ACQUISITION AGREEMENT AND PLAN OF MERGER DATED AS OF July 6, 2009 BY AND AMONG ALCANTARA BRANDS CORP. (ALCANTARA), a Nevada corporation, ALCANTARA SUB CO (SUB CO), a Nevada corporation AND CHALACO LORETO S.A.C. (LORETO), a Peruvian corporation TABLE OF CONTENTS

Section 1.1.

The Merger

1

Section 1.2.

Effective Time

1

Section 1.3.

Closing of the Merger

2

Section 1.4.

Effects of the Merger

2

Section 1.5.

Articles of Incorporation; Bylaws

2

Section 1.6.

Board of Directors and Officers

2

Section 1.7.

Conversion of Shares

2

Section 1.8.

Exchange of Certificates

4

Section 1.9.

Stock Options

5

Section 1.10.

Warrants

5

Section 1.11.

Taking of Necessary Action; Further Action

6

Section 2.1.

Organization and Qualification

6

Section 2.2.

Capitalization of ALCANTARA

7

Section 2.3.

Authority Relative to this Agreement; Recommendation.

8

Section 2.4.

SEC Reports; Financial Statements

8

Section 2.5.

Information Supplied

9

Section 2.6.

Consents and Approvals; No Violations

9

Section 2.7.

No Default

10

Section 2.8.

No Undisclosed Liabilities; Absence of Changes

10

Section 2.9.

Litigation

11

Section 2.10.

Compliance with Applicable Law

11

Section 2.11.

Employee Benefit Plans; Labor Matters

11

Section 2.12.

Environmental Laws and Regulations

13

Section 2.13.

Tax Matters

14

Section 2.14.

Title To Property

15

Section 2.15.

Intellectual Property

14

Section 2.16.

Insurance

15

Section 2.17.

Vote Required

15

Section 2.18.

Tax Treatment

16

Section 2.19.

Affiliates

16

Section 2.20.

Certain Business Practices

16

Section 2.21.

Insider Interests

16

Section 2.22.

Opinion of Financial Adviser

16

Section 2.23.

Brokers

16

Section 2.24.

Disclosure

16

Section 2.25.

No Existing Discussion

16

Section 2.26.

Material Contracts

17

Section 3.1.

Organization and Qualification

18

Section 3.2.

Capitalization of LORETO

18

Section 3.3.

Authority Relative to this Agreement; Recommenda­tion

19

Section 3.4.

SEC Reports; Financial Statements

20

Section 3.5.

Information Supplied

20

Section 3.6.

Consents and Approvals; No Violations

20

Section 3.7.

No Default

20

Section 3.8

No Undisclosed Liabilities; Absence of Changes

21

Section 3.9.

Litigation

21

Section 3.10.

Compliance with Applicable Law

21

Section 3.11.

Employee Benefit Plans; Labor Matters

22

Section 3.12.

Environmental Laws and Regulations

23

Section 3.13.

Tax Matters

24

Section 3.14.

Title to Property

24

Section 3.15.

Intellectual Property

24

Section 3.16.

Insurance

25

Section 3.17.

Vote Required

25

Section 3.18.

Tax Treatment

25

Section 3.19.

Affiliates

25

Section 3.20.

Certain Business Practices

25

Section 3.21.

Insider Interests

25

Section 3.22.

Opinion of Financial Adviser

26

Section 3.23.

Brokers

26

Section 3.24.

Disclosure

26

Section 3.25.

No Existing Discussions

26

Section 3.26.

Material Contracts

26

Section 4.1.

Conduct of Business of ALCANTARA

27

Section 4.2.

Conduct of Business of LORETO

29

Section 4.3.

Preparation of 8-K

32

Section 4.4.

Other Potential Acquirers

32

Section 4.5.

Meetings of Stockholders

32

Section 4.6.

FINRA OTC:BB Listing

32

Section 4.7.

Access to Information

32

Section 4.8.

Additional Agreements; Reasonable Efforts.

33

Section 4.9.

Employee Benefits; Stock Option and Employee Purchase Plans

33

Section 4.10.

Public Announcements

33

Section 4.11.

Indemnification

34

Section 4.12.

Notification of Certain Matters

35

Section 5.1.

Conditions to Each Party’s Obligations to Effect the Merger

35

Section 5.2.

Conditions to the Obligations of ALCANTARA and SUB CO

36

Section 5.3.

Conditions to the Obligations of LORETO

37

Section 6.1.

Termination

37

Section 6.2.

Effect of Termination

39

Section 6.3.

Fees and Expenses

39

Section 6.4.

Amendment

39

Section 6.5.

Extension; Waiver

39

Section 7.1.

Non-survival of Representations and Warranties

39

Section 7.2.

Entire Agreement; Assignment

39

Section 7.3.

Validity

39

Section 7.4.

Notices

40

Section 7.5.

Governing Law

40

Section 7.6.

Descriptive Headings

40

Section 7.7.

Parties in Interest

41

Section 7.8.

Certain Definitions

41

Section 7.9.

Personal Liability

41

Section 7.10.

Specific Performance

42

Section 7.11.

Counterparts

42

Section 7.12.

Conflict Waiver

41

Signatures

42

 

(a)

Board of Directors of SUB CO. At or prior to the Effective Time, ALCANTARA agrees to take such action as is necessary (i) to cause the number of directors comprising the full Board of Directors of SUB CO to be one (1) person and (ii) to cause Carlos Alcantara,  (the “ALCANTARA Designee”) to be elected as the sole director of SUB CO.

 

(b)

Board of Directors of ALCANTARA. At or prior to the Effective Time, each of LORETO and ALCANTARA agrees to take such action as is necessary (i) to cause the number of directors comprising the full Board of Directors of ALCANTARA to be one (1) person and (ii) to cause Carlos Alcantara (the “LORETO Designee”) to remain as the sole director of ALCANTARA. If the LORETO Designee shall decline or be unable to serve as a director prior to the Effective Time, LORETO shall nominate another person to serve in such person’s stead, which such person shall be subject to approval of the other party. From and after the Effective Time, and until successors are duly elected or appointed and qualified in accordance with applicable law, Carlos Alcantara shall be Chief Executive Officer, President, Secretary and Treasurer of the Surviving Corporation.

 

(a)

At the Effective Time, each share of common stock, par value $.001 per share of LORETO (individually a "LORETO Share" and collectively, the "LORETO Shares") issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of LORETO, ALCANTARA, or the holder thereof, be converted into and shall become fully paid and nonassessable ALCANTARA common shares determined by dividing (i) Three Million (3,000,000), by (ii) the total number of shares of LORETO, One-Thousand (1,000) outstanding immediately prior to the Effective Time (such quotient, the “Exchange Ratio”). The holder of one or more shares of LORETO common stock shall be entitled to receive in exchange therefor a number of shares of ALCANTARA Common Stock equal to the product of (x) (the number of shares of LORETO common stock (3,000,000)), times (y) (the Exchange Ratio. ALCANTARA Shares and LORETO Shares are sometimes referred to collectively herein as "Shares." By way of example, 3,000,000 / 1,000 = 3,000:1 (the Exchange Ratio). The number of shares of LORETO common stock held by a stockholder (assume 100 shares) times the Exchange Ratio of 3,000 equals 300,000 shares of ALCANTARA Shares to be issued. In the event that, subsequent to the date of this Agreement but prior to the Effective Time, the outstanding shares of ALCANTARA Common Stock or LORETO Common Stock are changed into a different number of shares or a different class as a result of a stock split, reverse stock split, stock dividend, subdivision, reclassification, combination, exchange, recapitalization or similar transaction, the number of shares of ALCANTARA Common Stock into which each share of LORETO Common Stock will be converted as a result of the Merger will be adjusted appropriately.

 

(b)

LORETO hereby acknowledges that (i) the ALCANTARA Shares have not been and will not be registered under the Securities Act of 1933 (“1933 Act”) or under the securities laws of any state and, therefore, the ALCANTARA Shares cannot be resold unless they are subsequently registered under said laws or exemptions from such registrations as are available; and (ii) the transferability of the Shares is restricted and that a legend shall be placed on the certificates representing the securities substantially to the following effect:

 

(c)

At the Effective Time, each LORETO Share held in the treasury of LORETO, by LORETO immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of LORETO, SUB CO or ALCANTARA be canceled, retired and cease to exist and no payment shall be made with respect thereto.

 

(a)

Prior to the Effective Time, ALCANTARA shall enter into an agreement with, and shall deposit with, Stoecklein Law Group or such other agent or agents as may be satisfactory to ALCANTARA and LORETO (the “Exchange Agent”), for the benefit of the holders of LORETO Shares, for exchange through the Exchange Agent in accordance with this Article I: (i) certificates representing the appropriate number of ALCANTARA Shares to be issued to holders of LORETO Shares issuable pursuant to Section 1.7 in exchange for outstanding LORETO Shares.

 

(b)

As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding LORETO Shares (the “Certificates”) whose shares were converted into the right to receive ALCANTARA Shares pursuant to Section 1.7: (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as LORETO and ALCANTARA may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for certificates representing ALCANTARA Shares. Upon surrender of a Certificate to the Exchange Agent, together with such letter of transmittal, duly executed, and any other required documents, the holder of such Certificate shall be entitled to receive in exchange therefore a certificate representing that number of whole ALCANTARA Shares and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of LORETO Shares which are not registered in the transfer records of LORETO, a certificate representing the proper number of ALCANTARA Shares may be issued to a transferee if the Certificate representing such LORETO Shares is presented to the Exchange Agent accompanied by all documents required by the Exchange Agent or ALCANTARA to evidence and effect such transfer and by evidence that any applicable stock transfer or other taxes have been paid. Until surrendered as contemplated by this Section 1.8, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the certificate representing ALCANTARA Shares as contemplated by this Section 1.8.

 

(c)

No dividends or other distributions declared or made after the Effective Time with respect to ALCANTARA Shares with a record date after the Effective Time shall be paid to the holder of any un-surrendered Certificate with respect to the ALCANTARA Shares represented thereby until the holder of record of such Certificate shall surrender such Certificate.

 

(d)

In the event that any Certificate for LORETO Shares or ALCANTARA Shares shall have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange therefor, upon the making of an affidavit of that fact by the holder thereof such ALCANTARA Shares and cash in lieu of fractional ALCANTARA Shares, if any, as may be required pursuant to this Agreement; provided, however, that ALCANTARA or the Exchange Agent, may, in its respective discretion, require the delivery of a suitable bond, opinion or indemnity.

 

(e)

All ALCANTARA Shares issued upon the surrender for exchange of LORETO Shares in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such LORETO Shares. There shall be no further registration of transfers on the stock transfer books of either of LORETO or ALCANTARA of the LORETO Shares or ALCANTARA Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to ALCANTARA for any reason, they shall be canceled and exchanged as provided in this Article I.

 

(f)

No fractional ALCANTARA Shares shall be issued in the Merger, but in lieu thereof each holder of LORETO Shares otherwise entitled to a fractional ALCANTARA Share shall, upon surrender of its, his or her Certificate or Certificates, be entitled to receive an additional share to round up to the nearest round number of shares.

 

(a)

Each of ALCANTARA and SUB CO is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and each has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power and authority would not have a Material Adverse Effect (as defined below) on ALCANTARA. When used in connection with ALCANTARA, the term “Material Adverse Effect” means any change or effect (i) that is or is reasonably likely to be materially adverse to the business, results of operations, condition (financial or otherwise) or prospects of ALCANTARA, other than any change or effect arising out of general economic conditions unrelated to any business in which ALCANTARA is engaged, or (ii) that may impair the ability of ALCANTARA to perform its obligations hereunder or to consummate the transactions contemplated hereby.

 

(b)

ALCANTARA has heretofore delivered to LORETO accurate and complete copies of the Articles of Incorporation and Bylaws (or similar governing documents), as currently in effect, of ALCANTARA. Except as set forth on Schedule 2.1 of the ALCANTARA Disclosure Schedule, ALCANTARA is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect on ALCANTARA.

 

(a)

The authorized capital stock of ALCANTARA consists of: (i) One Million (100,000,000) ALCANTARA Common Shares, par value $0.001 per share, of which, as of March 31, 2009, approximately 14,000,000 ALCANTARA Shares were issued and outstanding; and (ii) Ten Million (10,000,000) ALCANTARA Preferred Shared, par value $0.001 per share, were authorized, of which no Preferred Shares were issued. The authorized capital stock of SUB CO consists of One Million (1,000,000) shares of common stock ("SUB CO Shares"), of which, as of the date of this Agreement, One thousand (1,000) shares were issued and outstanding.  All of the outstanding ALCANTARA Shares and SUB CO Shares have been duly authorized and validly issued, and are fully paid, nonassessable and free of preemptive rights. Except as set forth herein, as of the date hereof, there are no outstanding (i) shares of capital stock or other voting securities of ALCANTARA or SUB CO, (ii) securities of ALCANTARA convertible into or exchangeable for shares of capital stock or voting securities of ALCANTARA or SUB CO, (iii) options or other rights to acquire from ALCANTARA or SUB CO and, except as described in the ALCANTARA SEC Reports (as defined below), no obligations of ALCANTARA or SUB CO to issue any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of ALCANTARA or SUB CO, and (iv) equity equivalents, interests in the ownership or earnings of ALCANTARA or SUB CO or other similar rights (collectively, “ALCANTARA Securities”). As of the date hereof, except as set forth on Schedule 2.2(a) of the ALCANTARA Disclosure Schedule there are no outstanding obligations of ALCANTARA or its subsidiaries to repurchase, redeem or otherwise acquire any ALCANTARA Securities or stockholder agreements, voting trusts or other agreements or understandings to which ALCANTARA is a party or by which it is bound relating to the voting or registration of any shares of capital stock of ALCANTARA. For purposes of this Agreement, ‘‘Lien” means, with respect to any asset (including, without limitation, any security) any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset.

 

(b)

The ALCANTARA Shares constitute the only class of equity securities of ALCANTARA registered under the Exchange Act.

 

(c)

Other than its 100% ownership of SUB CO, ALCANTARA does not own directly or indirectly more than fifty percent (50%) of the outstanding voting securities or interests (including membership interests) of any entity, other than as specifically disclosed in the disclosure documents.

 

(a)

ALCANTARA and SUB CO have all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, have been duly and validly authorized by the Board of Directors of ALCANTARA (the “ALCANTARA Board”) and the Board of Directors of SUB CO and no other corporate proceedings on the part of ALCANTARA or SUB CO are necessary to authorize this Agreement or to consummate the transactions contemplated hereby, except, as referred to in Section 2.3(b) and Section 2.17, the approval and adoption of this Agreement by the holders of at least a majority of the then outstanding SUB CO Shares, and the adoption of this Agreement by the holders of at least a majority of the then outstanding ALCANTARA Shares. This Agreement has been duly and validly executed and delivered by ALCANTARA and SUB CO and constitutes a valid, legal and binding agreement of ALCANTARA and SUB CO, enforceable against ALCANTARA and SUB CO in accordance with its terms.

 

(b)

The ALCANTARA Board has resolved to recommend that ALCANTARA, the sole stockholder of SUB CO, approve and adopt this Agreement. Additionally, the Board has resolved to recommend that ALCANTARA stockholders approve and adopt this Agreement, and the actions required to be taken to effectuate the terms and conditions set forth in this Agreement.

 

(a)

ALCANTARA has filed all required forms, reports and documents with the Securities and Exchange Commission (the “SEC”) from the Company’s inception through the period ended March 31, 2009, each of which has complied in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act (and the rules and regulations promulgated thereunder, respectively), each as in effect on the dates such forms, reports and documents were filed. ALCANTARA has heretofore delivered or promptly will deliver prior to the Effective Date to LORETO, in the form filed with the SEC (including any amendments thereto but excluding any exhibits), (i) its Annual Report on Form 10-K for the year ended December 31, 2008, (ii) its Quarterly Report on Form 10-Q for the period ended March 31, 2009, (iii) all definitive proxy statements relating to ALCANTARA’s meetings of stockholders (whether annual or special) held since December 31, 2007, if any, and (iv) all other reports or registration statements filed by ALCANTARA with the SEC since December 31, 2007.  None of such ALCANTARA SEC Reports, including, without limitation, any financial statements or schedules included or incorporated by reference therein, contained, when filed, any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited financial statements of ALCANTARA included in the ALCANTARA SEC Reports fairly present, in conformity with generally accepted accounting principles applied on a consistent basis (except as may be indicated in the notes thereto), the financial position of ALCANTARA as of the dates thereof and its results of operations and changes in financial position for the periods then ended. All material agreements, contracts and other documents required to be filed as exhibits to any of the ALCANTARA SEC Reports have been so filed.

 

(b)

ALCANTARA has heretofore made available or promptly will make available to LORETO a complete and correct copy of any amendments or modifications which are required to be filed with the SEC but have not yet been filed with the SEC, to agreements, documents or other instruments which previously had been filed by ALCANTARA with the SEC pursuant to the Exchange Act.

 

(a)

Except as set forth in Section 2.11(a) of the ALCANTARA Disclosure Schedule with respect to each employee benefit plan, program, policy, arrangement and contract (including, without limitation, any “employee benefit plan,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), maintained or contributed to at any time by ALCANTARA or any entity required to be aggregated with ALCANTARA pursuant to Section 414 of the Code (each, a “ALCANTARA Employee Plan”), no event has occurred and to the knowledge of ALCANTARA, no condition or set of circumstances exists in connection with which ALCANTARA could reasonably be expected to be subject to any liability which would have a Material Adverse Effect on ALCANTARA.

 

(b)

(i) No ALCANTARA Employee Plan is or has been subject to Title IV of ERISA or Section 412 of the Code; and (ii) each ALCANTARA Employee Plan intended to qualify under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code is the subject of a favorable Internal Revenue Service determination letter, and nothing has occurred which could reasonably be expected to adversely affect such determination.

 

(c)

Section 2.11(c) of the ALCANTARA Disclosure Schedule sets forth a true and complete list, as of the date of this Agreement, of each person who holds any ALCANTARA Stock Options, together with the number of ALCANTARA Shares which are subject to such option, the date of grant of such option, the extent to which such option is vested (or will become vested as a result of the Merger), the option price of such option (to the extent determined as of the date hereof), whether such option is a nonqualified stock option or is intended to qualify as an incentive stock option within the meaning of Section 422(b) of the Code, and the expiration date of such option. Section 2.11(c) of the ALCANTARA Disclosure Schedule also sets forth the total number of such incentive stock options and such nonqualified options. ALCANTARA has furnished LORETO with complete copies of the plans pursuant to which the ALCANTARA Stock Options were issued. Other than the automatic vesting of ALCANTARA Stock Options that may occur without any action on the part of ALCANTARA or its officers or directors, ALCANTARA has not taken any action that would result in any ALCANTARA Stock Options that are unvested becoming vested in connection with or as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

 

(d)

ALCANTARA has made available to LORETO (i) a description of the terms of employment and compensation arrangements of all officers of ALCANTARA and a copy of each such agreement currently in effect; (ii) copies of all agreements with consultants who are individuals obligating ALCANTARA to make annual cash payments in an amount exceeding $60,000; (iii) a schedule listing all officers of ALCANTARA who have executed a non-competition agreement with ALCANTARA and a copy of each such agreement currently in effect; (iv) copies (or descriptions) of all severance agreements, programs and policies of ALCANTARA with or relating to its employees, except programs and policies required to be maintained by law; and (v) copies of all plans, programs, agreements and other arrangements of ALCANTARA with or relating to its employees which contain change in control provisions all of which are set forth in Section 2.11(d) of the ALCANTARA Disclosure Schedule.

 

(e)

There shall be no payment, accrual of additional benefits, acceleration of payments, or vesting in any benefit under any ALCANTARA Employee Plan or any agreement or arrangement disclosed under this Section 2.11 solely by reason of entering into or in connection with the transactions contemplated by this Agreement.

 

(f)

There are no controversies pending or, to the knowledge of ALCANTARA, threatened, between ALCANTARA and any of their employees, which controversies have or could reasonably be expected to have a Material Adverse Effect on ALCANTARA. Neither ALCANTARA nor any of its subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by ALCANTARA or any of its subsidiaries (and neither ALCANTARA nor any of its subsidiaries has any outstanding material liability with respect to any terminated collective bargaining agreement or labor union contract), nor does ALCANTARA know of any activities or proceedings of any labor union to organize any of its or its subsidiaries employees. ALCANTARA has no knowledge of any strike, slowdown, work stoppage, lockout or threat thereof, by or with respect to any of its employees.

 

(a)

Except as publicly disclosed by ALCANTARA in the ALCANTARA SEC Reports, (i) ALCANTARA is in material compliance with all applicable federal, state, local and foreign laws and regulations relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata) (collectively, “Environmental Laws”), except for non-compliance that would not have a Material Adverse Effect on ALCANTARA, which compliance includes, but is not limited to, the possession by ALCANTARA of all material permits and other governmental authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof; (ii) ALCANTARA has not received written notice of, or, to the knowledge of ALCANTARA, is the subject of, any action, cause of action, claim, investigation, demand or notice by any person or entity alleging liability under or non-compliance with any Environmental Law (an “Environmental Claim”) that could reasonably be expected to have a Material Adverse Effect on ALCANTARA; and (iii) to the knowledge of ALCANTARA, there are no circumstances that are reasonably likely to prevent or interfere with such material compliance in the future.

 

(b)

Except as publicly disclosed by ALCANTARA, there are no Environmental Claims which could reasonably be expected to have a Material Adverse Effect on ALCANTARA that are pending or, to the knowledge of ALCANTARA, threatened against ALCANTARA or, to the knowledge of ALCANTARA, against any person or entity whose liability for any Environmental Claim ALCANTARA has or may have retained or assumed either contractually or by operation of law.

 

(a)

Except as set forth in Section 2.13 of the ALCANTARA Disclosure Schedule: (i) ALCANTARA has filed or has had filed on its behalf in a timely manner (within any applicable extension periods) with the appropriate Governmental Entity all income and other material Tax Returns (as defined herein) with respect to Taxes (as defined herein) of ALCANTARA and all Tax Returns were in all material respects true, complete and correct; (ii) all material Taxes with respect to ALCANTARA have been paid in full or have been provided for in accordance with GAAP on ALCANTARA’s most recent balance sheet which is part of the ALCANTARA SEC Documents; (iii) there are no outstanding agreements or waivers extending the statutory period of limitations applicable to any federal, state, local or foreign income or other material Tax Returns required to be filed by or with respect to ALCANTARA; (iv) to the knowledge of ALCANTARA none of the Tax Returns of or with respect to ALCANTARA is currently being audited or examined by any Governmental Entity; and (v) no deficiency for any income or other material Taxes has been assessed with respect to ALCANTARA which has not been abated or paid in full.

 

(b)

For purposes of this Agreement, (i) “Taxes” shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, gross receipts, sales, use, ad valorem, goods and services, capital, transfer, franchise, profits, license, withholding, payroll, employment, employer health, excise, estimated, severance, stamp, occupation, property or other taxes, customs duties, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority and (ii) “Tax Return” shall mean any report, return, documents declaration or other information or filing required to be supplied to any taxing authority or jurisdiction with respect to Taxes.

 

(a)

ALCANTARA owns, or possesses adequate licenses or other valid rights to use, all existing United States and foreign patents, trademarks, trade names, service marks, copyrights, trade secrets and applications therefore that are material to its business as currently conducted (the “ALCANTARA Intellectual Property Rights”).

 

(b)

The validity of the ALCANTARA Intellectual Property Rights and the title thereto of ALCANTARA is not being questioned in any litigation to which ALCANTARA is a party.

 

(c)

Except as set forth in Section 2.15(c) of the ALCANTARA Disclosure Schedule, the conduct of the business of ALCANTARA as now conducted does not, to ALCANTARA’s knowledge, infringe any valid patents, trademarks, trade names, service marks or copyrights of others. The consummation of the transactions completed hereby will not result in the loss or impairment of any ALCANTARA Intellectual Property Rights.

 

(d)

ALCANTARA has taken steps it believes appropriate to protect and maintain its trade secrets as such, except in cases where ALCANTARA has elected to rely on patent or copyright protection in lieu of trade secret protection.

 

(a)

ALCANTARA and SUB CO have delivered or otherwise made available to LORETO true, correct and complete copies of all contracts and agreements (and all amendments, modifications and supplements thereto and all side letters to which either ALCANTARA and SUB CO is a party affecting the obligations of any party thereunder) to which either ALCANTARA or SUB CO is a party or by which any of their respective properties or assets are bound that are, material to the business, properties or assets of ALCANTARA or SUB CO taken as a whole, including, without limitation, to the extent any of the following are, individually or in the aggregate, material to the business, properties or assets of ALCANTARA or SUB CO taken as a whole, all: (i) employment, product design or development, personal services, consulting, non-competition, severance, golden parachute or indemnification contracts (including, without limitation, any contract to which ALCANTARA is a party involving employees of ALCANTARA); (ii) licensing, publishing, merchandising or distribution agreements; (iii) contracts granting rights of first refusal or first negotiation; (iv) partnership or joint venture agreements; (v) agreements for the acquisition, sale or lease of material properties or assets or stock or otherwise entered into since March 31, 2009; (vi) contracts or agreements with any Governmental Entity; and (vii) all commitments and agreements to enter into any of the foregoing (collectively, together with any such contracts entered into in accordance with Section 4.1 hereof, the “ALCANTARA Contracts”). Neither ALCANTARA nor SUB CO is a party to or bound by any severance, golden parachute or other agreement with any employee or consultant pursuant to which such person would be entitled to receive any additional compensation or an accelerated payment of compensation as a result of the consummation of the transactions contemplated hereby.

 

(b)

Each of the ALCANTARA Contracts is valid and enforceable in accordance with its terms, and there is no default, other than what has been previously disclosed in ALCANTARA’s SEC reports, under any ALCANTARA Contract so listed either by ALCANTARA or SUB CO or, to the knowledge of ALCANTARA or SUB CO, by any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder by ALCANTARA or SUB CO or, to the knowledge of ALCANTARA or SUB CO, any other party, in any such case in which such default or event could reasonably be expected to have a Material Adverse Effect on ALCANTARA or SUB CO.

 

(c)

No party to any such ALCANTARA Contract has given notice to ALCANTARA of or made a claim against ALCANTARA or SUB CO with respect to any breach or default thereunder, other than what has been previously disclosed in ALCANTARA’s SEC reports, in any such case in which such breach or default could reasonably be expected to have a Material Adverse Effect on ALCANTARA or SUB CO.

 

(a)

LORETO is duly organized, validly existing and will be in good standing under the laws of the jurisdiction of its incorporation (Peru) or organization prior to Close, and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power and authority would not have a Material Adverse Effect (as defined below) on LORETO. When used in connection with LORETO, the term “Material Adverse Effect’’ means any change or effect (i) that is or is reasonably likely to be materially adverse to the business, results of operations, condition (financial or otherwise) or prospects of LORETO, taken as a whole, other than any change or effect arising out of general economic conditions unrelated to any business in which LORETO is engaged, or (ii) that may impair the ability of LORETO to consummate the transactions contemplated hereby.

 

(b)

LORETO has heretofore delivered to ALCANTARA accurate and complete copies of the Articles of Incorporation and Bylaws (or similar governing documents), as currently in effect, of LORETO. LORETO is duly qualified or licensed and in good standing to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect on LORETO.

 

(a)

As of the date of this Agreement, the authorized capital stock of LORETO consists of; (i) One Thousand (1,000) LORETO Common Shares, of which, One Thousand (1,000) common Shares were issued and were outstanding. All of the outstanding LORETO Shares have been duly authorized and validly issued, and are fully paid, non-assessable and free of preemptive rights.

 

(b)

Except as set forth in Section 3.2(b) of the LORETO Disclosure Schedule, between December 1, 2008 and the date hereof, no shares of LORETO’s capital stock have been issued and no LORETO Stock options have been granted. Except as set forth in Section 3.2(a) above, as of the date hereof, there are no outstanding (i) shares of capital stock or other voting securities of LORETO, (ii) securities of LORETO convertible into or exchangeable for shares of capital stock or voting securities of LORETO, (iii) options or other rights to acquire from LORETO, or obligations of LORETO to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of LORETO, or (iv) equity equivalents, interests in the ownership or earnings of LORETO or other similar rights (collectively, “LORETO Securities”). As of the date hereof, there are no outstanding obligations of LORETO to repurchase, redeem or otherwise acquire any LORETO Securities. There are no stockholder agreements, voting trusts or other agreements or understandings to which LORETO is a party or by which it is bound relating to the voting or registration of any shares of capital stock of LORETO.

 

(c)

Except as set forth in Section 3.2(c) of the LORETO Disclosure Schedule, there are no securities of LORETO convertible into or exchangeable for, no options or other rights to acquire from LORETO, and no other contract, understanding, arrangement or obligation (whether or not contingent) providing for the issuance or sale, directly or indirectly, of any capital stock or other ownership interests in, or any other securities of LORETO.

 

(d)

The LORETO Shares constitute the only class of equity securities of LORETO.

 

(e)

Except as set forth in Section 3.2(e) of the LORETO Disclosure Schedule, LORETO does not own directly or indirectly more than fifty percent (50%) of the outstanding voting securities or interests (including membership interests) of any entity.

 

(a)

LORETO has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of LORETO (the “LORETO Board”), and no other corporate proceedings on the part of LORETO are necessary to authorize this Agreement or to consummate the transactions contemplated hereby, except, as referred to in Section 3.17, the approval and adoption of this Agreement by the holders of at least a majority of the then outstanding LORETO Shares. This Agreement has been duly and validly executed and delivered by LORETO and constitutes a valid, legal and binding agreement of LORETO, enforceable against LORETO in accordance with its terms.

 

(b)

The LORETO Board has resolved to recommend that the stockholders of LORETO approve and adopt this Agreement.

 

(a)

With respect to each employee benefit plan, program, policy, arrangement and contract (including, without limitation, any “employee benefit plan,” as defined in Section 3(3) of ERISA), maintained or contributed to at any time by LORETO or any entity required to be aggregated with LORETO pursuant to Section 414 of the Code (each, a “LORETO Employee Plan”), no event has occurred and, to the knowledge of LORETO, no condition or set of circumstances exists in connection with which LORETO could reasonably be expected to be subject to any liability which would have a Material Adverse Effect on LORETO.

 

(b)

(i) No LORETO Employee Plan is or has been subject to Title IV of ERISA or Section 412 of the Code; and (ii) each LORETO Employee Plan intended to qualify under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code is the subject of a favorable Internal Revenue Service determination letter, and nothing has occurred which could reasonably be expected to adversely affect such determination.

 

(c)

Section 3.11(c) of the LORETO Disclosure Schedule sets forth a true and complete list, as of the date of this Agreement, of each person who holds any LORETO Stock Options, together with the number of LORETO Shares which are subject to such option, the date of grant of such option, the extent to which such option is vested (or will become vested as a result of the Merger), the option price of such option (to the extent determined as of the date hereof), whether such option is a nonqualified stock option or is intended to qualify as an incentive stock option within the meaning of Section 422(b) of the Code, and the expiration date of such option. Section 3.11(c) of the LORETO Disclosure Schedule also sets forth the total number of such incentive stock options and such nonqualified options. LORETO has furnished ALCANTARA with complete copies of the plans pursuant to which the LORETO Stock Options were issued. Other than the automatic vesting of LORETO Stock Options that may occur without any action on the part of LORETO or its officers or directors, LORETO has not taken any action that would result in any LORETO Stock Options that are unvested becoming vested in connection with or as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

 

(d)

LORETO has made available to ALCANTARA (i) a description of the terms of employment and compensation arrangements of all officers of LORETO and a copy of each such agreement currently in effect; (ii) copies of all agreements with consultants who are individuals obligating LORETO to make annual cash payments in an amount exceeding $60,000; (iii) a schedule listing all officers of LORETO who have executed a non-competition agreement with LORETO and a copy of each such agreement currently in effect; (iv) copies (or descriptions) of all severance agreements, programs and policies of LORETO with or relating to its employees, except programs and policies required to be maintained by law; and (v) copies of all plans, programs, agreements and other arrangements of the LORETO with or relating to its employees which contain change in control provisions.

 

(e)

Except as disclosed in Section 3.11(e) of the LORETO Disclosure Schedule there shall be no payment, accrual of additional benefits, acceleration of payments, or vesting in any benefit under any LORETO Employee Plan or any agreement or arrangement disclosed under this Section 3.11 solely by reason of entering into or in connection with the transactions contemplated by this Agreement.

 

(f)

There are no controversies pending or, to the knowledge of LORETO threatened, between LORETO and any of its employees, which controversies have or could reasonably be expected to have a Material Adverse Effect on LORETO. LORETO is not a party to any collective bargaining agreement or other labor union contract applicable to persons employed by LORETO (and LORETO does not have any outstanding material liability with respect to any terminated collective bargaining agreement or labor union contract), nor does LORETO know of any activities or proceedings of any labor union to organize any of its or employees. LORETO has no knowledge of any strike, slowdown, work stoppage, lockout or threat thereof by or with respect to any of its employees.

 

(a)

Except as disclosed by LORETO, (i) LORETO is in material compliance with all Environmental Laws, except for non-compliance that would not have a Material Adverse Effect on LORETO, which compliance includes, but is not limited to, the possession by LORETO of all material permits and other governmental authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof; (ii) LORETO has not received written notice of, or, to the knowledge of LORETO, is the subject of, any Environmental Claim that could reasonably be expected to have a Material Adverse Effect on LORETO; and (iii) to the knowledge of LORETO, there are no circumstances that are reasonably likely to prevent or interfere with such material compliance in the future.

 

(b)

Except as disclosed by LORETO, there are no Environmental Claims which could reasonably be expected to have a Material Adverse Effect on LORETO that are pending or, to the knowledge of LORETO, threatened against LORETO or, to the knowledge of LORETO, against any person or entity whose liability for any Environmental Claim LORETO has or may have retained or assumed either contractually or by operation of law.

 

(a)

LORETO owns, or possesses adequate licenses or other valid rights to use, all existing United States and foreign patents, trademarks, trade names, services marks, copyrights, trade secrets, and applications therefor that are material to its business as currently conducted (the “LORETO Intellectual Property Rights”).

 

(b)

Except as set forth in Section 3.15(b) of the LORETO Disclosure Schedule the validity of the LORETO Intellectual Property Rights and the title thereto of LORETO, as the case may be, is not being questioned in any litigation to which LORETO is a party.

 

(c)

The conduct of the business of LORETO as now conducted does not, to LORETO’s knowledge, infringe any valid patents, trademarks, trade-names, service marks or copyrights of others. The consummation of the transactions contemplated hereby will not result in the loss or impairment of any LORETO Intellectual Property Rights.

 

(d)

LORETO has taken steps it believes appropriate to protect and maintain its trade secrets as such, except in cases where LORETO has elected to rely on patent or copyright protection in lieu of trade secret protection.

 

(a)

LORETO has delivered or otherwise made available to ALCANTARA true, correct and complete copies of all contracts and agreements (and all amendments, modifications and supplements thereto and all side letters to which LORETO is a party affecting the obligations of any party thereunder) to which LORETO is a party or by which any of its properties or assets are bound that are, material to the business, properties or assets of LORETO taken as a whole, including, without limitation, to the extent any of the following are, individually or in the aggregate, material to the business, properties or assets of LORETO taken as a whole, all: (i) employment, product design or development, personal services, consulting, non-competition, severance, golden parachute or indemnification contracts (including, without limitation, any contract to which LORETO is a party involving employees of LORETO); (ii) licensing, publishing, merchandising or distribution agreements; (iii) contracts granting rights of first refusal or first negotiation; (iv) partnership or joint venture agreements; (v) agreements for the acquisition, sale or lease of material properties or assets or stock or otherwise. (vi) contracts or agreements with any Governmental Entity; and (vii) all commitments and agreements to enter into any of the foregoing (collectively, together with any such contracts entered into in accordance with Section 5.2 hereof, the “LORETO Contracts”). LORETO is not a party to or bound by any severance, golden parachute or other agreement with any employee or consultant pursuant to which such person would be entitled to receive any additional compensation or an accelerated payment of compensation as a result of the consummation of the transactions contemplated hereby.

 

(b)

Each of the LORETO Contracts is valid and enforceable in accordance with its terms, and there is no default under any LORETO Contract so listed either by LORETO or, to the knowledge of LORETO, by any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder by LORETO or, to the knowledge of LORETO, any other party, in any such case in which such default or event could reasonably be expected to have a Material Adverse Effect on LORETO.

 

(c)

No party to any such LORETO Contract has given notice to LORETO of or made a claim against LORETO with respect to any breach or default thereunder, in any such case in which such breach or default could reasonably be expected to have a Material Adverse Effect on LORETO.

 

(a)

amend its Articles of Incorporation or Bylaws (or other similar governing instrument);

 

(b)

amend the terms of any stock of any class or any other securities (except bank loans) or equity equivalents.

 

(c)

split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, make any other actual, constructive or deemed distribution in respect of its capital stock or otherwise make any payments to stockholders in their capacity as such, or redeem or otherwise acquire any of its securities; except as set forth herein;

 

(d)

adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of ALCANTARA (other than the Merger);

 

(e)

(i) incur or assume any long-term or short-term debt or issue any debt securities except for borrowings or issuances of letters of credit under existing lines of credit in the ordinary course of business; (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person; (iii) make any loans, advances or capital contributions to, or investments in, any other person; (iv) pledge or otherwise encumber shares of capital stock of ALCANTARA; or (v) mortgage or pledge any of its material assets, tangible or intangible, or create or suffer to exist any material Lien thereupon (other than tax Liens for taxes not yet due);

 

(f)

except as may be required by law, enter into, adopt, amend or terminate any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit, stock equivalent, stock purchase agreement, pension, retirement, deferred compensation, employment, severance or other employee benefit agreement, trust, plan, fund or other arrangement for the benefit or welfare of any director, officer or employee in any manner, or increase in any manner the compensation or fringe benefits of any director, officer or employee or pay any benefit not required by any plan and arrangement as in effect as of the date hereof (including, without limitation, the granting of stock appreciation rights or performance units); provided, however, that this paragraph (f) shall not prevent ALCANTARA from (i) entering into employment agreements or severance agreements with employees in the ordinary course of business and consistent with past practice or (ii) increasing annual compensation and/or providing for or amending bonus arrangements for employees for fiscal 2008 in the ordinary course of year-end compensation reviews consistent with past practice and paying bonuses to employees for fiscal 2008 in amounts previously disclosed to LORETO (to the extent that such compensation increases and new or amended bonus arrangements do not result in a material increase in benefits or compensation expense to ALCANTARA);

 

(g)

acquire, sell, lease or dispose of any assets in any single transaction or series of related transactions (other than in the ordinary course of business or as a result of the Closing Conditions of this Merger Agreement that have been described in the agreement);

 

(h)

except as may be required as a result of a change in law or in generally accepted accounting principles, change any of the accounting principles or practices used by it;

 

(i)

revalue in any material respect any of its assets including, without limitation, writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business;

 

(j)

(i) acquire (by merger, consolidation, or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof or any equity interest therein; (ii) enter into any contract or agreement other than in the ordinary course of business consistent with past practice which would be material to ALCANTARA; (iii) authorize any new capital expenditure or expenditures which, individually is in excess of $1,000 or, in the aggregate, are in excess of $5,000; provided, however that none of the foregoing shall limit any capital expenditure required pursuant to existing contracts;

 

(k)

make any tax election or settle or compromise any income tax liability material to ALCANTARA;

 

(l)

settle or compromise any pending or threatened suit, action or claim which (i) relates to the transactions contemplated hereby beyond those described as Closing Conditions to this agreement, or (ii) the settlement or compromise of which could have a Material Adverse Effect on ALCANTARA;

 

(m)

commence any material research and development project or terminate any material research and development project that is currently ongoing, in either case, except pursuant to the terms of existing contracts or in the ordinary course of business; or

 

(n)

take, or agree in writing or otherwise to take, any of the actions described in Sections 4.1(a) through 4.1(m) or any action which would make any of the representations or warranties of ALCANTARA contained in this Agreement untrue or incorrect.

 

(a)

amend its Articles of Incorporation or Bylaws (or other similar governing instrument);

 

(b)

authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise) any stock of any class or any other securities (except bank loans) or equity equivalents (including, without limitation, any stock options or stock appreciation rights;

 

 (c)

split, combine or reclassify any shares of its capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, make any other actual, constructive or deemed distribution in respect of its capital stock or otherwise make any payments to stockholders in their capacity as such, or redeem or otherwise acquire any of its securities;

 

(d)

adopt a plan of complete or partial liquidation, dissolution, merger consolidation, restructuring, re-capitalization or other reorganization of LORETO (other than the Merger);

 

(e)

(i) incur or assume any long-term or short-term debt or issue any debt securities except for borrowings or issuances of letters of credit under existing lines of credit in the ordinary course of business. (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person; (iii) make any loans, advances or capital contributions to or investments in, any other person; (iv) pledge or otherwise encumber shares of capital stock of LORETO; or (v) mortgage or pledge any of its material assets, tangible or intangible, or create or suffer to exist any material Lien thereupon (other than tax Liens for taxes not yet due);

 

(f)

except as may be required by law, enter into, adopt, amend or terminate any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, restricted stock, performance unit stock equivalent, stock purchase agreement, pension, retirement, deferred compensation, employment, severance or other employee benefit agreement, trust, plan, fund or other arrangement for the benefit or welfare of any director, officer or employee in any manner, or increase in any manner the compensation or fringe benefits of any director, officer or employee or pay any benefit not required by any plan and arrangement as in effect as of the date hereof (including, without limitation, the granting of stock appreciation rights or performance units); provided, however, that this paragraph (f) shall not prevent LORETO from (i) entering into employment agreements or severance agreements with employees in the ordinary course of business and consistent with past practice or (ii) increasing annual compensation and/or providing for or amending bonus arrangements for employees for fiscal 2009 in the ordinary course of year-­end compensation reviews consistent with past practice and paying bonuses to employees for fiscal 2009 in amounts previously disclosed to ALCANTARA (to the extent that such compensation increases and new or amended bonus arrangements do not result in a material increase in benefits or compensation expense to LORETO);

 

(g)

acquire, sell, lease or dispose of any assets in any single transaction or series of related transactions other than in the ordinary course of business;

 

(h)

except as may be required as a result of a change in law or in generally accepted accounting principles, change any of the accounting principles or practices used by it;

 

(i)

revalue in any material respect any of its assets, including, without limitation, writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business;

 

(j)

(i) acquire (by merger, consolidation, or acquisition of stock or assets) any corporation, partnership, or other business organization or division thereof or any equity interest therein; (ii) enter into any contract or agreement other than in the ordinary course of business consistent with past practice which would be material to LORETO; (iii) authorize any new capital expenditure or expenditures which, individually, is in excess of $1,000 or, in the aggregate, are in excess of $5,000; provided, however that none of the foregoing shall limit any capital expenditure required pursuant to existing contracts;

 

(k)

make any tax election or settle or compromise any income tax liability material to LORETO;

 

(l)

settle or compromise any pending or threatened suit, action or claim which (i) relates to the transactions contemplated hereby or (ii) the settlement or compromise of which could have a Material Adverse Effect on LORETO;

 

(m)

commence any material research and development project or terminate any material research and development project that is currently ongoing, in either case, except pursuant to the terms of existing contracts or except in the ordinary course of business; or

 

(n)

take, or agree in writing or otherwise to take, any of the actions described in Sections 4.2(a) through 4.2(m) or any action which would make any of the representations or warranties of LORETO contained in this Agreement untrue or incorrect.

 

(a)

LORETO and ALCANTARA, and their respective affiliates, officers, directors, employees, representatives and agents shall immediately cease any existing discussions or negotiations, if any, with any parties conducted heretofore with respect to any Third Party Acquisition.

 

(a)

Between the date hereof and the Effective Time, ALCANTARA will give LORETO and its authorized representatives, and LORETO will give ALCANTARA and its authorized representatives, reasonable access to all employees, plants, offices, warehouses and other facilities and to all books and records of itself and its subsidiaries, will permit the other party to make such inspections as such party may reasonably require and will cause its officers and those of its subsidiaries to furnish the other party with such financial and operating data and other information with respect to the business and properties of itself and its subsidiaries as the other party may from time to time reasonably request.

 

(b)

Between the date hereof and the Effective Time, ALCANTARA shall make available to LORETO, and LORETO will make available to ALCANTARA, within 25 business days after the end of each quarter, quarterly statements prepared by such party (in conformity with its past practices) as of the last day of the period then ended.

 

(c)

Each of the parties hereto will hold and will cause its consultants and advisers to hold in confidence all documents and information furnished to it in connection with the transactions contemplated by this Agreement.

 

(a)

To the extent, if any, not provided by an existing right under one of the parties’ directors and officers liability insurance policies, from and after the Effective Time, ALCANTARA and SUB CO shall, to the fullest extent permitted by applicable law, indemnify, defend and hold harmless each person who is now, or has been at any time prior to the date hereof, or who becomes prior to the Effective Time, a director, officer or employee of the parties hereto or any subsidiary thereof (each an “Indemnified Party” and, collectively, the ‘‘Indemnified Parties”) against all losses, expenses (including reasonable attorneys’ fees and expenses), claims, damages or liabilities or, subject to the proviso of the next succeeding sentence, amounts paid in settlement arising out of actions or omissions occurring at or prior to the Effective Time and whether asserted or claimed prior to, at or after the Effective Time) that are in whole or in part (i) based on, or arising out of the fact that such person is or was a director, officer or employee of such party or a subsidiary of such party or (ii) based on, arising out of or pertaining to the transactions contemplated by this Agreement. In the event of any such loss expense, claim, damage or liability (whether or not arising before the Effective Time), (i) ALCANTARA shall pay the reasonable fees and expenses of counsel selected by the Indemnified Parties, which counsel shall be reasonably satisfactory to ALCANTARA, promptly after statements therefor are received and otherwise advance to such Indemnified Party upon request reimbursement of documented expenses reasonably incurred, in either case to the extent not prohibited by the NGCL or its certificate of incorporation or bylaws, (ii) ALCANTARA will cooperate in the defense of any such matter and (iii) any determination required to be made with respect to whether an Indemnified Party’s conduct complies with the standards set forth under the NGCL and ALCANTARA’s certificate of incorporation or bylaws shall be made by independent counsel mutually acceptable to ALCANTARA and the Indemnified Party; provided, however, that ALCANTARA shall not be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld). The Indemnified Parties as a group may retain only one law firm with respect to each related matter except to the extent there is, in the opinion of counsel to an Indemnified Party, under applicable standards of professional conduct, conflict on any significant issue between positions of any two or more Indemnified Parties.

 

 (b)

In the event ALCANTARA or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then and in either such case, proper provision shall be made so that the successors and assigns of ALCANTARA shall assume the obligations set forth in this Section 4.11.

 

(c)

To the fullest extent permitted by law, from and after the Effective Time, all rights to indemnification now existing in favor of the employees, agents, directors or officers of ALCANTARA and LORETO and their subsidiaries with respect to their activities as such prior to the Effective Time, as provided in ALCANTARA’s and LORETO’s certificate of incorporation or bylaws, in effect on the date thereof or otherwise in effect on the date hereof, shall survive the Merger and shall continue in full force and effect for a period of not less than six years from the Effective Time.

 

(d)

The provisions of this Section 4.11 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party, his or her heirs and his or her representatives.

 

(a)

this Agreement shall have been approved and adopted by the requisite vote of the stockholders of SUB CO and LORETO;

 

(b)

this Agreement shall have been approved and adopted by the Board of Directors of ALCANTARA, SUB CO and LORETO;

 

(c)

no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or enforced by any United States court or United States governmental authority which prohibits, restrains, enjoins or restricts the consummation of the Merger;

 

(d)

any waiting period applicable to the Merger under the HSR Act shall have terminated or expired, and any other governmental or regulatory notices or approvals required with respect to the transactions contemplated hereby shall have been either filed or received; and

 

(a)

the representations of LORETO contained in this Agreement or in any other document delivered pursuant hereto shall be true and correct (except to the extent that the breach thereof would not have a Material Adverse Effect on LORETO) at and as of the Effective Time with the same effect as if made at and as of the Effective Time (except to the extent such representations specifically related to an earlier date, in which case such representations shall be true and correct as of such earlier date), and at the Closing LORETO shall have delivered to ALCANTARA a certificate to that effect;

 

(b)

each of the covenants and obligations of LORETO to be performed at or before the Effective Time pursuant to the terms of this Agreement shall have been duly performed in all material respects at or before the Effective Time and at the Closing LORETO shall have delivered to ALCANTARA a certificate to that effect;

 

 (c)

LORETO shall have obtained the consent or approval of each person whose consent or approval shall be required in order to permit the Merger as relates to any obligation, right or interest of LORETO under any loan or credit agreement, note, mortgage, indenture, lease or other agreement or instrument, except those for which failure to obtain such consents and approvals would not, in the reasonable opinion of ALCANTARA, individually or in the aggregate, have a Material Adverse Effect on LORETO;

 

(d)

LORETO shall have obtained the cancellation of all options, warrants, or other agreements relating to the right to receive securities of LORETO, except as such rights are set forth in the LORETO schedules as attached hereto;

 

(e)

there shall have been no events, changes or effects with respect to LORETO having or which could reasonably be expected to have a Material Adverse Effect on LORETO, and

 

(f)

LORETO shall have provided to ALCANTARA, audited financial statements, prepared pursuant to US GAAP, which financial statements are acceptable to ALCANTARA .

 

(a)

the representations of ALCANTARA and SUB CO contained in this Agreement or in any other document delivered pursuant hereto shall be true and correct (except to the extent that the breach thereof would not have a Material Adverse Effect on ALCANTARA) at and as of the Effective Time with the same effect as if made at and as of the Effective Time (except to the extent such representations specifically related to an earlier date, in which case such representations shall be true and correct as of such earlier date), and at the Closing ALCANTARA shall have delivered to LORETO a certificate to that effect;

 

(b)

each of the covenants and obligations of ALCANTARA to be performed at or before the Effective Time pursuant to the terms of this Agreement shall have been duly performed in all material respects at or before the Effective Time and at the Closing ALCANTARA shall have delivered to LORETO a certificate to that effect; and

 

 (c)

there shall have been no events, changes or effects with respect to ALCANTARA having or which could reasonably be expected to have a Material Adverse Effect on ALCANTARA.

 

(a)

by mutual written consent of ALCANTARA and LORETO;

 

(b)

by LORETO or ALCANTARA if (i) any court of competent jurisdiction in the United States or other United States Governmental Entity shall have issued a final order, decree or ruling or taken any other final action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action is or shall have become non-appealable or (ii) the Merger has not been consummated by September 6, 2009; provided, however, that no party may terminate this Agreement pursuant to this clause (ii) if such party’s failure to fulfill any of its obligations under this Agreement shall have been the reason that the Effective Time shall not have occurred on or before said date;

 

(c)

by ALCANTARA if (i) there shall have been a breach of any representation or warranty on the part of LORETO set forth in this Agreement, or if any representation or warranty of LORETO shall have become untrue, in either case such that the conditions set forth in Section 5.2(a) would be incapable of being satisfied by December 29, 2008 (or as otherwise extended), (ii) there shall have been a breach by LORETO of any of their respective covenants or agreements hereunder having a Material Adverse Effect on LORETO or materially adversely affecting (or materially delaying) the consummation of the Merger, and LORETO, as the case may be, has not cured such breach within 20 business days after notice by ALCANTARA thereof, provided that ALCANTARA has not breached any of its obligations hereunder, and (iii) LORETO shall have failed to acquire the cancellation of any options, warrants, except as set forth in the disclosure schedule.

 

(d)

by LORETO if (i) there shall have been a breach of any representation or warranty on the part of ALCANTARA or SUB CO set forth in this Agreement, or if any representation or warranty of ALCANTARA or SUB CO shall have become untrue, in either case such that the conditions set forth in Section 5.3(a) would be incapable of being satisfied by September 1, 2009 (or as otherwise extended), (ii) there shall have been a breach by ALCANTARA or SUB CO of its covenants or agreements hereunder having a Material Adverse Effect on ALCANTARA or materially adversely affecting (or materially delaying) the consummation of the Merger, and ALCANTARA, as the case may be, has not cured such breach within twenty business days after notice by LORETO thereof, provided that LORETO has not breached any of its obligations hereunder, (iii) the ALCANTARA Board shall have recommended to SUB CO’s stockholders a Superior Proposal, (iv) the ALCANTARA Board shall have withdrawn, modified or changed its approval or recommendation of this Agreement or the Merger or shall have failed to call, give notice of, convene or hold a stockholders’ meeting to vote upon the Merger, or shall have adopted any resolution to effect any of the foregoing, (v) LORETO shall have failed to obtain the requisite vote of its stockholders or (vi) SUB CO shall have failed to obtain the requisite vote of its stockholders.

 

(a)

“affiliate” means (except as otherwise provided in Sections 2.19, 3.19 and 4.13) a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person;

 

(b)

“business day” means any day other than a day on which Nasdaq is closed;

 

(c)

“capital stock” means common stock, preferred stock, partnership interests, limited liability company interests or other ownership interests entitling the holder thereof to vote with respect to matters involving the issuer thereof;

 

(d)

“knowledge’’ or “known’’ means, with respect to any matter in question, if an executive officer of ALCANTARA or its subsidiaries, or LORETO, as the case may be, has actual knowledge of such matter;

 

(e)

“person” means an individual, corporation, partnership, limited liability company, association, trust, unincorporated organization or other legal entity; and

 

(f)

“subsidiary” or “subsidiaries” of ALCANTARA, LORETO or any other person, means any corporation, partnership, limited liability company, association, trust, unincorporated association or other legal entity of which ALCANTARA, LORETO or any such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, 50% or more of the capital stock, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

Schedule 2.1

Organization

See Amended Articles/Bylaws/Minutes

Schedule 2.2(c)

Subsidiary

Alcantara Sub Co – 100% owned

Schedule 2.6

Consents & Approvals

None Required – Board Approval of

ALCANTARA

Shareholder approval of Alcantara Sub Co

Schedule 2.7

No Default

Not Applicable

Schedule 2.8

No Undisclosed Liability

None Exist

Schedule 2.9

Litigation

None Exist

Schedule 2.10

Compliance with Applicable Law

Not Applicable

Schedule 2.11

Employee Benefit Plans

Section 2.11(a) Not Applicable – None Exist

Section 2.11(b) No Benefit Plans Exist

Section 2.11(c) No Options Exist

Section 2.11(d) No Agreements Exist

Schedule 2.12

Environmental Laws/ Regulations

Not Applicable

Schedule 2.13

Tax Matters

None Exist

Schedule 2.14

Title to Property

None Exist

Schedule 2.15

Intellectual Property

None Exist

Schedule 2.16

Insurance

None Exist

Schedule 2.17

Vote Required

See Alcantara Sub Co Stockholder Meeting Certificate

Directors Approval of ALCANTARA

See Majority Consent of Stockholders of Alcantara

Schedule 2.18

Tax Treatment

Not Applicable

Schedule 2.19

Affiliates

Carlos Alcantara

Schedule 2.20

Certain Business Practices

None Exist

Schedule 2.21

Insider Interest

None Exist

Carlos Alcantara

Schedule 2.22

Opinion of Financial Adviser

Waived – None Exist

Schedule 2.23

Broker

None Exist

Schedule 4.1

Conduct of Business

See Amended & Restated Articles

Schedule 3.2(b)

Subsidiary Stock

None Exist

Schedule 3.2(c)

Capital Stock Rights

None Exist other than as in Articles

Schedule 3.2(d)

Securities conversions

None Exist

Schedule 3.2 (f)

Subsidiaries

None Exist

Schedule 3.6

Consents & Approvals

None Required other than Stockholders

Schedule 3.7

No Default

Not Applicable

Schedule 3.8

No Undisclosed Liability

None Exist

Schedule 3.9

Litigation

None Exist

Schedule 3.10

Compliance with Applicable Law

Not Applicable

Schedule 3.11

Employee Benefit Plans

Section 3.11(c) No Options Exist

Section 3.11(e) No Agreements Exist

Schedule 3.12

Environmental Laws/ Regulations

Not Applicable

Schedule 3.13

Tax Matters

None Exist

Schedule 3.14

Title to Property

None Exist

Schedule 3.15(b)

Intellectual Property

None Exist

Schedule 3.16

Insurance

None Exist

Schedule 3.17

Vote Required

See Stockholder Meeting Certificate

Schedule 3.18

Tax Treatment

Not Applicable

Schedule 3.19

Affiliates

Not Applicable

Schedule 3.20

Certain Business Practices

None Exist

Schedule 3.21

Insider Interest

None Exist

Schedule 3.22

Opinion of Financial Adviser

Waived – None Exist

Schedule 2.23

Broker

None Exist

Schedule 4.2

Conduct of Business

See Amended & Restated Articles