AGREEMENT AND PLAN OF MERGER BY AND AMONG SMI PRODUCTS, INC., NILE THERAPEUTICS, INC. AND NILE MERGER SUB, INC.
EXHIBIT
2.1
AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
SMI
PRODUCTS, INC.,
NILE
THERAPEUTICS, INC.
AND
NILE
MERGER SUB, INC.
This
AGREEMENT AND PLAN OF MERGER (this “Agreement”)
is
made and entered into as of August 15, 2007, among SMI Products, Inc., a
Delaware corporation (“Parent”),
Nile
Therapeutics, Inc., a Delaware corporation (“Nile”),
and
Nile Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary
of
Parent (“Merger
Sub”).
RECITALS
A. Upon
the
terms and subject to the conditions of this Agreement and in accordance with
the
Delaware General Corporation Law (“DGCL”),
Parent, Nile and Merger Sub intend to enter into a business combination
transaction.
B. The
Board
of Directors of Nile (i) has determined that the Merger (as defined in Section
1.1 below) is consistent with and in furtherance of the long-term business
strategy of Nile and fair to, and in the best interests of, Nile and its
stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement, (iii) has adopted a resolution
declaring the Merger advisable, and (iv) has determined to recommend that the
stockholders of Nile adopt this Agreement.
C. The
Board
of Directors of Parent (i) has determined that the Merger is consistent with
and
in furtherance of the long-term business strategy of Parent and fair to, and
in
the best interests of, Parent and its stockholders, (ii) has approved this
Agreement, the Merger and the other transactions contemplated by this Agreement,
(iii) has adopted a resolution declaring the Merger advisable, and (iv) has
approved the issuance of shares of Parent Common Stock (as defined in Section
1.6(a)below) pursuant to the Merger (the “Share
Issuance”).
D. The
Board
of Directors of Merger Sub (i) has determined that the Merger is consistent
with
and in furtherance of the long-term business strategy of Merger Sub, and fair
to
and in the best interests of, Merger Sub and its stockholder, (ii) has approved
this Agreement, the Merger and the other transactions contemplated by this
Agreement, (iii) has adopted a resolution declaring the Merger advisable, and
(iv) has determined to recommend that the sole stockholder of Merger Sub adopt
this Agreement.
E. Prior
to
and as a condition to the Closing (as defined in Section 1.2 below), Nile shall
have raised a minimum of $15 million through the issuance of shares of Nile
Common Stock (as defined in Section 1.6 below) and related options and warrants
to purchase Nile Common Stock (the “Financing”).
NOW,
THEREFORE, in consideration of the covenants, promises and representations
set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE
I
THE
MERGER
1.1. The
Merger.
At the
Effective Time (as defined in Section 1.2 hereof) and subject to and upon the
terms and conditions of this Agreement and the applicable provisions of the
DGCL, Merger Sub shall be merged with and into Nile (the “Merger”),
the
separate corporate existence of Merger Sub shall cease and Nile shall continue
as the surviving corporation and shall become a wholly-owned subsidiary of
Parent. The surviving corporation after the Merger is sometimes referred to
hereinafter as the “Surviving
Corporation.”
1.2. Effective
Time.
Unless
this Agreement is earlier terminated pursuant to Article VII hereof, the closing
of the Merger and the other transactions contemplated by this Agreement (the
“Closing”)
will
take place at the offices of Parent’s counsel, at a time and date to be
specified by the parties, but in no event later than two (2) business days
following satisfaction or waiver of the conditions set forth in Article VI
hereof. The date upon which the Closing actually occurs is herein referred
to as
the “Closing
Date.”
On
the
Closing Date, the parties hereto shall cause the Merger to be consummated by
filing a Certificate of Merger in the form attached as Exhibit
A
hereto
or like instrument (a “Certificate
of Merger”)
with
the Secretary of State of the State of Delaware, in accordance with the relevant
provisions of the DGCL (the time at which the Merger has become fully effective
(or such later time as may be agreed in writing by Nile and specified in the
Certificate of Merger) is referred to herein as the “Effective
Time”).
1.3. Effect
of the Merger.
(a) At
the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, except as provided herein, all the
property, rights, privileges, powers and franchises of Nile and Merger Sub
shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
Nile
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
(b) Prior
to
or at the Effective Time, the properties and assets of Parent and Merger Sub
will be free and clear of any and all encumbrances, charges, claims, equitable
interests, liens, options, pledges, security interests, mortgages, rights of
first refusal or restrictions of any kind and nature (collectively, the
“Encumbrances”),
except for such liabilities, accounts payable, debts, adverse claims, duties,
responsibilities and obligations of every kind or nature, whether accrued or
unaccrued, known or unknown, direct or indirect, absolute, contingent,
liquidated or unliquidated and whether arising under, pursuant to or in
connection with any contract, tort, strict liability or otherwise (collectively
the “Liabilities”)
of
Parent which are described in Sections 3.5(b) and 3.7 hereof.
1.4. Certificates
of Incorporation; Bylaws.
From
and after the Effective Time and until further amended in accordance with
applicable law, (i) the Certificate of Incorporation of Nile as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, and (ii) the Bylaws of Nile as
in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation.
1.5. Nile
Directors and Officers.
(a) Unless
otherwise determined by Nile prior to the Effective Time, the directors of
Nile
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation at and after the Effective Time, each to hold the office of a
director of the Surviving Corporation in accordance with the provisions of
the
DGCL and the Certificate of Incorporation and Bylaws of the Surviving
Corporation until their successors are duly elected and qualified.
(b) Unless
otherwise determined by Nile prior to the Effective Time, the officers of Nile
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation at and after the Effective Time, each to hold office in accordance
with the provisions of the Bylaws of the Surviving Corporation.
1.6. Effect
on Capital Stock.
Subject
to the terms and conditions of this Agreement, at the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Nile and Merger
Sub
or the holders of any of the following securities, the following shall
occur:
(a) Conversion
of Nile Capital Stock.
At the
Effective Time, the Parent shall issue (or reserve for issuance upon exercise
or
conversion of Nile Convertible Securities (as defined below)) an aggregate
of
23,750,000 shares of common stock of Parent, par value $0.001 per share (the
“Parent Common Stock”) to the holders of Nile Common Stock on a Fully Diluted
Basis (as defined below) (the “Merger
Consideration”)
(See
Capitalization Schedule attached hereto as Schedule 2.6). Each share of common
stock, par value $0.001 per share, of Nile (the “Nile
Common Stock”)
issued
and outstanding immediately prior to the Effective Time (other than Dissenting
Shares (as defined in Section 1.10 below)) will be automatically converted
(subject to Section 1.6(d)), into a number of shares of Parent Common Stock
determined by multiplying each such share of Nile Common Stock by the quotient
determined by dividing (x) 23,750,000 by (y) the aggregate number of shares
of
Nile Common Stock issued and outstanding immediately prior to the Effective
Time, on a Fully Diluted Basis (“Nile
Convertible Securities”)
(the
“Exchange
Ratio”),
such
aggregate shares of Parent Common Stock being referred to in this Agreement
as
the “Merger
Consideration”.
If any
shares of Nile Common Stock outstanding immediately prior to the Effective
Time
are unvested or are subject to a repurchase option, risk of forfeiture or other
condition under any applicable restricted stock purchase agreement or other
agreement with Nile, then the shares of Parent Common Stock issued in exchange
for such shares of Nile Common Stock will also be unvested and subject to the
same repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Common Stock may accordingly
be
marked with appropriate legends. For
purposes of this Agreement “Fully Diluted Basis” shall mean the number of shares
of Common Stock that would be outstanding upon the conversion of all outstanding
shares of preferred stock of Nile outstanding on the date of the Closing, plus
the shares of Common Stock issuable upon conversion or exercise, as the case
may
be, of all securities of Nile convertible into, exercisable for, or exchangeable
for, directly or indirectly, shares of Nile Common Stock, that are currently
exercisable by the holder thereof or which will become exercisable within 90
days of the date of the Closing.
(b) Nile
Stock Options.
At the
Effective Time, the Nile Therapeutics, Inc. 2005 Incentive Stock Plan ( the
“Nile
Option Plan”),
including all options to purchase Nile Common Stock then outstanding thereunder
or otherwise, shall be assumed by Parent in accordance with Section 5.5(a)
hereof.
(c) Nile
Warrants.
At the
Effective Time, all warrants to purchase Nile Common Stock then outstanding
shall be assumed by Parent, and shall become exercisable for shares of Parent
Common Stock in accordance with Section 5.5(b) hereof.
(d) Adjustments
to Merger Consideration.
Except
as described in Section 0, the Merger Consideration shall be adjusted to reflect
appropriately the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into or
exercisable or exchangeable for Parent Common Stock or Nile Common Stock),
reorganization, recapitalization, reclassification, combination, exchange of
shares or other like change with respect to Parent Common Stock or Nile Common
Stock occurring or having a record date on or after the date hereof and prior
to
the Effective Time.
(e) Fractional
Shares.
No
fraction of a share of Parent Common Stock will be issued by virtue of the
Merger. In lieu thereof any fractional share will be rounded to the nearest
whole share of Parent Common Stock (with 0.5 being rounded up).
1.7
Registration
Rights.
The
Parent shall include in the registration statement that it anticipates
filing with the SEC on Form ▇-▇, ▇▇-▇, or any another appropriate form in
accordance herewith, in the sole discretion of the Parent (the "Registration
Statement"),
that
includes the shares sold in the Private Placement that Nile contemplates
consummating prior to the Closing Date, the shares of each of the stockholders
set forth
on
Schedule 1.7 hereto (the "Parent
Stockholder Shares,"
and
each a “Parent
Stockholder”)
and
any of their permitted lawful transferees. If at any time following the
Closing,
the Parent shall determine to prepare and file with the SEC a registration
statement relating
to an offering for its own account or the account of others under the Securities
Act of any
of
its equity securities (a "Subsequent
Registration Statement"),
other
than on Form S-4 or Form
S-8
(each as promulgated under the Securities Act), and the Parent Stockholder
Shares are not
at
such time covered by an effective registration statement permitting their
resale, then the Parent shall include in the Subsequent Registration Statement
the Parent Stockholder Shares, unless
the inclusion of such Parent Stockholder Shares in such Subsequent Registration
Statement
is prohibited by a written agreement entered into between Parent and a third
party in connection with a capital raising transaction which obligates the
Parent to file such Subsequent Registration
Statement. The Parent shall use its reasonable efforts to provide in any such
third party
agreement entered into in connection with a capital raising transaction for
the
specific inclusion of the Parent Stockholder Shares in any registration
statement filed in connection therewith.
If the Registration Statement is being filed pursuant to a third-party written
agreement obligating
the
Company to file the same, the holders of the Parent Stockholder Shares shall
be
entitled
to receive all notices and documents sent by the Parent to the third-party
whose
securities
are being registered pursuant to such Subsequent Registration Agreement. The
obligations of the Parent set forth in this Section 1.7 to register the shares
of a Parent Stockholder shall be contingent upon that Parent Stockholder
promptly furnishing in writing to the Parent such information as may be required
in connection with such registration, and required to be furnished by third
party subscribers to such registration, including, without limitation, all
such
information as may be requested by the SEC or the NASD or any state securities
commission and all such information regarding the Parent Stockholder, the Parent
Stockholder Shares the intended method of disposition of the Parent Stockholder
Shares.
1.8 Rights
of Holders of Nile Capital Stock.
(a) On
and
after the Effective Date and until surrendered for exchange, each outstanding
stock certificate that immediately prior to the Effective Date represented
shares of Nile Common Stock (except Dissenting Shares and shares cancelled
or
extinguished pursuant to Section 0) shall be deemed for all purposes, to
evidence ownership of and to represent the number of whole shares of Parent
Common Stock into which such shares of Nile Common Stock shall have been
converted pursuant to Section (a) above. The record holder of each such
outstanding certificate representing shares of Nile Common Stock, shall, after
the Effective Date, be entitled to vote the shares of Parent Common Stock into
which such shares of Nile Common Stock shall have been converted on any matters
on which the holders of record of the Parent Common Stock, as of any date
subsequent to the Effective Date, shall be entitled to vote. In any matters
relating to such certificates of Nile Common Stock, Parent may rely conclusively
upon the record of stockholders maintained by Nile containing the names and
addresses of the holders of record of Nile Common Stock on the Effective Date.
(b) On
and
after the Effective Date, Parent shall reserve a sufficient number of authorized
but unissued shares of Parent Common Stock for issuance in connection with
(i)
the conversion of Nile Common Stock into Parent Common Stock and (ii) the
exercise of all options, warrants, and any other instrument convertible into,
or
exchangeable for, shares of Nile Common Stock, to purchase shares of Nile Common
Stock outstanding immediately prior to the Effective Time.
1.9 Procedure
for Exchange of Nile Common Stock.
(a) After
the
Effective Time, holders of certificates theretofore evidencing outstanding
shares of Nile Common Stock (except Dissenting Shares and shares cancelled
or
extinguished pursuant to Section 0), upon surrender of such certificates to
the
registrar or transfer agent for Parent Common Stock, shall be entitled to
receive certificates representing the number of whole shares of Parent Common
Stock into which shares of Nile Common Stock theretofore represented by the
certificates so surrendered shall have been converted as provided in Section
(a)
hereof. Parent shall not be obligated to deliver the Merger Consideration to
which any former holder of shares of Nile Common Stock is entitled until such
holder surrenders the certificate or certificates representing such shares.
Upon
surrender, each certificate evidencing Nile Common Stock shall be cancelled.
If
there is a transfer of Nile Common Stock ownership which is not registered
in
the transfer records of Nile, a certificate representing the proper number
of
shares of Parent Common Stock may be issued to a person other than the person
in
whose name the certificate so surrendered is registered if: (x) upon
presentation to the Secretary of Parent, such certificate shall be properly
endorsed or otherwise be in proper form for transfer, (y) the person requesting
such payment shall pay any transfer or other taxes required by reason of the
issuance of shares of Parent Common Stock to a person other than the registered
holder of such certificate or establish to the reasonable satisfaction of Parent
that such tax has been paid or is not applicable, and (z) the issuance of such
Parent Common Stock shall not, in the sole discretion of Parent, violate the
requirements of the Regulation D “safe harbor” of the Securities Act with
respect to the private placement of Parent Common Stock that will result from
the Merger.
(b) All
shares of Parent Common Stock issued upon the surrender for exchange of Nile
Common Stock in accordance with the above terms and conditions shall be deemed
to have been issued and paid in full satisfaction of all rights pertaining
to
such shares of Nile Common Stock.
(c)
No
holder surrendering a certificate representing shares of Nile Common Stock
will
be issued in exchange a certificate representing other than a whole number
of
shares of Parent Common Stock.
(d) Any
shares of Parent Common Stock issued in the Merger will not be transferable
except (1) pursuant to an effective registration statement under the
Securities Act or (2) upon receipt by Parent of a written opinion of
counsel reasonably satisfactory to Parent to the effect that the proposed
transfer is exempt from the registration requirements of the Securities Act
and
relevant state securities laws. Restrictive legends must be placed on all
certificates representing shares of Parent Common Stock issued in the Merger,
substantially as follows:
“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE, NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
IN A
FORM REASONABLY ACCEPTABLE TO THE COMPANY AND ITS LEGAL COUNSEL, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO
RULE
144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.”
(e) In
the
event any certificate for Nile Common Stock shall have been lost, stolen or
destroyed, Parent shall issue and pay in exchange for such lost, stolen or
destroyed certificate, upon the making of an affidavit of that fact by the
holder thereof, such shares of the Parent Common Stock and cash for fractional
shares, if any, as may be required pursuant to this Agreement; provided,
however,
that
Parent, in its discretion and as a condition precedent to the issuance and
payment thereof, may require the owner of such lost, stolen or destroyed
certificate to deliver a bond in such sum as it may direct as indemnity against
any claim that may be made against Parent or any other party with respect to
the
certificate alleged to have been lost, stolen or destroyed.
1.10
Dissenting
Shares.
(a) Shares
of
capital stock of Nile held by stockholders of Nile who have not consented to
and
approved this agreement in writing and who have properly exercised and preserved
appraisal rights with respect to those shares in accordance with all of the
provisions of Section 262 of the DGCL (“Dissenting
Shares”)
shall
not be converted into or represent a right to receive shares of Parent Common
Stock pursuant to Section (a) above, but the holders thereof shall be entitled
only to such rights as are granted by Section 262 of the DGCL. Each holder
of
Dissenting Shares who becomes entitled to payment for such shares pursuant
to
Section 262 of the DGCL shall receive payment therefor from the Surviving
Corporation in accordance with such laws; provided,
however,
that if
any such holder of Dissenting Shares shall have effectively withdrawn such
holder’s demand for appraisal of such shares or lost such holder’s right to
appraisal and payment of such shares under Section 262 of the DGCL, such holder
or holders (as the case may be) shall forfeit the right to appraisal of such
shares and each such share shall thereupon be deemed to have been cancelled,
extinguished and converted, as of the Effective Time, into and represent the
right to receive payment from Parent of shares of Parent Common Stock as
provided in Section (a) above.
(b) Any
payments in respect of Dissenting Shares will be deemed made by the Surviving
Corporation.
1.11
No
Further Ownership Rights in Nile Common Stock.
All
shares of Parent Common Stock issued in accordance with the terms hereof shall
be deemed to have been issued in full satisfaction of all rights pertaining
to
such shares of Nile Common Stock. After the Effective Time, there shall be
no
further registration of transfers on the records of Surviving Corporation of
shares of Nile Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates are presented to
Surviving Corporation for any reason, they shall be cancelled and exchanged
as
provided in this ARTICLE I.
1.12 Tax
Treatment.
It is
intended by the parties hereto that the Merger shall constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986,
as
amended (the “Code”).
Each
of the parties hereto adopts this Agreement as a “plan of reorganization” within
the meaning of Section 1.368-2(g) of the United States Treasury Regulations
(the
“Regulations”).
Both
prior to and after the Closing, each party's books and records shall be
maintained, and all federal, state and local income tax returns and schedules
thereto shall be filed in a manner consistent with the Merger being qualified
as
a reverse triangular merger under Section 368(a)(2)(E) of the Code (and
comparable provisions of any applicable state or local laws), except to the
extent the Merger is determined in a final administrative or judicial decision
not to qualify as a reorganization within the meaning of Code Section
368(a).
1.13 Payments
to Public Officials.
Notwithstanding anything to the contrary in this ARTICLE I, none of Nile,
Parent, Merger Sub or Surviving Corporation shall be liable to a holder of
Nile
Common Stock or SMI Stockholder Shares for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar
applicable law.
1.14 Taking
of Necessary Action; Further Action.
If, at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation (and/or its successor in interest) with full right, title and
possession to all assets, property, rights, privileges, powers and franchises
of
Nile and Merger Sub, the officers and directors of Parent and the Surviving
Corporation shall be fully authorized (in the name of Merger Sub, Nile and
otherwise) to take all such necessary action.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF NILE
Except
as
set forth in the schedules attached hereto, Nile hereby represents and warrants
to Parent that the statements contained in this ARTICLE II are true and correct.
2.1. Organization,
Qualification and Subsidiaries.
Nile is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.
Nile has no subsidiaries and does not have an equity interest in any other
firm,
partnership, association or other entity. Nile is duly qualified to transact
business as a foreign corporation and is in good standing under the applicable
laws of each jurisdiction where the location of its properties or the conduct
of
its business makes such qualification necessary, except where the failure to
be
so qualified would not have a Nile Material Adverse Effect (as defined in
Section 2.3 below).
2.2. Authorization,
Enforcement.
Nile
has the requisite corporate power and authority to conduct its business as
presently conducted and to enter into and to consummate the Merger. The
execution and delivery of this Agreement by Nile and the consummation by it
of
the transactions contemplated hereby have been duly authorized by all necessary
action on the part of Nile and no further consent or action is required by
Nile,
other than the Required Approvals (as defined in Section 3.2 below) and the
approval of Nile’s stockholders and the approval of the stockholders of Parent
and Merger Sub of the Merger and the amendments to their respective certificates
of incorporation (the “Stockholder
Approvals”).
This
Agreement, when executed and delivered in accordance with the terms hereof,
will
constitute the valid and binding obligation of Nile enforceable against Nile
in
accordance with its terms, subject to the Stockholder Approvals, applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar applicable laws affecting creditors’ rights and remedies generally and
general principles of equity.
2.3. No
Conflicts.
The
execution, delivery and performance of this Agreement by Nile and the
consummation by Nile of the Merger do not and will not: (i) conflict with or
violate any provision of Nile’s Certificate of Incorporation or Bylaws, or (ii)
subject to obtaining the Stockholder Approvals and the filing with the Secretary
of State of Delaware of the Certificate of Merger (collectively, the
“Required
Approvals”),
conflict with, or constitute a default (or an event that with notice or lapse
of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice
or
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing Nile debt or otherwise) or other understanding to which
Nile is a party or by which any material property or asset of Nile is bound
or
affected, or (iii) result in a violation of any applicable law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority as currently in effect to which Nile is subject
(including federal and state securities laws and regulations), or by which
any
material property or asset of Nile is bound or affected; except in the case
of
each of clauses (ii) and (iii), such as could not, individually or in the
aggregate (a) materially and adversely affect the legality, validity or
enforceability of the Merger, (b) have or result in a material adverse effect
on
the results of operations, assets, business or condition (financial or
otherwise) of Nile, taken as a whole, or (c) materially and adversely impair
Nile’s ability to perform fully on a timely basis its obligations under this
Agreement (any of (a), (b) or (c), a “Nile
Material Adverse Effect”);
provided,
however,
that
any adverse change, event or effect that is demonstrated to be caused primarily
by the conditions generally affecting the United States economy, or by
conditions generally effecting the biotechnology or pharmaceutical industries,
shall be deemed not to be a Nile Material Adverse Effect.
2.4. Filings,
Consents and Approvals.
Nile is
not required to obtain any consent, waiver, authorization or order of, give
any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection
with
the execution, delivery and performance by Nile of this Agreement, other than
the Required Approvals.
2.5. Issuance
of the Shares.
The
Nile Common Stock issued in the Financing will be duly authorized and validly
issued, fully paid and nonassessable, free and clear of all liens at issuance.
Assuming the accuracy of the purchasers’ representations and warranties set
forth in the relevant subscription agreements, no registration under the
Securities Act is required for the offer and sale of the Nile Common Stock
by
Nile to the purchasers in the Financing.
2.6. Capitalization.
As of
the date of this Agreement, Nile’s authorized capital consists of 25,000,000
shares of Nile Common Stock and 5,000,000 shares of preferred stock. Nile’s
outstanding capital (i) as of the date of this Agreement and (ii) as of
immediately before the Effective Time, is set forth on Schedule
2.6.
Except
as described in Schedule
2.6,
there
are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Nile
Common Stock, or contracts, commitments, understandings or arrangements by
which
Nile is or may become bound to issue additional shares of Nile Common Stock
or
rights convertible or exchangeable into shares of Nile Common
Stock.
2.7. Contracts
and Commitments.
(a) Schedule
2.7
hereto
lists the following agreements, whether oral or written, to which Nile is a
party, which are currently in effect, and which relate to the operation of
Nile’s business: (i) collective bargaining agreement or contract with any labor
union; (ii) bonus, pension, profit sharing, retirement or other form of deferred
compensation plan; (iii) hospitalization insurance or other welfare benefit
plan
or practice, whether formal or informal; (iv) stock purchase or stock option
plan; (v) contract for the employment of any officer, individual employee or
other person on a full-time or consulting basis or relating to severance pay
for
any such person; (vi) contract, agreement or understanding relating to the
voting of Nile Common Stock or the election of directors of Nile; (vii)
agreement or indenture relating to the borrowing of money or to mortgaging,
pledging or otherwise placing a lien on any of the assets of Nile; (viii)
guaranty of any obligation for borrowed money or otherwise; (ix) lease or
agreement under which Nile is lessee of, or holds or operates any property,
real
or personal, owned by any other party, for which the annual rental exceeds
$10,000; (x) lease or agreement under which Nile is lessor of, or permits any
third party to hold or operate, any property, real or personal, for which the
annual rental exceeds $10,000; (xi) contract which prohibits Nile from freely
engaging in business anywhere in the world; (xii) license agreement or agreement
providing for the payment or receipt of royalties or other compensation by
Nile
in connection with intellectual property rights held by Nile; (xiii) contract
or
commitment for capital expenditures in excess of $10,000; (xiv) agreement for
the sale of any capital asset; or (xvi) other agreement which is either material
to Nile’s business or was not entered into in the ordinary course of business.
(b) To
Nile’s
knowledge, (i) Nile has performed all obligations required to be performed
by it
in connection with the contracts or commitments required to be disclosed in
Schedule
2.7
hereto
and is not in receipt of any claim of default under any contract or commitment
required to be disclosed under such caption; (ii) Nile has no present
expectation or intention of not fully performing any material obligation
pursuant to any contract or commitment required to be disclosed under such
caption; and (iii) Nile has no knowledge of any breach or anticipated breach
by
any other party to any contract or commitment required to be disclosed under
such caption.
2.8. Affiliate
Transactions.
Except
as set forth in Schedule
2.8
hereto,
and other than pursuant to this Agreement, no officer, director or employee
of
Nile, or any member of the immediate family of any such officer, director or
employee, or any entity in which any of such persons owns any beneficial
interest (other than any publicly-held corporation whose stock is traded on
a
national securities exchange or in the over-the-counter market and less than
five percent (5%) of the stock of which is beneficially owned by any of such
persons) (collectively “Nile
Insiders”),
has
any agreement with Nile (other than normal employment arrangements) or any
interest in any property, real, personal or mixed, tangible or intangible,
used
in or pertaining to the business of Nile (other than ownership of capital stock
of Nile). Except as set forth on Schedule
2.8,
Nile is
not indebted to any Nile Insider (except for amounts due as normal salaries
and
bonuses and in reimbursement of ordinary business expenses) and no Nile Insider
is indebted to Nile (except for cash advances for ordinary business expenses).
None of the Nile Insiders has any direct or indirect interest in any competitor,
supplier or customer of Nile or in any person, firm or entity from whom or
to
whom Nile leases any property, or in any other person, firm or entity with
whom
Nile transacts business of any nature. For purposes of this Section 2.8, the
members of the immediate family of an officer, director or employee shall
consist of the spouse, parents, children and siblings of such officer, director
or employee.
2.9. Financial
Statements.
Nile
has provided the Parent and the Merger Sub with audited financial statements
for
the year ending December 31, 2006 and the six month period ended June 30, 2007.
The audited financial statements of Nile, together with the related notes
thereto, present fairly, in all material respects, the financial position of
Nile as of the dates specified and the results of its operations and changes
in
financial position for the periods covered thereby. Such audited financial
statements and related notes were prepared in accordance with United States
Generally Accepted Accounting Principles (“GAAP”)
throughout the period indicated except as may be disclosed in the notes thereto.
Except as required to be set forth in such financial statements, or on
Schedule
2.9,
Nile has
no material liabilities of any kind, whether accrued, absolute, contingent
or
otherwise or entered into any material transactions or commitments.
2.10. Taxes.
Nile
has filed, on a timely basis, each Federal, state, local and foreign Tax Return
which is required to be filed by it, or has requested an extension therefore,
and has paid all Taxes and all related assessments, penalties and interest
shown
on such tax returns to the extent that the same have become due and are not
being contested in good faith.
2.11. Litigation.
Other
than as set forth on Schedule
2.11,
there
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of Nile, threatened against or affecting Nile
or
its properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local
or
foreign) (collectively, an “Action”)
which:
(i) materially adversely affects or challenges the legality, validity or
enforceability of this Agreement or (ii) would, if there were an unfavorable
decision, individually or in the aggregate, have or reasonably be expected
to
result in a Nile Material
Adverse Effect. Nile is not nor has it ever been the subject of any Action
involving a claim of violation of or liability under federal or state securities
laws. There has not been, and to the knowledge of Nile, there is not pending
or
contemplated, any investigation by the SEC or any other governmental authority
involving Nile.
2.12. Compliance.
Nile is
not: (i) in violation of its certificate of incorporation or by-laws; (ii)
in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default
by
Nile under), nor has Nile received notice of a claim that it is in default
under
or that it is in violation of, any material indenture, loan or credit agreement
or any other material agreement or instrument to which it is a party or by
which
it or any of its properties is bound (whether or not such default or violation
has been waived), which default or violation would have or result in a
Nile Material
Adverse Effect; (iii) in violation of any order of any court, arbitrator or
governmental body; or (iv) in violation of any statute, rule or regulation
of
any governmental authority, except in each case as would not, individually
or in
the aggregate, have or result in a Nile Material
Adverse Effect.
2.13. Regulatory
Permits.
Nile
possesses or has applied for all certificates, authorizations and permits issued
by the appropriate federal, state, local or foreign regulatory authorities
necessary to conduct its business, except where the failure to possess such
permits would not, individually or in the aggregate, have a Nile Material
Adverse Effect (“Material
Permits”),
and
Nile has not received any notice of proceedings relating to the revocation
or
modification of any Material Permit.
2.14. Properties.
Nile
does not own any real property in fee simple, and Nile has good and marketable
title to all property (personal, tangible and intangible) owned by it, free
and
clear of all security interests, liens and encumbrances, except those that
(i)
do not materially interfere with the use made of such property by Nile; (ii)
for
such imperfections of title and encumbrances that would not have a
Nile Material
Adverse Effect; or (iii) for liens that are not yet due and payable.
2.15. Intellectual
Property.
Nile
owns all right, title and interest in, or possesses adequate and enforceable
rights to use, all patents, patent applications, trademarks, trade names,
service marks, copyrights, rights, licenses, franchises, trade secrets,
confidential information, processes, formulations, software and source and
object codes necessary for the conduct of Nile’s business (collectively, the
“Intangibles”),
except to the extent that the failure to own or possess adequate rights to
such
Intangibles would not have a Nile Material Adverse Effect. To the knowledge
of
Nile, Nile has not infringed upon the rights of others with respect to the
Intangibles and Nile has not received written notice that it has or may have
infringed or is infringing upon the rights of others with respect to the
Intangibles, or any written notice of conflict with the asserted rights of
others with respect to the Intangibles, which infringement or conflict, if
the
subject of an unfavorable decision, would have a Nile Material Adverse
Effect.
2.16. Insurance.
The
insurance policies owned and maintained by Nile that are material to Nile are
in
full force and effect, all premiums due and payable thereon have been paid
(other than retroactive or retrospective premium adjustments that Nile is not
currently required, but may in the future be required, to pay with respect
to
any period ending prior to the date of this Agreement), and Nile has received
no
notice of cancellation or termination with respect to any such policy that
has
not been replaced on substantially similar terms prior to the date of such
cancellation.
2.17. No
Undisclosed Liabilities.
Except
as reflected in the audited balance sheet of June 30, 2007 (the “Nile
Balance Sheet”)
contained in the audited financial statements referenced in Section 2.9, or
as
otherwise disclosed on Schedule
2.17,
Nile
has no liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise except liabilities which have arisen after the date of the Nile
Balance Sheet in the ordinary course of business (none of which is a material
uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit).
2.18. Environmental
Matters.
None of
the operations of Nile involves the generation, transportation, treatment,
storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270
or any state, local or foreign equivalent.
2.19. Material
Changes.
Except
for the proposed Financing, the transactions contemplated thereby and such
other
transactions as are set forth on Schedule
2.19,
since
the date of the Nile Balance Sheet: (i) there has been no event, occurrence
or
development that has had a Nile Material Adverse Effect, (ii) Nile has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent
with
past practice, and (B) liabilities not required to be reflected in Nile’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the SEC, (iii) Nile has not altered its method of accounting or the
identity of its auditors, (iv) Nile has not declared or made any dividend or
distribution of cash or other property to its stockholders except in the
ordinary course of business consistent with prior practice, or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock except consistent with prior practice or pursuant to existing Nile stock
option or similar plans, and (v) Nile has not issued any equity shares to any
officer, director or affiliate, except pursuant to existing Nile stock option
or
similar plans or upon conversion or exercise of outstanding Nile
securities.
2.20. Lack
of Publicity.
Neither
Nile nor any person acting on its behalf has engaged or will engage in any
form
of general solicitation or general advertising as those terms are used in
Regulation D under the Securities Act in the United States with respect to
the
Financing or the securities that will be exchanged for Nile Common Stock in
the
Merger, including, without limitation, any article, notice, advertisement or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio, regarding the Financing, nor did any such
person sponsor any seminar or meeting to which potential investors were invited
by, or any solicitation of a subscription by, a person not previously known
to
such investor in connection with investments in the Nile Common Stock generally.
Neither Nile nor any person acting on its or their behalf have engaged or will
engage in any form of directed selling efforts (as that term is used in
Regulation S under the Securities Act) with respect to the securities that
will
be exchanged for Nile Common Stock in the Merger.
2.21. Full
Disclosure.
The
representations and warranties of Nile contained in this Agreement (and in
any
schedule, exhibit, certificate or other instrument to be delivered under this
Agreement) are true and correct in all material respects, and such
representations and warranties do not omit any material fact necessary to make
the statements contained therein, in light of the circumstances under which
they
were made, not misleading. There is no fact of which Nile has knowledge that
has
not been disclosed to Parent pursuant to this Agreement, including the schedules
hereto, all taken together as a whole, which has had or could reasonably be
expected to have a Nile Material Adverse Effect or materially adversely affect
the ability of Nile to consummate in a timely manner the transactions
contemplated hereby.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
OF
PARENT AND MERGER SUB
Each
of
Parent and Merger Sub, jointly and severally, hereby represents and warrants
to
Nile that the statements contained in this ARTICLE III are true and
correct.
3.1. Organization
of Parent and Merger Sub.
(a) Each
of
Parent and Merger Sub is a corporation duly organized, validly existing and
in
good standing under the laws of the jurisdiction of its incorporation; has
the
corporate power and authority to own, lease and operate its assets and property
and to carry on its business as now being conducted; and is duly qualified
to do
business and in good standing as a foreign corporation in each jurisdiction
in
which the failure to be so qualified would have a Parent Material Adverse
Effect. As used in this Agreement, the term “Parent
Material Adverse Effect”
means
a
material adverse effect on the condition (financial or otherwise), business,
assets or results of operations of Parent and Merger Sub as a whole or on the
ability of Parent to consummate the transactions contemplated by this
Agreement;
provided, however,
that
any adverse change, event or effect that is demonstrated to be caused primarily
by the conditions generally affecting the United States economy shall be deemed
not to be a Parent Material Adverse Effect.
(b) Parent
has no subsidiaries other than Merger Sub, a Delaware corporation and a
wholly-owned subsidiary of Parent, which is inactive.
(c) Parent
has delivered or made available to Nile a true and correct copy of the
Certificate of Incorporation and Bylaws of each of Parent and Merger Sub, each
as amended to date, and each such instrument is in full force and effect.
Neither Parent nor Merger Sub is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws or equivalent governing
instruments.
3.2. Capital
Structure.
As of
the date of this Agreement, the authorized capital stock of Parent consists
of
100,000,000 shares of Parent Common Stock of which there were 755,100 shares
issued and outstanding as of the date hereof and 10,000,000 shares of blank
check preferred stock none of which are issued and outstanding. As of the
Closing, the authorized capital stock of Parent shall consist of 100,000,000
shares of Parent Common Stock and 10,000,000 shares of preferred stock and
there
shall be issued and outstanding such number of shares of Parent Common Stock
as
is required pursuant to Section 4.3 hereof and no shares of preferred stock
shall be issued and outstanding. The authorized capital stock of Merger Sub
consists of 1,000 shares of Common Stock, par value $0.001 per share (the
“Merger
Sub Common Stock”),
of
which there were no shares issued and outstanding as of the date hereof. All
outstanding shares of Parent and Merger Sub Common Stock are duly authorized,
validly issued, fully paid and nonassessable, were issued in compliance with
applicable securities laws and are not subject to preemptive rights created
by
statute, the Certificate of Incorporation or Bylaws of Parent and Merger Sub
or
any agreement or document to which Parent or Merger Sub is a party or by which
it is bound. Other than as set forth on Schedule 3.2, as of the date hereof,
Parent did not have any options or warrants to purchase common stock
outstanding.
3.3. Obligations
With Respect to Capital Stock.
Other
than as set forth on Schedule
3.3,
there
are no equity securities, partnership interests or similar ownership interests
of any class of Parent or Merger Sub, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests issued, reserved for issuance or
outstanding. There are no equity securities, partnership interests or similar
ownership interests of any class of Merger Sub of Parent, or any security
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests issued, reserved for
issuance or outstanding. There are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which Parent
or Merger Sub is a party or by which it is bound obligating Parent or Merger
Sub
to issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption
or
acquisition, of any shares of capital stock of Parent or Merger Sub or
obligating Parent or Merger Sub to grant, extend, accelerate the vesting of
or
enter into any such option, warrant, equity security, partnership interest
or
similar ownership interest, call, right, commitment or agreement. There are
no
registration rights and there are no voting trusts, proxies or other agreements
or understandings with respect to any equity security of any class of Parent
or
with respect to any equity security partnership interest or similar ownership
interest of any class of Merger Sub.
3.4. Authority.
(a) That
certain shares of Parent Common Stock have been registered under Section 12(g)
of the Exchange Act on Form SB-2/A dated July 31, 2001.
(b) Each
of
Parent and Merger Sub has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of each of Parent and Merger Sub, subject only
to
the adoption of this Agreement by Merger Sub’s stockholders and the filing and
recordation of the Certificate of Merger pursuant to the DGCL. This Agreement
has been duly executed and delivered by each of Parent and Merger Sub and,
assuming the due authorization, execution and delivery by Nile, constitutes
the
valid and binding obligation of each of Parent and Merger Sub, enforceable
in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws and general principles of equity.
(c)
The
execution and delivery of this Agreement by each of Parent and Merger Sub,
do
not, and the performance of this Agreement by each of Parent and Merger Sub,
will not (i) conflict with or violate the Certificate of Incorporation or Bylaws
of Parent, or Merger Sub, respectively, (collectively, the “Parent
Charter Documents”);
(ii)
subject to compliance with the requirements set forth in Section 3.4(d) below,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Parent or Merger Sub, respectively, or by which its or any of
their respective properties is bound or affected; or (iii) result in any breach
of, or constitute a default (or an event that with notice or lapse of time
or
both would become a default) under, or impair any of, Parent's or Merger Sub's
rights or alter the rights or obligations of any third party under, or to
Parent's knowledge, give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Parent or Merger Sub,
respectively, pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which any of Parent or Merger Sub is a party or by which Parent or Merger
Sub, or any of their respective properties are bound or affected.
(d) No
consent, approval, order or authorization of, or registration, declaration
or
filing with any Governmental Entity is required by or with respect to any of
Parent or Merger Sub in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of the Certificate of Merger with the Secretary of State
of
Delaware, (ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws (including under Regulation D) and (iii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained
or
made, individually or in the aggregate, would not be reasonably likely to have
a
Parent Material Adverse Effect.
3.5. Parent
SEC Filings; Parent Financial Statements.
(a) The
Parent has filed all forms, reports and documents required to be filed with
the
SEC. All such required forms, reports and documents (including the financial
statements, exhibits and schedules thereto and those documents that the Parent
may file subsequent to the date hereof) are collectively referred to herein
as
the “Parent
SEC Reports”
and
Parent has provided or made available to Nile copies thereof and of all
correspondence to or from the SEC with respect to the Parent. As of their
respective dates, the Parent SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act or the Securities Exchange Act of 1934,
as amended (the “Exchange
Act”),
as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such Parent SEC Reports, and (ii) did not at the time they were filed (or
if
amended or superseded by a filing prior to the date of this Agreement, then
on
the date of such filing) contain any untrue statement of a material fact or
omit
to state a material fact required to be stated therein or necessary in order
to
make the statements therein, in the light of the circumstances under which
they
were made, not misleading.
(b) Each
of
the financial statements (including, in each case, any related notes thereto)
contained in the Parent SEC Reports (the “Parent
Financials”),
including any Parent SEC Reports filed after the date hereof until the Closing,
as of their respective dates, (i) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, (ii)
was prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in
the
case of unaudited interim financial statements, as may be permitted by the
SEC
on Form 10-QSB under the Exchange Act) and (iii) fairly presented the financial
position of the Parent at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated, except
that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount. The balance sheet of the Parent as of June 30, 2007 is
hereinafter referred to as the “Parent
Balance Sheet.”
Except
as disclosed in the Parent Financials, the Parent does not have any liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually
or
in the aggregate, material to the business, results of operations or financial
condition of the Parent, except liabilities (i) provided for in the Parent
Balance Sheet, or (ii) incurred since the date of the Parent Balance Sheet
in
the ordinary course of business consistent with past practices.
No
person who has been suspended or barred from being associated with a registered
public accounting firm, or who has failed to comply with any sanction pursuant
to Rule 5300 promulgated by the Public Parent Accounting Oversight Board, has
participated in or otherwise aided the preparation of, or audited, any financial
statements, supporting schedules or other financial data filed by the Parent
with the SEC.
3.6. Absence
of Certain Changes or Events.
Except
as disclosed in the Parent SEC Reports filed prior to the date hereof or as
contemplated by this Agreement, since the date of the Parent Balance Sheet,
Parent has conducted business only in, and has not engaged in any material
transaction other than according to, the ordinary and usual course of such
businesses and there has not been (i) any change that individually or in the
aggregate, has had or is reasonably likely to have a Parent Material Adverse
Effect; (ii) any material damage, destruction or other casualty loss with
respect to any material asset or property owned, leased or otherwise used by
Parent or Merger Sub, whether or not covered by insurance; (iii) any
declaration, setting aside or payment of any dividend or other distribution
in
cash, stock or property in respect of the capital stock of Parent, except for
dividends or other distributions on its capital stock publicly announced prior
to the date hereof and except as expressly permitted hereby; (iv) any event
that
would constitute a violation of Section 4.1 or Section 4.2 hereof, if such
event
occurred after the date of this Agreement and prior to the Effective Time;
or
(v) any change by Parent in accounting principles, practices or
methods.
3.7. No
Undisclosed Liabilities.
Except
as reflected in the Parent Financials or as otherwise disclosed on Schedule
3.7,
Parent
has no liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise except liabilities which have arisen after the date of the Parent
Financials in the ordinary course of business (none of which is a material
uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit).
3.8. Tax
Matters.
(a) There
have been duly and timely filed by Parent with the appropriate Taxing
Authorities all Tax Returns required to be filed before the Closing Date and
all
such Tax Returns were true, correct and complete in all material respects.
No
extension is in effect for Parent with respect to the filing of any Tax Return,
the payment of any Taxes, or any limitation period regarding the assessment
or
collection of any Taxes.
(b) Parent
has paid in full all Taxes which have become due and payable on or before the
Closing Date (whether or not shown on any Tax Return). Adequate reserves and
accruals have been established to provide for the payment of all Taxes which
are
not yet due and payable with respect to the Parent through the Closing Date.
(c) There
are
no liens for Taxes upon Parent or Merger Sub or any of their properties or
assets except for Taxes not yet due and payable.
(d) Neither
Parent nor Merger Sub has ever been a member of an affiliated, consolidated,
unitary or combined group filing a consolidated, unitary or combined Tax Return.
Neither Parent nor Merger Sub has ever been a party to any tax allocation,
sharing or reimbursement agreement or arrangement.
(e) Neither
Parent nor Merger Sub has any liability for the Taxes of any other person under
Treasury Regulation Section 1.502-6 (or similar provisions of state, local
or
foreign tax law), as a transferee or successor, by contract, or
otherwise.
(f) Parent
does not have pending any ruling requests filed by it or on its behalf with
any
Taxing Authority and is not a party to any closing agreement described in
Internal Revenue Code Section 7121 (or similar provisions of state, local or
foreign law).
(g) Parent
has delivered to Nile correct and complete copies of all income Tax Returns
and
all other material Tax Returns filed with respect to Parent for all completed
taxable years commencing on or after January 1, 2004, together with all
examination reports by any Taxing Authority, any statements of deficiencies
proposed or assessed against or agreed to by Parent, and any notices of proposed
adjustments received with respect to such years.
(h) No
deficiency or proposed adjustment for any amount of Tax has been proposed,
asserted, assessed or reassessed (as may be applicable) by any Taxing Authority
against Parent that has not been paid, settled or otherwise resolved. There
is
no action, suit, claim, examination, investigation, proceeding or audit now
pending, proposed or threatened against Parent with respect to any Taxes. Parent
has not been notified by any Taxing Authority that any issues have been raised
with respect to any Tax Return.
(i) No
claim
has been made within the past five (5) calendar years by any Taxing Authority
in
a jurisdiction where Parent did not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
(j) Neither
Parent nor Merger Sub is an “investment company” within the meaning of Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
(k) As
used
in this Agreement, “Tax” means any federal, state, province, local or foreign
income taxes (including any tax on or based upon net income, or gross income,
or
income as specially defined, or earnings, or profits, or selected items of
income, earnings or profits) and all gross receipts, estimated, sales, use,
ad
valorem, transfer, franchise, license, withholding, payroll, employment, excise,
capital stock, social security (or similar), unemployment, disability,
severance, stamp, gains, registration, value added, occupation, premium, real
property, personal property, profits, windfall profits, environmental,
alternative or add-on minimum taxes, custom duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any Taxing
Authority whether disputed or not.
(l) As
used
in this Agreement, “Tax Return” is defined as any return, declaration, report,
claim for refund, information return, statement or other document (including
any
related or supporting information, schedule, attachment and any amendment
thereof) filed or required to be filed with any federal, state, province, local
or foreign governmental entity or other authority (a “Taxing Authority”) in
connection with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements relating
to any Tax.
3.9. Contracts
and Commitments.
(a) Schedule
3.9
hereto
lists the following agreements, whether oral or written, to which Parent or
Merger Sub is a party, which are currently in effect, and which relate to the
operation of Parent’s business, or where applicable, the business of Merger Sub:
(i) collective bargaining agreement or contract with any labor union; (ii)
bonus, pension, profit sharing, retirement or other form of deferred
compensation plan; (iii) hospitalization insurance or other welfare benefit
plan
or practice, whether formal or informal; (iv) stock purchase or stock option
plan; (v) contract for the employment of any officer, individual employee or
other person on a full-time or consulting basis or relating to severance pay
for
any such person; (vi) confidentiality agreement; (vii) contract, agreement
or
understanding relating to the voting of Parent Common Stock or the election
of
directors of Parent; (viii) agreement or indenture relating to the borrowing
of
money or to mortgaging, pledging or otherwise placing a lien on any of the
assets of Parent or Merger Sub; (ix) guaranty of any obligation for borrowed
money or otherwise; (x) lease or agreement under which Parent or Merger Sub
is
lessee of, or holds or operates any property, real or personal, owned by any
other party, for which the annual rental exceeds $10,000; (xi) lease or
agreement under which Parent or Merger Sub is lessor of, or permits any third
party to hold or operate, any property, real or personal, for which the annual
rental exceeds $10,000; (xii) contract which prohibits Parent or Merger Sub
from
freely engaging in business anywhere in the world; (xiii) license agreement
or
agreement providing for the payment or receipt of royalties or other
compensation by Parent or Merger Sub in connection with any intellectual
property rights; (xiv) contract or commitment for capital expenditures in excess
of $10,000; (xv) agreement for the sale of any capital asset; (xvi) contract
with Merger Sub any affiliate thereof which in any way relates to Parent (other
than for employment on customary terms); or (xvii) other agreement which is
either material to Parent’s business or was not entered into in the ordinary
course of business.
(b) To
Parent’s knowledge, Parent and Merger Sub has performed all obligations required
to be performed by them in connection with the contracts or commitments required
to be disclosed in Schedule
3.9
hereto
and is not in receipt of any claim of default under any contract or commitment
required to be disclosed under such caption, Parent and Merger Sub, where
applicable, have no present expectation or intention of not fully performing
any
material obligation pursuant to any contract or commitment required to be
disclosed under such caption, and Parent has no knowledge of any breach or
anticipated breach by any other party to any contract or commitment required
to
be disclosed under such caption.
3.10. Patents
and Trademarks.
Parent
has no patents, trademarks, licenses, sublicenses, or any agreement relating
to
the ownership of use of any intellectual property.
3.11. Compliance;
Permits; Restrictions.
(a) Neither
Parent nor Merger Sub is in conflict with, or in default or violation of (i)
any
law, rule, regulation, order, judgment or decree applicable to Parent or Merger
Sub or by which it or any of its properties are bound or affected, or (ii)
any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or Merger Sub is
a
party or by which Parent or Merger Sub or its or any of their respective
properties is bound or affected except for those conflicts, defaults or
violations which would not be reasonably expected to have a Parent Material
Adverse Effect. To the knowledge of Parent, no investigation or review by any
Governmental Entity is pending or threatened against Parent or Merger Sub,
nor
has any Governmental Entity indicated in writing an intention to conduct the
same. There is no agreement, judgment, injunction, order or decree binding
upon
Parent or Merger Sub which has or would reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of Parent
or
Merger Sub, any acquisition of material property by Parent or Merger Sub or
the
conduct of business by Parent as currently conducted.
(b) Parent
and Merger Sub hold all permits, licenses, variances, exemptions, orders and
approvals from Governmental Entities which are necessary to the conduct of
the
business of Parent except those the absence of which would not, individually
or
in the aggregate, be reasonably likely to have a Parent Material Adverse Effect,
(collectively, the “Parent
Permits”).
Parent and Merger Sub are in compliance in all material respects with the terms
of the Parent Permits.
3.12. Litigation.
There
is no action, suit, proceeding, claim, arbitration or investigation pending,
including derivative suits brought by or on behalf of Parent, or as to which
Parent or Merger Sub has received any written notice of assertion nor, to
Parent's knowledge, is there a threatened action, suit, proceeding, claim,
arbitration or investigation against Parent or Merger Sub seeking to delay,
limit or enjoin the transactions contemplated by this Agreement or which might
reasonably be expected to have a Parent Material Adverse Effect.
3.13. Brokers'
and Finders' Fees.
Parent
has not incurred, nor will it incur, directly or indirectly, any liability
for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby, other
than finders’ fees, the payment for which will be the sole responsibility of
Parent.
3.14. Employees.
(a) The
Company does not now have, nor has it ever had at any time, any
employees.
(b) Except
as
otherwise set forth in Schedule
3.14,
or as
contemplated by this Agreement, to the knowledge of Parent, neither any
executive employee of Parent nor any group of Parent’s employees has any plans
to terminate his, her or its employment; (b) Parent has no material labor
relations problem pending and its labor relations are satisfactory; (c) there
are no workers’ compensation claims pending against Parent nor is Parent aware
of any facts that would give rise to such a claim; (d) to the knowledge of
Parent, no employee of Parent is subject to any secrecy or non-competition
agreement or any other agreement or restriction of any kind that would impede
in
any way the ability of such employee to carry out fully all activities of such
employee in furtherance of the business of Parent; and (f) no employee or former
employee of Parent has any claim with respect to any intellectual property
rights of Parent.
3.15. Affiliate
Transactions.
Except
as set forth in Schedule
3.15
hereto,
and other than pursuant to this Agreement, no officer, director or employee
of
Parent, Merger Sub or any member of the immediate family of any such officer,
director or employee, or any entity in which any of such persons owns any
beneficial interest (other than any publicly-held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market
and
less than one percent of the stock of which is beneficially owned by any of
such
persons) (collectively “Parent
Insiders”),
has
any agreement with Parent (other than normal employment arrangements) or any
interest in any property, real, personal or mixed, tangible or intangible,
used
in or pertaining to the business of Parent (other than ownership of capital
stock of Parent). Parent is not indebted to any Parent Insider (except for
amounts due as normal salaries and bonuses and in reimbursement of ordinary
business expenses) and no Parent Insider is indebted to Parent) except for
cash
advances for ordinary business expenses, in each case in an amount less than
$1,000). None of the insiders has any direct or indirect interest in any
competitor, supplier or customer of Parent or in any person, firm or entity
from
whom or to whom Parent leases any property, or in any other person, firm or
entity with whom Parent transacts business of any nature. For purposes of this
Section 3.15, the members of the immediate family of an officer, director or
employee shall consist of the spouse, parents and children of such officer,
director or employee.
3.16. Books
and Records.
The
books of account, minute books, stock record books, and other records of Parent,
all of which have been made available to Nile, have been properly kept and
contain no inaccuracies except for inaccuracies that would not, individually
or
in the aggregate, reasonably be expected to have a Material Adverse Effect
on
Parent. At the Closing, all of Parent’s records will be in the possession of
Parent.
3.17. Real
Property.
Neither
Parent nor Merger Sub owns any real property. Schedule 3.17 contains
an accurate list of all leaseholds and other interests of Parent and Merger
Sub
in any real property. Parent and Merger Sub have good and valid title to those
leaseholds and other interests free and clear of all liens and encumbrances,
and
the real property to which those leasehold and other interests pertain
constitutes the only real property used in Parent’s business.
3.18. Insurance.
The
insurance policies owned and maintained by Parent that are material to Parent
are in full force and effect, all premiums due and payable thereon have been
paid (other than retroactive or retrospective premium adjustments that Parent
is
not currently required, but may in the future be required, to pay with respect
to any period ending prior to the date of this Agreement), and Parent has
received no notice of cancellation or termination with respect to any such
policy that has not been replaced on substantially similar terms prior to the
date of such cancellation.
3.19. Environmental
Matters.
None of
the operations of Parent or any Merger Sub involves the generation,
transportation, treatment, storage or disposal of hazardous waste, as defined
under 40 C.F.R. Parts 260-270 or any state, local or foreign
equivalent.
3.20. Absence
of Liens and Encumbrances.
Each of
Parent and Merger Sub has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used in its business, free
and
clear of any liens and encumbrances except (i) as reflected in the Parent
Financial Statements, (ii) for liens for taxes not yet due and payable and
(iii)
for such imperfections of title and encumbrances, if any, which would not be
reasonably expected to have a Parent Material Adverse Effect.
3.21. Board
Approval.
The
Board of Directors of each of Parent and Merger Sub has (i) determined that
the
Merger is fair to, advisable and in the best interests of it and its
stockholders, (ii) has approved the Share Issuance and (iii) duly approved
the
Merger, this Agreement and the transactions contemplated hereby.
3.22. Valid
Issuances.
The
Merger Consideration to be issued by Parent in the Merger, when issued in
accordance with the provisions of this Agreement, will be duly authorized,
validly issued, full paid and non-assessable, free of all liens and encumbrances
and not subject to preemptive rights.
3.23. Disclosed
Information.
None of
the information supplied or to be supplied by Parent for inclusion in any proxy
statement, or any amendments or supplements thereto, to be distributed to the
shareholders of either Nile or the Surviving Corporation in connection with
a
meeting of such stockholders to vote upon this Agreement and the transactions
contemplated hereby, will, at the time of the mailing of such proxy statement
and the time of such meeting contain any untrue statement of a material fact
or
omit to state any material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
3.24. Investigations
and Inquiries.
Nether
Parent nor any of its respective directors or officers is the subject of any
investigation, inquiry or proceeding before the Securities Exchange Commission
or any state securities commission or administrative agency.
3.25. Foreign
Corrupt Practices.
Neither
the Parent, nor to the Parent’s knowledge, any director, officer, agent,
employee or other Person acting on behalf of the Parent or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the Parent
(i) used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity; (ii) made any direct
or indirect unlawful payment to any foreign or domestic government official
or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
(iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
3.26. ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act.
Other
than as se forth on Schedule 3.26, the Parent is either in compliance with
any
and all applicable requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the
date
hereof or any elements of non-compliance.
3.27. Patriot
Act.
To the
extent applicable, both the Parent and Merger Sub are in compliance, in all
material respects, with the (i) Trading with the Enemy Act, as amended, and
each
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (ii) Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept
and
Obstruct Terrorism (USA Patriot Act of 2001).
3.28. Off
Balance Sheet Arrangements.
There
is no transaction, arrangement, or other relationship between the Parent and
an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Parent in its 1934 Act filings and is not so disclosed or
that
otherwise would be reasonably likely to have a Parent Material Adverse
Effect.
3.29. Investment
Company Status.
Neither
Parent nor the Merger Sub is, nor upon consummation of the sale of the
Securities will not be, an “investment company,” a company controlled by an
“investment company” or an “affiliated person” of, or “promoter” or “principal
underwriter” for, an “investment company” as such terms are defined in the
Investment Company Act of 1940, as amended.
3.30. Full
Disclosure.
The
representations and warranties of Parent and Merger Sub contained in this
Agreement (and in any schedule, exhibit, certificate or other instrument to
be
delivered under this Agreement) are true and correct in all material respects,
and such representations and warranties do not omit any material fact necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading. There is no fact of which Parent has
knowledge that has not been disclosed to Nile pursuant to this Agreement,
including the schedules hereto, all taken together as a whole, which has had
or
could reasonably be expected to have a Material Adverse Effect on Parent or
Merger Sub or materially adversely affect the ability of Parent or Merger Sub
to
consummate in a timely manner the transactions contemplated hereby.
3.31. Lack
of Publicity.
Neither
Parent nor any person acting on its behalf has engaged or will engage in any
form of general solicitation or general advertising as those terms are used
in
Regulation D under the Securities Act in the United States with respect to
the
Financing or the securities that will be exchanged in the Merger, including,
without limitation, any article, notice, advertisement or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, regarding the Financing, nor did any such person sponsor
any seminar or meeting to which potential investors were invited by, or any
solicitation of a subscription by, a person not previously known to such
investor in connection with investments in the securities of Nile generally.
Neither Parent nor any person acting on its or their behalf have engaged or
will
engage in any form of directed selling efforts (as that term is used in
Regulation S under the Securities Act) with respect to the securities that
will
be exchanged in the Merger.
ARTICLE
IV
CONDUCT
PRIOR TO THE EFFECTIVE TIME
4.1. Conduct
of Business by the Parties.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement pursuant to ARTICLE VIII or the Effective
Time, except as contemplated by this Agreement, the Financing or the
transactions contemplated hereby and thereby, each of Nile, Merger Sub and
Parent shall conduct their respective businesses in the ordinary course and
in
substantial compliance with all applicable laws and regulations, pay their
respective debts and Taxes when due subject to good faith disputes over such
debts or Taxes, pay or perform other material obligations when due subject
to
good faith disputes over such obligations, and use their commercially reasonable
efforts consistent with past practices and policies to (i) preserve intact
their
present business organization; (ii) keep available the services of each of
their
present officers and employees, respectively; and (iii) preserve their
relationships with customers, suppliers, distributors, licensors, licensees
and
others with which each party has business dealings material to their respective
business.
4.2. Negative
Covenants of Parent.
Except
as permitted by the terms of this Agreement, without the prior written consent
of Nile, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Parent shall not do any of the following and shall not permit
Merger Sub to do any of the following:
(a) Except
as
required by applicable law, waive any stock repurchase rights, accelerate,
amend
or change the period of exercisability of options or restricted stock, or
reprise options granted under any employee, consultant, director or other stock
plans or authorize cash payments in exchange for any options granted under
any
of such plans;
(b) Except
as
required by applicable law, grant any severance or termination pay to any
officer or employee except pursuant to written agreements outstanding, or
policies existing, on the date hereof and as previously disclosed in writing
or
made available to Nile, or adopt any new severance plan, or amend or modify
or
alter in any manner any severance plan, agreement or arrangement existing on
the
date hereof;
(c) Declare,
set aside or pay any dividends on or make any other distributions (whether
in
cash, stock, equity securities or property) in respect of any capital stock
or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any capital stock;
(d) Purchase,
redeem or otherwise acquire, directly or indirectly, any shares of capital
stock
of Parent or Merger Sub;
(f) Cause,
permit or submit to a vote of Parent's stockholders any amendments to the Parent
Charter Documents (or similar governing instruments of Merger Sub);
(g) Acquire
or agree to acquire by merging or consolidating with, or by purchasing any
equity interest in or a portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to enter into
any joint ventures, strategic partnerships or strategic
investments;
(h) Sell,
lease, license, encumber or otherwise dispose of any properties or assets except
in the ordinary course of business consistent with past practice, except for
the
sale, lease, licensing, encumbering or disposition of property or assets which
are not material, individually or in the aggregate, to the business of Parent
and Merger Sub;
(i) Incur
any
indebtedness for borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or options, warrants, calls or other
rights to acquire any debt securities of Parent;
(j) Adopt
or
amend any employee stock purchase or employee stock option plan, or enter into
any employment contract or collective bargaining agreement (other than offer
letters and letter agreements entered into in the ordinary course of business
consistent with past practice with employees who are terminable “at will”), pay
any special bonus or special remuneration to any director or employee, or
increase the salaries, wage rates, compensation or other fringe benefits
(including rights to severance or indemnification) of its directors, officers,
employees or consultants except, in each case, as may be required by
law;
(k) Pay,
discharge, settle or satisfy any litigation (whether or not commenced prior
to
the date of this Agreement) or any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than
the payment, discharge, settlement or satisfaction, in the ordinary course
of
business consistent with past practice or in accordance with their terms, of
liabilities recognized or disclosed in the Parent Balance Sheet or incurred
since the date of such financial statements, or (ii) waive the benefits of,
agree to modify in any manner, terminate, release any person from or knowingly
fail to enforce the confidentiality or nondisclosure provisions of any agreement
to which Parent or Merger Sub is a party or of which Parent or Merger Sub is
a
beneficiary;
(l) Except
in
the ordinary course of business consistent with past practice, materially
modify, amend or terminate any agreements or waive, delay the exercise of,
release or assign any material rights or claims thereunder without providing
prior notice to Parent;
(m) Except
as
required by GAAP, revalue any of its assets or make any change in accounting
methods, principles or practices;
(n) Make
any
Tax election or accounting method change (except as required by GAAP)
inconsistent with past practice that, individually or in the aggregate, is
reasonably likely to adversely affect in any material respect the Tax liability
or Tax attributes of Parent or Merger Sub, settle or compromise any material
Tax
liability or consent to any extension or waiver of any limitation period with
respect to Taxes;
(o) Take
any
action that would prevent the Merger from qualifying as a reorganization under
Section 368(a) of the Code; or
(p) Agree
in
writing or otherwise to take any of the actions described in Section 4.2(a)
through 4.2(o) above.
4.3. Affirmative
Pre-Closing Covenants of Parent. Prior
to
the Closing, Parent shall take all actions required such that immediately after
the Effective Time the holders of Parent Common Stock, or any securities
convertible into or exchangeable into shares of Parent Common Stock, including
any shares issuable to Section 6.2(h) hereof, shall own in the aggregate
1,250,000 shares of Parent Common Stock, which shall represent five percent
(5%)
of the fully diluted shares of Parent Common Stock immediately following the
Effective Time (the “Parent
Recapitalization”).
4.4. Covenants
of Nile.
Except
as disclosed in Schedule
4.4
hereto,
permitted by the terms of this Agreement or in connection with the Financing
or
the transactions contemplated hereby and thereby, during the period from the
date of this Agreement and continuing until the earlier of the termination
of
this Agreement pursuant to its terms or the Effective Time, Nile shall not
(i)
amend the Nile Charter Documents (other than as provided herein ); (ii) split,
combine or reclassify its outstanding shares of capital stock; (iii) declare,
set aside or pay any dividend payable in cash, stock or property in respect
of
any capital stock; (iv) take any action that would prevent the Merger from
qualifying as a reorganization under Section 368(a) of the Code or a qualifying
exchange under Section 351 of the Code; (v) conduct its business, other than
in
the ordinary course consistent with past practices; (vi) issue any capital
stock
or any options, warrants or other rights to subscribe for or purchase any
capital stock or any securities convertible into or exchangeable or exercisable
for, or rights to purchase or otherwise acquire, any shares of the capital
stock
of Nile; or (vii) directly or indirectly redeem, purchase, sell or otherwise
acquire any capital stock of Nile.
ARTICLE
V
ADDITIONAL
AGREEMENTS
5.1. Public
Disclosure; Securities Law Filings.
Parent
and Nile will consult with each other, and to the extent practicable, agree,
before issuing any press release or otherwise making any public statement with
respect to the Merger or this Agreement and will not issue any such press
release or make any such public statement prior to such consultation, except
as
may be required by law, in which case reasonable efforts to consult with the
other party will be made prior to such release or public statement. In addition,
Parent and Nile agree to cooperate in the preparation and filing of all filings
required by applicable securities laws, including, without limitation, the
Merger Form 8-K (as defined in Section 6.1 below), other current reports on
Form
8-K and information required by Rule 14f-1 under the Exchange Act.
5.2. Expenses.
Except
as otherwise provided in this Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be
paid by the party incurring such costs and expenses.
5.3. Commercially
Reasonable Efforts; Notification.
(a) Upon
the
terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use commercially reasonable efforts to take, or cause to
be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable
to
consummate and make effective, in the most expeditious manner practicable,
the
Merger and the other transactions contemplated by this Agreement, including
to
accomplish the following: (i) causing the conditions precedent set forth in
ARTICLE IV to be satisfied; (ii) obtaining all necessary actions or non-actions,
waivers, consents, approvals, orders and authorizations from any federal, state,
local or foreign governmental authority (collectively, “Governmental
Entities”
and
each a “Governmental
Entity”);
(iii)
making all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any);
(iv) avoiding any suit, claim, action, investigation or proceeding by any
Governmental Entity challenging the Merger or any other transaction contemplated
by this Agreement; (v) obtaining all consents, approvals or waivers from third
parties required as a result of the transactions contemplated in this Agreement;
(vi) defending any suits, claims, actions, investigations or proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to
have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; and (vii) executing or delivering
any
additional instruments reasonably necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this
Agreement.
(b) Parent
shall give prompt notice to Nile upon becoming aware that any representation
or
warranty made by it or Merger Sub contained in this Agreement has become untrue
or inaccurate, or of any failure of Parent or Merger Sub to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, in each case, where
the
conditions set forth in Section 6.2(a) or Section 6.2(b) would not be satisfied
as a result thereof; provided, however, that no such notification shall affect
the representations, warranties, covenants or agreements of the parties or
the
conditions to the obligations of the parties under this Agreement.
(c) Nile
shall give prompt notice to Parent upon becoming aware that any representation
or warranty made by it contained in this Agreement has become untrue or
inaccurate, or of any failure of Nile to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
by
it under this Agreement, in each case, where the conditions set forth in Section
6.3(a) or Section 6.3(b) would not be satisfied as a result thereof; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations
of
the parties under this Agreement.
5.4. Third
Party Consents.
On or
before the Closing Date, Parent and Nile will each use its commercially
reasonable efforts to obtain any consents, waivers and approvals under any
of
its respective agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions contemplated
hereby.
5.5. Nile
Stock Options and Warrants.
(a) At
the
Effective Time, the Nile Option Plan and each outstanding option to purchase
shares of Nile Common Stock (each, a “Nile
Stock Option”)
thereunder or otherwise, whether or not vested, shall, by virtue of the Merger,
be assumed by Parent. Each Nile Stock Option so assumed by Parent under this
Agreement will continue to have, and be subject to, the same terms and
conditions of such options immediately prior to the Effective Time (including,
without limitation, any repurchase rights or vesting provisions and provisions
regarding the acceleration of vesting and exercisability on certain
transactions), except that (i) each Nile Stock Option will be exercisable (or
will become exercisable in accordance with its terms) for that number of whole
shares of Parent Common Stock as determined by multiplying the number of shares
of Nile Common Stock that were subject to such Nile Stock Option immediately
prior to the Effective Time by the Exchange Ratio determined pursuant to Section
1.6(a), and rounding the resulting number down to the nearest whole number
of
shares of Parent Common Stock, and (ii) the per share exercise price for the
shares of Parent Common Stock issuable upon exercise of such assumed Nile Stock
Option will be determined by dividing the exercise price per share of Nile
Common Stock at which such Nile Stock Option was exercisable immediately prior
to the Effective Time, by the Exchange Ratio determined pursuant to Section
1.6(a) and rounding the resulting exercise price up to the nearest whole cent
and that such number of shares of Parent Common Stock and exercise price shall
be determined in a manner consistent with the requirements of Section 409A
of
the Code. No vesting periods for Nile Stock Options will accelerate as a result
of the transaction contemplated hereby. At the Effective Time, (i) all
references in the Nile Option Plans and related stock option agreements to
Nile
shall be deemed to refer to Parent and (ii) Parent shall assume all of Nile's
obligations with respect to the Nile Option Plans and Nile's Stock Options
as so
amended.
(b) At
the
Effective Time, each outstanding warrant to purchase shares of Nile Common
Stock
(each, a “Nile
Warrant”),
whether or not vested, shall, by virtue of the Merger, be assumed by Parent.
Each Nile Warrant so assumed by Parent under this Agreement will continue to
have, and be subject to, the same terms and conditions of such options or
warrants immediately prior to the Effective Time (including, without limitation,
any repurchase rights or vesting provisions and provisions regarding the
acceleration of vesting and exercisability on certain transactions), except
that
(i) each Nile Warrant will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of Parent Common
Stock as determined pursuant to the Exercise Ratio set forth in Section 1.6(a),
and (ii) the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed Nile Warrant will be equal to the
exercise price per share of Nile Common Stock at which such Nile Warrant was
exercisable immediately prior to the Effective Time, adjusted to give effect
to
the Exchange Ratio determined pursuant to Section 1.6(a). No vesting periods
for
any Nile Warrants will accelerate as a result of the transaction contemplated
hereby. At the Effective Time, (i) all references in the related stock warrant
agreements to Nile shall be deemed to refer to Parent and (ii) Parent shall
assume all of Nile's obligations with respect to Nile's Warrants as so
amended.
(c) It
is
intended that the Nile Stock Options assumed by Parent shall qualify following
the Effective Time as incentive stock options as defined in Section 422 of
the
Code to the extent the Nile Stock Options qualified as incentive stock options
immediately prior to the Effective Time and the provisions of this Section
5.5
shall be applied consistently with such intent.
5.6. Parent
Stock Options and Warrants.
At the
Effective Time, any outstanding options to purchase shares of Parent Common
Stock (each, a “Parent
Stock Option”),
whether or not vested, and any outstanding warrants to purchase shares of Parent
Common Stock, whether or not then exercisable, shall, by virtue of the Merger,
be cancelled.
5.7. Parent
Board of Directors.
At the
Effective Time, the Board of Directors of Parent, in accordance with applicable
law and the Parent Charter Documents, shall take all necessary action (which
action may include the resignation of existing directors) to cause the Board
of
Directors of Parent, as of the Effective Time, to appoint the directors of
Nile
as directors of the Parent.
5.8. Parent
Management.
At the
Effective Time, the Board of Directors of Parent, in accordance with applicable
law and the Parent Charter Documents shall take all necessary action to appoint
the officers of Nile to the similar offices of Parent.
5.9. Private
Placement.
Each of
Nile and Parent shall take all necessary action on its part such that the
issuance of the Merger Consideration to Nile stockholders constitutes a valid
“private placement” under the Securities Act. Without limiting the generality of
the foregoing, Nile shall
(1) provide
each Nile stockholder with a stockholder qualification questionnaire in the
form
reasonably acceptable to both Parent and Nile (a “Stockholder
Questionnaire”)
and
(2) use
its best efforts to cause each Nile stockholder to attest that that stockholder
either
(A) is
an “accredited investor” as defined in Regulation D of the Securities Act,
(B) has
such knowledge and experience in financial and business matters that the
stockholder is capable of evaluating the merits and risks of receiving the
Merger Consideration, or (C) has appointed an appropriate person reasonably
acceptable to both Parent and Nile to act as the stockholder’s purchaser
representative in connection with evaluating the merits and risks of receiving
the Merger Consideration.
5.10. Nile
Stockholder Written Consent; Materials to Stockholders.
(a) Nile
shall use commercially reasonable efforts to obtain, in lieu of holding a
stockholder meeting, the written consent of the number of Nile stockholders
necessary under its Certificate of Incorporation, Bylaws, and the DGCL to
approve this agreement and the Merger.
(b) Nile
shall as promptly as practicable following the date of this agreement prepare
and mail to Nile stockholders all information as may required to comply with
the
DGCL and the Securities Act.
5.11. No
Negotiation.
Other
than as contemplated pursuant to the Financing, until the Effective Date, or
such time, if any, as this Agreement is terminated pursuant to ARTICLE VII
below, neither Parent nor Nile shall, nor shall they permit any of their
respective affiliates, directors, officers, employees, investment bankers,
attorneys or other agents, advisors or representatives to, directly or
indirectly, (a) sell, offer or agree to sell its business, by sale of shares
or
assets, merger or otherwise (each an “Acquisition
Transaction”)
other
than pursuant to this Agreement, (b) solicit or initiate the submission of
any
proposal for an Acquisition Transaction, or (c) participate in any discussions
or negotiations with, or furnish any information concerning its business to,
any
corporation, person or other entity in connection with a possible Acquisition
Transaction other than pursuant to this Agreement.
If
either Parent or Nile is contacted or solicited by any third-party regarding
any
action contemplated in Sections 5.11(a), (b) or (c) above, such party must
promptly inform the other in writing.
5.12. Limitation
of Liability.
Notwithstanding anything to the contrary contained in this Agreement, except
as
a result of a fraud, or a material misstatement or omission hereunder,
perpetrated by any party to this agreement, or their respective successors
or
affiliates, shall have any liability hereunder from and after the Closing Date.
5.13. Failure
to Fulfill Conditions. In
the
event that either of the parties hereto determines that a condition to its
respective obligations to consummate the transactions contemplated hereby cannot
be fulfilled on or prior to the termination of this Agreement, it will promptly
notify the other party.
5.14. Notification
of Certain Matters. On
or
prior to the Effective Date, each party shall give prompt notice to the other
party of (i) the occurrence or failure to occur of any event or the discovery
of
any information, which occurrence, failure or discovery would be likely to
cause
any representation or warranty on its part contained in this Agreement to be
untrue, inaccurate or incomplete after the date hereof in any material respect
or, in the case of any representation or warranty given as of a specific date,
would be likely to cause any such representation or warranty on its part
contained in this Agreement to be untrue, inaccurate or incomplete in any
material respect as of such specific date, and (ii) any material failure of
such
party to comply with or satisfy any covenant or agreement to be complied with
or
satisfied by it hereunder.
5.15. Access
to Information.
Each of
Nile and Parent shall afford to the other and the other's accountants, counsel,
financial advisors and other representatives reasonable access during normal
business hours throughout the period prior to the Effective Time to all
properties, books, contracts, commitments and records (including, but not
limited to, tax returns) of it and, during such period, shall furnish promptly
(a) a copy of each report, schedule and other document filed or received by
it
during such period pursuant to the requirements of federal or state securities
laws or filed by it during such period with the SEC in connection with the
transactions contemplated by this Agreement or which may have a Parent Material
Adverse Effect or Nile Material Adverse Effect on it and (b) such other
information concerning its business, properties and personnel as the other
shall
reasonably request; provided, however, that no investigation pursuant to this
Section shall affect any representation or warranty made herein or the
conditions to the obligations of the respective parties to consummate the
Merger. All non-public documents and information furnished to either Nile or
Parent, as the case may be, in connection with the transactions contemplated
by
this Agreement shall be deemed to have been received, and shall be held by
the
recipient, in confidence, except that Nile and Parent, as applicable, may
disclose such information as may be required under applicable law or as may
be
necessary in connection with the preparation of the Proxy Statement. Each party
shall promptly advise the others, in writing, of any change or the occurrence
of
any event after the date of this Agreement and prior to the Effective Time
having, or which, insofar as can reasonably be foreseen, in the future would
reasonably be expected to have, any Nile Material Adverse Effect or Parent
Material Adverse Effect on, as applicable.
ARTICLE
VI
CONDITIONS
TO THE MERGER
6.1. Conditions
to Obligations of Each Party to Effect the Merger.
The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions, any of which may be waived if waived in writing by both
Parent and Nile:
(a) No
Prohibitive Change of Law.
There
shall have been no law, statute, rule or regulation, domestic or foreign,
enacted or promulgated which would prohibit or make illegal the consummation
of
the transactions contemplated hereby.
(b) Stockholder
Approvals.
This
Agreement shall have been adopted and the Merger shall have been duly approved
by the requisite vote under applicable law and in accordance with the procedures
set forth in Certificate of Incorporation, Bylaws and the DGCL by the
stockholders of each party to this Agreement and all other Stockholder Approvals
required by Section 2.2 shall have been obtained, including without limitation,
the approval of the stockholder of the Merger Sub.
(c) Dissenting
Shares.
Nile
stockholders holding in the aggregate not more than five percent (5%) of the
Nile Common Stock shall have delivered to Nile a written demand for appraisal
in
accordance with Section 262(d) of the DGCL.
(d) No
Order.
No
Governmental Entity shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which is in effect and
which
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(e) Schedules.
Each of
the parties hereto shall have delivered to each other complete and accurate
Schedules to this Agreement and such Schedules shall have been approved by
the
recipient.
(f) Exhibits.
The
parties shall mutually agree upon the form and substance of all the Exhibits
to
this Agreement and the appropriate signatories thereto shall have executed
and
delivered each such document.
(g) Officers’
Certificate.
Each
party shall have furnished to the other a certificate of its Chief Executive
Officer dated as of the Effective Date, in which such officers shall certify
that, to their best knowledge, the conditions set forth in Section 6.2(a) and
6.2(b) or 6.3(a) and 6.3(b) (as applicable) have been fulfilled and are true
and
correct.
(h) Nile
Financing. Nile
shall have closed on at least $15 million of gross proceeds from the sale of
Nile Common Stock in the Financing.
(i) Readiness
of the Form 8-K.
The
Form 8-K announcing the Closing, together with, or incorporating by reference,
the financial statements prepared by Nile and its accountant, and such other
information that may be required to be disclosed with respect to the Merger
in
any report or form to be filed with the SEC (“Merger
Form 8-K”)
shall
be, in the opinion of the parties and their respective counsel, in a form
reasonably acceptable for filing with the SEC immediately following the
Closing.
The
Merger 8-K will be prepared by counsel for Nile, subject to review by the
Parent’s counsel.
6.2. Additional
Conditions to Obligations of Nile.
The
obligation of Nile to effect the Merger shall be subject to the satisfaction
at
or prior to the Closing Date of each of the following conditions, any of which
may be waived, in writing, exclusively by Nile:
(a) Representations
and Warranties.
The
representations and warranties of Parent and Merger Sub set forth in this
Agreement shall be true and correct as of the date of this Agreement and as
of
the Closing Date as if made on and as of the Closing Date (except to the extent
any such representation and warranty expressly speaks only as of an earlier
date) and Nile shall have received a certificate signed on behalf of Parent
by
the Chief Executive Officer of Parent to such effect.
(b) Agreements
and Covenants.
Each of
Parent and Merger Sub shall have performed or complied with, in all material
respects, all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing Date, and Nile
shall have received a certificate to such effect signed on behalf of each of
Parent and Merger Sub by an authorized officer of Nile.
(c) Consents
and Approvals.
Parent
and Merger Sub shall have obtained all consents and approvals necessary to
consummate the transactions contemplated by this Agreement in order that
the
transactions contemplated herein not constitute a breach or violation of,
or
result in a right of termination or acceleration of, or creation of any
encumbrance on any of Parent’s or Merger Sub’s assets pursuant to the provisions
of, any agreement, arrangement or undertaking of or affecting Parent or any
license, franchise or permit of or affecting Parent or Merger Sub.
(d) No
Closing Material Adverse Effect.
Since
the date hereof, there has not occurred a Parent Material Adverse Effect.
For
purposes of the preceding sentence and Section (a), the occurrence of any
of the
following events or circumstances, in and of themselves and in combination
with
any of the others, shall not constitute a Parent Material Adverse Effect:
(i) any
litigation or threat of litigation filed or made after the date hereof
challenging any of the transactions contemplated herein or any stockholder
litigation or threat of stockholder litigation filed or made after the date
hereof resulting from this Agreement or the transactions contemplated herein
unless Nile shall conclude that it has or could have a Parent Material Adverse
Effect on the Parent and the Surviving Corporation, taken as a whole; and
(ii) any
adverse change, event or effect that is demonstrated to be caused primarily
by
conditions generally affecting the United States economy.
(e) Corporate
Documents.
Nile
shall have received a copy of the Certificate of Incorporation of each of
the
Parent and Merger Sub, certified by the Secretary of State of the State of
Delaware evidencing the good standing of Parent and Merger Sub in such
jurisdiction.
(f) Other
Agreements and Resignations.
Each of
the officers and directors of Parent and Merger Sub immediately prior to
the
Closing Date shall deliver duly executed resignations from their positions
with
each such applicable corporation immediately upon the Effective
Time.
(g) Compliance
with Securities Law Requirements.
Parent
shall be in compliance in all material respects with all requirements of
applicable securities laws, including, without limitation, the filing of
reports
required by Section 13 of the Exchange Act, and shall have taken all actions
with respect thereto as shall be required or reasonably requested by Nile
in
connection therewith.
(h) Conversion
of Promissory Notes.
All
debt instruments or securities of Parent held or beneficially owned by
Fountainhead Capital Partners Limited and its affiliates (“Fountainhead”)
shall
be converted into shares of Parent Common Stock.
(i) Parent
Capitalization.
Parent
shall have not more than 1,250,000 shares of Parent Common Stock issued and
outstanding immediately prior to the Merger.
6.3. Additional
Conditions to the Obligations of Parent and Merger Sub.
The
obligations of Parent and Merger Sub to effect the Merger shall be subject
to
the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations
and Warranties.
The
representations and warranties of Nile set forth in this Agreement shall
be true
and correct as of the date of this Agreement and as of the Closing Date as
if
made on and as of the Closing Date (except to the extent any such representation
and warranty expressly speaks only as of an earlier date or to the extent
such
representation and warranty is no longer true on account of transactions
contemplated by this Agreement or the Financing) and Parent shall have received
a certificate signed on behalf of Nile by the Chief Executive Officer of
Nile to
such effect; provided, however, that notwithstanding anything herein to the
contrary, this Section 6.3(a) shall be deemed to have been satisfied even
if
such representations or warranties are not so true and correct unless the
failure of such representations or warranties to be so true and correct,
individually or in the aggregate, has had, or is reasonably likely to have,
a
Nile Material Adverse Effect.
(b) Agreements
and Covenants.
Nile
shall have performed or complied with, in all material respects, all agreements
and covenants required by this Agreement to be performed or complied with
by it
at or prior to the Closing Date, and Parent shall have received a certificate
to
such effect signed on behalf of Nile by an authorized officer of
Nile.
(c) No
Closing Material Adverse Effect.
Since
the date hereof, there shall not have occurred a Nile Material Adverse Effect.
For purposes of the preceding sentence and Section 6.3(a), the occurrence
of any
of the following events or circumstances, in and of themselves and in
combination with any of the others, shall not constitute a Nile Material
Adverse
Effect:
(i) any
litigation or threat of litigation filed or made after the date hereof
challenging any of the transactions contemplated herein or any stockholder
litigation or threat of stockholder litigation filed or made after the date
hereof resulting from this Agreement or the transactions contemplated herein
unless Nile shall conclude that it has or could have a Nile Material Adverse
Effect on Nile and the Surviving Corporation, taken as a whole; and
(ii) any
adverse change, event or effect that is demonstrated to be caused primarily
by
conditions generally affecting the United States economy, or by conditions
generally affecting the biotechnology or pharmaceutical industries.
(d) Audited
Financial Statements.
Nile
shall have the audited financial statements that are required to be filed
with
the SEC as an exhibit to Merger Form 8-K available on or before the Closing
Date.
ARTICLE
VII
TERMINATION,
AMENDMENT AND WAIVER
7.1. Termination.
This
Agreement may be terminated at any time prior to the Effective Time, whether
before or after the requisite approval of the stockholders of Nile:
(a) by
mutual
written consent duly authorized by the Boards of Directors of Parent and
Nile;
or
(b) by
either
Parent or Nile if the Merger shall not have been consummated by August 31,
2007,
which date will be automatically extended upon written notice by Nile to
the
Parent of such a need for up to 30 days if the expiration of the Financing
shall
have been extended (such date, being the “Outside
Date”)
for
any reason; provided, however, that the right to terminate this Agreement
under
this Section 7.1(b) shall not be available to any party whose action or failure
to act has been a principal cause of, or resulted in the failure of, the
Merger
to occur on or before such date if such action or failure to act constitutes
a
breach of this Agreement; or
(c) by
either
Parent or Nile if a Governmental Entity shall have issued an order, decree
or
ruling or taken any other action, in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, which order,
decree,
ruling or other action shall have become final and non-appealable or any
law,
order, rule or regulation is in effect or is adopted or issued, which has
the
effect of prohibiting the Merger; or
(d) by
Parent, on the one hand, or Nile, on the other, if any condition to the
obligation of any such party to consummate the Merger set forth in Section
6.2
(in the case of Nile) or 6.3 (in the case of Parent) becomes incapable of
satisfaction prior to the Outside Date; provided, however, that the failure
of
such condition is not the result of a breach of this Agreement by the party
seeking to terminate this Agreement.
7.2. Fees
and Expenses.
All
Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses whether
or not the Merger is consummated, provided that in the event the Merger is
consummated, Nile will pay the reasonable legal fees of Parent’s counsel in this
transaction up to $25,000. As used in this Agreement, “Expenses”
shall
include all reasonable out-of-pocket expenses (including, without limitation,
all fees and expenses of counsel, accountants, experts and consultants to
a
party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and all other matters relating
to
the closing of the Merger and the other transactions contemplated
hereby.
7.3. Amendment.
This
Agreement may be amended by the parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to the Effective
Time;
provided, however, that, after the approval and adoption of this Agreement
by
the stockholders of Nile, there shall not be any amendment that by applicable
law requires further approval by the stockholders of Nile without the further
approval of such stockholders. This Agreement may not be amended by the parties
hereto except by execution of an instrument in writing signed on behalf of
each
of Parent, Nile and Merger Sub.
7.4. Extension;
Waiver.
At any
time prior to the Effective Time, any party hereto may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations
or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in
any
document delivered pursuant hereto and (iii) waive compliance with any of
the
agreements or conditions for the benefit of such party contained herein.
Any
agreement on the part of a party hereto to any such extension or waiver shall
be
valid only if set forth in an instrument in writing signed on behalf of such
party. Delay in exercising any right under this Agreement shall not constitute
a
waiver of such right.
ARTICLE
VIII
CONTINUATION
OF BUSINESS
After
the
Effective Time of the Merger, Parent, either directly or through Nile as
long as
Nile is within Parent’s “qualified group” within the meaning of Regulations
Section 1.368-1(d)(4)(ii) (the “Qualified
Group”),
will
continue at least one significant historic business line of Nile, or use
at
least a significant portion of Nile's historic business assets in a business,
in
each case within the meaning of Regulations Section 1.368-1(d), except that
Nile's historic business assets may be transferred (a) to a corporation
that is another member of Parent’s Qualified Group, or (b) to an entity
taxed as a partnership if (i) one or more members of Parent’s Qualified
Group have active and substantial management functions as a partner with
respect
to Parent’s historic business or (ii) members of Parent’s Qualified Group
in the aggregate own an interest in the partnership representing a significant
interest in Nile's historic business, in each case within the meaning of
Regulations Section 1.368-1(d)(4)(iii).
ARTICLE
IX
GENERAL
PROVISIONS
9.1. Notices.
All
notices and other communications hereunder shall be in writing and shall
be
deemed given on the day of delivery if delivered personally or sent via telecopy
(receipt confirmed) or on the second business day after being sent if delivered
by commercial delivery service, to the parties at the following addresses
or
telecopy numbers (or at such other address or telecopy numbers for a party
as
shall be specified by like notice):
(a) if
to
Parent or Merger Sub (prior to Closing):
President
SMI
Products, Inc.
12▇
▇▇▇▇▇
▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
With
a
copy to:
▇▇▇▇▇▇
▇.
▇. ▇▇▇▇▇▇
12▇
▇▇▇▇▇
▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
(b) if
to
Nile or Merger Sub (or Parent subsequent to Closing), to:
Chief
Executive Officer
Nile
Therapeutics, Inc.
28▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Phone:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
With
a
copy to:
▇▇▇
▇.
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇
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of the Am▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
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Tel:
(▇▇▇) ▇▇▇-▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
9.2. Interpretation.
(a) When
a
reference is made in this Agreement to Exhibits, such reference shall be
to an
Exhibit to this Agreement unless otherwise indicated. When a reference is
made
in this Agreement to a Section, such reference shall be to a Section of this
Agreement. Unless otherwise indicated the words “include,” “includes” and
“including” when used herein shall be deemed in each case to be followed by the
words “without limitation.” The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the
meaning or interpretation of this Agreement. When reference is made herein
to
“the business of” an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference
to
the subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity.
(b) For
purposes of this Agreement, the term “knowledge” means with respect to a party
hereto, with respect to any matter in question, that any of the officers
of such
party has actual knowledge of such matter.
(c) For
purposes of this Agreement, the term “person” shall mean any individual,
corporation (including any non-profit corporation), general partnership,
limited
partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company),
firm
or other enterprise, association, organization, entity or Governmental
Entity.
(d) For
purposes of this Agreement, an “agreement,” “arrangement,” “contract,”
“commitment” or “plan” shall mean a legally binding, written agreement,
arrangement, contract, commitment or plan, as the case may be.
(e) As
used
in this Agreement, the following terms shall have the respective meanings
ascribed thereto in the respective sections of this Agreement set forth opposite
each such term below unless the context otherwise requires:
|
Term
|
Section
|
|
|
Acquisition
Transaction
|
5.11
|
|
|
Action
|
2.11
|
|
|
Agreement
|
Preamble
|
|
|
Certificate
of Merger
|
1.2
|
|
|
Closing
|
1.2
|
|
|
Closing
Date
|
1.2
|
|
|
Code
|
0
|
|
|
DGCL
|
Recitals
|
|
|
Dissenting
Shares
|
0
|
|
|
Effective
Time
|
1.2
|
|
|
Encumbrances
|
1.3(b)
|
|
|
Exchange
Act
|
3.5(a)
|
|
|
Exchange
Ratio
|
1.6
|
|
|
Expenses
|
7.2
|
|
|
Financing
|
Recitals
|
|
|
GAAP
|
2.9
|
|
|
Governmental
Entity
|
5.3(a)
|
|
|
Intangibles
|
2.15
|
|
|
Liabilities
|
1.3(b)
|
|
|
Material
Permits
|
2.13
|
|
|
Materials
Adverse Effect
|
2.3
|
|
|
Memorandum
|
Recitals
|
|
|
Merger
|
1.1
|
|
|
Merger
Consideration
|
1.6(a)
|
|
|
Merger
Form 8-K
|
6.1(i)
|
|
|
Merger
Sub
|
Preamble
|
|
|
Merger
Sub Common Stock
|
3.2
|
|
|
Nile
|
Preamble
|
|
|
Nile
Balance Sheet
|
2.17
|
|
|
Nile
Common Stock
|
1.6(a)
|
|
|
Nile
Insider
|
2.8
|
|
|
Nile
Preferred Stock
|
1.6(b)
|
|
|
Nile
Material Adverse Effect
|
2.3
|
|
|
Nile
Option Plans
|
1.6(b)
|
|
|
Nile
Stock Option
|
5.5(a)
|
|
|
Nile
Warrant
|
5.5(b)
|
|
|
Outside
Date
|
7.1(b)
|
|
|
Parent
|
Preamble
|
|
|
Parent
Balance Sheet
|
3.5(b)
|
|
|
Parent
Charter Documents
|
3.4(a)
|
|
|
Parent
Common Stock
|
1.6(a)
|
|
|
Parent
Financials
|
3.5(b)
|
|
|
Parent
Insiders
|
3.15
|
|
|
Parent
Material Adverse Effect
|
3.1(a)
|
|
Parent
Permits
|
3.11(b)
|
|
|
Parent
Recapitalization
|
4.3
|
|
|
Parent
SEC Reports
|
3.5(a)
|
|
|
Parent
Stockholder
|
1.7
|
|
|
Parent
Stockholder Shares
|
1.7
|
|
|
Parent
Stock Option
|
5.6
|
|
|
Qualified
Group
|
ARTICLE
VIII
|
|
|
Registration
Statement
|
0
|
|
|
Regulations
|
0
|
|
|
Required
Approvals
|
2.4
|
|
|
SEC
|
1.7
|
|
|
Securities
Act
|
3.5(a)
|
|
|
Share
Issuance
|
Recitals
|
|
|
SMI
Stockholder Shares
|
0
|
|
|
Stockholder
Approvals
|
2.2
|
|
|
Stockholder
Questionnaire
|
5.9
|
|
|
Subsequent
Registration Statement
|
0
|
|
|
Surviving
Corporation
|
1.1
|
|
|
Tax
Returns
|
3.8(l)
|
|
|
Tax
|
3.8(k)
|
|
|
Taxing
Authority
|
3.8(l)
|
9.3. Counterparts.
This
Agreement may be executed in one or more counterparts, all of which shall
be
considered one and the same agreement and shall become effective when one
or
more counterparts have been signed by each of the parties and delivered to
the
other party, it being understood that all parties need not sign the same
counterpart.
9.4. Entire
Agreement; Third Party Beneficiaries.
This
Agreement and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral,
among
the parties with respect to the subject matter hereof. Nothing in this Agreement
is intended to or shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by reason of this
Agreement.
9.5. Severability.
In the
event that any provision of this Agreement, or the application thereof, becomes
or is declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in full force
and
effect and the application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties
hereto.
The parties further agree to replace such void or unenforceable provision
of
this Agreement with a valid and enforceable provision that will achieve,
to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
9.6. Other
Remedies; Specific Performance.
Except
as otherwise provided herein, any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of any other
remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one remedy will not preclude the exercise of any other
remedy.
The parties hereto agree that irreparable damage would occur in the event
that
any of the provisions of this Agreement were not performed in accordance
with
their specific terms or were otherwise breached. It is accordingly agreed
that
the parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction,
this
being in addition to any other remedy to which t they are entitled at law
or in
equity. In any action at law or suit in equity to enforce this Agreement
or the
rights of any of the parties hereunder, the prevailing party in such action
or
suit shall be entitled to receive a reasonable sum for its attorneys' fees
and
all other reasonable costs and expenses incurred in such action or
suit.
9.7. Governing
Law; Jurisdiction.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law thereof. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting
in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated
hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert
in
any suit, action or proceeding, any claim that it is not personally subject
to
the jurisdiction of any such court, that such suit, action or proceeding
is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service
of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in
any
manner permitted by law.
9.8. Rules
of Construction.
The
parties hereto agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against
the
party drafting such agreement or document.
9.9. Assignment.
No
party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other parties.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
9.10. Waiver
of Jury Trial.
EACH OF
PARENT, NILE AND MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
PARENT, Nile AND MERGER SUBIN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE
AND
ENFORCEMENT HEREOF.
9.11. Survival
of Representations and Warranties.
The
respective representations, warranties, obligations, agreements and promises
of
the parties contained in this Agreement and in any exhibit, schedule,
certificate or other document delivered pursuant to this Agreement, shall
survive for a period of one year following the Closing Date.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of
Merger to be executed by their duly authorized respective officers as of
the
date first written above.
| NILE THERAPEUTICS, INC. | ||
| |
|
|
| By: |
/s/
▇▇▇▇▇
▇▇▇▇▇▇▇
|
|
|
Name:
|
▇▇▇▇▇
▇▇▇▇▇▇▇
|
|
|
Title:
|
CEO
|
|
| SMI PRODUCTS, INC. | ||
| |
|
|
| By: |
/s/
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
|
| Name: |
▇▇▇▇▇▇▇▇
Alison
|
|
| Title: |
President
|
|
| NILE MERGER SUB, INC. | ||
| |
|
|
| By: |
/s/
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
|
| Name: |
▇▇▇▇▇▇▇▇
Alison
|
|
| Title: |
President
|
|
NILE
DISCLOSURE SCHEDULES
These
are
the Disclosure Schedules of Nile Therapeutics, Inc., a Delaware corporation
(“Nile”) to the Merger Agreement dated as of August 15, 2007 (the “Merger
Agreement”)
by and
among Nile, SMI Products, Inc., a Delaware corporation (“Parent”)
and
Nile Merger Sub “Merger
Sub”,
a
Delaware corporation and a wholly-owned subsidiary of Parent. Capitalized
terms
used and not otherwise defined in these Disclosure Schedules shall have the
meanings given to such terms in the Merger Agreement.
The
information included in these Disclosure Schedules is not intended to
constitute, and shall not be construed as constituting, representations or
warranties of Nile except as and to the extent provided in the Merger Agreement.
Inclusion of any information in these Disclosure Schedules is not and shall
not
be deemed an admission that such information is material to the operations,
business, assets, liabilities, prospects or financial condition of Nile.
Inclusion of information herein in connection with the disclosure of matters
that are not in the ordinary course of business shall not be deemed to be
an
admission that such included items or actions are not in the ordinary course
of
business.
Matters
disclosed in these Disclosure Schedules are not necessarily limited to matters
required by the Merger Agreement to be disclosed in these Disclosure Schedules.
Any matter disclosed in one section of these Disclosure Schedules shall be
deemed disclosed for all purposes of any other sections hereof, to the extent
that its relevance to such other sections is reasonably apparent. Such
additional matters are set forth for information purposes and these Disclosure
Schedules do not necessarily include matters of a similar nature. Headings
used
herein have been provided for convenience of reference.
Schedule
2.6
Nile
Capitalization
As
of the
date of this Agreement, Nile’s authorized capital consists of 25,000,000 shares
of Nile Common Stock and 5,000,000 shares of preferred stock. Nile’s outstanding
capital (i) as of the date of this Agreement and (ii) as of immediately before
the Effective Time, is set forth below. Nile makes no representations hereunder
or herein of the information set forth below regarding SMI, and the number
of
shares of SMI outstanding following the Merger.
|
Currently
Outstanding
|
Outstanding
Pre Merger |
Percent of
Nile Pre- Merger |
Outstanding
Post Merger |
Percent
Post-Merger |
||||||||||||
|
Common
Stock
|
5,126,904
|
5,126,904
|
64.31
|
%
|
15,272,975
|
61.09
|
%
|
|||||||||
|
Options
(1)
|
50,000
|
50,000
|
0.63
|
%
|
148,949
|
0.60
|
%
|
|||||||||
|
Notes
and Interest (2)
|
$
|
4,300,000.00
|
||||||||||||||
|
New
Issuance (3)(4)(5)
|
2,580,579
|
32.37
|
%
|
7,687,563
|
30.75
|
%
|
||||||||||
|
Vested
Options (6)
|
215,010
|
2.70
|
%
|
640,513
|
2.56
|
%
|
||||||||||
|
Merger
Consideration
|
23,750,000
|
|||||||||||||||
|
Conversion
Ratio
|
2.98
|
|||||||||||||||
|
Total
Outstanding Post Merger
|
25,000,000
|
|||||||||||||||
|
SMI
|
1,250,000
|
5.00
|
%
|
|||||||||||||
|
NILE
|
23,750,000
|
95.00
|
%
|
|||||||||||||
|
TOTAL
|
5,176,904
|
7,972,511
|
25,000,000
|
100.00
|
%
|
|||||||||||
|
Unvested
Options (7)(8)(9)
|
874,075
|
0.00
|
%
|
2,603,859
|
0.00
|
%
|
||||||||||
(1)
10
year Options exercisable at $0.25 per share.
(2)
The
6% Convertible Notes convert automatically upon the Closing of the Private
Placement into the same securities issued in the Private Placement at (the
"Conversion Shares") at a conversion price equal to 90% of the Offering
Price.
In addition the Noteholders will receive five year warrants (the "Conversion
Warrants") to purchase 10% of Conversion Shares at a per share exercise
price
equal to the price per share sold in the Financing (the “Per Share
Price”).
(3)
Includes 1,893,989 shares of Nile Common Stock issued in connection with
the
Financing.
(4)
Includes the 603,271 Conversion Shares and five year warrants to purchase
60,327
Conversion Warrants.
(5)
Includes 23,010 shares of Nile Common Stock to be issued to Mayo Medical
Foundation for Research and Education to the terms of the Mayo License
Agreement
(as defined below).
(6)
Includes options to purchase (a) 198,910 shares of Common Stock (representing
2.5% of the outstanding Nile Common Stock on a Fully Diluted Basis (as
defined
in Section 1.6(a)) to be granted to ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇ following the Closing
of
the Offering and (b) 16,100 shares of Common Stock, which will be immediately
vested in the name of ▇▇. ▇▇▇▇▇ ▇▇▇▇▇ as a result of the completion of
certain
performance milestones.
(7)
As of
the date hereof, none of the members of Management own any securities of
Nile or
rights to obtain equity securities of Nile other then (a) options to purchase
654,423 shares of Nile Common Stock (representing 7.6% of the outstanding
Nile
Common Stock on a Fully Diluted Basis) to be granted to ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
immediately following the Closing of the Financing (b) options to purchase
a
178,979 shares of Nile Common Stock (representing 2.2% of the outstanding
Nile
Common Stock on a Fully Diluted Basis) to be granted to ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
immediately following the Closing of the Financing, (c) options to purchase
80,368 shares of Common Stock (representing 1% of the outstanding Nile
Common
Stock on a Fully Diluted Basis) to be granted to ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ immediately
following the Closing of the Financing, and (d) options to purchase 198,910
shares of Common Stock (representing 2.5% of the outstanding Nile Common
Stock
on a Fully Diluted Basis) to be granted to ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇ following the
Closing of the Financing.
One
third
of the options granted to the ▇▇. ▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇ will vest, if at
all,
throughout the term of their respective employment upon the successful
completion of certain goals and milestones. Two-thirds of such options
will
vest, if at all, in equal installments upon the anniversary of such their
respective employment agreements. One quarter of the options granted to
▇▇.
▇▇▇▇▇ will vest on the anniversary date of her employment. Thereafter the
unvested options will vest, if at all, in equal monthly installments. The
options to be granted to ▇▇. ▇▇▇▇▇▇ will vest immediately. Approximately
16,100
options will vest in ▇▇. ▇▇▇▇▇’ name upon issuance as a result of the completion
of certain performance milestones. No other options are currently vested
or will
vest within 90 days from the date hereof.
All
such
options described above shall be exercisable at the Per Share
Price.
The
amounts set forth above reflect the shares outstanding as of the date hereof.
The capitalization is subject to adjustment as described in Schedule
1.6(a).
Schedule
2.7
Nile
Contracts and Commitments
(1) None.
(2) 401(k)
Plan though ADP Total Source.
(3) Medical,
dental, STD/LTD, vision, and life insurance plans through ADP
TotalSource
(4) 2005
Incentive Stock Option Plan.
(5) See
below:
(a) Employment
Agreements.
(i) ▇▇.
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, Chief Executive Officer of Nile, dated May 11, 2007, which
employment commenced on June 8, 2007.
(ii) ▇▇.
▇▇▇▇▇
▇▇▇▇▇, Chief Operating Officer of Nile, dated January 29, 2007, which employment
commenced on February 13, 2007.
(iii) ▇▇.
▇▇▇▇▇
▇▇▇▇▇▇, President and Chief Executive Officer, dated December 12, 2006, which
employment commenced on January 15, 2007 and was terminated on May 21, 2007.
(iv) Letter
Agreement with ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Vice President of Clinical Development
dated
August 6, 2007
(b) Scientific
Advisory Board Agreements.
(i) ▇▇.
▇▇▇▇▇
▇▇▇▇▇▇, dated February 14, 2006.
(ii) ▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Dated February 1, 2006.
(iii) Dr.
▇▇▇▇
▇▇▇▇▇▇▇▇, dated March 3, 2006.
(iv) ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, dated March 1, 2007.
(v) Dr.
▇▇▇▇▇
▇▇▇▇▇, dated March 14, 2007.
(c) Consulting
Agreements.
(i) ▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇, dated August 1, 2007, pursuant to which ▇▇. ▇▇▇▇▇ will assist
the
Company in accounting and compliance matter at an hourly rate of
$150.00.
(ii) ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, dated May 25, 2007, pursuant to which ▇▇. ▇▇▇▇▇▇ will provide
assist the company in its clinical operations at an hourly rate of $100.00
per
hour.
(6) Pursuant
to ▇▇. ▇▇▇▇▇▇▇’▇ Employment Agreement, Nile will use its best efforts to cause
▇▇. ▇▇▇▇▇▇▇ to be elected as a member of its Board of Directors throughout
the
term of his employment and shall include him in the management slate for
election as a director at every stockholders meeting during the term at which
his term as a director would otherwise expire. ▇▇. ▇▇▇▇▇▇▇ has agreed to
accept
election, and to serve during the term, as director of Nile, without any
compensation.
(7) Indebtedness.
(a) 6%
Convertible Notes.
In
March 2006, Nile issued to certain qualified investors 6% Convertible Promissory
Notes in the aggregate principal amount of approximately Four Million Dollars
($4,000,000.00) (the “Notes”). Upon the closing of any equity financing in
excess of $5,000,000, including the Financing, (a “Qualified Financing”), the
Notes will automatically convert into the same securities issued by Nile
(the
“Conversion Shares”) in an amount determined by dividing the principal amount of
the Notes, and all accrued interests thereon, by 90% of the price per share
sold
in the Offering (the “Offering Price”). In addition, upon conversion, Nile has
agreed to issue to the holders of the Notes (the “Noteholders”) five-year
warrants to purchase a number of shares of Common Stock equal to 10% of the
Conversion Shares at an exercise price equal to the Offering Price. The Notes
are senior to all other indebtedness.
(b) 8%
Promissory Note.
On July
24, 2007, Nile issued an 8% Promissory Note to a single investor in the
aggregate amount of $1,500,000. The Note matures and becomes payable together
with the 8% premium on the November 24, 2007. Nile also paid the investor
a 2%
fee at closing, which amount was netted from the gross proceeds.
(c) Promissory
Note.
Pursuant to ▇▇. ▇▇▇▇▇ Employment Contract, Nile loaned ▇▇. ▇▇▇▇▇ Forty Seven
Thousands Dollars ($47,000.00) in order to assist him in the satisfaction
of
certain obligations owed to his prior employer, which is evidenced by a Note
bearing interests at 4.75%. The Note will be repaid to Nile in three annual
installments to be subtracted from ▇▇. ▇▇▇▇▇’ Performance Bonus. The Note will
be repaid by within 10 days of termination of ▇▇. ▇▇▇▇▇’ employment prior to the
end of his employment term.
(8) None.
(9) On
March
21, 2007, Nile entered into a 3-year office lease with Seagate Telegraph
Associates, LLC for approximately 2,332 square feet on the 3rd
floor of
a building located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The lease
term
expires on April 30, 2010. Monthly base rent is $6,087 with annual escalations
of $233 per month to $6,320 per month effective May 1, 2008 and to $6,553
per
month effective May 1, 2009. Nile is also responsible for payment of its
share
of certain charges such as operating costs and taxes in excess of the base
year
and additional rent. In connection with this lease, Nile has made a $14,000
cash
deposit.
(10) None.
(11) None.
(12) Mayo
License Agreement. In
January 2006 Nile entered into an exclusive, worldwide, royalty bearing license
agreement (the “Mayo License Agreement”) with Mayo Foundation for Medical
Education and Research (“Mayo”), including the right to grant sublicenses, for
the rights to the intellectual property and know-how relating to CD-NP, a
chimeric natriuretic peptide, for all therapeutic uses. Under the terms of
the
License Agreement, the Company paid to Mayo an up-front cash payment and
reimbursed it for past patent expenses. In addition, Nile issued to Mayo
500,000
shares of Common Stock. Nile is also required to make performance-based cash
payments upon successful completion of clinical and regulatory milestones
relating to CD-NP. We will not owe any milestone payment to Mayo until the
first
patient is dosed in the first company sponsored Phase II clinical trial of
its
lead product in the U.S. The Company has also agreed to pay Mayo milestone
payments upon the receipt of regulatory approval for each additional indication
of CD-NP as well as for additional compounds or analogues contained in the
intellectual property. Nile is also obligated to pay Mayo royalty payments
based
on sales of the licensed product(s).
2NTX-99
License Agreement.
On
August 6, 2007, the Company entered into a license agreement relating with
▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, including the right to grant sublicenses, for the rights
to
the intellectual property and know-how relating to 2NTX-99. The intellectual
property portfolio for 2NTX-99 includes an issued U.S. patent and a pending
Patent Cooperative Treaty submission relating to its composition of matter,
multiple methods of manufacturing, and method of use in treating a variety
of
atheroclerotic-thrombotic pathological conditions. Under the terms of the
2NTX-99 License Agreement, the Company paid to ▇▇. ▇▇▇▇▇▇▇▇▇▇ an up-front
cash
payment and reimbursed him for past patent expenses. Additionally, the agreement
provides for cumulative performance-based milestone payments to ▇▇. ▇▇▇▇▇▇▇▇▇▇
upon completion of clinical and regulatory milestones relating to 2NTX-99
in the
U.S., Europe and Japan. Nile will also be required to make certain milestones
payments to ▇▇. ▇▇▇▇▇▇▇▇▇▇ upon regulatory approval for each additional
indication of 2NTX-99 and upon achieving certain annual sales milestones.
The
first milestone payment will be due when the first patient is dosed in the
first
company sponsored Phase I clinical trial of 2NTX-99 in the U.S or the EU.
Nile
also expects to be required to make quarterly royalty payments to ▇▇. ▇▇▇▇▇▇▇▇▇▇
equal to a percentage of net sales of licensed products by Nile and its
sub-licensees.
(13) None.
(14) Other
Material Agreements.
(a) Nile
routinely enters into Confidentiality and Non-Disclosure Agreements with
third-parties pursuant to which it receives and/or discloses confidential
information.
(b) In
the
ordinary course of business, Nile enters into service agreements with certain
clinical research organizations, clinical manufacturing organizations and
other
clinical, regulatory and medical consultants, organizations and third-party
vendors.
(c) On
August
10, 2007, Nile entered into a Separation Agreement and General Release (the
“Separation Agreement “) with ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, a former executive of Nile.
Pursuant to the terms of the Separation Agreement, Nile will continue to
▇▇.
▇▇▇▇▇▇ his base salary, performance bonus and benefits until May 21, 2008.
In
addition, Nile will grant options to ▇▇. ▇▇▇▇▇▇ to purchase a number of shares
of Nile Common Stock equal to 2.5% of the outstanding shares of Common Stock,
on
a fully diluted basis, immediately following the closing of the Financing.
The
Company will also provide the executive with limited “piggy-back” registration
rights and will reimburse him for attorney’s fees in an amount up to $12,500. In
addition, the parties agree to release each other from any claims arising
out of
▇▇. ▇▇▇▇▇▇’▇ employment with the Company.
(d) The
holders of the 6% Convertible Notes are entitled to certain rights to
participate in securities financings in order to maintain their ownership
percentage.
(e) Nile
has
entered into a Consulting Agreement with Fountainhead Capital Partners Limited
pursuant to which Nile will pay Fountainhead a consulting fee equal to
$500,000.
(f) Nile
has
entered into an Engagement Agreement with Riverbank Capital Securities, Inc.
(“Riverbank”) pursuant to which we will pay Riverbank a non-accountable expense
allowance for their services in connection with the Financing and will indemnify
Riverbank from claims arising out of the Financing. Nile will not pay Riverbank
any cash commissions or equity consideration for its services.
Schedule
2.8
Affiliated
Transactions
1. Promissory
Note.
Pursuant to ▇▇. ▇▇▇▇▇ Employment Contract, Nile loaned ▇▇. ▇▇▇▇▇ Forty Seven
Thousands Dollars ($47,000.00) in order to assist him in the satisfaction
of
certain obligations owed to his prior employer, which is evidenced by a Note
bearing interests at 4.75%. The Note will be repaid to Nile in three annual
installments to be subtracted from ▇▇. ▇▇▇▇▇’ Performance Bonus. The Note will
be repaid by within 10 days of termination of ▇▇. ▇▇▇▇▇’ employment prior to the
end of his employment term.
2. Two
River Group Holdings, LLC and affiliated Broker-Dealer.
▇▇▇▇▇
▇.
▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇, each a director and substantial
stockholder of Nile, are the managing members of Two River Group Holdings,
LLC,
a merchant banking and venture capital firm specializing in biotechnology
companies (“Two River”), and are officers and directors of an NASD member broker
dealer. ▇▇. ▇▇▇▇▇ also serves as our Secretary and ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, the
Vice
President of Finance for Two River, serves as our Treasurer. Additionally,
certain employees of Two River, who are also stockholders of Nile, perform
substantial operational activity for Nile, including without limitation
financial, clinical and regulatory activities.
Nile
has
agreed to pay to such affiliated broker-dealer $100,000 to cover its expenses
(non-accountable) incurred in connection with the Financing and the Merger
and
will provide customary indemnification to such broker-dealer.
Generally,
Delaware corporate law requires that any transactions between Nile and any
of
its affiliates be on terms that, when taken as a whole, are substantially
as
favorable to us as those then reasonably obtainable from a person who is
not an
affiliate in an arms-length transaction. Nevertheless, none of our affiliates
or
Two River is obligated pursuant to any agreement or understanding with us
to
make any additional products or technologies available to us, nor can there
be
any assurance, and the investors should not expect, that any biomedical or
pharmaceutical product or technology identified by such affiliates or Two
River
in the future will be made available to us. In addition, Messrs. Kash, Kazam
and
▇▇▇▇▇ may from time to time serve as officers or directors of other
biopharmaceutical or biotechnology companies. There can be no assurance that
such other companies will not have interests in conflict with
Nile’s.
From
time-to-time, some of Nile’s expenses are paid for by Two River. Nile reimburses
Two River for these expenses and no interest is charged on the outstanding
balance.
Schedule
2.9
Financial
Statements
Any
material liabilities of any kind, whether accrued, absolute, contingent or
otherwise or material transactions or commitments entered into since June
30,
2007.
Schedule
2.11
Litigation
None
Schedule
2.17
Nile
Undisclosed Liabilities
None
Schedule
3.2
Parent
Capitalization
SMI
currently has 100,000,000 shares of common stock, par value $0.001 per share
(the “SMI Common Stock”) authorized for issuance, of which there are 755,100 SMI
Common Stock issued and outstanding. The certificate of incorporation of
SMI
also authorizes the issuance of 10,000,000 shares of undesignated preferred
stock, none of which is currently outstanding. SMI has no options, warrants,
or
other rights to acquire shares of capital stock outstanding.
At
June
30, 2007 SMI was indebted to Fountainhead, a shareholder holding approximately
73.5% of SMI’s issued and outstanding common shares, in the amount of $165,901,
comprising (i) six (6) convertible promissory notes aggregating a principal
balance of $92,558 due and payable on August 11, 2007; (ii) a convertible
promissory note with a principal balance of $31,637 due on September 30,
2007,
(iii) a convertible promissory note with a principal balance of $8,116 due
on
March 31, 2008 and (iv) a convertible promissory note with a principal balance
of $33,590 due on June 30, 2008 (together, the “SMI Notes”). The principal
balance of the SMI Notes and all accrued interest thereunder are convertible,
in
whole or in part, into shares of SMI Common Stock at the option of the payee
or
other holder thereof at any time prior to maturity, upon ten (10) days advance
written notice to SMI. The SMI Notes will convert at the effective time into
a
number of shares, which when added to the number of fully-diluted SMI common
shares at the Closing will not exceed five percent (5%) of such fully-diluted
common shares.
Schedule
3.3
Parent
Obligations With Respect to Capital Stock
See
description of SMI Notes described in Schedule 3.2.
Schedule
3.7
Parent
Undisclosed Liabilities
None
Schedule
3.9
Parent
Contracts and Commitments
(a)
Fountainhead will familiarize itself to the extent it deems appropriate with
the
business, operations, financial condition and prospects of the
Company;
(b) At
the
request of the Company’s management, Fountainhead will provide strategic
advisory services relative to the achievement of the Company’s business
plan;
(c) Fountainhead
will undertake to identify potential merger and acquisition targets for the
Company and assist in the analysis of proposed transactions;
(d) Fountainhead
will assist the Company in identifying potential investment bankers, placement
agents and broker-dealers who are qualified to act on behalf of the Company
to
achieve its strategic goals.
(e) Fountainhead
will assist in the identification of potential investors which might have
an
interest in evaluating participation in financing transactions with the
Company;
(f) Fountainhead
will assist the Company in the negotiation of merger, acquisition and corporate
finance transactions;
(g) At
the
request of the Company’s management, Fountainhead will provide advisory services
related to corporate governance and matters related to the maintenance of
the
Company’s status as a publicly-reporting company; and
(h) At
the
request of the Company’s management, Fountainhead will assist the Company in
satisfying various corporate compliance matters.
2. See
description of SMI Notes described in Schedule 3.2.
Schedule
3.14
Employees
of Parent
None
Schedule
3.15
Parent
Affiliated Transactions
1. See
description of Services Agreement described in Schedule 3.9 and the description
of the SMI Notes on Schedule
2. See
description of SMI Notes described in Schedule 3.2.
3. Consulting
Agreement between Fountainhead Capital Partners Limited and Nile Therapeutics,
Inc.
Schedule
3.17
Parent
Real Property
None
Schedule
3.26
Sarbanes
Oxley
SMI
does
not have an independent audit committee and has not retained an outside
consultant to such a committee. SMI has only one director.
Schedule
4.4
Covenants
of Nile
Schedule
4.4
Parent
Shareholders Entitled to Registration Rights
1. Fountainhead
Capital Partners Limited
2. Ko
Zen
Asset Management, Inc.