Exhibit 10.1
MERGER AGREEMENT
AND
PLAN OF REORGANIZATION
dated as of February 22, 2006
among
UNITED HERITAGE CORPORATION
and
LOTHIAN OIL INC.
Table of Contents
ARTICLE I THE MERGER...........................................................2
1.1 The Merger............................................................2
1.2 Effective Time........................................................2
1.3 Effect of the Merger on Constituent Corporations......................2
1.4 Articles of Incorporation and Bylaws of Surviving Corporation.........2
1.5 Directors and officers of Surviving Corporation.......................2
1.6 Consideration To Be Issued; Effect On Outstanding Securities
of Lothian..........................................................3
1.7 Dissenting Shares.....................................................5
1.8 Exchange Procedures...................................................6
1.9 No Further Ownership Rights in Lothian Capital Stock..................7
1.10 Lost, Stolen or Destroyed Certificates................................7
1.11 Further Action........................................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF LOTHIAN...........................7
2.1 Organization and Qualification........................................7
2.2 Authority Relative to This Agreement..................................8
2.3 Capitalization........................................................8
2.4 Subsidiaries..........................................................9
2.5 No Conflicts..........................................................9
2.6 Books and Records; Organizational Documents..........................10
2.7 Lothian Financial Statements.........................................10
2.8 Absence of Changes...................................................10
2.9 No Undisclosed Liabilities...........................................11
2.10 Taxes................................................................11
2.11 Legal Proceedings....................................................13
2.12 Compliance with Laws and Orders......................................13
2.13 Employee Benefit Plans...............................................13
2.14 Title to Property....................................................15
2.15 Intellectual Property................................................16
2.16 Contracts............................................................17
2.17 Insurance............................................................18
2.18 Affiliate Transactions...............................................18
2.19 Employees; Labor Relations...........................................18
2.20 Environmental Matters................................................19
2.21 Other Negotiations; Brokers; Third Party Expenses....................20
2.22 Foreign Corrupt Practices Act........................................20
2.23 Tax-Free Reorganization..............................................20
2.24 Approvals............................................................20
2.25 Disclosure...........................................................21
2.26 Information Statement................................................21
2.27 Investment Advisors..................................................21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF UNITED..........................21
3.1 Organization and Qualification.......................................22
3.2 Authority Relative to This Agreement.................................22
3.3 Capitalization.......................................................22
3.4 Subsidiaries.........................................................23
3.5 No Conflicts.........................................................23
3.6 Books and Records; Organizational Documents..........................24
3.7 SEC Documents; United Financial Statements...........................24
3.8 Absence of Changes...................................................25
3.9 No Undisclosed Liabilities...........................................25
3.10 Taxes................................................................25
3.11 Legal Proceedings....................................................27
3.12 Compliance with Laws and Orders......................................27
3.13 Employee Benefit Plans...............................................27
3.14 Title to Property....................................................30
3.15 Intellectual Property................................................30
3.16 Contracts............................................................31
3.17 Insurance............................................................32
3.18 Affiliate Transactions...............................................32
3.19 Employees; Labor Relations...........................................32
3.20 Environmental Matters................................................34
3.21 Other Negotiations...................................................34
3.22 Foreign Corrupt Practices Act........................................34
3.23 Tax-Free Reorganization..............................................35
3.24 Approvals............................................................35
3.25 Disclosure...........................................................35
3.26 Information Statement................................................35
3.27 Investment Advisors..................................................36
ARTICLE IV ADDITIONAL AGREEMENTS..............................................36
4.1 Information Statement................................................36
4.2 Stockholder Approval.................................................36
4.3 Access to Information................................................36
4.4 Confidentiality......................................................37
4.5 Expenses.............................................................37
4.6 Public Disclosure....................................................37
4.7 Approvals............................................................37
4.8 Notification of Certain Matters......................................37
4.9 Additional Documents and Further Assurances..........................37
4.10 Form S-8.............................................................38
4.11 NCM Initial Listing Application......................................38
4.12 Auditors.............................................................38
4.13 Directors' and Officers' Indemnification.............................38
4.14 Benefit Arrangements.................................................39
4.15 Treatment as Reorganization..........................................39
4.16 Lothian Investor Agreements..........................................39
ARTICLE V ADDITIONAL AGREEMENTS...............................................39
5.1 Conditions to Obligations of Each Party to Effect the Merger.........39
5.2 Additional Conditions to Obligations of Lothian......................40
5.3 Additional Conditions to the Obligations of United...................42
ARTICLE VI SURVIVAL...........................................................43
6.1 Survival of Representations, Warranties, Covenants and
Agreements.........................................................43
ARTICLE VII CONDUCT PRIOR TO THE EFFECTIVE TIME...............................43
7.1 Conduct of Business..................................................43
7.2 No Solicitation--Lothian.............................................45
7.3 No Solicitation--United..............................................46
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER................................48
8.1 Termination..........................................................48
8.2 Intentionally Omitted................................................49
8.3 Effect of Termination................................................49
8.4 Amendment............................................................49
ii
8.5 Extension; Waiver....................................................49
ARTICLE IX MISCELLANEOUS PROVISIONS...........................................49
9.1 Notices..............................................................49
9.2 Entire Agreement.....................................................51
9.3 Further Assurances; Post-Closing Cooperation.........................51
9.4 Waiver...............................................................51
9.5 Third Party Beneficiaries............................................51
9.6 No Assignment; Binding Effect........................................51
9.7 Headings.............................................................51
9.8 Invalid Provisions...................................................51
9.9 Governing Law........................................................52
9.10 Construction.........................................................52
9.11 Counterparts.........................................................52
9.12 Specific Performance.................................................52
ARTICLE X DEFINITIONS.........................................................53
10.1 Definitions..........................................................53
EXHIBITS
Exhibit A - Form of Utah Articles of Merger
Exhibit B - Form of Delaware Certificate of Merger
Exhibit C - Form of Letter of Transmittal
Exhibit D - Form of United Certificate of Designation, Preferences and
Rights of Series A Preferred Stock
Exhibit E - Form of United Certificate of Designation, Preferences and
Rights of Series B Preferred Stock
Exhibit F - Form of United Officer's Certificate
Exhibit G - Matters to be Covered by Legal Opinion of Xxxxxxxxxx &
Xxxxx LLP
Exhibit H - Form of Lothian Officer's Certificate
Exhibit I - Matters to be Covered by Legal Opinion of Xxxxxxxxx &
Roshco, LLP
iii
MERGER AGREEMENT AND
PLAN OF REORGANIZATION
This MERGER AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement")
is made and entered into as of February 22, 2006, by and among UNITED HERITAGE
CORPORATION, a Utah corporation ("United") and LOTHIAN OIL INC., a Delaware
corporation ("Lothian"). In the event the parties mutually agree in writing
prior to the Effective Time (as defined below) to structure this merger as a
reverse triangular merger, rather than a direct merger, a wholly-owned
subsidiary of United (a "Merger Sub") shall become party to this Agreement and
this Agreement shall be amended as appropriate. Capitalized terms used and not
otherwise defined herein have the meanings set forth in Article X.
RECITALS
WHEREAS, the respective Boards of Directors of each of United and
Lothian believe it is in the best interests of United and Lothian and their
respective stockholders that Lothian merge with and into United (the "Merger")
and, in furtherance thereof, have approved the Merger. Upon mutual consent from
the respective Boards of Directors of each of United and Lothian prior to the
Effective Time, set forth in a writing signed by each of United and Lothian, the
Merger may be restructured as a reverse triangular merger, as contemplated by
the first paragraph hereof;
WHEREAS, the Boards of Directors of each of United and Lothian have
approved the Merger and this Agreement and the transactions contemplated hereby;
WHEREAS, pursuant to the Merger, among other things, and subject to
the terms and conditions of this Agreement, (i) all of the shares of common
stock of Lothian which are issued and outstanding immediately prior to the
Effective Time of the Merger shall be converted into the right to receive shares
of United's Common Stock, par value $0.001 ("United Common Stock"), (ii) all of
the shares of preferred stock of Lothian which are issued and outstanding
immediately prior to the Effective Time of the Merger shall be converted into
the right to receive shares of United's Preferred, par value $0.0001 ("United
Preferred Stock"); (iii) all Lothian Options then outstanding (whether vested or
unvested) shall be converted into options to purchase United Common Stock and
(iv) all Lothian Warrants then outstanding shall be converted into warrants to
purchase shares of United Capital Stock, on the terms and subject to the
conditions set forth herein;
WHEREAS, United and Lothian intend that the Merger shall constitute
a reorganization within the meaning of Section 368(a) of the Code, and in
furtherance thereof intend that this agreement shall be a "Plan of
Reorganization" within the meaning of Sections 354(a) and 361(a) of the Code;
and
WHEREAS, Lothian and United desire to make certain representations,
warranties, covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
the parties), and intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time subject to and upon the terms and
conditions of this Agreement and the applicable provisions of the Utah Law, and
the DGCL, Lothian shall be merged with and into United, the separate existence
of Lothian shall cease, and United shall continue as the surviving corporation
of the Merger. United is sometimes referred to herein as the "Surviving
Corporation".
1.2 Effective Time. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing and consummation of the Merger (the
"Closing") will take place as promptly as practicable, following satisfaction or
waiver of the conditions set forth in Article V, at the offices of Xxxxxxxxx &
Roshco LLP, unless another place or time is agreed to by United and Lothian. The
date upon which the Closing actually occurs is herein referred to as the
"Closing Date". On the Closing Date, the parties hereto shall cause the Merger
to be consummated by filing the articles of merger in substantially the form
attached hereto as Exhibit A (the "Utah Articles of Merger") and a certificate
of merger in substantially the form attached hereto as Exhibit B (the "Delaware
Certificate of Merger"), in each case in accordance with the relevant provisions
of applicable Law (the time of acceptance by the Secretary of State of the State
of Delaware of such filing, or such later time agreed to by the parties and set
forth in the Delaware Certificate of Merger, being referred to herein as the
"Effective Time").
1.3 Effect of the Merger on Constituent Corporations. At the Effective
Time, the effect of the Merger shall be as provided in the applicable provisions
of the DGCL and the Utah Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Lothian shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of Lothian shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation and Bylaws of Surviving Corporation.
(a) At the Effective Time: (i) the Articles of Incorporation of
United shall be amended to change the name of United to "Lothian Oil Inc.", and
(ii) the board of directors of United shall adopt and direct United to file with
the Utah Secretary of State a Certificate of Designation, Preferences and Rights
of Series A Preferred Stock in the form attached hereto as Exhibit D and a
Certificate of Designation, Preferences and Rights of Series B Preferred Stock
in the form attached hereto as Exhibit E (collectively, the "Series A and B
Certificates"), such that the Articles of Incorporation of United, as amended
and in effect immediately prior to the Effective Time, and as amended at the
Effective Time (including the Series A and B Certificates), shall be the
Articles of Incorporation of the Surviving Corporation from and after the
Effective Time until thereafter amended as provided by Law and such Articles of
Incorporation and the Bylaws of the Surviving Corporation.
(b) The Bylaws of United, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by such Bylaws, the Articles of Incorporation of
the Surviving Corporation and applicable Law.
1.5 Directors and officers of Surviving Corporation. The directors of
Surviving Corporation at, and immediately after, the Effective Time shall be
Xxxxxxx Xxxx and C. Xxxxx Xxxxxx (the "Existing Directors"), and Xxxxx Xxxxxx,
Xxxxxx Xxxxx, Xxxxx X. Xxxxxx, Xxxxx X. Xxxxxx and Xxxx Xxxxxxx (the "Lothian
Designees"), each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation. If any Lothian Designee
cannot or will not serve as a director of the Surviving Corporation, Lothian may
designate a replacement Lothian Designee, provided such replacement is
reasonably acceptable to the Existing Directors. The officers of Surviving
Corporation at, and immediately after, the Effective Time shall be as mutually
agreed to by Lothian and United, except that it is agreed that C. Xxxxx Xxxxxx
shall be Chief Executive Officer and President and Xxxxxxx Xxxx shall be Chief
Financial Officer.
2
1.6 Consideration To Be Issued; Effect On Outstanding Securities of
Lothian. On the terms and subject to the conditions of this Agreement, as of the
Effective Time, by virtue of the Merger and without any action on the part of
United or Lothian or any holder of any Lothian security, all of the following
shall occur:
(a) Conversion of Lothian Capital Stock. At the Effective Time,
(i) each share of Lothian Common Stock that is issued and outstanding
immediately prior thereto (other than any Dissenting Shares (as provided in
Section 1.7)) will be canceled and extinguished and will be converted
automatically into the right to receive that number of shares of United Common
Stock that is equal to the Exchange Ratio, rounded down to the nearest whole
share of United Common Stock, (ii) each share of Lothian Series A Preferred
Stock issued and outstanding immediately prior thereto will be canceled and
extinguished and will be converted automatically into the right to receive that
number of shares of United Series A Preferred Stock that is equal to the
Exchange Ratio, rounded down to the nearest whole share of United Series A
Preferred Stock; and (iii) each share of Lothian Series B Preferred Stock issued
and outstanding immediately prior thereto will be canceled and extinguished and
will be converted automatically into the right to receive that number of shares
of United Series B Preferred Stock that is equal to the Exchange Ratio, rounded
down to the nearest whole share of United Series B Preferred Stock.
(b) Cancellation of Lothian-Owned United Common Stock and United
Warrants. At the Effective Time, 1,093,333 shares of United Common Stock and all
United Warrants owned by Lothian or any Subsidiary of Lothian immediately prior
thereto shall be automatically canceled and extinguished without any conversion
thereof and without any further action on the part of United or Lothian.
Following the cancellation of 1,093,333 shares of United Common Stock owned by
Lothian, 2,666,666 shares of United common stock shall remain issued and
outstanding in the name of Lothian, which shares shall continue to be held as
collateral security for the payment of certain obligations of Lothian under a
promissory note dated October 6, 2005 (the "Promissory Note") pursuant to a
Stock Pledge Agreement dated as of October 6, 2005 (the "Stock Pledge
Agreement"). As the 2,666,666 shares of United common stock held as collateral
security for Lothian's obligations under the Promissory Note are released from
the lien of the Stock Pledge Agreement, each such released share shall be
automatically canceled and extinguished without any conversion thereof and
without any further action on the part of United or Lothian. In the event of a
default in the payment of the Promissory Note, the shares of United common stock
then held as collateral security for Lothian's obligations under the Promissory
Note shall be dealt with in the manner proscribed by the Stock Pledge Agreement
and shall be canceled and extinguished only upon the release of such shares from
the lien imposed by the Stock Pledge Agreement, if at all..
(c) Lothian Options and Lothian Stock Plan. At the Effective Time
all unexpired and unexercised Lothian Options then outstanding, whether vested
or unvested, shall be assumed by United in accordance with provisions described
below.
3
(i) At the Effective Time, each unexpired and unexercised
Lothian Option including without limitation each unexpired and unexercised
Lothian Option issued pursuant to the Lothian Oil Inc. Stock Incentive Plan
adopted on September 1, 2005 (the "Lothian Stock Plan") which is then
outstanding, whether or not exercisable and whether or not vested, shall by
virtue of the Merger, be assumed by United together with the Lothian Stock Plan
and converted into an option to purchase United Common Stock (a "United Option")
as provided herein and in such manner that (i) United is "assuming a stock
option in a transaction to which Section 424(a) applies" within the meaning of
Section 424 of the Code, or (ii) such transaction, to the extent that Section
424 of the Code does not apply to any such Lothian Options, would be a
transaction within Section 424 of the Code. Each Lothian Option so assumed by
United under this Agreement shall continue to have, and be subject to, the same
terms and conditions as were applicable to such Lothian Option immediately prior
to the Effective Time (including, without limitation, any repurchase rights
(other than rights of refusal) or vesting provisions), provided that (A) such
Lothian Option shall be exercisable for that number of whole shares of United
Common Stock equal to the product of the number of shares of Lothian Capital
Stock that were issuable upon exercise in full of such Lothian Option
immediately prior to the Effective Time (without regard to vesting) multiplied
by the Exchange Ratio (rounded down to the nearest whole number of shares of
United Common Stock) and (B) the per share exercise price for the shares of
United Common Stock issuable upon exercise of such assumed Lothian Option shall
be equal to the quotient determined by dividing the exercise price per share of
Lothian Capital Stock at which such Lothian Option was exercisable immediately
prior to the Effective Time by the Exchange Ratio (rounded up to the nearest
whole cent). United shall, at all times from and after the Effective Time,
reserve, keep and make available for issuance shares of United Common Stock that
are issuable upon the exercise in full of all United Options resulting from the
assumption and conversion of Lothian Options in accordance with this Section and
shall, as promptly as practicable after the Effective Time, issue to each holder
of a Lothian Option that is outstanding immediately prior to the Effective Time
a document evidencing the foregoing assumption of such Lothian Option by United
and the conversion of such Lothian Option into an United Option as provided
herein.
(ii) It is the intention of the parties that Lothian Options
assumed by United and converted into United Options pursuant hereto shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the same extent Lothian Options qualified as
incentive stock options immediately prior to the Effective Time and the
provisions of this Section 1.6(c) shall be applied consistent with this intent.
(iii) At the Effective Time, United shall assume Lothian's
obligations, and shall be assigned Lothian's repurchase rights and purchase
options entered into pursuant to the Lothian Stock Plan. Any and all
restrictions on Lothian Common Stock issued pursuant to Lothian Stock Plan or
such other agreements which do not lapse in accordance with their terms (as such
terms were in effect on the date of this Agreement) and which are not rights of
refusal shall continue in full force and effect until such restrictions lapse
pursuant to the terms of such agreements, and any repurchase rights or purchase
options which Lothian has with respect to the Lothian Stock Plan shall also
continue in full force and effect. The United Options issued in exchange for the
Lothian Options pursuant to this Section 1.6(c) shall be registered under the
Securities Act pursuant to an effective registration statement on Form S-8, as
provided in more detail in Section 4.10.
(d) Lothian Warrants. At the Effective Time each unexpired and
unexercised Lothian Warrant that is then outstanding, whether or not exercisable
and whether or not vested, shall be assumed by United and converted into a
warrant to purchase shares of United Common Stock or United Preferred Stock, as
the case may be (a "United Warrant") as provided herein. Each Lothian Warrant so
assumed by United under this Agreement shall continue to have, and be subject
to, the same terms and conditions as were applicable to such Lothian Warrant
immediately prior to the Effective Time, provided that (A) such Lothian Warrant
shall be exercisable for that number of whole shares of United Capital Stock
equal to the product of the number of shares of Lothian Capital Stock that were
issuable upon exercise in full of such Lothian Warrant immediately prior to the
Effective Time (without regard to vesting) multiplied by the Exchange Ratio
(rounded down to the nearest whole number of shares of United Common Stock) and
(B) the per share exercise price for the shares of United Capital Stock issuable
upon exercise of such assumed Lothian Warrant shall be equal to the quotient
determined by dividing the exercise price per share of Lothian Capital Stock at
which such Lothian Warrant was exercisable immediately prior to the Effective
Time by the Exchange Ratio (rounded up to the nearest whole cent). United shall,
at all times from and after the Effective Time, reserve, keep and make available
for issuance all shares of United Capital Stock that are issuable upon the
exercise in full of all United Warrants resulting from the assumption and
conversion of Lothian Warrants in accordance with this section and shall, as
promptly as practicable after the Effective Time, issue to each holder of a
Lothian Warrant that is outstanding immediately prior to the Effective Time a
document evidencing the foregoing assumption of such Lothian Warrant by United
and the conversion of such Lothian Warrant into a United Warrant as provided
herein.
4
(e) Exchange Ratio. The "Exchange Ratio" shall be .60606. The
Exchange Ratio shall be equitably adjusted to reflect fully the effect of any
stock split, reverse split, stock combination, stock dividend (including any
dividend or distribution of securities convertible into United Common Stock or
Lothian Capital Stock), reorganization, reclassification, recapitalization or
other like change with respect to United Common Stock or Lothian Capital Stock
occurring after the date hereof and prior to the Effective Time. No adjustment
shall be made to the Exchange Ratio as a result of any cancellation of any
Lothian Equity Security or any consideration (in any form whatsoever) received
by Lothian as a result of any exercise, conversion or exchange of Lothian Equity
Securities, after the Effective Time.
(f) Fractional Shares. No fraction of a share of United Capital
Stock will be issued in the Merger, but in lieu thereof, each holder of shares
of Lothian Capital Stock who would otherwise be entitled to a fraction of a
share of United Capital Stock but for the rounding required under Section 1.6(a)
(after aggregating all fractional shares of United Capital Stock to be received
by such holder) shall be entitled to receive from United an amount of cash
(rounded up to the nearest whole cent) equal to the product of (a) such
fraction, multiplied by (b) the average of the closing prices of United's Common
Stock for the ten (10) trading days ended on the last trading day prior to the
Effective Time (the "Closing Price").
(g) Intentionally Omitted.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Lothian Capital Stock held by a holder who has demanded
and perfected dissenters' rights for such shares in accordance with the DGCL,
who, as of the Effective Time, has not effectively withdrawn or lost such
dissenters' rights ("Dissenting Shares") shall not be converted into or
represent a right to receive United Capital Stock pursuant to Section 1.6
(except as provided in Section 1.7(b)) but the holder thereof shall only be
entitled to such rights as are granted by the DGCL.
5
(b) Notwithstanding the provisions of Section 1.7(a) above, if any
holder of shares of Lothian Capital Stock who demands purchase of such shares
under the DGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) such holder's dissenters' rights, then, as of the later of (i) the
Effective Time or (ii) the occurrence of such event, such holder's shares of
Lothian Capital Stock shall automatically be converted into and represent only
the right to receive United Capital Stock as provided in Section 1.6(a), without
interest thereon, upon surrender to Lothian of the certificate representing such
shares in accordance with Section 1.8 of this Agreement.
(c) Lothian shall give United (i) prompt notice of its receipt of
any written demands for purchase of any shares of Lothian Capital Stock,
withdrawals of such demands, and any other instruments relating to the Merger
served pursuant to the DGCL and received by Lothian and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands for
purchase of any shares of Lothian Capital Stock under the DGCL. Lothian shall
not, except with the prior written consent of United, which shall not be
unreasonably withheld, delayed or conditioned, or as may be required under
applicable Law, voluntarily make any payment with respect to any demands for
purchase of Lothian Capital Stock or offer to settle or settle any such demands.
1.8 Exchange Procedures.
(a) United Capital Stock. At the Effective Time, United shall
deposit with the Exchange Agent for exchange in accordance with this Article I,
the aggregate number of shares of United Common Stock, United Series A Preferred
Stock and United Series B Preferred Stock issuable in exchange for outstanding
shares of Lothian Capital Stock pursuant to Section 1.6 and cash in an amount
sufficient to permit the payment of all cash payable in lieu of fractional
shares pursuant to Section 1.6(f).
(b) Exchange Procedures. As soon as practicable after the
Effective Time, but in no event later than two (2) business days after the
Effective Time, United shall cause to be mailed to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Lothian Capital Stock (the "Certificates") and
which shares were converted into the right to receive shares of United Capital
Stock pursuant to Section 1.6, (i) a letter of transmittal in the form attached
hereto as Exhibit C and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of United
Capital Stock and cash in lieu of fractional shares. Upon surrender of a
Certificate for cancellation (or, if such Certificate is lost, of a lost
Certificate affidavit and indemnity agreement in customary form) to the Exchange
Agent or to such other agent or agents as may be appointed by United, together
with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, the holder of such Certificate shall
be entitled to receive in exchange therefor a certificate representing the
number of whole shares of United Capital Stock, to which such holder is entitled
pursuant to Section 1.6 and cash in lieu of fractional shares pursuant to
Section 1.6(f), and the Certificate so surrendered shall be canceled. Until
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Lothian Capital Stock will be deemed from and after the
Effective Time, for all corporate purposes, to evidence the ownership of the
number of full shares of United Capital Stock into which such shares of Lothian
Capital Stock shall have been so converted and the right to receive cash in lieu
of fractional shares as provided herein.
(c) Distributions With Respect to Unexchanged Shares of Lothian
Capital Stock. No dividends or other distributions with respect to United
Capital Stock declared or made after the Effective Time and with a record date
after the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the shares of United Capital Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate as provided in Section 1.8 or otherwise accepted by United. Subject
to applicable Law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
United Capital Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore payable (but for the provisions of
this Section 1.8(c)) with respect to such whole shares of United Capital Stock.
6
(d) Transfers of Ownership. If any certificate for shares of United
Capital Stock is to be issued pursuant to the Merger in a name other than that
in which the Certificate surrendered in exchange therefor is registered, it will
be a condition of the issuance thereof that the Certificate so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to United or any agent designated
by it any transfer or other taxes required by reason of the issuance of a
certificate for shares of United Capital Stock in any name other than that of
the registered holder of the Certificate surrendered, or established to the
satisfaction of United or any agent designated by it that such tax has been paid
or is not payable.
1.9 No Further Ownership Rights in Lothian Capital Stock. All shares of
United Capital Stock issued upon the surrender for exchange of shares of Lothian
Capital Stock in accordance with the terms hereof (including any cash in lieu of
fractional shares) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Lothian Capital Stock, and there shall
be no further registration of transfers on the records of Lothian of shares of
Lothian Capital Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the owner of such lost,
stolen or destroyed Certificates shall provide United with an affidavit of that
fact and indemnity in standard form.
1.11 Further Action. If, at any time after the Effective Time, any such
further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
Lothian, the officers and directors of the Surviving Corporation are fully
authorized to take, and will take, all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LOTHIAN
Lothian hereby represents and warrants to United, subject to such
exceptions and qualifications as are specifically disclosed in the Lothian
disclosure schedule and schedule of exceptions of Lothian (the "Lothian
Disclosure Schedule") delivered herewith and dated as of the date hereof as
follows:
2.1 Organization and Qualification. Lothian and each of the Lothian
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the Laws of the state or province of its incorporation, and has
all requisite corporate power and authority to conduct its business as now
conducted and as currently proposed to be conducted and to own, use, license and
lease its Assets and Properties. Lothian and each of the Lothian Subsidiaries is
duly qualified, licensed or admitted to do business and is in good standing as a
foreign corporation in each jurisdiction in which the ownership, use, licensing
or leasing of its Assets and Properties, or the conduct or nature of its
businesses, makes such qualification, licensing or admission necessary, except
for such failures to be so duly qualified, licensed or admitted and in good
standing that could not reasonably be expected to have a Material Adverse Effect
on Lothian. Section 2.1 of the Lothian Disclosure Schedule sets forth each
jurisdiction where Lothian and each of the Lothian Subsidiaries is so qualified
to do business and separately lists each other jurisdiction in which Lothian and
each of the Lothian Subsidiaries owns, uses, licenses or leases any material
Assets or Properties, has established a local office or other permanent local
presence or has employees or engages independent contractors.
7
2.2 Authority Relative to This Agreement. Subject only to the requisite
approval of the Merger, this Agreement and the other agreements attached as
exhibits hereto (the "Ancillary Agreements") by the stockholders of Lothian,
Lothian has all requisite corporate power and authority to execute and deliver
this Agreement and the Ancillary Agreements to which it is a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by Lothian of this
Agreement and the Ancillary Agreements to which Lothian is a party and the
consummation by Lothian of the transactions contemplated hereby and thereby, and
the performance by Lothian of its obligations hereunder and thereunder, have
been duly and validly authorized by all necessary action by the Board of
Directors of Lothian, and no other action on the part of the Board of Directors
of Lothian is required to authorize the execution, delivery and performance of
this Agreement and the Ancillary Agreements to which Lothian is a party by
Lothian and the consummation by Lothian of the transactions contemplated hereby
and thereby. This Agreement and the Ancillary Agreements to which Lothian is a
party have been duly and validly executed and delivered by Lothian and, assuming
the due authorization and valid execution and delivery of this Agreement by
United and each Ancillary Agreement by each party (other than Lothian) to such
Ancillary Agreement, each constitutes a legal, valid and binding obligation of
Lothian enforceable against Lothian in accordance with its respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar Laws relating
to the enforcement of creditors' rights generally and by general principles of
equity.
2.3 Capitalization. The authorized capital stock of Lothian consists
only of 95,000,000 shares of common stock, $0.001 par value per share (the
"Lothian Common Stock"), of which 27,286,828 shares of Lothian Common Stock are
issued and outstanding, and 5,000,000 shares of Preferred Stock, $0.001 par
value per share (the "Lothian Preferred Stock"). The designation and status of
Lothian Preferred Stock is as follows: (i) 220,000 shares are designated as
Series A Convertible Preferred Stock, of which 170,416 shares are issued and
outstanding (the "Lothian Series A Preferred Stock"), (ii) 50,000 shares are
designated as Series B-1 Convertible Preferred Stock, of which 50,000 shares are
issued and outstanding (the "Lothian Series B-1 Preferred Stock"), and (iii)
75,000 shares are designated Series B-2 Convertible Preferred Stock, none of
which are issued or outstanding, but all of which are reserved for issuance in
connection with Lothian Warrants (the "Lothian Series B-2 Preferred Stock"). All
of the issued and outstanding shares of Lothian Common Stock and Lothian
Preferred Stock are validly issued, fully paid and nonassessable, and have been
issued in compliance with all applicable federal, state and foreign securities
Laws. Except as set forth in Section 2.3 of the Lothian Disclosure Schedule, (a)
no shares of Lothian Common Stock or Lothian Preferred Stock are held in
treasury or are authorized or reserved for issuance and (b) no Options are
outstanding. Section 2.3 of the Lothian Disclosure Schedule lists the name (and,
if such holder is not an employee of Lothian, the address) of such holder of
Lothian Common Stock, Lothian Preferred Stock, Lothian Option and Lothian
Warrant. Except as set forth Section 2.3 of the Lothian Disclosure Schedule,
there are no agreements, arrangements or understandings to which Lothian is a
party (written or oral) to issue any Options with respect to Lothian and there
are no preemptive rights or agreements, arrangements or understandings to issue
preemptive rights with respect to the issuance or sale of Lothian Capital Stock
created by statute, the Certificate of incorporation or Bylaws of Lothian, or
any agreement or other arrangement to which Lothian is a party or to which it is
bound and there are no agreements, arrangements or understandings to which
Lothian is a party (written or oral) pursuant to which Lothian has the right to
elect to satisfy any Liability by issuing Lothian Common Stock or Equity
Equivalents. With respect to each Lothian Option and each Lothian Warrant,
Section 2.3 of the Lothian Disclosure Schedule sets forth the holder thereof,
the number and type of securities issuable thereunder, and, if applicable, the
exercise price therefor, the exercise period and vesting schedule thereof
(including a description of the circumstances under which such vesting schedule
can or will be accelerated). All Lothian Options and Lothian Warrants were
issued in compliance with all applicable federal, state and foreign securities
Laws. Except as set forth in Section 2.3 of the Lothian Disclosure Schedule,
Lothian is not a party or subject to any agreement or understanding, and, to
Lothian's knowledge, there is no agreement, arrangement or understanding between
or among any Persons which affects, restricts or relates to voting, giving of
written consents, dividend rights or transferability of shares with respect to
Lothian Capital Stock, including any voting trust agreement or proxy.
8
2.4 Subsidiaries. Lothian Oil Texas I, Inc., a Texas corporation,
Lothian Oil Texas II, Inc., a Texas corporation and Lothian Oil (USA), Inc., a
Texas corporation (together, the "Lothian Subsidiaries", each, a "Lothian
Subsidiary") are each a wholly-owned subsidiary of Lothian. Except for Lothian
Subsidiaries, Lothian has (and prior to the Closing will have) no Subsidiaries
and does not (and prior to the Closing will not) otherwise hold any equity,
membership, partnership, joint venture or other ownership interest in any
Person. There are no outstanding options, warrants, or other rights to acquire
capital stock of the Lothian Subsidiaries or securities convertible into or
exchangeable for such stock.
2.5 No Conflicts. The execution and delivery by Lothian of this
Agreement does not, and the performance by Lothian of its obligations under this
Agreement and the consummation of the transactions contemplated hereby do not
and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or Bylaws of
Lothian or the Lothian Subsidiaries;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 2.5 of the
Lothian Disclosure Schedule, if any, conflict with or result in a violation or
breach of any Law or Order applicable to Lothian or the Lothian Subsidiaries or
any of their respective Assets and Properties; or
(c) except as would not have a Material Adverse Effect on Lothian
(i) conflict with or result in a violation or breach of, (ii) constitute a
default (or an event that, with or without notice or lapse of time or both,
would constitute a default) under, (iii) require Lothian or the Lothian
Subsidiaries to obtain any consent, approval or action of, make any filing with
or give any notice to any Person (other than the filing of the Delaware
Certificate of Merger together with the required officers' certificates, any
filing required under the HSR Act in connection with the Merger and such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under state or federal securities Laws) as a result
or under the terms of, (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments or performance under,
(vi) result in the creation or imposition of (or the obligation to create or
impose) any material Lien upon Lothian or the Lothian Subsidiaries or any of
their respective material Assets or Properties, or (vii) result in the loss of a
material benefit under any material Contract or License to which Lothian or the
Lothian Subsidiaries is or are a party or by which any of Lothian's or the
Lothian Subsidiaries' material Assets and Properties are bound.
9
2.6 Books and Records; Organizational Documents. The minute books and
stock record books and other similar records of Lothian and the Lothian
Subsidiaries have been provided or made available to United or its counsel prior
to the execution of this Agreement, are complete and correct in all material
respects and have been maintained in accordance with customary business
practices. Such minute books contain a true and complete record of all actions
taken at all meetings and by all written consents in lieu of meetings of the
directors, stockholders and committees of the Board of Directors of Lothian and
the Lothian Subsidiaries from the date of Lothian's and the Lothian
Subsidiaries' respective incorporation through the date hereof. Lothian has,
prior to the execution of this Agreement, delivered to United true and complete
copies of its and the Lothian Subsidiaries' Certificates of Incorporation and
Bylaws, as amended through the date hereof. Neither Lothian nor any of the
Lothian Subsidiaries is in violation of any provisions of its Certificate of
Incorporation or Bylaws as so amended.
2.7 Lothian Financial Statements. Schedule 2.7 to the Lothian
Disclosure Schedule sets forth the Lothian Financials. Lothian Financials
delivered to United are correct and complete in all material respects and have
been prepared in accordance with GAAP applied on a basis consistent throughout
the periods indicated (except, with respect to any Lothian Financials that are
unaudited, for the absence of notes thereto and the effect of the absence of
notes thereto and the effect of the absence of year-end audit adjustments) and
consistent with each other (except as indicated in the notes thereto, as
delivered to United prior to the date hereof). Lothian Financials present fairly
the financial condition and operating results of Lothian as of the dates and
during the periods indicated therein. Since the Lothian Financial Statement
Date, there has been no change in any accounting policies, principles, methods
or practices, including any material change with respect to reserves (whether
for bad debts, contingent liabilities or otherwise), of Lothian.
2.8 Absence of Changes. Except as set forth in Section 2.8 of the
Lothian Disclosure Schedule, since the Lothian Financial Statement Date, there
has not been any material adverse change in the Business or Condition of Lothian
or any occurrence or event which, individually or in the aggregate, is
reasonably expected to have Material Adverse Effect on Lothian. In addition,
without limiting the generality of the foregoing, except as expressly
contemplated by this Agreement, or otherwise set forth in Section 2.8 of the
Lothian Disclosure Schedule, since the Lothian Financial Statement Date:
(a) neither Lothian nor the Lothian Subsidiaries has entered into
any material Contract or other material commitment or transaction;
(b) there has not been any material amendment or other material
modification (or agreement to do so), or material violation of the terms of, any
of the material Contracts set forth or described in Section 2.16(a)(1) of the
Lothian Disclosure Schedule;
10
(c) there has not been any amendment to Lothian's Certificate of
Incorporation or Bylaws;
(d) there has not been any transfer (by way of a License or
otherwise) to any Person of rights to any material Lothian Intellectual
Property, other than licenses in the ordinary course of business consistent with
past practice;
(e) neither Lothian nor the Lothian Subsidiaries has made any
change in accounting policies, principles, methods, practices or procedures
(including for bad debts, contingent liabilities or otherwise, respecting
capitalization or expense of research and development expenditures, depreciation
or amortization rates or timing of recognition of income and expense);
(f) Lothian has taken all commercially reasonable action required
to maintain, renew, extend or enforce any material Lothian Intellectual
Property;
(g) there has been no physical damage, destruction or other
casualty loss (whether or not covered by insurance) affecting any of the real or
personal property or equipment of Lothian or in an amount exceeding one hundred
thousand dollars ($100,000) individually or two hundred fifty thousand dollars
($250,000) in the aggregate; and
(h) neither Lothian nor the Lothian Subsidiaries has entered into
or approved any contract, arrangement or understanding or acquiesced in respect
of any arrangement or understanding, to do, engage in or cause or having the
effect of any of the foregoing.
2.9 No Undisclosed Liabilities. Except as reflected or reserved against
in Lothian Financials (including the notes thereto) or otherwise set forth in
Section 2.9 of the Lothian Disclosure Schedule, Lothian has no material
Liabilities, other than Liabilities incurred in the ordinary course of business
consistent with past practice since the Lothian Financial Statement Date.
2.10 Taxes.
(a) All Tax Returns, statements, reports, declarations and other
forms and documents (including without limitation estimated Tax Returns and
reports and material information statements, returns and reports) required to be
filed with any Taxing Authority with respect to any Taxable period ending on or
before the Effective Time, by or on behalf of Lothian, have been or will be
completed and filed when due (including any extensions of such due date) and all
amounts shown due on such Tax Returns on or before the Effective Time have been
or will be paid on or before such date. All such Tax Returns are true, accurate
and complete as filed. The Lothian December 31, 2005 unaudited balance sheet
included in the Lothian Financial Statements (the "Lothian Balance Sheet") (i)
fully accrues all Lothian's actual and contingent liabilities for Taxes with
respect to all periods through December 31, 2005 and Lothian has not and will
not incur any Tax liability in excess of the amount reflected on such Lothian
Balance Sheet with respect to such periods (excluding any amount thereof that
reflects timing differences between the recognition of income for purposes of
GAAP and for Tax purposes), and (ii) properly accrues in accordance with GAAP
all material liabilities for Taxes payable after December 31, 2005 with respect
to all transactions and events occurring on or prior to such date. All
information set forth in the notes to the Lothian Financial Statements relating
to Tax matters is true, complete and accurate in all material respects. No
material Tax liability since December 31, 2005 has been or will be incurred by
Lothian other than in the ordinary course of business, and adequate provision
has been made by Lothian for all Taxes since that date in accordance with GAAP
on at least a quarterly basis.
11
(b) Lothian has previously provided or made available to United
true and correct copies of all Tax Returns. Lothian has withheld and paid to the
applicable financial institution or Taxing Authority all amounts required to be
withheld. Lothian (or any member of any affiliated or combined group of which
Lothian has been a member) has not granted any extension or waiver of the
limitation period applicable to any Tax Returns that is still in effect. There
is no material claim, audit, action, suit, proceeding, or (to the knowledge of
Lothian) investigation now pending or (to the knowledge of Lothian) threatened
against or with respect to Lothian in respect of any Tax or assessment. No
notice of deficiency or similar document of any Taxing Authority asserting that
Lothian has unpaid Tax liability has been received by Lothian, and there are no
liabilities for Taxes (including liabilities for interest, additions to Tax and
penalties thereon and related expenses) with respect to the issues that have
been raised (and are currently pending) by any Taxing Authority that could, if
determined adversely to Lothian, materially and adversely affect the liability
of Lothian for Taxes. There are no liens for Taxes (other than for current Taxes
not yet due and payable) upon the assets of Lothian. Lothian has never been a
member of an affiliated group of corporations, within the meaning of Section
1504 of the Code. Lothian is in full compliance with all the terms and
conditions of any Tax exemptions or other Tax-sharing agreement or order of a
foreign government and the consummation of the Merger will not have any adverse
effect on the continued validity and effectiveness of any such Tax exemption or
other Tax-sharing agreement or order. Neither Lothian nor any Person on behalf
of Lothian has entered into or will enter into any agreement or consent pursuant
to the collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income tax Law) or agreed to
have Section 341(f)(2) of the Code (or any corresponding provision of state,
local or foreign income tax Law) apply to any disposition of any asset owned by
Lothian. None of the assets of Lothian is property that Lothian is required to
treat as being owned by any other Person pursuant to the so-called "safe harbor
lease" provisions of former Section 168(f)(8) of the Code. None of the assets of
Lothian directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code. None of the assets of Lothian is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
Lothian has not made and will not make a deemed dividend election under Treas.
Reg. Section 1.1502-32(f)(2) or a consent dividend election under Section 565 of
the Code. Lothian has never been a party (either as a distributing corporation
or as a corporation that has been distributed) to any transaction intended to
qualify under Section 355 of the Code or any corresponding provision of state
Law. Lothian does not have and has not had a permanent establishment in any
foreign country, as defined in any applicable tax treaty or convention between
the United States of America and any such foreign country. Lothian has never
elected to be treated as an S-corporation under Section 1362 of the Code or any
corresponding provision of federal or state Law. All material elections with
respect to Lothian's Taxes made during the fiscal year ending, March 31, 2005
are reflected on the Lothian Tax Returns for such period, a copy of which have
been provided or made available to United. After the date of this Agreement, no
material election with respect to Taxes not made in the ordinary course of
business will be made without the prior written consent of United, which consent
will not be unreasonably withheld or delayed. Lothian is not party to any joint
venture, partnership, or other arrangement or contract which could be treated as
a partnership for federal income tax purposes. Lothian is not currently, and
never has been, subject to the reporting requirements of Section 6038A of the
Code. There is no agreement, contract or arrangement to which Lothian is a party
that could, individually or collectively, result in the payment of any amount
that would not be deductible by reason of Sections 280G (as determined without
regard to Section 280G(b)(4) and (5)), 162(a) (by reason of being unreasonable
in amount), 162 (b) through (p) or 404 of the Code. Lothian is not a party to or
bound by any Tax indemnity, Tax sharing or Tax allocation agreement (whether
written or unwritten or arising under operation of federal Law as a result of
being a member of a group filing consolidated Tax Returns, under operation of
certain state Laws as a result of being a member of a unitary group, or under
comparable Laws of other states or foreign jurisdictions) which includes a party
other than Lothian nor does Lothian owe any amount under any such Agreement.
Lothian is not, and has not been, a United States real property holding
corporation (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. Other than by reason
of the Merger, Lothian has not been and will not be required to include any
material adjustment in Taxable income for any Tax period (or portion thereof)
pursuant to Section 481 or 263A of the Code or any comparable provision under
state or foreign Tax Laws as a result of transactions, events or accounting
methods employed prior to the Merger.
12
(c) As used in this Section 2.10, the term "Lothian" means Lothian
and any entity included in, or required under GAAP to be included in, any of the
Lothian Financials.
2.11 Legal Proceedings. Except as set forth in Section 2.11 of the
Lothian Disclosure Schedule:
(a) there are no Actions or Proceedings pending or, to the
knowledge of Lothian, threatened against, relating to or affecting Lothian or
the Lothian Subsidiaries or their respective Assets and Properties; and
(b) neither Lothian nor the Lothian Subsidiaries has received
notice, and does not otherwise have knowledge of any Orders outstanding against
Lothian or the Lothian Subsidiaries.
2.12 Compliance with Laws and Orders. Neither Lothian nor any Lothian
Subsidiary has violated in any material respect, and is not currently in default
in any material respect under, any Law or Order applicable to Lothian or Lothian
Subsidiary or any of their respective Assets and Properties.
2.13 Employee Benefit Plans.
(a) Except for the plans and agreements listed in Section 2.13 of
the Lothian Disclosure Schedule (collectively, the "Plans"), neither Lothian nor
the Lothian Subsidiaries maintains, is a party to, contributes to or is
obligated to contribute to, and neither Lothian's nor the Lothian Subsidiaries'
employees or former employees and their dependents or survivors receive benefits
under, any of the following (whether or not set forth in a written document):
(i) any employee benefit plan, as defined in section 3(3)
of ERISA;
(ii) any bonus, deferred compensation, incentive, restricted
stock, stock purchase, stock option, stock appreciation right, phantom stock,
supplemental pension, executive compensation, cafeteria benefit, dependent care,
director or employee loan, fringe benefit, sabbatical, severance, termination
pay or similar plan, program, policy, agreement or arrangement (other than any
such item provided solely pursuant to the terms of a written or oral contract
with any individual employee that is disclosed in Section 2.13 of the Lothian
Disclosure Schedule); or
13
(iii) any plan, program, agreement, policy, commitment or
other arrangement relating to the provision of any benefit described in section
3(1) of ERISA to former employees or directors or to their survivors, other than
procedures intended to comply with COBRA.
(b) Neither Lothian nor any ERISA Affiliate has, since December
31, 2005, terminated, suspended, discontinued contributions to or withdrawn from
any employee pension benefit plan, as defined in section 3(2) of ERISA,
including (without limitation) any multiemployer plan, as defined in section
3(37) of ERISA.
(c) Lothian has agreed to provide to United prior to Closing
complete, accurate and current copies of each of the following:
(i) The text (including amendments) of each of the Plans,
to the extent reduced to writing;
(ii) A summary of each of the Plans, to the extent not
previously reduced to writing;
(iii) With respect to each Plan that is an employee benefit
plan (as defined in section 3(3) of ERISA), the following:
(A) The most recent summary plan description that has
been prepared, as described in section 102 of ERISA;
(B) Any summary of material modifications that has been
distributed to participants or filed with the U.S. Department of Labor but that
has not been incorporated in an updated summary plan description furnished under
Subparagraph (A) above; and
(C) The annual report, as described in section 103 of
ERISA, and (where applicable) actuarial reports, for the most recent plan year
for which an annual report or actuarial report has been prepared; and
(iv) With respect to each Plan that is intended to qualify
under section 401(a) of the Code, the most recent determination letter
concerning the Plan's qualification under section 401(a) of the Code, as issued
by the IRS, and any subsequent determination letter application.
(d) With respect to each Plan that is an employee benefit plan (as
defined in section 3(3) of ERISA), the requirements of ERISA applicable to such
Plan have been satisfied, except to the extent that a failure to satisfy any of
such requirements would not have a Material Adverse Effect.
(e) With respect to each Plan that is subject to COBRA, the
requirements of COBRA applicable to such Plan have been satisfied, except to the
extent that a failure to satisfy any of such requirements would not have a
Material Adverse Effect.
(f) With respect to each Plan that is subject to the Family
Medical Leave Act of 1993, as amended, the requirements of such Act applicable
to such Plan have been satisfied, except to the extent that a failure to satisfy
any of such requirements would not have a Material Adverse Effect.
14
(g) Each Plan that is intended to qualify under section 401(a) of
the Code meets the requirements for qualification under section 401(a) of the
Code and the regulations thereunder, except to the extent that such requirements
may be satisfied by adopting retroactive amendments under section 401(b) of the
Code and the regulations thereunder. Each such Plan has been administered in
accordance with its terms (or, if applicable, such terms as will be adopted
pursuant to a retroactive amendment under section 401(b) of the Code) and the
applicable provisions of ERISA and the Code and the regulations thereunder,
except to the extent that a failure to be so administered would not have a
Material Adverse Effect.
(h) Neither Lothian nor any ERISA Affiliate has any accumulated
funding deficiency under section 412 of the Code or any termination or
withdrawal liability under Title IV of ERISA. For purposes of determining any
accumulated funding deficiency under section 412 of the Code, the term "ERISA
Affiliate" shall include any entity that is deemed to be a member of the same
"controlled group" within the meaning of section 414(m) or (o) of the Code.
(i) All contributions, premiums or other payments due from Lothian
or the Lothian Subsidiaries to (or under) any Plan have been fully paid or
adequately provided for on the books and financial statements of Lothian or the
Lothian Subsidiaries. All accruals (including, where appropriate, proportional
accruals for partial periods) have been made in accordance with prior practices.
(j) Except as disclosed in Section 2.13 of the Lothian Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
(excluding any employment agreement with United entered into by any employee or
director of Lothian in connection with this Agreement) will not result in (i)
any amount becoming payable to any employee, director or independent contractor
of Lothian or the Lothian Subsidiaries, (ii) the acceleration of payment or
vesting of any benefit, option or right to which any employee, director or
independent contractor of Lothian or the Lothian Subsidiaries may be entitled,
(iii) the forgiveness of any Indebtedness of any employee, director or
independent contractor of Lothian or the Lothian Subsidiaries or (iv) any cost
becoming due or accruing to Lothian or the Lothian Subsidiaries or United with
respect to any employee, director or independent contractor of Lothian or the
Lothian Subsidiaries.
(k) Other than routine claims for benefits under the Plans, there
are no pending, or, to the best knowledge of Lothian, threatened Actions or
Proceedings involving the Plans, or the fiduciaries, administrators, or trustees
of any of the Plans or Lothian or the Lothian Subsidiaries or any of their ERISA
Affiliates as the employer or sponsor under any Plan, with any of the IRS, the
Department of Labor, the PBGC, any participant in or beneficiary of any Plan or
any other Person whomsoever. None of Lothian or any Lothian Subsidiary knows of
any reasonable basis for any such claim, lawsuit, dispute, action or
controversy.
2.14 Title to Property. Except for title to Lothian Intellectual
Property, which is covered by Section 2.15 below, and except as set forth in
Section 2.14 of the Lothian Disclosure Schedule, Lothian and the Lothian
Subsidiaries have good and marketable title to all of their respective material
properties, interests in properties and assets, real and personal, reflected in
Lothian Financials or acquired after the Lothian Financial Statement Date
(except properties, interests in properties and assets sold or otherwise
disposed of since the Lothian Financial Statement Date in the ordinary course of
business), free and clear of all material mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (i) liens for current taxes not
yet due and payable, (ii) such imperfections of title, liens and easements as do
not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties and (iii) liens securing debt
which is reflected on Lothian Financials. The plants, property and equipment of
Lothian and the Lothian Subsidiaries that are used in the operations of its
businesses are in good operating condition and repair, subject to normal wear
and tear. All properties used in the operations of Lothian and the Lothian
Subsidiaries are reflected in Lothian Financials to the extent generally
accepted accounting principles required the same to be reflected as of the dates
of such Lothian Financials. With respect to properties and assets leased by
Lothian and the Lothian Subsidiaries, Lothian and each Lothian Subsidiary, as
applicable, holds valid leasehold interests in such properties and assets in
accordance with the terms of the agreements governing such leases.
15
2.15 Intellectual Property.
(a) Lothian has all requisite right, title and interest in or valid
and enforceable rights under Contracts or Licenses to use all Lothian
Intellectual Property necessary to the conduct of its business as presently
conducted. Each item of Lothian Intellectual Property, either is owned
exclusively by Lothian, free and clear of any Liens, or is licensed to Lothian
under a valid License granting sufficient rights to permit Lothian to conduct
its business as presently conducted. To the best of its knowledge, Lothian owns
or has the valid right to use all trademarks, service marks and trade names used
by Lothian in connection with the operation or conduct of the business of
Lothian, including the sale of any products or technology or the provision of
any services by Lothian. Lothian owns exclusively, and has good title to, all
copyrighted works that are Lothian products or other works of authorship that
Lothian otherwise purports to own; provided, however, that such works may
incorporate copyrighted works or works of authorship, trademarks or trade names
of third parties which are licensed to Lothian or are in the public domain.
Except pursuant to agreements in the ordinary course of business, neither
Lothian nor the Lothian Subsidiaries has transferred ownership of any Lothian
Intellectual Property to any other Person.
(b) To the extent that any Lothian Intellectual Property that
is material to Lothian's business has been developed or created by any Person
other than Lothian, Lothian has a written agreement with such Person with
respect thereto and Lothian has either (i) obtained ownership of, and is the
exclusive owner of, all such Intellectual Property by operation of Law or by
valid assignment of any such rights or (ii) obtained a License under or to such
Intellectual Property.
(c) The operation of the business of Lothian as currently
conducted, including Lothian's design, development, use, import, manufacture and
sale of the products, technology or services (including products, technology or
services currently under development) of Lothian: (i) does not infringe the
copyright or misappropriate the trade secrets of any Person; (ii) to the best of
Lothian's knowledge, does not infringe the patent rights or trademark rights of
any Person; (iii) does not violate in any material respect the rights of any
Person (including rights to privacy or publicity other than patent rights or
trademark rights described above); and, (iv) does not constitute unfair
competition or an unfair trade practice under any Law. None of Lothian or any
Lothian Subsidiary has received notice from any Person claiming that such
operation or any act, product, technology or service (including products,
technology or services currently under development) of Lothian or the Lothian
Subsidiaries infringes or misappropriates the Intellectual Property of any
Person or constitutes unfair competition or trade practices under any Law.
16
(d) Each item of Lothian Registered Intellectual Property is valid
and subsisting, and all necessary registration, maintenance, renewal fees,
annuity fees and taxes in connection with such Registered Intellectual Property
have been paid and all necessary documents and certificates in connection with
such Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions in which such Registered Intellectual Property is registered, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property.
(e) There are no Contracts or Licenses between Lothian and any
other Person with respect to Lothian Intellectual Property under which there is
any dispute known to Lothian regarding the scope of such Contract or License, or
performance under such Contract or License, including any dispute with respect
to any payments to be made or received by Lothian thereunder.
(f) Lothian has taken all requisite commercially reasonable steps
to maintain and preserve the confidentiality of Lothian's confidential
information and trade secrets of Lothian or any similar information provided by
any other Person to Lothian subject to a duty of confidentiality. Without
limiting the generality of the foregoing, Lothian has, and enforces, a policy
requiring each employee, consultant and independent contractor to execute
proprietary information, confidentiality and invention assignment agreements.
2.16 Contracts.
(a) Section 2.16(a)(1) of the Lothian Disclosure Schedule contains
a true and complete list of each of Lothian's and the Lothian Subsidiaries'
Contracts that are material to Lothian's business, operations or financial
condition (true and complete copies or, if none, reasonably complete and
accurate written descriptions of which, together with all amendments and
supplements thereto and all waivers of any terms thereof, have been made
available to United prior to the execution of this Agreement).
(b) Each Contract required to be disclosed in Section 2.16(a) of
the Lothian Disclosure Schedule is in full force and effect and constitutes a
legal, valid and binding agreement of Lothian or the Lothian Subsidiaries,
enforceable against Lothian or the Lothian Subsidiaries in accordance with its
terms (subject to the effect of bankruptcy and other Laws affecting the rights
of creditors generally and limitations on the enforcement of contracts under
principles of equity), and, to the knowledge of Lothian, each other party
thereto (subject to the effect of bankruptcy and other Laws affecting the rights
of creditors generally and limitations on the enforcement of contracts under
principles of equity), and, to the knowledge of Lothian, no other party to such
Contract is, nor has received notice that it is, in material violation or breach
of or default under any such Contract (or with notice or lapse of time or both,
would be in material violation or breach of or default under any such Contract).
(c) None of Lothian or any Lothian Subsidiary is a party to or
bound by any Contract that (i) automatically terminates or allows termination by
the other party thereto upon consummation of the transactions contemplated by
this Agreement or (ii) contains any covenant or other provision which limits
Lothian's or the Lothian Subsidiaries' ability to compete with any Person in any
line of business or in any area or territory.
17
2.17 Insurance. Lothian and the Lothian Subsidiaries have policies of
insurance and bonds of the type and in amounts customarily carried by companies
conducting businesses or owning assets similar to those of Lothian and Lothian
Subsidiary. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and Lothian and the Lothian Subsidiaries
are otherwise in compliance with the terms of such policies and bonds. None of
Lothian or any Lothian Subsidiary has knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.
2.18 Affiliate Transactions. Except as disclosed in Section 2.18 of the
Lothian Disclosure Schedule, and except for any stock purchase agreements, stock
option agreements, the Lothian Warrants and invention assignment or
confidentiality agreements in favor of Lothian or the Lothian Subsidiaries, (i)
there are no Contracts or Liabilities between Lothian or the Lothian
Subsidiaries, on the one hand, and (A) any current or former officer, director,
stockholder, or to Lothian's knowledge, any Affiliate or Associate of Lothian or
a Lothian Subsidiary or (B) any Person who, to Lothian's knowledge, is an
Associate of any such officer, director, stockholder or Affiliate, on the other
hand, (ii) neither Lothian nor the Lothian Subsidiaries provides or causes to be
provided any assets, services or facilities to any such current or former
officer, director, stockholder, Affiliate or Associate, (iii) none of Lothian,
any Lothian Subsidiary or any of their respective current or former officers,
directors, stockholders, Affiliates or Associates provides or causes to be
provided any assets, services or facilities to Lothian or the Lothian
Subsidiaries and (iv) none of Lothian or any Lothian Subsidiary beneficially
owns, directly or indirectly, any Investment Assets of any of their respective
current or former officers, directors, stockholders, Affiliates or Associates.
2.19 Employees; Labor Relations.
(a) None of Lothian or any Lothian Subsidiary is a party to any
collective bargaining agreement and there are no unfair labor practice or labor
arbitration proceedings pending with respect to Lothian or the Lothian
Subsidiaries, or, to the knowledge of Lothian, threatened, and there are no
facts or circumstances known to Lothian that could reasonably be expected to
give rise to such complaint or claim. To the knowledge of Lothian, there are no
organizational efforts presently underway or threatened involving any employees
of Lothian or the Lothian Subsidiaries or any of the employees performing work
for Lothian or the Lothian Subsidiaries but those provided by an outside
employment agency, if any. There has been no work stoppage, strike or other
concerted action by employees of Lothian or any Lothian Subsidiary.
(b) Except as set forth in Section 2.19(b) of the Lothian
Disclosure Schedule, all employees of Lothian and the Lothian Subsidiaries are
employed at will. Section 2.19(b) of the Lothian Disclosure Schedule sets forth,
individually and by category, the name of each officer, employee and consultant,
together with such person's position or function, annual base salary or wage and
any incentive, severance or bonus arrangements with respect to such person. To
the knowledge of Lothian or the Lothian Subsidiaries, no employee of Lothian any
Lothian Subsidiary has made any threat, or otherwise revealed his or her intent,
to terminate such employee's relationship with Lothian or the Lothian
Subsidiaries, for any reason, including because of the consummation of the
transactions contemplated by this Agreement. None of Lothian or any Lothian
Subsidiary is a party to any agreement for the provision of labor from any
outside agency. To the knowledge of Lothian or the Lothian Subsidiaries, there
have been no claims by employees of such outside agencies, if any, with regard
to employees assigned to work for Lothian or any Lothian Subsidiary, and no
claims by any Governmental or Regulatory Authority with regard to such employees
except as set forth in Section 2.19(b) of the Lothian Disclosure Schedule.
18
(c) There have been no federal or state claims based on sex, sexual
or other harassment, age, disability, race or other discrimination or common Law
claims, including claims of wrongful termination, by any employees of Lothian or
the Lothian Subsidiaries or by any of the employees performing work for Lothian
or the Lothian Subsidiaries but those provided by an outside employment agency,
and there are no facts or circumstances known to Lothian that could reasonably
be expected to give rise to such complaint or claim. Both Lothian and the
Lothian Subsidiaries have complied in all material respects with all Laws
related to the employment of employees and, except as set forth in Section
2.19(c) of the Lothian Disclosure Schedule, neither Lothian nor the Lothian
Subsidiaries has received any notice of any claim that it has not complied in
any material respect with any Laws relating to the employment of employees,
including any provisions thereof relating to wages, hours, collective
bargaining, the payment of Social Security and similar taxes, equal employment
opportunity, employment discrimination, the Worker Adjustment and Retraining
Notification Act, employee safety, or that it is liable for any arrearages of
wages or any taxes or penalties for failure to comply with any of the foregoing.
(d) None of Lothian or any Lothian Subsidiary has written policies
and/or employee handbooks or manuals except as described in Section 2.19(d) of
the Lothian Disclosure Schedule.
(e) To the knowledge of Lothian, no officer, employee or consultant
of Lothian or the Lothian Subsidiaries is obligated under any Contract or other
agreement or subject to any Order or Law that would interfere with Lothian's or
the Lothian Subsidiaries' businesses as currently conducted. To the knowledge of
Lothian, neither the execution nor delivery of this Agreement, nor the carrying
on of Lothian's or the Lothian Subsidiaries' businesses as presently conducted
nor any activity of such officers, employees or consultants in connection with
the carrying on of Lothian's or Lothian Subsidiaries' businesses as presently
conducted, will conflict with or result in a breach of the terms, conditions or
provisions of, constitute a default under, or trigger a condition precedent to
any rights under, any Contract or other agreement under which any of such
officers, employees or consultants is now bound.
(f) Lothian and the Lothian Subsidiaries have complied in all
material respects with the verification requirements and the record-keeping
requirements of the Immigration Reform and Control Act of 1986 ("IRCA"); to the
best knowledge of Lothian, the information and documents on which Lothian and
the Lothian Subsidiaries relied to comply with IRCA are true and correct; and
there have not been any discrimination complaints filed against Lothian or the
Lothian Subsidiaries pursuant to IRCA, and to the best knowledge of Lothian or
the Lothian Subsidiaries, there is no basis for the filing of such a complaint.
2.20 Environmental Matters.
(a) Lothian and the Lothian Subsidiaries possess all Environmental
Permits required for the operation of their businesses.
(b) Lothian and the Lothian Subsidiaries are in compliance in all
material respects with (i) all terms, conditions and provisions of its
Environmental Permits; and (ii) all Environmental Laws.
19
(c) Neither Lothian nor, to the knowledge of Lothian, any Lothian
Subsidiary or any predecessor of Lothian nor any entity previously owned by
Lothian has any obligation or liability with respect to any Hazardous Material,
including any Release or threatened or suspected Release of any Hazardous
Material, and there have been no events, facts or circumstances since the date
of incorporation of Lothian and the Lothian Subsidiaries which could reasonably
be expected to form the basis of any such obligation or liability.
(d) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or for Lothian or any
Lothian Subsidiary or, to the knowledge of Lothian, by or for any other Person
with respect to any Site while Lothian or any Lothian Subsidiary has occupied
the Site, which have not been delivered to United prior to execution of this
Agreement.
2.21 Other Negotiations; Brokers; Third Party Expenses. Neither Lothian
nor, to the knowledge of Lothian, any of its Affiliates (nor any investment
banker, financial advisor, attorney, accountant or other Person retained by or
acting for or on behalf of Lothian or at Lothian's direction) (a) has entered
into any Contract that conflicts with any of the transactions contemplated by
this Agreement or (b) other than with respect to Third Party Expenses expected
to be incurred by Lothian in connection with the negotiation and effectuation of
the terms and conditions of this Agreement and the transactions contemplated
hereby, has entered into any Contract or had any discussions with any Person
regarding any transaction involving Lothian which could reasonably be expected
to result in United, Lothian or any general partner, limited partner, manager,
officer, director, employee, agent or Affiliate of any of them being subject to
any claim for liability to said Person as a result of entering into this
Agreement or consummating the transactions contemplated hereby.
2.22 Foreign Corrupt Practices Act. None of Lothian, the Lothian
Subsidiaries, or to the knowledge of Lothian, any agent, employee or other
Person acting on behalf of Lothian or any Lothian Subsidiary has, directly or
indirectly, used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, made
any unlawful payment to foreign or domestic government officials or employees or
to foreign or domestic political parties or campaigns from corporate funds,
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended,
or made any bribe, rebate, payoff, influence payment, kickback or other similar
unlawful payment.
2.23 Tax-Free Reorganization. To the knowledge of Lothian, after Good
Faith Consultation with Lothian's independent accountants, neither Lothian nor
any of its directors, officers or stockholders has taken any action which could
reasonably be expected to jeopardize the status of the Merger as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code.
2.24 Approvals.
(a) Section 2.24(a) of the Lothian Disclosure Schedule contains a
list of all material Approvals of Governmental or Regulatory Authorities
relating to the business conducted by Lothian which are required to be given to
or obtained by Lothian prior to the Closing from any and all Governmental or
Regulatory Authorities in connection with the consummation of the transactions
contemplated by this Agreement.
(b) Section 2.24(b) of the Lothian Disclosure Schedule contains a
list of all material Approvals which are required to be given to or obtained by
Lothian prior to the Closing from any and all third parties other than
Governmental or Regulatory Authorities in connection with the consummation of
the transactions contemplated by this Agreement.
20
(c) Lothian has obtained all material Approvals from Governmental
or Regulatory Authorities necessary to conduct the business conducted by Lothian
in the manner as it is currently being conducted and there has been no written
notice received by Lothian of any material violation or material non-compliance
with any such Approvals. All material Approvals from Governmental or Regulatory
Authorities necessary to conduct the business conducted by Lothian as it is
currently being conducted are set forth in Section 2.24(c) of the Lothian
Disclosure Schedule.
(d) The affirmative vote or consent of the holders of the shares of
Lothian Common Stock and Lothian Preferred Stock (on an as-converted basis)
outstanding as of the applicable record date, voting together as a single class,
are the only votes of the holders of any of Lothian Capital Stock necessary to
approve this Agreement and the Merger and the transactions contemplated hereby.
2.25 Disclosure. No representation or warranty contained in Article II
of this Agreement, and no statement contained in the Lothian Disclosure Schedule
or in any certificate, list or other writing furnished to United pursuant to any
provision of this Agreement (including Lothian Financials and the notes thereto)
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the representations and warranties of Lothian in Article
II (as modified by the Lothian Disclosure Schedule), in the light of the
circumstances under which they were made, not misleading.
2.26 Information Statement. The information supplied by Lothian for
inclusion in the notice of merger and appraisal rights to be sent to the
stockholders of Lothian in connection with the approval of the Merger, this
Agreement and the Ancillary Agreements by the Lothian stockholders (the "Lothian
Notice of Merger") and the information statement to be sent to the stockholders
of United in connection with the approval of the Merger, this Agreement, and the
Ancillary Agreements (the "United Information Statement") shall not, on the date
the Lothian Notice of Merger and the United Information Statement is first
mailed to Lothian's stockholders and United's stockholders respectively and at
the Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the Lothian Notice of Merger or the United
Information Statement which has become false or misleading. Notwithstanding the
foregoing, Lothian makes no representation, warranty or covenant with respect to
any information supplied by United that is contained in the Lothian Notice of
Merger or the United Information Statement.
2.27 Investment Advisors. Except as set forth in Section 2.27 of the
Lothian Disclosure Schedule, no broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission in connection with this Agreement and the transactions
contemplated hereby based on arrangements made by or on behalf of Lothian.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF UNITED
21
United hereby represents and warrants to Lothian, subject to such
exceptions and qualifications as are specifically disclosed in the United
disclosure schedule and schedule of exceptions of United (the "United Disclosure
Schedule") delivered herewith and dated as of the date hereof as follows:
3.1 Organization and Qualification. United and each of the United
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the Laws of the state or province of its incorporation, and has
all requisite corporate power and authority to conduct its business as now
conducted and as currently proposed to be conducted and to own, use, license and
lease its Assets and Properties. United and each of the United Subsidiaries is
duly qualified, licensed or admitted to do business and is in good standing as a
foreign corporation in each jurisdiction in which the ownership, use, licensing
or leasing of its Assets and Properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary, except for
such failures to be so duly qualified, licensed or admitted and in good standing
that could not reasonably be expected to have a Material Adverse Effect on
United. Section 3.1 of the United Disclosure Schedule sets forth each
jurisdiction where United and each of the United Subsidiaries is so qualified to
do business and separately lists each other jurisdiction in which United and
each of the United Subsidiaries owns, uses, licenses or leases any material
Assets or Properties, has established a local office or other permanent local
presence or has employees or engages independent contractors.
3.2 Authority Relative to This Agreement. Subject only to the requisite
approval of the Merger, this Agreement and the Ancillary Agreements by the
stockholders of United, United has all requisite corporate power and authority
to execute and deliver this Agreement and the Ancillary Agreements to which it
is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by United of this Agreement and the Ancillary Agreements to which
United is a party and the consummation by United of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Board of Directors of United, and no other action on the part of the Board of
Directors of United is required to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements to which United is a
party by United and the consummation by United of the transactions contemplated
hereby and thereby. This Agreement and the Ancillary Agreements to which United
is a party have each been duly and validly executed and delivered by United and,
assuming the due authorization and the valid execution and delivery of this
Agreement by Lothian and each Ancillary Agreement by each other party (other
than United) to such Ancillary Agreement, each constitutes a legal, valid and
binding obligation of United enforceable against United in accordance with its
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar Laws relating to the enforcement of creditors' rights generally
and by general principles of equity. The shares of United Capital Stock to be
issued in the Merger pursuant to Section 1.6(a) shall, when issued in compliance
with this Agreement, be duly and validly issued, fully paid and non-assessable,
and the shares of United Capital Stock that will be issuable upon the exercise
of United Options and United Warrants that are issued in the Merger pursuant to
Section 1.6(c) and (d), respectively, when issued upon the exercise of and in
compliance with such United Options and United Warrants, will be duly and
validly issued, fully paid and non-assessable.
22
3.3 Capitalization. The authorized capital stock of United consists
only of 125,000,000 shares of United Common Stock, $0.001 par value per share,
of which 6,446,850 shares of United Common Stock are issued and outstanding. All
of the issued and outstanding shares of United Common Stock are validly issued,
fully paid and nonassessable, and have been issued in compliance with all
applicable federal, state and foreign securities Laws. Except as set forth in
Section 3.3 of the United Disclosure Schedule, (a) no shares of United Common
Stock are held in treasury or are authorized or reserved for issuance and (b) no
Options are outstanding. Section 3.3 of the United Disclosure Schedule lists the
name (and, if such holder is not an employee of Lothian, the address) of such
holder of United Common Stock, United Option and United Warrant. Except as set
forth Section 3.3 of the United Disclosure Schedule, there are no agreements,
arrangements or understandings to which United is a party (written or oral) to
issue any Options with respect to United and there are no preemptive rights or
agreements, arrangements or understandings to issue preemptive rights with
respect to the issuance or sale of United Capital Stock created by statute, the
certificate of incorporation or Bylaws of United, or any agreement or other
arrangement to which United is a party or to which it is bound and there are no
agreements, arrangements or understandings to which United is a party (written
or oral) pursuant to which United has the right to elect to satisfy any
Liability by issuing United Common Stock or Equity Equivalents. With respect to
each United Option and each United Warrant, Section 3.3 of the United Disclosure
Schedule sets forth the holder thereof, the number and type of securities
issuable thereunder, and, if applicable, the exercise price therefor, the
exercise period and vesting schedule thereof (including a description of the
circumstances under which such vesting schedule can or will be accelerated). All
United Options and United Warrants were issued in compliance with all applicable
federal, state and foreign securities Laws. Except as set forth in Section 3.3
of the United Disclosure Schedule, United is not a party or subject to any
agreement or understanding, and, to United's knowledge, there is no agreement,
arrangement or understanding between or among any Persons which affects,
restricts or relates to voting, giving of written consents, dividend rights or
transferability of shares with respect to United Capital Stock, including any
voting trust agreement or proxy.
3.4 Subsidiaries. National Heritage Sales Corporation, a Texas
corporation, UHC Petroleum Corporation, a Texas corporation, UHC Petroleum
Services Corporation, a Texas corporation, and UHC New Mexico Corporation, a New
Mexico corporation (together, the "United Subsidiaries", each, a "United
Subsidiary") are each a wholly-owned subsidiary of United. Except for the United
Subsidiaries, United has (and prior to the Closing will have) no Subsidiaries
and does not (and prior to the Closing will not) otherwise hold any equity,
membership, partnership, joint venture or other ownership interest in any
Person. There are no outstanding options, warrants, or other rights to acquire
capital stock of the United Subsidiaries or securities convertible into or
exchangeable for such stock.
3.5 No Conflicts. The execution and delivery by United of this
Agreement does not, and the performance by United of its obligations under this
Agreement and the consummation of the transactions contemplated hereby do not
and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or Bylaws of
United or the United Subsidiaries;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 3.5 of the United
Disclosure Schedule, if any, conflict with or result in a violation or breach of
any Law or Order applicable to United or the United Subsidiaries or any of their
respective Assets and Properties; or
23
(c) except as would not have a Material Adverse Effect on United
(i) conflict with or result in a violation or breach of, (ii) constitute a
default (or an event that, with or without notice or lapse of time or both,
would constitute a default) under, (iii) require United or the United
Subsidiaries to obtain any consent, approval or action of, make any filing with
or give any notice to any Person (other than the filing of the Utah Articles of
Merger together with the required officers' certificates, any filing required
under the HSR Act in connection with the Merger and such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under state or federal securities Laws) as a result or under the terms
of, (iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (v) result in or give to any
Person any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments or performance under, (vi) result in the
creation or imposition of (or the obligation to create or impose) any material
Lien upon United or the United Subsidiaries or any of their respective material
Assets or Properties under or (vii) result in the loss of a material benefit
under any material Contract or License to which United or the United
Subsidiaries is or are a party or by which any of United's or the United
Subsidiaries' material Assets and Properties are bound.
3.6 Books and Records; Organizational Documents. The minute books and
stock record books and other similar records of United and the United
Subsidiaries have been provided or made available to Lothian or its counsel
prior to the execution of this Agreement, are complete and correct in all
material respects and have been maintained in accordance with customary business
practices. Such minute books contain a true and complete record of all actions
taken at all meetings and by all written consents in lieu of meetings of the
directors, stockholders and committees of the Board of Directors of United and
the United Subsidiaries from the date of United's and the United Subsidiaries'
respective incorporation through the date hereof. United has, prior to the
execution of this Agreement, delivered to Lothian true and complete copies of
its and the United Subsidiaries' Certificates of Incorporation and Bylaws, as
amended through the date hereof. Neither United nor any of the United
Subsidiaries is in violation of any provisions of its Certificate of
Incorporation or Bylaws as so amended.
3.7 SEC Documents; United Financial Statements. (a) United has
furnished or made available to Lothian or its counsel true and complete copies
of all SEC Documents filed by it with the SEC since February 14, 2006, all in
the form so filed. As of their respective filing dates, such SEC Documents filed
by United and all SEC Documents filed after the date hereof but before the
Closing complied or will comply in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
SEC thereunder, as the case may be, and none of United's SEC Documents contained
or will contain any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading, except to the extent such SEC Documents have been corrected, updated
or superseded by a document subsequently filed with the SEC.
(b) The financial statements of United, including the notes
thereto, included in United's SEC Documents (the "United Financial Statements")
are correct and complete in all material respects and comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP consistently applied
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and present fairly
the consolidated financial position of United at the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited financial statements, to normal year-end
adjustments). The United Financial Statements present fairly the financial
condition and operating results of United as of the dates and during the periods
indicated therein. Since the United Financial Statement Date, there has been no
change in any accounting policies, principles, methods or practices, including
any material change with respect to reserves (whether for bad debts, contingent
liabilities or otherwise), of United.
24
3.8 Absence of Changes. Except as set forth in Section 3.8 of the
United Disclosure Schedule, since the United Financial Statement Date, there has
not been any material adverse change in the Business or Condition of United or
any occurrence or event which, individually or in the aggregate is reasonably
expected to have a Material Adverse Effect on United. In addition, without
limiting the generality of the foregoing, except as expressly contemplated by
this Agreement, or otherwise set forth in Section 3.8 of the United Disclosure
Schedule, since the United Financial Statement Date:
(a) neither United nor the United Subsidiaries has entered into any
material Contract or other material commitment or transaction;
(b) there has not been any material amendment or other material
modification (or agreement to do so), or material violation of the terms of, any
of the material Contracts set forth or described in Section 3.8 of the United
Disclosure Schedule;
(c) there has not been any amendment to United's Certificate of
Incorporation or Bylaws;
(d) there has not been any transfer (by way of a License or
otherwise) to any Person of rights to any material United Intellectual Property,
other than licenses in the ordinary course of business consistent with past
practice;
(e) neither United nor the United Subsidiaries has made any change
in accounting policies, principles, methods, practices or procedures (including
for bad debts, contingent liabilities or otherwise, respecting capitalization or
expense of research and development expenditures, depreciation or amortization
rates or timing of recognition of income and expense);
(f) United has taken all commercially reasonable action required to
maintain, renew, extend or enforce any material United Intellectual Property;
(g) there has been no physical damage, destruction or other
casualty loss (whether or not covered by insurance) affecting any of the real or
personal property or equipment of United or in an amount exceeding one hundred
thousand dollars ($100,000) individually or two hundred fifty thousand dollars
($250,000) in the aggregate; and
(h) neither United nor the United Subsidiaries has entered into or
approved any contract, arrangement or understanding or acquiesced in respect of
any arrangement or understanding, to do, engage in or cause or having the effect
of any of the foregoing.
3.9 No Undisclosed Liabilities. Except as reflected or reserved against
in the United Financial Statements included in its Form 10-QSB for the quarter
ending December 31, 2005 (the "December 10-QSB") (including the notes thereto),
United has no material Liabilities, other than Liabilities incurred in the
ordinary course of business consistent with past practice since the United
Financial Statement Date.
3.10 Taxes.
25
(a) All Tax Returns, statements, reports, declarations and other
forms and documents (including without limitation estimated Tax Returns and
reports and material information statements, returns and reports) required to be
filed with any Taxing Authority with respect to any Taxable period ending on or
before the Effective Time, by or on behalf of United, have been or will be
completed and filed when due (including any extensions of such due date) and all
amounts shown due on such Tax Returns on or before the Effective Time have been
or will be paid on or before such date. All such Tax Returns are true, accurate
and complete as filed. United's December 31, 2005 unaudited balance sheet
included in the December 10-QSB (the "United Balance Sheet") (i) fully accrues
all United's actual and contingent liabilities for Taxes with respect to all
periods through December 31, 2005 and United has not and will not incur any Tax
liability in excess of the amount reflected on such United Balance Sheet with
respect to such periods (excluding any amount thereof that reflects timing
differences between the recognition of income for purposes of GAAP and for Tax
purposes), and (ii) properly accrues in accordance with GAAP all material
liabilities for Taxes payable after December 31, 2005 with respect to all
transactions and events occurring on or prior to such date. All information set
forth in the December 10-QSB relating to Tax matters is true, complete and
accurate in all material respects. No material Tax liability since December 31,
2005 has been or will be incurred by United other than in the ordinary course of
business, and adequate provision has been made by United for all Taxes since
that date in accordance with GAAP on at least a quarterly basis.
(b) United has previously provided or made available to Lothian
true and correct copies of all United Tax Returns. United has withheld and paid
to the applicable financial institution or Taxing Authority all amounts required
to be withheld. United (or any member of any affiliated or combined group of
which United has been a member) has not granted any extension or waiver of the
limitation period applicable to any Tax Returns that is still in effect. There
is no material claim, audit, action, suit, proceeding, or (to the knowledge of
United) investigation now pending or (to the knowledge of United) threatened
against or with respect to United in respect of any Tax or assessment. No notice
of deficiency or similar document of any Taxing Authority asserting that United
has unpaid Tax liability has been received by United, and there are no
liabilities for Taxes (including liabilities for interest, additions to Tax and
penalties thereon and related expenses) with respect to the issues that have
been raised (and are currently pending) by any Taxing Authority that could, if
determined adversely to United, materially and adversely affect the liability of
United for Taxes. There are no liens for Taxes (other than for current Taxes not
yet due and payable) upon the assets of United. United has never been a member
of an affiliated group of corporations, within the meaning of Section 1504 of
the Code. United is in full compliance with all the terms and conditions of any
Tax exemptions or other Tax-sharing agreement or order of a foreign government
and the consummation of the Merger will not have any adverse effect on the
continued validity and effectiveness of any such Tax exemption or other
Tax-sharing agreement or order. Neither United nor any Person on behalf of
United has entered into or will enter into any agreement or consent pursuant to
the collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income tax Law) or agreed to
have Section 341(f)(2) of the Code (or any corresponding provision of state,
local or foreign income tax Law) apply to any disposition of any asset owned by
United. None of the assets of United is property that United is required to
treat as being owned by any other person pursuant to the so-called "safe harbor
lease" provisions of former Section 168(f)(8) of the Code. None of the assets of
United directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code. None of the assets of United is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
United has not made and will not make a deemed dividend election under Treas.
Reg. Section 1.1502-32(f)(2) or a consent dividend election under Section 565 of
26
the Code. United has never been a party (either as a distributing corporation or
as a corporation that has been distributed) to any transaction intended to
qualify under Section 355 of the Code or any corresponding provision of state
Law. United does not have and has not had a permanent establishment in any
foreign country, as defined in any applicable tax treaty or convention between
the United States of America and such foreign country. United has never elected
to be treated as an S-corporation under Section 1362 of the Code or any
corresponding provision of federal or state Law. All material elections with
respect to United's Taxes made during the fiscal years ending, March 31, 2005
are reflected on the United Tax Returns for such periods, a copy of which have
been provided or made available to Lothian. After the date of this Agreement, no
material election with respect to Taxes not made in the ordinary course of
business will be made without the prior written consent of Lothian, which
consent will not be unreasonably withheld or delayed. United is not party to any
joint venture, partnership, or other arrangement or contract which could be
treated as a partnership for federal income tax purposes. United is not
currently, and never has been, subject to the reporting requirements of Section
6038A of the Code. There is no agreement, contract or arrangement to which
United is a party that could, individually or collectively, result in the
payment of any amount that would not be deductible by reason of Sections 280G
(as determined without regard to Section 280G(b)(4) and (5)), 162(a) (by reason
of being unreasonable in amount), 162 (b) through (p) or 404 of the Code. United
is not a party to or bound by any Tax indemnity, Tax sharing or Tax allocation
agreement (whether written or unwritten or arising under operation of federal
Law as a result of being a member of a group filing consolidated Tax Returns,
under operation of certain state Laws as a result of being a member of a unitary
group, or under comparable Laws of other states or foreign jurisdictions) which
includes a party other than United nor does United owe any amount under any such
Agreement. United is not, and has not been, a United States real property
holding corporation (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. Other than
by reason of the Merger, United has not been and will not be required to include
any material adjustment in Taxable income for any Tax period (or portion
thereof) pursuant to Section 481 or 263A of the Code or any comparable provision
under state or foreign Tax Laws as a result of transactions, events or
accounting methods employed prior to the Merger.
(c) As used in this Section 3.10, the term "United" means United
and any entity included in, or required under GAAP to be included in, any of the
United Financial Statements.
3.11 Legal Proceedings. Except as set forth in Section 3.11 of the
United Disclosure Schedule:
(a) there are no Actions or Proceedings pending or, to the
knowledge of United, threatened against, relating to or the United Subsidiaries
or their respective Assets and Properties; and
(b) neither United nor the United Subsidiaries has received notice,
and does not otherwise have knowledge of any Orders outstanding against United
or the United Subsidiaries.
3.12 Compliance with Laws and Orders. Neither United nor any of the
United Subsidiaries has violated in any material respect, and is not currently
in default in any material respect under, any Law or Order applicable to United,
the United Subsidiaries or any of their respective Assets and Properties.
3.13 Employee Benefit Plans.
27
(a) Except for the Plans, neither United nor the United
Subsidiaries maintains, is a party to, contributes to or is obligated to
contribute to, and neither United's nor the United Subsidiaries' employees or
former employees and their dependents or survivors receive benefits under, any
of the following (whether or not set forth in a written document):
(i) any employee benefit plan, as defined in section 3(3)
of ERISA;
(ii) any bonus, deferred compensation, incentive, restricted
stock, stock purchase, stock option, stock appreciation right, phantom stock,
supplemental pension, executive compensation, cafeteria benefit, dependent care,
director or employee loan, fringe benefit, sabbatical, severance, termination
pay or similar plan, program, policy, agreement or arrangement (other than any
such item provided solely pursuant to the terms of a written or oral contract
with any individual employee that is disclosed in Section 3.13 of the United
Disclosure Schedule); or
(iii) any plan, program, agreement, policy, commitment or
other arrangement relating to the provision of any benefit described in section
3(1) of ERISA to former employees or directors or to their survivors, other than
procedures intended to comply with COBRA.
(b) Neither United nor any ERISA Affiliate has, since December 31,
2005, terminated, suspended, discontinued contributions to or withdrawn from any
employee pension benefit plan, as defined in section 3(2) of ERISA, including
(without limitation) any multiemployer plan, as defined in section 3(37) of
ERISA.
(c) United has agreed to provide to Lothian prior to Closing
complete, accurate and current copies of each of the following:
(i) The text (including amendments) of each of the Plans,
to the extent reduced to writing;
(ii) A summary of each of the Plans, to the extent not
previously reduced to writing;
(iii) With respect to each Plan that is an employee benefit
plan (as defined in section 3(3) of ERISA), the following:
(A) The most recent summary plan description that has
been prepared, as described in section 102 of ERISA;
(B) Any summary of material modifications that has been
distributed to participants or filed with the U.S. Department of Labor but that
has not been incorporated in an updated summary plan description furnished under
Subparagraph (A) above; and
(C) The annual report, as described in section 103 of
ERISA, and (where applicable) actuarial reports, for the most recent plan year
for which an annual report or actuarial report has been prepared; and
28
(iv) With respect to each Plan that is intended to qualify
under section 401(a) of the Code, the most recent determination letter
concerning the Plan's qualification under section 401(a) of the Code, as issued
by the IRS, and any subsequent determination letter application.
(d) With respect to each Plan that is an employee benefit plan (as
defined in section 3(3) of ERISA), the requirements of ERISA applicable to such
Plan have been satisfied, except to the extent that a failure to satisfy any of
such requirements would not have a Material Adverse Effect.
(e) With respect to each Plan that is subject to COBRA, the
requirements of COBRA applicable to such Plan have been satisfied, except to the
extent that a failure to satisfy any of such requirements would not have a
Material Adverse Effect.
(f) With respect to each Plan that is subject to the Family
Medical Leave Act of 1993, as amended, the requirements of such Act applicable
to such Plan have been satisfied, except to the extent that a failure to satisfy
any of such requirements would not have a Material Adverse Effect.
(g) Each Plan that is intended to qualify under section 401(a) of
the Code meets the requirements for qualification under section 401(a) of the
Code and the regulations thereunder, except to the extent that such requirements
may be satisfied by adopting retroactive amendments under section 401(b) of the
Code and the regulations thereunder. Each such Plan has been administered in
accordance with its terms (or, if applicable, such terms as will be adopted
pursuant to a retroactive amendment under section 401(b) of the Code) and the
applicable provisions of ERISA and the Code and the regulations thereunder,
except to the extent that a failure to be so administered would not have a
Material Adverse Effect.
(h) Neither United nor any ERISA Affiliate has any accumulated
funding deficiency under section 412 of the Code or any termination or
withdrawal liability under Title IV of ERISA. For purposes of determining any
accumulated funding deficiency under section 412 of the Code, the term "ERISA
Affiliate" shall include any entity that is deemed to be a member of the same
"controlled group" within the meaning of section 414(m) or (o) of the Code.
(i) All contributions, premiums or other payments due from United
or the United Subsidiaries to (or under) any Plan have been fully paid or
adequately provided for on the books and financial statements of United or the
United Subsidiaries. All accruals (including, where appropriate, proportional
accruals for partial periods) have been made in accordance with prior practices.
(j) Except as disclosed in Section 3.13 of the United Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
(excluding any employment agreement with United entered into by any employee or
director of United in connection with this Agreement) will not result in (i) any
amount becoming payable to any employee, director or independent contractor of
United or the United Subsidiaries, (ii) the acceleration of payment or vesting
of any benefit, option or right to which any employee, director or independent
contractor of United or the United Subsidiaries may be entitled, (iii) the
forgiveness of any Indebtedness of any employee, director or independent
contractor of United or the United Subsidiaries or (iv) any cost becoming due or
accruing to United or the United Subsidiaries or United with respect to any
employee, director or independent contractor of United or the United
Subsidiaries.
29
(k) Other than routine claims for benefits under the Plans, there
are no pending, or, to the best knowledge of United, threatened Actions or
Proceedings involving the Plans, or the fiduciaries, administrators, or trustees
of any of the Plans or United or the United Subsidiaries or any of their ERISA
Affiliates as the employer or sponsor under any Plan, with any of the IRS, the
Department of Labor, the PBGC, any participant in or beneficiary of any Plan or
any other Person whomsoever. United and United Subsidiary know of no reasonable
basis for any such claim, lawsuit, dispute, action or controversy.
3.14 Title to Property. Except for title to United Intellectual
Property, which is covered by Section 3.15 below, and except as set forth in
Section 3.14 of the United Disclosure Schedule, United and the United
Subsidiaries have good and marketable title to all of their respective material
properties, interests in properties and assets, real and personal, reflected in
the December 10-QSB or acquired after the date of the December 10-QSB (except
properties, interests in properties and assets sold or otherwise disposed of
since the date of United's December 10-QSB in the ordinary course of business),
free and clear of all material mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (i) liens for current taxes not
yet due and payable, (ii) such imperfections of title, liens and easements as do
not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties and (iii) liens securing debt
which is reflected in the December 10-QSB. The plants, property and equipment of
United and the United Subsidiaries that are used in the operations of its
business are in good operating condition and repair, subject to normal wear and
tear. All properties used in the operations of United and the United
Subsidiaries are reflected in the December 10-QSB to the extent generally
accepted accounting principles required the same to be reflected as of the dates
of the financial statements included in the December 10-QSB. With respect to
properties and assets leased by United and the United Subsidiaries, United or
the United Subsidiaries, as applicable, holds valid leasehold interests in such
properties and assets in accordance with the terms of the agreements governing
such leases.
3.15 Intellectual Property.
(a) United has all requisite right, title and interest in or valid
and enforceable rights under Contracts or Licenses to use all United
Intellectual Property necessary to the conduct of its business as presently
conducted. Each item of United Intellectual Property, either is owned
exclusively by United, free and clear of any Liens, or is licensed to United
under a valid License granting sufficient rights to permit United to conduct its
business as presently conducted. To the best of its knowledge, United owns or
has the valid right to use all trademarks, service marks and trade names used by
United in connection with the operation or conduct of the business of United,
including the sale of any products or technology or the provision of any
services by United. United owns exclusively, and has good title to, all
copyrighted works that are United products or other works of authorship that
United otherwise purports to own; provided, however, that such works may
incorporate copyrighted works or works of authorship, trademarks or trade names
of third parties which are licensed to United or are in the public domain.
Except pursuant to agreements in the ordinary course of business, neither United
nor the United Subsidiaries has transferred ownership of any United Intellectual
Property to any other Person.
30
(b) To the extent that any United Intellectual Property that is
material to United's business has been developed or created by any Person other
than United, United has a written agreement with such Person with respect
thereto and United has either (i) obtained ownership of, and is the exclusive
owner of, all such Intellectual Property by operation of Law or by valid
assignment of any such rights or (ii) obtained a License under or to such
Intellectual Property.
(c) The operation of the business of United as currently conducted,
including United's design, development, use, import, manufacture and sale of the
products, technology or services (including products, technology or services
currently under development) of United: (i) does not infringe the copyright or
misappropriate the trade secrets of any Person; (ii) to the best of United's
knowledge, does not infringe the patent rights or trademark rights of any
Person; (iii) does not violate in any material respect the rights of any Person
(including rights to privacy or publicity other than patent rights or trademark
rights described above); and, (iv) does not constitute unfair competition or an
unfair trade practice under any Law. Neither United nor United Subsidiary has
received notice from any Person claiming that such operation or any act,
product, technology or service (including products, technology or services
currently under development) of United or the United Subsidiaries infringes or
misappropriates the Intellectual Property of any Person or constitutes unfair
competition or trade practices under any Law.
(d) Each item of United Registered Intellectual Property is valid
and subsisting, and all necessary registration, maintenance, renewal fees,
annuity fees and taxes in connection with such Registered Intellectual Property
have been paid and all necessary documents and certificates in connection with
such Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions in which such Registered Intellectual Property is registered, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property.
(e) There are no Contracts or Licenses between United and any other
Person with respect to United Intellectual Property under which there is any
dispute known to United regarding the scope of such Contract or License, or
performance under such Contract or License, including any dispute with respect
to any payments to be made or received by United thereunder.
(f) United has taken all requisite commercially reasonable steps to
maintain and preserve the confidentiality of United's confidential information
and trade secrets of United or any similar information provided by any other
Person to United subject to a duty of confidentiality. Without limiting the
generality of the foregoing, United has, and enforces, a policy requiring each
employee, consultant and independent contractor to execute proprietary
information, confidentiality and invention assignment agreements
3.16 Contracts.
(a) Section 3.16(a)(1) of the United Disclosure Schedule contains a
true and complete list of each of United's and the United Subsidiaries'
Contracts that are material to United's business, operations or financial
condition (true and complete copies or, if none, reasonably complete and
accurate written descriptions of which, together with all amendments and
supplements thereto and all waivers of any terms thereof, have been made
available to United prior to the execution of this Agreement).
31
(b) Each Contract required to be disclosed in Section 3.16(a) of
the United Disclosure Schedule is in full force and effect and constitutes a
legal, valid and binding agreement of United or the United Subsidiaries,
enforceable against United or the United Subsidiaries in accordance with its
terms (subject to the effect of bankruptcy and other Laws affecting the rights
of creditors generally and limitations on the enforcement of contracts under
principles of equity), and, to the knowledge of United, each other party thereto
(subject to the effect of bankruptcy and other Laws affecting the rights of
creditors generally and limitations on the enforcement of contracts under
principles of equity), and, to the knowledge of United, no other party to such
Contract is, nor has received notice that it is, in material violation or breach
of or default under any such Contract (or with notice or lapse of time or both,
would be in material violation or breach of or default under any such Contract).
(c) Neither United nor any of the United Subsidiaries is a party
to or bound by any Contract that (i) automatically terminates or allows
termination by the other party thereto upon consummation of the transactions
contemplated by this Agreement or (ii) contains any covenant or other provision
which limits United's or the United Subsidiaries' ability to compete with any
Person in any line of business or in any area or territory
3.17 Insurance. United and the United Subsidiaries have policies of
insurance and bonds of the type and in amounts customarily carried by companies
conducting businesses or owning assets similar to those of United and the United
Subsidiaries. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and United and the United Subsidiaries
are otherwise in compliance with the terms of such policies and bonds. Neither
United nor any of the United Subsidiaries has knowledge of any threatened
termination of, or material premium increase with respect to, any of such
policies.
3.18 Affiliate Transactions. Except as disclosed in Section 3.18 of the
United Disclosure Schedule, and except for any stock purchase agreements, stock
option agreements, United Warrants and or confidentiality agreements in favor of
United or the United Subsidiaries, (i) there are no Contracts or Liabilities
between United or the United Subsidiaries, on the one hand, and (A) any current
or former officer, director, stockholder, or to United's knowledge, any
Affiliate or Associate of United or a United Subsidiary or (B) any Person who,
to United's knowledge, is an Associate of any such officer, director,
stockholder or Affiliate, on the other hand, (ii) neither United nor any of the
United Subsidiaries provides or causes to be provided any assets, services or
facilities to any such current or former officer, director, stockholder,
Affiliate or Associate, (iii) none of United, any of the United Subsidiaries or
any of their respective current or former officers, directors, stockholders,
Affiliates or Associates provides or causes to be provided any assets, services
or facilities to United or any United Subsidiary and (iv) none of United nor any
United Subsidiary beneficially owns, directly or indirectly, any Investment
Assets of any of their respective current or former officers, directors,
stockholders, Affiliates or Associates.
3.19 Employees; Labor Relations.
32
(a) None of United or any United Subsidiary is a party to any
collective bargaining agreement and there are no unfair labor practice or labor
arbitration proceedings pending with respect to United or the United
Subsidiaries, or, to the knowledge of United, threatened, and there are no facts
or circumstances known to United that could reasonably be expected to give rise
to such complaint or claim. To the knowledge of United, there are no
organizational efforts presently underway or threatened involving any employees
of United or the United Subsidiaries or any of the employees performing work for
United or the United Subsidiaries but those provided by an outside employment
agency, if any. There has been no work stoppage, strike or other concerted
action by employees of United or any United Subsidiary.
(b) Except as set forth in Section 3.19(b) of the United Disclosure
Schedule, all employees of United and the United Subsidiaries are employed at
will. Section 3.19(b) of the United Disclosure Schedule sets forth, individually
and by category, the name of each officer, employee and consultant, together
with such person's position or function, annual base salary or wage and any
incentive, severance or bonus arrangements with respect to such person. To the
knowledge of United or the United Subsidiaries, no employee of United or United
Subsidiary has made any threat, or otherwise revealed his or her intent, to
terminate such employee's relationship with United or the United Subsidiaries,
for any reason, including because of the consummation of the transactions
contemplated by this Agreement. None of United or any United Subsidiary is a
party to any agreement for the provision of labor from any outside agency. To
the knowledge of United or the United Subsidiaries, there have been no claims by
employees of such outside agencies, if any, with regard to employees assigned to
work for United or any United Subsidiary, and no claims by any Governmental or
Regulatory Authority with regard to such employees except as set forth in
Section 3.19(b) of the United Disclosure Schedule.
(c) There have been no federal or state claims based on sex, sexual
or other harassment, age, disability, race or other discrimination or common Law
claims, including claims of wrongful termination, by any employees of United or
the United Subsidiaries or by any of the employees performing work for United or
the United Subsidiaries but those provided by an outside employment agency, and
there are no facts or circumstances known to United that could reasonably be
expected to give rise to such complaint or claim. Both United and the United
Subsidiaries have complied in all material respects with all Laws related to the
employment of employees and, except as set forth in Section 3.19(c) of the
United Disclosure Schedule, none of United or any United Subsidiary has received
any notice of any claim that it has not complied in any material respect with
any Laws relating to the employment of employees, including any provisions
thereof relating to wages, hours, collective bargaining, the payment of Social
Security and similar taxes, equal employment opportunity, employment
discrimination, the Worker Adjustment and Retraining Notification Act, employee
safety, or that it is liable for any arrearages of wages or any taxes or
penalties for failure to comply with any of the foregoing.
(d) None of United or any United Subsidiary has written policies
and/or employee handbooks or manuals except as described in Section 3.19(d) of
the United Disclosure Schedule.
(e) To the knowledge of United, no officer, employee or consultant
of United or the United Subsidiaries is obligated under any Contract or other
agreement or subject to any Order or Law that would interfere with United's or
the United Subsidiaries' businesses as currently conducted. To the knowledge of
United, neither the execution nor delivery of this Agreement, nor the carrying
on of United's or the United Subsidiaries' businesses as presently conducted nor
any activity of such officers, employees or consultants in connection with the
carrying on of United's or United Subsidiaries' businesses as presently
conducted, will conflict with or result in a breach of the terms, conditions or
provisions of, constitute a default under, or trigger a condition precedent to
any rights under, any Contract or other agreement under which any of such
officers, employees or consultants is now bound.
33
(f) United and the United Subsidiaries have complied in all
material respects with the verification requirements and the record-keeping
requirements of the IRCA; to the best knowledge of United, the information and
documents on which United and the United Subsidiaries relied to comply with IRCA
are true and correct; and there have not been any discrimination complaints
filed against United or the United Subsidiaries pursuant to IRCA, and to the
best knowledge of United or the United Subsidiaries, there is no basis for the
filing of such a complaint.
3.20 Environmental Matters.
(a) United and the United Subsidiaries possess all Environmental
Permits required for the operation of their businesses.
(b) United and the United Subsidiaries are in compliance in all
material respects with (i) all terms, conditions and provisions of its
Environmental Permits; and (ii) all Environmental Laws.
(c) Neither United nor, to the knowledge of United, any United
Subsidiary or any predecessor of United nor any entity previously owned by
United has any obligation or liability with respect to any Hazardous Material,
including any Release or threatened or suspected Release of any Hazardous
Material, and there have been no events, facts or circumstances since the date
of incorporation of United and the United Subsidiaries which could reasonably be
expected to form the basis of any such obligation or liability.
(d) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or for United or any
United Subsidiary or, to the knowledge of United, by or for any other Person
with respect to any Site while United or any United Subsidiary has occupied the
Site, which have not been delivered to United prior to execution of this
Agreement.
3.21 Other Negotiations; Brokers; Third Party Expenses. Neither United
nor, to the knowledge of United, any of its Affiliates (nor any investment
banker, financial advisor, attorney, accountant or other Person retained by or
acting for or on behalf of United or at United's direction) (a) has entered into
any Contract that conflicts with any of the transactions contemplated by this
Agreement or (b) other than with respect to Third Party Expenses expected to be
incurred by United in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated hereby,
has entered into any Contract or had any discussions with any Person regarding
any transaction involving United which could reasonably be expected to result in
United, Lothian or any general partner, limited partner, manager, officer,
director, employee, agent or Affiliate of any of them being subject to any claim
for liability to said Person as a result of entering into this Agreement or
consummating the transactions contemplated hereby.
3.22 Foreign Corrupt Practices Act. Neither United, the United
Subsidiaries, nor to the knowledge of United, any agent, employee or other
Person acting on behalf of United or the United Subsidiaries has, directly or
indirectly, used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, made
any unlawful payment to foreign or domestic government officials or employees or
to foreign or domestic political parties or campaigns from corporate funds,
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended,
or made any bribe, rebate, payoff, influence payment, kickback or other similar
unlawful payment.
34
3.23 Tax-Free Reorganization. To the knowledge of United, after Good
Faith Consultation with United's independent accountants, neither United nor any
of its directors, officers or stockholders has taken any action which could
reasonably be expected to jeopardize the status of the Merger as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code.
3.24 Approvals.
(a) Section 3.24(a) of the United Disclosure Schedule contains a
list of all material Approvals of Governmental or Regulatory Authorities
relating to the business conducted by United which are required to be given to
or obtained by United prior to the Closing from any and all Governmental or
Regulatory Authorities in connection with the consummation of the transactions
contemplated by this Agreement.
(b) Section 3.24(b) of the United Disclosure Schedule contains a
list of all material Approvals which are required to be given to or obtained by
United prior to the Closing from any and all third parties other than
Governmental or Regulatory Authorities in connection with the consummation of
the transactions contemplated by this Agreement.
(c) United has obtained all material Approvals from Governmental
or Regulatory Authorities necessary to conduct the business conducted by United
in the manner as it is currently being conducted and there has been no written
notice received by United of any material violation or material non-compliance
with any such Approvals. All material Approvals from Governmental or Regulatory
Authorities necessary to conduct the business conducted by United as it is
currently being conducted are set forth in Section 3.24(c) of the United
Disclosure Schedule.
(d) The affirmative vote or consent of the holders of the shares
of United Common Stock outstanding as of the applicable record date is the only
vote of the holders of any of United Capital Stock necessary to approve this
Agreement and the Merger and the transactions contemplated hereby.
3.25 Disclosure. No representation or warranty contained in Article III
of this Agreement, and no statement contained in the United Disclosure Schedule
or in any certificate, list or other writing furnished to Lothian pursuant to
any provision of this Agreement (including the December 10-QSB) contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the representations and warranties of United in Article III (as modified
by the United Disclosure Schedule), in the light of the circumstances under
which they were made, not misleading.
3.26 Information Statement. The information supplied by United for
inclusion in the Lothian Notice of Merger and the United Information Statement
shall not, on the date the Lothian Notice of Merger and the United Information
Statement is first mailed to Lothian's stockholders and United's stockholders
respectively and at the Effective Time, contain any statement which, at such
time, is false or misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not false or misleading;
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the Lothian Notice of Merger or the United
Information Statement which has become false or misleading. Notwithstanding the
foregoing, United makes no representation, warranty or covenant with respect to
any information supplied by Lothian that is contained in the Lothian Notice of
Merger or the United Information Statement.
35
3.27 Investment Advisors. Except as set forth in Section 3.27 of the
United Disclosure Schedule, no broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission in connection with this Agreement and the transactions
contemplated hereby based on arrangements made by or on behalf of United.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Information Statement.
(a) Intentionally Omitted.
(b) Intentionally Omitted.
4.2 Stockholder Approval. Lothian shall promptly after the date hereof
take all action necessary in accordance with the DGCL and its Certificate of
Incorporation and Bylaws to secure from the stockholders of Lothian approval by
written consent to the transactions provided for herein, and shall thereafter
promptly comply with notice requirements to the remaining shareholders pursuant
to the DGCL by mailing the Lothian Notice to Shareholders. United shall promptly
after the date hereof take all action necessary in accordance with the Utah Law
and its Articles of Incorporation and Bylaws to secure from the stockholders of
United approval by written consent to the transactions provided for herein, and
shall thereafter promptly comply with notice requirements to the remaining
shareholders pursuant to the rules promulgated under the Securities Act and Utah
Law by causing its transfer agent to mailing the United Information Statement to
the United shareholders. Lothian and United will take all commercially
reasonable efforts to limit the applicability of stockholders dissenters' rights
to this transaction, and, to the extent that such are applicable, will take all
commercially reasonable efforts to minimize the exercise of any such rights and
will not take any action to induce stockholders to exercise any such rights.
4.3 Access to Information. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice Lothian and United shall each (i) give the other party, and
its respective officers, employees, accountants and counsel full access to all
buildings, offices, and other facilities and to all its Books and Records,
whether located on its premises or at another location; (ii) permit the other
party to make such inspections as it may reasonably require; (iii) cause its
officers to furnish the other party such financial, operating, technical and
product data and other information with respect to its business and Assets and
Properties as the other party from time to time may request, including financial
statements and schedules; (iv) allow the other party the opportunity to
interview such employees and other personnel and Affiliates of the other party
with such other party's prior written consent, which consent shall not be
unreasonably withheld or delayed; and (v) assist and cooperate with the other
party in the development of integration plans for implementation following the
Effective Time; provided, however, that no investigation pursuant to this
Section 4.3 shall affect or be deemed to modify any representation or warranty
made by such party herein.
36
4.4 Confidentiality. All information furnished to United and its
officers, employees, accountants and counsel by Lothian, and all information
furnished to Lothian by United and its respective officers, employees,
accountants and counsel, shall be held in confidence by the receiving party and
not used for any purpose except for purposes contemplated herein.
4.5 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger, including all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties ("Third Party Expenses") incurred by a party in connection with
the negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby, shall be the obligation of the
respective party incurring such Third Party Expenses, provided, however, that if
the Merger is consummated, United shall pay all Third Party Expenses incurred by
itself and by Lothian.
4.6 Public Disclosure. Unless otherwise required by Law (including
federal and state securities Laws) or, as to United, by the rules and
regulations of the NASD, prior to the Effective Time, no public disclosure
(whether or not in response to any inquiry) of the existence of any subject
matter of, or the terms and conditions of, this Agreement shall be made by any
party hereto unless approved by United and Lothian prior to release; provided,
however, that such approval shall not be unreasonably withheld or delayed; and
provided further, that if any such public disclosure is required by Law or, as
to United, by the rules and regulations of the NASD, the disclosing party will
give the other party reasonable advance notice of such disclosure and, if such
disclosure is pursuant to a court order or subpoena or similar process, the
disclosing party will cooperate with the other party's efforts to seek
injunctive or other relief preventing or limiting such disclosure.
4.7 Approvals. United and Lothian shall use all commercially reasonable
efforts required to obtain all Approvals from Governmental or Regulatory
Authorities or under any of the Contracts or other agreements as may be required
in connection with the Merger (all of which Approvals are set forth in either
the Lothian Disclosure Schedule or the United Disclosure Schedule) so as to
preserve all material rights of and benefits to Lothian thereunder and United
and Lothian shall provide each other with such assistance and information as is
reasonably required to obtain such Approvals.
4.8 Notification of Certain Matters. Lothian shall give prompt notice
to United, and United shall give prompt notice to Lothian, of (i) the occurrence
or non-occurrence of any event that is likely to cause any representation or
warranty of Lothian or United, respectively, contained in this Agreement to be
untrue or inaccurate in any material respect at or prior to the Closing Date and
(ii) any failure of Lothian or United, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 4.8 shall not limit or otherwise affect any remedies available to
the party receiving such notice.
4.9 Additional Documents and Further Assurances. Each party hereto, at
the request of the other party hereto, shall use all requisite commercially
reasonable efforts to execute and deliver such other instruments and do and
perform such other acts and things (including all action reasonably necessary to
seek and obtain any and all consents and approvals of any Government or
Regulatory Authority or Person required in connection with the Merger; provided,
however, that neither party shall be obligated to consent to any material
divestitures or operational limitations or activities in connection therewith
and no party shall be obligated to make a payment of money as a condition to
obtaining any such condition or approval) as may be necessary or desirable for
effecting completely the consummation of the Merger and the other transactions
contemplated hereby.
37
4.10 Form S-8. United will file, and will use its reasonable commercial
efforts to cause the shares of United Common Stock that are subject to issuance
upon exercise of the United Options that result from the conversion of Lothian
Options under Section 1.6(c) to be registered on a registration statement on
Form S-8 or successor form promulgated by the SEC under the Securities Act, as
soon as commercially reasonable after the Effective Time. In any event, United
will file such Form S-8 Registration Statement with five (5) business days after
the Effective Time, and will maintain the effectiveness of such Form S-8 for so
long as such United Options remain outstanding.
4.11 NCM Initial Listing Application. As soon as practicable after the
execution of this Agreement, Lothian and United shall prepare, and United shall
file with The NASDAQ Stock Market an initial listing application with respect to
all of the shares of United Common Stock outstanding and reserved for issuance
at the Effective Time and seeking to cause such shares of United Common Stock to
be listed on the NCM effective as of the Effective Time.
4.12 Auditors. Each party will use commercially reasonable efforts to
cause its respective management and independent auditors to facilitate on a
timely basis (i) the preparation of financial statements (including pro forma
financial statements if required) to comply with applicable SEC regulations,
(ii) the review of any audit or review work papers including the examination of
selected audited financial statements and data, and (iii) the delivery of such
representations from each party's independent accountants as may be reasonably
requested by the other party or its accountants.
4.13 Directors' and Officers' Indemnification.
(a) From and after the Effective Time, United will fulfill, honor
and perform all of the Indemnification Obligations (as defined below) of Lothian
arising under Lothian's Certificate of Incorporation or Bylaws, each as amended
or of the Lothian Subsidiaries arising under the Lothian Subsidiaries' charter
documents, or under any indemnification or similar agreement between Lothian or
the Lothian Subsidiaries on the one hand, and any Lothian Covered Person (as
defined below) on the other hand that existed prior to and remains in effect on
the date hereof (copies of which agreements have been provided to United). In
addition, to the extent that any Lothian Covered Person would, with respect to
any action or event relating to Lothian or the Lothian Subsidiaries that occurs
on or prior to the Effective Time, be entitled under United's Certificate of
Incorporation or Bylaws or the Lothian Subsidiaries charter documents, each as
in effect upon the Effective Time, to any indemnification, defense of claims or
advancement of expenses by or from United, United shall provide such
indemnification, defense and advancement of expenses to such Lothian Covered
Person. A "Lothian Covered Person" means any individual who, at any time prior
to the Effective Time, was a director or officer of Lothian or the Lothian
Subsidiaries or was a trustee or other fiduciary of a plan administered for the
benefit of employees of Lothian and/or the Lothian Subsidiaries.
"Indemnification Obligations" means an obligation of Lothian or the Lothian
Subsidiaries to provide indemnification, defense of claims or advancement of
expenses to a person.
(b) This Section 4.13 shall survive the consummation of the
Merger, is intended to benefit Lothian and each indemnified party, shall be
binding, jointly and severally, on all successors and assigns of the Surviving
Corporation and United, and shall be enforceable by the indemnified persons.
38
(c) Lothian hereby represents and warrants to United that no claim
for indemnification by Lothian or the Lothian Subsidiaries has been made by any
director or officer of Lothian prior to the date of this Agreement except for
any of such claims as have been paid in full and, to the knowledge of Lothian,
no basis exists for any such claim for indemnification.
4.14 Benefit Arrangements. United and Lothian agree that, following the
Effective Time, United will provide benefits to Lothian's employees as of the
Effective Time that are at least as favorable, taken as a whole, as the benefits
currently provided to employees of United performing functions similar to those
to be performed by such Lothian employees after the Effective Time. As soon as
practicable after the execution of this Agreement, Lothian and United shall
confer and work together in good faith to agree upon mutually acceptable
employee benefit and compensation arrangements (and amend or terminate Lothian
employee plans immediately prior to the Effective Time, if appropriate). United
shall use commercially reasonable efforts to ensure that continuous employment
with Lothian shall be credited to employees of Lothian or any Lothian Subsidiary
who become employees of United or any United Subsidiary at or after the
Effective Time for all purposes of eligibility and vesting of benefits but not
for purposes of accrual of benefits. United shall take commercially reasonable
steps to (a) cause to be waived all limitations as to preexisting condition
limitations, exclusions and waiting periods with respect to participation and
coverage requirements applicable to the employees of Lothian or the Lothian
Subsidiaries under any welfare benefit plan that such employees are eligible to
participate in after the Effective Time, other than limitations, exclusions or
waiting periods that are already in effect with respect to such employees and
that have not been satisfied as of the Effective Time under any welfare benefit
plan maintained for such employees immediately prior to the Effective Time and
(b) provide each employee of Lothian and the Lothian Subsidiaries with credit
for any co-payments and deductibles paid during the plan year commencing
immediately prior to the Effective Time in satisfying any applicable deductible
or out-or-pocket requirements under any welfare plans that such employees are
eligible to participate in after the Effective Time for such plan year.
4.15 Treatment as Reorganization. Neither United nor Lothian shall take
any action prior to or following the Closing that would reasonably be expected
to cause the Merger to fail to qualify as a "reorganization" within the meaning
of Section 368(a) of the Code.
4.16 Lothian Investor Agreements. At the Closing, United shall assume
by operation of law pursuant to the Merger Lothian's obligations under and with
respect to Lothian's agreements with its investors, including, without
limitation, Lothian's obligations set forth in Subscription Agreements relative
to the issuance and sale of the Lothian Series A Preferred Stock, those certain
letter agreements dated as of November 16, 2005 and November 18, 2005, that
certain Registration Rights Agreement, dated as of December 13, 2005, and that
certain Voting Agreement, dated as of December 13, 2005 .
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Conditions to Obligations of Each Party to Effect the Merger.The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction or waiver by such party, at or prior to the
Closing, of all the following conditions:
39
(a) Intentionally Omitted.
(b) Governmental and Regulatory Approvals. Approvals from any other
Governmental or Regulatory Authority (if any) necessary for consummation of the
transactions contemplated by this Agreement shall have been obtained, and any
waiting period applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated.
(c) No Injunctions or Regulatory Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing the
consummation of the Merger shall be in effect; nor shall there be any action
taken, or any Law or Order enacted, entered, enforced or deemed applicable to
the Merger or the other transactions contemplated by the terms of this Agreement
that would prohibit the consummation of the Merger or which would permit
consummation of the Merger only if certain material divestitures were made or if
United were to agree to material limitations on its business activities or
operations.
(d) Reorganization. The Merger shall constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code.
(e) Stockholder Approval. The Merger (and any amendments to
United's Certificate of Incorporation and Bylaws to enable United to perform its
obligations hereunder and to carry out the Merger) shall have been approved by
the requisite votes of the stockholders of United and Lothian in accordance with
the DGCL and Utah Law.
(f) NCM Listing. All of the shares of United Common Stock
outstanding and reserved for issuance at the Effective Time shall be listed on
the NCM.
(g) Legal Proceedings. No Governmental or Regulatory Authority
shall have notified either party to this Agreement in writing that such
Governmental or Regulatory Authority intends to commence proceedings to restrain
or prohibit the transactions contemplated hereby or force rescission, unless
such Governmental or Regulatory Authority shall have withdrawn such notice and
abandoned any such proceedings prior to the time which otherwise would have been
the Closing Date.
(h) Limitation on Dissenters. Holders of no more than five percent
(5%) of the outstanding shares of Lothian Capital Stock shall have exercised,
nor shall they have any continuing right to exercise, appraisal, dissenters' or
similar rights under applicable Law with respect to their shares by virtue of
the Merger.
5.2 Additional Conditions to Obligations of Lothian. The obligations of
Lothian to consummate the Merger and the other transactions contemplated by this
Agreement shall be subject to the satisfaction, or waiver by Lothian, at or
prior to the Closing, of each of the following conditions, any of which may be
waived, in writing, exclusively by Lothian:
40
(a) Representations and Warranties. Each of the representations and
warranties made by United in Article III of this Agreement (as qualified by the
United Disclosure Schedule) shall be true and correct in all material respects
on the date of this Agreement and such representations and warranties (as
qualified by the United Disclosure Schedule, as such may be updated at the
Closing Date and prior to the Effective Time, as provided below) shall be true
and correct in all material respects on and as of the Closing Date (except, in
each case, for any such representations or warranties that, by their express
terms, speak only as of a specific date or dates, in which case such
representations and warranties need only be true and correct in all material
respects on and as of such specified date or dates); provided, that United shall
have the opportunity to update the United Disclosure Schedule as of the Closing
Date; and provided further, that notwithstanding any failure of one or more of
the representations or warranties of United (as qualified as permitted above) to
be true and correct in all material respects as of the date of this Agreement or
as of the Closing Date, the condition set forth in this Section 5.2(a) shall
nevertheless be satisfied so long as such representations and warranties of
United (as qualified as permitted above), do not contain any misstatement or
omission of any fact or matter that would have a Material Adverse Effect on the
Business or Condition of United (it being agreed that in any controversy
concerning the applicability of this Section 5.2(a), the party claiming the
misstatement or omission of any fact or matter shall have the burden of proving
that such fact or matter would have a Material Adverse Effect on the Business or
Condition of United).
(b) Performance. United shall have performed and complied in all
material respects with each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by United at or before the
Closing.
(c) No Material Adverse Change. There shall have occurred no
material adverse change in the Business or Condition of United since the date
hereof; provided that for purposes of this Section 5.2(c), Section 3.8 and/or
Section 5.2(a), a change to the Business or Condition of United which is
attributable to or results from (i) the public announcement or pendency of the
transactions contemplated hereby on current or prospective customers of United,
(ii) changes in general economic conditions or changes affecting the industry
generally in which United operates, and/or (iii) changes resulting from the acts
or omissions of Lothian shall not be deemed to be a material adverse change in
the Business or Condition of United; provided further, that a reduction in the
market price of United's capital stock shall not, in and of itself, constitute a
material adverse change in the Business or Condition of United (it being agreed
that in any controversy concerning the applicability of this Section 5.2(c),
Section 3.8 and/or Section 5.2(a), the party claiming that there has occurred a
material adverse change in the Business or Condition of United since the date
hereof shall have the burden of proving the occurrence of such material adverse
change).
(d) Officer's Certificate. United shall have delivered to Lothian a
certificate, dated the Closing Date and executed by the President and Chief
Executive Officer of United substantially in the form set forth in Exhibit F
hereto.
(e) Legal Opinion. Lothian shall have received a legal opinion from
Xxxxxxxxxx & Xxxxx LLP, counsel to United, as to the matters set forth on
Exhibit G hereto.
(f) Directors and Officers. Each of the Lothian Designees shall
have been duly and validly elected to United's board of directors, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation. If any Lothian Designee cannot or will not serve as a
director of the Surviving Corporation, Lothian may designate a replacement
Lothian Designee, provided such replacement is reasonably acceptable to the
Existing Directors. The officers of Surviving Corporation at, and immediately
after, the Effective Time shall be as mutually agreed to by Lothian and United,
except that it is agreed that C. Xxxxx Xxxxxx shall be Chief Executive Officer
and President and Xxxxxxx Xxxx shall be Chief Financial Officer.
41
5.3 Additional Conditions to the Obligations of United. The obligations
of United to consummate the Merger and the other transactions contemplated by
this Agreement shall be subject to the satisfaction, or waiver by United, at or
prior to the Closing, of each of the following conditions, any of which may be
waived, in writing, exclusively by United:
(a) Representations and Warranties. Each of the representations and
warranties made by Lothian in Article II of this Agreement (as qualified by the
Lothian Disclosure Schedule) shall be true and correct in all material respects
on the date of this Agreement and such representations and warranties (as
qualified by the Lothian Disclosure Schedule, as such may be updated at the
Closing Date and prior to the Effective Time, as provided below) shall be true
and correct in all material respects on and as of the Closing Date (except, in
each case, for any such representations or warranties that, by their express
terms, speak only as of a specific date or dates, in which case such
representations and warranties need only be true and correct in all material
respects on and as of such specified date or dates); provided, that Lothian
shall have the opportunity to update the Lothian Disclosure Schedule as of the
Closing Date; and provided further, that notwithstanding any failure of one or
more of the representations or warranties of Lothian (as qualified as permitted
above) to be true and correct in all material respects as of the date of this
Agreement or as of the Closing Date, the condition set forth in this Section
5.3(a) shall nevertheless be satisfied so long as such representations and
warranties of Lothian (as qualified as permitted above), do not contain any
misstatement or omission of any fact or matter that could reasonably be
anticipated to have a Material Adverse Effect on the Business or Condition of
Lothian (it being agreed that in any controversy concerning the applicability of
this Section 5.3(a), the party claiming the misstatement or omission of any fact
or matter shall have the burden of proving that such fact or matter would have a
Material Adverse Effect on the Business or Condition of Lothian).
(b) Performance. Lothian shall have performed and complied in all
material respects with each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Lothian on or before the
Closing Date.
(c) No Material Adverse Change. There shall have occurred no
material adverse change in the Business or Condition of Lothian since the date
hereof; provided that for purposes of this Section 5.3(c), Section 2.8 and/or
Section 5.3(a), a change to the Business or Condition of Lothian which is
attributable to or results from (i) the public announcement or pendency of the
transactions contemplated hereby on current or prospective customers of Lothian,
(ii) changes in general economic conditions or changes affecting the industry
generally in which Lothian operates and/or (iii) changes resulting from the acts
or omissions of United shall not be deemed to be a material adverse change in
the Business or Condition of Lothian; provided further, that a reduction in the
market value of Lothian's capital stock shall not, in and of itself, constitute
a material adverse change in the Business or Condition of Lothian; (it being
agreed that in any controversy concerning the applicability of this Section
5.3(c), Section 2.8 and/or Section 5.3(a), the party claiming that there has
occurred a material adverse change in the Business or Condition of Lothian since
the date hereof shall have the burden of proving the occurrence of such material
adverse change).
(d) Officer's Certificate. Lothian shall have delivered to United a
certificate, dated the Closing Date and executed by the President and Chief
Executive Officer of Lothian substantially in the form set forth in Exhibit H
hereto.
42
(e) Third Party Consents. United shall have been furnished with
evidence satisfactory to it that Lothian has obtained the consents, approvals
and waivers listed in Section 2.5 of the Lothian Disclosure Schedule (except for
such consents, approvals and waivers the failure of which to receive would have
a Material Adverse Effect on the Surviving Corporation).
(f) Legal Opinion. United shall have received a legal opinion from
Xxxxxxxxx & Roshco, LLP, legal counsel to Lothian, as to the matters set forth
on Exhibit I hereto.
ARTICLE VI
SURVIVAL
6.1 Survival of Representations, Warranties, Covenants and Agreements.
Notwithstanding any right of United or Lothian (whether or not exercised) to
investigate the affairs of United or Lothian or a waiver by United or Lothian of
any condition to Closing set forth in Article V, each party shall have the right
to rely fully upon the representations, warranties, covenants and agreements of
the other party contained in this Agreement or in any instrument delivered
pursuant to this Agreement. Other than Lothian's capitalization representation
set forth in Section 2.3, which shall only survive until the Expiration Date,
none of the representations and warranties of Lothian or United, and none of the
other covenants and agreements of Lothian and United, which by their terms are
to be performed on or prior to the Closing Date, shall survive after the Merger.
ARTICLE VII
CONDUCT PRIOR TO THE EFFECTIVE TIME
7.1 Conduct of Business.
(a) During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement and the
Effective Time, Lothian and United each agree (unless such party receives prior
consent in writing from the other party, which consent shall not be unreasonably
withheld) to carry on its business in the ordinary and usual course and
consistent with its past practices, to pay its Liabilities and Taxes consistent
with its past practices (and in any event when due), to pay or perform other
obligations when due consistent with its past practices (other than Liabilities,
Taxes and other obligations, if any, contested in good faith through appropriate
proceedings), and, to the extent consistent with such business, to use
commercially reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and key
employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, independent contractors and other Persons
having business dealings with it, all with the express purpose and intent of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
(b) Without limiting Section 7.1(a), and except as otherwise
specifically provided in this Agreement, Lothian will not, directly or
indirectly, prior to the Effective Time, without the prior written consent of
United:
43
(i) enter into any material Contract or other material
commitment or transaction, except in the ordinary course of its business
consistent with past practice;
(ii) amend or otherwise modify (or agree to do so), except
in the ordinary course of business, or violate the terms of, any material
Contract;
(iii) amend its Certificate of Incorporation or Bylaws;
(iv) transfer (by way of a License or otherwise) to any
Person rights to any of its material Intellectual Property other than pursuant
to licenses granted in the ordinary course of its business consistent with past
practice;
(v) make any change in its accounting policies, principles,
methods, practices or procedures (including for bad debts, contingent
liabilities or otherwise, respecting capitalization or expense of research and
development expenditures, depreciation or amortization rates or timing of
recognition of income and expense);
(vi) commence or settle any material litigation;
(vii) declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any
shares of its capital stock, or split, combine or reclassify any of the Lothian
Capital Stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock
(except upon the conversion of shares of Lothian Preferred Stock into shares of
Lothian Common Stock in accordance with the terms of such Lothian Preferred
Stock), or repurchase, redeem or otherwise acquire, directly or indirectly, any
shares of Lothian Capital Stock or Lothian Equity Securities (except that
Lothian may repurchase or redeem shares of Lothian Capital Stock at the original
purchase price of such shares in connection with the termination of employment
with Lothian or Lothian Subsidiary of the Person whose shares are being
repurchased or redeemed);
(viii) acquire any business, company or corporation, whether
through the purchase of stock, a purchase, lease or License of assets, a merger,
consolidation, tender offer or any other form of business combination;
(ix) dispose of any significant assets, other than in the
ordinary course of its business, consistent with its past practices; or
(x) enter into or approve any contract, arrangement or
understanding or acquiesce in respect of any arrangement or understanding, to
do, engage in or cause or having the effect of any of the foregoing.
(c) Without limiting Section 7.1(a), and except as otherwise
specifically provided in this Agreement, United will not, directly or
indirectly, prior to the Effective Time, without the prior written consent of
Lothian:
(i) enter into any material Contract or other material
commitment or transaction, except in the ordinary course of its business
consistent with past practice;
(ii) amend or otherwise modify (or agree to do so), except
in the ordinary course of business, or violate the terms of, any material
Contract;
44
(iii) amend its Articles of Incorporation or Bylaws;
(iv) transfer (by way of a License or otherwise) to any
Person rights to any of its material Intellectual Property other than pursuant
to licenses granted in the ordinary course of its business consistent with past
practice;
(v) make any change in its accounting policies, principles,
methods, practices or procedures (including for bad debts, contingent
liabilities or otherwise, respecting capitalization or expense of research and
development expenditures, depreciation or amortization rates or timing of
recognition of income and expense);
(vi) commence or settle any material litigation;
(vii) declare, set aside or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any
shares of its capital stock, or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (except that United may repurchase or redeem shares of its capital stock
at the original purchase price of such shares in connection with the termination
of employment with United of the Person whose shares are being repurchased or
redeemed);
(viii) acquire any business, company or corporation, whether
through the purchase of stock, a purchase, lease or License of assets, a merger,
consolidation, tender offer or any other form of business combination;
(ix) dispose of any significant assets, other than in the
ordinary course of its business, consistent with its past practices; or
(x) enter into or approve any contract, arrangement or
understanding or acquiesce in respect of any arrangement or understanding, to
do, engage in or cause or having the effect of any of the foregoing.
7.2 No Solicitation--Lothian.
(a) Until the earlier of the Effective Time and the date of
termination of this Agreement pursuant to the provisions of Section 8.1 hereof,
Lothian will not, nor will Lothian permit any of its Representatives to
(directly or indirectly): (i) solicit, encourage, initiate, entertain or
participate in any negotiations or discussions with respect to an offer or
proposal, oral, written, or otherwise, formal or informal, to acquire all or any
substantial portion of Lothian's business or assets, whether by purchase of
assets, exclusive license, joint venture formation, purchase of stock, business
combination or otherwise, (ii) disclose any information not customarily
disclosed to any Person concerning Lothian and which Lothian believes would be
used for the purposes of formulating any such offer or proposal, (iii) assist,
cooperate with, facilitate or encourage any Person to make any offer or proposal
to acquire all or any substantial portion of Lothian's business or assets
(directly or indirectly), (iv) agree to, enter into a contract regarding,
approve, recommend or endorse any transaction involving, the acquisition of all
or any substantial portion of Lothian's business or assets (an "Acquisition
Proposal--Lothian"), or (v) authorize or permit any of Lothian's Representatives
to take any such action. Lothian shall notify United as promptly as practical if
any proposal or offer (formal or informal, oral, written or otherwise), or any
inquiry or contact with any Person with respect thereto, regarding an
45
Acquisition Proposal--Lothian is made, such notice to include the identity of
the Person proposing such Acquisition Proposal-Lothian and the terms thereof,
and shall keep United apprised on a current basis of the status of any such
Acquisition Proposal--Lothian and of any modifications to the terms thereof.
Lothian immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties other than United conducted
heretofore with respect to any Acquisition Proposal--Lothian. Notwithstanding
the foregoing, prior to the date of the approval of this Agreement and the
Merger by the stockholders of Lothian (the "Lothian Stockholder Approval Date"),
Lothian may furnish information concerning its business, properties or assets to
any corporation, partnership, person or other entity or group pursuant to
appropriate confidentiality agreements, and may negotiate and participate in
discussions and negotiations with such entity or group concerning an Acquisition
Proposal--Lothian if:
(i) such entity or group has on an unsolicited basis
submitted a bona fide written proposal to the Lothian Board of Directors
relating to any such transaction which the Lothian Board of Directors determines
in good faith, represents a superior transaction to the Merger (a "Competing
Proposal--Lothian") and in the good faith judgment of the Lothian Board of
Directors the person or entity making such Competing Proposal--Lothian appears
to have the financial means, or the ability to obtain the necessary financing to
successfully conclude such Competing Proposal--Lothian; and
(ii) in the opinion of the Lothian Board of Directors such
action is required to discharge the Lothian Board of Directors' fiduciary duties
to the Lothian's stockholders under applicable Law following receipt of advice
from independent legal counsel to Lothian.
(b) Except as set forth below in this subsection (b), neither the
Lothian Board of Directors nor any committee thereof shall: (i) fail to include,
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
United, the approval or positive recommendation by such Board of Directors or
any such committee of this Agreement or the Merger, (ii) approve or recommend or
propose to approve or recommend, any Acquisition Proposal--Lothian, or (iii)
enter into any agreement with respect to any Acquisition Proposal--Lothian,
provided, however, that notwithstanding the foregoing, prior to the Lothian
Stockholder Approval Date, the Lothian Board of Directors may fail to include or
may withdraw or modify, its approval or recommendation of this Agreement or the
Merger, or may approve or recommend any Acquisition Proposal--Lothian which
satisfies the requirements of each of subsection (i) and subsection (ii) of
Section 7.2(a) hereof (any such Acquisition Proposal--Lothian, a "Superior
Proposal--Lothian"), or enter into an agreement with respect to a Superior
Proposal--Lothian, in each case at any time after the fifth business day
following United's receipt of written notice from the Lothian advising United
that the Lothian Board of Directors has received a Superior Proposal--Lothian
which it intends to accept, specifying the material terms and conditions of such
Superior Proposal--Lothian and identifying the Person making such Superior
Proposal--Lothian.
7.3 No Solicitation--United.
(a) Until the earlier of the Effective Time and the date of
termination of this Agreement pursuant to the provisions of Section 8.1 hereof,
United will not take, nor will United permit its representatives to (directly or
indirectly): (i) solicit, encourage, initiate, entertain or participate in any
negotiations or discussions with respect to an offer or proposal, oral, written,
or otherwise, formal or informal to acquire all or any substantial portion of
United's business or assets, whether by purchase of assets, exclusive license,
joint venture formation, purchase of stock, business combination or otherwise,
46
(ii) disclose any information not customarily disclosed to any Person concerning
United and which United believes would be used for the purposes of formulating
any such offer or proposal, (iii) assist, cooperate with, facilitate or
encourage any Person to make any offer or proposal to acquire all or any
substantial portion of United's business or assets (directly or indirectly),
(iv) agree to, enter into a contract regarding, approve, recommend or endorse
any transaction involving, the acquisition of all or any substantial portion of
United's business or assets (an "Acquisition Proposal--United"), or (v)
authorize or permit any of United's Representatives to take any such action.
United shall notify Lothian as promptly as practical if any proposal or offer
(formal or informal, oral, written or otherwise), or any inquiry or contact with
any Person with respect thereto, regarding an Acquisition Proposal--United is
made, such notice to include the identity of the Person proposing such
Acquisition Proposal--United and the terms thereof, and shall keep Lothian
apprised, on a current basis of the status of any such Acquisition
Proposal--United and of any modifications to the terms thereof. United
immediately shall cease and cause to be terminated all existing discussions or
negotiations with any parties other than Lothian conducted heretofore with
respect to any Acquisition Proposal--United. Notwithstanding the foregoing,
prior to the date of the approval of this Agreement and the Merger by the
shareholders of United (the "United Stockholder Approval Date"), United may
furnish information concerning its business, properties or assets to any
corporation, partnership, person or other entity or group pursuant to
appropriate confidentiality agreements, and may negotiate and participate in
discussions and negotiations with such entity or group concerning an Acquisition
Proposal--United if:
(i) such entity or group has on an unsolicited basis
submitted a bona fide written proposal to the United Board of Directors relating
to any such transaction which the United Board of Directors determines in good
faith, represents a superior transaction to the Merger (a "Competing
Proposal--United") and in the good faith judgment of the United Board of
Directors the person or entity making such Competing Proposal--United appears to
have the financial means, or the ability to obtain the necessary financing to
successfully conclude such Competing Proposal--United; and
(ii) in the opinion of the United Board of Directors such
action is required to discharge the United Board of Directors' fiduciary duties
to United's stockholders under applicable Law following receipt of advice from
independent legal counsel to United.
(b) Except as set forth below in this subsection (b), neither the
United Board of Directors nor any committee thereof shall: (i) fail to include,
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Lothian, the approval or positive recommendation by such Board of Directors or
any such committee of this Agreement or the Merger, (ii) approve or recommend or
propose to approve or recommend, any Acquisition Proposal--United, or (iii)
enter into any agreement with respect to any Acquisition Proposal--United,
provided, however, that notwithstanding the foregoing, prior to the United
Stockholder Approval Date, the United Board of Directors may fail to include or
may withdraw or modify its approval or recommendation of this Agreement or the
Merger, or may approve or recommend any Acquisition Proposal--United which
satisfies the requirements of each of subsection (i) and subsection (ii) of
Section 7.3(a) hereof (any such Acquisition Proposal--United, a "Superior
Proposal--United"), or enter into an agreement with respect to a Superior
Proposal--United, in each case at any time after the fifth business day
following Lothian's receipt of written notice from the United advising Lothian
that the United Board of Directors has received a Superior Proposal--United
which it intends to accept, specifying the material terms and conditions of such
Superior Proposal--United and identifying the Person making such Superior
Proposal--United.
47
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time solely:
(a) by mutual written consent of Lothian and United;
(b) by United or Lothian if:
(i) there shall be any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental or Regulatory Authority that would make consummation of the Merger
illegal or there shall be a final nonappealable order of a federal or state
court in effect preventing consummation of the Merger;
(ii) if the Merger is not approved and adopted by the
affirmative vote of the stockholders of Lothian as required by the DGCL and
Lothian's Certificate of Incorporation and Bylaws, or if the Merger is not
approved and adopted by the affirmative vote of the stockholders of United as
required by the Utah Law and United's Articles of Incorporation and Bylaws;
(iii) if the holders of 5% or more of the outstanding shares
of United Capital Stock shall have demanded payment pursuant to the exercise of
dissenters' rights under Utah Law by virtue of the Merger;
(iv) if the holders of 5% or more of the outstanding shares
of Lothian Capital Stock shall have demanded payment pursuant to the exercise of
dissenters' rights under the DGCL by virtue of the Merger;
(v) the Merger, the issuance of United Capital Stock in the
Merger, or any other matter necessary to enable United to consummate, carry out
and perform the Merger as contemplated by this Agreement, is not approved and
adopted by the stockholders of United in accordance with the rules of the NCM or
Utah Law; or
(vi) the Effective Time has not occurred before 5 p.m.
(Eastern Time) on September 30, 2006, provided, however, that the right to
terminate this Agreement under this Section 8.1(b)(vi) shall not be available to
any party whose willful failure to fulfill any obligation hereunder has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before such date.
(c) by Lothian if:
(i) Lothian enters into a definitive agreement, as
permitted by Section 7.2 with respect to a Superior Proposal--Lothian, provided,
however, that Lothian has complied with all provisions thereof, including the
notice provisions therein; or
(ii) prior to the Effective Time, United's Board of
Directors shall have (A) failed to timely provide, or withdrawn, modified or
changed in a manner adverse to Lothian, its approval or recommendation of this
Agreement or the Merger, (B) recommended a Superior Proposal--United, (C)
executed a letter of intent, an agreement in principle or definitive agreement
relating to a Superior Proposal--United or similar business combination with a
person or entity other than Lothian, or (D) exercised its rights pursuant to
Section 7.3 with respect to a Superior Proposal--United, and, directly or
through its representatives, continued discussions with any third party
concerning an Superior Proposal--United for more than ten business days after
the date of receipt of such Superior Proposal--United.
48
(d) by United if:
(i) United enters into a definitive agreement, as permitted
by Section 7.3 with respect to a Superior Proposal--United that prohibits the
consummation of, or requires material changes to, the Merger or any other
business combination of United and Lothian, provided, however, that United has
complied with all provisions thereof, including the notice provisions therein;
or
(ii) prior to the Effective Time, Lothian Board of Directors
shall have (A) failed to timely provide, or withdrawn, modified or changed in a
manner adverse to United, its approval or recommendation of this Agreement or
the Merger, (B) recommended a Superior Proposal--Lothian, (C) executed a letter
of intent, an agreement in principle or definitive agreement relating to a
Superior Proposal--Lothian or similar business combination with a person or
entity other than United, or (D) exercised its rights pursuant to Section 7.2
with respect to a Superior Proposal--Lothian, and, directly or through its
representatives, continued discussions with any third party concerning an
Superior Proposal--Lothian for more than ten business days after the date of
receipt of such Superior Proposal--Lothian.
8.2 Intentionally Omitted.
8.3 Effect of Termination. In the event of a valid termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of United or Lothian,
or their respective officers, directors or stockholders or Affiliates or
Associates; provided, however, that each party shall remain liable for any
breaches of this Agreement prior to its termination.
8.4 Amendment. Except as is otherwise required by applicable Law, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto.
8.5 Extension; Waiver. At any time prior to the Effective Time, United
and Lothian may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements, covenants or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by prepaid first class certified mail, return
receipt requested, or mailed by overnight courier prepaid, to the parties at the
following addresses or facsimile numbers:
49
If to United, to:
United Heritage Corporation
0 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Attn: C. Xxxxx Xxxxxx, CEO
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxxxxx & Xxxxx LLP
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Lothian to:
Lothian Oil Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxx, CEO
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxxxx & Roshco, LLP
000 Xxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxxxx, Esq.
(000) 000-0000 Phone
(000) 000-0000 Facsimile
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 9.1, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided for in this Section 9.1, be deemed given upon facsimile confirmation,
(iii) if delivered by mail in the manner described above to the address as
provided for in this Section 9.1, be deemed given on the earlier of the third
Business Day following mailing or upon receipt and (iv) if delivered by
overnight courier to the address as provided in this Section 9.1, be deemed
given on the earlier of the first Business Day following the date sent by such
overnight courier or upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section 9.1). Any party
from time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such change
to the other party hereto.
50
9.2 Entire Agreement. This Agreement and the Exhibits and Schedules
hereto, including the Lothian Disclosure Schedule and the United Disclosure
Schedule, and all agreements required to be executed and delivered pursuant
hereto, constitute the entire agreement and understanding among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, except for the Confidentiality Agreement, which shall
continue in full force and effect and shall survive any termination of this
Agreement or the Closing in accordance with its terms.
9.3 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, the parties shall execute and deliver to the
other party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
diligent efforts to cause the conditions to its obligations to consummate the
Merger to be satisfied.
9.4 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
9.5 Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person.
9.6 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of Law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
9.7 Headings. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
9.8 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
51
9.9 Governing Law. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELWARE, INCLUDING LAWS
RELATING TO THE VALIDITY, INTERPRETATION AND EFFECT OF THIS AGREEMENT, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW, EXCEPT TO THE EXTENT THAT THE DGCL
AND/OR UTAH LAW SHALL SPECIFICALLY AND MANDATORILY APPLY TO THE MERGER AND THE
RIGHTS OF STOCKHOLDERS INCIDENT THERETO.
(b) EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY
CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK AND THE COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF
NEW YORK FOR ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
MERGER OR ANY OF THE OTHER TRANSACTION CONTEMPLATED HEREBY (AND AGREES NOT TO
COMMENCE ANY LITIGATION RELATING HERETO EXCEPT IN SUCH COURTS), AND FURTHER
AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S.
REGISTERED MAIL TO ITS RESPECTIVE ADDRESS SET FORTH IN SECTION 9.1 SHALL BE
EFFECTIVE SERVICE OF PROCESS FOR ANY LITIGATION BROUGHT AGAINST IT IN ANY SUCH
COURT. EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
OBJECTION TO THE LAYING OF VENUE IN ANY LITIGATION ARISING OUT OF THIS AGREEMENT
OR THE MERGER OR ANY OF THE OTHER TRANSACTIONS CONTEMPLATED HEREBY IN THE COURTS
OF THE STATE OF NEW YORK OR THE COURTS OF THE UNITED STATES OF AMERICA LOCATED
IN THE STATE OF NEW YORK AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENTENT FORUM.
(c) EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE MERGER OR ANY OF THE OTHER
TRANSACTIONS CONTEMPLATED HEREBY.
9.10 Construction. Ambiguities in this Agreement, if any, shall not be
construed strictly or in favor of or against any party hereto but rather shall
be given a fair and reasonable construction.
9.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.12 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Except where this Agreement specifically provides for arbitration, it
is agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at Law or in equity.
52
ARTICLE X
DEFINITIONS
10.1 Definitions.
(a) As used in this Agreement, the following defined terms shall
have the meanings indicated below:
"Acquisition Proposal -- Lothian" has the meaning ascribed to
it in Section 7.2(a).
"Acquisition Proposal -- United" has the meaning ascribed to
it in Section 7.3(a).
"Actions or Proceedings" means any action, suit, complaint,
petition, investigation, proceeding, arbitration, litigation or Governmental or
Regulatory Authority investigation, audit or other proceeding, whether civil or
criminal, in Law or in equity, or before any arbitrator or Governmental
Regulatory Authority.
"Affiliate" means, with respect to any Person, any other
Person that, directly or indirectly, through one or more intermediaries,
Controls, is Controlled by or is under common Control with, such Person. For
purposes of this definition, "Control" (including, with correlative meanings,
the terms "Controlled by" and "under common Control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock, as
trustee or executor, by Contract or credit arrangement or otherwise.
"Agreement" means this Merger Agreement and Plan of
Reorganization, including (unless the context otherwise requires) the Exhibits
and Schedules hereto and the certificates and instruments delivered in
connection herewith, or incorporated by reference, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Ancillary Agreements" has the meaning ascribed to it in
Section 2.2.
"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned, licensed or leased by such Person, including
cash, cash equivalents, Investment Assets, accounts and notes receivable,
chattel paper, documents, instruments, general intangibles, real estate,
equipment, inventory, goods and Intellectual Property.
53
"Associate" means, with respect to any Person, any corporation
or other business organization of which such Person is an officer or partner or
is the beneficial owner, directly or indirectly, of twenty percent (20%) or more
of any class of voting equity securities, any trust or estate in which such
Person has a substantial beneficial interest or as to which such Person serves
as a trustee or in a similar capacity and any relative or spouse of such Person,
or any relative of such spouse, who has the same home as such Person.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of such party,
including financial statements, internal reports, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs (including data processing files and records), retrieval programs,
operating data and plans and environmental studies and plans.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of New York are authorized or obligated
to close.
"Business or Condition" means, with respect to United, the
business, condition (financial or otherwise), results of operations or Assets
and Properties of United and the United Subsidiaries, taking United together
with the Lothian Subsidiaries as a whole, and, with respect to Lothian, the
business, condition, results of operations or Assets and Properties of Lothian
and the Lothian Subsidiaries, taking Lothian together with the Lothian
Subsidiaries as a whole.
"Certificates" has the meaning ascribed to it in Section
1.8(b).
"Closing" means the closing of the transactions contemplated
by Section 1.2.
"Closing Date" has the meaning ascribed to it in Section 1.2.
"Closing Price" has the meaning ascribed to it in Section
1.6(f).
"COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1986, as amended.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Competing Proposal--Lothian" has the meaning ascribed to it
in Section 7.2(a)(i).
"Competing Proposal--United" has the meaning ascribed to it in
Section 7.3(a)(i).
"Confidentiality Agreement" has the meaning set forth in
Section 4.4.
"Contract" means any agreement, Lease, debenture, note, bond,
evidence of Indebtedness, mortgage, indenture, security agreement, option or
other contract or commitment (whether written or oral).
"DGCL" means the General Corporation Law of the State of
Delaware.
54
"Delaware Certificate of Merger" has the meaning set forth in
Section 1.2.
"Dissenting Shares" has the meaning ascribed to it in Section
1.7(a).
"Effective Time" has the meaning ascribed to it in Section
1.2.
"Environment" means all air, surface water, groundwater or
land (including land surface or subsurface) including all fish, wildlife and
biota and all other natural resources.
"Environmental Law" means any and all Laws, Orders or
Contracts with any Governmental or Regulatory Authority, relating to the
protection of health and the Environment, worker health and safety, and/or
governing the handling, use, generation, treatment, storage, transportation,
disposal, manufacture, distribution, formulation, packaging, labeling or Release
of any Hazardous Materials.
"Environmental Permit" means any permit, license, approval,
consent or authorization required under or in connection with any Environmental
Law and includes without limitation any and all orders, consent orders or
binding agreements issued or entered into by a Governmental or Regulatory
Authority.
"Equity Equivalents" means securities (including Options to
purchase any shares of Lothian Capital Stock) which, by their terms, are or may
be exercisable, convertible or exchangeable for or into common stock, preferred
stock or other equity securities of Lothian at the election of the holder
thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means each person (as defined in section
3(9) of ERISA) that, together with Lothian, would be treated as a single
employer under section 4001(b) of ERISA or that would be deemed to be a member
of the same "controlled group" within the meaning of section 414(b) or (c) of
the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Exchange Agent" means ComputerShare.
"Exchange Ratio" has the meaning ascribed to it in Section
1.6(e).
"Existing Directors" has the meaning ascribed to it in Section
1.5.
"Expiration Date" shall mean the date 180 days after the
Effective Time.
"Lothian Financial Statement Date" means March 31, 2005.
"United Financial Statement Date" means March 31, 2005.
"GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time.
55
"Good Faith Consultation" with a Person's independent
accountants, as used in Sections 2.23 and 3.22 of this Agreement, means
consultation with such accountants following disclosure in good faith to such
accountants of all facts requested by such accountants or which the specified
Person otherwise had reason to believe would be relevant to such accountants'
assessment.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, bureau, board, commission, department,
official or other instrumentality of the United States, any foreign country or
any domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, quotation service and the National Association
of Securities Dealers.
"Hazardous Material" means petroleum, petroleum hydrocarbons
or petroleum products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls and
any other chemicals, materials, substances or wastes in any amount or
concentration which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous materials," "hazardous wastes,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "pollutants," "regulated substances," "solid wastes" or
"contaminants" or words of similar import under any Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, and the regulations promulgated thereunder.
"Indebtedness" of any Person means all obligations of such
Person (a) for borrowed money, (b) evidenced by notes, bonds, debentures or
similar instruments, (c) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (d) under capital leases and (e) in the nature of guarantees of the
obligations described in clauses (a) through (d) above of any other Person.
"Intellectual Property" means all trademarks and trademark
rights, trade names and trade name rights, service marks and service xxxx
rights, service names and service name rights, patents and patent rights,
utility models and utility model rights, copyrights, moral rights, mask work
rights, brand names, trade dress, product designs, product packaging, business
and product names, logos, slogans, rights of publicity, trade secrets,
inventions (whether patentable or not), invention disclosures, improvements,
processes, formulae, industrial models, processes, designs, specifications,
technology, methodologies, computer software (including all source code and
object code), firmware, development tools, flow charts, annotations, all Web
addresses, sites and domain names, all data bases and data collections and all
rights therein, any other confidential and proprietary right or information,
whether or not subject to statutory registration, and all related technical
information, manufacturing, engineering and technical drawings, know-how and all
pending applications for and registrations of patents, utility models,
trademarks, service marks and copyrights, and the right to xxx for past
infringement, if any, in connection with any of the foregoing, and all
documents, disks, records, files and other media on which any of the foregoing
is stored.
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by Lothian or the
Lothian Subsidiaries.
56
"IRS" means the United States Internal Revenue Service or any
successor entity.
"Law" or "Laws" means any law, statute, order, decree, consent
decree, judgment, rule, regulation, ordinance or other pronouncement having the
effect of law whether in the United States, any foreign country, or any domestic
or foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person, whether absolute, accrued, contingent (or based upon
any contingency), known or unknown, fixed or otherwise, or whether due or to
become due.
"License" means any Contract that grants a Person the right to
use or otherwise enjoy the benefits of any Intellectual Property (including any
covenants not to xxx with respect to any Intellectual Property).
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, easement, license, covenant, condition, restriction,
adverse claim, levy, charge, option, equity, adverse claim or restriction or
other encumbrance of any kind, or any conditional sale Contract, title retention
Contract or other Contract to give any of the foregoing, except for any
restrictions on transfer generally arising under any applicable federal or state
securities Law.
"Lothian" has the meaning ascribed to it in the forepart of
this Agreement.
"Lothian Capital Stock" means Lothian Common Stock and Lothian
Preferred Stock.
"Lothian Common Stock" has the meaning ascribed to it in
Section 2.3.
"Lothian Covered Person" has the meaning ascribed to it in
Section 4.13.
"Lothian Designees" has the meaning ascribed to it in Section
1.5.
"Lothian Equity Securities" means Lothian Options and Lothian
Warrants, collectively.
"Lothian Financials" means the audited consolidated balance
sheets of Lothian as of March 31, 2005 and the related audited consolidated
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, including the notes thereto.
"Lothian Intellectual Property" shall mean the Intellectual
Property that is (i) owned by; (ii) licensed to; or (iii) was developed or
created by or for Lothian or the Lothian Subsidiaries, and is used in or
necessary for the conduct of the present or anticipated business of Lothian or
the Lothian Subsidiaries, taken as a whole.
"Lothian Notice of Merger" has the meaning ascribed to it in
Section 2.26.
57
"Lothian Option" means any Option to purchase Lothian Capital
Stock, whether or not granted pursuant to Lothian Stock Plan, that is granted to
an employee, consultant or other individual service provider of Lothian or
Lothian Subsidiary.
"Lothian Preferred Stock" has the meaning ascribed to it in
Section 2.3, and shall include the Lothian Series A Preferred Stock, Lothian
Series B-1 Preferred Stock and the Lothian Series B-2 Preferred Stock.
"Lothian Registered Intellectual Property" means all
Registered Intellectual Property owned by, or filed in the name of, Lothian or
Lothian Subsidiary.
"Lothian Series A Preferred Stock" has the meaning ascribed to
it in Section 2.3.
"Lothian Series B-1 Preferred Stock" has the meaning ascribed
to it in Section 2.3.
"Lothian Series B-2 Preferred Stock" has the meaning ascribed
to it in Section 2.3
"Lothian Stock Plan" has the meaning ascribed to it in Section
1.6(c)(i).
"Lothian Stockholder Approval Date" has the meaning ascribed
to it in Section 7.2(a).
"Lothian Warrant" means each Lothian warrant to purchase
Lothian Capital Stock (if any) listed or required to be listed in Section 2.3 of
the Lothian Disclosure Schedule.
"Lothian Subsidiaries" has the meaning ascribed to it in
Section 2.4.
"Material Adverse Effect" when used with reference to any
entity or group of related entities, means any event, change or effect that is
(or will with the passage of time be) materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations
or results of operations of such entity and its subsidiaries, taken as a whole.
"Merger" has the meaning ascribed to it in the recitals to
this Agreement.
"NASD" means the National Association of Securities Dealers,
Inc.
"NCM" means the distinct tier of The NASDAQ Stock Market
referred to as The NASDAQ Capital Market.
"Option" with respect to any Person means any security, right,
subscription, warrant, option "phantom" stock right or other Contract that gives
the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
58
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA.
"Permit" means any license, permit, franchise or
authorization.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability Lothian or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of a Hazardous Material into the Environment.
"Representatives" means, with respect to any Person, such
Person's directors, officers, agents, employees, affiliates, attorneys,
accountants, financial advisers or other representatives.
"SEC" means the Securities and Exchange Commission or any
successor entity.
"SEC Documents" means, with respect to any Person, each
report, schedule, form, statement or other document filed with the SEC by such
Person pursuant to Section 13(a) and 15(d) of the Exchange Act and all final and
effective registration statements and prospectuses filed by such Person with the
SEC pursuant to the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Series A and B Certificates" has the meaning ascribed to it
in Section 1.4.
"Site" means any of the real properties currently or
previously owned, leased, occupied, used or operated by Lothian or the Lothian
Subsidiaries, any predecessors of Lothian or the Lothian Subsidiaries, or any
entities previously owned by Lothian or the Lothian Subsidiaries, including all
soil, subsoil, surface waters and groundwater thereat.
"Subsidiary" means, in addition to the Lothian Subsidiaries
and United Subsidiaries, any Person in which Lothian or United, as the context
requires, directly or indirectly through Subsidiaries or otherwise, beneficially
owns at least 50% of either the equity interest in, or the voting control of,
such Person, whether or not existing on the date hereof.
"Superior Proposal--Lothian" has the meaning ascribed to it in
Section 7.2(b).
"Superior Proposal--United" has the meaning ascribed to it in
Section 7.3(b).
"Surviving Corporation" has the meaning ascribed to it in
Section 1.1.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means any and all taxes including, without limitation, (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, value added, net worth, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible for the imposition of any such tax
(domestic or foreign), (ii) any liability for the payment of any amounts of the
type described in (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period or as the result
of being a transferee or successor thereof and (iii) any liability for the
payment of any amounts of the type described in (i) or (ii) as a result of any
express or implied obligation to indemnify any other Person.
59
"Tax Returns" means any return, report, information return,
schedule, certificate, statement or other document (including any related or
supporting information) filed or required to be filed with, or, where none is
required to be filed with a Taxing Authority, the statement or other document
issued by, a Taxing Authority in connection with any Tax.
"Taxing Authority" means any Governmental or Regulatory
Authority, board, bureau, body, department or authority of any United States
federal, state or local jurisdiction or any foreign jurisdiction, having or
purporting to exercise jurisdiction with respect to any Tax.
"Third Party Expenses" has the meaning ascribed to it in
Section 4.5.
"United" has the meaning ascribed to it in the forepart of
this Agreement.
"United Common Stock" has the meaning ascribed to it in
Recitals hereto.
"United Capital Stock" means the United Common Stock and the
United Preferred Stock.
"United Preferred Stock" means Series A Convertible Preferred
Stock, Series B-1 Convertible Preferred Stock and Series B-2 Convertible
Preferred Stock authorized by United's Certificate of Incorporation at the
Effective Time.
"United Financial Statements" has the meaning ascribed to it
in Section 3.7.
"United Information Statement" has the meaning ascribed to it
in Section 2.26.
"United Registered Intellectual Property" shall mean all
United States, international and foreign: (i) patents, patent applications
(including provisional applications); (ii) registered trademarks and service
marks, applications to register trademarks and service marks, intent-to-use
applications, other registrations or applications to trademarks or service
marks, or trademarks or service marks in which common law rights are owned or
otherwise controlled; (iii) registered copyrights and applications for copyright
registration; (iv) any mask work registrations and applications to register mask
works; and (v) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public legal
authority.
"United Stockholder Approval Date" has the meaning ascribed to
it in Section 7.3(a).
"United Subsidiaries" has the meaning ascribed to it in
Section 3.4.
60
"Utah Law" means the Utah Revised Business Corporation Act.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender, (ii) words using the singular
or plural number also include the plural or singular number, respectively, (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement as a whole and not to any particular Article, Section or
other subdivision, (iv) the terms "Article" or "Section" or other subdivision
refer to the specified Article, Section or other subdivision of the body of this
Agreement, (v) the phrases "ordinary course of business" and "ordinary course of
business consistent with past practice" refer to the business and practice of
Lothian or United, as the context requires, (vi) the words "include," "includes"
and "including" shall be deemed to be followed by the phrase "without
limitation," and (vii) when a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
indicated. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP. The term "party" or "parties"
when used herein refer to United, on the one hand, and Lothian, on the other.
(c) When used herein, the phrase "to the knowledge of" any Person,
"to the best knowledge of" any Person, "known to" any Person or any similar
phrase, means (i) with respect to any Person who is an individual, the actual
knowledge of such Person, and (ii) with respect to any other Person, the actual
knowledge of the directors and officers of such Person and other individuals
that have a similar position or have similar powers and duties as the officers
and directors of such Person.
[SIGNATURE PAGE FOLLOWS]
61
IN WITNESS WHEREOF, United and Lothian have caused this
Agreement to be signed by their duly authorized representatives, all as of the
date first written above.
UNITED HERITAGE CORPORATION LOTHIAN OIL INC.
By:/s/ C. Xxxxx Xxxxxx By:/s/ Xxxxx Xxxxxx
--------------------------------- --------------------------------
Name: C. Xxxxx Xxxxxx Name: Xxxxx Xxxxxx
Title: CEO Title: CEO
62
EXHIBIT A
FORM OF UTAH ARTICLES OF MERGER
ARTICLES OF MERGER
OF
LOTHIAN OIL INC.
A Delaware Corporation
(the non-surviving corporation)
and
UNITED HERITAGE CORPORATION
A Utah Corporation
(the surviving corporation)
ARTICLE I - Surviving Corporation
The name of the corporation surviving the merger ("Merger") is United
Heritage Corporation. United Heritage Corporation is a domestic corporation
incorporated on April 30, 1981 and existing pursuant to the provisions of the
Utah Revised Business Corporation Act.
ARTICLE II - Non-Surviving Corporations
The name of the non-surviving corporation is Lothian Oil Inc., a
Delaware corporation, which was incorporated on September 22, 2004.
ARTICLE III - Plan of Merger
The Plan of Merger containing such information as required by Utah Code
16-10a-1101 is set forth in Exhibit A, attached hereto and made a part hereof.
ARTICLE IV - Amendment to Articles of Incorporation
The Articles of Incorporation of United Heritage Corporation shall, on
the Merger becoming effective, be and constitute the Articles of Incorporation
of the surviving corporation with the following amendment:
Article I of the Articles of Incorporation of United Heritage
Corporation shall be amended to read in its entirety as follows:
Article I - Name: The name of this corporation is Lothian Oil Inc.
ARTICLE V - Manner of Adoption and Vote of Surviving Corporation
The designation of the voting group of United Heritage Corporation that
voted on the Merger was Common Stock. The number of outstanding shares of United
Heritage Corporation Common Stock and the number of votes entitled to be cast by
the holders of such shares, as of ___________, 2006, was _______________. The
number of votes of the United Heritage Corporation Common Stock voting group
cast for the Merger was 3,760,000 and the number of votes of the United Heritage
Corporation Common Stock voting group cast against the Merger was none.
ARTICLE VI - Manner of Adoption and Vote of Non-Surviving Corporation
The designation of the voting groups of Lothian Oil Inc. that voted on
the Merger was Common Stock, Series A Preferred Stock and Series B-1 Preferred
Stock.
The number of outstanding shares of Lothian Oil Inc. Common Stock and
the number of votes entitled to be cast by the holders of such shares, as of
___________, 2006, was 27,299,660. The number of votes of the Lothian Oil Inc.
Common Stock voting group cast for the Merger was ____________ and the number of
votes of the Lothian Oil Inc. Common Stock voting group cast against the Merger
was none.
The number of outstanding shares of Lothian Oil Inc. Series A Preferred
Stock as of ____________, 2006 was 150,000 and the number of votes entitled to
be cast by the holders of such shares, as of ___________, 2006, was 15,000,000.
The number of votes of the Lothian Oil Inc. Series A Preferred Stock voting
group cast for the Merger was ___________ and the number of votes of the Lothian
Oil Inc. Series A Preferred Stock voting group cast against the Merger was none.
The number of outstanding shares of Lothian Oil Inc. Series B-1
Preferred Stock as of ____________, 2006 was 50,000 and the number of votes
entitled to be cast by the holders of such shares, as of ___________, 2006, was
5,000,000. The number of votes of the Lothian Oil Inc. Series A Preferred Stock
voting group cast for the Merger was ____________ and the number of votes of the
Lothian Oil Inc. Series B-1 Preferred Stock voting group cast against the Merger
was none.
ARTICLE VII - Effective Date of Merger
The effective date of the Merger shall be the date upon which these
Articles are filed with the Utah Division of Corporations and Commercial Code.
In witness whereof, the undersigned, being the Chief Executive Officer
of the surviving corporation, executes these Articles of Merger subject to
penalties of perjury that the statements contained herein are true on this _____
day of March 2006.
-----------------------------------------
C. Xxxxx Xxxxxx
Exhibit A
PLAN OF MERGER
This Plan of Merger ("Plan") is entered into as of the _____ day of
March 2006 by and between United Heritage Corporation, a Utah corporation
("United Heritage") and Lothian Oil Inc., a Delaware corporation ("Lothian").
RECITALS
A. United Heritage is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Utah.
B. Lothian is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware.
C. The respective Boards of Directors of United Heritage and Lothian
and a majority of the issued and outstanding shares of United Heritage and
Lothian deem it advisable for good and valid business reasons and for the mutual
benefit of United Heritage and Lothian that Lothian be merged with and into
United Heritage (the "Merger") as a statutory merger under Section 368(a) of the
Internal Revenue Code of 1986, as amended, upon the terms and subject to the
conditions set forth herein and in the Merger Agreement and Plan of
Reorganization between the parties hereto dated as of February _____, 2006 (the
"Merger Agreement") and in accordance with the Utah Revised Business Corporation
Act (the "Act").
D. United Heritage and Lothian and their respective Boards of Directors
and, to the extent required by applicable law, their respective shareholders,
have approved this Plan.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained herein, the parties hereto agree as follows:
1. The Merger. At the Effective Time (as hereinafter defined), in
accordance with the Merger Agreement and Section 16-10a-1105(2) of the Act,
Lothian shall be merged with and into United Heritage, the separate existence of
Lothian shall cease, and United Heritage shall continue as the surviving
corporation under the new corporate name of Lothian Oil Inc. (United Heritage
and Lothian are herein sometimes referred to as the "Constituent Corporations"
and United Heritage, in its capacity as the corporation surviving the Merger, is
sometimes referred to herein as the "Surviving Corporation".)
2. Effective Time. The Merger shall become effective immediately upon
the filing of the Articles of Merger and this Plan with the Utah Department of
Corporations and Commercial Code. The date and time of such filing are sometimes
referred to herein as the "Effective Time."
3. Effect of the Merger. At the Effective Time, the Merger shall have
the effect provided for in Section 16-10a-1106 of the Act.
4. Articles of Incorporation and Bylaws; Directors and Officers.
(a) The Articles of Incorporation and Bylaws of United Heritage, as
in effect immediately prior to the Effective Time, shall, except as amended as
hereinafter provided, be the Articles of Incorporation and Bylaws of the
Surviving Corporation at the Effective Time and shall thereafter continue to be
its Articles of Incorporation and Bylaws until amended as provided therein and
under applicable law.
3
(b) Article I of the Articles of Incorporation of United shall be
hereby amended effective as of the Effective Time to read as follows:
ARTICLE I - NAME
The name of this corporation is Lothian Oil Inc.
(c) The following listed individuals shall be the directors of the
Surviving Corporation at the Effective Time:
C. Xxxxx Xxxxxx
Xxxxxxx Xxxx
Xxxxx Xxxxxx
Xxxxxx Xxxxx
Xxxxx X. Xxxxxx
Xxxxxxx Xxxxxxx
Each of these individuals will serve a term as a director
expiring at the annual meeting of shareholders to be held in 2006 and until
their successors shall be duly elected and qualified.
(d) The following individuals shall be the officers of the
Surviving Corporation at the Effective Time:
C. Xxxxx Xxxxxx - President and Chief Executive Officer
Xxxxxxx Xxxx - Chief Financial Officer and Secretary
5. Conversion of Securities.
(a) At the Effective Time, by virtue of the Merger and without
any further action on the part of United Heritage, Lothian or the shareholders
of United Heritage or Lothian, all of the shares of common stock of Lothian
issued and outstanding (the "Lothian Common Stock") in the aggregate, shall
automatically be converted into the right to receive shares of common stock of
United Heritage (the "United Heritage Common Stock") with the right of each of
the holders thereof, as of the Effective Time, to be treated as a registered
holder of shares of United Heritage Common Stock with all rights to dividends
and other distributions made to registered holders of United Heritage Common
Stock as of such dated, provided that the aggregate number of shares of United
Heritage Common Stock that each of the Lothian shareholders is entitled to
receive is rounded down to the nearest whole share, such shareholder will
receive from United Heritage in respect of the fractional share subject to such
rounding, the value in cash of such factional share determined by averaging the
representative bid and asked prices for the United Heritage Common Stock quoted
in the NASDAQ System as of 4:00 P.M., New York time, averaged over a period of
21 days consisting of the day as of which the value is being determined and the
20 consecutive business days prior to such day; provided that if such security
is listed on any domestic securities exchange the term "business days" as used
in this sentence means business days on which such exchange is open for trading.
On the On the Effective Date, each 3.3 shares of Lothian Common Stock will, by
virtue of the Merger, be canceled and converted into the right to receive 2
shares of United Heritage Common Stock. The value of "Market Price" means as to
any security.
4
(b) At the Effective Time, by virtue of the Merger and without
any further action on the part of United Heritage, Lothian or the shareholders
of United Heritage or Lothian, all of the shares of Series A and Series B-1
Preferred Stock of Lothian issued and outstanding (the "Lothian Series A or
Series B-1 Preferred Stock," as appropriate) shall automatically be converted
into the right to receive shares of Series A or Series B-1 Preferred Stock of
United Heritage (the "United Heritage Series A or Series B-1 Preferred Stock,"
as appropriate) with the right of each of the holders of the Lothian Series A or
Series B-1 Preferred Stock, as of the Effective Time, to be treated as a
registered holder of shares of the United Heritage Series A or Series B-1
Preferred Stock with all rights to dividends and other distributions made to
registered holders of United Heritage Series A or Series B-1 Preferred Stock as
of such date, provided that the aggregate number of shares of United Heritage
Series A or Series B-1 Preferred Stock that each of the Lothian shareholders is
entitled to receive is rounded down to the nearest whole share, such shareholder
will receive from United Heritage in respect of the fractional share subject to
such rounding, the value in cash of such factional share determined by averaging
the representative bid and asked prices for the united Heritage Common Stock
quoted in the NASDAQ System as of 4:00 P.M., New York time, averaged over a
period of 21 days consisting of the day as of which the value is being
determined and the 20 consecutive business days prior to such day; provided that
if such security is listed on any domestic securities exchange the term
"business days" as used in this sentence means business days on which such
exchange is open for trading, and multiplying such average by 100. On the On the
Effective Date, each 3.3 shares of Lothian Series A and Series B-1 Preferred
Stock will, by virtue of the Merger, be canceled and converted into the right to
receive 2 shares of United Heritage Series A or Series B-1 Preferred Stock.
6. Termination or Abandonment. This Plan may be terminated and the
Merger abandoned as provided in the Merger Agreement.
7. Other Provisions.
(a) Governing Law. This Plan shall be governed in all respects by
the laws of the State of Utah.
(b) Counterparts. This Plan may be executed in counterparts, each
of which shall be an original, but all of which together shall constitute one
and the same agreement.
5
IN WITNESS WHEREOF, the Constituent Corporations have executed this
Plan by their duly authorized officers as of the date first above written.
United Heritage Corporation Lothian Oil Inc.
By: By:
---------------------------------------- --------------------------------
C. Xxxxx Xxxxxx, Chief Executive Officer
6
EXHIBIT B
FORM OF DELAWARE CERTIFICATE OF MERGER
CERTIFICATE OF MERGER
OF
LOTHIAN OIL INC.
(a Delaware corporation)
INTO
UNITED HERITAGE CORPORATION
(a Utah corporation)
(Under Section 252 of the Delaware General Corporation Law)
The undersigned, being the surviving corporation, hereby sets forth as follows:
FIRST: The name of the surviving corporation is Lothian Oil Inc. (the
"Surviving Corporation"); its state of incorporation is Utah.
SECOND: The name of the non-surviving corporation is Lothian Oil Inc.;
its state of incorporation is Delaware.
THIRD: An Agreement of Merger has been approved, adopted, certified,
executed and acknowledged by Lothian Oil Inc. and United Heritage Corporation in
accordance with Section 251 of the Delaware General Corporation Law.
FOURTH: The Agreement of Merger is on file at the principal place of
business of the Surviving Corporation, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx,
Xxx Xxxx 00000.
FIFTH: A copy of the Agreement of Merger will be furnished by the
Surviving Corporation, on request and without cost, to any shareholder of any
constituent corporation hereof.
SIXTH: The Surviving Corporation agrees that it may be served with
process in Delaware in any proceeding for enforcement of any obligation of any
constituent corporation of Delaware, as well as for enforcement of any
obligation of the Surviving Corporation arising from the merger, including any
suit or other proceeding to enforce the right of any stockholder as determined
in appraisal proceedings pursuant to Section 262 of the Delaware General
Corporation Law. The Surviving Corporation irrevocably appoints the Secretary of
State of the State of Delaware as its agent to accept service of process in any
such suit or other proceedings. The Secretary of State shall mail a copy of such
process to the Surviving Corporation, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx,
Xxx Xxxx 00000.
IN WITNESS WHEREOF, this certificate is hereby executed this day of
______________, 2006.
LOTHIAN OIL INC.
BY:
--------------------------------
C. Xxxxx Xxxxxx
Chief Executive Officer
2
EXHIBIT C
LOTHIAN OIL INC.
LETTER OF TRANSMITTAL
TO ACCOMPANY STOCK CERTIFICATES OF LOTHIAN OIL INC., A DELAWARE
CORPORATION, SURRENDERED IN EXCHANGE FOR STOCK CERTIFICATES OF LOTHIAN OIL INC.,
A UTAH CORPORATION FORMERLY KNOWN AS UNITED HERITAGE CORPORATION. PLEASE FOLLOW
CAREFULLY THE INSTRUCTIONS ON THE FOLLOWING PAGE.
To: Lothian Oil Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Telephone Number (000) 000-0000
Gentlemen:
In connection with the merger of Lothian Oil Inc., a Delaware
corporation ("Lothian"), with and into Lothian Oil Inc., a Utah corporation
formerly known as United Heritage Corporation ("Lothian UT") (such merger being
referred to herein as the "Merger") pursuant to a Merger Agreement and Plan of
Reorganization, dated as of February ___, 2006 (the "Merger Agreement"), the
undersigned surrenders the stock certificates identified below ("Lothian
Certificates") in exchange for a Lothian UT stock certificate representing the
number of shares and class of Lothian UT capital stock ("Lothian UT Shares") as
shall be determined under Section 1.6 of the Merger Agreement.
-------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Owner(s) of Lothian Lothian Certificates Surrendered
Certificates as Shown on Records of Lothian
-------------------------------------------------------------------------------------------------------------
Certificate Number of
Number/Class Lothian Shares
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Total Number of
Shares
--------------------------------------------
NOTE: If the name and address as indicated are not correct, please
indicate any changes necessary. (If additional space is required, attach a
continuation sheet in substantially the above form.)
Please issue the Lothian UT Shares in the name(s) shown in the box
above and deliver the certificate representing such Lothian UT Shares by mail to
the address indicated in the box above.
Pursuant to the terms of the Merger Agreement, the issuance of the
Lothian UT Shares by Lothian UT is conditioned upon the Lothian stockholders
seeking exchange thereof completing and executing the Representation Letter
attached hereto as Exhibit A, and returning same together with a copy of this
Letter of Transmittal.
NOTE: HOLDER OF LOTHIAN UT SHARES MUST SIGN IN THE SPACE PROVIDED
BELOW.
(Must be signed by registered stockholder(s) exactly as name(s) appear(s) on
Lothian Certificates or by persons authorized to become stockholder(s). If
signature is by trustees, guardians, attorneys-in-fact, agents, of
corporations or others acting in a fiduciary or representative capacity,
please see Instructions 2 and 3 on the following page.)
-------------------------------------------------------------------------------------------------------------------
SIGN HERE PRINT NAME AND ADDRESS
(if different from above)
By: Name(s):
----------------------------------------- ------------------------------------
Name:
--------------------------------------- -----------------------------------
Title: Capacity:
-------------------------------------- -----------------------------------
Date: Address:
--------------------------------------- ------------------------------------
Phone:
-----------------------------------
Taxpayer Identification Number
or Social Security Number:
-----------------------------------
-------------------------------------------------------------------------------------------------------------------
INSTRUCTIONS
Forming Part of the Terms and Conditions of this
Letter of Transmittal
1. Use of Letter of Transmittal. This Letter of Transmittal duly
completed and signed, together with the surrendered Lothian Certificates and any
other documents required by these Instructions, should be sent by mail or
delivered by hand to ____________ (the "Exchange Agent") at the address set
forth on the first page of this Letter of Transmittal. Delivery shall be
affected, and risk of loss and title to the Lothian Certificates shall pass,
only upon proper delivery of such certificates to the Exchange Agent. THE METHOD
OF DELIVERY OF ALL DOCUMENTS IS AT THE ELECTION AND RISK OF THE STOCKHOLDER BUT
IF DELIVERY IS BY MAIL, REGISTERED OR CERTIFIED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
2. Signatures. The signatures on this Letter of Transmittal must
correspond with the name(s) as written on the face of the surrendered Lothian
Certificates. In the case of joint tenants, all should sign. If the surrendered
Lothian Certificates are registered in different forms of the name of any person
signing this Letter of Transmittal (e.g. "Xxxx Xxxxx" on one certificate and "X.
Xxxxx" on another), it will be necessary for such person either to sign this
Letter of Transmittal in each way in which the certificates are registered or to
sign as many Letters of Transmittal as there are different registrations. When
signing as agent, trustee, executor, administrator, guardian, officer of a
corporation, attorney-in-fact or other person acting in a fiduciary or
representative capacity, please give full title as such. If the surrendered
certificates have been transferred or assigned, this Letter of Transmittal
should be signed by the transferee or assignee, who should comply with
Instruction 3, and not by the transferor.
3. Supporting Evidence. In case any Letter of Transmittal, certificate
endorsement or stock power is executed by an agent, trustee, executor,
administrator, guardian, officer of a corporation, attorney-in-fact or other
person acting in a fiduciary or representative capacity, there should be
submitted with the Letter of Transmittal and surrendered Lothian Certificates
documentary evidence of appointment and authority to act in such capacity
(including court orders and corporate resolutions, where necessary) as well as
evidence of authority of the person making such execution to assign, sell or
transfer the Lothian Certificates. Such documentary evidence of authority must
be in form satisfactory to the Exchange Agent. Transferees or assignees should
submit written evidence of transfers and assignments, signed by the registered
stockholder(s) and should refer to the number of Lothian Certificates sold or
assigned and applicable Lothian Certificate number(s).
4. Consequences of Failures to Return Letter of Transmittal or Failure
to Surrender Lothian Certificates. Certificates representing Lothian UT Shares
will be sent only to persons who deliver the Letter of Transmittal, properly
completed and executed, to the Exchange Agent, together with Lothian
Certificates being submitted therewith and other documents required by these
Instructions.
5. Lost or Stolen Certificates. If Lothian Certificates have been lost
or stolen, the Exchange Agent should be contacted, in writing, for information
with respect to the procedures to be followed in order to receive Lothian UT
Shares in exchange for Lothian Certificates.
6. Waiver. Lothian Oil Inc. reserves the absolute right to waive any
irregularities or defects in the surrender of Lothian Certificates.
7. Inquiries. All inquiries with respect to the surrender of Lothian
Certificates in exchange for Lothian UT Shares should be made directly the
Exchange Agent, at the appropriate address on the first page of this Letter of
Transmittal.
EXHIBIT A
REPRESENTATION LETTER
To: Lothian Oil Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Telephone Number (000) 000-0000
The undersigned makes the following representations and warranties in order to
permit Lothian Oil Inc, a Utah Corporation (the "Company") to determine the
availability of the exemption(s) relied upon by the Company from registration
under the Securities Act of 1933, as amended (the "Securities Act"), and the
regulations promulgated thereunder in connection with the issuance by the
Company of its capital stock to the undersigned in exchange for the
undersigned's capital stock in Lothian Oil Inc, a Delaware corporation pursuant
to a Merger Agreement and Plan of Reorganization, dated as of February ___, 2006
(the "Merger Agreement").
TO ESTABLISH THAT THE UNDERSIGNED IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a) PROMULGATED UNDER THE SECURITIES ACT, THE
UNDERSIGNED MUST XXXX AT LEAST ONE BOX BELOW, THEREBY MAKING THE
REPRESENTATION SET FORTH BESIDE THE MARKED BOX.
|_| The undersigned is a natural person whose individual net
worth, or joint net worth with that person's spouse, at the
time of the undersigned's purchase exceeds $1,000,000.
|_| The undersigned is a natural person who had an individual
income in excess of $200,000 in each of the two most recent
years or joint income with that person's spouse in excess of
$300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current
year.
|_| The undersigned is a bank as defined in Section 3(a)(2) of the
Securities Act or a savings and loan association or any other
institution as defined in Section 3(a)(5)(A) of the Securities
Act.
|_| The undersigned is a broker dealer registered pursuant to
Section 15 of the United States Securities Exchange Act of
1934, as amended.
|_| The undersigned is an insurance company as defined in Section
(2)(13) of the Securities Act.
|_| The undersigned is an investment company registered under the
Investment Company Act or a business development company as
defined in Section 2(a)(48) of that Act.
|_| The undersigned is a Small Business Investment Company
licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the U.S. Small Business Investment
Act of 1958, as amended.
|_| The undersigned is a plan established and maintained by a
State within the United States, one or more political
subdivisions of such a State, or any agency or instrumentality
of such a State or its political subdivisions, for the benefit
of its employees, with total assets in excess of $5,000,000.
|_| The undersigned is an employee benefit plan within the meaning
of the United States Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), (i) the investment decision for
which is made by a plan fiduciary, as defined in Section 3(21)
of ERISA, which is either a bank, savings and loan
association, insurance company, or registered investment
advisor or (ii) which has total assets in excess of $5,000,000
or (iii) which is a self-directed plan with investment
decisions made solely by persons that are Accredited
Investors.
|_| The undersigned is a private business development company as
defined in Section 202(a)(22) of the United States Investment
Advisers Act of 1940.
|_| The undersigned is an organization that is described in
Section 501(c)(3) of the United States Internal Revenue Code
of 1986, as amended, a corporation, a Massachusetts or similar
business trust, or a partnership that, in any case, was not
formed for the specific purpose of acquiring the Company's
capital stock and has total assets in excess of $5,000,000.
|_| The undersigned is an executive officer (as defined in Rule
501(f) promulgated under the Securities Act) or Management
Committee of the Company or of the Management Committee.
|_| The undersigned is a trust with total assets of $5,000,000,
not formed for the specific purpose of acquiring the Company's
capital stock, whose purchase of the Company's capital stock
is directed by a sophisticated person as described in Rule
506(b)(2)(ii) promulgated under the Securities Act.
|_| The undersigned is an entity in which all of the equity owners
are Accredited Investors.
The undersigned has such knowledge and experience in business,
financial and tax matters including, in particular, investing in
private placements of securities in entities similar to the Company, so
as to enable the undersigned to utilize the information made available
to the undersigned in connection with the Merger to: (i) evaluate the
merits and risks of an investment in the Company and to make an
informed investment decision with respect thereto; and (ii) to
reasonably be assumed to have the capacity to protect the undersigned's
own interests in connection with the Merger.
With the exception of direct communication to the undersigned from an
officer, director or employee of the Company, the undersigned is
unaware of, is no way relying on, and did not become aware of the
Merger, through or as a result of any form of public advertising
including, without limitation, any advertisement, article, notice,
leaflet or other communication (whether published in any newspaper,
magazine, or similar media or broadcast over television or radio, or
otherwise generally disseminated or distributed).
With the exception of direct communication to the undersigned by an
officer, director or employee of the Company, the undersigned did not
become aware of the Merger through or as the result of any public or
promotional seminar or meeting to which the undersigned was invited by,
or any solicitation of a subscription by, a person not previously known
to the undersigned in connection with investments in securities
generally.
The undersigned has had access to all material information regarding
the Company and the Merger through the XXXXX Archives of the Securities
and Exchange Commission at xxx.xxx.xxx or by the delivery of copies of
all Reports, Registration Statements and Information Statements filed
by the Company with the Securities and Exchange Commission during the
past twenty-four months.
The undersigned has had access to all material information regarding
Lothian by virtue of the undersigned being a holder of outstanding
securities or the right to acquire securities of Lothian.
The undersigned is acquiring shares of capital stock of the Company
pursuant to the Merger and the Merger Agreement for investment purposes
only and not with a view toward the further distribution thereof. The
undersigned understands and acknowledges that the shares of capital
stock of the Company received in the Merger will be classified,
pursuant to Rule 502(d) of Regulation D of the Securities Act, as
"restricted securities" acquired in a transaction under Section 4(2) of
the Securities Act, which cannot be sold without registration under the
Securities Act or an exemption therefrom, and such stock will also be
subject to applicable state securities laws which may require
registration or qualification of such stock in connection with their
resale, unless an exemption from such registration or qualification is
available.
The undersigned represents to the Company that the foregoing is true
and correct.
Dated: __________________
-------------------------
EXHIBIT D
FORM OF
UNITED CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A PREFERRED STOCK
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF
SERIES A PREFERRED STOCK
OF
UNITED HERITAGE CORPORATION
(Pursuant to Section 16-10a-602 of the
Utah Revised Business Corporation Act)
---------------------------------------------
United Heritage Corporation, a corporation organized and existing under
the laws of the State of Utah (the "Corporation"), hereby certifies that,
pursuant to authority vested in the Board of Directors of the Corporation by the
amended Articles of Incorporation of the Corporation, the following resolution
was adopted as of February ___, 2006 by the Board of Directors of the
Corporation pursuant to Section 16-10a-821 of the Utah Revised Business
Corporation Act:
RESOLVED, that, pursuant to authority vested in the Board of Directors
of the Corporation by Article IV of the Corporation's amended Articles of
Incorporation, of the total authorized number of 5,000,000 shares of Preferred
Stock of the Corporation, there shall be designated a series of 133,333 shares
which shall be issued in and constitute a single series to be known as "Series A
Convertible Preferred Stock", par value $0.0001 per share (hereinafter called
the "Series A Preferred"). The shares of Series A Preferred shall have the
voting powers, designations, preferences and other special rights, and
qualifications, limitations and restrictions thereof set forth below:
Section 1. Dividends and Distributions.
(a) The holders of Series A Preferred shall be entitled to receive
dividends at a rate of eight percent (8%) of the liquidation preference of
$165.000165 per share per annum, which shall be fully cumulative, prior and in
preference to any declaration or payment of any dividend (payable other than in
shares of common stock, $0.001 par value per share, of the Corporation (the
"Common Stock") or other distribution on the Common Stock of the Corporation.
The holders of Series A Preferred shall not have preference but shall be
entitled to equal dividends or distributions to holders of subsequent series of
Preferred Stock issued by the Corporation, if any. If the dividends on the
Series A Preferred cannot legally be paid in full, dividends shall be paid, to
the maximum permissible extent, to the holders of the Series A Preferred, pari
passu. The dividends on the Series A Preferred shall accrue from the date of
issuance of each share and shall be payable quarterly with respect to each
calendar quarter on March 31, June 30, September 30 and December 31 of each year
(each a "Dividend Date"), commencing on the last day of the fiscal quarter in
which the effective date of Corporation's merger with Lothian Oil Inc. occurs
(with dividends being pro-rated for such quarter), to the holders of record of
the Series A Preferred on the first day of the month for each Dividend Date
(each, a "Record Date"), except that if any such date is a Saturday, Sunday or
legal holiday (a "Non-Business Day") then such dividend shall be payable on the
next day that is not a Saturday, Sunday or legal holiday on which banks in New
York, New York are required or authorized to be closed (a "Business Day"). The
dividends on the Series A Preferred shall be payable only when, as and if
declared by the Board of Directors out of funds legally available therefor. The
amount of dividends payable for any period that is shorter or longer than 30
days shall be computed on the basis of a 360-day year of twelve 30-day months.
All accrued but unpaid dividends shall accrue interest after each Dividend Date
at a rate of eight percent (8%) per annum from each Dividend Date, computed on
the basis of a 360-day year of twelve 30-day months.
(b) The holders of Series A Preferred shall not be entitled to receive
any dividends or other distributions except as provided in this Certificate of
Designation of Series A Preferred.
Section 2. Voting Rights.
Except as otherwise required by law or as expressly provided herein,
each share of Series A Preferred shall entitle the holder thereof to notice of
any stockholders' meeting in accordance with the by-laws of the Corporation and
to vote upon all matters submitted to a vote of stockholders. Each share of
Series A Preferred shall be entitled the holder thereof to the number of votes
on any matter equal to the number of shares of Common Stock into which such
share of Series A Preferred could be converted on the record date for the vote
or written consent of stockholders with respect to such matter. Fractional votes
shall not, however, be permitted and any fractional voting rights (after
aggregating all shares of Common Stock into which shares of Series A Preferred
held by each holder could be converted) shall be rounded downward to the nearest
whole number. Except as otherwise required by law or expressly provided herein,
the holders of Series A Preferred and Common Stock shall vote together and not
as separate classes or series.
Section 3. Liquidation, Dissolution, Winding Up or Certain Mergers
or Consolidations.
If the Corporation shall adopt a plan of liquidation or of dissolution,
or commence a voluntary case under the federal bankruptcy laws or any other
applicable state or federal bankruptcy, insolvency or similar law, or consent to
the entry of an order for relief in any involuntary case under such law or to
the appointment of a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Corporation or of any substantial part
of its property, or make an assignment for the benefit of its creditors, or
admit in writing its inability to pay its debts generally as they become due and
on account of such event the Corporation shall liquidate, dissolve or wind up,
or upon any other liquidation, dissolution or winding up of the Corporation, or
engage in a merger, plan of reorganization or consolidation in which the
Corporation is not the surviving Corporation, then and in that event, holders of
Series A Preferred shall have a liquidation preference over holders of Common
Stock, but shall not have a liquidation preference but shall be equal to holders
of subsequent series of Preferred Stock issued by the Corporation, if any. If
upon any liquidation, dissolution, winding up, merger, plan of reorganization or
consolidation, the amount so payable or distributable does not equal or exceed
the "Liquidation Preferences" of the Series A Preferred, then, and in that
event, the amount of cash so payable, and amount of securities or other
consideration so distributable, shall be shared ratably among the holders of the
Series A Preferred and any subsequent series of Preferred Stock issued by the
Corporation. For the purposes hereof, the term "Liquidation Preference(s)" shall
mean $165.000165 per share with respect to each of the Series A Preferred, plus
any and all accrued unpaid dividends thereon.
2
Section 4. Redemption.
(a) All, but not less than all, of the Series A Preferred may be
redeemed upon payment of $165.000165 per Series A Share, plus accrued and unpaid
dividends thereon (the "Redemption Price"), at any time by the Corporation at
its sole discretion upon thirty (30) days' written notice to the holders of the
Series A Preferred; provided, however, the Company shall not redeem the Series A
Preferred unless, at the time of such redemption, (i) the Company is a reporting
company under Section 12 of the Securities Exchange Act of 1934, as amended, and
(ii) the Common Stock is traded on the NASDAQ System or in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or the American Stock Exchange, (iii) a registration statement
under the Securities Act of 1933, as amended has been filed and is effective and
covers the Common Stock issuable upon conversion of the Series A Preferred; and
(iv) the Market Price as of the date of any Redemption Notice hereunder is no
less than two hundred percent (200%) of the Conversion Ratio.
(b) Any notice of redemption (a "Redemption Notice") given by the
Corporation with respect to the Series A Preferred shall be delivered by mail,
first class postage prepaid, to each holder of record (at the close of business
on the business day preceding the day on which notice is given) of the Series A
Preferred, at the address last shown on the records of the Corporation for such
holder or given by the holder to the Corporation, for the purpose of notifying
such holder of the redemption to be effected. The Redemption Notice shall
specify a date (the "Redemption Date") not earlier than 30 days after the
mailing of the Redemption Notice on which the Series A Preferred then
outstanding shall be redeemed and the place at which payment may be obtained,
which shall be the principal offices of the Corporation. The Redemption Notice
shall call upon each holder of Series A Preferred to either (i) surrender to the
Corporation, in the manner and at the place designated, such holder's
certificate or certificates representing the Series A Preferred to be redeemed,
or (ii) convert the Series A Preferred into Common Stock prior to the Redemption
Date in accordance with the provisions of Section 5 below. If the Corporation
elects to redeem shares pursuant to this Section 4 and defaults or fails to
perform its redemption obligations pursuant to this Section 4 in connection
therewith, the holders of the Series A Preferred shall then have the absolute
right to convert such Series A Preferred into Common Stock in accordance with
the provisions of Section 5.
(c) On the Redemption Date, the Corporation shall pay the Redemption
Price to the person whose name appears on the certificate or certificates of the
Series A Preferred that (i) shall not have been converted pursuant to Section 5
hereof and (ii) shall have been surrendered to the Corporation in the manner and
at the place designated in the Redemption Notice, and thereupon each surrendered
certificate shall be canceled.
(d) If the funds of the Corporation legally available for redemption
of the Series A Preferred are insufficient to redeem the total number of Series
A Preferred outstanding on the Redemption Date, the Series A Preferred shall be
redeemed (on a pro rata basis from the holders of the Series A Preferred, from
time to time), to the extent the Corporation is legally permitted to do so, and
the redemption obligations of the Corporation hereunder will be a continuing
obligation until the Corporation's redemption of all of the Series A Preferred.
3
(e) From and after the Redemption Date, unless there shall have been a
default in payment of the Redemption Price, all rights of the holders of the
Series A Preferred (except the right to receive the Redemption Price subsequent
to the Redemption Date upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever.
Section 5. Conversion.
(a) Right to Convert: Subject to the provisions for adjustment
hereinafter set forth, each share of Series A Preferred shall be convertible in
the manner hereinafter set forth into fully paid and nonassessable shares of
Common Stock. Commencing upon issuance, the Liquidation Preference of each share
of Series A Preferred (a "Series A Share") may, at the option of the holder
thereof, be converted into such number of fully paid and nonassessable whole
shares of Common Stock as determined by dividing the Liquidation Preference by
$1.65000165 (the "Conversion Ratio"). Such rights of conversion shall be
exercised by the holder thereof by giving written notice that the holder elects
to convert a stated number of shares of Series A Preferred into Common Stock and
by surrender of a certificate or certificates for the shares to be so converted
to the Corporation at its principal office (or such other office or agency of
the Corporation as the Corporation may designate by notice in writing to the
holder or holders of the Series A Preferred) at any time during its usual
business hours on the date set forth in such notice, together with a statement
of the name or names (with address), subject to compliance with applicable laws
to the extent such designation shall involve a transfer, in which the
certificate or certificates for shares of Common Stock.
(i) Adjustments to Conversion Ratio: The Conversion Ratio shall
be adjusted from time to time as follows:
(A) If and whenever the Corporation issues or sells, or in
accordance with paragraph 5(ii) is deemed to have issued or sold, any shares of
its Common Stock for a consideration per share less than the Conversion Ratio in
effect immediately prior to the time of such issue or sale, then immediately
upon such issue or sale or deemed issue or sale the Conversion Ratio shall be
reduced to eighty-five percent (85%) of the per share consideration received by
the Corporation for such shares of Common Stock issued or deemed to have been
issued.
As used herein, "Common Stock Deemed Outstanding"
means, at any given time, without duplication, the number of shares of Common
Stock actually outstanding at such time, plus the number of shares of Common
Stock deemed to be outstanding pursuant to subparagraphs 5(a)(ii)(A) and
5(a)(ii)(B) hereof whether or not the Options or Convertible Securities (as such
terms are defined in subparagraph 5(a)(ii)(A) below) are actually exercisable at
such time, plus the number of shares of Common Stock issuable upon exercise of
Options outstanding at such time, as such number of shares is proportionately
adjusted for stock splits, stock dividends, stock combinations and other
recapitalizations.
(B) Notwithstanding the foregoing, there shall be no
adjustment in the Conversion Ratio as a result of (a) the issuance of any Common
Stock as a result of the exercise of any Options outstanding at the time of the
initial issuance of the Series A Preferred, (b) the issuance of any Common Stock
as a result of the conversion of the Series A Preferred, (c) the issuance or
deemed issuance of any Common Stock as a result of the granting by the Company
of any Options approved by the Corporation's Board of Directors, to the extent
that the exercise price of any such Option is not less than eighty-five percent
(85%) of the Conversion Ratio on the date such Option is granted, or (d) the
issuance or deemed issuance of any Common Stock in connection with any
transaction or series of transactions (other than transactions specifically
described in this subsection (B)) at a price not less than eighty-five percent
(85%) of the Conversion Ratio on the date of issuance or deemed issuance and in
which the consideration received by the Company is not more than $1,000,000, in
one transaction or a series of transactions.
4
(ii) Effect on Conversion Ratio of Certain Events. For
purposes of determining the adjusted Conversion Ratio under paragraph 5(a)(i)
above, the following shall be applicable:
(A) Issuance of Rights or Options. If the Corporation
in any manner grants or sells any rights, warrants or options (collectively,
"Options") to subscribe for or purchase Common Stock (other than Options
described in subparagraph 5(a)(i)(B) above) or any stock or securities directly
or indirectly convertible into or exchangeable for Common Stock ("Convertible
Securities") and the price per share for which Common Stock is issuable upon the
exercise of such Options, or upon conversion or exchange of any Convertible
Securities issuable upon exercise of such Options, is less than the Conversion
Ratio in effect immediately prior to the time of the granting or sale of such
Options, then the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to be outstanding and to have been issued and sold by the
Corporation at the time of the granting or sale of such Options for such price
per share. For purposes of this paragraph, the "price per share for which Common
Stock is issuable" shall be determined by dividing (A) the total amount, if any,
received or receivable by the Corporation as consideration for the granting or
sale of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Ratio shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. If the
Corporation in any manner issues or sells any Convertible Securities and the
price per share for which Common Stock is issuable upon conversion or exchange
thereof is less than the Conversion Ratio in effect immediately prior to the
time of such issue or sale, then the maximum number of shares of Common Stock
issuable upon conversion or exchange of such Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the Corporation at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this paragraph, the "price per share for which
Common Stock is issuable" shall be determined by dividing (A) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Ratio shall be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Conversion Ratio had been
or are to be made pursuant to other provisions of this Section 5, no further
adjustment of the Conversion Ratio shall be made by reason of such issue or
sale.
5
(C) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Ratio in
effect at the time of such change shall be immediately adjusted to the
Conversion Ratio which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of paragraph 5(a)(ii), if
the terms of any Option or Convertible Security which was outstanding as of the
date of the initial issuance of the Series A Preferred are changed in the manner
described in the immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
change; provided that no such change shall at any time cause the Conversion
Ratio hereunder to be increased.
(D) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Ratio then in effect hereunder shall
be adjusted immediately to the Conversion Ratio which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued. For purposes of paragraph 5(a)(ii), the
expiration or termination of any Option or Convertible Security which was
outstanding as of the date of the initial issuance of the Series A Preferred
shall not cause the Conversion Ratio hereunder to be adjusted unless, and only
to the extent that, a change in the terms of such Option or Convertible Security
caused it to be deemed to have been issued after the date of issuance of the
Series A Preferred.
(E) Calculation of Consideration Received. If any
Common Stock, Option or Convertible Security is issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Corporation therefor (net of
non-customary discounts, commissions and related expenses). If any Common Stock,
Option or Convertible Security is issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation shall be the Market Price thereof as of the date of
receipt. If any Common Stock, Option or Convertible Security is issued to the
owners of the non-surviving entity in connection with any merger in which the
Corporation is the surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value of such portion of the assets and business
of the non-surviving entity as is attributable to such Common Stock, Option or
Convertible Security, as the case may be. The fair value of any consideration
other than cash and securities shall be determined jointly by the Corporation
and the holders of at least a majority of the then outstanding Series A
Preferred. If such parties are unable to reach agreement within a reasonable
period of time, the fair value of such consideration shall be determined by an
independent appraiser experienced in valuing such type of consideration selected
by the Corporation and approved by the holders of at least a majority of the
then outstanding Series A Preferred (such approval not to be unreasonably
withheld). The determination of such appraiser shall be final and binding upon
the parties, and the fees and expenses of such appraiser shall be borne by the
Corporation.
6
(F) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Corporation, together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of One Cent ($.01).
(G) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.
(H) Record Date. If the Corporation takes a record of
the holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date shall be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(I) "Market Price" of any security means the average
of the closing prices of such security's sales on all securities exchanges on
which such security may at the time be listed, or, if there has been no sales on
any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any
day such security is not quoted in the NASDAQ System, the average of the highest
bid and lowest asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of twenty-one
(21) trading days consisting of the day as of which "Market Price" is being
determined and the twenty (20) consecutive business days prior to such day. If
at any time such security is not listed on any securities exchange or quoted in
the NASDAQ System or the over-the-counter market, the "Market Price" of any
security shall be the negotiated price thereof in any arm-length transaction
involving the Corporation, or, if no such transaction is then occurring, the
"Market Price" shall be the fair value thereof determined jointly by the
Corporation and the holders of at least a majority of the then outstanding
Series A Preferred. If such parties are unable to reach agreement within a
reasonable period of time, the Market Price shall be determined by an
independent appraiser experienced in valuing securities selected by the
Corporation. The determination of such appraiser shall be final and binding upon
the parties, and the Corporation shall pay the fees and expenses of such
appraiser.
(iii) In case the Corporation shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares or shall
deduct or pay a dividend on its outstanding shares of Common Stock payable in
shares of Common Stock, the Conversion Ratio in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Corporation shall be combined into a
small number of shares, the Conversion Ratio in effect immediately prior to such
combination shall be proportionately increased.
7
(iv) Notices. Immediately upon any adjustment of the
Conversion Ratio, the Corporation shall give written notice thereof to all
holders of Series A Preferred, setting forth in reasonable detail and certifying
the calculation of such adjustment.
(b) Reclassifications. In the case, at any time after the date hereof,
of any capital reorganization or any reclassification of the stock of the
Corporation (other than as a result of a stock dividend or subdivision, split-up
or combination of shares), or the consolidation or merger of the Corporation
with or into another person (other than a consolidation or merger (i) in which
the Corporation is the continuing entity and which does not result in any change
in the Common Stock or (ii) which is treated as a liquidation pursuant to
Section 3 hereof), the Series A Preferred shall, after such reorganization,
reclassification, consolidation or merger be convertible into the kind and
number of shares of stock or other securities or property of the Corporation or
otherwise to which such holder would have been entitled if immediately prior to
such reorganization, reclassification, consolidation or merger such holder had
converted its Series A Preferred into Common Stock. The provisions of this
Section 5 shall similarly apply to successive reorganizations,
reclassifications, consolidations or mergers
(c) Fractional Shares. In lieu of any fractional shares to which the
holder of a Series A Share would otherwise be entitled upon conversion, the
Corporation shall pay cash equal to such fraction multiplied by the fair market
value of one share of Common Stock as determined by the Board of Directors in
the good faith exercise of its reasonable business judgment.
(d) Intentionally Omitted.
Section 6. Registration of Transfer.
The Corporation shall keep at its principal office a register for the
registration of Series A Preferred. Upon the surrender of any certificate
representing Series A Preferred at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of Series A Preferred shares
represented by the surrendered certificate. Each such new certificate shall be
registered in such name and shall represent such number of Series A Preferred
shares as is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Series A Preferred represented by such new certificate from
the date to which dividends have been fully paid on such Series A Preferred
represented by the surrendered certificate.
Section 7. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing Series
A Preferred shares, and in the case of any such loss, theft or destruction, upon
receipt of indemnity reasonably satisfactory to the Corporation (provided that
if the holder is a financial institution or other institutional investor its own
agreement shall be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of Series A Preferred shares represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate, and dividends shall accrue on the
Series A Preferred represented by such new certificate from the date to which
dividends have been fully paid on such lost, stolen, destroyed or mutilated
certificate.
8
Section 8. No Pre-Emptive Rights.
The holders of Series A Preferred shall not have any pre-emptive rights
with respect to any issuance or sale of securities by the Corporation pursuant
to the Amended and Restated Certificate of Incorporation.
Section 9. No Impairment.
The Corporation will not, through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Certificate of Designation and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series A Preferred against impairment.
Section 10. Reservation of Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the Series A Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding Series A Preferred. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding Series A Preferred, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
Section 11. Amendment and Waiver.
No amendment, modification or waiver shall be binding or effective with
respect to any provision of this Certificate of Designation without the prior
written consent of the holders of not less than fifty-one percent (51%) of the
then outstanding Series A Preferred; provided, however, the Corporation reserves
the right by amendment of this Certificate of Designation from time to time to
decrease the number of shares which constitute the Series A Preferred Stock (but
not below the number of shares thereof then outstanding) and in other respects
to amend this Certificate of Designation within the limitations provided by law,
this Certificate of Designation and the Certificate of Incorporation.
[SIGNATURE PAGE TO FOLLOW]
9
UNITED HERITAGE CORPORATION
---------------------------------
Name: C. Xxxxx Xxxxxx
Title: Chief Executive Officer
ATTEST:
--------------------------
Name: Xxxxxxx Xxxx
Title: Secretary
10
EXHIBIT E
FORM OF
UNITED CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES B PREFERRED STOCK
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF
SERIES B PREFERRED STOCK
OF
UNITED HERITAGE CORPORATION
(Pursuant to Section 16-10a-602 of the
Utah Revised Business Corporation Act)
----------------------------------------
United Heritage Corporation, a corporation organized and existing under
the laws of the State of Utah (the "Corporation"), hereby certifies that,
pursuant to authority vested in the Board of Directors of the Corporation by the
amended Articles of Incorporation of the Corporation, the following resolution
was adopted as of February ___, 2006 by the Board of Directors of the
Corporation pursuant to Section 16-10a-821 of the Utah Revised Business
Corporation Act:
RESOLVED, that, it is in the best interest of this Corporation, that in
addition to the 133,333 shares of Series A Convertible Preferred Stock, par
value $0.0001 per share (hereinafter call the "Series A Preferred"), to create a
new series of its Preferred Stock;
RESOLVED FURTHER, that, pursuant to authority vested in the Board of
Directors of the Corporation by Article IV of the Corporation's amended Articles
of Incorporation, of the total authorized number of 5,000,000 shares of
Preferred Stock of the Corporation, there shall be designated a series of 30,303
shares which shall be issued in and constitute a single series to be known as
"Series B-1 Convertible Preferred Stock", par value $0.0001 per share
(hereinafter called the "Series B-1 Preferred") and there shall be designated a
series of 45,455 shares which shall be issued in and constitute a single series
to be known as "Series B-2 Convertible Preferred Stock", par value $0.0001 per
share (hereinafter called the "Series B-2 Preferred, and collectively with the
Series B-1 Preferred, the "Series B Preferred"). The shares of Series B
Preferred shall have the voting powers, designations, preferences and other
special rights, and qualifications, limitations and restrictions thereof set
forth below:
Section 1. Dividends and Distributions.
(a) The holders of Series B Preferred shall be entitled to receive
dividends at a rate of eight percent (8%) of the applicable liquidation
preference per share per annum, which shall be fully cumulative, prior and in
preference to any declaration or payment of any dividend (payable other than in
shares of common stock, $.001 par value per share, of the Corporation (the
"Common Stock") or other distribution on the Common Stock of the Corporation.
The holders of Series B Preferred shall not have preference but shall be
entitled to equal dividends or distributions to holders of the Series A
Preferred. If the dividends on all outstanding shares of Series A Preferred and
Series B Preferred cannot legally be paid in full, dividends shall be paid, to
the maximum permissible extent, to the holders of the Series A Preferred and the
Series B Preferred, pari passu. The dividends on the Series B Preferred shall
accrue from the date of issuance of each share and shall be payable quarterly
with respect to each calendar quarter on March 31, June 30, September 30 and
December 31 of each year (each a "Dividend Date"), commencing on the last day of
the fiscal quarter in which the effective date of the Corporation's merger with
Lothian Oil Inc. occurs (with dividends being pro-rated for such quarter), to
the holders of record of the Series B Preferred on the first day of the month
for each Dividend Date (each, a "Record Date"), except that if any such date is
a Saturday, Sunday or legal holiday (a "Non-Business Day") then such dividend
shall be payable on the next day that is not a Saturday, Sunday or legal holiday
on which banks in New York, New York are required or authorized to be closed (a
"Business Day"). The dividends on the Series B Preferred shall be payable only
when, as and if declared by the Board of Directors out of funds legally
available therefor. The amount of dividends payable for any period that is
shorter or longer than 30 days shall be computed on the basis of a 360-day year
of twelve 30-day months. All accrued but unpaid dividends shall accrue interest
after each Dividend Date at a rate of eight percent (8%) per annum from each
Dividend Date, computed on the basis of a 360-day year of twelve 30-day months.
(b) The holders of Series B Preferred shall not be entitled to receive
any dividends or other distributions except as provided in this Certificate of
Designation of Series B Preferred.
Section 2. Voting Rights.
Except as otherwise required by law or as expressly provided herein,
each share of Series B Preferred shall entitle the holder thereof to notice of
any stockholders' meeting in accordance with the by-laws of the Corporation and
to vote upon all matters submitted to a vote of stockholders. Each share of
Series B Preferred shall entitle the holder thereof to the number of votes on
any matter equal to the number of shares of Common Stock into which such share
of Series B Preferred could be converted on the record date for the vote or
written consent of stockholders with respect to such matter. Fractional votes
shall not, however, be permitted and any fractional voting rights (after
aggregating all shares of Common Stock into which shares of Series B Preferred
held by each holder could be converted) shall be rounded downward to the nearest
whole number. Except as otherwise required by law or expressly provided herein,
the holders of Series B Preferred and Common Stock shall vote together and not
as separate classes or series.
At each meeting or pursuant to each consent of the Corporation's
stockholders for the election of directors, the holders of Series B-1 Preferred,
voting as a separate class, shall be entitled to elect one (1) member of the
Corporation's Board of Directors. Any additional members of the Corporation's
Board of Directors shall be elected by the holders of Common Stock and Preferred
Stock, voting together as a single class. If a vacancy on the Board of Directors
is to be filled by the Board of Directors, only directors elected by the same
class or classes of stockholders as those who would be entitled to vote to fill
such vacancy shall vote to fill such vacancy.
Section 3. Liquidation, Dissolution, Winding Up or Certain Mergers
or Consolidations.
2
If the Corporation shall adopt a plan of liquidation or of dissolution,
or commence a voluntary case under the federal bankruptcy laws or any other
applicable state or federal bankruptcy, insolvency or similar law, or consent to
the entry of an order for relief in any involuntary case under such law or to
the appointment of a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Corporation or of any substantial part
of its property, or make an assignment for the benefit of its creditors, or
admit in writing its inability to pay its debts generally as they become due and
on account of such event the Corporation shall liquidate, dissolve or wind up,
or upon any other liquidation, dissolution or winding up of the Corporation, or
engage in a merger, plan of reorganization or consolidation in which the
Corporation is not the surviving Corporation (collectively, a "Liquidation
Event"), then and in that event, holders of Series B Preferred shall have a
liquidation preference over holders of Common Stock, but shall not have a
liquidation preference over but shall be equal to holders of Series A Preferred
and senior to distributions to any other class or series of the Corporation's
stock . If upon any Liquidation Event, the amount so payable or distributable
does not equal or exceed the "Liquidation Preferences" of the Series A Preferred
and Series B Preferred, then, and in that event, the amount of cash so payable,
and amount of securities or other consideration so distributable, shall be
shared ratably among the holders of the Series A Preferred and the Series B
Preferred. For the purposes hereof, the term "Liquidation Preference(s)" for the
Series A Preferred shall have the meaning provided in the Certificate of
Designation, Preferences and Rights of Series A Preferred Stock filed by the
Corporation with the Utah Secretary of State simultaneously with the filing of
this Certificate of Designation, and for the Series B Preferred shall mean
$165.000165 per share with respect to each of the Series B-1 Preferred, and
$206.25020625 per share with respect to each of the Series B-2 Preferred, in all
cases plus any and all accrued unpaid dividends thereon. For the purposes of
this Section 3, holders of a majority of the Series B Preferred then outstanding
may by affirmative vote or written consent deem any transaction specified in
this Section 3 not to constitute a Liquidation Event.
Section 4. Redemption.
(a) All, but not less than all, of the Series B-1 Preferred may be
redeemed upon payment of $165.000165 per share of Series B-1 Preferred and all,
but not less than all, of the Series B-2 Preferred may be redeemed upon payment
of $206.25020625 per share, in all cases plus accrued and unpaid dividends
thereon (the "Redemption Price"), at any time by the Corporation at its sole
discretion upon thirty (30) days' written notice to the holders of the
applicable Series B Preferred; provided, however, the Company shall not redeem
any Series B Preferred unless, at the time of such redemption, (i) the Company
is a reporting company under Section 12 of the Securities Exchange Act of 1934,
as amended, and (ii) the Common Stock is traded on the NASDAQ System or in the
domestic over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or the American Stock Exchange, and (iii) a registration statement
under the Securities Act of 1933, as amended has been filed and is effective and
covers the Common Stock issuable upon conversion of the Series B Preferred; and
(iv) the Market Price as of the date of any Redemption Notice hereunder is no
less than two hundred percent (200%) of the Conversion Ratio.
(b) Any notice of redemption (a "Redemption Notice") given by the
Corporation with respect to the applicable Series B Preferred shall be delivered
by mail, first class postage prepaid, to each holder of record (at the close of
business on the business day preceding the day on which notice is given) of the
applicable Series B Preferred, at the address last shown on the records of the
Corporation for such holder or given by the holder to the Corporation, for the
purpose of notifying such holder of the redemption to be effected. The
Redemption Notice shall specify a date (the "Redemption Date") not earlier than
30 days after the mailing of the Redemption Notice on which the applicable
Series B Preferred then outstanding shall be redeemed and the place at which
payment may be obtained, which shall be the principal offices of the
Corporation. The Redemption Notice shall call upon each holder of the applicable
Series B Preferred to either (i) surrender to the Corporation, in the manner and
at the place designated, such holder's certificate or certificates representing
the Series B Preferred to be redeemed, or (ii) convert such Series B Preferred
into Common Stock prior to the Redemption Date in accordance with the provisions
of Section 5 below. If the Corporation elects to redeem shares pursuant to this
Section 4 and defaults or fails to perform its redemption obligations pursuant
to this Section 4 in connection therewith, the holders of the applicable Series
B Preferred shall then have the absolute right to convert such Series B
Preferred into Common Stock in accordance with the provisions of Section 5.
3
(c) On the Redemption Date, the Corporation shall pay the Redemption
Price to the person whose name appears on the certificate or certificates of the
applicable Series B Preferred that (i) shall not have been converted pursuant to
Section 5 hereof and (ii) shall have been surrendered to the Corporation in the
manner and at the place designated in the Redemption Notice, and thereupon each
surrendered certificate shall be canceled.
(d) If the funds of the Corporation legally available for redemption of
the applicable Series B Preferred are insufficient to redeem the total number of
such shares of Series B Preferred outstanding on the Redemption Date, the
applicable Series B Preferred shall be redeemed (on a pro rata basis from the
holders of such Series B Preferred, from time to time), to the extent the
Corporation is legally permitted to do so, and the redemption obligations of the
Corporation hereunder will be a continuing obligation until the Corporation's
redemption of all of the applicable Series B Preferred.
(e) From and after the Redemption Date, unless there shall have been a
default in payment of the Redemption Price, all rights of the holders of the
Series B Preferred (except the right to receive the Redemption Price subsequent
to the Redemption Date upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever.
Section 5. Conversion.
(a) Right to Convert: Subject to the provisions for adjustment
hereinafter set forth, each share of Series B Preferred shall be convertible in
the manner hereinafter set forth into fully paid and nonassessable shares of
Common Stock. Commencing upon issuance, each share of Series B-1 Preferred may,
at the option of the holder thereof, be converted into such number of fully paid
and nonassessable whole shares of Common Stock as determined by dividing the
Liquidation Preference by $1.65000165, and each share of Series B-2 Preferred
may, at the option of the holder thereof, be converted into such number of fully
paid and nonassessable whole shares of Common Stock as determined by dividing
the Liquidation Preference by $2.0625020625 (the "Conversion Ratio"). Such
rights of conversion shall be exercised by the holder thereof by giving written
notice to the Corporation that the holder elects to convert a stated number of
shares of the applicable Series B Preferred into Common Stock and by surrender
of a certificate or certificates for the shares to be so converted to the
Corporation at its principal office (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to the holder
or holders of the Series B Preferred) at any time during its usual business
hours on the date set forth in such notice, together with a statement of the
name or names, subject to compliance with applicable laws to the extent such
designation shall involve a transfer, in which the certificate or certificates
for shares of Common Stock are to be issued. The Corporation shall, as soon as
possible thereafter and in no case more than three (3) business days, issue and
deliver at such office to such holder of Series B Preferred, or to the nominee
or nominees of such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of the applicable Series B
Preferred to be converted, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock as of
such date.
4
(i) Adjustments to Conversion Ratio: The Conversion Ratio
shall be adjusted from time to time as follows:
(A) If and whenever the Corporation issues or sells,
or in accordance with paragraph 5(ii) is deemed to have issued or sold, any
shares of its Common Stock for a consideration per share less than the
applicable Conversion Ratio in effect immediately prior to the time of such
issue or sale, then immediately upon such issue or sale or deemed issue or sale
such Conversion Ratio shall be reduced to eighty-five percent (85%) of the per
share consideration received by the Corporation for such shares of Common Stock
issued or deemed to have been issued.
(a) As used herein, "Common Stock Deemed Outstanding" means, at any given time,
without duplication, the number of shares of Common Stock actually outstanding
at such time, plus the number of shares of Common Stock deemed to be outstanding
pursuant to subparagraphs 5(a)(ii)(A) and 5(a)(ii)(B) hereof whether or not the
Options or Convertible Securities (as such terms are defined in subparagraph
5(a)(ii)(A) below) are actually exercisable at such time, plus the number of
shares of Common Stock issuable upon exercise of Options outstanding at such
time, as such number of shares is proportionately adjusted for stock splits,
stock dividends, stock combinations and other recapitalizations.
(B) Notwithstanding the foregoing, there shall be no
adjustment in the Conversion Ratio as a result of (a) the issuance of any Common
Stock as a result of the exercise of any Options outstanding at the time of the
initial issuance of the Series B Preferred, (b) the issuance of any Common Stock
as a result of the conversion of the Series B Preferred, (c) the issuance or
deemed issuance of any Common Stock as a result of the granting by the Company
of any Options approved by the Corporation's Board of Directors, to the extent
that the exercise price of any such Option is not less than eighty-five percent
(85%) of the Conversion Ratio on the date such Option is granted, or (d) the
issuance or deemed issuance of any Common Stock in connection with any
transaction or series of transactions (other than transactions specifically
described in this subsection (B)) at a price not less than eighty-five percent
(85%) of the Conversion Ratio on the date of issuance or deemed issuance and in
which the consideration received by the Company is not more than $1,000,000, in
one transaction or a series of transactions.
(ii) Effect on Conversion Ratio of Certain Events. For
purposes of determining the adjusted Conversion Ratio under paragraph 5(a)(i)
above, the following shall be applicable:
5
(A) Issuance of Rights or Options. If the Corporation
in any manner grants or sells any rights, warrants or options (collectively,
"Options") to subscribe for or purchase Common Stock (other than Options
described in subparagraph 5(a)(i)(B) above) or any stock or securities directly
or indirectly convertible into or exchangeable for Common Stock ("Convertible
Securities") and the price per share for which Common Stock is issuable upon the
exercise of such Options, or upon conversion or exchange of any Convertible
Securities issuable upon exercise of such Options, is less than the applicable
Conversion Ratio in effect immediately prior to the time of the granting or sale
of such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the granting or sale of such Options for
such price per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable" shall be determined by dividing (A) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting or sale of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon exercise of all such
Options, plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the applicable Conversion
Ratio shall be made when Convertible Securities are actually issued upon the
exercise of such Options or when Common Stock is actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(B) Issuance of Convertible Securities. If the
Corporation in any manner issues or sells any Convertible Securities and the
price per share for which Common Stock is issuable upon conversion or exchange
thereof is less than the applicable Conversion Ratio in effect immediately prior
to the time of such issue or sale, then the maximum number of shares of Common
Stock issuable upon conversion or exchange of such Convertible Securities shall
be deemed to be outstanding and to have been issued and sold by the Corporation
at the time of the issuance or sale of such Convertible Securities for such
price per share. For the purposes of this paragraph, the "price per share for
which Common Stock is issuable" shall be determined by dividing (A) the total
amount received or receivable by the Corporation as consideration for the issue
or sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the conversion
or exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Ratio shall be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Conversion Ratio had been
or are to be made pursuant to other provisions of this Section 5, no further
adjustment of the applicable Conversion Ratio shall be made by reason of such
issue or sale.
(C) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the applicable Conversion
Ratio in effect at the time of such change shall be immediately adjusted to the
Conversion Ratio which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of paragraph 5(a)(ii), if
the terms of any Option or Convertible Security which was outstanding as of the
date of the initial issuance of the Series B Preferred are changed in the manner
described in the immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
change; provided that no such change shall at any time cause the applicable
Conversion Ratio hereunder to be increased.
6
(D) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the applicable Conversion Ratio then in effect
hereunder shall be adjusted immediately to the Conversion Ratio which would have
been in effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued. For purposes of paragraph
5(a)(ii), the expiration or termination of any Option or Convertible Security
which was outstanding as of the date of the initial issuance of the Series B
Preferred shall not cause the applicable Conversion Ratio hereunder to be
adjusted unless, and only to the extent that, a change in the terms of such
Option or Convertible Security caused it to be deemed to have been issued after
the date of issuance of the Series B Preferred.
(E) Calculation of Consideration Received. If any
Common Stock, Option or Convertible
Security is issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor (net of non-customary discounts, commissions and related
expenses). If any Common Stock, Option or Convertible Security is issued or sold
for a consideration other than cash, the amount of the consideration other than
cash received by the Corporation shall be the fair value of such consideration,
except where such consideration consists of securities, in which case the amount
of consideration received by the Corporation shall be the Market Price thereof
as of the date of receipt. If any Common Stock, Option or Convertible Security
is issued to the owners of the non-surviving entity in connection with any
merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of
the assets and business of the non-surviving entity as is attributable to such
Common Stock, Option or Convertible Security, as the case may be. The fair value
of any consideration other than cash and securities shall be determined jointly
by the Corporation and the holders of a majority of the then outstanding Series
B Preferred. If such parties are unable to reach agreement within a reasonable
period of time, the fair value of such consideration shall be determined by an
independent appraiser experienced in valuing such type of consideration selected
by the Corporation and approved by the holders of a majority of the then
outstanding Series B Preferred (such approval not to be unreasonably withheld).
The determination of such appraiser shall be final and binding upon the parties,
and the fees and expenses of such appraiser shall be borne by the Corporation.
(F) Reserved.
(G) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.
(H) Record Date. If the Corporation takes a record of
the holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date shall be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
7
(I) "Market Price" of any security means the average
of the closing prices of such security's sales on all securities exchanges on
which such security may at the time be listed, or, if there has been no sales on
any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any
day such security is not quoted in the NASDAQ System, the average of the highest
bid and lowest asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of twenty-one
(21) trading days consisting of the day as of which "Market Price" is being
determined and the twenty (20) consecutive business days prior to such day. If
at any time such security is not listed on any securities exchange or quoted in
the NASDAQ System or the over-the-counter market, the "Market Price" shall be
the fair value thereof determined jointly by the Corporation and the holders of
at least a majority of the then outstanding Series B Preferred. If such parties
are unable to reach agreement within a reasonable period of time, the Market
Price shall be determined by an independent appraiser selected by a majority of
the holders of the then outstanding Series B Preferred, which appraiser shall be
experienced in valuing securities selected by the Corporation. The determination
of such appraiser shall be final and binding upon the parties, and the
Corporation shall pay the fees and expenses of such appraiser.
(iii) In case the Corporation shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares or shall
deduct or pay a dividend on its outstanding shares of Common Stock payable in
shares of Common Stock, the applicable Conversion Ratio in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely, in
case the outstanding shares of Common Stock of the Corporation shall be combined
into a small number of shares, the applicable Conversion Ratio in effect
immediately prior to such combination shall be proportionately increased.
(iv) Notices. Immediately upon any adjustment of any
Conversion Ratio, the Corporation shall give written notice thereof to all
holders of Series B Preferred, setting forth in reasonable detail and certifying
the calculation of such adjustment.
(b) Reclassifications. In the case, at any time after the date hereof,
of any capital reorganization or any reclassification of the stock of the
Corporation (other than as a result of a stock dividend or subdivision, split-up
or combination of shares), or the consolidation or merger of the Corporation
with or into another person (other than a consolidation or merger (i) in which
the Corporation is the continuing entity and which does not result in any change
in the Common Stock or (ii) which is treated as a liquidation pursuant to
Section 3 hereof), the Series B Preferred shall, after such reorganization,
reclassification, consolidation or merger be convertible into the kind and
number of shares of stock or other securities or property of the Corporation or
otherwise to which such holder would have been entitled if immediately prior to
such reorganization, reclassification, consolidation or merger such holder had
converted its Series B Preferred into Common Stock. The provisions of this
Section 5 shall similarly apply to successive reorganizations,
reclassifications, consolidations or mergers
(c) Fractional Shares. In lieu of any fractional shares to which the
holder of Series B Preferred Share would otherwise be entitled upon conversion,
the Corporation shall pay cash equal to such fraction multiplied by the Market
Price of one share of Common Stock.
8
(d) Status of Converted Stock. In the event any shares of Series B
Preferred shall be converted pursuant to Section 5 hereof, the shares so
converted shall be cancelled and shall not be issuable by the Corporation. This
Certificate of Designations shall be appropriately amended to effect the
corresponding reduction in the Corporation's authorized capital stock
Section 6. Registration of Transfer.
The Corporation shall keep at its principal office a register for the
registration of Series B Preferred. Upon the surrender of any certificate
representing Series B Preferred at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of Series B Preferred shares
represented by the surrendered certificate. Each such new certificate shall be
registered in such name and shall represent such number of Series B Preferred
shares as is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Series B Preferred represented by such new certificate from
the date to which dividends have been fully paid on such Series B Preferred
represented by the surrendered certificate.
Section 7. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing Series
B Preferred shares, and in the case of any such loss, theft or destruction, upon
receipt of indemnity reasonably satisfactory to the Corporation (provided that
if the holder is a financial institution or other institutional investor its own
agreement shall be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of Series B Preferred shares represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate, and dividends shall accrue on the
Series B Preferred represented by such new certificate from the date to which
dividends have been fully paid on such lost, stolen, destroyed or mutilated
certificate.
Section 8. No Pre-Emptive Rights.
The holders of Series B Preferred shall not have any pre-emptive rights
with respect to any issuance or sale of securities by the Corporation pursuant
to the Corporation's amended Articles of Incorporation.
Section 9. No Impairment.
The Corporation will not, through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Certificate of Designation and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series B Preferred against impairment.
Section 10. Reservation of Stock Issuable Upon Conversion.
9
The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the Series B Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding Series B Preferred. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding Series B Preferred, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
[SIGNATURE PAGE TO FOLLOW]
10
UNITED HERITAGE CORPORATION
-----------------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Executive Officer
ATTEST:
------------------------------------------
Name: Xxxxxxx Xxxx
Title: Secretary
11
EXHIBIT F
FORM OF UNITED OFFICER CERTIFICATE
Pursuant to Section 5.2(d) of the Merger Agreement and Plan of
Reorganization, dated as of February ___, 2006 (the "Merger Agreement";
capitalized terms used but not defined herein shall have the respective meanings
ascribed to them in the Merger Agreement), by and among United Heritage
Corporation, a Utah corporation ("United") and Lothian Oil Inc., a Delaware
corporation ("Lothian"), I, C. Xxxxx Xxxxxx, in my capacity as President and
Chief Executive Officer of United and on behalf of United, and not individually,
DO HEREBY CERTIFY that:
1. I am the duly elected, qualified and acting President and
Chief Executive Officer of United.
2. Each of the representations and warranties made by United in
Article III of the Merger Agreement, as modified by United Disclosure Schedule
(other than representations and warranties which by their express terms are made
solely as of a specified date earlier than the date of this Officer's
Certificate) is true and correct in all material respects on and as of the date
hereof as though such representation or warranty was made on and as of the date
hereof; and each of the representations and warranties made by United in the
Merger Agreement as of a specified date earlier than the date of this Officer's
Certificate is true and correct in all material respects on and as of such
earlier date, as modified by United Disclosure Schedule.
3. United has performed and complied in all material respects
with each agreement, covenant and obligation required by the Merger Agreement to
be so performed or complied with by United on or before the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
as of the ___ day of ___________, _____.
By:
-----------------------
C. Xxxxx Xxxxxx
President and Chief Executive Officer
United Heritage Corporation
EXHIBIT G
MATTERS TO BE COVERED BY LEGAL OPINION OF XXXXXXXXXX & XXXXX LLP
Lothian Oil Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Gentlemen:
We have acted as counsel to United Heritage Corporation, a Utah
corporation (the "Company"), in connection with the negotiation, execution and
delivery of the Merger Agreement and Plan of Reorganization, dated as of
February ___, 2006 (the "Merger Agreement"; capitalized terms used but not
defined herein shall have the respective meanings ascribed to them in the Merger
Agreement), by and among the Company and Lothian Oil Inc., a Delaware
corporation ("Lothian") and the Ancillary Agreements to which it is a party
(collectively, the "Transaction Documents").
For purposes of rendering this opinion, we have limited our examination
to originals or copies, certified or otherwise identified to our satisfaction,
of the following: (i) the Transaction Documents, (ii) the amended Articles of
Incorporation and the Bylaws of the Company, (iii) resolutions of the Board of
Directors and of the stockholders of the Company, and (iv) a certificate of an
officer of the Company. We have assumed the genuiness of all signatures by or on
behalf of persons other than the Company and that all such signatories have been
duly authorized, the authenticity of all documents submitted to us as originals,
and the conformity with originals of all documents submitted to us as certified,
conformed or photostatic copies.
Based solely upon and in reliance on the foregoing and subject in all
respects to the qualifications, limitations and assumptions set forth herein, it
is our opinion that:
1. The Company is a corporation duly incorporated and organized,
validly existing and in good standing under the laws of the State of Utah.
2. The Company is duly qualified as a foreign corporation to transact
business in, and is in good standing in the States of Texas.
3. The Company has all necessary corporate power and authority to
execute, deliver and perform its obligations under the Transaction Documents to
which the Company is a party, and the Company has all necessary corporate power
and authority to own its properties and to conduct its business in the manner
and in the locations presently owned and conducted.
4. The Transaction Documents have been duly authorized, executed and
delivered by the Company, and, assuming due authorization, execution and
delivery by the other parties thereto, each such agreement is a valid and
binding obligation of the Company, enforceable in accordance with its terms.
5. The Certificate of Designation, Preferences and Rights of Series A
Preferred Stock and the Certificate of Designation, Preferences and Rights of
Series B Preferred Stock (the "Certificates of Designation") have been duly
adopted by the Company, have become effective under the laws of Utah and the
Certificates of Designation constitute valid and binding obligations of the
Company, enforceable in accordance with their respective terms.
6. The issuance of United Capital Stock to the Lothian stockholders has
been duly authorized by the Company, and when delivered in accordance with the
Merger Agreement such United Capital Stock will be validly issued, outstanding,
fully paid and nonassessable. To our knowledge, there are no contractual
preemptive rights of stockholders or rights of first refusal with respect to the
issuance of such United Capital Stock.
7. The execution and delivery by the Company of the Transaction
Documents, and the performance of its obligations thereunder will not (i)
violate the Company's amended Articles of Incorporation, the Bylaws of the
Company, or to our knowledge, any law, statute, rule or regulation (exclusive of
local laws) applicable to the Company or any order, judgment or decree to which
the Company is subject. To our knowledge, no authorization, consent, approval,
exemption or other action by, or notice to, any court or administrative or
governmental body is required for any of the actions of the Company described in
this paragraph 7.
8. The issuance of the United Capital Stock pursuant to the Merger
Agreement does not require registration under the Securities Act or registration
or qualification under any state securities laws. For purposes of the opinion
set forth in this paragraph 8, we have assumed that each Lothian stockholder is
an "accredited investor" as that term is defined in Rule 501(a) promulgated
under the Securities Act and that each Lothian stockholder will execute and
deliver to the Company, as a condition precedent to the issuance of any Company
securities to such Lothian stockholder in connection with the Merger, a Letter
of Transmittal in the form attached to the Merger Agreement as Exhibit C.
9. To our knowledge, Section 3.3 of the Merger Agreement and Section
3.3 of the United Disclosure Schedule together correctly set forth the
capitalization of the Company.
The opinions set forth herein are subject to the following
qualifications:
A. The enforceability of the Transaction Documents may be limited by
(i) applicable bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent conveyance and other similar state or federal debtor relief laws from
time to time in effect and which affect the enforcement of creditor's rights or
the collection of debtor's obligations in general, (ii) general principles of
equity the application of which may deny Lothian certain of the rights and
remedies granted to it under the Transaction Documents, and (iii) general
principles of commercial reasonableness and good faith to the extent required of
Lothian or its stockholders by applicable law.
B. We express no opinion concerning any aspect or involvement of any
person or entity other than the Company in the transactions contemplated by the
Transaction Documents.
For purposes of this opinion, we do not hold ourselves out as experts
in the laws of any jurisdiction other than California and federal laws generally
applicable to transactions of the type involved here.
In basing the opinions and other matters set forth herein "to our
knowledge," such words signify that, in the course of our representation as
counsel to the Company, no information has come to our attention that has given
us actual knowledge (i.e., conscious awareness) that any such opinions or other
matters are not accurate or that any of the foregoing documents, certificates,
reports and information on which we have relied are not correct and complete. We
have undertaken no independent investigation or verification of such matters.
The words "to our knowledge," and similar language used herein are intended to
be limited to the knowledge of the lawyers within our firm who have worked on
the matters related to the transactions contemplated by the Transaction
Documents.
2
The opinions in this letter are limited to the matters set forth
herein. No opinion may be inferred or implied beyond the opinions expressly
stated, and our opinions must be read in conjunction with the assumptions,
limitations, exceptions and qualifications set forth in this letter. We assume
no obligation to advise you of any change in facts or law which might come to
our attention subsequent to the date hereof.
This opinion is being furnished solely for the benefit of Lothian, its
stockholders and its counsel and may not be relied upon by any other person or
entity without our prior written consent.
Yours truly,
3
EXHIBIT H
FORM OF LOTHIAN OFFICER CERTIFICATE
Pursuant to Section 5.3(d) of the Merger Agreement and Plan of
Reorganization, dated as of February ___, 2006 (the "Merger Agreement";
capitalized terms used but not defined herein shall have the respective meanings
ascribed to them in the Merger Agreement), by and among United Heritage
Corporation, a Utah corporation ("United") and Lothian Oil Inc., a Delaware
corporation ("Lothian"), I, Xxxxx Xxxxxx, in my capacity as Chief Executive
Officer of Lothian and on behalf of Lothian, and not individually, DO HEREBY
CERTIFY that:
1. I am the duly elected, qualified and acting Chief Executive
Officer of Lothian.
2. Each of the representations and warranties made by Lothian in
Article II of the Merger Agreement, as modified by Lothian Disclosure Schedule
(other than representations and warranties which by their express terms are made
solely as of a specified date earlier than the date of this Officer's
Certificate) is true and correct in all material respects on and as of the date
hereof as though such representation or warranty was made on and as of the date
hereof; and each of the representations and warranties made by Lothian in the
Merger Agreement as of a specified date earlier than the date of this Officer's
Certificate is true and correct in all material respects on and as of such
earlier date, as modified by Lothian Disclosure Schedule.
3. Lothian has performed and complied in all material respects
with each agreement, covenant and obligation required by the Merger Agreement to
be so performed or complied with by Lothian on or before the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
as of the ___ day of ___________, _____.
By:
-----------------------
Xxxxx Xxxxxx
Chief Executive Officer
Lothian Oil Inc.
EXHIBIT I
MATTERS TO BE COVERED BY LEGAL OPINION OF XXXXXXXXX & ROSHCO, LLP
United Heritage Corporation
0 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Gentlemen:
We have acted as counsel to Lothian Oil Inc., a Delaware corporation
(the "Company"), in connection with the negotiation, execution and delivery of
the Merger Agreement and Plan of Reorganization, dated as of February ___, 2006
(the "Merger Agreement"; capitalized terms used but not defined herein shall
have the respective meanings ascribed to them in the Merger Agreement), by and
among the Company and United Heritage Corporation, a Utah corporation ("United")
and the Ancillary Agreements to which it is a party (collectively, the
"Transaction Documents").
For purposes of rendering this opinion, we have limited our examination
to originals or copies, certified or otherwise identified to our satisfaction,
of the following: (i) the Transaction Documents, (ii) the Certificate of
Incorporation and the Bylaws of the Company, (iii) resolutions of the Board of
Directors and of the Stockholders of the Company, and (iv) a certificate of an
officer of the Company. We have assumed the genuiness of all signatures by or on
behalf of persons other than the Company and that all such signatories have been
duly authorized, the authenticity of all documents submitted to us as originals,
and the conformity with originals of all documents submitted to us as certified,
conformed or photostatic copies.
Based solely upon and in reliance on the foregoing and subject in all
respects to the qualifications, limitations and assumptions set forth herein, it
is our opinion that:
1. The Company is a corporation duly incorporated and organized,
validly existing and in good standing under the laws of the State of Delaware.
2. The Company has all necessary corporate power and authority to
execute, deliver and perform its obligations under the Transaction Documents to
which the Company is a party, and the Company has all necessary corporate power
and authority to own its properties and to conduct its business in the manner
and in the locations presently owned and conducted.
4. The Transaction Documents have been duly authorized, executed and
delivered by the Company, and, assuming due authorization, execution and
delivery by the other parties thereto, each such agreement is a valid and
binding obligation of the Company, enforceable in accordance with its terms.
5. The execution and delivery by the Company of the Transaction
Documents, and the performance of its obligations thereunder will not (i)
violate the Company's Certificate of Incorporation, the Bylaws of the Company, ,
or to our knowledge, any law, statute, rule or regulation (exclusive of local
laws) applicable to the Company or any order, judgment or decree to which the
Company is subject. To our knowledge, no authorization, consent, approval,
exemption or other action by, or notice to, any court or administrative or
governmental body is required for any of the actions of the Company described in
this paragraph 5.
6. To our knowledge, Section 2.3 of the Merger Agreement and Section
2.3 to the Lothian Disclosure Schedule together correctly set forth the
capitalization of the Company.
The opinions set forth herein are subject to the following
qualifications:
A. The enforceability of the Transaction Documents may be limited by
(i) applicable bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent conveyance and other similar state or federal debtor relief laws from
time to time in effect and which affect the enforcement of creditor's rights or
the collection of debtor's obligations in general, (ii) general principles of
equity the application of which may deny Lothian certain of the rights and
remedies granted to it under the Transaction Documents, and (iii) general
principles of commercial reasonableness and good faith to the extent required of
United by applicable law.
B. We express no opinion concerning any aspect or involvement of any
person or entity other than the Company in the transactions contemplated by the
Transaction Documents.
For purposes of this opinion, we do not hold ourselves out as experts
in the laws of any jurisdiction other than New York and federal laws generally
applicable to transactions of the type involved here.
In basing the opinions and other matters set forth herein "to our
knowledge," such words signify that, in the course of our representation as
counsel to the Company, no information has come to our attention that has given
us actual knowledge (i.e., conscious awareness) that any such opinions or other
matters are not accurate or that any of the foregoing documents, certificates,
reports and information on which we have relied are not correct and complete. We
have undertaken no independent investigation or verification of such matters.
The words "to our knowledge," and similar language used herein are intended to
be limited to the knowledge of the lawyers within our firm who have worked on
the matters related to the transactions contemplated by the Transaction
Documents.
The opinions in this letter are limited to the matters set forth
herein. No opinion may be inferred or implied beyond the opinions expressly
stated, and our opinions must be read in conjunction with the assumptions,
limitations, exceptions and qualifications set forth in this letter. We assume
no obligation to advise you of any change in facts or law which might come to
our attention subsequent to the date hereof.
This opinion is being furnished solely for the benefit of United and
its counsel and may not be relied upon by any other person or entity without our
prior written consent.
Yours truly,
2
EXHIBIT J
