ARRANGEMENT AGREEMENT
THIS AGREEMENT made as of the 22nd day of April, 2005.
AMONG:
NXTPHASE T & D CORPORATION, a corporation existing under the laws of Canada
("NxtPhase")
AND:
BEACON POWER CORPORATION, a corporation existing under the laws of Delaware
("Beacon")
AND:
BEACON ACQUISITION CO., an unlimited liability company incorporated under
the laws of Nova Scotia ("Acquisitionco")
RECITALS:
A. Beacon and NxtPhase have agreed to effect a business combination by
entering into a plan of arrangement under Section 192 of the Canada
Business Corporations Act.
B. Each of El Dorado, Perseus and Working Opportunity Fund has, on or prior to
the date of this Agreement, entered into a Letter Agreement.
C. The parties have entered into this Agreement to provide for the matters
referred to in the foregoing recital and for other matters relating to the
Arrangement.
AGREEMENTS
In consideration of the premises and the respective covenants and agreements
herein contained, the parties covenant and agree as follows:
PART 1
DEFINITIONS AND INTERPRETATION
1.1 Definitions. In this Agreement and the recitals hereto, unless the context
otherwise requires, the following terms shall have the meanings hereinafter set
forth:
"1933 Act" means the United States Securities Act of 1933, as amended, and the
rules and regulations thereunder;
"Agreement" means this Arrangement Agreement, including the recitals and
schedules hereto, as the same may be supplemented or amended from time to time;
"Arrangement" means an arrangement under the provisions of section 192 of the
CBCA on the terms and conditions set forth in this Agreement and the Plan of
Arrangement, and any amendment or variation thereto in accordance with the terms
hereof;
"Beacon Equity Incentive Plan" means Beacon's Second Amended and Restated 1998
Stock Incentive Plan, pursuant to which Beacon may issue Beacon RSUs and options
to purchase Beacon Shares;
"Beacon Meeting" means the special meeting of the holders of Beacon Shares, and
any adjournment thereof, to be held to consider and, if thought fit, approve the
issuance of Beacon Shares in connection with the Arrangement;
"Beacon Rights Agreement" means that certain Rights Agreement dated as of
September 25, 2002, between Beacon and EquiServe Trust Company, N.A., as amended
on December 27, 2002;
"Beacon RSUs" means restricted stock units of Beacon issued pursuant to the
Beacon Equity Incentive Plan;
"Beacon Shareholder" means a holder of Beacon Shares;
"Beacon Shares" means the common stock par value $0.01 per share in the capital
of Beacon;
"Business Day" means any day other than a Saturday, a Sunday or any other day on
which banks in Vancouver, British Columbia or Boston, Massachusetts are not open
for business;
"CBCA" means the Canada Business Corporations Act;
"Code" means the Internal Revenue Code of 1986, as amended;
"Constating Documents" means the articles of incorporation, the articles of
continuance or the articles of amalgamation pursuant to which a corporation or
unlimited liability company is incorporated, organized, continued or
amalgamated, as the case may be, together with any amendments thereto, and the
bylaws or of such corporation or unlimited liability company, and any
shareholders' agreement which has been executed by such corporation and which
governs in whole or in part such corporation's affairs;
"Court" means the Supreme Court of British Columbia;
"Director" means the Director appointed pursuant to section 260 of the CBCA;
"Dissent Right" has the meaning assigned to it in the Plan of Arrangement;
"Dissenting Shareholder" has the meaning assigned to it in the Plan of
Arrangement;
"Effective Date" means the date upon which the Arrangement becomes effective, as
shown on the certificate of arrangement to be issued by the Director to
NxtPhase;
"El Dorado" means El Dorado Investment Company, an Arizona corporation;
"Encumbrance" includes any mortgage, charge, pledge, hypothecation, security
interest, lien, easement, right-of-way, encroachment, covenant, condition, right
of entry, lease, licence, assignment, option or claim or any other encumbrance,
charge or any title defect of whatever kind or nature, regardless of form,
whether or not registered or registrable and whether or not consensual or
arising by law (statutory or otherwise);
"Final Order" means the final order of the Court approving the Arrangement and
the fairness of the terms and conditions thereof following the application
contemplated by Section 2.4 of this Agreement;
"GAAP" means U.S. generally accepted accounting principles applied on a basis
consistent with prior periods unless otherwise specifically stated;
"Governmental Authority" means any federal, provincial, state, municipal, county
or regional governmental or quasi-governmental authority, domestic or foreign,
and includes any ministry, department, commission, bureau, board, administrative
or other agency or regulatory body or instrumentality thereof;
"Intellectual Property" means all (a) patents and patent applications, (b)
copyrights and registrations thereof and (c) trademarks, service marks, trade
names, domain names and applications and registrations therefor;
"Interim Order" means the interim order of the Court pursuant to the application
contemplated by Section 2.4 of this Agreement, as the same may be amended,
supplemented or varied by the Court;
"Investor Rights Agreement" means that certain Investor Rights Agreement dated
as of November 12, 2004 by and among NxtPhase and the holders of NxtPhase
Preferred Shares, as amended to date;
"Letter Agreement" means the letter agreement regarding certain representations,
warranties and covenants and indemnification related thereto, substantially in
the form attached hereto as Schedule "D";
"Letter of Transmittal" has the meaning assigned to it in the Plan of
Arrangement;
"Material Adverse Change" means, with respect to NxtPhase or Beacon, a material
adverse change in or with respect to the assets, liabilities (actual or
contingent), capital, operations, business or condition, financial or otherwise,
of such company and its Subsidiaries taken as a whole but shall not include
changes of general application in such company's industries or in capital
markets generally;
"Material Contract" means an oral or written contract, agreement, lease,
licence, permit, commitment, covenant, undertaking or instrument to which a
person or any of such person's affiliates is a party or is otherwise bound and
is material to the business of the person, including without limitation any
contract which:
(a) is out of the ordinary and usual course of the business of such person
or affiliate,
(b) involves an obligation of such person or affiliate to pay $100,000 or
more,
(c) relates to the acquisition or disposition of assets material to the
business of such person or an affiliate,
(d) relates to the purchase, sale, issuance, redemption, conversion,
exchange or voting of any securities of such person or affiliate or
the management, control or composition of the board of directors or
similar governing body of such person or affiliate, or
(e) relates to the employment of an employee of such person or affiliate
or any remuneration payable by such person or affiliate to any
director, officer or shareholder of such person or affiliate for
acting in any capacity;
and for purposes of this definition "affiliate" means a person that directly or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, a specified person;
"Nasdaq" means the National Association of Securities Dealers Automated
Quotation System - SmallCap Market;
"NxtPhase Business Plan" means that certain Business Plan of NxtPhase for the
year ended December 31, 2005, a true and complete copy of which has been
delivered to Beacon;
"NxtPhase Common Shares" means the common shares without par value in the
capital of NxtPhase;
"NxtPhase Disclosure Letter" means that letter delivered by NxtPhase to Beacon
setting forth a schedule of exceptions to Section 3 and/or Section 4 of this
Agreement and attached hereto as Schedule "C";
"NxtPhase Financial Statements" means the audited consolidated financial
statements of NxtPhase Corporation as at and for the year ended December 31,
2003, the audited consolidated financial statements of NxtPhase Corporation for
the seven and one half month period ended August 17, 2004, the audited
consolidated financial statements of NxtPhase for the four and one half month
period ended December 31, 2004 and the unaudited consolidated financial
statements of NxtPhase for the three month period ended March 31, 2005;
"NxtPhase IP Schedule" means, collectively, that certain NxtPhase IP Patent
Schedule dated as of April 15, 2005 and that certain Trademark Report dated
April 20, 2005, true and complete copies of which have been delivered to Beacon;
"NxtPhase Liabilities" means all of the liabilities and obligations of NxtPhase,
absolute or contingent, including without limitation:
(a) any outstanding and unpaid indebtedness, obligation or liability, for
borrowed money, amounts unpaid for real or personal property or
services, taxes, fines, judgments, wages or employment benefits of
which NxtPhase is the obligor,
(b) any amount payable by NxtPhase to a Dissenting Shareholder for
NxtPhase Shares in respect of which Dissent Rights are exercised,
(c) any liability, contingent or otherwise, under any instrument of
guarantee or indemnity in favour of a third party of which NxtPhase is
the obligor, or
(d) any other indebtedness, liability or obligation involving the payment
of money of which NxtPhase is the obligor, which, in accordance with
GAAP, would be disclosed as a liability on NxtPhase's unconsolidated
balance sheet;
"NxtPhase Meeting" means the special meeting of holders of NxtPhase Shares, and
any adjournment thereof, to be held to consider and, if thought fit, to approve
the Arrangement;
"NxtPhase Preferred Shares" means Class A Preferred Shares in the capital of
NxtPhase;
"NxtPhase Shares" means, collectively, the NxtPhase Common Shares and the
NxtPhase Preferred Shares;
"NxtPhase Shareholder" means a holder of NxtPhase Shares;
"Option" has the definition as set forth in Section 7.1 of the Investor Rights
Agreement, as amended by the provisions of the Letter Agreement;
"Perseus" means Perseus 2000, L.L.C., a Delaware limited liability company;
"Perseus Financing" means the purchase of up to $1,500,000 of NxtPhase Preferred
Shares at $4.50 per NxtPhase Preferred Share by Perseus in three tranches of
$500,000 each and otherwise on the terms and conditions in the summary of terms
between NxtPhase and Perseus dated as of the date hereof;
"Plan of Arrangement" means the plan of arrangement substantially in the form
set out as Schedule "A" hereto and any amendment or variation thereto made in
accordance with the terms hereof;
"Proxy Circular" means the Joint Proxy Statement/Prospectus (to be included as
Part 1 of the Registration Statement on Form S-4 to be filed by Beacon with the
SEC) to be sent to NxtPhase Shareholders in connection with the NxtPhase Meeting
and to Beacon Shareholders in connection with the Beacon Meeting;
"Registration Statement" means the registration statement with respect to the
Beacon Shares to be issued in connection with the Arrangement as declared
effective by the SEC under the 1933 Act;
"SEC" means the United States Securities and Exchange Commission;
"Securities Purchase Agreement" means that certain Securities Purchase Agreement
dated as of November 12, 2004 by and among NxtPhase and the holders of NxtPhase
Preferred Shares, as amended to date;
"Subsidiary" means, with respect to a specified body corporate, a body corporate
of which more than 50% of the outstanding shares ordinarily entitled to elect a
majority of the directors thereof, whether or not shares of any other class or
classes shall or might be entitled to vote upon the happening of any event or
contingency, are at the time owned, directly or indirectly, by such specified
body corporate;
"Tax" and "Taxes" means any Canadian or United States federal, state or local or
any non-United States or non-Canadian net income, alternative or add-on minimum,
estimated, gross income, gross receipts, sales, use, value-added, ad valorem,
transfer, franchise, capital, paid-up capital, profits, lease, service,
greenmail, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, customs
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever (including any Tax liability incurred or borne as a transferee
or successor or by contract, or otherwise), together with any interest or any
penalty, addition to tax or additional amount imposed by any Governmental
Authority (domestic or foreign) responsible for the imposition of any such tax;
"Taxing Authority" means each national, state, provincial or local government or
any governmental, administrative or regulatory authority, agency, court,
commission, tribunal, body or instrumentality of any government that imposes,
regulates, administers, collects or regulates the collection of Taxes in any
applicable jurisdiction;
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof;
"Termination Date" means December 31, 2005;
"Trading Day" means a day on which Beacon Shares is traded on Nasdaq;
"VWAP" means the daily dollar volume-weighted average sale price for the Beacon
Shares on Nasdaq on any particular Trading Day during the period beginning at
9:30 a.m., New York City Time (or such other time as Nasdaq publicly announces
is the official open of trading), and ending at 4:00 p.m., New York City Time
(or such other time as Nasdaq publicly announces is the official close of
trading), as reported by Bloomberg through its "Volume at Price" functions or,
if the foregoing does not apply, the dollar volume-weighted average price of
such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30 a.m., New York City Time
(or such other time as Nasdaq publicly announces is the official open of
trading), and ending at 4:00 p.m., New York City Time (or such other time as
Nasdaq publicly announces is the official close of trading), as reported by
Bloomberg, or, if no dollar volume-weighted average price is reported for such
security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security as reported in the "pink sheets" by the National Quotation Bureau, Inc.
All such determinations of VWAP shall be appropriately and equitably adjusted in
accordance with the provisions set forth herein for any stock dividend, stock
split, stock combination or other similar transaction occurring during any
period used to determine the Exchange Value as set forth in Section 2.1; and
"Working Opportunity Fund" means Working Opportunity Fund (EVCC), Ltd., a
British Columbia corporation.
1.2 Interpretation. For the purposes of this Agreement, except as otherwise
expressly provided:
(a) "this Agreement" means this Agreement, including the schedules hereto,
and not any particular part, section or other portion hereof, and
includes any agreement, document or instrument entered into, made or
delivered pursuant to the terms hereof, as the same may, from time to
time, be supplemented or amended and in effect;
(b) all references in this Agreement to a designated "part", "section",
"subsection" or other subdivision or to a schedule are references to
the designated part, section, subsection or other subdivision of, or
schedule to, this Agreement;
(c) the words "hereof", "herein", "hereto" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular part, section, subsection or other subdivision or schedule
unless the context or subject matter otherwise requires;
(d) the division of this Agreement into parts, sections and other portions
and the insertion of headings are for convenience of reference only
and are not intended to interpret, define or limit the scope, extent
or intent of this Agreement or any provision hereof;
(e) unless otherwise provided herein, all references to currency in this
Agreement are to lawful money of the United States of America;
(f) a reference in this Agreement to a statute includes all regulations
made thereunder, all amendments to the statute or regulations in force
from time to time, and any statute or regulation that supplements or
supersedes such statute or regulations;
(g) the singular of any term includes the plural, and vice versa, and the
use of any term is generally applicable to any gender and, where
applicable, a body corporate, firm or other entity, and the word "or"
is not exclusive and the word "including" is not limiting whether or
not non-limiting language (such as "without limitation" or "but not
limited to" or words of similar import) is used with reference
thereto;
(h) in the event that any date on which any action is required to be taken
hereunder by any of the parties hereto is not a Business Day, such
action shall be required to be taken on the next succeeding day which
is a Business Day; and
(i) all references to "approval", "authorization" or "consent" in this
Agreement means written approval, authorization or consent.
1.3 Schedules. Attached to and forming part of this Agreement are the following
Schedules:
Schedule "A" - Plan of Arrangement
Schedule "B" - Terms of Beacon RSUs
Schedule "C" NxtPhase Disclosure Letter
Schedule "D" Letter Agreement
PART 2
ARRANGEMENT
2.1 Share Exchange. Beacon will acquire all of the issued and outstanding
NxtPhase Shares in accordance with the Plan of Arrangement as follows:
(a) each NxtPhase Share held by a NxtPhase Shareholder (other than Beacon)
issued pursuant to the Perseus Financing, shall be, and be deemed to
be, transferred to Acquisitionco, free and clear of all Encumbrances,
in consideration of the issue to such NxtPhase Shareholder of that
number of Beacon Shares having a value equal to $4.50 per NxtPhase
Share plus the amount of all accrued and unpaid dividends on such
NxtPhase Share in accordance with the terms of the NxtPhase Preferred
Shares (i.e. at a rate per annum of 8%, but for this purpose whether
or not declared) from the date of issue of such NxtPhase Shares to but
excluding the Effective Date (the "New Financing Consideration"). For
this purpose, Beacon Shares shall have a value equal to the 20-day
VWAP as of the date of this Agreement.
(b) each NxtPhase Share held by a NxtPhase Shareholder, other than those
held by NxtPhase Shareholders who have exercised the Dissent Right and
other than those issued pursuant to the Perseus Financing, shall be,
and be deemed to be, transferred to Acquisitionco, free and clear of
all Encumbrances, in consideration of the issue to such NxtPhase
Shareholder of such number of Beacon Shares calculated pursuant to
Section 2.1(c) as the "Exchange Value", in accordance with the Plan of
Arrangement;
(c) the "Exchange Value" shall be calculated as follows:
Exchange Value = Aggregate Beacon Shares
---------------------------
Aggregate NxtPhase Shares
Aggregate Beacon Shares = Aggregate Consideration
--------------------------
Beacon Share Price
Aggregate Consideration = $14,235,000:
(i) plus the aggregate issue price of any NxtPhase Shares,
if any, issued by NxtPhase, in accordance with Section
4.2, between the date of this Agreement and the
Effective Date, including, for greater certainty, the
amount received by NxtPhase for any NxtPhase Shares
issued pursuant to the Perseus Financing (other than
NxtPhase Shares issued to Beacon) and to El Dorado in
accordance with the Securities Purchase Agreement, and
(ii) minus the aggregate amount of non-working capital
indebtedness, if any, incurred by NxtPhase, in
accordance with Section 4.2, between the date of this
Agreement and the Effective Date, and
(iii) minus the amount of the New Financing Consideration.
Beacon Share Price = 20-day VWAP of Beacon Shares as of
the date of this Agreement
Aggregate NxtPhase Shares = 2,548,718 plus an additional
66,667 NxtPhase Shares to be
issued to El Dorado immediately
prior to the Effective Date
pursuant to the Securities
Purchase Agreement plus the
aggregate number of any other
NxtPhase Shares, if any, issued
by NxtPhase, in accordance with
Section 4.2, between the date of
this Agreement and the Effective
Date, other than those issued
pursuant to the Perseus
Financing.
(d) the Exchange Value and the New Financing Consideration shall each be
subject to equitable adjustment in the event of any stock split, stock
dividend, reverse stock split or similar event affecting Beacon Shares
between the date of this Agreement and the Effective Date;
(e) each NxtPhase Share of a NxtPhase Shareholder who sent to NxtPhase a
written objection to the resolution to approve the Arrangement at or
prior to the NxtPhase Meeting, as modified by the Interim Order or the
Final Order, shall be, and shall be deemed to be, transferred to
NxtPhase for cancellation and cancelled contemporaneously with the
acquisition by Beacon and Acquisitionco of NxtPhase Shares pursuant to
Section 2.1 and such NxtPhase Shareholders shall thereupon have no
rights or entitlements with respect to those NxtPhase Shares except as
provided in Section 5 of the Plan of Arrangement; and
(f) no certificates or scrip representing fractional shares of Beacon
Shares issuable in connection with the Arrangement shall be issued to
NxtPhase Shareholders upon the surrender for exchange of certificates
that, immediately prior to the Effective Date, represented NxtPhase
Shares converted into Beacon Shares pursuant to this Section 2.1, and
NxtPhase Shareholders shall not be entitled to any voting rights,
rights to receive any dividends or distributions or other rights as a
stockholder of Beacon with respect to any fractional shares of Beacon
Shares that would otherwise have been issued to NxtPhase Shareholders.
In lieu of any fractional shares of Beacon Shares that would have
otherwise been issued, each NxtPhase Shareholder that would have been
entitled to receive a fractional share of Beacon Shares shall, upon
proper surrender of such NxtPhase Shareholder's certificates for
NxtPhase Shares in accordance with the Letter of Transmittal from such
NxtPhase Shareholder to Beacon, receive a cash payment equal to the
Exchange Value multiplied by the fraction of a share that such
NxtPhase Shareholder would otherwise be entitled to receive, subject
to equitable adjustment in the event of any stock split, stock
dividend, reverse stock split or similar event affecting Beacon Shares
between the date of this Agreement and the Effective Date.
2.2 Proxy Circular.
As soon as practicable but in any event not later than June 30, 2005, Beacon
will, subject to the prior review and written approval of NxtPhase, prepare the
Proxy Circular for mailing to Beacon Shareholders and to NxtPhase Shareholders.
The Proxy Circular will include all such information as is necessary to ensure
compliance with the requirements of applicable corporate and securities laws of
Beacon and NxtPhase in connection with the shareholder approval required by
those companies for the Arrangement and compliance with the Interim Order,
subject to the receipt by NxtPhase of an exemption order from the Director of
the CBCA. NxtPhase will promptly apply to the Director of the CBCA for an
exemption order exempting the Proxy Circular from the requirements of the CBCA
with respect to the contents thereof. Beacon will ensure that all information
included in the Proxy Circular, except such information relating to NxtPhase,
does not contain a misrepresentation or any untrue statement of a material fact
or omit to state a material fact required to be stated in the Proxy Circular
that is necessary to make any statement that it makes not misleading in light of
the circumstances in which it is made. NxtPhase will provide to Beacon all
information about itself, its Affiliates and their respective directors,
officers and shareholders as may be reasonably necessary to be included in the
Proxy Circular pursuant to applicable laws. NxtPhase will ensure that all
information included in the Proxy Circular relating to NxtPhase does not contain
a misrepresentation or any untrue statement of a material fact or omit to state
a material fact required to be stated in the Proxy Circular that is necessary to
make any statement that it makes not misleading in light of the circumstances in
which it is made. If, at any time prior to the time the Registration Statement
is declared effective under the 1933 Act, any event or circumstance relating to
NxtPhase or any of its Affiliates, or its or their respective officers,
directors or shareholders, should be discovered by NxtPhase which is required to
be set forth in an amendment or supplement to the Proxy Circular, NxtPhase shall
promptly inform Beacon.
2.3 Shareholder Meetings.
(a) As soon as practicable after the Registration Statement is declared
effective by the SEC, NxtPhase will convene the NxtPhase Meeting and
Beacon will convene the Beacon Meeting. Each of NxtPhase and Beacon
will file the Proxy Circular with the appropriate regulatory
authorities in all jurisdictions where the same is required to be
filed and will mail the same to their shareholders and such other
appropriate persons in accordance with applicable law and the Interim
Order. The parties will cooperate with each other in connection with
the preparation of documentation for submission of the Proxy Circular
to regulatory authorities and the delivery to shareholders and other
appropriate persons;
(b) NxtPhase shall convene the NxtPhase Meeting and Beacon shall convene
the Beacon Meeting in a timely and expeditious manner in accordance
with the Interim Order and their Constating Documents on a date
mutually convenient to the parties in accordance with the Interim
Order and will solicit proxies to be voted at those meetings in favour
of the Arrangement and other matters incidental thereto; and
(c) NxtPhase shall advise Beacon forthwith upon receipt thereof, from and
after the date upon which the Proxy Circular is distributed to
shareholders of NxtPhase until and including the date of the NxtPhase
Meeting, and immediately after the NxtPhase Meeting, of the number of
NxtPhase Shares in respect of which NxtPhase has received, pursuant to
the Interim Order, written objection to the special resolution
respecting the Arrangement to be voted upon at the NxtPhase Meeting.
2.4 Interim Order and Final Order.
(a) NxtPhase shall, as soon as reasonably practicable, apply to the Court
for and diligently prosecute, pursuant to Section 192 of the CBCA, an
Interim Order providing for, among other things, the calling and
holding of the NxtPhase Meeting for the purpose of considering and, if
deemed advisable, approving the Arrangement. If the approval of the
Arrangement at the NxtPhase Meeting as set forth in the Interim Order
is obtained, thereafter NxtPhase shall forthwith use its reasonable
best efforts to take the necessary steps to submit the Arrangement to
the Court and apply for and diligently prosecute the Final Order in
such fashion as the Court may direct and, as soon as practical
thereafter and subject to compliance with any other conditions
provided for in Part 5 hereof, NxtPhase shall file with the Director,
pursuant to subsection 192(6) of the CBCA, a certified copy of the
Final Order and all other necessary documents to give effect to the
Arrangement.
(b) The Interim Order sought by NxtPhase shall provide that for the
purpose of the NxtPhase Meeting:
(i) the securities of NxtPhase for which the holders shall be
entitled to vote on the Arrangement shall be the NxtPhase Shares;
(ii) the NxtPhase Shareholders shall be entitled to vote on the
Arrangement together, and not as separate classes, with the
NxtPhase Shareholders being entitled to one vote for each
NxtPhase Share held; and
(iii)the requisite majority for the approval of the Arrangement by
the NxtPhase Shareholders shall be two-thirds of the votes cast
by the NxtPhase Shareholders present in person or by proxy at the
NxtPhase Meeting, voting together.
2.5 Beacon Securities Compliance and Other Registrations of Beacon.
(a) U.S. Federal Securities Laws. As promptly as practicable after the date
hereof, Beacon and NxtPhase shall cooperate in the preparation of the
Registration Statement and Proxy Circular to be mailed to Beacon
Shareholders and NxtPhase Shareholders in connection with the Arrangement
and the transactions contemplated thereby and to be filed by Beacon as part
of the Registration Statement. Beacon shall use reasonable best efforts to
promptly respond to any comments of the SEC, and to the extent such
comments relate to NxtPhase, NxtPhase shall use reasonable best efforts to
provide to Beacon any assistance required. Beacon shall use reasonable best
efforts to cause all documents that it is solely responsible for filing
with the SEC or other regulatory authorities under this Section 2.5, except
information relating to NxtPhase contained in such documents, to comply in
all material respects with all applicable requirements of law and the rules
and regulations promulgated thereunder and not to contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements contained therein not
misleading. NxtPhase will ensure that all information included in such
documents relating to NxtPhase does not contain a misrepresentation or any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading. Whenever any event occurs which is required to be
set forth in an amendment or supplement to the Registration Statement,
Beacon or NxtPhase, as the case may be, shall promptly inform the other of
such occurrence and cooperate in having Beacon file with the SEC or its
staff or any other Governmental Authority or government officials, and/or
mailing to Beacon Shareholders or NxtPhase Shareholders, such amendment or
supplement, if required. Beacon will advise NxtPhase, promptly after it
receives notice thereof, of the time when the Registration Statement or any
post-effective amendment thereto has become effective or any supplement or
amendment has been filed, of the issuance of any stop order, of the
suspension of qualification of the Beacon Shares issuable in connection
with the Arrangement for offering or sale in any jurisdiction, or the
initiation or threat of any proceeding for any such purpose, or of any
request by the SEC for the amendment or supplement of the Registration
Statement or for additional information.
(b) State Securities Laws. Beacon shall use reasonable best efforts to take all
actions necessary required to be made by it to register or qualify the
Beacon Shares to be issued in the Arrangement pursuant to all applicable
U.S. state "blue sky" or securities laws and shall take all reasonable
actions necessary to maintain such registrations or qualifications in
effect for all purposes hereof.
(c) The Nasdaq Stock Market. Prior to the Effective Date, Beacon shall, if
required by the rules of Nasdaq, use reasonable best efforts to file with
Nasdaq a Notification Form: Listing of Additional Shares with respect to
the Beacon Shares issuable in connection with the Arrangement.
2.6 Beacon RSUs.
Immediately following the Effective Date, Beacon will issue Beacon RSUs to the
employees of NxtPhase in accordance with and subject to the terms and conditions
set forth in the attached Schedule "B".
2.7 NxtPhase Securities Compliance.
NxtPhase will make all necessary filings and applications under Canadian
provincial securities laws, rules and regulations required to be made by it in
connection with the transactions contemplated herein and will take all
reasonable actions necessary to comply with such laws, rules and regulations in
all material respects.
2.8 Cooperation, Consents and Approvals. Each party will, and will cause each of
its Subsidiaries to, cooperate and use its reasonable best efforts:
(a) to obtain, before the Effective Date, all authorizations, waivers,
exemptions, consents, orders and other approvals from domestic or foreign
courts, governmental or regulatory agencies, boards, commissions or other
authorities, shareholders and third parties as are necessary for the
consummation of the transactions contemplated hereby; and
(b) to satisfy each of the conditions precedent to be satisfied by it and to
take, or cause to be taken, all other action and to do, or cause to be
done, all other things necessary or advisable under applicable laws and
regulations to permit the completion of the Arrangement in accordance with
the provisions of this Agreement and the Plan of Arrangement.
Each party will vigorously defend, or cause to be defended, any lawsuits or
other legal proceedings brought against it or any of its Subsidiaries
challenging this Agreement or the implementation of the Arrangement.
PART 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Beacon. Beacon and Acquisitionco represent
and warrant to and in favour of NxtPhase as follows and acknowledges that
NxtPhase is relying upon such representations and warranties in connection with
the transactions contemplated herein:
(a) Each of Beacon and Acquisitionco is a corporation duly organized, validly
existing and in good standing under applicable laws, has the corporate
power and authority to own or lease its property and assets and to carry on
its business as now conducted by it;
(b) the execution, delivery and performance of this Agreement by Beacon,
including all matters contemplated hereby, have been authorized by all
necessary corporate action, other than stockholder approvals, and Beacon
has the corporate power and authority to enter into and perform its
obligations under this Agreement;
(c) Beacon has duly executed and delivered this Agreement and this Agreement is
a valid and binding agreement enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency and other laws affecting the
enforcement of creditors' rights generally and to general principles of
equity;
(d) as at the date of this Agreement, the authorized capital of Beacon consists
of 110,000,000 Beacon Shares, of which 43,665,143 Beacon Shares are issued
and outstanding as fully paid and non-assessable, and 10,000,000 shares of
preferred stock, par value $0.01 per share, of which no shares are issued
and outstanding;
(e) on the Effective Date, Beacon will have issued to Acquisitionco sufficient
Beacon Shares to permit Acquisitionco to acquire all of the NxtPhase Shares
as contemplated in the Arrangement, and Acquisitionco will be authorized by
all necessary corporate action and will have all necessary power and
authority to transfer such Beacon Shares to the NxtPhase Shareholders in
consideration for the NxtPhase Shares held by such NxtPhase Shareholders.
3.2 Representations and Warranties of NxtPhase. NxtPhase represents and warrants
to and in favour of Beacon as follows and acknowledges that Beacon is relying
upon such representations and warranties in connection with the transactions
contemplated herein:
(a) NxtPhase and each of its Subsidiaries is a corporation duly organized,
validly existing and in good standing under applicable laws and is current
and up to date with respect to all filings required thereunder, has the
corporate power and authority to own or lease its property and assets and
to carry on its business as now conducted by it, is duly licensed or
qualified as a foreign corporation in each jurisdiction in which the
character of the property and assets now owned by it or the nature of its
business as now conducted by it requires it to be so licensed or qualified
(save where failure to have such licence or qualification is not, in the
aggregate, material), and no proceedings have been taken by NxtPhase or, to
the best of NxtPhase's knowledge, taken or threatened by any other person,
with respect to the bankruptcy, insolvency, receivership, liquidation,
dissolution or winding-up of NxtPhase or any of its Subsidiaries;
(b) the execution, delivery and performance of this Agreement by NxtPhase,
including all matters contemplated hereby, have been authorized by all
necessary corporate action, other than required stockholder approvals, and
NxtPhase has the corporate power and authority to enter into and perform
its obligations under this Agreement;
(c) NxtPhase has duly executed and delivered this Agreement and this Agreement
is a valid and binding agreement enforceable against it in accordance with
its terms, subject to bankruptcy, insolvency and other laws affecting the
enforcement of creditors' rights generally and to general principles of
equity;
(d) the authorized capital of NxtPhase consists of an unlimited number of
NxtPhase Common Shares and an unlimited number of NxtPhase Preferred
Shares, of which, as at the date of this Agreement, 1,000,000 NxtPhase
Common Shares and 1,548,718 NxtPhase Preferred Shares are issued and
outstanding as fully paid and non-assessable, and Section 3.2(d) of the
NxtPhase Disclosure Letter contains a complete and accurate list of the
names of all NxtPhase Shareholders and all holders of outstanding warrants,
options or other rights ultimately exchangeable, exercisable or convertible
for or into NxtPhase Shares, organized by the type of security held by each
such holder and setting forth the amount of such security held by such
holder;
(e) except as disclosed in Section 3.2(e) of the NxtPhase Disclosure Letter, no
person has any right, agreement, option, understanding or commitment,
present or future, contingent or absolute, oral or written, or any right
capable of becoming any of the foregoing (including convertible or
exchangeable securities, warrants or convertible or exchangeable
obligations of any nature), whether legal, equitable, contractual or
otherwise, for the purchase, allotment or issue of or conversion into any
of the unissued shares of NxtPhase or any of its Subsidiaries or any
unissued securities of NxtPhase or any of its Subsidiaries, or for the
acquisition of any right or interest in any material portion of the
property or assets of NxtPhase or any of its Subsidiaries (but not
including commitments to customers of NxtPhase to supply NxtPhase products)
or to require NxtPhase or any of its Subsidiaries to purchase, redeem or
otherwise acquire any issued and outstanding shares in the capital of
NxtPhase or any of its Subsidiaries;
(f) the NxtPhase Financial Statements, true and complete copies of which have
been delivered to Beacon, present fairly the consolidated financial
position of NxtPhase Corporation and its Subsidiaries or NxtPhase and its
Subsidiaries, as the case may be, on a consolidated basis at the relevant
dates and the results of its operations and the changes in its consolidated
financial position for the periods indicated and have been prepared in
accordance with GAAP, subject to usual year end adjustments in the case of
statements for interim periods;
(g) there has been no Material Adverse Change in NxtPhase from that shown in
the NxtPhase Financial Statements;
(h) the execution and delivery of this Agreement and the consummation of the
Arrangement have been duly authorized by the board of directors of NxtPhase
and do not and will not:
(i) result in the breach of, or violate any term or provision of the
Constating Documents of NxtPhase or any of its Subsidiaries,
(ii) conflict with, result in a breach of, constitute default under, or
accelerate or permit the acceleration of the performance required by,
or result in the cancellation, suspension or material alteration of,
any Material Contract, instrument, licence, permit or authority to
which NxtPhase or any of its Subsidiaries is a party or by which it or
any of its Subsidiaries is bound or to which any material property of
NxtPhase or any of its Subsidiaries is subject or result in the
creation of any Encumbrance upon any of the material assets of
NxtPhase or any of its Subsidiaries under any such agreement or
instrument, or give to others any material interest or rights,
including rights of purchase, termination, cancellation or
acceleration, under any such agreement, instrument, licence, permit or
authority, or
(iii)violate any provision or law or administrative regulation or any
judicial or administrative order, award, judgment or decree applicable
to NxtPhase or any of its Subsidiaries;
(i) the Subsidiaries of NxtPhase consist of (and only of) NxtPhase T&D, Inc., a
Delaware corporation, and NxtPhase does not have any equity securities or
have the right to acquire equity securities of any other entity;
(j) NxtPhase owns all of the issued and outstanding shares of its Subsidiaries,
and such shares have been validly issued to NxtPhase as fully paid and
non-assessable and all such shares owned by NxtPhase are owned free and
clear of all Encumbrances and there are no outstanding options, rights,
entitlements, understandings or commitments (contingent or otherwise)
regarding the right to acquire any shares or other ownership interests in
any NxtPhase Subsidiary;
(k) Section 3.2(k) of the NxtPhase Disclosure Letter sets forth each Material
Contract between NxtPhase or any of its Subsidiaries and any other person
and there are no Material Contracts, covenants, undertakings or other
commitments of NxtPhase or any of its Subsidiaries or affiliates or any
partnership or joint venture in which it or any of its Subsidiaries or
affiliates is a partner or participant or any instruments binding on any of
them or any of their respective material properties:
(i) under which the consummation of the Arrangement would have the effect
of imposing restrictions or obligations on NxtPhase, any of its
Subsidiaries or any such partnership or joint venture materially
greater than those imposed upon NxtPhase or any such Subsidiary,
partnership or joint venture at the date hereof,
(ii) which would give a third party, as a result of the Arrangement, a
right to terminate any Material Contract to which NxtPhase or any of
its Subsidiaries or any such partnership or joint venture is a party
or to purchase any of their respective assets,
(iii)under which the consummation of the Arrangement would impose material
restrictions on the ability of NxtPhase or any of its Subsidiaries to
carry on any business which it might choose to carry on within any
geographical area, to acquire property or dispose of its property and
assets in their entirety or to change its corporate status, or
(iv) under which the consummation of the Arrangement would impose material
restrictions on the ability of NxtPhase or any of its Subsidiaries to
pay any dividends or make other distributions to its shareholders or
to borrow money and to mortgage and pledge its property as security
therefor;
each Material Contract listed in Section 3.2(k) of the NxtPhase Disclosure
Letter is in full force and effect and, to the best of the knowledge of
NxtPhase, is valid, binding and enforceable against NxtPhase in accordance
with its terms and no material breach or default exists in respect thereof
on the part of any party thereto and no event has occurred which, with the
giving of notice or lapse of time or both, would constitute such a material
breach or default;
(l) neither NxtPhase nor any of its Subsidiaries has incurred any liability for
brokerage fees, finder's fees, agent's commissions or other similar forms
of compensation in connection with this Agreement or the transactions
contemplated hereby;
(m) there are no actions, suits, proceedings or investigations commenced, or to
the best knowledge of NxtPhase contemplated or threatened, against or
affecting NxtPhase or any of its Subsidiaries or before or by any person or
Governmental Authority or before any arbitrator of any kind nor, to the
best knowledge of NxtPhase, are there any existing facts or conditions
which may reasonably be expected to be a proper basis for any actions,
suits, proceedings or investigations which, in either case, would prevent
or hinder the Arrangement or which would involve the possibility of any
material judgment or liability or which can reasonably be expected to have
a material adverse effect on the business, operations, properties, assets
or condition, financial or otherwise, of NxtPhase or any of its
subsidiaries;
(n) there are no known or anticipated NxtPhase Liabilities or material
liabilities of any of NxtPhase's Subsidiaries of any kind whatsoever
(including absolute, accrued or contingent liabilities) nor any material
commitments, whether or not determined or determinable, in respect of which
NxtPhase or any of its Subsidiaries is or may become liable except as
disclosed on, reflected in or provided for in the NxtPhase Financial
Statements or incurred in the ordinary course of business, and neither
NxtPhase nor any of its Subsidiaries is in default in connection with any
such liability or under any loan agreement, indenture or other instrument
pursuant to which it has incurred any such liability;
(o) the corporate records and minute books of NxtPhase and each of its
Subsidiaries, true and complete copies of which have been delivered to
Beacon, as required to be maintained by it under the laws of its
jurisdiction of incorporation are up to date and contain complete and
accurate minutes of all meetings of its directors and shareholders and all
resolutions consented to in writing;
(p) NxtPhase and each of its Subsidiaries owns good and marketable title to its
property and assets free and clear of Encumbrances except the Encumbrances
listed in Section 3.2(p) of the NxtPhase Disclosure Letter;
(q)
(i) NxtPhase and its Subsidiary own or have the right to use all
Intellectual Property necessary to use, manufacture, market and
distribute the products manufactured, marketed, sold or licensed, and
to provide the services provided by NxtPhase or its Subsidiaries to
other parties and to operate the internal systems of NxtPhase or its
Subsidiary that are material to their respective business or
operations. NxtPhase or its Subsidiary is the owner of all right,
title, and interest in and to Intellectual Property listed in the
NxtPhase IP Schedule (the "NxtPhase Intellectual Property"), free and
clear of all Encumbrances. NxtPhase or its Subsidiary has taken all
measures necessary to protect the proprietary nature of each item of
NxtPhase Intellectual Property. NxtPhase has delivered to Beacon true
and complete copies of all assignments and related documentation
related to NxtPhase Intellectual Property. Other than as set forth in
Section 3.2(q)(i) of the NxtPhase Disclosure Letter, to NxtPhase's
knowledge, (a) no other person or entity has any rights to any of the
NxtPhase Intellectual Property (except pursuant to agreements or
licenses specified in Section 3.2(q)(ii) of the NxtPhase Disclosure
Letter), and (b) no other person or entity is infringing, violating or
misappropriating any of the NxtPhase Intellectual Property.
(ii) Section 3.2(q)(ii) of the NxtPhase Disclosure Letter identifies each
license or other agreement (or type of license or other agreement),
pursuant to which NxtPhase or its Subsidiary has licensed, distributed
or otherwise granted any rights to any third party with respect to,
any NxtPhase Intellectual Property. Section 3.2(q)(ii) of the NxtPhase
Disclosure Letter identifies each item of Intellectual Property used
by NxtPhase or its Subsidiary that is owned by a party other than
NxtPhase or its Subsidiary (the "Licensed Intellectual Property"), and
the license or agreement pursuant to which NxtPhase or its Subsidiary
uses it (excluding off-the-shelf software programs licensed by
NxtPhase or its Subsidiary pursuant to "shrink wrap" licenses).
(iii)Each item of NxtPhase Intellectual Property and Licensed Intellectual
Property will be owned or available for use by NxtPhase immediately
following the Effective Date on substantially identical terms and
conditions as it was immediately prior to the Effective Date.
(r) NxtPhase and each of its Subsidiaries has duly filed on a timely basis all
Tax Returns required to be filed by it and has paid all Taxes which are due
and payable, and has paid all assessments and reassessments, and all other
taxes, governmental charges, penalties, interest and fines due and payable
on or before the date hereof; adequate provision has been made for Taxes
payable for the current Tax period for which Tax Returns are not yet
required to be filed; there are no agreements, waivers or other
arrangements, providing for an extension of time with respect to the filing
of any Tax Return by, or payment of any Tax, governmental charge or
deficiency against, NxtPhase or any of its Subsidiaries; there are no
actions, suits, proceedings, investigations or claims now threatened or
pending against NxtPhase or any of its Subsidiaries in respect of Taxes,
governmental charges or assessments, nor any matters under discussion with
any Governmental Authority relating to Taxes, governmental charges or
assessments asserted by any such authority; all Tax Returns filed by
NxtPhase and its Subsidiaries were complete and correct in all respects;
there are no liens for Taxes upon any of NxtPhase's or any Subsidiary's
assets, other than Liens for Taxes not yet due and payable; neither
NxtPhase nor any Subsidiary is, or has been, a U.S. real property holding
company (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(A)(ii), of the Code; neither NxtPhase
nor any Subsidiary has ever been a member of a group filing a consolidated
federal income Tax Return or a combined, consolidated, unitary or other
affiliated group Tax Return for state, local or non-U.S. Tax purposes
(other than a group the common parent of which is NxtPhase), and neither
NxtPhase nor any Subsidiary has any liability for the Taxes of any Person
(other than NxtPhase) under Treasury Regulation Section 1.1502-6 (or any
corresponding provision of state, local or non-U.S. Tax law), or as a
transferee or successor, or by contract, or otherwise; Section 3.2(r) of
the NxtPhase Disclosure Letter contains a list of all jurisdictions
(whether foreign or domestic) to which any Tax is properly payable by
NxtPhase or any Subsidiary; no claim has ever been made by a Tax Authority
in a jurisdiction where NxtPhase or any Subsidiary does not file Tax
Returns that NxtPhase or any Subsidiary is or may be subject to Tax in that
jurisdiction; neither NxtPhase nor any Subsidiary has, or has ever had, a
permanent establishment or other taxable presence in any countries other
than the country of such entities formation, as determined pursuant to
applicable non-U.S. law and any applicable Tax treaty or convention between
the United States and such foreign country;
(s) except as disclosed in Section 3.2(s) of the NxtPhase Disclosure Letter,
NxtPhase and each of its Subsidiaries has withheld from each payment made
to any of its officers, directors, and employees, past and present, the
amount of all taxes including, but not limited to, income tax and other
deductions required to be withheld therefrom and has paid the same to the
proper tax and other receiving offices within the time required under any
applicable tax legislation;
(t) NxtPhase has not declared or paid any dividends or made any distribution of
its properties or assets to its shareholders nor disposed of any of its
properties or assets or incurred any material indebtedness except as
described in the NxtPhase Financial Statements or this Agreement;
(u) neither NxtPhase nor any of its Subsidiaries is in default in any material
respect with respect to any permit held or order, writ, injunction or
decree of any court, Governmental Authority or any arbitration panel;
(v) the business of NxtPhase and each of its Subsidiaries is being conducted in
all material respects in compliance with all applicable laws, regulations
and ordinances of all authorities having jurisdiction;
(w) no exemption, consent, approval, order or authorization of, or registration
or filing with, any court, Governmental Authority, or any third party is
required by, or with respect to NxtPhase or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by NxtPhase or
the consummation by NxtPhase of the transactions contemplated hereby;
(x) the information and consolidated financial statements related to NxtPhase
and provided by NxtPhase and contained in the Proxy Circular and any
related documentation to be distributed in connection with the solicitation
of proxies by the management of Beacon for the Beacon Meeting will be true,
correct and complete in all material respects and will not contain any
untrue statement of any material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading in light of the circumstances in which they are
made; and
(y) none of the representations, warranties or statements of fact made in this
Section 3.2 contain any untrue statement of a material fact or omit to
state any material fact necessary to make any such warranty or
representation not misleading.
PART 4
COVENANTS
4.1 Conduct of Beacon Business.
Beacon hereby covenants and agrees that until the Effective Date, other than as
contemplated in this Agreement or as expressly consented to by NxtPhase (which
consent will not be unreasonably withheld or delayed), Beacon will not and will
not permit any of its Subsidiaries to take or fail to take any action within its
control which would result in a condition precedent to the Arrangement not being
satisfied unless a waiver has been obtained with respect to such condition
precedent.
4.2 Conduct of NxtPhase Business.
NxtPhase hereby covenants and agrees, other than as contemplated in this
Agreement or as expressly consented to in writing by Beacon (which shall not be
unreasonably withheld or delayed), NxtPhase will not and will not permit any of
its Subsidiaries to:
(a) carry on its business, including but not limited to incurring debt, in a
materially different manner than as set forth in
the NxtPhase Business Plan;
(b) declare or make any distribution by way of dividend, distribution of
property or assets, return of capital or otherwise to or for the benefit of
its shareholders;
(c) increase or decrease its paid-up capital or purchase or redeem any NxtPhase
Shares;
(d) other than pursuant to the Perseus Financing or the issuance to El Dorado
of 66,667 NxtPhase Preferred Shares in accordance with the Securities
Purchase Agreement, on or before May 1, 2005, issue, authorize or propose
the issuance of, or purchase or redeem or propose the purchase or
redemption of, any NxtPhase Shares of any class or securities convertible
into, or rights, warrants or options to acquire, any NxtPhase Shares or
other exchangeable or convertible securities, rights, warrants or options,
nor enter into any commitment or agreement therefor;
(e) other than pursuant to the Perseus Financing or the issuance to El Dorado
of 66,667 NxtPhase Preferred Shares in accordance with the Securities
Purchase Agreement, after May 1, 2005, issue, authorize or propose the
issuance of, or purchase or redeem or propose the purchase or redemption
of, any NxtPhase Shares of any class or securities convertible into, or
rights, warrants or options to acquire, any NxtPhase Shares or other
exchangeable or convertible securities, rights, warrants or options, the
aggregate value of which exceeds $1,500,000, nor enter into any commitment
or agreement therefor;
(f) issue, authorize or propose the issuance of, or purchase or redeem or
propose the purchase or redemption of, any NxtPhase Shares of any class or
securities convertible into, or rights, warrants or options to acquire, any
NxtPhase Shares or other exchangeable or convertible securities, rights,
warrants or options to any person or entity who is not a party to the
Investor Rights Agreement, nor enter into any commitment or agreement
therefor;
(g) reorganize, amalgamate or merge with any other person, corporation,
partnership or other business organization whatsoever;
(h) adopt a plan of liquidation or resolutions providing for its liquidation,
dissolution, merger, amalgamation, consolidation or reorganization;
(i) other than as set forth in the NxtPhase Business Plan or in the ordinary
course of business, enter into or modify any employment agreement (whether
written or oral), grant any bonuses, severance or termination pay, other
than in accordance with applicable law, or make any loan to any employee,
officer or director, other than advances to such individuals for reasonable
and necessary business expenses incurred by such individuals in the
ordinary course of business on behalf of NxtPhase;
(j) take or fail to take any action within its control which would result in a
condition precedent to the Arrangement not being satisfied;
(k) make or change any material election in respect of Taxes, adopt or change
any accounting method in respect of Taxes or otherwise, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to
any claim or assessment in respect of Taxes;
(l) fail to use reasonable best efforts to ensure that the representations and
warranties set forth in Sections 3.2 (g), (k), (m), (n), (p)-(s), (u)-(w)
and (y) remain true and correct until the Effective Date as if made on and
as of such date, except for failures or breaches of representations and
warranties which would not result in a Material Adverse Change with respect
to NxtPhase;
(m) alter or amend its Constating Documents as the same exist at the date of
this Agreement; and
(n) the NxtPhase board of directors shall not permit the transfer of any
NxtPhase Shares to any individual or entity other than an affiliate of a
NxtPhase Shareholder as of the date of this Agreement who also becomes a
party to the Investor Rights Agreement. In the event of any such permitted
transfer, NxtPhase shall promptly provide notice to Beacon and copies of
all relevant transfer documents.
4.3 Access to Books and Records.
Beacon and NxtPhase upon reasonable notice shall, during the period prior to the
Effective Date, afford the other party and its accountants, counsel and other
representatives, full access during normal business hours to the properties,
books, contracts, commitments and records of the other party and its
Subsidiaries in its possession or to which it has access and furnish promptly to
the other party a copy of all information concerning its business, properties
and personnel as the other party may reasonably request.
4.4 Alternative Offer.
NxtPhase agrees that it will not, without Beacon's prior written consent,
directly or indirectly, solicit or initiate any expression of interest, proposal
or offer from, or negotiate with, or enter into any letter of intent or similar
document or any contractual agreement or commitment, any person other than
Beacon relating to the acquisition of NxtPhase Shares, any amalgamation, merger
or other form of business combination involving NxtPhase or any NxtPhase
Subsidiary, any sale, lease, exchange or transfer of all or a substantial
portion of the assets of NxtPhase, or any takeover bid, reorganization,
recapitalization, liquidation or winding-up of or other business combination or
transaction involving NxtPhase or any NxtPhase Subsidiary (any offer or proposal
relating to any such transaction, an "Acquisition Proposal"). NxtPhase will
ensure that its representatives, including those of any NxtPhase Subsidiary, are
aware of the provisions of this Section 4.4 and NxtPhase will be responsible for
any breach of this Section 4.4 by any of the foregoing and any such breach shall
be considered a breach by NxtPhase. NxtPhase shall within one day of receipt
inform Beacon of receipt of any written or oral Acquisition Proposal, and
provide Beacon with the identity of the party making the Acquisition Proposal
and the material terms thereof.
4.5 Indemnification of NxtPhase Directors; Directors and Officers Insurance.
NxtPhase, prior to the Effective Date, will directly or indirectly cause the
persons who served as directors or officers of NxtPhase or its Subsidiary on or
before the Effective Date to be covered by a run off directors' and officers'
liability insurance policy for NxtPhase's existing directors and officers with
the same coverage and amounts containing terms and conditions which are not less
advantageous than NxtPhase's existing directors' and officers' liability policy.
4.6 Amendment No. 2 to Beacon Rights Agreement.
The Beacon board of directors will take all reasonable action necessary to
irrevocably amend the Beacon Rights Agreement so that the consummation of the
transactions contemplated by this Agreement and the Arrangement will not result
in the Rights (as defined in the Beacon Rights Agreement) becoming evidenced by,
and transferable pursuant to, certificates separate from the certificates
representing Beacon Shares.
4.7 Registration Obligations for Affiliates.
Section 4.7 of the NxtPhase Disclosure Letter sets forth a list of those people
who are, in NxtPhase's reasonably judgment, "affiliates" of NxtPhase, within in
the meaning of Rule 145 promulgated by the 1933 Act (each a "Rule 145
Affiliate"). Perseus and its affiliates shall be considered "affiliates" of
NxtPhase for purposes of this Section 4.7. NxtPhase shall notify Beacon in
writing regarding any change in the identity of its Rule 145 Affiliates prior to
the Effective Date. Beacon shall be entitled to place appropriate legends on the
certificates evidencing any Beacon Shares to be received by Rule 145 Affiliates
pursuant to the terms of this Agreement reflecting the restrictions set forth in
Rule 145 and to issue appropriate stop transfer instructions to the transfer
agent for Beacon Shares.
4.8 Consents.
NxtPhase shall use reasonable best efforts to obtain, prior to the Effective
Date, the waivers, consents and/or approvals required for NxtPhase to execute
and deliver this Agreement and consummate the Arrangement pursuant to the terms
of any Material Contract.
4.9 Material Changes.
Each party will advise the other party orally and in writing of any material
change with respect to it or its Subsidiaries on a consolidated basis promptly
after such material change has occurred.
PART 5
CONDITIONS PRECEDENT
5.1 Mutual Conditions Precedent.
The obligations of the parties to complete the transactions contemplated by this
Agreement and to file the documents required to give effect to the Arrangement
shall be subject to satisfaction of or mutual waiver by the parties on or before
the Effective Date of each of the following conditions:
(a) the Arrangement, with or without amendment, shall have been approved at the
NxtPhase Meeting in accordance with the provisions of the Interim Order and
the Arrangement shall have otherwise been approved and adopted by the
requisite majorities of persons entitled to vote thereon as determined by
the Court or by any other rules and policies of Canadian corporate and
securities regulatory authorities having jurisdiction;
(b) the Registration Statement (including any post-effective amendment thereto)
shall be effective under the 1933 Act, and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding shall be pending or to the knowledge of Beacon threatened by the
SEC to suspend the effectiveness of such Registration Statement, and Beacon
shall have received all U.S. state securities or "blue sky" permits or
other authorizations, or confirmations, as to the availability of an
exemption from registration requirements as may be necessary;
(c) the Interim Order and the Final Order shall have been obtained from the
Court in form and substance satisfactory to each of the parties, acting
reasonably;
(d) all other consents, orders, regulations and approvals, including regulatory
and judicial approvals and orders, necessary for the completion of the
transactions provided for in this Agreement shall have been obtained or
received from the persons, authorities or bodies having jurisdiction in the
circumstances;
(e) the Beacon Shareholders shall have approved (i) the Plan of Arrangement and
the issuance of Beacon Shares pursuant to the Arrangement and this
Agreement, (ii) an amendment to the Beacon Certificate of Incorporation
increasing the number of Beacon Shares authorized for issuance from
110,000,000 to 170,000,000 and (iii) an amendment to the Beacon Equity
Incentive Plan increasing the number of Beacon Shares authorized for
issuance under such plan from 9,000,000 to 23,000,000;
(f) subject to Section 4.7 and any applicable securities laws in the provinces
of Canada, the issuance of the Beacon Shares pursuant to the Arrangement
will comply with the registration requirements by the 1933 Act, and be
registered and freely tradable shares in the United States upon issuance
and will be exempt from the registration and prospectus requirements of
applicable securities laws in each of the provinces of Canada in which
NxtPhase Shareholders are resident; and
(g) no order or decree of any domestic or foreign court, tribunal, governmental
agency or other regulatory authority or administrative agency, board or
commission, and no law, regulation, policy, directive or order shall be
enacted, promulgated, made, issued or applied to cease trade, enjoin,
prohibit or impose material limitations on, the Arrangement or the
transactions contemplated thereby.
5.2 Conditions in Favour of Beacon.
The obligations of Beacon to complete the transactions contemplated by this
Agreement and to file the documents necessary to give effect to the Arrangement
are subject to the following conditions, each of which is for the exclusive
benefit of Beacon and may be asserted or waived by Beacon in its sole discretion
at any time, in whole or in part:
(a) the representations and warranties of NxtPhase as set forth in Sections
3.2(a)-(c), (d) (other than as a result of the Perseus Financing), (e),
(f), (h)-(j), (l), (o), (t) and (x) shall be true and correct on and as of
the Effective Date as if made on and as of such date and the covenants of
NxtPhase to be performed on or before the Effective Date pursuant to the
terms of this Agreement shall have been duly performed, except as affected
by transactions contemplated or permitted by this Agreement and except for
any failures or breaches of representations, warranties or covenants which
would not result in a Material Adverse Change with respect to NxtPhase;
(b) each of the NxtPhase Shareholders shall have entered into a Letter
Agreement, other than Western Technology Seed Investment and Xxxxx
Xxxxxxxxx;
(c) NxtPhase and each of its Subsidiaries shall have delivered to Beacon a
properly executed statement satisfying the requirements of Treasury
Regulation Sections 1.897-2(h) and 1.1445-2(c)(3) in a form reasonably
acceptable to Beacon;
(d) Dissent Rights shall not have been exercised prior to the Effective Date by
any NxtPhase Shareholder who is a party to the Investor Rights Agreement.
With respect to Section 5.2(b), each party shall use reasonable efforts to
ensure that such condition is satisfied and each party shall promptly inform the
other in the event it receives an executed Letter Agreement from any NxtPhase
Shareholder. In the event such condition remains unsatisfied on August 31, 2005,
unless Beacon shall inform NxtPhase no later than August 31, 2005 that such
condition is irrevocably waived by Beacon, this Agreement shall automatically
terminate on such date and be of no further force and effect and neither party
shall have any liability to the other hereunder or under the Letter Agreements.
5.3 Condition in Favour of NxtPhase.
The obligations of NxtPhase to complete the transactions contemplated by this
Agreement and to file the documents necessary to give effect to the Arrangement
are subject to the following condition, which is for the exclusive benefit of
NxtPhase and may be asserted or waived by NxtPhase in its sole discretion at any
time, in whole or in part:
(a) prior to the Effective Date, Beacon shall have received approval for the
trading of Beacon Shares on Nasdaq; and
(b) the representations and warranties of Beacon as set out in this Agreement
shall be true and correct on and as of the Effective Date as if made on and
as of such date and the covenants of Beacon to be performed on or before
the Effective Date pursuant to the terms of this Agreement shall have been
duly performed, except as affected by transactions contemplated or
permitted by this Agreement and except for any failures or breaches of
representations, warranties or covenants which would not result in a
Material Adverse Change with respect to Beacon.
5.4 Notice and Cure Provisions.
Each party will give prompt notice to the other of the occurrence, or failure to
occur, at any time from the date hereof until the Effective Date, of any event
or state of facts which occurrence or failure would or would be likely to:
(a) cause any of the representations or warranties of any party contained
herein to be untrue or inaccurate in any material respect on the date
hereof or at the Effective Date; or
(b) result in the failure to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by any party hereunder prior to
the Effective Date.
No party may elect not to complete the transactions contemplated hereby in
reliance upon the conditions precedent contained in this Part 5 or any
termination right under Part 6 unless the party intending to rely thereon has
delivered a written notice to the other party specifying in reasonable detail
all breaches of covenants, representations and warranties or other matters which
the party delivering such notice is asserting as the basis for the
non-fulfilment of the applicable condition precedent or as a basis for the
termination right, as the case may be. If any such notice is delivered, the
notifying party will not be entitled to terminate this Agreement, provided that
the receiving party is proceeding diligently to cure such matter, if curable,
until the expiration of a period of 30 days from such notice.
PART 6
AMENDMENT AND TERMINATION
6.1 Amendments.
The parties may mutually amend any provision of this Agreement at any time prior
to the Effective Date; provided, however, that any amendment effected subsequent
to approvals, if any, obtained at the Beacon Meeting or the NxtPhase Meeting
shall be subject to any restrictions contained in the Delaware General
Corporation Law or CBCA. No amendment of any provision of this Agreement shall
be valid unless the same shall be in writing and signed by all of the parties
hereto. No waiver of any right or remedy hereunder shall be valid unless the
same shall be in writing and signed by the party giving such waiver. No waiver
by any party with respect to any default, misrepresentation, or breach of
warranty or covenant hereunder shall be deemed to extend to any prior to
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior to
subsequent such occurrence.
6.2 Termination by Agreement.
This Agreement may, at any time before the Effective Date, be terminated by
unanimous agreement in writing of the parties hereto without further action on
the part of their respective shareholders, notwithstanding anything contained
herein, and notwithstanding the approval of this Agreement and the Arrangement
by the shareholders of NxtPhase or the granting by the Court of the Final Order.
6.3 Termination Date.
If the Final Order, in form and substance satisfactory to the parties, has not
been obtained by the parties hereto at or before 5:00 pm (Vancouver time) on the
Termination Date, this Agreement shall terminate unless the parties otherwise
agree.
6.4 Termination for Non-Fulfilment.
This Agreement shall terminate if the conditions precedent set forth in Section
5 are not satisfied or waived, as therein contemplated, on or before the
Termination Date.
6.5 Other Termination.
Each of Beacon and NxtPhase may, in its sole discretion, terminate this
Agreement if:
(a) a receiver, liquidator, assignee, custodian, trustee, sequestrator or other
similar official for Beacon or NxtPhase or for a substantial part of the
assets of Beacon or NxtPhase is appointed and such appointment is neither
made ineffective nor discharged within 21 days after the making thereof, or
such appointment is consented to, requested by, or acquiesced in by the
affected party;
(b) Beacon or NxtPhase commences a voluntary proceeding under any applicable
bankruptcy, insolvency or similar law of any jurisdiction (including,
without limitation, any laws relating to a reorganization, arrangement or
compromise of its debts) now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary proceeding under any such
law or to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or other similar
official of any substantial part of its assets; or makes a general
assignment for the benefit of its creditors; or takes corporate or other
action in furtherance of any of the foregoing; or
(c) entry is made against Beacon or NxtPhase of a judgment, decree or order for
relief affecting a substantial part of its assets by a court of competent
jurisdiction in an involuntary proceeding commenced under any applicable
bankruptcy, insolvency or other similar law of any jurisdiction now or
hereafter in effect.
6.6 Survival.
In the event of any termination of this Agreement, the provisions hereof will
become void and neither party will have any liability to the other party in
respect of this Agreement, except in respect of any breach of this Agreement
which occurred on or before the Termination Date. Notwithstanding the foregoing,
Sections 7.2, 7.7, 7.9 and 7.10 shall survive any termination of this Agreement.
PART 7
GENERAL
7.1 Notices.
All notices which may or are required to be given pursuant to any provision of
this Agreement shall be given or made in writing and shall be served personally,
electronic mail or by telecopy addressed to the recipient as follows:
to Beacon or Acquisitionco:
Beacon Power Corporation
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: F. Xxxxxxx Xxxx, President and Chief Executive Officer
Facsimile: 000-000-0000
Email: xxxx@xxxxxxxxxxx.xxx
with a copy to:
Xxxxxx X. Xxxxx, Esq.
Xxxxxxx & Xxxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile: 000-000-0000
Email: xxxxxx@XxxxxxxXxxxxx.xxx
to NxtPhase:
NxtPhase T & D Corporation
0000 Xxxx Xxxxxxxx
Xxxxxxxxx, XX, Xxxxxx X0X 0X0
Attention: Xxxxxx Xxxxxxxx, President and Chief Executive Officer
Facsimile: 000-000-0000
Email: xxxxxxxxx@xxxxxxxx.xxx
with a copy to:
Candy L. Saga, Esq.
Farris, Vaughan, Xxxxx & Xxxxxx LLP
X.X. Xxx 00000, Xxxxxxx Xxxxxx Xxxxx
00xx Xxxxx, 000 X. Xxxxxxx Xxxxxx
Xxxxxxxxx, XX, Xxxxxx X0X 0X0
Facsimile: 000 000 0000
Email: xxxxx@xxxxxx.xxx
or to such other address as the relevant party may, from time to time, advise by
notice in writing given pursuant to this Section 7.1. Any notice that is
delivered shall be deemed to be delivered on the date of delivery if delivered
prior to 5:00 p.m. (local time at the place of receipt) on a Business Day or on
the next Business Day if delivered after 5:00 p.m. or on a non-Business Day. Any
notice sent by electronic mail or facsimile transmission shall be deemed to be
delivered on the date of transmission (for which confirmed receipt is provided
to the sender) if transmitted prior to 5:00 p.m. (local time at the place of
receipt) on a Business Day or the next Business Day if transmitted after 5:00
p.m. or on a non-Business Day.
7.2 Confidential Information.
Beacon and NxtPhase hereby agree that:
(a) "Confidential Information" shall be defined as the books and records, other
documents, material and information of or relating to the disclosing party
and/or its Subsidiaries, joint ventures or investments (whether or not in
writing) disclosed or given by Beacon or NxtPhase to the other party in
connection with this Agreement, or contained or ascertained as a result of
any meeting with officers or directors of the other party or their agents,
representatives or advisers, but does not include:
(i) information which is now or hereafter enters the public domain through
no action on the receiving party's part in violation of the terms or
conditions hereof,
(ii) information which was in the possession of Beacon or NxtPhase, as
applicable, at the time of disclosure by the other party and was not
acquired directly or indirectly on a confidential basis, or
(iii)information already disclosed by the disclosing party to others on an
unrestricted, non-confidential basis;
(b) if the Effective Date has not occurred by the Termination Date, Beacon and
NxtPhase shall: (A) promptly return to the other party all written
Confidential Information, together with all copies, extracts or summaries
thereof; and (B) promptly destroy all notes, memoranda and other material
prepared by the other party which reflect, interpret, evaluate, include or
are derived from any Confidential Information and such destruction shall
promptly thereafter be certified in writing to the other party provided,
however, that Beacon and NxtPhase may retain such information as may be
necessary to support or substantiate any opinion, advice, recommendation,
whether written or oral, given in connection with the transactions
contemplated hereby, provided that: (I) the other party is provided with
written particulars of any retained Confidential Information; and (II) such
information will not be used or disclosed to any party not subject hereto
for any other purpose; and
(c) without the other party's express prior written consent, Beacon and
NxtPhase will not disclose to any person or entity (other than those
directors, officers, employees, attorneys, agents, representatives and
advisers who actually need to have the information for purposes of
assistance with the transactions contemplated by this Agreement) either the
Confidential Information or the terms, conditions or other facts with
respect to the transactions contemplated by this Agreement unless
disclosure is required under relevant securities laws or pursuant to an
order entered into or a subpoena issued by a court of competent
jurisdiction, in which event Beacon or NxtPhase, as applicable, will, prior
to such disclosure, promptly advise and consult with the other party and
its legal counsel concerning the information to be disclosed;
7.3 Assignment.
No party may assign this Agreement or its rights or obligations hereunder
without the prior written consent of the other parties; provided, that,
Acquisitionco may assign its rights and obligations hereunder to an affiliate of
Beacon.
7.4 Binding Effect.
This Agreement and the Arrangement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
7.5 No Third Party Beneficiaries.
This Agreement and the Arrangement does not confer any rights or remedies upon
any person other than Beacon and NxtPhase and their respective successor and
permitted assigns; provided, however, that (a) the provisions in Section 2.1 of
this Agreement concerning the issuance of such number of Beacon Shares to the
NxtPhase Shareholders calculated pursuant to the Exchange Value and the
provisions of Schedule "A" are intended for the benefit of the NxtPhase
Shareholders and (b) the provisions of Schedule "B" are intended for the benefit
of the NxtPhase Employees (as defined therein).
7.6 Waiver.
Any waiver or release of any of the provisions of this Agreement, to be
effective, must be in writing executed by the party granting the same. Waivers
may only be granted upon compliance with the terms governing amendments set
forth in Section 6.1, mutatis mutandis.
7.7 Governing Law.
This Agreement shall be governed by and construed and interpreted in accordance
with the laws of the Province of British Columbia and the laws of Canada
applicable therein.
7.8 Expenses.
All expenses incurred in connection with the Arrangement and the transactions
contemplated thereby shall be paid by the party incurring such expenses.
7.9 Time of Essence.
Time is of the essence of this Agreement.
7.10 Public Announcements.
Each of the parties hereto shall cooperate with the others in relaying
information concerning this Agreement and the transaction contemplated herein,
and shall furnish to and discuss with the other parties hereto drafts of all
press and other releases prior to publication. No press release or other public
announcement concerning the proposed transactions contemplated by this Agreement
will be made by either party without the prior consent of the other party, such
consent not to be unreasonably withheld; provided that nothing contained herein
shall prevent either party at any time from furnishing any information to any
Governmental Authority or to the public if so required by applicable law.
7.11 Further Assurances.
Each party will from time to time promptly execute and deliver all further
documents and take all further action necessary or appropriate to give effect to
and perform the provisions and intent of this Agreement and to complete the
transactions contemplated hereby.
7.12 Counterparts.
This Agreement and any amendment, supplement or restatement of this Agreement
may be executed and delivered in one or more counterparts each of which when
executed and delivered shall be deemed an original but all of which together
shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date set forth above.
BEACON POWER CORPORATION
Per: /s/Xxxxx X. Xxxxxxx
------------------------------------------
Authorized Signatory
NXTPHASE T & D CORPORATION
Per: /s/Xxxxxx Xxxxxxxx
-------------------------------------------
Authorized Signatory
BEACON ACQUISITION CO.
Per: /s/Xxxxx X. Xxxxxxx
------------------------------------------
Authorized Signatory
