EXECUTION COPY
SHARE EXCHANGE
AGREEMENT
by and
among
FERO INDUSTRIES,
INC.,
PYRO PHARMACEUTICALS,
INC.
SHAREHOLDERS
and
THE
PRINCIPAL
Dated as of October 13,
2009
TABLE OF CONTENTS
ARTICLE I Exchange of Company
Shares
Exchange by Shareholders
Closing
ARTICLE II Representations and Warranties
of the Shareholders
Good Title
Power and Authority
No Conflicts
No Finder’s Fee
Purchase Entirely for Own
Account
Shareholder Status
Experience of Such Shareholder
Access to Information
Restricted Securities
Legends
No Derivatives
ARTICLE III Representations and
Warranties of the Company
Organization, Standing and
Power
Company Subsidiaries
Capital Structure
Authority; Execution and Delivery;
Enforceability
No Conflicts; Consents
Taxes
Benefit Plans
Litigation
Compliance with Applicable
Laws
Brokers
Contracts
Title to Properties
Intellectual Property
Labor Matters
Financial Statements
Undisclosed Liabilities
Transactions With Affiliates and
Employees
Internal Accounting Controls
Investment Company
Disclosure
Absence of Certain Changes or
Events
ARTICLE IV Representations and Warranties
of the Parent
Organization, Standing and
Power
Subsidiaries; Equity Interests
Capital Structure
Authority; Execution and Delivery;
Enforceability
No Conflicts; Consents
Financial Statements
SEC Documents; Undisclosed
Liabilities
Absence of Certain Changes or
Events
Taxes
Benefit Plans
ERISA Compliance; Excess Parachute
Payments
Litigation
Compliance with Applicable
Laws
Contracts
Title to Properties
Intellectual Property
Labor Matters
Market Makers
Transactions With Affiliates and
Employees
Internal Accounting Controls
Solvency
Application of Takeover
Protections
No Additional Agreements
Investment Company
Disclosure
Certain Registration Matters
Listing and Maintenance
Requirements
No Undisclosed Events, Liabilities,
Developments or Circumstances
Foreign Corrupt Practices
Information Supplied
ARTICLE V Deliveries
Deliveries of the Shareholders
Deliveries of the Parent
Deliveries of the Company
ARTICLE VI Conditions to Initial
Closing
Shareholder and Company Conditions
Precedent
Parent Conditions Precedent
ARTICLE VII Covenants
Preparation of 14f-1 Notice; Blue Sky
Laws
Public Announcements
Fees and Expenses
Continued Efforts
Exclusivity
Filing of Form 8-K and Press
Release
Furnishing of Information
Access
Preservation of Business
Financing
Directors and Officers
Company Options
ARTICLE VIII Indemnification
Survival of Representations and
Warranties
Indemnification by the
Principal
Procedures for Indemnification
Limitations on Indemnification
ARTICLE IX Miscellaneous
Notices
Amendments; Waivers; No Additional
Consideration
SECTION 9.03
Termination.
Replacement of Securities
Remedies
Independent Nature of Shareholders’
Obligations and Rights
Interpretation
Severability
Counterparts; Facsimile
Execution
Entire Agreement; Third Party
Beneficiaries
Governing Law
Assignment
EXHIBIT A - Shareholders and Ownership
Company Shares
i
EXECUTION COPY
SHARE EXCHANGE
AGREEMENT
This SHARE EXCHANGE AGREEMENT (this
“ Agreement ”), effective as of October 13,
2009, is entered into by and among Fero Industries, Inc., a
Colorado corporation (the “ Parent ”), Pyro
Pharmaceuticals, Inc., a Delaware corporation (the “
Company ”), the Shareholders of the Company (each a
“ Shareholder ” and collectively, the “
Shareholders ”) who have signed Exhibit A
attached hereto and, solely for the purposes of Article VIII
and Article IX of this Agreement, Kyle Schlosser, an
individual (the “ Principal ”). Each of
the parties to this Agreement are individually referred to herein
as a “ Party ” and collectively as the “
Parties .”
BACKGROUND
A.
The Company’s authorized equity
capital consists exclusively of 25,000,000 shares of common stock,
$0.001 par value (“ Company Common Stock ”) and
5,000,000 shares of preferred stock, $0.001 par value (“
Company Preferred Stock ”), of which 7,500,000 shares
of Company Common Stock and 5,000,000 shares of Company Preferred
Stock are issued and outstanding as of the date of this Agreement.
Prior to the Initial Closing (as defined in
Section 1.02), some or all of the 5,000,000 shares of Company
Preferred Stock may be converted into shares of Company Common
Stock on a one-for-one basis. (The 7,500,000 shares of
Company Common Stock issued and outstanding as of the date of this
Agreement and the 5,000,000 shares of Company Preferred Stock (or
any shares of Company Common Stock issued upon conversion of the
outstanding shares of Company Preferred Stock) are referred to
herein as the “ Company Shares ”). The
Shareholders are the record and beneficial owner of the number of
Company Shares set forth opposite such Shareholder’s name on
Exhibit A .
B.
Immediately following the effective time
of the Initial Closing and contingent only upon the occurrence of
such Initial Closing, the Parent shall consummate the private
placement of sale of up to One Million Five Hundred Thousand
Dollars ($1,500,000) of principal amount of five-year, 8%
convertible promissory notes of the Parent (“ Note
” or “ Notes ”), convertible into shares
of the common stock of the Parent, $.001 par value per share
(“ Parent Common Stock ”) at a conversion price
of $0.30 per share, for the minimum gross proceeds of $500,000 and
the maximum gross proceeds of up to $1,500,000, as contemplated by
hereof (the “ Financing ”).
C.
The Shareholders wish to transfer all of
their Company Shares in exchange for their portion, determined in
accordance with Section 1.01, of an aggregate of 38,250,000 shares
(“ Parent Shares ”) of Parent Common
Stock.
D.
The exchange of Company Shares for Parent
Common Stock is intended to constitute a non-taxable transfer to a
corporation controlled by the transferor within the meaning of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986 (the
“ Code ”), as amended or such other tax free
provisions that may be applicable under the Code.
E.
The Board of Directors of the Company and
the Board of Directors of the Parent have determined that it is
desirable and in the best interest of their respective stockholders
to effect this plan of reorganization and share
exchange.
AGREEMENT
NOW THEREFORE, in consideration of the
mutual promises herein, and for other good and valuable
consideration, the receipt and sufficiency of which the parties
agree as follows:
ARTICLE I
Exchange of Company Shares
SECTION
1.1
Exchange by
Shareholders
. At each Closing, each Shareholder
shall sell, transfer, convey, assign and deliver to the Parent all
of the Company Shares owned by such Shareholder free and clear of
all Liens (as defined in ) in exchange for each Shareholder’s
pro rata share of the Parent Shares. A Shareholder’s
pro rata share of the Parent Shares shall be determined by
multiplying the total number of Parent Shares by a fraction, the
numerator of which is the total number of Company Shares owned by
the Shareholder at the Initial Closing and the denominator of which
is the total number of Company Shares issued and outstanding at the
Initial Closing.
SECTION 1.2
Closing
. The initial closing (the
“Initial Closing”) of the transactions contemplated
hereby (the “Transactions”) shall take place at the
offices of Indeglia & Carney, 1900 Main Street, Suite 125,
Irvine, California 92614, commencing at 9:00 a.m. local time on the
first business day following the satisfaction or waiver of all
conditions to the obligations of the parties to consummate the
Transactions contemplated hereby (other than conditions with
respect to actions the respective parties will take at the Initial
Closing itself), or such other date and time as the parties may
mutually determine (the “ Initial Closing Date
”). At the Initial Closing, the Shareholders (“
Majority Shareholders ”) holding at least eighty
percent (80%) of the outstanding Company Shares shall deliver an
executed copy of this Agreement and the deliveries required by
Section 5.01. From time to time after the Initial
Closing, Parent and the Shareholders other than the Majority
Stockholders may effect additional exchanges of shares in
accordance with Section 1.01. The Initial Closing and each
additional closing is referred to herein as a “
Closing ” and the Initial Closing Date and the date of
each additional closing date is referred to herein as a “
Closing Date ”.
ARTICLE II
Representations and Warranties of the
Shareholders
Each Shareholder hereby severally
represents and warrants to Parent as of the date hereof and as of
the Closing Date upon which such Shareholder effects a Closing
pursuant to Article I that:
SECTION 2.1
Good Title
. The Shareholder is the record and
beneficial owner, and has good title to the Company Shares owned by
such Shareholder set forth on Exhibit A , with the
right and authority to sell and deliver such Company Shares to the
Parent. Following the exchange of the Shareholder’s
Company Shares pursuant to this Agreement, the Parent will receive
good title to such Company Shares, free and clear of all liens,
security interests, pledges, equities and claims of any kind,
voting trusts, stockholder agreements and other encumbrances other
than restrictions under the federal securities laws (collectively,
“ Liens ”).
SECTION
2.2
Power and Authority
. This Agreement constitutes the
legal, valid and binding obligation of the Shareholder, enforceable
against such Shareholder in accordance with the terms hereof,
except as may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equity principles related to
or limiting creditors’ rights generally and by general
principals of equity.
SECTION
2.3
No Conflicts
. The execution and delivery of
this Agreement by the Shareholder and the performance by the
Shareholder of its obligations hereunder in accordance with the
terms hereof: (i) will not require the consent of any third
party or any federal, state, local or foreign government or any
court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality,
domestic or foreign (“ Governmental Entity ”)
under any statutes, laws, ordinances, rules, regulations, orders,
writs, injunctions, judgments, or decrees (collectively, “
Laws ”); (ii) will not violate any Laws
applicable to such Shareholder and (iii) will not violate or
breach any contractual obligation to which such Shareholder is a
party.
SECTION
2.4
No Finder’s Fee
. No broker, investment banker,
financial advisor or other person is entitled to any
broker’s, finder’s, financial advisor’s or other
similar fee or commission in connection with the Transactions based
upon arrangements made by or on behalf of the
Shareholder.
SECTION
2.5
Purchase Entirely for Own
Account
. The Parent Shares proposed to be
acquired by the Shareholder hereunder will be acquired for
investment for its own account, and not with a view to the resale
or distribution of any part thereof, and the Shareholder has no
present intention of selling or otherwise distributing the Parent
Shares, except in compliance with applicable securities
laws.
SECTION
2.6
Shareholder Status
. The Shareholder has accurately
confirmed on Exhibit A attached hereto whether the
Shareholder meets the definition of “accredited
investor” set forth in Rule 501(a) under the Securities
Act of 1933, as amended (the “ Securities Act
”). The Shareholder is not required to be registered as
a broker-dealer under Section 15 of the Securities and
Exchange Act of 1934, as amended (the “ Exchange Act
”).
SECTION
2.7
Experience of Such
Shareholder
. The Shareholder, either alone or
together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so
as to be capable of evaluating the merits and risks of the
prospective investment in the Parent Shares and has so evaluated
the merits and risks of such investment. The Shareholder is
able to bear the economic risk of an investment in the Parent
Shares and, at the present time, is able to afford a complete loss
of such investment.
SECTION
2.8
Access to Information
. The Shareholder acknowledges that
it has received and had the opportunity to review the
Parent’s annual report on Form 10-K for the fiscal years
ended June 30, 2008 and June 30, 2009 and the Parent’s
quarterly report on Form 10-Q for the three month period ended
March 31, 2009, including the Parent Financial Statements (as
defined in ) (“ SEC Reports ”); the
Company’s Super 8-K (as defined in ), including the
Company’s Financial Statements (as defined in ); and
this Agreement and all exhibits hereto including the Parent
Disclosure Letter (as defined in the opening paragraph to Article
IV) and Company Disclosure Letter (as defined in the opening
paragraph in Article III). Such Shareholder further
acknowledges that it or its representatives have been afforded
(a) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the
Parent and the Company concerning the terms and conditions of the
reorganization contemplated by this Agreement and the offering of
the Parent Shares, the merits and risks of investing in the Parent
Shares, (b) access to information about the Parent and the
Company and the Parent’s and the Company’s financial
condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate the
reorganization contemplated by this Agreement and its investment in
the Parent Shares, and (c) the opportunity to obtain such
additional information which the Parent or the Company possesses or
can acquire without unreasonable effort or expense that is
necessary to verify the accuracy and completeness of the
information contained herein or otherwise provided to the
Shareholder.
SECTION
2.9
Restricted Securities
. The Shareholder understands that the
Parent Shares are characterized as “restricted
securities” under the Securities Act inasmuch as the Parent
Shares are being offered in a transaction not involving a public
offering. The Shareholder further acknowledges that the
Parent Shares may not be resold without registration under the
Securities Act or the existence of an exemption therefrom.
The Shareholder represents that it is familiar with
Rule 144 promulgated under the Securities Act, as presently in
effect, and understands the resale limitations imposed thereby and
by the Securities Act.
SECTION
2.10
Legends
. It is understood that the Parent
Shares will bear the following legend or one that is substantially
similar to the following legend:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT
”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.
SECTION
2.11
No Derivatives
.
Except for the Company Shares attributed to such Shareholder
on Exhibit A or as disclosed in the Company Disclosure Letter, the
Shareholder does not hold, nor is the Shareholder entitled to
receive, any options, warrants, rights, convertible or exchangeable
securities, “phantom” stock rights, stock appreciation
rights, stock-based performance units, commitments, Contracts (as
defined in Section 3.05 ), arrangements or undertakings of
any kind to which the Company is a party or by which any of them is
bound (i) obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional capital shares or
other equity interests in, or any security convertible or
exercisable for or exchangeable into any capital shares of or other
equity interest in, the Company or any Voting Company Debt (as
defined in Section 3.03 ), (ii) obligating the Company
to issue, grant, extend or enter into any such option, warrant,
call, right, security, commitment, Contract, arrangement or
undertaking or (iii) that give any person the right to receive
any economic benefit or right similar to or derived from the
economic benefits and rights occurring to holders of the capital
shares of the Company.
ARTICLE III
Representations and Warranties of the
Company
The Company represents and warrants to
the Parent as of the date hereof and as of the Initial Closing Date
that, except as set forth on Schedule 3 attached hereto
(the “ Company Disclosure Letter ”):
SECTION
3.1
Organization, Standing and
Power
. The Company is duly organized,
validly existing and in good standing under the laws of the State
of Delaware and has the corporate power and authority and possesses
all governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold
its properties and assets and to conduct its businesses as
presently conducted, other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in
the aggregate, has not had and would not reasonably be expected to
have a material adverse effect on the Company, a material adverse
effect on the ability of the Company to perform its obligations
under this Agreement or on the ability of the Company to consummate
the Transactions (a “ Company Material Adverse Effect
”). The Company is duly qualified to do business in
each jurisdiction where the nature of its business or its ownership
or leasing of its properties make such qualification necessary
except where the failure to so qualify would not reasonably be
expected to have a Company Material Adverse Effect. The
Company has delivered to the Parent true and complete copies of the
Company’s certificate of incorporation and bylaws, each as
amended to the date of this Agreement (the “ Company
Constituent Instruments ”).
SECTION
3.2
Company Subsidiaries
. The Company does not own,
directly or indirectly, any capital stock, membership interest,
partnership interest, joint venture interest or other equity
interest in any person.
SECTION 3.3
Capital Structure
. The Company is authorized to
issue 25,000,000 shares of Company Common Stock and 5,000,000
shares of Company Preferred Stock. As of the date of this
Agreement, (A) 7,500,000 shares of Company Common Stock are issued
and outstanding, (B) 5,000,000 shares of Company Preferred Stock
are issued and outstanding, and (C) 3,125,000 shares of Company
Common Stock are subject to outstanding and unexercised options
(“ Company Options ”) issued pursuant to the
Company’s 2002 Stock Incentive Plan. Except for
issuances of shares of Company Common Stock pursuant to the Company
Options or conversion of the outstanding shares of Company
Preferred Stock, since the date of this Agreement the Company has
not issued any shares of Company Common Stock or Company Preferred
Stock. All outstanding capital shares of the Company are duly
authorized, validly issued, fully paid and nonassessable and not
subject to or issued in violation of any purchase option, call
option, right of first refusal, preemptive right, subscription
right or any similar right or any Contract to which the Company is
a party or otherwise bound. There are no bonds, debentures,
notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, capital shares having
the right to vote) on any matters on which holders of Company
Shares may vote (“ Voting Company Debt ”).
Except as set forth in the Company
Disclosure Letter, there are no options, warrants, rights,
convertible or exchangeable securities, “phantom” stock
rights, stock appreciation rights, stock-based performance units,
commitments, Contracts, arrangements or undertakings of any kind to
which the Company is a party or by which it is bound
(i) obligating the Company to issue, deliver or sell, or cause
to be issued, delivered or sold, additional capital shares or other
equity interests in, or any security convertible or exercisable for
or exchangeable into any capital shares or other equity interest
in, the Company or any Voting Company Debt, (ii) obligating
the Company to issue, grant, extend or enter into any such option,
warrant, call, right, security, commitment, Contract, arrangement
or undertaking or (iii) that give any person the right to
receive any economic benefit or right similar to or derived from
the economic benefits and rights occurring to holders of the
capital shares of the Company. As of the date of this
Agreement, there are no outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company.
SECTION
3.4
Authority; Execution and Delivery;
Enforceability
. The Company has all requisite
corporate power and authority to execute and deliver this Agreement
and to consummate the Transactions. The execution and
delivery by the Company of this Agreement and the consummation by
the Company of the Transactions have been duly authorized and
approved by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the Transactions. When executed
and delivered, this Agreement will be enforceable against the
Company in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equity principles related to or limiting
creditors’ rights generally and by general principals of
equity.
SECTION 3.5
No Conflicts; Consents
.
(a)
The execution and delivery by the Company
of this Agreement does not, and the consummation of the
Transactions and compliance with the terms hereof and thereof will
not, conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give rise to
a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of the
Company under, any provision of (i) the Company Constituent
Instruments, (ii) any material contract, lease, license,
indenture, note, bond, agreement, permit, concession, franchise or
other instrument (“ Contract ”) to which the
Company is a party or by which any of its properties or assets is
bound or (iii) subject to the filings and other matters
referred to in , any material judgment, order or decree (“
Judgment ”) or material Law applicable to the Company
or its properties or assets, other than, in the case of clauses
(ii) and (iii) above, any such items that, individually or in
the aggregate, have not had and would not reasonably be expected to
have a Company Material Adverse Effect.
(b)
Except for required filings with the
Securities and Exchange Commission (the “ SEC ”)
and applicable “Blue Sky” or state securities
commissions, no material consent, approval, license, permit, order
or authorization (“ Consent ”) of, or
registration, declaration or filing with, or permit from, any
Governmental Entity is required to be obtained or made by or with
respect to the Company in connection with the execution, delivery
and performance of this Agreement or the consummation of the
Transactions.
SECTION
3.6
Taxes
.
(a)
The Company has timely filed, has caused
to be timely filed on its behalf, or has qualified for an extension
for filing, all Tax Returns required to be filed by it, and all
such Tax Returns are true, complete and accurate, except to the
extent any failure to file or any inaccuracies in any filed Tax
Returns, individually or in the aggregate, have not had and would
not reasonably be expected to have a Company Material Adverse
Effect. All Taxes shown to be due on such Tax Returns, or
otherwise owed, have been timely paid, except to the extent that
any failure to pay, individually or in the aggregate, has not had
and would not reasonably be expected to have a Company Material
Adverse Effect. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for
any such claim.
(b)
The Company Financial Statements reflect
an adequate reserve for all Taxes payable by the Company (in
addition to any reserve for deferred Taxes to reflect timing
differences between book and Tax items) for all taxable periods and
portions thereof through the date of such financial statements.
No deficiency with respect to any Taxes has been proposed,
asserted or assessed against the Company, and no requests for
waivers of the time to assess any such Taxes are pending, except to
the extent any such deficiency or request for waiver, individually
or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(c)
For purposes of this
Agreement:
“ Taxes ” includes all
forms of taxation, whenever created or imposed, and whether of the
United States or elsewhere, and whether imposed by a local,
municipal, governmental, state, foreign, federal or other
Governmental Entity, or in connection with any agreement with
respect to Taxes, including all interest, penalties and additions
imposed with re