Exhibit 10.72
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into effective as of May 2, 2001, by and among HEADWATERS INCORPORATED,
a Delaware corporation ("Headwaters"), HEADWATERS SUB CORPORATION, a New Jersey
corporation and a wholly owned subsidiary of Headwaters ("Merger Sub"),
HYDROCARBON TECHNOLOGIES, INC., a New Jersey corporation ("HTI"), and Xxxxxx X.
Xxxxxxx, Lap-Xxxxx (Xxxx) Xxx, Ph.D., Xxxxx X. Xxxxxx, and Xxxxxxx Xxxxxx (the
"HTI Founders").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the applicable provisions of the laws of the State of New
Jersey ("New Jersey Law"), Headwaters and HTI will enter into a business
combination transaction pursuant to which Merger Sub will acquire in excess of
ninety percent (90%) of the outstanding capital stock of HTI and immediately
thereafter Merger Sub will merge with and into HTI (the "Merger").
B. As a condition and inducement to Headwaters' willingness to enter
into this Agreement, certain shareholders of HTI have agreed, and certain other
shareholders of HTI are expected to agree, to transfer in aggregate in excess of
ninety percent (90%) of the outstanding shares of HTI Common Stock to Merger Sub
in exchange for shares of Headwaters Common Stock and cash, on the terms and
subject to the conditions set forth in the Share Exchange Agreement (the
"Exchange Agreement"), in substantially the form attached hereto as Exhibit A
(the "Exchange"). (The Merger, the Exchange, and the other transactions
contemplated herein and in the Exchange Agreement, taken together, are referred
to herein as the "Transaction.") Merger Sub, as owner of such shares of HTI
Common Stock following the Exchange, shall vote for or consent to the Merger.
C. The Boards of Directors of Headwaters and Merger Sub (i) have
determined that the Exchange and the Merger are in the best interests of
Headwaters, its stockholders, and Merger Sub and (ii) have approved this
Agreement, the Exchange Agreement, and the Transaction;
D. The Board of Directors of HTI (i) has determined that the Exchange
and the Merger are in the best interests of HTI and its stockholders, (ii) has
approved this Agreement, the Exchange Agreement, and the Transaction, and (iii)
has determined to recommend that certain stockholders of HTI (the "HTI
Stockholders") enter into the Exchange Agreement.
E. Headwaters, Merger Sub, HTI, and the HTI Founders desire to make
certain representations and warranties and other agreements in connection with
the Merger and the Transaction.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto do hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section l.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of New Jersey Law, Merger Sub shall be merged with and
into HTI, the separate corporate existence of Merger Sub shall cease, and HTI
shall continue as the surviving corporation. (HTI as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation.")
1.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger, substantially in the form of Exhibit B hereto (the
"Certificate of Merger"), with the Secretary of State of the State of New
Jersey, in accordance with the relevant provisions of New Jersey Law (the time
of such filing (or such later time as may be agreed in writing by the parties
and specified in the Certificate of Merger) being the "Effective Time") as soon
as practicable on or after the Closing Date (as herein defined). Unless the
context otherwise requires, the term "Agreement" as used herein refers
collectively to this Agreement and the Certificate of Merger. The closing of the
Merger (the "Closing"), along with the closing of the Exchange, shall take place
at the offices of HTI or Headwaters, at a time and date to be specified by the
parties, which shall be no later than the second business day after the
satisfaction or waiver of the conditions set forth in Articles V and VI, or at
such other time, date, and location as the parties hereto agree in writing (the
"Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
New Jersey Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers, and
franchises of HTI and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities, and duties of HTI and Merger Sub shall become the debts,
liabilities, and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Merger Sub, in
the form attached hereto as Exhibit C, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate of
Incorporation; provided, however, that at the Effective Time the Certificate of
Incorporation of the Surviving Corporation shall be amended so that the name of
the Surviving Corporation shall be Hydrocarbon Technologies, Inc.
(b) The Bylaws of HTI, as in effect immediately prior to the Effective Time,
shall be, at the Effective Time, the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors. The persons listed on Schedule 1.5 hereto shall be the
directors of the Surviving Corporation, from and after the Effective Time, until
their respective successors are duly elected or appointed and qualified.
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1.6 Effect on Capital Stock.
(a) Definitions. For purposes of this Agreement:
(i) Exchanged Shares shall mean all shares of HTI
Common Stock to be exchanged pursuant to the Exchange Agreement.
(ii) Merger Shares shall mean all Outstanding Shares
other than the Exchanged Shares.
(iii) Fully Diluted Number shall mean the aggregate
of (i) the number of Exchanged Shares, plus (ii) the number of Merger Shares,
plus (iii) the number of shares of HTI Common Stock underlying all vested and
unvested HTI Stock Options (as defined below) outstanding as of the Effective
Time.
(iv) Headwaters Common Stock shall mean the common
stock, $0.01 par value per share, of Headwaters.
(v) HTI Common Stock shall mean the common stock,
$.01 par value per share, of HTI.
(vi) Option Exchange Ratio shall mean (A) $14,468,750
divided by the Fully Diluted Number, and divided by the Signing Price.
(vii) Signing Price shall mean $8.702.
(viii) Outstanding Shares shall mean all shares of
HTI Common Stock outstanding immediately prior to the Closing under the Exchange
Agreement.
(ix) Transaction Consideration shall mean the
aggregate of the Merger Consideration (as defined herein) and the Exchange
Consideration (as defined in the Exchange Agreement).
(b) Merger Consideration. The aggregate consideration for the
Merger Shares (the "Merger Consideration") shall consist of cash in the amount
of (A) $14,468,750, divided by (B) the Fully Diluted Number, multiplied by (C)
the number of Merger Shares.
(c) Conversion of Merger Shares. Immediately prior to the
Closing, the Exchange Agreement shall be consummated. At the Effective Time, by
virtue of the Merger, and without any action on the part of Merger Sub, HTI, or
the holders of any shares of the Common Stock of HTI, each share of HTI Common
Stock issued and outstanding immediately prior to the Effective Time that is not
owned by Headwaters or Merger Sub, and all rights to accrued dividends in
respect thereof (other than any shares of HTI Common Stock to be canceled
pursuant to Section 1.6(d) and any Dissenting Shares (as defined in and to the
extent provided in Section 1.7)), will be canceled and extinguished and
automatically converted into the right to receive in cash the aggregate
consideration (rounded to the nearest cent) per Merger Share in the amount of
(A) the Merger Consideration plus
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the aggregate exercise price of any vested HTI Stock Options exercised between
the date hereof and the Effective Time, divided by (B) the number of Merger
Shares.
(d) Cancellation of Headwaters-Owned Stock. Any shares of HTI
Common Stock held in the treasury of HTI or owned by Merger Sub or Headwaters
immediately prior to the Effective Time, including the Exchanged Shares, shall
be canceled and extinguished without any conversion thereof except for the
consideration described in the Exchange Agreement.
(e) Stock Options. At the Effective Time, all options to
purchase HTI Common Stock ("HTI Stock Options") then outstanding under HTI's
Stock Option Plan (the "HTI Stock Option Plan") shall be exchanged by Headwaters
for options to acquire Headwaters Common Stock under Headwaters' option plan
registered on Form S-8 ("Substitute Options") and shall have, and be subject to,
the same vesting and expiration terms as set forth in the HTI Stock Option Plan
and/or any agreements pursuant to which such HTI Stock Options were granted as
in effect immediately prior to the Effective Time, except that (A) each
Substitute Option shall be exercisable for that number of whole shares of
Headwaters Common Stock equal to the number of shares underlying such HTI Stock
Option immediately prior to the Effective Time, multiplied by the Option
Exchange Ratio and rounded to the nearest whole number of shares of Headwaters
Common Stock and (B) the price at which each such Substitute Option is
exercisable shall be divided by the Option Exchange Ratio and rounded to the
nearest cent. Headwaters shall have reserved at the Effective Time a sufficient
number of shares of Headwaters Common Stock for issuance upon exercise of the
assumed HTI Stock Options.
(f) Capital Stock of Merger Sub. Each share of Common Stock,
$.01 par value, of Merger Sub (the "Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid, and nonassessable share of Common
Stock, $.01 par value, of the Surviving Corporation. Each certificate of shares
of Merger Sub Common Stock shall continue to evidence ownership of such share of
Common Stock of the Surviving Corporation.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, the shares of any holder of HTI Common Stock who has demanded and
perfected appraisal rights for such shares in accordance with New Jersey Law, to
the extent applicable, and who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal rights ("Dissenting Shares") shall not be
converted into, or represent a right to receive, the Merger Consideration
pursuant to Section 1.6, but the holder thereof shall only be entitled to such
rights as are granted by New Jersey Law.
(b) Notwithstanding the foregoing, if any holder of shares of
HTI Common Stock who demands appraisal of such shares under New Jersey Law shall
effectively withdraw or lose (for failure to perfect or otherwise) the right to
appraisal, then, as of the later of the Effective Time or the occurrence of such
event, such holder's shares shall automatically be converted into and represent
only the right to receive the Merger Consideration pursuant to Section 1.6
hereof, without interest thereon, upon surrender of the certificate representing
such shares of HTI Common Stock in the
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manner provided in Section 1.8 hereof (or, in the case of a lost, stolen, or
destroyed certificate, upon delivery of an affidavit (and bond, if required) in
the manner provided in Section 1.10 hereof).
(c) HTI shall give Headwaters (i) prompt notice of any written
demands for appraisal of any shares of HTI Common Stock, withdrawals of such
demands, and any other instruments served pursuant to New Jersey Law and
received by HTI which relate to any such demand for appraisal and (ii) the
opportunity to participate in all negotiations and proceedings which take place
prior to the Effective Time with respect to demands for appraisal under New
Jersey Law. HTI shall not, except with the prior written consent of Headwaters
or as may be required by applicable law, voluntarily make any payment with
respect to any demands for appraisal of HTI Common Stock or offer to settle or
settle any such demands. Any payments made in respect of Dissenting Shares shall
be made by HTI.
1.8 Surrender of Certificates.
(a) Exchange Procedures. Promptly after the Effective Time,
Headwaters shall mail to each holder of record (as of the Effective Time) of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of HTI Common Stock whose shares
were converted into the right to receive the Merger Consideration pursuant to
Section 1.6, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to Headwaters, and which shall be in such
form and have such other provisions as Headwaters may reasonably specify)
("Letter of Transmittal") and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration pursuant
to Section 1.6. Upon surrender of Certificates for cancellation to Headwaters,
together with the Letter of Transmittal, duly completed and validly executed in
accordance with the instructions thereto, the holders of such Certificates shall
be entitled to receive in exchange therefor the Merger Consideration pursuant to
Section 1.6, and the Certificates so surrendered shall forthwith be canceled.
Until so surrendered, each outstanding Certificate will be deemed from and after
the Effective Time, for all corporate purposes, to evidence the right to receive
the Merger Consideration set forth in Section 1.6.
(b) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, neither Headwaters, the Surviving Corporation, nor any party
hereto shall be liable to a holder of shares of HTI Common Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat, or similar law.
1.9 No Further Ownership Rights in HTI Common Stock. All Merger
Consideration paid upon the surrender of shares of HTI Common Stock in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to such Merger Shares, and there shall be
no further registration of transfers on the records of the Surviving Corporation
of shares of HTI Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.10 Lost, Stolen, or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen, or destroyed, Headwaters shall pay
the Merger Consideration in exchange for such lost,
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stolen, or destroyed Certificates upon the making of an affidavit of that fact
by the holder thereof; provided, however, that Headwaters may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen, or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Headwaters, HTI, or the Surviving Corporation with respect to the Certificates
alleged to have been lost, stolen, or destroyed.
1.11 Taking of Necessary Action; Further Action. 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 the Surviving Corporation with full
right, title, and possession to all assets, property, rights, privileges,
powers, and franchises of HTI and Merger Sub, the officers and directors of HTI
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action, so
long as such action is consistent with this Agreement. This provision shall be a
continuing obligation of the HTI Founders and the officers and directors of HTI
and shall survive the Effective Time.
1.12 Tax Treatment. The parties intend that the Transaction will be a
reorganization within the meaning of Section 368 of the Internal Revenue Code,
as amended (the "Code") and hereby adopt this Agreement, in conjunction with the
Exchange Agreement, as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the regulations promulgated under the Code (the
"Treasury Regulations").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF HTI
HTI hereby makes the representations and warranties to Headwaters and
Merger Sub contained in this Article II, except as set forth in the disclosure
letter previously delivered by HTI to Headwaters dated on or before the date
hereof and certified by a duly authorized officer of HTI (the "HTI Disclosure
Letter"). As used herein, where a statement is made "to the knowledge" of HTI or
a statement is made that HTI "knows" a particular fact or circumstance, such
knowledge shall include the actual knowledge after reasonable inquiry of the HTI
Founders and directors of HTI.
2.1 Organization of HTI. HTI is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power to own, lease, and operate its property
and to carry on its business as now being conducted, and is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the character of the properties owned or held under lease or license or
the nature of the business conducted by it requires such qualification, except
where the failure to be so qualified would not have a material adverse effect on
the business, assets (including intangible assets), financial condition, or
results of operations (a "Material Adverse Effect") of HTI. The subsidiaries of
HTI are as listed on Section 2.1 of the HTI Disclosure Letter; HTI owns all of
the capital stock or equity of such entities. HTI has delivered true and correct
copies of the Certificate of Incorporation and Bylaws of HTI, as amended to
date, to counsel for Headwaters.
2.2 HTI Capital Structure. The authorized capital stock of HTI consists
of 10,000,000 shares of HTI Common Stock, of which there are 1,599,611 shares
issued and
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outstanding as of the date hereof, and no shares of Preferred Stock are
authorized, issued, or outstanding. All outstanding shares of HTI Common Stock
are duly authorized, validly issued, fully paid, and non-assessable and are not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of HTI, or any agreement or document to which HTI is a
party or by which it is bound. As of the date that is one day prior to the date
hereof, HTI had reserved an aggregate of 489,500 shares of Common Stock, net of
exercises, for issuance to employees, consultants, and non-employee directors
pursuant to the HTI Stock Option Plan, under which options are outstanding for
an aggregate of 152,000 shares. Through the date hereof, HTI has issued no
employee offer letters agreeing to issue HTI Stock Options for shares of HTI
Common Stock. All shares of HTI Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, would be duly authorized, validly issued, fully
paid, and nonassessable. Section 2.2 of the HTI Disclosure Letter sets forth a
list of all owners of HTI Common Stock and the number of shares held, all
repurchases of HTI Common Stock (including the date of repurchase) and each
outstanding HTI Stock Option, the name of the holder of such option, the number
of shares subject to such option, the exercise price of such option, the number
of shares as to which such option will have vested at such date and whether the
exercisability of such option will be accelerated in any way by the transactions
contemplated by this Agreement or for any other reason, and indicates the extent
of acceleration, if any, and such list is true, correct, and complete in all
material respects.
2.3 Obligations With Respect to Common Stock. Except as set forth in
Sections 2.2 or 2.3 of the HTI Disclosure Letter, there are no options,
warrants, equity securities, partnership interests, or similar ownership
interests, calls, rights (including preemptive rights) of any class of HTI, or
any securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests, or similar ownership interests issued,
reserved for issuance, or outstanding. Except as set forth in Section 2.3 of the
HTI Disclosure Letter, there are no commitments or agreements of any character
to which HTI is a party or by which HTI is bound obligating HTI to issue,
deliver, or sell, or cause to be issued, delivered, or sold, or repurchase,
redeem, or otherwise acquire, or cause the repurchase, redemption, or
acquisition, of any options, warrants, equity securities, partnership interests,
or similar ownership interests, calls, rights (including preemptive rights) of
HTI or obligating HTI to grant, extend, accelerate the vesting of, or enter into
any such option, warrant, equity security, partnership interests, or similar
ownership interests, call, right, commitment, or agreement. Except as set forth
in Section 2.3 of the HTI Disclosure Letter, there are no registration rights,
and to the knowledge of HTI, except as set forth herein, there are no voting
trusts, proxies, or other agreements or understandings, with respect to any
equity security, partnership interests, or similar ownership interests of any
class of HTI.
2.4 Authority.
(a) HTI has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby and thereby, have been duly authorized
by all necessary corporate action on the part of HTI, subject only to the
approval of this Agreement by HTI's stockholders (unless Merger Sub, after
consummation of the Exchange, satisfies the ownership requirements of Section
14A:10-5.1 of the New Jersey Business Corporations Act (the "Act") for a merger
of a subsidiary corporation without shareholder
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approval, in which case the only approval shall be that of Merger Sub) and the
filing and recordation of the Certificate of Merger pursuant to New Jersey Law.
If the Merger does not qualify for treatment under Section 14A:10-5.1 of the
Act, a vote of the holders of at least a majority of the outstanding shares of
the HTI Common Stock is required for HTI's stockholders to approve and adopt
this Agreement and to approve the Merger. This Agreement has been duly executed
and delivered by HTI and the HTI Founders and, assuming the due authorization,
execution, and delivery by Headwaters and Merger Sub, constitutes the valid and
binding obligations of HTI and the HTI Founders, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy and other
similar laws and general principles of equity. The execution and delivery of
this Agreement and the Exchange Agreement by HTI and the HTI Founders do not,
and the performance of this Agreement and the Exchange Agreement by HTI and the
HTI Founders will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of HTI, (ii) subject to compliance with the requirements
set forth in Section 2.4(b) below, conflict with or violate any law, rule,
regulation, order, judgment, or decree applicable to the HTI Founders or HTI, or
by which the HTI Founders or HTI, or any of their respective properties, is
bound or affected, or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or impair HTI's rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration, or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of HTI pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, or other instrument or obligation to which HTI is a party or by which
HTI or its properties are bound or affected, except, with respect to clauses
(ii) and (iii), for any such conflicts, violations, defaults, or other
occurrences that would not have a Material Adverse Effect on HTI. Section 2.4 of
the HTI Disclosure Letter lists all consents, waivers, and approvals under any
of HTI's agreements, contracts, licenses, or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
(b) 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 ("Governmental
Entity") is required by or with respect to HTI or the HTI Founders in connection
with the execution and delivery of this Agreement or the Exchange Agreement, or
the consummation of the transactions contemplated hereby and thereby, except for
(i) the filing of the Agreement of Merger with the Secretary of State of the
State of New Jersey, and (ii) such other consents, authorizations, filings,
approvals, and registrations which, if not obtained or made, would not have a
Material Adverse Effect on HTI or have a material adverse effect on the ability
of the parties to consummate the Merger.
2.5 HTI Financial Statements.
(a) HTI has delivered to Headwaters certain consolidated
financial statements of HTI and its subsidiaries as follows: (i) the audited
balance sheets as of June 30, 2000, December 31, 1999, and December 31, 1998,
and the related audited statements of operations, stockholders' equity and cash
flows for the years ended as of December 31, 1999 and 1998, and the six months
ended as of June 30, 2000, and the notes thereto; (ii) the unaudited quarterly
financial data for the quarterly periods ended as of September 30, 2000, and
December 31, 2000, and (iii) the unaudited balance sheets as of December 31,
2000, and February 28, 2001, and the statement of operations,
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stockholders' equity and cash flows for the one-year period ended December 31,
2000 (collectively, the "HTI Financials"). Each of the HTI Financials (i) was
prepared in accordance with generally accepted accounting principles ("GAAP"),
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and (ii) fairly presented the financial position
of HTI as at the respective dates thereof and the results of its operations and
cash flows for the periods indicated, except for the absence of notes for the
unaudited interim financial statements and that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not, or are not expected to be, material in amount. The balance sheet
of HTI as of December 31, 2000 is hereinafter referred to as the "HTI Balance
Sheet." Except as disclosed in the HTI Financials, HTI does not have any
liabilities, debts, or obligations of any kind or description (absolute,
accrued, contingent, or otherwise) of a nature required to be disclosed on a
balance sheet or in the related notes to the financial statements prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations, or financial condition of HTI, except (i)
as and to the extent reflected or reserved against in the HTI Balance Sheet, or
(ii) incurred since the date of the HTI Balance Sheet in the ordinary course of
business consistent with past practices.
2.6 Absence of Certain Changes or Events. Since the date of the HTI
Balance Sheet, there has not been: (i) any event that has had or would
reasonably be expected to have a Material Adverse Effect on HTI, or (ii) any
material change by HTI in its accounting methods, principles, or practices,
except as required by concurrent changes in GAAP, nor has HTI entered into any
contracts, leases, orders, or other commitments other than in the ordinary
course of business.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or "Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) All federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to Taxes required to be
filed with any tax authority by or on behalf of the HTI with respect to any
taxable period ending on or before the Closing Date if due on or before the
Closing Date (i) have been or will be filed on or before the applicable due date
(including any extensions of such due date if properly obtained), and (ii) have
been, or will be when filed, prepared in all material respects in compliance
with all applicable legal requirements. All amounts shown on the Tax Returns to
be due on or before the Closing Date have been or will be paid on or before the
Closing Date.
(c) HTI's financial statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with GAAP. HTI will
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establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period from
the date of this Agreement through the Closing Date.
(d) Since inception, no Tax Return of HTI has been examined or
audited by any applicable tax authority. No extension or waiver (other than the
normal extension occurring by reason of an extension of time to file a Return)
of the limitation period applicable to any such Returns has been granted (by HTI
or any other person on behalf of HTI), and no such extension or waiver has been
requested from HTI.
(e) No claim or legal proceeding is pending or, to the best of
the knowledge of HTI, has been threatened against or with respect to HTI in
respect of any material Tax. There are no unsatisfied liabilities for material
Taxes (including liabilities for interest, additions to tax and penalties
thereon and related expenses) with respect to any notice of deficiency or
similar document received by HTI with respect to any material Tax (other than
liabilities for Taxes asserted under any such notice of deficiency or similar
document which are being contested in good faith by HTI and with respect to
which adequate reserves for payment have been established). There are no liens
for material Taxes upon any of the assets of HTI except liens for current Taxes
not yet due and payable. HTI has not entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code. HTI has not been
and, to the knowledge of HTI, will not be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions or events occurring, or accounting methods employed,
prior to the Closing. HTI has neither made an election, nor is required, to
treat any of its assets as owned by another person pursuant to the provision of
Section 168(f) of the Code or as tax-exempt bond financed property or tax-exempt
use property within the meaning of Section 168 of the Code. HTI has not acquired
and does not own any assets that directly or indirectly secure any debt the
interest on which is tax exempt under Section 103(a) of the Code.
(f) There is no agreement, plan, arrangement, or other
Contract covering any employee or independent contractor or former employee or
independent contractor of HTI that, considered individually or considered
collectively with any other such agreement, will or could reasonably be expected
to give rise directly or indirectly to the payment of any amount that would not
be deductible pursuant to Section 280G or Section 162 of the Code. HTI is not,
nor has it ever been, a party to or bound by any tax indemnity agreement, tax
sharing agreement, tax allocation agreement, or similar agreement. HTI has never
been a member of a consolidated, combined, or unitary group. HTI has no interest
in nor is it subject to any joint venture, partnership, or other arrangement or
contract which is treated as a partnership for federal income tax purposes. HTI
has no liability for Taxes of any Person other than HTI under Section 1.1502-6
of the Treasury Regulations (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract or otherwise. HTI is not
and has not been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code.
(g) There is currently no limitation on the utilization of the
net operating losses, built-in losses, capital losses, Tax credits, or other
similar items of HTI under Sections 382, 383, and 384 of the Code and Section
1502 of the Code and under the Treasury Regulations promulgated
10
thereunder. HTI has not taken any action not in accordance with past practice
that would have the effect of deferring a measure of Tax (including but not
limited to income, sales, gross receipts, or payroll) from a period (or portion
thereof) ending on or prior to the Closing to a period (or portion thereof)
beginning after the Closing. No material item of income or gain of HTI reported
or to be reported for financial reporting purposes in any pre-Closing period is
required to be included in taxable income in a post-Closing period. HTI has
never been a party to any transaction intended to qualify under Section 355 of
the Code. The total adjusted tax basis of HTI's assets equals or exceeds the sum
of HTI's liabilities.
2.8 Intellectual Property.
(a) Section 2.8(a) of the HTI Disclosure Letter contains a
true and complete list of all patents, trademarks, trade names, service marks,
and copyrights, and registrations thereof and applications (including
provisional applications) therefor (including all trademarks and service marks
that HTI has used with the intent of creating or benefiting from any common law
rights relating to such marks), used in the business of HTI, and lists any
proceedings or actions pending as of the date hereof before any court or
tribunal (including the United States Patent and Trademark Office or equivalent
authority anywhere in the world) related to such intellectual property.
(b) Except as set forth in Section 2.8(b) of the HTI
Disclosure Letter, HTI owns, or has the right to use, sell, or license all
intellectual property (including the patents, trademarks, trade names, service
marks, copyrights, and registrations thereof and applications therefor described
in Section 2.8(a) of the HTI Disclosure Letter) necessary or required for the
conduct of its business as currently conducted (such intellectual property and
the rights thereto are collectively referred to herein as the "HTI IP Rights"),
and HTI has delivered or will deliver to Headwaters prior to the Effective Time
certificates of originality with respect to the HTI IP Rights in form and
substance reasonably satisfactory to Headwaters. HTI (i) owns exclusively all
trademarks, service marks, and trade names used by it in connection with the
operation or conduct of the business of HTI, including the sale of any products
or technology or the provision of any services by HTI; provided, however, that
HTI may use trademarks, service marks, and trade names of third parties which
are licensed to HTI or are in the public domain, and (ii) owns exclusively, and
has good title to, each copyrighted work that is an HTI product and each other
work of authorship that HTI otherwise purports to own.
(c) To the extent that any HTI intellectual property has been
developed or created by any person other than HTI, HTI has a written agreement
with such person with respect thereto and has either (i) obtained ownership of,
and is the exclusive owner of, all such intellectual property by operation of
law or by valid assignment of any such rights or (ii) has obtained a license
under or to such intellectual property.
(d) Except pursuant to agreements described in Section 2.8(d)
of the HTI Disclosure Letter, HTI has not transferred ownership of or granted
any license of or other right to use or authorized the retention of any rights
to use any intellectual property that is or was HTI IP, to any other Person.
(e) The HTI IP constitutes all the intellectual property used
in and/or necessary to the conduct of HTI's business as it currently is
conducted, including the design, development,
11
distribution, marketing, manufacture, use, import, license, and sale of the
products, technology, and services of HTI (including products, technology, or
services currently under development).
(f) Section 2.8(f) of the HTI Disclosure Letter lists all
contracts and licenses (including all inbound licenses) to which HTI is a party
with respect to any intellectual property. No person other than HTI has
ownership rights to improvements made by HTI in intellectual property that has
been licensed to HTI.
(g) Section 2.8(g) of the HTI Disclosure Letter lists all
contracts, licenses, and agreements between HTI and any other person wherein or
whereby HTI has agreed to, or assumed, any obligation or duty to warrant,
indemnify, reimburse, hold harmless, guaranty, or otherwise assume or incur any
obligation or liability or provide a right of rescission with respect to the
infringement or misappropriation by HTI or such other person of the intellectual
property of any person other than HTI.
(h) The operation of the business of HTI as currently
conducted, including HTI's design, development, use, import, manufacture, and
sale of the products, technology, or services (including products, technology,
or services currently under development) of HTI (the "HTI Technology") does not
(i) with respect to the HTI Technology underlying HTI's contracts and proposed
contracts with Shenhua Group Corporation described in Sections 2.8 and 2.16 of
the HTI Disclosure Letter and with PetroChina described in Section 2.16 of the
HTI Disclosure Letter (the "Shenhua/PetroChina Agreements") infringe or
misappropriate the intellectual property of any person, and with respect to all
other HTI Technology, with the knowledge of HTI, infringe or misappropriate the
intellectual property of any person, (ii) violate any term or provision of any
license or contract concerning such intellectual property (including any
provision required by or imposed pursuant to 35 U.S.C. xx.xx. 200-212 in any
license or contract to which HTI is a party requiring that products be
manufactured substantially in the United States ("Made-in-America
Requirements")), (iii) with respect to the HTI Technology underlying the
Shenhua/PetroChina Agreements, violate the rights of any person (including
rights to privacy or publicity) and with respect to all other HTI Technology,
with the knowledge of HTI, violate the rights of any person (including rights to
privacy or publicity), or (iv) constitute unfair competition or an unfair trade
practice under any law, and HTI has not received notice from any person claiming
that such operation or any act, product, technology, or service (including
products, technology, or services currently under development) of HTI infringes
or misappropriates the intellectual property of any person or constitutes unfair
competition or trade practices under any law, including notice of third party
patent or other intellectual property rights from a potential licensor of such
rights.
(i) Each item of HTI IP is valid and subsisting, and all
necessary registration, maintenance, renewal fees, annuity fees, and taxes in
connection with such HTI IP have been paid and all necessary documents and
certificates in connection with such HTI IP have been filed with the relevant
patent, copyright, trademark, or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
HTI IP. Section 2.8(i)(1) of the HTI Disclosure Letter lists all actions that
must be taken by HTI within ninety (90) days from the date hereof, including the
payment of any registration, maintenance, renewal fees, annuity fees, and taxes
or the filing of any documents, applications, or certificates for the purposes
of maintaining, perfecting, or preserving or renewing any HTI IP. Except as set
forth in Section 2.8(i)(2) of the HTI
12
Disclosure Letter, HTI has registered the copyright with the U.S. Copyright
Office for the latest version of each product or technology of HTI that
constitutes or includes a copyrightable work. In each case in which HTI has
acquired ownership of any intellectual property rights from any person, HTI has
obtained a valid and enforceable assignment sufficient to irrevocably transfer
all rights in such intellectual property (including the right to seek past and
future damages with respect to such intellectual property) to HTI and, to the
maximum extent provided for by and required to protect HTI's ownership rights in
and to such intellectual property in accordance with applicable laws, HTI has
recorded each such assignment of HTI IP with the relevant governmental or
regulatory authority, including the PTO and the U.S. Copyright Office.
(j) There are no contracts or licenses between HTI and any
other person with respect to HTI intellectual property under which there is any
dispute (or, to HTI's knowledge, facts that may reasonably lead to a dispute)
known to HTI regarding the scope of such contract or license, or performance
under such contract or license, including with respect to any payments to be
made or received by HTI thereunder.
(k) To the knowledge of HTI, no person is infringing or
misappropriating any HTI IP.
(l) HTI has taken all commercially reasonable steps to protect
its rights in confidential information and trade secrets of HTI or provided by
any other person to HTI subject to a duty of confidentiality. Without limiting
the generality of the foregoing, HTI has, and enforces, a policy requiring each
employee, and each consultant and independent contractor with access to
confidential information, to execute proprietary information, confidentiality,
and invention and copyright assignment agreements substantially in the form set
forth in Section 2.8(l) of the HTI Disclosure Letter, and each current and
former employee, consultant, and independent contractor of HTI has executed such
an agreement and copies of all such agreements have been provided or made
available to Headwaters for review.
(m) No HTI IP or product, technology, or service of HTI is
subject to any order, action, or proceeding, or "march in" rights, that
restricts, or that is reasonably expected to restrict in any manner, the use,
transfer, or licensing of any HTI IP by HTI or that may affect the validity,
use, or enforceability of such HTI IP.
(n) No (i) product, technology, service, or publication of
HTI, (ii) material published or distributed by HTI, or (iii) conduct or
statement of HTI constitutes obscene material, a defamatory statement, or
material, false advertising, or otherwise violates any law.
(o) Neither this Agreement nor any transactions contemplated
by this Agreement will result in Headwaters granting any rights or licenses with
respect to the intellectual property of Headwaters or HTI to any person pursuant
to any contract to which HTI is a party or by which any of its assets and
properties are bound.
(p) Section 2.8(p) of the HTI Disclosure Letter sets forth a
list of (x) all software which HTI has licensed from any third party which is
used by HTI in its products or otherwise in its business (other than standard
off-the-shelf software) and (y) a list of all "freeware" and "shareware"
13
incorporated into any product now or heretofore shipped by HTI. HTI has all
rights necessary to the use of such software, "freeware", and "shareware."
(q) HTI's products comply in all material respects with all
applicable standards and with the feature specifications and performance
standards set forth in HTI's product data sheets. There are no outstanding
claims (or facts that may reasonably lead to a claim) for breach of warranties
by HTI in connection with the foregoing. All product performance comparisons
heretofore furnished by HTI to customers or Headwaters are accurate in all
material respects as of the dates so furnished (except that, in the case of
product performance comparisons made as of a specified earlier date, such
comparisons shall be accurate as of such specified earlier date, and, in the
case of product performance comparisons superseded by a subsequent product
performance comparison furnished to the customer before the customer's
acquisition of a license on the product covered by the superseded comparison,
the superseding comparison shall be accurate in all material respects and the
superseded comparison shall be disregarded).
(r) HTI has taken all reasonably necessary and appropriate
steps to protect and preserve ownership of HTI IP. HTI has secured valid written
assignments from all consultants and employees who contributed to the creation
or development of the HTI IP. In the event that the consultant is concurrently
employed by HTI and a third party, HTI has taken additional steps to ensure that
any HTI IP developed by such a consultant does not belong to the third party or
conflict with the third party's employment agreement; such steps include
ensuring that all research and development work performed by such a consultant
are performed only on HTI's facilities and only using HTI's resources, except as
set forth in Section 2.8(r) of the HTI Disclosure Letter.
(s) HTI is in timely compliance in all material respects with
the performance milestones set forth in its agreement with Lyondell Chemical
Company described in Section 2.8(a) of the HTI Disclosure Letter.
(t) HTI is in compliance in all material respects with the
terms of the Institut Francais du Petrole ("IFP") agreement described in Section
2.8(a) of the HTI Disclosure Letter and has not to date used any of IFP's
technology.
2.9 Compliance; Permits.
(a) HTI is not in conflict with, or in default or violation
of, (i) any law, rule, regulation, order, judgment or decree applicable to HTI
or by which HTI or any of its properties is bound or affected (except for such
conflicts, defaults and violations which are not, individually or in the
aggregate, material to the operation of the business of HTI), or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which HTI is a party or by which
HTI or any of its properties is bound or affected. To the knowledge of HTI, no
investigation or review by any governmental or regulatory body or authority is
pending or threatened against HTI, nor has any governmental or regulatory body
or authority indicated an intention to conduct the same.
14
(b) HTI holds all permits, licenses, variances, exemptions,
orders and approvals from governmental authorities which are material to the
operation of the business of HTI (collectively, the "HTI Permits"). HTI is in
compliance with the terms of HTI Permits.
2.10 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which HTI has received any notice
of assertion, nor, to HTI's knowledge, is there a threatened action, suit,
proceeding, claim, arbitration or investigation against HTI, including any such
action, suit, proceeding, claim, arbitration or investigation that in any manner
challenges or seeks to prevent, enjoin, alter or delay any of the transactions
contemplated by this Agreement.
2.11 Brokers' and Finders' Fees. HTI has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
2.12 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.12(a)(i) below (which definition shall apply
only to this Section 2.12), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity
under common control with HTI within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder;
(ii) "HTI Employee Plan" shall mean any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, deferred compensation, performance
compensation, stock or stock-related compensation, fringe benefits or other
employee benefits or remuneration of any kind, whether written or unwritten or
otherwise, funded or unfunded, including without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of ERISA which is or has been
maintained, contributed to, or required to be contributed to, by HTI or any
Affiliate for the benefit of any HTI Employee, or with respect to which HTI or
any Affiliate has or may have any liability or obligation;
(iii) "COBRA" shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "HTI Employee" shall mean any current or former
employee, consultant or director of HTI or any Affiliate;
(vi) "HTI Employee Agreement" shall mean each
management, employment, severance, consulting, relocation, repatriation,
expatriation, visas, work permit or other agreement or contract or arrangement
between HTI or any Affiliate and any HTI Employee;
(vii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
15
(viii) "FMLA" shall mean the Family Medical Leave Act
of 1993, as amended;
(ix) "HTI International Employee Plan" shall mean
each HTI Employee Plan that has been adopted or maintained by HTI or any
Affiliate, whether informally or formally, or with respect to which HTI or any
Affiliate will or may have any liability, for the benefit of HTI Employees who
perform services outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "HTI Multiemployer Plan" shall mean any "HTI
Pension Plan" (as defined below) which is a "multiemployer plan," as defined in
Section 3(37) of ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiii) "HTI Pension Plan" shall mean each HTI
Employee Plan which is an "employee pension benefit plan," within the meaning of
Section 3(2) of ERISA.
(b) Schedule. Section 2.12(b) of the HTI Disclosure Letter
contains an accurate and complete list of each HTI Employee Plan and each HTI
Employee Agreement under each HTI Employee Plan. HTI does not have any plan or
commitment to establish any new HTI Employee Plan or HTI Employee Agreement, to
modify any HTI Employee Plan or HTI Employee Agreement (except to the extent
required by law or to conform any such HTI Employee Plan or HTI Employee
Agreement to the requirements of any applicable law, in each case as previously
disclosed to Headwaters in writing, or as required by this Agreement or in the
ordinary course of business), or to enter into any HTI Employee Plan or HTI
Employee Agreement.
(c) Documents. HTI has made available to Headwaters: (i)
correct and complete copies of all documents embodying each HTI Employee Plan
and each HTI Employee Agreement including (without limitation) all amendments
thereto and all related trust documents; (ii) the most recent annual actuarial
valuations, if any, prepared for each HTI Employee Plan; (iii) the three (3)
most recent annual reports (Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the Code in
connection with each HTI Employee Plan; (iv) if the HTI Employee Plan is funded,
the most recently required and completed annual and periodic accounting of HTI
Employee Plan assets; (v) the most recent summary plan description together with
the summary(ies) of material modifications thereto, if any, required under ERISA
with respect to each HTI Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters, and all applications and correspondence to or
from the IRS or the DOL with respect to any such application or letter; (vii)
all material written agreements and contracts relating to each HTI Employee
Plan, including, but not limited to, administrative service agreements, group
annuity contracts and group insurance contracts; (viii) all written
communications material to any HTI Employee or HTI Employees relating to any HTI
Employee Plan and any proposed HTI Employee Plans, in each case, relating to any
amendments, terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would result
in any material liability to HTI; (ix) all correspondence to or from any
governmental agency relating to any HTI Employee Plan; (x) all COBRA forms and
related notices; (xi) all policies pertaining to
16
fiduciary liability insurance covering the fiduciaries for each HTI Employee
Plan; and (xii) all discrimination tests for each HTI Employee Plan for the most
recent plan year.
(d) Employee Plan Compliance. Except as set forth in Section
2.12(d) of the HTI Disclosure Letter, (i) HTI has performed in all material
respects all obligations required to be performed by it under, is not in default
or violation of, and has no knowledge of any default or violation by any other
party to each HTI Employee Plan, and each HTI Employee Plan has been established
and maintained in all material respects in accordance with its terms and in
compliance in all material respects with all applicable laws, statutes, orders,
rules and regulations, including but not limited to ERISA or the Code; (ii) each
HTI Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code has either received a
favorable determination, opinion, notification or advisory letter from the IRS
with respect to each such Plan as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, or has remaining a period of time under applicable
Treasury Regulations or IRS pronouncements in which to apply for such a letter
and make any amendments necessary to obtain a favorable determination as to the
qualified status of each such HTI Employee Plan; (iii) to HTI's knowledge, no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any HTI Employee Plan; (iv) there are no
actions, suits or claims pending, or, to the knowledge of HTI, threatened or
reasonably anticipated (other than routine claims for benefits) against any HTI
Employee Plan or against the assets of any HTI Employee Plan; (v) each HTI
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to the
Headwaters, Merger Sub, the Surviving Corporation, HTI or any of its Affiliates
(other than ordinary administration expenses or full vesting of any employer
contributions to any HTI Employee Plan intended to qualify under Section 401(a)
of the Code); (vi) there are no audits, inquiries or proceedings pending or, to
the knowledge of HTI or any Affiliates, threatened by the IRS or DOL with
respect to any HTI Employee Plan; and (vii) neither HTI nor any Affiliate is
subject to any penalty or tax with respect to any HTI Employee Plan under
Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) HTI Pension Plan. Neither HTI nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to any HTI
Pension Plan that is subject to Title IV of ERISA or Section 412 of the Code.
(f) HTI Multiemployer Plans. At no time has HTI or any
Affiliate contributed to or been required to contribute to any HTI Multiemployer
Plan.
(g) No Post-Employment Obligations. No HTI Employee Plan
provides, or reflects or represents any liability to provide, retiree life
insurance, retiree health or other retiree employee welfare benefits to any
person for any reason, except as may be required by COBRA or other applicable
statute, and HTI has never represented, promised or contracted (whether in oral
or written form) to any HTI Employee (either individually or to HTI Employees as
a group) or any other person that such HTI Employee(s) or other person would be
provided with retiree life insurance, retiree health or other retiree employee
welfare benefit, except to the extent required by statute.
17
(h) COBRA. Neither HTI nor any Affiliate has, prior to the
Effective Time and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA or any similar
provisions of state law applicable to its HTI Employees.
(i) Effect of Transaction.
(i) Except as set forth in the Disclosure Letter, the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any HTI Employee
Plan, HTI Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any HTI Employee.
(ii) Except as set forth in the Disclosure Letter, no
payment or benefit which will or may be made by HTI or its Affiliates with
respect to any HTI Employee as a result of the transactions contemplated by this
Agreement will be characterized as a "parachute payment," within the meaning of
Section 280G(b)(2) of the Code (but without regard to clause (ii) thereof).
(j) HTI International Employee Plan. Neither HTI nor any
Affiliate has ever maintained, established, sponsored, participated in, or
contributed to, any HTI International Employee Plan.
2.13 Absence of Liens and Encumbrances; Condition of Equipment. Set
forth in Section 2.13 of the HTI Disclosure Letter are a complete and correct
list and summary description of all fixed assets, machinery, equipment, vehicles
and other tangible assets owned or used by HTI at the date of this Agreement.
HTI has the exclusive right to use all such assets, subject, in the case of
leased property, to continuing obligations under leases therefor. HTI has good
and valid title to, or, in the case of leased properties and assets, valid
leasehold interests in, all of its material tangible properties and assets,
real, personal and mixed, used in its business, free and clear of any liens or
encumbrances except as reflected in the HTI Financials and except for liens for
taxes not yet due and payable.
2.14 Environmental Matters.
(a) Hazardous Material. Except as set forth in Section 2.14 of
the HTI Disclosure Letter, no underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state, or local statute, ordinance, or regulation to be radioactive,
toxic, hazardous, or otherwise a danger to health or the environment, including,
without limitation, PCBs, asbestos, petroleum, urea-formaldehyde, and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
listed as hazardous wastes pursuant to the Resource Conservation and Recovery
Act of 1976, as amended, and the regulations promulgated pursuant to said laws
(a "Hazardous Material"), but excluding office and janitorial supplies, are
present, as a result of HTI's actions, or, to HTI's knowledge, as a result of a
third party's actions or otherwise, in, on, or under any property, including the
land and the improvements, ground water, and surface water thereof, that HTI has
at any time owned, operated, occupied, or leased.
18
(b) Hazardous Materials Activities. Neither HTI nor any HTI
officer or employee on its behalf has transported, sold, distributed, stored,
treated, processed, used, manufactured, generated, disposed of, released, or
exposed its employees, others, or the environment to Hazardous Materials or any
product containing a Hazardous Material (collectively "Hazardous Materials
Activities") except in compliance with all applicable treaties, federal, state,
and local statutes, ordinances, regulations, or judicial and administrative
orders (collectively, "Environmental Laws") in effect prior to or as of the date
hereof.
(c) Permits. HTI currently holds all environmental approvals,
permits, licenses, clearances and consents (the "HTI Environmental Permits")
required for the conduct of HTI's Hazardous Materials Activities, the use and
occupancy of its property, and other businesses of HTI as such activities and
businesses are currently being conducted and is in compliance with all terms and
conditions of all HTI Environmental Permits.
(d) Environmental Liabilities. Except as set forth in Section
2.14 of the HTI Disclosure Letter, HTI is not subject to and has not received
notice of any past, pending, or, to HTI's knowledge, threatened claim, demand,
action, judicial or administrative proceeding, notice of noncompliance, notice
of violation, consent order, or consent agreement (collectively, "Environmental
Claims") under any Environmental Law from any enforcement entity or third party,
concerning any HTI Environmental Permit, Hazardous Material, or Hazardous
Materials Activity of HTI, any property that HTI has at any time owned,
operated, occupied, or leased, or any facility or location to which Hazardous
Materials generated by HTI have been transported for disposal. HTI is not aware
of any fact or circumstance that could involve HTI in any Environmental Claim or
impose upon HTI any liability that would have a Material Adverse Effect on HTI.
2.15 Labor Matters. To HTI's knowledge, there are no activities or
proceedings of any labor union to organize any employees of HTI and there are no
strikes, or material slowdowns, work stoppages or lockouts, or threats thereof
by or with respect to any employees of HTI. HTI is and has been in compliance
with all applicable laws regarding employment practices, terms and conditions of
employment, and wages and hours (including, without limitation, ERISA, WARN or
any similar state or local law), except for any noncompliance that would not
have a Material Adverse Effect on HTI. HTI has not received any notice from any
of its employees that any employee is terminating his or her employment with
HTI, nor, to the best of HTI's knowledge, does any employee intend to terminate
his or her employment with HTI as a result of the transactions contemplated
hereby.
2.16 Agreements, Contracts, and Commitments. Set forth in Section 2.16
of the HTI Disclosure Letter are a complete and correct list and summary
description of all material contracts, agreements, orders, leases, licenses and
other commitments (each a "HTI Contract") of HTI at the date of this Agreement.
Except as set forth in the HTI Disclosure Letter, HTI is not a party to nor is
bound by:
(a) any collective bargaining agreements;
(b) any bonus, deferred compensation, severance, incentive
compensation, pension, profit-sharing, or retirement plans, or any other
employee benefit plans or arrangements;
19
(c) any employment or consulting agreement, contract, or
commitment with any officer- or director-level employee, or member of HTI's
Board of Directors;
(d) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right 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;
(e) any agreement of indemnification or guaranty not entered
into in the ordinary course of business other than indemnification agreements
between HTI and any of its officers or directors;
(f) any agreement, contract, or commitment containing any
covenant limiting the freedom of HTI to engage in any line of business or
compete with any person;
(g) any agreement, contract, or commitment relating to capital
expenditures and involving future obligations in excess of $10,000 and not
cancelable without penalty;
(h) any agreement, contract, or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary course
of business or any ownership interest in any corporation, partnership, joint
venture, or other business enterprise;
(i) any mortgages, indentures, loans, or credit agreements,
security agreements, or other agreements or instruments relating to the
borrowing of money or extension of credit;
(j) any joint marketing or development agreement (excluding
agreements with resellers, value added resellers, or independent software
vendors entered into in the ordinary course of business that do not permit such
resellers or vendors to modify HTI's software products);
(k) any distribution agreement (identifying any that contain
exclusivity provisions); or
(l) any other agreement, contract, or commitment which
involves payment by HTI under any such agreement, contract or commitment of
$100,000 or more individually and is not cancelable without penalty within
thirty (30) days.
Neither HTI, nor to HTI's knowledge any other party to a HTI Contract,
has breached, violated, or defaulted under, or received notice that it has
breached, violated, or defaulted under, any of the material terms or conditions
of any of such HTI Contracts in such a manner as would permit any other party to
cancel or terminate any such HTI Contract, or would permit any other party to
seek damages.
2.17 Employees; Change of Control Payments. Set forth in Section 2.17
of the HTI Disclosure Letter is a complete list of the current employees of HTI,
including a complete and correct compensation schedule for all employees and a
complete and correct list and summary description of benefits for the key
employees of HTI. Except as set forth in Section 2.17 of the HTI
20
Disclosure Letter, there are no employment contracts with any personnel. Section
2.17 of the HTI Disclosure Letter sets forth each plan or agreement pursuant to
which any amounts may become payable (whether currently or in the future) to
current or former officers, directors and employees of HTI as a result of or in
connection with the Merger.
2.18 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), judgment, injunction, order, or decree to which HTI
is a party or otherwise binding upon HTI which has or reasonably would be
expected to have the effect of prohibiting or impairing any business practice of
HTI, any acquisition of property (tangible or intangible) by HTI, or the conduct
of business by HTI. Without limiting the foregoing, HTI has not entered into any
agreement under which HTI is restricted from selling, licensing, or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time, or in any segment of the market.
2.19 Title to Properties; Absence of Liens and Encumbrances.
(a) Schedule 2.19(a) of the HTI Disclosure Letter sets forth
the location, years of ownership, and former owners (to the extent known) of all
real property owned by HTI, either currently or in the past.
(b) Section 2.19(b) of the HTI Disclosure Letter sets forth a
list of all real property currently leased by HTI, the name of the lessor, and
the date of the lease and each amendment thereto. All such current leases are in
full force and effect, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any material
existing default or event of default (or event which with notice or lapse of
time, or both, would constitute a material default).
(c) HTI has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal, and mixed, used or held for use in its
business, free and clear of any liens, pledges, charges, claims, security
interests, or other encumbrances of any sort except as reflected in HTI's
Financials or in Section 2.19(b) of the HTI Disclosure Letter and except for
liens for Taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount, or extent,
and which do not materially detract from the value, or materially interfere with
the present use, of the property subject thereto or affected thereby.
2.20 Board Approval. The Board of Directors of HTI has, as of the date
of this Agreement, determined (i) that the Transaction is fair to, and in the
best interests of, HTI and all of its stockholders, and (ii) to recommend that
the stockholders of HTI approve and adopt this Agreement and approve the Merger.
2.21 Insurance. Section 2.21 of the HTI Disclosure Letter sets forth
all insurance policies held by HTI for the two years prior to the Effective
Time. During the past five years HTI has not experienced any uninsured losses in
respect of public liability, product liability, and worker compensation claims.
All insurance policies are duly in force as of the date of this Agreement. No
21
notice has been received by HTI regarding the cancellation, non-renewal, or
increased premiums due with respect to any insurance policy.
2.22 Warranties. HTI has heretofore furnished or made available to
Headwaters or its counsel for its review copies of all written warranties
covering the products of HTI currently in effect. HTI has not experienced any
warranty claims which have affected the consolidated net income of HTI by more
than $10,000 in any one fiscal year.
2.23 Minute Books. The minute books of HTI made available to counsel
for Headwaters are the only minute books of HTI and contain a reasonably
accurate summary, in all material respects, of all meetings of directors (and
committees thereof) and stockholders or actions by written consent since the
time of incorporation of HTI.
2.24 Business Plan. The projections set forth in the Business Plan were
prepared in good faith based on conclusions and assumptions that, to the
knowledge of HIT, are reasonable as of the date hereof.
2.25 No Material Misrepresentations. Neither this Agreement nor any
certificate, exhibit, schedule, or other information furnished by or on behalf
of HTI pursuant to this Agreement contains any untrue statement of material fact
or, when this Agreement and such certificates, schedules, and other information
are taken in their entirety, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
therein not misleading as of the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HEADWATERS
AND MERGER SUB
Headwaters and Merger Sub represent and warrant to HTI, except as set
forth in the disclosure letter supplied by Headwaters to HTI on or before the
date hereof and certified by a duly authorized officer of Headwaters (the
"Headwaters Disclosure Letter"), as follows:
3.1 Organization of Headwaters. Each of Headwaters and Merger Sub is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power to own,
lease, and operate its property and to carry on its business as now being
conducted, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a Material Adverse Effect on the business, assets (including
intangible assets), financial condition, or results of operations of Headwaters
and its subsidiaries taken as a whole.
3.2 Authority.
(a) Each of Headwaters and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Headwaters and, in
the case of this Agreement, Merger Sub, subject only to the filing and
recordation of the Certificate
22
of Merger pursuant to New Jersey Law. This Agreement has been duly executed and
delivered by each of Headwaters and Merger Sub, and, assuming the due
authorization, execution, and delivery by HTI, constitutes valid and binding
obligations of Headwaters and Merger Sub, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy and other similar
laws and general principles of equity. The execution and delivery of this
Agreement by each of Headwaters and Merger Sub do not, and the performance of
this Agreement by each of Headwaters and Merger Sub will not, (i) conflict with
or violate the Certificate of Incorporation or Bylaws of Headwaters or the
Certificate of Incorporation or Bylaws of Merger Sub or the equivalent
organizational documents of any of Headwaters' other subsidiaries, (ii) conflict
with or violate any law, rule, regulation, order, judgment, or decree applicable
to Headwaters or any of its subsidiaries (including Merger Sub) or by which its
or any of their respective properties is bound or affected pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, or other instrument or obligation to which Headwaters or any of its
subsidiaries (including Merger Sub) is a party or by which Headwaters or any of
its subsidiaries or its or any of their respective properties are bound or
affected, except, with respect to clause (ii), for the consent of Zion's First
National Bank and any such conflicts, violations, defaults, or other occurrences
that would not have a Material Adverse Effect on Headwaters and its subsidiaries
taken as a whole. The Headwaters Disclosure Letter lists all consents, waivers,
and approvals under any of Headwaters' or any of its subsidiaries' agreements,
contracts, licenses, or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby which, if not obtained,
would have a Material Adverse Effect on Headwaters and its subsidiaries taken as
a whole or have a material adverse effect on the ability of the parties to
consummate the Merger.
(b) No consent, approval, order or authorization of, or
registration, declaration, or filing with any Governmental Entity is required by
or with respect to Headwaters or Merger Sub in connection with the execution and
delivery of this Agreement and the Exchange Agreement or the consummation of the
Transaction, except for
(i) the filing of the Certificate of Merger with the
Secretary of State of the State of New Jersey;
(ii) the filing with the Securities and Exchange
Commission (the "SEC") of the Form D (as hereinafter defined) and any required
state filings related to the Exchange and such reports under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") as may be required in
connection with this Agreement and the transactions contemplated hereby; and
(iii) such other consents, authorizations, filings,
approvals, and registrations which, if not obtained or made, would not have a
Material Adverse Effect on Headwaters and its subsidiaries taken as a whole or
have a material adverse effect on the ability of the parties to consummate the
Merger.
3.3 No Material Misrepresentations. Neither this Agreement nor the
Headwaters Disclosure Letter contains any untrue statement of material fact or,
when this Agreement and the Headwaters Disclosure Letter are taken in their
entirety, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein not misleading
as of the date hereof.
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3.4 Available Funds. Headwaters and Merger Sub collectively have
sufficient capital available to consummate the transactions contemplated by this
Agreement and is not relying on obtaining additional financing in connection
with such transactions.
3.5 Merger Sub. Merger Sub is a wholly-owned subsidiary of Headwaters
that was formed to effect the transactions contemplated by this Agreement. As of
the date of this Agreement, Merger Sub has no business, operations, assets, or
liabilities other than those arising from its formation and pursuant to this
Agreement.
3.6 SEC Documents. Headwaters has filed all required reports,
schedules, forms, statements, and other documents with the SEC since October 1,
1999 (collectively, and in each case including all exhibits and schedules
thereto and documents incorporated by reference therein, the "Headwaters SEC
Documents"). As of their respective dates, the Headwaters SEC Documents complied
in all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act") or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such
Headwaters SEC Documents. As of their respective dates, none of the Headwaters
SEC Documents (including any and all financial statements therein) contained any
untrue statement of a material fact or failed to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Headwaters included in the
Headwaters SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited consolidated quarterly statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
period involved (except as may be indicated in the notes thereto), and present
fairly, in all material respects, the consolidated financial position of
Headwaters and its subsidiaries at the respective dates thereof and the
consolidated results of operations and cash flows for the periods specified
(subject, in the case of unaudited quarterly statements, to normal year-end
audit adjustments). Except as reflected or reserved against in the Headwaters
Financial Statements or otherwise disclosed in the Headwaters Disclosure Letter,
Headwaters and its subsidiaries have no material liabilities or other
obligations (including contingent liabilities and obligations) except, (i) since
the date of the most recent audited balance sheet included in the Headwaters
Financial Statements, liabilities and obligations incurred in the ordinary
course of business or (ii) that would not be required to be reflected or
reserved against in the consolidated balance sheet of Headwaters and its
subsidiaries prepared in accordance with GAAP.
3.7 Absence of Certain Changes or Events. Except as disclosed in the
Headwaters SEC Documents, or in the Headwaters Disclosure Letter, since the date
of the most recent audited balance sheet included in the Headwaters SEC
Documents, there is not and has not been (a) any material adverse change to
Headwaters, or (b) any condition, event, or occurrence that could reasonably be
expected to prevent or materially delay Headwaters from consummating the
transactions contemplated by this Agreement; provided that, for purposes of this
Section 3.7, a change in the price of Headwaters Common Stock shall not be
deemed to constitute a "material adverse change."
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ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Conduct of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, HTI agrees, except as provided in
Section 4.1 of the HTI Disclosure Letter, or to the extent that Headwaters shall
otherwise consent in writing, to carry on its business diligently and in
accordance with good commercial past practice and to carry on its business in
the usual, regular, and ordinary course, in substantially the same manner as
heretofore conducted and in compliance with all applicable laws and regulations,
to pay its debts and taxes when due subject to good faith disputes over such
debts or taxes, to pay or perform other material obligations when due, and use
its commercially reasonable efforts consistent with past practices and policies
to preserve intact its present business organization, keep available the
services of its present officers and employees, and preserve its relationships
with customers, suppliers, distributors, licensors, licensees, and others with
which it has business dealings. In addition, HTI will promptly notify Headwaters
of any material event involving its business or operations. No information or
knowledge obtained in any investigation will affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger and the Exchange.
In addition, except as permitted by the terms of this Agreement, and
except as provided in Section 4.1 of the HTI Disclosure Letter, without the
prior written consent of Headwaters, HTI shall not do any of the following:
(a) Waive any stock repurchase rights; accelerate, amend, or
change the period of exercisability of options or restricted stock; or re-price
options granted under any employee, consultant, or director stock plans, or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) Enter into any material partnership arrangements, joint
development agreements, strategic alliances, agreements to create standards, or
agreements with "Standards" bodies;
(c) Grant any severance or termination pay to any officer or
employee except payments in amounts consistent with policies and past practices
or pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to Headwaters; or adopt any new
severance plan;
(d) Transfer or license to any person or entity or otherwise
extend, amend, or modify in any material respect any rights to the HTI IP
Rights, other than in the ordinary course of business, or enter into grants to
future patent rights, other than in the ordinary course of business;
(e) Declare or pay any dividends on or make any other
distributions (whether in cash, stock, or property) in respect of any capital
stock, or split, combine, or reclassify any capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of, or in
substitution for any capital stock;
25
(f) Repurchase or otherwise acquire, directly or indirectly,
any shares of capital stock except pursuant to rights of repurchase of any such
shares under any employee, consultant, or director stock plan or agreement
existing on the date hereof;
(g) Issue, deliver, sell, authorize, or propose the issuance,
delivery, or sale of any shares of capital stock or any securities convertible
into shares of capital stock, or subscriptions, rights, warrants, or options to
acquire any shares of capital stock or any securities convertible into shares of
capital stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than
shares of HTI Common Stock issued pursuant to the exercise of stock options
outstanding as of the date of this Agreement.
(h) Cause, permit, or propose any amendments to any charter
document or bylaw (or similar governing instruments of any subsidiaries);
(i) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest in or a material portion of the
assets of, or by any other manner, any business or any corporation, partnership
interest, association, or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business of HTI, or enter into any
joint ventures, strategic partnerships or alliances;
(j) Buy, sell, lease, license, encumber, or otherwise dispose
of or acquire any properties or assets which are material, individually or in
the aggregate, to the business of HTI or which exceed $100,000 in the aggregate;
(k) Incur any indebtedness for borrowed money (other than
ordinary course trade payables) or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire debt securities of
HTI, or guarantee any debt securities of others;
(l) Adopt or amend any employee benefit or employee stock
purchase or employee option plan, or enter into any employment contract, pay any
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates of its officers or employees, or change in any material
respect any management policies or procedures;
(m) Pay, discharge, or satisfy any claim, liability, or
obligation (absolute, accrued, asserted or unasserted, contingent, or
otherwise), other than the payment, discharge, or satisfaction in the ordinary
course of business;
(n) Make any grant of exclusive rights to any third party; or
(o) Agree in writing or otherwise to take any of the actions
described in Section 4.1(a) through (n) above.
4.2 Information Statement. Headwaters will prepare, with the
cooperation of HTI, the Information Statement to be sent to the HTI Stockholders
to solicit agreement to the terms of the Exchange Agreement and related
documents. Insofar as the Information Statement contains information pertaining
to Headwaters, at the time of its mailing to the HTI Stockholders and at the
26
time of the execution and closing of the Exchange Agreement, the Information
Statement will contain no untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading, and Headwaters will advise HTI in writing if, prior to the execution
and closing of the Exchange Agreement, it shall obtain knowledge of any facts
that would make it necessary to supplement or amend the Information Statement to
comply with applicable laws. Information provided by HTI for inclusion in the
Information Statement, at the time of its mailing to the HTI Stockholders and at
the time of the execution and closing of the Exchange Agreement, will contain no
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and Headwaters will
advise HTI in writing if, prior to the execution and closing of the Exchange
Agreement, it shall obtain knowledge of any facts that would make it necessary
to supplement or amend the Information Statement to comply with applicable laws.
The Board of Directors of HTI, subject to the directors' fiduciary duties, will
recommend that the Stockholders approve and adopt the Exchange Agreement and the
Transaction.
4.3 Access to Information; Confidentiality. Subject to the
Confidentiality Agreement between the parties, each party will afford the other
party and its accountants, counsel, and other representatives full access to the
properties, books, records, and personnel of the other party and full
cooperation, during the period prior to the Effective Time, to obtain all
information concerning the business, including the status of product development
efforts, properties, results of operations, and personnel of such party, and to
determine the accuracy of each party's representations and warranties, as the
other party may reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 4.3 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger. The parties acknowledge
that HTI and Headwaters have previously executed the Confidentiality Agreement,
which Confidentiality Agreement will continue in full force and effect in
accordance with its terms. HTI shall cooperate with Headwaters and its auditors
in determining whether any restatement of HTI's financials is necessary or
appropriate prior to the Closing.
4.4 No Solicitation. From and after the date of this Agreement until
the earlier of the Effective Time or termination of this Agreement pursuant to
its terms, HTI shall not, and will instruct its respective directors, officers,
employees, representatives, agents, and affiliates not to, directly or
indirectly, (i) solicit or knowingly encourage submission of any proposals or
offers by any person, entity, or group (other than Headwaters and its
affiliates, agents, and representatives), or (ii) participate in any discussions
or negotiations with, or disclose any non-public information concerning HTI to,
or afford any access to the properties, books or records of HTI to, or otherwise
assist or facilitate, or enter into any agreement or understanding with, any
person, entity or group (other than Headwaters and its affiliates, agents and
representatives), in connection with any Acquisition Proposal with respect to
HTI. For the purposes of this Agreement, an "Acquisition Proposal" with respect
to HTI means any proposal or offer relating to (i) any merger, consolidation,
sale of substantial assets or similar transactions involving HTI (other than
sales of assets or inventory in the ordinary course of business or permitted
under the terms of this Agreement), (ii) sale of 10% or more of the outstanding
shares of capital stock of HTI (including without limitation by way of a tender
offer or an exchange offer), (iii) the acquisition by any person of beneficial
ownership or a right to acquire beneficial ownership of, or the formation of any
"group" (as defined under
27
Section 13(d) of the Exchange Act and the rules and regulations thereunder)
which beneficially owns, or has the right to acquire beneficial ownership of,
10% or more of the then outstanding shares of capital stock of HTI; or (iv) any
public announcement of a proposal, plan or intention to do any of the foregoing
or any agreement to engage in any of the foregoing. HTI will immediately cease
any and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. HTI will (i) notify
Headwaters as promptly as practicable if any inquiry or proposal is made or any
information or access is requested in writing in connection with an Acquisition
Proposal or potential Acquisition Proposal and (ii) as promptly as practicable
provide Headwaters with a copy of any such inquiry, proposal or Acquisition
Proposal (or a detailed summary thereof if such inquiry, proposal or Acquisition
Proposal is not in writing). In addition, subject to the other provisions of
this Section 4.4, from and after the date of this Agreement until the earlier of
the Effective Time and termination of this Agreement pursuant to its terms, HTI
will not, and will instruct its respective directors, officers, employees,
representatives, investment bankers, agents and affiliates not to, directly or
indirectly, make or authorize any public statement, recommendation or
solicitation in support of any Acquisition Proposal made by any person, entity
or group (other than Headwaters).
4.5 Legal Requirements. Each of Headwaters, Merger Sub, and HTI will
take all reasonable actions necessary or desirable to comply promptly with all
legal requirements which may be imposed on them with respect to the consummation
of the transactions contemplated by this Agreement and the Exchange Agreement
(including furnishing all information required in connection with approvals of
or filings with any Governmental Entity, and prompt resolution of any litigation
prompted hereby) and will promptly cooperate with and furnish information to any
party hereto necessary in connection with any such requirements imposed upon any
of them or their respective subsidiaries in connection with the consummation of
the transactions contemplated by this Agreement and the Exchange Agreement.
4.6 Third Party Consents. As soon as practicable following the date
hereof, HTI and Headwaters will each use reasonable commercial efforts to obtain
all consents, waivers, and approvals under any of its agreements, contracts,
licenses, or leases required to be obtained in connection with the consummation
of the transactions contemplated hereby.
4.7 Notification of Certain Matters. Subject to the terms and
provisions of the Confidentiality Agreement, each party will give prompt notice
to the other parties of the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be reasonably likely to cause (a) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this Agreement
to the Effective Time, or (b) any material failure of such party, as the case
may be, or of any officer, director, employee, or agent thereof, to comply with
or satisfy any covenant, condition, or agreement to be complied with or
satisfied by it under this Agreement. Notwithstanding the above, the delivery of
any notice pursuant to this section will not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
4.8 Commercially Reasonable Efforts and Further Assurances. Merger Sub,
as the owner of the HTI Common Stock immediately following the Exchange, will
cause the Merger to be effected in accordance with the terms and conditions
hereto. Subject to the respective rights and
28
obligations of Headwaters and HTI under this Agreement, each of the parties to
this Agreement and the Exchange Agreement will use its commercially reasonable
efforts to effectuate the Exchange, the Merger, and the other transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement and the Exchange Agreement. Each party hereto, at
the reasonable request of another party hereto, will execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
4.9 HTI Employee Matters.
(a) Headwaters agrees to continue the employment with the
Surviving Corporation of all HTI employees at the same salary as was in
existence immediately prior to the Effective Time; provided, however, that this
provision shall not be interpreted to limit Headwaters' ability to terminate or
change the nature of its or the Surviving Corporation's employment relationship
with any such HTI employee after the Effective Time. Headwaters agrees to permit
such employees of the Surviving Corporation to participate in the Headwaters
employee benefit plans and to give them years of service credit for purposes of
such plans based on each employee's service with HTI prior to the Effective
Time. The parties agree that this Section 4.9(a) is not intended to create any
third party beneficiary right in any employee.
(b) Headwaters agrees to guarantee as of the Effective Time
the obligations of HTI pursuant to the employment agreements listed in Schedule
4.10.
(c) HTI shall terminate its bonus policy (provided that such
termination and transition to Headwaters' bonus plan satisfy applicable
Department of Energy requirements), Employee Stock Purchase Plan and any stock
option plans effective at or prior to the Closing.
4.10 Board Representation. Headwaters will cause two designees of the
Representative to be appointed to the Board of Directors of Headwaters as of the
Effective Date, one for a term that shall end on March 31, 2004, and the other
for a term that shall end on March 31, 2003. If, at any time prior to March 31,
2004, the Board of Directors of Headwaters has an executive or similar
committee, the Board of Directors shall appoint one of the Board designees of
the Representative to such committee for a term expiring not earlier than the
term specified above.
4.11 Directors and Officers of the Surviving Corporation. Headwaters
shall cause the initial board of directors of the Surviving Corporation to
consist of six designees of the Representative and two representatives of
Headwaters; provided, however, that Headwaters will retain the power to elect
and remove directors from the board of directors of the Surviving Corporation.
Headwaters will also continue the employment of all officers of HTI, as of the
Closing Date, in their present capacities in the Business Unit, and will cause
the board of directors of the Surviving Corporation to remove such officers only
with the approval of a majority vote of the Headwaters Board that includes the
approval of both of the Representative's designees thereto.
4.12 Cooperation Concerning License Agreements. HTI will consult with
Headwaters in the negotiation and execution of the Shenhua and PetroChina
license agreements, and will agree to any commercially reasonable requests of
Headwaters (that would not significantly impact the ability
29
of HTI to meet the Milestones) concerning the terms, and timing of the
execution, of these agreements. HTI will provide to Headwaters promptly all
information relating to the progress of negotiations.
4.13 Treatment of Merger as a Qualifying Reorganization. Each of HTI
and Headwaters shall (a) treat the Merger as a reorganization under Section 368
of the Code, (b) report the Merger and all related transactions consistently
therewith in any and all Tax Returns filed by it, (c) take all such actions as
may be reasonably required to cause the Merger to be treated as a qualifying
reorganization, and (d) take no action which could disqualify the Merger from
reorganization status under Section 368 of the Code. Neither HTI nor Headwaters,
as of the date of this Agreement and on the Closing Date, know of any reason
that the Transaction may not qualify as a reorganization within the meaning of
Section 368 of the Code.
4.14 Non-Compete Agreements. Each of Xxxxxx X. Xxxxxxx, Lap-Xxxxx
(Xxxx) Xxx, Ph.D., and Xxxxx X. Xxxxxx hereby agrees that, as of the Effective
Time, (i) the non-competition provision in his employment agreement with HTI
described in Section 2.17 of the HTI Disclosure Letter shall continue in effect
until the later of two years after the Closing Date or one year after the
termination of his employment with Headwaters or any subsidiary thereof,
including the Surviving Corporation, and (ii) the scope of the non-competition
provision set forth in the respective employment agreements shall be extended to
include, in addition to the business of HTI, the business activities of
Headwaters or of any Headwaters subsidiary in which the employee materially
participated as an officer, director or employee of Headwaters, the Business
Unit or any other Headwaters subsidiary.
4.15 Tax Matters
(a) Tax Returns. Headwaters shall cause HTI to prepare and
file all Tax Returns required to be filed by or with respect to HTI for all
periods ending on or prior to the Closing Date which are filed on or after the
Closing Date and for all periods which begin prior to the Closing Date and end
after the Closing Date. Headwaters shall timely pay or cause to be timely paid
the Taxes attributable to such Tax periods, subject only to Headwaters' rights
under Section 8.1 of this Agreement to the extent that the payment of such Taxes
represents an item described therein. The stockholders of HTI shall not bear any
responsibility for the Taxes of HTI attributable to such periods except as
provided in Section 8.1 hereof.
(b) Cooperation and Access to Information. Provided that the
rights under this paragraph (b) lapse on the expiration of the Indemnity period,
the parties to this Agreement shall cooperate as and to the extent reasonably
requested by any other party hereto, in connection with (i) the filing of Tax
Returns pursuant to this Agreement and any audit, litigation, or other
proceeding with respect to Taxes, and (ii) complying with Section 6043 of the
Code and all Treasury Regulations promulgated thereunder. Such cooperation shall
include the retention and (upon another party's request) the provision of
records and information which are reasonably relevant to any such Tax Return,
audit, litigation, or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder.
30
(c) Retention of Books and Records. Provided that the rights
under this paragraph (c) lapse on the expiration of the Indemnity period, the
parties to this Agreement agree (i) to retain all books and records with respect
to Tax matters pertinent to HTI relating to any taxable period beginning before
the Closing Date until the expiration of the statute of limitations of the
respective taxable periods, and (ii) to give the other parties to this Agreement
reasonable written notice prior to transferring, destroying, or discarding any
such books and records and, if a party so requests, Headwaters, HTI, or the HTI
Stockholders, as the case may be, shall allow the other party to take possession
of such books and records.
(d) Treatment of Indemnity Payment as Purchase Price
Adjustment. In the case of any claim for indemnity under this Agreement based on
Taxes determined to be payable by HTI or a successor thereto, the indemnity
obligation shall be considered to be a purchase price adjustment under this
Agreement and the Exchange Agreement.
4.16 Bridge Loan. If the Closing does not occur within thirty (30) days
of the date hereof, Headwaters shall make available to HTI a bridge loan, in the
amount of up to two hundred thousand dollars ($200,000), with a maturity date of
one year following the date hereof, bearing the same interest rate as would be
applicable at such time pursuant to HTI's loan agreements with Yardville
National Bank described in Section 6.8 hereto, and containing other terms and
conditions reasonably agreeable to Headwaters. Such bridge loan would be secured
by a perfected security interest immediately subordinate to any Permitted Lien.
For purposes of this Section 4.16, a Permitted Lien is any security interest
encumbering HTI assets in existence as of the date hereof. HTI's entry into any
bridge loan agreement is subject to obtaining the consent of Yardville National
Bank; HTI will make commercially reasonable efforts to obtain such consent.
4.17 Environmental Issues.
(a) HTI shall use its reasonable best efforts to obtain
written confirmation from the New Jersey Department of Environmental Protection
(the "NJDEP") reasonably satisfactory to Headwaters that no further action need
be taken regarding environmental remediation of the real property owned by HTI.
(b) The parties hereto acknowledge that the Transaction may be
subject to the requirements of the New Jersey Industrial Site Recovery Act,
N.J.S.A. 13:1K-6, et seq., and the regulations promulgated pursuant thereto
("ISRA"). To permit completion of the Transaction, HTI shall use its reasonable
best efforts to comply with ISRA by seeking to obtain from the NJDEP (a) one of
the following, at HTI's option and discretion, regarding HTI's wholly-owned
subsidiary, Chemsampco: (i) a Letter of Non-applicability; (ii) approval of a
Negative Declaration; (iii) approval of a Remediation-in-Process or other form
of waiver; or (iv) execution of a Remediation Agreement, as such terms are used
in ISRA; and (b) a Letter of Non-applicability regarding HTI (each of the items
set forth in (a) (i) through (iv) and (b) being referred to as an "ISRA
Approval"). If remediation pursuant to one or more Remediation Agreements is
required by the NJDEP, then HTI shall be responsible for implementing such
Remediation Agreements and satisfying all other requirements under ISRA,
including but not limited to providing a remediation funding source and
obtaining a no further action letter from the NJDEP evidencing full compliance
with ISRA. If HTI enters into a Remediation Agreement with the NJDEP to allow
closing of the
31
Transaction to occur, subject to the provisions of Section 6.10 of this
Agreement, all of the costs of such remediation, if any, shall constitute a
claim for indemnification under this Agreement or under the Exchange Agreement
(regardless of any representations or warranties or exceptions thereto set forth
in this Agreement) and such claim may be paid from the Escrow Account or
Contingent Payment in accordance with the terms of the Exchange Agreement. If
any indemnification is paid to Headwaters from the Escrow Account or from
Contingent Payments related to ISRA compliance, including costs of remediation,
then to the extent of such indemnification the Representative shall be assigned
any rights, claims, entitlements or choses in action which Headwaters, ITI or
the Surviving Corporation may have against any third parties, including the New
Jersey Spill Compensation Fund, who or which may be liable for such costs,
whether in whole or in part.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF HEADWATERS AND MERGER SUB
The obligations of Headwaters and Merger Sub hereunder are subject to
the satisfaction, or waiver thereof by Headwaters, of the following conditions:
5.1 Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the HTI Stockholders by the requisite vote (if any)
under applicable law and HTI's Certificate of Incorporation.
5.2 No Actions or Proceedings. No judgment, writ, order, injunction,
award, or decree of or by any Governmental Entity shall have been issued that
would, and no action or proceeding shall have been instituted by or before any
Governmental Entity seeking to, enjoin or prevent the consummation of the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, no person shall have (i) commenced, or shall have notified either HTI
or Headwaters that it intends to commence, an action or proceeding or (ii)
provided HTI or Headwaters with notice, in either case which allege(s) that any
of the intellectual property presently embodied, or proposed to be embodied, in
HTI's products or design environments infringes or otherwise violates the
intellectual property rights of such person, is available for licensing from a
potential licensor providing the notice, or otherwise alleges that HTI does not
otherwise own or have the right to exploit such intellectual property.
5.3 Representations and Warranties. The representations and warranties
of HTI shall be true and correct in all material respects at the Effective Time,
with the same effect as though such representations and warranties had been made
on and as of such date, except for changes which, in the aggregate, would not
have a material adverse effect on the financial condition, properties, business,
prospects, or results of operations of HTI, and each and all of the agreements
of HTI to be performed or complied with in all material respects pursuant to the
terms of this Agreement shall have been duly performed and complied with.
5.4 No Material Adverse Effect. No event shall have occurred since the
date of this Agreement that has had or would reasonably be expected to have a
Material Adverse Effect on HTI.
32
5.5 Exchange Agreement. The transactions contemplated by the Exchange
Agreement shall have closed prior to the Closing, and HTI Stockholders shall
have agreed, pursuant to the Exchange Agreement, to exchange at least ninety
percent (90%) of the Outstanding Shares.
5.6 Opinion of Counsel. There shall be delivered to Headwaters on the
Closing Date of the Merger an opinion or opinions of counsel to HTI, dated the
Closing Date of the Merger and satisfactory in form and substance to Headwaters
and its counsel, in substantially the form of Exhibit D hereto.
5.7 Non-Compete and Affiliate Agreements. HTI, Headwaters, and each of
Xxxxx X. Xxxxxxx, Xxxxx Xxxxxxx, and Xxxxxxxx Xxxx, Ph.D. (the "Key Employees")
shall have entered into agreements not-to-compete (the "Non-Compete Agreements")
substantially in the form of Exhibit E hereto. The directors and executive
officers of HTI, and shareholder reasonably deemed to be an affiliate of HTI
shall have entered into Affiliate Agreements, substantially in the form of
Exhibit F hereto with Headwaters.
5.8 Employment. The Key Employees of HTI shall continue to be employed
by HTI at the Closing (and shall not have given any notice or other indication
that they will not continue to be willing to be employed by the Surviving
Corporation following the Closing). At least ninety percent (90%) of the
employees of HTI employed as of this date, including the Key Employees, shall
continue to be employed by HTI at the Closing (and shall not have given any
notice or other indication that they will not continue to be willing to be
employed by the Surviving Corporation following the Closing). Arrangements
satisfactory to Headwaters shall have been made to effect the assignment to the
Surviving Corporation of all intellectual property created by HTI's founders,
employees, and consultants (other than intellectual property created for a prior
employer), and to obtain their full cooperation to complete and prosecute all
appropriate U.S. and foreign patent filings related thereto.
5.9 Compliance Certificate. HTI shall have delivered to Headwaters a
certificate, executed by the President of HTI, dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Section 5.3.
5.10 Certificates and Documents. HTI shall have delivered to
Headwaters:
(a) Certificates, as of the most recent practicable dates, as
to the corporate and tax good standing of HTI issued by the Department of
Treasury of the State of New Jersey and the Secretary of State of each other
state in which HTI is currently qualified to transact business; and
(b) Resolutions of the Board of Directors of HTI and (if
required by applicable law) the HTI Stockholders, authorizing and approving all
matters in connection with this Agreement, the Exchange Agreement, and the
Transaction and certified by the Secretary or Assistant Secretary of HTI as of
the Closing Date.
5.11 Dissenters' Shares. Holders of no more than one percent (1%) of
the Outstanding Shares shall have exercised, nor shall they have any continued
right to exercise, appraisal, dissenters', or similar rights under applicable
law with respect to their shares by virtue of the Merger.
33
5.12 Consents and Approvals. HTI shall have obtained the consents and
approvals referred to in Section 2.4 of the HTI Disclosure Letter.
5.13 Environmental Status.
(a) HTI shall have received written confirmation from the
NJDEP reasonably satisfactory to Headwaters that no further action need be taken
regarding environmental remediation of the real property owned by HTI; provided
that this condition precedent shall be waived as of June 30, 2001, as long as
HTI has received and provided to Headwaters a No Further Action letter from the
NJDEP relating to the "Marco" portion of the property and the NJDEP has given
Headwaters and its counsel no reason to believe that a No Further Action letter
relating to the rest of the property will not be forthcoming.
(b) HTI shall have satisfied the filing, notice and approval
requirements of ISRA as described in Section 4.17 of this Agreement; provided,
however, if the NJDEP requires one or more Remediation Agreements pursuant to
ISRA, the costs and the time required to carry out such Remediation Agreements
shall be immaterial, in Headwaters' reasonable discretion.
5.14 HTI Further Financial Statements. HTI shall have provided
Headwaters at least one week prior to Closing with (i) unaudited quarterly
financial statements for the quarterly periods ended as of March 31, 2001,
December 31, 2000, and March 31, 2000; and (ii) the audited balance sheet as of
December 31, 2000, and the related statement of operations, shareholders' equity
and cash flows for the one-year period then ended.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF HTI
The obligations of HTI hereunder are subject to the satisfaction, or
waiver thereof by HTI, of the following conditions:
6.1 Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the HTI Stockholders by the requisite vote under
applicable law and HTI's Certificate of Incorporation.
6.2 No Actions or Proceedings. No judgment, writ, order, injunction,
award, or decree of or by any Governmental Entity shall have been issued that
would, and no action or proceeding shall have been instituted by or before any
Governmental Entity seeking to, enjoin or prevent the consummation of the
transactions contemplated hereby.
6.3 Representations and Warranties. The representations and warranties
of Headwaters shall be true and correct in all material respects on and as of
the Effective Time, with the same effect as though such representations and
warranties had been made on and as of such date, except for changes which, in
the aggregate, would not have a material adverse effect on the financial
condition, properties, business, prospects, or results of operations of
Headwaters, and each and all of the agreements of Headwaters to be performed or
complied with in all material respects pursuant to the terms of this Agreement
shall have been duly performed and complied with.
34
6.4 Certificates. Headwaters shall have delivered to HTI (a) a
certificate, executed by a duly authorized officer of Headwaters, dated as of
the Closing Date, certifying to the fulfillment of the conditions specified in
Section 6.3, and (b) resolutions of the Board of Directors of Headwaters,
authorizing and approving all matters in connection with this Agreement, the
Exchange Agreement, and the Transaction, certified by the Secretary or Assistant
Secretary of Headwaters as of the Closing Date.
6.5 Board Representation. The designees of the Representative shall
have been appointed to the Headwaters Board of Directors, with such appointments
effective as of the Effective Date.
6.6 No Material Adverse Effect. No event shall have occurred since the
date of this Agreement that has had or would reasonably be expected to have a
Material Adverse Effect on Headwaters.
6.7 Consents and Approvals. Headwaters shall have obtained the consents
and approvals referred to in Section 3.2 of the Headwaters Disclosure Letter.
6.8 Loan Agreement. Headwaters shall have repaid the balance due under
the loan agreements between HTI and Yardville National Bank dated as of October
5, 1999 and April 18, 2001 in the principal amounts of $1,000,000 and $500,000,
respectively, or caused the release of the individual guarantees of Xxxxxx X.
Xxxxxxx, Lap-Xxxxx (Xxxx) Xxx, and Xxxxx X. Xxxxxx thereunder.
6.9 Opinion of Counsel.. There shall be delivered to HTI on the Closing
Date of the Merger an opinion or opinions of counsel to Headwaters, dated the
Closing Date of the Merger and satisfactory in form and substance to HTI and its
counsel, in substantially the form of Exhibit G hereto.
6.10 ISRA Status. If the NJDEP requires one or more Remediation
Agreements pursuant to ISRA, the costs required to carry out such Remediation
Agreements to be treated as an indemnification event pursuant to Section 4.17(b)
of this Agreement shall be immaterial, in HTI's reasonable discretion, or
Headwaters shall have agreed to waive any claim of indemnification following the
Effective Time with respect to such Remediation Agreements.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Notwithstanding any investigation made by or on behalf of Headwaters or
HTI, the representations and warranties of HTI and Headwaters contained in this
Agreement shall be continuing representations and warranties and shall survive
the Effective Time of the Merger until the second anniversary thereof; provided,
however, that the representations and warranties with respect to taxes and tax
liabilities of HTI contained in Section 2.7 hereof shall be continuing
representations and warranties and shall survive until the expiration of the
third year following the date on which HTI shall have completed filing all
required tax returns for any partial tax period ending at the Effective Time of
the Merger, or, if all required returns are filed before the last day prescribed
by law or by regulations to file such returns, then until the expiration of the
third year following such last day, or for such longer period following the
filing of any such return during
35
which the period of the statute of limitations applicable to such return shall
have been extended by action of HTI or any governmental authority; and provided
further that the representations and warranties concerning compliance with law
and environmental matters in Sections 2.9 and 2.14 shall be continuing
representations and warranties and shall survive the Effective Time of the
Merger until the fourth anniversary thereof.
ARTICLE VIII
INDEMNITY OF HEADWATERS
8.1 Indemnification of Headwaters. Headwaters shall be indemnified by
the holders of the Exchanged Shares in accordance with the terms of the Exchange
Agreement.
8.2 No Limitation of Remedies. Notwithstanding anything contained in
this Agreement or the Exchange Agreement to the contrary, nothing shall preclude
or limit Headwaters' or the Surviving Corporation's rights to exercise any other
remedy Headwaters or the Surviving Corporation may have in law or equity
regarding intentional misrepresentation or any remedies available to Headwaters
or the Surviving Corporation under any other agreement; provided, however, that
other than for intentional misrepresentation, or as provided in any other
agreement, Headwaters' or the Surviving Corporation's sole remedy hereunder
shall be limited to the indemnification set forth in Sections 9.1 and 9.2 of the
Exchange Agreement.
ARTICLE IX
COSTS INCIDENT TO AGREEMENT
Except as otherwise expressly provided herein, each of the parties
hereto will pay all the costs incurred by it incident to the preparation,
execution, or delivery of this Agreement or the performance of its obligations
hereunder, including, without limitation, the fees and disbursements of its
attorneys, accountants, investment bankers, consultants, brokers, and persons
providing other services.
ARTICLE X
TERMINATION
10.1 Termination. Except as provided in Section 10.2 below, this
Agreement and the Exchange Agreement may be terminated and the Merger and the
Exchange abandoned at any time prior to the Effective Time:
(a) by mutual written consent of HTI and Headwaters;
(b) by Headwaters if there shall be any action taken, or any
statute, rule, regulation, or order enacted, promulgated, or issued or deemed
applicable to the Transaction, by any Governmental Entity, which would: (i)
prohibit Headwaters' or HTI's ownership or operation of any portion of the
business of HTI or (ii) compel Headwaters or HTI to dispose of or hold separate,
as a result of the Transaction, any portion of the business or assets of HTI or
Headwaters; in either case, the unavailability of which assets or business would
have a Material Adverse Effect on
36
Headwaters or would reasonably be expected to have a material adverse effect on
Headwaters' ability to realize the benefits expected from the Transaction.
(c) by Headwaters, if it is not in material breach of its
obligations under this Agreement or the Exchange Agreement and there has been a
breach of any representation, warranty, covenant, or agreement contained in this
Agreement on the part of HTI, and as a result of such breach the conditions set
forth in Section 5.3 would not then be satisfied; provided, however, that if
such breach is curable by HTI within thirty (30) days through the exercise of
its reasonable best efforts, then, for so long as HTI continues to exercise such
reasonable best efforts, Headwaters may not terminate this Agreement or the
Exchange Agreement under this Section 10.1(c) unless such breach is not cured
within thirty (30) days (but no cure period shall be required for a breach which
by its nature cannot be cured);
(d) by HTI, if it is not in material breach of its obligations
under this Agreement or the Exchange Agreement, and there has been a breach of
any representation, warranty, covenant, or agreement contained in this Agreement
or the Exchange Agreement on the part of Headwaters or Merger Sub, and as a
result of such breach the conditions set forth in Section 6.3 would not then be
satisfied; provided, however, that if such breach is curable by Headwaters or
Merger Sub within thirty (30) days through the exercise of its reasonable best
efforts, then, for so long as Headwaters or Merger Sub continues to exercise
such reasonable best efforts, HTI may not terminate this Agreement and the
Exchange Agreement under this Section 10.1(d) unless such breach is not cured
within thirty (30) days (but no cure period shall be required for a breach which
by its nature cannot be cured); or
(e) by either HTI or Headwaters if the Merger shall not have
been consummated by July 31, 2001; provided, however, that the right to
terminate this Agreement and the Exchange Agreement under this Section 10.1(e)
shall not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Exchange and the Merger to
occur on or before such date and such action or failure to act constitutes a
willful and material breach of this Agreement and the Exchange Agreement;
Where action is taken to terminate this Agreement and the Exchange
Agreement pursuant to this Section 10.1, it shall be sufficient for such action
to be authorized by the board of directors of the party taking such action.
10.2 Effect of Termination. In the event of termination of this
Agreement and the Exchange Agreement as provided in Section 10.1, this Agreement
and the Exchange Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Headwaters, Merger Sub, or HTI, or their
respective officers, directors, or stockholders, provided that the provisions of
this Article X shall remain in full force and effect and survive any termination
of this Agreement and the Exchange Agreement.
10.3 Amendment. Except as is otherwise required by applicable law,
prior to the Closing, this Agreement and the Exchange Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed by Headwaters, HTI, and the HTI Founders. Except as is otherwise required
by applicable law, after the Closing, this Agreement and the Exchange
37
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed by Headwaters, HTI, and the HTI Founders.
10.4 Extension; Waiver. At any time prior to the Effective Time,
Headwaters and Merger Sub, on the one hand, and HTI, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE XI
MISCELLANEOUS
11.1 Successors and Assigns. This Agreement and the Exchange Agreement
shall be binding upon the parties hereto, their legal representatives,
successors in interest, assignees, transferees, creditors (including judgment
creditors), trustees (including trustees in bankruptcy), receivers, and all
holders or possessors of, or purported holders or possessors of, any of the
stock of HTI, including without limitation, assignees, transferees, pledgees,
holders of security interests in and liens upon any of such stock and trustees,
and all persons with notice or knowledge, or chargeable with notice or
knowledge, of the provisions hereof. This Agreement and the Exchange Agreement
cannot be amended or modified except by a written agreement executed by the
parties hereto; provided, however, that no such amendment or modification may be
made after the HTI Stockholders approve and adopt this Agreement and the
Exchange Agreement if such amendment or modification, in the judgment of the
Board of Directors of HTI, would materially and adversely affect the interest of
the HTI Stockholders. Except for the purposes or in the events set forth in
Section 1.6(c), this Agreement and the rights, duties and obligations hereunder
may not be assigned by any party without the prior written consent of the other
parties; provided, however, that this Agreement and the Exchange Agreement may
be assigned by Headwaters to any directly or indirectly wholly-owned subsidiary
of Headwaters, provided that Headwaters shall continue to be bound by this
Agreement and the Exchange Agreement after such assignment.
11.2 Notices. Any notices or other communications required or permitted
hereunder will be in writing and will be deemed sufficiently given only if
delivered in person or sent by telegram, telecopy or telex or by first-class or
air mail or by recognized air courier service, postage or other charges prepaid,
addressed as follows:
If to HTI:
Hydrocarbon Technologies, Inc.
0000 Xxx Xxxx Xxxxxx
Xxxxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, President
38
Copy to:
Xxxxxxx X. Xxxxx
Smith, Stratton, Wise, Xxxxx & Xxxxxxx
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
If to Headwaters:
Headwaters Incorporated
00000 X. Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Chief Executive Officer
Facsimile Number: (000) 000-0000
Copy to:
Xxxxx X. Xxxxxxxx, Esq.
Pillsbury Winthrop LLP
00 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice or communication will be
deemed to have been given as of the date so delivered, telegraphed, telecopied,
telexed, mailed, or sent by courier.
11.3 Entire Agreement. This Agreement, including the Exhibits attached
hereto, and the Disclosure Letter constitute the entire understanding of the
parties relating to the subject matter hereof and supersede all prior and
contemporaneous agreements and understandings, whether oral or written, relating
to the subject matter hereof.
11.4 Remedies. In the event of a breach, or a threatened or attempted
breach, of any provision of this Agreement by any party, any other party shall,
in addition to all other remedies, be entitled to (i) a temporary or permanent
injunction against such breach without the necessity of showing any actual
damages and (ii) a decree for the specific performance of the Agreement.
11.5 Waiver. The waiver by any party of the breach of any of the terms
and conditions of, or any right under, this Agreement shall not be deemed to
constitute the waiver of any other breach of the same or any other term or
condition or of any similar right. No such waiver shall be binding or effective
unless expressed in writing and signed by the party giving such waiver.
39
11.6 Adjustments to Shares. The number of shares for purposes of this
Agreement shall be adjusted to reflect fully the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into Headwaters Common Stock or HTI Common Stock),
reorganization, recapitalization, or other like change with respect to
Headwaters Common Stock or HTI Common Stock occurring on or after the date
hereof.
11.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
40
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
HEADWATERS INCORPORATED
By: /s/ Xxxx X. Xxxxxx
------------------------------
Xxxx X. Xxxxxx,
Chief Executive Officer
HEADWATERS SUB CORPORATION
By: /s/ Xxxx X. Xxxxxx
------------------------------
Xxxx X. Xxxxxx,
Chief Executive Officer
HYDROCARBON TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Xxxxxx X. Xxxxxxx, President
"HTI FOUNDERS"
/s/ Xxxxxx X. Xxxxxxx
------------------------------
Xxxxxx X. Xxxxxxx
/s/ L.K. (Theo) Xxx, Ph.D.
------------------------------
L.K. (Theo) Xxx, Ph.D.
/s/ Xxxxx Xxxxxx
------------------------------
Xxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxx
------------------------------
Xxxxxxx Xxxxxx
41
AGREEMENT AND PLAN OF REORGANIZATION
Dated as of May 2, 2001
By and Among
HEADWATERS INCORPORATED
HEADWATERS SUB CORPORATION
HYDROCARBON TECHNOLOGIES, INC.
and
the HTI Founders Named Herein
42
LIST OF EXHIBITS
Exhibit A Exchange Agreement
Exhibit B Certificate of Merger
Exhibit C Certificate of Incorporation
Exhibit D Opinion of HTI Counsel
Exhibit E Non-Compete Agreement
Exhibit F Affiliate Agreement
Exhibit G Opinion of Headwaters Counsel
43
EXHIBIT A
EXCHANGE AGREEMENT
EXHIBIT B
CERTIFICATE OF MERGER
EXHIBIT C
CERTIFICATE OF INCORPORATION
EXHIBIT D
OPINION OF HTI COUNSEL
EXHIBIT E
NON-COMPETE AGREEMENT
EXHIBIT F
AFFILIATE AGREEMENT
EXHIBIT G
OPINION OF HEADWATERS COUNSEL
