Exhibit 10.6
INDEMNIFICATION AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is
being entered into by and between CalbaTech, Inc., a Nevada
corporation ("CTI" or "CalbaTech"), Molecularware, Inc., a Delaware
corporation ("MW" or "Acquired Corporation") and the shareholders of
MW that shall agree to exchange their stockholdings in accordance
with the terms hereof. This Agreement shall become effective as of
the latter date written in conjunction with the signatures affixed
hereto (the "Effective Date").
WHEREAS, CTI is a corporation organized and existing under the
laws of the State of Nevada, with its principal business office
located at 00000 Xxx Xxxxxx, Xxxxx 000, Xxxxx 000, Xxxxxx, XX 00000,
and MW is a corporation organized and existing under the laws of the
State of Delaware, with its principal business office located at Xxx
Xxxxxxxx, 0xx Xxxxx, Xxxxxxxxx, XX 00000. CTI and MW are collectively
referred to herein as the "Constituent Corporations";
WHEREAS, the authorized capital stock of CTI consists of two
hundred million (200,000,000) shares of common stock, par value of
one tenth of one cent ($0.001) per share, of which there are
approximately eleven million four hundred thousand (11,400,000)
shares are presently issued and outstanding.
WHEREAS, the authorized capital stock of MW consists of thirty
five million (35,000,000) shares of common stock, par value of one
tenth of one cent ($0.001) per share, of which twelve million nine
hundred ninety eight thousand and four hundred (12,998,400) shares
are presently issued and outstanding and held by the shareholders of
MW as set forth on Schedule 1 attached hereto.
WHEREAS, pursuant to the terms of this Agreement, CTI will
acquire all of the issued and outstanding shares of MW's capital
stock from the shareholders of MW in exchange for 300,000 shares of
CTI's common stock in a transaction intended to be a tax-free
reorganization under Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and the parties intend that this
Agreement shall constitute a plan of reorganization for the purposes
of Section 368 of the Code, such that immediately following such
exchange, MW will become a wholly-owned subsidiary of CTI. In
addition, CTI will issue certain debentures for the benefit of MW to
satisfy existing liabilities of MW that are described on Schedule 2
attached hereto. The foregoing exchange and issuance, together with
the other transactions contemplated herein, are collectively referred
to herein as the "Transaction."
WHEREAS, the respective Boards of Directors of CTI and MW, as
well as their respective shareholders, where necessary, deem it
desirable and in their best interests that the Constituent
Corporations enter into this Agreement and consummate the Transaction
pursuant to the terms and conditions contained herein; and
NOW, THEREFORE, in consideration of the promises and mutual
agreements, provisions and covenants herein contained, the receipt
and sufficiency of which is hereby acknowledged and agreed, the
parties agree as follows:
On May 31, 2003, or on such other date that the parties shall
agree (the "Closing"):
1. MW shareholders will transfer all MW stock to CTI.
2. CTI will issue three hundred thousand (300,000) shares (the
"Shares") of its common stock to the MW shareholders pro rata
in accordance with their respective percentage ownership of
the MW stock. The exact number of Shares to be issued to each
MW shareholder is set forth next to such shareholder's name on
Schedule 1 attached hereto. No fractional shares shall be issued.
3. CTI will make available convertible debentures having an
aggregate principal amount of six hundred thousand dollars
($600,000) (the "Convertible Debenture") to the management of
MW for use in resolving the liabilities described on Schedule
2. The Convertible Debentures shall provide for (a) a
maturity date of the second anniversary of the closing, (b) an
interest rate of twelve percent (12%), compounded quarterly,
and (c) the right to convert (exercisable at the holder's
option at any time within 30 days following the effectiveness
of a registration statement filed with respect to the shares
of CTI's common stock into which the Convertible Debentures
are convertible) the outstanding principal balance plus all
accrued interest into common shares of CTI at a discounted
rate equal to eighty-percent (80%) of the price of CTI's
common shares at the time of conversion, it being understood
and agreed that the right to convert is in lieu of the right
to receive principal and interest. Each Convertible Debenture
shall be in the form attached hereto as Schedule 3.
4. MW will, either at Closing or within ninety (90) days
thereafter, confirm in writing to CTI that all of the
liabilities described on Schedule 2 have been satisfied and
are no longer outstanding or have otherwise been settled with
the Convertible Debentures; and
5. CTI and MW will agree upon an operating budget for MW covering
the next thirteen (13) month period.
ARTICLE I
EXCHANGE OF INTEREST
1. Shareholder Approval.
The Closing is contingent upon, among other things, the approval
of the Transaction by the shareholders of MW. If less than 80% of
all of the shareholders of MW shall fail to approve the Transaction
by executing consents in form and substance satisfactory to CTI, the
parties shall have the right to terminate this Agreement without penalty.
2. Filings After Shareholder Approval.
As soon as practicable after all conditions to the obligations
of the parties to this Agreement to effect the exchange of interest
shall have been satisfied or otherwise waived in writing, CTI shall
file with the Nevada Secretary of State the documents, where
necessary or required by Nevada Law, and take such other and future
actions as may be required by Nevada law to make the exchange of
interest effective. Notwithstanding any duties imposed hereby, the
Transaction shall become effective upon Closing.
ARTICLE II
NAME AND CONTINUED CORPORATE EXISTENCE
OF ACQUIRED CORPORATION
The corporate name of MW, the Acquired Corporation, whose
corporate existence is to survive this exchange of interest and
continue thereafter, and its identity, existence, purposes, powers,
objects, franchises, rights and immunities shall continue unaffected
and unimpaired by the exchange of interest.
ARTICLE III
DIRECTORS AND OFFICERS
OF ACQUIRED CORPORATION
1. Directors.
Upon Closing, CTI agrees to take such corporate actions as are
necessary to create a board of directors of MW consisting of five
persons, and CTI agrees to vote its shares of MW stock to elect (a)
at least two of such directors as instructed by MW's pre-closing
board of directors, and (b) at least one other director from a pool
of third-party industry experts mutually agreed upon by CTI and MW's
pre-closing board of directors. CTI further agrees to vote its
shares as described in the immediately preceding sentence for at
least one year following the Closing and to refrain from taking any
actions to either remove the directors elected pursuant to such
sentence or to increase or decrease the number of members of the MW
board of directors.
2. Officers.
The current officers of the newly formed MW Nevada, into which,
post-Transaction, MW will be merged, shall resign and the Board of
Directors, as provided for in Article III, Section 1, above, shall
appoint the new officers of MW Nevada. Notwithstanding the forgoing,
Xxxxxxx Xxxxx shall be appointed Chief Executive Officer ("CEO") of
MW and unless earlier removed in accordance with the provisions of
his employment agreement with MW, shall remain as CEO for a period of
not less than one-year from the date of the Closing.
ARTICLE IV
TERMS OF THE EXCHANGE OF SHARES
At Closing, CTI will issue the Shares to MW's shareholders in
the respective amounts set forth on Schedule 1, and MW and its
shareholders shall take such steps as are necessary to transfer all
shares of MW's capital stock to CTI. Such number of shares assume the
consummation of a planned 14-for-1 reverse stock split of CTI common
stock at an imputed per share valuation of no less than two dollars
($2.00) per share. The Shares issued shall be unregistered shares
and the resale or other transfer thereof shall be subject to the
restrictions set forth in SEC Rule 144. CTI agrees, at its own
expense, to use its reasonable best efforts to file and obtain the
effectiveness of a registration statement with respect to the Shares
within twelve (12) months following the Closing. Holders of the
Shares shall also have standard piggy-back registration rights, which
means, among other things, that the Shares will be included for
registration in the first registration statement filed by CTI after
the Closing (other than the registration statement referred to in
Article V). The Shares will, in any event, and be subject to
ordinary and customary xxxxxxx xxxxxxx policies of CalbaTech.
ARTICLE V
OTHER TERMS OF PAYMENT
CTI also agrees to make available the Convertible Debentures at
Closing. CTI agrees, at its own expense, to use its reasonable best
efforts to file and obtain the effectiveness of a registration
statement with respect to the shares of common stock into which the
Convertible Debentures are convertible prior to Closing or as soon
thereafter as practicable.
Convertible Debentures will be issued by CTI to satisfy the pre-
existing liabilities of MW set forth on Schedule 2 in accordance with
the instructions received from MW's pre-closing board of directors,
and MW shall use its best efforts to satisfy such liabilities within
90 days of the effectiveness of the registration statement referenced
in the immediately preceding paragraph. Notwithstanding the
foregoing, any Convertible Debentures remaining after the end of such
90 day period shall be issued by CTI as follows:
(1) to and in the name of MW in an aggregate amount equal
to the aggregate amount of liabilities listed on Schedule 2 that
have not then been satisfied, such Convertible Debentures to be
sold as soon as practicable by MW, with the proceeds of such
sale to be used solely for the purpose of spaying such
unsatisfied liabilities; and
(2) as to the remaining Convertible Debentures, in
accordance with further instructions received from MW's pre-
closing board of directors.
ARTICLE VI
ASSETS AND LIABILITIES
Pursuant to, and in connection with the Article IV and Article V
above, it is understood and agreed that MW is currently, and will
continue to negotiate and settle any and all outstanding liabilities
of MW such that, upon Closing, or within ninety (90) days thereafter
if not so extended in writing by the Constituent Corporations, MW
will have settled all outstanding liabilities or will have negotiated
to an agreement with each creditor a payment plan to settle each and
every liability of MW and will present to CTI a balance sheet as of
Closing that will: either (i) be without liabilities at the time of
Closing; or (ii) demonstrate settlement of such liabilities within
said ninety (90) day cure period. It is understood and agreed that
MW is an ongoing business and that obligations will continue to arise
on an ongoing basis and that the balance sheet as presented to CTI is
static and only intended to provide evidence that all outstanding
debts that were inexistence at the time of the Closing have been
satisfied. On the Closing, all property, real, personal and mixed,
and all debts due to either of the Constituent Corporations on
whatever account, as well for stock subscriptions as all other choses
in action, and all and every other interest of or belonging to either
of Constituent Corporations shall remain with each of the Constituent
Corporations, and the title to any real estate or any interest,
whether vested by deed or otherwise, in either of the Constituent
Corporations shall not revert or be in any way impaired by reason of
the exchange. It is understood and agreed to by MW that CTI is not,
under any circumstances, assuming the existing debts, liabilities
and/or obligations of MW. The parties respectively agree that from
time to time, when requested by either party or by its successors or
assigns, they will execute and deliver or cause to be executed and
delivered all deeds and instruments, and will take or cause to be
taken all further or other action, as either party may deem necessary
or desirable in order to vest in and confirm to each of the
respective parties or its successors or assigns title to and
possession of all the property and rights and otherwise carry out the
intent and purposes of this Agreement.
ARTICLE VII
CONDUCT OF BUSINESS BY MW
Prior to Closing, MW shall conduct its business in its usual and
ordinary manner, and shall not enter into any transaction other than
in the usual and ordinary course of such business. It is understood
and agreed to that MW shall continue to seek acquisitions, both
tangible and intangible, as well as seek other sources of debt or
equity funding that are in the best interest of MW, and as such,
these activities are considered within its usual and ordinary course
of business. Without limiting the generality of the above, MW shall
not, except as otherwise consented to in writing by CTI or as
otherwise provided in this Agreement:
1. Amend its certificate of incorporation or its bylaws;
2. Declare or pay any dividend or make any other distribution upon
or with respect to its capital stock;
3. Repurchase any of its outstanding stock or by any other means
transfer any of its funds to its shareholders either selectively or
rateably, in return for value or otherwise, except as salary or other
compensation in the ordinary or normal course of business;
4. Undertake or incur any obligations or liabilities except current
obligations or liabilities in the ordinary course of business and
except for liabilities for fees and expenses in connection with the
negotiation and consummation of the Transaction in amounts to be
determined after the Effective Date;
5. Mortgage, pledge, subject to lien or otherwise encumber any
realty or any tangible or intangible personal property;
6. Sell, assign or otherwise transfer any tangible assets of
whatever kind, or cancel any claims, except in the ordinary course of
business;
7. Sell, assign, or otherwise transfer any trademark, trade name,
patent or other intangible asset;
8. Default in performance of any material provision of any material
contract or other obligation; or
9. Waive any right of any substantial value.
ARTICLE VIII
WARRANTIES OF THE CONSTITUENT CORPORATIONS
1. Representations and Warranties of MW.
MW covenants, represents and warrants to CTI that:
a. It is, on the date of this Agreement and will be up to and
including the Closing: (i) a corporation duly organized and existing
and in good standing under the laws of the jurisdiction of the State
of Delaware; and (ii) duly authorized under its articles, and under
applicable laws, to engage in the business carried on by it;
b. Its Board of Directors has and its shareholders have authorized
and approved the execution and delivery of this Agreement, and the
performance of the Transaction contemplated by this Agreement;
c. To the best of MW's knowledge, it has complied with, and is not
in violation of any applicable Federal, State, or local statutes,
laws, and regulations affecting its properties or the operation of
its business;
d. Except as contemplated by this Agreement and the preceding
Letter of Intent dated April 23th, 2003, other than what has already
been disclosed to CTI, MW is not involved as a defendant or plaintiff
in any suit, action, arbitration, or legal, administrative or other
proceeding, which to its best knowledge, would affect the company or
its business, assets, or financial condition in a negative manner;
or, governmental investigation which is pending; to the best of its
knowledge, threatened against or affecting the company or its
business assets or financial condition; and is not in default with
respect to any order, writ, injunction or decree of any Federal,
State, local/foreign court, department, agency, or instrumentality
applicable to it;
e. Except as contemplated by this Agreement and the preceding
Letter of Intent dated April 23th, 2003, the execution and delivery of
this Agreement and its performance in the time and manner
contemplated will not cause, constitute, or conflict with, or result
in: (i) a breach or violation of any provisions of or constitute a
default under any license, mortgage, article of incorporation, bylaw,
other similar agreement to which the company is a party, or by which
it may be bound, nor will any consents or authorizations of any party
other than those required; (ii) any event that would permit any party
to any agreement or instrument to terminate it or to accelerate the
maturity of any indebtedness or other obligation of the company; or,
(iii) an event that would result in the creation or imposition of any
lien, charge, encumbrance on any asset;
f. All federal, state and local tax returns required to be filed by
it on or before the Closing will have been filed, and all taxes shown
to be required to be paid on or before the Closing will have been
paid;
g. All leases now held by it are now and will be on the Closing in
good standing and not voidable or void by reason of any default
whatsoever; and
h. MW has not been represented by any financial advisor other than
Mr. Xxxx Xxxxxxx in connection with the transaction contemplated.
2. Representations and Warranties of CTI.
CTI covenants, represents and warrants to MW that:
a. It is on the date of this Agreement, and will be on Closing
Date: (i) a corporation duly organized and existing and in good
standing under the laws of the jurisdiction of the State of Nevada;
and (ii) duly authorized under its articles, and under applicable
laws, to engage in the business carried on by it;
b. Its Board of Directors has authorized and approved the execution
and delivery of this Agreement, and the performance of the
Transaction contemplated by this Agreement;
c. It has complied with, and is not in violation of any applicable
Federal, State, or local statutes, laws, and regulations affecting
its properties or the operation of its business.
d. It is not involved as a defendant or plaintiff in any suit,
action, arbitration, or legal, administrative or other proceeding,
which to its best knowledge, would affect the company or its
business, assets, or financial condition in a negative manner; or,
governmental investigation which is pending; to the best of its
knowledge, threatened against or affecting the company or its
business assets or financial condition; and is not in default with
respect to any order, writ, injunction or decree of any Federal,
State, local/foreign court, department, agency, or instrumentality
applicable to it;
e. The execution and delivery of this Agreement and its performance
in the time and manner contemplated will not cause, constitute, or
conflict with, or result in any of the following: (1) a breach or
violation of any provisions of or constitute a default under any
license, indenture, mortgage instrument, article of incorporation,
bylaw, other agreement or instrument to which the company is a party,
or by which it may be bound, nor will any consents or authorizations
of any party other than those required, (2) any event that would
permit any party to any agreement or instrument to terminate it or to
accelerate the maturity of any indebtedness or other obligation of
the company, or, (3) an event that would result in the creation or
imposition of any lien, charge, encumbrance on any asset;
f. It is a fully reporting company under the Securities Exchange
Act of 1934, and is current in all its reporting requirements; and
g. CTI's common stock is listed and trading on the Over the Counter
Bulletin Board (under the trading symbol "CLBE") and no restrictions
have been imposed on the trading of these shares by the National
Association of Securities Dealers, Inc. or any other regulatory body.
ARTICLE IX
CONSUMMATION OF EXCHANGE
If the exchange contemplated is completed, all expenses incurred
in consummating the plan of exchange shall, except as otherwise
agreed in writing between the Constituent Corporations, be borne by
the party incurring the expense.
ARTICLE X
MISCELLANEOUS
1. Access to Books and Records.
MW shall, before Closing, afford to the officers and authorized
representatives of CTI free and full access to its books and records,
and the officers of MW will furnish CTI with financial and operating
data and other information as to the business and properties of MW as
CTI shall from time to time reasonably request. CTI shall, before
Closing, afford to the officers and authorized representatives of MW
free and full access to its books and records, and the officers of
CTI will furnish MW with financial and operating data and other
information as to the business and properties of CTI as MW shall from
time to time reasonably request. CTI and MW agree that, unless and
until the merger contemplated by this Agreement has been consummated,
CTI and MW and their officers and representatives will hold in strict
confidence all data and information obtained from one another as long
as it is not in the public domain, and if the merger provided for is
not consummated as contemplated, CTI and MW will each return to the
other party all data as the other party may reasonably request.
2. Rights Cumulative; Waivers.
The rights of each of the parties under this Agreement are
cumulative. The rights of each of the parties hereunder shall not be
capable of being waived or varied other than by an express waiver or
variation in writing. Any failure to exercise or any delay in
exercising any of such rights shall not operate as a waiver or
variation of that or any other such right. Any defective or partial
exercise of any of such rights shall not preclude any other or
further exercise of that or any other such right. No act or course
of conduct or negotiation on the part of any party shall in any way
preclude such party from exercising any such right or constitute a
suspension or any variation of any such right.
3. Benefit; Successors Bound.
This Agreement and the terms, covenants, conditions, provisions,
obligations, undertakings, rights, and benefits hereof, shall be
binding upon, and shall inure to the benefit of, the undersigned
parties and their heirs, executors, administrators, representatives,
successors, and permitted assigns.
4. Entire Agreement.
This Agreement contains the entire agreement between the parties
with respect to the subject matter hereof. There are no promises,
agreements, conditions, undertakings, understandings, warranties,
covenants or representations, oral or written, express or implied,
between them with respect to this Agreement or the matters described
in this Agreement, except as set forth in this Agreement. Any such
negotiations, promises, or understandings shall not be used to
interpret or constitute this Agreement.
5. Assignment.
Neither this Agreement nor any other benefit to accrue hereunder
shall be assigned or transferred by either party, either in whole or
in part, without the written consent of the other party, and any
purported assignment in violation hereof shall be void.
6. Amendment.
This Agreement may be amended only by an instrument in writing
executed by all the parties hereto.
7. Severability.
Each part of this Agreement is intended to be severable. In the
event that any provision of this Agreement is found by any court or
other authority of competent jurisdiction to be illegal or
unenforceable, such provision shall be severed or modified to the
extent necessary to render it enforceable and as so severed or
modified, this Agreement shall continue in full force and effect.
8. Section Headings.
The Section headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9. Construction.
Unless the context otherwise requires, when used herein, the
singular shall be deemed to include the plural, the plural shall be
deemed to include each of the singular, and pronouns of one or no
gender shall be deemed to include the equivalent pronoun of the other
or no gender.
10. Further Assurances.
In addition to the instruments and documents to be made,
executed and delivered pursuant to this Agreement, the parties hereto
agree to make, execute and deliver or cause to be made, executed and
delivered, to the requesting party such other instruments and to take
such other actions as the requesting party may reasonably require to
carry out the terms of this Agreement and the transactions
contemplated hereby.
That said, CTI shall produce, prior to the Closing or on such date as
the Parties shall agree (but no later than July 15th, 2003),
management contracts providing for incentive compensation consistent
with the terms outlined in the previously executed Letter of Intent
dated April 23rd, 2003 between the Constituent Corporations. In the
event that the CEO of MW is terminated after the closing but prior to
the signing of an agreeable management contract, that executive shall
receive severance equal to one hundred and seventy five thousand
dollars ($175,000).
11. Notices.
Any notice which is required or desired under this Agreement
shall be given in writing and may be sent by personal delivery or by
mail by either the United States mail, postage prepaid, or by Federal
Express or similar generally recognized overnight carrier to the
Constituent Corporations at their respective addresses set forth in
the recitals to this Agreement, and to MW's shareholders at their
respective addresses set forth on Schedule 1, or to such other
address as a party may communicate in writing to the other parties.
12. Arbitration, Venue, Governing Law.
This agreement shall be deemed to be made, governed by,
interpreted under and construed in all respects in accordance with
the commercial rules of Judicial Arbitration and Mediation Service
("JAMS"). This chosen jurisdiction is irrespective of the country or
place of domicile or residence of either party. In the event of
controversy arising out of the interpretation, construction,
performance or breach of this agreement, the parties hereby consent
to adjudication under the commercial rules of JAMS. Said venue of
the arbitration shall be in Orange County, California. Judgment on
the award rendered by the arbitrator may be entered in any federal or
state court in Orange County, California. The Laws of the State of
California shall govern all disputes regarding this matter. Any
provision herein which is later determined to be in violation of any
such laws shall be eliminated from the terms of this Agreement, and
the remainder of this Agreement shall continue in full force and effect.
13. Consents.
The person signing this Agreement on behalf of each party hereby
represents and warrants that he has the necessary power, consent and
authority to execute and deliver this Agreement on behalf of such party.
14. Execution in Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original and all of which together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.
CTI: MW:
Dated:________________________ Dated:_______________________
By:________________________________ By:___________________________
Xxxxx XxXxxxx, Chief Executive Officer Xxxxxxx Xxxxx, Chief Executive
Officer
