AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PACIFIC RIM ENTERTAINMENT, INC.
PR ACQUISITION CORP.
AND
OSAGE COMPUTER GROUP, INC.
Dated: November 5, 1997
TABLE OF CONTENTS
ARTICLE I: MERGER OF OSAGE WITH AND INTO SUB AND RELATED MATTERS.................................1
1.1 The Merger.................................................................................1
1.2 Conversion of Stock........................................................................3
1.3 Merger Consideration.......................................................................3
1.4 Additional Rights; Taking of Necessary Action; Further Action..............................7
1.5 Dissenters' Rights.........................................................................7
1.6 No Further Rights or Transfers.............................................................7
ARTICLE II: THE CLOSING..........................................................................7
2.1 Closing Date...............................................................................7
2.2 Closing Transactions.......................................................................8
ARTICLE III: CERTAIN CORPORATE ACTION...........................................................11
3.1 Osage Corporate Action....................................................................11
3.2 Acquiror Corporate Action.................................................................11
ARTICLE IV: REPRESENTATIONS AND WARRANTIES......................................................11
4.1 Representations and Warranties of Osage and the Osage Shareholders........................11
4.2 Representations and Warranties of Acquiror and the Sub....................................23
ARTICLE V: AGREEMENTS OF THE PARTIES............................................................28
5.1 Financing Transactions; Issuance of Securities of Acquiror prior to the Closing...........28
5.2 Disclosure Documents......................................................................28
5.3 Access to Information.....................................................................29
5.4 Confidentiality; No Solicitation..........................................................29
5.5 Interim Operations........................................................................31
5.6 Consents..................................................................................34
5.7 Filings...................................................................................34
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5.8 All Reasonable Efforts...................................................................34
5.9 Public Announcements.....................................................................34
5.10 Notification of Certain Matters..........................................................35
5.11 Expenses.................................................................................35
5.12 Registration Rights......................................................................35
5.13 Documents at Closing.....................................................................39
5.14 Prohibition on Trading in Acquiror Stock.................................................39
5.15 Matters of Corporate Governance..........................................................39
5.16 Acknowledgment of Approvals..............................................................40
5.17 Production of Schedules and Exhibits.....................................................40
ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER............................................40
6.1 Conditions to Obligations of Osage and the Osage Shareholders.............................40
6.2 Conditions to Acquiror's and the Sub's Obligations........................................42
ARTICLE VII: INDEMNIFICATION....................................................................43
7.1 Indemnification...........................................................................43
ARTICLE VIII: TERMINATION.......................................................................44
8.1 Termination...............................................................................44
8.2 Notice and Effect of Termination..........................................................45
8.3 Extension; Waiver.........................................................................45
8.4 Amendment and Modification................................................................46
ARTICLE IX: MISCELLANEOUS.......................................................................46
9.1 Survival of Representations and Warranties................................................46
9.2 Notices...................................................................................46
9.3 Entire Agreement; Assignment..............................................................47
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9.4 Binding Effect; Benefit..................................................................47
9.5 Headings.................................................................................47
9.6 Counterparts.............................................................................48
9.7 Governing Law............................................................................48
9.8 Arbitration..............................................................................48
9.9 Severability.............................................................................48
9.10 Release and Discharge....................................................................48
9.11 Certain Definitions......................................................................48
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EXHIBITS AND SCHEDULES
EXHIBITS
1.3(a)(iv) Certificate of Designation of Series B $3.00 Convertible Preferred Stock
1.3(a)(v) Form of Option Agreement
1.3(b)(vi) Form of Voting Trust
2.2(a)(ii) Investment Letter
5.1(a)(i) Summary of Terms of Series A $3.00 Convertible Preferred Stock
6.1(f) Summary of Terms of Employment
SCHEDULES
4.1(a) Articles of Incorporation and Bylaws of Osage and each Subsidiary
4.1(e) Financial Statements
4.1(f)(i) Location of Leased Property
4.1(f)(ii) Written Notice
4.1(h) Litigation
4.1(j)(i) Employee Benefit Plan
4.1(j)(ii) Employee Benefit Plan (for which Osage has obligation to contribute)
4.1(j)(iv) Material Employment Arrangements, Contracts, etc.
4.1(o) Intellectual Property
4.1(r)(i) Labor Relations; Employees
4.1(r)(ii) List of Employees
4.1(r)(v) Strikes, grievance proceedings, arbitrations, etc.
4.1(t) Suppliers and Clients
4.1(w) Absence of Certain Changes
4.2(a) Certificate of Incorporation and Bylaws of Acquiror and Sub
4.2(g) No Violations
4.2(i) Litigation
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and entered
into as of November 5, 1997, by and among PACIFIC RIM ENTERTAINMENT, INC., a
Delaware corporation ("Acquiror"), PR ACQUISITION CORP., a Delaware corporation
and wholly-owned subsidiary of Acquiror ("Sub"), OSAGE COMPUTER GROUP, INC., a
Arizona corporation ("Osage") and XXXX XXXXXXXXXX, XXXXX XXXXX, XXXXX XXXXX,
XXXXX XXXXXXX, XXXX VAN DE VREDE FAMILY TRUST and XXXX XXXXXXX as the sole
shareholders of Osage (collectively the "Osage Shareholders").
Recitals
WHEREAS, Acquiror and Osage have determined that it is in the best
interests of their respective shareholders for Osage to merge with and into Sub
upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Acquiror and Osage have each
approved this Agreement and the consummation of the transactions contemplated
hereby and approved the execution and delivery of this Agreement; and
WHEREAS, for federal income tax purposes, it is intended that this merger
shall qualify as a tax-free reorganization under the provisions of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
MERGER OF OSAGE WITH AND INTO SUB
AND RELATED MATTERS
1.1 The Merger.
(a) Upon the terms and conditions of this Agreement, at the "Effective
Time" (as defined herein), Osage shall be merged with and into the Sub (the
"Merger") in accordance with the provisions of the Arizona Business Corporation
Act ("ABCA") and the Delaware General Corporation Law (the "DGCL") and the
separate corporate existence of Osage shall cease, and the Sub shall continue as
the surviving corporation under the laws of the state of Delaware with the
corporate name "OSAGE COMPUTER GROUP, INC." (the "Surviving Corporation").
(b) The Merger shall become effective as of the filing of and receipt
of a certificate of merger (the "Certificate of Merger") with the Secretary of
State of Delaware and
articles of merger (the "Articles of Merger") with the Arizona Corporate
Commission, in accordance with the provisions of Section 252 of the DGCL and
Section 10-123 of the ABCA, and the confirmation by the Certificate of Merger
that the Merger is effective as of such filing date. The date and time when the
Merger shall become effective is referred to herein as the "Effective Time."
(c) At the Effective Time:
(i) the Sub shall continue its existence under the laws of the
State of Delaware as the Surviving Corporation;
(ii) the separate corporate existence of Osage shall cease;
(iii) all rights, title and interests to all assets, whether
tangible or intangible and any property or property rights owned by Osage shall
be allocated to and vested in the Sub as the Surviving Corporation without
reversion or impairment, without further act or deed, and without any transfer
or assignment having occurred, but subject to any existing liens or other
encumbrances thereon, and all liabilities and obligations of Osage shall be
allocated to the Sub as the Surviving Corporation which shall be the primary
obligor therefor and, except as otherwise provided by law or contract, no other
party to the Merger, other than the Sub as the Surviving Corporation, shall be
liable therefor;
(iv) the Certificate of Incorporation of the Sub as in effect
immediately prior to the consummation of the Merger, other than the name of the
Sub which shall be changed to "OSAGE COMPUTER GROUP, INC." in connection with
the Merger, shall be the Certificate of Incorporation of the Surviving
Corporation, until thereafter amended as provided by law and such Certificate of
Incorporation;
(v) Each of Acquiror, Sub and Osage shall execute and deliver, and
file or cause to be filed with the Secretary of State of the State of Delaware,
the Certificate of Merger and with the Arizona Corporation Commission, the
Articles of Merger, with such amendments thereto as the parties hereto shall
deem mutually acceptable.
(vi) the Bylaws of the Sub, as in effect immediately prior to the
consummation of the Merger, shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by law and such Bylaws; and
(vii) the officers and directors of the Acquiror shall be nominated
and elected in accordance with the provisions of Sections 6.1(d) hereof.
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1.2 Conversion of Stock.
At the Effective Time, and without any action on the part of the
parties hereto, the Osage Shareholders or any other party:
(a) the shares representing 100% of the issued and outstanding common
stock of Osage ("Osage Common Stock") as of the Closing (other than "Dissenting
Shares", as defined herein) shall, by virtue of the Merger and without any
action on the part of any holder thereof, be converted into and represent the
right to receive, and shall be exchangeable for the merger consideration
identified at Section 1.3 hereafter (the "Merger Consideration);
(b) each share of capital stock of Osage held in treasury as of the
Effective Time shall, by virtue of the Merger, be canceled without payment of
any consideration therefor and without any conversion thereof;
(c) each share of common stock of the Sub that is issued and
outstanding as of the Effective Time shall continue to represent one share of
common stock of the Surviving Corporation after the Merger, which shares shall
thereafter constitute all of the issued and outstanding shares of capital stock
of the Surviving Corporation;
(d) Acquiror shall pay all charges and expenses, including those of any
exchange agent and the National Association of Securities Dealers, Inc., if any,
in connection with the issuance or exchange of the shares in connection with the
Merger;
(e) From and after the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of shares of Osage capital
stock (or any warrants or other rights to acquire any of the same) that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates for shares of Osage capital stock (or any warrants or other
rights to acquire any of the same) that were outstanding immediately prior to
the Effective Time, they shall be canceled and exchanged for the consideration
to be received therefor in connection with the Merger as provided in this
Agreement; and
(f) No fractional shares of stock shall be issued in the Merger, and
each holder of Osage Common Stock entitled to receive as part of the Merger
Consideration fractional shares shall receive that number of shares of stock
rounded to the nearest whole number.
1.3 Merger Consideration.
(a) The Merger Consideration consisting of the total purchase price
payable to the Osage Shareholders in connection with the acquisition by merger
of Osage shall be paid or delivered, as the case may be, upon the "Closing" (as
hereafter defined) and shall consist exclusively of the following:
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(i) $500,000 in cash, cashier's check or by wire transfer;
(ii) the delivery of 900,000 newly issued shares of Acquiror's
common stock, subject to the affirmative covenants relative to fair market value
identified at subsection 1.3(b) hereafter;
(iii) the delivery of 200,000 additional newly issued shares of
Acquiror's common stock ("collectively with the shares delivered pursuant to
subsection 1.3(a)(ii), the "Acquiror Common Stock"), which shall not be subject
to the affirmative covenants relative to fair market value identified at
subsection 1.3(b) hereafter;
(iv) the delivery of 50 newly issued shares of Series B $3.00
Convertible Preferred Stock, face amount $1.5 million (the "Acquiror Preferred
Stock"), subject to the terms and conditions set forth within the Certificate of
Designation attached hereto as Exhibit 1.3(a)(iv); and
(v) the delivery of 800,000 options, which options (the "Acquiror
Options") are to be granted for a period of six (6) years from the Closing at an
exercise price of the lower of: (i) $3.00 per share; or (ii) the average of the
closing bid and ask prices of the Acquiror Common Stock on the principal
exchange, automated quotation system or over-the-counter market for the 15
trading days prior to the date upon which any segment of the options vest (with
the recognition, however, that different exercise prices may be established for
different segments of the options since they may vest at different times). The
options will vest in the following manner: (x) 400,000 options will vest once
the Acquiror's audited financial statements reflect annual earnings for the
preceding year (commencing one (1) year after the Closing) of no less than $.20
per share; and (y) the remaining 400,000 options will vest once the Acquiror's
audited financial statements reflect annual earnings for the preceding year
(commencing one (1) year after the Closing) of no less than $.30 per share, with
the recognition that once the Acquiror achieves audited earnings per share of
$.30, all of the options vest.
(b) The 900,000 shares of the Acquiror Common Stock, identified at
subsection 1.3(a)(ii) above, may be increased (but not decreased) based upon the
determination of the quarterly value (the "Quarterly Value") of the Common Stock
of Acquiror for each of the six (6) consecutive three (3) month periods
following the effectiveness of the "Registration Statement," as hereafter
defined at Section 5.12 (the "Effective Date") (i.e., from the Effective Date
through the 18th month following the Effective Date). During each of the six (6)
consecutive three (3) month periods following the Effective Date, a
determination shall be made as to the Quarterly Value of the Acquiror Common
Stock, with the Acquiror agreeing that the Osage Shareholders should be able,
during each of such three (3) month periods, to yield gross proceeds (or deemed
gross proceeds) of $300,000 from the sale (or deemed sale) of no more than
150,000 shares of Acquiror Common Stock (i.e., to yield a deemed value of not
less than $2.00 per share).
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(i) The Quarterly Value shall be derived from a combination of: (a)
sales of shares of Acquiror Common Stock by the Osage Shareholders in open
market transactions, upon which value shall be measured by the average per share
sales price; or (b) to the extent that open market sales have not generated
sales proceeds to the Osage Shareholders of at least $300,000, then the
remaining value (i.e., the difference between the sum total of such sales and
$300,000) shall be measured based upon the average of the closing bid and ask
prices of the Common Stock of Acquiror on the principal exchange, automated
quotation system or over-the-counter market, for the fifteen (15) trading days
before the last trading day in each respective three (3) month period (such last
trading date hereinafter referred to as the "Valuation Date"); provided,
however, that such average price is $2.00 or higher, and if the average price is
lower than $2.00, the value of such unsold shares shall be measured based upon
85% of the aforesaid average closing bid and ask prices for the fifteen (15)
trading days before the Valuation Date. Quarterly Value shall then be determined
by making a separate non-cumulative computation on each of the respective
Valuation Dates to determine how many shares of Acquiror Common Stock have been
sold during the three (3) month period, or would need to be sold (assuming a
sale) on such Valuation Dates, in order for the Osage Shareholders to have
yielded gross receipts of at least $300,000.
(ii) To the extent that more than 150,000 shares have been sold
during the three (3) month period, or would need to be sold on each of the
respective Valuation Dates, to yield $300,000 to the Osage Shareholders, then a
deficit would be created (the "Deficit") to the extent 150,000 is lower than the
number of Shares of Acquiror Common Stock sold or needed to be sold to yield
$300,000 during such period. By way of illustration, if during a three (3) month
period, the Osage Shareholders sold 150,000 shares at $1.00 and the average
price at the end of the three (3) month period was $5.00, then a sale of 30,000
shares at $5.00 per share is deemed to occur on the Valuation Date (to arrive at
gross proceeds of $300,000) and a Deficit of 30,000 shares is created. Likewise,
if during the three (3) month period, the Osage Shareholders sold 50,000 shares
at $5.00 and the average price at the end of the three (3) month period was
$1.00; then, computed at 85% of average market value, a sale of 58,824 shares
shall be deemed to occur on the Valuation Date (to arrive at deemed proceeds of
$300,000) and no Deficit is created since the Osage Shareholders were able to
obtain actual and deemed proceeds of $300,000 from the aggregate sale and deemed
sale of less than 150,000 shares. By way of further illustration, if no sales
are conducted during the three (3) month period and the shares of Acquiror
Common Stock are valued at $1.00 upon the Valuation Date, computed at 85% of
average market value, a Deficit to the extent of 202,941 shares is created,
rounded to the nearest whole number.
(iii) The determinaton of Quarterly Value is separate as to each of
the six (6) consecutive three (3) month periods.
(iv) If a Deficit is created based upon the Quarterly Value on the
respective Valuation Dates, additional shares of Acquiror Common Stock shall be
issued to the Osage Shareholders (in proportion to their share ownership as of
the Closing) within fifteen (15) days after completion of the financial
statements referred to in subsection 1.3(b)(v) hereafter.
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(v) The additional shares to be issued to satisfy a Deficit (the
"Additional Acquiror Common Stock") may either derive from Acquiror as newly
issued shares of Common Stock, or may be withdrawn from a pool of 1,500,000
shares of Common Stock of Acquiror deposited at the Closing in a voting trust
(the "Voting Trust") by certain of the existing Acquiror Stockholders. If
Acquiror's financial statements covering the most recent quarterly period ended
prior to the respective Valuation Dates, as the same are included within a
report filed with the Securities and Exchange Commission, reflect that Acquiror
has remained in compliance with the performance criteria identified at
subsection (vii) hereafter (the "Performance Criteria") during such quarterly
period, the Additional Acquiror Common Stock necessary to satisfy the Deficit
will be withdrawn from the Voting Trust. If Acquiror's financial statements
reflect, however, that Acquiror has not, during such same quarterly period,
remained in compliance with the Performance Criteria, then, and in that event,
the Additional Acquiror Common Stock necessary to satisfy the Deficit will be
issued by Acquiror as newly issued shares of Common Stock.
(vi) The operation of the Voting Trust will be governed by the
terms of a voting trust agreement (the "Voting Trust Agreement") executed by the
parties on or before the Closing, a form of which is attached hereto as Exhibit
1.3(b)(vi). The Voting Trust Agreement will provide, among other things, that
the Voting Trust shall only remain in effect until the earlier of: (i) the end
of the 18th month following the Effective Date; or (ii) at such earlier date
when all of the shares covered by it have been released to their beneficial
owners or allocated to the Osage Shareholders. During each of the three (3)
month periods following the Effective Date in which no Deficit arises, 250,000
shares shall be released from the Voting Trust.
(vii) For the purposes of subsection (v) hereof, Acquiror shall
remain in compliance with the Performance Criteria so long as during each of the
fiscal quarters for which a determination of a Deficit is necessary, it achieves
"earnings per share" (as reflected within the financial statements included
within a report filed with the Securities and Exchange Commission) as follows:
(x) $.0125 for each of the quarters for the first twelve (12) months after the
Closing; and (y) $.025 for each of the remaining quarters for which the
determination of a Deficit is necessary. For purposes hereof, failure to
maintain the Performance Criteria for any one particular quarter shall not
adversely affect the determinations thereunder for any subsequent quarter.
(c) The Merger Consideration shall be allocated among the Osage
Shareholders in the proportion of their share ownership of the outstanding
common stock of Osage at the Closing in accordance with the percentages
identified on the signature page hereof.
(d) The shares of Acquiror Common Stock and Acquiror Preferred Stock to
be delivered at the Closing, as well as any Additional Acquiror Common Stock,
when and if delivered, shall be fully paid and non-assessable and shall be free
and clear of all liens, levies and encumbrances except that all of such Acquiror
Common Stock, Additional Acquiror Common Stock and Acquiror Preferred Stock and
shares of Common Stock issuable upon conversion of
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the Acquiror Preferred Stock shall be "restricted securities" pursuant to Rule
144, promulgated under the Securities Act of 1933, as amended (the "Act").
1.4 Additional Rights; Taking of Necessary Action; Further Action.
Each of Acquiror, Sub, Osage and Osage Shareholders, respectively,
shall use their best efforts to take all such action as may be necessary and
appropriate to effectuate the Merger under the ABCA and DGCL as promptly as
possible, including, without limitation, the filing of the Certificate of Merger
and the Articles of Merger consistent with the terms of this Agreement. If at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest in Sub as the Surviving
Corporation full right, title and possession to all assets, property, rights,
privileges, powers and franchises of Osage, the officers of such corporations
are fully authorized in the name of their corporations or otherwise, and
notwithstanding the Merger, to take, and shall take, all lawful and necessary
action.
1.5 Dissenters' Rights.
Each of Osage and the Osage Shareholders acknowledge that dissenters'
rights are available to each of the Osage Shareholders pursuant to Chapter 13 of
the ABCA and that (i) Osage has complied with the provisions of the ABCA in
notifying each Osage Shareholder of the availability of such rights; and (ii)
pursuant to the provisions of the ABCA, if the appropriate procedures and
guidelines are followed, any dissenting shareholder ("Dissenting Shareholders"),
in lieu of the Merger Consideration, shall be entitled to receive the fair value
of their shares in accordance with the provisions of Section 10-325 of the ABCA.
1.6 No Further Rights or Transfers.
At and after the Effective Time, the shares of capital stock of Osage
outstanding immediately prior to the Effective Time shall cease to provide the
Osage Shareholders thereof any rights as a shareholder of Osage or the Surviving
Corporation, except for the right to surrender the certificate or certificates
representing such shares and to receive the consideration to be received in the
Merger as provided in this Agreement.
ARTICLE II
THE CLOSING
2.1 Closing Date.
Subject to satisfaction or waiver of all conditions precedent set forth
in Section 6 of this Agreement, the closing of the Merger (the "Closing") shall
take place at the offices of Osage, 0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxx, XX 00000, at 10:00 a.m., local time on the later of: (i) the first
Business Day following the day upon which all appropriate Acquiror Corporate
Action and Osage Corporate Action has been taken in accordance with Section 3 of
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this Agreement; or (ii) the day on which the last of the conditions precedent
set forth in Section 6 of this Agreement is fulfilled or waived, or (b) at such
other time, date and place as the parties may agree, but in no event shall such
date be later than December 15, 1997, unless such date is extended by the mutual
written agreement of the parties.
2.2 Closing Transactions.
At the Closing, the following transactions shall occur, all of such
transactions being deemed to occur simultaneously:
(a) Osage and the Osage Shareholders will deliver, or shall cause to be
delivered, to the Acquiror and Sub, and shall take the following actions:
(i) The Osage Shareholders (other than Dissenting Shareholders)
shall surrender and deliver to the Sub as the Surviving Corporation the
certificate or certificates representing all of such shares of Osage Common
Stock;
(ii) The Osage Shareholders (other than Dissenting Shareholders)
shall, to the extent necessary to comply with applicable federal and state
securities laws (including, if applicable, Rule 145 promulgated under the Act),
execute and deliver at the Closing a copy of an Investment Letter in a form to
be mutually agreed by the parties at that time and attached to this Agreement as
Exhibit 2.2(a)(ii) ("Investment Letter");
(iii) Any outstanding shareholder agreements relating to Osage
Common Stock shall have been terminated and evidence of such termination
satisfactory to Acquiror shall have been delivered to Acquiror;
(iv) Osage and the Osage Shareholders shall execute and deliver,
and file or cause to be filed with the Arizona Corporation Commission, the
Articles of Merger with such amendments thereto as the parties hereto shall deem
mutually acceptable;
(v) A certificate shall be executed by Osage and the Osage
Shareholders to the effect that all representations and warranties made by Osage
and the Osage Shareholders under this Agreement are true and correct as of the
Closing, as though originally given to Acquiror and Sub on said date;
(vi) A certificate of good standing shall be delivered by Osage
from the Arizona Corporation Commission of the State of Arizona, dated at or
about the Closing, to the effect that such corporation is in good standing under
the laws of such state;
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(vii) An incumbency certificate shall be delivered by Osage signed
by all of the officers thereof dated at or about the Closing;
(viii) Certified Articles of Incorporation shall be delivered by
Osage dated at or about the Closing and a copy of the Bylaws of Osage certified
by the Secretary of Osage dated at or about the Closing;
(ix) Certified Board and shareholder resolutions shall be delivered
by the Secretary of Osage dated at or about the Closing authorizing the
transactions contemplated under this Agreement;
(x) The delivery of an opinion of counsel of Osage and the Osage
Shareholders in form and substance satisfactory to Acquiror and the Sub, a form
of which shall be agreed upon within fifteen (15) days of the date hereof; and
(xi) Each of the parties to this Agreement shall have otherwise
executed whatever documents and agreements, provided whatever consents or
approvals and taken all such actions as are required under this Agreement.
(b) Acquiror and Sub will deliver, or shall cause to be delivered, to
Osage and the Osage Shareholders, and shall take the following actions:
(i) Acquiror shall deliver or shall cause to be delivered to the
Osage Shareholders (other than Dissenting Shareholders) a certificate or
certificates representing the number of shares of Acquiror Common Stock,
Acquiror Preferred Stock and Acquiror Options as such holder is entitled to
receive in connection with the Merger;
(ii) Acquiror shall deliver or shall cause to be delivered to the
holders of Osage Common Stock, the cash component ($500,000) of the Merger
Consideration;
(iii) Acquiror and the Sub shall execute and deliver, and file or
cause to be filed with the Secretary of the State of Delaware, the Certificate
of Merger with such amendments thereto as the parties hereto shall deem mutually
acceptable;
(iv) Sub shall receive from the Secretary of State of Delaware a
final Certificate of Merger;
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(v) Each of the existing members of Acquiror's Board of Directors
will tender his resignation and nominate to the Board five (5) individuals
consisting of a majority (3 members) of designees of the holders of the Acquiror
Preferred Stock; one designee of the former Acquiror Board members ("Pacific Rim
Designee"); and a designee mutually acceptable to the holders of the Acquiror
Preferred Stock and Pacific Rim Designee. The newly constituted Board of
Directors will hold office in accordance with the DGCL and will appoint
executive officers in accordance with the DGCL;
(vi) A certificate shall be executed by the Acquiror's and Sub's
President to the effect that all representations and warranties of the Acquiror
and Sub under this Agreement are true and correct as of the Closing, as though
originally given to Osage on said date;
(vii) A certificate of good standing shall be delivered by Acquiror
and Sub from the Secretary of the State of Delaware dated at or about the
Closing that the Acquiror and Sub are in good standing under the laws of said
state;
(viii) An incumbency certificate shall be delivered by Acquiror and
Sub signed by all of the officers thereof dated at or about the Closing;
(ix) Certified Certificates of Incorporation shall be delivered by
Acquiror and Sub dated at or about the Closing, and a copy of the Bylaws of
Acquiror and Sub certified by the Secretary of Acquiror and Sub dated at or
about the Closing;
(x) Certified Board resolutions shall be delivered by the Secretary
of the Acquiror and Sub dated at or about the Closing authorizing the
transactions contemplated under this Agreement;
(xi) Acquiror will deliver Employment Agreements to Messrs.
Leadbeater and Xxxxx upon the terms and conditions identified upon Exhibit
6.1(f) to this Agreement;
(xii) There shall be executed a Voting Trust Agreement upon the
terms and conditions identified upon Exhibit 1.3(b)(vi) to this Agreement;
(xiii) A Certificate of Designation shall be filed with the
Secretary of State of Delaware in accordance with the DGCL, designating the
terms of the Acquiror Preferred Stock and the Series A Preferred Stock;
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(xvi) The delivery of an opinion of counsel of Acquiror and the Sub
in form and substance satisfactory to Osage and the Osage Shareholders, a form
of which shall be agreed upon within fifteen (15) days of the date hereof; and
(xvii) Each of the parties to this Agreement shall have otherwise
executed whatever documents and agreements, provided whatever consents or
approvals and taken all such actions as are required under this Agreement.
ARTICLE III
CERTAIN CORPORATE ACTION
3.1 Osage Corporate Action.
Osage shall cause to occur all corporate action necessary to effect the
Merger and to consummate the other transactions contemplated hereby.
3.2 Acquiror Corporate Action.
Acquiror and the Sub shall cause to occur all corporate action
necessary on behalf of either of them to effect the Merger and to consummate the
other transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Osage and the Osage Shareholders.
As a material inducement to Acquiror and Sub to execute this Agreement
and consummate the Merger and other transactions contemplated hereby, Osage and
the Osage Shareholders, jointly and severally, hereby make the following
representations and warranties to Acquiror and Sub. The representations and
warranties are true and correct in all material respects at this date, and will
be true and correct in all materials on the Closing as though made on and as of
such date.
(a) Corporate Existence and Power.
(i) Osage is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Arizona, and has all corporate
powers and all governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except where the failure to
have any of the foregoing would not have a Material Adverse Effect. Osage is
duly qualified to do business as a foreign corporation and is in good
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standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. True, correct
and complete copies of the Articles of Incorporation and Bylaws of Osage as
amended to date are attached hereto as Schedule 4.1(a) and are made a part
hereof. There are currently no subsidiaries of Osage.
(b) Due Authorization. This Agreement has been duly authorized,
executed and delivered by Osage and the Osage Shareholders and constitutes a
valid and binding agreement of Osage and the Osage Shareholders, enforceable in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium, and other similar laws relating
to, limiting or affecting the enforcement of creditors rights generally or by
the application of equitable principles. As of the Closing all corporate action
on the part of Osage required under applicable law in order to consummate the
Merger will have occurred.
(c) No Contravention. The execution and delivery of the Agreement does
not, and the consummation of the transactions contemplated thereby will not: (i)
conflict with or result in any violation of any provision of the Articles of
Incorporation or Bylaws of Osage; or (ii) conflict with or result in any
violation or default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of a right
or obligation or loss under, any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Osage and the Osage Shareholders or their properties or assets, or
result in the creation or imposition of any mortgage, lien, pledge, charge or
security interest of any kind ("Encumbrance") on any assets of Osage, except
such as is not reasonably likely to have a Material Adverse Effect or prevent
Osage or the Osage Shareholders from consummating the transactions contemplated
by this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, is required by or with respect to Osage in connection with the
execution and delivery of this Agreement by Osage and the Osage Shareholders or
the consummation by Osage and the Osage Shareholders of the transactions
contemplated hereby, except the filing of the Articles of Merger.
(d) Capitalization and Share Ownership. The authorized capital stock of
Osage consists solely of ten million (10,000,000) shares of common stock, no par
value per share ("Osage Common Stock"), and one million (1,000,000) shares of
preferred stock, no par value per share ("Osage Preferred Stock"). There are
currently outstanding (i) 2,000,000 shares of Osage Common Stock, (ii) no shares
of Osage Preferred Stock and (iii) no Osage Options. The outstanding shares of
capital stock of Osage have been duly authorized and validly issued and are
fully paid and nonassessable and free of preemptive rights. Except as set forth
in this Section 4.1(d), there are outstanding (A) no shares of capital stock or
other voting securities of Osage, (B) no securities of Osage convertible into or
exchangeable for shares of capital stock or voting
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securities of Osage and (C) no options, warrants or other rights to acquire from
Osage, and no obligation of Osage to issue, any capital stock, voting securities
or securities convertible into or exchangeable for capital stock or voting
securities of Osage, and there are no agreements or commitments to do any of the
foregoing. There are no voting trusts or voting agreements applicable to any
capital stock of Osage. The Osage Common Stock to be surrendered in the Merger
will be owned of record and beneficially, by the Osage Shareholders, free and
clear of all liens and encumbrances of any kind and nature, and have not been
sold, pledged, assigned or otherwise transferred. There are no agreements (other
than this Agreement) to sell, pledge, assign or otherwise transfer such
securities.
(e) Financial Statements. Attached as Schedule 4.1(e) are copies of
financial statements of Osage for the years ended December 31, 1996 and December
31, 1995 and accompanying notes, which were audited by Xxxxxx, Grey and Xxxx,
Mesa, Arizona. Also attached are unaudited interim financial statements of Osage
for the nine (9) month period ended September 30, 1997 (the "Interim Financial
Statements"). (The Audited Financial Statements and the Interim Financial
Statements shall be referred to collectively as the "Financial Statements").
Such Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
reported upon and fairly present in all material respects the financial position
of Osage as of the date thereof and the results of operations for the periods
then ended (subject to normal year-end adjustments).
(f) Real Properties.
(i) Osage currently leases real property at those locations
identified on Schedule 4.1(f)(i) hereto pursuant to the true, correct and
complete copies of the lease agreements attached to Schedule 4.1(f)(i). Osage
owns or leases no other real estate. None of the leasehold interests held by
Osage is subject to any Encumbrance, except (a) liens for ad valorem taxes not
yet due or being contested in good faith; and (b) contractual or statutory
mechanics or materialmen's liens or other statutory or common law Encumbrances
relating to obligations of Osage that are not delinquent or are being contested
in good faith. There are no Encumbrances which materially interfere with the
present use of such leasehold interests.
(ii) Except as described on Schedule 4.1(f)(ii) hereto, Osage has
not received any written notice from any governmental entity having jurisdiction
over Osage or over any of the real property leased by Osage of any violation by
Osage of any law, regulation or ordinance relating to zoning, environmental
matters, local building or fire codes or similar matters relating to any of the
real property leased by Osage or of any condemnation or eminent domain
proceeding.
(iii) Except such as has not had and is not reasonably likely to
have a Material Adverse Effect, all of the buildings leased by Osage and all
plumbing, HVAC, electrical, mechanical and similar systems are in good repair
and adequate for their current use, ordinary wear and tear excepted.
(iv) Except as described on Schedule 4.1(f)(iv), Osage is not a
party to any lease, sublease, lease assignment or other agreement for the use or
occupancy of any of the leasehold premises wherein Osage is the landlord,
sub-landlord or assignor, whether by name, as
13
successor-in-interest or otherwise. There are no outstanding agreements with any
party to acquire the leasehold premises or any portion thereof or any interest
therein.
(v) All certificates of occupancy and all other licenses, permits,
authorizations, consents, certificates and approvals required by all
governmental authorities having jurisdiction over the leasehold premises
occupied by Osage have been issued, are fully paid for and are in full force and
effect, will survive the Closing and will not be invalidated, violated or
otherwise adversely affected by the Merger or the other transactions
contemplated by this Agreement.
(g) No Contingent Liabilities. Except as set forth in the Financial
Statements, at the Closing, Osage shall have no liabilities, whether related to
tax or non-tax matters, known or unknown, due or not yet due, liquidated or
unliquidated, fixed or contingent, determined or determinable in amount or
otherwise and, to the knowledge of Osage after due inquiry, there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such a liability, except as and to the extent reflected on: (i) the
Financial Statements; (ii) this Agreement or any Schedule or Exhibit hereto; or
(iii) liabilities incurred since the date of the Financial Statements solely in
the ordinary course of business and as accurately reflected on the books and
records of Osage; provided, however, that no liability shall be incurred from
and after the date hereof which is in contravention of any negative covenant
contained herein and applicable to Osage.
(h) Litigation. Except as described on Schedule 4.1(h) hereto there is
no action, suit, investigation or proceeding (or, to the knowledge of Osage, any
basis therefor) pending against, or to the knowledge of Osage threatened,
against or affecting Osage or any of its properties before any court or
arbitrator or any governmental body, agency or official that (i) if adversely
determined against Osage, would have a Material Adverse Effect or (ii) in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
Merger or any of the other transactions contemplated by the Agreement.
(i) Taxes. Osage has timely filed all tax returns required to be filed
by it, or will timely file when due all tax returns required to be filed by it
between the date hereof and the Closing. Osage has paid in a timely fashion or
will pay when due in a timely fashion, all taxes required to be paid in respect
of the periods covered by such returns, and the books and the financial
statements of Osage reflect, or will reflect, adequate reserves for all taxes
payable by Osage which have been, or will be, accrued but are not yet due. Osage
is not delinquent in the payment of any material tax, assessment or governmental
charge. No deficiencies for any taxes have been proposed, asserted or assessed
against Osage, Osage and the Osage Shareholders are not aware of any facts which
would constitute the basis for the proposal or assertion of any such deficiency
and there is no action, suit, proceeding, audit or claim now pending or
threatened against Osage. All taxes which Osage is required by law to withhold
and collect have been duly withheld and collected, and have been timely paid
over to the proper authorities to the extent due and payable. For the purposes
of this Agreement, the term "tax" shall include all federal state, local and
foreign income, property, sales, excise and other taxes of any nature
whatsoever. Neither Osage nor any member of any affiliated or combined group of
which Osage is or has
14
been a member has granted any extension or waiver of the limitation period
applicable to any tax returns. There are no Encumbrances for taxes upon the
assets of Osage, except Encumbrances for current taxes not yet due. There are no
tax sharing or tax allocation agreements to which Osage is now or ever has been
a party. Osage will not be required under Section 481(c) of the Internal Revenue
Code of 1986, as amended (the "Code"), to include any material adjustment in
taxable income for any period subsequent to the Merger. Osage (a) has not been a
member of an affiliated group filing a consolidated federal income tax return
(other than a group the common parent of which was Osage) and (b) has no
liability for the taxes of any person (other than Osage) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(j) ERISA.
(i) Schedule 4.1(j)(i) identifies each "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that is subject to any provision of ERISA, and either (i)
is maintained, administered or contributed to by Osage or any affiliate (as
defined below), (ii) covers any employee or former employee of Osage or any
affiliate or (iii) under which Osage or any affiliate has any liability. Copies
of such plans and, if applicable, related trust agreements) and all amendments
thereto and any written interpretations thereof have been furnished to Acquiror,
together, if applicable, with (x) the most recent annual reports (Form 5500
including, if applicable, Schedule B thereto) prepared in connection with any
such plan and (y) the most recent actuarial valuation report prepared in
connection with any such plan. Such plans are referred to collectively herein as
the "Employee Plans." Any Form 5500 for any plan year of any Employee Plan that
has not been filed, but for which the filing date has passed on the date of this
Agreement, shall be filed prior to the date of the Merger. For purposes of this
Section, "affiliate" of any Person means any other Person which, together with
such Person, would be treated as a single employer for any purpose under Section
414 of the Code.
(ii) Schedule 4.1(j)(ii) identifies all Employee Plans to which
Osage currently has any obligation to contribute. Osage is not a party to any
multiemployer plan as defined in Section 4001(a) (3) of ERISA ("Multiemployer
Plans"), and neither Osage nor any affiliate has any outstanding liability to
contribute to any Multiemployer Plan, for delinquent contributions or for
withdrawal liability pursuant to Section 4201 of ERISA.
(iii) There are no Employee Plans that are intended to be qualified
plans under Section 401(a) of the Code, except as may have been shown and
identified as such on the list referred to in subparagraphs (i) or (ii) above.
Each Employee Plan has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Plan, other than any failure to comply that is not
reasonably likely to have a Material Adverse Effect.
(iv) Schedule 4.1(j)(iv) identifies each material employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits,
15
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits that is not an Employee Plan
and (A) is entered into, maintained or contributed to, as the case may be by
Osage or any of its affiliates or (B) covers any employee or former employee of
Osage or any of its affiliates or (C) under which Osage or any affiliate has
liability. Such contracts, plans and arrangements as are described above, copies
of all of which have been furnished previously to Acquiror, are referred to
collectively herein as the "Benefit Arrangements." Each Benefit Arrangement has
been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such Benefit Arrangement other than any failure to comply
that is not reasonably likely to have a Material Adverse Effect.
(v) Neither Osage nor any affiliate has or maintains and has
maintained any Employee Plan or Benefit Arrangement providing post-retirement
health or medical benefits in respect of any active or former employee of Osage
or any affiliate or former affiliate, except as may be required pursuant to the
provisions of COBRA.
(vi) Osage is not a party to or subject to any union contract or
any express employment contract (other than as set forth on Schedule 4.1(j)(iv)
hereto) or arrangement providing for annual future compensation to any officer,
consultant, director or employee in excess of $100,000.
(k) Insurance Coverage. Schedule 4.1(k) sets forth a list of all Osage
key-man life insurance policies. Osage maintains insurance covering its assets,
business, equipment, properties, operations, employees, officers and directors
with such coverage, in such amounts, and with such deductibles and premiums as
are consistent with insurance coverage provided for other companies of
comparable size and in comparable industries. All of such policies are in full
force and effect and all premiums payable have been paid in full and Osage is in
full compliance with the terms and conditions of such policies. Osage has not
received any notice from any issuer of such policies of its intention to cancel
or refusal to renew any policy issued by it or of its intention to renew any
such policy based on a material increase in premium rates other than in the
ordinary course of business. None of such policies are subject to cancellation
by virtue of the Merger or the consummation of the other transactions
contemplated by this Agreement. There is no claim by Osage pending under any of
such policies as to which coverage has been questioned or denied.
(l) Compliance with Laws. Osage is not in violation of, and has not
violated, any applicable provisions of any laws, statues, ordinances or
regulations, other than as would not be reasonably likely to have a Material
Adverse Effect or constitute a felony. No such laws, statutes, ordinances or
regulations require or are reasonably expected to require capital expenditures
by Osage that are reasonably likely to have a Material Adverse Effect. Without
limiting the generality of the foregoing, Osage has all licenses, permits,
certificates and authorizations needed or required for the conduct of Osage's
business as presently conducted and for the use of its properties and premises
occupied by it, except where the failure to obtain a licenses, permit,
certificate or authorization would not have a Material Adverse Effect.
16
(m) Investment Banking Fees. There is no investment banker, broker,
finder or other similar intermediary which has been retained by, or is
authorized by, Osage or the Osage Shareholders to act on its behalf who might be
entitled to any fee or commission from Osage, the Osage Shareholders, Acquiror
or the Sub or any of their respective affiliates upon consummation of the
transactions contemplated by this Agreement.
(n) Personal Property. Osage has good and valid title to all of its
personal property, tangible and intangible, reflected on the Financial
Statements and to all other personal property owned by it, free and clear of any
Encumbrance. Osage is the owner of all of its personal property now located in
or upon its leased premises and of all personal property which is used in the
operation of its business. All such equipment, furniture and fixtures and other
tangible personal property are in good operating condition and repair and do not
require any repairs other than normal routine maintenance to maintain such
property in good operating condition and repair. All inventory as reflected on
the Financial Statements is usable in the ordinary course of business free from
material defects. Osage owns no motor vehicles.
(o) Intellectual Property; Intangible Property. The corporate names of
Osage and the trade names and service marks listed on Schedule 4.1(o) are the
only names and service marks which are used by Osage in the operation of its
business (the "Names and Service Marks"). Osage has not done business and has
not been known by any other name other than by its Names and Service Marks.
Osage owns and has the exclusive right within Arizona to use all intellectual
property presently in use by it and necessary for the operation of its business
as now being conducted, which intellectual property includes, but is not limited
to, patents, trademarks, trade names, service marks, copyrights, trade secrets,
customer lists, inventions, formulas, methods, processes and other proprietary
information. There are no outstanding licenses or consents granting third
parties the right to use any intellectual property owned by Osage. No royalties
or fees are payable by Osage to any third party by reason of the use of any of
its intellectual property. Osage has received no notice of any adversely held
patent, invention, trademark, copyright, service xxxx or tradename of any
person, or any claims of any other person relating to any of the intellectual
property subject hereto, and to the knowledge of Osage, there is no reasonable
basis for any such charge or claim. There is no presently known threatened use
or encroachment of any such intellectual property.
(p) Accounts Receivable. Each of the accounts receivable of Osage
referred to on the Financial Statements constitutes a valid claim in the full
amount thereof against the debtor charged therewith on the books of Osage to
which each such account is payable and has been acquired in the ordinary course
of business. Each account receivable is fully collectible to the extent of the
face value thereof (less the amount of the allowance for the doubtful accounts
reflected on the Financial Statements) no later than ninety (90) days after such
account receivable is due. No account debtor has any valid setoff, deduction or
defense with respect thereto, and no account debtor has asserted any such
setoff, deduction or defense. There are no accounts receivable which arise
pursuant to an agreement with the United States Government or any agency or
instrumentality thereof.
17
(q) Contracts, Leases, Agreements and Other Commitments. Osage is not a
party to or bound by any oral, written or implied contracts, agreements, leases,
powers of attorney, guaranties, surety arrangements or other commitments
excluding equipment and furniture leases entered into in the ordinary course of
business (which do not exceed $100,000 in liabilities or commitments in the
aggregate), except for the following (which are hereinafter collectively called
the "Corporation Agreements"):
(i) The leases and agreements described on Schedules 4.1(f),
4.1(j)(i) and (ii) and 4.1(r)(i); and
(ii) Agreements involving a maximum possible liability or
obligation on the part of Osage of less than Twenty-Five Thousand Dollars
($25,000) separately or less than One Hundred Thousand Dollars ($100,000) in the
aggregate.
The Corporation Agreements constitute all of the agreements and instruments
which are necessary and desirable to operate the business as currently conducted
by Osage. True, correct and complete copies of each Corporation Agreement
described and listed under subsection 4.1(q)(i) have been made available to
Acquiror within ten (10) business days prior to the date hereof. The term
"Corporation Agreement" excludes purchase orders entered into in the ordinary
course for personality or inventory which may be returned to the vendor without
penalty. All of the Corporation Agreements are valid, binding and enforceable
against the respective parties thereto in accordance with their respective
terms. Following the Merger, the Surviving Corporation shall become entitled to
all rights of Osage under such of the Corporation Agreements as if the Surviving
Corporation were the original party to such Corporation Agreements. All parties
to all of the Corporation Agreements have performed all obligations required to
be performed to date under such Corporation Agreements, and no party is in
default or in arrears under the terms thereof, and no condition exists or event
has occurred which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. The consummation of this Agreement and the
Merger will not result in an impairment or termination of any of the rights of
Osage under any Corporation Agreement. None of the terms or provisions of any
Corporation Agreement materially adversely affects the business, prospects,
financial condition or results of operations of Osage.
18
(r) Labor Relations; Employees.
(i) Set forth on Schedule 4.1(r)(i) is a list of:
(A) All collective bargaining agreements and other agreements
requiring arbitration of employment disputes, and any written amendments
thereto, as well as all arbitration awards decided under any such agreements,
and all oral assurances or modifications, past practices, and/or arrangements
made in relation thereto, to which Osage is a party or by which it is bound; and
(B) All employment agreements, and all severance agreements
which have not been fully performed, to which Osage is a party or by which it is
bound.
(ii) Set forth on Schedule 4.1(r)(ii) is a list of all key
management employees of Osage, broken down by location, together with their rate
of compensation and title.
(iii) Osage will deliver to Acquiror true and correct copies of all
of the documents referred to on Schedule 4.1(r)(i) hereof and all of the
personnel policies, employee and/or supervisor handbooks, procedures and forms
of employment applications relating to the employees of Osage.
(iv) There is no union representing or purporting to represent any
of the employees of Osage, and Osage is not subject to or currently negotiating
any collective bargaining agreements with any union representing or purporting
to represent the employees of any of the foregoing.
(v) Except as set forth on Schedule 4.1(r)(v):
(A) There are no strikes, slow downs or other work stoppages,
grievance proceedings, arbitrations, labor disputes or representation questions
pending or, to the best knowledge of Osage, threatened;
(B) Osage has complied in all material respects with all laws
relating to labor, employment and employment practices, including without
limitation, any provisions thereof relating to wages, hours and other terms of
employment, collective bargaining, nondiscrimination and the payment of social
security, unemployment compensation and similar taxes, and Osage is not (1)
liable for any arrearages of wages or any taxes or penalties for failure to
comply with any of the foregoing or (2) delinquent in the payment of any
severance, salary, bonus, commission or other direct or indirect compensation
for services performed by any employee to the date hereof, or any amount
required to be reimbursed to any employee or former employee; and
19
(C) There are no charges, suits, actions, administrative
proceedings, investigations and/or claims pending or, to the knowledge of Osage,
threatened against any Osage, whether domestic or foreign, before any court,
governmental agency, department, board or instrumentality, or before any
arbitrator (collectively "Actions"), concerning or in any way relating to the
employees or employment practices of Osage, including, without limitation,
Actions involving unfair labor practices, wrongful discharge and/or any other
restrictions on the right of Osage to terminate its respective employees,
employment discrimination, occupational safety and health, and workers'
compensation.
(vi) There are no express or implied agreements, policies,
practices, or procedures, whether written or oral, pursuant to which any
employee of Osage is not terminable at will and except as required by law, no
employee is entitled to any benefit or to participate in any employee benefit
plan of Osage following such termination of employment.
(vii) Osage is not a party to any oral or written (A) agreement
with any executive officer or other key employee of Osage (1) the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Osage of the nature of the transactions
contemplated by this Agreement, (2) providing any term of employment or
compensation guarantee extending for a period longer than one year, or (3)
providing severance benefits or other benefits after the termination of
employment of such executive officer or key employee regardless of the reason
for such termination of employment; or (B) agreement or plan which will remain
in effect after the Closing, including, without limitation, any stock option
plan, stock appreciation right plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement.
(s) Osage has not taken any action which requires or, taken together
with the transactions contemplated hereby, would require the giving of any
notice under the Worker Adjustment Retraining and Notification Act or any
comparable state or local law or regulation.
(t) Suppliers and Customers. Set forth on Schedule 4.1(t) is a list of
the five largest customers of Osage based on the percentage of revenue
represented by those customers for the fiscal year ended December 31, 1996 and
the five largest customers in terms of volume of contracts. The relationship of
Osage with its suppliers and customers are good commercial working relationships
and no supplier or customer of Osage has canceled, curtailed or otherwise
terminated or, to the knowledge of Osage, threatened to cancel or otherwise
terminate, his or its relationship with Osage. Osage has no knowledge, or reason
to believe, that the Merger or any other transaction contemplated hereby would
adversely affect any such supplier or customer relationship.
(u) Conflicting Interests. Except as set forth on Schedule 4.1(u), no
director, officer, employee or Osage Shareholder, and no relative or affiliate
of any of the foregoing (i) sells or purchases goods or services from Osage or
has any pecuniary interest in any supplier or
20
client of any of the foregoing or in any other business enterprise with which
Osage conducts business or with which any of the foregoing is in competition, or
(ii) is indebted to Osage except for money borrowed and as set forth on the
Financial Statements.
(v) Environmental Protection. Neither Osage nor the Osage Shareholders
have been notified by any governmental authority, agency or third party, and
Osage and the Osage Shareholders have no knowledge, of any violation by Osage of
any Environmental Statute (as defined below). All registrations by Osage with,
licenses from or permits issued by governmental agencies pursuant to
environmental, health and safety laws are in full force and effect. The term
"Environmental Statutes" means all statutes, ordinances, regulations, orders and
requirements of common law concerning discharges to the air, soil, surface water
or groundwater and concerning the storage, treatment or disposal of any waste or
hazardous substance. There is no hazardous substance at any premises currently
or previously occupied by Osage. Osage has not received any notice or any
request for information, notice of claim, demand or other notification that it
may be potentially responsible with respect to any investigation or clean-up of
any threatened or actual release of hazardous substances. All hazardous wastes
and substances have been stored, treated, disposed of and transported in
conformance with all requirements applicable to such hazardous substances and
wastes.
(w) Absence of Certain Changes or Events. Except as and to the extent
set forth on the Financial Statements, to the extent contained in this
Agreement, or as set forth on Schedule 4.1(w), there has not been (i) any
material adverse change in the business, assets, properties, results of
operations, financial condition or prospects of Osage; (ii) any entry by Osage
into any material commitment or transaction which is not in the ordinary course
of business; (iii) any change by Osage in accounting principles or methods
except insofar as may be required by a change in generally accepted accounting
principles; (iv) any declaration, payment or setting aside for payment of any
dividends or other distributions (whether in cash, stock or property) in respect
of capital stock of Osage or any Subsidiary, or any direct or indirect
redemption, purchase or any other type of acquisition by Osage of any shares of
its capital stock or any other securities for an aggregate sum not in excess of
$5,000; (v) any agreement by Osage, whether in writing or otherwise, to take any
action which, if taken prior to the date of this Agreement, would have made any
representation or warranty in this Section 4.1 untrue or incorrect; (vi) any
acquisition of the assets of Osage, other than in the ordinary course of
business and consistent with past practice and not in excess of $5,000 in the
aggregate; or (vii) any execution of any agreement with any executive officer of
Osage providing for his or her employment, or any increase in the compensation
or in severance or termination benefits payable or to become payable by Osage to
its officers or key employees, or any material increase in benefits under any
collective bargaining agreement or in benefits under any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, insurance or other plan or
arrangement or understanding (whether or not legally binding) providing benefits
to any present or former employee of Osage. Since the date of the Financial
Statements, there has not been and there is not threatened, any material adverse
change in financial condition, business, results of operations or prospects of
the business or any material
21
physical damage or loss to any of the properties or assets of the business or to
the premises occupied in connection with the business, whether or not such loss
is covered by insurance.
(x) Investment Intent.
(i) Except with respect to the registration rights granted to the
Osage Shareholders pursuant to the terms of this Agreement, the shares of
Acquiror Common Stock are not being registered under the Act on the basis of the
statutory exemption provided by Section (4)2 thereof, relating to transactions
not involving a public offering, and the Acquiror's reliance on the statutory
exemption thereof is based in part on the representations contained in this
Agreement;
(ii) The Osage Shareholders represent (a) that they have reviewed
such quarterly, annual and periodic reports of the Acquiror as have been filed
with the Securities and Exchange Commission (the "Reports") and that they have
such knowledge and experience in financial and business matters that it is
capable of utilizing the information set forth therein, concerning Acquiror to
evaluate the risk of investing in the Acquiror; (b) that they have been advised
that the shares of Acquiror Common Stock to be issued to each of them by the
Acquiror will not be registered under the Act, except as otherwise provided in
this Agreement, and accordingly, the Osage Shareholders may only be able to sell
or otherwise dispose of such shares in accordance with Rule 144 or except as
otherwise provided in this Agreement; (c) that the shares of Acquiror Common
Stock will be held for investment and not with a view to, or for resale in
connection with the public offering or distribution thereof; (d) that the shares
of Acquiror Common Stock so issued will not be sold without registration thereof
under the Act (unless such shares are subject to registration or in the opinion
of counsel to the Acquiror an exemption from such registration is available), or
in violation of any law; and (e) that the certificate or certificates
representing the shares of Acquiror Common Stock to be issued will be imprinted
with a legend in form and substance substantially as follows:
'THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION, UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION
LETTER OF COUNSEL FOR THE COMPANY OR A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION."
and Acquiror is hereby authorized to notify its transfer agent of the
status of the Shares and to take such other action including, but not limited
to, the placing of a "stop-transfer" order on the transfer agent's books and
records to assure compliance with the Act, as amended.
22
(iii) Osage and the Osage Shareholders have been afforded the
opportunity to review and are familiar with the Reports and have based their
decision to invest solely on the information contained therein, and the
information contained within this Agreement and the associated exhibits and
schedules, and have not been furnished with any other literature, prospectus or
other information except as included in the Reports or this Agreement;
(iv) The Osage Shareholders are able to bear the economic risks of
an investment in the shares of Acquiror Common Stock and that their overall
commitment to their investments which are not readily marketable is not
disproportionate to their net worth; and
(v) The Osage Shareholders understand that no federal or state
agency has approved or disapproved the shares of Acquiror Common Stock and
Acquiror Preferred Stock, passed upon or endorsed the merits of the transfer of
such shares set forth within this Agreement or made any finding or determination
as to the fairness of such shares for investment.
(y) Statements And Other Documents Not Misleading. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by Osage or the Osage Shareholders to Acquiror or Sub in
connection with the Merger or the other transactions contemplated hereby,
contains or will contain any untrue statement of any material fact or omit or
will omit to state any material fact required to be stated in order to make such
statement, information, document or other instruments, in light of the
circumstances in which they are made, not misleading. There is no fact known to
Osage or the Osage Shareholders which may have a Material Adverse Effect on the
business, prospects, financial condition or results of operations of Osage or of
any of its properties or assets which has not been set forth in this Agreement
as an exhibit or schedule hereto.
4.2 Representations and Warranties of Acquiror and the Sub.
As a material inducement to Osage and the Osage Shareholders to execute
this Agreement and to consummate the Merger and the other transactions
contemplated hereby, Acquiror and Sub hereby make the following representations
and warranties to Osage and the Osage Shareholders.
(a) Corporate Existence and Power. Acquiror is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and the Sub is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware. Each of Acquiror
and the Sub has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except where the failure to have any of the foregoing would not have
a Material Adverse Effect. Each of Acquiror and the Sub is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for
23
those jurisdictions where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect. Acquiror owns all of the
issued and outstanding shares of capital stock of the Sub, and there are no
other rights or obligations of Acquiror or the Sub to issue any other shares of
capital stock of the Sub. The Sub has conducted no business activity other than
in connection with the transactions contemplated by this Agreement. True,
complete and correct copies of the Articles of Incorporation and Bylaws of
Acquiror as amended to date are attached hereto as Schedule 4.2(a) and are made
a part hereof.
(b) Due Authorization. This Agreement has been duly authorized,
executed and delivered by Acquiror and the Sub and constitutes a valid and
binding agreement of Acquiror and the Sub, enforceable in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium, and other similar laws relating to, limiting or
affecting the enforcement of creditors rights generally or by the application of
equitable principles. As of the Closing all corporate action on the part of
Acquiror and the Sub required under applicable law in order to consummate the
Merger will have occurred.
(c) No Contravention. The execution and delivery of the Agreement does
not, and the consummation of the transactions contemplated thereby will not (i)
conflict with or result in any violation of any provision of the Articles of
Incorporation or Bylaws of Acquiror or Sub or (ii) conflict with or result in
any violation or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
an right or obligation or to loss or a benefit under, any provision of the
charter or Bylaws of Acquiror or the Sub or any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Acquiror or its properties or
assets. or result in the creation or imposition of any Encumbrance on any asset
of Acquiror, except, only as to clause (ii) above, such as is not reasonably
likely to have a Material Adverse Effect or prevent Acquiror or Sub from
consummating the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, is required by or with
respect to Acquiror or the Sub in connection with the execution and delivery of
this Agreement by either of them or the consummation by either of them of the
transactions contemplated hereby, except the filing of the Certificate of Merger
with the Secretary of the State of Delaware.
(d) Capitalization.
(i) As of the Closing, the authorized capital stock of the Acquiror
shall consist solely of shares of common stock, par value $.01 per share
("Acquiror Common Stock"), of which no more than 3,520,000 shares of Acquiror
Common Stock will be outstanding as of the Closing except as permitted by
Section 5 and one thousand (1,000) shares of preferred stock, of which none are
currently outstanding. All outstanding shares of capital stock of Acquiror have
been duly authorized and validly issued and are fully paid and nonassessable and
free of preemptive rights, and upon the issuance of the shares of Acquiror
Common Stock and
24
Acquiror Preferred Stock to be issued in the Merger, such shares will be duly
authorized, validly issued, fully paid and nonassessable shares of Acquiror
Common Stock and Acquiror Preferred Stock, respectively. Except as set forth in
its SEC Documents, as defined below, and except for the shares of Acquiror
Common Stock and Acquiror Preferred Stock and Acquiror Options to be issued in
connection with the Merger and the transactions relating thereto or permitted
hereby (including the private placement of $3,660,000 million of Series A $3.00
Convertible Preferred Stock), there will be outstanding (A) no shares of capital
stock or other voting securities of Acquiror, (B) no securities of Acquiror
convertible into or exchangeable for shares of capital stock or voting
securities of Acquiror and (C) no options, warrants or other rights to acquire
from Acquiror, and no obligation of Acquiror to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Acquiror and there are no agreements or commitments, to do
any of the foregoing.
(ii) Acquiror has a sufficient number of its authorized but
unissued shares of Acquiror Common Stock and Acquiror Preferred Stock to permit
it to issue the number of shares of Acquiror Common Stock and Acquiror Preferred
Stock due in connection with the Merger and the related transactions, as well as
all of Acquiror's other obligations to issue shares of Acquiror Common Stock
upon exercise of any option, warrant or other right to acquire the same.
(e) SEC Filings.
(i) As of the Closing, Acquiror shall have filed all of its Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and, to the knowledge of
Acquiror, Current Reports on Form 8-K required pursuant to the Securities
Exchange Act of 1934 and upon request will make available to Osage and the Osage
Shareholders copies of its periodic reports filed pursuant to the Securities
Exchange Act of 1934, as well as its proxy or information statements relating to
meetings of, or actions taken without a meeting by the stockholders of Acquiror
held since 1994 and all of its other reports, statements, schedules and
registration statements filed with the Securities and Exchange Commission since
inception, other than pre-effective amendments to such registration statements.
The documents referred to in the preceding sentence are sometimes referred to
herein as the "SEC Documents."
(ii) As of its filing date, to the knowledge of Acquiror, each such
SEC Document did not contain any untrue statement of a 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 were made, not misleading.
(f) Financial Statements. The financial statements contained within the
SEC Documents fairly present in all material respects the results of operations,
retained earnings and changes in financial position, as the case may be, of the
Acquiror at and for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which will not be
material to the Acquiror, taken as a whole, in amount or effect), in each case
in accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. The books and
records, financial and other, of the
25
Acquiror are, to the knowledge of the Acquiror, in all material respects
complete and correct and have been maintained in accordance with good business
and accounting practices.
(g) No Violations. Except as described on Schedule 4.2(g) hereto,
neither Acquiror or any of its subsidiaries has received any written notice from
any governmental entity having jurisdiction over it or over any of the real
property leased by it of any violation by Acquiror or any of its subsidiaries of
any law, regulation or ordinance relating to zoning, environmental matters,
local building or fire codes or similar matters relating to any of the real
property leased by Acquiror or any of its subsidiaries.
(h) No Contingent Liabilities. Except as set forth in the financial
statements referred to in Section 4.2(f) above, as of the Closing, Acquiror and
each of its subsidiaries shall have no liabilities, whether related to tax or
non-tax matters, known or unknown, due or not yet due, liquidated or
unliquidated, fixed or contingent, determined or determinable in amount or
otherwise and, to the knowledge of Acquiror after due inquiry, there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability except as and to the extent reflected on:
(i) the SEC Documents; (ii) this Agreement or any Schedule or Exhibit thereto;
or (iii) liabilities incurred since the date of the most recent SEC Document
solely in the ordinary course of business (or in connection with the
transactions contemplated hereby) and as accurately reflected on the books and
records of Acquiror; provided however, that no liability shall be incurred from
and after the date hereof which is in contravention of any negative covenant
contained herein and applicable to Acquiror.
(i) Litigation. Except as set forth in any of the SEC Documents or
Schedule 4.2(i), there is no action, suit, investigation or proceeding (or, to
the knowledge of Acquiror, any basis therefor) pending against, or to the
knowledge of Acquiror threatened, against or affecting Acquiror, any of its
subsidiaries or any of their properties before any court or arbitrator or any
governmental body, agency or official that (i) if adversely determined against
Acquiror, would have a Material Adverse Effect on Acquiror and its subsidiaries,
taken as a whole, or (ii) in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the Merger or any of the other transactions
contemplated by the Agreement.
(j) Taxes. Acquiror and each of its subsidiaries have timely filed all
tax returns required to be filed by them, or will timely file when due all tax
returns required to be filed by them between the date hereof and the Closing.
Acquiror and each of its subsidiaries have paid in a timely fashion or will pay
when due in a timely fashion, all taxes required to be paid in respect of the
periods covered by such returns, and the books and the financial statements of
Acquiror and each of its subsidiaries reflect, or will reflect, adequate
reserves for all taxes payable by Acquiror and each of its subsidiaries which
have been, or will be, accrued but are not yet due. Acquiror and each of its
subsidiaries are not delinquent in the payment of any material tax, assessment
or governmental charge. No deficiencies for any taxes have been proposed,
asserted or assessed against Acquiror and each of its subsidiaries, Acquiror and
each of its subsidiaries are not aware of any facts which would constitute the
basis for the proposal or assertion of any such deficiency and there is no
action, suit, proceeding, audit or claim now
26
pending, or to Acquiror's knowledge, threatened against Acquiror and each of its
subsidiaries. All taxes which Acquiror and each of its subsidiaries are required
by law to withhold and collect have been duly withheld and collected, and have
been timely paid over to the proper authorities to the extent due and payable.
For the purposes of this Agreement, the term "tax" shall include all federal
state, local and foreign income, property, sales, excise and other taxes of any
nature whatsoever. Neither Acquiror or any of its subsidiaries nor any member of
any affiliated or combined group of which Acquiror is or has been a member has
granted any extension or waiver of the limitation period applicable to any tax
returns. There are no Encumbrances for taxes upon the assets of Acquiror or any
of its subsidiaries, except Encumbrances for current taxes not yet due. There
are no tax sharing or tax allocation agreements to which Acquiror or any of its
subsidiaries is now or ever has been a party. Acquiror will not be required
under Section 481(c) of the Internal Revenue Code of 1986, as amended (the
"Code"), to include any material adjustment in taxable income for any period
subsequent to the Merger. None of Acquiror or its subsidiaries (A) has been a
member of an affiliated group filing a consolidated federal income tax return
(other than a group the common parent of which was Acquiror or a subsidiary of
Acquiror) and (b) has no liability for the taxes of any person (other than
Acquiror or any of its subsidiaries) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise.
(k) Compliance with Laws. To the best knowledge of Acquiror and Sub,
neither Acquiror nor any of its subsidiaries is in violation of, and has not
violated, any applicable provisions of any laws, statutes, ordinances or
regulations, other than as would not be reasonably likely to have a Material
Adverse Effect on Acquiror and its subsidiaries, taken as a whole, or constitute
a felony. No such laws, statutes, ordinances or regulations require or are
reasonably expected to require capital expenditures that are reasonably likely
to have a Material Adverse Effect on Acquiror and its subsidiaries, taken as a
whole. Without limiting the generality of the foregoing, Acquiror and Sub have
all licenses, permits, certificates and authorizations needed or required for
the conduct of Acquiror's or Sub's business as presently conducted and for the
use of its properties and premises occupied by it, except where the failure to
obtain a license, permit, certificate or authorization would not have a Material
Adverse Effect.
(l) Investment Banking Fees. There is no investment banker, broker,
finder or other similar intermediary which has been retained by, or is
authorized by, either Acquiror or the Sub to act on its behalf who might be
entitled to any fee or commission from Osage, the Osage Shareholders, Acquiror
or the Sub or any of their respective affiliates upon consummation of the
transactions contemplated by this Agreement.
(m) Statements And Other Documents Not Misleading. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by Acquiror or Sub to Osage and the Osage Shareholders in
connection with the Merger or the other transactions contemplated hereby, or any
information furnished by Acquiror and Sub taken as a whole contains or will
contain any untrue statement of any material fact or omit or will omit to state
any material fact required to be stated in order to make such statement,
information,
27
document or other instruments, in light of the circumstances in which they are
made, not misleading. There is no fact known to Acquiror and Sub taken as a
whole which may have a Material Adverse Effect on the business, prospects,
financial condition or results of operations of Acquiror and Sub taken as a
whole or of any of its properties or assets which has not been set forth in this
Agreement as an exhibit or schedule hereto.
ARTICLE V
AGREEMENTS OF THE PARTIES
5.1 Financing Transactions; Issuance of Securities of Acquiror prior to the
Closing.
(a) Between the date hereof and the Closing, Acquiror contemplates that
it will issue the following securities all in a manner in compliance with its
Certificate of Incorporation, By-Laws and the DGCL and in compliance with
applicable federal and state securities laws:
(i) Commencing as promptly as practicable after the date of this
Agreement, Acquiror shall commence a private offering to a limited number of
accredited investors in accordance with Rule 506 of Regulation D promulgated
under the Act of $3,660,000 of newly issued shares of Series A $3.00 Convertible
Preferred Stock upon terms and conditions summarized in Exhibit 5.1(a)(i); and
(ii) Additional shares of Acquiror Common Stock will be issued to
creditors and other accredited investors so that upon the Closing Acquiror shall
have outstanding no more than 3,520,000 shares of Common Stock;
5.2 Disclosure Documents.
Osage shall supply to Acquiror the necessary information in writing, or
cause the necessary information to be supplied in writing, relating to Osage for
inclusion in any document(s) to be prepared in connection with any of the
financing transactions identified within Section 5.1 hereof.
28
5.3 Access to Information.
At all times prior to the Closing or the earlier termination of this
Agreement in accordance with the provisions of Section 7, and in each case
subject to Section 5.4 below, each of the parties hereto shall provide to the
other parties (and the other parties' authorized representatives) full access
during normal business hours and upon reasonable prior notice to the premises,
properties, books, records, assets, liabilities, operations, contracts,
personnel, financial information and other data and information of or relating
to such party (including without limitation all written proprietary and trade
secret information and documents, and other written information and documents
relating to intellectual property rights and matters), and will cooperate with
the other party in conducting its due diligence investigation of such party.
5.4 Confidentiality; No Solicitation.
(a) Confidentiality of Acquiror-Related Information. With respect to
information concerning Osage that is made available to Acquiror pursuant to the
terms of this Agreement, Acquiror agrees that, except in connection with the
private placement and other securities purchase agreements associated therewith,
it shall hold such information in strict confidence, shall not use such
information except for the sole purpose of evaluating the Merger and related
transactions and shall not disseminate or disclose any of such information other
than to its directors, officers, employees, shareholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Merger and the related transactions (each of whom shall be
informed in writing by Acquiror of the confidential nature of such information
and directed by Acquiror in writing to treat such information confidentially).
If this Agreement is terminated pursuant to the provisions of Section 7,
Acquiror shall immediately return all such information, all copies thereof and
all information, all copies thereof and all information prepared by Acquiror
based upon the same; provided, however, that one copy of all such material may
be retained by Acquiror's outside legal counsel for purposes only of resolving
any disputes under this Agreement. The above limitations on use, dissemination
and disclosure shall not apply to information that (i) is learned by Acquiror
from a third party entitled to disclose it; (ii) become known publicly other
than through Acquiror or any party who received the same through Acquiror,
provided that Acquiror has no knowledge that the disclosing party was subject to
an obligation of confidentiality; (iii) is required by law or court order to be
disclosed by Acquiror; or (iv) is disclosed with the express prior written
consent thereto of Osage and the Osage Shareholders. Acquiror shall undertake
all necessary steps to ensure that the secrecy and confidentiality of such
information will be maintained in accordance with the provisions of this
paragraph (a). Notwithstanding anything contained herein to the contrary, in the
event a party is required by court order or subpoena to disclose information
which is otherwise deemed to be confidential or subject to the confidentiality
obligations hereunder, prior to such disclosure, the disclosing party shall: (i)
promptly notify the non-disclosing party and, if having received a court order
or subpoena, deliver a copy of the same to the non-disclosing party; (ii)
cooperate with the non-disclosing party, at the expense of the non-disclosing
party in obtaining a protective or similar order with respect to such
information; and (iii) provide only
29
such of the confidential information as the disclosing party is advised by its
counsel is necessary to strictly comply with such court order or subpoena.
(b) Confidentiality of Osage-Related Information. With respect to
information concerning Acquiror that is made available to Osage and the Osage
Shareholders pursuant to the provisions of this Agreement, Osage and the Osage
Shareholders agree that they shall hold such information in strict confidence,
shall not use such information except for the sole purpose of evaluating the
Merger and the related transactions and shall not disseminate or disclose any of
such information other than to their directors, officers, employees,
shareholders, affiliates, agents and representatives who need to know such
information for the sole purpose of evaluating the Merger and the related
transactions (each of whom shall be informed in writing by Osage or the Osage
Shareholders of the confidential nature of such information and directed by such
party in writing to treat such information confidentially). If this Agreement is
terminated pursuant to the provisions of Section 7, Osage and the Osage
Shareholders agree to return immediately all such information, all copies
thereof and all information prepared by either of them based upon the same;
provided, however, that one copy of all such material may be retained by Osage's
outside legal counsel for purposes only of resolving any disputes under this
Agreement. The above limitations on use, dissemination and disclosure shall not
apply to information that (i) is learned by Osage or the Osage Shareholders from
a third party entitled to disclose it; (ii) becomes known publicly other than
through Osage, the Osage Shareholders or any party who received the same through
Osage or the Osage Shareholders, provided that Osage or the Osage Shareholders
have no knowledge that the disclosing party was subject to an obligation of
confidentiality; (iii) is required by law or court order to be disclosed by
Osage; or (iv) is disclosed with the express prior written consent thereto of
Acquiror. Osage or the Osage Shareholders agree to undertake all necessary steps
to ensure that the secrecy and confidentiality of such information will be
maintained in accordance with the provisions of this paragraph (b).
Notwithstanding any thing contained herein to the contrary, in the event a party
is required by court order or subpoena to disclose information which is
otherwise deemed to be confidential or subject to the confidentiality
obligations hereunder, prior to such disclosure, the disclosing party shall: (i)
promptly notify the non-disclosing party and, if having received a court order
or subpoena, deliver a copy of the same to the non-disclosing party; (ii)
cooperate with the non-disclosing party at the expense of the non-disclosing
party in obtaining a protective or similar order with respect to such
information; and (iii) provide only such of the confidential information as the
disclosing party is advised by its counsel is necessary to strictly comply with
such court order or subpoena.
(c) Nondisclosure. Neither Osage, the Osage Shareholders, the Sub or
Acquiror shall disclose to the public or to any third party the existence of
this Agreement or the transactions contemplated hereby or any other material
non-public information concerning or relating to the other party hereto, other
than with the express prior written consent of the other party hereto, except as
may be required by law or court order or to enforce the rights of such
disclosing party under this Agreement, in which event the contents of any
proposed disclosure shall be discussed with the other party before release;
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, any party hereto may disclose this
30
Agreement to any of its directors, officers, employees, shareholders,
affiliates, agents and representative who need to know such information for the
sole purpose of evaluating the Merger, and to any party whose consent is
required in connection with the Merger or this Agreement. The parties anticipate
issuing a mutually acceptable, joint press release announcing the execution of
this Agreement and the consummation of the Merger.
(d) No Solicitation. In consideration of the substantial expenditure of
time, effort and money to be undertaken by Acquiror in connection with the
transactions contemplated by this Agreement, the Osage Shareholders, Osage or
any affiliate thereof will not, prior to the earlier of the Closing, or ninety
(90) days after the termination of this Agreement, directly or indirectly,
through any officer, director, agent or otherwise: (i) solicit, initiate or
encourage the submission of inquiries, proposals or offers from any person or
entity relating to any acquisition or purchase of assets of or any equity
interest in Osage or any affiliate thereof or any tender offer (including a
self-tender offer), exchange offer, merger, consolidation, business combination,
sale of a substantial amount of assets or sale of securities, liquidation,
dissolution or similar transaction involving Osage or its affiliates (a
"Transaction Proposal"); (b) enter into or participate in any discussions or
negotiations regarding a Transaction Proposal, or furnish to any other person or
entity any information with respect to the business, properties or assets of
Osage or its affiliates in connection with a Transaction Proposal; or (c)
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage any effort or attempt by any other person to do or seek a Transaction
Proposal. Osage or the Osage Shareholders shall promptly notify Acquiror if any
such proposal or offer, or any inquiry or contact with any person or entity with
respect thereto is made.
5.5 Interim Operations.
During the period from the date of this Agreement and
continuing until the Closing:
(a) Interim Operations of Osage. Osage agrees (except as expressly
contemplated by this Agreement, including any Exhibits and Schedules hereto, or
to the extent that Acquiror shall otherwise consent in writing) that as to
Osage:
(i) Ordinary Course. Osage shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it;
(ii) Dividends; Changes in Stock. Osage shall not and shall not
propose to (a) declare, set aside or pay any dividend, on, or make other
distributions in respect of, any of its capital stock, (b) split, combine or
reclassify any of its capital stock or issue, authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution
31
for shares of its capital stock (c) redeem, repurchase or otherwise acquire any
shares of its capital stock or (d) otherwise change its capitalization.
(iii) Issuance of Securities. Except as contemplated by this
Agreement, Osage shall not sell, issue, pledge, authorize or propose the sale or
issuance of, pledge or purchase or propose the purchase of, any shares of its
capital stock of any class or securities convertible into, or rights, warrants
or options to acquire, any such shares or other convertible securities.
(iv) Governing Documents. Osage shall not amend its certificate of
incorporation or its Bylaws.
(v) No Dispositions. Osage shall not sell, lease, pledge, encumber
or otherwise dispose of or agree to sell, lease, pledge, encumber or otherwise
dispose of, any of its assets that are material or any other assets except in
the ordinary course of business consistent with prior practice.
(vi) Indebtedness. Osage shall not incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities of Osage or guarantee any debt securities of others other than in the
ordinary course of business consistent with prior practice.
(vii) Benefit Plans; Etc. Osage shall not adopt or amend in any
material respect any collective bargaining agreement or Employee Benefit Plan
(as defined herein).
(viii) Executive Compensation. Osage shall not grant to any
executive officer any increase in compensation or in severance or termination
pay, or enter into any employment agreement with any executive officer.
(ix) Acquisitions. Osage shall not acquire (by merger,
consolidation or acquisition of stock or assets or otherwise) any corporation,
partnership or other business organization or subdivision thereof, or make any
investment by either purchase of stock or securities, contributions to capital ,
property transfer or, except in the ordinary course of business, purchase of any
property or assets, of any other individual or entity.
(x) Tax Elections. Osage shall not make any material tax election
or settle or compromise any material federal, state, local or foreign tax
liability.
(xi) Waivers and Releases. Osage shall not waive, release, grant or
transfer any rights of material value or modify or change in any material
respect any Corporation Agreement other than in the ordinary course of business
and consistent with past practice.
(xii) Other Actions. Osage shall not enter into any agreement or
arrangement to do any of the foregoing. Osage shall not take any action, or fail
to take any action, that is reasonably likely to result in any of the
representations and warranties of Osage set forth in this Agreement becoming
untrue in any material respect.
(xiii) Permitted Distributions. Notwithstanding anything to the
contrary in this Agreement, on or before the Closing, Osage may make
distribution to the Osage
32
Shareholders out of the normal course of business to pay accrued but unpaid
bonuses to Osage employees (principally Xxxx Xxxxxxxxxx and Xxxxx Xxxxx) not to
exceed $400,000.
(b) Interim Operations of Acquiror and Sub. Acquiror and Sub jointly
and severally agree (except as expressly contemplated by this Agreement,
including any Exhibits and Schedules hereto, or to the extent that Osage and the
Osage Shareholders shall otherwise consent in writing or to the extent required
to permit Acquiror to meet its obligations under Section 5) that:
(i) Ordinary Course. Acquiror shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve intact its present business organization
(provided that such obligation shall not relate to the officers and employees of
Acquiror or any of its subsidiaries including the Sub) and preserve its
relationships with customers, suppliers and others having business dealings with
it. The Sub shall conduct no business activity other than in connection with the
transactions contemplated by this Agreement in connection with the Merger.
(ii) Dividends; Changes in Stock. Neither Acquiror nor the Sub
shall (and shall not propose to) (a) declare or pay any dividend, on, or make
other distributions in respect of, any of its capital stock, (b) split, combine
or reclassify any of its capital stock or issue, authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, (c) repurchase or otherwise acquire any shares
of its capital stock or (d) otherwise change its capitalization.
(iii) Issuance of Securities. Except as provided for in Section 5,
neither Acquiror nor the Sub shall sell, issue, pledge, authorize or propose the
sale or issuance of, pledge or purchase or propose the purchase of, any shares
of its capital stock of any class or securities convertible into, or rights,
warrants or options to acquire, any such shares or other convertible securities.
(iv) No Dispositions. Acquiror shall not sell, lease, pledge,
encumber or otherwise dispose of, or agree to sell, lease, pledge, encumber or
otherwise dispose of, any of its assets that are material, or any other assets
except in the ordinary course of business consistent with prior practice.
(v) Indebtedness. Neither Acquiror nor the Sub shall incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or guarantee any debt securities of others other than
in the ordinary course of business consistent with prior practice.
(vi) Benefit Plans, Etc. Neither Acquiror nor the Sub shall adopt
or amend in any material respect any collective bargaining agreement or Employee
Benefit Plan (as defined herein).
33
(vii) Executive Compensation. Neither Acquiror nor the Sub shall
grant to any executive officer any increase in compensation, or enter into any
employment agreement with any executive officer, other than any of the same the
material terms of which have been disclosed to Osage on or before the date
hereof.
(viii) Other Actions. Neither Acquiror nor the Sub shall enter into
any agreement or arrangement to do any of the foregoing. Neither Acquiror nor
the Sub shall take any action, or fail to take any action, that is reasonably
likely to result in any of their representations and warranties set forth in
this Agreement becoming untrue in any material respect.
5.6 Consents.
Acquiror, Sub, Osage and the Osage Shareholders shall cooperate and use
their best efforts to obtain, prior to the Closing, all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts as are necessary for the consummation of
the transactions contemplated by this Agreement; provided, however, that no loan
agreement or contract for borrowed monies shall be repaid and no contract shall
be amended materially to increase the amount payable thereunder or otherwise to
be materially more burdensome in order to obtain any such consent, approval or
authorization without first obtaining the written approval of the other parties
hereto.
5.7 Filings.
Acquiror, the Sub, Osage and the Osage Shareholders shall, as promptly
as practicable, make any required filing, and any other required submissions,
under any law, statute, order rule or regulation with respect to the Merger and
the related transactions and shall cooperate with each other with respect to the
foregoing and any shareholder of the Acquiror who has an obligation to file a
Schedule 13D does so prior to the Closing.
5.8 All Reasonable Efforts.
Subject to the terms and conditions of this Agreement and to the
fiduciary duties and obligations of the boards of directors of the parties
hereto to their respective shareholders, as advised by their counsel, each of
the parties to this Agreement shall use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, or to remove any
injunctions or other impediments or delays, legal or otherwise, as soon as
reasonable practicable, to consummate the Merger and the other transactions
contemplated by this Agreement.
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5.9 Public Announcements.
Acquiror, the Sub, Osage and the Osage Shareholders shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Merger, this agreement or the other transactions
contemplated by this Agreement and shall not issue any other press release or
make any other public statement without prior consultation with the other
parties, except as may be required by law or, with respect to Acquiror, by
obligations pursuant to any listing agreement with an national securities
exchange.
5.10 Notification of Certain Matters.
Osage and the Osage Shareholders shall give prompt notice to Acquiror,
and Acquiror and the Sub shall give prompt notice to Osage and the Osage
Shareholders, of (a) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which would cause any of its representations or
warranties in this Agreement to be untrue or inaccurate in any material respect,
as to Osage and the Osage Shareholders, at or prior to the Closing, and, as to
Acquiror and Sub, as of the Closing and (b) any material failure of Osage and
the Osage Shareholders, on the one hand, or Acquiror or the Sub, on the other
hand, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by them under this Agreement;
provided, however, the delivery of any notice pursuant to this Section shall not
limit or otherwise affect the remedies available to the party receiving such
notice under this Agreement as expressly provided in this Agreement.
5.11 Expenses.
Except as otherwise expressly provided herein, all costs and expenses
incurred in connection with the Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses whether or not the
Merger is consummated.
5.12 Registration Rights.
(a) Promptly after the Closing of the Merger, the Acquiror shall use
its best efforts to prepare and file with the Securities and Exchange Commission
(the "SEC"), and use its best efforts to have declared effective, a registration
statement (the "Registration Statement") registering under the Act and the
securities statutes and regulations of certain states as provided herein, for
resale at market, the Acquiror Common Stock, the Additional Acquiror Common
Stock (to the extent then registrable) and the Shares of Common Stock issuable
upon conversion of the Acquiror Preferred Stock (collectively, the "Registrable
Securities") and thereafter, subject to the terms and conditions of this
Agreement, Acquiror shall use its best efforts to keep such Registration
Statement effective for a period of three (3) years. Restrictions on resale of
the Registrable Securities are identified at Section 5.12(j). From time to time,
the Acquiror shall amend or supplement such Registration Statement and the
prospectus contained therein as and to the extent necessary to comply with the
Act and any applicable state securities statute or regulation. In particular, to
the extent that it is determined that the Additional Acquiror Common Stock may
not be included within the Registration Statement. Acquiror agrees to amend
and/or
35
update the Registration Statement at the end of the eighteenth month following
the Effective Date to include therein the resale of any such shares of
Additional Acquiror Common Stock. The parties acknowledge and understand that
the Acquiror also intends to include in such Registration Statement the resale
of the shares issuable upon conversion of the Acquiror's Series A $3.00
Convertible Preferred Stock in a mutually acceptable manner and 1,200,000 shares
of Common Stock of Acquiror outstanding as of the Merger. Additional shares may
be included within the Registration Statement upon the consent of Acquiror's
Board of Directors, including the affirmative approval of the Pacific Rim
Designee.
(b) Acquiror shall pay all expenses of the Acquiror relating to such
registration, other than brokerage or underwriting discounts or commissions, if
any.
(c) It shall be a condition precedent to the obligations of Acquiror
to take any action pursuant to this Section 5.12 that each of the holders of
Registrable Securities whose shares are so to be registered shall furnish to
Acquiror in a timely fashion such information regarding such holder, such
holder's Registrable Securities and such other factual information as shall be
reasonably required to effect the registration of such shares.
(d) To the maximum extent permitted by law, Acquiror shall indemnify
and hold harmless each such holder of Registrable Securities from and against
any and all claims, damages or liabilities, joint or several, to which such
holder becomes subject under the Act or under any other statute or at common law
or otherwise, and, except as hereinafter provided, will reimburse each such
holder for any legal or other expenses reasonably incurred by such holder in
connection with investigating or defending any actions, whether or not resulting
in any liability, insofar as such losses, claims, damages, expenses, liabilities
or actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement, in any
preliminary or amended preliminary prospectus or in the prospectus (or the
registration statement or prospectus as from time to time amended or supplement
by Acquiror) or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statement therein not misleading in the circumstances in which
they were made, unless such untrue preliminary or amended preliminary prospectus
or prospectus in reliance upon and in conformity with information furnished in
writing to Acquiror in connection therewith by such holder expressly for use
therein. Promptly after receipt by any such holder of notice of the commencement
of any action in respect of which indemnity may be sought against Acquiror, such
holder shall notify Acquiror in writing of the commencement thereof, and,
subject to the provisions of this Section 5.12, Acquiror shall assume the
defense of such action (including the employment of counsel, who shall be
counsel reasonably satisfactory to such holder), and the payment of expenses
insofar as such action shall relate to any alleged liability in respect of which
indemnity may be sought against Acquiror. Acquiror shall not be liable to
indemnify any such holder for any settlement of any such action effected with
Acquiror's prior written consent. Acquiror shall not, except with the approval
of each party being indemnified under this Section 5.12, consent to entry of any
judgment or enter into any settlement of any claim or litigation in connection
with which provisions of this Section 5.12 have been applied which does not
include an unconditional
36
term thereof the giving by such claimant or plaintiff to the parties being so
indemnified of a release from all liability in respect to such claim or
litigation.
(e) Each holder whose shares of Registrable Securities are registered
pursuant to the provisions of this Section 5.12 shall indemnify and hold
harmless Acquiror, each of its directors and each of its officers from and
against any and all claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the Act or under any other statute
or at common law or otherwise, and, except as hereinafter provided, will
reimburse Acquiror and each director and officer for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions, whether or not resulting in any liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration statement, in any preliminary or amended
preliminary prospectus or in the prospectus (or the registration statement or
prospectus as from time to time amended or supplemented) or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading in the circumstances in which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to Acquiror in connection
therewith by such holder expressly for use therein. Promptly after receipt of
notice of the commencement of any action in respect of which indemnity may be
sought against such holder, Acquiror shall notify such holder in writing of the
commencement thereof, and such holder shall, subject to the provisions of this
Section 5.12, assume the defense of such action (including the employment of
counsel, who shall be counsel reasonably satisfactory to Acquiror) and the
payment of expenses insofar as such action shall relate to any alleged liability
in respect of which indemnity may be sought against such holder. Such holder
shall not be liable to indemnify Acquiror, any director, officer or other person
for any settlement of any such action effected without such holder's consent.
Such holder shall not, except with the approval of the parties being indemnified
under this Section 5.12, consent to entry of any judgment or enter into any
settlement of any claim or litigation in connection with which provision of this
Section 5.12 have been applied which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the parties being so
indemnified of a release from all liability in respect to such claim or
litigation. The liability of any such holder under this Section 5.12 shall be
limited to the aggregate price at which such holder's shares of Acquiror Common
Stock is sold.
(f) In connection with its obligations to register the Registrable
Securities as provided in this Section 5.12, Acquiror shall have no obligation:
(i) to assist or cooperate in the offering or disposition of such shares; (ii)
except as expressly provided in this Section 5.12, to indemnify or hold harmless
the holders of such securities being registered or any underwriter designated by
such holders; (iii) to obtain a commitment from an underwriter relative to the
sale of such shares; or (iv) to include such Registrable Securities within an
underwritten offering of Acquiror conducted on a firm basis.
37
(g) If in the opinion of a lead or managing underwriter retained by
Acquiror to conduct an underwriting on a firm basis, the resale of such
Registrable Securities covered by the registration statement would have an
adverse effect upon the completion of an underwritten sale of securities, on
behalf of Acquiror, then, in that event, the holders of the Registrable
Securities to be included in such registration statement do hereby agree to the
restrictions upon resale requested by a managing underwriter.
(h) In connection with its obligations to register the Registrable
Securities as provided in this Section 5.12, Acquiror shall also:
(i) furnish to each holder of shares of Registrable Securities
that are registered or to be registered pursuant to the provisions of this
Section 5.12, such copies of each preliminary and final prospectus and any and
all supplements and such other documents as such holder may reasonably request
to facilitate the public offering of the shares of Registrable Securities.
(ii) use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under the applicable
securities or "Blue Sky" laws of such jurisdiction in the United States as such
holder may reasonably request (not to exceed an aggregate of 10 such
jurisdictions); provided, however, that Acquiror shall not be obligated to
qualify to do business in any jurisdiction where it is not then so qualified or
to take any action that would subject it to the service of process in suits
other than those arising out of the offer or sale of the securities covered by
the registration statement in any jurisdiction where it is not then so subject;
and
(iii) furnish to each such holder upon request a copy of all
documents filed and all correspondence from and to the SEC in connection with
any such offering.
(i) The registration and other rights granted to the holders of
Registrable Securities in this Section 5.12 may not be assigned or transferred
by such holder without the prior written consent of Acquiror thereto.
(j) (i) Once the potential resale of the Registrable Securities are
registered, and for a period of eighteen (18) months thereafter, resale of the
Registrable Securities shall be limited to that number of shares of Common Stock
on a quarterly basis, that would, upon sale in an ordinary brokerage
transaction, yield to the sellers thereof net proceeds of $300,000. The resale
of the shares of Additional Acquiror Common Stock, once included within the
Regsitration Statement, shall be subject to no further restrictions upon resale.
(ii) Except as set forth in this Section 5.12, the holders of the
Registrable Securities may not transfer, sell, encumber or otherwise dispose of
the Registrable Securities for at least a period of eighteen (18) months
following the Closing without the consent of the Pacific Rim Designee with the
exception, however, that the holders of the Registrable Securities may
38
(a) pledge the shares as collateral for a loan secured from a financial
institution provided that such lender agrees to be bound by the terms of any
such restrictions on resale and (b) transfer the shares to family members by
gift where the transferee agrees to be bound by the terms of any such
restrictions on resale.
5.13 Documents at Closing.
Each party to this Agreement agrees to execute and deliver at the
Closing those documents identified in Section 2.2.
5.14 Prohibition on Trading in Acquiror Stock.
Osage and the Osage Shareholders acknowledge that the United States
Securities Laws prohibit any person who has received material non-public
information concerning the matters which are the subject matter of this
Agreement from purchasing or selling the securities of the Acquiror, or from
communicating such information to any person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell securities
of the Acquiror. Accordingly, the Osage Shareholders agree that they will not
purchase or sell any securities of the Acquiror, or communicate such information
to any other person under circumstances in which it is reasonably foreseeable
that such person is likely to purchase or sell securities of the Acquiror, until
no earlier than 72 hours following the dissemination of a Current Report on Form
8-K to the SEC announcing the Closing pursuant to this Agreement.
5.15 Matters of Corporate Governance.
For that period during which the Osage Shareholders retain the voting
rights identified in Section 3 of the Certificate of Designation, Preference and
Rights of Series B $3.00 Convertible Preferred Stock, the Osage Shareholders
shall nominate to the Acquiror's Board of Directors the Pacific Rim Designee,
and any Board action undertaken during such period with respect to the
transactions identified below shall require the affirmative vote of a majority
of the Board of Directors which shall include the Pacific Rim Designee. These
transactions shall include:
(a) transactions between Acquiror and any interested party (including
all directors, officers, employees or stockholders beneficially owning more than
five percent (5%) of Acquiror's outstanding capital stock); or
(b) any modification to the terms of this Agreement or any other
closing agreements, schedules or exhibits.
39
5.16 Acknowledgment of Approvals.
By virtue of their respective signatures to this Agreement, Acquiror,
Sub, Osage and the Osage Shareholders acknowledge their approval of this
Agreement and their consent to the consummation of the transactions identified
herein.
5.17 Production of Schedules and Exhibits.
Within fifteen (15) days of the execution of this Agreement each of
the parties hereto shall produce, to the extent not previously done, to the
other, all of the Schedules and Exhibits required to be produced pusuant to this
Agreement. The Schedules and Exhibits produced subsequent to the execution of
this Agreement, shall be given such force and effect as though such Schedules
and Exhibits were produced upon execution of this Agreement.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 Conditions to Obligations of Osage and the Osage Shareholders.
The obligations of Osage and the Osage Shareholders to consummate the
Merger and the other transactions contemplated to be consummated by it at the
Closing are subject to the satisfaction (or waiver by Osage and the Osage
Shareholders) at or prior to the Closing (or at such other time prior thereto as
may be expressly provided in this Agreement) of each of the following
conditions:
(a) The representations and warranties of Acquiror and the Sub set out
in this Agreement shall be true and correct in all material respects at and as
of the time of the Closing as though such representations and warranties were
made at and as of such time.
(b) Each of Acquiror and the Sub shall have complied in a timely manner
and in all material respects with the respective covenants and agreements set
out in this Agreement.
(c) The Merger shall have been approved by Acquiror and Sub in
accordance with the provisions of the DGCL. The Board of Directors of Acquiror
and the Board of Directors of Sub and Acquiror, as sole shareholder of Sub,
shall have approved the execution of this Agreement and the Merger thereby.
(d) On or before the Closing, the officers and directors of Acquiror
shall tender their immediate resignations from office and shall in conjunction
therewith increase the size of the Board of Directors to five (5) members and
shall nominate to Acquiror's Board of
40
Directors three (3) individuals designated by the holders of the Acquiror
Preferred Stock, one (1) individual designated by the Acquiror's Board of
Directors (as such Board was constituted immediately prior to the Closing (the
"Pacific Rim Designee")) and one (1) individual designated by mutual agreement
of the holders of the Acquiror Preferred Stock and the Pacific Rim Designee. All
of such members shall be elected and shall hold such positions in accordance
with the DGCL. The officers of Acquiror shall be appointed by its newly elected
Board of Directors.
(e) Osage and the Osage Shareholders shall be reasonably satisfied that
the Merger results in a tax-free reorganization under Section 368 of the Code.
(f) Acquiror shall enter into an Employment Agreement with Messrs. Xxxx
Xxxxxxxxxx and Xxxxx Xxxxx, substantially in accordance with the terms contained
within Exhibit 6.1(f).
(g) 1,500,000 shares of Acquiror's Common Stock shall be placed in a
voting trust pursuant to the terms of the Voting Trust Agreement attached hereto
as Exhibit 1.3(b)(vi).
(h) There shall be delivered to Osage and the Osage Shareholders an
officer's certificate of Acquiror and Sub to the effect that all of the
representations and warranties of Acquiror and Sub set forth herein are true and
complete in all material respects as of the Closing, and the Acquiror and Sub
have complied in all material respects with their covenants and agreements set
forth herein that are required to be complied with by the Closing.
(i) Osage shall have completed prior to the Closing, to its
satisfaction, a due diligence review of the financial condition, results of
operations, properties, assets, liabilities, business and prospects of Acquiror.
(j) Acquiror shall have discharged and settled all of its outstanding
indebtedness incurred by prior management with the exception of: (i) a bridge
loan in the principal amount of $450,000; and (ii) expenses incurred in
connection with this transaction not to exceed $100,000; and after completion of
the financing transactions identified in Section 5.1 shall, as of the Closing,
have a net worth of no less than $2,550,000.
(k) All director, shareholder, lender, lessor and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the Merger shall have been secured.
(l) No statute, rule, regulation, executive order, decree, injunction
or restraining order shall have been enacted, entered, promulgated or enforced
by any court of competent jurisdiction or governmental authority that prohibits
or restricts the consummation of the Merger or the related transactions.
41
6.2 Conditions to Acquiror's and the Sub's Obligations.
The obligations of Acquiror and the Sub to consummate the Merger and
the other transactions contemplated to be consummated by it at the Closing are
subject to the satisfaction (or waiver by Acquiror) at or prior to the Closing
(or at such other time prior thereto as may be expressly provided in this
Agreement) of each of the following conditions:
(a) The Osage Shareholders shall not have filed with Osage, prior to
the Osage shareholder meeting at which a vote is to be taken with respect to a
proposal to approve this Agreement, a written objection to such proposed action,
as required by Section 10-321 of the ABCA in order for such shareholder to
perfect the right to dissent from such proposed action.
(b) The representations and warranties of Osage and the Osage
Shareholders set out in this Agreement shall be true and correct in all material
respects at and as of the time of the Closing as though such representations and
warranties were made at and as of such time.
(c) Osage and the Osage Shareholders shall have complied in a timely
manner and in all material respects with its covenants and agreements set out in
this Agreement.
(d) Acquiror shall have successfully completed the financing
transactions identified in Section 5.1.
(e) There shall be delivered to Acquiror and Sub an officer's
certificate of Osage to the effect that all of the representations and
warranties of Osage set forth herein are true and complete in all respects as of
the Closing, and that Osage has complied in all material respects with covenants
and agreements set forth herein required to be complied with by the Closing; and
there shall be delivered to Acquiror and Sub a certificate signed by the Osage
Shareholders to the effect that the representations and warranties of the Osage
Shareholders set forth herein are true and correct in all material respects and
that the Osage Shareholders have complied in all material respects with its
covenants and agreements set forth herein required to be complied with by
Closing.
(f) Acquiror and Sub shall have completed prior to the Closing, to
their satisfaction, a due diligence review of the financial condition, results
of operations, properties, assets, liabilities, businesses and prospects of
Osage.
(g) All director, shareholder, lender, lessor and other parties'
consents and approvals, as well as all filings with, and all necessary consents
or approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement,
42
applicable law or any applicable contract or agreement (other than as
contemplated by this Agreement) to complete the Merger shall have been secured.
(h) No statute, rule, regulation, executive order, decree, injunction
or restraining order shall have been enacted, entered, promulgated or enforced
by any court of competent jurisdiction or governmental authority that prohibits
or restricts the consummation of the Merger or the related transactions.
(i) Acquiror's and Sub's Board of Directors, and shareholders to the
extent necessary, shall have approved the Merger in accordance with the DGCL.
(j) The Board of Directors and Osage Shareholders shall have approved
the Merger in accordance with the ABCA.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
(a) Osage Shareholders. The Osage Shareholders shall indemnify, defend
and hold harmless Acquiror and Sub from and against any and all demands, claims,
actions or causes of action, judgments, assessments, losses, liabilities,
damages or penalties and reasonable attorneys' fees and related disbursements
(collectively, "Claims") incurred by Acquiror or Sub which arise out of or
result from a misrepresentation, breach of warranty, or breach of any covenant
of Osage or the Osage Shareholder contained herein or in the Schedules annexed
hereto or in any deed, exhibit, closing certificate, schedule or any ancillary
certificates or other documents or instruments furnished by Osage or the Osage
Shareholder pursuant hereto or in connection with the transactions contemplated
hereby or thereby.
(b) Acquiror and Sub. Acquiror and Sub shall indemnify, defend and hold
harmless Osage and the Osage Shareholders from and against any and all Claims,
as defined at subsection 7.1(a) above, incurred by Osage and/or the Osage
Shareholders which arise out of or result from a misrepresentation, breach of
warranty or breach of any covenant of Acquiror and Sub contained herein or in
the Schedules annexed hereto or in any deed, exhibit, closing certificate,
schedule or any ancillary certificates or other documents or instruments
furnished by Acquiror or the Sub pursuant hereto or in connection with the
transactions contemplated hereby or thereby.
(c) Methods of Asserting Claims for Indemnification. All claims for
indemnification under this Agreement shall be asserted as follows:
43
(i) Third Party Claims. In the event that any Claim for which a
party (the "Indemnitee") would be entitled to indemnification under this
Agreement is asserted against or sought to be collected from the Indemnitee by a
third party the Indemnitee shall promptly notify the other party (the
"Indemnitor") of such Claim, specifying the nature thereof, the applicable
provision in this Agreement or other instrument under which the Claim arises,
and the amount or the estimated amount thereof (the "Claim Notice"). The
Indemnitor shall have thirty (30) days (or, if shorter, a period to a date not
less than ten (10) days prior to when a responsive pleading or other document is
required to be filed but in no event less than ten (10) days from delivery or
mailing of the Claim Notice) (the "Notice Period") to notify the Indemnitee (a)
whether or not it disputes the Claim and (b) if liability hereunder is not
disputed, whether or not it desires to defend the Indemnitee. If the Indemnitor
elects to defend by appropriate proceedings, such proceedings shall be promptly
settled or prosecuted to a final conclusion in such a manner as to avoid any
risk of damage to the Indemnitee; and all costs and expenses of such proceedings
and the amount of any judgment shall be paid by the Indemnitor.
If the Indemnitee desires to participate in, but not control, any such
defense or settlement, it may do so at its sole cost and expense. If the
Indemnitor has disputed the Claim, as provided above, and shall not defend such
Claim, the Indemnitee shall have the right to control the defense or settlement
of such Claim, in its sole discretion, and shall be reimbursed by the Indemnitor
for its reasonable costs and expenses of such defense.
(ii) Non-Third Party Claims. In the event that the Indemnitee
should have a Claim for indemnification hereunder which does not involve a Claim
being asserted against it or sought to be collected by a third party, the
Indemnitee shall promptly send a Claim Notice with respect to such Claim to the
Indemnitor. If the Indemnitor does not notify the Indemnitee within the Notice
Period that it disputes such Claim, the Indemnitor shall pay the amount thereof
to the Indemnitee. If the Indemnitor disputes the amount of such Claim, the
controversy in question shall be submitted to arbitration pursuant to Section
9.8 hereafter.
ARTICLE VIII
TERMINATION
8.1 Termination.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Closing:
(a) by mutual written consent of the board of directors of Acquiror,
the Sub, Osage and the Osage Shareholders:
(b) by any of Acquiror, the Sub, Osage or the Osage Shareholders:
44
(i) if the Closing shall not have occurred on or before January 1,
1998; provided, however, that the right to terminate this Agreement under this
Section 8.1(b)(i) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before that date; or
(ii) if any court of competent jurisdiction, or any governmental
body, regulatory or administrative agency or commission having appropriate
jurisdiction shall have issued an order, decree or filing or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable.
(c) by Osage and the Osage Shareholders if any of the conditions
specified in Section 6.1 have not been met and the sole remedy of Osage and the
Osage Shareholders in that event, shall be either to waive such failure and
proceed to close hereunder, or to terminate this Agreement in which event
neither Osage and the Osage Shareholders nor Acquiror shall have any claim or
action against the other; or
(d) by Acquiror and Sub if any of the conditions specified in Section
6.2 have not been met and the sole remedy of Acquiror and Sub in that event,
shall be either to waive such failure and proceed to close hereunder, or to
terminate this Agreement in which event neither Acquiror and the Sub nor Osage
and the Osage Shareholders shall have any claim or action against the other.
8.2 Notice and Effect of Termination.
In the event of the termination and abandonment of this Agreement
pursuant to Section 8.1, written notice thereof shall forthwith be given to the
other party or parties specifying the provision pursuant to which such
termination is made, and this Agreement shall forthwith become void and have no
effect without any liability on the part of any party or its directors, officers
or shareholders, except for the provisions of this Section 8.2 and Sections 5.4,
5.9 and 5.11, which shall survive any termination of this Agreement. Nothing
contained in this Section 8.2 shall relieve any party from any liability for any
breach of this Agreement provided that the sole remedy available to Osage and
the Osage Shareholders for any breach of this Agreement by Acquiror or Sub shall
be as set forth in Section 6.1 hereof.
8.3 Extension; Waiver.
Any time prior to the Closing, the parties may (a) extend the time for
the performance of any of the obligations or other acts of any other party under
or relating to this Agreement; (b) waive any inaccuracies in the representations
or warranties by any other party or (c) waive compliance with any of the
agreements of any other party or with any conditions to its
45
own obligations. Any agreement on the part of any other party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
8.4 Amendment and Modification.
This Agreement may be amended, whether before or after the vote of the
Osage Shareholders or shareholders of Acquiror, by written agreement of
Acquiror, the Sub, Osage and the Osage Shareholders; provided, however, that
after the approval, if any, of this Agreement by the Osage Shareholders, no such
amendment shall reduce or change the consideration to be received by any Osage
Shareholder in connection with the Merger as set out in Section 1.3 hereof or
shall otherwise adversely affect the rights under this Agreement of the Osage
Shareholders without the approval of such adversely affected shareholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of Acquiror, the Sub, Osage and the Osage Shareholders.
ARTICLE IX
MISCELLANEOUS
9.1 Survival of Representations and Warranties.
The respective representations and warranties of Acquiror, the Sub,
Osage and the Osage Shareholders shall not be deemed waived or otherwise
affected by any investigation made by any party. Each representation and
warranty shall survive the Closing through all applicable statutes of
limitations.
9.2 Notices.
All notices requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given on the date if delivered personally, or
upon the second business day after it shall have been deposited by certified or
registered mail with postage prepaid, or sent by telex, telegram or telecopier,
as follows (or at such other address or facsimile number for a party as shall be
specified by like notice):
(a) if to Osage, to it at: with a copy to:
Osage Computer Group Xxxx X. Xxxxx, Esquire
0000 X. Xxxxxxxxx Xxxx Xxxxx X. Xxxxx & Associates, P.C.
Suite 245 4204 North Xxxxx Avenue
Phoenix, AZ 85016 Xxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxxxx Fax: (000) 000-0000
Fax: (000) 000-0000
and
Xxxxxx X. Xxxxxxx, P.C.
0000 Xxxxx 00xx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
(b) if to Acquiror or the Sub to it at: with a copy to:
Pacific Rim Entertainment, Inc. Xxxxxxx X. Xxxxx, Esquire
000 Xxxx Xxxxxx, Xxxxx 000 Xxxxxxxx Ingersoll, P.C.
Xxxx Xxxxxx, XX 00000 Eleven Penn Center, 14th Floor
Attn: Xxxxxx Xxxxxx Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
9.3 Entire Agreement; Assignment.
This Agreement, including all Exhibits and Schedules hereto,
constitutes the entire Agreement among the parties with respect to its subject
matter and supersedes all prior agreements and understandings, both written and
oral, among the parties or any of them with respect to such subject matter and
shall not be assigned by operation of law or otherwise.
9.4 Binding Effect; Benefit.
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and assigns. Nothing in this Agreement
is intended to confer on any person other than the parties to this Agreement or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.5 Headings.
The descriptive headings of the sections of this Agreement are
inserted for convenience only, do not constitute a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
47
9.6 Counterparts.
This Agreement may be executed in two or more counterparts and
delivered via facsimile, each of which shall be deemed to be an original, and
all of which together shall be deemed to be one and the same instrument.
9.7 Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the laws that might
otherwise govern under principles of conflicts of laws applicable thereto.
9.8 Arbitration.
If a dispute arises as to the interpretation of this Agreement, it
shall be decided finally in an arbitration proceeding conforming to the Rules of
the American Arbitration Association applicable to commercial arbitration then
in effect at the time of the dispute. The arbitration shall take place in
Phoenix, Arizona. The decision of the Arbitrators shall be conclusively binding
upon the parties and final, and such decision shall be enforceable as a judgment
in any court of competent jurisdiction. The parties shall share equally the
costs of the arbitration.
9.9 Severability.
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
void, unenforceable or against its regulatory policy, the remainder of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
9.10 Release and Discharge.
By virtue of their execution of this Agreement, as of the Closing and
thereafter, the Osage Shareholders hereby agree to release, remise and forever
discharge Osage from and against any and all debts, obligations, liabilities and
amounts owing from Osage to the Osage Shareholders prior to the Closing, and
Osage is not obligated to take any action or make any payments to third parties
on behalf of the Osage Shareholders.
9.11 Certain Definitions.
As used herein:
(a) "Affiliate" shall have the meanings ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended to date (the "Exchange Act");
(b) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which federally chartered financial institutions are not open for
business in the City of Phoenix, Arizona.
(c) "Knowledge" shall mean the actual current knowledge of the
executive management of the party to this Agreement to whom knowledge is
ascribed together with the knowledge such executive management should reasonably
be expected to have in the performance of its duties and responsibilities.
(d) "Material Adverse Effect" shall mean any adverse effect on the
business, condition (financial or otherwise) or results of operation of the
relevant party and its subsidiaries, if any, which is material to such party and
its subsidiaries, if any, taken as a whole;
(e) "Person" means any individual, corporation, partnership,
association, trust or other entity or organization, including a governmental or
political subdivision or any agency or institution thereof; and
(f) "Subsidiary" shall mean, when used with reference to an entity,
any corporation, a majority of the outstanding voting securities of which is
owned directly or indirectly, or a majority of the board of directors of which
may be elected, by such entity.
49
IN WITNESS WHEREOF, Acquiror, the Sub, Osage and the Osage Shareholders
have caused this Agreement to be signed by their respective officers hereunto
duly authorized, all as of the date first written above.
Attest: PACIFIC RIM ENTERTAINMENT, INC.
By: By: /s/ Xxxxxx X. Xxxxxx
------------------------------ -----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
Attest: PR ACQUISITION CORP.
By: By: /s/ Xxxxxx X. Xxxxxx
------------------------------ -----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
Attest: OSAGE COMPUTER GROUP, INC.
By: By: /s/ Xxxx X. Xxxxxxxxxx
------------------------------ -----------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: President
OSAGE SHAREHOLDERS:
Witness
/s/ Xxxx X. Xxxxxxxxxx
---------------------------------- ------------------------------------
Name: Signature
----------------------------- Name: Xxxx X. Xxxxxxxxxx
Address: Address:
-------------------------- ----------------------------
---------------------------------- ------------------------------------
Percentage of Ownership:
------------
Witness
/s/ Xxxxx Xxxxx
---------------------------------- ------------------------------------
Name: Signature
----------------------------- Name: Xxxxx Xxxxx
Address: Address:
-------------------------- ----------------------------
---------------------------------- ------------------------------------
Percentage of Ownership:
------------
50
Witness
/s/ Xxxxxx Xxxxx
---------------------------------- ------------------------------------
Name: Signature
----------------------------- Name: Xxxxxx Xxxxx
Address: Address:
-------------------------- ----------------------------
---------------------------------- ------------------------------------
Percentage of Ownership:
------------
Witness
/s/ Xxxxx Xxxxxxx
---------------------------------- ------------------------------------
Name: Signature
----------------------------- Name: Xxxxx Xxxxxxx
Address: Address:
-------------------------- ----------------------------
---------------------------------- ------------------------------------
Percentage of Ownership:
------------
Witness
/s/ Xxxx Van de Vrede Family Trust
---------------------------------- ------------------------------------
Name: Signature
----------------------------- Name: Xxxx Van de Vrede Family Trust
Address: Address:
-------------------------- ----------------------------
---------------------------------- ------------------------------------
Percentage of Ownership:
------------
Witness
/s/ Xxxx Xxxxxxx
---------------------------------- ------------------------------------
Name: Signature
----------------------------- Name: Xxxx Xxxxxxx
Address: Address:
-------------------------- ----------------------------
---------------------------------- ------------------------------------
Percentage of Ownership:
------------
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