Document:

ex10-1.htm

Exhibit 10.1

 

AMENDMENT AND ACKNOWLEDGMENT AGREEMENT

 

This Amendment And Acknowledgment Agreement (this “Agreement”), dated as of November 5, 2010, and effective as of the Effective Date (as defined below), is made by and among Genta Incorporated, a Delaware corporation (the “Company”), and the undersigned parties whose names are set forth on Exhibit A attached hereto (each a “Holder” and collectively the “Holders”), each of whom are parties to that certain Securities Purchase Agreement, dated March 5, 2010 (the “Purchase Agreement”).  Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement.

 

WHEREAS, pursuant to Section 2.1 of each of the Notes, the Company is required to have a sufficient number of shares of its common stock (the “Common Stock”) authorized, reserved and available for issuance to satisfy the potential conversion in full of the Notes (including the Notes issuable in payment of interest on all outstanding Notes), and the failure to do so would be deemed to be an event of default (an “Event of Default”) under the Notes;

 

WHEREAS, as a result of a potential reset of the conversion prices under the Notes, on December 31, 2010, the Company may not have a sufficient number of shares of Common Stock authorized;

 

WHEREAS, to avoid the Event of Default, the Board of Directors of the Company has approved two reverse stock splits each with a ratio of up to 1-for-100 to be effective before December 31, 2011 (the “Reverse Stock Splits”), and an amendment to the Company’s Restated Certificate of Incorporation to increase the number of shares of Common Stock authorized to 100,000,000,000, in each case, to be effective upon filing of a Certificate of Amendment to the Company’s Restated Certificate of Incorporation (the “Certificate of Amendment”);

 

WHEREAS, the Reverse Stock Splits and the Certificate of Amendment require the approval of the stockholders of the Company, and the Company will prepare and file a preliminary proxy statement (the “Proxy Statement”) to seek such stockholder approval, and the Proxy Statement is subject to review by the United States Securities and Exchange Commission (the “SEC”), and the Reverse Stock Splits are subject to review by the Financial Industry Regulatory Authority; and

 

WHEREAS, the undersigned Holders represent the required threshold to amend the provisions of each of the Notes and the April 2009 Consent Agreement.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants herein below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.           Definitions.

 

(a)           “2010 Notes” means the B Notes, C Notes, D Notes and E Notes.

 

(b)           “April 2009 Consent Agreement” means that certain Consent Agreement dated as of April 2, 2009, by and among the Company and the Purchasers listed on Exhibit A thereto, as amended.

 

(c)           “April 2009 Purchase Agreement” means that certain Securities Purchase Agreement dated as of April 2, 2009, by and among the Company and the Purchasers listed on Exhibit A thereto, as amended.

 

(d)           “April 2009 Notes” means the Company’s Senior Secured Convertible Promissory Notes due April 2, 2012, as amended.

 

  

  

  

(e)           “Effective Date” means the date and time when this Agreement has been executed and delivered by the Company and the Requisite Holders.

 

(f)           “F Notes” means the Company’s Senior Unsecured Convertible Promissory Notes issuable upon exercise of the Purchase Rights (as defined in the April 2009 Consent Agreement) and Purchase Options (as defined in the April 2009 Purchase Agreement).

 

(g)           “Notes” means the September 2009 Notes, 2010 Notes, F Notes and April 2009 Notes.

 

(h)           “Requisite Holders” means (i) the holders of at least 66 2/3% of the combined principal amount of the currently outstanding B Notes, (ii) the holders of at least 66 2/3% of the combined principal amount of the currently outstanding C Notes, (iii) the holders of at least 66 2/3% of the combined principal amount of the currently outstanding D Notes, (iv) the holders of at least 66 2/3% of the combined principal amount of the currently outstanding E Notes, (v) the Holders holding at least two-thirds of the principal amount of the currently outstanding September 2009 Notes, (vi) Holders, representing at least two-thirds of the currently outstanding and unexercised Purchase Rights (as defined in the April 2009 Consent Agreement) and the currently outstanding principal amount of the F Notes issued upon exercise of the Purchase Rights, (vii) Holders, holding at least 66 2/3% of the currently outstanding principal amount of the April 2009 Notes, and (viii) Holders holding at least two-thirds of the principal amount of the currently outstanding April 2009 Notes.

 

(i)           “September 2009 Notes” means the Company’s Unsecured Subordinated Convertible Notes due July 7, 2011 issued by the Company pursuant to that certain Securities Purchase Agreement dated September 4, 2009 by and among the Company and the Purchasers listed on Exhibit A thereto.

 

2.            Amendment of Notes.

 

(a)           Section 2.1(g) of each 2010 Note is hereby amended and restated in its entirety to read as follows:

 

“(g)  at any time following the consummation of the Reverse Split Maker shall fail to have a sufficient number of shares of Common Stock authorized, reserved and available for issuance to satisfy the potential conversion in full (disregarding for this purpose any and all limitations of any kind on such conversion) of this Note and each Other Note (including the Notes issuable in payment of interest on all outstanding Notes and the Notes issuable upon exercise of the Debt Warrants); provided that no Event of Default shall be deemed to occur under this Section 2.1(g) if (i) the Company fails to have a sufficient number of shares of Common Stock authorized and reserved for the conversion of this Note and each Other Note (including the Notes issuable in payment of interest on all outstanding Notes and the Notes issuable upon exercise of the Debt Warrants) during the period of time between December 31, 2010 and March 20, 2011; (ii) such failure is the direct result of a delay in (X) shareholders approving two reverse stock splits and (Y) increasing the number of authorized shares of Common Stock; and (iii) such failure is caused solely by the review of and/or written comments to a preliminary proxy statement filed by the Company for the purpose of approving two reverse stock splits and increasing the number of authorized shares of Common Stock, from the United States Securities and Exchange Commission and/or the Financial Industry Regulatory Authority; or”

 

(b)           Section 2.1(g) of each September 2009 Note is hereby amended and restated in its entirety to read as follows:

 

  

  

  

“(g)  at any time following the Issuance Date the Maker shall fail to have a sufficient number of shares of Common Stock authorized, reserved and available for issuance to satisfy the potential conversion in full (disregarding for this purpose any and all limitations of any kind on such conversion) of this Note and each Other Note; provided that no Event of Default shall be deemed to occur under this Section 2.1(g) if (i) the Company fails to have a sufficient number of shares of Common Stock authorized and reserved for the conversion of this Note and each Other Note (including the Notes issuable in payment of interest on all outstanding Notes) during the period of time between December 31, 2010 and March 20, 2011; (ii) such failure is the direct result of a delay in (X) shareholders approving two reverse stock splits and (Y) increasing the number of authorized shares of Common Stock; and (iii) such failure is caused solely by the review of and/or written comments to a preliminary proxy statement filed by the Company for the purpose of approving two reverse stock splits and increasing the number of authorized shares of Common Stock, from the United States Securities and Exchange Commission and/or the Financial Industry Regulatory Authority; or”

(c)           Section 2.1(h) of each April 2009 Note is hereby amended and restated in its entirety to read as follows:

 

“(h)  at any time following the Authorization Date the Maker shall fail to have a sufficient number of shares of Common Stock authorized, reserved and available for issuance to satisfy the potential conversion in full (disregarding for this purpose any and all limitations of any kind on such conversion) of this Note and each Other Note; provided that no Event of Default shall be deemed to occur under this Section 2.1(h) if (i) the Company fails to have a sufficient number of shares of Common Stock authorized and reserved for the conversion in full of this Note and each Other Note during the period of time between December 31, 2010 and March 20, 2011; (ii) such failure is the direct result of a delay in (X) shareholders approving two reverse stock splits and (Y) increasing the number of authorized shares of Common Stock; and (iii) such failure is caused solely by the review of and/or written comments to a preliminary proxy statement filed by the Company for the purpose of approving two reverse stock splits and increasing the number of authorized shares of Common Stock, from the United States Securities and Exchange Commission and/or the Financial Industry Regulatory Authority; or”

3.            Amendment to the April 2009 Purchase Agreement.

 

(a)           Section 1.2(b) of the April 2009 Purchase Agreement is hereby amended and restated in its entirety to read as follows:

 

“(b)  Each of the Purchasers shall have the option (the “Purchase Option”), in each such Purchaser’s sole discretion, to purchase Senior Unsecured Convertible Promissory Notes (i) if on or before November 4, 2010, in substantially the form attached hereto as  Exhibit H (the “F-1 Notes”) and (ii) if after November 4, 2010, in substantially the form attached hereto as  Exhibit I (the “F-2 Notes” and together with the F-1 Notes, the “F Notes ”) in the principal amount of up to the amount set forth opposite such Purchaser’s name on  Exhibit A in one or more closings (each an “Additional Closing”, and along with the First Closing, each a “ Closing ”).  The Purchase Option shall be exercisable at any time and from time to time on or prior to the later of (i) the date that is two weeks after the Company’s public release of final top-line survival results from the Company’s Phase 3 trial of Genasense® plus chemotherapy in advanced melanoma, known as AGENDA, and (ii) March 30, 2011.  The issuance of the F Notes at any Additional Closing shall be made on the terms and conditions set forth in this Agreement, and the representations and warranties of the Company set forth in Article 3 and the representations and warranties of the Purchasers in Article 4 hereof shall speak as of the date of such Additional Closing.”; and

  

  

  

(b)           The form of note attached hereto as Exhibit B is hereby inserted as a new “Exhibit I” to the April 2009 Purchase Agreement.

 

4.            Amendment to the April 2009 Consent Agreement.  

 

(a)           Section 4 of the April 2009 Consent Agreement is hereby amended and restated in its entirety to read as follows:

 

“4.  Note Purchase Right.  At any time, and from time to time after the Authorization Date (as defined in the Purchase Agreement) each of the Holders who are not natural persons (the “Institutional Holders”) shall have the right (the “Purchase Right”), in each such Institutional Holder’s sole discretion, upon written notice to the Company (“Purchase Notice”), to purchase one or more Senior Unsecured Convertible Promissory Notes (i) if on or before November 4, 2010, in substantially the form attached hereto as Exhibit B (the “F-1 Notes”) and (ii) if after November 4, 2010, in substantially the form attached hereto as Exhibit C (the “F-2 Notes” and together with the F-1 Notes, the “F Notes”) in an aggregate principal amount up to that amount set forth opposite such Institutional Holder’s name on Exhibit A hereto, in one or more closings (each a “Closing”).  The Purchase Right shall be exercisable at any time and from time to time on or prior to the later of (i) the date that is two weeks after the Company’s public release of final top-line survival results from the Company’s Phase 3 trial of Genasense® plus chemotherapy in advanced melanoma, known as AGENDA, and (ii) March 30, 2011.  At each Closing, the Company shall issue and sell to the Institutional Holder purchasing notes at such Closing an F Note having the principal amount set forth in the Purchase Exercise Notice.  At each such Closing, the purchasing Institutional Holder shall deliver the purchase price for the F Note, which shall equal the principal amount thereof, by wire transfer of immediately available funds to the Company.  The Closing shall take place on the date specified in the Purchase Notice, which shall not be less than five Trading Days (as defined in the F Note) from the date on which the Purchase Notice is delivered.”; and

 

(b)           The form of note attached hereto as Exhibit C is hereby inserted as a new “Exhibit C” to the April 2009 Consent Agreement.

 

5.            Consideration.  In consideration of the amendment set forth in Sections 2, 3 and 4 above, the Company hereby agrees that from the Effective Date until September 30, 2011 it will not effect any of the Reverse Stock Splits without the approval of (i) the holders of at least 66 2/3% of the combined principal amount of the B Notes outstanding as of the Effective Date, (ii) the holders of at least 66 2/3% of the combined principal amount of the C Notes outstanding as of the Effective Date, (iii) the holders of at least 66 2/3% of the combined principal amount of the D Notes outstanding as of the Effective Date, (iv) the holders of at least 66 2/3% of the combined principal amount of the E Notes outstanding as of the Effective Date, (v) the holders of at least two-thirds of the principal amount of the outstanding September 2009 Notes as of the Effective Date, and (vi) the holders of at least two-thirds of the principal amount of the outstanding April 2009 Notes as of the Effective Date, unless the Board of Directors of the Company deems such Reverse Stock Splits to be in the best interest of the Company and its stockholders to avoid an imminent Event of Default under Section 2.1(g) of any outstanding Notes at such time prior to such date.

 

6.            Specific Performance; Consent to Jurisdiction; Venue.

 

(a)           The Company and the Holders acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof without the requirement of posting a bond or providing any other security, this being in addition to any other remedy to which any of them may be entitled by law or equity.

 

  

  

  

(b)           The parties agree that venue for any dispute arising under this Agreement will lie exclusively in the state or federal courts located in New York County, New York, and the parties irrevocably waive any right to raise forum non conveniens or any other argument that New York is not the proper venue. The parties irrevocably consent to personal jurisdiction in the state and federal courts of the state of New York. The Company and each Holder consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 6(b) shall affect or limit any right to serve process in any other manner permitted by law. The Company and the Holders hereby agree that the prevailing party in any suit, action or proceeding arising out of or relating to this Agreement shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party. The parties hereby waive all rights to a trial by jury.

 

7.            Entire Agreement; Amendment. The amendments set forth in Sections 2, 3 and 4 of this Agreement shall become effective on the Effective Date.  Except as modified by this Agreement, the Notes shall remain in full force and effect in accordance with their terms.  This Agreement contains the entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein, neither the Company nor any Holder make any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein.  No provision of this Agreement may be waived or amended other than by a written instrument signed by (i) the Company, (ii) the holders of at least 66 2/3% of the combined principal amount of the B Notes outstanding as of the Effective Date, (iii) the holders of at least 66 2/3% of the combined principal amount of the C Notes outstanding as of the Effective Date, (iv) the holders of at least 66 2/3% of the combined principal amount of the D Notes outstanding as of the Effective Date, (v) the holders of at least 66 2/3% of the combined principal amount of the E Notes outstanding as of the Effective Date, (vi) the holders of at least two-thirds of the principal amount of the outstanding September 2009 Notes as of the Effective Date, and (vii) the holders of at least two-thirds of the principal amount of the outstanding April 2009 Notes as of the Effective Date.  The Holders acknowledge that any amendment or waiver effected in accordance with this section shall be binding upon each Holder (and their permitted assigns) and the Company, including, without limitation, an amendment or waiver that has an adverse effect on any or all Holders.

 

8.            Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

 

	
If to the Company or its Subsidiaries:

	  	
Genta Incorporated

200 Connell Drive

Berkeley Heights, NJ 07922

	  	  	
Attention: Raymond P. Warrell, Jr., M.D.

	  	  	
Telephone No.: (908) 286-3966

	  	  	
Telecopy No.: (908) 464-1705

 

  

  

  

	
with copies to:

	  	
Morgan, Lewis & Bockius LLP

502 Carnegie Center

Princeton, NJ 08540

	  	  	
Attention: Emilio Ragosa

	  	  	
Telephone No.: (609) 919-6633

	  	  	
Telecopy No.: (609) 919-6701

	 	 	 
	
If to any Holder:

	  	
At the address of such Holder set forth on the signature page to this Agreement, with copies to Holder’s counsel as set forth on the signature page to this Agreement or as specified in writing by such Holder, with a copy to:

	 	 	 
	
With a copy to:

	  	
Cooley LLP

	  	  	
4401 Eastgate Mall

	  	  	
San Diego, CA 92121

	  	  	
Attention: Steven M. Przesmicki

	  	  	
Telephone No.: (858) 550-6070

	  	  	
Telecopy No.: (858) 550-6420

 

 Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto.

9.            Waivers. No waiver by a party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

 

10.           Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

 

11.           Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. The Holders may assign the rights under this Agreement without the consent of the Company. 

 

12.           No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

13.           Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.

 

14.           Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart.

 

  

  

  

15.           Publicity. The Company agrees that it will not disclose, and will not include in any public announcement, the names of the Holders without the consent of the Holders, which consent shall not be unreasonably withheld or delayed, or unless and until such disclosure is required by law, rule or applicable regulation, and then only to the extent of such requirement. Notwithstanding the foregoing, the Holders consent to being identified in any filings the Company makes with the SEC to the extent required by law or the rules and regulations of the SEC.

 

16.           Severability. The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible.

 

17.           Further Assurances. From and after the date of this Agreement, upon the request of the Holders or the Company, the Company and each Holder shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

 

  

  

  

In Witness Whereof, the parties have caused this Amendment And Acknowledgment Agreement to be executed as of the Effective Date.

 

	  	  	  	
GENTA INCORPORATED

	 	 	 	 
	 	 	 	 
	  	  	  	  	
By: 

	  
	  	  	  	  	
Name: 

	
Raymond P. Warrell, Jr., M.D.

	  	  	  	  	
Title: 

	
Chairman and Chief Executive Officer

 

[SIGNATURE PAGES CONTINUE]

 

  

  

  

[HOLDER SIGNATURE PAGES TO AMENDMENT AND ACKNOWLEDGMENT AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Amendment and Acknowledgment Agreement to be duly executed by their respective authorized signatories as of the __ day of November 2010.

 

Name of Holder: ________________________________________________________

 

Signature of Authorized Signatory of Holder: __________________________________

 

Name of Authorized Signatory: ____________________________________________________

 

Title of Authorized Signatory: _____________________________________________________

 

Email Address of Holder:________________________________________________

 

Fax Number of Holder: ________________________________________________

 

Amount outstanding under each Note held:                                                                                                                              

 

Address for Notice of Holder:

 

 

Address for Delivery of Securities for Holder (if not same as address for notice):

 

[SIGNATURE PAGES CONTINUE]

  

  

  

 

Exhibit A

Holders

 

 

  

  

  

Exhibit B

Form Of F-2 Note

(in the same form as the F Note with the conforming change to Section 2.1(g) as set forth herein)

 

  

  

  

Exhibit C

Form Of F-2 2010 Note

(in the same form as the F Note with the conforming change to Section 2.1(g) as set forth herein)microchannelcodeofethics_exh.htm - Generated by SEC Publisher for SEC Filing

 

Code of Ethics

 

OVERVIEW

 

MicroChannel Technologies Corporation (“MicroChannel”) has adopted a Code of Ethics that applies to all Officers, Directors, and Employees of the company and its affiliates (herein collectively referred to as, “Employee” or “Employees”).  

In so doing, this Code of Ethics demands the highest standards of business conduct required of all Employees.  

The Code is part of MicroChannel’s ongoing effort to comply with applicable laws and have an effective program in place to prevent and detect violations of law; this code is an effort to train and educate MicroChannel Employees about ethical business practices.

 

OBJECTIVE

 

A key MicroChannel objective is to conduct business operations in the most ethical manner possible. MicroChannel cares about its Employees, shareholders, clients, suppliers and the communities in which it conducts business operations. During the course of meeting its business objectives, MicroChannel believes that it is essential for all Employees to understand and comply with the Code of Ethics and in so doing, participate in MicroChannel’s way of operating its business.

 

STANDARD OF CONDUCT

 

MicroChannel insists that all aspects of its business operations be conducted with honesty, integrity, fairness and with respect for those affected by its business activities. Similarly, MicroChannel expects the same in its relationships among those with whom it does business.

All Employees are expected to maintain and promote integrity and honesty in all business transactions. Employees must conduct themselves according to the highest ethical standards and are expected to apply ethical business practices in the administrative and financial affairs of MicroChannel business operations. 

There is no Code of Ethics that can expect to define suitable behavior for each situation, nor should it seek to do so. As such, Employees are expected to exercise vigilance and make considered judgment of what is right and proper in any particular situation.

While carrying out the business operations of MicroChannel, Employees are expected to be accountable, truthful, trustworthy, conscientious, and committed to the highest standards of ethical business practices. As such, Employees are required to avoid all impropriety as well as the appearance of impropriety when conducting MicroChannel business operations.

 

ACCURACY AND COMPLETENESS OF ACCOUNTING RECORDS

 

MicroChannel’s accounting and supporting documents must accurately and completely describe and represent the nature and result of MicroChannel’s business operations. The results and activities of MicroChannel’s operations must be presented in a fair and unbiased manner.

 

1

 

 

MicroChannel business transactions must be appropriately authorized as well as completely and accurately recorded on the Company’s books. Proposed budgets, financial assessments, evaluations and fiscal presentations must fairly present all information relevant to the business transaction. Furthermore, at no time will the Company establish or maintain cash funds or asset accounts which are unrecorded.

Misappropriation, wrongful allocation, or improper use of the Company’s assets and property, or the false entry to records and reports by any Employee or by others must be reported to Board of MicroChannel.

 

ACCURATE AND TIMELY COMMUNICATION

 

MicroChannel expects Employees to be completely truthful and forthright in all internal and external interactions and communications, whether with shareholders, clients, government agencies, or others. 

Employees will ensure that all statements are accurate and complete with no misrepresentations which may mislead or misinform. In all cases, Employees are expected to provide full, prompt and accurate disclosure to governmental agencies.

 

MAINTAINING AND RETAINING RECORDS

 

In order to maintain the security and integrity of MicroChannel’s record-keeping and reporting systems, all Employees must adhere to applicable records retention procedures and fully understand how to document and transact entries that fall within their jurisdiction.

All Employees are expected to comply fully with audits and provide timely response to requests for records or other materials from or on behalf of MicroChannel auditors or management.

 

COMPLYING WITH THE LAW

 

MicroChannel Employees are expected to fully comply with both the letter and the spirit of the laws and regulations of the countries in which the Company conducts business.

MicroChannel Employees are expected to act in accordance with the accepted business practices in commercial markets and adhere to the contractual terms and conditions applicable to any business transaction.

All Employees must commit to abiding by all applicable laws and regulations.

The breach of rules, regulations, ethical standards, and laws cannot be justified by the pursuit of profit or the departure from acceptable practice by competitors.

 

INSIDER TRADING

 

MicroChannel Employees are strictly prohibited by law from buying or selling the Company’s shares or any other public security as a result of inside information.

Furthermore, it is against the law and unethical to provide such information about MicroChannel to other individuals or companies so that they may gain.

 

2

 

 

In accordance with the Code of Ethics, Employees are strictly prohibited from trading in shares of MicroChannel, clients or suppliers as a result of any inside information.

 

ENVIRONMENTAL ISSUES

 

MicroChannel is committed to running its business in an environmentally sound and sustainable manner. MicroChannel’s objective is to ensure that its business operations have the minimum adverse environmental impact commensurate with the legitimate needs of its business operations.

DISCLOSURE OF PERSONAL INTEREST

MicroChannel Employees are expected to fully disclose any personal interest(s) which could impinge or might reasonably be considered by others to conflict with their business dealings with industry.

MicroChannel Employees must not engage in personal activities and financial interests that may conflict with their responsibilities and obligations to the Company or give assistance to competitors, in conflict with the interests of MicroChannel or its clients.

Under all circumstances, Employees must obtain the formal consent of MicroChannel management if they intend to become partners, shareholders, or Directors, or participants in companies outside the MicroChannel corporate structure.

 

PERSONAL DISCRETION AND CONFIDENTIALITY

 

At all times, Employees are expected to respect the confidentiality of information received during the course of business dealings and must never use such information for personal benefit or gain.

Employees are expected to give information during the course of business which is truthful, complete and fair and never intended to mislead.

Employees cannot disclose MicroChannel trade secrets, confidential or proprietary information, or any other such information without the written, formal authorization of management. Such information may not be disclosed as a means of making profit, gains or benefits.

At no time can Employees use Internet bulletin boards, chat rooms, messaging services, or other electronic systems to discuss issues, affairs, or opinions related to MicroChannel or any of its industries, or to respond to comments about the Company. MicroChannel considers electronic postings to be the same as “speaking to the media”.

 

FAIR COMPETITION

 

MicroChannel is committed to vigorous yet fair competition and supports the development of appropriate competition laws. Each Employee must avoid any business arrangement that might prevent the effective operation of fair competition.

 

COMPLIANCE WITH THE COMPANY’S CODE OF ETHICS

 

MicroChannel’s Board of Directors is responsible for ensuring that the standards outlined in the Code of Ethics are fully communicated to all Employees and are similarly understood and 

 

3

 

 

adhered
to.

Should the Company experience loss of business as a result of
adhering to the Code of Ethics, the Board of Directors will not criticize,
condemn or complain.

Likewise, should a real or suspected breach of the
Company’s Code of Ethics be brought to the attention of the Company, the Board
of Directors will ensure that the reporting Employee does not suffer as a
consequence of doing so.

The Company’s Code of Ethics are reflective of
MicroChannel’s ethical standards and expectations. Accordingly, Employees are
expected to fulfill the Company’s ethical commitments in a way that is clearly
visible to all those with whom MicroChannel conducts its business.

At all
times, Employees are expected to fully comply with the standards established in
the Code of Ethics and ensure that their personal conduct is always above
reproach.

MicroChannel expects each Employee to ensure that the conduct
of others around him or her is in compliance with the Code of Ethics and that
any breach of the same is duly reported to management.

All breaches of
the law or violations of regulations and the standards of conduct listed in this
Code of Ethics may lead to serious consequences for the Employee concerned;
MicroChannel Employees have a legal, moral, and ethical duty to report any such
real or suspected violation to the Board of Directors and regulatory
authorities.

 

“CODE OF ETHICS” ENFORCEMENT

 

MicroChannel Employees understand and acknowledge that a
breach of the Code of Ethics can result in severe disciplinary action, including
but not necessarily limited to termination.

The Company’s Code of Ethics
will be fairly enforced at all levels, without prejudice.

 

ANNUAL ACKNOWLEDGEMENT

 

Each Employee will be required to sign a statement
annually that he or she has read and understands MicroChannel’s Code of Ethics.
This statement will also require that the Employee state that he or she is in
full compliance with the Code.

 

EMPLOYEE CERTIFICATION AND
ACKNOWLEDGEMENT

 

I acknowledge and certify that I have read and understood
the information set forth in the Code of Ethics of MicroChannel Technologies,
Inc. and will comply with these principles in my daily work activities. I am not
aware of any violation of the standards of MicroChannel’s Code of
Ethics.

Date:___________________________________
Name
(print):___________________________________
Position:___________________________________
Address:___________________________________
Signature:___________________________________

 

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