Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of this 30th day of November, 1999, by and among Applied Holographics
plc, a public limited company incorporated and existing under the laws of
England and Wales ("BUYER"), Applied OpSec Corporation, a Colorado corporation,
and a direct wholly-owned subsidiary of Buyer ("NEWCO"), and Optical Security
Group, Inc., a Colorado corporation ("SELLER").
RECITALS
WHEREAS, Buyer and Seller have agreed that Buyer shall acquire Seller
by causing Newco, which has been formed for the express purpose of consummating
the transactions contemplated hereby, to merge with and into Seller (the
"MERGER"), with Seller as the surviving corporation of the Merger, upon the
terms and subject to the conditions set forth herein, all in accordance with the
Colorado Business Corporation Act (the "CBCA").
WHEREAS, substantially concurrently herewith and as a condition and
inducement to Buyer's willingness to enter into this Agreement, Buyer and
certain stockholders of Seller, who include certain of the directors and
officers of Seller and its Subsidiaries (as defined herein) who hold, in the
aggregate, approximately 35.2% of the outstanding shares of common stock, par
value $.005, of Seller (the "SELLER COMMON STOCK"), are entering into
Stockholder Agreements in the form of EXHIBIT A hereto (the "STOCKHOLDER
AGREEMENTS").
WHEREAS, as a condition and inducement to Buyer to enter into, and
after the execution of, this Agreement, Buyer and Seller are entering into the
Seller Option Agreement ("SELLER OPTION AGREEMENT"), attached hereto as EXHIBIT
B, pursuant to which Seller has granted an option to purchase shares of Seller
Common Stock ("SELLER OPTION") to Buyer.
WHEREAS, in furtherance of the acquisition of Seller by Buyer on the
terms and subject to the conditions set forth in this Agreement, Buyer proposes
to cause Newco to make a tender offer (as it may be amended from time to time as
permitted under this Agreement, the "OFFER") to purchase all of the outstanding
shares of Seller Common Stock, at a purchase price of $7.00 per share (the
"OFFER PRICE"), without interest thereon, upon the terms and subject to the
conditions set forth in this Agreement.
WHEREAS, the Boards of Directors of Buyer, Newco and Seller have
determined that the Offer, this Agreement and the Merger are advisable and in
the best interests of Buyer, Newco and Seller and their respective stockholders.
The Boards of Directors of each of Buyer, Newco and Seller have approved the
Offer, this Agreement and the Merger. The Board of Directors of Seller has
resolved to recommend to the stockholders of Seller to vote in favor of this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, Buyer, Newco and
Seller hereby agree as follows:
ARTICLE I
THE OFFER
1.01. THE OFFER.
(a) Subject to the provisions of this Agreement, as promptly as
practicable, but in no event later than five (5) business days after the date of
the public announcement by Buyer and Seller of this Agreement, Buyer shall cause
Newco to commence the Offer. The initial expiration date for the Offer shall be
the 20th business day following the commencement of the Offer. The obligation of
Newco to accept for payment, and pay for, any shares of Seller Common Stock
tendered pursuant to the Offer shall be subject to the conditions set forth in
EXHIBIT C hereto (the "OFFER CONDITIONS") (any of which may be waived in whole
or in part by Buyer in its sole discretion) and to the terms and conditions of
this Agreement.
(b) Buyer may, without the consent of Seller, cause Newco to (A)
extend the Offer, if at the scheduled or extended expiration date of the
Offer any of the Offer Conditions shall not be satisfied or waived, until
such time as such conditions are satisfied or waived, (B) extend the Offer
for any period required by any rule, regulation, interpretation or position
of the U.S. Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer or any period required by applicable law and
(C) extend the Offer on one or more occasions for an aggregate period of not
more than ten (10) business days beyond the latest expiration date that would
otherwise be permitted under clause (A) or (B) of this sentence, if on such
expiration date there shall not have been tendered at least 90% of the
outstanding shares of Seller Common Stock. Subject to the terms and
conditions of the Offer and this Agreement, Buyer shall cause Newco to accept
for payment, and pay for, all shares of Seller Common Stock validly tendered
and not withdrawn pursuant to the Offer that Newco becomes obligated to
accept for payment and pay for, pursuant to the Offer as promptly as
practicable after the expiration of the Offer.
(c) On the date of commencement of the Offer, Buyer shall cause Newco
to file with the SEC a Tender Offer Statement on Schedule 14D-1 (the "SCHEDULE
14D-1") with respect to the Offer, which shall contain an offer to purchase and
a related letter of transmittal and summary advertisement (such Schedule 14D-1
and the documents included therein pursuant to which the Offer shall be made,
together with any supplements or amendments thereto, the "OFFER DOCUMENTS"). The
Offer Documents shall comply as to form in all material respects with the
requirements of the Exchange Act (as defined herein) and the rules and
regulations promulgated thereunder and the Offer Documents, on the date first
published, sent or given to the holders of shares of Seller Common Stock, shall
not contain any untrue statement of a material fact or omit 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. Each of Buyer, Newco and Seller agree promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect, and Buyer further agrees to cause Newco to take all steps necessary to
cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other
Offer Documents as so corrected to be disseminated to holders of Seller Common
Stock, in each case as and to the extent required by applicable federal
securities laws. Seller and its counsel shall be given reasonable opportunity to
review and comment upon the Offer Documents prior to their filing with the SEC
or dissemination to the holders of Seller Common Stock. Buyer agrees to cause
Newco to provide Seller and its counsel any comments Buyer, Newco or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
1.02. SELLER ACTIONS.
(a) Seller hereby approves of, and consents to, the Offer and
represents that the Board of Directors of Seller, at a meeting duly called and
held, duly and unanimously adopted resolutions approving this Agreement, the
Offer and the Merger, determining, as of the date of such resolutions, that the
terms of the Offer are fair to, and in the best interests of, the holders of
Seller Common Stock, recommending that the holders of Seller Common Stock accept
the Offer, tender their shares of Seller Common Stock pursuant to the Offer and
approve this Agreement (if required) and approving the acquisition of shares of
Seller Common Stock by Newco pursuant to the Offer and the other transactions
contemplated by this Agreement, including the Merger. Seller
has been advised by each of its directors and executive officers who owns shares
of Seller Common Stock (each of whom is listed in Section 1.02(a) of the Seller
Disclosure Schedule) that such person currently intends to tender all shares of
Seller Common Stock.
(b) On the date the Offer Documents are filed with the SEC, Seller
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer (such Schedule 14D-9, as supplemented or amended
from time to time, the "SCHEDULE 14D-9") containing, subject to the terms of
this Agreement, the recommendation described in paragraph (a) and shall mail the
Schedule 14D-9 to the holders of shares of Seller Common Stock. The Schedule
14D-9 shall comply as to form in all material respects with the requirements of
the Exchange Act and the rules and regulations promulgated thereunder and, on
the date filed with the SEC and on the date first published, sent or given to
the holders of Seller Common Stock, shall not contain any untrue statement of a
material fact or omit 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. Each of Buyer, Newco
and Seller agrees promptly to correct any information provided by it for use in
the Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and Seller further agrees to take
all steps necessary to amend or supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. Buyer, Newco and their counsel
shall be given reasonable opportunity to review and comment upon the Schedule
14D-9 prior to its filing with the SEC or dissemination to the holders of Seller
Common Stock. Seller agrees to provide Buyer, Newco and their counsel any
comments Seller or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments.
(c) In connection with the Offer and the Merger, Seller shall cause its
transfer agent to furnish Buyer promptly with mailing labels containing the
names and addresses of the record holders of Seller Common Stock as of a recent
date and of those persons becoming record holders subsequent to such date,
together with copies of all lists of stockholders, security position listings
and computer files and all other information in Seller's possession or control
regarding the beneficial owners of shares of Seller Common Stock, and shall
furnish to Buyer such information and assistance (including updated lists of
stockholders, security position listings and computer files) as Buyer may
reasonably request in communicating the Offer to the holders of shares of Seller
Common Stock. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Buyer and each of its agents shall
hold in confidence the information contained in any such labels, listings and
files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will deliver, and will use
their reasonable efforts to cause their agents to deliver, to Seller all copies
and any extracts or summaries from such information then in their possession or
control.
ARTICLE II
THE MERGER
2.01. THE MERGER. At the Effective Time (as defined in Section 2.03
hereof), in accordance with this Agreement and the CBCA, Newco shall be merged
with and into Seller, the separate existence of Newco (except as may be
continued by operation of law) shall cease, and Seller shall continue as the
surviving corporation under the corporate name it possesses immediately prior to
the Effective Time, as a wholly-owned subsidiary of Buyer. Seller after the
Merger hereinafter sometimes is referred to as the "SURVIVING CORPORATION."
2.02. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of this Agreement and
the CBCA. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time all the rights and property of Seller and Newco (the
"CONSTITUENT CORPORATIONS") shall vest in the Surviving Corporation, and all
debts and liabilities of Seller and Newco shall become the debts and liabilities
of the Surviving Corporation.
2.03. CONSUMMATION OF THE MERGER. In the event of, and as soon as is
practicable after, the satisfaction or waiver of the conditions set forth in
Article VI hereof, the parties hereto will cause the Merger to be consummated by
filing, with the Secretary of State of Colorado, Articles of Merger (the time of
confirmation of such filing or such later time as is specified in such Articles
of Merger being the "EFFECTIVE TIME"). Contemporaneous with the filing referred
to in this Section 2.03, a closing (the "CLOSING") will be held at the offices
of Xxxxxxx Xxxx LLP, 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 or at such
other location as the parties may establish for the purpose of confirming all
the foregoing. The date and the time of such Closing are referred to as the
"CLOSING DATE."
2.04. CHARTER; BYLAWS; DIRECTORS AND OFFICERS. Unless otherwise
determined by Buyer prior to the Effective Time, the Articles of Organization
and Bylaws of the Surviving Corporation shall be the Articles of Organization
and Bylaws of Seller, as in effect immediately prior to the Effective Time,
until thereafter amended as provided therein and under the CBCA. The directors
of Newco immediately prior to the Effective Time will be the initial directors
of the Surviving Corporation, and the officers of Newco immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation, in
each case until their successors are elected and qualified.
2.05. EFFECT ON OUTSTANDING SECURITIES.
(a) NEWCO COMMON STOCK. By virtue of the Merger, automatically and
without any action on the part of any Person, including without limitation the
holder thereof, each share of common stock, par value $.01 per share, of Newco
("NEWCO COMMON STOCK") issued and outstanding immediately prior to the Effective
Time shall be converted into and become one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
(b) SELLER COMMON STOCK. By virtue of the Merger, automatically and
without any action on the part of any Person, including without limitation the
holder thereof, each of the shares of Seller Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of Seller Common
Stock to be cancelled pursuant to Section 2.05(d) hereof and any Dissenting
Shares (as defined in Section 2.08)), shall be cancelled and extinguished and be
automatically converted into and become a right to receive an amount per share
in cash (the "COMMON STOCK MERGER CONSIDERATION") equal to $7.00, upon surrender
in the manner provided in Section 2.09 of the certificate that evidenced the
shares of Seller Common Stock (a "COMMON STOCK CERTIFICATE").
(c) SELLER PREFERRED STOCK. By virtue of the Merger, automatically and
without any action on the part of any Person, including without limitation the
holder thereof, each of the shares of Series B 8% Convertible Preferred Voting
Stock of Seller ("SELLER PREFERRED STOCK") issued and outstanding immediately
prior to the Effective Time (other than any Dissenting Shares (as hereinafter
defined)), shall be cancelled and extinguished and be automatically converted
into and become a right to receive an amount per share in cash (the "PREFERRED
STOCK MERGER CONSIDERATION", and, together with the Common Stock Merger
Consideration, the "MERGER CONSIDERATION") equal to the product of (i) the
number of shares of Seller Common Stock into which such share of Seller
Preferred Stock is convertible MULTIPLIED BY (ii) the Common Stock Merger
Consideration, upon surrender in the manner provided in Section 2.09 of the
certificate that evidenced the shares of Seller Preferred Stock (a "PREFERRED
STOCK CERTIFICATE," and, together with the Common Stock Certificates, the
"CERTIFICATES").
(d) TREASURY STOCK; SHARES OWNED BY BUYER OR SELLER. Each share of
Seller Common Stock which is issued and held in the treasury of Seller
immediately prior to the Effective Time or issued and outstanding and owned by
Buyer or any direct or indirect Subsidiary (as defined in Article VIII) of Buyer
or Seller, shall be cancelled and retired, and no payment shall be made with
respect thereto.
(e) DISSENTING SHARES. The holders of Dissenting Shares, if any, shall
be entitled to payment for such shares only to the extent permitted by and in
accordance with the provisions of the CBCA; provided,
however, that if, in accordance with the applicable provisions of the CBCA, any
holder of Dissenting Shares shall forfeit such right to payment of the fair cash
value of such shares, such shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration applicable thereto as provided in
Section 2.05(b) or (c), as the case may be.
2.06. SELLER STOCK OPTIONS, WARRANTS AND RELATED MATTERS.
(a) Prior to the Effective Time, Seller shall terminate Seller's
Incentive Stock Option Plan, Nonqualified Stock Option Plan and Stock Bonus Plan
(collectively, the "SELLER EQUITY PLANS"), and, in connection therewith, shall
provide written notice to each holder of a then outstanding stock option (each,
an "OPTION") to purchase shares of Seller Common Stock pursuant to the Seller
Equity Plans (whether or not such Option is then vested or exercisable), that
such Option shall be, as of the date of such notice, exercisable in full and
that such Option shall terminate at the Effective Time and that, if such Option
is not exercised or otherwise terminated before the Effective Time, such holder
shall be entitled to receive in cancellation of such Option a cash payment from
Buyer promptly after the Effective Time, in an amount equal to the excess of the
Common Stock Merger Consideration over the per share exercise price of such
Option, if any, multiplied by the number of shares covered by such Option (the
"OPTION SETTLEMENT AMOUNT"), subject to income tax withholding as required by
applicable law. The Seller Disclosure Schedule includes a complete listing of
Options held by each optionee (including the date of grant, the number of shares
issuable upon exercise of the Option, and the Option Settlement Amount to which
the Optionee is entitled). Except as otherwise provided in this Section 2.06(a),
Seller shall not grant or amend any Option after the date hereof. Seller hereby
represents and warrants to Buyer that the number of shares of Seller Common
Stock subject to issuance pursuant to the exercise of Options issued and
outstanding under the Seller Equity Plans is, and shall be as of the Effective
Time, not in excess of 2,154,712. To the extent that the cancellation of any
Option pursuant to this Section 2.06(a) requires the agreement of the holder of
such Option under a Seller Equity Plan, Seller shall use commercially reasonable
efforts, including taking reasonable instructions from Buyer, to enter into an
agreement with such holder providing for the cancellation of such Option in
consideration for the receipt by such holder of the applicable Option Settlement
Amount with respect to such Option. Buyer acknowledges and agrees that the
failure of Seller to obtain any required agreement of a holder of an Option to
the provisions of this Section 2.06(a) after using its commercially reasonable
efforts to do so, shall not be deemed to be a breach by Seller of this Agreement
but shall be relevant in determining whether or not Seller has satisfied its
obligations under this Agreement for purposes of Section 6.02(b) hereof.
(b) Prior to the Effective Time, Seller shall use its commercially
reasonable efforts, including taking reasonable instructions from Buyer, to
receive from each holder of an outstanding warrant (each, a "WARRANT") to
purchase shares of Seller Common Stock an agreement that, as of the Effective
Time, such Warrant shall be converted into a right of such holder to receive
from Buyer promptly after the Effective Time the consideration set forth in the
next sentence. Each holder of a Warrant shall be entitled to receive from Buyer
in respect of the shares of Seller Common Stock to be issued upon the exercise
of such Warrant, an amount in cash, without interest (the "WARRANT
CONSIDERATION"), equal to the product of (i) the number of shares of Seller
Common Stock subject to such Warrant immediately prior to the Effective Time and
(ii) the excess, if any, by which the Common Stock Merger Consideration exceeds
the exercise price per share that was applicable with respect to such Warrant.
Seller hereby represents and warrants to Buyer that the number of shares of
Seller Common Stock subject to issuance pursuant to the Warrants is, and shall
be as of the Effective Time, not in excess of 1,152,457. Buyer acknowledges and
agrees that the failure of Seller to obtain the agreements with each holder of a
Warrant described in this Section 2.06(b) after using its commercially
reasonable efforts to do so, shall not be deemed to be a breach by Seller of
this Agreement but shall be relevant in determining whether or not Seller has
satisfied its obligations under this Agreement for purposes of Section 6.02(b)
hereof.
(c) Simultaneously with the execution of this Agreement, Seller and
Xxxxxxx X. Xxxx are entering an amendment to Xx. Xxxx'x employment agreement
(the "AMENDMENT"), which Amendment shall not be amended or otherwise changed
without the prior written consent of Buyer. In addition, promptly after the
Effective Time, Buyer shall pay to Xx. Xxxx an amount in cash equal to $250,000
in settlement of certain
Options held by Xx. Xxxx under a Seller Equity Plan. Also, in satisfaction of
certain rights of Xx. Xxxx to receive shares of Seller Common Stock upon a
merger or acquisition of Seller as described in paragraph 3-5 of Xx. Xxxx'x
employment agreement, and as otherwise allocated in a manner to be agreed upon
by the parties, Buyer shall pay to Xx. Xxxx promptly after the Effective Time an
amount in cash equal to $3,500,000.
2.07. CANCELLATION OF CONVERTIBLE DEBENTURES.
(a) Prior to the Effective Time, Seller shall use its commercially
reasonable efforts to receive from each holder (each, a "DEBENTURE HOLDER") of
an outstanding debenture (each, a "DEBENTURE") an agreement that, simultaneously
with the consummation of the Merger and at the Effective Time, the Debenture
then held by it shall (automatically and without further action by the Debenture
Holder) be cancelled and deemed to be paid-in-full and each Debenture Holder
shall be entitled to receive as payment therefor the consideration set forth in
Sections 2.07(c) and (d) below. Buyer acknowledges and agrees that the failure
of Seller to obtain the agreements with each Debenture Holder described in this
Section 2.07(a) after using its best efforts and taking all actions necessary to
do so, shall not be deemed to be a failure of Seller to satisfy its covenants
and other agreements contained herein for purposes of Section 6.02(b) hereof.
(b) At the Closing, each Debenture Holder who shall have agreed to the
cancellation of the Debenture held by such holder pursuant to Section 2.07(a)
hereof, shall deliver the original Debenture held by it for cancellation in
accordance with this Section 2.07. At the Effective Time, and subject to and
upon delivery and cancellation of such original Debenture, Buyer shall pay to
such Debenture Holder the consideration to which such Debenture Holder is
entitled, pursuant to Sections 2.07(c) and (d) below, as payment for, and in
full satisfaction of, all amounts owed by Seller thereunder. From and after the
Effective Time, none of Buyer, Newco or Seller shall have any liability or
obligation of any kind whatsoever under the Debentures to the extent that a
Debenture Holder shall have agreed to the cancellation of his, her or its
Debenture pursuant to this Section 2.07.
(c) Subject to the provisions of this Section 2.07, promptly after the
Effective Time, Buyer shall pay to each Debenture Holder of a Debenture with a
strike price of $6.00 who shall have entered into an agreement with Seller for
the cancellation of such holder's Debenture, an amount in cash equal to 116.67%
of such Debenture Holders' pro-rata share of the outstanding principal amount of
such Debenture, together with accrued interest thereon as provided in the
applicable Debenture. The maximum aggregate consideration payable to the
Debenture Holders of Debentures with a strike price of $6.00 by Buyer, assuming
that all such Debenture Holders enter into agreements with Seller for the
cancellation of such holders' Debentures, shall be $583,350.
(d) Subject to the provisions of this Section 2.07, promptly after the
Effective Time, Buyer shall pay to each Debenture Holder of a Debenture with a
strike price of $6.50 who shall have entered into an agreement with Seller for
the cancellation of such holder's Debenture, an amount in cash equal to 109% of
such Debenture Holders' pro-rata share of the outstanding principal amount of
such Debenture, together with accrued interest thereon as provided in the
applicable Debenture. The maximum aggregate consideration payable to the
Debenture Holders of Debentures with a strike price of $6.50 by Buyer, assuming
that all such Debenture Holders enter into agreements with Seller for the
cancellation of such holders' Debentures, shall be $3,019,300.
2.08. DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary,
holders of Seller Common Stock and Seller Preferred Stock which are entitled to
dissenter's rights in connection with the Merger under the CBCA (collectively,
the "DISSENTING SHARES") shall not be converted into or represent the right to
receive the Merger Consideration applicable to such shares. Such stockholders
shall be entitled to receive payment of the fair market value of such Dissenting
Shares held by them in accordance with the provisions of the CBCA, except that
all Dissenting Shares held by stockholders who shall have failed to perfect or
who effectively shall have withdrawn or lost their rights to the payment of fair
market value for such shares under the CBCA shall
thereupon be deemed to have been converted into and to have become exchangeable
for, as of the Effective Time, the right to receive the Merger Consideration
applicable to such shares, without any interest thereon, upon surrender, in the
manner provided in Section 2.09, of the certificate or certificates that
formerly evidenced such shares.
(b) Seller shall give Buyer (i) prompt notice of any demand for payment
of fair market value received by Seller, the withdrawals of any such demand, and
any other instrument served pursuant to the CBCA and received by Seller and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for payment of fair market value under the CBCA. Seller shall not,
except with the prior written consent of Buyer, make any payment with respect to
any demands for payment of fair market value or offer to settle or settle any
such demands.
2.09. EXCHANGE OF CERTIFICATES.
(a) From and after the Effective Time, a bank or trust company to be
designated by Buyer (the "EXCHANGE AGENT") shall act as exchange agent in
effecting the exchange of the Merger Consideration for Certificates which, prior
to the Effective Time, represented shares of Seller Common Stock or Seller
Preferred Stock, as the case may be, entitled to payment pursuant to Section
2.05 hereof. At or immediately prior to the Effective Time, Buyer shall deposit
with the Exchange Agent the aggregate Merger Consideration necessary to make the
payments contemplated hereby on a timely basis (the "DEPOSIT AMOUNT") in trust
for the benefit of the holders of Certificates. Upon the surrender of each such
Certificate and the issuance and delivery by the Exchange Agent of the Merger
Consideration applicable thereto in exchange therefor, such Certificate shall
forthwith be cancelled. Until so surrendered and exchanged, each such
Certificate (other than Certificates representing shares held by Buyer or Seller
or any direct or indirect Subsidiary of Buyer or Seller and Dissenting Shares)
shall represent solely the right to receive the Merger Consideration applicable
thereto, without interest, multiplied by the number of shares represented by
such Certificate. Promptly after the Effective Time, the Exchange Agent shall
mail to each record holder of Certificates which immediately prior to the
Effective Time represented shares a form of letter of transmittal and
instructions for use in surrendering such Certificates and receiving the Merger
Consideration applicable thereto. Upon the surrender to the Exchange Agent of
such an outstanding Certificate together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such instructions, the
holder shall receive the Merger Consideration applicable thereto, without any
interest thereon and such Certificate shall be cancelled. If any Merger
Consideration is to be paid to a name other than the name in which the
Certificate representing shares surrendered in exchange therefor is registered,
it shall be a condition to such payment or exchange that the Person requesting
such payment or exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the payment of such Merger Consideration to a name
other than that of the registered holder of the Certificate surrendered, or such
Person shall establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of shares for
any Merger Consideration delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(b) Buyer shall not be entitled to the return of any of the Deposit
Amount in the possession of the Exchange Agent relating to the transactions
described in this Agreement until the date which is 180 days after the Effective
Time. Thereafter, each holder of a Certificate representing a share may
surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Merger Consideration applicable thereto, without any interest
thereon, but shall have no greater rights against the Surviving Corporation than
may be accorded to general creditors of the Surviving Corporation.
(c) At and after the Effective Time, the holders of Certificates to be
exchanged for the Merger Consideration applicable thereto pursuant to this
Agreement shall cease to have any rights as to stockholders of Seller except for
the right to surrender such holder's Certificates in exchange for payment of the
Merger Consideration applicable thereto, and after the Effective Time there
shall be no transfers on the stock transfer
books of the Surviving Corporation of the shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent,
they shall be cancelled and exchanged for the Merger Consideration applicable
thereto, as provided in this Article II, subject to applicable law in the case
of Dissenting Shares.
(d) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the Person claiming such Certificate
to be lost, stolen or destroyed and subject to such other conditions as the
Buyer may impose, the Exchange Agent shall pay in exchange for such lost, stolen
or destroyed Certificate the Merger Consideration deliverable in respect of such
Certificate as determined in accordance herewith. When authorizing such payment
of the Merger Consideration in exchange for such Certificate, the Buyer (or any
authorized officer thereof) may, in its reasonable discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificate to deliver to the Surviving Corporation a bond in such sum
as the Surviving Corporation may reasonably require as indemnity against any
claim that may be made against Buyer, the Surviving Corporation or the Exchange
Agent with respect to the Certificate alleged to have been lost, stolen or
destroyed.
(e) The provisions of this Section 2.09 shall also apply to Dissenting
Shares that lose their status as such, except that the obligations of Exchange
Agent under this Section 2.09 shall commence on the date of loss of such status.
2.10. SUPPLEMENTARY ACTION. If, at any time after the Effective Time,
any further assignments or assurances in law or any other things are necessary
or desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of either Seller or Newco, or
otherwise to carry out the provisions of this Agreement, the officers and
directors of the Surviving Corporation are hereby authorized and empowered, in
the name of and on behalf of Seller and Newco, to execute and deliver any and
all things necessary or proper to vest or to perfect or confirm title to such
property or rights in the Surviving Corporation, and otherwise to carry out the
purposes and provisions of this Agreement.
2.11. POSSIBLE ALTERNATIVE STRUCTURE. Notwithstanding any other
provision of this Agreement to the contrary, prior to the Effective Time, Buyer
shall be entitled to revise the structure of the transaction to provide that
Seller shall be merged with and into Newco at the Effective Time, with Newco as
the surviving corporation of the Merger. Notwithstanding the foregoing or any
other provision of this Agreement to the contrary, Buyer and Seller may jointly
elect prior to the Effective Time, to substitute an alternative structure for
the accomplishment of the transactions contemplated by this Agreement; it being
understood by Buyer and Seller that any change to the structure of the Merger
pursuant to this Section 2.11 shall not be adopted if such change would (a)
materially delay consummation of the Merger, (b) change the amount or form of
consideration to be received by the stockholders of Seller or (c) have an
adverse impact on the financial benefits reasonably expected to be derived by,
or affect the obligations of Seller to, the security holders (Seller Common
Stock, Seller Preferred Stock, Options, Debentures and Warrants) of Seller from
the transactions provided for herein. Buyer and Seller agree that this Agreement
shall be appropriately amended in order to reflect any alternative structure.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer and Newco that, except as
described in the applicable section of the Seller Disclosure Schedule furnished
by Seller to Buyer prior to the execution of this Agreement (the "SELLER
DISCLOSURE SCHEDULE") corresponding to the Sections set forth below:
3.01. ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado. Each Subsidiary of Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Seller and its Subsidiaries have all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as it is now being conducted. Each of Seller and
its Subsidiaries is duly qualified as a foreign corporation, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, other than in jurisdictions where the failure to be so qualified,
individually and in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect. Except as set forth in Section 3.01
of the Seller Disclosure Schedule, other than Seller's ownership interest in its
Subsidiaries, Seller has no direct or indirect equity or related interest in any
partnership, corporation, limited liability company, joint venture, business
association or other entity.
3.02. ARTICLES OF ORGANIZATION; BYLAWS; AND STOCK TRANSFER RECORDS.
Seller has made available to Buyer prior to the date of this Agreement complete
and correct copies of (i) the Articles of Organization (or other charter
document) and By-laws of Seller and each of its Subsidiaries, (ii) shareholder
list of each of Seller's Subsidiaries and (iii) all stock certificates
representing any of the issued and outstanding capital stock of each of Seller's
Subsidiaries, and in each case such copies are or will be accurate and complete
as of the date of this Agreement or when furnished.
3.03. CAPITALIZATION OF SELLER.
(a) On the date of this Agreement, the authorized capital stock of
Seller consists of (i) 15,000,000 shares of Seller Common Stock, of which
6,202,425 shares are issued and outstanding and (ii) 2,500,000 shares of
preferred stock, of which 15,000 shares have been designated Seller Preferred
Stock, of which 1,793 shares are issued and outstanding. Except for (i) Options
listed in the Seller Disclosure Schedule which were granted under the Seller
Equity Plans, (ii) the rights created pursuant to this Agreement, (iii) rights
created pursuant to the Warrants, (iv) rights created pursuant to the
Debentures, and (v) as set forth in Section 3.03 of Seller Disclosure Schedule,
there are no other options, warrants, calls, rights, commitments or agreements
of any character to which Seller is a party or by which it is bound obligating
Seller to issue, sell, deliver, repurchase or redeem or cause to be issued,
sold, delivered, repurchased or redeemed any shares of capital stock of, or
equity interests in, Seller. All outstanding shares are, and all shares subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be, duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights or
rights of first refusal. None of Seller or any of its Subsidiaries is required
to redeem, repurchase or otherwise acquire shares of capital stock of Seller or
any of its Subsidiaries. Seller has no stockholder rights plan or agreement in
force providing for the issuance to holders of shares of Seller Common Stock or
Seller Preferred Stock of rights to purchase or receive stock, cash or other
assets upon the acquisition or proposed acquisition of shares of Seller Common
Stock or Seller Preferred Stock by a Person (a "RIGHTS PLAN"), nor has Seller's
Board of Directors or stockholders ever adopted a Rights Plan.
(b) All of Seller's Subsidiaries are listed in Exhibit 21.1 to Seller's
Annual Report on Form 10-KSB for the fiscal year ended March 31, 1999 (the "1999
10-KSB"). Except as set forth in the 1999 10-KSB or in the Seller Disclosure
Schedule, Seller owns all of the outstanding capital stock of its Subsidiaries
free and clear of any liens, security interests, pledges, agreements, claims,
charges or encumbrances of any nature whatsoever. Except as set forth in Section
3.03 of Seller Disclosure Schedule, there are no voting trusts or other
agreements or understandings to which Seller or any of its Subsidiaries is a
party or by which Seller or any of its Subsidiaries may be bound with respect to
the voting of the capital stock of Seller or any of Seller's Subsidiaries.
Except as set forth in Section 3.03 of Seller Disclosure Schedule, there are no
options, warrants, calls, rights, commitments, or agreements of any character to
which any of Seller's Subsidiaries is a party or by which any of Seller's
Subsidiaries is bound obligating such Subsidiary to issue, sell, deliver,
repurchase or redeem, or caused to be issued, sold, delivered, repurchased or
redeemed, any shares of capital stock of, or equity interests in, such
Subsidiary. All of the outstanding capital stock of each of Seller's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and issued free of preemptive rights or rights of first refusal.
3.04. CORPORATE POWER, AUTHORIZATION AND ENFORCEABILITY. Seller has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Seller, the
performance by Seller of its obligations hereunder and the consummation by
Seller of the transactions contemplated hereby have been duly and validly
authorized by Seller's Board of Directors and no other corporate action on the
part of Seller is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Offer and the
Merger, the approval and adoption of this Agreement by holders of a majority of
the Seller Common Stock and, with respect to the Merger, the approval and
adoption of this Agreement by the holders of a majority of the Seller Preferred
Stock). This Agreement has been duly executed and delivered by Seller and is a
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms. The affirmative vote of the holders of a majority of
the outstanding shares of Seller Common Stock and Seller Preferred Stock
entitled to vote thereon is the only vote of any class of capital stock of
Seller required by the CBCA, the Articles of Organization of Seller or the
Bylaws to adopt this Agreement and approve the Offer and the Merger.
3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming satisfaction of any applicable requirements referred to in
Section 3.05(b) below, and except as set forth in Section 3.05 of the Seller
Disclosure Schedule, the execution and delivery by Seller of this Agreement, the
compliance by Seller with the provisions hereof and the consummation by Seller
of the transactions contemplated hereby:
(A) will not conflict with or violate any statute, law,
ordinance, rule, regulation, order, writ, judgment, award, injunction,
decree or ruling applicable to Seller or any of its Subsidiaries or any
of their properties, or conflict with, violate or result in any breach
of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any
rights of termination, amendment, cancellation or acceleration of, or
the loss of a benefit under, or result in the creation of a lien,
security interest, charge or encumbrance on any of the properties or
assets of Seller or any of its Subsidiaries pursuant to (i) the
Articles of Organization (or other charter document) or Bylaws of
Seller or any of its Subsidiaries, or (ii) any contract, lease,
agreement, note, bond, mortgage, indenture, deed of trust, or other
instrument or obligation, or any license, authorization, permit,
certificate or other franchise, other than such conflicts, violations,
breaches, defaults, losses, rights of termination, amendment,
cancellation or acceleration, liens, security interests, charges or
encumbrances as to which requisite waivers have been obtained; and
(B) do not and will not result in any grant of rights to any
other party under the Articles of Organization (or other charter
document) or Bylaws of Seller or any of its Subsidiaries or restrict or
impair the ability of the Buyer or any of its Subsidiaries to vote, or
otherwise exercise the rights of a stockholder with respect to shares
of Seller or any of its Subsidiaries that may be directly or indirectly
acquired or controlled by them.
(b) Other than in connection with or in compliance with the provisions
of the CBCA and the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), (i) Seller is not required to submit any notice, report, registration,
declaration or other filing with any foreign, federal, state or local
government, court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (collectively, "GOVERNMENTAL
ENTITIES"), in connection with the execution or delivery of this Agreement by
Seller or the performance by Seller of its obligations hereunder or the
consummation by Seller of the transactions contemplated by this Agreement and
(ii) no waiver, consent, approval, order or authorization of any Governmental
Entity is required to be obtained in connection with the execution or delivery
of this Agreement by Seller or the performance by Seller of its obligations
hereunder or the consummation by Seller of the transactions contemplated by this
Agreement, other than such notices, reports, registrations, declarations,
filings, waivers, consents, approvals, orders, or authorizations, the absence of
which would not, individually and in the
aggregate, subject Seller or its Subsidiaries to any criminal penalties or
otherwise reasonably be expected to have a Material Adverse Effect.
3.06. SEC REPORTS; FINANCIAL STATEMENTS. Seller has filed all required
reports, schedules, forms, statements and other documents with the Securities
and Exchange Commission (the "SEC") since March 31, 1994 (collectively, the "SEC
REPORTS"). Seller has delivered to Buyer copies of (a) the consolidated balance
sheets of Seller and its Subsidiaries as of March 31 for the fiscal years 1998
and 1999, and the related consolidated statements of operations and cash flows
for the fiscal years 1997 through 1999, inclusive, as reported in the Annual
Report of Seller on Form 10-KSB for the fiscal year ended March 31, 1999 filed
with the SEC under the Exchange Act, accompanied by the audit report of Ernst &
Young LLP, and (b) the unaudited consolidated balance sheet of Seller and its
Subsidiaries as of September 30, 1999, the related unaudited consolidated
statements of income and changes in stockholders' equity for the six (6) months
ended September 30, 1999 and September 30, 1998 and the related unaudited
consolidated statements of cash flows for the six (6) months ended September 30,
1999 and September 30, 1998, all as reported in the Seller's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1999 (the "SEPTEMBER 1999
10-QSB") filed with the SEC under the Exchange Act. The March 31, 1999
consolidated balance sheet (the "SELLER BALANCE SHEET") of Seller (including the
related notes, where applicable) and the other financial statements referred to
herein were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved ("GAAP") (except
as may be indicated in the notes or schedules thereto and except, in the case of
the unaudited interim statements, as may be permitted under Form 10-QSB of the
Exchange Act) and present fairly in all material respects the consolidated
financial position of Seller and its consolidated Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows as of
the dates and for the fiscal periods indicated therein (subject, in the case of
unaudited interim financial statements, to normal year-end adjustments). The
books and records of Seller and its Subsidiaries have been, and are being,
maintained in accordance with GAAP and applicable legal and regulatory
requirements. Each SEC Report filed with the SEC complied in all material
respects with the then applicable requirements of the Exchange Act and the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and the rules and
regulations of the SEC promulgated thereunder and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Seller has filed all
documents and agreements which were required to be filed as exhibits to the SEC
Reports. None of Seller's Subsidiaries is required to file any statements or
reports with the SEC.
3.07. NO DEFAULT. Neither Seller nor any of its Subsidiaries is in
default or violation (and no event has occurred which with or without notice,
the lapse of time or the happening or occurrence of any other event would
constitute a default or violation) of any term, condition or provision of (i)
its Articles of Organization (or other charter document) or Bylaws, or (ii) any
contract, lease, agreement, license, note, bond, mortgage, indenture, deed of
trust or other instrument or obligation to which Seller or any of its
Subsidiaries is a party or by which Seller or its Subsidiaries or any of their
properties or assets may be bound (nor to the knowledge of Seller is any other
party thereto in breach thereof or default thereunder), except, in each case,
for such violations, conflicts, breaches or defaults which either individually
or in the aggregate will not have a Material Adverse Effect.
3.08. COMPLIANCE WITH LAW. Except as set forth in Section 3.08 of the
Seller Disclosure Schedule, each of Seller and its Subsidiaries is in
compliance, and has conducted its respective businesses so as to comply with,
all statutes, laws, ordinances, rules, regulations, permits and approvals
applicable to its operations, whether domestic or foreign, other than where such
noncompliance will not result in, or create the possibility of resulting in, a
material limitation on the conduct of the business of Seller, will not cause, or
create the possibility of causing, Seller or any of its Subsidiaries to incur
any financial penalty in excess of $20,000, and will not otherwise result, or
create the possibility of resulting in, any Material Adverse Effect. Except as
disclosed in the SEC Reports, as of the date hereof no investigation or review
by any Governmental Entity with respect to Seller, any of its Subsidiaries or
any property owned or leased by Seller or any of its Subsidiaries is pending or,
to the knowledge of Seller, threatened.
3.09. PERMITS. Seller and its Subsidiaries have all permits,
authorizations, licenses and franchises from Governmental Entities required to
conduct their business as now being conducted, except where the failure to have
any such permits, authorizations, licenses and franchises would not have a
Material Adverse Effect. Section 3.09 of the Seller Disclosure Schedule lists as
of the date of this Agreement all of Seller's licenses and permits
(collectively, the "LICENSES"). The Licenses are the only permits and licenses
required by Seller to operate its business as currently conducted. Seller is not
in material default with respect to any of the Licenses. The consummation of the
transactions contemplated by this Agreement will not cause any default,
cancellation or loss of a benefit under, or require any approval of a
Governmental Authority with respect to, any of the Licenses.
3.10. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the 1999
10-KSB, the September 1999 10-QSB, in Section 3.10 of the Seller Disclosure
Schedule, or incurred hereinafter in the ordinary course of business consistent
with past practice and with Section 5.01 hereof, since March 31, 1999, (i) the
business of each of Seller and its Subsidiaries has been conducted only in the
ordinary course consistent with past practices, (ii) there has not been any
change in the business, assets, financial condition or results of operations of
Seller and its Subsidiaries, (iii) there has not been any change in any policy
or practice followed by Seller nor its Subsidiaries in the ordinary course of
business except for changes which have not had and are not likely to have a
Material Adverse Effect, (iv) there has not been any material agreement,
contract or commitment entered into, or agreed to be entered into, except for
those in the ordinary course of business; (v) there has not been any increase in
or establishment of any bonus, insurance, severance (including severance after a
change in control), deferred compensation, pension, retirement, profit sharing,
life insurance or split dollar life insurance, retiree medical or life
insurance, or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
Seller or its Subsidiaries, except with respect to cash compensation, in the
ordinary course of business consistent with past practice; (vi) there has not
been any change in any of the accounting methods or practices of Seller and its
Subsidiaries other than changes required by applicable law or applicable
accounting policies; and (viii) neither Seller nor its Subsidiaries has
declared, paid or set aside for payment any dividend or other distribution in
respect of its capital stock or redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of capital stock or other securities of
Seller or any Subsidiary.
3.11. NO UNDISCLOSED LIABILITIES. Except for liabilities and
obligations incurred since March 31, 1999 in the ordinary course of business,
incurred in connection with this Agreement or identified in Section 3.11 of the
Seller Disclosure Schedule, neither Seller nor any of its Subsidiaries has any
liabilities or obligations of any nature whatsoever (whether absolute, accrued,
fixed, contingent, liquidated, unliquidated or otherwise), required by generally
accepted accounting principles to be recognized or disclosed on a consolidated
balance sheet of Seller and its Subsidiaries or in the notes thereto, other than
those recognized or disclosed in the Seller Balance Sheet or disclosed in the
1999 10-KSB or the September 1999 10-QSB.
3.12. LITIGATION. Except as set forth in the 1999 10-KSB or the
September 1999 10-QSB, there is no action, suit, investigation or proceeding
pending against, or to the knowledge of Seller, threatened against or affecting,
Seller or any of its Subsidiaries or any of their respective properties as to
which there is a reasonable possibility of an adverse determination and which if
determined adversely to Seller could be expected to have a Material Adverse
Effect and there is no judgment, decree, writ, injunction, award, ruling or
order of any Governmental Entity or arbitrator outstanding against Seller or any
of its Subsidiaries having, or which, insofar as can reasonably be foreseen, in
the future would have, a Material Adverse Effect. Section 3.12 of the Seller
Disclosure Schedule includes a list of all litigation pending or threatened
against Seller as of the date of this Agreement. Seller has made available to
Buyer correct and complete copies of all correspondence prepared by its counsel
for Seller's auditors in connection with the last completed audit of Seller's
financial statements and any such correspondence since the date of the last such
audit. As of the date of this Agreement, there are no actions, suits or
proceedings pending or, to the knowledge of Seller, threatened against Seller
arising out of or in any way related to this Agreement, the Offer, the Merger or
any of the transactions contemplated hereby or thereby.
3.13. ERISA.
(a) Section 3.13 of the Seller Disclosure Schedule lists each "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all other written or oral plans
or agreements involving direct or indirect compensation (including any
employment agreements entered into between Seller or any of its Subsidiaries and
any employee or former employee of Seller or any of its Subsidiaries, but
excluding worker's compensation, unemployment compensation and other
government-mandated programs) currently or previously maintained, contributed to
or entered into by Seller or any of its Subsidiaries or any ERISA Affiliate
thereof for the benefit of any employee or former employee of or current or
former service provider to Seller or any of its Subsidiaries under which Seller
or any of its Subsidiaries or any ERISA Affiliate thereof has or may have any
present or future obligation or liability (collectively, the "SELLER EMPLOYEE
PLANS"). For purposes of this Section 3.13, "ERISA AFFILIATE" shall mean any
entity which is a member of (i) a "controlled group of corporations," as defined
in Section 414(b) of the Internal Revenue Code of 1986, as amended (the "CODE"),
(ii) a group of entities under "common control," as defined in Section 414(c) of
the Code or (iii) an "affiliated service group," as defined in Section 414(m) of
the Code or treasury regulations promulgated under Section 414(o) of the Code,
any of which includes Seller or any of its Subsidiaries. Section 3.13 of Seller
Disclosure Schedule identifies the only Seller Employee Plans which individually
or collectively would constitute an "employee pension benefit plan," as defined
in Section 3(2) of ERISA (collectively, the "SELLER PENSION PLANS").
(b) No Seller Pension Plan is subject to Title IV of ERISA, Part 3 of
Title I of ERISA or Section 412 of the Code. No Seller Pension Plan constitutes
or has since the enactment of ERISA constituted a "multiemployer plan," as
defined in Section 3(37) of ERISA. Nothing done or omitted to be done and no
transaction or holding of any asset under or in connection with any Seller
Employee Plan has or is likely to make Seller or any of its Subsidiaries or any
officer or director thereof subject to any material liability under Title I of
ERISA or liable for any material tax pursuant to Section 4975 of the Code.
(c) Each Seller Pension Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date. Each trust forming a part of a Seller Pension
Plan is exempt from tax pursuant to Section 501(a) of the Code. Each Seller
Employee Plan has been maintained in compliance with its terms and with the
applicable requirements of ERISA and the Code.
(d) Each employment, severance or other similar contract, arrangement
or policy and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), vacation benefits, severance
or severance-type benefits, disability benefits, death benefits, hospitalization
benefits, retirement benefits, deferred compensation, profit-sharing, bonuses,
stock options, stock purchase, phantom stock, stock appreciation or other forms
of incentive compensation or post-retirement insurance, compensation or benefits
which (i) is not a Seller Employee Plan, (ii) is entered into, maintained or
contributed to, as the case may be, by Seller or any of its Subsidiaries, and
(iii) covers any employee or former employee of or other current or former
service provider to Seller or any of its Subsidiaries, is herein referred to as
a "SELLER BENEFIT ARRANGEMENT" and collectively as the "SELLER BENEFIT
ARRANGEMENTS." All Seller Benefit Arrangements are listed in Section 3.13 of the
Seller Disclosure Schedule. Each Seller Benefit Arrangement has been maintained
in compliance with its terms and with the requirements prescribed by any and all
statutes (including but not limited to the Code), orders, rules and regulations
which are applicable to such Seller Benefit Arrangements.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by Seller or any of its Subsidiaries
relating to, or change in employee participation or coverage under, any Seller
Employee Plan or Seller Benefit Arrangement which would increase the expense of
maintaining such Seller Employee Plan or Seller Benefit Arrangement above the
level of the expense incurred in respect thereof for the fiscal year ended March
31, 1999.
(f) The Seller has complied with the requirements of Section 4980B of
the Code with respect to any "qualifying event" (as defined in Section
4980B(f)(3) of the Code) occurring prior to and including the Closing Date,
except where failure to be in compliance individually and in the aggregate has
not had and would not reasonably be expected to have a Material Adverse Effect
and, to Seller's knowledge, no tax payable on account of Section 4980B of the
Code has been incurred with respect to any current or former employees of Seller
or any of its Subsidiaries.
(g) There is no term of any Seller Employee Plan or Seller Benefit
Arrangement covering a "disqualified individual" (as defined in Section 280G(c)
of the Code), or of any contract, instrument, agreement or arrangement with any
such disqualified individual, that individually or collectively could result in
a disallowance of the deduction for any "excess parachute payment" (as defined
in Section 280G(b)(i) of the Code) or the imposition of the excise tax provided
in Section 4999 of the Code. The consummation of the transactions contemplated
by this Agreement will not result in any "excess parachute payment" or the
imposition of any such excise tax.
(h) Seller has heretofore delivered or made available to Buyer copies
of all of Seller Employee Plans, Seller Pension Plans and Seller Benefit
Arrangements listed in Section 3.13 of Seller Disclosure Schedule.
(i) There is no pending or, to Seller's knowledge, threatened legal
action, proceeding or investigation, other than routine claims for benefits,
concerning any Seller Employee Plan, Seller Pension Plan or Seller Benefit
Arrangement or, to the knowledge of Seller any fiduciary or service provider
thereof and, to the knowledge of Seller, there is no basis for any such legal
action or proceeding.
(j) No Seller Employee Plan or Seller Benefit Arrangement provides
health, life or other similar welfare coverages after termination of employment
except to the extent required by applicable state insurance laws and Title I,
Part 6 of ERISA.
(k) With respect to each Seller Employee Plan, Seller Pension Plan or
Seller Benefit Arrangement for which a separate fund of assets is or is required
to be maintained, full payment has been made of all amounts required of Seller
and its Subsidiaries and ERISA Affiliates under the terms of each such Plan or
Arrangement or applicable law, through the Closing Date.
3.14. LABOR MATTERS. There is no labor strike, dispute, slowdown,
stoppage or lockout actually pending, or threatened against Seller or any
Subsidiary. Neither Seller nor any Subsidiary is a party to or bound by any
collective bargaining agreement with any labor organization applicable to
employees of Seller or any Subsidiary. Neither Seller nor any Subsidiary has
experienced any material work stoppage or other material labor difficulty during
the two-year period ending on the date hereof.
3.15. TAX RETURNS AND REPORTS.
(a) Seller and its Subsidiaries have timely filed in correct form with
the appropriate taxing authorities all federal, state, county, local and foreign
returns, estimates, information statements, reports and other documents in
respect of Taxes (as defined in Article VIII) required to be filed by Seller and
its Subsidiaries. All amounts shown due on such returns have been timely paid as
required by law.
(b) No assessment that has not been settled or otherwise resolved has
been made with respect to Taxes not shown on the Tax returns, other than such
additional Taxes as are being contested in good faith or which if determined
adversely to Seller would not have a Material Adverse Effect. There are no
material disputes pending or written claims asserted for Taxes or assessments
upon Seller or any of its Subsidiaries, nor has Seller or any of its
Subsidiaries been requested to give any currently effective waivers extending
the statutory period of limitation applicable to any Federal, state, county,
foreign or local income tax return for any period. No deficiency in Taxes or
other proposed adjustment that has not been settled or otherwise resolved has
been asserted in writing by any taxing authority against any of Seller or its
Subsidiaries. No Tax return of Seller or any of its Subsidiaries is now under
examination by any applicable taxing authority. There are no material liens for
Taxes (other than current Taxes not yet due and payable) on any of the assets of
Seller or any of its Subsidiaries, except for such liens for Taxes that would
not have a Material Adverse Effect. During the past five years, no jurisdiction
has made any written claim or allegation, or made any written inquiry pursuant
to such a written claim or allegation, that Seller or any of its Subsidiaries is
required to file Tax returns in such jurisdiction for any Tax for which Seller
or the applicable Subsidiary does not presently filed Tax returns in such
jurisdiction.
(c) Adequate provision has been made on the Seller Balance Sheet for
all Taxes of Seller and its Subsidiaries in respect of all periods through the
date hereof.
(d) As of the date of this Agreement, Seller has no ruling requests
currently pending with the Internal Revenue Service.
(e) Except as set forth in the SEC Reports, neither Seller nor any of
its Subsidiaries is a party to (or obligated under) any Tax allocation, tax
sharing or tax indemnity agreement which has as a party any Person other than
Seller or its Subsidiaries.
(f) Seller and its Subsidiaries have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, consultant, independent contractor, creditor, stockholder or
other party.
3.16. SELLER DEBT. Section 3.16 of the Seller Disclosure Schedule lists
all outstanding Indebtedness of Seller and each Subsidiary as of the date
hereof, except for individual items of indebtedness the principal amount of
which do not exceed $25,000. Section 3.16 of the Seller Disclosure Schedule sets
forth the amount of principal and unpaid interest outstanding under each
instrument evidencing Indebtedness of Seller or each Subsidiary, if any, that
will accelerate or become due or result in a right on the part of the holder of
such indebtedness (with or without due notice or lapse of time) to require
prepayment, redemption or repurchase as a result of the execution of this
Agreement or the consummation of the transactions contemplated hereby.
3.17. TRADEMARKS, PATENTS AND COPYRIGHTS.
(a) Section 3.17 of the Seller Disclosure Schedule contains a true and
complete list of Seller Intellectual Property and includes details of all due
dates for further filings, maintenance, payments or other actions falling due
within twelve (12) months of the Closing Date. All of Seller's patents, patent
applications, registered trademarks, and trademark applications, and registered
copyrights remain in good standing with all fees and filings due as of the
Closing Date duly made and the due dates specified in the Seller Disclosure
Schedule are accurate and complete.
(b) The Seller Intellectual Property consists solely of items and
rights which are: (i) owned by Seller; or (ii) rightfully used by Seller
pursuant to a valid license ("SELLER LICENSED INTELLECTUAL PROPERTY"), the
parties and date of each such license agreement and each material agreement in
which Seller is the licensor or owner of the subject rights in the agreement
being set forth on Section 3.17(b) of the Seller Disclosure Schedule. Seller has
all rights in Seller Intellectual Property necessary to carry out Seller's
current activities (and had all rights necessary to carry out its former
activities at the time such activities were being conducted), including without
limitation, to the extent required to carry out such activities, rights to make,
use, reproduce, modify, adopt, create derivative works based on, translate,
distribute (directly and indirectly), transmit, display and perform publicly,
license, rent and lease and, other than with respect to the Seller Licensed
Intellectual Property, assign and sell, the Seller Intellectual Property.
(c) The reproduction, manufacturing, distribution, licensing,
sublicensing or sale of any Seller Intellectual Property, now used or offered or
proposed for use, licensing or sale by Seller does not infringe on
any patent, copyright, trademark, service xxxx, trade name, trade dress, firm
name, Internet domain name, logo, trade dress, of any person and does not
constitute a misappropriation of any trade secret. No claims (i) challenging the
validity, effectiveness or ownership by Seller of any of the Seller Intellectual
Property, or (ii) to the effect that the use, distribution, licensing,
sublicensing or sale of the Seller Intellectual Property as now used or offered
or proposed for use, licensing, sublicensing or sale by Seller infringes or will
infringe on any intellectual property or other proprietary right of any person
have been asserted or, to the knowledge of Seller, are threatened by any person
or have been made or threatened by any person against the Seller's distributors.
To the knowledge of Seller, there is no unauthorized use, infringement or
misappropriation of any of the Seller Intellectual Property by any third party,
employee or former employee.
(d) All Seller Intellectual Property has been solely developed by full
time employees within the scope of his or her employment with the Seller or
within the scope of his or her employment with companies acquired by Seller
prior to the date hereof. All employee contribution or participation in the
conception and development of the Seller Intellectual Property on behalf of
Seller constitutes work prepared by an employee within the scope of his or her
employment in accordance with applicable federal and state law that has accorded
Seller ownership of all tangible and intangible property thereby arising.
(e) Seller is not, nor as a result of the execution or delivery of this
Agreement, or performance of Seller's obligations hereunder, will Seller be, in
violation of any material license, sublicense, agreement or instrument to which
Seller is a party or otherwise bound, nor will execution or delivery of this
Agreement, or performance of Seller's obligations hereunder, cause the
diminution, termination or forfeiture of any material Seller Intellectual
Property.
(f) Section 3.17(f) of the Seller Disclosure Schedule contains a true
and complete list of all of Seller's internally-developed software programs
("SELLER SOFTWARE PROGRAMS"). Seller owns full and unencumbered right and good,
valid and marketable title to such Seller Software Programs and all Seller
Intellectual Property free and clear of all mortgages, pledges, liens, security
interests, conditional sales agreements or encumbrances.
(g) The Seller Software Programs (i) have been designed to ensure year
2000 compatibility, which includes, but is not limited to, being able to provide
specific dates and calculate spans of dates within and between twentieth century
and twenty-first century, prior to, including and following January 1, 2000;
(ii) operate and will operate in accordance with their specifications and
correctly process day and date calculations for dates prior and up to December
31, 1999, and on and after January 1, 2000, prior to, during and after the
calendar year 2000; and (iii) shall not end abnormally or provide invalid or
incorrect results as a result of date data, specifically including date data
which represents or references different centuries or more than one century.
3.18. MATERIAL AGREEMENTS. Except as set forth in the 1999 10-KSB and
as listed in Section 3.18 of the Seller Disclosure Schedule, except for this
Agreement and the agreements specifically referred to herein, neither Seller nor
any of its Subsidiaries is a party to or bound by any of the following
agreements (with the following agreements, and the agreements included as
exhibits to the SEC Reports, collectively referred to as the "MATERIAL
AGREEMENTS"):
(a) any contract or agreement or amendment thereto that would be
required to be filed as an exhibit to a registration statement on Form S-1 filed
by Seller as of the date hereof;
(b) any confidentiality agreement, non-competition agreement or other
contract or agreement that contains covenants limiting Seller's or any of its
Subsidiaries' freedom to compete in any line of business or in any location or
with any Person; and
(c) any loan agreement, indenture, note, bond, debenture or any other
document or agreement evidencing a capitalized lease obligation or other
Indebtedness (as defined in Article VIII) to any Person, other than any
Indebtedness in a principal amount less than $25,000 individually or $100,000 in
the aggregate.
Seller has delivered to Buyer a correct and complete copy of each
Material Agreement and a written summary setting forth the terms and conditions
of each oral agreement, if any, referred to in the Seller Disclosure Schedule.
Each such Material Agreement constitutes the legal, valid and binding obligation
of Seller or a Subsidiary, as the case may, and to the knowledge of Seller, the
other party thereto, enforceable against such parties in accordance with the
terms thereof (except as enforcement may be limited by general principles of
equity whether applied in a court of law or equity and by bankruptcy, insolvency
and similar laws affecting creditors' rights and remedies generally). None of
Seller or any of its Subsidiaries, as the case may be, is in default under, or
with the giving of notice or the lapse of time, or both, would be in default
under, any of the material terms or conditions of any Material Agreement. To the
knowledge of Seller, there has occurred no material default or event which, with
the giving of notice or the lapse of time, or both, would constitute a material
default by any other party to any Material Agreement.
3.19. INSURANCE. Seller and each Subsidiary is presently insured, and
during each of the past five calendar years has been insured, against such risks
as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured. The policies of fire, theft,
liability and other insurance maintained with respect to the assets or
businesses of Seller and its Subsidiaries provide reasonably adequate coverage
against loss. Seller has heretofore furnished to Buyer a complete and correct
list as of the date hereof of all insurance policies maintained by Seller or its
Subsidiaries, and has made available to Buyer complete and correct copies of all
such policies, together with all riders and amendments thereto. All such
policies are in full force and effect and all premiums due thereon have been
paid to the date hereof. Seller and its Subsidiaries have complied in all
material respects with the terms of such policies.
3.20. PROPERTIES. Except as set forth in Section 3.20 of the Seller
Disclosure Schedule, neither Seller nor any or its Subsidiaries owns any real
property. Seller and its Subsidiaries have good and valid title, free and clear
of all Encumbrances to all of their material properties and assets, whether
tangible or intangible, real, personal or mixed, reflected in the 1999 10-KSB as
being owned by Seller and its Subsidiaries as of the date thereof, other than
(i) any properties or assets that have been sold or otherwise disposed of in the
ordinary course of business since the date of the Seller Balance Sheet, (ii)
liens disclosed in the notes to the Seller Balance Sheet and (iii) liens arising
in the ordinary course of business after the date of the Seller Balance Sheet.
All buildings, and all fixtures, equipment and other property and assets that
are material to its business on a consolidated basis, held under leases or
sub-leases by Seller or any Subsidiary are held under valid instruments
enforceable in accordance with their respective terms, subject to applicable
laws of bankruptcy, insolvency or similar laws relating to creditors' rights
generally and to general principles of equity (whether applied in a proceeding
in law or equity). Substantially all of Seller's and its Subsidiaries' equipment
in regular use has been reasonably maintained and is in serviceable condition,
reasonable wear and tear excepted.
3.21. LEASES. Section 3.21 of the Seller Disclosure Schedule lists all
outstanding leases, both capital and operating, or licenses, pursuant to which
Seller or any of its Subsidiaries has (i) obtained the right to use or occupy
any real or tangible personal property under arrangements where the remaining
obligation is more than $25,000, inclusive of any renewal rights or (ii) granted
to any other Person the right to use any material item of machinery, equipment,
furniture, vehicle or other personal property of Seller or any of its
Subsidiaries having an original cost of $25,000 or more.
3.22. BUSINESS ACTIVITY RESTRICTION. Except as set forth in Section
3.22 of the Seller Disclosure Schedule, there is no non-competition or other
similar agreement, commitment, judgment, injunction, order or decree to which
Seller or any Subsidiary is a party or subject to that has or could reasonably
be expected to have the effect of prohibiting or impairing the conduct of
business by Seller. Seller has not entered into any agreement under which Seller
is restricted from selling, licensing or otherwise distributing any of its
technology
or products to, or providing services to, customers or potential customers or
any class of customers, in any geographic area, during any period of time or in
any segment of the market or line of business.
3.23. ACCOUNTS RECEIVABLE; INVENTORY.
(a) Except as specifically set forth in Section 3.23 of the Seller
Disclosure Schedule, hereto, all accounts and notes receivable reflected in the
Seller Balance Sheet, and all accounts and notes receivable arising subsequent
to the date of the Seller Balance Sheet, have arisen in the ordinary course of
business, represent valid obligations to Seller or a Subsidiary and, subject
only to an amount of bad debts reasonable in the industry and not materially
different than Seller's past experience, have been collected or are collectible
in the aggregate recorded amounts thereof in accordance with their terms.
(b) The inventories (and any reserves established with respect thereto)
of Seller and its Subsidiaries as of March 31, 1999 are described in Section
3.23(b) of the Seller Disclosure Schedule. All such inventories (net of any such
reserves) are properly reflected on the Seller Balance Sheet in accordance with
GAAP and, to the best knowledge of Seller, are of such quality as to be useable
and saleable in the ordinary course of business (subject, in the case of
work-in-process inventory, to completion in the ordinary course of business).
3.24. CUSTOMERS AND SUPPLIERS. Neither Seller's nor any of its
Subsidiaries' customers which individually accounted for more than 5% of
Seller's or such Subsidiary's gross revenues during the 12-month period
preceding the date hereof has terminated or threatened or indicated an intention
to terminate any agreement with Seller or such Subsidiary. Except as set forth
in Section 3.24 of the Seller Disclosure Schedule, as of the date hereof, no
material supplier of Seller or any of its Subsidiaries has notified Seller in
writing that it will stop, or decrease the rate of, supplying materials,
products or services to Seller or such Subsidiary.
3.25. YEAR 2000 COMPLIANCE. The only "mission-critical" computer
systems (as such term is commonly used in regulations and trade organization
guidelines with respect to the Year 2000 Problem (as defined below)) owned or
utilized by Seller and its Subsidiaries in their businesses are set forth in
Section 3.25 of the Disclosure Schedule (the "SELLER MISSION CRITICAL SYSTEMS").
Seller and its Subsidiaries have taken all steps necessary to ensure that all of
such Seller Mission Critical Systems will not, or each of Seller and its
Subsidiaries has received written assurances from the applicable third-party
service providers with respect to each Seller Mission Critical System that each
of such Seller Mission Critical Systems will not, contain any deficiencies
relating generally to formatting for entering dates (commonly referred to and
referred herein as the "YEAR 2000 PROBLEM") and each Seller Mission Critical
System is in compliance with all regulations and trade organization guidelines
concerning the Year 2000 Problem. To the knowledge of Seller, all of Seller's
and its Subsidiaries' other computer systems ("NON-MISSION CRITICAL SYSTEMS"),
third party service and equipment providers are in compliance with all
regulations and trade organization guidelines concerning the Year 2000 Problem,
except where the failure to be compliant would not result in any Material
Adverse Effect. None of Seller or any Subsidiary is aware of any inability on
the part of any customer or service provider with which Seller or any Subsidiary
transacts business to timely remedy any deficiencies of its own in respect of
the Year 2000 Problem.
3.26. ENVIRONMENTAL MATTERS. Except as would not reasonably be
expected to have a Material Adverse Effect, (a) Seller and each Subsidiary
are in compliance with all applicable Environmental Laws, (b) neither Seller
nor any Subsidiary has received any written notice with respect to the
business of, or any property owned or leased by, Seller or any Subsidiary
from any governmental entity or third party alleging that Seller or any
Seller Subsidiary is not in compliance with any Environmental Law, and (c)
there has been no "release" of a "hazardous substance", as those terms are
defined in the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 ET SEQ., in excess of a reportable
quantity on any real property owned by Seller or any Subsidiary that is used
for the business of Seller or any Subsidiary.
3.27. PRIOR ACQUISITIONS AND DISPOSITIONS. Except as set forth in the
1999 10-KSB or in Section 3.27 of the Seller Disclosure Schedule, no claims,
amounts owed, liabilities (contingent or otherwise), encumbrances,
legal proceedings or any other obligations of any kind are due or were incurred
or outstanding in connection with any acquisitions or dispositions made by
Seller or any of its Subsidiaries prior to the date of this Agreement.
3.28. ABSENCE OF CERTAIN BUSINESS PRACTICES. No employee, consultant,
agent or other representative of Seller or any of its Subsidiaries has directly
or indirectly within the past five years given or agreed to give any gift or
similar benefit to any customer, supplier, governmental employee or other Person
who is or may be in a position to help or hinder the business of Seller or any
of its Subsidiaries in connection with any actual or proposed transaction which
(a) would reasonably be expected to subject Seller or any of its Subsidiaries to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding, (b) if not given in the past, would reasonably be expected to have
had a Material Adverse Effect, or (c) if not continued in the future, would
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, Seller has not committed, been charged with or to
the knowledge of Seller been under investigation with respect to, nor does there
exist, any violation by Seller of the Foreign Corrupt Practices Act, as amended
(the "FCPA").
3.29. TAKEOVER LAWS. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation enacted under
state or federal laws in the United States including, without limitation,
applicable to Seller or any of Seller Subsidiaries is applicable to the
execution, delivery and performance of this Agreement, the Seller Option
Agreement or the Stockholder Agreements or the consummation of the Offer or the
Merger.
3.30. OPINION OF FINANCIAL ADVISOR. Seller has received the opinion of
Seller's Financial Advisor, as of the date of this Agreement, to the effect that
the Merger Consideration is fair, from a financial point of view, to Seller's
stockholders.
3.31. DISCLOSURE. To Seller's knowledge, as of the date of this
Agreement, no representation or warranty by Seller in this Agreement contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not false or
misleading.
3.32. BROKERS AND FINDERS. Seller has furnished to Buyer or its counsel
a true and complete copy of that certain letter agreement (the "XXXXXXXXXXX
ENGAGEMENT LETTER") between Seller and Xxxxxxxxxxx Xxxxxxx & Co., Inc. (the
"SELLER'S FINANCIAL ADVISOR"), such letter agreement being the only agreement
pursuant to which such firm would be entitled to any payment relating to the
transactions contemplated hereunder. No broker, finder or investment banker
other than Seller's Financial Advisor is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Seller or any of its
Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND NEWCO
Buyer and Newco, jointly and severally, represent and warrant to Seller
that:
4.01. ORGANIZATION AND QUALIFICATION. Each of Buyer and Newco is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has all requisite corporate power
and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted. Newco is a new corporation that was
formed for the purpose of consummating the transactions contemplated by this
Agreement and has conducted no business and engaged in no activities unrelated
to the transactions contemplated by this Agreement.
4.02. CORPORATE POWER, AUTHORIZATION AND ENFORCEABILITY. Each of Buyer
and Newco has full corporate power and authority to enter into this Agreement
and to perform its obligations hereunder and to consummate all the transactions
contemplated hereby. The execution and delivery of this Agreement by Buyer and
Newco, the performance by each of Buyer and Newco of their respective
obligations hereunder and the consummation by Buyer and Newco of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Newco and the Board of Directors of the Buyer and no other
corporate action on the part of Buyer or Newco is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than the
approval of this Agreement and the Merger by the shareholders of Buyer and
Newco). This Agreement has been duly executed and delivered by each of Buyer and
Newco and is a legal, valid and binding obligation of each of Buyer and Newco,
enforceable against Buyer and Newco in accordance with its terms. The
affirmative vote of the holders of a majority of the outstanding shares of
common stock of Buyer entitled to vote thereon is the only vote of any class of
capital stock of Buyer required to adopt this Agreement and approve the Merger.
4.03. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming satisfaction of all applicable requirements referred to in
Section 4.03(b) below, the execution and delivery of this Agreement by Buyer and
Newco, the compliance by Buyer and Newco with the provisions hereof and the
consummation by Buyer and Newco of the transactions contemplated hereby will not
conflict with or violate any statute, law, ordinance, rule, regulation, order,
writ, judgment, award, injunction, decree or ruling applicable to the Buyer or
any of its Subsidiaries or any of their properties, or conflict with, violate or
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, cancellation or acceleration of, or the loss
of a benefit under, or result in the creation of a lien, security interest,
charge or encumbrance on any of the properties or assets of the Buyer or any of
its Subsidiaries pursuant to (i) the organizational documents of the Buyer or
any of its Subsidiaries or (ii) any contract, lease, agreement, note, bond,
mortgage, indenture, deed of trust, or other instrument or obligation, or any
license, authorization, permit, certificate or other franchise, other than such
conflicts, violations, breaches, defaults, losses, rights of termination,
amendment, cancellation or acceleration, liens, security interests, charges or
encumbrances as to which requisite waivers have been obtained or which
individually or in the aggregate would not have a material adverse effect on the
ability of the Buyer and Newco to perform their obligations under this
Agreement.
(b) Other than in connection with or in compliance with the provisions
of the CBCA, the Companies Xxx 0000 (as amended) and the Listing Rules of the
London Stock Exchange Limited, (i) neither Buyer nor Newco is required to submit
any notice, report, registration, declaration or other filing with any
Governmental Entity in connection with the execution or delivery of this
Agreement by Buyer and Newco or the performance by Buyer and Newco of their
obligations hereunder or the consummation by Buyer and Newco of the transactions
contemplated by this Agreement and (ii) no waiver, consent, approval, order or
authorization of any Governmental Entity is required to be obtained by Buyer or
Newco in connection with the execution or delivery of this Agreement by Buyer
and Newco or the performance by Buyer and Newco of their obligations hereunder
or the consummation by Buyer and Newco of the transactions contemplated by this
Agreement.
4.04. BROKERS AND FINDERS. No broker, finder or investment banker other
than Xxxxx Xxxxxxxxx and Co. Limited, the fees and expenses of which will be
paid by Buyer, is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Buyer or any of its Subsidiaries.
4.05. FINANCING. Buyer has provided to Seller a true and correct copy
of the Placing Agreement, between Buyer and Xxxxx Xxxxxxxxx and Co. Limited (the
"PLACING AGREEMENT"), pursuant to which, prior to the Effective Time, Buyer will
complete a placing of ordinary 5p shares in Buyer (the "SHARE ISSUANCE"), which
placing is being underwritten by Xxxxx Xxxxxxxxx and Co. Limited, and which, if
consummated will provide sufficient funds to consummate the transactions
contemplated by this Agreement, including (i) the payment of the aggregate
Merger Consideration to be paid pursuant to Section 2.05, (ii) the payment of
the amounts to be
paid with respect to outstanding Options, Warrants and Debentures pursuant to
Sections 2.06 and 2.07, (iii) the payment of any fees and expenses in connection
with the Merger or the financing thereof and (iv) provide for the working
capital needs of the Surviving Corporation following the Merger.
ARTICLE V
COVENANTS
5.01. CONDUCT OF BUSINESS BY SELLER. Except as required or permitted by
this Agreement or as disclosed in Section 5.01 of the Seller Disclosure
Schedule, during the period from the date of this Agreement until the Effective
Time, Seller agrees as to itself and its Subsidiaries that (except to the extent
that Buyer shall otherwise consent in writing) Seller and its Subsidiaries shall
conduct their respective operations in the ordinary course of business
consistent with past practice, and each of Seller and its Subsidiaries will use
its reasonable efforts to preserve intact its present business organization, to
keep available the services of its present officers and employees and to
maintain satisfactory relationships with licensors, licensees, suppliers,
contractors, distributors, customers and others having business relationships
with it. Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time, neither Seller nor any of
its Subsidiaries shall, without the prior written consent of Buyer (which
consent will be given or denied within a reasonable time after any request for
such consent):
(a) amend its Articles of Organization or other charter document or
Bylaws;
(b) authorize for issuance, issue, sell, deliver, pledge or agree or
commit to issue, sell, deliver or pledge (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any capital stock of any class or any debt or other securities
convertible into capital stock or equivalents (including, without limitation,
stock appreciation rights), or amend any of the terms of any of the foregoing,
other than the issuance of shares of capital stock upon the exercise of
outstanding options or rights under the Seller Equity Plans;
(c) (i) split, combine or reclassify any shares of its capital stock,
or authorize or propose the issuance or authorization of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
adopt or approve any Rights Plan, or repurchase, redeem or otherwise acquire any
of its securities or any securities of its Subsidiaries, or (ii) make any
payment of cash or other property to terminate, cancel or otherwise settle any
outstanding Options, other than in the case of clauses (i) or (ii) above for the
issuance of shares of Seller Common Stock in connection with the exercise of
options or rights under the Seller Equity Plans;
(d) (i) incur or assume any long-term Indebtedness or increase any
amounts outstanding under long-term credit facilities existing as of the date of
this Agreement or grant, extend or increase the amount of a mortgage lien on any
leasehold or fee simple interest of Seller or its Subsidiaries; or, except in
the ordinary course of business consistent with past practice in the case of
clauses (ii) through (vi) below, (ii) incur or assume any short-term debt or
increase amounts outstanding under short-term credit facilities existing as of
September 30, 1999; (iii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the obligations
of any other Person, except for obligations of Seller or any Subsidiary of
Seller; (iv) make any loans, advances or capital contributions to, or
investments in, any other Person; (v) pledge or otherwise encumber shares of
capital stock of Seller or any of its Subsidiaries; or (vi) mortgage or pledge
any of its assets, tangible or intangible, or create or suffer to exist any lien
thereon except as existing on the date of this Agreement or as may be required
under agreements outstanding on the date of this Agreement to which Seller or
any of its Subsidiaries are parties;
(e) except as expressly provided in this Agreement, enter into, adopt
or amend in any manner or terminate any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance, change-in-control or
other employee benefit agreement, trust, plan, fund or other arrangement for the
benefit or welfare of any director, officer or employee, or increase in any
manner the compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any plan or arrangement as in effect as of
the date of this Agreement or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(f) sell, lease, license, pledge or otherwise dispose of or encumber
any material assets except in the ordinary course of business consistent with
past practice (including without limitation any indebtedness owed to it or any
claims held by it);
(g) except in connection with the Bridgestone Agreement, acquire or
agree to acquire by merging or consolidating with or by purchasing any portion
of the capital stock or assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, association or other
business organization or division thereof, other than in the ordinary course of
business consistent with past practice;
(h) change any of the accounting principles or practices used by it
affecting its assets, liabilities or business, except for such changes required
by a change in generally accepted accounting principles;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(whether absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise), other than the payment, discharge or satisfaction of liabilities (i)
in the ordinary course of business consistent with past practices, (ii) with
notice to Buyer, in an amount which does not exceed $25,000 in the aggregate,
(iii) incurred pursuant to the terms of the Xxxxxxxxxxx Engagement Letter in an
amount not to exceed $1,250,000 plus expenses, or (iv) incurred in connection
with the transactions contemplated hereby, not to exceed the amounts described
in Section 5.01(i) of the Seller Disclosure Schedule;
(j) except as required by their terms, enter into, terminate or breach
(or take or fail to take any action, that, with or without notice or lapse of
time or both, would become a breach) or materially amend any contract which is
or would be a Material Agreement;
(k) without prior consultation with Buyer (in addition to the consent
requirement described above) commence any litigation or arbitration other than
in accordance with past practice or settle any litigation or arbitration for
money damages or other relief against Seller or any Subsidiary in excess of
$50,000 or if as part of such settlement Seller or any Subsidiary would agree to
any restrictions on its operations;
(l) grant any license with respect to or otherwise convey any Seller
Intellectual Property or take any action or fail to take any action which would
cause the representations and warranties of Seller set forth in Section 3.17
hereof to become untrue in any respect;
(m) elect or appoint any new directors or officers of Seller or any
Subsidiary;
(n) waive, release or amend its rights under any confidentiality,
"standstill" or similar agreement that Seller entered into in connection with
its consideration of a potential strategic transaction; provided, however, that
Seller may waive, release or amend its rights under any such confidentiality,
"standstill" or similar agreement if Seller's Board determines, based on the
advice of independent legal counsel that failure to do so would be reasonably
likely to constitute a breach of its fiduciary duties to Seller's stockholders
under applicable law;
(o) make or change any election, request permission of any Tax
authority or to change any accounting method, file any amended Tax return, enter
into any closing agreement, settle any Tax claim or
assessment relating to Seller or its Subsidiaries, surrender any right to claim
a refund of Taxes, or consent to any extension or waiver of the limitation
period applicable to any Tax claim or assessment relating to Seller or its
Subsidiaries; or
(p) settle or comprise any pending or threatened suit, action or claim
which is material or which relates to any of the transactions contemplated by
this Agreement;
(q) take any action that would reasonably be expected to result in (i)
any of the representations and warranties of Seller set forth in this Agreement
becoming untrue or (ii) any of the Offer Conditions not being satisfied;
(r) amend, modify or otherwise change any of the terms and conditions
set forth in the Bridgestone Agreement; or
(s) take, or agree in writing or otherwise to take, (i) any of the
actions described in Sections 5.01(a) through 5.01(r).
5.02. ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Subject to and in accordance with the terms and conditions of that
certain letter agreement between Buyer and Seller regarding the confidentiality
of information exchanged by the parties prior to the date hereof (the
"CONFIDENTIALITY AGREEMENT"), from the date of this Agreement to the Effective
Time, Seller shall, and shall cause its Subsidiaries, officers, directors,
employees and agents to, afford the officers, employees and agents of Buyer and
its affiliates and the attorneys, accountants, banks, other financial
institutions and investment banks working with Buyer and its officers, employees
and agents, reasonable access, at all reasonable times upon reasonable notice
and in such manner as will not unreasonably interfere with the conduct of
Seller's business, to its officers, employees, agents, properties, books,
records and contracts, and shall furnish Buyer and its affiliates and the
attorneys, banks, other financial institutions and investment banks working with
Buyer, all financial, operating and other data and information as they
reasonably request.
(b) Subject to the requirements of law, Buyer shall, and shall cause
its officers, employees, agents, consultants and affiliates and the attorneys,
banks, other financial institutions and investment banks who obtain such
information to, hold all information obtained pursuant to this Agreement or the
Confidentiality Agreement in confidence in accordance with the terms and
conditions of the Confidentiality Agreement and in the event of termination of
this Agreement for any reason, Buyer shall promptly return or destroy all
nonpublic documents obtained from Seller or any of its Subsidiaries and any
copies made of such documents for Buyer and all documentation and other material
prepared by Buyer or its advisors based on written nonpublic information
furnished by Seller or its advisors shall be destroyed except for those which
Buyer or its counsel deems advisable to retain in connection with pending or
future litigation.
5.03. PROXY STATEMENT.
(a) Promptly after execution and delivery of this Agreement, Seller
shall prepare and shall file with the SEC as soon as is reasonably practicable a
preliminary Proxy Statement, together with a form of proxy, with respect to the
Seller Special Meeting and shall use all reasonable efforts to have the Proxy
Statement and form of proxy cleared by the SEC as promptly as practicable, and
promptly after request by Buyer shall mail the definitive Proxy Statement and
form of proxy to stockholders of Seller. Subject to its fiduciary duties under
applicable law, the Proxy Statement shall contain the recommendation of the
Board of Directors that the stockholders of Seller vote to adopt and approve the
Offer, the Merger and this Agreement. The term "Proxy Statement" shall mean such
proxy or information statement at the time it initially is mailed to Seller's
stockholders and all amendments or supplements thereto, if any, similarly filed
and mailed.
(b) Buyer will provide Seller with all information concerning Buyer (or
its Affiliates) required to be included in, or otherwise reasonably requested by
Seller in connection with the preparation of, the Proxy Statement. The
information provided and to be provided by Buyer and Seller, respectively, for
use in the Proxy Statement shall, on the date the Proxy Statement is first
mailed to Seller's stockholders and on the date of the Seller Special Meeting
(as hereinafter defined), not contain an untrue statement of a material fact or
omit to state any material fact necessary in order to make such information, in
light of the circumstances under which it was provided, not misleading, and
Seller and Buyer each agree to correct any information provided by it for use in
the Proxy Statement which shall have become false or misleading in any material
respect. The Proxy Statement shall comply as to form in all material respects
with all applicable requirements of federal securities laws.
5.04. MEETING OF STOCKHOLDERS OF SELLER.
(a) Seller shall take all action necessary, in accordance with the CBCA
and its Articles of Incorporation, to cause only proposals one and two set forth
in Seller's definitive proxy statement (the "ANNUAL MEETING PROXY STATEMENT")
filed with the SEC on November 2, 1999, to be voted on by Seller's stockholders
at the annual meeting of Seller's stockholders currently scheduled for December
2, 1999 (the "ANNUAL MEETING"). Seller shall take all action necessary to cause
proposals three, four and five set forth in the Annual Meeting Proxy Statement
not to be voted on by the stockholders of Seller at the Annual Meeting,
including causing all proxies held by management of Seller to be voted in favor
of adjourning the Annual Meeting so that no such vote is taken on such matters
at such meeting.
(b) If required under the CBCA and Seller's Articles of Incorporation,
Seller shall, as soon as practicable following the expiration of the Offer, duly
call, give notice of, convene and hold a meeting of its stockholders (the
"SELLER SPECIAL MEETING") to consider and vote upon this Agreement, the Offer
and the Merger and shall, through its Board of Directors, recommend to its
stockholders the approval and adoption of the Offer, this Agreement, the Merger
and the other transactions contemplated hereby. Without limiting the generality
of the foregoing but subject to its rights to terminate this Agreement pursuant
to Section 7.01(d), Seller agrees that its obligations pursuant to the second
sentence of this Section 5.04 shall not be affected by the commencement, public
proposal, public disclosure or communication to Seller of any Acquisition
Proposal. Notwithstanding the foregoing, if Buyer shall acquire at least 90% of
the outstanding shares of Seller Common Stock in the Offer, the parties shall
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
Seller Special Meeting in accordance with the CBCA. Buyer agrees to cause all
shares of Seller Common Stock purchased pursuant to the Offer to be voted in
favor of the Merger, this Agreement and the transactions contemplated hereby.
5.05. NO SOLICITATION BY SELLER.
(a) Except as provided in Section 5.05(b), Seller agrees that, from the
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement pursuant to Section 7.01, Seller shall not, nor
shall it permit any of its Subsidiaries to, nor shall it authorize or permit any
of its directors, officers or employees or any representative retained by it
(including Seller's Financial Advisor) or any of its Subsidiaries
to, directly or indirectly through another Person, (i) solicit, initiate,
entertain or encourage (including by way of furnishing non-public information)
any inquiries or the making of an Acquisition Proposal, or (ii) participate in
any discussions or negotiations regarding any Acquisition Proposal; PROVIDED,
HOWEVER, that if, at any time, the Board of Directors of Seller determines in
good faith, after consultation with and receipt of advice from outside counsel,
that it is necessary to do so in order to act in a manner consistent with its
fiduciary duties to Seller's stockholders under applicable law, Seller may, in
response to a Superior Proposal (as defined below) and subject to delivering a
Seller Notice (as defined in paragraph (c) below) and compliance with the other
provisions of paragraph (c) below, following delivery of Seller Notice (x)
furnish information with respect to Seller and its Subsidiaries to any Person
making such Acquisition Proposal pursuant to a confidentiality agreement entered
into between such Person and Seller with terms no less favorable to Seller than
those contained in the Confidentiality Agreement and (y) participate in
discussions or negotiations regarding such Acquisition Proposal. For purposes of
this Agreement, an "Acquisition Proposal" means any inquiry, proposal or offer
from any Person (i) relating to any direct or indirect acquisition or purchase
of (A) a business that constitutes 15% or more of the net revenues, net income
or the assets of Seller and its Subsidiaries, taken as a whole, (B) 20% or more
of any class of equity securities of Seller or (C) any material equity interest
in any Subsidiary of Seller (i.e., in excess of 20% of the outstanding capital
stock of such Subsidiary), (ii) relating to any tender offer or exchange offer
that if consummated would result in any Person beneficially owning 20% or more
of any class of equity securities of Seller or any material equity interest in
any of its Subsidiaries, or (iii) relating to any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Seller or any of its Subsidiaries, in each case, other
than the transactions contemplated by this Agreement. Immediately following the
execution and delivery of this Agreement by the parties hereto, Seller will
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted with respect to the foregoing. Promptly
following the execution of this Agreement by the parties hereto, Seller will
request each Person that has, prior to the date of this Agreement, executed a
confidentiality agreement in connection with its consideration of an Acquisition
Proposal to return or destroy all confidential information heretofore furnished
to such Person by or on behalf of Seller or any of its Subsidiaries.
(b) Except as expressly permitted by this Section 5.05, the Board of
Directors of Seller shall not (i) withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse to Buyer, the approval or recommendation
by such Board of Directors of the Merger, the Offer or this Agreement, (ii)
approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal, or (iii) cause Seller to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each,
a "SELLER ACQUISITION AGREEMENT") related to any Acquisition Proposal, other
than any such agreement entered into concurrently with a termination pursuant to
the next sentence to facilitate such action. Notwithstanding the foregoing, if
at any time the Board of Directors of Seller determines in good faith, after
consultation with and receipt of advice from outside counsel, that it is
necessary to do so in order to act in a manner consistent with its fiduciary
duties to Seller's stockholders under applicable law, subject to compliance with
paragraph (c) below, the Board of Directors of Seller may, in response to a
Superior Proposal which was not solicited by Seller and which did not otherwise
result from a breach of this Section 5.05 (subject to this and the following
sentences) terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause Seller to enter into any Acquisition
Agreement with respect to any Superior Proposal) but only at a time that is at
least after the third business day after delivery of a Seller Notice. For
purposes of this Agreement, a "Superior Proposal" means any proposal made by a
third party to acquire, directly or indirectly, including pursuant to a tender
offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Seller Common Stock then outstanding or
all or substantially all the assets of Seller which (i) the Board of Directors
of Seller determines in good faith is reasonably likely to be consummated,
taking into account the Person making the proposal and all legal, financial and
regulatory aspects of the proposal, including any break-up fees, expense
reimbursement provisions and conditions to consummation, and (ii) the Board of
Directors determines in good faith (after consultation with and based upon the
advice of its outside financial advisors) would, if consummated, provide greater
value to Seller's stockholders than the transactions contemplated by this
Agreement.
(c) In addition to the obligations of Seller as set forth in paragraphs
(a) and (b) of this Section 5.05, Seller shall advise the Buyer orally and in
writing of any request for non-public information, any Acquisition Proposal,
including all of the material proposed terms of such Acquisition Proposal, the
identity of the third party, or any decision by Seller to take any of the
actions permitted in clauses (x) or (y) of paragraph (a) above (with any such
notice referred to as a "SELLER NOTICE"). Any such Seller Notice will be
delivered promptly after (and in no event later than 24 hours after) receipt of
any request for non-public information or of any Acquisition Proposal and prior
to Seller taking any of the actions permitted in clauses (x) or (y) of paragraph
(a) above. In addition, in the event Seller intends to enter into a Seller
Acquisition Agreement relating to a Superior Proposal, Seller will deliver a
Seller Notice at least 24 hours prior to entering into such Seller Acquisition
Agreement, which Seller Notice will identify the third party and the material
proposed terms of such Superior Proposal. Seller will keep Buyer reasonably
informed of the status of any such request or Acquisition Proposal and will
update the information required to be provided in Seller Notice upon the request
of the Newco.
5.06. PUBLIC ANNOUNCEMENTS. Buyer and Seller will consult with each
other before, but will not be required to obtain the other party's consent with
respect to, issuing any press release, any filing with the SEC on Form 8-K or
otherwise making any public statements with respect to this Agreement or the
Merger or the other transactions contemplated hereby, and shall not issue any
such press release, SEC Form 8-K filing or make any such public statement prior
to such consultation, except to the extent that compliance with legal
requirements requires a party to issue a press release or public announcement or
make an 8-K filing prior to such consultation. This Section 5.06 shall supersede
any conflicting provisions in the Confidentiality Agreement.
5.07. NOTIFICATION OF CERTAIN MATTERS.
(a) Seller shall give prompt notice (which notice shall state that it
is delivered pursuant to Section 5.07 of this Agreement) in writing to Buyer and
Buyer shall give prompt notice in writing to Seller, of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause 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
through the Effective Time and (ii) any material failure of Seller or Buyer, 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; provided, however, no such notification
shall affect the representations or warranties of the parties or the conditions
to the obligations of the parties hereunder.
(b) Seller shall give prompt notice in writing (which notice shall
state that it is delivered pursuant to Section 5.07 of this Agreement) to Buyer
of any occurrence that has had or may reasonably be expected to have a Material
Adverse Effect.
5.08. EMPLOYMENT AND BENEFIT MATTERS
(a) From and after the Effective Time, Buyer agrees to cause the
Surviving Corporation to provide the employees of Seller and its Subsidiaries
(the "SELLER EMPLOYEES") who remain employed after the Effective Time with the
types and levels of employee benefits which are in the aggregate at least as
favorable as those maintained by Seller prior to the Effective Time. Buyer will
cause the Surviving Corporation to treat, and cause its applicable benefit plans
to treat, the service of Seller Employees with Seller or any Subsidiary as
service rendered to the Surviving Corporation for purposes of eligibility to
participate, vesting and for other appropriate benefits but not for benefit
accrual.
(b) Notwithstanding anything to the contrary contained herein, Buyer
shall have sole discretion with respect to the determination as to whether or
when to terminate, merge or continue any employee benefit plans and programs of
Seller after the Effective Time.
5.09. OFFICERS' AND DIRECTORS' INDEMNIFICATION; INSURANCE.
(a) The Surviving Corporation agrees that for a period ending on the
sixth anniversary of the Effective Time, the Surviving Corporation will maintain
all rights to indemnification (including with respect to the advancement of
expenses incurred in the defense of any action or suit) existing on the date of
this Agreement in favor of the present and former directors, officers, employees
and agents of Seller as provided in Seller's Articles of Incorporation and
By-laws , in each case as in effect on the date of this Agreement, and that
during such period, neither the Articles of Incorporation nor the Bylaws of the
Surviving Corporation shall be amended to reduce or limit the rights of
indemnity afforded to the present and former directors, officers, employees and
agents of Seller, or the ability of the Surviving Corporation to indemnify them,
nor to hinder, delay or make more difficult the exercise of such rights or
indemnity or the ability to indemnify.
(b) The Surviving Corporation agrees to indemnify to the fullest extent
permitted under its Articles of Incorporation, its Bylaws, and applicable law
the present and former directors, officers, employees and agents of Seller
against all losses, damages, liabilities or claims made against them arising
from their service in such capacities prior to and including the Effective Time,
to at least the same extent as such persons are currently permitted to be
indemnified pursuant to Seller's Articles of Incorporation and Bylaws for a
period ending on the sixth anniversary of the Effective Time.
(c) Buyer will cause to be maintained for a period of three years from
the Effective Xxxx Xxxxxx'x current directors' and officers' insurance and
indemnification policy to the extent that it provides coverage for events
occurring prior to the Effective Time (the "D&O INSURANCE") for all persons who
are directors and officers of Seller on the date of this Agreement, so long as
such insurance is available on commercially reasonable terms and the annual
premium therefor would not be in excess of 200% of the last annual premium paid
prior to the date of this Agreement (the "MAXIMUM PREMIUM"). If the existing D&O
Insurance expires, is terminated or cancelled during such three-year period,
Buyer will use all reasonable efforts to cause to be obtained as much D&O
Insurance as can be obtained for the remainder of such period for an annualized
premium not in excess of the Maximum Premium, on terms and conditions no less
advantageous than the existing D&O Insurance.
5.10. ADDITIONAL AGREEMENTS.
(a) Subject to the terms and conditions hereof, each of the parties to
this Agreement agrees to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement (including consummation of the
Merger) and to cooperate with each other in connection with the foregoing.
(b) Subject to the terms and conditions hereof, each of the parties to
this Agreement agrees to use commercially reasonable efforts to: (i) obtain all
necessary waivers, consents and approvals from other parties to loan agreements,
leases, licenses and other contracts, (ii) obtain all necessary consents,
approvals and authorizations as required to be obtained under any federal, state
or foreign law or regulations, (iii) defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby, (iv) lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, (v) effect all necessary registrations and
filings, including, but not limited to, submissions of information requested by
Governmental Entities, and (vi) fulfill all conditions to this Agreement.
(c) In connection with and without limiting the foregoing, Seller and
its Board of Directors shall (i) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable
to the Offer, the Merger, this Agreement or any of the other transactions
contemplated by this Agreement and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to the Offer, the Merger, this
Agreement or any other transaction contemplated by this Agreement, take all
action necessary
to ensure that the Offer, the Merger, this Agreement and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by the Offer and this Agreement and otherwise to minimize
the effect of such statute or regulation on the Offer, the Merger or this
Agreement and the other transactions contemplated by this Agreement.
5.11. SELLER INDEBTEDNESS. Prior to the Effective Time, Seller shall
cooperate with Buyer in taking such actions requested by Buyer as are reasonably
appropriate or necessary in connection with the redemption, prepayment,
modification, satisfaction or elimination of any outstanding Indebtedness of
Seller or any of its Subsidiaries with respect to which a consent is required to
be obtained to effectuate the Merger and the transactions contemplated by this
Agreement and has not been so obtained.
5.12. UPDATE OF DISCLOSURE SCHEDULES. Each party agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Section 6.02(a) and
6.03(a) have been fulfilled, the Schedules hereby shall be deemed to include
only that information contained therein on the date of this Agreement and shall
be deemed to exclude all information contained in any supplement or amendment
thereto.
5.13. FUTURE FILINGS. Seller will deliver to Buyer as soon as they
become available true and complete copies of any report or statement mailed by
it to its stockholders generally or filed by it with the SEC subsequent to the
date of this Agreement and prior to the Effective Time. As of their respective
dates, such reports and statements (excluding any information therein provided
by Buyer, as to which Seller makes no representation) will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading and will comply as to
form in all material respects with all applicable requirements of law. The
consolidated financial statements of Seller to be included in such reports and
statements (excluding any information therein provided by Buyer, as to which
Seller makes no representation) will be prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except (i) as otherwise indicated in such financial statements
and the notes thereto or (ii) in the case of unaudited interim statements, to
the extent permitted under Form 10-QSB under the Exchange Act) and will present
fairly the consolidated financial position, results of operations and cash flows
of Seller as of the dates thereof and for the periods indicated therein
(subject, in the case of any unaudited interim financial statements, to normal
year-end audit adjustments). Buyer shall deliver to Seller as soon as they
become available, true and complete copies of any report or statement mailed by
it to Seller's stockholders generally or filed by it with the SEC subsequent to
the date of this Agreement and prior to the Effective Time.
5.14. FINANCING. As soon as practicable after the date hereof, Buyer
shall use its best efforts and take all actions necessary to complete the Share
Issuance pursuant to which the New Buyer Shares will be offered for sale to the
public in accordance with the Placing Agreement. Buyer shall use its best
efforts and take all actions necessary to cause the New Buyer Shares to be
admitted to the London Stock Exchange's Official List. Buyer will notify Seller
promptly in the event that Buyer becomes aware of any facts, circumstances or
developments that would create reasonable doubt regarding the completion prior
to the Closing Date of the Share Issuance. Prior to the Effective Time, Buyer
shall contribute the proceeds of the Share Issuance to Newco and Newco shall use
such proceeds solely to complete the Offer in accordance with its terms and pay
the Merger Consideration and other amounts payable pursuant to Article II
hereof.
5.15. MEETING OF STOCKHOLDERS OF BUYER. Promptly after the execution
and delivery of this Agreement, Buyer shall duly call, give notice of, convene
and hold a meeting of its shareholders (the "BUYER SPECIAL MEETING") to consider
and vote upon this Agreement, the Merger and the Share Issuance, and shall,
through its Board of Directors, recommend to its shareholders the approval and
adoption of the Merger, this Agreement, and the Share Issuance. Buyer shall use
reasonable efforts to solicit from stockholders of Buyer
proxies in favor of such adoption and approval and, subject to the rules of the
London Stock Exchange and the duties of the directors of Buyer under the laws of
England, to take all other action necessary to secure the vote or consent of
stockholders required by the laws of the United Kingdom to effect the Merger and
the Share Issuance. On or prior to the date hereof, each of the directors of
Buyer has delivered a written irrevocable commitment to Seller that they will
vote their shares of Buyer stock at the Buyer Special Meeting in favor of the
Merger, the Merger Agreement and the Share Issuance.
5.16. COMPLETION OF BRIDGESTONE TRANSACTION. Seller shall use its best
efforts to complete the transactions contemplated by the Bridgestone Agreement
substantially in accordance with its terms.
5.17. DIRECTORS. Promptly upon the acceptance for payment of, and
payment for, Shares by Buyer pursuant to the Offer, Buyer shall be entitled to
designate such number of directors on the Board of Directors of Seller as will
give Buyer, subject to compliance with Section 14(f) of the Exchange Act,
representation on Seller's Board of Directors equal to the product of (i) the
total number of directors on Seller's Board of Directors and (ii) the percentage
that the number of shares of Seller Common Stock purchased by Buyer in the Offer
bears to the number of shares of Seller Common Stock outstanding, and Seller
shall, at such time, cause Buyer's designees to be so elected by its existing
Board of Directors; provided, that in the event that Buyer's designees are
elected to the Board of Directors of Seller, until the Effective Time such Board
of Directors shall have at least two directors who are directors of Seller on
the date of this Agreement and who are not officers of Seller or any of its
Subsidiaries (the "INDEPENDENT DIRECTORS") and; provided further that, in such
event, if the number of Independent Directors shall be reduced below two for any
reason whatsoever, the remaining Independent Director shall designate a person
to fill such vacancy who shall be deemed to be an Independent Director for
purposes of this Agreement or, if no Independent Directors then remain, the
other directors of Seller on the date hereof shall designate two persons to fill
such vacancies who shall not be officers or affiliates of Seller or any of its
Subsidiaries, or officers or affiliates of Buyer or any of its Subsidiaries, and
such persons shall be deemed to be Independent Directors for purposes of this
Agreement. Subject to applicable law, Seller shall take all action requested by
Buyer necessary to effect any such election, including mailing to its
stockholders the Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
Seller agrees to make such mailing with the mailing of the Schedule 14D-9
(provided that Buyer shall have provided to Seller on a timely basis all
information required to be included in the Information Statement with respect to
Buyer's designees). In connection with the foregoing, Seller will promptly, at
the option of Buyer, either increase the size of the Seller's Board of Directors
and/or obtain the resignation of such number of its current directors as is
necessary to enable Buyer's designees to be elected or appointed to, and to
constitute a majority of Seller's Board of Directors as provided above.
ARTICLE VI
CONDITIONS OF MERGER
6.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) SELLER STOCKHOLDER APPROVAl. Except as otherwise provided in
Section 5.04(b) hereof, this Agreement, the Offer and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of Seller in
accordance with the CBCA.
(b) BUYER STOCKHOLDER APPROVAL. This Agreement, the Merger and the
Share Issuance shall have been approved and adopted by the requisite vote of the
stockholders of Buyer in accordance with the Listing Rules of London Stock
Exchange Limited.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction, judgment or other order, decree or
ruling nor any statute, rule, regulation or order shall be in effect which
prevents the consummation of the Merger.
6.02. CONDITIONS PRECEDENT TO BUYER'S AND NEWCO'S OBLIGATIONS. Buyer
and Newco shall be obligated to perform the acts contemplated for performance by
them under Article II only if each of the following conditions is satisfied at
or prior to the Closing Date, unless any such condition is waived in writing by
Buyer and Newco:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Seller set forth in this Agreement shall be true and correct in all material
respects (without giving duplicative effect to any materiality qualification
contained in the applicable representation or warranty) as of the Closing Date
with the same force and effect as though made again at and as of the Closing
Date, except for any representations and warranties that address matters only as
of a particular date (which shall remain true and correct in all material
respects (without giving duplicative effect to any materiality qualification
contained in the applicable representation or warranty) as of such date). Buyer
shall have received a certificate to the foregoing effect signed by the
president and chief executive officer and chief financial officer of Seller.
(b) PERFORMANCE OF OBLIGATIONS OF SELLER. Seller shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date. Buyer shall have received a
certificate to the foregoing effect signed by the president and chief executive
officer and chief financial officer of Seller.
(c) ABSENCE OF MATERIAL ADVERSE CHANGES. There shall not have occurred
any change in the business, assets, prospects, financial condition or results of
operations of Seller or any of its Subsidiaries which has had, or is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect.
(d) CONSENTS. Seller shall have received all necessary consents or
waivers, in form and substance satisfactory to Buyer, from the other parties to
each contract, lease or agreement to which Seller is a party to the Merger,
except where the failure to obtain such consent or waiver would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
(e) BRIDGESTONE TRANSACTION. The Bridgestone Transaction shall have
been consummated substantially in accordance with the terms of the Bridgestone
Agreement.
(f) SHARE ISSUANCE. Buyer shall have received sufficient funds from the
Share Issuance to fund its obligations under this Agreement.
(g) ADMITTANCE OF NEW BUYER SHARES. The New Buyer Shares shall have
been admitted to the London Stock Exchange's Official List, subject to notice of
admittance.
6.03. CONDITIONS TO OBLIGATION OF SELLER. The Seller shall be obligated
to perform the acts contemplated for performance by it under Article II only if
each of the following conditions is satisfied at or prior to the Closing Date,
unless any such condition is waived in writing by Seller:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Buyer set forth in this Agreement shall be true and correct in all material
respects (without giving duplicative effect to any materiality qualification
contained in the applicable representation or warranty) as of the Closing Date
with the same force and effect as though made again at and as of the Closing
Date, except for any representations and warranties that address matters only as
of a particular date (which shall remain true and correct in all material
respects (without giving duplicative effect to any materiality qualification
contained in the applicable representation or warranty) as of such date). Seller
shall have received a certificate to the foregoing effect signed by the
president and chief executive officer and chief financial officer of Buyer.
(b) PERFORMANCE OF OBLIGATIONS OF BUYER. Buyer shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date. Seller shall have received a
certificate to the foregoing effect signed by the president and chief executive
officer and chief financial officer of Buyer.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01 TERMINATION. This Agreement may be terminated, at any time prior
to the Effective Time, whether before or after approval by the stockholders of
Seller:
(a) by mutual written agreement of the Boards of Directors of Buyer and
Seller;
(b) by either Buyer or Seller:
(i) if any court of competent jurisdiction in the United
States or other United States governmental body shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable;
(ii) if there has been a material breach by the other party of
any representation, warranty, covenant or agreement set forth in this Agreement
or the Seller Option Agreement unless such breach is capable of being cured and
is cured prior to the Closing Date;
(iii) if the stockholders of Buyer shall fail to approve the
Merger and the Share Issuance at the Buyer Special Meeting;
(iv) if the stockholders of Seller shall fail to approve the
Offer and the Merger at the Seller Special Meeting;
(c) by Buyer:
(i) if Seller or any of its directors or officers shall
participate in discussions or negotiations in breach of Section 5.05 or if the
Board of Directors of Seller shall have approved or recommended an Acquisition
Proposal by a third party, or withdrawn or modified in a manner adverse to Buyer
its approval or recommendation of this Agreement or the transactions
contemplated hereby, or failed to mail the Proxy Statement to its stockholders
or failed to include in such Proxy Statement such recommendation (including the
recommendation that the stockholders of Seller vote in favor of the Merger); or
publicly resolved to do any of the foregoing;
(ii) prior to the purchase of shares of Seller Common Stock
pursuant to the Offer, in the event of a breach or failure to perform by Seller
of any representation, warranty, covenant or other agreement contained in this
Agreement which (i) would give rise to the failure of a condition set forth in
Exhibit A and (ii) cannot be cured, or has not been cured within 15 days after
Seller receives written notice from Buyer of such breach or failure to perform.
(iii) if the Buyer Share Issuance or the Placing Agreement
shall have been terminated without Buyer having received the proceeds of the
Buyer Share Issuance or any alternative financing;
(iv) if Buyer permits the Offer to lapse in accordance with
its terms or the Offer is terminated by Buyer or Newco without the purchase of
shares of Seller Common Stock by Newco in accordance with the Offer Conditions;
(d) by Seller, pursuant to Section 5.05(b); provided, that, in order
for the termination of this Agreement pursuant to this paragraph (d) to be
deemed effective, Seller shall have complied with all provisions of Section
5.05, including the notice provisions therein, and with applicable requirements,
including the payment of the Seller Break-Up Fee;
(e) by either Seller or Buyer in the event the Effective Time has not
occurred by the latest to occur of (i) March 31, 2000 or (ii) 60 days after the
clearance by the SEC of the Proxy Statement (with such date, as it may
thereafter be extended by mutual written agreement of Buyer and Seller, referred
to as the "OUTSIDE DATE").
7.02. PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination of this Agreement by Seller or Buyer or both of them pursuant to
Section 7.01, the terminating party shall provide written notice of such
termination to the other party and this Agreement shall forthwith become void
and there shall be no liability on the part of Buyer, Newco or Seller, except as
set forth in this Section 7.02 and in Sections 5.02(b) and 7.03 of this
Agreement. The foregoing shall not relieve any party for liability for damages
actually incurred as a result of any breach of this Agreement. The
Confidentiality Agreement and Sections 5.03(b), 7.02 and 7.03 of this Agreement
shall survive the termination of this Agreement.
7.03. FEES AND EXPENSES. (a) Except as otherwise provided in this
Agreement and whether or not the transactions contemplated by this Agreement are
consummated, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
(b) In the event that Buyer terminates this Agreement pursuant to
Section 7.01 (other than Sections 7.01(a), (b)(i), (b)(iii) or (c)(iii)), or
Seller terminates this Agreement pursuant to Section 7.01(b)(iv) or (d), then
Seller shall pay to Buyer the amount of $300,000 as reimbursement of Buyer's
expenses and as liquidated damages (the "SELLER BREAK-UP FEE"). Any such payment
shall be made within three (3) business days after a termination.
(c) In the event that Buyer terminates this Agreement pursuant to
Section 7.01(b)(iii) or (c)(iii) or Seller terminates this Agreement pursuant to
Section 7.01(b)(iii), then Buyer shall pay to Seller the amount of $300,000 as
reimbursement of Buyer's expenses and as liquidated damages (the "BUYER BREAK-UP
FEE"). Any such payment shall be made within three (3) business days after a
termination.
7.04. AMENDMENT. This Agreement may be amended by each of the parties
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that (i) such amendment
shall be in writing signed by all of the parties, and (ii) after adoption of
this Agreement and the Merger by the stockholders of Seller, no amendment may be
made without the further approval of the stockholders of Seller to the extent
such approval is required by applicable law.
7.05. WAIVER. Subject to the requirements of applicable law, at any
time prior to the Effective Time, whether before or after the Seller Special
Meeting, any party hereto, by action taken by its Board of Directors (or, in the
case of Buyer, any similar body), may (i) extend the time for the performance of
any of the obligations or other acts of any other party hereto or (ii) waive
compliance with any of the agreements of any other party or with any conditions
to its own obligations. 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 by a duly authorized officer of such party.
Notwithstanding the above, any waiver given shall not apply to any subsequent
failure of compliance with agreements of the other party or conditions to its
own obligations.
ARTICLE VIII
DEFINITIONS
As used herein the following terms not otherwise defined have the
following respective meanings:
"AFFILIATE" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person. As used in this definition the term "CONTROL" (including the terms
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means, with respect to the
relationship between or among two or more Persons, the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause the
direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee or executor, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
"BRIDGESTONE AGREEMENT" shall mean that certain Stock Purchase
Agreement, dated as of September 15, 1999, by and among Seller, Keystone
Technologies, L.L.C., Xxxxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxxxx, Xxxxxxx Xxxxxx and
Xxxxxxx Xxxxx.
"BRIDGESTONE TRANSACTION" shall mean the transactions contemplated by
the Bridgestone Agreement.
"ENCUMBRANCES" shall mean any and all liens, charges, security
interests, options, claims, mortgages, pledges, proxies, voting trusts or
agreements, obligations, understandings or arrangements or other restrictions on
title or transfer of any nature whatsoever.
"ENVIRONMENTAL LAW" shall mean all foreign, federal, state or local
laws governing pollution or the protection of the environment.
"INDEBTEDNESS" as applied to any Person, means (i) all indebtedness of
Seller or any of its Subsidiaries for borrowed money, whether current or funded,
or secured or unsecured, (ii) all indebtedness of Seller or any of its
Subsidiaries for the deferred purchase price of property or services represented
by a note or other security, (iii) all indebtedness of Seller created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by Seller or any of its Subsidiaries (even though the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (iv) all
indebtedness of Seller or any of its Subsidiaries secured by a purchase money
mortgage or other lien to secure all or part of the purchase price of property
subject to such mortgage or lien, (v) all obligations under leases which shall
have been or must be, in accordance with generally accepted accounting
principles, recorded as capital leases in respect of which Seller or any of its
Subsidiaries is liable as lessee, (vi) any liability of Seller or any of its
Subsidiaries in respect of banker's acceptances or letters of credit, (vii) all
indebtedness referred to in clause (i), (ii), (iii), (iv), (v) or (vi) above
which is directly or indirectly guaranteed by Seller or any of its Subsidiaries
or which Seller or any of its Subsidiaries has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss and (viii) all Debentures.
"MATERIAL ADVERSE EFFECT" means a change or effect that is, or in the
reasonably judgment of Buyer, would be, materially adverse to the business,
properties, assets, prospects, results of operations or condition (financial or
otherwise) of Seller and its Subsidiaries taken as a whole.
"PERSON" means any corporation, association, partnership, limited
liability company, organization, business, individual, government or political
subdivision thereof or governmental agency.
"SELLER INTELLECTUAL PROPERTY" mean all trademarks, trade names,
service marks, trade dress, and all goodwill associated with any of the
foregoing, patents, Internet domain names, copyrights and any renewal rights
therefor, technology, supplier lists, trade secrets, know-how, computer software
programs or applications in both source and object code form, technical
documentation of such software programs, registrations and
applications for any of the foregoing and all other tangible or intangible
proprietary information or materials that are or have been used (including
without limitation in the development of) Seller's business and/or in any
product, technology or process (i) currently being or formerly manufactured,
published or marketed by Seller or (ii) previously or currently under
development for possible future manufacturing, publication, marketing or other
use by Seller.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, joint venture or other legal entity of
which such Person (either alone or through or together with any other subsidiary
of such person) owns, directly or indirectly, a majority of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity; PROVIDED, FURTHER, that for all purposes under this
Agreement, those Persons, corporations and other legal entities described on
Section 8.01 of the Seller Disclosure Schedule shall be deemed to be
Subsidiaries of Seller as of the date of this Agreement.
"TAX" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, intangibles, social security,
unemployment, disability, payroll, license, employee or other tax or levy, of
any kind whatsoever, including any interest, penalties or additions to tax in
respect of any of the foregoing.
ARTICLE IX
MISCELLANEOUS
9.01. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by rule of law or public policy,
all other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
9.02. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given,
or made as of the date delivered if sent via telecopier or delivered personally
(including, without limitation, delivery by commercial carrier warranting
next-day delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by similar notice, except that notices
of changes of address shall be effective upon receipt):
(a) If to Seller:
Optical Security Group, Inc.
000 00xx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, CEO
Telecopier No.: 303-534-1010
with a copy to
Xxxx, Shaiman & Xxxxxx, P.C.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopier No.: 000-000-0000
(b) If to Buyer or Newco:
Applied Holographics plc
00 Xxxxxxx Xxxx
Xxxxxxxx District 0
Xxxxxxxxxx
Xxxx & Xxxx
Xxxxxxx XX00 OAD
Attention: Xxxxxxx Xxxxx
Telecopier No.: 011-44-191-416-3053
With copies to:
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telecopier No.: (000) 000-0000
9.03. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.04. REPRESENTATIONS AND WARRANTIES, ETC. The respective
representations and warranties of Seller, Buyer and Newco contained herein shall
survive until, and shall expire with, and be terminated and extinguished upon
the earlier to occur of (a) the termination of this Agreement pursuant to
Section 6.1 and (b) the Closing Date. This Section 8.4 shall have no effect upon
any other obligation of the parties hereto, whether to be performed before or
after the consummation of the Merger.
9.05. MISCELLANEOUS. This Agreement, the documents delivered pursuant
hereto or in connection herewith and the Confidentiality Agreement (i)
constitute the entire agreement and supersede all other prior agreements and
undertakings, both written and oral (including, without limitation, any
agreement or proposed agreement relating to the timing of execution of this
Agreement and the payment of any amount in connection therewith), among the
parties, or any of them, with respect to the subject matter hereof, (ii) are not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder, (iii) may not be assigned without the prior written consent
of the other parties hereto, except that Newco may assign its rights hereunder
in whole or in part to one or more direct or indirect Subsidiaries or affiliates
of Buyer which, in written instruments reasonably satisfactory to Seller, shall
agree to make all representations and warranties of Newco set forth herein and
shall agree to assume all of such party's obligations hereunder and be bound by
all of the terms and conditions of this Agreement and Newco and Buyer may assign
this Agreement to their lenders as collateral security; PROVIDED, HOWEVER, that
no such assignment shall relieve the assignor of its obligations hereunder, and
(iv) shall be governed by and construed in accordance with the laws of the State
of Colorado (without reference to choice of law rules). This Agreement may be
executed in one or more counterparts which together shall constitute a single
agreement.
IN WITNESS WHEREOF, Buyer, Newco and Seller have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
APPLIED HOLOGRAPHICS PLC
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxx
-------------------------------
Title: Chief Executive
------------------------------
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxx
-------------------------------
Title: Finance Director
------------------------------
APPLIED OPSEC CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxx
-------------------------------
Title: President
------------------------------
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxx
-------------------------------
Title: Treasurer and Secretary
------------------------------
OPTICAL SECURITY GROUP, INC.
By: /s/ Xxxxxxx X. Xxxx
----------------------------------------
Name: Xxxxxxx X. Xxxx
-------------------------------
Title: Chief Executive Officer
------------------------------
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
-------------------------------
Title: Vice President and Chief
Financial Officer
------------------------------
