Form 8-K for VAPOR CORP.
18-Dec-2014
Entry into a Material Definitive Agreement, Other Events, Financial Statements and Ex
The Merger Agreement
The Merger Agreement provides for the merger of Vaporin with and into the Registrant, with the Registrant as the surviving entity. A closing under the Merger Agreement is to occur as soon as practicable (and in any event, within three business days) after the satisfaction or waiver of all conditions to closing. The Merger Agreement also provides that the Registrant and Vaporin may agree on a different closing date. The merger will become effective at the time specified in a certificate of merger which the Registrant and Vaporin will prepare and which the Registrant will file with the Delaware Secretary of State.
At the effective time of the merger, all issued and outstanding shares of Vaporin common stock (including shares of common stock issued upon conversion of Vaporin preferred stock immediately prior to the consummation of the merger in accordance with the Merger Agreement) will be converted into, and become the right to receive the number of shares of the Registrant’s common stock such that the former Vaporin stockholders will collectively hold approximately 45% of the issued and outstanding shares of the Registrant’s common stock following consummation of the merger. Because the number of shares of the Registrant’s common stock to be issued to Vaporin stockholders in the merger is based on the number of shares of the Registrant’s common stock issued and outstanding immediately prior to the effective time of the merger, the exact number of shares of the Registrant’s common stock that Vaporin stockholders will receive in the merger cannot be precisely determined until the closing date of the merger. The options and warrants to acquire Vaporin common stock that are issued and outstanding as of the effective time of the merger, as well as 910,000 restricted stock units which are exchangeable for Vaporin common stock, will be assumed by the Registrant in the merger and the number of shares issuable under such securities shall be adjusted to give effect to the Per Share Merger Consideration (as defined in the Merger Agreement).
Pursuant to the terms of the Merger Agreement, the Registrant is required to take all action to cause its board of directors immediately following the consummation of the merger to be comprised of (x) three directors chosen by the Registrant’s Board of Directors (at least two of whom shall be independent for purposes of the Nasdaq listing rules) and (y) two directors chosen by the Vaporin Board or Directors (at least one of whom shall be independent for purposes of the Nasdaq listing rules), each to serve for a term expiring on the earlier of his or her death, resignation, removal or the Registrant’s next annual meeting of stockholders and, despite the expiration of his or her term, until his or her successor has been elected and qualified or there is a decrease in the size of the Registrant’s Board of Directors. If at any time prior to the effective time of the merger, any such board designee becomes unable or unwilling to serve as a director of the Registrant following consummation of the merger, then the party that designated such individual shall designate another individual to serve in such individual’s place.
The Merger Agreement contains customary representations and warranties of the Registrant and Vaporin relating to their respective businesses. The representations and warranties in the Merger Agreement do not survive the effective time of the merger. Each of the Registrant and Vaporin has also undertaken customary covenants that place restrictions on it and its subsidiaries until the completion of the merger and have agreed to carry on their respective business in the ordinary course consistent with past practice and cause their respective significant subsidiaries to do the same. Each of the Registrant and Vaporin has agreed to use commercially reasonable efforts to preserve intact its business organization and that of its significant subsidiaries, as well as maintain its rights, franchises and existing relations with customers, suppliers and employees. The Merger Agreement also contains covenants by each party to furnish current information to the other party, for each party to duly call and hold a meeting of their respective stockholders to vote on proposals necessary for the consummation of the merger.
The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, and are subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Merger Agreement. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Registrant or Vaporin, or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Registrant’s or Vaporin’s respective public disclosures.
Both the Registrant and Vaporin have agreed not to solicit proposals from any other person or entity relating to alternative business combination transactions or enter into discussions or negotiations with any other person or entity in connection with any proposals for alternative business combination transactions. Either party may terminate the Merger Agreement if the other party breaches such covenant. The Merger Agreement provides certain other termination rights for both the Registrant and Vaporin, including but not limited to the ability to terminate the Merger Agreement if, upon the advice of such party’s legal and financial advisors, the failure to do so would result in a breach of the directors of the terminating party’s fiduciary duties under applicable law. Under certain circumstances a party may be obligated to pay the other party a termination fee of $500,000.
The Registrant has also agreed that, for a period of six years following the closing date of the merger, it will indemnify, defend and hold harmless each officer and director of Vaporin and its subsidiaries against losses arising from such person’s status as an officer or director of Vaporin or any of its subsidiaries prior to the effective time of the merger. The Registrant has also agreed to cover such directors and officers its existing directors’ and officers’ insurance policy or obtain a six-year “tail” policy, in each case with coverages not less advantageous as Vaporin’s existing policy, provided, however, that the Registrant will not be required to pay more than 200% of Vaporin’s current premium for such insurance.
The Merger Agreement contains customary conditions which must be satisfied prior to the closing of the merger. In addition to such customary conditions, as a condition to the Registrant’s obligation to close, the certain conditions related to third party financing for the Registrant must be satisfied. These conditions include the requirement that the proceeds of a $3.5 million equity financing must be placed into escrow and the only condition to the release of such funds from escrow must be the closing of the merger. Additionally, the Registrant must have received commitments from certain third parties for financing of up to $25 million to be used for the construction of retail stores and which is contingent on the achievement of certain performance metrics by the Registrant. Either party may terminate the Merger Agreement if the conditions to closing have not been satisfied on or before May 14, 2015 provided that the party seeking to terminate the Merger Agreement is not then in breach of the Merger Agreement.
The Joint Venture
The Registrant and Vaporin agreed to enter into the Joint Venture through Emagine, a Delaware limited liability company of which the Registrant and Vaporin are 50% members. The Operating Agreement provides that Emagine is a manager-managed limited liability company and Vaporin will serve as the initial manager of Emagine and will manage the day-to-day operations of Emagine, subject to certain customary limitations on managerial actions that require the . . .
2.1 Agreement and Plan of Merger, by and among the Registrant and Vaporin, Inc., dated as of December 17, 2014 (a schedule to the agreement has been omitted pursuant to Item 601(b)(2) of Regulation S-K; a copy of the schedule will be furnished supplementally to the SEC upon request).
10.1 Operating Agreement of Emagine the Vape Store, LLC, by and between the Registrant and Vaporin, dated as of December 17, 2014.
99.1 Joint Press Release, dated as of December 18, 2014.
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