UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 11, 2008
VYREX CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation)
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000-27866
(Commission File
Number)
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88-0271109
(I.R.S. Employer
Identification Number)
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21615 N. 2
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Avenue
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Phoenix, Arizona
(Address of principal executive offices)
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85027
(Zip Code)
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(623) 780-3321
(Registrants telephone number including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the Registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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TABLE OF CONTENTS
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ITEM 1.01
- ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
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On February 11, 2008, Vyrex Corporation (Vyrex or the Company), PowerVerde, Inc.
(PowerVerde) and Vyrex Acquisition Corporation (VAC), a wholly-owned subsidiary of Vyrex, all
Delaware corporations, entered into an Agreement and Plan of Merger (the Merger Agreement).
Pursuant to the terms of the Merger Agreement, on February 12, 2008, VAC merged with and into
PowerVerde, with PowerVerde remaining as the surviving corporation and a wholly-owned subsidiary of
Vyrex (the Merger). As consideration for the Merger, as of the closing of the Merger, each
issued and outstanding share of common stock of PowerVerde was converted into the right to receive
1.2053301 shares of the common stock of Vyrex and each share of VAC was converted into one share of
PowerVerde common stock. As a result of the Merger, the former shareholders of PowerVerde hold 95%
of the common stock of Vyrex. Pursuant to the Merger Agreement, PowerVerde paid $233,000 in
accounts payable and other liabilities owed by Vyrex. A copy of the Merger Agreement is attached
hereto as Exhibit 10.01 and is incorporated into this Item by reference.
In addition, immediately prior to execution of the Merger Agreement, Vyrex paid a $200,000
promissory note through issuance of 250,000 shares of common stock and issued an additional 25,000
shares of common stock as payment for certain consulting and administrative services. See Item
3.02 Recent Sales of Unregistered Securities.
The Company intends to promptly amend its certificate of incorporation to change its name from
Vyrex Corporation to PowerVerde Solar Corporation.
In connection with the Merger, all of the Companys officers and directors resigned, and the
following individuals were appointed to their respective positions set forth beside their names
below:
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Name
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Title
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George Konrad
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President, Treasurer and Director
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Fred Barker
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Vice President, Secretary and Director
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Richard H. Davis
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Director
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Biographical and other information on Messrs. Konrad, Barker and Davis is set forth in the
sections entitled Directors and Executive Officers of the Form 10-SB disclosure.
FORM 10-SB DISCLOSURE
Item 2.01(f) of Form 8-K provides that if a registrant reporting a transaction under Item 2.01
was a shell company (as such term is defined in Rule 12b-2 under the Exchange Act), in connection
with such transaction the registrant must disclose the information that would be required if it
were filing a general form for securities registration on Form 10-SB. Please note that the
information provided below relates to the combined company after the Merger. Since our operations
after the Merger will consist solely of PowerVerde operations, except where the context otherwise
requires, the following discussion of our business and operations, PowerVerde, we, us, our
and the Company will mean or refer to PowerVerdes business and operations.
FORWARD-LOOKING STATEMENTS
Prospective investors are cautioned that the statements in this Report that are not
descriptions of historical facts may be forward-looking statements that are subject to risks and
uncertainties. This Report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Such forward-looking statements are based on the beliefs of our management as well as on
assumptions made by and information currently available to us as of the date of this Report. When
used in this Report, the words plan, will, may, anticipate, believe, estimate,
expect, intend, project and similar expressions, as they relate to PowerVerde, are intended
to identify such forward-looking statements. Although PowerVerde believes these statements are
reasonable, actual actions, operations and results could differ materially from those indicated by
such forward-looking statements as a result of the risk factors included in this Report or other
factors. We must caution, however, that this list of factors may not be exhaustive and that these
or other factors, many of which are outside of our control, could have a material adverse effect on
PowerVerde and our ability to achieve our objectives. All forward-looking statements attributable
to PowerVerde or persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements set forth above.
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DESCRIPTION OF BUSINESS
General
The Company is a Delaware corporation formed in March 2007 by its two principal owners and
officers: George Konrad; and Fred Barker. The Company was formed in order to further develop,
commercialize and market a series of unique electric generating power systems designed to produce
electrical power with zero emissions based on a patented pressure-driven motor. The design of the
motor was conceived by Mr. Barker in January 2001. Mr. Barker previously had a working
relationship with Mr. Konrad and enlisted Mr. Konrad and his manufacturing expertise, together with
Mr. Barkers own engineering expertise, to co-develop the motor.
An initial prototype of the motor was created and tested in early 2002, based on which
Messrs. Barker and Konrad concluded that the concept would work. A new design was developed in
early 2007 which resulted in a motor that produced more torque and horsepower as well as being
easier to mass produce. The new design combined the motor with
PowerVerdes proprietary Organic Rankine Cycle system (ORC). Under
this application, the energy from solar-heated water drives the
motor, ultimately producing alternating electrical current. The prototype has been tested extensively, and substantial tooling,
engineering and CAM/CNC programming has been completed for the production model motor; however, the
final design for the production model has not yet been completed. We expect to complete the final
design by the end of the third quarter of 2008, at which time we would be able to begin
manufacturing.
Messrs. Barker and Konrad together obtained U.S. Patent No. 6,840,151, which was issued on
January 11, 2005. On June 6, 2007, Messrs. Barker and Konrad and the Companys predecessor
PowerVerde, LLC, permanently and exclusively assigned to PowerVerde all rights to the patent and
the other intellectual property relating to the PowerVerde systems.
The Company plans to manufacture and market the PowerVerde power systems to end users in the
U.S. market; however, we have not yet hired any employees. An international division is planned to
coordinate global OEM licensing partnerships. The Company has not yet entered into any agreements
for distribution or marketing of its products, and there can be no assurance that it will ever do
so.
Product Description
The primary PowerVerde motor, with its related Organic Rankine Cycle, produces 10 kW of net
power for individual end users and the system can be installed in multiple units for business,
schools, hospitals and other users of electrical power. These non-combustion motors are powered by
any gas pressure source. With relatively low pressure (100-250psi), they produce substantial
torque and horsepower. The PowerVerde system has very few moving parts, which results in a motor of
durability and reliability. The system requires:
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A heat source (solar, waste heat, geothermal) or well-head pressure from
methane, CO
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or natural gas wells.
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An Organic Rankine Cycle (ORC) to convert heat into pressure
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PowerVerde patented engine to convert the pressure into horsepower
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A generator to convert the horsepower into electricity
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The Company has built and tested the pre-production motor and Organic Rankine Cycle, and the
Company believes that the overall design meets or exceeds performance parameters. The Company
believes that it will soon be able to enhance the systems power capacity to 20 kW of net power;
however, there can be no assurance that the Company will be successful in this effort.
Government Regulations and Incentives
The Company believes that the time is right for the PowerVerde system. Regulatory proposals
to limit greenhouse gasses are gaining momentum. One such measure would be a carbon tax placed on
fuels in proportion to their carbon content. Another would be a tax on oil. These would drive up
the price of electricity from fossil fuel sources yet have no impact on carbon-free renewable
sources such as those offered by the Company.
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Governments, utilities, businesses, and consumers alike are acutely aware of the negative
effects of pollution and use of fossil fuels. Fossil fuel-based emissions contribute to serious
health and environmental conditions such as acid rain, particulate pollution, nitrogen deposition,
and global climate change.
Consequently, government agencies at the federal, state and local levels have implemented and
proposed various economic incentives in the form of tax credits, rebates, deductions, accelerated
depreciation and other subsidies designed to enhance the use of energy-efficient and clean power
sources. We believe that these incentives will have a substantial positive impact on demand for
the PowerVerde systems; however, there can be no assurance that, even with these incentives, our
systems will be economically competitive or that the incentives will continue to be available.
Competition
The Company faces substantial competition from numerous other companies, most of whom have
financial and other resources substantially greater than those of the Company. The Companys
competition is worldwide, ranging from solo inventors and small businesses all the way to major
utility companies and multinational corporations, all of whom are attempting to design, develop and
market clean and efficient methods for the generation and delivery of electricity. This
competition is expected to increase due to pressures arising from the high prices of oil and
natural gas and from environmental concerns. These competitors may prove more successful in
offering similar products and/or may offer alternative products which prove superior in performance
and/or more popular with potential customers than the Companys products. The Companys ability to
commercialize its products and grow and achieve profitability in accordance with its business plan
will depend on its ability to satisfy its customers and withstand increasing competition by
providing high-quality products at reasonable prices. There can be no assurance that the Company
will be able to achieve or maintain a successful competitive position.
RISK FACTORS
Investing in our common stock is speculative and involves a high degree of risk. Prospective
investors should carefully consider the following risks and uncertainties and all other information
contained or referred to in this Current Report on Form 8-K before investing in our common stock.
The risks and uncertainties described below are not the only ones facing us. Additional risks and
uncertainties that we are unaware of, or that we currently deem immaterial, also may become
important factors that affect us. Our business, financial condition or results of operations could
be materially and adversely affected by some or all of the matters described below or other
currently unknown factors. In that case, the trading price of our Common Stock could decline, and
you could lose all of your investment.
Risks related to our business
General; No Operating History
The Company is a recently formed enterprise with no operating history. The Company has yet to
generate any revenues, and the commercial value of its products is uncertain. There can be no
assurance that the Company will ever be profitable. Further, the Company is subject to all the
risks inherent in a new business including, but not limited to: intense competition; lack of
sufficient capital; loss of protection of proprietary technology and trade secrets; difficulties in
commercializing its products, managing growth and hiring and retaining key employees; adverse
changes in costs and general business and economic conditions; and the need to achieve product
acceptance, to enter and develop new markets and to develop and maintain successful relationships
with customers, third party suppliers and contractors.
Intellectual Property
The Company relies primarily on a combination of trade secrets, patents, copyright and
trademark laws, and confidentiality procedures to protect its proprietary technology, which is its
principal asset.
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The Companys ability to compete effectively will depend to a large extent on its success in
protecting its proprietary technology, both in the United States and abroad. There can be no
assurance that (i) any patent that the Company applies for will be issued, (ii) any patents issued,
including the Companys existing U.S. Patent No. 6,840,151 B1, on which its current products are
based, will not be challenged, invalidated, or circumvented, (iii) that the Company will have the
financial resources to enforce its patents or (iv) the patent rights granted will provide any
competitive advantage. The Company could incur substantial costs in defending any patent
infringement suits or in asserting its patent rights, including those granted by third parties, and
the Company might not be able to afford such expenditures.
Although the Company has entered into confidentiality and invention agreements with its key
personnel, there can be no assurance that these agreements will be honored or that the Company will
be able to protect its rights to its non-patented trade secrets and know-how effectively. There
can be no assurance that competitors will not independently develop substantially equivalent or
superior proprietary information and techniques or otherwise gain access to the Companys trade
secrets and know-how. In addition, the Company may be required to obtain licenses to patents or
other proprietary rights from third parties. If the Company does not obtain required licenses, it
could encounter delays in product development or find that the development, manufacture or sale of
products requiring these licenses could be foreclosed.
Need for Additional Funds
The Company will need to raise substantial additional funds. Without such additional funds,
the Company may have to cease operations. The Company will require substantial additional funding
for its contemplated research and development activities, commercialization of its products and
ordinary operating expenses. Adequate funds for these purposes may not be available when needed or
on terms acceptable to the Company. Insufficient funds may require the Company to delay or scale
back its activities or to cease operations.
Competition
The Company faces substantial competition from numerous other companies, most of whom have
financial and other resources substantially greater than those of the Company. The Companys
competition is worldwide, ranging from solo inventors and small businesses all the way to major
utility companies and multinational corporations, all of whom are attempting to design, develop and
market clean and efficient methods for the generation and delivery of electricity. This
competition is expected to increase due to pressures arising from the high prices of oil and
natural gas and from environmental concerns. These competitors may prove more successful in
offering similar products and/or may offer alternative products which prove superior in performance
and/or more popular with potential customers than the Companys products. The Companys ability to
commercialize its products and grow and achieve profitability in accordance with its business plan
will depend on its ability to satisfy its customers and withstand increasing competition by
providing high-quality products at reasonable prices. There can be no assurance that the Company
will be able to achieve or maintain a successful competitive position.
Governmental Incentives
The Companys business plan relies to a significant extent on the availability of substantial
federal, state and local governmental incentives for the purchase of energy-saving,
environmentally-friendly products such as the Companys systems. These incentives include, among
others, tax deductions, tax credits, rebates and accelerated depreciation. There can be no
assurance that some or all of these incentives will not be substantially reduced or eliminated, nor
can there be any assurance that any currently proposed incentives will actually take effect.
Energy Prices
The Companys products are energy-efficient electric generators which compete primarily with
conventional oil and natural gas-generated electricity produced and delivered by conventional
utility companies. A significant decrease in the price of oil and/or natural gas could therefore
materially adversely affect the competitive position of the Company.
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Suppliers
The Companys success will depend to a large extent on its ability to obtain a reliable supply
of materials and parts from its suppliers on commercially reasonable terms. This may not prove
possible due to competition, inflation, shortages, international crises, adverse economic and
political conditions, business failures of suppliers or other reasons.
Management; Dependence on Key Personnel
The success of the Company will depend in large part upon the skill and efforts of its
founders and executive officers, George Konrad and Fred Barker, and other key personnel who may be
hired. Loss of any such personnel, whether due to resignation, death, and disability or otherwise,
could have a material adverse effect on the Company. In addition, Messrs. Konrad and Barker do not
intend to work for PoweVerde on a full-time basis, as they have substantial other business
activities. They intend to dedicate the time they deem appropriate to meet PowerVerdes needs;
however, there can be no assurance that they will be willing or able to dedicate such time and
attention as would maximize PowerVerdes chances for success.
Calamities
Although the Company maintains insurance which it considers prudent, there can be no assurance
that such insurance will prove adequate in the event of actual casualty losses or broader
calamities such as terrorist attacks, earthquakes, financial crises, economic depressions or other
catastrophic events, which are either uninsurable or not economically insurable. Any such losses
could have a material adverse effect on the Company.
Product Liability; Availability of Insurance
The design, development and manufacture of the Companys proposed products involve an inherent
risk of product liability claims and associated adverse publicity. There can be no assurance the
Company will be able to obtain or maintain insurance for any of its proposed commercial products.
Such insurance is expensive, difficult to obtain and may not be available in the future on
acceptable terms or at all. The Company is also exposed to product liability claims in the event
the use of its proposed products result in injury.
Risks Related to Our Common Stock; Liquidity Risks
Volatility of Stock Price
The market prices for securities of emerging and development stage companies such as the
Company have historically been highly volatile. Difficulty in raising capital as well as future
announcements concerning the Company or its competitors, including the results of testing,
technological innovations or new commercial products, government regulations, developments
concerning proprietary rights, litigation or public concern as to safety of potential products
developed by the Company or others, may have a significant adverse impact on the market price of
the Companys stock.
We have no intention to pay dividends on our Common Stock.
For the near-term, we intend to retain any remaining future earnings, if any, to finance our
operations and do not anticipate paying any cash dividends with respect to our Common Stock.
Our
common stock is quoted on the OTC Bulletin Board (OTCBB)
and there is minimal liquidity in the
trading market for our common stock.
Our common stock is currently quoted on the OTCBB under the symbol VYRX. There has been
minimal trading of our common stock for several years, and no assurance can be given as to when, if
ever, an active trading
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market will develop or, if developed, that it will be sustained. As a result, investors may
be unable to sell their shares of our common stock.
Possible Depressive Effect on Price of Securities of Future Sales of Common Stock
As a result of the Merger, the Company has issued to the former PowerVerde shareholders
24,588,734 shares of the Companys Common Stock. These shares are restricted securities subject to
Rule 144. The sale or availability for sale of substantial amounts of Common Stock in the public
market under Rule 144 or otherwise could materially adversely affect the prevailing market prices
of the Companys Common Stock and could impair the Companys ability to raise additional capital
through the sale of its equity securities.
Possible Adverse Effects of Authorization and Issuance of Preferred Stock
The Companys Board of Directors is authorized to issue up to 50,000,000 shares of preferred
stock. The Board of Directors has the power to establish the dividend rates, liquidation
preferences, voting rights, redemption and conversion terms and privileges with respect to any
series of preferred stock. The issuance of any series of preferred stock having rights superior to
those of the common stock may result in a decrease in the value or market price of the common stock
and could further be used by the Board as a device to prevent a change in control favorable to the
Company. Holders of preferred stock to be issued in the future may have the right to receive
dividends and certain preferences in liquidation and conversion rights. The issuance of such
preferred stock could make the possible takeover of the Company or the removal of management of the
Company more difficult, and adversely affect the voting and other rights of the holder of the
common stock, or depress the market price of the Common Stock.
Disclosures Relating to Low Priced Stocks; Restrictions on Resale of Low Price Stocks and on
Broker-Dealer Sale; Possible Adverse Effect of Penny Stock Rules on Liquidity for the Companys
Securities
Since the Company has net tangible assets of less than $1,000,000, transactions in the
Companys securities are subject to Rule 15g-9 under the Exchange Act which imposes additional
sales practice requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally, individuals with a net worth in excess
of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together with their spouses). For
transactions covered by this Rule, a broker-dealer must make a special suitability determination
for the purchaser and have received the purchasers written consent to the transaction prior to the
sale. Consequently, this Rule may affect the ability of broker-dealers to sell the Companys
securities, and may affect the ability of shareholders to sell any of the Companys securities in
the secondary market.
The Commission has adopted regulations which generally define a penny stock to be any
non-NASDAQ equity security of a small Company that has a market price (as therein defined) less
than $5.00 per share, or with an exercise price of less than $5.00 per share subject to certain
exceptions, and which is not traded on any exchange or quoted on NASDAQ. For any transaction by
broker-dealers involving a penny stock (unless exempt), the rules require delivery, prior to a
transaction in a penny stock, of a risk disclosure document relating to the penny stock market.
Disclosure is also required to be made about compensation payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally, monthly statements
are required to be sent disclosing recent price information for the penny stock held in an account
and information on the limited market in penny stocks.
Anti-Takeover Provisions Limitation on Voting Rights
The Companys Certificate of Incorporation and Bylaws contain provisions that may make it more
difficult to acquire control of the Company by means of tender offer, over-the-counter purchases, a
proxy fight, or otherwise. The Certificate of Incorporation also includes provisions restricting
stockholder voting rights. The Companys Certificate of Incorporation includes a provision that
requires that any action required by the stockholders may not be affected by a written consent, and
that special meetings of the stockholders may only be called by the Board of Directors. This
provision makes it difficult for stockholders to pass any resolution not supported by the Board of
Directors except at a regularly called meeting. The Companys Certificate of Incorporation
provides for a staggered
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term of the Board of Directors, thus eliminating the ability to elect all of the directors in
any one year. This provision may make the implementation of a change in management a process
requiring more than one year even if supported by a majority of the stockholders. The Companys
Certificate of Incorporation provides that directors may only be removed for cause and a vote of
70% of the shareholders. Certain provisions of the Certificate of Incorporation may only be
amended by a vote of 70% of the stockholders. As a result of the number of shares currently owned
by management, this provision may for some time have the effect of indirectly eliminating any
possibility stockholders could pass a resolution unless approved by management, in connection with
any question submitted or required to be submitted to a vote of the stockholders. The Companys
Certificate of Incorporation also requires that stockholders give advance notice to the Company of
any directorship nominations or other business to be brought by the stockholders at any
stockholders meeting. This provision makes it more difficult for stockholders to nominate
candidates for the Board of Directors who are not supported by management. In addition, the
Certificate of Incorporation requires advance notice for stockholder proposals to be brought before
the annual meeting. The requirements include that the notice must specify certain information
regarding the stockholder and the meeting. This provision to implement stockholder proposals makes
it more difficult even if a majority of stockholders are in support thereof. Each of these
provisions may also have the effect of deterring hostile take-overs or delaying changes in control
or management of the Company. In addition, the indemnification provisions of the Companys Bylaws
and Certificate of Incorporation may represent a conflict of interest with the stockholders since
officers and directors may be indemnified prior to any judicial determinations as to their conduct.
PLAN OF OPERATION
General
The following plan of operations provides information which the Companys management believes
is relevant to an assessment and understanding of its business, operations and financial condition.
The discussion should be read in conjunction with the financial statements as of and for the
period ended September 30, 2007, and the notes thereto which are included in this Current Report.
This plan of operation contains forward-looking statements that involve risks, uncertainties and
assumptions. The Companys actual results may differ substantially from those anticipated in any
forward-looking statements included in this discussion as a result of various factors, including
those set forth in Risk Factors contained elsewhere in this Report.
The Company plans to mass produce patented renewable power systems using proven techniques
established by high technology manufacturing companies such as Boeing. This outsourcing process
utilizes other companies to produce many of the necessary parts which saves the selling company the
cost of buying machinery or establishing a large manufacturing facility with the attendant costs of
salaries, benefits and overhead.
The Company is in a unique position to utilize such a system. One of the principals, George
Konrad, owns and operates a manufacturing facility, Arizona Research and Development (ARD), which
is capable of producing
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all of the manufactured parts needed for the PowerVerde renewable power systems. The Company
intends to enter into an agreement with ARD to manufacture machined parts for the PowerVerde
patented motor as well as assemble the motors and Organic Rankine Cycles, all on fair market terms.
ARD will also test and qualify all systems under a rigid quality control program. See Certain
Relationships and Related Transactions.
ARD has been involved in the development of the PowerVerde systems and is uniquely positioned
to continue on to the manufacturing process.
All machining will be done by CNC lathes and machining centers owned by ARD. As production
increases it may be necessary for ARD to subcontract certain components or enlarge the present
facility.
The design and tooling process of rapid prototyping has been employed by PowerVerde and ARD
throughout the developmental program using solid modeling CAD, Stereo lithography, Finite Element
Analysis, Computerized Fluid Dynamics (CFD), CAM, CNC machining and other techniques developed by
the aerospace industry. This process produces products that are ready to go into mass produced
manufacturing immediately upon completion of the testing program.
PowerVerde also intends to contract to local refrigeration specialty companies the job of
installing and maintaining the power systems. The companies will be contracted in each area of
market penetration.
We have no employees as of the date of this Report; however, we intend to add sales and
marketing staff to promote the systems as soon as beta testing is complete, which is expected to
occur by the end of the third quarter of 2008. We have not yet entered into any agreements for
distribution or marketing of our products, and there can be no assurance that we will ever do so.
We intend to continue with research and development activities in order to further improve and
refine our products.
Production
ARD will purchase all materials and components utilized in the PowerVerde renewable electrical
generating systems and deliver the finished product to PowerVerde under the terms of the agreement
to be entered into between them. ARD has been manufacturing high tech camera booms for many years
and has established a working relationship with suppliers of aluminum, steel and all other parts
needed for the manufacture of PowerVerde energy systems. ARD will be responsible for maintaining
inventory of all parts and materials.
PowerVerde will provide to ARD all manufacturing drawings, specifications, parts lists,
material requirements, assembly manuals and quality control requirements relating to the systems to
be produced.
Production schedules will be determined by sales and established by PowerVerde.
Liquidity and Capital Resources
Our current liabilities on a pro-forma basis as of September 30, 2007, were
$59,740, including accounts payable for accounting, legal and general operations of the combined
entities. Pro forma basis includes the financials as if the Merger had been effected September 30,
2007.
At
September 30, 2007, on a pro-forma basis the Companys
total liabilities exceeded the total
assets by $15,591. In connection with the Merger, PoweVerde paid
$233,000 in accounts payable owed by Vyrex.
As of the date of this Report, we have enough cash to sustain operations for approximately the
next five months. Consequently, we will need to raise substantial additional capital in order to
finance our plan of operations.
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We intend to seek the necessary funds though private debt and/or equity transactions. There
can be no assurance that we will be able to raise the necessary funds. If we do not, we will be
forced to cease operations.
DESCRIPTION OF PROPERTY
The Company des not own any real property. It shares use of a full-service machining and
manufacturing facility located at 21615 N. 2
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Avenue, Phoenix, Arizona, owned by
Arizona Research and Development, Inc. (ARD), a company wholly-owned by George Konrad, the
Companys President and largest shareholder (the ARD Facility). The Company pays a monthly
rental of $.75 per square foot that it uses and also pays its proportional share of the facilitys
utilities. As of February 2008, the Company is using approximately 700 square feet at a monthly
rental of approximately $525. The Company expects to substantially increase its use of the ARD
Facility by the end of 2008, and the Company believes that the ARD Facility will be adequate to
satisfy its needs through that time; however, in the event that the Company begins material sales,
it may need to move to a larger facility.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of February 12, 2008, following the
closing of the Merger regarding the beneficial ownership of our Common Stock by (i) each of our
directors and named executive officers; and (ii) all of our executive officers and directors as a
group. To our knowledge, no other person beneficially owns more than 5% of our common stock.
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Name and Address of Beneficial Owner
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Shares Owned
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Percent of Class
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George Konrad
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10,020,000
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49.1
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Fred Barker
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3,000,000
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14.7
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Richard H. Davis
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1,080,000
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5.3
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All Directors and Executive Officers as a group (3 persons)
|
|
|
14,100,000
|
|
|
|
69.1
|
|
|
|
|
1
|
|
Mr. Davis shares include (i) 980,000 shares owned by
Martinez-Ayme Securities, Inc., the Companys investment banking firm (MAS),
of which Mr. Davis is a principal and (ii) 100,000 shares owned by Mr. Davis
wife, as to which he disclaims beneficial ownership.
|
DIRECTORS AND EXECUTIVE OFFICERS
In connection with the Merger, all of the prior officers and directors of the Company (G. Dale
Garlow, Sheldon S. Hendler, M.D., Ph.D., Thomas K. Larson, Jr., and Richard G. McKee, Jr.) resigned
and George Konrad, Fred Barker and Richard H. Davis were appointed to the Board. As a result of
the foregoing, our Board of Directors now consists of three members.
10
The names of our current officers and directors, as well as certain information about them are
set forth below:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position(s)
|
George Konrad
|
|
|
49
|
|
|
President, Treasurer, Director
|
Fred Barker
|
|
|
75
|
|
|
Vice President, Secretary, Director
|
Richard H. Davis
|
|
|
50
|
|
|
Director
|
George
Konrad
. Mr. Konrad is in charge of our operations. His
company, ARD, formed in 1993, is involved in
various advanced technology projects. ARD is a full-service R & D machine shop with CNC and
CAD-CAM capabilities
.
Mr. Konrad has substantially improved the design of the JimmyJib, a
camera boom that is used by cinematographers all over the world. This boom has electronic remote
capabilities and is utilized at most movie locations and major sporting events around the world.
ARD manufactures all of the major components for the JimmyJib and turns out thousands of parts each
month.
Fred Barker.
Mr. Barker directs our engineering activities. He is a graduate of the
University of Washington, with a degree in mechanical engineering, and has done advanced studies at
the University of Puget Sound and the University of Arizona. He was awarded two National Defense
Education Act (NDEA) scholarships for science and math and was a Fulbright Scholar. From 1958 to
1972, Mr. Barker worked as an engineer for The Boeing Company, focusing on the structures, wing
groups and instrumentation of the 737, 747, 757 and 767 aircraft.
From 1972 to 1978, Mr. Barker worked for CBS as a technical advisor
for documentary films. From 1979 to 1984, he worked for Condomar
Acapulco on a real estate project in Acapulco, Mexico. From 1984 to
1986, he worked for Aramco and Dynarabia in Dhahran, Saudia
Arabia, on the ARABSAT downlink project. From 1986 to 2002, Mr. Barker
owned and operated Flight Innovations, Inc. and VertiFan, Inc., which designed and developed vertical take-off and landing
aircraft. VertiFan worked under a U.S. Department of Defense contract. Mr. Barker has been honored for outstanding
contributions by the Seattle chapters of the American Societies of Manufacturing Engineers and
Automotive Engineers. He has worked on the PowerVerde project since 2001.
Richard H. Davis
. Richard Davis received a B.S degree in economics from Florida State
University in 1982. He joined First Equity Corporation (First Equity) in Miami that same year.
First Equity operated as a regional full-service brokerage and investment bank. Mr. Davis duties
included equity deal structure and brokerage-related activities. After First Equity was acquired in
2001, Mr. Davis joined the corporate finance department of William R. Hough & Company (Hough),
where he continued structuring equity finance and private acquisitions. Hough was acquired in 2004
by RBC Dain Rauscher (Dain), a global investment banking firm. Dain consolidated Houghs
corporate finance activities into its New York offices. Mr. Davis elected to remain in Miami and
joined Martinez-Ayme Securities, assuming the newly-created position of managing director of
corporate finance.
Election of Directors
Holders of our Common Stock are entitled to one vote for each share held on all matters
submitted to a vote of the stockholders, including the election of directors. Cumulative voting
with respect to the election of directors is not permitted by our Certificate of Incorporation.
Our Board of Directors shall be elected at the annual meeting of the shareholders or at a
special meeting called for that purpose. Each director shall hold office until the next annual
meeting of shareholders and until the directors successor is elected and qualified.
Committees
Our Board does not yet have any committees; however, we intend to establish an audit committee
and a compensation / stock option committee in the near future.
11
EXECUTIVE COMPENSATION
We have not paid any compensation to officers or directors in such capacity; however, we
periodically engage the services of Messrs. Konrad and Barker to perform certain services at a rate
of $60 per hour. We believe that the compensation to Mr. Barker does not exceed the compensation
that would be charged by an unaffiliated third party rendering
comparable services. See Certain
Relationships and Related Transactions.
Employment Agreements
We have not entered into employment agreements with our executive officers as of the date of
this Report. We may in the future enter into employment agreements with Messrs. Konrad and
Barker. No assurance can be given as to when, if ever, such agreements will be entered into or the
terms thereof; however, we intend to use fair market terms in any such agreement. We expect that
such agreements could include bonuses, severance payments, noncompetition provisions and other
material items.
We may also issue to our officers and directors stock options on terms and conditions to be
determined by our Board of Directors or designated committee.
Compensation of Directors
We have not yet determined a compensation plan for our directors. We intend to provide our
directors with reasonable compensation for their services in cash, stock and/or options.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Certificate of Incorporation allows us to indemnify our present and former officers and
directors and other personnel against liabilities and expenses arising from their service to the
full extent permitted by Delaware law. The persons indemnified include our (i) present or former
directors or officers, (ii) any person who while serving in any of the capacities referred to in
clause (i) who served at our request as a director, officer, partner, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, and (iii) any person nominated or
designated by (or pursuant to authority granted by) our board of directors or any committee thereof
to serve in any of the capacities referred to in clauses (i) or (ii).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to its agreement with ARD, the Company uses the ARD Facility and pays ARD (i) monthly
rent of $.75 per square foot plus a proportionate share of utilities and (ii) $60 per hour for
engineering, development and machining services by Mr. Konrad and (iii) rates ranging from $60-$75
per hour for machine shop services and manufacturing services. Pursuant to its agreement with
Mr. Barker, the Company pays him $60 per hour for his engineering and development services. See
Description of Property.
Since inception in March 2007, the Company has paid from approximately $3000 to $8000 per
month, for a total of approximately $48,000, under its agreement with ARD, and from approximately
$7000 to $8000, for a total of approximately $55,000, under its agreement with Mr. Barker.
We do not have any independent directors, as Messrs. Konrad and Barker are officers and
principal shareholders, and Mr. Davis works for our investment banking firm. We intend to seek
qualified independent directors to serve on our board of Directors.
12
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 200,000,000 shares of common stock, $0.0001 par value
per share, and 50,000,000 shares of preferred stock, $0.0001 par value per share.
The following is a summary of some of the terms of our common stock, preferred stock, charter,
bylaws and certain provisions of Delaware Law. The following summary does not purport to be
complete and is qualified in its entirety by reference to the terms of our charter, bylaws and
Delaware law. Please see those documents and Delaware law for further information.
Common Stock
As of February 12, 2008, there were 25,882,878 shares of our common stock outstanding, of
which 24,588,734 were issued to the former PowerVerde shareholders in connection with the Merger.
The holders of our common stock are entitled to one vote for each share held of record on all
matters submitted to a vote of stockholders. Holders of common stock are not entitled to cumulate
their votes in the election of directors. Accordingly, holders of a majority of the shares of
common stock entitled to vote in any election of directors may elect all of the directors standing
for election. Subject to preferences applicable to any outstanding preferred stock, holders of
common stock are entitled to receive ratably any dividends declared by the Board of Directors out
of funds legally available therefore. See Dividend Policy. In the event of a liquidation,
dissolution or winding up of the Company, holders of common stock are entitled to share ratably in
the assets remaining after payment of liabilities and the liquidation preferences of any
outstanding preferred stock. Holders of our common stock have no preemptive, conversion or
redemption rights. Each outstanding share of common stock is fully paid and non-assessable.
Preferred Stock
As of February 12, 2008, there were 50,000,000 shares of preferred stock authorized, none of
which were issued and outstanding.
Antitakeover Provisions
The Companys Certificate of Incorporation and Bylaws contain provisions that may make it more
difficult to acquire control of the Company by means of tender offer, over-the-counter purchases, a
proxy fight, or otherwise. The Certificate of Incorporation also includes provisions restricting
stockholder voting rights. The Companys Certificate of Incorporation includes a provision that
requires that any action required by the stockholders may not be affected by a written consent, and
that special meetings of the stockholders may only be called by the Board of Directors. This
provision makes it difficult for stockholders to pass any resolution not supported by the Board of
Directors except at a regularly called meeting. The Companys Certificate of Incorporation
provides for a staggered term of the Board of Directors, thus eliminating the ability to elect all
of the directors in any one year. This provision may make the implementation of a change in
management a process requiring more than one year even if supported by a majority of the
stockholders. The Companys Certificate of Incorporation provides that directors may only be
removed for cause and a vote of 70% of the shareholders. Certain provisions of the Certificate of
Incorporation may only be amended by a vote of 70% of the stockholders. As a result of the number
of shares currently owned by management, this provision may for some time have the effect of
indirectly eliminating any possibility stockholders could pass a resolution unless approved by
management, in connection with any question submitted or required to be submitted to a vote of the
stockholders. The Companys Certificate of Incorporation also requires that stockholders give
advance notice to the Company of any directorship nominations or other business to be brought by
the stockholders at any stockholders meeting. This provision makes it more difficult for
stockholders to nominate candidates for the Board of Directors who are not supported by management.
In addition, the Certificate of Incorporation requires advance notice for stockholder proposals to
be brought before the annual meeting. The requirements include that the notice must specify
certain information regarding the stockholder and the meeting. This provision to implement
stockholder proposals makes it more difficult even if a majority of stockholders are in support
thereof. Each of these provisions may also have the effect of deterring hostile take-overs or
delaying changes in control or management of the Company. In addition, the indemnification
provisions of the
13
Companys Bylaws and Certificate of Incorporation may represent a conflict of interest with
the stockholders since officers and directors may be indemnified prior to any judicial
determinations as to their conduct.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Companys Common Stock began trading on the Over-The-Counter Bulletin Board (OTCBB) on
October 22, 1998 under the symbol VYRX. Prior to that date, the Common Stock was tracked on the
Nasdaq Small Cap Market . The over-the-counter market quotations provided reflect inter-dealer
prices, without retail mark-ups, mark-down or commission and may not represent actual transactions.
The following table sets forth the range of high and low sales prices on the OTCBB for the periods
indicated, as adjusted for a 12-for-100 reverse stock split which accompanied the Companys October
2005 reincorporation in Delaware. Trading of the common stock on the OTCBB through the date of
this report has been based on adjusted pre-split shares and actual post-split shares that began
around June 30, 2006 under the symbol VYXC.
|
|
|
|
|
|
|
|
|
|
|
Period Beginning
|
|
Period Ending
|
|
High
|
|
Low
|
January 1, 2006
|
|
March 31, 2006
|
|
$
|
2.08
|
|
|
$
|
.42
|
|
April 1, 2006
|
|
June 30, 2006
|
|
$
|
1.42
|
|
|
$
|
.67
|
|
July 1, 2006
|
|
September 30, 2006
|
|
$
|
2.75
|
|
|
$
|
.85
|
|
October 1, 2006
|
|
December 31, 2006
|
|
$
|
1.55
|
|
|
$
|
.87
|
|
January 1, 2007
|
|
March 31, 2007
|
|
$
|
1.80
|
|
|
$
|
.55
|
|
April 1, 2007
|
|
June 30, 2007
|
|
$
|
1.10
|
|
|
$
|
.40
|
|
July 1, 2007
|
|
September 30, 2007
|
|
$
|
.51
|
|
|
$
|
.35
|
|
October 1, 2007
|
|
December 31, 2007
|
|
$
|
.37
|
|
|
$
|
.35
|
|
January 1, 2008
|
|
February 11, 2008
|
|
$
|
.52
|
|
|
$
|
.30
|
|
Dividends
The Company has never declared or paid any cash dividends on its common stock. The Company
does not intend to declare or pay any cash dividends on its common stock in the foreseeable future.
Subject to the limitations described below, the holders of the Companys common stock are entitled
to receive only such dividends (cash or otherwise) as may (or may not) be declared by the Companys
Board of Directors.
Securities Sold Without Registration
Except for the 24,588,734 shares of Common Stock issued to former PowerVerde shareholders in
connection with the Merger and (i) 250,000 shares issued on February 11, 2008, to Don Leach in
payment of Vyrexs March 10, 2003, $200,000 promissory note held by him, (ii) 20,000 shares issued
on February 11, 2008 to Richard G. McKee, Jr., for consulting services and (iii) 5,000 shares
issued on February 11, 2008 to Mary Jane Dean for financial and administrative services, Vyrex did
not sell any securities without registering the securities under the Securities Act during its most
recently completed fiscal year, i.e., its fiscal year ended December 31, 2007, or during the
previous three fiscal years ended December 31, 2006, December 31, 2005, and December 31, 2004,
respectively, or during the period from December 31, 2007, through the filing of this Report.
These shares were issued pursuant to an exemption from registration requirements under Regulation D
and/or Section 4(2) of the Securities Act of 1933, as amended.
During 2007, PowerVerde sold 4,000,000 shares of its common stock to accredited investors in a
private placement at $.125 per share, for a total offering of $500,000, and sold 400,000 additional
shares to accredited investors in a subsequent private placement in late 2007 and early 2008 at
$.50 per share, for a total offering of $200,000. These shares were sold pursuant to an exemption
from registration requirements under Regulation D and/or Section 4(2) of the Securities Act of
1933, as amended. In connection with each offering, Martinez-Ayme Securities (MAS) received a
commission equal to 10% of the gross proceeds received.
14
Legal Proceedings
The Company is not party to any disputes or legal proceedings at the time of this Report.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
There has been no change in or disagreements with Accountants.
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
Reference is made to the disclosure set forth under Item 1.01 of this Report, which disclosure
is incorporated by reference into this section.
ITEM 3.02 RECENT SALES OF UNREGISTERED SECURITIES
In connection with the Merger, on February 12, 2008, Vyrex issued an aggregate of 24,588,734
shares of common stock to the stockholders of PowerVerde in exchange for their common shares at the
ratio of 1.2053301 shares of Vyrex common stock for each share of PowerVerde common stock.
Immediately prior to the closing of the Merger, on February 11, 2008, Vyrex issued (i) 250,000
shares of its common stock to Don Leach in payment of Vyrexs March 10, 2003, $200,000 promissory
note held by him, (ii) 20,000 shares to Vyrex Director Richard G. McKee, Jr., for consulting
services and (iii) 5,000 shares to Mary Jane Dean for financial and administrative services, These
issuances were made pursuant to an exemption from registration requirements under Regulation D
and/or Section 4(2) of the Securities Act of 1933, as amended.
ITEM 5.01 CHANGE IN CONTROL OF REGISTRANT
Reference is made to the disclosure set forth under Item 1.01 and 3.02 of this Report, which
disclosure is incorporated herein by reference.
As a result of the closing of the Merger, the former shareholders of PowerVerde own 95% of the
total outstanding shares of Vyrex capital stock and 95% of the total voting power of all of Vyrexs
outstanding voting securities. In addition, PowerVerdes officers and principal shareholders
became Vyrexs officers and control our Board of Directors.
ITEM 5.02 ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF
CERTAIN OFFICERS.
Reference is made to the disclosure set forth under Item 1.01 of this Report, which disclosure
is incorporated by reference into this section.
ITEM 5.06 CHANGE IN SHELL COMPANY STATUS
As a result of the completion of the Merger, the Company is no longer a shell company, as that
term is defined in Rule 12b-2 under the Exchange Act. Reference is made to the disclosure set
forth under Item 1.01 of this report, which disclosure is incorporated by reference into this
section.
ITEM 8.01 OTHER EVENTS.
In connection with the closing of the Merger, the Company changed the address of its corporate
headquarters from 2159 Avenida de la Playa, La Jolla, California 92037 to 21615 N. 2
nd
Avenue, Phoenix, Arizona 85027. Additionally on February 12, 2008, the Company issued a press
release announcing the completion of the Merger, a copy of which is attached as Exhibit 99.3.
15
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
|
(a)
|
|
Financial Statements of Business Acquired.
|
|
|
|
|
PowerVerde, Inc. audited financial statements for the period from inception through
September 30, 2007
|
|
|
(b)
|
|
Pro-Forma Financial Information.
|
|
|
|
|
Unaudited interim pro forma financial statements combining PowerVerde, Inc. and
Vyrex Corporation as of September 30, 2007
|
16
Exhibits.
|
|
|
Exhibit Number
|
|
Exhibit Description
|
|
|
|
10.1
|
|
Agreement and Plan of Merger, dated as of February 11, 2008
by and among Vyrex Corporation, Vyrex Acquisition
Corporation and PowerVerde, Inc. (Nonmaterial schedules and
exhibits identified in the Agreement and Plan of Merger
have been omitted pursuant to Item 601b.2 of Regulation
S-B). The Company agrees to furnish supplementally to the
Commission upon request by the Commission a copy of any
omitted schedule or exhibit(s).)
|
|
|
|
10.2
|
|
Services Agreement dated as of February 1, 2008, between
PowerVerde, Inc., and Fred Barker d/b/a Barker Engineering.
|
|
|
|
10.3
|
|
Services Agreement dated as of February 1, 2008, between
PowerVerde, Inc., and Arizona Research and Development,
Inc.
|
|
|
|
21
|
|
Subsidiaries of the Company
|
|
|
|
99.1
|
|
PowerVerde, Inc. audited financial statements for the
period from inception (March 9, 2007) through September 30,
2007
|
|
|
|
99.2
|
|
Unaudited interim pro forma financial statements combining
PowerVerde, Inc. and Vyrex Corporation as of September 30,
2007
|
|
|
|
99.3
|
|
Press Release dated February 12, 2008
|
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
|
|
VYREX INCORPORATED
|
|
Dated: February 12, 2008
|
By:
|
/s/ George Konrad
|
|
|
|
George Konrad
|
|
|
|
President and Principal Executive Officer
|
|
|
17
EXHIBIT INDEX
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
10.1
|
|
Agreement and Plan of Merger, dated as of February 11, 2008 by
and among Vyrex Corporation, Vyrex Acquisition Corporation
and PowerVerde, Inc. (Nonmaterial schedules and exhibits
identified in the Agreement and Plan of Merger have been
omitted pursuant to Item 601b.2 of Regulation S-B). The
Company agrees to furnish supplementally to the Commission
upon request by the Commission a copy of any omitted schedule
or exhibit(s).
|
|
|
|
10.2
|
|
Services Agreement dated as of February 1, 2008, between
PowerVerde, Inc., and Fred Barker d/b/a Barker Engineering.
|
|
|
|
10.3
|
|
Services Agreement dated as of February 1, 2008, between
PowerVerde, Inc., and Arizona Research and Development, Inc.
|
|
|
|
21
|
|
Subsidiaries of the Company
|
|
|
|
99.1
|
|
PowerVerde, Inc. audited financial statements for the period
from inception through September 30, 2007
|
|
|
|
99.2
|
|
Unaudited interim pro forma financial statements combining
PowerVerde, Inc. and Vyrex Corporation as of September 30,
2007
|
|
|
|
99.3
|
|
Press Release dated February 12, 2008
|
18
EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
among
VYREX CORPORATION,
VYREX ACQUISITION CORPORATION
and
POWERVERDE, INC.
February
11, 2008
TABLE OF CONTENTS
|
|
|
|
|
|
|
PAGE
|
|
1. The Merger
|
|
|
1
|
|
1.1 Merger
|
|
|
1
|
|
1.2 Effective Time
|
|
|
1
|
|
1.3 Certificate of Incorporation; By-laws; Directors and Officers; Parent Name Change
|
|
|
2
|
|
1.4 Assets and Liabilities
|
|
|
2
|
|
1.5 Manner and Basis of Converting Shares
|
|
|
2
|
|
1.6 Surrender and Exchange of Certificates
|
|
|
3
|
|
1.7 Parent Common Stock
|
|
|
3
|
|
|
|
|
|
|
2. Representations and Warranties of the Company
|
|
|
4
|
|
2.1 Organization, Standing, Subsidiaries, Etc.
|
|
|
4
|
|
2.2 Qualification
|
|
|
4
|
|
2.3 Capitalization of the Company
|
|
|
4
|
|
2.4 Company Stockholders
|
|
|
4
|
|
2.5 Corporate Acts and Proceedings
|
|
|
4
|
|
2.6 Compliance with Laws and Instruments
|
|
|
5
|
|
2.7 Binding Obligations
|
|
|
5
|
|
2.8 Brokers and Finders Fees
|
|
|
5
|
|
2.9 Financial Statements
|
|
|
5
|
|
2.10 Absence of Undisclosed Liabilities
|
|
|
5
|
|
2.11 Changes
|
|
|
6
|
|
2.12 Tax Returns and Audits
|
|
|
6
|
|
2.13 Employee Benefit Plans; ERISA
|
|
|
7
|
|
2.14 Title to Property and Encumbrances
|
|
|
7
|
|
2.15 Litigation
|
|
|
7
|
|
2.16 Patents, Trademarks, Etc.
|
|
|
7
|
|
2.17 Interested Party Transactions
|
|
|
8
|
|
2.18 Questionable Payments
|
|
|
8
|
|
2.19 Obligations to or by Stockholders
|
|
|
8
|
|
2.20 Assets and Contracts
|
|
|
8
|
|
2.21 Employees
|
|
|
9
|
|
2.22 Disclosure
|
|
|
9
|
|
|
|
|
|
|
3. Representations and Warranties of Parent and Acquisition Corp.
|
|
|
9
|
|
3.1 Organization and Standing
|
|
|
9
|
|
3.2 Corporate Authority
|
|
|
10
|
|
3.3 Brokers and Finders Fees
|
|
|
10
|
|
3.4 Capitalization of Parent
|
|
|
10
|
|
3.5 Acquisition Corp
|
|
|
11
|
|
3.6 Validity of Shares
|
|
|
11
|
|
3.7 SEC Reporting and Compliance
|
|
|
11
|
|
3.8 Financial Statements
|
|
|
12
|
|
3.9 Governmental Consents
|
|
|
12
|
|
i
|
|
|
|
|
|
|
PAGE
|
|
3.10 Compliance with Laws and Instruments
|
|
|
12
|
|
3.11 No General Solicitation
|
|
|
12
|
|
3.12 Binding Obligations
|
|
|
13
|
|
3.13 Absence of Undisclosed Liabilities
|
|
|
13
|
|
3.14 Changes
|
|
|
13
|
|
3.15 Tax Returns and Audits
|
|
|
14
|
|
3.16 Employee Benefit Plans; ERISA
|
|
|
14
|
|
3.17 Litigation
|
|
|
15
|
|
3.18 Interested Party Transactions
|
|
|
15
|
|
3.19 Questionable Payments
|
|
|
15
|
|
3.20 Obligations to or by Stockholders
|
|
|
15
|
|
3.21 Assets and Contracts
|
|
|
15
|
|
3.22 Employees
|
|
|
16
|
|
3.23 Patents, Trademarks, Etc.
|
|
|
16
|
|
3.24 Disclosure
|
|
|
17
|
|
|
|
|
|
|
4. Investment Letter
|
|
|
17
|
|
|
|
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5. Conduct of Businesses Pending the Merger
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17
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5.1 Conduct of Business by the Company Pending the Merger
|
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17
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5.2 Conduct of Business by Parent and Acquisition Corp. Pending the Merger
|
|
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18
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6. Additional Agreements
|
|
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19
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6.1 Access and Information
|
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19
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6.2 Additional Agreements
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19
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6.3 Publicity
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20
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6.4 Appointment of Officers and Directors
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20
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6.5 Stock Incentive Plan
|
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20
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6.6 Additional Parent Actions
|
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20
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6.7 Payment of Parent Liabilities
|
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20
|
|
6.8 Indemnity Agreements
|
|
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20
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6.9 Post-Closing Audit and Filing Expenses
|
|
|
20
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6.10 Parent Post-Closing Capitalization Table
|
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21
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7. Conditions of Parties Obligations
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21
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7.1 Company Obligations
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21
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7.2 Parent and Acquisition Corp. Obligations
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22
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8. Survival of Representations and Warranties
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23
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9. Amendment of Agreement
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24
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10. Definitions
|
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24
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11. Closing
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28
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12. Termination Prior to and After Closing
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28
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12.1 Termination of Agreement
|
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28
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12.2 Termination of Obligations
|
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28
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13. Miscellaneous
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28
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13.1 Notices
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28
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ii
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PAGE
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13.2 Entire Agreement
|
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29
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13.3 Expenses
|
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29
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13.4 Time
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29
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13.5 Severability
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29
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13.6 Successors and Assigns
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29
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13.7 No Third Parties Benefited
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30
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13.8 Counterparts; Signature by Facsimile
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30
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13.9 Governing Law
|
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30
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13.10 Venue; Submission to Jurisdiction
|
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30
|
|
iii
LIST OF EXHIBITS AND SCHEDULES
Exhibits
|
|
|
A
|
|
Certificate of Merger
|
B
|
|
Directors and Officers of the Surviving Corporation
|
C
|
|
Parent Post Closing Capitalization Table
|
Company Disclosure Schedules
|
|
|
2.4
|
|
Company Stockholders
|
2.9
|
|
Financial Statements
|
2.11
|
|
Company Changes/Indebtedness
|
2.13
|
|
Schedule of Employee Benefit Plans
|
2.15
|
|
Litigation
|
2.16
|
|
Company Patents, Trademarks, Etc.
|
2.17
|
|
Company Interested Party Transactions
|
2.20
|
|
Company Assets and Contracts
|
Parent Disclosure Schedules
|
|
|
3.4
|
|
Capitalization of Parent
|
3.14
|
|
Parent Changes/Indebtedness
|
3.21
|
|
Parent Assets and Contracts
|
6.7
|
|
Parent Debt
|
iv
AGREEMENT AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER is made and entered into as of February 11, 2008, by and
among VYREX CORPORATION, a Delaware corporation (Parent), VYREX ACQUISITION CORPORATION, a
Delaware corporation and wholly-owned subsidiary of Parent (Acquisition Corp.), and POWERVERDE,
INC., a Delaware corporation (the Company).
W I T N E S S E T H:
WHEREAS, the Board of Directors of each of Acquisition Corp., Parent and the Company have each
determined that it is fair to and in the best interests of their respective corporations and
shareholders for Acquisition Corp. to be merged with and into the Company (the Merger) upon the
terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of Acquisition Corp. and the Board of Directors of the Company
have approved the Merger in accordance with the General Corporation Law of the State of Delaware
(the DGCL), and upon the terms and subject to the conditions set forth herein and in the
Certificate of Merger (the Certificate of Merger) attached as
Exhibit A
hereto; and the Board
of Directors of Parent has also approved this Agreement and the Certificate of Merger; and
WHEREAS, the requisite Stockholders (as such term is defined in Section 10 hereof) have
approved, by written consent pursuant to Sections 228 and 251 of the DGCL, this Agreement and the
Certificate of Merger and the transactions contemplated hereby and thereby, including without
limitation, the Merger, and Parent, as the sole stockholder of Acquisition Corp., has approved this
Agreement, the Certificate of Merger and the transactions contemplated and described hereby and
thereby, including without limitation, the Merger.
NOW, THEREFORE, in consideration of the mutual agreements and covenants hereinafter set forth,
the parties hereto agree as follows:
1.
The Merger
.
1.1
Merger
. Subject to the terms and conditions of this Agreement and the Certificate of
Merger, Acquisition Corp. shall be merged with and into the Company in accordance with Section 251
of the DGCL. At the Effective Time (as hereinafter defined), the separate legal existence of
Acquisition Corp. shall cease, and the Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the Surviving Corporation) and shall continue its corporate
existence under the laws of the State of Delaware under the name PowerVerde, Inc.
1.2
Effective Time
. The Merger shall become effective on the date and at the time the
Certificate of Merger is filed with the Secretary of State of the State of Delaware in accordance
with Section 251 of the DGCL. The time at which the Merger shall become effective as aforesaid is
referred to hereinafter as the Effective Time.
1
1.3
Certificate of Incorporation; By-laws, Directors and Officers; Parent Name Change
.
(a) The Certificate of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation from and
after the Effective Time until further amended in accordance with applicable law.
(b) The By-laws of the Company, as in effect immediately prior to the Effective Time, shall be
the By-laws of the Surviving Corporation from and after the Effective Time until amended in
accordance with applicable law, the Certificate of Incorporation of the Surviving Corporation and
such By-laws.
(c) The directors and officers listed in
Exhibit B
hereto shall be the
directors and
officers of the Surviving Corporation and the Parent, and each shall hold his respective office or
offices from and after the Effective Time (except, in the case of directors, as described in
Section 6.4) until his successor shall have been elected and shall have qualified in accordance
with applicable law, or as otherwise provided in the Certificate of Incorporation or By-laws of the
Surviving Corporation.
(d) As soon as practicable following the Effective Time, the Parent shall file a certificate
of amendment to its certificate of incorporation changing its name to PowerVerde Solar Corporation.
1.4
Assets and Liabilities
. At the Effective Time, the Surviving Corporation shall possess all
the rights, privileges, powers and franchises of a public as well as of a private nature, and be
subject to all the restrictions, disabilities and duties of each of Acquisition Corp. and the
Company (collectively, the Constituent Corporations); and all the rights, privileges, powers and
franchises of each of the Constituent Corporations, and all property, real, personal and mixed, and
all debts due to any of the Constituent Corporations on whatever account, as well for stock
subscriptions as all other things in action or belonging to each of the Constituent Corporations,
shall be vested in the Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectively the property of the
Surviving Corporation as they were of the several and respective Constituent Corporations, and the
title to any real estate vested by deed or otherwise in either of the such Constituent Corporations
shall not revert or be in any way impaired by the Merger; but all rights of creditors and all liens
upon any property of any of the Constituent Corporations shall be preserved unimpaired, and all
debts, liabilities and duties of the Constituent Corporations shall thenceforth attach to the
Surviving Corporation, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
1.5
Manner and Basis of Converting Shares
.
(a) At the Effective Time:
(i) each share of common stock, $.001 par value, of Acquisition Corp. that
shall be outstanding immediately prior to the Effective
2
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive one share of common stock,
par value $.001 per share, of the Surviving Corporation, so that at the Effective
Time, Parent shall be the holder of all of the issued and outstanding shares of the
Surviving Corporation;
(ii) the shares of common stock, par value $.001 per share, of the Company (the
Company Common Stock), which shares at the Closing will constitute all of the
issued and outstanding shares of capital stock of the Company, beneficially owned by
the Stockholders listed in
Schedule 2.4
(other than shares of Company Common
Stock as to which appraisal rights are perfected pursuant to the applicable
provisions of the DGCL and not withdrawn or otherwise forfeited), shall, by virtue
of the Merger and without any action on the part of the holders thereof, be
converted into the right to receive 1.2053301 shares of Parent Common Stock for each
share of Company Common Stock; and
(b) After the Effective Time, there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common Stock that were
outstanding immediately prior to the Effective Time.
1.6
Surrender and Exchange of Certificates
. Promptly after the Effective Time and upon
(i) surrender of a certificate or certificates representing shares of Company Common Stock that
were outstanding immediately prior to the Effective Time or an affidavit and indemnification in
form reasonably acceptable to counsel for the Parent stating that such Stockholder has lost its
certificate or certificates or that such have been destroyed and (ii) delivery of a Representation
Letter (as described in Section 4 hereof), Parent shall issue to each record holder of the Company
Common Stock surrendering such certificate or certificates and Representation Letter, a certificate
or certificates registered in the name of such Stockholder representing the number of shares of
Parent Common Stock that such Stockholder shall be entitled to receive as set forth in
Section 1.5(a)(ii) hereof. Until the certificate, certificates or affidavit is or are surrendered
together with the Representation letter as contemplated by this Section 1.6 and Section 4 hereof,
each certificate or affidavit that immediately prior to the Effective Time represented any
outstanding shares of Company Common Stock shall be deemed at and after the Effective Time to
represent only the right to receive upon surrender as aforesaid 1.2053301 shares of Parent Common
Stock for each share of Company Stock previously held or to perfect any rights of appraisal which
such holder may have pursuant to the applicable provisions of the DGCL.
1.7
Parent Common Stock
. Parent agrees that it will cause the Parent Common Stock into which
the Company Common Stock is converted at the Effective Time pursuant to Section 1.5(a)(ii) to be
available for such purpose. Parent further covenants that immediately prior to the Effective Time
there will be no more than 1,294,144 shares of Parent Common Stock issued and outstanding, and,
except as set forth in
Schedule 3.4
, that no other common or preferred stock or equity
securities or any options, warrants, rights or other agreements or instruments convertible,
exchangeable or exercisable into common or preferred stock or other equity securities shall be
issued or outstanding.
3
2.
Representations and Warranties of the Company
.
The Company hereby represents and warrants
to each of Parent and Acquisition Corp. as follows:
2.1
Organization, Standing, Subsidiaries, Etc
.
(a) The Company is a corporation duly organized and existing in good standing under the laws
of the State of Delaware, and has all requisite power and authority (corporate and other) to carry
on its business, to own or lease its properties and assets, to enter into this Agreement and the
Certificate of Merger and to carry out the terms hereof and thereof. Copies of the Certificate of
Incorporation and By-laws of the Company that have been delivered to Parent and Acquisition Corp.
prior to the execution of this Agreement are true and complete and have not since been amended or
repealed.
(b) The Company has no subsidiaries or direct or indirect interest (by way of stock ownership
or otherwise) in any firm, corporation, limited liability company, partnership, association or
business.
2.2
Qualification
. The Company is duly qualified to conduct business as a foreign corporation
and is in good standing in each jurisdiction wherein the nature of its activities or its properties
owned or leased makes such qualification necessary, except where the failure to be so qualified
would not have a material adverse effect on the condition (financial or otherwise), properties,
assets, liabilities, business operations, results of operations or prospects of the Company taken
as a whole (the Condition of the Company).
2.3
Capitalization of the Company
. The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock, and 20,000,000 shares of Company preferred stock, none
of which have been issued, and the Company has no authority to issue any other capital stock. There
are 20,400,000 shares of Company Common Stock issued and outstanding, and such shares are duly
authorized, validly issued, fully paid and nonassessable. The Company has no outstanding warrants,
stock options, rights or commitments to issue Company Common Stock or other Equity Securities of
the Company, and there are no outstanding securities convertible or exercisable into or
exchangeable for Company Common Stock or other Equity Securities of the Company.
2.4
Company Stockholders
.
Schedule 2.4
hereto contains a true and complete table
setting forth the names of the record owners of all of the outstanding shares of Company Common
Stock and other Equity Securities of the Company, together with the number and percentage (on a
fully-diluted basis) of securities held. To the knowledge of the Company, there is no voting trust,
agreement or arrangement among any of the beneficial holders of Company Common Stock affecting the
exercise of the voting rights of Company Common Stock.
2.5
Corporate Acts and Proceedings
. The execution, delivery and performance of this Agreement
and the Certificate of Merger (together, the Merger Documents) have been duly authorized by the
Board of Directors of the Company and have been approved by the requisite vote of the Stockholders,
and all of the corporate acts and other proceedings required for the due and valid authorization,
execution, delivery and performance of the Merger Documents and the consummation of the Merger have
been validly and appropriately taken, except for the filing of the Certificate of Merger referred
to in Section 1.2.
4
2.6
Compliance with Laws and Instruments
. To the knowledge of the Company, the business,
products and operations of the Company have been and are being conducted in compliance in all
material respects with all applicable laws, rules and regulations, except for such violations
thereof for which the penalties, in the aggregate, would not have a material adverse effect on the
Condition of the Company. The execution, delivery and performance by the Company of the Merger
Documents and the consummation by the Company of the transactions contemplated by this Agreement:
(a) will not require any authorization, consent or approval of, or filing or registration with, any
court or governmental agency or instrumentality, except such as shall have been obtained prior to
the Closing, (b) will not cause the Company to violate or contravene in any material respect
(i) any provision of law, (ii) any rule or regulation of any agency or government, (iii) any order,
judgment or decree of any court, or (iv) any provision of the Certificate of Incorporation or
By-laws of the Company, (c) will not violate or be in conflict with, result in a breach of or
constitute (with or without notice or lapse of time, or both) a default under, any indenture, loan
or credit agreement, deed of trust, mortgage, security agreement or other contract, agreement or
instrument to which the Company is a party or by which the Company or any of its properties is
bound or affected, except as would not have a material adverse effect on the Condition of the
Company, and (d) will not result in the creation or imposition of any material Lien upon any
property or asset of the Company.
2.7
Binding Obligations
. The Merger Documents constitute the legal, valid and binding
obligations of the Company and are enforceable against the Company in accordance with their
respective terms.
2.8
Brokers and Finders Fees
. To the knowledge of the Company, no Person has, or as a result
of the transactions contemplated herein will have any right or valid claim against the Company,
Parent, Acquisition Corp. or any Stockholder for any commission, fee or other compensation as a
finder or broker, or in any similar capacity.
2.9
Financial Statements
. Attached hereto as
Schedule 2.9
are the Companys audited
Balance Sheet, Statement of Operations, Statement of Stockholders Equity and Statement of Cash
Flows as of and for the period from inception (March 9, 2007) through September 30, 2007 (the
Balance Sheet Date). Such financial statements (i) are in accordance with the books and records
of the Company, (ii) present fairly in all material respects the financial Condition of the Company
as of the dates therein specified and the results of its operations and its cash flows for the
periods therein specified and (iii) have been prepared in accordance with generally accepted
accounting principles in the United States of America (US GAAP) applied on a basis consistent
with prior accounting periods.
2.10
Absence of Undisclosed Liabilities
. The Company has no material obligation or liability
(whether accrued, absolute, contingent, liquidated or otherwise, whether due or to become due),
arising out of any transaction entered into at or prior to the Closing, except (a) as disclosed in
Schedule 2.11
hereto, (b) to the extent set forth on or reserved against in the Balance
Sheet, (c) current liabilities incurred and obligations under agreements entered into in the usual
and ordinary course of business since September 30, 2007, none of which (individually or in the
aggregate) has had or will have a material adverse effect on the Condition of the Company and
(d) by the specific terms of any written agreement, document or arrangement identified in the
Schedules.
5
2.11
Changes
. Since September 30, 2007, except as disclosed in
Schedule 2.11
hereto,
the Company has not (a) incurred any debts, obligations or liabilities, absolute, accrued,
contingent or otherwise, whether due or to become due, except for fees, expenses and liabilities
incurred in connection with the Merger and related transactions and current liabilities incurred in
the usual and ordinary course of business, (b) discharged or satisfied any Liens other than those
securing, or paid any obligation or liability other than, current liabilities shown on the Balance
Sheet and current liabilities incurred since September 30, 2007, in each case in the usual and
ordinary course of business, (c) mortgaged, pledged or subjected to Lien any of its assets,
tangible or intangible, other than in the usual and ordinary course of business, (d) sold,
transferred or leased any of its assets, except in the usual and ordinary course of business,
(e) cancelled or compromised any debt or claim, or waived or released any right, of material value,
(f) suffered any physical damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting the Condition of the Company, (g) entered into any transaction
other than in the usual and ordinary course of business, (h) encountered any labor union
difficulties, (i) made or granted any wage or salary increase or made any increase in the amounts
payable under any profit sharing, bonus, deferred compensation, severance pay, insurance, pension,
retirement or other employee benefit plan, agreement or arrangement, other than in the ordinary
course of business consistent with past practice, or entered into any employment agreement, (j)
issued or sold any shares of capital stock, bonds, notes, debentures or other securities or granted
any options (including employee stock options), warrants or other rights with respect thereto, (k)
declared or paid any dividends on or made any other distributions with respect to, or purchased or
redeemed, any of its outstanding capital stock, (l) suffered or experienced any change in, or
condition affecting, the financial Condition of the Company other than changes, events or
conditions in the usual and ordinary course of its business, none of which (either by itself or in
conjunction with all such other changes, events and conditions) could reasonably be expected to
have a material adverse effect on the Condition of the Company, (m) made any change in the
accounting principles, methods or practices followed by it or depreciation or amortization policies
or rates theretofore adopted, (n) made or permitted any amendment or termination of any material
contract, agreement or license to which it is a party, (o) suffered any material loss not reflected
in the Company Balance Sheet or its statement of income for the year ended on the Company Balance
Sheet Date, (p) paid, or made any accrual or arrangement for payment of, bonuses or special
compensation of any kind or any severance or termination pay to any present or former officer,
director, employee, stockholder or consultant, (q) made or agreed to make any charitable
contributions or incurred any non-business expenses in excess of $5,000 in the aggregate, or (r)
entered into any agreement, or otherwise obligated itself, to do any of the foregoing.
2.12
Tax Returns and Audits
. All required federal, state and local Tax Returns of the Company
have been accurately prepared in all material respects and duly and timely filed, and all federal,
state and local Taxes required to be paid with respect to the periods covered by such returns have
been paid to the extent that the same are material and have become due, except where the failure so
to file or pay could not reasonably be expected to have a material adverse effect upon the
Condition of the Company. The Company is not and has not been delinquent in the payment of any
Tax. The Company has not had a Tax deficiency assessed against it. None of the Companys federal
income tax returns nor any state or local income or franchise tax returns has been audited by
governmental authorities. The reserves for Taxes reflected on the
6
Companys Balance Sheet are sufficient for the payment of all unpaid Taxes payable by the Company
with respect to the period ended on the Companys Balance Sheet Date. There are no federal, state,
local or foreign audits, actions, suits, proceedings, investigations, claims or administrative
proceedings relating to Taxes or any Tax Returns of the Company now pending, and the Company has
not received any notice of any proposed audits, investigations, claims or administrative
proceedings relating to Taxes or any Tax Returns.
2.13
Employee Benefit Plans; ERISA
.
Schedule 2.13
lists any: (i) employee benefit
plans as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended (ERISA), maintained or contributed to by the Company and covering employees of the
Company, including (x) any such plans that are employee welfare benefit plans as defined in
Section 3(1) of ERISA and (y) any such plans that are employee pension benefit plans as defined
in Section 3(2) of ERISA (collectively, the Company Benefit Plans); or (ii) life and health
insurance, hospitalization, savings, bonus, deferred compensation, incentive compensation, holiday,
vacation, severance pay, sick pay, sick leave, disability, tuition refund, service award, company
car, scholarship, relocation, patent award, fringe benefit and other employee benefit plans,
contracts (other than individual employment, consultancy or severance contracts), policies or
practices of the Company providing employee or executive compensation or benefits to its employees,
other than the Company Benefit Plans (collectively, the Benefit Arrangements). Each Company
Benefit Plan and Benefit Arrangement has been maintained and administered in all material respects
in accordance with applicable law.
2.14
Title to Property and Encumbrances
. The Company has good, valid and indefeasible
marketable title to all properties and assets used in the conduct of its business (except for
property held under valid and subsisting leases which are in full force and effect and which are
not in default) free of all Liens and other encumbrances, except Permitted Liens and such ordinary
and customary imperfections of title, restrictions and encumbrances as do not, individually or in
the aggregate, materially detract from the value of the property or assets or materially impair the
use made thereof by the Company in its business. Without limiting the generality of the foregoing,
the Company has good and indefeasible title to all of its properties and assets reflected in the
Balance Sheet, except for property disposed of in the usual and ordinary course of business since
September 30, 2007, and for property held under valid and subsisting leases which are in full force
and effect and which are not in default.
2.15
Litigation
. There is no legal action, suit, arbitration or other legal, administrative or
other governmental proceeding (other than proceedings before the United States Patent and Trademark
Office or foreign counterparts thereof) pending or, to the best knowledge of the Company,
threatened against or affecting the Company or its properties, assets or business, and after
reasonable investigation, the Company is not aware of any incident, transaction, occurrence or
circumstance that might reasonably be expected to result in or form the basis for any such action,
suit, arbitration or other proceeding. The Company is not in default with respect to any order,
writ, judgment, injunction, decree, determination or award of any court or any governmental agency
or instrumentality or arbitration authority.
2.16
Patents, Trademarks, Etc
.
Schedule 2.16
sets forth a list of all United States
patents, trademarks, trade names, and applications therefore used by the Company exclusively in and
material to the conduct of its business (the Patent and Trademark Rights). Except as disclosed in
Schedule 2.16
, (a) the Company owns or possesses adequate licenses or
7
other valid rights to use all Patent and Trademark Rights; and (b) to the Companys knowledge, the
conduct of its business as now being conducted does not conflict with any valid patents,
trademarks, trade names or copyrights of others in any way which has a material adverse effect on
the business or financial Condition of the Company or its business.
2.17
Interested Party Transactions
. Except as disclosed on
Schedule 2.17
, no officer,
director or stockholder of the Company or any Affiliate or associate (as such term is defined in
Rule 405 under the Securities Act) of any such Person or the Company has or has had, either
directly or indirectly, (a) an interest in any Person that (i) furnishes or sells services or
products that are furnished or sold or are proposed to be furnished or sold by the Company or
(ii) purchases from or sells or furnishes to the Company any goods or services, or (b) a beneficial
interest in any contract or agreement to which the Company is a party or by which it may be bound
or affected.
2.18
Questionable Payments
. Neither the Company nor, to the knowledge of the Company, any
director, officer, agent, employee or other Person associated with or acting on behalf of the
Company, has used any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect unlawful payments to
government officials or employees from corporate funds; established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; made any false or fictitious entries on the
books of record of any such corporations; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
2.19
Obligations to or by Stockholders
. Except as disclosed on
Schedule 2.19
, the
Company has no liability or obligation or commitment to any stockholder of the Company or any
Affiliate or associate (as such term is defined in Rule 405 under the Securities Act) of any
stockholder of Company, nor does any stockholder of Company or any such Affiliate or associate have
any liability, obligation or commitment to the Company.
2.20
Assets and Contracts
. Except as expressly set forth in a schedule to this Agreement, the
Companys Balance Sheet or the notes thereto, the Company is not a party to any written or oral
agreement not made in the ordinary course of business that is material to the Company. Company
does not own any real property. Except as disclosed on
Schedule 2.20
, Company is not a
party to or otherwise bound by any written or oral (a) agreement with any labor union,
(b) agreement for the purchase of fixed assets or for the purchase of materials, supplies or
equipment in excess of normal operating requirements, (c) agreement for the employment of any
officer, individual employee or other Person on a full-time basis or any agreement with any Person
for consulting services, (d) bonus, pension, profit sharing, retirement, stock purchase, stock
option, deferred compensation, medical, hospitalization or life insurance or similar plan, contract
or understanding with respect to any or all of the employees of Company or any other Person,
(e) indenture, loan or credit agreement, note agreement, deed of trust, mortgage, security
agreement, promissory note or other agreement or instrument relating to or evidencing Indebtedness
for Borrowed Money or subjecting any asset or property of Company to any Lien or evidencing any
Indebtedness, (f) guaranty of any Indebtedness, (g) lease or agreement under which Company is
lessee of or holds or operates any property, real or personal, owned by any other Person, (h) lease
or agreement under which Company is lessor or permits any Person to hold or operate any property,
real or personal, owned or controlled by Company, (i) agreement granting any preemptive right,
right of first refusal or similar right to any Person,
8
(j) agreement or arrangement with any Affiliate or any associate (as such term is defined in
Rule 405 under the Securities Act) of Company or any present or former officer, director or
stockholder of Company, (k) agreement obligating Company to pay any royalty or similar charge for
the use or exploitation of any tangible or intangible property, (1) covenant not to compete or
other restriction on its ability to conduct a business or engage in any other activity, (m)
distributor, dealer, manufacturers representative, sales agency, franchise or advertising contract
or commitment, (n) agreement to register securities under the Securities Act, (o) collective
bargaining agreement, or (p) agreement or other commitment or arrangement with any Person
continuing for a period of more than two months from the Closing Date that involves an expenditure
or receipt by Company in excess of $1,000. Except as disclosed on
Schedule 2.20
, the
Company maintains no insurance policies and insurance coverage of any kind with respect to Company,
its business, premises, properties, assets, employees and agents.
Schedule 2.20
contains a
true and complete list and description of each bank account, savings account, other deposit
relationship and safety deposit box of Company, including the name of the bank or other depository,
the account number and the names of the individuals having signature or other withdrawal authority
with respect thereto. Except as disclosed on
Schedule 2.20
, no consent of any bank or other
depository is required to maintain any bank account, other deposit relationship or safety deposit
box of Company in effect following the consummation of the Merger and the transactions contemplated
hereby. Company has furnished to the Parent true and complete copies of all agreements and other
documents disclosed or referred to in
Schedule 2.20
or the Company Balance Sheet or the
notes thereto, as well as any additional agreements or documents, requested by the Parent.
2.21
Employees
. Except as disclosed on
Schedule 2.17
, other than pursuant to ordinary
arrangements of consulting compensation at fair market rates, Company is not under any obligation
or liability to any officer, director, employee or Affiliate of Company. The Company has no
employment agreements with, or any severance payment obligations to, any of its officers or
employees.
2.22
Disclosure
. There is no fact relating to the Company that the Company has not disclosed to
Parent that materially and adversely affects or, insofar as the Company can now reasonably foresee,
will materially and adversely affect the Condition of the Company.
3.
Representations and Warranties of Parent and Acquisition Corp
.
Parent and Acquisition
Corp. jointly and severally represent and warrant to the Company as follows:
3.1
Organization and Standing
. Parent is a corporation duly organized and existing in good
standing under the laws of the State of Delaware. Acquisition Corp. is a corporation duly organized
and existing in good standing under the laws of the State of Delaware. Parent is duly qualified to
conduct business as a foreign corporation and is in good standing in each jurisdiction wherein the
nature of its activities or its properties owned or leased makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse effect on the
Condition of the Parent (as defined below). Parent and Acquisition Corp. have heretofore delivered
to the Company complete and correct copies of their respective Certificates of Incorporation and
By-laws as now in effect. Parent and Acquisition Corp. have full corporate power and authority to
carry on their respective businesses as they are now being conducted and as now proposed to be
conducted and to own or lease their respective properties and assets. Neither Parent nor
Acquisition Corp. has any subsidiaries (except Parent as the sole
9
stockholder of Acquisition Corp.) or direct or indirect interest (by way of stock ownership or
otherwise) in any firm, corporation, limited liability company, partnership, association or
business. Parent owns all of the issued and outstanding capital stock of Acquisition Corp. free and
clear of all Liens, and Acquisition Corp. has no outstanding options, warrants or rights to
purchase capital stock or other equity securities of Acquisition Corp., other than the capital
stock owned by Parent. Unless the context otherwise requires, all references in this Section 3 to
the Parent shall be treated as being a reference to the Parent and Acquisition Corp. taken
together as one enterprise.
3.2
Corporate Authority
. Each of Parent and/or Acquisition Corp. (as the case may be) has
full corporate power and authority to enter into the Merger Documents and the other agreements to
be made pursuant to the Merger Documents, and to carry out the transactions contemplated hereby and
thereby. All corporate acts and proceedings required for the authorization, execution, delivery and
performance of the Merger Documents and such other agreements and documents by Parent and/or
Acquisition Corp. (as the case may be) have been duly and validly taken or will have been so taken
prior to the Closing. Each of the Merger Documents constitutes a legal, valid and binding
obligation of Parent and/or Acquisition Corp. (as the case may be), each enforceable against them
in accordance with their respective terms.
3.3
Brokers and Finders Fees
. No person, firm, corporation or other entity is entitled
by reason of any act or omission of Parent or Acquisition Corp. to any brokers or finders fees,
commission or other similar compensation with respect to the execution and delivery of this
Agreement or the Certificate of Merger, or with respect to the consummation of the transactions
contemplated hereby or thereby. Parent and Acquisition Corp. jointly and severally agree to defend,
indemnify and hold Company harmless from and against any and all loss, claim or liability
(including attorneys fees, expert fees and all costs of court, whether or not assessable under
applicable law) arising out of any such claim from any other Person who claims he, she or it
introduced Parent or Acquisition Corp. to, or assisted them with, the transactions contemplated by
or described herein.
3.4
Capitalization of Parent
. The authorized capital stock of Parent consists of
(a) 200,000,000 shares of common stock, par value $0.0001 per share (the Parent Common Stock), of
which not more than 1,294,144 shares will be, prior to the Effective Time, issued and outstanding
and (b) 50,000,000 shares of preferred stock, par value $0.0001 per share, of which no shares are
issued or outstanding.
Schedule 3.4
hereto contains a complete and true capitalization
table setting forth the Parent common stock holdings of the officers and directors of Parent and
the holders of greater than 5% of Parent Common Stock. Except as set forth on
Schedule 3.4
or in the Parent SEC Documents (as defined in Section 3.7 below), Parent has no outstanding
options, warrants, rights or commitments to issue shares of Parent Common Stock or any other Equity
Security of Parent or Acquisition Corp., and there are no outstanding securities convertible or
exercisable into or exchangeable for shares of Parent Common Stock or any other Equity Security of
Parent or Acquisition Corp. There is no voting trust, agreement or arrangement among any of the
beneficial holders of Parent Common Stock affecting the nomination or election of directors or the
exercise of the voting rights of Parent Common Stock. All outstanding shares of the capital stock
of Parent are validly issued and outstanding, fully paid and nonassessable, and none of such shares
have been issued in violation of the preemptive rights of any person or any applicable law.
10
3.5
Acquisition Corp
. Acquisition Corp. is a wholly-owned subsidiary of Parent that was
formed specifically for the purpose of the Merger and that has not conducted any business or
acquired any property, and will not conduct any business or acquire any property prior to the
Closing Date, except in preparation for and otherwise in connection with the transactions
contemplated by this Agreement, the Certificate of Merger and the other agreements to be made
pursuant to or in connection with this Agreement and the Certificate of Merger. The authorized
capital stock of Acquisition Corp. consists of 1,000 shares of $.001 par value common stock (the
Acquisition Corp. Common Stock), of which not more than 100 shares will be, prior to the
Effective Time, issued and outstanding.
3.6
Validity of Shares
. All of the 24,588,734 shares of Parent Common Stock to be
issued at the Closing pursuant to Section 1.5(a)(ii) hereof, when issued and delivered in
accordance with the terms hereof and the Certificate of Merger, shall be duly and validly issued,
fully paid and nonassessable. The issuance of the Parent Common Stock upon the Merger pursuant to
Section 1.5(a)(ii) will be exempt from the registration and prospectus delivery requirements of the
Securities Act and from the qualification or registration requirements of any applicable state blue
sky or securities laws.
3.7
SEC Reporting and Compliance
.
(a) Parent has filed with the Commission all forms, reports and documents required to be filed
by companies registered pursuant to Section 12(g) of the Exchange Act (collectively, the Parent
SEC Documents). The Parent SEC Documents (i) were prepared in all material respects in accordance
with the requirements of the Securities Act and the Exchange Act, as the case may be, and the
rules and regulations thereunder and (ii) did not, at the time they were filed (or at the effective
date thereof in the case of registration statements), 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 made therein, in light of the circumstances under which they were made, not
misleading.
(b) Parent has not filed, and nothing has occurred with respect to which Parent would be
required to file, any report on Form 8-K since September 30, 2007. Prior to and until the Closing,
Parent will provide to the Company copies of any and all amendments or supplements to the Parent
SEC Documents filed with the Commission since September 30, 2007 and any and all subsequent
statements, reports and filings filed by the Parent with the Commission or delivered to the
stockholders of Parent.
(c) Parent is not an investment company within the meaning of Section 3 of the Investment
Company Act.
(d) The shares of Parent Common Stock are quoted on the OTC Bulletin Board under the symbol
VYXC, and Parent is in compliance in all material respects with all rules and regulations of the
OTC Bulletin Board applicable to it and the Parent Stock.
(e) Between the date hereof and the Closing Date, Parent shall continue to satisfy the filing
requirements of the Exchange Act and all other requirements of
11
applicable securities laws and the OTC Bulletin Board and, as of the Closing Date, the Parent
Stock shall be listed on the OTC Bulletin Board.
(f) To the best of its knowledge, Parent has otherwise complied in all material respects with
the Securities Act, Exchange Act and all other applicable federal and state securities laws.
3.8
Financial Statements
. The balance sheets, and statements of operations, statements of
changes in shareholders equity and statements of cash flows contained in the Parent SEC Documents
(the Parent Financial Statements) (i) have been prepared in accordance with US GAAP applied on a
basis consistent with prior periods (and, in the case of unaudited financial information, on a
basis consistent with year-end audits), (ii) are in accordance with the books and records of the
Parent, and (iii) present fairly in all material respects the financial Condition of the Parent at
the dates therein specified and the results of its operations and changes in financial position for
the periods therein specified. The financial statements included in the Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2006, are audited by, and include the related
report of Berenfeld Spritzer Schehecter & Sheer, LLP, Parents independent registered public
accounting firm. The financial information included in each of the Quarterly Reports on Form 10-QSB
for the quarters ended March 31, 2007, June 30, 2007, and September 30, 2007, is unaudited, but
reflects all adjustments (including normally recurring accounts) that Parent considers necessary
for a fair presentation of such information and have been prepared in accordance with US GAAP,
consistently applied, and present fairly in all material respects the financial condition of the
Parent on the dates therein specified.
3.9
Governmental Consents
. All consents, approvals, orders, or authorizations of, or
registrations, qualifications, designations, declarations, or filings with any federal or state
governmental authority on the part of Parent or Acquisition Corp. required in connection with the
consummation of the Merger shall have been obtained prior to, and be effective as of, the Closing.
3.10
Compliance with Laws and Instruments
. The execution, delivery and performance by
Parent and/or Acquisition Corp. of this Agreement, the Certificate of Merger and the other
agreements to be made by Parent or Acquisition Corp. pursuant to or in connection with this
Agreement or the Certificate of Merger and the consummation by Parent and/or Acquisition Corp. of
the transactions contemplated by the Merger Documents will not cause Parent and/or Acquisition
Corp. to violate or contravene (i) any provision of law, (ii) any rule or regulation of any agency
or government, (iii) any order, judgment or decree of any court, or (v) any provision of their
respective articles or certificate of incorporation or by-laws as amended and in effect on and as
of the Closing Date and will not violate or be in conflict with, result in a breach of or
constitute (with or without notice or lapse of time, or both) a default under any indenture, loan
or credit agreement, deed of trust, mortgage, security agreement or other agreement or contract to
which Parent or Acquisition Corp. is a party or by which Parent and/or Acquisition Corp. or any of
their respective properties is bound.
3.11
No General Solicitation
. In issuing Parent Common Stock in the Merger hereunder,
neither Parent nor anyone acting on its behalf has offered to sell the Parent Common Stock by any
form of general solicitation or advertising.
12
3.12
Binding Obligations
. The Merger Documents constitute the legal, valid and binding
obligations of Parent and Acquisition Corp., and are enforceable against Parent and Acquisition
Corp., in accordance with their respective terms.
3.13
Absence of Undisclosed Liabilities
. Neither Parent nor Acquisition Corp. has any
obligation or liability (whether accrued, absolute, contingent, liquidated or otherwise, whether
due or to become due), arising out of any transaction entered into at or prior to the Closing,
except (a) as disclosed in the Parent SEC Documents, (b) to the extent set forth on or reserved
against in the audited balance sheet of Parent as of December 31, 2006 (the Parent Balance Sheet)
or the Notes to the Parent Financial Statements, (c) current liabilities incurred and obligations
under agreements entered into in the usual and ordinary course of business since December 31, 2006
(the Parent Balance Sheet Date), none of which (individually or in the aggregate) materially and
adversely affects the condition (financial or otherwise), properties, assets, liabilities, business
operations, results of operations or prospects of the Parent or Acquisition Corp., taken as a whole
(the Condition of the Parent), as disclosed on a Schedule attached to this Agreement, and (e) by
the specific terms of any written agreement, document or arrangement attached as an exhibit to the
Parent SEC Documents.
3.14
Changes
. Since the Parent Balance Sheet Date, except as disclosed in the Parent SEC
Documents and on
Schedule 3.14
, the Parent has not (a) incurred any debts, obligations or
liabilities, absolute, accrued or, to the Parents knowledge, contingent, whether due or to become
due, except for current liabilities incurred in the usual and ordinary course of business,
(b) discharged or satisfied any Liens other than those securing, or paid any obligation or
liability other than, current liabilities shown on the Parent Balance Sheet and current liabilities
incurred since the Parent Balance Sheet Date, in each case in the usual and ordinary course of
business, (c) mortgaged, pledged or subjected to Lien any of its assets, tangible or intangible,
other than in the usual and ordinary course of business, (d) sold, transferred or leased any of its
assets, except in the usual and ordinary course of business, (e) cancelled or compromised any debt
or claim, or waived or released any right of material value, (f) suffered any physical damage,
destruction or loss (whether or not covered by insurance) which could reasonably be expected to
have a material adverse effect on the Condition of the Parent, (g) entered into any transaction
other than in the usual and ordinary course of business, (h) encountered any labor union
difficulties, (i) made or granted any wage or salary increase or made any increase in the amounts
payable under any profit sharing, bonus, deferred compensation, severance pay, insurance, pension,
retirement or other employee benefit plan, agreement or arrangement, other than in the ordinary
course of business consistent with past practice, or entered into any employment agreement, (j)
issued or sold any shares of capital stock, bonds, notes, debentures or other securities or granted
any options (including employee stock options), warrants or other rights with respect thereto, (k)
declared or paid any dividends on or made any other distributions with respect to, or purchased or
redeemed, any of its outstanding capital stock, (l) suffered or experienced any change in, or
condition affecting, the financial Condition of the Parent other than changes, events or conditions
in the usual and ordinary course of its business, none of which (either by itself or in conjunction
with all such other changes, events and conditions) could reasonably be expected to have a material
adverse effect on the Condition of the Parent, (m) made any change in the accounting principles,
methods or practices followed by it or depreciation or amortization policies or rates theretofore
adopted, (n) made or permitted any amendment or termination of any material contract, agreement or
license to which it is a party,
13
(o) suffered any material loss not reflected in the Parent Balance Sheet or its statement of income
for the year ended on the Parent Balance Sheet Date, (p) paid, or made any accrual or arrangement
for payment of, bonuses or special compensation of any kind or any severance or termination pay to
any present or former officer, director, employee, stockholder or consultant, (q) made or agreed to
make any charitable contributions or incurred any non-business expenses in excess of $5,000 in the
aggregate, or (r) entered into any agreement, or otherwise obligated itself, to do any of the
foregoing.
3.15
Tax Returns and Audits
. All required federal, state and local Tax Returns of the
Parent have been accurately prepared in all material respects and duly and timely filed, and all
federal, state and local Taxes required to be paid with respect to the periods covered by such
returns have been paid to the extent that the same are material and have become due, except where
the failure so to file or pay could not reasonably be expected to have a material adverse effect
upon the Condition of the Parent. The Parent is not and has not been delinquent in the payment of
any Tax. The Parent has not had a Tax deficiency assessed against it. None of the Parents federal
income tax returns nor any state or local income or franchise tax returns has been audited by
governmental authorities. The reserves for Taxes reflected on the Parent Balance Sheet are
sufficient for the payment of all unpaid Taxes payable by the Parent with respect to the period
ended on the Parent Balance Sheet Date. There are no federal, state, local or foreign audits,
actions, suits, proceedings, investigations, claims or administrative proceedings relating to Taxes
or any Tax Returns of the Parent now pending, and the Parent has not received any notice of any
proposed audits, investigations, claims or administrative proceedings relating to Taxes or any Tax
Returns.
3.16
Employee Benefit Plans; ERISA
.
(a) Except as disclosed in the Parent SEC Documents, there are no employee benefit
plans
(within the meaning of Section 3(3) of ERISA) nor any other employee benefit or fringe benefit
arrangements, practices, contracts, policies or programs other than programs merely involving the
regular payment of wages, commissions, or bonuses established, maintained or contributed to by the
Parent. Any plans listed in the Parent SEC Documents are hereinafter referred to as the Parent
Employee Benefit Plans.
(b) Any current and prior material documents, including all amendments thereto, with respect
to each Parent Employee Benefit Plan have been given to the Company or its advisors.
(c) All Parent Employee Benefit Plans are in material compliance with the applicable
requirements of ERISA, the Code and any other applicable state, federal or foreign law.
(d) There are no pending, or to the knowledge of the Parent, threatened, claims or lawsuits
which have been asserted or instituted against any Parent Employee Benefit Plan, the assets of any
of the trusts or funds under the Parent Employee Benefit Plans, the plan sponsor or the plan
administrator of any of the Parent Employee Benefit Plans or against any fiduciary of a Parent
Employee Benefit Plan with respect to the operation of such plan.
14
(e) There is no pending, or to the knowledge of the Parent, threatened, investigation or
pending or possible enforcement action by the Pension Benefit Guaranty Corporation, the Department
of Labor, the Internal Revenue Service or any other government agency with respect to any Parent
Employee Benefit Plan.
(f) No actual or, to the knowledge of Parent, contingent liability exists with respect to the
funding of any Parent Employee Benefit Plan or for any other expense or obligation of any Parent
Employee Benefit Plan, except as disclosed on the financial statements of the Parent or the Parent
SEC Documents, and to the knowledge of the Parent, no contingent liability exists under ERISA with
respect to any multi-employer plan, as defined in Section 3(37) or Section 4001(a)(3) of ERISA.
3.17
Litigation
. There is no legal action, suit, arbitration or other legal,
administrative or other governmental proceeding pending or, to the knowledge of the Parent,
threatened against or affecting the Parent or Acquisition Corp. or their properties, assets or
business. To the knowledge of the Parent, neither Parent nor Acquisition Corp. is in default with
respect to any order, writ, judgment, injunction, decree, determination or award of any court or
any governmental agency or instrumentality or arbitration authority.
3.18
Interested Party Transactions
. Except as disclosed in the Parent SEC Documents and on
Schedule 3.14
, no officer, director or stockholder of the Parent or any Affiliate or
associate (as such term is defined in Rule 405 under the Securities Act) of any such Person or
the Parent has or has had, either directly or indirectly, (a) an interest in any Person that
(i) furnishes or sells services or products that are furnished or sold or are proposed to be
furnished or sold by the Parent or (ii) purchases from or sells or furnishes to the Parent any
goods or services, or (b) a beneficial interest in any contract or agreement to which the Parent is
a party or by which it may be bound or affected.
3.19
Questionable Payments
. Neither the Parent, Acquisition Corp. nor to the knowledge of
the Parent, any director, officer, agent, employee or other Person associated with or acting on
behalf of the Parent or Acquisition Corp., has used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity; made any direct or
indirect unlawful payments to government officials or employees from corporate funds; established
or maintained any unlawful or unrecorded fund of corporate monies or other assets; made any false
or fictitious entries on the books of record of any such corporations; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment.
3.20
Obligations to or by Stockholders
. Except as disclosed in the Parent SEC Documents,
the Parent has no liability or obligation or commitment to any stockholder of Parent or any
Affiliate or associate (as such term is defined in Rule 405 under the Securities Act) of any
stockholder of Parent, nor does any stockholder of Parent or any such Affiliate or associate have
any liability, obligation or commitment to the Parent.
3.21
Assets and Contracts
. Except as expressly set forth in a schedule to this Agreement,
the Parent Balance Sheet or the notes thereto, the Parent is not a party to any written or oral
agreement not made in the ordinary course of business that is material to the Parent. Parent does
not own any real property. Parent is not a party to or otherwise bound by any written or oral
(a) agreement with any labor union, (b) agreement for the purchase of fixed assets or for
15
the purchase of materials, supplies or equipment in excess of normal operating requirements,
(c) agreement for the employment of any officer, individual employee or other Person on a full-time
basis or any agreement with any Person for consulting services, (d) bonus, pension, profit sharing,
retirement, stock purchase, stock option, deferred compensation, medical, hospitalization or life
insurance or similar plan, contract or understanding with respect to any or all of the employees of
Parent or any other Person, (e) indenture, loan or credit agreement, note agreement, deed of trust,
mortgage, security agreement, promissory note or other agreement or instrument relating to or
evidencing Indebtedness for Borrowed Money or subjecting any asset or property of Parent to any
Lien or evidencing any Indebtedness, (f) guaranty of any Indebtedness, (g) lease or agreement under
which Parent is lessee of or holds or operates any property, real or personal, owned by any other
Person, (h) lease or agreement under which Parent is lessor or permits any Person to hold or
operate any property, real or personal, owned or controlled by Parent, (i) agreement granting any
preemptive right, right of first refusal or similar right to any Person, (j) agreement or
arrangement with any Affiliate or any associate (as such term is defined in Rule 405 under the
Securities Act) of Parent or any present or former officer, director or stockholder of Parent, (k)
agreement obligating Parent to pay any royalty or similar charge for the use or exploitation of any
tangible or intangible property, (1) covenant not to compete or other restriction on its ability to
conduct a business or engage in any other activity, (m) distributor, dealer, manufacturers
representative, sales agency, franchise or advertising contract or commitment, (n) agreement to
register securities under the Securities Act, (o) collective bargaining agreement, or (p) agreement
or other commitment or arrangement with any Person continuing for a period of more than two months
from the Closing Date that involves an expenditure or receipt by Parent in excess of $1,000.
Except as disclosed on
Schedule 3.21
, the Parent maintains no insurance policies and
insurance coverage of any kind with respect to Parent, its business, premises, properties, assets,
employees and agents.
Schedule 3.21
contains a true and complete list and description of
each bank account, savings account, other deposit relationship and safety deposit box of Parent,
including the name of the bank or other depository, the account number and the names of the
individuals having signature or other withdrawal authority with respect thereto. Except as
disclosed on
Schedule 3.21
, no consent of any bank or other depository is required to
maintain any bank account, other deposit relationship or safety deposit box of Parent in effect
following the consummation of the Merger and the transactions contemplated hereby. Parent has
furnished to the Company true and complete copies of all agreements and other documents disclosed
or referred to in
Schedule 3.21
or the Parent Balance Sheet or the notes thereto, as well
as any additional agreements or documents, requested by the Company.
3.22
Employees
. Other than pursuant to ordinary arrangements of employment compensation,
Parent is not under any obligation or liability to any officer, director, employee or Affiliate of
Parent. The Company has no employment agreements with, or any severance payment obligations to,
any of its officers or employees.
3.23
Patents, Trademarks, Etc
. The Parent SEC Documents disclose all of Parents Patent
and Trademark rights. Except as disclosed in
the Parent SEC Documents,
(a) Parent owns or
possesses adequate licenses or other valid rights to use all Patent and Trademark Rights; and
(b) to Patents knowledge, the conduct of its business as now being conducted does not conflict
with any valid patents, trademarks, trade names or copyrights of
16
others in any way which has a material adverse effect on the business or financial Condition of the
Parent or its business.
3.24
Disclosure
. There is no fact relating to Parent that Parent has not disclosed to the
Company in writing or disclosed in Parent SEC filings or in any schedules or exhibits attached
hereto or incorporated herein that materially and adversely affects nor, insofar as Parent can now
foresee, will materially and adversely affect, the condition (financial or otherwise), properties,
assets, liabilities, business operations, results of operations or prospects of Parent. No
representation or warranty by Parent herein and no information disclosed in the schedules or
exhibits hereto by Parent contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not misleading.
4.
Investment Letter
.
At or prior to the Closing, Parent shall have received from each of
the Companys shareholders a Representation Letter in standard form for comparable transactions
agreeing among other things that the shares of Parent Common Stock to be issued in the merger are,
among other things, being acquired for investment purposes and not with a view to public resale,
are being acquired for the shareholders own account, and that the shares of Parent Common Stock
are restricted and may not be resold without registration, except in reliance on an exemption
therefrom under the Securities Act.
5.
Conduct of Businesses Pending the Merger
.
5.1
Conduct of Business by the Company Pending the Merger
. Prior to the Effective Time,
unless Parent or Acquisition Corp. shall otherwise agree in writing or as otherwise contemplated by
this Agreement or disclosed in any Schedule to this Agreement:
(a) the business of the Company shall be conducted only in the ordinary course;
(b) the Company shall not (i) directly or indirectly redeem, purchase or otherwise acquire
or
agree to redeem, purchase or otherwise acquire any shares of its capital stock; (ii) amend its
Certificate of Incorporation or By-laws; or (iii) split, combine or reclassify the outstanding
Company Common Stock or declare, set aside or pay any dividend payable in cash, stock or property
or make any distribution with respect to any such stock;
(c) the Company shall not (i) issue or agree to issue any additional shares of, or
options,
warrants or rights of any kind to acquire any shares of, Company Common Stock; (ii) acquire or
dispose of any fixed assets or acquire or dispose of any other substantial assets other than in the
ordinary course of business; (iii) incur additional Indebtedness or any other liabilities or enter
into any other transaction other than in the ordinary course of business; (iv) enter into any
contract, agreement, commitment or arrangement with respect to any of the foregoing; or (v) except
as contemplated by this Agreement, enter into any contract, agreement, commitment or arrangement to
dissolve, merge, consolidate or enter into any other material business combination;
(d) the Company shall use its best efforts to preserve intact the business organization of the
Company, to keep available the service of its present officers and key employees, and to preserve
the good will of those having business relationships with it; and
17
(e) the Company will not enter into any new employment agreements with any of its officers or
employees or grant any increases in the compensation or benefits of its officers and employees
other than increases in the ordinary course of business and consistent with past practice or amend
any employee benefit plan or arrangement.
5.2
Conduct of Business by Parent and Acquisition Corp. Pending the Merger
. Parent
represents and warrants to the Company that Parent and Acquisition Corp. do not operate any
business. Prior to the Effective Time, unless the Company shall otherwise agree in writing or as
otherwise contemplated by this Agreement or disclosed in any Schedule to this Agreement:
(a) the business of Parent and Acquisition Corp. shall be conducted only in the ordinary
course; provided, however, that Parent shall take the steps necessary to have discontinued its
existing business without liability to Parent or Acquisition Corp. as of the Closing Date;
(b) neither Parent nor Acquisition Corp. shall (i) directly or indirectly redeem, purchase
or
otherwise acquire or agree to redeem, purchase or otherwise acquire any shares of its capital
stock; (ii) amend its articles or certificate of incorporation or by-laws; or (iii) split, combine
or reclassify its capital stock or declare, set aside or pay any dividend payable in cash, stock or
property or make any distribution with respect to such stock;
(c) neither Parent nor Acquisition Corp. shall (i) issue or agree to issue any additional
shares of, or options, warrants or rights of any kind to acquire shares of, its capital stock;
(ii) acquire or dispose of any assets other than in the ordinary course of business (except for
dispositions in connection with Section 5.2(a) hereof); (iii) incur additional Indebtedness or any
other liabilities or enter into any other transaction except in the ordinary course of business;
(iv) enter into any contract, agreement, commitment or arrangement with respect to any of the
foregoing, or (v) except as contemplated by this Agreement, enter into any contract, agreement,
commitment or arrangement to dissolve, merge, consolidate or enter into any other material business
contract or enter into any negotiations in connection therewith;
(d) neither Parent nor Acquisition Corp. will, nor will they authorize any director or
authorize or permit any officer or employee or any attorney, accountant or other representative
retained by them to, make, solicit, encourage any inquiries with respect to, or engage in any
negotiations concerning, any Acquisition Proposal (as defined below for purposes of this
paragraph). Parent will promptly advise the Company orally and in writing of any such inquiries or
proposals (or requests for information) and the substance thereof. As used in this paragraph,
Acquisition Proposal shall mean any proposal for a merger or other business combination involving
the Parent or Acquisition Corp. or for the acquisition of a substantial equity interest in either
of them or any material assets of either of them other than as contemplated by this Agreement.
Parent will immediately cease and cause to be terminated any existing activities, discussions or
negotiations with any person conducted heretofore with respect to any of the foregoing; and
(e) neither the Parent nor Acquisition Corp. will enter into any new employment agreements
with any of their officers or employees or grant any increases in the compensation or benefits of
their officers or employees.
18
6.
Additional Agreements
.
6.1
Access and Information
. The Company, Parent and Acquisition Corp. shall each afford to
the other and to the others accountants, counsel and other representatives full access during
normal business hours throughout the period prior to the Effective Time of all of its properties,
books, contracts, commitments and records (including but not limited to tax returns) and during
such period, each shall furnish promptly to the other all information concerning its business,
properties and personnel as such other party may reasonably request; provided, that no
investigation pursuant to this Section 6.1 shall affect any representations or warranties made
herein. Each party shall hold, and shall cause its employees and agents to hold, in confidence all
such information (other than such information which (i) is already in such partys possession or
(ii) becomes generally available to the public other than as a result of a disclosure by such party
or its directors, officers, managers, employees, agents or advisors, or (iii) becomes available to
such party on a non-confidential basis from a source other than a party hereto or its advisors,
provided that such source is not known by such party to be bound by a confidentiality agreement
with or other obligation of secrecy to a party hereto or another party until such time as such
information is otherwise publicly available; provided, however, that (A) any such information may
be disclosed to such partys directors, officers, employees and representatives of such partys
advisors who need to know such information for the purpose of evaluating the transactions
contemplated hereby (it being understood that such directors, officers, employees and
representatives shall be informed by such party of the confidential nature of such information),
(B) any disclosure of such information may be made as to which the party hereto furnishing such
information has consented in writing, and (C) any such information may be disclosed pursuant to a
judicial, administrative or governmental order or request; provided, however, that the requested
party will promptly so notify the other party so that the other party may seek a protective order
or appropriate remedy and/or waive compliance with this Agreement and if such protective order or
other remedy is not obtained or the other party waives compliance with this provision, the
requested party will furnish only that portion of such information which is legally required and
will exercise its best efforts to obtain a protective order or other reliable assurance that
confidential treatment will be accorded the information furnished). If this Agreement is
terminated, each party will deliver to the other all documents and other materials (including
copies) obtained by such party or on its behalf from the other party as a result of this Agreement
or in connection herewith, whether so obtained before or after the execution hereof.
6.2
Additional Agreements
. Subject to the terms and conditions herein provided, each of
the parties hereto agrees to use its commercially reasonable best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the transactions contemplated by
this Agreement, including using its commercially reasonable efforts to satisfy the conditions
precedent to the obligations of any of the parties hereto to obtain all necessary waivers, and to
lift any injunction or other legal bar to the Merger (and, in such case, to proceed with the Merger
as expeditiously as possible). In order to obtain any necessary governmental or regulatory action
or non-action, waiver, consent, extension or approval, each of Parent, Acquisition Corp. and the
Company agrees to take all reasonable actions and to enter into all reasonable agreements as may be
necessary to obtain timely governmental or regulatory approvals and to take such further action in
connection therewith as may be necessary. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the
19
purposes of this Agreement, the proper officers and/or directors of Parent, Acquisition Corp. and
the Company shall take all such necessary action.
6.3
Publicity
. No party shall issue any press release or public announcement pertaining to
the Merger that has not been agreed upon in advance by Parent and the Company; provided, however,
that this provision shall not prevent any party from making any announcement or filing any report
required by it to be in compliance with any applicable federal or state securities laws.
6.4
Appointment of Officers and Directors
. Parent shall accept the resignation of the
current officers and directors of Parent as provided by Section 7.2(f)(7) hereof, and shall cause
the persons listed as officers and directors in
Exhibit B
hereto to be elected to such positions,
in each case immediately upon the Effective Time, except that the resignation and appointment of
certain directors shall be delayed until compliance with Section 14(f) of the Exchange Act and
rules promulgated thereunder, as set forth in
Exhibit B
and Section 7.2(f)(7) hereof. At the
first annual meeting of Parent stockholders and thereafter, the election of members of Parents
Board of Directors shall be accomplished in accordance with the by-laws of Parent.
6.5
[Intentionally Deleted]
6.6
Additional Parent Actions
. Prior to the Closing, Parent shall have
(a) cancelled any shares of Parent Common Stock held in treasury by Parent; and
(b) no outstanding contractual commitments, and shall not have outstanding payables or
liabilities, except for Parents reasonable legal and accounting fees and expenses incurred in
connection with this Agreement and the Merger, which shall be paid at Closing.
6.7
Payment of Parent Liabilities
. Immediately upon the execution of this Agreement, the
Company shall pay the Parents liabilities in the maximum amount of $183,131 as set forth on
Schedule 6.7
to the extent not previously paid (the Parent Debt).
6.8
Indemnity Agreements
. Parent and Company acknowledge that Parent is a party to
certain indemnification agreements (the Indemnity Agreements) in favor of Parents current and
former officers and directors, copies of which have been provided to Company. Parent and Company
agree that these Indemnity Agreements shall survive the Merger and any subsequent merger,
reorganization or reincorporation of Parent, and that Parent and Company shall take no action which
will deprive the beneficiaries of these Indemnification Agreements of the benefits and protections
thereof, nor shall Parent or Company take any action intended to or effecting any change,
limitation, termination or other modification of the rights and duties of any party under such
Indemnity Agreements.
6.9
Post-Closing Audit and Filing Expenses
. The Company agrees that it shall be
responsible for all post-Closing costs and expenses incurred in connection with preparation and
filing of Parents SEC Documents due after Closing.
20
6.10
Parent Post-Closing Capitalization Table
. Attached hereto as
Exhibit C
is a table
showing the capitalization of Parent after consummation of the Merger and the transactions
contemplated herein.
7.
Conditions of Parties Obligations
.
7.1
Company Obligations
. The obligations of Parent and Acquisition Corp. under this
Agreement and the Certificate of Merger are subject to the fulfillment at or prior to the Closing
of the following conditions, any of which may be waived in whole or in part by Parent.
(a) No Errors, etc. The representations and warranties of the Company under this Agreement
shall be deemed to have been made again on the Closing Date and shall then be true and correct in
all material respects.
(b) Compliance with Agreement. The Company shall have performed and complied in all material
respects with all agreements and conditions required by this Agreement to be performed or complied
with by it on or before the Closing Date.
(c) No Default or Adverse Change. There shall not exist on the Closing Date any Default or
Event of Default or any event or condition that, with the giving of notice or lapse of time, or
both, would constitute a Default or Event of Default, and since the Balance Sheet Date, there shall
have been no material adverse change in the Condition of the Company.
(d) No Restraining Action. No action or proceeding before any court, governmental body or
agency shall have been threatened, asserted or instituted to restrain or prohibit, or to obtain
substantial damages in respect of, this Agreement or the Certificate of Merger or the carrying out
of the transactions contemplated by the Merger Documents.
(e) Supporting Documents. Parent and Acquisition Corp. shall have received the following:
(i) Copies of resolutions of the Board of Directors
and the Stockholders of the
Company authorizing and approving the execution, delivery and performance of the Merger
Documents and all other documents and instruments to be delivered pursuant hereto and
thereto.
(ii) A certificate, dated the Closing Date, executed
by the Companys President and
Chief Executive Officer, certifying as to satisfaction of the conditions set forth in
Section 7.1(c)
and certifying that, except for the filing of the Certificate of
Merger: (i) all consents, authorizations, orders and approvals of, and filings and
registrations with, any court, governmental body or instrumentality that are required for
the execution and delivery of this Agreement and the Certificate of Merger and the
consummation of the Merger shall have been duly made or obtained, and all material consents
by third parties that are required for the Merger have been obtained; and (ii) no action or
proceeding before any court, governmental body or agency has been threatened, asserted or
instituted to restrain or prohibit, or to obtain substantial damages in respect of,
21
this Agreement or the Certificate of Merger or the carrying out of the transactions contemplated
by the Merger Documents.
(iii) Evidence as of a date within 10 days of
the Effective Time of the good standing
and corporate existence of the Company issued by the Secretary of State of the State of
Delaware.
(iv) Such additional supporting documentation and
other information with respect to
the transactions contemplated hereby as Parent and Acquisition Corp. may reasonably
request.
(f) Proceedings and Documents. All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates, opinions, agreements,
instruments and documents mentioned herein or incident to any such transactions shall be reasonably
satisfactory in form and substance to Parent and Acquisition Corp. The Company shall furnish to
Parent and Acquisition Corp. such supporting documentation and evidence of the satisfaction of any
or all of the conditions precedent specified in this Section 7.1 as Parent or its counsel may
reasonably request.
7.2
Parent and Acquisition Corp. Obligations
. The obligations of the Company under this
Agreement and the Certificate of Merger are subject to the fulfillment at or prior to the Closing
of the following conditions, any of which may be waived in whole or in part by the Company:
(a) No Errors, etc. The representations and warranties of Parent and Acquisition Corp. under
this Agreement shall be deemed to have been made again on the Closing Date and shall then be true
and correct in all material respects.
(b) Compliance with Agreement. Parent and Acquisition Corp. shall have performed and complied
in all material respects with all agreements and conditions required by this Agreement and the
Certificate of Merger to be performed or complied with by them on or before the Closing Date.
(c) No Default or Adverse Change. There shall not exist on the Closing Date any Default or
Event of Default or any event or condition, that with the giving of notice or lapse of time, or
both, would constitute a Default of Event of Default, and since the Parent Balance Sheet Date,
there shall have been no material adverse change in the Condition of the Parent.
(d) Supporting Documents. The Company shall have received the following, each in form and
substance reasonably satisfactory to the Company and its counsel:
(i) Copies of resolutions of Parents and
Acquisition Corp.s respective boards of
directors and the sole shareholder of Acquisition Corp., authorizing and approving, to the extent applicable, the execution, delivery
and performance of this Agreement, the Certificate of Merger and all other documents and
instruments to be delivered by them pursuant hereto and thereto.
22
(ii) A certificate, dated the Closing Date, executed
by Richard G. McKee, Jr., as
Director of each of the Parent and Acquisition Corp., certifying as to satisfaction of the
conditions set forth in
Section 7.2(c)
and certifying that, except for the filing
of the Certificate of Merger: (i) all consents, authorizations, orders and approvals of,
and filings and registrations with, any court, governmental body or instrumentality that
are required for the execution and delivery of this Agreement and the Certificate of Merger
and the consummation of the Merger shall have been duly made or obtained, and all material
consents by third parties required for the Merger have been obtained; and (ii) no action or
proceeding before any court, governmental body or agency has been threatened, asserted or
instituted to restrain or prohibit, or to obtain substantial damages in respect of, this
Agreement or the Certificate of Merger or the carrying out of the transactions contemplated
by any of the Merger Documents.
(iii) The executed resignations of the Parents
Board of Directors and Executive
Officers, with the resignations to take effect at the Effective Time.
(iv) Evidence as of a date within 10 days of the
Effective Time of the good standing
and corporate existence of Parent issued by the Secretary of State of Delaware.
(v) Evidence as of a date within 10 days of the
Effective Time of the good standing
and corporate existence of Acquisition Corp. issued by the Secretary of State of Delaware.
(vi) Such additional supporting documentation and
other information with respect to
the transactions contemplated hereby as the Company may reasonably request.
(e) No Restraining Action. No action or proceeding before any court, governmental body or
agency shall have been threatened, asserted or instituted to restrain or prohibit, or to obtain
substantial damages in respect of, this Agreement or the Certificate of Merger or the carrying out
of the transactions contemplated by the Merger Documents.
(f) Proceedings and Documents. All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates, opinions, agreements,
instruments and documents mentioned herein or incident to any such transactions shall be
satisfactory in form and substance to the Company. Parent and Acquisition Corp. shall furnish to
the Company such supporting documentation and evidence of satisfaction of any or all of the conditions specified in this
Section 7.2 as the Company may reasonably request.
8.
Survival of Representations and Warranties
.
The representations and warranties of the
parties made in Sections 2 and 3 of this Agreement (including the Schedules to the Agreement which
are hereby incorporated by reference) shall survive for 24 months beyond the Effective Time. This
Section 8 shall not limit any claim for fraud or any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
23
9.
Amendment of Agreement
.
This Agreement and the Certificate of Merger may be amended or
modified at any time in all respects by an instrument in writing executed (i) in the case of this
Agreement by the parties hereto and (ii) in the case of the Certificate of Merger by the parties
thereto.
10.
Definitions
.
Unless the context otherwise requires, the terms defined in this Section
10 shall have the meanings herein specified for all purposes of this Agreement, applicable to both
the singular and plural forms of any of the terms herein defined.
Acquisition Corp. means VYREX ACQUISITION CORPORATION, a Delaware corporation.
Acquisition Proposal shall have the meaning assigned to such term in Section 5.2(d)
hereof.
Affiliate shall mean any Person that directly or indirectly controls, is controlled
by, or is under common control with, the indicated Person.
Agreement shall mean this Agreement.
Balance Sheet and Balance Sheet Date shall have the meanings assigned to such
terms in Section 2.9 hereof.
Benefit Arrangements shall have the meaning assigned to it in Section 2.12 hereof.
Certificate of Merger shall have the meaning assigned to it in the second recital of
this Agreement. Closing and Closing Date shall have the meanings assigned to such terms
in Section 11 hereof.
Code shall mean the Internal Revenue Code of 1986, as amended.
Commission or SEC shall mean the U.S. Securities and Exchange Commission.
Company shall mean PowerVerde, Inc., a Delaware corporation.
Company Common Stock shall have the meaning assigned to it in Section 1.5(a)(ii).
Company Benefit Plans shall have the meaning assigned to it in Section 2.13 hereof.
Condition of the Company shall have the meaning assigned to it in Section 2.2
hereof.
Condition of the Parent shall have the meaning assigned to it in Section 3.13
hereof.
24
Constituent Corporations shall have the meaning assigned to it in Section 1.4
hereof.
Default shall mean a default or failure in the due observance or performance of any
covenant, condition or agreement on the part of the Company to be observed or performed
under the terms of this Agreement or the Certificate of Merger, if such default or failure
in performance shall remain unremedied for five days.
DGCL shall have the meaning assigned to it in the second recital hereof.
Effective Time shall have the meaning assigned to it in Section 1.2 hereof.
Equity Security shall mean any stock or similar security of an issuer or any
security (whether stock or Indebtedness for Borrowed Money) convertible, with or without
consideration, into any stock or similar equity security, or any security (whether stock or
Indebtedness for Borrowed Money) carrying any warrant or right to subscribe to or purchase
any stock or similar security, or any such warrant or right.
ERISA shall have the meaning assigned to it in Section 2.13 hereof.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
Event of Default shall mean (a) the failure of the Company to pay any Indebtedness
for Borrowed Money, or any interest or premium thereon, within five days after the same
shall become due, whether such Indebtedness shall become due by scheduled maturity, by
required prepayment, by acceleration, by demand or otherwise, (b) an event of default under
any agreement or instrument evidencing or securing or relating to any such Indebtedness, or
(c) the failure of the Company to perform or observe any material term, covenant, agreement
or condition on its part to be performed or observed under any agreement or instrument
evidencing or securing or relating to any such Indebtedness when such term, covenant or
agreement is required to be performed or observed.
Indebtedness shall mean any obligation of the Company which under generally accepted
accounting principles is required to be shown on the balance sheet of the Company as a liability. Any obligation secured by a Lien on, or payable
out of the proceeds of production from, property of the Company shall be deemed to be
Indebtedness even though such obligation is not assumed by the Company.
Indebtedness for Borrowed Money shall mean (a) all Indebtedness in respect of money
borrowed including, without limitation, Indebtedness which represents the unpaid amount of
the purchase price of any property and is incurred in lieu of borrowing money or using
available funds to pay such amounts and not constituting an account payable or expense
accrual incurred or assumed in the ordinary course of business of the Company, (b) all
Indebtedness evidenced by a promissory note, bond or similar written obligation to pay
money, or (c) all such Indebtedness guaranteed by the Company or for which the Company is
otherwise contingently liable.
25
Investment Company Act shall mean the Investment Company Act of 1940, as amended.
Knowledge and know means, when referring to any person or entity, the actual
knowledge of such person or entity of a particular matter or fact, and what that person or
entity would have reasonably known after reasonable inquiry. An entity will be deemed to
have knowledge of a particular fact or other matter if any individual who is serving, or
who has served, as an executive officer of such entity has actual knowledge of such fact
or other matter, or had actual knowledge during the time of such service of such fact or
other matter, or would have had knowledge of such particular fact or matter after
reasonable inquiry.
Lien shall mean any mortgage, pledge, security interest, encumbrance, lien or charge
of any kind, including, without limitation, any conditional sale or other title retention
agreement, any lease in the nature thereof and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction and including any
lien or charge arising by statute or other law.
Merger shall have the meaning assigned to it in the first recital hereof.
Merger Documents shall have the meaning assigned to it in Section 2.5 hereof.
Parent shall mean Vyrex Corporation, a Delaware corporation.
Parent Balance Sheet and Parent Balance Sheet Date shall have the meanings
assigned to them in Section 3.13 hereof.
Parent Common Stock shall have the meaning assigned to it in Section 3.4 hereof.
Parent Debt shall have the meaning assigned to it in Section 6.7 hereof.
Parent Employee Benefit Plans shall have the meaning assigned to it in Section 3.16
hereof.
Parent Financial Statements shall have the meaning assigned to it in Section 3.8
hereof.
Parent SEC Documents shall have the meaning assigned to it in Section 3.7(a) hereof.
Patent and Trademark Rights shall have the meaning assigned to it in Section 2.16
hereof.
Permitted Liens shall mean (a) Liens for taxes and assessments or governmental
charges or levies not at the time due or in respect of which the validity thereof shall
currently be contested in good faith by appropriate proceedings; (b) Liens in respect of
pledges or deposits under workmens compensation laws or similar legislation, carriers,
26
warehousemens, mechanics, laborers and materialmens and similar Liens, if the
obligations secured by such Liens are not then delinquent or are being contested in good
faith by appropriate proceedings; and (c) Liens incidental to the conduct of the business
of the Company that were not incurred in connection with the borrowing of money or the
obtaining of advances or credits and which do not in the aggregate materially detract from
the value of its property or materially impair the use made thereof by the Company in its
business.
Person shall include all natural persons, corporations, business trusts,
associations, limited liability companies, partnerships, joint ventures and other entities
and governments and agencies and political subdivisions.
Representation Letter shall have the meaning assigned to it in Section 4 hereof.
Securities Act shall mean the Securities Act of 1933, as amended.
Stockholders shall mean all of the stockholders of the Company.
Surviving Corporation shall have the meaning assigned to it in Section 1.1 hereof.
Tax or Taxes shall mean (a) any and all taxes, assessments, customs, duties,
levies, fees, tariffs, imposts, deficiencies and other governmental charges of any kind
whatsoever (including, but not limited to, taxes on or with respect to net or gross income,
franchise, profits, gross receipts, capital, sales, use, ad valorem, value added, transfer,
real property transfer, transfer gains, transfer taxes, inventory, capital stock, license,
payroll, employment, social security, unemployment, severance, occupation, real or personal
property, estimated taxes, rent, excise, occupancy, recordation, bulk transfer,
intangibles, alternative minimum, doing business, withholding and stamp), together with any
interest thereon, penalties, fines, damages costs, fees, additions to tax or additional amounts
with respect thereto, imposed by the United States (federal, state or local) or other
applicable jurisdiction; (b) any liability for the payment of any amounts described in
clause (a) as a result of being a member of an affiliated, consolidated, combined, unitary
or similar group or as a result of transferor or successor liability, including, without
limitation, by reason of Regulation section 1.1502-6; and (c) any liability for the
payments of any amounts as a result of being a party to any Tax Sharing Agreement or as a
result of any express or implied obligation to indemnify any other Person with respect to
the payment of any amounts of the type described in clause (a) or (b).
Tax Return shall include all returns and reports (including elections, declarations,
disclosures, schedules, estimates and information returns (including Form 1099 and
partnership returns filed on Form 1065)) required to be supplied to a Tax authority
relating to Taxes.
US GAAP shall have the meaning assigned to it in Section 2.9 hereof.
27
11.
Closing
.
The closing of the Merger (the Closing) shall occur concurrently with the
Effective Time (the Closing Date). The Closing shall occur at the offices of Carlton Fields,
P.A., 100 SE 2
nd
Street, Miami, Florida 33131. At the Closing, Parent shall present for
delivery to each Stockholder the certificate representing the Parent Common Stock to be issued
pursuant to Section 1.5(a)(ii) hereof to them pursuant to Sections 1.6 and 4 hereof. Such
presentment for delivery shall be against delivery to Parent and Acquisition Corp. of the
certificates, agreements and other instruments referred to in Section 7.1 hereof, and the
certificates representing all of the Company Common Stock issued and outstanding immediately prior
to the Effective Time. Parent will deliver at such Closing to the Company the officers certificate
referred to in Section 7.2 hereof. All of the other documents, certificates and agreements
referenced in Section 7 will also be executed as described therein. At the Effective Time, all
actions to be taken at the Closing shall be deemed to be taken simultaneously.
12.
Termination Prior to and After Closing
.
12.1
Termination of Agreement
. This Agreement may be terminated at any time prior to the
Closing:
(a) By the mutual written consent of the Company, Acquisition Corp. and Parent;
(b) By the Company, if Parent or Acquisition Corp. (i) fails to perform in any material
respect any of its agreements contained herein required to be performed by it on or prior to the
Closing Date, (ii) materially breaches any of its representations, warranties or covenants
contained herein;
(c) By either the Company, on the one hand, or Parent and Acquisition Corp., on the other
hand, if there shall be any order, writ, injunction or decree of any court or governmental or
regulatory agency binding on Parent, Acquisition Corp. or the Company, which prohibits or
materially restrains any of them from consummating the transactions contemplated hereby; or
(d) By either the Company, on the one hand, or Parent and Acquisition Corp., on the other
hand, if the Closing has not occurred on or prior to February 29, 2008, for any reason other then a
breach by the terminating party.
12.2
Termination of Obligations
. Termination of this Agreement pursuant to this Section 12
shall terminate all obligations of the parties hereunder, except for the obligations under Sections
6.1, 13.3 and 13.9; provided, however, that (i) termination pursuant to paragraphs (b) or (c) of
Section 12.1 shall not relieve the defaulting or breaching party or parties from any liability to
the other parties hereto and (ii) in the event of a termination due to a breach by Parent or
Acquisition Corp., Parent shall pay to the Company within 30 days thereafter the Parent Debt plus
$50,000 (representing a previous advance by the Company to Parent).
13.
Miscellaneous
.
13.1
Notices
. All notices, consents, waivers and other communications required or
permitted under this Agreement must be in writing and will be deemed to have been
28
given by a party (a) when delivered by hand; (b) one day after deposit with a nationally recognized
overnight courier service ; (c) five days after deposit in the United States mail, if sent by
certified mail, return receipt requested; or (d) when sent by facsimile with confirmation of
transmission by the transmitting equipment (a confirming copy of the notice shall also be delivered
by the method specified in (b) above); in each case costs prepaid and to the following addresses
or facsimile numbers and marked to the attention of the person (by name or title) designated below
(or to such other address, facsimile number, or person as a party may designate by notice to the
other parties)
|
|
|
If to Parent
|
|
|
|
or Acquisition Corp.:
|
|
Vyrex Corporation
|
|
|
2159 Avenida de la Playa
|
|
|
La Jolla, California 92037
|
|
|
|
|
|
|
With a copy to:
|
|
Robert B. Macaulay, Esq.
|
|
|
Carlton Fields, P.A.
|
|
|
100 S.E. 2
nd
Street, Suite 4000
|
|
|
Miami, Florida 33131
|
|
|
|
|
|
|
If to the Company:
|
|
PowerVerde, Inc.
|
|
|
21615 N 2
nd
Avenue
Phoenix, Arizona 85027
|
|
|
Phoenix, Arizona 85021
|
|
|
Attn: George Konrad, President
|
|
|
|
With a copy to:
|
|
James E. Brophy, Esq.
|
|
|
Ryley Carlock & Applewhite
|
|
|
One North Central Avenue, Suite 1200
|
|
|
Phoenix, Arizona 85004
|
13.2
Entire Agreement
. This Agreement, including the schedules and exhibits attached
hereto and other documents referred to herein, contains the entire understanding of the parties
hereto with respect to the subject matter hereof. This Agreement supersedes all prior agreements
and undertakings between the parties with respect to such subject matter.
13.3
Expenses
. Each party shall bear and pay all of the legal, accounting and other
expenses incurred by it in connection with the transactions contemplated by this Agreement.
13.4
Time
. Time is of the essence in the performance of the parties respective
obligations herein contained.
13.5
Severability
. Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.
13.6
Successors and Assigns
. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, assigns and heirs.
29
13.7
No Third Parties Benefited
. This Agreement is made and entered into for the sole
protection and benefit of the parties hereto, their successors, assigns and heirs, and no other
Person shall have any right or action under this Agreement.
13.8
Counterparts; Signature by Facsimile
. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which, when taken together, shall be deemed to
constitute one and the same instrument. The exchange of copies of this Agreement and of signature
pages by facsimile transmission shall constitute effective execution and delivery of this Agreement
as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of
the parties transmitted by facsimile or by PDF file shall be deemed to be their original signatures
for all purposes.
13.9
Governing Law
. The laws of the state of Delaware (without giving effect to its
conflicts of laws principles) govern all matters arising out of or relating to this Agreement and
all of the transactions it contemplates including without limitation, its validity, interpretation,
construction, performance, and enforcement.
13.10
Venue; Submission to Jurisdiction
. Any action or proceeding arising out of or
relating to this Agreement or arising out of or in any manner relating to the relationship between
the parties shall only be brought in the state or federal courts in Maricopa County, Arizona or
Miami-Dade County, Florida, and each of the parties hereto submits to the personal jurisdiction of
such courts (and of the appropriate appellate courts wherever located) in any such action or
proceeding, and selects the courts in Maricopa County, Arizona or Miami-Dade County, Florida, for
proper venue in any such action or proceeding. The prevailing party in any legal dispute shall be
entitled to recover its reasonable attorneys fees and costs, including expert witness fees and all
costs of court, whether or not assessable under applicable law.
[Signature Page Follows]
30
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be binding and
effective as of the day and year first above written.
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PARENT:
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VYREX CORPORATION,
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a Delaware corporation
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By: /s/ Richard G. McKee, Jr.
Name: Richard G. McKee, Jr.
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Title: Director
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ACQUISITION CORP.:
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VYREX ACQUISITION CORPORATION
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a Delaware corporation
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By: /s/ Richard G. McKee, Jr.
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Name: Richard G. McKee, Jr.
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Title: Director
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COMPANY:
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POWERVERDE, INC.,
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a Delaware corporation
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By: /s/ George Konrad
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Name: George Konrad
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Title: President
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31
EXHIBIT A
CERTIFICATE OF MERGER OF
DOMESTIC CORPORATIONS
Pursuant to Title 8, Section 251(c) of the Delaware General Corporation Law, the undersigned
corporation executed the following Certificate of Merger:
FIRST
: The name of the surviving Delaware corporation is PowerVerde, Inc., and the name
of the Delaware corporation being merged into this surviving corporation is Vyrex
Acquisition Corporation.
SECOND
: The Agreement of Merger has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations.
THIRD
: The name of the surviving Delaware corporation is PowerVerde, Inc.
FOURTH
: The Certificate of Incorporation of the surviving corporation shall be its
Certificate of Incorporation.
FIFTH:
The merger is to become effective immediately upon filing of this Certificate of
Merger.
SIXTH
: The Agreement of Merger is on file at 21615 N 2
nd
Avenue, Phoenix,
Arizona 85027, the place of business of the surviving corporation.
SEVENTH
: A copy of the Agreement of Merger will be furnished by the surviving
corporation on request, without cost, to any stockholder of the constituent corporations.
IN WITNESS WHEREOF
, said surviving corporation has caused this certificate to be signed by an
authorized officer, the 11
th
day of February, 2008.
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POWERVERDE, INC.
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By: /s/ George Konrad
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Name: George Konrad
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Title: President
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A-1
EXHIBIT B
POST-CLOSING PARENT AND SURVIVING CORPORATION
OFFICERS AND DIRECTORS
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Name
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Position(s)
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George Konrad
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President, Treasurer, Director
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Fred Barker
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Vice President, Secretary, Director
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Richard H. Davis
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Director
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A-2
EXHIBIT C
PARENT POST-CLOSING CAPITALIZATION TABLE
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No. of Shares
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Percent
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Original Vyrex Shareholders
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1,294,144
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5.0
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%
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Former PowerVerde Shareholders
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24,588,734
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95.0
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%
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A-3
PowerVerde, Inc.
Stockholders
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Stockholder
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No. of Shares
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% Owned
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George Konrad
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10,020,000
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49.1
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%
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Fred Barker
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3,000,000
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14.7
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%
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Bill Tucker
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600,000
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2.94
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%
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Chris Tucker
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600,000
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2.94
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%
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Ray Beahn
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800,000
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3.92
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%
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Martinez-Ayme Securities
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980,000
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4.80
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%
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Alfredo F. Ayme
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100,000
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0.49
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%
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Les Anderton Trust
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200,000
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0.98
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%
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Salvatore Autera
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100,000
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0.49
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%
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Vince Beatty
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200,000
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0.98
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%
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Mark Block
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225,000
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1.10
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%
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Leon Breece
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200,000
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0.98
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%
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Mario R. Cappelletti
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50,000
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0.25
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%
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William Chester
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50,000
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0.25
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%
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Lori W. Davis
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100,000
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0.49
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%
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Louise Davis
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50,000
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0.25
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%
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Paul K. Duffy
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100,000
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0.49
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%
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Dynamic Value Partners Ltd.
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100,000
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0.49
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%
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Robert Ehrman
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100,000
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0.49
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%
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William Forshee
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200,000
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0.98
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%
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Edward Gomez (Emmett A. Larkin Company Inc. C/F Edward C. Gomez Transfer IRA)
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400,000
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1.96
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%
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Eric Littman
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200,000
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0.98
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%
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Kevin Lockwood
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200,000
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0.98
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%
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Reynaldo A. Martinez
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100,000
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0.49
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%
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Richard G. McKee Jr.
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425,000
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2.08
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%
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Steven McKnight
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300,000
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1.47
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%
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Juan Mendez
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100,000
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0.49
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%
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Ronald Mozick
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200,000
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0.98
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%
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Fidel Pijeira
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50,000
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0.25
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%
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Magdiel Rodriguez
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100,000
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0.49
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%
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A-4
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Stockholder
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No. of Shares
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% Owned
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Jeffrey Sweet
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200,000
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0.98
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%
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James E. Foulk
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50,000
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0.25
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%
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Don Leach
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50,000
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0.25
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%
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Len Friedman
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25,000
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0.12
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%
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Robert Moliski
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12,500
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0.06
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%
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Robert Bach
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12,500
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0.06
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%
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Edward Gomez
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50,000
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0.25
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%
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Douglas Harker
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25,000
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0.12
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%
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Greg Ormond
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25,000
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0.12
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%
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Lynn Ross
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12,500
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0.06
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%
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Denise Lindsay/MMA
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50,000
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0.25
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%
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Michael J. Stasko
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12,500
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0.06
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%
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Andrew Hellinger
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25,000
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0.12
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%
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TOTAL
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20,400,000
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100
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%
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A-5