Exhibit 2.1
AGREEMENT AND PLAN OF MERGER BETWEEN CNE GROUP, INC.
AND ARROW DEVELOPMENT RESOURCES LTD. DATED AS OF AUGUST 1, 2005
This Agreement and Plan of Merger is entered into as of August 1, 2005 (this
"Agreement") by and between CNE Group, Inc., a Delaware corporation ("CNE") and
Arrow Resources Development Ltd., a Bermuda limited company ("ARR") (CNE and ARR
being hereinafter collectively referred to as the "Constituent Corporations").
WHEREAS, the Board of Directors of CNE and the Board of Directors of ARR, have
each approved and deem it advisable and in the best interests of their
respective stockholders to consummate the combination of ARR and CNE upon the
terms and subject to the conditions of this Agreement;
WHEREAS, it is intended that the combination be accomplished by a merger of CNE
with and into ARR (the "Merger");
WHEREAS, in consideration for entering into this Agreement, CNE has issued to
Arrow Pacific Resources (S) Pte. Ltd., the sole shareholder of ARR, 20 million
shares of Series AAA convertible preferred stock of CNE that are convertible,
upon approval of the shareholders of CNE of the Merger and the filing of the
required documents in connection therewith, into common stock of CNE
representing 96% of all equity of ARR on a fully-diluted basis.
WHEREAS, each of CNE and ARR intend that the Merger will be treated as a tax
free reorganization which meets the requirements of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Board of Directors of CNE has approved the transactions
contemplated by this Agreement and the transactions contemplated hereby in
accordance with Section 251 of the Delaware General Corporations Law ("DGCL").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions contained
in this Agreement, and in accordance with the DGCL, at the Effective Time (as
herein defined), CNE shall be merged with and into ARR, the separate corporate
existence of CNE shall thereupon cease, and ARR shall continue as the Surviving
Company (sometimes hereinafter referred to as the "Surviving Company") and shall
continue its corporate existence under the laws of Bermuda. All of the rights,
privileges, powers, immunities, purposes and franchises of ARR and CNE shall
vest in the Surviving Company and all of the debts, liabilities, obligations and
duties of ARR and CNE shall become the debts, liabilities, obligations and
duties of the Surviving Company.
Section 1.2 Closing. Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of
ARR at 10:00 a.m., local time, on the second business day after which all of the
conditions set forth in Article VII are first satisfied or waived (provided that
if all such conditions do not continue to be so satisfied or waived on such
second business day, the Closing shall be automatically extended from time to
time until the first subsequent business day on which all such conditions are
again so satisfied or waived, subject, however, to Section 8.1(b)), or on such
other date and at such other time and place as CNE and ARR shall agree (the date
on which the Closing actually occurs being referred to herein as the "Closing
Date").
Section 1.3 Effective Time. The Merger shall become effective at the time of
filing of, or at such later time specified in, (a) a properly executed
Certificate of Merger, in the form required by and executed in accordance with
the DGCL, filed with the Secretary of State of the State of Delaware, in
accordance with the provisions of Section 251 of the DGCL; and (b) a properly
executed merger certification, in the form required by and executed in
accordance with the Bermudan Companies Xxx 0000, filed with the Registrar of
Companies of Bermuda, in accordance with the Bermudan Companies Xxx 0000. Such
filings shall be made contemporaneously with, or immediately after, the Closing.
When used in this Agreement, the term "Effective Time" shall mean the date and
time at which the Merger shall become effective.
Section 1.4 Certificate of Incorporation, Memorandum of Association and
Bye-Laws. At the Effective Time, the Certificate of Incorporation of ARR, as in
effect immediately prior to the Effective Time, shall be amended and restated as
set forth in Exhibit A hereto. The Certificate of Incorporation of ARR, as so
amended at the Effective Time, shall be the Certificate of Incorporation of the
Surviving Company until thereafter amended in accordance with applicable law.
The Memorandum of Association of ARR, in effect immediately prior to the
Effective Time, shall be amended as set forth in Exhibit B hereto. The Bye-Laws
of ARR, in effect immediately prior to the Effective Time, shall be amended as
set forth in Exhibit C hereto. The Bye-Laws of ARR, as so amended and restated
at the Effective Time, shall be the Bye-Laws of the Surviving Company until
thereafter amended in accordance with applicable law.
Section 1.5 Directors and Officers. The seven individuals whose names are set
forth on Exhibit D hereto shall be the initial directors of the Surviving
Company and shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualified in the manner provided in
the Certificate of Incorporation or Bye-Laws of the Surviving Company or as
otherwise provided by law. Two of the directors are current CNE inside
directors, two are designees of ARR and three are independent directors as
defined by the American Stock Exchange. The individuals whose names are set
forth on Exhibit E hereto at the Effective Time shall be the initial officers of
the Surviving Company and shall hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Certificate of Incorporation or Bye-Laws of the Surviving
Company or as otherwise provided by law.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Shares. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder of any shares of capital
stock of ARR or CNE:
(a) Each share of ARR issued and outstanding immediately prior to the
Effective Time shall remain outstanding.
(b) Each share of Common Stock of CNE ("CNE Common Stock"), or a fraction
thereof, issued and outstanding immediately prior to the Effective Time
(other than CNE Dissenting Shares (as herein defined) and shares of CNE
Common Stock to be canceled pursuant to Section 2.1(c) hereof) shall be
converted into one (or a fraction thereof, as the case may be) duly
issued, validly authorized, fully paid and nonassessable share of ARR. All
such shares of CNE Common Stock when so converted shall automatically be
canceled and retired and cease to exist and holders of such shares of CNE
Common Stock shall cease to have any rights as stockholders of CNE.
(c) All shares of CNE Common Stock that are owned by CNE as treasury stock or
shares of CNE Common Stock, owned by any direct or indirect wholly-owned
Subsidiary of CNE shall automatically be canceled and retired and shall
cease to exist and no cash, shares of ARR, or other consideration shall be
delivered or deliverable in exchange therefor. As used in this Agreement,
a "Subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors
or other governing body (or, if there are no such voting interests, 50% or
more of the equity interests of which) is owned directly or indirectly by
such first person.
(d) All shares of CNE Common Stock to be converted pursuant to Section 2.1(a)
or (b) (as the case may be), issued and outstanding immediately prior to
the Effective Time, shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist and each holder of a
certificate which immediately prior to the Effective Time represented
outstanding shares of CNE Common Stock (the "Certificates") shall cease to
have any rights as stockholders of CNE.
Section 2.2 Exchange Procedures.
(a) ARR shall designate a bank or trust company reasonably acceptable to CNE
to act as Exchange Agent hereunder (the "Exchange Agent"). Immediately
following the Effective Time, the Surviving Company shall deliver, in
trust, to the Exchange Agent, for the benefit of the holders of shares of
CNE Common Stock for exchange in accordance with this Article II, through
the Exchange Agent, certificates evidencing the shares of ARR issuable
pursuant to Section 2.1 in exchange for outstanding shares of CNE Common
Stock (the "Exchange Fund").
(b) As soon as practicable after the Effective Time, the Surviving Company
shall cause the Exchange Agent to mail to each holder of record of a
Certificate or Certificates (i) a form of letter of transmittal specifying
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent and (ii) instructions for use in surrendering such
Certificates in exchange for certificates representing shares of ARR. Upon
surrender of a Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor (A)
certificates representing that number of shares of ARR into which the
shares of CNE Common Stock, represented by the surrendered Certificate
have been converted at the Effective Time pursuant to Section 2.1 hereof,
and (B) any dividends or other distributions to which such holder is
entitled pursuant to Section 2.3, and the Certificate so surrendered shall
forthwith be canceled. Until surrendered as contemplated by this Section
2.2(b), each Certificate shall be deemed from and after the Effective Time
to
represent only the right to receive upon such surrender the shares of ARR
and any dividends or distributions of ARR in accordance with Section 2.3
hereof. Neither the Exchange Agent nor any party hereto shall be liable to
a holder of shares of CNE Common Stock for any amount paid to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
(c) 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, if required by the
Surviving Company, the posting by such person of a bond, in such
reasonable amount as the Surviving Company may direct, as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the applicable certificate representing
shares of ARR in accordance with Section 2.1 hereof and any dividends or
other distributions to which the holders thereof are entitled pursuant to
Section 2.3 hereof.
Section 2.3 Dividends; Transfer Taxes; Withholding. No dividends or other
distributions that are declared on or after the Effective Time on shares of ARR,
or are payable to the holders of record thereof who became such on or after the
Effective Time, shall be paid to any person entitled by reason of the Merger to
receive certificates representing shares of ARR, and no distribution of cash
consideration, until such person shall have surrendered its Certificate(s) as
provided in Section 2.2 hereof. Subject to applicable law, there shall be paid
to each person receiving a certificate representing such shares of ARR, at the
time of such surrender or as promptly as practicable thereafter, the amount of
any dividends or other distributions theretofore paid with respect to the shares
of ARR represented by such certificate and having a record date on or after the
Effective Time but prior to such surrender and a payment date on or subsequent
to such surrender. In no event shall the person entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other distributions. If any cash or certificate representing shares
of ARR is to be paid to or issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of such certificate representing shares
of ARR and the distribution of such cash payment in a name other than that of
the registered holder of the Certificate so surrendered, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. The Surviving Company or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of CNE Common Stock such amounts as the Surviving
Company or the Exchange Agent are required to deduct and withhold under the
Code, or any provision of state, local or foreign tax law, with respect to the
making of such payment. To the extent that amounts are so withheld by the
Surviving Company or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the CNE
Common Stock in respect of whom such deduction and withholding was made by the
Surviving Company or the Exchange Agent.
Section 2.4 Return of Exchange Fund. Any portion of the certificates
representing shares of ARR and any dividends or distributions payable pursuant
to Section 2.3 hereof, which remains undistributed to the former holders of CNE
Common Stock for one year after the Effective Time shall be delivered to the
Surviving Company, upon its request, and any such former holders who have not
theretofore surrendered to the Exchange Agent their Certificate(s) in compliance
with
this Article II shall thereafter look only to the Surviving Company for payment
of their claim for shares of ARR and any dividends or distributions with respect
to such shares of ARR (in each case, without interest thereon). The Exchange
Agent shall invest any cash included in the Exchange Fund, as directed by the
Surviving Company, on a daily basis. Any interest and other income resulting
from such investments shall be paid to the Surviving Company.
Section 2.5 Options and Warrants.
(a) Following the Effective Time, each outstanding option and warrant to
purchase shares of ARR shall remain outstanding and unchanged.
(b) Not later than the Effective Time, each option to purchase shares of CNE
Common Stock (each a "CNE Stock Option") which is outstanding immediately
prior to the Effective Time pursuant to any stock option plan of CNE in
effect on the date hereof (the "CNE Stock Plans") shall become and
represent an option to purchase the number of shares of ARR (a "Substitute
CNE Option"), decreased to the nearest whole share. After the Effective
Time, except as provided above in this Section 2.5, each Substitute CNE
Stock Option shall be exercisable upon the same terms and conditions as
were applicable to the related CNE Stock Option immediately prior to the
Effective Time, and each Substitute CNE Stock Option shall be vested to
the extent provided in the related CNE Stock Option. This Section 2.5
shall be subject to any contrary provision contained in the applicable CNE
Stock Plan or in the option agreement with respect to any CNE Stock Option
outstanding thereunder, but, subject to the other provisions of this
Agreement, CNE shall use its reasonable best efforts to obtain any
necessary consents of the holders of such CNE Stock Options to effect this
Section 2.5.
(c) Not later than the Effective Time, each warrant to purchase shares of CNE
Common Stock (each a "CNE Stock Warrant") which is outstanding immediately
prior to the Effective Time pursuant to any stock option plan of CNE in
effect on the date hereof (the "CNE Stock Plans") shall become and
represent a warrant to purchase the number of shares of ARR (a "Substitute
CNE Warrant"), decreased to the nearest whole share. After the Effective
Time, except as provided above in this Section 2.5, each Substitute CNE
Stock Warrant shall be exercisable upon the same terms and conditions as
were applicable to the related CNE Stock Warrant immediately prior to the
Effective Time, and each Substitute CNE Stock Warrant shall be vested to
the extent provided in the related CNE Stock Warrant. This Section 2.5
shall be subject to any contrary provision contained in the applicable CNE
Stock Plan or in the warrant agreement with respect to any CNE Stock
Warrant outstanding thereunder, but, subject to the other provisions of
this Agreement, CNE shall use its reasonable best efforts to obtain any
necessary consents of the holders of such CNE Stock Warrants to effect
this Section 2.5.
Section 2.6 Closing of Transfer Books. At the Effective Time, no transfer of
shares of CNE Common Stock shall thereafter be made, and the stock transfer
books of CNE and ARR shall be closed to such extent. If, after the Effective
Time, Certificates are presented to the Surviving Company, they shall be
canceled and exchanged as provided in this Article II.
Section 2.7 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of CNE Common Stock (subject to confirmation of no dissenter's
rights for Company stockholders) outstanding immediately prior to the Effective
Time held by a holder (if any) who is entitled to demand, and who properly
demands, appraisal for such shares in accordance with Section 262 of the DGCL
("CNE Dissenting Shares"), shall not be converted into a right to
receive shares of ARR unless such holder fails to perfect or otherwise loses
such holder's right to appraisal, if any. If, after the Effective Time, such
holder fails to perfect or loses any such right to appraisal, such CNE
Dissenting Shares shall be treated as if they had been converted as of the
Effective Time into a right to receive shares of ARR. CNE shall give prompt
notice to ARR of any demands received by CNE for appraisal of shares of CNE
Common Stock, and ARR shall have the right to participate in any negotiations or
proceedings with respect to such demands. Prior to the Effective Time, CNE shall
not, without the prior written consent of ARR (which should not be unreasonably
withheld), make any payments with respect to, or settle, any such demands.
Section 2.8 Further Assurances. If, at any time after the Effective Time, the
Surviving Company shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Company its right, title or interest in, to or under any of the rights,
properties or assets of CNE or ARR acquired or to be acquired by the Surviving
Company as a result of, or in connection with, the Merger or otherwise to carry
out this Agreement, the officers of the Surviving Company shall be authorized to
execute and deliver, in the name and on behalf of each of CNE and ARR or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in such names and on such behalves or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Company or otherwise to carry out the purposes of this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ARR
Except as set forth in the ARR Disclosure Schedule delivered by ARR to CNE at or
prior to the execution of this Agreement (the "ARR Disclosure Schedule") (each
section of which qualifies the correspondingly numbered representation and
warranty), ARR represents and warrants to CNE as follows:
Section 3.1 Organization and Good Standing. ARR is a corporation duly organized,
validly existing and in good standing under the laws of Bermuda and has the
corporate power and authority to carry on its business as it is now being
conducted. ARR is duly qualified as a foreign corporation to do business, 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, except where the failure to be so qualified or in good
standing would not have a material adverse effect, individually or in the
aggregate, on the business, financial condition, or results of operations of ARR
or, if applicable, the ability of ARR to consummate the Merger and the other
transactions contemplated by this Agreement (an "ARR Material Adverse Effect").
Section 3.2 Certificate of Incorporation, Memorandum of Association and
Bye-Laws. Complete and correct copies of the Certificate of Incorporation,
Memorandum of Association and Bye-laws, each as amended to date, of ARR have
been made available to CNE. The Certificate of Incorporation, Memorandum of
Association and Bye-laws of ARR are in full force and effect. ARR is not in
violation of any material provision of its Certificate of Incorporation,
Memorandum of Association or Bye-laws.
Section 3.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of ARR consists of
1,200,000 shares, par value US$.01 per share. All outstanding shares of
ARR are validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(b) Except as described in this Section 3.3 and as contemplated by this
Agreement (i) no shares of capital stock or other equity securities of ARR
are authorized, issued or outstanding, or reserved for issuance, and there
are no options, warrants or other rights (including registration rights),
agreements, arrangements or commitments of any character to which ARR is a
party relating to the issued or unissued capital stock or other equity
interests of ARR, requiring ARR to grant, issue or sell any shares of the
capital stock or other equity interests of ARR by sale, lease, license or
otherwise; (ii) ARR has no obligations, contingent or otherwise, to
repurchase, redeem or otherwise acquire any shares of the capital stock or
other equity interests of ARR; (iii) ARR does not, directly or indirectly,
own, and has not agreed to purchase or otherwise acquire, the capital
stock or other equity interests of, or any interest convertible into or
exchangeable or exercisable for such capital stock or such equity
interests, of any corporation, partnership, joint venture or other entity
which would be material in value to ARR; and (iv) there are no voting
trusts, proxies or other agreements or understandings to which ARR is a
party with respect to the voting of any shares of capital stock or other
equity interests of ARR.
Section 3.4 Subsidiaries. ARR has no Subsidiaries.
Section 3.5 Corporate Authority.
(a) ARR has the requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery by ARR of this Agreement and the consummation by
ARR of the transactions contemplated hereby, have been duly authorized by
its Board of Directors and, except for the approval and adoption of ARR's
stockholders with respect to this Agreement and the transactions
contemplated hereby, no other corporate action on the part of ARR is
necessary to authorize the execution and delivery by ARR of this Agreement
and the consummation by it of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by ARR and constitutes a
valid and binding agreement of ARR and is enforceable against ARR in
accordance with its terms, except to the extent that (i) such enforcement
may be subject to any bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other laws, now or hereafter in effect, relating to
or limiting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defense, and to the discretion of the court before
which any proceeding therefor may be brought.
(b) Prior to execution and delivery of this Agreement, the Board of Directors
of ARR (at a meeting duly called and held) has (i) approved this
Agreement, the Merger and the other transactions contemplated hereby and
thereby, (ii) determined that the transactions contemplated hereby are
fair to and in the best interests of the holders of ARR shares and (iii)
determined to recommend this Agreement, the Merger and the other
transactions contemplated hereby to ARR's stockholders for approval and
adoption at a stockholders meeting (it being understood that such
determination is subject to any future determination by the Board of
Directors of ARR, in good faith and as advised by
outside counsel, that such recommendation may be inconsistent with the
fiduciary obligations of the Board of Directors of ARR under applicable
law). The affirmative vote of the holders of a majority of the outstanding
shares of ARR is the only vote of the holders of any class or series of
ARR's capital stock necessary to approve and adopt the Merger Agreement.
Section 3.6 Compliance with Applicable Law. ARR holds, and is in compliance with
the terms of, all permits, licenses, exemptions, orders and approvals of all
Governmental Entities (as hereinafter defined) necessary for the conduct of its
business ("Company Permits"), except for failures to hold or to comply with such
permits, licenses, exemptions, orders and approvals which would not have an ARR
Material Adverse Effect. With respect to ARR Permits, to the knowledge of ARR no
action or proceeding is pending or threatened that would reasonably be expected
to have an ARR Material Adverse Effect. The business of ARR is being conducted
in compliance with all applicable laws, ordinances, regulations, judgments,
decrees or orders ("Applicable Law") of governmental or regulatory authorities
or administrative agency or commission (a "Governmental Entity"), except for
violations or failures to so comply that would not have an ARR Material Adverse
Effect. To the knowledge of ARR, no investigation or review by any Governmental
Entity with respect to ARR is pending or threatened, other than, in each case,
those which would not reasonably be likely to have an ARR Material Adverse
Effect.
Section 3.7 Non-Contravention. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, (i) result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to the
loss of a material benefit under any loan, guarantee of indebtedness or credit
agreement, note, bond, mortgage, indenture, lease, agreement, contract,
instrument, permit, concession, franchise, right or license (any of the
foregoing, a "Contract") applicable to ARR, or result in the creation of any
Lien upon any of the properties or assets of ARR, (ii) conflict or result in any
violation of any provision of the Certificate of Incorporation, Memorandum of
Association or Bye-Laws or other equivalent organizational document, in each
case as amended, of ARR, (iii) subject to the governmental filings referenced in
clause (i) of Section 3.8, conflict with or violate any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to ARR or any of its
properties or assets, other than, in the case of clauses (i) and (iii), any such
violations, conflicts, defaults, rights, losses or Liens that, individually or
in the aggregate, would not have an ARR Material Adverse Effect.
Section 3.8 Government Approvals; Required Consents. No filing or registration
with, or authorization, consent or approval of, any Governmental Entity is
required by or with respect to ARR in connection with the execution and delivery
of this Agreement by ARR or is necessary for the consummation of the
transactions contemplated hereby (including, without limitation, the Merger)
except: (i) in connection, or in compliance, with the provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), any state securities or
"Blue Sky" law and any requirements of any foreign or supranational antitrust
law, (ii) for the filing of a Certificate of Merger with the Secretary of State
of the State of Delaware and the Registrar of Companies of Bermuda, (iii) such
consents, approvals, authorizations, permits, filings and notifications listed
in the ARR Disclosure Schedule and (iv) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
obtain or make would not, individually or in the aggregate, have an ARR Material
Adverse Effect.
Section 3.9 Absence of Certain Changes or Events. Since May 26, 2005 ARR has
conducted its business and operations in the ordinary and usual course
consistent with past practice and there has not occurred (i) any event,
condition or occurrence having or that would reasonably be expected to have,
individually or in the aggregate, an ARR Material Adverse Effect; (ii) any
damage, destruction or loss (whether or not covered by insurance) having or
which would reasonably be expected to have, individually or in the aggregate, an
ARR Material Adverse Effect; or (iii) any declaration, setting aside or payment
of any dividend or distribution of any kind by ARR on its shares.
Section 3.10 Actions and Proceedings. There are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental Entity against
ARR, any of its properties, assets or business, or, to the knowledge of ARR, any
of ARR's current or former directors or officers or any other person whom ARR
has agreed to indemnify, as such, that would reasonably be expected to have,
individually or in the aggregate, an ARR Material Adverse Effect. To the
knowledge of ARR, there are no actions, suits or legal, administrative,
regulatory or arbitration proceedings pending or threatened against ARR, any of
its properties, assets or business, or, to the knowledge of ARR, any of ARR's
current or former directors or officers or any other person whom ARR has agreed
to indemnify, as such, that relates to the transactions contemplated by this
Agreement or would reasonably be expected to have, individually or in the
aggregate, an ARR Material Adverse Effect. To ARR's knowledge, there are no
facts or circumstances specific to ARR which, if known to a third party, would
reasonably be expected to result in such a suit or proceeding which could be
expected to have an ARR Material Adverse Effect.
Section 3.11 Contracts. Each Contract entered into by ARR is valid, binding and
enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not reasonably be
expected to have an ARR Material Adverse Effect and there are no defaults by ARR
or, to the knowledge of ARR, another party thereto, thereunder, except those
defaults that would not reasonably be expected to have an ARR Material Adverse
Effect. ARR is not a party to or bound by any non-competition agreement or any
other agreement or obligation which purports to limit in any material respect
the manner in which, or the localities in which, ARR is entitled to conduct all
or any material portion of the business of ARR taken as a whole.
Section 3.12 Taxes.
(a) As used in this Agreement, the following terms shall have the following
meanings: the term "Taxes" means all federal, state, local, foreign and
other net income, gross income, gross receipts, sales use, ad valorem,
transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits, customs, duties or other taxes, fees,
assessments or charges of any kind whatever, together with any interest
any penalties, additions to tax or additional amounts with respect
thereto; and the term "Returns" means all returns, declarations, reports,
statements and other documents required to be filed in respect of Taxes.
All citations to the Code, or to the Treasury Regulations promulgated
thereunder, shall include any amendments or any substitute or successor
provisions thereto.
(b) There have been properly completed and filed on a timely basis and in
correct form all Returns required to be filed by ARR. As of the time of
filing, the Returns correctly reflected the facts regarding the income,
business, assets, operations, activities, status
or other matters of ARR or any other information required to be shown
thereon. An extension of time within which to file any Return which has
not been filed has not been requested or granted.
(c) With respect to all amounts in respect of Taxes imposed upon ARR, or for
which ARR is or could be liable, whether to taxing authorities (as, for
example, under law) or to other persons or entities (as, for example,
under tax allocation agreements), with respect to all taxable periods or
portions of periods ending on or before the Closing Date, all applicable
tax laws and agreements have been fully complied with, and all amounts
required to be paid by ARR, to taxing authorities or others, on or before
the date hereof have been paid.
(d) No issues have been raised (and are currently pending) by any taxing
authority in connection with any of the Returns filed by ARR. No waivers
of statutes of limitation with respect to such Returns have been given by
or requested from ARR. All deficiencies asserted or assessments made as a
result of any examinations have been fully paid, or are fully reflected as
a liability in ARR's financial statements contained or are being contested
in good faith and an adequate reserve therefor has been established and is
fully reflected in the financial statements.
(e) ARR is not a party to or bound by any tax indemnity, tax sharing or tax
allocation agreement.
(f) ARR has not agreed to make, and is not required to make, any adjustment
under section 481(a) of the Code by reason of a change in accounting
method or otherwise.
(g) ARR is not a party to any agreement, contract, arrangement or plan that
has resulted or would result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
(h) The unpaid Taxes of ARR do not exceed the reserve for tax liability with
respect to ARR (excluding any reserve for deferred Taxes established to
reflect timing differences between book and tax income) set forth or
included in ARR's financial statements as adjusted for the passage of time
through the Closing Date, in accordance with the past practices of ARR.
(i) The transactions contemplated herein will not result in restorations into
income of amounts deferred under the consolidated return regulations, such
as those relating to intercompany transactions, excess loss accounts, and
the like.
(j) The transactions contemplated herein are not subject to any tax
withholding provisions of law or regulations.
(k) No breach of any of the foregoing representations and warranties in this
Section 3.12 shall be deemed to exist unless such breach would have an ARR
Material Adverse Effect.
Section 3.13 Title to Properties; Encumbrances. Except as described in the
following sentence, each of ARR has good, valid and, in the case of real
property, marketable title to, or a valid leasehold interest in, all of its
material properties and assets (real, personal, tangible and intangible),
including, without limitation, all such properties and assets reflected in ARR's
balance sheet as of ________, 2005 (except for properties and assets disposed of
in the ordinary course of business since such date, except for such title or
interest the failure of which to have would not have, individually or in the
aggregate, an ARR Material Adverse Effect. None of such properties or assets are
subject to any Liens (whether absolute, accrued, contingent or otherwise),
except imperfections of title and Liens, if any, which do not materially detract
from the value of the property or assets subject thereto and do not materially
impair the business or operations of ARR taken as a whole.
Section 3.14 Intellectual Property. ARR owns or has a valid license to use all
inventions, patents, trademarks, service marks, trade names, copyrights, trade
secrets, technology and know-how, software and other intellectual property
rights (collectively, the "ARR Intellectual Property") necessary to carry on its
businesses as currently conducted; and ARR has not received any notice of
infringement of or conflict with, and, to ARR's knowledge, there are no
infringements of or conflicts with, the rights of others with respect to the use
of any of ARR Intellectual Property that, in either such case, has had or would
reasonably be expected to have an ARR Material Adverse Effect.
Section 3.15 Employee Benefit Plans; ERISA. ARR does not maintain, administer or
contribute to, nor has any liability with respect to, nor do the employees of
ARR receive or expect to receive as a condition of employment, benefits pursuant
to:
(a) any employee benefit plan (as defined in Section 3(3) of ERISA (each such
plan, an "ARR Plan"), including, without limitation, any Multiemployer
Plan; or
(b) any bonus, deferred compensation, performance compensation, stock
purchase, stock option, stock appreciation, severance, salary
continuation, vacation, sick leave, holiday pay, fringe benefit, personnel
policy, reimbursement program, incentive, insurance, welfare or similar
plan, program, policy or arrangement (each such plan, an "ARR Benefit
Plan");
Except as required by section 4980B of the Code, ARR has not promised any former
employee or other individual medical or other benefit coverage and ARR does not
maintain or contribute to any plan, program, policy or arrangement providing
medical or life insurance benefits to former employees, their spouses or
dependents or any other individual not employed by ARR. No ARR Plan or ARR
Benefit Plan has any provision which could increase or accelerate benefits or
increase the liability of ARR or any of its Subsidiaries as a result of any
transaction contemplated by this Agreement.
Section 3.16 Environmental Matters. ARR is and at all times has been, and all
real property currently or previously owned, leased, occupied, used by or under
the control of ARR and all operations or activities of ARR (including, without
limitation, those conducted on or taking place at any of such real property) are
and at all times have been, in material compliance with and not subject to any
material liability or obligation under any Environmental Law or Environmental
Permit. As used in this Agreement: "Environmental Laws" means all applicable
federal, state or local laws, rules, regulations or principles of common law
relating to protection of health and safety, pollution, and environmental
matters of any kind whatsoever, including with respect to the storage,
treatment, generation, transportation, spillage, discharge, leakage or other
release or threatened release of any material, substance or waste of any kind
whatsoever; and "Environmental Permits" means any permits, licenses,
notifications, consents or approvals required under any Environmental Law. There
is no condition or circumstance regarding ARR or its business or any such real
property or the operations or activities conducted thereon, which
may give rise to a violation of, or liability or obligation under, any
Environmental Law or Environmental Permit which would have an ARR Material
Adverse Effect. Neither ARR nor any Person, the acts or omissions of which may
be attributable to, the responsibility of, or be the basis of a liability to,
ARR has, or has arranged to have, any material, substance or waste generated,
released, treated, stored or disposed of at, or transported to, any facility or
property the remediation or cleanup of which, or the response costs related
thereto, could become or result in material responsibilities of or material
liabilities to ARR. There are no allegations, claims, demands, citations,
notices of violation, or orders of noncompliance made against, issued to or
received by ARR relating or pursuant to any Environmental Law or Environmental
Permit except those which have been corrected or complied with, and to the
knowledge of ARR no such allegation, claim, demand, citation, notice of
violation or order of noncompliance is threatened, imminent or likely.
Section 3.17 Labor Matters. With respect to employees of ARR: (i) to the
knowledge of ARR there is no pending or threatened unfair labor practice charges
or employee grievance charges; (ii) there is not request for union
representation, labor strike, dispute, slowdown or stoppage actually pending or,
to the knowledge of ARR, threatened against or affecting ARR; (iii) ARR is not a
party to any collective bargaining agreements; and (iv) the employment of each
of ARR's employees is terminable at will without cost to ARR except for payments
required under ARR Plans and Company Benefit Plans and payment of accrued
salaries or wages and vacation pay. No employee or former employee has any right
to be rehired by ARR prior to ARR's hiring a person not previously employed by
ARR. Except as required by Section 4980B of the Code, ARR has no liability to
provide now or in the future medical benefits, life insurance or other welfare
benefits to former employees of ARR or their spouses or dependents or any other
individual not employed by ARR. ARR is and, since May 26, 2005 has been, in
compliance in all with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including,
without limitation, any such laws respecting employment discrimination,
occupational safety and health, and unfair labor practices, except where such
failure to comply would not have an ARR Material Adverse Effect. ARR is not
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them or any amounts required to be reimbursed to such employees.
Section 3.18 Affiliate Transactions. Except as contemplated by the transactions
contemplated hereby, there are no material Contracts or other material
transactions between ARR, on the one hand, and any (i) officer or director of
ARR, (ii) record or beneficial owner of five percent or more of the voting
securities of ARR or (iii) affiliate (as such term is defined in Regulation
12b-2 promulgated under the Exchange Act) of any such officer, director or
beneficial owner, on the other hand.
Section 3.19 Real Estate.
(a) ARR owns no real estate.
(b) All real estate leased by ARR (the "ARR Leased Premises") are leased
pursuant to written leases, true, correct and complete copies of which
have been made available to CNE. To ARR's knowledge, ARR is not in default
under any term of any agreement relating to ARR Leased Premises nor, to
ARR's knowledge, is any other party thereto in default thereunder, which
in any case would have an ARR Material Adverse Effect.
(c) There are no condemnation proceedings pending or, to ARR's knowledge,
threatened with respect to any portion of ARR Leased Premises.
(d) To the knowledge of ARR, the buildings and other facilities located on the
ARR Leased Premises are free of any patent structural or engineering
defects and, to ARR's knowledge, are free of any latent structural or
engineering defects.
Section 3.22 Brokers. No broker, finder or financial advisor retained by ARR is
entitled to any brokerage, finder's or other fee or commission from ARR in
connection with the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CNE
Except as set forth in the CNE Disclosure Schedule delivered by CNE to ARR at or
prior to the execution of this Agreement (the "CNE Disclosure Schedule") (each
section of which qualifies the correspondingly numbered representation and
warranty), CNE represents and warrants to ARR as follows:
Section 4.1 Organization and Good Standing. CNE is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to carry on its business as it is now
being conducted. CNE is duly qualified as a foreign corporation to do business,
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, except where the failure to be so qualified or in good
standing would not have a material adverse effect, individually or in the
aggregate, on the business, financial condition, results of operations or
prospects of CNE and its Subsidiaries taken as a whole, or, if applicable, the
ability of CNE to consummate the Merger and the other transactions contemplated
by this Agreement (a "CNE Material Adverse Effect").
Section 4.2 Certificate of Incorporation and By-Laws. Complete and correct
copies of the Certificates of Incorporation and By-laws or equivalent
organizational documents, each as amended to date, of CNE and each of its
Subsidiaries have been made available to ARR. The Certificates of Incorporation,
By-laws and equivalent organizational documents of CNE and each of its
Subsidiaries are in full force and effect. Neither CNE nor any of its
Subsidiaries is in violation of any material provision of its Certificate of
Incorporation, By-laws or equivalent organizational documents.
Section 4.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of CNE consists of:
(i) 25 million shares of preferred stock, par value $.00001 per share
("CNE Preferred Stock") of which 13,438,241 shares are outstanding
in the following series: Series AA, A, B, C and E;
(ii) 40 million shares of common stock, par value $.00001 per share ("CNE
Preferred Stock") of which 10,790,915 shares are outstanding;
(iii) 2,220,000 common stock warrants; and
(iv) 503,500 incentive stock options for common shares.
(b) Upon approval of the CNE shareholders of the Merger and the completion of
the requisite filings with the Delaware Secretary of State and Bermudan
Registrar of Companies, the entire issued and outstanding capital stock of
CNE will consist of one billion shares of common stock, par value $.00001
per share, of which 26,000,000 common shares will be issued or reserved
for CNE stockholders of record prior to the Merger, and 650,000,000 common
shares will be issued to Arrow Pacific Resources (S) Pte. Ltd.
(c) Except as described in this Section 4.3 and as contemplated by this
Agreement: (i) no shares of capital stock or other equity securities of
CNE are authorized, issued or outstanding, or reserved for issuance and
there are no options, warrants or other rights (including registration
rights), agreements, arrangements or commitments of any character to which
CNE or any of its Subsidiaries is a party relating to the issued or
unissued capital stock or other equity interests of CNE or any of its
Subsidiaries, requiring CNE or any of its Subsidiaries to grant, issue or
sell any shares of the capital stock or other equity interests of CNE or
any of its Subsidiaries by sale, lease, license or otherwise; (ii) neither
CNE nor any of its Subsidiaries have any obligation, contingent or
otherwise, to repurchase, redeem or otherwise acquire any shares of the
capital stock or other equity interests of CNE or any of its Subsidiaries;
(iii) none of CNE or any of its Subsidiaries, directly or indirectly,
owns, or has agreed to purchase or otherwise acquire, the capital stock or
other equity interests of, or any interest convertible into or
exchangeable or exercisable for such capital stock or such equity
interests, of any corporation, partnership, joint venture or other entity
which would be material in value to CNE; and (iv) there are no voting
trusts, proxies or other agreements or understandings to which CNE or any
of its Subsidiaries is a party with respect to the voting of any shares of
capital stock or other equity interests of CNE or any of its Subsidiaries.
Section 4.4 CNE Subsidiaries. The CNE Disclosure Schedule sets forth a list of
each Subsidiary of CNE; its authorized, issued and outstanding capital stock or
other equity interests; the percentage of such capital stock or other equity
interests owned by CNE or any Subsidiary of CNE, and the identity of such owner;
the capital stock reserved for future issuance pursuant to outstanding options
or other agreements; and the identity of all parties to any such option or other
agreement. Each Subsidiary of CNE is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each Subsidiary of CNE has all requisite
corporate power and authority to carry on its business as it is now being
conducted. Each Subsidiary of CNE is duly qualified as a foreign corporation or
organization authorized to do business, 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, except where
the failure to be so qualified or in good standing would not have a CNE Material
Adverse Effect. All of the outstanding shares of capital stock or other
ownership interests in each of CNE's Subsidiaries have been validly issued, and
are fully paid, nonassessable and are owned by CNE or another Subsidiary of CNE
free and clear of all Liens, and are not subject to preemptive rights created by
statute, such Subsidiary's respective Certificate of Incorporation or By-laws or
any agreement to which such Subsidiary is a party.
Section 4.5 Corporate Authority.
(a) CNE has the requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by CNE and the consummation by
CNE of the transactions contemplated hereby have been duly authorized by
its Board of Directors and stockholders and no other corporate action on
the part of CNE is necessary to authorize the execution and delivery by
CNE of this Agreement and the consummation by it of the transactions
contemplated hereby. This Agreement has been duly executed and delivered
by CNE and constitutes a valid and binding agreement of CNE and is
enforceable against CNE in accordance with its terms, except to the extent
that (i) such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or
hereafter in effect, relating to or limiting creditors' rights generally
and (ii) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defense, and to the
discretion of the court before which any proceeding therefor may be
brought.
(b) Prior to the execution and delivery of this Agreement, the Board of
Directors of CNE (at a meeting duly called and held) has (i) approved this
Agreement and the Merger and the other transactions contemplated hereby,
(ii) determined that the transactions contemplated hereby are fair to and
in the best interests of the holders of CNE Common Stock and (iii)
determined to recommend this Agreement, the Merger and the other
transactions contemplated hereby to CNE's stockholders for approval and
adoption. This Agreement and the transactions contemplated hereby have
been duly approved and adopted by the affirmative vote of the holders of a
majority of the outstanding shares of CNE Common Stock in accordance with
Sections 228 and 251 of the DGCL and no further vote of the holders of any
class or series of CNE's capital stock is necessary to approve, adopt and
consummate this Agreement or the transactions contemplated hereby.
Section 4.6 Compliance with Applicable Law. Except as disclosed in the CNE
Disclosure Schedule, (i) each of CNE and its Subsidiaries holds, and is in
compliance with the terms of, all permits, licenses, exemptions, orders and
approvals of all Governmental Entities necessary for the conduct of their
respective businesses ("CNE Permits"), except for failures to hold or to comply
with such permits, licenses, exemptions, orders and approvals which would not
have a CNE Material Adverse Effect, (ii) with respect to the CNE Permits, to the
knowledge of CNE no action or proceeding is pending that would reasonably be
expected to have a CNE Material Adverse Effect, (iii) the business of CNE and
its Subsidiaries is being conducted in compliance with all Applicable Laws,
except for violations or failures to so comply that would not have a CNE
Material Adverse Effect, and (iv) to the knowledge of CNE, no investigation or
review by any Governmental Entity with respect to CNE or its Subsidiaries is
pending or threatened, other than, in each case, those which would not
reasonably be likely to have a CNE Material Adverse Effect.
Section 4.7 Non-contravention. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, (i) result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to the
loss of a material benefit under any Contract applicable to CNE or any of its
Subsidiaries, or result in the creation of any Lien upon any of the properties
or assets of CNE or any of its Subsidiaries, (ii) conflict or result in any
violation of any provision of the Certificate of Incorporation or By-Laws or
other equivalent organizational document, in each case as amended, of CNE or any
of its Subsidiaries, (iii) subject to the governmental filings referenced in
clause (i) of Section 4.8, conflict with or violate any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to CNE or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (i) and (iii), any such violations, conflicts, defaults, rights,
losses or Liens that, individually or in the aggregate, would not have a CNE
Material Adverse Effect.
Section 4.8 Government Approvals; Required Consents. No filing or registration
with, or authorization, consent or approval of, any Governmental Entity is
required by or with respect to CNE or any of its Subsidiaries in connection with
the execution and delivery of this Agreement by CNE or is necessary for the
consummation of the transactions contemplated hereby (including, without
limitation, the Merger) except: (i) in connection, or in compliance, with the
provisions of the Securities Act, the Exchange Act, any state securities or
"Blue Sky" law and any requirements of any foreign or supranational antitrust
law, (ii) for the filing of a Certificate of Merger with the Secretary of State
of the State of Delaware, (iii) such consents, approvals, authorizations,
permits, filings and notifications listed in the CNE Disclosure Schedule and
(iv) such other consents, orders, authorizations, registrations, declarations
and filings the failure of which to obtain or make would not, individually or in
the aggregate, have a CNE Material Adverse Effect.
Section 4.9 Financial Statements and Other Documents. The CNE Disclosure
Schedule contains complete and accurate copies of the audited consolidated
balance sheets, consolidated statements of income, retained earnings and cash
flows and notes to consolidated financial statements (together with any
supplementary information thereto) of CNE, all as of and for the fiscal years
ended [December 31, 2002, December 31, 2003 and December 31, 2004]. The CNE
Disclosure Schedule also contains complete and accurate copies of the unaudited
consolidated balance sheet, consolidated statements of income, retained earnings
and cash flows (together with any supplementary information thereto) of CNE, all
as of and for the period ending June 30, 2005 and/or the month immediately
preceding the Closing (all of the foregoing financial statements, collectively,
the "CNE Financial Statements"). The CNE Financial Statements fairly present, in
all material respects, the consolidated financial position of CNE and its
consolidated Subsidiaries, as of and for the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the respective periods then ended (subject, in the case of the unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein) in conformity with GAAP (except, in the case of the unaudited
statements, for the omission of normal and customary footnote disclosures
required by GAAP, none of which would materially affect such Financial
Statements) applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto). Since January 1, 2002, CNE
has not made any change in the accounting practices or policies applied in the
preparation of its financial statements, except as may be required by GAAP.
Section 4.10 Absence of Certain Changes or Events. Except to the extent
disclosed in the CNE Disclosure Schedule, since June 30, 2005 CNE and its
Subsidiaries have conducted their businesses and operations in the ordinary and
usual course consistent with past practice and there has not occurred (i) any
event, condition or occurrence having or that would reasonably be expected to
have, individually or in the aggregate, a CNE Material Adverse Effect; (ii) any
damage, destruction or loss (whether or not covered by insurance) having or
which would reasonably be expected to have, individually or in the aggregate, a
CNE Material Adverse Effect; or (iii) any declaration, setting aside or payment
of any dividend or distribution of any kind by CNE on any class of its capital
stock.
Section 4.11 Actions and Proceedings. Except as set forth in the CNE Disclosure
Schedule, there are no outstanding orders, judgments, injunctions, awards or
decrees of any Governmental Entity against CNE or any of its Subsidiaries, any
of their properties, assets or business, or, to the knowledge of CNE, any of
CNE's or its Subsidiaries' current or former directors or officers or any other
person whom CNE or any of its Subsidiaries has agreed to indemnify, as such,
that would reasonably be expected to have, individually or in the aggregate, a
CNE Material Adverse Effect. Except as set forth in the CNE Disclosure Schedule,
to the knowledge of CNE, there are no actions, suits or legal, administrative,
regulatory or arbitration proceedings pending or, threatened against CNE or any
of its Subsidiaries, any of their properties, assets or business, or, to the
knowledge of CNE, any of CNE' or its Subsidiaries' current or former directors
or officers or any other person whom CNE or any of its Subsidiaries has agreed
to indemnify, as such, that relates to transactions contemplated by this
Agreement or would reasonably be expected to have, individually or in the
aggregate, a CNE Material Adverse Effect. To the knowledge of CNE, there are no
facts or circumstances specific to CNE which if known to a third party would
reasonably be expected to result in such a suit or proceeding which could be
expected to have a CNE Material Adverse Effect.
Section 4.12 Contracts. Each Contract entered into by CNE is valid, binding and
enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not reasonably be
expected to have a CNE Material Adverse Effect and there are no defaults
thereunder, except those defaults that would not reasonably be expected to have
a CNE Material Adverse Effect. Except as set forth in the CNE Disclosure
Schedule, neither CNE nor any of its Subsidiaries is a party to or bound by any
non-competition agreement or any other agreement or obligation which purports to
limit in any material respect the manner in which, or the localities in which,
CNE or any such Subsidiary is entitled to conduct all or any material portion of
the business of CNE and its Subsidiaries taken as a whole. All Contracts which
are material, individually or in the aggregate, to the business, financial
condition, results of operations or prospects of ARR and its Subsidiaries taken
as a whole, are listed in the CNE Disclosure Schedule.
Section 4.13 Taxes.
(a) There have been properly completed and filed on a timely basis and in
correct form all Returns required to be filed by CNE and any of its
Subsidiaries. As of the time of filing, the Returns correctly reflected
the facts regarding the income, business, assets, operations, activities,
status or other matters of CNE or its Subsidiary or any other information
required to be shown thereon. An extension of time within which to file
any Return which has not been filed has not been requested or granted.
(b) With respect to all amounts in respect of Taxes imposed upon CNE and any
of its Subsidiaries, or for which CNE or any of its Subsidiaries is or
could be liable, whether to taxing authorities (as, for example, under
law) or to other persons or entities (as, for example, under tax
allocation agreements), with respect to all taxable periods or portions of
periods ending on or before the Closing Date, all applicable tax laws and
agreements have been fully complied with, and all amounts required to be
paid by CNE or any of its Subsidiaries, to taxing authorities or others,
on or before the date hereof have been paid.
(c) No issues have been raised (and are currently pending) by any taxing
authority in connection with any of the Returns filed by CNE or any of its
Subsidiaries. No waivers of statutes of limitation with respect to such
Returns have been given by or requested from CNE or any of its
Subsidiaries. The Disclosure Schedule sets forth (i) the taxable years
of CNE and its Subsidiaries as to which the respective statutes of
limitations with respect to Taxes have not expired, and (ii) with respect
to such taxable years sets forth those years for which examinations have
been completed, those years for which examinations are presently being
conducted, those years for which examinations have not been initiated, and
those years for which required Returns have not yet been filed. All
deficiencies asserted or assessments made as a result of any examinations
have been fully paid, or are fully reflected as a liability in the CNE
Financial Statements or are being contested in good faith and an adequate
reserve therefor has been established and is fully reflected in the CNE
Financial Statements.
(d) Neither CNE nor any of its Subsidiaries is a party to or bound by any tax
indemnity, tax sharing or tax allocation agreement.
(e) Neither CNE nor any of its Subsidiaries has agreed to make, and is not
required to make, any adjustment under section 481(a) of the Code by
reason of a change in accounting method or otherwise.
(f) Neither CNE nor any of its Subsidiaries is a party to any agreement,
contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of section 280G of the Code.
(g) The unpaid Taxes of CNE and its Subsidiaries do not exceed the reserve for
tax liability with respect to CNE (excluding any reserve for deferred
Taxes established to reflect timing differences between book and tax
income) set forth or included in the CNE Financial Statements as adjusted
for the passage of time through the Closing Date, in accordance with the
past practices of CNE or such Subsidiary.
(h) The transactions contemplated herein will not result in restorations into
income of amounts deferred under the consolidated return regulations, such
as those relating to intercompany transactions, excess loss accounts, and
the like.
(i) The transactions contemplated herein are not subject to any tax
withholding provisions of law or regulations.
(j) No breach of any of the representations and warranties contained in
paragraphs (a) through (i) of this Section 4.13 shall be deemed to exist
unless such breach would have a CNE Material Adverse Effect.
(k) To the knowledge of CNE there is no plan or intention on the part of CNE
stockholders to sell, exchange or otherwise dispose of a number of shares
of ARR Common Stock received by them for shares of CNE Stock pursuant to
the Merger, nor to enter into any puts, calls, straddles, spreads or
similar transactions, that would reduce CNE stockholders' ownership for
U.S. federal income tax purposes of ARR shares to a number of shares
having a value, as of the Effective Time, of less than 50 percent of the
value of all of the formerly outstanding stock of CNE as of the same date.
For purposes of this representation, shares of CNE Stock surrendered by
dissenters are treated as outstanding shares of ARR at the Effective Time.
Moreover, shares of CNE Stock and shares of ARR held by CNE stockholders
and otherwise sold, redeemed or disposed of prior to or subsequent to the
Merger will be considered in making this representation.
(l) At the Effective Time, the fair market value of the assets of CNE will
exceed the sum of its liabilities, plus the amount of liabilities, if any,
to which such assets are subject.
(m) At the Effective Time there will not be any intercorporate indebtedness
existing between ARR and CNE.
(n) CNE and CNE stockholders will pay their own respective expenses, if any,
incurred in connection with the Merger.
(o) CNE will not make any extraordinary dividend payments to its stockholders
prior to the Effective Time, or in contemplation of the Merger.
(p) CNE represents and warrants that the Surviving Company (and the Surviving
Company hereby agrees that it) will not take, or permit any of its
Subsidiaries to take any action that would cause the Merger not to be a
tax-free reorganization under the Code by reason of any violation of the
continuity-of-proprietary-interest doctrine or the
continuity-of-business-enterprise doctrine.
Section 4.14 Title to Properties; Encumbrances. Except as described in the
following sentence, each of CNE and its Subsidiaries has good, valid and, in the
case of real property, marketable title to, or a valid leasehold interest in,
all of its material properties and assets (real, personal, tangible and
intangible), including, without limitation, all such properties and assets
reflected in the consolidated balance sheet of CNE and its Subsidiaries as of
June 30, 2005 included in the CNE Financial Statements (except for properties
and assets disposed of in the ordinary course of business and consistent with
past practices since June 30, 2005), except for such title or interest the
failure of which to have would not have, individually or in the aggregate, a CNE
Material Adverse Effect. None of such properties or assets are subject to any
Liens (whether absolute, accrued, contingent or otherwise), except (i) as set
forth in the CNE Disclosure Schedule or (ii) imperfections of title and Liens,
if any, which do not materially detract from the value of the property or assets
subject thereto and do not materially impair the business or operations of CNE
and its Subsidiaries taken as a whole.
Section 4.15 Intellectual Property. CNE and its Subsidiaries own or have a valid
license to use all inventions, patents, trademarks, service marks, trade names,
copyrights, trade secrets, technology and know-how, software and other
intellectual property rights (collectively, the "CNE Intellectual Property")
necessary to carry on their respective businesses as currently conducted; and
neither CNE nor any such Subsidiary has received any notice of infringement of
or conflict with, and, to CNE's knowledge, there are no infringements of or
conflicts with, the rights of others with respect to the use of any of the CNE
Intellectual Property that, in either such case, has had or would reasonably be
expected to have, individually or in the aggregate, a CNE Material Adverse
Effect.
Section 4.16 Employee Benefit Plans; ERISA.
(a) None of CNE, any of its Subsidiaries or any ERISA Affiliate maintains,
administers or contributes to, or has any liability with respect to, nor
do the employees of CNE, its Subsidiaries or any ERISA Affiliate receive
or expect to receive as a condition of employment, benefits pursuant to:
(i) any employee benefit plan (as defined in Section 3(3) of ERISA (each
such plan, a "CNE Plan"), including, without limitation, any
Multiemployer Plan; or
(ii) any bonus, deferred compensation, performance compensation, stock
purchase, stock option, stock appreciation, severance, salary
continuation, vacation, sick leave, holiday pay, fringe benefit,
personnel policy, reimbursement program, incentive, insurance,
welfare or similar plan, program, policy or arrangement (each such
plan, a "CNE Benefit Plan");
other than those CNE Plans and CNE Benefit Plans described in the CNE
Disclosure Schedule. Except as required by section 4980B of the Code, none
of CNE, any of its Subsidiaries or any ERISA Affiliate has promised any
former employee or other individual medical or other benefit coverage and
none of CNE, any of its Subsidiaries or any ERISA Affiliate maintains or
contributes to any plan, program, policy or arrangement providing medical
or life insurance benefits to former employees, their spouses or
dependents or any other individual not employed by CNE, any of its
Subsidiaries or any ERISA Affiliate. No CNE Plan or CNE Benefit Plan has
any provision which could increase or accelerate benefits or increase the
liability of CNE or any of its Subsidiaries as a result of any transaction
contemplated by this Agreement.
(b) All CNE Plans and CNE Benefit Plans which are not Multiemployer Plans and
any related trust agreements or annuity contracts (or any related trust
instruments) comply with and are and have been operated in accordance with
each applicable provision of ERISA and the Code in all material respects.
Each CNE Plan, as amended to date, which is not a Multiemployer Plan, that
is intended to be qualified under Section 401(a) and 501(a) of the Code
has been determined to be so qualified by the IRS, has been submitted to
the IRS for a determination with respect to such qualified status, or the
remedial amendment period with respect to CNE Plan will not have expired
prior to the Effective Time, and no event has occurred, either by reason
of any action or failure to act, which would cause the loss of any such
qualification.
(c) Neither any CNE Plan fiduciary nor any CNE Plan has engaged in any
transaction in violation of section 406 of ERISA or any "prohibited
transaction" (as defined in section 4975(c)(1) of the Code) unless exempt
under section 408 of ERISA or section 4975 of the Code and there has been
no "reportable event" (as defined in section 4043 of ERISA),with respect
to any CNE Plan which is not a Multiemployer Plan, for which the 30-day
notice requirement has not been waived. None of CNE, any of its
Subsidiaries or any ERISA Affiliate has incurred or suffered to exist any
"accumulated funding deficiency" (as defined in section 302 of ERISA)
whether or not waived by the IRS, involving any CNE Plan subject to
section 412 of the Code or Part 3 of Subtitle B of Title I of ERISA. No
withdrawals have occurred so as to cause any CNE Plan to become subject to
the provisions of section 4063 of ERISA, and none of CNE, any of its
Subsidiaries or any ERISA Affiliate has ceased making contributions to any
employee benefit plan subject to section 4064(a) of ERISA to which any of
CNE, any of its Subsidiaries or any ERISA Affiliate made contributions
during the six (6) years prior to the date hereof or ceased operations at
a facility so as to become subject to section 4062(e) of ERISA. Full
payment has been made of all amounts which CNE, any of its Subsidiaries or
any ERISA Affiliate is required or committed to pay to each of CNE Plans
and CNE Benefit Plans relating to all periods prior to or as of Effective
Time.
(d) True and complete copies of each CNE Plan, CNE Benefit Plan, related trust
agreements, annuity contracts, determination letters, the most recent
determination letter request, summary plan descriptions, all
communications to employees regarding
any CNE Plan or CNE Benefit Plan, annual reports on Form 5500, Form 990,
actuarial reports and PBGC Forms 1 for the most recent three (3) Plan
years, and each plan, agreement, instrument and commitment referred to
herein has been previously furnished to ARR. The annual reports on Form
5500 and Form 990 and actuarial statements furnished to ARR fully and
accurately set forth the financial and actuarial condition of the
respective CNE Plan or CNE Benefit Plan, as may be applicable.
(e) The aggregate present value of all accrued benefits pursuant to each CNE
Plan subject to Title IV of ERISA, determined on the basis of current
participation and projected compensation for active participants, and
including the maximum value of all subsidized benefits, and earnings,
mortality and other actuarial assumptions set forth in the most recent
actuarial report for CNE Plan does not exceed the current fair market
value of CNE Plan's assets.
(f) None of CNE, any of its Subsidiaries or any ERISA Affiliate has incurred
any liability to the PBGC, including as a result of the voluntary or
involuntary termination of any CNE Plan which is subject to Title IV of
ERISA, except such liabilities as would not have a CNE Material Adverse
Effect. There is currently no active filing by CNE, its Subsidiaries or
any ERISA Affiliate with the PBGC (and no proceeding has been commenced by
the PBGC and no condition exists and no event has occurred that could
constitute grounds for the termination of any Plan by the PBGC) to
terminate any CNE Plan which is subject to Title IV of ERISA and which has
been maintained or funded, in whole or in part, by CNE, its Subsidiaries
or any ERISA Affiliate.
(g) To the knowledge of CNE or its Subsidiaries, there are no pending or
threatened claims by or on behalf of any of CNE Plans or CNE Benefit Plans
by any employee or beneficiary covered under any CNE Plans or CNE Benefit
Plans or otherwise involving any CNE Plan or CNE Benefit Plan (other than
routine claims for benefits), except those as would not have a CNE
Material Adverse Effect.
(h) With respect to each CNE Plan which is a Multiemployer Plan covering
employees of CNE, any of its Subsidiaries or any ERISA Affiliate: (i) none
of CNE, such Subsidiary or such ERISA Affiliate would incur any withdrawal
liability on a complete withdrawal from each such CNE Plan as of the
Effective Date, under applicable laws and conditions of each such CNE Plan
and the applicable provisions of law without regard to any limitation,
reduction or adjustment of liability under Title IV of ERISA or any Plan
provision based on Title IV of ERISA; (ii) none of CNE, its Subsidiaries
or any ERISA Affiliate has made or suffered a "complete withdrawal" or a
"partial withdrawal", as such terms are respectively defined in sections
4203 and 4205 of ERISA; (iii) none of CNE, its Subsidiaries or any ERISA
Affiliate has any contingent liability under section 4204 of ERISA; and
(iv) no such CNE Plan is in reorganization as defined in section 4241 of
ERISA and no circumstances exist which present a material risk of any such
CNE Plan going into reorganization, except where any of the foregoing
would not have a CNE Material Adverse Effect.
(i) With respect to employees of CNE and its Subsidiaries, CNE and its
Subsidiaries are and have been in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, any such
laws respecting employment discrimination, occupational safety and health,
and unfair labor practices.
4.17 Environmental Matters. CNE and its Subsidiaries are and at all times have
been, and all real property currently or previously owned, leased, occupied,
used by or under the control of CNE or any of its Subsidiaries and all
operations or activities of CNE and its Subsidiaries (including, without
limitation, those conducted on or taking place at any of such real property) are
and at all times have been, in material compliance with and not subject to any
material liability or obligation under any Environmental Law or Environmental
Permit. There is no condition or circumstance regarding CNE or any of its
Subsidiaries or its business or any such real property or the operations or
activities conducted thereon, which may give rise to a violation of, or
liability or obligation under, any Environmental Law or Environmental Permit
which would have a CNE Material Adverse Effect. Neither CNE, any of its
Subsidiaries nor any Person, the acts or omissions of which may be attributable
to, the responsibility of, or be the basis of a liability to, CNE has, or has
arranged to have, any material, substance or waste generated, released, treated,
stored or disposed of at, or transported to, any facility or property the
remediation or cleanup of which, or the response costs related thereto, could
become or result in material responsibilities of or material liabilities to CNE.
There are no allegations, claims, demands, citations, notices of violation, or
orders of noncompliance made against, issued to or received by CNE relating or
pursuant to any Environmental Law or Environmental Permit except those which
have been corrected or complied with, and no such allegation, claim, demand,
citation, notice of violation or order of noncompliance is threatened, imminent
or likely.
Section 4.18 Labor Matters. With respect to employees of CNE and its
Subsidiaries: (i) to the knowledge of CNE, there is no pending or threatened
unfair labor practice charges or employee grievance charges; (ii) there is not
request for union representation, labor strike, dispute, slowdown or stoppage
actually pending or, to the knowledge of CNE, threatened against or affecting
CNE, and there has been no such event during the 18 months preceding the date
hereof; (iii) CNE is not a party to any collective bargaining agreements; and
(iv) except as set out in the CNE Disclosure Schedule, the employment of each of
CNE' employees is terminable at will without cost to CNE except for payments
required under the CNE Plans and CNE Benefit Plans and payment of accrued
salaries or wages and vacation pay. No employee or former employee has any right
to be rehired by CNE prior to CNE's hiring a person not previously employed by
CNE. Except as required by Section 4980B of the Code, neither CNE nor any ERISA
Affiliate has any liability to provide now or in the future medical benefits,
life insurance or other welfare benefits to former employees of CNE or any ERISA
Affiliate or their spouses or dependents or any other individual not employed by
CNE or any ERISA Affiliate. The CNE Disclosure Schedule contains a true and
complete list of all employees who are employed by CNE as of June 30, 2005
and/or one month immediately preceding the Closing, as the case may be, and such
list correctly reflects their salaries, wages, other compensation (other than
benefits under the Plans and Employee Benefit Plans), dates of employment and
positions. CNE is and, since June 30, 2005 and/or one month immediately
preceding the Closing, as the case may be, has been, in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including,
without limitation, any such laws respecting employment discrimination,
occupational safety and health, and unfair labor practices. CNE is not
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them or any amounts required to be reimbursed to such employees.
Section 4.19 Affiliate Transactions. Except as set forth in the CNE Disclosure
Schedule or as contemplated by the transactions contemplated hereby, there are
no material Contracts or other material transactions between CNE or any of its
Subsidiaries, on the one hand, and any (i) officer or director of CNE or any of
its Subsidiaries, (ii) record or beneficial owner of five percent
or more of the voting securities of CNE or (iii) affiliate (as such term is
defined in Regulation 12b-2 promulgated under the Exchange Act) of any such
officer, director or beneficial owner, on the other hand.
Section 4.20 Brokers. No broker, finder or financial adviser is entitled to any
brokerage, finder's or other fee or commission from ARR or CNE in connection
with the transactions contemplated by this Agreement.
Section 4.21 CNE Not an Interested Stockholder. As of the date of this
Agreement, neither CNE nor any of its affiliates is an "Interested Stockholder"
of ARR as such term is defined in Section 203 of the DGCL.
Section 4.22 Real Estate.
(a) Owned Real Estate. All material real estate owned by CNE (the "CNE Real
Estate") is owned in fee simple title, subject only to real estate taxes
not delinquent and to covenants, conditions, restrictions and easements
which are of record and minor irregularities or imperfections of title
which do not in the aggregate materially detract from the value of the CNE
Real Estate or interfere with CNE's use or occupancy thereof. Except as
set forth in the CNE Disclosure Schedule, none of the CNE's Real Estate is
subject to any leases or tenancies.
(b) Leased Premises. All real estate leased by CNE (the "CNE Leased Premises")
are leased pursuant to written leases, true, correct and complete copies
of which have been made available to ARR. To CNE's knowledge, CNE is not
in default under any material term of any agreement relating to the CNE
Leased Premises nor, to CNE' knowledge, is any other party thereto in
default thereunder which in any case would have a CNE Material Adverse
Effect. All options in favor of, or which obligate, CNE to purchase any of
the CNE Leased Premises or any other real estate, if any, are described in
the CNE Disclosure Schedule which in any case would have a CNE Material
Adverse Effect.
(c) Condemnation. There are no condemnation proceedings pending or, to CNE's
knowledge, threatened with respect to any portion of the CNE Real Estate
or the CNE Leased Premises.
(d) Condition of Buildings. To the knowledge of CNE, the buildings and other
facilities located on the CNE Real Estate and the CNE Leased Premises are
free of any patent structural or engineering defects and, to CNE'
knowledge, are free of any latent structural or engineering defects.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Prior to the Effective Time, unless ARR shall otherwise agree in writing (which
agreement shall not be unreasonably withheld, or as otherwise expressly
contemplated by this Agreement, including, without limitation, Article IV
hereof, or as set forth in Article V of the CNE Disclosure Schedule, CNE shall
conduct, and cause each of its Subsidiaries to conduct, its business only in the
ordinary and usual course consistent with past practice, and CNE shall use, and
cause each of its Subsidiaries to use, its reasonable efforts to preserve intact
the present business organization, keep available the services of its present
officers and key employees, and
preserve their existing business relationships. CNE shall promptly give ARR
written notice of the existence or occurrence of any condition which would make
any representation or warranty of CNE herein contained untrue or which might
reasonably be expected to prevent the consummation of the transactions
contemplated hereby. Without limiting the generality of the foregoing, unless
ARR shall otherwise agree in writing (which agreement shall not be unreasonably
withheld, or as otherwise expressly contemplated by this Agreement, including,
without limitation, Article IV hereof, or as set forth in Article V of the CNE
Disclosure Schedule, prior to the Effective Time CNE shall not, nor shall it
permit any of its Subsidiaries to:
(a) (i) amend its Certificate of Incorporation, By-Laws or other
organizational documents, (ii) split, combine or reclassify any shares of
its outstanding capital stock, (iii) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property, or (iv)
directly or indirectly redeem or otherwise acquire any shares of its
capital stock or shares of the capital stock of any of its Subsidiaries;
(b) authorize for issuance, issue (except upon the exercise of outstanding
stock options) or sell or agree to issue or sell any shares of, or rights
to acquire or convertible into any shares of, its capital stock or shares
of the capital stock of any of its Subsidiaries (whether through the
issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise), except for the granting of options
pursuant to CNE's Stock Plan, as in effect on the date hereof, to current
or new employees in the ordinary course of business consistent with past
practice;
(c) (i) merge, combine or consolidate with another entity, (ii) acquire or
purchase an equity interest in or a substantial portion of the assets of
another corporation, partnership or other business organization or
otherwise acquire any assets outside the ordinary course of business and
consistent with past practice or otherwise enter into any material
contract, commitment or transaction outside the ordinary course of
business and consistent with past practice or (iii) sell, lease, license,
waive, release, transfer, encumber or otherwise dispose of any of its
material assets outside the ordinary course of business and consistent
with past practice;
(d) (i) incur, assume or prepay any material indebtedness or any other
material liabilities other than in each case in the ordinary course of
business and consistent with past practice, (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person other
than a Subsidiary of CNE, in each case other than in the ordinary course
of business and consistent with past practice or (iii) make any loans,
advances or capital contributions to, or investments in, any other person,
other than to any Subsidiary of CNE;
(e) pay, satisfy, discharge or settle any material claim, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than in
the ordinary course of business and consistent with past practice or
pursuant to mandatory terms of any CNE Contract in effect on the date
hereof;
(f) modify or amend, or waive any benefit of, any non-competition agreement to
which CNE or any of its Subsidiaries is a party;
(g) authorize or make capital expenditures outside the ordinary course of
business;
(h) permit any insurance policy naming CNE or any Subsidiary of CNE as a
beneficiary or a loss payee to be canceled or terminated other than in the
ordinary course of business and other than with respect to replacement
policies which CNE deems to be commercially appropriate under all relevant
circumstances;
(i) (i) adopt, enter into, terminate or amend in any material respect (except
as may be required by applicable law) any plan for the current or future
benefit or welfare of any director or officer, (ii) increase in any manner
the compensation or fringe benefits of, or pay any bonus to, any director,
officer or employee, (iii) hire any highly compensated employees, or (iii)
take any action to fund or in any other way secure, or to accelerate or
otherwise remove restrictions with respect to, the payment of compensation
or benefits under any employee plan, agreement, contract, arrangement or
other CNE Plan other than in the ordinary course of business;
(j) make any material change in its accounting or tax policies or procedures,
except as required by law or to comply with GAAP;
(k) acquire any shares of capital stock of ARR; or
(l) enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Access and Information. Each party hereto shall (and shall cause its
Subsidiaries and its and their respective officers, directors, employees,
auditors and agents to) afford to the other party and to such other party's
officers, employees, financial advisors, legal counsel, accountants, consultants
and other representatives (except to the extent not permitted under applicable
law as advised by counsel and except as may be limited by any confidentiality
obligation contained in any contract with a third party) reasonable access
during normal business hours throughout the period prior to the Effective Time
to all of its books and records and its properties and personnel and, during
such period, shall furnish promptly to the other party a copy of each report,
schedule and other document filed or received by it pursuant to the requirements
of federal securities laws.
Section 6.2 No Solicitation.
(a) Prior to the Effective Time, CNE agrees that neither it nor any of its
directors, officers, employees, agents or representatives will, directly
or indirectly, (i) solicit or initiate any inquiries or the making of any
proposal with respect to any merger, consolidation or other business
combination involving CNE or the acquisition of all or any significant
part of the assets or capital stock of CNE (an "Acquisition Transaction")
or (ii) negotiate or otherwise engage in discussions with any person
(other than ARR and its representatives) with respect to any Acquisition
Transaction, or which may reasonably be expected to lead to a proposal for
an Acquisition Transaction or enter into any agreement, arrangement or
understanding with respect to any such Acquisition Transaction; provided,
however, that, CNE may furnish information to, negotiate or otherwise
engage in discussions with any person which makes, indicates in writing an
intention or desire to make, or with respect to whom the Board of
Directors of CNE has
concluded in good faith after consultation with its financial advisor is
reasonably likely to make, a Superior Proposal (as herein defined), if the
Board of Directors of CNE determines in good faith, after consultation
with its outside counsel, that the failure to take such action may be
inconsistent with the fiduciary duties of the Board of Directors of CNE
under applicable law; and provided further that notwithstanding anything
to the contrary herein contained, the Board of Directors of CNE may take
and disclose to CNE's stockholders a position contemplated by Rule 14e-2
promulgated under the Exchange Act, comply with Rule 14d-9 thereunder and
make all disclosures required by applicable law in connection therewith.
Any of the foregoing to the contrary notwithstanding, CNE may engage in
discussions with or provide information to any person or group that has
made a proposal with respect to an Acquisition Transaction for the limited
purpose of determining whether such proposal is, or could lead to, a
Superior Proposal.
(b) Except as may be inconsistent with the fiduciary duties of CNE's Board of
Directors under Applicable Law, CNE agrees that, as of the date hereof, it
and its directors, officers, employees, agents and representatives, shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any person (other than ARR and its
representatives) conducted heretofore with respect to any Acquisition
Transaction. CNE agrees to promptly advise ARR of any inquiries or
proposals received by, any such information requested from, or any
negotiations or discussions sought to be initiated or continued with, CNE
or any of its directors, officers, employees, agents or representatives,
in each case from a person (other than ARR and its representatives) with
respect to an Acquisition Transaction, and the terms thereof, but
expressly not including the identity of such third party, and the general
terms of any financing arrangement or commitment in connection with such
Acquisition Transaction, and, except as may otherwise be inconsistent with
the fiduciary duties of CNE's Board of Directors under applicable law, to
update on an ongoing basis or upon ARR's reasonable request, the status
thereof, as well as any actions taken or other developments pursuant to
this Section 6.2. As used herein, "Superior Proposal" means a bona fide,
written proposal or offer made by any person (or group) (other than ARR)
with respect to an Acquisition Transaction (i) on terms which the Board of
Directors of CNE determines in good faith, based on the advice of
independent financial advisors and legal counsel, to be more favorable to
CNE and its stockholders than the transactions contemplated hereby
(including taking into account the financing thereof).
Section 6.3 Proxy Statement; Stockholder Approval.
(a) CNE, acting through its Board of Directors, shall, subject to and in
accordance with applicable law and its Certificate of Incorporation and
its By-Laws, promptly and duly call, give notice of, convene and hold as
soon as practicable a meeting of the holders of CNE Common Stock for the
purpose of voting to approve and adopt this Agreement and the transactions
contemplated hereby, and, (i) except as the Board of Directors of CNE
determines, in good faith and as advised by outside counsel, may be
inconsistent with the fiduciary duties of the Board of Directors of CNE
under applicable law, and subject to the second proviso of Section 6.2(a),
recommend approval and adoption of this Agreement and the transactions
contemplated hereby (including, without limitation, the Stock Issuance),
by the stockholders of CNE and include in the Proxy Statement such
recommendation and (ii) except as the Board of Directors of CNE
determines, in good faith and as advised by outside counsel, may be
inconsistent with the fiduciary duties of
the Board of Directors of CNE under applicable law, take all reasonable
action to solicit and obtain such approval.
(b) CNE shall, as promptly as practicable (or with such other timing as they
mutually agree), cause the definitive Proxy Statement/Prospectus to be
mailed to the stockholders of CNE.
Section 6.4 Compliance with the Securities Act.
(a) At least 30 days prior to the Effective Time, CNE shall cause to be
delivered to ARR a list identifying all persons who are Affiliates of CNE.
(b) CNE shall use its reasonable best efforts to cause each person who is
identified as one of its Affiliates in its list referred to in Section
6.4(a) above to deliver to ARR, at least 10 days prior to the Effective
Time, a written agreement, in the form attached hereto as Exhibit 6.4(b).
Section 6.5 Reasonable Best Efforts.
(a) Subject to the terms and conditions herein provided and applicable legal
requirements, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to
be done, not inconsistent with the fiduciary duties of its Board of
Directors, and to assist and cooperate with the other parties hereto in
doing, as promptly as practicable, all things necessary, proper or
advisable under applicable laws and regulations to ensure that the
conditions set forth in Article VI are satisfied and to consummate and
make effective the transactions contemplated by this Agreement, and to
obtain as promptly as practicable all consents, waivers, approvals,
authorizations or permits of, or registration or filing with or
notification to (any of the foregoing being a "Consent") any Governmental
Entity (it being agreed that CNE shall cause to be taken all necessary
action by its control persons and CNE's "ultimate parent entity" with
respect to such Consents).
(b) CNE agrees to use its reasonable best efforts to obtain as promptly as
practicable all consents, waivers, approvals, authorizations of, or
notification to all parties with which it has agreements.
(c) Each party hereto shall promptly inform the other of any material
communication from any Governmental Entity regarding any of the
transactions contemplated by this Agreement. After consultation with the
other party, such party will make an appropriate response in compliance
with such request.
Section 6.6 Public Announcements. Each of CNE and ARR agrees that, except as may
be required by Applicable Law as advised by counsel, it will not issue any press
release or otherwise make any public statement with respect to this Agreement
(including the Exhibits hereto) or the transactions contemplated hereby (or
thereby) without having consulted with the other party.
Section 6.7 Directors' and Officers' Indemnification and Insurance. The
Surviving Company shall cause to be maintained from the Effective Time the
current policies of the directors' and officers' liability insurance maintained
by ARR; provided that the Surviving Company may substitute therefor policies of
at least the same coverage containing terms and conditions which
are no less advantageous to the Indemnified Parties and provided that such
substitution shall not result in any gaps or lapses in coverage with respect to
matters occurring prior to the Effective Time; and provided, further, that the
Surviving Company shall not be required to pay an annual premium in excess of
300% of the last annual premium paid by ARR prior to the date hereof (which
premium is disclosed in Section 6.7 of ARR Disclosure Schedule) and if the
Surviving Company is unable to obtain the insurance required by this Section
6.7(b) it shall obtain as much comparable insurance as possible for an annual
premium equal to such maximum amount.
Section 6.8 Expenses. Except as provided in the sentence immediately following,
each party hereto shall bear its own costs and expenses in connection with this
Agreement and the transactions contemplated hereby. ARR agrees at Closing to
reimburse CNE for up to $200,000 in expenses related to reasonable attorney and
accountant fees upon ARR and CNE shareholder approval of the Merger.
Section 6.9 American Stock Exchange Listing. CNE shall maintain its listing for
trading on the American Stock Exchange at all times from the date of this
Agreement through the Closing Date.
Section 6.10 Supplemental Disclosure. ARR shall give prompt notice to CNE, and
CNE shall give prompt notice to ARR, of (a) the occurrence, or non-occurrence,
of any event the occurrence, or non-occurrence, of which would be likely to
cause (i) any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect or (ii) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied in
any material respect, and (b) any failure of ARR or CNE, as the case may be, to
comply with in any material respect any covenant or agreement to be complied
with by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 6.10 shall not have any effect for the purpose of
determining the satisfaction of the conditions set forth in Article VII of this
Agreement or the right to terminate this Agreement pursuant to Article VIII of
this Agreement or otherwise limit or affect the remedies available hereunder to
any party.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction or waiver at or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite vote (as
described in Section 4.5) of the stockholders of CNE in accordance with
applicable law by no later than December 31, 2005.
(b) Regulatory Approvals. All authorizations, consents, orders, declarations
or approvals of, or filings with, or terminations or expirations of
waiting periods imposed by, any Governmental Entity, which the failure to
obtain, make or occur would have an ARR Material Adverse Effect (with ARR
as the Surviving Company for these purposes), assuming the Merger had
taken place, shall have been obtained, shall have been made or shall have
occurred.
(c) No Injunction. No Governmental Entity having jurisdiction over ARR or CNE,
or any of CNE's Subsidiaries, shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(d) Litigation. There shall not have been instituted or be pending any suit,
action or proceeding by any Governmental Entity as a result of this
Agreement or any of the transactions contemplated hereby which questions
the validity or legality of the transactions contemplated by this
Agreement and which, if such Governmental Entity were to prevail, would
reasonably be expected to have an ARR Material Adverse Effect (with ARR as
the Surviving Company for these purposes).
Section 7.2 Conditions to Obligations of CNE to Effect the Merger. The
obligations of CNE to effect the Merger shall be subject to the satisfaction at
or prior to the Effective Time of the following additional conditions, unless
waived in writing by CNE:
(a) Representations and Warranties. The representations and warranties of ARR
that are qualified with reference to an ARR Material Adverse Effect shall
be true and correct and the representations and warranties that are not so
qualified shall be true and correct except where the failure to be true
and correct would not have an ARR Material Adverse Effect, in each case as
of the date hereof and as of the Effective Time as though made at and as
of the Effective Time.
(b) Performance of Obligations of ARR. ARR shall have performed all
obligations required to be performed by it under this Agreement at or
prior to the Effective Time except where the failure to so perform would
not have an ARR Material Adverse Effect.
Section 7.3 Conditions to Obligation of ARR to Effect the Merger. The obligation
of ARR to effect the Merger shall be subject to the satisfaction at or prior to
the Effective Time of the following additional conditions, unless waived in
writing by ARR:
(a) Representations and Warranties. The representations and warranties of CNE
that are qualified with reference to a CNE Material Adverse Effect shall
be true and correct and the representations and warranties that are not so
qualified shall be true and correct except where the failure to be true
and correct would not have a CNE Material Adverse Effect, in each case as
of the date hereof and as of the Effective Time as though made on and as
of the Effective Time.
(b) Performance of Obligations of CNE. CNE shall have performed all
obligations required to be performed by it under this Agreement at or
prior to the Effective Time except where the failure to so perform would
not have a CNE Material Adverse Effect.
(c) Material Adverse Effect. Since the date of this Agreement, there shall
have been no event or circumstance which has had, or would reasonably be
expected to have, a CNE Material Adverse Effect; and ARR shall have
received a certificate on behalf of CNE by its chief executive officer or
chief financial officer to such effect.
(d) American Stock Exchange Listing. CNE shall, at all times from the date of
this Agreement through the Closing, have maintained its listing for
trading on the American Stock Exchange.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated, and the Merger and
the other transactions contemplated hereby may be abandoned, at any time prior
to the Effective Time, whether before or after approval by the stockholders of
ARR or CNE:
(a) by mutual written consent of CNE and ARR;
(b) by either CNE or ARR, if the Merger shall not have been consummated on or
before December 31, 2005 (unless, in the case of any such termination
pursuant to this Section 8.1(b), the failure of such event to occur shall
have been caused by the action or failure to act of the party seeking to
terminate this Agreement, which action or failure to act constitutes a
breach of such party's obligations under this Agreement);
(c) by either CNE or ARR, if any permanent injunction, order, decree or ruling
by any Governmental Entity of competent jurisdiction preventing the
consummation of the Merger shall have become final and nonappealable;
provided, however, that the party seeking to terminate this Agreement
pursuant to this Section 8.1(c) shall have used its reasonable best
efforts to remove such injunction or overturn such action;
(d) by CNE if the Board of Directors of CNE shall determine, in good faith and
after consultation with its financial advisor and outside counsel, that a
proposal for an Acquisition Transaction constitutes a Superior Proposal;
and
(e) by ARR, if there has been a breach by CNE of any of its representations or
warranties, covenants or agreements set forth in this Agreement the effect
of which is a CNE Material Adverse Effect, which breach is not curable or,
if curable, is not cured within 45 days after written notice of such
breach is given by ARR to CNE.
Section 8.2 Effect of Termination. In the event of termination of this Agreement
pursuant to this Article VIII, the Merger shall be deemed abandoned and this
Agreement shall forthwith become void, except that the provisions of Section
6.10 shall survive any termination of this Agreement; provided, however, that
nothing in this Agreement shall relieve any party from liability for any
material breach of this Agreement.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Amendment and Modification. At any time prior to the Effective Time,
this Agreement may be amended, modified or supplemented only by written
agreement (referring specifically to this Agreement) of CNE and ARR with respect
to any of the terms contained herein; provided, however, that no such amendment,
modification or supplementation shall be made which under applicable law
requires the approval of stockholders of ARR or CNE, without the further
approval of such stockholders.
Section 9.2 Waiver. At any time prior to the Effective Time, CNE, on the one
hand, and ARR, on the other hand, may (i) extend the time for the performance of
any of the obligations or other acts of the other, (ii) waive any inaccuracies
in the representations and warranties of the other
contained herein or in any documents delivered pursuant hereto and (iii) waive
compliance by the other with any of the agreements or conditions contained
herein which may legally be waived. Any such extension or waiver shall be valid
only if set forth in an instrument in writing specifically referring to this
Agreement and signed on behalf of such party.
Section 9.3 Survivability. The respective representations and warranties and
covenants and agreements of CNE, on the one hand, and ARR, on the other hand,
contained herein or in any certificates or other documents delivered prior to or
as of the Effective Time shall not survive beyond the Effective Time.
Notwithstanding the foregoing, the covenants and agreements of the Surviving
Company after the Merger shall survive the Effective Time.
Section 9.4 Notices. All notices and other communications hereunder shall be in
writing and shall be delivered personally or by next-day courier or telecopied
with confirmation of receipt, to the parties at the addresses specified below
(or at such other address for a party as shall be specified by like notice;
provided that notices of a change of address shall be effective only upon
receipt thereof). Any such notice shall be effective upon receipt, if personally
delivered or telecopied, or one day after delivery to a courier for next-day
delivery.
If to CNE to: If to ARR to:
------------ ------------
Chairman and Chief Executive Officer Arrow Resources Development Ltd.
CNE Group, Inc. Carnegie Hall Tower
000 Xxxx 00xx Xxxxxx, Xxxxx 000 000 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000 Facsimile:____________
Section 9.5 Descriptive Headings; Interpretation. 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. References in this Agreement to
Sections, Exhibits or Articles mean a Section, Exhibit or Article of this
Agreement unless otherwise indicated. References to this Agreement shall be
deemed to include the Exhibits hereto, unless the context otherwise requires.
The term "Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, a Governmental Entity, an unincorporated
organization and any other entity of any fund.
Section 9.6 Entire Agreement; Assignment. This Agreement (including the Exhibits
and other documents and instruments referred to herein) constitute the entire
agreement and supersede all other prior agreements and understandings, both
written and oral, among the parties or any of them, with respect to the subject
matter hereof. Except for the provisions of Sections 4.13(p) (with respect to
the shareholders of ARR as of the date hereof), 6.7 and 6.9 of this Agreement is
not intended to confer upon any person not a party hereto any rights or remedies
hereunder. This Agreement shall not be assigned by operation of law or
otherwise.
Section 9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
provisions thereof relating to conflicts of law.
Section 9.8 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located
in the State of Delaware or in Delaware state court, this being in addition to
any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any federal court located in the State of Delaware or any
Delaware state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated by this Agreement, (b) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state court sitting in the
State of Delaware.
Section 9.9 Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect
against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
Section 9.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREFORE, each of CNE and ARR has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
CNE Group, Inc. Arrow Resources Development Ltd.
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxx Xxxxxxx
-------------------------------------- --------------------------------
Xxxxxx X. Xxxxxx, Chairman Xxxxx Xxxxxxx, CEO/President
and Chief Executive Officer
By: /s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxxxxx, Vice
President and Chief Financial Officer
