
(j)Not borrow any funds under existing lines of credit or otherwise
except as the Target deems reasonably necessary for the ordinary operation of
Target's business, including the issuance of additional Target Notes and Target
Note Warrants pursuant to the continuing bridge financing.
In connection with the continued operation of the business of Target
between the date of this Agreement and the Effective Date, Target shall confer
in good faith and on a regular and frequent basis with one or more
representatives of the Acquiring Company designated in writing to report
operational matters of materiality and the general status of ongoing operations.
In addition, during regular business hours, Target will allow employees and
agents of the Acquiring Company to be present at Target's business locations to
observe the business and operations of Target. Target acknowledges that the
Acquiring Company does not and will not waive any rights it may have under this
Agreement as a result of such consultations nor shall the Acquiring Company (or
either of them) be responsible for any decisions made by Target's officers and
directors with respect to matters which are the subject of such consultation.
5.2 Conduct of Business by Acquiring Company. From the date hereof to the
Effective Date, Acquiring Company will, except as required in connection with
the Transaction and the other transactions contemplated by this Agreement and
except as otherwise disclosed on the schedules hereto or consented to in writing
by the Acquiring Company:
Agreement and Plan of Reorganization Page 21
(a) carry on its business in the ordinary and regular course in
substantially the same manner as heretofore conducted and not engage in any new
line of business or enter into any material agreement, transaction or activity
or make any material commitment except those in the ordinary and regular course
of business and not otherwise prohibited under this Section 5.2;
(b) neither change nor amend its Articles of Incorporation or Bylaws;
(c) not issue or sell shares of capital stock of Acquiring Company or
issue, sell or grant options, warrants or rights to purchase or subscribe to, or
enter into any arrangement or contract with respect to the issuance or sale of
any of the capital stock of Acquiring Company or rights or obligations
convertible into or exchangeable for any shares of the capital stock of
Acquiring Company or make any changes (by split-up, combination, reorganization
or otherwise) in the capital structure of Acquiring Company;
(d) not declare, pay or set aside for payment any dividend or other
distribution in respect of the capital stock or other equity securities of
Acquiring Company and not redeem, purchase or otherwise acquire any shares of
the capital stock or other securities of Acquiring Company or rights or
obligations convertible into or exchangeable for any shares of the capital stock
or other securities of Acquiring Company or obligations convertible into such,
or any options, warrants or other rights to purchase or subscribe to any of the
foregoing;
(e) not acquire or enter into any agreement to acquire, by merger,
consolidation or purchase of stock or assets, any business or entity;
(f) use its best efforts to preserve intact the corporate existence,
goodwill, and business organization of Acquiring Company, to keep the officers
and employees of Acquiring Company available to Acquiring Company and to
preserve the relationships of Acquiring Company with its stockholders and others
having business relations with Acquiring Company, and preserve, maintain and
enforce all of Acquiring Company's material licenses, permits, and similar
rights, except for such instances which would not have an Acquiring Company
Material Adverse Effect;
(g) Not (i) enter into, modify or extend in any manner the terms of any
employment, severance or similar agreements with officers and directors, (ii)
grant any increase in the compensation of officers or directors, whether now or
hereafter payable or (iii) grant any increase in the compensation of any other
employees (it being understood by the parties hereto that for the purposes of
(ii) and (iii) above increases in compensation shall include any increase
pursuant to any option, bonus, stock purchase, pension, profit-sharing, deferred
compensation, retirement or other plan, arrangement, contract or commitment);
(h) except in instances which would not have an Acquiring Company
Material Adverse Effect, perform all of its obligations under all Material
Contracts (except those being contested in good faith) and not enter into,
assume or amend any contract or commitment that would be a Material Contract
other than contracts to provide services entered into in the ordinary course of
business;
Agreement and Plan of Reorganization Page 22
(i) except in instances which would not have an Acquiring Company
Material Adverse Effect, prepare and file all federal, state, local and foreign
returns for taxes and other tax reports, filings and amendments thereto required
to be filed by it, and allow the Target to review all such returns, reports,
filings and amendments at Acquiring Company's offices prior to the filing
thereof, which review shall not interfere with the timely filing of such
returns;
(j) Not borrow any funds under existing lines of credit or otherwise
except as reasonably necessary for the ordinary operation of Acquiring Company's
business;
(k) File all reports required with the Securities and Exchange
Commission in a timely manner, and ensure that each such report filed is
accurate and complete in all material respects as of the date filed; and
(l) Not offer the Per Share Consideration to any shareholder of Target
without the Target's prior written consent, and make the offer of the Per Share
Consideration to such shareholders, with such documentation, at such time and in
such manner as the Target may reasonably approve.
In connection with the continued operation of the business of Acquiring
Company between the date of this Agreement and the Effective Date, Acquiring
Company shall confer in good faith and on a regular and frequent basis with one
or more representatives of the Target designated in writing to report
operational matters of materiality and the general status of ongoing operations.
In addition, during regular business hours, Acquiring Company will allow
employees and agents of the Target to be present at Acquiring Company's business
locations to observe the business and operations of Acquiring Company. Acquiring
Company acknowledges that the Target does not and will not waive any rights it
may have under this Agreement as a result of such consultations nor shall the
Target (or either of them) be responsible for any decisions made by Acquiring
Company's officers and directors with respect to matters which are the subject
of such consultation.
5.3 Notice of any Material Change. Each of the Target and the Acquiring
Company shall (with respect only to itself), promptly after the first notice or
occurrence thereof but not later than the Closing Date, advise the other in
writing of any event or the existence of any state of facts that (a) would make
any of its representations and warranties in this Agreement untrue in any
material respect, or (b) would otherwise constitute either a Target Material
Adverse Effect or an Acquiring Company Material Adverse Effect.
5.4 Inspection and Access to Information.
(a) Between the date of this Agreement and the Effective Date, the
Target will provide to the Acquiring Company and its accountants, counsel and
other authorized representatives reasonable access, during normal business hours
Agreement and Plan of Reorganization Page 23
to its premises, properties, contracts, commitments, books, records and other
information (including tax returns filed and those in preparation) and will
cause its officers to furnish to the Acquiring Company and its authorized
representatives such financial, technical and operating data and other
information pertaining to its business, as the Acquiring Company shall from time
to time reasonably request.
(b) Between the date of this Agreement and the Effective Date, the
Acquiring Company will provide to the Target and its accountants, counsel and
other authorized representatives reasonable access, during normal business hours
to its premises, properties, contracts, commitments, books, records and other
information (including tax returns filed and those in preparation) and will
cause its officers to furnish to the Target and its authorized representatives
such financial, technical and operating data and other information pertaining to
its business, as the Target shall from time to time reasonably request.
5.5 Confidentiality.
(a) Definition Of Confidential Information.
(i) As used in this Section 5.5, the term "Confidential Information"
includes any and all of the following information of Target or the Acquiring
Company that has been or may hereafter be disclosed in any form, whether in
writing, orally, electronically or otherwise, or otherwise made available by
observation, inspection or otherwise by any party ("Disclosing Party") to the
other party (a "Receiving Party"):
all information that is a trade secret under applicable trade secret or
other law; and
all information concerning customer and vendor lists, current and
anticipated customer requirements, current and anticipated product
offers, market studies, business plans, projected sales, financial
projections, historical financial information, trade secrets,
information shared during due diligence, policies and procedures and
proprietary information, computer hardware, computer software and
database technologies, systems, structures, architectures and contents.
(ii) Any trade secrets of a Disclosing Party shall also be entitled to
all of the protections and benefits under applicable trade secret law and any
other applicable law. If any information that a Disclosing Party deems to be a
trade secret is found by a court of competent jurisdiction not to be a trade
secret for purposes of this Section 5.5, such information shall still be
considered Confidential Information of that Disclosing Party for purposes of
this Section 5.5 to the extent included within the definition. In the case of
trade secrets, each of the parties hereby waives any requirement that the other
party submit proof of the economic value of any trade secret or post a bond or
other security.
(b) Restricted Use of Confidential Information.
Agreement and Plan of Reorganization Page 24
(i) Each Receiving Party acknowledges the confidential and proprietary
nature of the Confidential Information of the Disclosing Party and agrees that
such Confidential Information: (A) shall be kept confidential by the Receiving
Party; (B) shall not be used for any reason or purpose other than to evaluate
and complete the transactions contemplated hereby; and (C) without limiting the
foregoing, shall not be disclosed by the Receiving Party to any person, except
in each case as otherwise expressly permitted by the terms of this Agreement or
with the prior written consent of an authorized representative of Disclosing
Party.
(ii) Each party to this Agreement shall: (A) enforce the terms of this
Section 5.5 as to its respective agents and representatives; (B) take such
action to the extent necessary to cause its agents and representatives to comply
with the terms and conditions of this Section 5.5; and (C) be responsible and
liable for any breach of the provisions of this Section 5.5 by it or its agents
or representatives.
(iii) Unless and until this Agreement is terminated, the Receiving
Party shall maintain as confidential any Confidential Information as it
generally would its own confidential information in the ordinary course of its
business.
(c) Exceptions. Section 5.5(b) does not apply to that part of the
Confidential Information of a Disclosing Party that a Receiving Party
demonstrates: (i) was, is or becomes generally available to the public other
than as a result of a breach of this Section 5.5; (ii) was or is developed by
the Receiving Party independently of and without reference to any Confidential
Information of the Disclosing Party; or (iii) was, is or becomes available to
the Receiving Party on a non-confidential basis from a third party (who is not a
Disclosing Party) not bound by a confidentiality agreement or any legal,
fiduciary or other obligation restricting disclosure.
(d) Legal Proceedings. If a Receiving Party becomes compelled in any
proceeding or is requested by a governmental body having regulatory jurisdiction
over the Receiving Party to make any disclosure that is prohibited or otherwise
constrained by this Section 5.5, that Receiving Party shall provide the
Disclosing Party with prompt notice of such compulsion or request so that it may
seek an appropriate protective order or other appropriate remedy or waive
compliance with the provisions of this Section 5.5. In the absence of a
protective order or other remedy, the Receiving Party may disclose that portion
(and only that portion) of the Confidential Information of the Disclosing Party
that, based upon advice of the Receiving Party's counsel, the Receiving Party is
legally compelled to disclose or that has been requested by such governmental
body, provided, however, that the Receiving Party shall use reasonable efforts
to obtain reliable assurance that confidential treatment will be accorded by any
Person to whom any Confidential Information is so disclosed. The provisions of
this Section 5.5(d) do not apply to any proceedings between the parties to this
Agreement.
(e) Return Or Destruction Of Confidential Information. If this
Agreement is terminated, each Receiving Party shall (i) destroy all Confidential
Information of the Disclosing Party prepared or generated by the Receiving Party
without retaining a copy of any such material; (ii) promptly deliver to the
Disclosing Party all other Confidential Information of the Disclosing Party,
Agreement and Plan of Reorganization Page 25
together with all copies thereof, in the possession, custody or control of the
Receiving Party or destroy all such Confidential Information; and (iii) certify
all such destruction in writing to the Disclosing Party, provided, however, that
the Receiving Party may retain a list that contains general descriptions of the
information it has returned or destroyed to facilitate the resolution of any
controversies after the Disclosing Party's Confidential Information is returned.
5.6 Reasonable Efforts; Further Assurances; Cooperation. Subject to the
other provisions of this Agreement, the parties hereby shall each use their
reasonable efforts to perform their obligations herein and to take, or cause to
be taken or do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable law to obtain all regulatory approvals and satisfy
all conditions to the obligations of the parties under this Agreement and to
cause the Transaction and the other transactions contemplated herein to be
carried out promptly in accordance with the terms hereof. The parties agree to
use their reasonable best efforts to complete the transactions contemplated
hereby by the date specified in Section 8.1(b) hereof. The parties shall
cooperate fully with each other and their respective officers, directors,
employees, agents, counsel, accountants and other designees in connection with
any steps required to be taken as a part of their respective obligations under
this Agreement, including without limitation:
(a) In the event any claim, action, suit, investigation or other
proceeding by any governmental body or other person is commenced which questions
the validity or legality of the Transaction or any of the other transactions
contemplated hereby or seeks damages in connection therewith, the parties agree
to cooperate and use all reasonable efforts to defend against such claim,
action, suit, investigation or other proceeding and, if an injunction or other
order is issued in any such action, suit or other proceeding, to use all
reasonable efforts to have such injunction or other order lifted, and to
cooperate reasonably regarding any other impediment to the completion of the
transactions contemplated by this Agreement.
(b) Each party shall give prompt written notice to the other of (i) the
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause any representation or warranty of the Target or the Acquiring
Company, as the case may be, contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Date or that will or may result in the failure to satisfy the
conditions specified in Article 6 or 7 and (ii) any failure of the Target or the
Acquiring Company, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder.
5.7 Public Announcements. Prior to Closing, no party will make any public
announcement regarding this Agreement without the prior written consent of the
other parties. The Target and the Acquiring Company acknowledge that they will
each need to advise their officers, directors, certain employees and advisors of
the terms and nature of this Agreement, and they agree that such disclosure does
not constitute a "public announcement" provided that the recipients of such
disclosure are under obligations of confidentiality to the Disclosing Party.
Agreement and Plan of Reorganization Page 26
5.8 Non-Solicitation.
(a) In consideration of the substantial expenditures of time, effort,
and expense to be undertaken by the Acquiring Company in completing the
transactions contemplated by this Agreement, the Target agrees that it will not
(and it will not cause or permit any officer, director, affiliate, employee,
agent, or representative of Target) indirectly or directly seek, solicit,
initiate, or participate in discussions, negotiations, or agreements of any kind
or nature with any person or entity other than the Acquiring Company which
discussions, negotiations, or agreements in any way concern the acquisition the
Target common stock or the assets of Target.
(b)In consideration of the substantial expenditures of time, effort,
and expense to be undertaken by the Target in completing the transactions
contemplated by this Agreement, the Acquiring Company agrees that it will not
(and it will not cause or permit any officer, director, affiliate, employee,
agent, or representative of the Acquiring Company) indirectly or directly seek,
solicit, initiate, or participate in discussions, negotiations, or agreements of
any kind or nature with any person or entity other than the Target which
discussions, negotiations, or agreements in any way concern the acquisition the
Acquiring Company common stock.
ARTICLE 6
Conditions Precedent to Obligations of Target
---------------------------------------------
Except as may be waived by the Target, the obligations of the Target to
complete the transactions contemplated by this Agreement shall be subject to the
satisfaction on or before the Closing Date of each of the following conditions:
6.1 Compliance. The Acquiring Company shall have, or shall have caused to
be, satisfied or complied with and performed in all material respects all terms,
covenants and conditions of this Agreement to be complied with or performed by
the Acquiring Company on or before the Closing Date.
6.2 Representations and Warranties. All of the representations and
warranties made by the Acquiring Company in this Agreement shall be true and
correct in all material respects at and as of the Closing Date with the same
force and effect as if such representations and warranties had been made at and
as of the Closing Date, except for changes permitted or contemplated by this
Agreement.
6.3 Acquiring Company Board of Director Action. The Board of Directors of
the Acquiring Company shall have:
(a) Approved the amended and restated articles of incorporation and
shall have recommended such agreement to the stockholders of the Acquiring
Company approval;
Agreement and Plan of Reorganization Page 27
(b) Approved the agreement to exchange the Real Property with Donald J.
Smith for the cancellation of all indebtedness that the Acquiring Company owes
to Mr. Smith, without warranty of title and without recourse, and shall have
recommended to the stockholders of the Acquiring Company approval;
(c) Agreed irrevocably and in writing as individuals and as
stockholders of the Acquiring Company to vote for the matters described in
Sections 6.3(a) and (b) when presented to the stockholders of the Acquiring
Company for approval;
(d) Approved and implemented amended and restated bylaws for the
Acquiring Company in a form reasonably satisfactory to the Target;
(e) Adopted such other resolutions as may be reasonably necessary or
appropriate to cure or clarify any previous actions taken by the Acquiring
Company or its board of directors or officers; and
(f) Approved employment agreements with the persons to be appointed
officers of the Acquiring Company after the Effective Date in a form that
provides for mandatory indemnification to the maximum extent permitted by the
Colorado Business Corporation Act and public policy, and otherwise is in form
and substance satisfactory to each such person.
6.4 Minutes for Prior Asset Sale. The Acquiring Company shall have provided
the final minutes for the asset sale approved by its stockholders in December
1999 which reflect approval of sufficient number of shares for such approval as
required by its articles of incorporation and the Colorado Business Corporation
Act, or shall have provided a legal opinion that such approval was not
necessary.
6.5 Reverse Stock Split; Name Change. The Acquiring Company shall have
completed such actions as may be necessary or appropriate to complete the
reverse stock split (described in Section 1.1(a), above) and a name change of
the Acquiring Company to "Lifeline Therapeutics, Inc." effective at the
Effective Date, including all actions necessary to obtain the necessary CUSIP
number and to commence trading on the OTC Bulletin Board on the day after the
Effective Date under a symbol reasonably acceptable to the Target.
6.6 Section 14(f) Notification. The Acquiring Company shall have complied
with the requirements of Section 14(f) of the Securities Exchange Act of 1934 to
permit the Acquiring Company to appoint the new directors as contemplated by
Section 1.4(c), above.
6.7 Financial Condition. The Acquiring Company's shall have no assets and
shall have no liabilities greater than $25,000 as of the Effective Date (not
including the Real Property or the debt owed to Mr. Smith which will be
addressed in a separate agreement as described in Section 6.3(b), above). The
maximum liabilities permitted of the Acquiring Company pursuant to this Section
includes (but is not limited to) any liabilities owed by the Acquiring Company
Agreement and Plan of Reorganization Page 28
to any attorney, accountant, advisor, or consultant engaged by the Acquiring
Company in connection with the transactions contemplated hereby and any
compensation owed to any officer, director, or employee of or consultant to the
Acquiring Company for services rendered to and including the Closing, and those
services not specifically approved in writing by the Target Company to be
rendered after the Closing.
6.8 Disclosure to Target's Stockholders. The Acquiring Company shall make
disclosure to the Target's stockholders and to the holders of the Target Notes
and Target Note Warrants, which is accurate and complete in all material
respects and which is sufficient to provide each of them a basis for determining
whether to exchange their shares of the Target's common stock for their portion
of the Total Consideration.
6.9 Availability of an Exemption From Registration. The Acquiring Company
shall take such steps as may be reasonably required to ensure that there is an
exemption from registration available to it for the issuer of the Total
Consideration upon completion of the Transaction.
6.10 Effectiveness of Agreement with Donald J.Smith. The Agreement with Mr.
Smith (which is an exception to the title to the Acquiring Company's Real
Property as described in Section 4.19(a)) is valid, binding, and enforceable in
accordance with its terms and is reasonably satisfactory to the Target. This
will be considered to be reasonably satisfactory if the agreement includes a
binding obligation on the part of Mr. Smith to accept the Real Property from the
Acquiring Company by quitclaim deed in full satisfaction of all amounts that the
Acquiring Company owes to Mr. Smith, without recourse to the Acquiring Company
on the part of Mr. Smith. This Agreement will be subject to no condition
precedent other than approval by the shareholders of the Acquiring Company.
6.11 Certificates. The Target shall have received a certificate or
certificates, executed on behalf of the Acquiring Company by its president,
chairman and chief financial officer to the effect that the conditions contained
in Sections 6.1, 6.2, 6.3, 6.4, 6.5 6.6, 6.7, 6.8 and 6.9 hereof have been
satisfied.
6.12 No Taxation. Neither the Target, the Acquiring Company, nor the
stockholders of the Target will recognize any gain or loss as a result of the
Transaction.
6.13 Offer to Target Company Shareholders. The Acquiring Company shall make
an offer to all Target Company shareholders for the Target Common Stock held by
such persons, not including persons who are not accredited investors or who are
otherwise subject to sanctions imposed by the National Association of Securities
Dealers, Inc., the Securities and Exchange Commission, or a state securities
agency of the nature that would require disclosure an that may preclude, or make
more difficult, the listing of the Acquiring Company on a stock exchange
following the completion of the Transaction.
Agreement and Plan of Reorganization Page 29
6.14 Legal Opinion. The Target shall have received a legal opinion from
counsel to the Acquiring Company, in form satisfactory to the Target, that:
(a) The Acquiring Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Colorado, with
corporate power to own its properties and to conduct its business.
(b) This Agreement and the documents delivered by the Acquiring
Company to complete the Transaction have been duly authorized by all requisite
corporate action by the Acquiring Company, and constitute the valid and binding
obligations of the Acquiring Company, enforceable against the Acquiring Company
in accordance with the terms of each document to which the Acquiring Company is
a party.
(c) The shares of the Series A Stock to be issued as the Total
Consideration upon the completion of the Transaction have been duly authorized
and, upon issuance, delivery, and the completion of the Transaction as described
herein, will be validly issued, fully paid and nonassessable.
(d) Any opinion required by Section 6.4, above.
6.15 Consents; Litigation. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations or terminations of
waiting periods imposed by any governmental entity, and all required third-party
consents, the failure to obtain which would have a material adverse effect on
the Acquiring Company, shall have been obtained. In addition, no preliminary or
permanent injunction or other order shall have been issued by any court or by
any governmental or regulatory agency, body or authority which prohibits the
completion of the Transaction and the transactions contemplated by this
Agreement and which is in effect at the Effective Date.
6.16 Form 8-K. The Acquiring Company shall have prepared, for filing
promptly after the Effective Date in accordance with the requirements of the
Securities and Exchange Commission, a current report on Form 8-K reporting the
Transaction pursuant to Item 2 thereof, and including the necessary financial
statements and other relevant and material information in form reasonably
satisfactory to the Target.
ARTICLE 7
Conditions Precedent to Obligations of
the Acquiring Company
---------------------
Except as may be waived by the Acquiring Company, the obligations of the
Acquiring Company to complete the transactions contemplated by this Agreement
shall be subject to the satisfaction on or before the Closing Date of each of
the following conditions:
Agreement and Plan of Reorganization Page 30
7.1 Compliance. The Target shall have, or shall have caused to be,
satisfied or complied with and performed in all material respects all terms,
covenants and conditions of this Agreement to be complied with or performed by
the Target on or before the Closing Date.
7.2 Representations and Warranties. All of the representations and
warranties made by the Target in this Agreement shall be true and correct in all
material respects at and as of the Closing Date with the same force and effect
as if such representations and warranties had been made at and as of the Closing
Date, except for changes permitted or contemplated by this Agreement or as
required by the investment banker for purposes of effectuating the private
placement.
7.3 Target Corporate Action. The Target shall have taken all steps
necessary to:
(a) Approve and file with the Secretary of State of Colorado amended
and restated articles of incorporation;
(b) Approve and implement amended and restated bylaws for the Target;
(c) Adopt such other resolutions as may be reasonably necessary or
appropriate to cure or clarify any previous actions taken by the Target or its
board of directors or officers;
(d) Provide to the Acquiring Company audited financial statements of
the Target that do not differ materially from the Financial Statements described
in Section 3.9, above; and
(e) Terminate, with the consent of each party thereto, each employment
agreement to which the Target is a party, effective as of the Effective Date
(subject to the approval of employment agreements by the Acquiring Company with
those persons on terms that are not materially different from their existing
employment agreements.
7.4 Section 14(f) Notification. The Target shall have provided the
information to the Acquiring Company reasonably necessary so that the Acquiring
Company can comply with the requirements of Section 14(f) of the Securities
Exchange Act of 1934.
7.5 Offer to Target Company Shareholders. The Acquiring Company shall have
made an offer to all Target Company shareholders for the Target Common Stock
held by such persons, not including persons who are not accredited investors or
who are otherwise subject to sanctions imposed by the National Association of
Securities Dealers, Inc., the Securities and Exchange Commission, or a state
securities agency of the nature that would require disclosure an that may
preclude, or make more difficult, the listing of the Acquiring Company on a
stock exchange following the completion of the Transaction.
Agreement and Plan of Reorganization Page 31
7.6 Accredited Investors; Disclosure; Investment Intent. Each of the
Target's stockholders, noteholders and warrant holders receiving any portion of
the Total Consideration will make the following representations to the Acquiring
Company (in addition to such other representations as the Acquiring Company may
deem necessary or appropriate in the circumstances):
(a) Such stockholder, noteholder and warrant holder is an accredited
investor as that term is defined in Section 2(a)(15) of the Securities Act of
1933, as amended, and in Rules 215 and 501(a) thereunder;
(b) Such stockholder, noteholder, and warrant holder is a resident of
the state of Colorado;
(c) Such stockholder, noteholder, and warrant holder is acquiring the
Series A Stock for investment only and not with a view to the further
distribution, resale or other transfer thereof;
(d) Such stockholder, noteholder, and warrant holder understands that
the Acquiring Company has not registered its Series A Stock under the Securities
Act of 1933 or any state law and the availability of an exemption from
registration depends upon, among other things, the bona fide nature of the
investment intent as expressed by such stockholder;
(e) Through their own due diligence, each such stockholder, noteholder,
and warrant holder is fully aware of the type of business, financial condition,
historical performance, and other factors affecting its ownership of an interest
in the Target and the Acquiring Company has further discussed the advisability
of such stockholder's participation in the Transaction with his or her
respective legal, financial, tax, investment, accounting, and other advisors to
the extent each stockholder determines such consultation to be necessary or
appropriate in the circumstances; and
(f) Each stockholder, noteholder, and warrant holder will represent
that he or she (directly or with the assistance of his or her advisors) has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the Transaction and the contemplated
investment in the Series A Stock and he or she is able to bear the economic
risks of such investment.
7.7 Certificates. The Acquiring Company shall have received a certificate
or certificates, executed on behalf of the Target by its president, chairman and
chief financial officer to the effect that the conditions contained in Sections
7.1, 7.2, 7.3, and 7.4, hereof have been satisfied.
7.8 No Taxation. Neither the Acquiring Company, the Target, nor the
stockholders of the Acquiring Company will recognize any gain or loss as a
result of the Transaction.
Agreement and Plan of Reorganization Page 32
7.9 Legal Opinion. The Acquiring Company shall have received a legal
opinion from counsel to the Target, in form satisfactory to the Acquiring
Company, that:
(a) The Target is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Colorado, with corporate power
to own its properties and to conduct its business.
(b) This Agreement and the documents delivered by the Target to
complete the Transaction have been duly authorized by all requisite corporate
action by the Target, and constitute the valid and binding obligations of the
Target, enforceable against the Target in accordance with the terms of each
document to which the Target is a party.
7.10 Consents; Litigation. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations or terminations of
waiting periods imposed by any governmental entity, and all required third-party
consents, the failure to obtain which would have a material adverse effect on
the Target, shall have been obtained. In addition, no preliminary or permanent
injunction or other order shall have been issued by any court or by any
governmental or regulatory agency, body or authority which prohibits the
completion of the Transaction and the transactions contemplated by this
Agreement and which is in effect at the Effective Date.
7.11 Form 8-K. The Target shall have provided the Acquiring Company the
information reasonably necessary to be included in the Form 8-K reporting the
completion of the Transaction promptly after the Effective Date in accordance
with the requirements of the Securities and Exchange Commission.
ARTICLE 8
Miscellaneous
-------------
8.1 Termination. In addition to the provisions regarding termination set
forth elsewhere herein, this Agreement and the transactions contemplated hereby
may be terminated at any time on or before the Closing Date:
(a) by mutual consent of Target and the Acquiring Company;
(b) by either of the Acquiring Company or the Target if the
transactions contemplated by this Agreement have not been completed by September
30, 2004, unless such failure of completion is due to the failure of the
terminating party to perform or observe the covenants, agreements, and
conditions hereof to be performed or observed by it at or before the Closing
Date; or
(c) by either the Target or the Acquiring Company if the transactions
contemplated hereby violate any nonappealable final order, decree, or judgment
of any court or governmental body or agency having competent jurisdiction.
Agreement and Plan of Reorganization Page 33
8.2 Expenses.
(a) Subject only to Section 6.7 hereof, each party shall pay its own
broker, legal, and accounting fees and such other expenses incurred by such
party in connection with the transactions described in this Agreement.
(b) Notwithstanding the foregoing, if any party shall breach any
material provision of this Agreement in any material respect, such party (the
"Breaching Party") will be liable to the other party (the "Non-Breaching Party")
for damages.
8.3 Entire Agreement. This Agreement and the schedules hereto contain the
complete agreement among the parties with respect to the transactions
contemplated hereby and supersede all prior agreements and understandings among
the parties with respect to such transactions. Section and other headings are
for reference purposes only and shall not affect the interpretation or
construction of this Agreement. The parties hereto have not made any
representation or warranty except as expressly set forth in this Agreement or in
any certificate or schedule delivered pursuant hereto. The obligations of any
party under any agreement executed pursuant to this Agreement shall not be
affected by this section.
8.4 Survival All representations, warranties, covenants and agreements of
the Target and the Acquiring Company shall survive the execution and delivery of
this Agreement and the Closing hereunder as provided in this Agreement
including, without limitation, the following:
Sections 3.20 and 4.9 No Broker
Article 8 General Indemnification
Section 5.5 Confidentiality
Section 5.7 Public announcement
Section 8.13 Remedies and Venue
Section 5.6 Further assurances
Section 8.2 Expenses
Section 8.7 Post-Closing Negative Covenant
as well as any agreement, representation, or warranty contained in any document
delivered or to be delivered by any party at the Closing. All representations
and warranties of the Target and the Acquiring Company contained in this
Agreement shall survive for the periods of the statute of limitations applicable
to breaches thereof.
8.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
8.6 Notices. All notices, demands, requests, or other communications that
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be sent by
Agreement and Plan of Reorganization Page 34
facsimile transmission, next-day courier or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or transmitted by
hand delivery, addressed as follows:
(a) If to the Target:
Lifeline Nutraceuticals Corporation
Suite 1750
6400 South Fiddler's Green Circle
Englewood, CO 80111
Attention: Bill Driscoll, CEO
Tel: 720-488-1711
Fax: 720-488-1722
with a copy (which shall not constitute notice) to:
Burns, Figa & Will, P.C.
Suite 1030
6400 South Fiddler's Green Circle
Englewood, CO 80111
Attn: Herrick K. Lidstone, Jr., Esq.
Tel: 303-796-2626
Fax: 720-493-9951
(b) If to the Acquiring Company:
With a copy (which shall not constitute notice) to:
Michael A. Littman, Esq.
7609 Ralston Road
Arvada, CO 80002
Tel: 303-422-8127
Fax:
Each party may designate by notice in writing a new address to which any
notice, demand, request, or communication may thereafter be so given, served, or
sent. Each notice, demand, request, or communication that is mailed, delivered,
or transmitted in the manner described above shall be deemed sufficiently given,
served, sent, and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt or the affidavit of
messenger being deemed conclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
Agreement and Plan of Reorganization Page 35
8.7 Post-Closing Negative Covenant. The Acquiring Company will not, during
the period ending twelve months after the Closing, complete a reverse stock
split of its outstanding common stock.
8.8 Successors; Assignments. This Agreement and the rights, interests, and
obligations hereunder shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, by operation of law or otherwise, by any of the parties hereto without
the prior written consent of the other.
8.9 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the substantive laws of the State of Colorado
without application of its conflicts of laws principles.
8.10 Waiver and Other Action. This Agreement may be amended, modified, or
supplemented only by a written instrument executed by the parties against which
enforcement of the amendment, modification or supplement is sought.
8.11 Severability. Each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
8.12 No Third Party Beneficiaries. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person,
firm or corporation other than the parties hereto and their stockholders, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement or result in such person, firm or corporation being deemed a third
party beneficiary of this Agreement, even if such person is specifically named
herein.
8.13 Mutual Contribution. The parties to this Agreement and their counsel
have mutually contributed to its drafting. Consequently, no provision of this
Agreement shall be construed against any party on the ground that such party
drafted the provision or caused it to be drafted or the provision contains a
covenant of such party.
8.14 Remedies and Venue. Any person having any rights under any provision
of this Agreement will be entitled to enforce such rights specifically, to
recover damages by reason of any breach of any provision of this Agreement, and
to exercise all other rights granted by law, which rights may be exercised
cumulatively and not alternatively. Jurisdiction and venue for the enforcement
of any rights or any other action hereunder, except arbitration, rests in the
Colorado district court for Arapahoe County, Colorado.
Agreement and Plan of Reorganization Page 36
8.15 Arbitration. Except for injunction proceedings to enforce the
provisions of Section 5.5, all claims arising out of or related to this
Agreement or breach thereof shall be submitted to final binding arbitration
pursuant to this Section 8.14. The arbitration shall be conducted in accordance
with the Colorado Uniform Arbitration Act. The arbitrators shall be required to
follow Colorado law in making an order. The arbitration shall be conducted in
Arapahoe County, Colorado. The panel of arbitrators shall consist of three
arbitrators. One arbitrator shall be appointed by the Target, one arbitrator
shall be appointed by the Acquiring Company (if prior to the Closing) or the
persons who were members of the Board of Directors of the Acquiring Company
immediately prior to the Effective Date (if after the Closing), and one
arbitrator shall be appointed by the two arbitrators so chosen. Each party shall
pay the costs and fees of an attorney the party engages to assist the party in
the arbitration and the arbitrator the party chooses. The Target and the
Acquiring Company shall each pay 50% of the costs and fees of the third
arbitrator.
8.16 Schedules. The following Schedules constitute a part of, and
incorporated into, this Agreement.
Schedule Description
--------------------
3.7A Holders of the Target's stock
3.7B Holders of Target Notes
3.7C Holders of Target Note Warrants
3.9 Target Financial Statements
3.13 Target Material Contracts
3.17 Target Employee Agreements
4.1a Form of Acquiring Company's Amended and Restated Articles
of Incorporation
4.1b Form of Acquiring Company's Amended and Restated Bylaws
4.9 Acquiring Company Financial Statements
4.13 Acquiring Company Material Contracts
4.19a Real Property
4.19b Leasehold Interests
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
- ------------------------------------------------------------ -------------------
YAAK RIVER RESOURCES, INC., LIFELINE NUTRACEUTICALS CORPORATION,
the Acquiring Company the Target
- ------------------------------------------------------------ -------------------
- ------------------------------------------------------------ -------------------
By: By:
- ------------------------------------------------------------ -------------------
Name Bill Driscoll, President
- ------------------------------------------------------------ -------------------
Title
- ------------------------------------------------------------ -------------------
Agreement and Plan of Reorganization Page 37
Schedule 3.7A
LIST OF THE SHAREHOLDERS OF LIFELINE NUTRACEUTICALS CORPORATION
As of August 31, 2004
- -----------------------------------------------------------------------
- ----------------------- ---------------- ------------------ -----------
Name, Address and Number of Shares
Tax ID Number Consideration Paid Date Issued
- ----------------------- ---------------- ------------------ -----------
William Driscoll 4,500,000 shares $2,250 8/2003
2,500,000 shares $2,500 5/2004
- ----------------------- ---------------- ------------------ -----------
Michael Barber 4,500,000 shares $2,250 8/2003
- ----------------------- ---------------- ------------------ -----------
Paul Myhill 1,000,000 shares $ 500 8/2003
3,500,000 shares $3,500 2/2004
1,350,000 shares $1,350 5/2004
- ----------------------- ---------------- ------------------ -----------
Christopher Micklatcher 50,000 shares $ 25 8/2003
100,000 shares $ 50 12/2003
550,000 shares $ 550 8/2004
- ----------------------- ---------------- ------------------ -----------
Kim Gannon 50,000 shares $ 25 8/2003
- ----------------------- ---------------- ------------------ -----------
Melva Hahn 50,000 shares $ 25 8/2003
- ----------------------- ---------------- ------------------ -----------
Joseph McCord 200,000 shares $ 200 5/2004
800,000 shares $ 800 7/2004
1,400,000 shares $1,400 8/2004
- ----------------------- ---------------- ------------------ -----------
George Betts 50,000 shares $ 50 5/2004
- ----------------------- ---------------- ------------------ -----------
Daniel Streets 200,000 shares $ 200 5/2004
300,000 shares $ 300 7/2004
2,000,000 shares $2,000 8/2004
- ----------------------- ---------------- ------------------ -----------
Steve Parkinson 250,000 shares $ 250 8/2003
- ----------------------- ---------------- ------------------ -----------
John Bradley 250,000 shares $ 250 8/2004
- ----------------------- ---------------- ------------------ -----------
Will Stevenson 50,000 shares $ 50 8/2004
- ----------------------- ---------------- ------------------ -----------
Agreement and Plan of Reorganization Page 38
Total shares 23,650,000
Schedule 3.7B
Holders of Target Convertible Loans
- ------------------ --------- -------- -------------------- ------- --------
Name, Address Interest
and Tax ID Original ($ accrued through
Number Amount Date 8/31/2004) Term Shares
- ------------------ --------- -------- -------------------- ------- --------
Barbara M. Hadley $50,000 9/9/03 10% 1 year 100,000
($4,904)
- ------------------ --------- -------- -------------------- ------- --------
Robert Wolta $60,000 12/10/03 10% 1 year 120,000
($4,356)
- ------------------ --------- -------- -------------------- ------- --------
Robert Wolta $35,000 4/7/04 10% 1 year 70,000
($1,400)
- ------------------ --------- -------- -------------------- ------- --------
Tim Colleran $25,000 3/2/04 10% 1 year 50,000
($1,034)
- ------------------ --------- -------- -------------------- ------- --------
Tim/Lisa Bates $20,000 4/24/04 10% 1 year 40,000
($707)
- ------------------ --------- -------- -------------------- ------- --------
Daniel McGregor $50,000 4/28/04 10% 1 year 100,000
($1,712)
- ------------------ --------- -------- -------------------- ------- --------
Agreement and Plan of Reorganization Page 39
Schedule 3.7C Holders of Target Bridge Loans
- ------------------------- -------- -------- --------------------- ------ -----------
Name, Address and Tax Interest
ID Number Original ($ accrued through
Amount Date 8/31/2004) Term Shares
(estimated)
- ------------------------- -------- -------- --------------------- ------ -----------
Altis Accredited $50,000 6/9/04 10% 1 year 50,000
Capital ($1,137)
- ------------------------- -------- -------- --------------------- ------ -----------
Daniel McGregor $50,000 6/16/04 10% 1 year 50,000
($1,041)
- ------------------------- -------- -------- --------------------- ------ -----------
Carol H. Streets - Roth $50,000 6/14/04 10% 1 year 50,000
IRA ($1,068)
- ------------------------- -------- -------- --------------------- ------ -----------
Paul L. Mista $25,000 7/23/04 10% 1 year 25,000
($267)
- ------------------------- -------- -------- --------------------- ------ -----------
Kelsey Ellen Dihle $12,500 8/3/04 10% 1 year 12,500
Irrevocable Trust ($99)
- ------------------------- -------- -------- --------------------- ------ -----------
Joshua Martin Dihle $12,500 8/3/04 10% 1 year 12,500
Irrevocable Trust ($99)
- ------------------------- -------- -------- --------------------- ------ -----------
Philip Peterson $25,000 8/17/04 10% 1 year 25,000
($96)
- ------------------------- -------- -------- --------------------- ------ -----------
Paul L. Mista $25,000 8/31/04 10% 1 year 25,000
($7)
- ------------------------- -------- -------- --------------------- ------ -----------
Bridge Loan holders will receive a number of warrants equivalent to their loan
amount divided by the share price in the private placement. For example a loan
of $50,000 divided by a per share offering price of $1.00 would yield 50,000
warrants.
Agreement and Plan of Reorganization Page 40
