BUSINESS COMBINATION AGREEMENT BY AND BETWEEN CAPITAL GOLD CORPORATION AND NAYARIT GOLD INC. Dated as of February 10, 2010
Exhibit
2.1
BY
AND BETWEEN
CAPITAL
GOLD CORPORATION
AND
NAYARIT
GOLD INC.
Dated
as of February 10, 2010
TABLE
OF CONTENTS
Page
|
||
ARTICLE
I
|
TERMS
OF THE AMALGAMATION
|
1
|
1.1
|
The
Amalgamation
|
2
|
1.2
|
The
Closing; Effective Time; Effect
|
2
|
1.3
|
Exchange
of Securities
|
2
|
1.4
|
Tender
and Payment; Dissent Rights
|
3
|
1.5
|
Governing
By-laws.
|
5
|
1.6
|
Directors
and Officers; Lock Up
|
5
|
1.7
|
Certain
Adjustments to Parent Capitalization
|
6
|
1.8
|
Other
Effects of the Amalgamation
|
6
|
1.9
|
Additional
Actions
|
6
|
1.10
|
Headquarters
|
6
|
ARTICLE
II
|
REPRESENTATIONS
AND WARRANTIES OF NAYARIT
|
6
|
2.1
|
Due
Organization and Good Standing
|
6
|
2.2
|
Capitalization
|
7
|
2.3
|
Subsidiaries
|
8
|
2.4
|
Authorization;
Binding Agreement
|
9
|
2.5
|
Governmental
Approvals
|
9
|
2.6
|
No
Violations or Conflicts
|
9
|
2.7
|
Nayarit
Financial Statements
|
10
|
2.8
|
Absence
of Certain Changes
|
11
|
2.9
|
Absence
of Undisclosed Liabilities
|
11
|
2.10
|
Compliance
with Laws
|
11
|
2.11
|
Regulatory
Agreements; Permits
|
12
|
2.12
|
Litigation
|
13
|
2.13
|
Restrictions
on Business Activities
|
13
|
2.14
|
Material
Contracts
|
13
|
2.15
|
Intellectual
Property
|
15
|
2.16
|
Employee
Benefit Plans
|
16
|
2.17
|
Taxes
and Returns
|
17
|
2.18
|
Finders
and Investment Bankers
|
18
|
2.19
|
Title
to Properties; Assets
|
19
|
2.20
|
Employee
Matters
|
21
|
2.21
|
Environmental
Matters
|
23
|
2.22
|
Transactions
with Affiliates
|
24
|
2.23
|
Insurance
|
24
|
2.24
|
Books
and Records
|
25
|
2.25
|
Bankruptcy
|
25
|
2.26
|
Information
Supplied
|
25
|
2.27
|
Illegal
Payments
|
25
|
2.28
|
Notes
and Accounts Receivable
|
26
|
2.29
|
Money
Laundering Laws
|
26
|
2.30
|
Antitakeover
Statutes
|
26
|
i
2.31
|
Suppliers
|
26
|
2.32
|
Negotiations
|
26
|
2.33
|
Mineral
Rights
|
26
|
2.34
|
Mining
Reports
|
27
|
2.35
|
Public
Filings
|
27
|
2.36
|
Reporting
Status
|
28
|
2.37
|
No
Cease Trade
|
28
|
ARTICLE III
|
REPRESENTATIONS
AND WARRANTIES OF PARENT
|
28
|
3.1
|
Due
Organization and Good Standing
|
29
|
3.2
|
Capitalization
of Parent
|
29
|
3.3
|
Subsidiaries
|
30
|
3.4
|
Authorization;
Binding Agreement
|
30
|
3.5
|
Governmental
Approvals
|
30
|
3.6
|
No
Violations or Conflicts
|
30
|
3.7
|
SEC
Documents; Internal Controls; SEC Foreign Issuer
|
31
|
3.8
|
Absence
of Undisclosed Liabilities
|
32
|
3.9
|
Compliance
with Laws
|
32
|
3.10
|
Regulatory
Agreements; Permits
|
32
|
3.11
|
Absence
of Certain Changes
|
33
|
3.12
|
Taxes
and Returns
|
33
|
3.13
|
Restrictions
on Business Activities
|
34
|
3.14
|
Employee
Benefit Plans
|
34
|
3.15
|
Employee
Matters
|
34
|
3.16
|
Material
Contracts
|
35
|
3.17
|
Litigation
|
36
|
3.18
|
Transactions
with Affiliates
|
36
|
3.19
|
Books
and Records
|
36
|
3.20
|
Information
Supplied
|
36
|
3.21
|
Intellectual
Property
|
37
|
3.22
|
Real
Property
|
37
|
3.23
|
Environmental
Matters
|
37
|
3.24
|
Insurance
|
37
|
3.25
|
Bankruptcy
|
37
|
3.26
|
TSX/OTCBB
Quotation
|
37
|
ARTICLE
IV
|
COVENANTS
|
37
|
4.1
|
Conduct
of Business of Nayarit
|
37
|
4.2
|
Access
and Information; Confidentiality
|
41
|
4.3
|
No
Solicitation
|
42
|
4.4
|
Stockholder
Litigation
|
45
|
4.5
|
Conduct
of Business of Parent
|
45
|
4.6
|
Voting
|
45
|
ARTICLE
V
|
ADDITIONAL
COVENANTS OF THE PARTIES
|
45
|
5.1
|
Notification
of Certain Matters
|
45
|
5.2
|
Commercially
Reasonable Efforts
|
46
|
5.3
|
Indemnification
|
47
|
5.4
|
Public
Announcements
|
49
|
ii
5.5
|
Parent
Registration Statement; Proxy Statement
|
49
|
5.6
|
Reservation
of Stock
|
50
|
5.7
|
Nayarit
Filings
|
50
|
5.8
|
Nayarit
Stockholder Meeting
|
51
|
5.9
|
Directors
and Officers of Parent
|
52
|
5.10
|
Xxxx-Xxxxx-Xxxxxx
Filing
|
52
|
5.11
|
Exchange
Listing
|
52
|
ARTICLE
VI
|
CONDITIONS
|
52
|
6.1
|
Conditions
to Each Party’s Obligations
|
52
|
6.2
|
Conditions
to Obligations of Parent
|
53
|
6.3
|
Conditions
to Obligations of Nayarit
|
55
|
6.4
|
Frustration
of Conditions
|
56
|
ARTICLE
VII
|
TERMINATION
AND ABANDONMENT
|
56
|
7.1
|
Termination
|
56
|
7.2
|
Effect
of Termination
|
58
|
7.3
|
Fees
and Expenses
|
58
|
7.4
|
Amendment
|
58
|
7.5
|
Waiver
|
58
|
ARTICLE
IX
|
MISCELLANEOUS
|
59
|
8.1
|
Survival
|
59
|
8.2
|
Notices
|
59
|
8.3
|
Binding
Effect; Assignment
|
60
|
8.4
|
Governing
Law; Jurisdiction
|
60
|
8.5
|
Waiver
of Jury Trial
|
60
|
8.6
|
Counterparts
|
60
|
8.7
|
Interpretation
|
61
|
8.8
|
Entire
Agreement
|
61
|
8.9
|
Severability
|
61
|
8.10
|
Specific
Performance
|
61
|
8.11
|
Third
Parties
|
62
|
8.12
|
Headings
|
62
|
EXHIBITS
Exhibit
A – Amalgamation Agreement
Exhibit
B – Form of Lock-Up Agreement
iii
Index
of Defined Terms
Page | |
Acquisition
Proposal
|
42
|
Action
|
13
|
Affiliate
|
61
|
Agreement
|
1
|
Amalgamation
|
1
|
Amalgamation
Consideration
|
2
|
AmalgSub
|
1
|
Antitrust
Laws
|
9
|
Articles
of Amalgamation
|
2
|
Benefit
Plans
|
16
|
Break
Fee
|
58
|
Business
Day
|
61
|
Canadian
Securities Authorities
|
28
|
Canadian
Securities Laws
|
28
|
Certificate
of Incorporation
|
29
|
Claim
Notice
|
48
|
Closing
|
2
|
Closing
Date
|
2
|
Code
|
4
|
Completion
Deadline
|
57
|
Consent
|
9
|
Damages
|
47
|
Effective
Time
|
2
|
Encumbrances
|
10
|
Enforceability
Exceptions
|
9
|
Environmental
Laws
|
23
|
Exchange
Act
|
31
|
Exchange
Agent
|
3
|
GAAP
|
7
|
Governmental
Authority
|
9
|
Indebtedness
|
8
|
Indemnitee
|
48
|
Indemnitor
|
48
|
Intellectual
Property
|
15
|
Knowledge
|
61
|
Landlord
Leases
|
19
|
Law
|
10
|
Leased
Real Property
|
19
|
Leases
|
19
|
Lock
Up Agreement
|
5
|
Material
Adverse Effect
|
7
|
Merger
Sub
|
1
|
iv
Mineral
Rights
|
26
|
Nayarit
|
1
|
Nayarit
Affiliate Transaction
|
24
|
Nayarit
Common Shares
|
1
|
Nayarit
Convertible Securities
|
7
|
Nayarit
Disclosure Schedules
|
6
|
Nayarit
Dissent Rights
|
5
|
Nayarit
Dissenting Stockholders
|
5
|
Nayarit
Financials
|
10
|
Nayarit
Indemnified Party
|
48
|
Nayarit
Material Contract
|
13
|
Nayarit
Permits
|
12
|
Nayarit
Proxy Circular
|
50
|
Nayarit
Proxy Matters
|
51
|
Nayarit
Public Disclosure Record
|
28
|
Nayarit
Real Property
|
19
|
Nayarit
Stock Certificates
|
3
|
Nayarit
Stockholder
|
3
|
Nayarit
Stockholder Meeting
|
51
|
Order
|
13
|
OSC
|
28
|
OTCBB
|
37
|
Owned
Real Property
|
19
|
Parent
|
1
|
Parent
Affiliate Transaction
|
36
|
Parent
Common Stock
|
1
|
Parent
Disclosure Schedule
|
28
|
Parent
Indemnified Party
|
47
|
Parent
Material Contracts
|
35
|
Parent
Organizational Documents
|
29
|
Parent
Permits
|
32
|
Parent
Proxy Matters
|
49
|
Parent
Stock Options
|
29
|
Parent
Stock Plan
|
29
|
Parent
Stockholder Meeting
|
49
|
Party
|
1
|
Permitted
Encumbrances
|
19
|
Person
|
61
|
Proxy
Statement
|
49
|
Public
Reports
|
31
|
RCRA
|
23
|
Registration
Statement
|
49
|
Representatives
|
41
|
Required
Nayarit Vote
|
9
|
Required
Parent Vote
|
30
|
Requisite
Regulatory Approvals
|
46
|
v
Reverse
Split
|
1
|
SEC
|
31
|
SEDAR
|
13
|
Subsidiary
|
6
|
Superior
Proposal
|
43
|
Surviving
Company
|
1
|
Tax
|
18
|
Tax
Returns
|
17
|
Tenant
Leases
|
19
|
TSX
|
37
|
TSXV
|
28
|
U.S.
Securities Act
|
31
|
vi
This
BUSINESS COMBINATION AGREEMENT
(this “Agreement“) is made and
entered into as of February 10, 2010 by and among Capital Gold Corporation, a
corporation organized under the laws of Delaware (“Parent”), Nayarit Gold Inc.,
(“Nayarit”), a
corporation organized under the Ontario Business Corporation Act (“OBCA”), Xxxx Xxxxxxxx (with
respect to Section 4.6 only), Xxxxx Xxxxxxxxxx (with respect to Section 4.6
only) and Xxxxxxx Xxxxxxxx (with respect to Section 4.6 only). Parent and
Nayarit are sometimes referred to herein individually as a “Party” and collectively as the
“Parties.”
WITNESSETH:
WHEREAS, Parent and Nayarit
intend to effect an amalgamation (the “Amalgamation”) of Nayarit and
a corporation, to be organized under the OBCA as a wholly-owned subsidiary of
Parent (“Merger Sub”),
to form a combined entity (“AmalgSub” or the “Surviving Company”), with
AmalgSub continuing as the surviving entity following the Amalgamation upon the
terms and subject to the conditions set forth in this Agreement and in
accordance with the OBCA.
WHEREAS, pursuant to the
Amalgamation, all of the issued and outstanding common stock, no par value, of
Nayarit (the “Nayarit
Common Shares”), will be
exchanged for the Amalgamation Consideration (as defined herein) upon the terms
and subject to the conditions set forth in this Agreement and in accordance with
the OBCA.
WHEREAS, the Board of
Directors of each of Nayarit and Parent have approved this Agreement and the
Amalgamation and each of them have determined that this Agreement, the
Amalgamation Agreement (substantially in the form attached hereto as Exhibit A), the
Amalgamation and the other transactions contemplated hereby and thereby are
advisable and in the respective best interests of Nayarit and
Parent.
WHEREAS, the Board of
Directors of Nayarit has resolved to recommend that its stockholders approve and
adopt the Amalgamation Agreement and the Amalgamation.
WHEREAS, the Board of
Directors of Parent has resolved to recommend that its stockholders approve a
plan to effect a reverse split of the outstanding Parent common stock, par value
$0.0001 per share (the “Parent
Common Stock”), at a ratio of four (4) shares of Parent Common Stock for
every one (1) outstanding share of Parent Common Stock (the “Reverse Split”) prior to the
Effective Time (as defined herein).
NOW, THEREFORE, in
consideration of the premises set forth above, which are incorporated in this
Agreement as if fully set forth below, and the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the Parties hereto agree as follows:
1
ARTICLE
I
TERMS
OF THE AMALGAMATION
1.1 The
Amalgamation. Subject to the terms and conditions of this
Agreement, and in accordance with the applicable provisions of the constating
documents of Nayarit and Parent, at the Effective Time Merger Sub and Nayarit
shall amalgamate to form AmalgSub, and continue as one company under the terms
and conditions of this Agreement. Upon consummation of the
Amalgamation, the separate existence of each of Nayarit and Merger Sub shall
thereupon cease, and AmalgSub, as the surviving company in the Amalgamation,
shall continue its corporate existence under the OBCA as a wholly-owned
subsidiary of Parent.
1.2 The Closing; Effective Time;
Effect.
(a) Unless
this Agreement shall have been terminated and the transactions contemplated
hereby shall have been abandoned pursuant to Section 7.1, and subject to the
satisfaction or waiver of the conditions set forth in Article VI hereof, the
closing of the Amalgamation (the “Closing”) shall take place at
the offices of Ellenoff Xxxxxxxx & Schole LLP, 000 Xxxx 00xx Xxxxxx,
00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m. New York City time no later than
the second Business Day after the date that all of the closing conditions set
forth in Article VI have been satisfied or waived, unless another time, date or
place is agreed upon in writing by the Parties hereto. The date on
which the Closing occurs is herein referred to as the “Closing Date.”
(b) Subject
to the terms and conditions hereof, concurrently with the Closing, the Parties
shall file with the Ontario Ministry of Government Services (Companies and
Personal Property Security Branch) articles of amalgamation in accordance with
the OBCA (referred to herein as the “Articles of Amalgamation”),
executed in accordance with the relevant provisions of the OBCA and shall make
all other filings or recordings required under the OBCA in order to effect the
Amalgamation. The Amalgamation shall become effective upon the
receipt of the Articles of Amalgamation issued under the OBCA or at such other
time as is agreed by the Parties hereto, in accordance with the OBCA and as
specified in the Articles of Amalgamation. The time when the
Amalgamation shall become effective is herein referred to as the “Effective Time.”
(c) From
and after the Effective Time, the Surviving Company shall possess all
properties, rights, privileges, powers and franchises of Nayarit and Merger Sub,
and all of the claims, obligations, liabilities, debts and duties of Nayarit and
Merger Sub shall become the claims, obligations, liabilities, debts and duties
of the Surviving Company.
1.3 Exchange of
Securities.
(a) At
the Effective Time, by virtue of the Amalgamation and without any action on the
part of Nayarit or the holders of any securities of Nayarit, all of the Nayarit
Common Shares issued and outstanding immediately prior to the Effective Time
(other than Nayarit Common Shares held by Nayarit Dissenting Stockholders (as
defined below)) shall become exchangeable into Parent Common Stock on the basis
of 0.134048 shares of Parent Common Stock for each one (1) Nayarit Common Share
(the “Amalgamation
Consideration”). The Parties acknowledge
and agree that the foregoing exchange ratio takes into effect the Reverse
Split. From and
after the Effective Time, any certificate representing the Nayarit Common Shares
shall be deemed for all purposes to represent Parent Common Stock into which
such Nayarit Common Shares represented thereby were exchanged in accordance with
the immediately preceding sentence. At the Closing, the
Amalgamation Consideration shall be effectuated to the stockholders of Nayarit
of record immediately prior to the Closing (individually, a “Nayarit Stockholder” and
collectively, the “Nayarit
Stockholders”).
2
(b) Upon
the exchange of Nayarit Common Shares for shares of Parent Common Stock, all
Nayarit Common Shares shall, by virtue of the Amalgamation and without any
action on the part of the Nayarit Stockholders, be automatically cancelled and
shall cease to exist, and each Nayarit Stockholder shall cease to have any
rights with respect thereto, except the right to receive the Amalgamation
Consideration, subject to the terms and conditions of this
Agreement.
(c) Each
Nayarit Common Share in respect of which Nayarit Dissent Rights (as defined
below) have been exercised shall be deemed to be transferred by the holder
thereof, without any further formality on such holder’s part, free and clear of
all Encumbrances to Parent with Parent being obliged to pay therefor the amount
determined and payable in accordance with Section 1.4(g) hereof, and the name of
such holder will be removed from the register of holders of Nayarit Common
Shares and Parent will be recorded as the registered holder of the Nayarit
Common Shares so transferred and will be deemed to be the legal and beneficial
owner of such Nayarit Common Shares.
(d) The
Nayarit Convertible Securities (as defined below) shall be exerciseable for or
satisfied with the issuance of (and the holder thereof shall accept),
in lieu of the number of Nayarit Common Shares otherwise issuable thereunder,
the number of shares of Parent Common Stock which the holder would have been
entitled to receive as a result of the transactions contemplated by the
Amalgamation if, immediately prior to the Effective Time, such holder had been
the registered holder of the number of Nayarit Common Shares to which such
holder was theretofore entitled under such Nayarit Convertible
Securities.
1.4 Tender and Payment; Dissent
Rights.
(a) Surrender of Certificates
Via Exchange Agent. At the Effective Time, Parent shall cause
the exchange agent selected by Parent, which shall be an independent transfer
agent or trust company (the “Exchange Agent ”) to mail to
the former Nayarit Stockholders appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates or other instruments theretofore representing Nayarit Common Shares
(the “Nayarit Stock
Certificates”) shall pass, only upon proper delivery of such certificates
to the Exchange Agent). The Nayarit Stock Certificates so surrendered
shall be duly endorsed as the Exchange Agent may reasonably
require. In the event of a transfer of ownership of Nayarit Common
Shares represented by Nayarit Stock Certificates that are not registered in the
transfer records of Nayarit, the Amalgamation Consideration payable for such
shares as provided for herein may be issued to a transferee if the Nayarit Stock
Certificates representing such shares are delivered to the Exchange Agent,
accompanied by all documents required to evidence such transfer and by evidence
reasonably satisfactory to the Exchange Agent that such transfer is proper and
that any applicable stock transfer Taxes have been paid. In the event
any Nayarit Stock 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 the posting by such Person of a bond in such
amount as Parent may reasonably direct, or an indemnification agreement
reasonably acceptable to Parent, as indemnity against any claim that may be made
against it with respect to such certificate, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed certificate the Amalgamation
Consideration as provided for herein. The Exchange Agent may
establish such other reasonable and customary rules and procedures in connection
with its duties as it may deem appropriate.
3
(b) Right to Receive
Amalgamation Consideration. After the Effective Time, each
holder of Nayarit Common Shares issued and outstanding at the Effective Time
shall surrender the Nayarit Stock Certificate(s) representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided for herein, without interest, pursuant to
this Section 1.4. Parent shall not be obligated to deliver the
consideration to which any former holder of Nayarit Common Shares is entitled as
a result of the Amalgamation until such holder surrenders such holder’s Nayarit
Stock Certificate(s) for exchange as provided in this Section
1.4. Notwithstanding any other provision of this Agreement to the
contrary, neither Parent, nor Nayarit, nor AmalgSub, nor the Exchange Agent
shall be liable to any holder of Nayarit Common Shares for any amounts paid or
properly delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
(c) Fractional
Shares. No certificates or scrip representing fractional
shares of Parent Common Stock or book-entry credit of the same shall be issued
upon the surrender of the Nayarit Common Shares for exchange. Each Nayarit Stockholder who receives any portion of
the Parent Common Stock who would otherwise have been entitled to receive a
fraction of a share of Parent Common Stock shall have such fractional share
rounded down to the nearest whole number.
(d) Transfer Books; No Further
Ownership Rights in the Nayarit Common Stock. At the Effective
Time, the transfer books of Nayarit shall be closed, and thereafter there shall
be no further registration of transfers of Nayarit Common Shares on the records
of Nayarit. From and after the Effective Time, the Nayarit Common
Shares outstanding immediately prior to the Effective Time shall be cancelled
and they shall cease to have any rights, except as otherwise provided for herein
or by applicable Law.
(e) Withholding
Taxes. Parent and the Exchange Agent shall be entitled to
deduct and withhold from the Amalgamation Consideration payable to a Nayarit
Stockholder any such amounts as are required under the Internal Revenue Code of
1986, as amended (the “Code”), or any applicable
provision of state, local or foreign Tax Law. To the extent such
amounts are so withheld by Parent or the Exchange Agent, such withheld amounts
shall be treated for all purposes as having been paid to the Nayarit
Stockholders in respect of which such deduction and withholding was made by
Parent or the Exchange Agent.
(f) Nayarit Convertible
Securities. The Parties agree that the agreements evidencing the grant or
other obligation to issue Nayarit Common Shares pursuant to the Nayarit
Convertible Securities (as defined below) shall continue in effect on the same
terms and conditions (subject to the adjustments required after giving effect to
the Amalgamation) and that Parent or Nayarit, as applicable, shall execute any
requisite supplementary agreements and take all requisite corporate action
necessary to effect the foregoing and Parent shall to reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery upon
satisfaction of the conditions for issuance of such shares of Parent Common
Stock (subject to the adjustments required after giving effect to the
Amalgamation).
4
(g)Dissent
Procedures. Nayarit Stockholders may exercise rights of
dissent with respect to Nayarit Common Shares in connection with the
Amalgamation pursuant to and in the manner set forth in Section 185 of the OBCA
(“Nayarit Dissent
Rights”). A Nayarit Stockholder who duly exercises such Nayarit Dissent
Rights (including sending a notice of dissent to Nayarit) (“Nayarit Dissenting
Stockholders”) ceases to have any rights as a holder of Nayarit Common
Shares other than the right to be paid the fair value of such holder’s Nayarit
Common Shares pursuant to Section 185 of the OBCA. In any case where a Nayarit
Dissenting Stockholder withdraws the notice of dissent in accordance with
Section 185 of the OBCA or is ultimately determined not to be entitled, for any
reason, to be paid fair value for their Nayarit Common Shares, such holder shall
be deemed to have participated in the Amalgamation as of the Effective Time on
the same basis as non-Nayarit Dissenting Stockholders. In no case shall Parent,
Nayarit, Merger Sub or the Surviving Company or any other Person be required to
recognize Nayarit Dissenting Stockholders as holders of Nayarit Common Shares
after the Effective Time, and the names of such Dissenting Nayarit Stockholders
shall be deleted from the register of holders of Nayarit Common Shares at the
Effective Time.
(a) At
the Effective Time, the Board of Directors of Parent shall consist of either
five (5) or seven (7) directors, in any event to include Xxxx Xxxxxxxx, Xxxxxxx
X. Xxxxxx, Xxxx X. Xxxxxx, Xxxxxxx X. Xxxxx and one (1) nominee of
Nayarit. For a period of thirty-six (36) months following the
Effective Time, the Parties hereto agree that they shall cause their nominees on
the Board of Directors to execute and deliver an undertaking whereby such
nominees agree to: (i) nominate the foregoing individuals for re-election at
each annual meeting of the shareholders of Parent; and (ii) cause any successors
chosen by such nominees to comply with the foregoing provision at each annual
meeting of the shareholders of Parent. The Parties intend to appoint an
independent director as chair of the Board of Directors of Parent.
(b) At
the Effective Time, the officers of Parent shall include a chief of Parent, who
shall be Xxxx Xxxxxxxx, and two (2) senior executives, who shall be Xxxxxxx Xxxxxxxx and Xxxxx
Xxxxxxxxxx.
(c) At
the Closing, Xxxx Xxxxxxxx, Xxxxx Xxxxxxxxxx and Xxxxxxx Xxxxxxxx each shall
enter into a “lock-up” agreement substantially in the form set forth on Exhibit B attached
hereto (a “Lock Up
Agreement”) pursuant to which such Persons shall agree, for a period of
six (6) months from the Closing Date, that they each shall neither, on his, her
or its own behalf or on behalf of entities, family members or trusts affiliated
with or controlled by him, her or it, offer, issue, grant any option on, sell or
otherwise dispose of any portion of the Amalgamation Consideration issued to
such Person.
5
1.8 Other Effects of the
Amalgamation. The Amalgamation shall have all further effects
as specified in the applicable provisions of the OBCA.
1.10 Headquarters. The headquarters of
Parent following the Effective Time will be located in Denver, Colorado, and
Parent shall further (so long as it sees fit) maintain satellite or home offices
in Xxxxxxx, Xxxx Xxxxxx, Xxxxxx,
and corporate financial
offices in Philadelphia, Pennsylvania.
REPRESENTATIONS
AND WARRANTIES OF NAYARIT
The
following representations and warranties by Nayarit to Parent are qualified by
the Nayarit disclosure schedules, which set forth certain disclosures concerning
Nayarit and its subsidiaries (each a “Subsidiary” and collectively,
the “Subsidiaries”) and
each of their divisions and businesses (the “Nayarit Disclosure
Schedules“). Except as disclosed in the Nayarit Disclosure
Schedules, Nayarit hereby represents and warrants to Parent as
follows:
6
For
purposes of this Agreement, the term “Material Adverse Effect” shall
mean, with respect to a Party, any occurrence, state of facts, change, event,
effect or circumstance that, individually or in the aggregate, has, or would
reasonably be expected to have, a material adverse effect on the assets,
liabilities, business, results of operations or financial condition of such
Party and its subsidiaries, taken as a whole, or to otherwise carry on its
business as now being conducted and as proposed to be conducted following the
Effective Time, except, in each case, for any such effect attributable to:
(i) changes in laws, regulations or generally accepted accounting
principles (“GAAP”) in
the United States or Canada, as the case may be, or
interpretations thereof, (ii) the announcement or pendency of this
Agreement, any actions taken in compliance with this Agreement or the
consummation of any of the transactions contemplated by this Agreement
(including the Amalgamation), or (iii) the failure of a Party or any of
its subsidiaries to take any action referred to in Sections 4.1 or 4.5, as the
case may be, due to the other Party’s unreasonable withholding, delaying or
conditioning of its consent. For purposes of determining whether a
particular change, event, circumstance or effect has a “Material Adverse
Effect,” the nature and effect of each change, event, circumstance or effect
shall be considered alone and together and along with the detrimental impact on
the properties, financial condition, business operations, prospects or results
of operations of a Party and its subsidiaries, taken as a whole, of such change,
event, circumstance or effect.
(a) The
authorized capital stock of Nayarit consists of an unlimited number of Nayarit
Common Shares. As of the date hereof, 90,259,548 Nayarit Common
Shares were issued and outstanding. Except for Nayarit Common Shares
held by the Nayarit Stockholders, no Nayarit Common Shares or preferred stock
are issued and outstanding. All of the outstanding Nayarit Common
Shares are duly authorized, validly issued, fully paid and non-assessable and
not subject to any preemptive or similar rights. None of the
outstanding securities of Nayarit has been issued in violation of any foreign,
federal or state securities Laws.
(b) Except
as set forth in Section 2.2(b) of the
Nayarit Disclosure Schedules (collectively, the “Nayarit Convertible
Securities”), there are no: (i) outstanding options, warrants, puts,
calls, convertible securities, preemptive or similar rights, (ii) bonds,
debentures, notes or other indebtedness having general voting rights or that are
convertible or exchangeable into securities having such rights, or (iii)
subscriptions or other rights, agreements, arrangements, contracts or
commitments of any character, relating to the issued or unissued Nayarit Common
Shares or equity or partnership interest in any Subsidiary or obligating Nayarit
or any Subsidiary to issue, transfer, deliver or sell or cause to be issued,
transferred, delivered, sold or repurchased any options or Nayarit Common Stock,
or other equity interest in, Nayarit or any Subsidiary, or securities
convertible into or exchangeable for such shares or equity interests, or
obligating Nayarit or any Subsidiary to grant, extend or enter into any such
option, warrant, call, subscription or other right, agreement, arrangement or
commitment for such equity interests. There are no outstanding
obligations of Nayarit or any Subsidiary to repurchase, redeem or otherwise
acquire any Nayarit Common Shares or other equity interest in, Nayarit or any
Subsidiary to provide funds to make any investment (in the form of a loan,
capital contribution or otherwise) in any other entity.
7
(c) There
are no stockholder agreements, voting trusts or other agreements or
understandings to which Nayarit or any Subsidiary is a party with respect to the
voting of the Nayarit Common Shares or other equity interest in Nayarit or any
Subsidiary.
(d) No
Indebtedness of Nayarit or any Subsidiary contains any restriction upon:
(i) the prepayment of any of such Indebtedness, (ii) the incurrence of
Indebtedness by Nayarit or any Subsidiary, or (iii) the ability of Nayarit or
any Subsidiary to grant any Encumbrance (as defined in Section 2.6), other than
Permitted Encumbrances (as defined in Section 2.19), on its properties or
assets. As used in this Agreement, “Indebtedness” means (A) all
indebtedness for borrowed money or for the deferred purchase price of property
or services (including amounts by
reason of overdrafts and amounts owed by reason of letter of credit
reimbursement agreements) including with respect thereto, all interests, fees
and costs (other than current trade liabilities incurred in the ordinary
course of business consistent with past practices and payable in accordance with
customary practices), (B) any other indebtedness that is evidenced by a note,
bond, debenture, credit agreement or similar instrument, (C) all obligations
under financing leases, (D) all
obligations under conditional sale or other title retention agreements relating
to property purchased by Nayarit or any Subsidiary, (E) all obligations under leases
required to be accounted for as capital leases under Canadian GAAP, (F) all obligations in respect
of acceptances issued or created, (G) all liabilities secured by an Encumbrance
on any property, and (H) all guarantee obligations.
2.3 Subsidiaries. Section 2.3(a) of the
Nayarit Disclosure Schedules sets forth, a true, complete and correct list of
all Subsidiaries, the authorized capital stock and other equity interests of
each Subsidiary, the issued and outstanding capital stock and other equity
interests of each Subsidiary, their respective jurisdictions of organization and
all jurisdictions in which each Subsidiary is qualified to conduct
business. All of the capital stock and other equity interests of the
Subsidiaries are owned, directly or indirectly, by Nayarit free and clear of any
Encumbrance with respect thereto. All of the outstanding shares of
capital stock or other equity interests in each of the Subsidiaries are duly
authorized, validly issued, fully paid and non-assessable and are free of
preemptive rights and were issued in compliance with applicable Laws (as defined
in Section 2.6). No capital stock or other equity interests of any of
the Subsidiaries are or may become required to be issued or purchased by reason
of any options, warrants, rights to subscribe to, puts, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of any capital stock of, or other equity interests
in, any Subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any Subsidiary is bound to issue additional shares of its
capital stock or other equity interests, or options, warrants or rights to
purchase or acquire any additional shares of its capital stock or other equity
interests or securities convertible into or exchangeable for such shares or
interests. Neither Nayarit nor any Subsidiary owns any shares of
capital stock or other equity or voting interests in (including any securities
exercisable or exchangeable for or convertible into capital stock or other
equity or voting interests in) any other Person other than publicly traded
securities constituting less than five percent (5%) of the outstanding equity of
the issuing entity, other than capital stock or other equity interest of the
Subsidiaries owned by Nayarit or another Subsidiary.
8
2.5 Governmental
Approvals. No consent, approval, waiver, authorization or
permit of, or notice to or declaration or filing (each, a “Consent”) with any government,
any state or other political subdivision thereof, or any other entity, authority
or body exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including any
governmental or regulatory authority, agency, department, board, commission,
administration or instrumentality, any court, tribunal or arbitrator or any
self-regulatory organization (each, a “Governmental Authority”), on
the part of Nayarit or any Subsidiary is required to be obtained or made in
connection with the execution, delivery or performance by Nayarit of this
Agreement or the consummation by Nayarit of the transactions contemplated hereby
(including the Amalgamation), other than: (i) the filing of the
Articles of Amalgamation in accordance with the OBCA, (ii) such
filings as may be required in any jurisdiction where Nayarit is qualified or
authorized to do business as a foreign corporation in order to maintain such
qualification or authorization, (iii) compliance with any applicable
federal or provincial securities Laws, (iv) pursuant
to any other Laws designed to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade (“Antitrust Laws”), if
applicable, and (v) those Consents that, if they were not obtained or made,
would not reasonably be expected to have a Material Adverse Effect.
9
(a) As
used herein, the term “Nayarit
Financials” means (x) Nayarit’s audited consolidated financial statements
(including, in each case, any related notes thereto), consisting, in part, of
Nayarit’s balance sheets as of September 30, 2008 and September 30, 2009 and its
statements of operations and statements of cash flow for the fiscal years ended
September 30, 2007, September 30, 2008 and September 30, 2009, (y) any unaudited
interim financial statements of Nayarit requested by Parent, and (z) any
financial statements filed by Nayarit with SEDAR. Nayarit has made or
will make available to Parent true, correct and complete copies of the Nayarit
Financials (to include any interim financial statements of Nayarit requested by
Parent). The Nayarit Financials fairly present in all material
respects the consolidated financial condition and the results of operations,
changes in stockholders’ equity, and cash flow of Nayarit and the Subsidiaries
as at the respective dates of and for the periods referred to in such financial
statements, all in accordance with Canadian GAAP. The Nayarit
Financials, to the extent required for inclusion in the Proxy Statement, comply
in all material respects with applicable Canadian Securities Laws (as defined
below). Notwithstanding any provision in this Agreement to the
contrary, any representation and warranty in this Agreement with respect to
Nayarit’s unaudited interim financial statements for the three months six months
periods ended September 30, 2009 shall be made as of the Closing
Date. Neither Nayarit nor any Subsidiary has any off-balance sheet
arrangements.
10
(b) Nayarit
has had no: (i) significant deficiencies or material weaknesses in the design or
operation of Nayarit’s internal controls over financial reporting that are
reasonably likely to adversely affect Nayarit’s ability to record, process,
summarize and report financial information and (ii) fraud, whether or not
material, that involves management or other employees who have a significant
role in Nayarit’s internal controls over financial reporting.
(c) Nayarit
and each Subsidiary has not and, to the Knowledge of Nayarit, no auditor or
accountant of Nayarit or any Subsidiary or any manager, director, officer or
consultant of Nayarit or any Subsidiary, has received any material written
complaint, allegation, assertion or claim, regarding the accounting or auditing
practices, procedures, methodologies or methods of Nayarit or any Subsidiary or
their internal accounting controls, including any complaint, allegation,
assertion or claim that Nayarit or any Subsidiary has engaged in questionable
accounting or auditing practices. No attorney representing Nayarit or
any Subsidiary has reported evidence of any violation of consumer protection
(including rules and regulations promulgated by any state or federal
Governmental Authority or with jurisdiction, oversight or regulatory control
over the conduct of the business of Nayarit or its Subsidiaries) or securities
Laws, breach of fiduciary duty or similar violation by Nayarit or any Subsidiary
or any of their respective officers, directors, managers, employees or agents to
the Board of Directors, board of managers or any committee thereof or to any
director, manager or executive officer of Nayarit or any
Subsidiary.
(a) Nayarit
and the Subsidiaries are each in compliance with all Laws applicable to it and
the conduct of its businesses as currently conducted and as proposed to be
conducted following consummation of the Amalgamation, except where the failure
to be in compliance would not reasonably be expected to have a Material Adverse
Effect. Nayarit and each Subsidiary is not in conflict with, or in
default or violation of, nor has it received any notice of any conflict with, or
default or violation of any applicable Law by which Nayarit or any Subsidiary,
or any property or asset of Nayarit or any Subsidiary, is bound or affected,
except for any such conflicts, defaults or violations that would not reasonably
be expected to have a Material Adverse Effect.
(b) There is no pending or, to the Knowledge
of Nayarit, threatened, proceeding, examinations, reviews or
investigation to which Nayarit or any Subsidiary is subject before any
Governmental Authority regarding whether Nayarit has violated in any material
respect applicable Laws. Neither Nayarit nor any Subsidiary has
received written notice of any material violation
of, or noncompliance with, any Law applicable to Nayarit or any Subsidiary, or
directing Nayarit or any Subsidiary to take remedial action with respect to such
applicable Law or otherwise, and no deficiencies of Nayarit or any Subsidiary have been
asserted in writing by any
Governmental Authority with respect to possible violations of any applicable
Laws except for such violations or deficiencies that would not reasonably be
expected to have a Material Adverse Effect. Nayarit and each Subsidiary have filed
or made all material reports, statements, documents, registrations, notices,
filings or submissions required to be filed with any Governmental Authority, and
all such reports, statements, documents, registrations, notices, filings and submissions are in
material compliance (and materially complied at the relevant time) with
applicable Law and no material deficiencies have been asserted by any
Governmental Authority with respect to any such reports, statements,
documents, registrations, notices, filings or
submissions required to be filed with any Governmental
Authority.
11
(a) There
are no: (i) written agreements, consent agreements, memoranda of understanding,
commitment letters, cease and desist orders, or similar undertakings to which
Nayarit or any Subsidiary
is a party, on the one hand, and any Governmental Authority is a party or
addressee, on the other hand, (ii) Orders or directives of or supervisory
letters from a Governmental Authority specifically with respect to Nayarit or
any Subsidiary, or (iii) resolutions or policies or procedures adopted by
Nayarit or any Subsidiary
at the request of a Governmental Authority, that (A) limit in any material
respect the ability of Nayarit or
any Subsidiary to conduct its business as currently being conducted or as
contemplated by the Parties to be conducted following the Closing, (B) in any
manner impose any requirements on Nayarit or any Subsidiary that materially
add to or otherwise materially modify in any respect the requirements imposed
under applicable Laws, (C) require Nayarit or any Subsidiary or any of its
divisions to make capital contributions or make loans to another division or
Affiliate of Nayarit or any
Subsidiary or (D) in any manner relate to the ability of Nayarit
or any Subsidiary to pay
dividends or otherwise materially restrict the conduct of business of Nayarit
or any Subsidiary in any
respect.
(b) Nayarit
and each Subsidiary hold
all material permits, licenses, franchises, grants, authorizations, consents,
exceptions, variances, exemptions, orders and other governmental authorizations,
certificates, consents and approvals necessary to lawfully conduct its business
as presently conducted and to own, lease and operate its assets and properties
(collectively, the “Nayarit
Permits”), all of which are in full force and effect, and no suspension,
non-renewal, amendment, restriction, limitation or cancellation of any of the
Nayarit Permits is pending or, to the Knowledge of Nayarit, threatened, except
where the failure of any of the Nayarit Permits to be in full force and effect,
or the suspension or cancellation of any of the Nayarit Permits, would not
reasonably be expected to have a Material Adverse Effect. To the
Knowledge of Nayarit, no facts or circumstances exist that would reasonably be
expected to impact Nayarit’s or any Subsidiary’s ability to obtain any material
Nayarit Permit in the future as may be necessary for Nayarit or any Subsidiary
to continue its operations as currently contemplated. Neither Nayarit
nor any Subsidiary is in
violation in any material respect of the terms of any Nayarit
Permit.
12
(c) To
the Knowledge of Nayarit each of the officers and employees of Nayarit and all Subsidiaries are in
compliance with all applicable Laws requiring any registration, licensing or
qualification, and are not subject to any liability or disability by reason of
the failure to be so registered, licensed or qualified, except where such
failure to be in compliance or such liability or disability would not reasonably
be expected to have a Material Adverse Effect.
2.13 Restrictions on Business
Activities. There is no agreement or Order
binding upon Nayarit or any Subsidiary which has or could reasonably be expected
to have the effect of prohibiting, preventing, restricting or impairing in any
respect any business practice of Nayarit or any Subsidiary as their business is
currently conducted, any acquisition of property by Nayarit or any Subsidiary, the conduct of
business by Nayarit or any
Subsidiary as currently conducted, or restricting in any respect the
ability of Nayarit or any
Subsidiary from engaging in business as currently conducted or from
competing with other parties, except where such agreement or Order would not
reasonably be expected to have a Material Adverse Effect.
2.14 Material
Contracts.
(a) Section 2.14 of the
Nayarit Disclosure Schedules sets forth a list of, and Nayarit has made
available to Parent (except for such Nayarit Material Contracts that Nayarit has
filed on the
Canadian System for Electronic Document Analysis and Retrieval (“SEDAR”)
as a material contract as required by Part 12 of National Instrument
51-102), true, correct and complete copies of, each written contract, agreement,
commitment, arrangement, lease, license, permit or plan and each other
instrument to which Nayarit or any
Subsidiary is a party or by which Nayarit or any Subsidiary is bound as of
the date hereof (each, a “Nayarit Material Contract”)
that:
13
(ii) contains
covenants that materially limit the ability of Nayarit or any Subsidiary (or which,
following the consummation of the Amalgamation, could materially restrict the
ability of Parent, Nayarit, the
Subsidiaries or any of their Affiliates): (A) to compete in any line of
business or with any Person or in any geographic area or to sell, supply, price,
develop or distribute any service, product or asset, including any
non-competition covenants, exclusivity restrictions, rights of first refusal or
most-favored pricing clauses or (B) to purchase or acquire an interest in any
other entity, except, in each case, for any such contract that may be canceled
without any penalty or other liability to Nayarit or any Subsidiary upon notice
of 60 days or less;
(iii) involves
any joint venture, partnership, limited liability or other similar agreement or
arrangement relating to the formation, creation, operation, management or
control of any partnership or joint venture that is material to the business of
Nayarit, taken as a whole;
(iv) involves
any exchange traded, over-the-counter or other swap, cap, floor, collar, futures
contract, forward contract, option or other derivative financial instrument or
contract, based on any commodity, security, instrument, asset, rate or index of
any kind or nature whatsoever, whether tangible or intangible, including
currencies, interest rates, foreign currency and indices;
(v) relates
to Indebtedness (whether incurred, assumed, guaranteed or secured by any asset)
having an outstanding principal amount in excess of $100,000 with respect to any
Indebtedness;
(vi) was
entered into by Nayarit or any Subsidiary and has not yet been consummated, and
involves the acquisition or disposition, directly or indirectly (by merger or
otherwise), of a substantial amount of the assets or capital stock or other
equity interests of another Person, other than the acquisition or disposition of
assets in the ordinary course of business consistent with past
practices;
(vii) by
its terms calls for aggregate payments by Nayarit or any Subsidiary under such
contract of more than $100,000 with respect to any payments;
(viii) with
respect to any material agreement for the acquisition or disposition, directly
or indirectly (by merger or otherwise), of a substantial amount of the assets or
capital stock or other equity interests of another Person, pursuant to which
Nayarit or any Subsidiary
has: (A) any continuing indemnification obligations or (B) any “earn-out” or other contingent payment obligations;
(ix) involves
any managers, directors, executive officers or key employees of Nayarit or any
Subsidiary that cannot be cancelled by Nayarit or any Subsidiary within 60 days’
notice without liability, penalty or premium;
(x) obligates
Nayarit or any Subsidiary
to provide indemnification or a guarantee in excess of $100,000 with respect to
any obligation;
14
(xi) obligates
Nayarit or any Subsidiary
to make any capital commitment or capital expenditure (including pursuant to any
joint venture) in excess of $100,000 with respect to such
obligation;
(xii) relates
to the development, ownership, licensing or use of any Intellectual Property (as
defined in Section 2.15) material to the business of Nayarit or any Subsidiary, other than “shrink wrap,” “click wrap,” and “off the shelf” software agreements and other agreements for
software commercially available on reasonable terms to the public generally,
with license, maintenance, support and other fees of less than $10,000 per
year;
(xiii) provides
for any standstill arrangements; or
(xix) Nayarit
has filed on SEDAR
as a material contract as required by Part 12 of National Instrument
51-102.
(b) With
respect to each Nayarit Material Contract: (i) each Nayarit Material
Contract is legal, valid, binding and enforceable in all material respects
against Nayarit or the Subsidiaries, as the case may be, and, to Nayarit’s
Knowledge, the other party thereto, and in full force and effect (except as such
enforcement may be limited by the Enforceability Exceptions); (ii) the
consummation of the transactions contemplated by this Agreement will not affect
the terms, validity or enforceability of such Nayarit Material Contract by the
Surviving Company or any Subsidiary and, to Nayarit’s Knowledge, the other party
thereto; (iii) neither Nayarit nor any Subsidiary is in breach or
default in any material respect, and no event has occurred which, with the
passage of time or giving of notice or both, would constitute such a breach or
default by Nayarit or any
Subsidiary, or permit termination or acceleration by the other party,
under any Nayarit Material Contract; (iv) to Nayarit’s Knowledge, no other party
to any Nayarit Material Contract is in breach or default in any material
respect, and no event has occurred which, with the passage of time or giving of
notice or both, would constitute such a breach or default by such other party,
or permit termination or acceleration by Nayarit or any Subsidiary, under such
Nayarit Material Contract, (v) such Nayarit Material Contract was entered into
at arms’ length and in the ordinary course of business consistent with past
practices, and (vi) the consummation of the transactions contemplated by this
Agreement will not obligate Nayarit or any Subsidiary to make any payments
thereunder. Except as set forth in Section 2.14 of the
Nayarit Disclosure Schedules, no other powers of attorney have been granted by
the Company or any of its Subsidiaries to any Person.
(a) Neither
Nayarit nor any Subsidiary owns or licenses any Intellectual Property that are
material to the conduct of the business of Nayarit and the Subsidiaries other
than such trade names, service marks and/ or copyrights as may exist at Law or
by usage in respect of the use of the words “Nayarit” or “Nayarit Gold” in the
context of the business of Nayarit and the
Subsidiaries.
(b) For
purposes of this Agreement, “Intellectual Property” means:
(A) United States, international and foreign patents and patent applications,
including divisionals, continuations, continuations-in-part, reissues,
reexaminations and extensions thereof and counterparts claiming priority
therefrom; utility models; invention disclosures; and statutory invention
registrations and certificates; (B) United States and foreign registered,
pending and unregistered trademarks, service marks, trade dress, logos, trade
names, corporate names and other source identifiers, domain names, Internet
sites and web pages; and registrations and applications for registration for any
of the foregoing, together with all of the goodwill associated therewith; (C)
United States and foreign registered copyrights, and registrations and
applications for registration thereof; rights of publicity; and copyrightable
works; and (D) all inventions and design rights (whether patentable or
unpatentable) and all categories of trade secrets as defined in the Uniform
Trade Secrets Act, including business, technical and financial
information.
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2.16 Employee Benefit
Plans.
(a) Section 2.16(a) of
the Nayarit Disclosure Schedules lists, with respect to Nayarit, any Subsidiary
and any trade or business (whether or not incorporated) which is treated as a
single employer with Nayarit: (i) all employee benefits, (ii) loans to managers,
officers, directors or employees other than advances for expense reimbursements
incurred in the ordinary course of business consistent with past practices and
any securities option, securities stock purchase, phantom securities, securities
appreciation right, equity-related, supplemental retirement, severance,
sabbatical, medical, dental, vision care, disability, employee relocation,
cafeteria benefit or dependent care, life insurance or accident insurance plans,
programs, agreements or arrangements, (iii) all bonus, pension, retirement,
profit sharing, savings, deferred compensation or incentive plans, programs,
policies, agreements or arrangements, (iv) other fringe, perquisite, or employee
benefit plans, programs, policies, agreements or arrangements and (v) any
current or former employment, consulting, change of control, retention or
executive compensation, termination or severance plans, programs, policies,
agreements or arrangements, written or otherwise, as to which unsatisfied
liabilities or obligations (contingent or otherwise) remain for the benefit of,
or relating to, any present or former employee, consultant, manager or director,
or which could reasonably be expected to have any liabilities or obligations
(together, the “Benefit
Plans”).
(c) Except
as set forth in Section 2.16(c) of
the Nayarit Disclosure Schedules or as otherwise provided in this Agreement, the
consummation of the transactions contemplated by this Agreement will not, either
alone or in combination with any other event or events, (i) entitle any current
or former employee, manager, director or consultant of Nayarit or any Subsidiary to any payment
(whether of severance pay, unemployment compensation, phantom stock plan
payments, golden parachute, bonus or otherwise), (ii) accelerate, forgive
indebtedness, vest, distribute, or increase benefits or an obligation to fund
benefits with respect to any employee, manager, director or consultant of
Nayarit or any Subsidiary,
or (iii) increase the amount of compensation due any such employee, manager,
director or consultant.
16
(d) Except
as set forth in Section 2.16(d) of
the Nayarit Disclosure Schedules, no Nayarit Benefit Plan provides benefits,
including death or medical benefits (whether or not insured), with respect to
current or former employees, managers, directors or consultants of Nayarit or any Subsidiary after
retirement or other termination of service (other than: (i) coverage mandated by
applicable Laws, (ii) death benefits or retirement benefits under any “employee pension benefit plan”, or (iii) benefits, the full direct
cost of which is borne by the current or former employee, manager, director or
consultant (or beneficiary thereof)).
(e) All
employees, managers, directors, and consultants are appropriately classified as
such under applicable Law in all material respects, and neither Nayarit nor any
Subsidiary is in material violation of any applicable Law in connection with
such classification or has not received notice of any possible violation from
any Governmental Authority.
(a) Nayarit
and each Subsidiary has timely filed or will have timely filed, or caused to be
filed, all federal, provincial, state, local and foreign Tax returns and reports
required to be filed by it (taking into account all available extensions)
(collectively, “Tax
Returns”), and all such Tax Returns are true, accurate, correct and
complete in all material respects, and has paid, collected or withheld, or
caused to be paid, collected or withheld, all Taxes required to be paid,
collected or withheld, other than such Taxes that it is contesting in good faith
or for which adequate reserves in the Nayarit Financials have been established
in accordance with Canadian GAAP. There are no claims, assessments,
audits, examinations, investigations or other proceedings pending against
Nayarit or any Subsidiary
in respect of any Tax, and neither Nayarit nor any Subsidiary has been
notified in writing of any proposed Tax claims, assessments or audits against
Nayarit or any Subsidiary
(other than, in each case, claims or assessments for which adequate reserves in
the Nayarit Financials have been established in accordance with Canadian GAAP or
are immaterial in amount). There are no Encumbrances with respect to
any Taxes upon any of Nayarit’s or
any Subsidiary’s assets, other than: (i) Taxes,
the payment of which are not yet due, (ii) Taxes or charges being contested in
good faith by appropriate proceedings, or (iii) Taxes for which adequate
reserves in the Nayarit Financials have been established in accordance with
Canadian GAAP. No Tax Returns of Nayarit have been
audited. Neither Nayarit nor any Subsidiary has any
outstanding waivers or extensions of any applicable statute of limitations to
assess any amount of Taxes. There are no outstanding requests by
Nayarit or any Subsidiary for any extension of time
within which to file any Tax Return or within which to pay any Taxes shown to be
due on any Tax Return.
(b) Neither
Nayarit nor any Subsidiary is nor has it ever been a member of any consolidated,
combined, unitary or affiliated group of corporations for any Tax purposes other
than a group of which Nayarit or
such Subsidiary is or was the common parent corporation.
17
(c) Neither
Nayarit nor any Subsidiary
has made any change in accounting method or received a ruling from, or signed an
agreement with, any taxing authority.
(d) Neither
Nayarit nor any Subsidiary
has participated in, or sold, distributed or otherwise promoted, any “reportable transaction,” as defined in Treasury Regulation Section
1.6011-4 or any comparable foreign Tax Law.
(e) Neither
Nayarit nor any Subsidiary
has: (i) changed any Tax accounting methods, policies or procedures except as
required by a change in Law, (ii) made, revoked or amended any Tax
election, (iii) filed any amended Tax Returns or claim for refund or (iv)
entered into any closing agreement affecting or otherwise settled or compromised
any material Tax liability or refund.
(f) Nayarit
or any Subsidiary is not a party to or bound by any Tax indemnity agreement, Tax
sharing agreement or similar contract. Nayarit or any Subsidiary is
not a party to any joint venture, partnership, or other arrangement or contract,
which could be treated as a partnership or “disregarded entity” for United
States federal income Tax purposes.
(g) Nayarit
or any Subsidiary has not been or, to Nayarit’s Knowledge, will be required to
include any material adjustment in Taxable income for any Tax period (or portion
thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax Laws as a result of transactions, events or
accounting methods employed prior to the Amalgamation other than any such
adjustments required as a result of the Amalgamation. Nayarit or any
Subsidiary has not filed any consent to have the provisions of paragraph 341(f)
of the Code (or comparable provisions of any state or foreign Tax Laws) apply to
Nayarit or any Subsidiary. Nayarit or any Subsidiary has not filed
any disclosures under Section 6662 or comparable provisions of state, local
or foreign law to prevent the imposition of penalties with respect to any Tax
reporting position taken on any Tax Return.
(h) For
purposes of this Agreement, the following terms have the following meanings:
“Tax ” (and, with
correlative meaning, “Taxes” and “Taxable”) means (i) any
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Authority responsible for the imposition of any such tax (domestic
or foreign), (ii) any liability for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any taxable period, and
(iii) any liability for the payment of any amounts of the type described in
(i) or (ii) as a result of being a transferee of or successor to any
Person, or as a result of any express or implied obligation to indemnify any
other Person.
18
(a) Section 2.19(a)-1 of
the Nayarit Disclosure Schedules contains a correct and complete list of all
real property owned by Nayarit or
any Subsidiary or any partnership or joint venture in which Nayarit or any Subsidiary directly or
indirectly has an interest having a fair market value in excess of $100,000
(“Owned Real
Property”). Section 2.19(a)-2 of
the Nayarit Disclosure Schedules contains a correct and complete list of all
real property leased or subleased by Nayarit or any Subsidiary as tenant or
subtenant (“Leased Real
Property”) (the Owned Real Property and the Leased Real Property are
herein sometimes collectively called the “Nayarit Real Property”). The
list set forth in Section 2.19(a)-1 of
the Nayarit Disclosure Schedules contains, with respect to each parcel of the
Owned Real Property, a description of all existing leases, licenses or other
occupancy contracts to which Nayarit or any Subsidiary is a party or
by which Nayarit or any
Subsidiary is bound as a landlord, including all amendments,
modifications, extensions, renewals and supplements thereto (collectively, the
“Landlord Leases”), the
terms of which have been complied with by Nayarit or such Subsidiary in all
material respects. The list set forth in Section 2.19(a)-2 of
the Nayarit Disclosure Schedules contains, with respect to each parcel of the
Leased Real Property, a description of all existing leases, subleases, licenses
or other occupancy contracts to which Nayarit or any Subsidiary is a party or
by which Nayarit or any
Subsidiary is bound as a tenant, including all amendments, modifications,
extensions, assignments, subleases, renewals and supplements thereto
(collectively, the “Tenant
Leases”) (the Landlord Leases and the Tenant Leases are herein sometimes
collectively called the “Leases
”), the terms of which have been complied with by Nayarit and such Subsidiary in all
material respects. Except as would not reasonably be
expected to have a Material Adverse Effect, Nayarit and the Subsidiaries have
good, valid and marketable title to all of the Owned Real Property and related
personal property, assets and rights, free and clear of all Encumbrances other
than Permitted Encumbrances. For purposes of this Agreement, the term
“Permitted Encumbrances”
means: (i) Encumbrances with respect to Taxes either not yet due or being
contested in good faith in appropriate proceedings or for which adequate
reserves have been set aside; (ii) mechanics’, materialmen’s or similar
statutory Encumbrances for amounts not yet due or being contested in good faith
in appropriate proceedings; (iii) any covenants, conditions, restrictions,
reservations, rights, liens, easements, encumbrances, encroachments and other
matters affecting title which are shown as exceptions on the title insurance
policies and/or title insurance commitments or reports which have been made
available to Parent; (iv) the terms and conditions of the Tenant Leases; (v)
applicable federal, state, local or tribal authority building and land use
regulations, restrictions or requirements, (vi) existing easements and
encroachments; and (vii) building code violations not caused by Nayarit or any Subsidiary or
Parent.
(b) A
correct and complete copy of each Lease has been furnished to Parent prior to
the date hereof. Nayarit or a Subsidiary, if applicable,
has a valid, binding and enforceable leasehold interest under each of the Tenant
Leases and each of the Leases is in full force and effect (except as such
enforcement may by limited by the Enforceability Exceptions or where the loss of
such Lease would not have a Material Adverse Effect) and to the extent permitted
under the terms of each Lease, grants Nayarit or a Subsidiary the concurrent
right to use and occupy the premises leased thereby. Neither Nayarit
nor any Subsidiary nor, to
the Knowledge of Nayarit, any other party to any Lease is in breach of or in
default under, in any material respect, any of the Leases, except to the extent
any such breach would not have a Material Adverse Effect. Nayarit and
the Subsidiaries enjoy peaceful and undisturbed possession under all Tenant
Leases, have not received notice of any material default, delinquency or breach
on the part of any party under any Lease, and there are no existing material
defaults (with or without notice or lapse of time or both) by Nayarit or any Subsidiary or, to the
Knowledge of Nayarit, any other party thereto. No Consent under any
Lease is required in connection with the transactions contemplated hereby,
except where the failure to obtain such Consent would not have a Material
Adverse Effect.
19
(c) Except
as would not reasonably be expected to have a Material Adverse Effect, neither
Nayarit nor any Subsidiary
nor, to the Knowledge of Nayarit, any other party to any Landlord Lease, is in
breach of or in default under any of the Landlord Leases.
(d) True
and complete copies of all Tenant Leases, together with all modifications,
extensions, amendments and assignments thereof, if any, affecting or relating to
the Owned Real Property have heretofore been furnished to Parent.
(e) There
is no action, suit, litigation, hearing or administrative proceeding pending or,
to Nayarit’s Knowledge, threatened against Nayarit or any Subsidiary or any joint
venture or partnership in which Nayarit or any Subsidiary owns an
interest, with respect to all or any portion of the Nayarit Real Property, in
each case which is not or would not be fully covered by insurance, except as
would not reasonably be expected to have a Material Adverse Effect.
(f) There
are no condemnation or eminent domain proceedings pending, or to Nayarit’s
Knowledge, threatened against any Owned Real Property and, to Nayarit’s
Knowledge, there are no condemnation or eminent domain proceedings pending or
threatened against any Leased Real Property.
(g) Neither
Nayarit nor any Subsidiary
has granted any Person a purchase option, right of first refusal, right of first
offer or other right to purchase any Owned Real Property.
(h) Neither
Nayarit nor any Subsidiary
has sent to any holder of any mortgage or other interest (secured or unsecured)
in any Nayarit Real Property, nor has Nayarit or any Subsidiary received from any such
holder, a notice of default under any financing, loan or other document or
security agreement with respect to any Nayarit Real Property.
(i) There
are no finder’s fees, brokerage commissions or tenant improvement allowances
outstanding with respect to any Nayarit Real Property.
(j) There
are no Tax certiorari or Tax appeal proceedings outstanding with respect to any
Owned Real Property as of the date hereof.
(k) Neither
Nayarit nor any Subsidiary
has assigned its interest as lessor or lessee under any Lease, other than to
Nayarit or a Subsidiary or collateral assignments in connection with any
existing financing of any Nayarit Real Property.
20
(l) Nayarit
and each Subsidiary have insurable and marketable title to all Owned Real
Property subject to Permitted Encumbrances. Neither Nayarit nor any Subsidiary has received
notice of, or other writing referring to, any requirements or recommendations by
any insurance company that has issued a policy covering any part of the Nayarit
Real Property or by any board of fire underwriters or other body exercising
similar functions, requiring or recommending any repairs or work to be done on
any part of the Nayarit Real Property, which repair or work has not been
completed.
(m) Nayarit
has no Knowledge of any proceeding pending for the adjustment of the assessed
valuation of all or any portion of any Nayarit Real Property or abatement with
respect to all or any portion of the real estate taxes payable on any Nayarit
Real Property.
(n) The
use and operation of the Nayarit Real Property in the conduct of the business of
Nayarit and the Subsidiaries does not violate any instrument of record or
agreement affecting such Owned Real Property, except for such violations that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect. Valid policies of title insurance have been
issued insuring all fee simple title to the Owned Real Property, except where
the failure of such policies to be in full force and effect would not reasonably
be expected to have a Material Adverse Effect and such policies are in full
force and effect. No material claim has been made against any such
policy.
(o) All
Nayarit Real Property and tangible personal property of each of Nayarit and the
Subsidiaries is in generally good repair and is operational and usable in the
manner in which it is currently being utilized, subject to normal wear and tear,
technical obsolescence, repair or replacement.
(a) There
has been: (i) to the Knowledge of Nayarit, no labor union organizing or
attempting to organize any employee of Nayarit or any Subsidiary into one or
more collective bargaining units; and (ii) no labor dispute, strike, work
slowdown, work stoppage, lock out or other collective labor action by or with
respect to any employees, managers or consultants of Nayarit or any Subsidiary pending or, to
Nayarit’s Knowledge, threatened against Nayarit or any
Subsidiary. Neither Nayarit nor any Subsidiary is a party to,
or bound by, any collective bargaining agreement or other agreement with any
labor organization applicable to the employees, managers or consultants of
Nayarit or any Subsidiary
and no such agreement is currently being negotiated.
(b) Except
as would not reasonably be expected to result in a Material Adverse Effect,
Nayarit and each
Subsidiary: (i) is in compliance with all applicable Laws respecting
employment and employment practices, terms and conditions of employment, health
and safety and wages and hours, including Laws relating to discrimination,
disability, labor relations, hours of work, payment of wages and overtime wages,
pay equity, immigration, workers compensation, working conditions, employee
scheduling, occupational safety and health, family and medical leave, and
employee terminations, (ii) has not received written notice, or to the Knowledge
of Nayarit any other form of notice, that there is any unfair labor practice
charge or complaint against Nayarit or any Subsidiary pending, (iii)
is not liable for any arrears of wages or any penalty for failure to comply with
any of the foregoing, and (iv) is not liable for any payment to any trust or
other fund or to any Governmental Authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the ordinary course of
business and consistent with past practice). Except as would not
reasonably be expected to have a Material Adverse Effect, there are no
complaints, lawsuits, arbitrations, administrative proceedings, or other Actions
pending or, to the Knowledge of Nayarit, threatened against Nayarit or any Subsidiary or any of their
respective employees, managers, consultants or former employees brought by or on
behalf of any applicant for employment, any current or former employee, any
Person alleging to be a current or former employee, any class of the foregoing,
or any Governmental Authority, relating to any such Law or regulation, or
alleging breach of any express or implied contract of employment, wrongful
termination of employment, or alleging any other discriminatory, wrongful or
tortious conduct in connection with the employment relationship.
21
(c) Nayarit
has provided Parent a list with the name, title and total annual compensation
(including projected bonus or other incentive compensation for fiscal year 2010)
of each employee and independent contractor of Nayarit and its Subsidiaries as
of the date hereof.
(d) Nayarit
and its Subsidiaries are in compliance in all material respects with all
applicable Laws, including Mexican labor Laws, respecting labor, employment,
immigration, fair employment practices, terms and conditions of employment,
workers’ compensation, occupational safety, plant closings, compensation and
benefits, and wages and hours. Neither Nayarit nor any of its
Subsidiaries is liable for any payment to any trust or other fund or to any
Governmental Authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no material Actions pending or, to the
Knowledge of Nayarit, threatened between Nayarit or any of its Subsidiaries and
any current or former employees of Nayarit or any of its
Subsidiaries.
(e) There
has been no “mass layoff” or “plant closing” as defined by the United States
Worker Adjustment Retraining Notification Act or similar state, local or foreign
“plant closing” Law with respect to Nayarit or any of its
Subsidiaries.
(f) There
has been and is no unfair labor practice complaint against Nayarit or any of its
Subsidiaries pending or, to the Knowledge of Nayarit, threatened before any
Governmental Authority, and no pending or, to the Knowledge of Nayarit,
threatened arbitration arising out of any collective bargaining
agreement.
(g) All
material amounts due from Nayarit and its Subsidiaries, or for which any
material claim may be asserted against Nayarit and its Subsidiaries, on account
of wages and other benefits have been paid or accrued as a liability on the
books and records of each of Nayarit and its Subsidiaries.
(h) Nayarit
and its Subsidiaries are not liable for any material liabilities, judgments,
arrearage of wages, fines or penalties for failure to comply with any applicable
labor Laws.
22
2.21 Environmental
Matters. Except as set forth on Section 2.21 of the
Nayarit Disclosure Schedules:
(a) Neither
Nayarit nor any Subsidiary
is the subject of any pending Order, judgment or written claim asserted or
arising under any Environmental Law that has or would reasonably be expected to
have a Material Adverse Effect.
(b) Neither
Nayarit nor any Subsidiary
has entered into any negotiations or agreements with any Person under any
Environmental Law, which has or would reasonably be expected to have a Material
Adverse Effect.
(c) To
the Knowledge of Nayarit, Nayarit and each Subsidiary, and the ownership
and operation of all assets in which Nayarit or any Subsidiary has an ownership
interest, are in compliance with all applicable Environmental Laws,
including obtaining and complying with all permits or authorizations required
pursuant to Environmental Laws, except where such failure to be comply with
Environmental Laws would not reasonably be expected to have a Material Adverse
Effect
(d) To
the Knowledge of Nayarit, there are no conditions existing on, in, at, under, or
about or resulting from the past or present operations of Nayarit or any
Subsidiary or any other party that may give rise to any on-site or off-site
investigation or remedial obligations of Nayarit or any Subsidiary under any
Environmental Laws, except where such investigation or remedial obligation would
not reasonably be expected to have a Material Adverse Effect.
(e) To
the Knowledge of Nayarit, neither Nayarit nor any Subsidiary currently owns or
operates, nor in the past has it owned or operated, any property that is on the
United States Environmental Protection Agency’s National Priorities List or the
Environmental Protection Agency’s CERCLIS list or any other comparable lists
promulgated by any other comparable foreign Governmental Authority;
(f) To
the Knowledge of Nayarit, all Resource Conservation and Recovery Act “RCRA” regulated hazardous
waste (or any other hazardous waste regulated by any comparable foreign Law) for
which Nayarit or any Subsidiary was the generator, has been managed in
compliance with the applicable provisions of RCRA (or such comparable foreign
Law, as the case may be) and any other Environmental Laws.
(g) To
the Knowledge of Nayarit, no lien, deed notice or use restriction has been
recorded pursuant to any Environmental Law with respect to the assets of Nayarit
or any Subsidiary;
(h) As
used in this Agreement, the term “Environmental Laws” means all
applicable: (i) federal or foreign statutes regulating or prescribing
restrictions regarding the environment (air, water, land, animal and plant
life), including but not limited to the following, as amended: the Clean Air Act
(or other comparable foreign Law), Clean Water Act, Comprehensive Environmental
Response (or other comparable foreign Law), Compensation and Liability Act (or
other comparable foreign Law), Emergency Planning and Community Right-to-Know
Act (or other comparable foreign Law), Endangered Species Act (or other
comparable foreign Law), Hazardous Materials Transportation Act (or other
comparable foreign Law), Migratory Bird Treaty Act (or other comparable foreign
Law), National Environmental Policy Act, Occupational Safety and Health Act (or
other comparable foreign Law), Oil Pollution Act of 1990 (or other comparable
foreign Law), RCRA (or other comparable foreign Law), Safe Drinking Water Act
(or other comparable foreign Law), Mine Safety and Health Act (or other
comparable foreign Law) and Toxic Substances Control Act (or other comparable
foreign Law); (ii) any applicable regulations promulgated pursuant to such
federal statutes or other comparable foreign Law; (iii) any applicable state or
provincial Law counterparts of such federal or other comparable foreign Law
statutes and the regulations promulgated thereunder; and (iv) any other
applicable state, provincial, local statutes, rules, regulations or ordinances,
or tribal authority, regulating the use of or affecting the environment, each as
currently in effect on the date of this Agreement.
23
(i) Nayarit
has provided to Parent information regarding all of Nayarit’s financial
assurance obligations (including but not limited to any site restoration bonds
and environmental risk insurance) required under Environmental Laws in
connection with Nayarit’s and its Subsidiaries operations.
(j) The
transaction that is the subject of this Agreement will not require any
notification to, or approval of, any Governmental Authority, either pursuant to
Mexico’s General Law on the Prevention and Comprehensive Management of Waste
(Ley General para la
Prevención y Gestión Integral de los Residuos) and Mexico’s Regulations
to the General Law on the Prevention and Comprehensive Management of Waste
(Reglamento de xx Xxx General
para la Prevención y Gestión Integral de los Residuos), or otherwise
under applicable Environmental Laws.
2.23 Insurance. Nayarit
and each Subsidiary are covered by valid and currently effective insurance
policies issued in favor of Nayarit or such Subsidiary that are
customary for companies of similar size in the industry and locales in which
Nayarit or such Subsidiary
operates to insure their respective operations and the loss(es)
therefrom. Section 2.23 of the
Nayarit Disclosure Schedules sets forth a true, correct and complete list of all
material insurance policies, and their respective coverage amounts, premiums and
deductibles, maintained by Nayarit or any
Subsidiary. With respect to each current insurance policy: (i)
the policy is in full force and effect and all premiums due thereon have been
paid, (ii) Nayarit or any
Subsidiary, as applicable, is not in any material respect, in breach of
or default under, and Nayarit or
any Subsidiary, as applicable, has not taken any action or failed to take
any action which, with notice or the lapse of time or both, would constitute
such a breach or default, or permit termination or modification of, any such
policy, (iii) to the Knowledge of Nayarit, no insurer on any such policy has
been declared insolvent or placed in receivership, conservatorship or
liquidation, and (iv) no notice of cancellation or termination has been received
with respect to any such policy, and Nayarit knows of no reason any such
insurance policy would be cancelled or modified in any material respect as a
result of the transactions contemplated hereby.
24
2.25 Bankruptcy. Neither
Nayarit nor any Subsidiary
has: (i) commenced a voluntary case, or had entered against it a petition, for
relief under bankruptcy, liquidation, winding-up or similar legislation code or
any similar petition, order or decree under any federal,
provincial, or state law or statute relative to bankruptcy,
insolvency or other relief for debtors; (ii) caused, suffered or consented to
the appointment of a receiver, trustee, administrator, conservator, liquidator
or similar official in any federal, provincial, state or foreign
judicial or non judicial proceedings, to hold, administer or liquidate all or
substantially all of its property; or (iii) made an assignment for the benefit
of creditors. Nayarit and the Subsidiaries are able to pay their
debts as the same become due in the ordinary course of their respective business
consistent with past practices.
2.26 Information
Supplied. None of the information supplied or to be supplied
by Nayarit for inclusion or incorporation by reference in the Registration
Statement, Proxy Statement, Nayarit Proxy Circular (as defined below) or any
other report, form, registration, or other filing made with any Governmental
Authority with respect to the transactions contemplated hereby will, at the date
of filing of the Registration Statement or the date the Proxy Statement or
Nayarit Proxy Circular is first mailed to Parent’s stockholders and the Nayarit
Stockholders, as the case may be, or at the time of the Parent Stockholder
Meeting (as defined in Section 5.7), or Nayarit Stockholder Meeting (as defined
in Section 5.8), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. Notwithstanding the foregoing, Nayarit makes no
representation, warranty or covenant with respect to any information supplied by
Parent which is contained in the Registration Statement, Proxy Statement,
Nayarit Proxy Circular or other filing made in connection with the transactions
contemplated by this Agreement.
2.27 Illegal
Payments. Neither Nayarit nor any Subsidiary or, to the Knowledge of
Nayarit, any officer, director, manager, agent or employee of Nayarit or any Subsidiary has:
(a) used any funds of Nayarit or any Subsidiary for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any payment in violation of applicable Law to
any foreign or domestic government official or employee or to any foreign or
domestic political party or campaign or violated any provision of the Corruption
of Foreign Officials Act (Canada), as amended; or (c) made any other
payment in violation of applicable Law.
25
2.28 Notes and Accounts
Receivable. All notes and accounts receivable of Nayarit and the Subsidiaries are
reflected properly on their books and records, are valid receivables and, to
Nayarit’s Knowledge, will be collected in accordance with their terms at their
recorded amounts subject to the allowances as set forth in the Nayarit
Financials.
2.29 Money Laundering
Laws. The
operations of Nayarit and the Subsidiaries are and have been conducted at all times
in compliance with laundering statutes in all applicable jurisdictions, the
rules and regulations thereunder and any related or similar rules, regulations
or guidelines, issued, administered or enforced by any Governmental Authority
and no action involving Nayarit or any Subsidiary with respect to such statutes, rules
and regulations is pending or threatened.
2.30 Antitakeover
Statutes. The transactions contemplated by this Agreement are
not subject to the requirements of any “moratorium,” “control share,” “fair
price,” “affiliate transactions,” “business combination” or other antitakeover
Laws and regulations applicable to Nayarit or any Subsidiary.
2.31 Suppliers. No
supplier of Nayarit or any
Subsidiary has cancelled or otherwise terminated any contract with
Nayarit or any Subsidiary prior to the expiration of
the contract term, or made any threat to Nayarit or any Subsidiary to cancel,
reduce the supply or otherwise terminate its relationship with Nayarit or any Subsidiary, except for such
cancellations or terminations that would not reasonably be expected to have a
Material Adverse Effect. Neither Nayarit nor any Subsidiary has: (i)
breached any material agreement with or (ii) engaged in any fraudulent conduct
with respect to, any supplier of Nayarit or any Subsidiary.
2.32 Negotiations. Nayarit
has suspended or terminated, and has the legal right to terminate or suspend,
all negotiations and discussions of any acquisition, merger, consolidation or
sale of all or substantially all of the assets or equity interests of Nayarit
or any Subsidiary with
Persons other than Parent.
2.33 Mineral
Rights
. Applying
customary standards in the mining industry, each of Nayarit and the Subsidiaries
has valid and sufficient registered title, free and clear of any title defect or
Encumbrance, to its Mineral Rights and other properties (other than property as
to which it is a lessee, in which case it has a valid leasehold interest)
necessary to permit the conduct of their respective business and operations as
currently conducted and as proposed to be conducted as disclosed by Nayarit in
its public filings, except to the extent that a failure to do so would not
constitute a Material Adverse Effect. Section 2.33 of
the Nayarit Disclosure Schedules is a true and complete list of all
the concessions, surface use agreements, option agreements and other rights of
Nayarit and the Subsidiaries to conduct mining and mineral exploration and
development (collectively, “Mineral Rights”) and related
activities, and accurately depicts and describes the information therein,
including geographic location, Mineral Right identification, type of Mineral
Right, whether under application or granted, interest held, registered holder,
approximate area covered, date granted (as applicable), date of expiry (as
applicable), priority status (for applications), rent amount, all production
royalty, net profits or proceed interests, and land and surface owners’ payments
applicable thereto, and Section 2.33 of the
Nayarit Disclosure Schedules details all Encumbrances respecting such Mineral
Rights. Except as disclosed in Section 2.33 of the
Nayarit Disclosure Schedules, Nayarit or its Subsidiaries are in exclusive
possession of the included properties, Nayarit nor any of its Subsidiaries have
not received any notice of default of any of the terms or provisions of such
Mineral Rights or related contracts, such Mineral Rights and related contracts
are valid and are in full effect, and Nayarit and its Subsidiaries have timely
performed all obligations thereunder, and Nayarit has no Knowledge of any act or
omission or any condition on such properties which could be considered or
construed as a default under any such Mineral Rights or related
contract.
26
2.34 Mining
Reports.
(a) The
information set forth in the SRK Consulting Preliminary Economic Assessment
report regarding the mineral resources and reserves, mineral exploration and
mining assets, properties and projected financial analysis of current and future
operations of Nayarit, its Subsidiaries and their respective mine assets
provided to Parent is accurate in all material respects at the Effective Time
and did not omit any material fact required to make such information
accurate. All information contained in the SRK Consulting Preliminary
Economic Assessment report was prepared and furnished in accordance with
appropriate industry standards and good industry practices, including, without
limitation, historical development, reserve and resource estimates, project
development costs, ownership costs, operation costs, production costs and all
other costs associated with the development of Nayarit’s and its Subsidiaries’
mining assets.
(b) The
information relating to estimates in the Nayarit Public Disclosure Record of
mineral resources has been prepared in accordance with Canada National
Instrument 43-101 Standards of
Disclosure for Mineral Projects, in all material respects and in
accordance with generally accepted engineering practices, and the information
prepared by Nayarit, upon which estimates of resources were based, is, as of the
date hereof and the Closing Date, complete and accurate in all material respects
and there have been no changes to such information since the date of delivery or
preparation thereof which would reasonably be expected to have a Material
Adverse Effect. With respect to information not prepared by Nayarit,
upon which estimates of resources were based, such information is, to Nayarit’s
Knowledge, as of the date hereof and the Closing Date, complete and accurate in
all material respects, and to Nayarit’s Knowledge, there have been no changes to
such information which would reasonably be expected to have a Material Adverse
Effect.
2.35 Public Filings.
Nayarit has filed all documents required to be filed by it in accordance with
applicable Canadian Securities Laws with the applicable Canadian Securities
Authorities and the TSXV. Except as disclosed by Nayarit in the
Nayarit Public Disclosure Record, all such documents and information comprising
the Nayarit Public Disclosure Record, as of their respective dates (and the
dates of any amendments thereto), (i) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances in which
they were made not misleading, and (ii) complied in all material respects with
the requirements of applicable Canadian Securities Laws, and any amendments to
the Nayarit Public Disclosure Record required to be made have been filed on a
timely basis with the Canadian Securities Authorities and the TSXV. Nayarit has
not filed any confidential material change reports with any Canadian Securities
Authorities that, at the date of this Agreement, remain
confidential. There are no outstanding or unresolved comments in
comment letters received from any Canadian Securities Authority and any exchange
staff with respect to the Nayarit Public Disclosure Record. To the
Knowledge of Nayarit, none of the filings comprising the Nayarit Public
Disclosure Record is the subject of ongoing review, comment or investigation by
any Canadian Securities Authority or the TSXV.For the purposes of this
Agreement, the term “Canadian
Securities Laws” means the Securities Act (Ontario) and the equivalent
legislation of the other applicable provinces of Canada and the
applicable rules and regulations promulgated thereunder; the term “Canadian Securities
Authorities” means the Ontario Securities Commission (“OSC”) and other applicable
securities regulatory authorities of the provinces of Canada, the term “TSXV” means the TSX Venture
Exchange; and the term “Nayarit
Public Disclosure Record” means all forms, reports, schedules,
statements and other documents (i) required to be filed with all applicable
Canadian Securities Authorities, the TSXV by Nayarit since January 1, 2005, and
(ii) all forms, reports, schedules, statements and other documents filed with
all applicable Canadian Securities Authorities by Nayarit accessible to the
public on SEDAR.
27
2.36 Reporting
Status. Nayarit is a reporting issuer or its equivalent in the
provinces of British Columbia, Alberta and Ontario. The Nayarit
Common Shares are listed on the TSXV.
2.37 No Cease Trade.
Nayarit is not subject to any cease trade or other order of any applicable stock
exchange or Canadian Securities Authority and, to the Knowledge of Nayarit, no
investigation or other proceedings involving Nayarit which may operate to
prevent or restrict trading of any securities of Nayarit are currently in
progress or pending before any applicable stock exchange or Canadian Securities
Authority.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF PARENT
Except as
(i) disclosed in, and reasonably apparent from, Parent’s annual report on Form
10-K for the year ended October 14, 2009, Parent’s quarterly reports on Form
10-Q for the quarters ended July 31, 2009, January 31, 2009 and April 30, 2009
and the Company’s Current Reports on Form 8-K filed with the SEC on January 23,
2009, February 5, 2009, March 13, 2009, April 1, 2009, April 3, 2009, June 23,
2009, July 24, 2009, September 3, 2009, September 18, 2009, September 23, 2009,
October 15, 2009, October 29, 2009 and November 6, 2009 (excluding any
amendments thereto filed after the date hereof and any disclosures set forth in
any risk factor section and in any section relating to forward-looking
statements to the extent that they are cautionary, predictive or forward-looking
in nature), or (ii) disclosed in a correspondingly numbered section of the
disclosure schedule (the “Parent Disclosure Schedule”)
which schedule sets forth, among other things, items the disclosure of which is
necessary or appropriate either in response to an express disclosure requirement
contained in a provision hereof or as an exception to one or more
representations or warranties contained in this Article III, or to one or more
of Parent’s covenants contained herein, (provided, however, that
notwithstanding anything in this Agreement to the contrary, the mere inclusion
of any information in the Parent Disclosure Schedule shall not be deemed an
admission that any information contained therein describes or represents a
material exception or material fact, event or circumstance or that any
exception, fact, event or circumstance described in any such information has had
or would be reasonably likely to have a Material Adverse Effect), Parent hereby
represents and warrants to Nayarit as follows:
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3.1 Due Organization and Good
Standing. Parent is a corporation duly organized, validly
existing and in good standing under the Laws of the state of Delaware and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being
conducted. Parent is duly qualified or licensed and in good standing
to do business in each jurisdiction in which the character of the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing would not reasonably be
expected to have a Material Adverse Effect. Parent has heretofore
made available to Nayarit accurate and complete copies of Parent’s Certificate
of Incorporation, as amended (the “Certificate of Incorporation”)
and bylaws (the bylaws and the Certificate of Incorporation, collectively, the
“Parent
Organizational Documents”), each as
currently in effect. Parent is not in violation of any provision of
the Parent Organizational Documents.
(a) Taking
into effect the Reverse Split, the authorized capital stock of Parent consists
of 75,000,000 shares of Parent Common Stock of which there are, as of the date
of this Agreement, 48,497,655 shares of Parent Common Stock
outstanding. No other shares of Parent Common Stock are issued or
outstanding. Taking into effect the Reverse Split, as of the date of
this Agreement, no shares of Parent Common Stock were reserved for issuance
except for an aggregate of 1,662,500 shares of Parent Common Stock reserved for
issuance upon exercise of the issued and outstanding options to purchase shares
of Parent Common Stock (the “Parent Stock Options”) under
Parent’s equity incentive plan, dated December 13, 2006, adopted by Parent and
subsequently approved by Parent’s stockholders (the “Parent Stock Plan”) and
150,000 shares of Parent Common Stock reserved for issuance upon exercise of
warrants to purchase shares of Parent Common Stock under the Warrant Agreement
by and between Parent and Standard Bank Plc, dated as of July 10,
2008. All of the issued and outstanding shares of Parent Common Stock
have been duly authorized and validly issued and are fully paid, non-assessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof.
(b) Except
as set forth in Section 3.2(b) of the
Parent Disclosure Schedule, there are no outstanding bonds, debentures, notes,
debt securities or other indebtedness for borrowed money of Parent having the
right to vote (or convertible into or exercisable or exchangeable for securities
having the right to vote) on any matters on which the stockholders of Parent may
vote. Section 3.2(b)
of the Parent Disclosure Schedule sets forth a true and complete list of all
indebtedness for borrowed money of Parent outstanding on the date of this
Agreement.
(c) Except
as set forth in paragraph (a) and (b) above, there are no issued, outstanding or
authorized securities (including securities convertible into or exercisable or
exchangeable for shares of capital stock or other equity or voting securities)
of Parent and (except for the issuance of the Amalgamation Consideration
contemplated by this Agreement) there are no options, warrants, calls, rights
(including “phantom” stock or stock appreciation rights), commitments,
agreements, arrangements or undertakings of any kind to which Parent is a party
or by which it is bound obligating Parent to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other equity
or voting securities of Parent (or securities convertible into or exercisable or
exchangeable for shares of capital stock or other equity or voting securities)
or obligating Parent to issue, grant, extend or enter into any such option,
warrant, call, right, commitment, agreement, arrangement or
undertaking. Except as contemplated by this Agreement, there are no
outstanding contractual obligations, commitments, understandings or arrangements
of Parent to repurchase, redeem or otherwise acquire or make any payment in
respect of any shares of capital stock or other equity or voting securities of
Parent or other agreements or arrangements with or among any securityholders of
Parent with respect to securities of Parent.
29
3.3 Subsidiaries. Except
for all of the common stock of Minera Santa Xxxx X. de X.X. de C.V., Oro De
Altar S. de X.X. de C.V. and Leadville Mining and Milling Holding Company,
Parent does not as of the date hereof own, directly or indirectly, any capital
stock, membership interest, partnership interest, joint venture interest or
other equity interest in any Person.
3.4 Authorization; Binding
Agreement. Parent has all 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 and the consummation of the transactions contemplated hereby, (i) have
been duly and validly authorized by the Board of Directors of Parent, and (ii)
no other corporate proceedings on the part of Parent are necessary to authorize
the execution and delivery of this Agreement or to consummate the transactions
contemplated hereby, other than receipt of the Required Parent
Vote. The affirmative vote of the stockholders of Parent holding at
least a majority of the issued and outstanding Parent Common Stock of Parent
(the “Required
Parent Vote”) is necessary to approve the Parent Proxy Matters (as
defined in Section 5.5). This Agreement has been duly and validly executed and
delivered by Parent and (assuming the due authorization, execution and delivery
hereof by Nayarit) constitutes the legal, valid and binding obligation of Parent
enforceable against Parent in accordance with its terms, subject to the
Enforceability Exceptions.
3.5 Governmental
Approvals. No Consent of or with any Governmental Authority on
the part of Parent is required to be obtained or made in connection with the
execution, delivery or performance by Parent of this Agreement or the
consummation by Parent of the transactions contemplated hereby other than (i)
the filing of the Articles of Amalgamation under the OBCA, (ii) such
filings as may be required with the SEC and foreign and state securities Laws
administrators, (iii) pursuant to Antitrust Laws (if applicable) and (iv) those
Consents that, if they were not obtained or made, would not reasonably be
expected to have a Material Adverse Effect.
3.6 No Violations or
Conflicts. Except as set forth in Section 3.6 of the
Parent Disclosure Schedule, the execution and delivery by Parent of this
Agreement and the consummation by Parent of the transactions contemplated
hereby, and compliance by Parent with any of the provisions hereof, will not (i)
conflict with or violate any provision of the Parent Organizational Documents,
(ii) require any Consent under or result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, amendment or acceleration)
under, any Parent Material Contract to which Parent is a party or by which its
assets are bound, (iii) result (immediately or with the passage of time or
otherwise) in the creation or imposition of any Encumbrance upon any of the
properties, rights or assets of Parent, or (iv) subject to obtaining the
Consents from Governmental Authorities, and the waiting periods referred to
therein having expired, and any condition precedent to such Consent having been
satisfied, conflict with, contravene or violate in any respect any Law to which
Parent or any of its assets or properties is subject, except, in the case of
clauses (ii), (iii) and (iv) above, for any deviations from the foregoing that
would not reasonably be expected to have a Material Adverse Effect.
30
3.7 SEC Documents; Internal
Controls; SEC Foreign Issuer .
(a) Parent
has filed with the Securities Exchange Commission (“SEC”) and the OSC and made
available to Nayarit all forms, reports, schedules, registration statements and
other documents required to be filed or furnished by Parent with the SEC or the
OSC since March 22, 2006 (collectively, and in each case including all
certifications, exhibits and schedules thereto and documents incorporated by
reference therein, the “Public
Reports”). As of their respective dates of filing or
furnishing (or, if amended or superseded by a subsequent filing or furnishment
prior to the date hereof, as of the date of such subsequent filing or
furnishment), the Public Reports complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the “U.S. Securities Act”), the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and/or the
Xxxxxxxx-Xxxxx Act of 2002, as the case may be, and the rules and regulations of
the SEC thereunder applicable to such Public Reports, and applicable Canadian
securities Laws, and none of the Public Reports when filed or furnished
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
there are no outstanding comments from or unresolved issues raised by the SEC or
the OSC with respect to any of the Public Reports. Parent is a
“reporting issuer” under applicable Canadian securities Laws and is not in
default of any material requirements of any applicable Canadian securities
Laws.
(b) Except
as set forth in Section 3.7(b) of the
Parent Disclosure Schedule, Parent has timely filed all forms, reports,
schedules and other documents, together with any amendments required to be made
with respect thereto, that they were required to file since September 22, 2005
with any Governmental Authority (other than Public Reports) and have paid all
fees and assessments due and payable in connection therewith. Except
for normal examinations conducted by a Governmental Authority in the regular
course of the business of Parent, no Governmental Authority has initiated any
Action or, to the Knowledge of Parent, threatened an investigation into the
business or operations of Parent since September 22, 2009. There is
no material unresolved violation or exception by any Governmental Authority with
respect to any report, form, schedule or other document filed by, or relating to
any examinations by any such Governmental Authority of Parent.
(c) Since
July 31, 2009 to the date of this Agreement (i) to the Knowledge of Parent, no
director, officer, employee, auditor, accountant or representative of Parent has
received or otherwise had or obtained knowledge of any material complaint,
allegation, assertion or claim, whether written or oral, regarding the
accounting or auditing practices, procedures, methodologies or methods of Parent
or its internal accounting controls, including any material complaint,
allegation, assertion or claim that Parent has engaged in questionable
accounting or auditing practices, and (ii) no attorney representing Parent,
whether or not employed by Parent, has reported evidence of a material violation
of securities Laws, breach of fiduciary duty or similar violation by Parent or
any of its officers, directors, employees or agents to the Board of Directors of
Parent or any committee thereof or to any director or officer of
Parent.
31
3.8 Absence of Undisclosed
Liabilities. Parent has not incurred any liabilities or
obligations of the type required to be reflected on a balance sheet in
accordance with United States GAAP that are not adequately reflected or reserved
on or provided for in the Public Reports, other than liabilities of the type
required to be reflected on a balance sheet in accordance with United States
GAAP that would not reasonably be expected to have a Material Adverse
Effect..
3.9 Compliance with
Laws. Parent is in compliance
with all Laws applicable to it and the conduct of its business as currently
conducted and as proposed to be conducted following consummation of the
Amalgamation. Parent is not in conflict with, or in default or
violation of, nor has it received any notice of any conflict with, or default or
violation of, (A) any applicable Law by which Parent or any of its property or
assets is bound or affected, or (B) any Parent Material Contract to which Parent
is a party or by which Parent or any property, asset or right of Parent is bound
or affected, except, in each case, for any such conflicts, defaults or
violations that would not reasonably be expected to have a Material Adverse
Effect.
3.10 Regulatory Agreements;
Permits.
(a) There
are no (1) except for The Standard Bank Plc mandates, written agreements,
consent agreements, memoranda of understanding, commitment letters, cease and
desist orders, or similar undertakings to which Parent is a party, on the one
hand, and any Governmental Authority is a party or addressee, on the other hand,
(2) Orders or directives of or supervisory letters from a Governmental Authority
specifically with respect to Parent or any property or asset owned by Parent, or
(3) resolutions or policies or procedures adopted by Parent at the request of a
Governmental Authority, that (A) limit in any material respect the ability
of Parent to conduct its business as currently being conducted or (B) in any
manner relate to the ability of Parent to pay dividends or otherwise materially
restrict the conduct of business of Parent in any respect.
(b) Except
for updated certificates on concessions, Parent holds all material permits,
licenses, franchises, grants, authorizations, consents, exceptions, variances,
exemptions, orders and other governmental authorizations, certificates, consents
and approvals necessary to lawfully conduct its business as presently conducted
and to own, lease and operate its assets and properties (collectively, the
“Parent Permits”), all
of which are in full force and effect, and no suspension, non-renewal,
amendment, restriction, limitation or cancellation of any of the Parent Permits
is pending or, to the Knowledge of Parent, threatened, except where the failure
of any of the Parent Permits to be in full force and effect, or the suspension
or cancellation of any of the Parent Permits, would not reasonably be expected
to have a Material Adverse Effect. To the Knowledge of Parent, no
facts or circumstances exist that would reasonably be expected to impact
Parent’s ability to obtain any material Parent Permit in the future as may be
necessary for Parent to continue its operations as currently
contemplated. Parent is not in violation in any material respect of
the terms of any Parent Permit.
32
3.11 Absence of Certain
Changes. Except for the transactions contemplated by this
Agreement and except as set forth in Section 3.11 of the
Parent Disclosure Schedules, Parent has conducted its businesses in the ordinary
course of business consistent with past practice and there has not been any
fact, change, effect, occurrence, event, development or state of circumstances
that has had or would reasonably be expected to have a Material Adverse
Effect.
3.12 Taxes and
Returns. Except as would not reasonably be expected to have a
Material Adverse Effect:
(a) Parent
has or will have timely filed, or caused to be timely filed, all material Tax
Returns required to be filed by it (taking into account all available
extensions), which such Tax Returns are true, accurate, correct and complete in
all material respects, and has paid, collected or withheld, or caused to be
paid, collected or withheld, all material Taxes required to be paid, collected
or withheld, other than such Taxes for which adequate reserves in the Public
Reports have been established in accordance with United States
GAAP. Section 3.12 of the
Parent Disclosure Schedules sets forth each jurisdiction where Parent files or
is required to file a Tax Return. There are no claims, assessments,
audits, examinations, investigations or other proceedings pending against Parent
in respect of any Tax, and Parent has not been notified in writing of any
proposed Tax claims or assessments against Parent (other than, in each case,
claims or assessments for which adequate reserves in the Public Reports have
been established in accordance with United States GAAP or are immaterial in
amount). There are no material Encumbrances with respect to any Taxes
upon any of Parent’s assets, other than (i) Taxes, the payment of which is not
yet due, or (ii) Taxes or charges being contested in good faith by appropriate
proceedings and for which adequate reserves in the Public Reports have been
established in accordance with United States GAAP. Parent does not
have any outstanding waivers or extensions of any applicable statute of
limitations to assess any material amount of Taxes. There are no
outstanding requests by Parent for any extension of time within which to file
any Tax Return or within which to pay any Taxes shown to be due on any Tax
Return.
(b) Parent
has not constituted either a “distributing corporation” or a “controlled
corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of securities (to any Person or entity that is not a member of the
consolidated group of which Parent is the common parent corporation) qualifying
for, or intended to qualify for, Tax-free treatment under Section 355 of the
Code (i) within the two-year period ending on the date hereof or (ii) in a
distribution which could otherwise constitute part of a “plan” or “series of
related transactions” (within the meaning of Section 355(e) of the Code) in
conjunction with the Amalgamation.
(c) Parent
is not or (i) has been at any time within the five-year period ending on the
date hereof a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Code and (ii) has ever been a member of any
consolidated, combined, unitary or affiliated group of corporations for any Tax
purposes other than a group of which Parent is or was the common parent
corporation.
33
(d) Parent
has not made any change in accounting method or received a ruling from, or
signed an agreement with, any taxing authority.
(e) Parent is not a party to any contract, agreement,
plan or arrangement that, individually or collectively, could reasonably be
expected to give rise to the payment of any amount that would not be deductible
pursuant to Sections 280G or 162(m) of the Code.
(f) Parent
has not participated in, or sold, distributed or otherwise promoted, any
“reportable transaction,” as defined in Treasury Regulation Section
1.6011-4.
(g) Since
September 30, 2009, Parent has not: (i) changed any Tax accounting methods,
policies or procedures except as required by a change in Law, (ii) made,
revoked, or amended any material Tax election, (iii) filed any amended Tax
Returns or claim for refund, or (iv) entered into any closing agreement
affecting or otherwise settled or compromised any material Tax liability or
refund.
3.13 Restrictions on Business
Activities. Except for The Standard Bank Plc mandates, there
is no agreement or Order binding upon Parent which has or could reasonably be
expected to have the effect of prohibiting, preventing, restricting or impairing
in any respect any business practice of Parent as its business is currently
conducted, any acquisition of property by Parent, the conduct of business by
Parent as currently conducted, or restricting in any material respect the
ability of Parent from engaging in business as currently conducted or from
competing with other parties, except where such agreement or Order would not be
reasonably expected to have a Material Adverse Effect.
3.14 Employee Benefit
Plans. Except as set forth on Section 3.14 of the
Parent Disclosure Schedules, Parent does not maintain, and has no liability
under, any Benefit Plan, and neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director or employee of
Parent, or (ii) result in the acceleration of the time of payment or vesting of
any such benefits.
3.15 Employee
Matters.
(a) There
has been: (i) to the Knowledge of Parent, no labor union organizing or
attempting to organize any employee of Parent into one or more collective
bargaining units; and (ii) no labor dispute, strike, work slowdown, work
stoppage, lock out or other collective labor action by or with respect to any
employees, managers or consultants of Parent pending or, to Parent’s Knowledge,
threatened against Parent. Parent is not a party to, or bound by, any
collective bargaining agreement or other agreement with any labor organization
applicable to the employees, managers or consultants of Parent and no such
agreement is currently being negotiated.
(b) Except
as would not reasonably be expected to result in a Material Adverse Effect,
Parent: (i) is in compliance with all applicable Laws respecting employment and
employment practices, terms and conditions of employment, health and safety and
wages and hours, including Laws relating to discrimination, disability, labor
relations, hours of work, payment of wages and overtime wages, pay equity,
immigration, workers compensation, working conditions, employee scheduling,
occupational safety and health, family and medical leave, and employee
terminations, (ii) has not received written notice, or to the Knowledge of
Parent any other form of notice, that there is any unfair labor practice charge
or complaint against Parent pending, (iii) is not liable for any arrears of
wages or any penalty for failure to comply with any of the foregoing, and (iv)
is not liable for any payment to any trust or other fund or to any Governmental
Authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for employees (other than routine payments to
be made in the ordinary course of business and consistent with past
practice). Except as would not reasonably be expected to have a
Material Adverse Effect, there are no complaints, lawsuits, arbitrations,
administrative proceedings, or other Actions pending or, to the Knowledge of
Parent, threatened against Parent or any of its employees, managers, consultants
or former employees brought by or on behalf of any applicant for employment, any
current or former employee, any Person alleging to be a current or former
employee, any class of the foregoing, or any Governmental Authority, relating to
any such Law or regulation, or alleging breach of any express or implied
contract of employment, wrongful termination of employment, or alleging any
other discriminatory, wrongful or tortious conduct in connection with the
employment relationship.
34
(c) There
has been and is no unfair labor practice complaint against Parent pending or, to
the Knowledge of Parent, threatened before any Governmental Authority, and no
pending or, to the Knowledge of Parent, threatened arbitration arising out of
any collective bargaining agreement.
(d) All
material amounts due from Parent, or for which any material claim may be
asserted against Parent, on account of wages and other benefits have been paid
or accrued as a liability on the books and records of Parent.
(e) Parent
is not liable for any material liabilities, judgments, arrearage of wages, fines
or penalties for failure to comply with any applicable labor Laws.
3.16 Material
Contracts.
(a) Except
as set forth in the Public Reports filed prior to the date hereof, there are no
contracts, agreements, leases, mortgages, indentures, notes, bonds, liens,
license, permit, franchise, purchase orders, sales orders or other
understandings, commitments or obligations (including without limitation
outstanding offers or proposals) of any kind, whether written or oral, to which
Parent is a party or by or to which any of the properties or assets of Parent
may be bound, subject or affected, which either (i) creates or imposes a
liability greater than $100,000, or (ii) may not be cancelled by Parent on less
than 60 days’ prior notice (the “Parent Material
Contracts”). All Parent Material Contracts have been made
available to Nayarit, and are set forth in Section 3.16(a) of
the Parent Disclosure Schedules other than those that are exhibits to the Public
Reports.
(b) With
respect to each Parent Material Contract: (i) the Parent Material Contract was
entered into at arms’ length and in the ordinary course of business consistent
with past practices; (ii) the Parent Material Contract is legal, valid, binding
and enforceable in all material respects against Parent and, to Parent’s
Knowledge, the other party thereto, and in full force and effect (except as such
enforcement may be limited by the Enforceability Exceptions); (iii) Parent is
not in breach or default in any material respect, and no event has occurred that
with the passage of time or giving of notice or both would constitute such a
breach or default by Parent, or permit termination or acceleration by the other
party, under the Parent Material Contract; and (iv) to Parent’s Knowledge, no
other party to the Parent Material Contract is in breach or default in any
material respect, and no event has occurred that with the passage of time or
giving of notice or both would constitute such a breach or default by such other
party, or permit termination or acceleration by Parent, under any Parent
Material Contract.
35
3.18 Transactions with
Affiliates. Section 3.18 of the
Parent Disclosure Schedules sets forth a true, correct and complete list of the
contracts or arrangements that are in existence as of the date of this Agreement
under which there are any existing or future liabilities or obligations between
Parent, on the one hand, and, on the other hand, any (i) present or former
director, officer, employee or Affiliate of Parent, or any family member of any
of the foregoing, or (ii) record or beneficial owner of more than five percent
(5%) of the outstanding Parent Common Stock as of the date hereof (each, a
“Parent Affiliate
Transaction”).
3.19 Books and
Records. All of the books and records of Parent are complete
and accurate in all material respects and have been maintained in the ordinary
course consistent with past practices and in accordance with applicable Laws and
standard industry practices with regard to the maintenance of such books and
records. The records, systems, controls, data and information of
Parent are recorded, stored, maintained and operated under means (including any
electronic, mechanical or photographic process, whether computerized or not)
that are under the control of Parent.
3.20 Information
Supplied. None of the information supplied or to be supplied
by Parent for inclusion or incorporation by reference in (a) any Current Report
on Form 8-K or any other report, form, registration, or other filing made with
any Governmental Authority with respect to the transactions contemplated hereby
or (b) the Registration Statement, Proxy Statement or Nayarit Proxy Circular
(with respect to information regarding Parent) will, at the date it is first
mailed to Parent’s stockholders or at the time of the Stockholder Meeting, or
Nayarit Stockholder Meeting, respectively, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. Notwithstanding the
foregoing, Parent makes no representation, warranty or covenant with respect to
any information supplied by Nayarit which is contained in the Registration
Statement, Proxy Statement or Nayarit Proxy Circular.
36
3.21 Intellectual
Property. Other than as set forth in the Public Reports,
domain names and off-the-shelf software, Parent does not own, license or
otherwise have any right, title or interest in any Intellectual
Property.
3.22 Real
Property. Other than as set forth in the Public Reports,
Parent does not own or lease any real property, and has no commitments or
obligations to purchase or lease real property either prior to or after the
Effective Time.
3.23 Environmental
Matters. Except as set forth in the Public Reports or for such
matters that are not reasonably expected to have a Material Adverse Effect,
Parent: (i) has, to the Knowledge of Parent, complied with all applicable
Environmental Laws; (ii) has not received any notice, demand, letter, claim or
request for information alleging that Parent may be in violation of or liable
under any Environmental Law; and (iii) is not subject to any Order or other
arrangement with any Governmental Authority or subject to any indemnity or other
agreement with any third party relating to Liability under any Environmental
Law.
3.24 Insurance. Set
forth on Section
3.24 of the Parent Disclosure Schedules sets forth a correct and complete
list of all material insurance policies issued in favor of Parent, or pursuant
to which Parent is a named insured or otherwise a beneficiary. With
respect to each such insurance policy: (i) the policy is in full force and
effect and all premiums due thereon have been paid and (ii) Parent is not
in any material respect, in breach of or default under, and Parent has not taken
any action or failed to take any action which, with notice or the lapse of time
or both, would constitute such a breach or default, or permit termination or
modification of, any such policy.
3.25 Bankruptcy. Parent
has not: (i) commenced a voluntary case, or had entered against it a petition,
for relief under the federal bankruptcy code or any similar petition, order or
decree under any federal or state law or statute relative to bankruptcy,
insolvency or other relief for debtors; (ii) caused, suffered or consented to
the appointment of a receiver, trustee, administrator, conservator, liquidator
or similar official in any federal, state or foreign judicial or non judicial
proceedings, to hold, administer and/or liquidate all or substantially all of
its property; or (iii) made an assignment for the benefit of
creditors.
3.26 TSX/OTCBB
Quotation. The Parent Common Stock is traded in Canada on the
Toronto Stock Exchange (“TSX”) and simultaneously in
the United States of America listed for trading on the Over the Counter Bulletin
Board (the “OTCBB”). There is
no action or proceeding pending or, to Parent’s Knowledge, threatened against
Parent by the TSX or OTCBB with respect to any intention by such entity to
prohibit or terminate the trading or quotation of Parent’s Common
Stock on the TSX or OTCBB, respectively.
COVENANTS
(a) Unless
Parent shall otherwise consent in writing (such consent not to be unreasonably
withheld), during the period from the date of this Agreement to the Effective
Time, except as expressly contemplated by this Agreement or as set forth on
Section 4.1 of
the Nayarit Disclosure Schedules:
37
(i) Nayarit
and the Subsidiaries shall conduct their respective business, in all material
respects, in the ordinary course of business consistent with past
practice;
(ii) Nayarit
and the Subsidiaries shall use commercially reasonable efforts consistent with
the foregoing to preserve intact, in all material respects, its business
organization, to keep available the services of its managers, directors,
officers, key employees and consultants, to maintain, in all material respects,
existing relationships with all Persons with whom it does significant business,
and to preserve the possession, control and condition of its
assets;
(iii) Nayarit
and the Subsidiaries shall use commercially reasonable efforts to keep all of
the Mineral Rights, the Nayarit Permits and the Nayarit Material Contracts in
good standing and in full force and effect and use commercially reasonable
efforts to continue to maintain, in all material respects, its respective
assets, properties, rights and operations in accordance with present practice in
a condition suitable for their current use; and
(iv) Nayarit
and the Subsidiaries shall use commercially reasonable efforts consistent with
the foregoing to conduct its business in compliance with applicable Laws in all
material respects, and to preserve intact the business organization of Nayarit
and the Subsidiaries.
(b) Without
limiting the generality of the foregoing clause (a), except as set forth on
Section 4.1 of
the Nayarit Disclosure Schedules, during the period from the date of this
Agreement to the Effective Time, and other than as contemplated hereby, neither
Nayarit nor any Subsidiary
will (except as specifically contemplated by the terms of this Agreement),
without the prior written consent of Parent (such consent not to be unreasonably
withheld, conditioned or delayed):
(i) amend,
waive or otherwise change, in any respect, its constating documents or other
organizational documents or enter into any stockholder, membership, partnership
or other agreement;
(ii) authorize
for redemption or issuance, issue, grant, sell, pledge, dispose of or propose to
issue, grant, sell, pledge or dispose of any Nayarit Common Shares, any shares
of capital stock or other securities or other equity interests or any options,
warrants, commitments, subscriptions or rights of any kind to acquire or sell
Nayarit Common Shares, any shares of capital stock or other securities or other
equity interests, including any securities convertible into or exchangeable for
Nayarit Common Shares or equity interests in any Subsidiary or decrease or
increase the number of authorized shares of Nayarit Common Shares or equity
interests in any Subsidiary;
(iii) split,
combine, recapitalize or reclassify any of the Nayarit Common Shares or equity
interests in any Subsidiary or issue any other securities in respect thereof, or
declare, pay or set aside any distribution or other dividend (whether in cash,
equity or property or any combination thereof) in respect of the Nayarit Common
Shares or equity interests in any Subsidiary, or directly or indirectly redeem,
purchase or otherwise acquire or offer to acquire any of the Nayarit Common
Shares or equity interests in any Subsidiary;
38
(iv) incur,
create, assume, prepay or otherwise become liable for any Indebtedness
(directly, contingently or otherwise), make a loan or advance to or investment
in any third party, or guarantee or endorse any indebtedness, liability or
obligation of any Person;
(v) increase
the wages, salaries or compensation of any of its current or former consultants,
officers, managers or directors by more than five percent (5%), or increase
bonuses for the foregoing individuals in an aggregate amount greater than one
hundred twenty percent (120%) of the amounts paid to such individuals in the
previous calendar year, or increase other benefits of any of the foregoing
individuals, or enter into, establish, amend or terminate any Nayarit Benefit
Plan or any other employment, consulting, retention, change in control,
collective bargaining, bonus or other incentive compensation, profit sharing,
health or other welfare, stock option or other equity or equity-related,
pension, retirement, consulting, vacation, severance, separation, termination,
deferred compensation, fringe, perquisite or other compensation or benefit plan,
policy, program, agreement, trust, fund or other arrangement with, for or in
respect of any current or former consultant, officer, manager or director or
terminate the employment of any senior executive, in each case other than in the
ordinary course of business consistent with past practice or other than as
required by applicable Law or pursuant to the terms of any Nayarit Benefit Plan
or Nayarit Material Contract in effect on the date of this
Agreement;
(vi) make
or rescind any material election relating to Taxes, settle any material claim,
action, suit, litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes, or make any material change in its accounting or
Tax policies or procedures, in each case except as required by applicable Law or
Canadian GAAP;
(vii) transfer
or license to any Person or otherwise extend, materially amend or modify, permit
to lapse or fail to preserve any of Intellectual Property owned or licensed by
Nayarit, other than nonexclusive licenses, or disclose to any Person who has not
entered into a confidentiality agreement any material trade
secrets;
(viii) terminate
or waive or assign any material right under any Nayarit Material Contract or
enter into any Nayarit Material Contract or fail to perform any material term or
obligation of a Nayarit Material Contract;
(ix) establish
any subsidiary or enter into any new line of business;
(x) make
any capital expenditures, or commit to make capital expenditures for any period
following the Effective Time;
(xi) fail
to maintain its books, accounts and records in all material respects in the
ordinary course of business consistent with past practice;
(xii) fail
to use commercially reasonable efforts to keep in force insurance policies or
replacement or revised policies providing insurance coverage with respect to the
assets, operations and activities of Nayarit or any Subsidiary in an amount and
scope of coverage as are currently in effect;
39
(xiii) other
than as required to be in compliance with Canadian Securities Authorities rules
and regulations or with Canadian GAAP, or as approved by Nayarit’s outside
auditors, revalue any of its material assets or make any change in accounting
methods, principles or practices;
(xiv) waive,
release, assign, settle or compromise any Action (including any third-party
Action relating to this Agreement or the transactions contemplated hereby,
including the Amalgamation), or otherwise pay, discharge or satisfy any claims,
liabilities or obligations other than in the ordinary course of business
consistent with past practice, unless such amount has been reserved in the
Nayarit Financials;
(xv) acquire,
including by merger, consolidation, acquisition of stock or assets, or any other
form of business combination, any corporation, partnership, limited liability
company, other business organization or any division thereof;
(xvi) adopt
a plan of complete or partial liquidation, winding up, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization, except
as otherwise permitted hereunder;
(xvii) voluntarily
incur any material liability or obligation (whether absolute, accrued,
contingent or otherwise);
(xviii) sell,
lease, license, transfer, exchange or swap, mortgage or otherwise pledge or
encumber (including securitizations), or otherwise dispose of any material
portion of its properties, assets or rights;
(xix) take
any action that would reasonably be expected to delay or impair the obtaining of
any consents or approvals of any Governmental Authority to be obtained in
connection with this Agreement;
(xx) enter
into, amend, waive or terminate (other than terminations in accordance with
their terms) any Nayarit Affiliate Transaction;
(xxi) enter
into any Benefit Plan or any employment, severance, or change of control
agreement;
(xxii)
notwithstanding anything to the contrary set forth in this Section 4.1, sell,
lease, transfer, mortgage, encumber (other than Permitted Encumbrances) or
otherwise dispose of any (i) exploration and option agreements over mining
concessions owned by third parties and similar agreements granting Nayarit
and/or its Subsidiaries any right to carry out mining related activities over
mining lots and/or granting an option to acquire such mining concessions, (ii)
concessions or options over mining concessions or (iii) any Owned Real
Property;
(xxiii) sell,
lease, transfer, mortgage, encumber (other than Permitted Encumbrances) or
otherwise dispose of any of its assets or properties to any Person;
or
40
(xxiv) authorize or agree
orally or in writing to do any of the foregoing actions.
(a) Between
the date of this Agreement and the Effective Time, each Party shall give, and
shall direct its accountants and legal counsel to give, the other Party and its
officer, manager, director, employee, accountant, consultant, legal counsel,
financial advisor, agent or other representative (collectively, the “Representatives”), at
reasonable times and upon reasonable intervals and notice, access to all offices
and other facilities and to all employees, properties, contracts, agreements,
commitments, books and records of or pertaining to such Party and its
subsidiaries (including Tax Returns, internal work papers, client files, client
contracts and director service agreements) and such financial and operating data
and other information, all of the foregoing as the requesting Party or its
Representatives may reasonably request regarding such Party’s business, assets,
liabilities, employees and other aspects (including unaudited financial
statements, including a consolidated quarterly balance sheet and income
statement, in the form such financial statements have been delivered to the
other Party prior to the date hereof) and instruct such Party’s Representatives
to cooperate with the requesting Party in its investigation (including by
reading available independent public accountant’s work papers) and to provide a
copy of, or make available, each material report, schedule and other document
filed or received pursuant to the requirements of applicable securities Laws;
provided that
the requesting Party shall conduct any such activities in such a manner as not
to interfere unreasonably with the business or operations of the Party providing
such information. Parent agrees to indemnify and hold Nayarit and its
Subsidiaries harmless from any and all claims and liabilities, including costs
and expenses for loss, injury to or death of any Representative of Parent and
any loss, damage to or destruction of any property owned by Nayarit or its
Subsidiaries or others (including claims or liabilities for loss of use of any
property) resulting directly or indirectly from the action or inaction of any of
Parent’s Representatives (and not resulting from the negligence or willful
misconduct of Nayarit, it Subsidiaries or their respective directors, managers,
officers, employees and agents) during any visit to the business or property
sites of Nayarit or its Subsidiaries prior to the completion of the
Amalgamation, whether pursuant to this Section 4.2 or
otherwise. Nayarit agrees to indemnify and hold Parent harmless from
any and all claims and liabilities, including costs and expenses for loss,
injury to or death of any Representative of Nayarit and any loss, damage to or
destruction of any property owned by Parent or others (including claims or
liabilities for loss of use of any property) resulting directly or indirectly
(and not resulting from the gross negligence or willful misconduct of Parent or
its directors, officers, employees and agents) from the action or inaction of
any of Nayarit’s Representatives during any visit to the business or property
sites of Parent prior to the completion of the Amalgamation, whether pursuant to
this Section 4.2 or otherwise.
(b) The
terms and conditions of this Agreement and the Amalgamation Agreement are
strictly confidential and the Parties hereby agree that they and their
respective Representatives shall not disclose to the public or to any third
party the existence or terms of this Agreement and the Amalgamation Agreement
other than with the express prior written consent of the other Party, except as
the Parties may otherwise agree or as may be required by applicable Law, rule or
regulation, or at the request of any Governmental Authority having jurisdiction
over a Party or any of its Representatives or Affiliates (including, without
limitation, the rules or regulations of the SEC), or as may be required to
defend any Action brought against such Party in connection with this Agreement
and the Amalgamation Agreement. If a Party is so required to make
such a disclosure, it must first provide to the other Party the content of the
proposed disclosure, the reasons the disclosure is required, and the time and
place that the disclosure will be made. In such event, the Parties
will work together to draft a disclosure which is acceptable to both
Parties.
41
(c) If
a Party is required by applicable Laws or stock exchange listing requirements to
make public disclosure regarding the transactions contemplated by this Agreement
and the Amalgamation Agreement, it shall provide the other Party with a draft of
the proposed disclosure and, to the extent practical, obtain the consent of the
other Party prior to such disclosure.
(a) For
purposes of this Agreement, “Acquisition Proposal” means (other than
the Amalgamation) any inquiry, proposal or offer, or any indication of interest
in making an offer or proposal, from any Person or group, at any time relating
to a merger, take-over bid, amalgamation, plan of arrangement, reorganization,
recapitalization, consolidation, asset sale, share exchange, business
combination or similar transaction, including any single or multi-step
transaction or series of related transactions involving Nayarit, its
Subsidiaries or Parent, on the one hand, and any third party, on the other hand,
or acquisition or purchase of assets of or by Nayarit, its Subsidiaires or
Parent representing 50% or more of such Person’s assets or
business. Without limiting the foregoing, the term Acquisition
Proposal includes any inquiry, proposal or offer made or received by Nayarit,
its Subsidiaries or Parent or any indication of interest in same by Nayarit, its
Subsidiaries or Parent to any third-party at any time relating to a merger,
take-over bid, amalgamation, plan of arrangement, reorganization,
recapitalization, consolidation, asset sale, share exchange, business
combination or similar transaction, including any single or multi-step
transaction or series of related transactions with Nayarit, its Subsidiaries or
Parent or any of their respective Affiliates.
(b) In
order to induce each Party to continue to expend management time and financial
resources in furtherance of the transactions contemplated hereby, from the date
hereof until the earlier of (x) the Effective Date or (y) termination of this
Agreement pursuant to Section 7.1, none of Nayarit, any Subsidiary or Parent
shall (unless otherwise required by applicable Law), directly or indirectly, and
shall not, directly or indirectly, authorize or permit any of its Representative
to: (i) solicit, encourage, assist, initiate or facilitate the making,
submission or announcement of any Acquisition Proposal, (ii) furnish any
non-public information regarding Nayarit, any Subsidiary or Parent or the
Amalgamation to any Person or group (other than a Party to this Agreement or
their Representatives) in connection with or in response to an Acquisition
Proposal, (iii) engage, participate in or continue discussions or negotiations
with any Person or group with respect to, or which could be expected to lead to,
an Acquisition Proposal, (iv) withdraw, modify or qualify, or propose publicly
to withdraw, modify or qualify, in a manner adverse to Parent, the approval of
this Agreement or the Amalgamation or the recommendation by the Board of
Directors of Nayarit or Parent that its stockholders adopt the Amalgamation
Agreement, (v) approve, endorse or recommend, or publicly propose to approve,
endorse or recommend, any Acquisition Proposal, (vi) discuss, negotiate or enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement related to any Acquisition Proposal, or (vii) release
any third party from, or waive any provision of, any confidentiality agreement
to which Nayarit, any Subsidiary or Parent is a
party. Notwithstanding the foregoing, this Section 4.3 shall not
prevent or restrict the directors of Nayarit or Parent from considering or
negotiating any unsolicited bona fide Acquisition Proposal that may be a
Superior Proposal or from considering, negotiating, approving, recommending to
the Nayarit Stockholders or the stockholders of Parent or entering into an
agreement in respect of a Superior Proposal from any Person if the directors of
Nayarit or Parent determine in good faith after consulting with outside counsel
that such action is necessary or advisable for such directors to act in a manner
consistent with his or her fiduciary duties under applicable
Law. “Superior
Proposal” means [A] with respect to Nayarit, an Acquisition Proposal if
such Acquisition Proposal is not conditional on obtaining financing and the
directors of Nayarit have determined in good faith, after consultation with, and
receiving advice (which may include written opinions, a copy of which shall have
been provided to Parent) from, as appropriate, the financial, legal and other
advisors to Nayarit to the effect that such Acquisition Proposal would, if
consummated in accordance with the terms thereof, but without assuming away the
risk of non-completion, result in a transaction which: (x) provides
consideration to Nayarit Stockholders that exceeds the consideration payable
under this Agreement to the Nayarit Stockholders by at least twenty five percent
(25%); and (y) is reasonably capable of being completed without undue delay,
taking into account all legal, financial, regulatory and other aspects of such
Acquisition Proposal, and [B] with respect to Parent, an Acquisition Proposal if
the directors of Parent have determined in good faith, after consultation with,
and receiving advice (which may include written opinions, a copy of which shall
have been provided to Nayarit) from, as appropriate, the financial, legal and
other advisors to Parent to the effect that such Acquisition Proposal would, if
consummated in accordance with the terms thereof, but without assuming away the
risk of non-completion, result in a transaction which is accretive to the
stockholders of Parent.
42
(c) Without
limiting the foregoing, Nayarit agrees it shall be responsible for the actions
of its and its Subsidiaries’ Representatives that would constitute a violation
of the restrictions set forth in this Section 4.3. Nayarit shall
promptly inform its and its Subsidiaries’ Representatives of the obligations
undertaken in this Section 4.3. Without limiting the foregoing,
Parent agrees it shall be responsible for the actions of its Representatives
that would constitute a violation of the restrictions set forth in this Section
4.3. Parent shall promptly inform its Representatives of the
obligations undertaken in this Section 4.3.
(d) Each
Party shall notify the other Party promptly (and in any event within 48 hours)
orally and in writing of the receipt by a Party or any of their respective
Representatives of: (i) any bona fide inquiries, proposals or offers, requests
for information or requests for discussions or negotiations regarding or
constituting any Acquisition Proposal or any bona fide inquiries, proposals or
offers, requests for information or requests for discussions or negotiations
that could be expected to result in an Acquisition Proposal and (ii) any request
for non-public information relating to Nayarit, any Subsidiary or Parent,
specifying in each case the material terms and conditions thereof (including a
copy thereof if in writing) and the identity of the party making such inquiry,
proposal, offer or request for information. Each Party shall keep the
other Party promptly informed of the status of any such inquiries, proposals,
offers or requests for information. From and after the date of this
Agreement, each Party shall immediately cease and cause to be terminated any
solicitations, discussions or negotiations with any Person with respect to any
Acquisition Proposal and shall direct, and use its commercially reasonable
efforts to cause, its Representatives to cease and terminate any such
solicitations, discussions or negotiations.
43
(e) If
Nayarit or Parent receives a request for material non-public information from a
Person who is considering making or has made an Acquisition Proposal (the
existence and content of which have been disclosed to the other Party), and the
directors of Nayarit or Parent determine that such proposal would or does
constitute a Superior Proposal then, and only in such case, the directors of
Nayarit or Parent may, subject to the execution of a confidentiality agreement
on terms which are not more favorable to the Person mailing or considering
mailing the Acquisition Proposal than those set forth in this Agreement, provide
such Person with access to information regarding Nayarit or Parent, as the case
may be; provided, however, that the Person who is considering making the
Acquisition Proposal shall not be precluded thereunder from making the
Acquisition Proposal, and provided further that Nayarit or Parent sends a copy
of any such confidentiality agreement to the other Party immediately upon the
execution thereof and the other Party is provided with a list of or a copy of
the information, if any, provided to such Person that was not previously
provided to such other Party and such other Party is immediately provided with
access to similar information.
(f) From
the date of this Agreement until the earlier of (x) the Closing Date or (y) the
date of termination of this Agreement pursuant to Section 7.1, the directors of
Nayarit and the directors of Parent shall not accept, approve, recommend or
enter into any agreement in respect of an Acquisition Proposal (other than a
confidentiality agreement contemplated by Section 4.3(e) hereof) on the basis
that it would constitute a Superior Proposal, unless (i) it has provided
the other Party with a copy of the documents containing such Acquisition
Proposal (with such deletions as are necessary to protect any confidential
portions of such document, provided that the material terms and conditions of,
and the identity of the Person making, such Acquisition Proposal may not be
deleted) which the directors of Nayarit or Parent, as the case may be, have
determined would be a Superior Proposal pursuant to Section 4.3(b) hereof,
and (ii) if applicable, the requirements of Section 4.3(g) have been
satisfied.
(g) In
the event an Acquisition Proposal which is deemed a Superior Proposal pursuant
to Section 4.3(b) is received by Nayarit, during the five (5) Business Days
after the date Parent received notice of the determination of the directors of
Nayarit to accept, approve and recommend or enter into an agreement with respect
to such Superior Proposal, Parent shall have the opportunity, but not the
obligation, to offer in writing to amend the terms of this Agreement and the
Amalgamation. The directors of Nayarit shall promptly review any
offer by Parent to amend the terms of this Agreement and the Amalgamation in
order to determine in good faith, whether the offer of Parent upon acceptance by
Nayarit would at least match the value per Nayarit Common Share of the Superior
Proposal. If the directors of Nayarit so determine, Nayarit shall
enter into an amended agreement with Parent reflecting the amended proposal of
Parent and will promptly reaffirm its recommendation of the Amalgamation as
amended. Nayarit acknowledges and agrees that each successive
financial modification of any Acquisition Proposal shall constitute a new
Acquisition Proposal for purposes of the requirement under Section 4.3(f)
hereof and shall initiate an additional five (5) Business Day
period.
44
4.5 Conduct of Business of
Parent.
(a) Unless
Nayarit shall otherwise consent in writing (such consent not to be unreasonably
withheld), during the period from the date of this Agreement to the Effective
Time, except as specifically contemplated by the terms of this Agreement, Parent
shall conduct its business in, and shall not take any action other than in, the
ordinary course of business consistent with past practice;
(b) Without
limiting the generality of the foregoing clause (a), during the period from the
date of this Agreement to the Effective Time, Parent will not (except as
specifically contemplated by this Agreement), without the prior written consent
of Nayarit (such consent not to be unreasonably withheld):
(i) except
for a $15 million 12-month revolving credit facility, make a loan or advance to
or investment in any third party other than in the ordinary course of business
consistent with past practices;
(ii)
except as contemplated by this Agreement, redeem, retire, purchase or otherwise
acquire, directly or indirectly, any shares of the capital stock of
Parent;
(iii) except
in the ordinary course of business consistent with past practices, make any
capital expenditures, or commit to make capital expenditures; or
|
(iv)
|
authorize
or agree to do any of the foregoing
actions.
|
4.6 Voting. Subject
to Section 4.3, Xxxxx Xxxxxxxxxx and Xxxxxxx Xxxxxxxx hereby agree to vote any
shares of Nayarit Common Shares owned by each of them at the Nayarit Stockholder
Meeting in favor of the Nayarit Proxy Matters. Subject to Section
4.3, Xxxx Xxxxxxxx hereby agrees to vote any shares of Parent Common Stock owned
by him at the Parent Stockholder Meeting in favor of the Parent Proxy
Matters.
ARTICLE
V
ADDITIONAL
COVENANTS OF THE PARTIES
45
(a) Subject
to the terms and conditions of this Agreement, prior to the Effective Time, each
Party shall use commercially reasonable efforts, and shall cooperate fully with
the other Party, to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper or advisable under applicable Laws and
regulations to consummate the Amalgamation and the other transactions
contemplated by this Agreement and the Registration Statement, Proxy Statement
and Nayarit Proxy Circular (including the receipt of all authorizations,
approvals and permits required to be obtained from or made with any Governmental
Authority and relevant stock exchanges in order to consummate the transactions
contemplated by this Agreement (collectively, the “Requisite Regulatory
Approvals”)), and the satisfaction, but not the waiver, of the closing
conditions set forth in Article VI), and to comply promptly with all
requirements of Governmental Authorities applicable to the transactions
contemplated by this Agreement.
(b) Parent,
Nayarit and each Subsidiary will cooperate with each other and will take all
commercially reasonable steps, and proceed diligently and in good faith:
(i) to submit any necessary filings, amendments or revisions to any
required Governmental Authority or other third party in connection with the
transactions contemplated hereby, and (ii) to promptly submit and make
other applications, notices and submissions (or amendments to any of the
foregoing previously submitted) with any Governmental Authority or other third
party which must be filed in order for Nayarit to obtain all Consents which must
be obtained prior to the Closing in order for Nayarit and the Subsidiaries to
operate their respective business as currently operated and currently intended
by the Parties to be operated following the Closing. All such filings
shall be made, if not already made, as promptly as practicable and Parent shall
supply as promptly as reasonably practicable any additional information and
documentary material that may be requested by Nayarit in connection with such
Consents.
(c) In
furtherance and not in limitation of the covenants of the Parties contained in
Sections 5.2(a) and (b), if any objections are asserted with respect to the
transactions contemplated hereby under any applicable Law or if any suit is
instituted (or threatened to be instituted) by any applicable Governmental
Authority or any private party challenging any of the transactions contemplated
hereby as violative of any applicable Law or which would otherwise prevent,
materially impede or materially delay the consummation of the transactions
contemplated hereby, Parent and Nayarit shall use their commercially reasonable
efforts to resolve any such objections or suits so as to permit consummation of
the transactions contemplated by this Agreement, including in order to resolve
such objections or suits which, in any case if not resolved, could reasonably be
expected to prevent, materially impede or materially delay the consummation of
the transactions contemplated hereby (including the Amalgamation).
46
(d) In
the event any Action is instituted (or threatened to be instituted) by a
Governmental Authority or private party challenging the Amalgamation or any
other transaction contemplated by this Agreement, or any other agreement
contemplated hereby, Parent and Nayarit shall cooperate in all respects with
each other and use their respective commercially reasonable efforts to contest
and resist any such action or proceeding and to have vacated, lifted, reversed
or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and that prohibits,
prevents or restricts consummation of the transactions contemplated by this
Agreement.
(e) Notwithstanding
anything herein to the contrary, neither Parent nor Nayarit shall be required to
agree to any term, condition or modification with respect to obtaining any
Consents in connection with the Amalgamation or the consummation of the
transactions contemplated by this Agreement that would result in, or would be
reasonably likely to result in: (i) a Material Adverse Effect of either Party or
(ii) Parent or Nayarit having to cease, sell or otherwise dispose of any assets
or business (including the requirement that any such assets or business be held
separate).
(a) Indemnification by
Nayarit. From the date of this Agreement through the Closing
Date, Nayarit shall indemnify and hold harmless each of Parent and its
Affiliates and each of their respective successors and assigns, and their
respective officers, directors, employees and agents (each, a “Parent Indemnified Party”)
from and against any liabilities, claims (including claims by third parties),
demands, judgments, losses, costs, damages or expenses whatsoever (including
reasonable attorneys’, consultants’ and other professional fees and
disbursements of every kind, nature and description) (collectively, “Damages”) such Parent
Indemnified Party may sustain, suffer or incur and that result from, arise out
of or relate to: (i) any breach by Nayarit or any Subsidiary of any of their
representations, warranties, covenants or agreements contained in this Agreement
or in any agreement or certificate delivered in connection with this Agreement
and/or (ii) any negligence, willful misconduct or fraud committed in connection
with the execution and delivery of, or the performance under, this Agreement by
Nayarit or any Subsidiary.
(b) Indemnification by
Parent. From the date of this Agreement through the Closing
Date, Parent shall indemnify and hold harmless Nayarit and its respective
Affiliates and each of their respective successors and assigns, and their
respective officers, directors, employees and agents (each, a “Nayarit Indemnified Party”)
from and against any Damages such Nayarit Indemnified Party may sustain, suffer
or incur and that result from, arise out of or relate to: (i) any breach by
Parent of any of its representations, warranties, covenants or agreements
contained in this Agreement or in any agreement or certificate delivered in
connection with this Agreement and/or (ii) any negligence, willful misconduct or
fraud committed the execution and delivery of, or the performance under, this
Agreement by Parent.
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(c) Indemnification
Procedures. A Person seeking indemnification under this
Section 5.3 (the “Indemnitee”) must give timely
written notice to the Person from whom indemnification is sought (the “Indemnitor”) as soon as
practical after the Indemnitee becomes aware of any condition or event that
gives rise to Damages for which indemnification is sought under this Section
5.3. The failure of the Indemnitee to give timely notice shall not
affect the Indemnitee’s rights to indemnification hereunder except to the extent
the Indemnitor demonstrates it was materially prejudiced by such
failure. In the event a claim or demand is made by a party against an
Indemnitee, the Indemnitee shall promptly notify the Indemnitor of such claim or
demand, specifying the nature and the amount of the Damages (the “Claim Notice”). The
Indemnitor shall notify the Indemnitee within twenty (20) days after receipt of
the Claim Notice whether the Indemnitor will undertake, conduct and control,
through counsel of its own choosing and at its expense, the settlement or
defense thereof, and Indemnitee shall cooperate with Indemnitor in connection
therewith, provided that if Indemnitor undertakes such defense: (i) Indemnitor
shall not thereby permit to exist any Encumbrance or other adverse charge upon
any asset of Indemnitee or settle such action without first obtaining the
consent of Indemnitee, except for settlements solely covering monetary matters
for which Indemnitor has acknowledged responsibility for payment; (ii)
Indemnitor shall permit Indemnitee (at Indemnitee’s sole cost and expense) to
participate in such settlement or defense through counsel chosen by Indemnitee;
and (iii) Indemnitor shall agree promptly to reimburse Indemnitee for the full
amount of any Damages resulting from such claim, except for those costs
expressly assumed by the Indemnitee hereunder. The Indemnitee agrees
to preserve and provide access to all evidence that may be useful in defending
against such claim and to provide reasonable cooperation in the defense thereof
or in the prosecution of any action against a third party in connection
therewith. The Indemnitor’s defense of any claim or demand shall not
constitute an admission or concession of liability therefor or otherwise operate
in derogation of any rights Indemnitor may have against Indemnitee or any third
party. So long as Indemnitor is reasonably contesting any such claim
in good faith, Indemnitee shall not pay or settle any such claim. If
Indemnitor does not notify Indemnitee within twenty (20) days after receipt of
Indemnitee’s Claim Notice that it elects to undertake the defense thereof,
Indemnitee shall have the right to contest the claim in the exercise of its
exclusive, reasonable discretion at the expense of the Indemnitor (provided the
Indemnitor shall not be required to pay Indemnitee's expenses for the defense,
settlement or compromise of claims which are not covered by Indemnitor’s
obligations under this Section 5.3 or which Indemnitor has not consented
to).
(d) Insurance
Effect. Notwithstanding the foregoing, to the extent any
Damages that are subject to indemnification pursuant to this Agreement are
covered by insurance, the Indemnitee shall use commercially reasonable efforts
to obtain the maximum recovery under such insurance. If the
Indemnitee receives payment from the Indemnitor for indemnification under this
Section 5.3 and later receives proceeds from insurance or other amounts in
respect of such Damages, then it shall hold such proceeds or other amounts in
trust for the benefit of the Indemnitor and shall pay to the Indemnitor, as
promptly as practicable after receipt, a sum equal to the amount of the proceeds
or other amount received, up to the aggregate amount of any payments received
from the Indemnitor pursuant to this Agreement in respect of such
Damages.
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(e) Exclusive
Remedy. Except with respect to any claims for negligence,
willful misconduct or fraud, the rights of any Parent Indemnified Party or
Nayarit Indemnified Party for indemnification relating to this Agreement or the
transactions contemplated hereby shall be strictly limited to those contained in
this Section 5.3, and, except as specifically set forth in Section 8.10, such
indemnification rights and the right to terminate this Agreement pursuant to
Section 7.1 and the right to receive the Break Fee, if applicable, shall be the
sole and exclusive remedies of such Parent Indemnified Party or Nayarit
Indemnified Party, as applicable, with respect to this Agreement or any matter
arising under or in connection with this Agreement. To the maximum
extent permitted by applicable Law, the Parent Indemnified Parties and the
Nayarit Indemnified Parties hereby waive all other rights and remedies, and
release all claims against each other, with respect to this Agreement or any
matter arising under or in connection with this Agreement, whether under any
applicable Law, at common law or otherwise.
5.5 Parent Registration
Statement; Proxy Statement.
(a) Promptly
after the date of this Agreement, (i) Parent shall prepare and file with
the SEC a registration statement on Form S-4 (or other appropriate form), which
shall include the Proxy Statement, for the purpose of registering the
Amalgamation Consideration to be issued to the Nayarit Stockholders pursuant to
the Amalgamation (the “Registration Statement”), and
(ii) Parent shall prepare and file with the SEC a proxy statement on
Schedule 14A (the “Proxy
Statement”) for the purpose of, among other things, soliciting proxies
from holders of Parent Common Stock to vote, at a meeting of the holders of
Parent Common Stock to be called for such purpose (the “Parent Stockholder Meeting”), in
favor of, among other things, [I] the issuance of the Amalgamation
Consideration, [II] any other proposals the Parties deem necessary to effectuate
the effectiveness of the Registration Statement, and [III] an adjournment
proposal (collectively, the “Parent Proxy
Matters”). For purposes of this Agreement, “Proxy Statement”
means the letter to Parent’s Stockholders, the notices of meeting, the proxy
statement and forms of proxies to be distributed to Parent’s Stockholders in
connection with the Parent Proxy Matters and any additional solicitation
materials required to be filed with the SEC in connection
therewith.
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(b) Parent,
with the assistance of Nayarit, shall promptly respond to any SEC comments on
the Registration Statement and shall use reasonable best efforts to cause such
Registration Statement to be declared effective by the SEC as soon after filing
as practicable. Parent, with the assistance of Nayarit, shall
promptly respond to any SEC comments on the Proxy Statement and shall use
reasonable best efforts to have the Proxy Statement cleared by the SEC under the
Exchange Act as soon after filing as practicable.
(c) Parent
will advise Nayarit, promptly after it receives notice thereof, of the time when
the Registration Statement has been declared effective by the SEC or any
supplement or amendment to the Registration Statement has been filed, or any
request by the SEC for amendment of the Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional
information. Parent will advise Nayarit, promptly after it receives
notice thereof, of the time when the Proxy Statement has been cleared by the SEC
under the Exchange Act or any supplement or amendment to the Proxy Statement has
been filed, or any request by the SEC for amendment of the Proxy Statement or
comments thereon and responses thereto or requests by the SEC for additional
information.
(d) If
at any time prior to the Effective Time, any information relating to Parent,
Nayarit or any of their respective subsidiaries, affiliates, officers or
directors, should be discovered by Parent or Nayarit, as applicable, that should
be set forth in an amendment or supplement to the Registration Statement or the
Proxy Statement, so that such documents would not include any misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the Party which discovers such information shall promptly notify
the other Party hereto and an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and, to the extent
required by law, disseminated to the stockholders of Parent.
(e) All
reasonable out-of-pocket expenses (including all reasonable fees and expenses of
counsel, accountants and advisors) incurred by Parent or its Affiliates in
connection with or related to the preparation, printing, filing and mailing of
the Registration Statement and Proxy shall be equally shared by Parent and
Nayarit.
5.6 Reservation of
Stock. Parent hereby agrees there shall be, or Parent shall
cause to be, reserved for issuance and delivery such number of shares of Parent
Common Stock as shall be required for issuance and delivery of the Amalgamation
Consideration and upon the exercise, conversion or exchange of Nayarit
Convertible Securities.
5.7 Nayarit
Filings.
(a) Nayarit
shall prepare, in consultation with Parent, a proxy circular, in the form and
containing the information required by applicable corporate and Canadian
Securities Laws and TSXV requirements (the “Nayarit Proxy Circular”),
together with any other documents required by such requirements, and not
containing any misrepresentation (as defined under applicable securities
legislation and requirements) with respect thereto, other than with respect to
any information relating to and provided by Parent (all of which shall be in a
form satisfactory to Parent, acting reasonably).
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(b) Nayarit
shall, as soon as practicable file, with the TSXV an application for conditional
acceptance of the Amalgamation, and enclosing a draft of the Proxy Circular and,
with the assistance of Parent, shall promptly respond to any comments on the
application or Nayarit Proxy Circular and shall use reasonable best efforts to
cause such conditional acceptance to be obtained and the Nayarit Proxy Circular
to be cleared for mailing by the TSXV as soon after filing as
practicable. Nayarit will advise Parent, promptly after it receives
notice thereof, of the time when the Nayarit Proxy Circular has been cleared by
the TSXV for mailing or any request by the TSXV for amendment of the Nayarit
Proxy Circular or comments thereon and responses thereto or requests by the TSXV
for additional information.
(c) As
soon as is practicable after the TSXV has conditionally accepted the
Amalgamation and advised that the Nayarit Proxy Circular may be mailed to
Nayarit Stockholders, Nayarit shall file and mail the Nayarit Proxy Circular in
accordance with all applicable corporate and securities Laws and TSXV
requirements, in and to all jurisdictions where the Nayarit Proxy Circular is
required to be filed and mailed.
(e) If
at any time after mailing of the Nayarit Proxy Circular and prior to the Nayarit
Stockholder Meeting, any information relating to Parent, Nayarit or any of their
respective subsidiaries, affiliates, officers or directors, should be discovered
by Parent or Nayarit, as applicable, that should be set forth in the Nayarit
Proxy Circular, so that such document would not include any misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the Party which discovers such information shall promptly notify
the other Party hereto and an appropriate amendment or supplement describing
such information shall be promptly filed with the appropriate Canadian
Securities Authority and exchange and, to the extent required by law,
disseminated to the Nayarit Stockholders.
(a) duly
call, give notice of, convene and hold a special meeting of the stockholders of
Nayarit (the “Nayarit
Stockholder Meeting”) for the purposes of considering and taking action
upon the approval of the Amalgamation;
(b) (i)
use commercially reasonable efforts to solicit the approvals required by the
Nayarit Stockholders and (ii) include in the Nayarit Proxy Circular: (A) the
recommendation of the Board of Directors of Nayarit to the Nayarit Stockholder
that they vote in favor the Amalgamation and (B) all other requests or approvals
necessary to consummate the transactions contemplated by this Agreement
(collectively, the “Nayarit
Proxy Matters”). Notwithstanding the foregoing, Nayarit may
adjourn or postpone the Nayarit Stockholder Meeting as and to the extent
required by applicable Law. Nayarit shall use its commercially
reasonable efforts to cause the Nayarit Proxy Circular to be mailed to the
Nayarit Stockholders promptly as practicable after TSXV clearance is
received. Parent shall make its directors, officers, employees and
consultants available to Nayarit and its counsel in connection with the drafting
of the Nayarit Proxy Circular. If, prior to the Effective Time, any
event occurs with respect to Parent, or any change occurs with respect to other
information supplied by Parent for inclusion in the Nayarit Proxy Circular,
Parent shall promptly notify Nayarit of such event, and Nayarit and Parent shall
cooperate in the prompt preparation and distribution of any necessary amendment
or supplement to the Nayarit Proxy Circular and, as required by Law, in
disseminating the information contained in such amendment or supplement to the
Nayarit Stockholders; and
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(c) promptly
transmit any amendment or supplement to the Nayarit Stockholders, if at any time
prior to the Nayarit Stockholder Meeting, there shall be discovered any
information that should be set forth in an amendment or supplement to the
Nayarit Proxy Circular.
5.9 Directors and Officers of
Parent.
(a) Subject
to any limitation imposed under applicable Laws, the Parties shall take all
necessary actions so that the persons identified in Section 1.6(b) are
elected to the positions of officers of Parent effective immediately after the
Closing.
(b) Subject
to any limitation imposed under applicable Laws, the Parties shall take all
necessary actions so that the persons identified in Section 1.6(a) are
elected to the positions of directors of Parent effective immediately after the
Closing.
5.10 Xxxx-Xxxxx-Xxxxxx
Filing. If required pursuant to the Xxxx-Xxxxx-Xxxxxx Act, as
promptly as practicable after the date of this Agreement, Parent and Nayarit
shall each prepare and file the notifications required of them thereunder in
connection with the transactions contemplated by this Agreement and shall
promptly and in good faith respond to all information requested of them by the
Federal Trade Commission and Department of Justice in connection with such
notification and otherwise cooperate in good faith with each other and such
Governmental Authorities. Parent and Nayarit shall (a) promptly
inform the other of any communication to or from the Federal Trade Commission,
the Department of Justice or any other Governmental Authority regarding the
transactions contemplated by this Agreement, (b) give the other prompt notice of
the commencement of any action, suit, litigation, arbitration, proceeding or
investigation by or before any Governmental Authority with respect to such
transactions and (c) keep the other reasonably informed as to the status of any
such action, suit, litigation, arbitration, proceeding or
investigation. Parent and Nayarit shall split equally all filing fees
relating to such filing.
5.11 Exchange
Listing. Parent
shall use commercially reasonable efforts to have the Parent Common Stock be
publicly listed in the United States on the New York Stock Exchange
Amex.
ARTICLE
VI
CONDITIONS
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(a) Parent Stockholder
Approval. The Required Parent Vote with respect to the Parent
Proxy Matters as set forth in the Proxy Statement shall have been obtained in
accordance with the DGCL.
(b) Nayarit Stockholder
Approval. The Required Nayarit Vote with respect to the
Nayarit Proxy Matters as set forth in the Nayarit Proxy Circular shall have been
obtained in accordance with the OCBA and all applicable local, federal and
securities Laws.
(c) Antitrust
Laws. If applicable, the required waiting period (and any
extension thereof) under any Antitrust Laws, if any, shall have expired or been
terminated.
(d) Requisite Regulatory
Approvals and Consents. The Requisite Regulatory Approvals and
all Consents from third parties required in connection with the transactions
contemplated by this Agreement, shall have been obtained or made, including for
greater certainty, Requisite Regulatory Approvals and Consents from the New York
Stock Exchange Amex, the TSX and the TSXV.
(e) Effective Registration
Statement. The Registration Statement shall have been declared
effective by the SEC and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for that purpose
shall be pending before or threatened by the SEC.
(f) No Law or
Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent) or Order that is then in effect and has the effect of making the
Amalgamation illegal or otherwise preventing or prohibiting consummation of the
Amalgamation.
(g) Updating of Disclosure
Schedules. Final versions of the Parent Disclosure Schedules
and Nayarit Disclosure Schedules shall have been delivered by the appropriate
Party to the other Party and such schedules shall have been certified as the
final, true, correct and complete schedules of such Party.
(h) Litigation. There
shall be no pending Action against any Party or any of its Affiliates, or any of
their respective properties or assets, or any officer, director, partner, member
or manager, in his or her capacity as such, of any Party or any of their
Affiliates, with respect to the consummation of the Amalgamation or the
transactions contemplated thereby which could reasonably be expected to have a
Material Adverse Effect.
(a) Representations and
Warranties. Each of the representations and warranties of
Nayarit and the Subsidiaries set forth in this Agreement shall be true and
correct as of the date of this Agreement and as of the Effective Time as though
made as of the Effective Time (except to the extent that any of such
representations and warranties expressly speaks only as of an earlier
date).
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(b) Agreements and
Covenants. Nayarit shall have performed, in all material
respects, all of its obligations and complied with, in all material respects,
all of its agreements and covenants to be performed or complied with by it under
this Agreement at or prior to the Effective Time.
(c) Officer
Certificate. Nayarit shall have delivered to Parent a
certificate, dated the Closing Date, signed by the chief executive officer or
chief financial officer of Nayarit, certifying in such capacity as to the
satisfaction of the conditions specified in Sections 6.2(a), (b) and
(e).
(d) Secretary’s
Certificate. Nayarit shall have delivered to Parent a true
copy of the resolutions of the Board of Directors of Nayarit authorizing the
execution of this Agreement and the consummation of the Amalgamation and
transactions contemplated herein, certified by the Secretary of Nayarit or
similar officer.
(e) Material Adverse
Effect. No Material Adverse Effect shall have occurred with
respect to Nayarit’s or its Subsidiaries’ business since the date of this
Agreement.
(f) Legal
Opinion. Parent shall have received an opinion of Nayarit’s
counsel, Xxxxxxxx Law, in form and substance reasonably acceptable to Parent,
dated as of the Closing Date.
(g) Title
Opinion. Parent
shall have received an opinion covering the Mineral Rights from Nayarit’s
Mexican counsel, Bufete Tecrcero y Xxxxx, S.C., in form and substance reasonably
acceptable to Parent, dated as of the Closing Date.
(h) Lock Up
Agreements. Parent shall have received the Lock Up Agreements
duly executed by each of Xxxxx Xxxxxxxxxx and Xxxxxxx Xxxxxxxx.
(i) Financials. Nayarit
shall have filed with the SEDAR all financial statements that are required
pursuant to applicable OSC Rules / National Instruments and Canadian Securities
Laws.
(j) Nayarit Stockholder
Dissenters Rights. In connection with the Amalgamation, no
more than five percent (5%) of Nayarit Stockholders shall have exercised their
right to dissent and undertake the Nayarit Dissent Rights under the
OBCA.
(k) SRK Consulting
Report. Parent shall have received from Nayarit a final report
from SRK Consulting and such final report shall not be materially different from
the preliminary SRK Consulting report provided to Parent.
(l) Due
Diligence. On or prior to February 15, 2010, Parent shall not
have notified Nayarit that Parent is not satisfied, in its sole discretion, with
its due diligence review of Nayarit’s or the Subsidiaries’ business, operations,
properties, assets and financial condition.
(m) Resignation of Nayarit
Officers and Directors. Except for those executive officers
and directors continuing in their capacities after the Effective Time as set
forth in the Nayarit Proxy Circular, each executive officer and director of
Nayarit and its Subsidiaries shall have tendered his or her resignation and full
and final release effective as of the Effective Time.
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(n) Nayarit Convertible
Securities. All Nayarit Convertible Securities and all other
agreements or instruments pursuant to which Nayarit Common Shares were issuable
prior to the Closing Date shall provide only for the issuance of Parent Common
Stock upon the due exercise or issuance of securities thereunder, on the
exchange basis set forth in the Amalgamation Agreement.
(o) Parent Fairness
Opinion. If required by the Board of Directors of Parent,
Parent shall have received a fairness opinion with respect to the transactions
contemplated by this Agreement and the Amalgamation Agreement.
(p) Nayarit Fairness
Opinion. Nayarit shall have received a fairness opinion from its
investment banking advisors with respect to the transactions contemplated by
this Agreement and the Amalgamation Agreement.
(q) Employment
Agreements. The employment agreements between Nayarit,
on one hand, and each of Xxxxx Xxxxxxxxxx and Xxxxxxx Xxxxxxxx, on the other
hand, shall either have been (i) terminated prior to the Effective Date in
accordance with the terms thereof, including payment of all termination payments
prescribed therein (except for any payments relating to the change of control of
Nayarit), or (ii) terminated with no payment of change of control benefits in
consideration for the execution of a new employment agreement with Parent on
terms comparable to the other senior officers of Parent.
(r) SRK Consulting
Certification. Parent shall have received a certificate from
SRK Consulting certifying that Nayarit’s representation and warranty set forth
in Section 2.34(a) is true and correct as of the date of this Agreement and as
of the Effective Time.
(a) Representations and
Warranties. Each of the representations and warranties of
Parent set forth in this Agreement shall be true and correct as of the date of
this Agreement and as of the Effective Time as though made as of the Effective
Time (except to the extent that any of such representations and warranties
expressly speaks only as of an earlier date).
(b) Agreements and
Covenants. Parent shall have performed, in all material
respects, its obligations and complied with, in all material respects, its
agreements and covenants to be performed or complied with by it under this
Agreement at or prior to the Effective Time, including, without limitation, the
resignation from the Board of Directors of Parent of those persons currently on
the Board of Directors of Parent who are not named as directors following the
Effective Time in the Proxy Statement.
(c) Officer
Certificate. Parent shall have delivered to Nayarit a
certificate, dated the Closing Date, signed by the chief executive officer or
chief financial officer of Parent, certifying in such capacity as to the
satisfaction of the conditions specified in Sections 6.3(a), (b) and
(e).
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(d) Secretary’s
Certificate. Parent shall have delivered to Nayarit a true
copy of the resolutions of the Board of Directors of Parent authorizing the
execution of this Agreement and the consummation of the Amalgamation and
transactions contemplated herein, certified by the Secretary of Parent or
similar officer.
(e) Material Adverse
Effect. No Material Adverse Effect shall have occurred with
respect to Parent’s business since the date of this Agreement.
(f) Legal
Opinion. Nayarit shall have received opinions of Parent’s
counsel, Ellenoff Xxxxxxxx & Schole LLP, in form and substance reasonably
acceptable to Nayarit, dated as of the Closing Date.
(g) Resignation of Parent
Officers and Directors. Except for those executive officers
and directors continuing in their capacities after the Effective Time as set
forth in the Proxy Statement, each executive officer and director of Parent
shall have tendered his or her resignation effective as of the Effective
Time.
(h) Exchange
Agent. Parent shall have entered into an agreement with the
Exchange Agent with respect to the exchange of the Nayarit Stock Certificates in
exchange for the Amalgamation Consideration.
(i) Due
Diligence. On or prior to February 15, 2010, Nayarit shall not
have notified Parent that Nayarit is not satisfied, in its sole discretion, with
its due diligence review of Parent’s business, operations, properties, assets
and financial condition.
(j) Title
Opinion. Nayarit
shall have received an opinion covering Parent’s subsidiaries’ title to their
mining assets in Mexico from Parent’s counsel, Xxxxx, Xxxxxx x Xxxxxxx S.C., in
form and substance reasonably acceptable to Nayarit, dated as of the Closing
Date.
(k) Lock Up
Agreements. Nayarit shall have received the Lock Up Agreement
duly executed by Xxxx Xxxxxxxx.
6.4 Frustration of
Conditions. Notwithstanding anything contained herein to the
contrary, neither Parent nor Nayarit may rely on the failure of any condition
set forth in this Article VI to be satisfied if such failure was caused by the
action or inaction of such Party or its Affiliates.
TERMINATION
AND ABANDONMENT
56
(a) by
mutual written consent of Nayarit and Parent, as duly authorized by the Board of
Directors of Parent and the Board of Directors of Nayarit;
(b) by
written notice by either Parent or Nayarit if the Closing conditions set forth
in Section 6.1 have not been satisfied by Nayarit or Parent, as the case may be
(or waived by Parent or Nayarit as the case may be) by 120 days after the date
of this Agreement (the “Completion
Deadline”). Notwithstanding the foregoing, the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
Party whose action or inaction is the primary cause of, or resulted in, any such
condition set forth in Section 6.1 to fail to be fulfilled;
(c) by
written notice by either Parent or Nayarit, if any Governmental Authority shall
have enacted, issued, promulgated, enforced or entered any Order or Law that is,
in each case, then in effect and is final and nonappealable and has the effect
of permanently restraining, enjoining or otherwise preventing or prohibiting the
transactions contemplated by this Agreement (including the Amalgamation); provided, however, the right
to terminate this Agreement under this Section 7.1(c) shall not be available to
any Party whose failure to fulfill any obligation under this Agreement has been
the primary cause of, or resulted in, any such Order or Law to have been
enacted, issued, promulgated, enforced or entered;
(d) by
written notice by Parent, if: (i) there has been a breach by Nayarit of any of
its representations, warranties, covenants or agreements contained in this
Agreement, or if any material representation or warranty of Nayarit shall have
become untrue or inaccurate, and (ii) the breach or inaccuracy is incapable of
being cured prior to the Closing or is not cured within twenty (20) days of
notice of such breach or inaccuracy;
(e) by
written notice by Nayarit, if: (i) there has been a breach by Parent of any of
its representations, warranties, covenants or agreements contained in this
Agreement, or if any material representation or warranty of Parent shall have
become untrue or inaccurate, and (ii) the breach or inaccuracy is incapable of
being cured prior to the Closing or is not cured within twenty (20) days of
notice of such breach or inaccuracy;
(f) by
written notice by Parent if the Closing conditions set forth in Section 6.2,
other than Sections 6.2(a) and 6.2(b) (which are addressed by Section 7.1(d)),
have not been satisfied by Nayarit (or waived by Parent) by the Completion
Deadline. Notwithstanding the foregoing, the right to terminate this
Agreement under this Section 7.1(f) shall not be available to Parent if Parent
is in material breach of any representation, warranty or covenant contained in
this Agreement, and such breach has primarily caused the Closing conditions set
forth in Section 6.2 to not be satisfied; or
(g) by
written notice by Nayarit if the Closing conditions set forth in Section 6.3,
other than Sections 6.3(a) and 6.3(b) (which are addressed by Section 7.1(e)),
have not been satisfied by Parent (or waived by Nayarit) by the Completion
Deadline. Notwithstanding the foregoing, the right to terminate this
Agreement under this Section 7.1(g) shall not be available to Nayarit if Nayarit
is in material breach of any representation, warranty or covenant contained in
this Agreement, and such breach has primarily caused the Closing conditions set
forth in Section 6.3 to not be satisfied.
57
58
MISCELLANEOUS
8.2 Notices. All
notices, consents, waivers and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
facsimile, receipt confirmed, or on the next Business Day when sent by reliable
overnight courier to the respective Parties at the following addresses (or at
such other address for a Party as shall be specified by like
notice):
|
(i)
|
if
to Nayarit, to:
|
Nayarit
Gold Inc.
00 Xxxxxx
Xxxxxxx
Xxxxx
000
Xxxxx
Xxxxxxxxx, XX
X0X
0X0
Xxxxxx
Attention: Xxxxx
X. Xxxxxxxxxx
Facsimile:
(000) 000-0000
with a
copy to (but which shall not constitute notice to Nayarit):
Xxxxxxxx
Law
000
Xxxxxxxx Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention:
Xxxxxx X. Xxxxxxxx, Esq.
Facsimile:
(000) 000-0000
|
(ii)
|
if
to Parent, to:
|
Capital
Gold Corporation
00 Xxxxxx
Xxxxxx, 00xx xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention:
Xxxx Xxxxxxxx
Facsimile:
(000) 000-0000
with a
copy to (but which shall not constitute notice to Parent):
Ellenoff
Xxxxxxxx & Schole LLP
000 Xxxx
00xx
Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention: Xxxxx
X. Xxxxxxxx, Esq.
Facsimile:
(000) 000-0000
59
8.4 Governing Law;
Jurisdiction. This Agreement shall be governed by, construed
and enforced in accordance with the Laws of the State of Delaware without regard
to the conflict of laws principles thereof. All Actions arising out
of or relating to this Agreement shall be heard and determined exclusively in
the Supreme Court of the State of New York, New York County, or in the United
States District Court for the Southern District of New York. The
Parties hereby: (a) submit to the exclusive jurisdiction of the Supreme Court of
the State of New York, New York County, or in the United States District Court
for the Southern District of New York for the purpose of any Action arising out
of or relating to this Agreement brought by any Party and (b) irrevocably
waive, and agree not to assert by way of motion, defense or otherwise, in any
such Action, any claim that it is not subject personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment or
execution, that the Action is brought in an inconvenient forum, that the venue
of the Action is improper, or that this Agreement or the transactions
contemplated hereby may not be enforced in or by any of the above-named
courts. Each of Parent and Nayarit agrees that a final judgment in
any action or proceeding with respect to which all appeals have been taken or
waived, shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment or in any other manner provided by Law. Each of
Parent and Nayarit agree that service of process to a Party with respect to any
Action relating to the transactions contemplated by this Agreement may be
accomplished pursuant to the methods set forth in Section
8.2. Nothing in this Section 8.4 shall affect the right of any Party
to serve legal process in any other manner permitted by Law.
8.5 Waiver of Jury
Trial. Each of the Parties hereby waives to the fullest extent
permitted by applicable Law any right it may have to a trial by jury with
respect to any Action directly or indirectly arising out of, under or in
connection with this Agreement or the transactions contemplated
hereby. Each of the Parties: (a) certifies that no representative,
agent or attorney of the other Party has represented, expressly or otherwise,
that such other Party would not, in the event of any Action, seek to enforce the
foregoing waiver and (b) acknowledges that it and the other Party has been
induced to enter into this Agreement by, among other things, the mutual waivers
and certifications in this Section 8.5.
60
8.7 Interpretation. The
article and section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the Parties and shall not
in any way affect the meaning or interpretation of this Agreement. As
used in this Agreement: (a) the term “Person” shall mean and include
an individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an association, an unincorporated organization, a
Governmental Authority and any other entity, (b) unless otherwise specified
herein, the term “Affiliate,” with respect to
any Person, shall mean and include any Person, directly or indirectly, through
one or more intermediaries controlling, controlled by or under common control
with such Person, (c) the term “Knowledge,” when used with
respect to Nayarit, shall mean the actual knowledge, after reasonable inquiry of
the executive officers and directors of Nayarit, and, when used with respect to
Parent, shall mean the actual knowledge, after reasonable inquiry, of the
executive officers and directors of Parent, and (d) the term “Business Day” means any day on
which the principal offices of the SEC in Washington, D.C. are open to accept
filings, or, in the case of determining a date when any payment is due, any day
on which banks are not required or authorized to close in the City of New
York. Whenever the words “include,” “includes”
or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof,” “herein,”
“hereby” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement. The Parties have participated jointly in the negotiation
and drafting of this Agreement. Consequently, in the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties, and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provision of this Agreement.
61
8.11 Third
Parties. Nothing contained in this Agreement or in any
instrument or document executed by any Party in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any Person that is not a party hereto or thereto or
a successor or permitted assign of such a Party other than Section 5.3 hereof
(which is intended to be for the benefit of the Persons covered thereby and may
be enforced by such Persons).
8.12 Headings. The
headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this
Agreement.
[Signature
Page Follows]
62
IN WITNESS WHEREOF, the
Parties hereto have caused this Agreement and Plan of Amalgamation to be signed
and delivered by their respective duly authorized officers as of the date first
above written.
CAPITAL GOLD CORPORATION | |||
By:
|
/s/ Xxxx Xxxxxxxx | ||
Name: Xxxx Xxxxxxxx | |||
Title: President |
NAYARIT GOLD INC. | |||
By:
|
/s/ Xxxxx Xxxxxxxxxx | ||
Name: Xxxxx Xxxxxxxxxx | |||
Title: President and CEO | |||
/s/ Xxxx Xxxxxxxx | |||
Xxxx Xxxxxxxx | |||
with respect to Section 4.6 only) |
/s/ Xxxxx Xxxxxxxxxx | |||
Xxxxx Xxxxxxxxxx | |||
(with respect to Section 4.6 only) | |||
/s/ Xxxxxxx Xxxxxxxx | |||
Xxxxxxx Xxxxxxxx | |||
(with respect to Section 4.6 only) | |||
63