Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") dated as of April 7,
2003, by and among American Millennium Corporation, Inc., a New Mexico
corporation ("AMCI"), Xxxxxxxxx Precision Control, Inc., a Texas corporation,
doing business as Precision Control ("Precision") and the shareholders (the
"Selling Shareholders") of Precision listed on Schedule A attached hereto.
RECITALS
A. AMCI and the Selling Shareholders deem it desirable and in the best
interests of AMCI and Precision for AMCI to acquire one hundred percent (100%)
of all of the issued and outstanding capital stock of Precision (the "Precision
Capital Stock") from the Selling Shareholders in exchange for shares of the
common voting stock, $.001 par value, of AMCI (the "AMCI Common Stock"), so that
Precision will become a controlled subsidiary of AMCI and the Selling
Shareholders will become additional shareholders of AMCI.
B. For federal income tax purposes, it is intended that the exchange of the
Precision Capital Stock for shares of the AMCI Common Stock qualify as a type B
reorganization under the provisions of Section 368(a)(1)(B) of the United States
Internal Revenue Code of 1986, as amended (the "Code").
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and in order to set forth the terms
and conditions of the exchange, the mode of carrying the same into effect, the
manner and basis of exchanging the capital stock and other stock rights of the
Selling Shareholders in Precision for shares of the AMCI Common Stock and such
other details and provisions as are deemed necessary or proper, the parties
hereto hereby agree as follows:
ARTICLE I
EXCHANGE
1.1 Adoption of Plan of Exchange. Subject to and in accordance with the
terms and conditions of this Agreement, AMCI and the Selling Shareholders hereby
adopt a plan of reorganization pursuant to Section 368(a)(1)(B) of the Code.
1.2 Selling Shareholder Transfers. The Selling Shareholders agree to
transfer to AMCI all of their shares of the common stock, par value $1.00 per
share of Precision (the "Precision Common Stock"), now owned and hereafter
acquired prior to the Closing Date, all options, warrants or rights of any kind
held by the Selling Shareholders for shares of capital stock in Precision. The
real property of approximately 4.5 acres with all improvements thereon including
the building comprising approximately 10,000 square feet of office and warehouse
space (the "Property") shall be (a) appraised prior to Closing by an appraiser
approved by AMCI and (b) contributed by Xxxxx Xxxxx prior to Closing to the
capital of Precision (the "Contribution") subject to the first mortgage
indebtedness thereon (the "First Mortgage") in the approximate amount of One
Hundred Eight Thousand Dollars ($110,000.00) and the capital account of
Precision shall be thereupon increased by the difference in the appraised value
of the Property and the balance due on the First Mortgage on the date of the
contribution. If the First Mortgage documents contain a "due on sale" clause,
then a condition precedent to Closing shall be that the Selling Shareholders'
must obtain written evidence of approval of the Contribution, and a waiver of
principal acceleration by reason of the Contribution, from the holder of the
First Mortgage. The indebtedness of Precision to the Selling Shareholders in the
approximate amount of (none) ($0.00) shall be paid in cash in full by Precision
simultaneous with Closing from funds to be advanced by AMCI to Precision at
Closing (the "Closing Advance").
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1.3 AMCI Stock Issues. In exchange for the Selling Shareholders' transfers
set forth in Section 1.2 above, AMCI shall issue to the Selling Shareholders Two
Million Seven Hundred Fifty Thousand (2,750,000) shares of the AMCI Common
Stock, in accordance with the remaining terms of this Agreement. The
determination as to the equitable allocation and distribution of the Two Million
Seven Hundred Fifty Thousand (2,750,000) shares of the AMCI Common Stock amongst
the Selling Shareholders shall be ratable in accordance with the presently
issued and reserved for issuance shares of Precision, as evidenced by the
signatures of all of the Selling Shareholders on Schedule A attached hereto. If
Precision's gross sales after it becomes a subsidiary of AMCI of its products
exceeds Four Million Dollars ($4,000,000.00) from and after the Closing Date
through July 31, 2004, then in such event the Selling Shareholders shall be
entitled to the issuance on or before August 31, 2004 by AMCI of warrants
("Warrants") to purchase One Million (1,000,000) common shares, as adjusted for
all stock splits or stock dividends from and after the date hereof, if any. The
Warrants shall be for a term of three years commencing on the issuance date
("Effective Date") and shall be exercisable at a price of Twenty-Five Cents
($0.25) per share if exercised during the first Warrant year, Fifty Cents
($0.50) per share if exercised during the second Warrant year and Seventy-Five
Cents ($0.75) per share if exercised during the third Warrant year. The Warrants
shall be in the form of and have such benefits and restrictions as set forth in
Exhibit "B" attached hereto.
1.4 Closing Date. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the office of Precision Control,
on April 21, 2003, or such other date to be specified by the parties. The date
on which the Closing occurs is herein referred to as the "Closing Date."
1.5 Material Adverse Effect. "Material Adverse Effect" or "Material Adverse
Change" means any effect, change, event, circumstance or condition which when
considered with all other effects, changes, events, circumstances or conditions
would reasonably be expected to materially adversely affect the business,
results of operations or financial condition of AMCI or Precision, in each case
including its respective subsidiaries together with it taken as a whole, as the
case may be. In no event shall any of the following constitute a Material
Adverse Effect or a Material Adverse Change: (i) a change in the trading prices
of AMCI's equity securities between the date hereof and the Closing Date, in and
of itself; (ii) effects, changes, events, circumstances or conditions generally
affecting the industry in which either AMCI or Precision operate or arising from
changes in general business or economic conditions; (iii) effects, changes,
events, circumstances or conditions resulting from any change in law or
generally accepted accounting principles, which affect generally entities such
as AMCI and Precision; (v) any effects, changes, events, circumstances or
conditions (including, without limitation, non-governmental litigation, delays
in customer orders, a reduction in sales, a disruption in supplier, distributor
or similar relationships or a loss of employees) resulting from the announcement
or pendency of any of the transactions contemplated by this Agreement; and (vi)
any effects, changes, events, circumstances or conditions resulting from
compliance by AMCI or Precision with the terms of, or the taking of any action
contemplated, or permitted by, this Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF PRECISION AND THE SELLING SHAREHOLDERS
Precision and the Selling Shareholders hereby jointly and severally
represent and warrant, subject to the exceptions specifically described in
writing in the respective Sections of the Disclosure Schedule delivered by
Precision and the Selling Shareholders to AMCI and dated as of the date hereof
(the "Precision Disclosure Schedule") as follows:
2.1 Organization and Standing. Precision is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas, has
full requisite corporate power and authority to carry on its business as it is
currently conducted, and to own and operate the assets or properties currently
owned and operated by it, and is duly qualified or licensed to do business and
is in good standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of the assets or properties owned or the
nature of the business conducted by it would make such qualification or
licensing necessary, except where the failure to be so qualified or licensed
could not reasonably be expected to have a Material Adverse Effect on Precision.
2.2 Agreement Authorized and its Effect on Other Obligations. Upon approval
and adoption of this Agreement by the Board of directors of Precision and
execution of this Agreement by the Selling Shareholders, the consummation of the
transactions contemplated hereby will have been duly and validly authorized by
all necessary corporate action on the part of Precision and the Selling
Shareholders, and this Agreement will be a valid and binding obligation of
Precision and the Selling Shareholders and enforceable against Precision and the
Selling Shareholders in accordance with its terms, except as enforceability may
be limited by (i) bankruptcy, insolvency, reorganization, debtor relief or
similar laws affecting the rights of creditors generally, and (ii) general
principles of equity. This Agreement and the consummation of the transactions
contemplated hereby do not conflict with or cause a violation, breach or default
of any term or provision of (i) the certificate of incorporation or bylaws of
Precision or (ii) any indenture, mortgage, deed of trust, lease, contract or
other agreement to which Precision or any of its subsidiaries or any of the
Selling Shareholders is a party or by which any of them or their properties are
bound, other than such violations, breaches or defaults as could not reasonably
be expected to have a Material Adverse Effect on Precision. At the Closing Date,
the consummation of the transactions contemplated by this Agreement will not
conflict with or result in a violation or breach of any term or provision of,
nor constitute a default under, (i) the certificate of incorporation or bylaws
of Precision or (ii) any indenture, mortgage, deed of trust, lease, contract or
other agreement to which Precision or any of its subsidiaries or any of the
Selling Shareholders is a party or by which any of them or their properties are
bound, other than such violations, breaches or defaults as could not reasonably
be expected to have a Material Adverse Effect on Precision. Section 2.2 of the
Precision Disclosure Schedule lists all holders of any material indebtedness for
borrowed money of Precision as of the date of this Agreement, the lessors of any
material property leased by Precision and the other parties to any Material
Contract (as defined in Section 2.9) to which Precision is a party as of the
date of this Agreement in each case whose consent to the transactions
contemplated hereby is required.
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2.3 Capitalization.
2.3.1 Authorized, Issued and Treasury Stock. The capitalization of
Precision consists of 100,000 shares of common stock, par value $1.00 per share
(the "Precision Preferred Stock"), of which as of April 21, 2003, 1,000 shares
were issued and outstanding; as of April 21, 2003, no shares of the Precision
Common Stock were held in Precision's treasury.
2.3.2 Status of Shares. All of the outstanding shares of the Precision
Preferred Stock and the Precision Common Stock are validly issued, fully paid
and nonassessable, and were not issued in violation of any preemptive rights of
any stockholder.
2.3.3 List of Outstanding Options, Etc. Section 2.3 of the Precision
Disclosure Schedule sets forth a complete list as of the date of this Agreement
of all outstanding options, warrants or obligations of any kind to issue any
shares of capital stock of Precision, the owners thereof and the amounts owned.
2.3.4 Selling Shareholders 100% of Outstanding Precision Common Stock. At
the Closing Date, the Selling Shareholders will own one hundred percent (100%)
of all of the issued and outstanding shares of the Precision Common Stock on a
diluted basis, taking into account all outstanding options, warrants or
obligations of any kind to issue any shares of Precision Common Stock. The
number of shares of Precision Common Stock, owned and to be owned prior to the
Closing Date by each Selling Shareholder and the number of outstanding options,
warrants, etc. for each Selling Shareholder is accurately and completely set
forth on Schedule A attached hereto.
2.4 Subsidiaries. Section 2.4 of the Precision Disclosure Schedule lists
the subsidiary corporations or "Affiliates" (herein defined as such term is used
in Rule 145 under the Securities Act) of Precision existing at the date hereof,
and shows as to each of such subsidiary corporations or Affiliates the
percentage of the total outstanding stock or other ownership thereof which is
owned by Precision at such date. All ownership interests in Affiliates and
outstanding shares of stock of the subsidiary corporations owned by Precision
are validly issued, fully paid, and nonassessable, and Precision has good and
valid title thereto free and clear of any mortgage, pledge, lien, charge,
security interest, option, right of first refusal, preferential purchase right,
defect, encumbrance or other right or interest of any other person
(collectively, an "Encumbrance"), except for shares of capital stock or other
similar ownership interests of certain subsidiaries or Affiliates of Precision
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that are owned by certain nominee equity holders as required by the applicable
law of the jurisdiction of organization of such subsidiaries or Affiliates. Each
such subsidiary is a corporation duly organized, validly existing, and in good
standing (or equivalent concept with respect to jurisdictions that do not
recognize such concept) under the laws of the jurisdiction under which it is
incorporated and has full requisite corporate power and authority to own its
property and carry on its business as presently conducted by it and is, or on
the Effective Time will be, duly qualified or licensed to do business and is, or
on the Effective Time will be, in good standing (or equivalent concept with
respect to jurisdictions that do not recognize such concept) as a foreign
corporation authorized to do business in all jurisdictions in which the
character of the assets or properties owned or the nature of the business
conducted makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed could not reasonably be expected to have
a Material Adverse Effect on Precision. As hereinafter used in this Article II,
the term "Precision" also includes any and all of its directly and indirectly
held subsidiaries or Affiliates, except where the context indicates to the
contrary; provided, however, that for purposes of Sections 2.7.1 and 2.20, the
term "Precision" further includes any corporation, trade, business or entity
under common control with Precision within the meaning of Section 414(b), (c),
(m) or (o) of the Code or Section 4001 of ERISA.
2.5 Reports and Financial Statements. Precision has previously furnished or
made available to AMCI true and complete copies of (a) Precision's financial
reports prepared for Precision through December 31, 2002, and (b) Precision's
federal tax returns for calendar years 2001, 2000 and 1999. The financial
statements of Precision (collectively, the "Precision Reports") were, or (if
prepared after the date hereof) will be, prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved and fairly present, or will fairly present, the consolidated financial
position for Precision as of the dates thereof and the consolidated results of
their operations and changes in financial position for the periods then ended
(except with respect to interim period financial statements, for normal year-end
adjustments which are not material and for the absence of footnotes).
2.6 Liabilities. Precision has no liabilities of the type required to be
disclosed in the consolidated financial statements of Precision prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except for: (i) liabilities disclosed in the financial statements
(including any related notes) contained in the Precision Reports and (ii)
liabilities incurred in the ordinary course of business consistent with past
practices.
2.7 Additional Precision Information. Set forth in Section 2.7 of the
Precision Disclosure Schedule are true, complete and correct lists of the
following items, and Precision agrees that upon the request of AMCI, it will
furnish to AMCI true, complete and correct copies of any documents referred to
in such lists:
2.7.1 Employee Compensation Plans. All bonus, incentive compensation, stock
option, deferred compensation, profit-sharing, retirement, pension, welfare,
severance pay, supplemental income, group insurance, death benefit, or other
fringe benefit plans, arrangements or trust agreements that are in effect as of
the date of this Agreement covering active, former or retired employees of
Precision (collectively, "Precision Plans"), together with copies of the most
recent Internal Revenue Service determination letters that have been received,
if any, with respect to such plans;
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2.7.2 Collective Bargaining Agreements. Any collective bargaining
agreements of Precision as of the date of this Agreement with any labor union or
other similar representative of employees, including amendments, supplements,
and understandings; and
2.7.3 Guaranties. All indebtedness of Precision guaranteed by any current
or former shareholder of Precision, or guaranteed by any third party, and all
third party indebtedness, liabilities and commitments of others as to which
Precision is a guarantor, endorser, co-maker, surety, or accommodation maker
(excluding liabilities as an endorser of checks and the like in the ordinary
course of business) and all letters of credit, whether stand-by or documentary,
issued by any third party.
2.8 Certain Agreements. The consummation of the transactions contemplated
by this Agreement will not cause or result in the acceleration or vesting of any
benefits, payments or rights covering active, former or retired employees of
Precision under (i) any Precision Plans or (ii) any other agreements to which
Precision is a party that could reasonably be expected to have a Material
Adverse Effect on Precision.
2.9 No Undisclosed Contracts or Defaults. Except as may be specified in the
Precision Reports, Precision is not a party as of the date of this Agreement,
to, or bound as of the date of this Agreement by, any material contract or
arrangement of a nature required to be disclosed within an annual report of
Precision under generally accepted accounting principles (a "Material
Contract"), nor is Precision in default in any material obligation or covenant
on its part to be performed under any lease or other contract that is material
to the business of Precision.
2.10 Absence of Certain Changes and Events. Except as set forth in the
Precision Reports, other than as a result of the transactions contemplated by
this Agreement, between December 31, 2002 and the date of this Agreement, there
has not been:
2.10.1 Financial Change. Any adverse change in the financial condition,
backlog, operations or business of Precision which could reasonably be expected
to have a Material Adverse Effect on Precision;
2.10.2 Property Damage. Any damage, destruction, or loss to the business or
properties of Precision (whether or not covered by insurance) that could
reasonably be expected to have a Material Adverse Effect on Precision;
2.10.3 Dividends. Any declaration, setting aside, or payment of any
dividend or other distribution in respect of the Precision Common Stock, or any
direct or indirect redemption, purchase or any other acquisition by Precision of
any such stock that could reasonably be expected to have a Material Adverse
Effect on this transaction;
2.10.4 Labor Disputes. Any labor dispute; or
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2.10.5 Employment Arrangements. Any increase in compensation, bonus,
deferred compensation, stock options or other consideration of any employee or
director other than in the ordinary course of business consistent with past
practice.
2.11 Taxes.
2.11.1 Tax Returns Filed; Taxes Paid. Except with respect to failures
which, in the aggregate, could not reasonably be expected to have a Material
Adverse Effect on Precision, (i) all returns and reports ("Tax Returns") of or
with respect to any and all taxes, charges, fees, levies, assessments, duties or
other amounts payable to any federal, state, local or foreign taxing authority
or agency, including, without limitation, (x) income, franchise, profits, gross
receipts, minimum, alternative minimum, estimated, ad valorem, value added,
sales, use, service, real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, workers compensation,
unemployment compensation, utility, severance, excise, stamp, windfall profits,
transfer and gains taxes, (y) customs, duties, imposts, charges, levies or other
similar assessments of any kind, and (z) interest, penalties and additions to
tax imposed with respect thereto ("Tax" or "Taxes") which are required to be
filed on or before the Closing by or with respect to Precision have been or will
be duly and timely filed, (ii) all Taxes which have become or will become due
with respect to the period covered by each such Tax Return have been or will be
timely paid in full, (iii) all withholding Tax requirements imposed on or with
respect to Precision have been or will be satisfied in full in all respects, and
(iv) no penalty, interest or other charge is or will become due with respect to
the late filing of any such Tax Return or late payment of any such Tax.
2.11.2 Open Returns Disclosed. All federal and state income and franchise
Tax Returns of or with respect to Precision with unexpired or extended statutes
of limitations which have been audited by the applicable governmental authority
are set forth in Section 2.11 of the Precision Disclosure Schedule.
2.11.3 Extensions Disclosed. As of the date of this Agreement, there is not
in force any extension of time with respect to the due date for the filing of
any federal or state income or franchise Tax Return of or with respect to
Precision or any waiver or agreement for any extension of time for the
assessment or payment of any federal or state income or franchise Tax of or with
respect to Precision.
2.11.4 Claims Disclosed. There is no claim against Precision for any Taxes,
and no assessment, deficiency or adjustment has been asserted or proposed in
writing with respect to any Tax Return of or with respect to Precision other
than those which could not reasonably be expected to have a Material Adverse
Effect on Precision.
2.11.5 Scheduled Tax Liabilities Sufficient. The total amounts set up as
liabilities for current and deferred Taxes in the financial statements referred
to in Section 2.5 of this Agreement are sufficient to cover in all material
respects the payment of all Taxes, whether or not assessed or disputed, which
are, or are hereafter found to be, or to have been, due by or with respect to
Precision up to and through the periods covered thereby.
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2.11.6 Tax Allocation Agreements. There are no Tax allocation or sharing
agreements.
2.11.7 No Tax Liens. Except for statutory liens for current Taxes not yet
due, no material liens for Taxes exist upon the assets of Precision.
2.11.8 Change of Accounting Method. Precision will not be required to
include any amount in income for any taxable period beginning after December 31,
2002, as a result of a change in accounting method for any taxable period or
pursuant to any agreement with any Tax authority with respect to any such
taxable period.
2.11.9 Partnerships; Foreign Corporations. Except as is set forth in
Section 2.11.9 of the Precision Disclosure Schedule, as of the date of this
Agreement, none of the property of Precision is held in an arrangement for which
partnership Tax Returns are being filed, and as of the date of this Agreement,
Precision does not own any interest in any controlled foreign corporation (as
defined in section 957 of the Code), passive foreign investment company (as
defined in section 1296 of the Code) or other entity the income of which is
required to be included in the income of Precision.
2.11.10 Safe Harbor Leases; Tax-Exempt Use Property. Except as is set forth
in Section 2.11.10 of the Precision Disclosure Schedule, as of the date of this
Agreement, none of the property of Precision is subject to a safe-harbor lease
(pursuant to section 168(f)(8) of the Internal Revenue Code of 1954 as in effect
after the Economic Recovery Tax Act of 1981 and before the Tax Reform Act of
1986) or is "tax-exempt use property" (within the meaning of section 168(h) of
the Code) or "tax-exempt bond financed property" (within the meaning of section
168(g)(5) of the Code).
2.11.11 Actions Preventing Treatment as a Reorganization. Neither Precision
nor, to the knowledge of Precision, any of its Affiliates has taken or agreed to
take any action that would prevent the transactions contemplated hereby from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code.
2.12 Intellectual Property. For purposes of this Section 2.12 and Section
2.14, "Third Party Distributed Software" means the third party software programs
currently being distributed by Precision, whether as integrated or bundled with
any of Precision's software or hardware products or as a separate stand-alone
product, and "Internally Developed Software" means all software programs
developed for or on behalf Precision and currently being distributed by
Precision and all software or hardware products or programs under development by
Precision but not currently distributed, other than Third Party Distributed
Software. Third Party Distributed Software and Internally Developed Software
shall collectively be referred to as the "Software Programs."
2.12.1 Ownership. Precision exclusively owns all Internally Developed
Software, including without limitation those Software Programs listed on Section
2.12.1 of the Precision Disclosure Schedule, free and clear of all mortgages,
pledges, liens, security interests, conditional sales agreements, encumbrances
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or charges of any kind (other than object code end user licenses in the ordinary
course of business and Marketing Agreements). Precision exclusively owns (or by
the Closing Date will so own) all material patents, trademarks, service marks,
trade names and copyrights (including registrations, licenses and applications
pertaining thereto) and all other material intellectual property rights, trade
secrets and other confidential or proprietary information, processes and
formulae embodied in the Internally Developed Software (the "Intellectual
Property"), free and clear of all mortgages, pledges, liens, security interests,
conditional sales agreements, encumbrances or charges of any kind (other than
object code end user licenses in the ordinary course of business and Marketing
Agreements). Section 2.12 of the Precision Disclosure Schedule contains a
complete list of all registered trademarks and service marks, all reserved trade
names, all registered copyrights and all filed patent applications and issued
patents relating to the Internally Developed Software.
2.12.2 Notices. In no instance has the eligibility of the Internally
Developed Software for protection under applicable copyright law been forfeited
to the public domain by omission of any required notice or any other action.
2.12.3 Protection. The source code and related technical system
documentation for the Internally Developed Software are protected by Precision
as trade secrets in accordance with trade secret protections sufficient to
maintain trade secret status under applicable law. The source code and related
technical system documentation for the Internally Developed Software have been
disclosed by Precision only to (i) employees and contractors who have had a
"need to know" the contents thereof in connection with the performance of their
duties to Precision and who have executed nondisclosure agreements in the form
provided by Precision to AMCI, and (ii) third parties under source code escrow
agreements.
2.12.4 Personnel. All personnel who during the three years prior to the
date hereof have been employees, agents, consultants and contractors of
Precision (and/or Precision's predecessors) and who (on behalf of Precision
and/or Precision's predecessors) have contributed to or participated in the
conception and development of Internally Developed Software and related
technical documentation that is material to the operation of Precision's
business have executed nondisclosure agreements and have executed appropriate
instruments of assignment in favor of Precision as assignee (or will have so
executed by the Closing Date) that have conveyed to Precision (or will so convey
to Precision by the Closing Date), effective, and exclusive ownership of all
tangible and intangible property thereby arising.
2.12.5 Third-Party Software. Section 2.12.5 of the Precision Disclosure
Schedule contains a complete list of material Third Party Distributed Software.
Section 2.12.5 of the Precision Disclosure Schedule lists all license agreements
for the use of all such material Third Party Software and, if any such software
is not licensed, the basis of the use of such software by Precision. Precision
has not taken any action that could, or failed to take any action, the failure
of which could, reasonably be expected to (i) give rise to the termination by a
licensor of Precision's license to distribute any material Third Party
Distributed Software or (ii) materially restrict Precision's right of use of any
material Third Party Distributed Software under any license agreement or other
right of use, in each case subject to any right Precision may have to receive
notice of and/or cure or remedy such action or failure to act.
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2.12.6 No Infringement. The Internally Developed Software and, to
Precision's knowledge as of the date of this Agreement, the Third Party
Distributed Software do not infringe and will not infringe any copyright or
trade secret of any person or entity, and, to Precision's knowledge, no part of
the Internally Developed Software nor the use thereof for their intended
purposes (and to Precision's knowledge as of the date of this Agreement, no part
of the Third Party Distributed Software nor the use thereof for their intended
purposes) infringes or will infringe any valid and subsisting patent or other
exclusionary right of any third party. As of the date of this Agreement, no
written claims have been asserted against Precision by any person or entity as
to the use of any of the Intellectual Property.
2.12.7 Integrity. Except with respect to demonstration or trial copies, no
portion of the Internally Developed Software or, to Precision's knowledge as of
the date of this Agreement, the Third Party Distributed Software contains any
"back door," "time bomb," "Trojan horse," "worm," "drop dead device," "virus" or
other software routines that disable or erase software, hardware, or data
without the consent of the user.
2.12.8 Year 2000. The Software Programs are Year 2000 Compliant. As used in
this Section 2.12.8 and Section 3.15, "Year 2000 Compliant" means that (a) the
performance of the software has not been and will not be adversely affected by
any date change involving dates in the 20th and 21st century and (b) use of the
software will not end abnormally or provide invalid or incorrect results as a
result of date data, specifically including date data which represents or
references different centuries or more than one century, provided that such date
data is in the correct format for such software as specified in the applicable
documentation for such software.
2.13 Intentionally omitted.
2.14 Software Contracts.
2.14.1 End-User Agreements. Section 2.14.1 of the Precision Disclosure
Schedule sets forth a complete example of each of Precision's current standard
end user license agreements with respect to the Internally Developed Software
(the "Standard Licenses"). Section 2.14.1 of the Precision Disclosure Schedule
accurately identifies each license transaction (with customer name redacted, if
desired) which generated $10,000 or more of revenues during the twelve months
ending December 31, 2002.
2.14.2 Marketing Agreements. Section 2.14.2 of the Precision Disclosure
Schedule sets forth a complete list of all contracts, agreements, licenses, or
other commitments or arrangements in effect with respect to the marketing,
remarketing, distribution, licensing or promotion of the Software Programs or
any other Technical Documentation or the Intellectual Property by any
independent salesperson, distributor, sublicensor or other remarketer or sales
organization (the "Marketing Agreements"), which generated 5% or more of
Precision's revenues during the preceding four fiscal quarters.
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2.15 Title to Properties. With minor exceptions which in the aggregate are
not material, and except for merchandise and other property and assets sold,
used or otherwise disposed of in the ordinary course of business for fair value
or no longer necessary for the operation of Precision's business, Precision has
good and valid title to or valid leasehold interests in all its properties,
interests in properties and assets, real and personal, reflected in the most
recent balance sheet of Precision included in the Precision Reports, free and
clear of any Encumbrance of any nature whatsoever, except (i) liens and
Encumbrances reflected in the most recent balance sheet of Precision included in
the Precision Reports, (ii) liens for current taxes or other governmental
charges or levies not yet due and payable, (iii) Encumbrances that are created,
arise or exist under or in connection with any leases or other contracts or
other matters referred to in the Precision Disclosure Schedule, (iv)
Encumbrances that relate to or are created, arise or exist in connection with,
any legal proceeding disclosed herein that is being contested in good faith, and
(v) such imperfections of title, easements and Encumbrances, if any, as do not
and will not materially detract from the value of the property subject thereto
or affected thereby, or otherwise materially impair business operations. All
leases pursuant to which Precision leases (whether as lessee or lessor) any
substantial amount of real or personal property are in good standing, valid and
effective, except as validity or effectiveness may be limited by (i) bankruptcy,
insolvency, reorganization, debtor relief or similar laws affecting the rights
of creditors generally, and (ii) general principles of equity; and there is not,
under any such leases, any existing or prospective default or event of default
or event which with notice or lapse of time, or both, would constitute a default
by Precision and in respect to which Precision has not taken reasonable steps to
prevent a default from occurring. The buildings and premises of Precision that
are used in its business are in good and sufficient operating condition and
repair for the continued conduct of Precision's business on a basis consistent
with past practice, subject to ordinary wear and tear. All major items of
equipment of Precision are in good and sufficient operating condition and in a
state of reasonable maintenance and repair for the continued conduct of
Precision's business on a basis consistent with past practice, ordinary wear and
tear excepted, and are free from any known defects except as may be repaired by
routine maintenance and such minor defects as do not substantially interfere
with the continued use thereof in the conduct of normal operations.
2.16 Selling Shareholders Are Accredited Investors. The Selling
Shareholders are Accredited Investors as that term is defined in Regulation D
(Rule 501, et. seq.) as promulgated by the Securities and Exchange Commission
("SEC"). Each Selling Shareholder, on his or its own behalf, hereby represents
and warrants to AMCI and the other Selling Shareholders that he or it:
2.16.1 Independent Due Diligence. Has undertaken such independent due
diligence activities that he or it feels necessary in order to make his or its
determination as to the transactions contemplated in this Agreement;
2.16.2 Sufficient Knowledge and Experience. Has sufficient knowledge and
experience in business and financial matters, or has received competent
professional advice concerning AMCI and the transactions contemplated in this
Agreement, to evaluate the risks thereof;
11
2.16.3 Understands Risk. Understands that an investment in AMCI involves a
risk of loss of all or a portion of such capital and that there is no guarantee
whatsoever that AMCI or Precision will generate any profits from their
activities; and
2.16.4 No Due Diligence By Counsel or Advisor. Is aware that due diligence
performed by any counsel or accountant for AMCI with respect to his or its
participation as an owner of securities, or rights to own securities, of AMCI,
has been limited in scope and in reasonable reliance on information available
through AMCI's public filings (through the SEC XXXXX system).
2.17 Environmental Compliance.
2.17.1 Environmental Conditions. There are no materials or substances that
are regulated by Applicable Environmental Laws (as defined in Section 2.17.3) on
any real property owned or leased by Precision as a result of the actions of
Precision or, to its knowledge, of any third party or otherwise, that could
reasonably be expected to have a Material Adverse Effect on Precision.
2.17.2 Permits, etc. Precision has in full force and effect all
environmental permits, licenses, approvals and other authorizations required
under Applicable Environmental Laws to conduct its operations and is operating
in material compliance thereunder.
2.17.3 Compliance. Precision's operations and use of its assets do not
violate any applicable federal, state or local law, statute, ordinance, rule,
regulation, order or notice requirement pertaining to (a) the condition or
protection of air, groundwater, surface water, soil, or other environmental
media, (b) the environment, including natural resources or any activity which
affects the environment, or (c) the regulation of any pollutants, contaminants,
waste, substances (whether or not hazardous or toxic), including, without
limitation, the Comprehensive Environmental Response Compensation and Liability
Act (49 U.S.C. Section 9601 et seq.), the Hazardous Materials Transportation Act
(49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 1609 et seq.), the Clean Water Act (33 U.S.C. 1251 et seq.), the
Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act
(17 U.S.C. Section 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. Section
201 and Section 300f et seq.), the Rivers and Harbors Act (33 U.S.C. Section 401
et seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et seq.) and analogous
state and local provisions, as any of the foregoing may have been amended or
supplemented from time to time (collectively the "Applicable Environmental
Laws"), except for violations which, either singly or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on Precision.
2.17.4 Environmental Claims. No written notice has been served on Precision
from any entity, governmental agency or individual regarding any existing,
pending or threatened investigation or inquiry related to alleged violations
under any Applicable Environmental Laws, or regarding any claims for remedial
obligations or contribution under any Applicable Environmental Laws, other than
any of the foregoing which, either singly or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Precision or which
have been cured or corrected in all material respects.
12
2.17.5 Renewals. Precision does not know of any reason it would not be able
to renew any of the permits, licenses, or other authorizations required pursuant
to any Applicable Environmental Laws to operate and use any of Precision's
assets for their current purposes and uses.
2.17.6 Environmental Documents. There are no environmental orders or
decrees material to current operations conducted by Precision and there have not
been any environmental audits, assessments, investigations or reviews conducted
within the last five years on any property owned, leased or used by Precision.
2.18 Compliance with Other Laws. Precision is not in violation of or in
default with respect to the Occupational Safety and Health Act (29 U.S.C.
Section 651 et seq.) as amended ("OSHA"), or any other applicable law or any
applicable rule, regulation, or any writ or decree of any court or any
governmental commission, board, bureau, agency, or instrumentality, or
delinquent with respect to any report required to be filed with any governmental
commission, board, bureau, agency or instrumentality, except for violations or
defaults which, either singly or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on Precision.
2.19 Finder's Fees. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Precision and its
advisors directly with AMCI and its advisors, without the intervention on behalf
of Precision of any other person as the result of any act of Precision, and so
far as is known to Precision, without the intervention on behalf of Precision of
any other person in such manner as to give rise to any valid claim against any
of the parties hereto for a brokerage commission, finder's fee or any similar
payments.
2.20 Compliance with ERISA. Precision has made available to AMCI a copy of
each Precision Plan, any related summary plan description, trust agreement and
annuity or insurance contract, if any, and each plan's most recent annual report
filed with the Internal Revenue Service, if any, and: (i) each Precision Plan
has been maintained and administered in material compliance with its terms and
with the requirements prescribed by any and all applicable statutes, orders,
rules and regulations, and is, to the extent required by applicable law or
contract, fully funded without having any deficit or unfunded actuarial
liability; (ii) all required contributions under any such plans have been made
and the applicable funds have been funded in accordance with the terms thereof
and no past service funding liabilities exist thereunder; (iii) each Precision
Plan that is required or intended to be qualified under applicable law or
registered or approved by a governmental agency or authority has been so
qualified, registered or approved by the appropriate governmental agency or
13
authority, and, to the knowledge of Precision, nothing has occurred since the
date of the last qualification, registration or approval to materially and
adversely affect, or cause, the appropriate governmental agency or authority to
revoke such qualification, registration or approval; (iv) to the extent
applicable, the Precision Plans comply, in all material respects, with the
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code, and any Precision Plan intended to be qualified under
Section 401(a) of the Code has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of Precision, nothing has occurred to
cause the loss of such qualified status; (v) no Precision Plan is covered by
Title IV of ERISA or Section 412 of the Code; (vi) there are no pending or, to
the knowledge of Precision, anticipated material claims against or otherwise
involving any of the Precision Plans and no suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of Precision Plan
activities) has been brought against or with respect to any Precision Plan;
(vii) all material contributions, reserves or premium payments, required to be
made as of the date hereof to the Precision Plans have been made or provided
for; (viii) Precision has not incurred any liability under subtitle C or D of
Title IV of ERISA with respect to any "single-employer plan," within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained by Precision;
(ix) Precision has not incurred any withdrawal liability under Subtitle E of
Title IV of ERISA with respect to any "multiemployer plan," within the meaning
of Section 4001(a)(3) of ERISA; (x) Precision has substantially performed all
obligations, whether arising by law or by contract, required to be performed by
it in connection with the Precision Plans; (xi) to the knowledge of Precision,
no act, omission or transaction has occurred which would result in imposition on
Precision of (a) a civil penalty assessed pursuant to subsections (c), (i) or
(l) of Section 502 of ERISA, (b) breach of fiduciary duty liability damages
under Section 409 of ERISA or (c) a tax imposed pursuant to Chapter 43 of
Subtitle D of the Code; (xii) in connection with the consummation of the
transactions contemplated by this Agreement, no payments have or will be made
hereunder, under the Precision Plans or otherwise by Precision which, in the
aggregate, would result in imposition of the sanctions imposed under Sections
280G and 4999 of the Code; and (xiii) Precision has no obligations for retiree
health and life benefits under any Precision Plan, except as set forth on
Section 2.20 of the Precision Disclosure Schedule, and there are no restrictions
on the rights of Precision to amend or terminate any such Precision Plan without
incurring any liability thereunder.
2.21 Investigations; Litigation. Except as may be required pursuant to the
Xxxx Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (collectively, "HSR") and any applicable
comparable foreign laws and regulations, (i) no investigation or review by any
governmental entity with respect to Precision or any of the transactions
contemplated by this Agreement is pending or, to Precision's knowledge is, as of
the date of this Agreement, threatened, nor, as of the date of this Agreement,
has any governmental entity indicated to Precision an intention to conduct the
same, and (ii) except as set forth in the Precision Reports, as of the date of
this Agreement, there is no action, suit or proceeding pending or, to
Precision's knowledge, threatened against or affecting Precision at law or in
equity, or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, which either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Precision.
2.22 Product Warranty. There are no existing liabilities or, to the
knowledge of Precision, likely liabilities, arising from claims regarding the
performance or design of the products and services sold by Precision either in
the past or at present for which adequate reserves have not been established on
the most recent balance sheet in the Precision Reports that in the aggregate
could reasonably be expected to have a Material Adverse Effect on Precision.
14
2.23 Inapplicability of Certain Statutes. Precision is not subject to any
state takeover law that might apply to the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AMCI
AMCI represents and warrants, subject to the exceptions specifically
described in writing in the respective sections of the Disclosure Schedule
delivered by AMCI to Precision and the Selling Shareholders dated as of the date
hereof (the "AMCI Disclosure Schedule") as follows:
3.1 Organization and Standing. AMCI is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Mexico,
has full requisite corporate power and authority to carry on its business as it
is currently conducted, and to own and operate the properties currently owned
and operated by it and is duly qualified or licensed to do business and is in
good standing as a foreign corporation authorized to do business in all
jurisdictions in which the character of the properties owned or the nature of
the business conducted by it would make such qualification or licensing
necessary, except where the failure to be so qualified or licensed could not
reasonably be expected to have a Material Adverse Effect on AMCI. As hereinafter
used in this Article III, the term "AMCI" also includes any and all of its
directly and indirectly held subsidiaries, except where the context indicates to
the contrary; provided, however, that for purposes of Section 3.9, the term
"AMCI" further includes any corporation, trade, business or entity under common
control with AMCI within the meaning of Section 414(b), (c), (m) or (o) of the
Code or Section 4001 of ERISA.
3.2 Agreement Authorized and its Effect on Other Obligations. The
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of AMCI and this
Agreement is a valid and binding obligation of AMCI enforceable against AMCI in
accordance with its terms, except as enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, debtor relief or similar laws affecting
the rights of creditors generally, and (ii) general principles of equity. At the
Closing Date, the consummation of the transactions contemplated hereby will not
conflict with or result in a violation or breach of any term or provision of,
nor constitute a default under (i) the certificate of incorporation or bylaws of
AMCI or (ii) any indenture, mortgage, deed of trust, lease, contract or other
agreement to which AMCI or any of its subsidiaries is a party or by which any of
them or their properties are bound, other than such violations, breaches or
defaults as could not reasonably be expected to have a Material Adverse Effect
on AMCI.
3.3 Capitalization. The capitalization of AMCI consists of Ten Million
(10,000,000) shares of authorized preferred stock, par value $0.001 per share,
of which at the date hereof One Million Forty Thousand (1,040,000) shares were
issued or outstanding; and Sixty Million (60,000,000) shares of authorized AMCI
Common Stock (notation - AMCi plans to seek shareholder approval increasing the
"authorized" shares of common stock to One Hundred Million or more, as may be
approved by a majority shareholder vote), par value $0.001 per share, of which
Forty Five Million Two Hundred Eighty One Thousand Nine Hundred Seventy Seven
(45,281,977) shares were issued and outstanding as of March 5, 2003, an
additional Fourteen Million Eight Hundred Thousand Six Hundred (14,800,600)
shares were reserved for issuance in connection with various AMCI benefit plans,
an additional Ten Million Four Hundred Thousand (10,400,000) shares were
reserved for issuance upon conversion of all issued shares of preferred stock,
an additional Six Million Eighty Four Thousand Nine Hundred Sixteen (6,084,916)
shares were reserved for issuance upon exercise of outstanding warrants, at
March 5, 2003, and no shares of AMCI Common Stock were held in AMCI's treasury
(notation - shares reserved for issuance subject to majority shareholders'
approval as aforementioned). Section 3.3 of the AMCI Disclosure Schedule sets
forth a complete list as of the date of this Agreement of all outstanding
options, warrants or obligations of any kind to issue any shares of capital
stock of AMCI.
15
3.4 Reports and Financial Statements. AMCI has previously furnished or made
available (through the SEC XXXXX system) to Precision true and complete copies
of its filings, including the quarterly and annual reports filed by AMCI with
the SEC pursuant to the Securities and Exchange Act of 0000 (xxx "Xxxxxxxx
Xxx"). The consolidated financial statements of AMCI and its subsidiaries
included in AMCI's most recent report on Form 10-K and most recent report on
Form 10-Q, and any other reports filed with the SEC by AMCI under the Exchange
Act subsequent thereto (the "AMCI Reports") were, or (if filed after the date
hereof) will be, prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved and fairly
present, or will fairly present, the consolidated financial position for AMCI
and its subsidiaries as of the dates thereof and the consolidated results of
their operations and changes in financial position for the periods then ended
(except with respect to interim period financial statements, for normal year-end
adjustments which would not have a Material Adverse Impact on AMCI and for the
absence of footnotes).
3.5 Liabilities. AMCI has no liabilities of the type required to be
disclosed in the consolidated financial statements of AMCI prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except for: (i) liabilities disclosed in the financial statements
(including any related notes) contained in the AMCI Reports and (ii) liabilities
incurred in the ordinary course of business consistent with past practices.
3.6 No Undisclosed Defaults. Except as may be specified in the AMCI
Reports, AMCI is not in default in any material obligation or covenant on its
part to be performed under any lease or other contract that is material to the
business of AMCI and its subsidiaries taken as a whole, other than such defaults
as could not reasonably be expected to have a Material Adverse Effect on AMCI.
3.7 Absence of Certain Changes and Events in AMCI. Except as set forth in
the AMCI Reports, other than as a result of the transactions contemplated by
this Agreement, between January 31, 2000 and the date of this Agreement, there
has not been:
3.7.1 Financial Change. Any adverse change in the financial condition,
operations, or business of AMCI which could reasonably be expected to have a
Material Adverse Effect on AMCI;
16
3.7.2 Property Damage. Any damage, destruction, or loss to the business or
properties of AMCI (whether or not covered by insurance) that could reasonably
be expected to have a Material Adverse Effect on AMCI;
3.7.3 Dividends. Any declaration, setting aside, or payment of any dividend
or other distribution in respect of AMCI's capital stock, or any direct or
indirect redemption, purchase or any other acquisition of such stock, except as
set forth in this Agreement; or
3.7.4 Labor Disputes. Any labor dispute.
3.8 Finder's Fees. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by AMCI and its advisors
directly with Precision or its advisors, without the intervention on behalf of
AMCI of any other person as the result of an act of AMCI and, so far as known to
AMCI, without the intervention on behalf of AMCI of any other person in such
manner as to give rise to any valid claim against any of the parties hereto for
a brokerage commission, finder's fee, or any similar payments.
3.9 Compliance With ERISA. AMCI represents to Precision as to all its
bonus, incentive compensation, stock option, deferred compensation,
profit-sharing, retirement, pension, welfare, severance pay, supplemental
income, group insurance, death benefit, or other fringe benefit plans,
arrangements or trust agreements covering active, former or retired employees of
AMCI (collectively, the "AMCI Plans"), any related summary plan, trust agreement
and annuity or insurance contract, if any, and each plan's most recent annual
report filed with the Internal Revenue Service, if any, the most recent reports
with respect to such plans, trust agreements and annuity or insurance contracts
filed with any governmental agency, all Internal Revenue Service determination
letters that have been received with respect to such plans that: (i) each AMCI
Plan has been maintained and administered in material compliance with its terms
and with the requirements prescribed by any and all applicable statutes, orders,
rules and regulations, and is, to the extent required by applicable law or
contract, fully funded without having any deficit or unfunded actuarial
liability; (ii) all required contributions under any such plans have been made
and the applicable funds have been funded in accordance with the terms thereof
and no past service funding liabilities exist thereunder; (iii) each AMCI Plan
17
that is required or intended to be qualified under applicable law or registered
or approved by a governmental agency or authority has been so qualified,
registered or approved by the appropriate governmental agency or authority, and
nothing has occurred since the date of the last qualification, registration or
approval to adversely affect, or cause, the appropriate governmental agency or
authority to revoke such qualification, registration or approval; (iv) to the
extent applicable, the AMCI Plans comply, in all material respects, with the
requirements of ERISA and the Code, and any AMCI Plan intended to be qualified
under Section 401(a) of the Code has been determined by the Internal Revenue
Service to be so qualified and nothing has occurred to cause the loss of such
qualified status; (v) no AMCI Plan is covered by Title IV of ERISA or Section
412 of the Code; (vi) there are no pending or anticipated material claims
against or otherwise involving any of the AMCI Plans and no suit, action or
other litigation (excluding claims for benefits incurred in the ordinary course
of AMCI Plan activities) has been brought against or with respect to any AMCI
Plan; (vii) all material contributions, reserves or premium payments, required
to be made as of the date hereof to the AMCI Plans have been made or provided
for; (viii) AMCI has not incurred any liability under subtitle C or D of Title
IV of ERISA with respect to any "single-employer plan," within the meaning of
Section 4001(a) of ERISA, currently or formerly maintained by AMCI; (ix) AMCI
has not incurred any withdrawal liability under Subtitle E of Title IV of ERISA
with respect to any "multiemployer plan," within the meaning of Section
4001(a)(3) of ERISA; (x) AMCI has substantially performed all obligations,
whether arising by law or by contract, required to be performed by it in
connection with the AMCI Plans; (xi) no act, omission or transaction has
occurred which would result in imposition on AMCI of (a) a civil penalty
assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA, (b)
breach of fiduciary duty liability damages under Section 409 of ERISA or (c) a
tax imposed pursuant to Chapter 43 of Subtitle D of the Code; (xii) in
connection with the consummation of the transactions contemplated by this
Agreement, no payments have or will be made hereunder, under the AMCI Plans or
otherwise by AMCI which, in the aggregate, would result in imposition of the
sanctions imposed under Sections 280G and 4999 of the Code; and (xiii) AMCI does
not have any obligations for retiree health and life benefits under any AMCI
Plan, except as may be set forth on the AMCI Disclosure Schedule, and there are
no restrictions on the rights of AMCI to amend or terminate any such AMCI Plan
without incurring any liability thereunder.
3.10 Investigations; Litigation. Except as may be required pursuant to HSR
and any applicable comparable foreign laws and regulations, (i) no investigation
or review by any governmental entity with respect to AMCI in connection with any
of the transactions contemplated by this Agreement is pending or, to AMCI's
knowledge is, as of the date of this Agreement, threatened, nor, as of the date
of this Agreement, has any governmental entity indicated to AMCI an intention to
conduct the same and (ii) except as set forth in the AMCI Reports, as of the
date of this Agreement, there is no action, suit or proceeding pending or, to
AMCI's knowledge, threatened against or affecting AMCI or its subsidiaries at
law or in equity, or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, which either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on AMCI.
3.11 Actions Preventing Treatment as a Reorganization. Neither AMCI nor, to
the knowledge of AMCI, any of its Affiliates has taken or agreed to take any
action that would prevent the transactions contemplated hereby from constituting
a reorganization qualifying under the provisions of Section 368(a) of the Code.
3.12 AMCI Common Stock. The AMCI Common Stock to be issued in connection
with the transactions contemplated hereby shall be duly authorized by all
necessary corporate action, and when issued in accordance with this Agreement,
will be validly issued, fully paid and nonassessable and not subject to
preemptive rights.
3.13 Intentionally omitted.
3.14 Environmental Compliance.
3.14.1 Environmental Conditions. There are no materials or substances that
are regulated by Applicable Environmental Laws (as defined in Section 2.17.3) on
any real property owned or leased by AMCI as a result of the actions of AMCI or,
to its knowledge, of any third party or otherwise, that could reasonably be
expected to have a Material Adverse Effect on AMCI.
18
3.14.2 Permits, etc. AMCI has in full force and effect all environmental
permits, licenses, approvals and other authorizations required under Applicable
Environmental Laws to conduct its operations and is operating in material
compliance thereunder.
3.14.3 Compliance. AMCI's operations and use of its assets do not violate
any applicable federal, state or local law, statute, ordinance, rule,
regulation, order or notice requirement pertaining to (a) the condition or
protection of air, groundwater, surface water, soil, or other environmental
media, (b) the environment, including natural resources or any activity which
affects the environment, or (c) the regulation of any pollutants, contaminants,
waste, substances (whether or not hazardous or toxic), including, without
limitation, the Comprehensive Environmental Response Compensation and Liability
Act (49 U.S.C. Section 9601 et seq.), the Hazardous Materials Transportation Act
(49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 1609 et seq.), the Clean Water Act (33 U.S.C. 1251 et seq.), the
Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act
(17 U.S.C. Section 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. Section
201 and Section 300f et seq.), the Rivers and Harbors Act (33 U.S.C. Section 401
et seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et seq.) and analogous
state and local provisions, as any of the foregoing may have been amended or
supplemented from time to time (collectively the "Applicable Environmental
Laws"), except for violations which, either singly or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on AMCI.
3.14.4 Environmental Claims. No written notice has been served on AMCI from
any entity, governmental agency or individual regarding any existing, pending or
threatened investigation or inquiry related to alleged violations under any
Applicable Environmental Laws, or regarding any claims for remedial obligations
or contribution under any Applicable Environmental Laws, other than any of the
foregoing which, either singly or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on AMCI or which have been cured or
corrected in all material respects.
3.14.5 Renewals. AMCI does not know of any reason it would not be able to
renew any of the permits, licenses, or other authorizations required pursuant to
any Applicable Environmental Laws to operate and use any of AMCI's assets for
their current purposes and uses.
3.14.6 Environmental Documents. There are no environmental orders or
decrees material to current operations conducted by AMCI and there have not been
any environmental audits, assessments, investigations or reviews conducted
within the last five years on any property owned, leased or used by AMCI.
3.15 Compliance with Other Laws. AMCI is not in violation of or in default
with respect to the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.) as amended ("OSHA"), or any other applicable law or any applicable rule,
regulation, or any writ or decree of any court or any governmental commission,
board, bureau, agency, or instrumentality, or delinquent with respect to any
report required to be filed with any governmental commission, board, bureau,
agency or instrumentality, except for violations or defaults which, either
singly or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect on AMCI.
19
3.16 Investigations; Litigation. Except as may be required pursuant to the
Xxxx Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 and the rules and
regulations promulgated thereunder (collectively, "HSR") and any applicable
comparable foreign laws and regulations, (i) no investigation or review by any
governmental entity with respect to AMCI or any of the transactions contemplated
by this Agreement is pending or, to AMCI's knowledge is, as of the date of this
Agreement, threatened, nor, as of the date of this Agreement, has any
governmental entity indicated to AMCI an intention to conduct the same, and (ii)
except as set forth in the AMCI Reports, as of the date of this Agreement, there
is no action, suit or proceeding pending or, to AMCI's knowledge, threatened
against or affecting AMCI at law or in equity, or before any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, which either individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect on AMCI.
3.17 Product Warranty. There are no existing liabilities or, to the
knowledge of AMCI, likely liabilities, arising from claims regarding the
performance or design of the products and services sold by AMCI either in the
past or at present for which adequate reserves have not been established on the
most recent balance sheet in the AMCI Reports that in the aggregate could
reasonably be expected to have a Material Adverse Effect on AMCI.
ARTICLE IV
OBLIGATIONS PENDING CLOSING DATE
4.1 Agreements of Precision and the Selling Shareholders. Precision and the
Selling Shareholders agree that from the date hereof to the Closing Date, except
(i) to the extent AMCI shall otherwise consent in writing (which consent shall
not be unreasonably withheld or delayed) or (ii) as set forth or referred to in
the section of the Precision Disclosure Schedule corresponding to the respective
section of this Article IV, they shall:
4.1.1 Maintenance of Present Business. Other than as contemplated by this
Agreement, operate Precision's business only in the usual, regular, and ordinary
manner in an effort to maintain the goodwill Precision now enjoys and, to the
extent consistent with such operation, use all reasonable efforts to preserve
intact Precision's present business organization, keep available the services of
Precision's present officers and employees, and preserve Precision's
relationships with customers, suppliers, jobbers, distributors, and others
having business dealings with Precision, and in connection therewith Precision
shall not substantially and adversely deviate from its licensing and pricing
practices;
4.1.2 No Delay. Not take any action or enter into any transaction which
would materially affect the ability of Precision to, or materially delay
Precision's ability to, complete the transactions contemplated by this
Agreement;
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4.1.3 Maintenance of Books and Records. Maintain Precision's books of
accounts and records in the usual, regular, and ordinary manner, in accordance
with generally accepted accounting principles applied on a consistent basis;
4.1.4 Compliance with Law. Duly comply with all laws applicable to
Precision and to the conduct of Precision's business, except where the failure
to comply with such laws would not have a Material Adverse Effect on Precision;
4.1.5 Compliance with Agreement. At the expense of Precision, take all
commercially reasonable actions as may be necessary, advisable or proper (i) to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, (ii) to insure that the
representations and warranties made by Precision and the Selling Shareholders
herein are true and correct at the Closing Date such that the condition
contained in Section 5.2.1 would be satisfied, (iii) to fully perform all
covenants made by them herein and (iv) to satisfy timely all other obligations
imposed upon them by this Agreement;
4.1.6 Inspection. Upon reasonable advance notice, permit AMCI and its
officers and authorized representatives, during normal business hours, to
inspect its records and to consult with its officers, employees, attorneys, and
agents for the purpose of determining the accuracy of the representations and
warranties hereinabove made and the compliance with covenants contained in this
Agreement; provided, however, that Precision and the Selling Shareholders shall
not be required to permit any inspection, or to disclose any information, that
in the reasonable judgment of Precision and the Selling Shareholders would (i)
result in the disclosure of any trade secrets of third parties, (ii) violate any
obligation of Precision with respect to confidentiality, (iii) jeopardize
protections afforded Precision and/or the Selling Shareholders under the
attorney-client privilege or the attorney work product doctrine, or (iv)
materially interfere with the conduct of Precision's business; and
4.1.7 Maintenance of Intellectual Property. Not take any action that would,
or not fail to take any action the failure of which would, materially and
adversely affect Precision's Intellectual Property.
4.1.8 Precision To Add or Substitute Director. Precision shall have taken
such action as necessary to, simultaneous with the closing of this transaction,
either add AMCI's, Chief Executive Officer, Xxxxx Xxxxxxxx, as an additional
member of Precision's board of directors or as a replacement for an existing
director.
4.2 Agreements of AMCI, Precision and the Selling Shareholders. Each party
agrees to take (or not to take, as the case may be) the following actions after
the date hereof:
4.2.1 Xxxx-Xxxxx-Xxxxxx; Securities Laws. Each party shall promptly file
such materials as may be required under HSR, if applicable, with respect to the
transactions contemplated hereby and shall cooperate with the other party to the
extent necessary to assist the other party in the preparation of such filings.
Each party shall promptly make and effect all other registrations, filings and
submissions required to be made or effected by it pursuant to the Securities
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Act, the Exchange Act and any other applicable legal requirements with respect
to the transactions contemplated hereby. Without limiting the generality of the
foregoing, each party agrees to (i) promptly provide all information requested
by any governmental entity in connection with the transactions contemplated
hereby or any of the other transactions contemplated by this Agreement; (ii)
promptly take, and cause its Affiliates to take, all actions and steps necessary
to obtain any antitrust clearance or similar clearance, if applicable, from the
Federal Trade Commission, the Department of Justice, any state attorney general,
any foreign competition authority or any other governmental entity in connection
with the transactions contemplated by this Agreement; (iii) give the other party
prompt notice of the commencement of any investigation, action or legal
proceeding by or before any governmental entity with respect to the transactions
contemplated hereby or any of the other transactions contemplated by this
Agreement; (iv) keep the other party informed as to the status of any such
investigation, action or legal proceeding, and (v) promptly inform the other
party of any communication to or from the Federal Trade Commission, the
Department of Justice or any other governmental entity regarding the
transactions contemplated hereby. Each party will consult and cooperate with the
other parties and will consider in good faith the views of the other parties in
connection with any analysis, appearance, presentation, memorandum, brief,
argument, opinion or proposal made or submitted in connection with any
investigation, action or legal proceeding under or relating to HSR or any other
federal or state or foreign antitrust, competition or fair trade law. In
addition, except as may be prohibited by any governmental entity or by any law,
rule or regulation, in connection with any investigation, action or legal
proceeding under or relating to HSR or any other federal or state or foreign
antitrust, competition or fair trade law or any other similar investigation,
action or legal proceeding, each party hereto will permit authorized
representatives of the other party to be present at each meeting or conference
relating to any such investigation, action or legal proceeding and to have
access to and be consulted in connection with any document, opinion or proposal
made or submitted to any governmental entity in connection with any such
investigation, action or legal proceeding;
4.2.2 Notice of Material Development. Each party will promptly notify the
other parties in writing of (i) any event occurring subsequent to the date of
this Agreement which would render any representation or warranty of such party
contained in this Agreement untrue or inaccurate and which would reasonably be
expected to result in a Material Adverse Effect, (ii) any Material Adverse
Effect on such party and (iii) any material breach by such party of any covenant
or agreement contained in this Agreement; and
4.2.4 Tax Treatment. No party shall (before or after the Closing Date) take
any action or fail to take any action which action or failure to act would
prevent, or would reasonably be likely to prevent, the transactions contemplated
hereby from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
4.3 Additional Agreements of Precision. Precision agrees that from the date
hereof to the Closing Date, except (i) to the extent AMCI shall otherwise
consent in writing (which consent shall not be unreasonably withheld or delayed)
or (ii) as set forth or referred to in the section of the Precision Disclosure
Schedule corresponding to the respective section of this Article IV, it will:
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4.3.1 Prohibition of Certain Employment Contracts. Not enter into any
contracts of employment which (i) cannot be terminated on notice of 14 days or
less without the payment of severance compensation or (ii) provide for any
increase in compensation, including, without limitation, any modification of any
stock option agreements, outside the ordinary course of business consistent with
past practice, or severance payments or benefits covering a period beyond the
termination date (other than those which AMCI has previously approved) except as
contemplated by this Agreement or as may be required by law;
4.3.2 Prohibition of Certain Loans. Not incur any indebtedness for borrowed
money except for borrowings incurred in the ordinary course of business
consistent with past practices;
4.3.3 Prohibition of Certain Commitments. Not enter into commitments of a
capital expenditure nature which would exceed Twenty Five Thousand Dollars
($25,000), in the aggregate, except as may be necessary for the maintenance of
existing facilities and equipment in good operating condition and repair in the
ordinary course of business and except as may be required by law;
4.3.4 Intentionally omitted;
4.3.5 Maintenance of Insurance. Maintain insurance on its properties and
with respect to the conduct of its business of such kinds and in such
substantially similar amounts as presently carried by it, which insurance may be
added to from time to time in its discretion; provided, that if during the
period from the date hereof to and including the Closing Date any of its
property or assets are damaged or destroyed by fire or other casualty, the
obligations of AMCI and Precision under this Agreement shall not be affected
thereby (subject, however, to the provision that the coverage limits of such
policies are adequate in amount to cover the replacement value of such property
or assets and loss of profits during replacement, less commercially reasonable
deductibles, if of material significance to the assets or operations of
Precision) but it shall promptly notify AMCI in writing thereof and proceed with
the repair or restoration of such property or assets in such manner and to such
extent as may be approved by AMCI, and upon the Closing Date all proceeds of
insurance and claims of every kind arising as a result of any such damage or
destruction shall remain the property of Precision;
4.3.6 Precision Acquisition Proposals - No Solicitation. Not directly or
indirectly, or authorize or permit any of its respective agents to: (i) solicit,
initiate, facilitate or knowingly encourage (including by way of furnishing
information) any inquiry or the making of any proposal which constitutes, or may
reasonably be expected to lead to, any acquisition or purchase by a third party
(other than AMCI or an affiliate of AMCI) of a substantial amount of assets of,
or any equity interest in, Precision or any merger, consolidation, business
combination, sale of securities, recapitalization, liquidation, dissolution or
similar transaction involving Precision (in each case, other than as permitted
by Section 4.1.1, Section 4.3.8 or any other provision of this Agreement)
(collectively, "Precision Transaction Proposals") or agree to or endorse any
Precision Transaction Proposal or (ii) propose, enter into or participate in any
discussions or negotiations regarding any Precision Transaction Proposal, or
furnish to another person (other than AMCI or a representative of AMCI) any
information with respect to its business, properties or assets for the purpose
of facilitating any Precision Transaction Proposal.
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4.3.7 No Amendment to Certificate of Incorporation, etc. Not amend its
certificate of incorporation or bylaws or other organizational documents or
merge or consolidate with or into any other corporation or change in any manner
the rights of its capital stock;
4.3.8 No Issuance, Sale, or Purchase of Securities. Not issue or sell, or
issue options or rights to subscribe to, or enter into any contract or
commitment to issue or sell (upon conversion or otherwise), any shares of its
capital stock or subdivide or in any way reclassify any shares of its capital
stock, or acquire, or agree to acquire, any shares of its capital stock;
4.3.9 Prohibition on Dividends, Cash or Property Distributions. Not declare
or pay any dividend on shares of its capital stock or make any other
distribution of cash or other assets to the holders thereof;
4.3.10 Union Contracts and Precision Plans. Not (i) enter into or modify
any collective bargaining agreement with any labor union or other similar
representative of employees, (ii) increase the compensation or benefits of any
employee of Precision or any of its subsidiaries other than in the ordinary
course of business, (iii) except as contemplated by this Agreement, amend or
terminate any Precision Plan, or (iv) enter into or adopt any new employee
benefit plan, policy or arrangement.
4.4 Additional Agreements of AMCI. AMCI agrees that from the date hereof to
the Closing Date, it will:
4.4.1 Maintenance of Present Business. Other than as contemplated by this
Agreement, operate its business in the usual, regular, and ordinary manner;
4.4.2 No Delay. Not take any action or enter into any transaction which
would materially affect the ability of AMCI to, or materially delay AMCI's
ability to, complete the transactions contemplated by this Agreement;
4.4.3 Consultation. Upon reasonable advance notice, permit Precision and
its officers and authorized representatives, during normal business hours, to
consult with its officers, employees, attorneys and agents for the purpose of
determining the accuracy of the representations and warranties hereinabove made
and the compliance with covenants contained in this Agreement; provided,
however, that AMCI shall not be required to permit any inspection, or to
disclose any information, that in the reasonable judgment of AMCI would (i)
result in the disclosure of any trade secrets of third parties, (ii) violate any
obligation of AMCI with respect to confidentiality, (iii) jeopardize protections
afforded AMCI under the attorney-client privilege or the attorney work product
doctrine, or (iv) materially interfere with the conduct of AMCI's business;
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4.4.4 Issuance of AMCI Common Stock - Rule 144 Restrictions. Take all
action reasonably necessary to cause the "issuance" of AMCI Common Stock to the
Selling Shareholders in connection with the transactions contemplated hereby,
subject to the restrictions of Rule 144 under the Securities Act of 1933
("Securities Act"). AMCI also shall take any action reasonably required to be
taken under state blue sky or securities laws and under other applicable laws,
rules and regulations in connection with the issuance of the AMCI Common Stock
pursuant to the transactions contemplated hereby. The parties understand and
agree that notwithstanding this Section 4.4.4, the AMCI Common Stock issued to
the Selling Shareholders is subject to the registration rights with respect to
such shares pursuant to Section 7.2 hereof.
4.4.5 Compliance with Agreement. At its expense, take all commercially
reasonable actions as may be necessary, advisable or proper (i) to consummate
and make effective, in the most expeditious manner practicable, the transactions
contemplated hereby and the other transactions contemplated by this Agreement,
(ii) to insure that the representations and warranties made by it herein are
true and correct at the Closing Date such that the condition contained in
Section 5.1.1 would be satisfied, (iii) to fully perform all covenants made by
it herein and (iv) to satisfy timely all other obligations imposed upon it by
this Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1 Conditions Precedent to Obligations of AMCI. The obligations of AMCI to
consummate and effect the transactions contemplated hereby shall be subject to
the satisfaction of the following conditions, or to the waiver thereof by AMCI
in the manner contemplated by Section 6.4 before the Closing Date:
5.1.1 Representations and Warranties of Precision and the Selling
Shareholders True at Closing Date. The representations and warranties of
Precision and the Selling Shareholders herein contained shall be, in all
material respects, true as of and at the Closing Date with the same effect as
though made at such date, except as affected by transactions permitted or
contemplated by this Agreement and except for those representations and
warranties that address matters only as of a particular date (which shall remain
true and correct as of such particular date), provided that any inaccuracies in
such representations and warranties will be disregarded if the circumstances
giving rise to all such inaccuracies (considered collectively) do not
constitute, and are not reasonably expected to result in, a Material Adverse
Effect on Precision (it being understood that any materiality qualifications
contained in such representations and warranties shall be disregarded for this
purpose); and Precision shall have performed and complied, in all material
respects, with all covenants required by this Agreement to be performed or
complied with by Precision and the Selling Shareholders before the Closing Date.
5.1.2 No Material Litigation. No suit, action or other legal proceeding
shall have been commenced by any United States federal or state governmental
entity with respect to the transactions contemplated hereby and shall be pending
before any court or governmental agency of competent jurisdiction which would
reasonably be expected to have a Material Adverse Effect on Precision.
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5.1.3 Xxxx-Xxxxx-Xxxxxx, etc. All waiting periods which may be required by
HSR and any applicable comparable laws and regulations shall have expired with
respect to the transactions contemplated by this Agreement, or early termination
with respect thereto shall have been obtained without the imposition of any
governmental request or order requiring the sale or disposition or holding
separate (through a trust or otherwise) of particular assets or business of
AMCI, its Affiliates or any component of Precision or other actions as a
precondition to the expiration of any waiting period or the receipt of any
necessary governmental approval or consent.
5.2 Conditions Precedent to Obligations of Precision and the Selling
Shareholders. The obligations of Precision and the Selling Shareholders to
consummate and effect the transactions contemplated hereby shall be subject to
the satisfaction of the following conditions, or to the waiver thereof by
Precision and the Selling Shareholders in the manner contemplated by Section 6.4
before the Closing Date:
5.2.1 Representations and Warranties of AMCI True at Closing Date. The
representations and warranties of AMCI herein contained shall be, in all
material respects, true as of and at the Closing Date with the same effect as
though made at such date, except as affected by transactions permitted or
contemplated by this Agreement and except for those representations and
warranties that address matters only as of a particular date (which shall remain
true and correct as of such particular date), provided that any inaccuracies in
such representations and warranties will be disregarded if the circumstances
giving rise to all such inaccuracies (considered collectively) do not
constitute, and are not reasonably expected to result in, a Material Adverse
Effect on AMCI (it being understood that any materiality qualifications
contained in such representations and warranties shall be disregarded for this
purpose); and AMCI shall have performed and complied, in all material respects,
with all covenants required by this Agreement to be performed or complied with
by AMCI before the Closing Date.
5.2.2 No Material Litigation. No suit, action or other legal proceeding
shall have been commenced by any United States federal or state governmental
entity with respect to the transactions contemplated hereby and shall be
pending, before any court or governmental agency of competent jurisdiction which
would reasonably be expected to have a Material Adverse Effect on AMCI.
5.2.3 Xxxx-Xxxxx-Xxxxxx, etc. All waiting periods which may be required by
HSR or any applicable comparable laws and regulations shall have expired with
respect to the transactions contemplated by this Agreement, or early termination
with respect thereto shall have been obtained without the imposition of any
governmental request or order requiring the sale or disposition or holding
separate (through a trust or otherwise) of particular assets or businesses of
AMCI, its Affiliates or any component of Precision or other actions as a
precondition to the expiration of any waiting period or the receipt of any
necessary governmental approval or consent.
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ARTICLE VI
TERMINATION AND ABANDONMENT
6.1 Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time (whether before or after the approval
and adoption thereof by the stockholders of Precision) before the Closing Date
upon the following conditions:
6.1.1 By Mutual Consent. By mutual written consent of AMCI and Precision.
6.1.2 By AMCI Because of Conditions Precedent. By AMCI, if (i) there has
been a breach by Precision and/or the Selling Shareholders of its
representations, warranties, covenants, or agreements set forth in this
Agreement if, as a result of such breach, the conditions set forth in Section
5.1.1 would not be satisfied, and (ii) Precision or the Selling Shareholders
fail to cure such breach within 30 business days after written notice thereof
from AMCI (except that no cure period shall be provided for any breach by
Precision or the Selling Shareholders which by its nature cannot be cured).
6.1.3 By AMCI Because of Material Adverse Change. By AMCI, if there has
been since March 28, 2003, a Material Adverse Change unknown to AMCI with
respect to Precision which condition or event shall not have been ameliorated
such that it no longer constitutes a Material Adverse Change within three (3)
business days following receipt by Precision of notice from AMCI (except that no
cure period shall be provided for any Material Adverse Change which by its
nature cannot be cured).
6.1.4 By Selling Shareholders Because of Conditions Precedent. By the
Selling Shareholders if (i) there has been a breach by AMCI of any of its
representations, warranties, covenants or agreements set forth in this Agreement
if, as a result of such breach, the conditions set forth in Section 5.2.1 would
not be satisfied, and (ii) AMCI fails to cure such breach within three (3)
business days after written notice thereof from Precision or the Selling
Shareholders (except that no cure period shall be provided for any breach by
AMCI which by its nature cannot be cured).
6.1.5 By Selling Shareholders Because of Material Adverse Change. By the
Selling Shareholders, if there has been since December 31, 2002, a Material
Adverse Change with respect to AMCI which condition or event shall not have been
ameliorated such that it no longer constitutes a Material Adverse Change within
thirty (30) business days following receipt by AMCI of notice from Precision
(except that no cure period shall be provided for any Material Adverse Change
which by its nature cannot be cured).
6.1.6 By AMCI or Selling Shareholders Because of Statute or Order. By AMCI
or the Selling Shareholders if (i) a statute, rule, regulation or executive
order shall have been enacted, entered or promulgated after the date of this
Agreement (and shall remain in effect) prohibiting the consummation of the
transactions contemplated hereby substantially on the terms contemplated hereby
or (ii) an order, decree, ruling or injunction shall have been entered by a
court of competent jurisdiction after the date of this Agreement (and shall not
have been vacated, withdrawn or overturned) permanently restraining, enjoining
or otherwise prohibiting the consummation of the transactions contemplated
hereby substantially on the terms contemplated hereby and such order, decree,
ruling or injunction shall have become final and non-appealable; provided, that
the party seeking to terminate this Agreement pursuant to this Section 6.1.7
shall have used its reasonable best efforts to remove such order, decree, ruling
or injunction.
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6.1.7 By AMCI or Selling Shareholders If Transactions Contemplated Hereby
Not Effective by April 30, 2003. By either AMCI or the Selling Shareholders, if
all conditions to consummation of the transactions contemplated hereby shall not
have been satisfied or waived on or before April 30, 2003, other than as a
result of a breach of this Agreement by the breaching party.
6.1.8 By AMCI If No Board Approval. This Agreement is subject to final
approval by the Board of Directors of AMCI.
6.2 Termination by Board of Directors. An election of AMCI to terminate
this Agreement and abandon the transactions contemplated hereby as provided in
Section 6.1 shall be exercised on behalf of AMCI by its board of directors. An
election of Precision to terminate this Agreement and abandon the transactions
contemplated hereby as provided in Section 6.1 shall be exercised on behalf of
Precision by its board of directors.
6.3 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to and in accordance with the provisions of Section
6.1 hereof, this Agreement shall become void and have no effect, without any
liability on the part of any party hereto (or its stockholders or controlling
persons or directors or officers), except (i) the provisions of Section 4.3.6
shall survive such termination and abandonment and (ii) neither party shall be
released or relieved from any liability arising from any willful breach by such
party of any of its representations, warranties, covenants or agreements as set
forth in this Agreement.
6.4 Waiver of Conditions. Subject to the requirements of any applicable
law, any of the terms or conditions of this Agreement may be waived at any time
by the party whom is entitled to the benefit thereof, by action taken by its
board of directors.
6.5 Expense on Termination. If the transactions contemplated hereby are
abandoned pursuant to and in accordance with the provisions of Section 6.1
hereof, all expenses will be paid by the party incurring them.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Registration Rights. The shares of AMCI Common Stock issued to the
Selling Shareholders under this Agreement shall have the registration rights
provided for in this section 7 Any and all shares issued under this Agreement
are hereafter referred to as the "Registrable Stock" and the Selling
Shareholders are hereafter referred to as the "Holders".
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7.1.1 Right to Piggyback. Whenever AMCI proposes to register any of its
securities under the Securities Act and the registration form to be used may be
used for the registration of any of the Registrable Stock in connection with the
resale thereof by the Holders (a "Piggyback Registration"), AMCI will (i) give
no less than fifteen (15) days prior written notice to all Holders of its
intention to effect such a registration (the "Registration Notice"), and (ii)
include in such registration all Registrable Stock issued prior to the date
fifteen (15) days following the date of the Registration Notice in accordance
with the priorities set forth in this Section 7.1.
7.1.2 Piggyback Expenses. All expenses incident to AMCI's performance of or
compliance with this Section 7.1, including, without limitation, all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for AMCI and all independent certified public
accountants, underwriters (excluding discounts and commissions relating to
Registrable stock) and other persons or entities retained by AMCI in connection
with the Registrable Stock or any Piggyback Registration will be paid by AMCI.
Holders shall pay for fees and disbursements of counsel retained by Holders (or
any of them) and, if the Piggyback Registration is an underwritten offering,
shall pay all underwriting discounts and commissions relating to the sale of
Registrable Stock.
7.1.3 Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of AMCI and the managing
underwriters advise AMCI in writing that in their opinion the number of
securities to be included in such registration exceeds the number which can be
sold in such offering, AMCI will include in such registration (i) first, the
securities that AMCI proposes to sell and Registrable Stock prorata among AMCI
and the Holders on the basis of the number of shares which AMCI proposes to
register and the number of shares of Registrable Stock issued to Holders prior
to the date of the Registration Notice; provided, however, that in no event will
the Registrable Stock issued to the Holders prior to the date of the
Registration Notice exceed fifty percent (50%) of the securities being sought
for underwritten primary registration if AMCI is unable to register all of the
securities for which AMCI sought underwritten primary registration.
7.1.4 Priority on Secondary Registrations. If a Piggyback Registration is
an underwritten secondary registration on behalf of holders of AMCI's securities
and the managing underwriters advise AMCI in writing that in their opinion the
number of securities to be included in such registration exceeds the number
which can be sold in such offering, AMCI will include in such registration (i)
first, the Registrable Stock of the Holders acquired pursuant to this Agreement
prior to the date of the Registration Notice prorata among the Holders, (ii)
second, the securities requested to be included therein by the other holders
(other than the Holders) requesting such registration, and (iii) third, the
other securities requested to be included in such registration, if any.
7.1.5 Selection of Underwriters. The Holders shall have no right to select
or participate in the selection of any investment banker(s) or manager(s) to
administer any offering.
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7.2 Holdback Agreements. In connection with any underwritten Piggyback
Registration, each Holder agrees not to effect any public sale or distribution
of equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven (7) days prior
to and the ninety (90) day period beginning on the effective date of any such
underwritten Piggyback Registration in which any shares of Registrable Stock are
included, unless the underwriters managing the registered public offering
otherwise agree and such sale or distribution otherwise complies with Regulation
ss.240.10b-6 of the Exchange Act; provided, however, that the Holders may elect,
at their option, to not have the underwriter sell the Registrable Stock the
Holders have registered and to otherwise determine the method and timing of the
sale of the securities so registered without regard to the holdback provisions
hereof.
7.3 Registration Procedures. Whenever Registrable Stock will be registered
pursuant to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Stock in accordance with the
intended method of disposition thereof, and pursuant thereto, the Company will
as expeditiously as possible:
7.3.1 Prepare and file with the SEC a registration statement filed pursuant
to the Securities Act on Form X-0, X-0, X-0, XX-0 or SB-2 or any similar
registration statement pursuant to which Registrable Stock may be registered (a
"Registration Statement") with respect to such Registrable Stock and use its
best efforts to cause such Registration Statement to become effective (provided
that, no less than ten (10) days before filing a Registration Statement or
prospectus or any amendments or supplements thereto, the Company will furnish to
the counsel or counsels of Holders copies of all such documents proposed to be
filed);
7.3.2 Prepare and file with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than one (1) year and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement;
7.3.3 Furnish to each Holder such number of copies of such Registration
Statement, each amendment and supplement thereto, the prospectus included in
such Registration Statement (including each preliminary prospectus) and such
other documents as such Holder may reasonably request in order to facilitate the
disposition of the Registrable Stock owned by such Holder;
7.3.4 Use its best efforts to register or qualify such Registrable Stock
under such other securities or blue sky laws of such jurisdictions as any Holder
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition in such jurisdictions of Registrable Stock owned by such Holder
(provided that the Company will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction, or (iii) consent to general service of process in any such
jurisdiction);
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7.3.5 Notify each Holder, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such Registration Statement
contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading, and, at the request of any such
Holder, the Company will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the Holders of Registrable Stock such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;
7.3.6 Cause all such Registrable Stock to be listed on each securities
exchange on which similar securities issued by the Company are then listed, if
any; and
7.3.7 Provide a transfer agent and registrar for all such Registrable Stock
not later than the effective date of such Registration Statement;
7.3.8 Make available for inspection during normal business hours by any
Holder, any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney, accountant or other agent retained by
any such Holder or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such Holder, underwriter, attorney,
accountant or agent in connection with such Registration Statement.
7.4 Indemnification. The Company agrees to indemnify, to the extent
permitted by law, each Holder against all losses, claims, damages, liabilities
and expenses caused by any untrue or alleged untrue statement of material fact
contained in any Registration Statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein, except insofar as the same are
caused by or contained in any information furnished to the Company by Holders
(or any of them) expressly for use therein or which Holders (or any of them)
failed to provide after being so requested or by any Holder's failure to deliver
a copy of the Registration Statement or prospectus or any amendments or
supplements thereto after the Company has furnished such Holder with a
sufficient number of copies of the same or which is otherwise attributable of
the negligence or willful misconduct of any Holder.
7.4.1 In connection with any Registration Statement in which any Holder is
participating, each such Holder will furnish to the Company in writing, within
fifteen (15) days after written request therefor, such information and
affidavits as the Company reasonably requests for use in connection with any
such Registration Statement or prospectus and, to the extent permitted by law,
will indemnify the Company, its directors and officers, each person or entity
who controls the Company (within the meaning of the Securities Act), against any
losses, claims, damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of material fact contained or required to be contained
in the Registration Statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained or required to be contained in any information or
affidavit so furnished or required to be so furnished in writing by such Holder.
31
7.4.2 Any person or entity entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification, and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim, with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without the indemnifying party's consent (but such
consent will not be unreasonably withheld). An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
7.4.3 The indemnification provided for under this section will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person or entity
of such indemnified party and will survive the transfer of securities. The
Company and Holders also agree to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in the event
the Company's or any Holder's indemnification, as the case may be, is
unavailable for any reason.
7.5 Holders Shares Possibly Subject to 120 Day Lock-Up Restrictions. Each
Holder's shares of the Company under this agreement shall, if requested by an
underwriter of a primary offering of the Company's securities, agree that he
will not sell or otherwise transfer or dispose of his shares of the Company's
common stock during the period beginning seven days prior to and ending 120 days
following the effective date of a registration statement of the Company filed
under the Securities Act of 1933, as amended. The restrictions agreed to herein
shall be binding upon any assignee of person acquiring Securities hereunder.
7.6 Employee Benefit Plans of Precision. AMCI shall take all actions
necessary or appropriate to permit the employees of Precision and its
subsidiaries (the "Precision Employees") to continue to participate from and
after the Closing Date in the Precision Plans maintained by Precision and its
subsidiaries immediately prior to the Closing Date. Notwithstanding the
foregoing, AMCI may permit or cause any such Precision Plan to be terminated or
discontinued on or after the Closing Date, provided that AMCI shall take all
actions necessary or appropriate to permit the Precision Employees participating
in such Precision Plan to immediately thereafter participate in the comparable
AMCI Plan maintained by AMCI or any of its subsidiaries for their similarly
situated employees. If the Precision Plan that is terminated or discontinued by
AMCI is a group health plan, then AMCI shall permit each Precision Employee
participating in such group health plan to be covered under an AMCI Plan that
(i) provides medical and dental benefits to each such v Employee effective
immediately upon the cessation of coverage of such individuals under such group
health plan, (ii) credits such v Employee, for the year during which such
coverage under such AMCI Plan begins, with any deductibles and copayments
already incurred during such year under such group health plan, and (iii) waives
any preexisting condition restrictions to the extent necessary to provide
immediate coverage and to the extent such restrictions were not applicable under
such group health plan. AMCI and the AMCI Plans shall recognize each Precision
Employee's years of service and level of seniority with Precision and its
subsidiaries for purposes of terms of employment and eligibility, vesting and
benefit determination under the AMCI Plans (other than benefit accruals under
any defined benefit pension plan).
32
7.7 Stock Options and Warrants. AMCI and Precision hereby agree that all
outstanding options, warrants or obligations of any kind to issue any shares of
capital stock of Precision held by persons other than the Selling Shareholders
will be terminated as soon as practicable after the Closing Date and replaced
with comparable options, warrants and obligations for shares of AMCI Common
Stock.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Entirety. This Agreement embodies the entire agreement among the
parties with respect to the subject matter hereof, and all prior agreements
among the parties with respect thereto are hereby superseded in their entirety.
8.2 Counterparts. Any number of counterparts of this Agreement may be
executed and each such counterpart shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one instrument.
8.3 Notices and Waivers. Any notice or waiver to be given to any party
hereto shall be in writing and shall be delivered by overnight courier, sent by
facsimile transmission or first class registered or certified mail, postage
prepaid.
IF TO AMCI
Addressed to:
American Millennium Corporation, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, CEO
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxxxxxxx@xxxxxxxxxxx.xxx
IF TO PRECISION
Addressed to:
Xxxxxxxxx Precision Control, Inc.
IF TO SELLING SHAREHOLDERS
33
At the addresses and facsimile numbers listed on Schedule A opposite each
Selling Shareholder.
Any communication so addressed and mailed by first-class registered or certified
mail, postage prepaid, shall be deemed to be received on the fifth business day
after so mailed, and any communication so addressed and if delivered by
overnight courier, facsimile or email to such address shall be deemed to be
received (i) in the case of delivery by overnight courier, on the second
business day after such communication is delivered to the overnight courier
service, and (ii) in the case of delivery by facsimile or email, upon delivery
during normal business hours on any business day.
8.4 Termination of Representations, Warranties, etc. The respective
representations, warranties, covenants and agreements contained in this
Agreement shall expire with, and be terminated and extinguished by, the closing
at the time of the consummation thereof; provided, however, that this Section
8.4 shall not limit or otherwise effect any covenant or agreement of the parties
hereto which by its terms contemplates performance after the closing or after
termination of this Agreement.
8.5 Captions. The captions contained in this Agreement are solely for
convenient reference and shall not be deemed to affect the meaning or
interpretation of any article, section, or paragraph hereof.
8.6 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
8.7 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
8.8 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New Mexico without regard
to applicable principles of conflicts of law.
8.9 Public Announcements. The parties agree that before or after the
closing they shall consult with each other before the making of any public
announcement regarding the existence of this Agreement, the contents hereof or
the transactions contemplated hereby, and to obtain the prior approval of the
other party as to the content of such announcement, which approval shall not be
unreasonably withheld. However, the foregoing shall not apply to any
announcement or written statement which, upon the written advice of counsel, is
required by law, rule or regulation to be made, except that the party required
to make such announcement shall, whenever practicable, consult with and solicit
prior approval from such other party concerning the timing and content of such
legally required announcement or statement before it is made.
34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Reorganization to be duly executed as of the date first above written.
AMERICAN MILLENNIUM CORPORATION, INC., a New Mexico corporation
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------
Name: Xxxxx Xxxxxxxx
Title: Chief Executive Officer
XXXXXXXXX PRECISION CONTROL, INC., a Texas corporation
By: /s/ Xxxxx Xxxxx
--------------------------
Name: Xxxxx Xxxxx
Title: President
SELLING SHAREHOLDERS
/s/ Xxxxx Xxxxx /s/ Xxxx Xxxxx
--------------- -----------------
Xxxxx Xxxxx Xxxx Xxxxx
35
SCHEDULE A
TO
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
AMERICAN MILLENNIUM CORPORATION, INC.
XXXXXXXXX PRECISION CONTROL, INC.
AND
THE FOLLOWING SHAREHOLDERS ("SELLING SHAREHOLDERS")
No. of
Shares No. of Shares Number of Number of
Name & Address Owned To Be Issued Options Owned Warrants Owned
-------------- ---------- ------------ ------------- --------------
Xxxxx Xxxxx 375 1,031,250 0 0
000 X.X. 0000
Xxxxxxx, XX 00000
Xxxxx Xxxxx 375 1,031,250 0 0
000 X.X. 0000
Xxxxxxx, XX 00000
Xxxxx Xxxxxxxxx 100 275,000 0 0
0000 X.X. 0000
Xxxxxxx, XX 00000
Xxxx Xxxxxx 50 137,500 0 0
0000 Xxxxxxx Xxxx
Xxxxxx, XX 00000
Xxxx Xxxxx 25 65,750 0 0
Longview, TX
Xxxx Xxxxx 75 206,250 0 0
0000 X.X. 000
Xxxxxxx, XX 00000
36
EXHIBIT B
TO
AGREEMENT AND PLAN OF REORGANIZATION AMONG
AMERICAN MILLENNIUM CORPORATION, INC.
XXXXXXXXX PRECISION CONTROL, INC.
AND
THE SELLING SHAREHOLDERS
NEITHER TH]S WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED
UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II)
THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
AMERICAN MILLENNIUM CORPORATION, INC.
COMMON STOCK PURCHASER WARRANT
Warrant No. LPC 1,000,000 Shares
Original Issue Date: April 21, 2003
THIS CERTIFIES THAT, FOR VALUE RECEIVED, The Selling Shareholders (as defined in
the AGREEMENT AND PLAN OF REORGANIZATION (the "Reorg Plan") between the
parties), if the requirements of Section 1.3 of the Reorg Plan are accomplished,
shall be entitled to purchase, on the terms and conditions hereinafter set
forth, at any time or from time to time from a date no sooner than 30 days after
the date hereof until 5:00 p.m., Eastern Time, on the third (3rd) anniversary of
the Original Issue Date set forth above, or if such date is not a day on which
the Company is open for business, then the next succeeding day on which the
Company is open for business (such date is the "Expiration Date"), but not
thereafter, to purchase up to one million (1,000,000) shares of the Common
Stock, par value US$.001 per share (the "Common Stock"), of AMERICAN MII,LENNRJM
CORPORATION, INC., a U.S. New Mexico corporation (the "Company"), at a price of
Twenty-Five Cents ($0.25) per share if exercised during the first Warrant year,
Fifty Cents ($0.50) per share if exercised during the second Warrant year and
Seventy-Five Cents ($0.75) per share if exercised during the third Warrant year
(the "Exercise Price"), such number of shares and Exercise Price being subject
to adjustment upon the occurrence of the contingencies set forth in this
Warrant. Each share of Common Stock as to which this Warrant is exercisable is a
"Warrant Share" and all such shares are collectively referred to as the "Warrant
Shares".
Section 1. Exercise of Warrant; Conversion of Warrant.
(a) This Warrant may, at the option of the Holder, be exercised in whole or
in part from time to time no sooner than 30 days after the date hereof by
delivery to the Company at its office at 0000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxx,
XX 00000, Attention: President, or to any transfer agent for the Common Stock,
on or before 5:00 p.m., Eastern Time, on the Expiration Date, (i) a written
notice of such registered Holder's election to exercise this Warrant (the
"Exercise Notice"), which notice may be in the form of the Notice of Exercise
attached hereto, properly executed and completed by the registered Holder or an
authorized officer thereof, (ii) a check or bank wire payable to the order of
the Company, in an amount equal to the product of the Exercise Price multiplied
by the number of Warrant Shares specified in the Exercise Notice, and (iii)this
Warrant (the items specified in (i), (ii), and (iii) are collectively the
"Exercise Materials").
37
(b) Upon timely receipt of the Exercise Materials (whichever is
applicable), the Company shall, as promptly as practicable, and in any event
within five (5) business days after its receipt of the Exercise Materials,
execute or cause to be executed and delivered to Holder a certificate or
certificates representing the number of Warrant Shares specified in the Exercise
Notice, together with cash in lieu of any fraction of a share, and, (x) if the
Warrant is exercised in full, a copy of this Warrant marked "Exercised", or (y)
if the Warrant is partially exercised, a copy of this Warrant marked "Partially
Exercised" together with a new Warrant on the same terms for the unexercised
balance of the Warrant Shares. The stock certificate or certificates shall be
registered in the name of the registered Holder of this Warrant or such other
name or names as shall be designated in the Exercise Notice. The date on which
the Warrant shall be deemed to have been exercised (the "Effective Date"), and
the date the person in whose name any certificate evidencing the Common Stock
issued upon the exercise hereof is issued shall be deemed to have become the
holder of record of such shares, shall be the date the Company receives the
Exercise Materials, irrespective of the date of delivery of a certificate or
certificates evidencing the Common Stock issued upon the exercise hereof, except
that, if the date on which the Exercise Materials are received by the Company is
a date on which the stock transfer books of the Company are closed, the
Effective Date shall be the date the Company receives the Exercise Materials,
and the date such person shall be deemed to have become the holder of the Common
Stock issued upon the exercise hereof shall be the next succeeding date on which
the stock transfer books are open. All shares of Common Stock issued upon the
exercise or conversion of this Warrant will, upon issuance, be fully paid and
nonassessable and free from all taxes, liens, and charges with respect thereto.
(c) If the Company shall fail to issue to Holder within five (5) business
days following the Effective Date a certificate for the number of shares of
Common Stock to which such holder is entitled upon such holder's exercise of
this Warrant, in addition to all other available remedies which such holder may
pursue hereunder and the Purchase Agreement between the Company and the initial
holder of the Warrant (the "Securities Purchase Agreement"), the Company shall
pay additional damages to such holder on each day after the Effective Date, an
amount equal to 1.0% of the product of (A) the number of Warrant Shares not
issued to Holder and to which Holder is entitled multiplied by (B) the Closing
Bid Price of the Common Stock on the Effective Date. Such damages shall be
computed daily and are due and payable daily.
(d) Cashless Exercise. The warrant holder, whether the undersigned or
otherwise, in lieu of any cash payment required hereunder, shall have the right
to exercise the warrants in whole or in part by surrendering the warrants in
exchange for the number of shares of the Company' s common stock equal to (x)
the number of shares as to which the warrants are being exercised multiplied by
(y) a fraction, the numerator of which is the Market Price (as defined below) of
the common stock less the exercise price of the warrants being exercised, and
the denominator of which is such Market Price. The term "Market Price" means the
closing ask price per share of the common stock on the principal stock exchange
or market on which the common stock is then quoted or traded on the day
preceding the date on which written notice of election to exercise the warrants
has been given to the Company (a "cashless exercise"). If the warrant holder
opts for a cashless exercise of the warrants, no other consideration shall be
paid to the Company, other than surrendering the warrant itself, nor will there
be paid any commission or other remuneration to any other person or entity by
the warrant holder.
Section 2. Adjustments to Warrant Shares. The number of Warrant Shares issuable
upon the exercise hereof shall be subject to adjustment as follows:
(a) In the event the Company is a party to a consolidation, share exchange,
or merger, or the sale of all or substantially all of the assets of the Company
to, any person, or in the case of any consolidation or merger of another
corporation into the Company in which the Company is the surviving corporation,
and in which there is a reclassification or change of the shares of Common Stock
of the Company, this Warrant shall after such consolidation, share exchange,
merger, or sale be exercisable for the kind and number of securities or amount
and kind of property of the Company or the corporation or other entity resulting
from such share exchange, merger, or consolidation, or to which such sale shall
be made, as the case may be (the "Successor Company"), to which a holder of the
number of shares of Common Stock deliverable upon the exercise (immediately
prior to the time of such consolidation, share exchange, merger, or sale) of
this Warrant would have been entitled upon such consolidation, share exchange,
merger, or sale; and in any such case appropriate adjustments shall be made in
the application of the provisions set forth herein with respect to the rights
and interests of the registered Holder of this Warrant, such that the provisions
set forth herein shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to the number and kind of securities or the
type and amount of property thereafter deliverable upon the exercise of this
Warrant. The above provisions shall similarly apply to successive
consolidations, share exchanges, mergers, and sales. Any adjustment required by
this Section 2 (a) because of a consolidation, share exchange, merger, or sale
shall be set forth in an undertaking delivered to the registered Holder of this
Warrant and executed by the Successor Company which provides that the Holder of
this Warrant shall have the right to exercise this Warrant for the kind and
number of securities or amount and kind of property of the Successor Company or
to which the holder of a number of shares of Common Stock deliverable upon
exercise (immediately prior to the time of such consolidation, share exchange,
merger, or sale) of this Warrant would have been entitled upon such
consolidation, share exchange, merger, or sale. Such undertaking shall also
provide for future adjustments to the number of Warrant Shares and the Exercise
Price in accordance with the provisions set forth in Section 2 hereof.
38
(b) In the event the Company should at any time, or from time to time after
the Original Issue Date, fix a record date for the effectuation of a stock split
or subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock, or securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon exercise or
exercise thereof), then, as of such record date (or the date of such dividend,
distribution, split, or subdivision if no record date is fixed), the number of
Warrant Shares issuable upon the exercise hereof shall be proportionately
increased and the Exercise Price shall be appropriately decreased by the same
proportion as the increase in the number of outstanding Common Stock Equivalents
of the Company resulting from the dividend, distribution, split, or subdivision.
Notwithstanding the preceding sentence, no adjustment shall be made to decrease
the Exercise Price below $.001 per Share.
(c) In the event the Company should at any time or from time to time after
the Original Issue Date, fix a record date for the effectuation of a reverse
stock split, or a transaction having a similar effect on the number of
outstanding shares of Common Stock of the Company, then, as of such record date
(or the date of such reverse stock split or similar transaction if no record
date is fixed), the number of Warrant Shares issuable upon the exercise hereof
shall be proportionately decreased and the Exercise Price shall be appropriately
increased by the same proportion as the decrease of the number of outstanding
Common Stock Equivalents resulting from the reverse stock split or similar
transaction.
(d) In the event the Company should at any time or from time to time after
the Original Issue Date, fix a record date for a reclassification of its Common
Stock, then, as of such record date (or the date of the reclassification if no
record date is set), this Warrant shall thereafter be convertible into such
number and kind of securities as would have been issuable as the result of such
reclassification to a holder of a number of shares of Common Stock equal to the
number of Warrant Shares issuable upon exercise of this Warrant immediately
prior to such reclassification, and the Exercise Price shall be unchanged.
(e) The Company will not, by amendment of its Articles of Incorporation or
through reorganization, consolidation, merger, dissolution, issue, or sale of
securities, sale of assets or any other voluntary action, void or seek to avoid
the observance or performance of any of the terms of the Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate in order to
protect the rights of the Holder against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (x) will not create a par
value of any share of stock receivable upon the exercise of the Warrant above
the amount payable therefore upon such exercise, and (y) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and non-assessable shares upon the exercise of the
Warrant.
(f) When any adjustment is required to be made in the number or kind of
shares purchasable upon exercise of the Warrant, or in the Exercise Price, the
Company shall promptly and in no event later than twenty (20) days notify the
Holder of such event and of the number of shares of Common Stock or other
securities or property thereafter purchasable upon exercise of the Warrants and
of the Exercise Price, together with the computation resulting in such
adjustment.
(g) The Company covenants and agrees that all Warrant Shares that may be
issued will, upon issuance, be validly issued, fully paid, and nonassessable.
The Company further covenants and agrees that the Company will at all times have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of its Common Stock to provide for the exercise of the Warrant in full.
39
Section 3. Adjustments. Only such adjustments as are set forth herein.
Section 4. No Stockholder Rights. This Warrant shall not entitle the Holder
hereof to any voting rights or other rights as a stockholder of the Company.
Section 5. Transfer of Securities.
(a) This Warrant and the Warrant Shares and any shares of capital stock
received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon, or otherwise, shall not be
transferable except upon compliance with the provisions of the Securities Act of
1933, as amended (the "Securities Act") and applicable state securities laws
with respect to the transfer of such securities. The Holder of this Warrant, by
acceptance of this Warrant, agrees to be bound by the provisions of Section 4
hereof and to indemnify and hold harmless the Company against any loss or
liability arising from the disposition of this Warrant or the Warrant Shares
issuable upon exercise hereof or any interest in either thereof in violation of
the provisions of this Warrant.
(b) Each certificate for the Warrant Shares and any shares of capital stock
received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon or otherwise, and each
certificate for any such securities issued to subsequent transferees of any such
certificate shall (unless otherwise permitted by the provisions hereof) be
stamped or otherwise imprinted with a legend in substantially the following
form:
Legend for Warrant Shares or other shares of capital stock:
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOFHAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW AND NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED
UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR
(II)THE COMPANY SHALLHAVE RECEIVED A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED 1N CONNECTION WITH SUCH
PROPOSED TRANSFER.
Section 6. Registration Rights.
(a) The shares of the Company's Common Stock issued to the Warrant holder
under this Agreement upon purchase of the shares shall have the registration
rights provided for herein. Any and all shares issued pursuant to these warrants
are hereafter referred to as the "Registrable Stock" and the Warrant holder
hereunder is hereinafter referred to as the "Holder".
(b) Whenever the Company proposes to register any of its securities under
the Securities Act and the registration form to be used may be used for the
registration of any of the Registrabte Stock in connection with the resale
thereof by the Holder (a "Piggyback Registration"), the Company will (i) give no
less than fifteen (15) days prior written notice to Holder of its intention to
effect such a registration (the "Registration Notice"), and (ii) include in such
registration all Registrable Stock issued prior to the date fifteen (15) days
following the date of the Registration Notice in accordance with the priorities
set forth herein.
40
(c) All expenses incident to the Company's performance of or compliance
herewith, including, without limitation, all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters
(excluding discounts and commissions relating to Registrable stock) and other
persons or entities retained by the Company in connection with the Registrable
Stock or any Piggyback Registration will be paid by the Company. Holder shall
pay for fees and disbursements of counsel retained by Holder (or any of them)
and, if the Piggyback Registration is an underwritten offering, shall pay all
underwriting discounts and commissions relating to the sale of Registrable
Stock.
(d) If a Piggyback Registration is an underwritten primary registration on
behalf of the Company and the managing underwriters advise the Company in
writing that in their opinion the number of securities to be included in such
registration exceeds the number which can be sold in such offering, the Company
will include in such registration (i) first, the securities that the Company
proposes to sell and Registrable Stock prorata among the Company and the Holder
on the basis of the number of shares which the Company proposes to register and
the number of shares of Registrable Stock issued to Holder prior to the date of
the Registration Notice; provided, however, that in no event will the
Registrable Stock issued to Holder prior to the date of the Registration Notice
exceed fifty percent (50%) of the securities being sought for underwritten
primary registration if the Company is unable to register all of the securities
for which the Company sought underwritten primary registration.
(e) If a Piggyback Registraion is an underwritten secondary registration on
behalf of other Holders of the Company's securities and the managing
underwriters advise the Company in writing that in their opinion the number of
securities to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the Registrable Stock of Holder acquired pursuant to this Agreement prior to the
date of the Registration Notice, (ii) second, the securities requested to be
included therein by the other Holders (other than the Holder) requesting such
registration, and (iii) third, the other securities requested to be included in
such registration, if any.
(f) The Holder shall have no right to select or participate in the
selection of any investment banker(s) or manager(s) to administer any offering.
(g) In connection with any underwritten Piggyback Registration, Holder
agrees not to effect any public sale or distribution of equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
such securities, during the seven (7) days prior to and the ninety (90) day
period beginning on the effective date of any such underwritten Piggyback
Registration in which any shares of Registrable Stock are included, unless the
underwriters managing the registered public offering otherwise agree and such
sale or distribution otherwise complies with Regulation ss.240.10b-6 of the
Exchange Act; provided, however, that the Holder may elect, at Holder's option,
to not have the underwriter sell the Registrable Stock the Holder has registered
and to otherwise determine the method and timing of the sale of the securities
so registered without regard to the holdback provisions hereof.
(h) Whenever Registrable Stock will be registered pursuant to tiffs
Agreement, the Company will use its best efforts to effect the registration and
the sale of such Registrable Stock in accordance with the intended method of
disposition thereof, and pursuant thereto, the Company wild as expeditiously as
possible:
(1) Prepare and file with the SEC a registration statement filed pursuant
to the Securities Act on Form S-l, X-0, X-0, XX-0 or SB-2 or any similar
registration statement pursuant to which Registrable Stock may be registered (a
"Registration Statement") with respect to such Registrable Stock and use its
best efforts to cause such Registration Statement to become effective (provided
that, no less than ten (10) days before filing a Registration Statement or
prospectus or any amendments or supplements thereto, the Company will furnish to
the counsel or counsels of Holder copies of all such documents proposed to be
filed);
(2) Prepare and file with the SEC such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than two (2) years and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement;
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(3) Furnish to each Holder such number of copies of such Registration
Statement, each amendment and supplement thereto, the prospectus included in
such Registration Statement (including each preliminary prospectus) and such
other documents as such Holder may reasonably request in order to facilitate the
disposition of the Registrable Stock owned by such Holder;
(4) Use its best efforts to register or qualify such Registrable Stock
under such other securities or blue sky laws of such jurisdictions as Holder
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable Holder to consummate the disposition
in such jurisdictions of Registrable Stock owned by such Holder (provided that
the Company will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any such jurisdiction, or (iii)
consent to general service of process in any such jurisdiction);
(5) Notify Holder, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such Registration Statement
contains an untrue statement of a material fact or omits any fact necessary to
make the statements therein not misleading, and, at the request of Holder, the
Company will prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the Holder of Registrable Stock such prospectus will not
contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading;
(6) Cause all such Registerable Stock to be listed on each securities
exchange on which similar securities issued by the Company are then listed, if
any;
(7) Provide a transfer agent and registrar for all such Registerable Stock
not later than the effective date of such Registration Statement; and
(8) Make available for inspection during normal business hours by Holder,
any underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by Holder or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company and cause the Company's officers, directors, employees
and independent accountants to supply all information reasonably requested by
Holder, underwriter, attorney, accountant or agent in connection with such
Registration Statement.
(i) The Company agrees to indemnify, to the extent permitted by law, Holder
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
Registration Statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein, except insofar as the same are caused by or
contained in any information furnished to the Company by Holder expressly for
use therein or which Holder failed to provide after being so requested or by
Holder's failure to deliver a copy of the Registration Statement or prospectus
or any amendments or supplements thereto after the Company has furnished Holder
with a sufficient number of copies of the same or which is otherwise
attributable of the negligence or willful misconduct of Holder.
(j) In connection with any Registration Statement in which Holder is
participating, Holder will furnish to the Company in writing, within fifteen
(15) days after written request therefor, such information and affidavits as the
Company reasonably requests for use in connection with any such Registration
Statement or prospectus and, to the extent permitted by law, will indemnify the
Company, its directors and officers, each person or entity who controls the
Company (within the meaning of the Securities Act), against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact contained or required to be contained in the
Registration Statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or omission is
contained or required to be contained in any information or affidavit so
furnished or required to be so furnished in writing by Holder.
42
(k) Any person or entity entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification, and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim, with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without the indemnifying party's consent (but such
consent will not be unreasonably withheld). An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
(l) The indemnification provided for under this section will remain in full
force and effect regardless of any investigation made by or on behalf of the
indemnified party or any officer, director or controlling person or entity of
such indemnified party and will survive the transfer of securities. The Company
and Holder also agree to make such provisions, as are reasonably requested by
any indemnified party, for contribution to such party in the event the Company's
or Holder's indemnification, as the case may be, is unavailable for any reason.
(m) Holder's shares of the Company, if purchased under the terms of this
warrant agreement shall, if requested by an underwriter of a primary offering of
the Company's securities, agree that Holder will not sell or otherwise transfer
or dispose of his shares of the Company's common stock during the period
beginning seven days prior to and ending 120 days following the effective date
of a registration statement of the Company filed under the Securities Act of
1933, as amended. The restrictions agreed to herein shall be binding upon any
assignee of person acquiring Securities hereunder.
Section 7. Miscellaneous.
(a) The terms of this Warrant shall be binding upon and shall inure to the
benefit of any successors or assigns of the Company and of the holder or holders
hereof and of the Common Stock issued or issuable upon the exercise hereof.
(b) Except as otherwise provided herein, this Warrant and all rights
hereunder are transferable by the registered holder hereof in person or by duly
authorized attorney on the books of the Company upon surrender of this Warrant,
properly endorsed, to the Company. The Company may deem and treat the registered
holder of this Warrant at any time as the absolute owner hereof for all purposes
and shall not be affected by any notice to the contrary.
(c) Notwithstanding any provision herein to the contrary, Holder hereof may
not exercise, sell, transfer, or otherwise assign this Warrant unless the
Company is provided with an opinion of counsel satisfactory in form and
substance to the Company, to the effect that such exercise, sale, transfer, or
assignment would not violate the Securities Act or applicable state securities
laws.
(d) This Warrant may be divided into separate Warrants covering one share
of Common Stock or any whole multiple thereof, for the total number of shares of
Common Stock then subject to this Warrant at any time, or from time to time,
upon the request of the registered holder of this Warrant and the surrender of
the same to the Company for such purpose. Such subdivided Warrants shall be
issued promptly by the Company following any such request and shall be of the
same form and tenor as this Warrant, except for any requested change in the name
of the registered holder stated herein.
(e) All notices, requests, demands, and other communications required or
permitted under this Warrant and the transactions contemplated herein shall be
in writing and shall be deemed to have been duly given, made, and received when
personally delivered the day after deposited with a recognized national
overnight delivery service prior to its dead-line for receiving packages for
next day delivery or upon the fifth day after deposited in the United States
registered or certified mail with postage prepaid, return receipt requested, in
each case addressed as set forth below:
43
If to the Company:
American Millennium Corporation, Inc.
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Holder hereof, to the address of such Holder appearing on the
books of the Company.
(f) This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado.
[Remainder of page intentionally left blank; signatures on the following page]
44
SIGNATURE PAGE
TO
COMPANY
COMMON STOCK PURCHASE WARRANT
IN WITNESS WHEREOF, the Company, has caused this Warrant to be executed in
its name by its duly authorized officers under its corporate seal, and to be
dated as of the date first above written.
AMERICAN MILLENNIUM CORPORATION, INC.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
45
ASSIGNMENT
(To be Executed by the Registered Holder to
effect a Transfer of the foregoing Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, and assigns and
transfers unto ___________ the foregoing Warrant and the rights
represented thereto to purchase shares of Common Stock of American
Millennium Corporation, Inc. in accordance with terms and conditions
thereof, and does hereby irrevocably constitute and appoint Attorney
to transfer the said Warrant on the books of the Company, with full
power of substitution.
Holder: ___________
Address: ___________
Dated: ___________
In the presence of: _____________
46
FORM OF NOTICE OF EXERCISE OR CONVERSION
[To be signed only upon exercise of Warrant]
To: AMERICAN MILLENNIUM CORPORATION, INC.
The undersigned registered Holder of the attached Warrant hereby irrevocably
elects to exercise the Warrant for, and to purchase thereunder, shares of Common
Stock of American Millennium Corporation, Inc., issuable upon exercise of said
Warrant and hereby surrenders said Warrant.
The Holder herewith delivers to American Millennium Corporation, Inc., a check
in the amount of $ representing the Exercise Price for such shares. The
undersigned herewith requests that the certificates for such shares be issued in
the name of, and delivered to the undersigned, whose address is Dated:
Holder:
By:
NOTICE
The signature above must correspond to the name as written upon the face of the
within Warrant in every particular, without alteration or enlargement or any
change whatsoever
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