EXHIBIT 1.1
ACQUISITION AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 5, 2001
BETWEEN
PROMOTIONAL CONCEPTS, INC.
AND
TARTAM, INC.
TABLE OF CONTENTS
ARTICLE 1. The Merger
Section 1.1. The Merger
Section 1.2. Effective Time
Section 1.3. Closing of the Merger
Section 1.4. Effects of the Merger
Section 1.5. Board of Directors and Officers
Section 1.6. Conversion of Shares
Section 1.7. Exchange of Certificates
Section 1.8. Stock Options
Section 1.9. Taking of Necessary Action; Further Action
ARTICLE 2. Representations and Warranties of PRO
Section 2.1. Organization and Qualification
Section 2.2. Capitalization of PRO
Section 2.3. Authority Relative to this Agreement;
Recommendation.
Section 2.4. SEC Reports; Financial Statements
Section 2.5. Information Supplied
Section 2.6. Consents and Approvals; No Violations
Section 2.7. No Default
Section 2.8. No Undisclosed Liabilities; Absence of Changes
Section 2.9. Litigation
Section 2.10. Compliance with Applicable Law
Section 2.11. Employee Benefit Plans; Labor Matters
Section 2.12. Environmental Laws and Regulations
Section 2.13. Tax Matters
Section 2.14. Title To Property
Section 2.15. Intellectual Property
Section 2.16. Insurance
Section 2.17. Vote Required
Section 2.18. Tax Treatment
Section 2.19. Affiliates
Section 2.20. Certain Business Practices
Section 2.21. Insider Interests
Section 2.22. Opinion of Financial Adviser
Section 2.23. Brokers
Section 2.24. Disclosure
Section 2.25. No Existing Discussion
Section 2.26. Material Contracts
ARTICLE 3. Representations and Warranties of TAR.
Section 3.1. Organization and Qualification
Section 3.2. Capitalization of TAR
Section 3.3. Authority Relative to this Agreement;
Recommendation
Section 3.4. SEC Reports; Financial Statements
Section 3.5. Information Supplied
Section 3.6. Consents and Approvals; No Violations
Section 3.7. No Default
Section 3.8 No Undisclosed Liabilities; Absence of Changes
Section 3.9. Litigation
Section 3.10. Compliance with Applicable Law
Section 3.11. Employee Benefit Plans; Labor Matters
Section 3.12. Environmental Laws and Regulations
Section 3.13. Tax Matters
Section 3.14. Title to Property
Section 3.15. Intellectual Property
Section 3.16. Insurance
Section 3.17. Vote Required
Section 3.18. Tax Treatment
Section 3.19. Affiliates
Section 3.20. Certain Business Practices
Section 3.21. Insider Interests
Section 3.22. Opinion of Financial Adviser
Section 3.23. Brokers
Section 3.24. Disclosure
Section 3.25. No Existing Discussions
Section 3.26. Material Contracts
ARTICLE 4. Covenants
Section 4.1. Conduct of Business of PRO
Section 4.2. Conduct of Business of TAR
Section 4.3. Preparation of 8-K and the Proxy Statement
Section 4.4. Other Potential Acquirers
Section 4.5. Meetings of Stockholders
Section 4.6. NASD OTC:BB Listing
Section 4.7. Access to Information
Section 4.8. Additional Agreements; Reasonable Efforts.
Section 4.9. Employee Benefits; Stock Option and Employee
Purchase Plans
Section 4.10. Public Announcements
Section 4.11. Indemnification
Section 4.12. Notification of Certain Matters
ARTICLE 5. Conditions to Consummation of the Merger Conditions to Each Party's
Obligations to Effect the
Section 5.1. Merger
Section 5.2. Conditions to the Obligations of PRO
Section 5.3. Conditions to the Obligations of TAR
ARTICLE 6. Termination; Amendment; Waiver
Section 6.1. Termination
Section 6.2. Effect of Termination
Section 6.3. Fees and Expenses
Section 6.4. Amendment
Section 6.5. Extension; Waiver
ARTICLE 7. Miscellaneous
Section 7.1. Nonsurvival of Representations and Warranties
Section 7.2. Entire Agreement; Assignment
Section 7.3. Validity
Section 7.4. Notices
Section 7.5. Governing Law
Section 7.6. Descriptive Headings
Section 7.7. Parties in Interest
Section 7.8. Certain Definitions
Section 7.9. Personal Liability
Section 7.10. Specific Performance
Section 7.11. Counterparts
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of March 5,
2001, is between PROMOTIONAL CONCEPTS, INC., a Nevada corporation ("PRO"), and
Tartam, Inc., a Nevada corporation ("TAR").
Whereas, the Boards of Directors of PRO and TAR each have, in light of and
subject to the terms and conditions set forth herein, (i) determined that the
Merger (as defined below) is fair to their respective stockholders and in the
best interests of such stockholders and (ii) approved the Merger in accordance
with this Agreement;
Whereas, for Federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
Whereas, PRO and TAR desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
Now, therefore, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, PRO and TAR hereby agree as follows:
ARTICLE I
The Merger
Section 1.1. The Merger.
At the Effective Time (as defined below) and upon the terms and subject to the
conditions of this Agreement and in accordance with the General Corporation law
of the state of Nevada (the "NGCL"), TAR shall be merged with and into PRO (as
defined below) (the "Merger`). Following the Merger, PRO shall continue as the
surviving corporation (the "Surviving Corporation"), shall continue to be
governed by the laws of the jurisdiction of its incorporation or organization
and the separate corporate existence of TAR shall cease. Prior to the Effective
Time, the parties hereto shall mutually agree as to the name of the Surviving
Corporation; however, initially the Surviving Corporation shall be named
Promotional Concepts, Inc. a Nevada corporation. The Merger is intended to
qualify as a tax-free reorganization under Section 368 of the Code as relates to
the non-cash exchange of stock referenced herein.
Section 1.2. Effective Time.
Subject to the terms and conditions set forth in this Agreement, a Certificate
of Merger (the "Merger Certificate") shall be duly executed and acknowledged by
each of TAR and PRO, and thereafter the Merger Certificate reflecting the Merger
shall be delivered to the Secretary of State of the State of Nevada for filing
pursuant to the NGCL on the Closing Date (as defined in Section 1.3). The Merger
shall become effective at such time as a properly executed and certified copy of
the Merger Certificate is duly filed by the Secretary of State of the State of
Nevada in accordance with the NGCL or such later time as the parties may agree
upon and set forth in the Merger Certificate (the time at which the Merger
becomes effective shall be referred to herein as the "Effective Time").
Section 1.3. Closing of the Merger.
The closing of the Merger (the "Closing") will take place at a time and on a
date to be specified by the parties, which shall be no later than the second
business day after satisfaction of the latest to occur of the conditions set
forth in Article 5 (the "Closing Date"), at the offices of Promotional Concepts,
Inc., 0000 Xxxx Xxxxxx, Xxxxx 000 Xxx Xxxxx, Xxxxxx 00000, unless another time,
date or place is agreed to in writing by the parties hereto.
Section 1.4. Effects of the Merger.
The Merger shall have the effects set forth in the NGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
properties, rights, privileges, powers of TAR shall vest in the Surviving
Corporation, and all debts, liabilities and duties of TAR shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 1.5. Board of Directors and Officers of PRO.
At or prior to the Effective Time, each of TAR and PRO agrees to take such
action as is necessary (i) to cause the number of directors comprising the full
Board of Directors of PRO to remain the same. In addition, PRO majority
stockholders of PRO prior to the Effective Time shall take all action necessary
to cause, to the greatest extent practicable, the PRO's Board of Directors shall
remain the same until the next Annual Meeting.
Section 1.6. Conversion of Shares.
(a) At the Effective Time, each share of common stock, par value $.001
per share of TAR (individually a "TAR Share" and collectively, the "TAR Shares")
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of TAR, PRO, or the holder
thereof, be converted into and shall become fully paid and nonassessable PRO
common shares determined by issuing one share of PRO common shares for every
1,200 shares of TAR.
(b) At the Effective Time, each TAR Share held in the treasury of TAR,
by TAR immediately prior to the Effective Time shall, by virtue of the Merger
and without any action on the part of TAR or PRO be canceled, retired and cease
to exist and no payment shall be made with respectthereto.
Section 1.7. Exchange of Certificates.
(a) Prior to the Effective Time, PRO shall enter into an agreement
with, and shall deposit with, Promotional Concepts, Inc., or such other agent or
agents as may be satisfactory to PRO and TAR (the "Exchange Agent'), for the
benefit of the holders of TAR Shares, for exchange through the Exchange Agent in
accordance with this Article I: (i) certificates representing the appropriate
number of PRO Shares to be issued to holders of TAR Shares issuable pursuant to
Section 1.6 in exchange for outstanding TAR Shares.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding TAR Shares (the "Certificates") whose shares were converted into the
right to receive PRO Shares pursuant to Section 1.6: (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as TAR
and PRO may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing PRO
Shares. Upon surrender of a Certificate to the Exchange Agent, together with
such letter of transmittal, duly executed, and any other required documents, the
holder of such Certificate shall be entitled to receive in exchange therefore a
certificate representing that number of whole PRO Shares and, if applicable, a
check representing the cash consideration to which such holder may be entitled
on account of the Cash Fund, which such holder has the right to receive pursuant
to the provisions of this Article I, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of TAR Shares
which are not registered in the transfer records of TAR, a certificate
representing the proper number of PRO Shares may be issued to a transferee if
the Certificate representing such TAR Shares is presented to the Exchange Agent
accompanied by all documents required by the Exchange Agent or PRO to evidence
and effect such transfer and by evidence that any applicable stock transfer or
other taxes have been paid. Until surrendered as contemplated by this Section
1.7, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing PRO Shares as contemplated by this Section 1.8.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to PRO Shares with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the PRO Shares represented thereby until the holder of record of such
Certificate shall surrender such Certificate.
(d) In the event that any Certificate for TAR Shares or PRO Shares
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange therefor, upon the making of an affidavit of that fact by the holder
thereof such PRO Shares and cash in lieu of fractional PRO Shares, if any, as
may be required pursuant to this Agreement; provided, however, that PRO or the
Exchange Agent, may, in its respective discretion, require the delivery of a
suitable bond, opinion or indemnity.
(e) All PRO Shares issued upon the surrender for exchange of TAR Shares
in accordance with the terms hereof (including any cash paid pursuant to Section
1.10 shall be deemed to have been issued in full satisfaction of all rights
pertaining to such TAR Shares. There shall be no further registration of
transfers on the stock transfer books of either of TAR or PRO of the TAR Shares
or PRO Shares which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to PRO for any reason,
they shall be canceled and exchanged as provided in this Article I.
(f) No fractional PRO Shares shall be issued in the Merger, but in lieu
thereof each holder of TAR Shares otherwise entitled to a fractional PRO Share
shall, upon surrender of its, his or her Certificate or Certificates, be
entitled to receive an additional share to round up to the nearest round number
of shares.
Section 1.8. At the Effective Time;
Each outstanding option to purchase TAR Shares, if any (a "TAR Stock Option" or
collectively, "TAR Stock Options") issued pursuant to any TAR Stock Option Plan
or TAR Long Term Incentive Plan whether vested or unrested, shall be cancelled.
Section 1.9. Taking of Necessary Action;
Further Action. If, at any time after the Effective Time, TAR or PRO reasonably
determines that any deeds, assignments, or instruments or confirmations of
transfer are necessary or desirable to carry out the purposes of this Agreement
and to vest PRO with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of TAR, the officers and directors of
PRO and TAR are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary or desirable
action.
ARTICLE 2
Representations and Warranties of PRO
Except as set forth on the Disclosure Schedule delivered by PRO to TAR (the "PRO
Disclosure Schedule"), PRO hereby represents and warrants to TAR as follows:
Section 2.1. Organization and Qualification.
(a) PRO is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted, except where the failure to be
so organized, existing and in good standing or to have such power and authority
would not have a Material Adverse Effect (as defined below) on PRO. When used in
connection with PRO, the term "Material Adverse Effect" means any change or
effect (i) that is or is reasonably likely to be materially adverse to the
business, results of operations, condition (financial or otherwise) or prospects
of PRO, other than any change or effect arising out of general economic
conditions unrelated to any business in which PRO is engaged, or (ii) that may
impair the ability of PRO to perform its obligations hereunder or to consummate
the transactions contemplated hereby.
(b) PRO has heretofore delivered to TAR accurate and complete copies of
the Certificate of Incorporation and Bylaws (or similar governing documents), as
currently in effect, of PRO. Except as set forth on Schedule 2.1 of the PRO
Disclosure Schedule, PRO is duly qualified or licensed and in good standing to
do business in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification or
licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not have a Material
Adverse Effect on PRO.
Section 2.2. Capitalization of PRO.
(a) The authorized capital stock of PRO consists of: (i) twenty-five
Million (25,000,000) Shares of Common Stock, $0.001 par value, and zero (0)
shares of Preferred stock, $0.001 par value. As of March 5, 2001 9,293,200
shares of PRO Common Stock were issued and outstanding with no shares of PRO
Preferred Stock issued and outstanding. All of the outstanding PRO Shares have
been duly authorized and validly issued, and are fully paid, nonassessable and
free of preemptive rights. Except as set forth herein, as of the date hereof,
there are no outstanding (i) shares of capital stock or other voting securities
of PRO, (ii) securities of PRO convertible into or exchangeable for shares of
capital stock or voting securities of PRO, except for the preferred shares of
PRO, (iii) options or other rights to acquire from PRO and, no obligations of
PRO to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of PRO, and (iv)
equity equivalents, interests in the ownership or earnings of PRO or other
similar rights (collectively, "PRO Securities"). As of the date hereof, there
are no outstanding obligations of PRO or its subsidiaries to repurchase, redeem
or otherwise acquire any PRO Securities or stockholder agreements, voting trusts
or other agreements or understandings to which PRO is a party or by which it is
bound relating to the voting or registration of any shares of capital stock of
PRO. For purposes of this Agreement, "Lien" means, with respect to any asset
(including, without limitation, any security) any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
(b) The PRO Shares constitute the only class of equity securities of
PRO registered or required to be registered under the Exchange Act.
(c) PRO does not own directly or indirectly more than fifty percent
(50%) of the outstanding voting securities or interests (including membership
interests) of any entity, other than as specifically disclosed in the disclosure
documents.
Section 2.3. Authority Relative to this Agreement; Recommendation.
(a) PRO has all necessary 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 have been duly and validly authorized by the
Board of Directors of PRO (the "PRO Board") and no other corporate proceedings
on the part of PRO are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby, except, as referred to in Section 2.17,
the approval and adoption of this Agreement by the holders of at least a
majority of the then outstanding PRO Shares. This Agreement has been duly and
validly executed and delivered by PRO and constitutes a valid, legal and binding
agreement of PRO, enforceable against PRO in accordance with its terms.
(b) The PRO Board has resolved to recommend that the stockholders of
PRO approve and adopt this Agreement.
Section 2.4. SEC Reports; Financial Statements.
PRO is not required to file forms, reports and documents with the SEC.
Section 2.5. Information Supplied.
None of the information supplied or to be supplied by PRO for inclusion or
incorporation by reference in connection with the Merger (the "Proxy Statement")
will at the date mailed to stockholders of PRO and at the times of the meeting
or meetings of stockholders of PRO to be held in connection with the Merger,
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. The Proxy Statement, insofar as it relates to the meeting of PRO's
stockholders to vote on the Merger, will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 2.6. Consents and Approvals;
No Violations. Except for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable requirements of, the
Securities Act, the Exchange Act, state securities or blue sky laws, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1916, as amended (the "HSR
Act"), the rules of the National Association of Securities Dealers, Inc.
("NASD"), the filing and recordation of the Merger Certificate as required by
the NGCL, and as set forth on Schedule 2.6 of the PRO Disclosure Schedule no
filing with or notice to, and no remit, authorization, consent or approval of,
any court or tribunal or administrative, governmental or regulatory body, agency
or authority (a "Governmental Entity") is necessary for the execution and
delivery by PRO of this Agreement or the consummation by PRO of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a Material Adverse Effect on PRO.
Except as set forth in Section 2.6 of the PRO Disclosure Schedule, neither the
execution, delivery and performance of this Agreement by PRO nor the
consummation by PRO of the transactions contemplated hereby will (i) conflict
with or result in any breach of any provision of the respective Certificate of
Incorporation or Bylaws (or similar governing documents) of PRO, (ii) 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, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which PRO is a party or by which
any of its properties or assets may be bound, or (iii) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to PRO or any of
its properties or assets, except in the case of (ii) or (iii) for violations,
breaches or defaults which would not have a Material Adverse Effect on PRO.
Section 2.7. No Default.
Except as set forth in Section 2.7 of the PRO Disclosure Schedule, PRO is not in
breach, default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a breach default or violation) of any
term, condition or provision of (i) its Certificate of Incorporation or Bylaws
(or similar governing documents), (ii) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
PRO is now a party or by which any of its respective properties or assets may be
bound or (iii) any order, writ injunction, decree, law, statute, rule or
regulation applicable to PRO or any of its respective properties or assets,
except in the case of (ii) or (iii) for violations, breaches or defaults that
would not have a Material Adverse Effect on PRO. Except as set forth in Section
2.7 of the PRO Disclosure Schedule, each note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which PRO is
now a party or by which its respective properties or assets may be bound that is
material to PRO and that has not expired is in full force and effect and is not
subject to any material default thereunder of which PRO is aware by any party
obligated to PRO thereunder.
Section 2.8. No Undisclosed Liabilities; Absence of Changes.
Except as and to the extent disclosed by PRO in the PRO, none of PRO or its
subsidiaries had any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of PRO and
its consolidated subsidiaries (including the notes thereto) or which would have
a Material Adverse Effect on PRO. Except as disclosed by PRO, none of PRO or its
subsidiaries has incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, which could reasonably be expected to have, and there
have been no events, changes or effects with respect to PRO or its subsidiaries
having or which could reasonably be expected to have, a Material Adverse Effect
on PRO. Except as and to the extent disclosed by PRO there has not been (i) any
material change by PRO in its accounting methods, principles or practices (other
than as required after the date hereof by concurrent changes in generally
accepted accounting principles), (ii) any revaluation by PRO of any of its
assets having a Material adverse Effect on PRO, including, without limitation,
any write-down of the value of any assets other than in the ordinary course of
business or (iii) any other action or event that would have required the consent
of any other party hereto pursuant to Section 4.2 of this Agreement had such
action or event occurred after the date of this Agreement.
Section 2.9. Litigation.
Except as set forth in Schedule 2.9 of the PRO Disclosure Schedule there is no
suit, claim, action, proceeding or investigation pending or, to the knowledge of
PRO, threatened against PRO or any of its subsidiaries or any of their
respective properties or assets before any Governmental Entity which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on PRO or could reasonably be expected to prevent or
delay the consummation of the transactions contemplated by this Agreement.
Except as disclosed by PRO, none of PRO or its subsidiaries is subject to any
outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen in the future, could reasonably be expected to have a
Material Adverse Effect on PRO or could reasonably be expected to prevent or
delay the consummation of the transactions contemplated hereby. Section 2.10.
Compliance with Applicable Law.
Except as disclosed by PRO, PRO and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "PRO
Permits"), except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals which would not have a Material Adverse Effect
on PRO. Except as disclosed by PRO, PRO and its subsidiaries are in compliance
with the terms of the PRO Permits, except where the failure so to comply would
not have a Material Adverse Effect on PRO. Except as disclosed by PRO, the
businesses of PRO and its subsidiaries are not being conducted in violation of
any law, ordinance or regulation of any Governmental Entity except that no
representation or warranty is made in this Section 2.10 with respect to
Environmental Laws and except for violations or possible violations which do
not, and, insofar as reasonably can be foreseen, in the future will not, have a
Material Adverse Effect on PRO. Except as disclosed by PRO no investigation or
review by any Governmental Entity
with respect to PRO or its subsidiaries is pending or, to the knowledge of PRO,
threatened, nor, to the knowledge of PRO, has any Governmental Entity indicated
an intention to conduct the same, other than, in each case, those which PRO
reasonably believes will not have a Material Adverse Effect on PRO.
Section 2.11. Employee Benefit Plans; Labor Matters.
(a) Except as set forth in Section 2.11(a) of the PRO Disclosure
Schedule with respect to each employee benefit plan, program, policy,
arrangement and contract (including, without limitation, any "employee benefit
plan," as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), maintained or contributed to at any time by PRO
or any entity required to be aggregated with PRO pursuant to Section 414 of the
Code (each, a "PRO Employee Plan"), no event has occurred and to the knowledge
of PRO, no condition or set of circumstances exists in connection with which PRO
could reasonably be expected to be subject to any liability which would have a
Material Adverse Effect on PRO.
(b) (i) No PRO Employee Plan is or has been subject to Title IV of
ERISA or Section 412 of the Code; and (ii) each PRO Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code is the subject of a favorable Internal Revenue
Service determination letter, and nothing has occurred which could reasonably be
expected to adversely affect such determination.
(c) Section 2.11(c) of the PRO Disclosure Schedule sets forth a true
and complete list, as of the date of this Agreement, of each person who holds
any PRO Stock Options, together with the number of PRO Shares which are subject
to such option, the date of grant of such option, the extent to which such
option is vested (or will become vested as a result of the Merger), the option
price of such option (to the extent determined as of the date hereof), whether
such option is a nonqualified stock option or is intended to qualify as an
incentive stock option within the meaning of Section 422(b) of the Code, and the
expiration date of such option. Section 2.11(c) of the PRO Disclosure Schedule
also sets forth the total number of such incentive stock options and such
nonqualified options. PRO has furnished TAR with complete copies of the plans
pursuant to which the PRO Stock Options were issued. Other than the automatic
vesting of PRO Stock Options that may occur without any action on the part of
PRO or its officers or directors, PRO has not taken any action that would result
in any PRO Stock Options that are unvested becoming vested in connection with or
as a result of the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
(d) PRO has made available to TAR (i) a description of the terms of
employment and compensation arrangements of all officers of PRO and a copy of
each such agreement currently in effect; (ii) copies of all agreements with
consultants who are individuals obligating PRO to make annual cash payments in
an amount exceeding $60,000; (iii) a schedule listing all officers of PRO who
have executed a non-competition agreement with PRO and a copy of each such
agreement currently in effect; (iv) copies (or descriptions) of all severance
agreements, programs and policies of PRO with or relating to its employees,
except programs and policies required to be maintained by law; and (v) copies of
all plans, programs, agreements and other arrangements of PRO with or relating
to its employees which contain change in control provisions all of which are set
forth in Section 2.11(d) of the PRO Disclosure Schedule.
(e) There shall be no payment, accrual of additional benefits,
acceleration of payments, or vesting in any benefit under any PRO Employee Plan
or any agreement or arrangement disclosed under this Section 2.11 solely by
reason of entering into or in connection with the transactions contemplated by
this Agreement.
(f) There are no controversies pending or, to the knowledge of PRO,
threatened, between PRO and any of their employees, which controversies have or
could reasonably be expected to have a Material Adverse Effect on PRO. Neither
PRO nor any of its subsidiaries is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by PRO or
any of its subsidiaries (and neither PRO nor any of its subsidiaries has any
outstanding material liability with respect to any terminated collective
bargaining agreement or labor union contract), nor does PRO know of any
activities or proceedings of any labor union to organize any of its or
employees. PRO has no knowledge of any strike, slowdown, work stoppage, lockout
or threat thereof, by or with respect to any of its employees.
Section 2.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by PRO in the PRO SEC Reports, (i) PRO
is in material compliance with all applicable federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) (collectively, "Environmental Laws"),
except for non-compliance that would not have a Material Adverse Effect on PRO,
which compliance includes, but is not limited to, the possession by PRO of all
material permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof; (ii)
PRO has not received written notice of, or, to the knowledge of PRO, is the
subject of, any action, cause of action, claim, investigation, demand or notice
by any person or entity alleging liability under or non-compliance with any
Environmental Law (an "Environmental Claim") that could reasonably be expected
to have a Material Adverse Effect on PRO; and (iii) to the knowledge of PRO,
there are no circumstances that are reasonably likely to prevent or interfere
with such material compliance in the future.
(b) Except as publicly disclosed by PRO, there are no Environmental
Claims which could reasonably be expected to have a Material Adverse Effect on
PRO that are pending or, to the knowledge of PRO, threatened against PRO or, to
the knowledge of PRO, against any person or entity whose liability for any
Environmental Claim PRO has or may have retained or assumed either contractually
or by operation of law.
Section 2.13. Tax Matters.
(a) Except as set forth in Section 2.13 of the PRO Disclosure Schedule:
(i) PRO has filed or has had filed on its behalf in a timely manner (within any
applicable extension periods) with the appropriate Governmental Entity all
income and other material Tax Returns (as defined herein) with respect to Taxes
(as defined herein) of PRO and all Tax Returns were in all material respects
true, complete and correct; (ii) all material Taxes with respect to PRO have
been paid in full or have been provided for in accordance with GAAP on PRO's
most recent balance sheet which is part of the PRO SEC Documents. (iii) there
are no outstanding agreements or waivers extending the statutory period of
limitations applicable to any federal, state, local or foreign income or other
material Tax Returns required to be filed by or with respect to PRO; (iv) to the
knowledge of PRO none of the Tax Returns of or with respect to PRO is currently
being audited or examined by any Governmental Entity; and (v) no deficiency for
any income or other material Taxes has been assessed with respect to PRO which
has not been abated or paid in full. (vi) Management of PRO asserts that any
franchise taxes, if owed, by TAR to the State of Nevada will be paid by PRO.
(b) For purposes of this Agreement, (i) "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, sales, use, ad valorem, goods and services, capital,
transfer, franchise, profits, license, withholding, payroll, employment,
employer health, excise, estimated, severance, stamp, occupation, property or
other taxes, customs duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority and (ii) "Tax Return" shall
mean any report, return, documents declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction with respect to
Taxes.
Section 2.14. Title to Property.
PRO has good and defensible title to all of its properties and assets, free and
clear of all liens, charges and encumbrances except liens for taxes not yet due
and payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which, individually or in the aggregate, would not
have a Material Adverse Effect on PRO; and, to PRO's knowledge, all leases
pursuant to which PRO leases from others real or personal property are in good
standing, valid and effective in accordance with their respective terms, and
there is not, to the knowledge of PRO, under any of such leases, any existing
material default or event of default (or event which with notice of lapse of
time, or both, would constitute a default and in respect of which PRO has not
taken adequate steps to prevent such a default from occurring) except where the
lack of such good standing, validity and effectiveness, or the existence of such
default or event, would not have a Material Adverse Effect on PRO.
Section 2.15. Intellectual Property.
(a) PRO owns, or possesses adequate licenses or other valid rights to
use, all existing United States and foreign patents, trademarks, trade names,
service marks, copyrights, trade secrets and applications therefore that are
material to its business as currently conducted (the "PRO Intellectual Property
Rights").
(b) The validity of the PRO Intellectual Property Rights and the title
thereto of PRO is not being questioned in any litigation to which PRO is a
party.
(c) Except as set forth in Section 2.15(c) of the PRO Disclosure
Schedule, the conduct of the business of PRO as now conducted does not, to PRO's
knowledge, infringe any valid patents, trademarks, trade names, service marks or
copyrights of others. The consummation of the transactions completed hereby will
not result in the loss or impairment of any PRO Intellectual Property Rights.
(d) PRO has taken steps it believes appropriate to protect and maintain
its trade secrets as such, except in cases where PRO has elected to rely on
patent or copyright protection in lieu of trade secret protection.
Section 2.16. Insurance.
PRO currently does not maintain general liability and other business insurance.
Section 2.17. Vote Required.
The affirmative vote of the holders of at least a majority of the outstanding
PRO Shares is the only vote of the holders of any class or series of PRO's
capital stock necessary to approve and adopt this Agreement and the Merger.
Section 2.18. Tax Treatment.
Neither PRO nor, to the knowledge of PRO, any of its affiliates has taken or
agreed to take action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
Section 2.19. Affiliates.
Except for Principal PRO Stockholder("PRO") and the directors and executive
officers of PRO, each of whom is listed in Section 2.19 of the PRO Disclosure
Schedule, there are no persons who, to the knowledge of PRO, may be deemed to be
affiliates of PRO under Rule 1-02(b) of Regulation S-X of the SEC (the "PRO
Affiliates").
Section 2.20. Certain Business Practices.
None of PRO or any directors, officers, agents or employees of PRO has (i) used
any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended (the "FCPA"), or (iii) made any other unlawful
payment.
Section 2.21. Insider Interests.
Except as set forth in Section 2.21 of the PRO Disclosure Schedule, neither PRO
nor any officer or director of PRO has any interest in any material property,
real or personal, tangible or intangible, including without limitation, any
computer software or PRO Intellectual Property Rights, used in or pertaining to
the business of PRO, expect for the ordinary rights of a stockholder or employee
stock option holder.
Section 2.22. Opinion of Financial Adviser.
No advisers, as of the date hereof, have delivered to the PRO Board a written
opinion to the effect that, as of such date, the exchange ratio contemplated by
the Merger is fair to the holders of PRO Shares.
Section 2.23. Brokers.
No broker, finder or investment banker (other than the PRO Financial Adviser, a
true and correct copy of whose engagement agreement has been provided to TAR) is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of PRO.
Section 2.24. Disclosure.
No representation or warranty of PRO in this Agreement or any certificate,
schedule, document or other instrument furnished or to be furnished to TAR
pursuant hereto or in connection herewith contains, as of the date of such
representation, warranty or instrument, or will contain any untrue statement of
a material fact or, at the date thereof, omits or will omit to state a material
fact necessary to make any statement herein or therein, in light of the
circumstances under which such statement is or will be made, not misleading.
Section 2.25. No Existing Discussions.
As of the date hereof, PRO is not engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to any Third Party
Acquisition (as defined in Section 4.4).
Section 2.26. Material Contracts.
(a) PRO has delivered or otherwise made available to TAR true, correct
and complete copies of all contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which PRO is a
party affecting the obligations of any party thereunder) to which PRO is a party
or by which any of its properties or assets are bound that are, material to the
business, properties or assets of PRO taken as a whole, including, without
limitation, to the extent any of the following are, individually or in the
aggregate, material to the business, properties or assets of PRO taken as a
whole, all: (i) employment, product design or development, personal services,
consulting, non-competition, severance, golden parachute or indemnification
contracts (including, without limitation, any contract to which PRO is a party
involving employees of PRO); (ii) licensing, publishing, merchandising or
distribution agreements; (iii) contracts granting rights of first refusal or
first negotiation; (iv) partnership or joint venture agreements; (v) agreements
for the acquisition, sale or lease of material properties or assets or stock or
otherwise entered into since September 30, 2000; (vi) contracts or agreements
with any Governmental Entity. and (vii) all commitments and agreements to enter
into any of the foregoing (collectively, together with any such contracts
entered into in accordance with Section 4.1 hereof, the "PRO Contracts"). PRO is
not a party to or bound by any severance, golden parachute or other agreement
with any employee or consultant pursuant to which such person would be entitled
to receive any additional compensation or an accelerated payment of compensation
as a result of the consummation of the transactions contemplated hereby.
(b) Each of the PRO Contracts is valid and enforceable in accordance
with its terms, and there is no default under any PRO Contract so listed either
by PRO or, to the knowledge of PRO, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by PRO or, to the knowledge of PRO, any other
party, in any such case in which such default or event could reasonably be
expected to have a Material Adverse Effect on PRO.
(c) No party to any such PRO Contract has given notice to PRO of or
made a claim against PRO with respect to any breach or default thereunder, in
any such case in which such breach or default could reasonably be expected to
have a Material Adverse Effect on PRO.
ARTICLE 3
Representations and Warranties of TAR
Except as set forth on the Disclosure Schedule delivered by TAR to PRO (the "TAR
Disclosure Schedule"), TAR hereby represents and warrants to PRO as follows:
Section 3.1. Organization and Qualification.
(a) Each of TAR and its subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a Material Adverse
Effect (as defined below) on TAR. When used in connection with TAR, the term
"Material Adverse Effect" means any change or effect (i) that is or is
reasonably likely to be materially adverse to the business, results of
operations, condition (financial or otherwise) or prospects of TAR and its
subsidiaries, taken as a whole, other than any change or effect arising out of
general economic conditions unrelated to any businesses in which TAR and its
subsidiaries are engaged, or (ii) that may impair the ability of TAR to
consummate the transactions contemplated hereby.
(b) TAR has heretofore delivered to PRO accurate and complete copies of
the Certificate of Incorporation and Bylaws (or similar governing documents), as
currently in effect, of TAR. Each of TAR and its subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Material Adverse Effect on TAR.
Section 3.2. Capitalization of TAR.
(a) As of March 5, 2001, the authorized capital stock of TAR consists
of; (i) Twenty Million (20,000,000) TAR common Shares, $.001 par value, of which
6,000,000 common Shares are issued and outstanding, and (ii) no authorized
preferred shares. All of the outstanding TAR Shares have been duly authorized
and validly issued, and are fully paid, nonassessable and free of preemptive
rights.
(b) Except as set forth in Section 3.2(b) of the TAR Disclosure
Schedule, TAR is the record and beneficial owner of all of the issued and
outstanding shares of capital stock of its subsidiaries.
(c) Except as set forth in Section 3.2(c) of the TAR Disclosure
Schedule, between December 31, 1999 and the date hereof, no shares of TAR's
capital stock have been issued and no TAR Stock options have been granted.
Except as set forth in Section 3.2(a) above, as of the date hereof, there are no
outstanding (i) shares of capital stock or other voting securities of TAR, (ii)
securities of TAR or its subsidiaries convertible into or exchangeable for
shares of capital stock or voting securities of TAR, (iii) options or other
rights to acquire from TAR or its subsidiaries, or obligations of TAR or its
subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of TAR,
or (iv) equity equivalents, interests in the ownership or earnings of TAR or its
subsidiaries or other similar rights (collectively, "TAR Securities"). As of the
date hereof, there are no outstanding obligations of TAR or any of its
subsidiaries to repurchase, redeem or otherwise acquire any TAR Securities.
There are no stockholder agreements, voting trusts or other agreements or
understandings to which TAR is a party or by which it is bound relating to the
voting or registration of any shares of capital stock of TAR.
(d) Except as set forth in Section 3.2(d) of the TAR Disclosure
Schedule, there are no securities of TAR convertible into or exchangeable for,
no options or other rights to acquire from TAR, and no other contract,
understanding, arrangement or obligation (whether or not contingent) providing
for the issuance or sale, directly or indirectly, of any capital stock or other
ownership interests in, or any other securities of, any subsidiary of TAR.
(e) The TAR Shares constitute the only class of equity securities of
TAR or its subsidiaries.
(f) Except as set forth in Section 3.2(f) of the TAR Disclosure
Schedule, TAR does not own directly or indirectly more than fifty percent (50%)
of the outstanding voting securities or interests (including membership
interests) of any entity.
Section 3.3. Authority Relative to this Agreement; Recommendation.
(a) TAR has all necessary 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 have been duly and validly authorized by the
Board of Directors of TAR (the "TAR Board"), and no other corporate proceedings
on the part of TAR are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby, except, as referred to in Section 3.17,
the approval and adoption of this Agreement by the holders of at least a
majority of the then outstanding TAR Shares. This Agreement has been duly and
validly executed and delivered by TAR and constitutes a valid, legal and binding
agreement of TAR, enforceable against TAR in accordance with its terms.
(b) The TAR Board has resolved to recommend that the stockholders of
TAR approve and adopt this Agreement.
Section 3.4. SEC Reports; Financial Statements.
(a) TAR has filed all required forms, reports and documents with the
Securities and Exchange Commission (the "SEC") since Septemner 1, 2000, each of
which has complied in all material respects with all applicable requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange
Act (and the rules and regulations promulgated thereunder, respectively), each
as in effect on the dates such forms, reports and documents were filed. TAR has
heretofore delivered or promptly will deliver prior to the Effective Date to
TAR, in the form filed with the SEC (including any amendments thereto but
excluding any exhibits), (i) its Registration Statement on Form 10SB-12G dated
September 1, 2000, (ii) all definitive proxy statements relating to TAR's
meetings of stockholders (whether annual or special) held since September 1,
2000, if any, and (iii) all other reports or registration statements filed by
TAR with the SEC since September 1, 2000 (all of the foregoing, collectively,
the "TAR SEC Reports"). None of such TAR SEC Reports, including, without
limitation, any financial statements or schedules included or incorporated by
reference therein, contained, when filed, any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited financial statements of TAR included in the TAR SEC Reports fairly
present, in conformity with generally accepted accounting principles applied on
a consistent basis (except as may be indicated in the notes thereto), the
financial position of TAR as of the dates thereof and its results of operations
and changes in financial position for the periods then ended. All material
agreements, contracts and other documents required to be filed as exhibits to
any of the TAR SEC Reports have been so filed.
(b) TAR has heretofore made available or promptly will make available
to PRO a complete and correct copy of any amendments or modifications which are
required to be filed with the SEC but have not yet been filed with the SEC, to
agreements, documents or other instruments which previously had been filed by
TAR with the SEC pursuant to the Exchange Act.
Section 3.5. Information Supplied.
None of the information supplied or to be supplied by TAR for inclusion or
incorporation by reference to (i) the 8-K will, at the time the 8-K is filed
with the SEC and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (ii) the Proxy Statement will, at the date mailed to
stockholders of PRO, if any, and at the times of the meeting or meetings of
stockholders of PRO to be held in connection with the Merger, 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. The Proxy
Statement, insofar as it relates to the meeting of TAR's stockholders to vote on
the Merger, will comply as to form in all material respects with the provisions
of the Exchange Act and the rules and regulations thereunder, and the 8-K will
comply as to form in all material respects with the provisions of the Securities
Act and the rules and regulations thereunder.
Section 3.6. Consents and Approvals;
No Violations. Except as set forth in Section 3.6 of the TAR Disclosure
Schedule, and for filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, the Securities Act,
the Exchange Act, state securities or blue sky laws, the HSR Act, the rules of
the NASD, and the filing and recordation of the Merger Certificate as required
by the NGCL, no filing with or notice to, and no permit, authorization, consent
or approval of, any Governmental Entity is necessary for the execution and
delivery by TAR of this Agreement or the consummation by TAR of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations consents or approvals or to make such filings or give such notice
would not have a Material Adverse Effect on TAR.
Neither the execution, delivery and performance of this Agreement by TAR nor the
consummation by TAR of the transactions contemplated hereby will (i) conflict
with or result in any breach of any provision of the respective Certificate of
Incorporation or Bylaws (or similar governing documents) of TAR or any of TAR's
subsidiaries, (ii) 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, amendment, cancellation or acceleration or Lien) under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which TAR or any of TAR is subsidiaries is a party or by which any of them or
any of their respective properties or assets may be bound or (iii) violate any
order, writ, injunction, decree, law, statute, rule or regulation applicable to
TAR or any of TAR's subsidiaries or any of their respective properties or
assets, except in the case of (ii) or (iii) for violations, breaches or defaults
which would not have a Material Adverse Effect on TAR.
Section 3.7. No Default.
None of TAR or any of its subsidiaries is in breach, default or violation (and
no event has occurred which with notice or the lapse of time or both would
constitute a breach, default or violation) of any term, condition or provision
of (i) its Certificate of Incorporation or Bylaws (or similar governing
documents), (ii) any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which TAR or any of its
subsidiaries is now a party or by which any of them or any of their respective
properties or assets may be bound or (iii) any order, writ, injunction, decree,
law, statute, rule or regulation applicable to TAR, its subsidiaries or any of
their respective properties or assets, except in the case of (ii) or (iii) for
violations, breaches or defaults that would not have a Material Adverse Effect
on TAR. Each note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which TAR or any of its
subsidiaries is now a party or by which any of them or any of their respective
properties or assets may be bound that is material to TAR and its subsidiaries
taken as a whole and that has not expired is in full force and effect and is not
subject to any material default thereunder of which TAR is aware by any party
obligated to TAR or any subsidiary thereunder.
Section 3.8. No Undisclosed Liabilities; Absence of Changes.
Except as set forth in Section 2.8 of the TAR Disclosure Schedule and except as
and to the extent publicly disclosed by TAR in the TAR SEC Reports, as of
September 1, 2000, TAR does not have any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would be required
by generally accepted accounting principles to be reflected on a balance sheet
of TAR (including the notes thereto) or which would have a Material Adverse
Effect on TAR. Except as publicly disclosed by TAR, since September 1, 2000, TAR
has not incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, which could reasonably be expected to have, and there
have been no events, changes or effects with respect to TAR having or which
reasonably could be expected to have, a Material Adverse Effect on TAR. Except
as and to the extent publicly disclosed by TAR in the TAR SEC Reports and except
as set forth in Section 2.8 of the TAR Disclosure Schedule, since September 1,
2000, there has not been (i) any material change by TAR in its accounting
methods, principles or practices (other than as required after the date hereof
by concurrent changes in generally accepted accounting principles), (ii) any
revaluation by TAR of any of its assets having a Material Adverse Effect on TAR,
including, without limitation, any write-down of the value of any assets other
than in the ordinary course of business or (iii) any other action or event that
would have required the consent of any other party hereto pursuant to Section
4.1 of this Agreement had such action or event occurred after the date of this
Agreement.
Section 3.9. Litigation.
Except as publicly disclosed by TAR in the TAR SEC Reports, there is no suit,
claim, action, proceeding or investigation pending or, to the knowledge of TAR,
threatened against TAR or any of its subsidiaries or any of their respective
properties or assets before any Governmental Entity which, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect on
TAR or could reasonably be expected to prevent or delay the consummation of the
transactions contemplated by this Agreement. Except as publicly disclosed by TAR
in the TAR SEC Reports, TAR is not subject to any outstanding order, writ,
injunction or decree which, insofar as can be reasonably foreseen in the future,
could reasonably be expected to have a Material Adverse Effect on TAR or could
reasonably be expected to prevent or delay the consummation of the transactions
contemplated hereby.
Section 3.10. Compliance with Applicable Law.
Except as publicly disclosed by TAR in the TAR SEC Reports, TAR holds all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the `'TAR Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not have a
Material Adverse Effect on TAR. Except as publicly disclosed by TAR in the TAR
SEC Reports, TAR is in compliance with the terms of the TAR Permits, except
where the failure so to comply would not have a Material Adverse Effect on TAR.
Except as publicly disclosed by TAR in the TAR SEC Reports, the business of TAR
is not being conducted in violation of any law, ordinance or regulation of any
Governmental Entity except that no representation or warranty is made in this
Section 2.10 with respect to Environmental Laws (as defined in Section 2.12
below) and except for violations or possible violations which do not, and,
insofar as reasonably can be foreseen, in the future will not, have a Material
Adverse Effect on TAR. Except as publicly disclosed by TAR in the TAR SEC
Reports, no investigation or review by any Governmental Entity with respect to
TAR is pending or, to the knowledge of TAR, threatened, nor, to the knowledge of
TAR, has any Governmental Entity indicated an intention to conduct the same,
other than, in each case, those which TAR reasonably believes will not have a
Material Adverse Effect on TAR.
Section 3.11. Employee Benefit Plans; Labor Matters.
(a) With respect to each employee benefit plan, program, policy,
arrangement and contract (including, without limitation, any "employee benefit
plan," as defined in Section 3(3) of ERISA), maintained or contributed to at any
time by TAR, any of its subsidiaries or any entity required to be aggregated
with TAR or any of its subsidiaries pursuant to Section 414 of the Code (each, a
"TAR Employee Plan"), no event has occurred and, to the knowledge of TAR, no
condition or set of circumstances exists in connection with which TAR or any of
its subsidiaries could reasonably be expected to be subject to any liability
which would have a Material Adverse Effect on TAR.
(b) (i) No TAR Employee Plan is or has been subject to Title IV of
ERISA or Section 412 of the Code; and (ii) each TAR Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code is the subject of a favorable Internal Revenue
Service determination letter, and nothing has occurred which could reasonably be
expected to adversely affect such determination.
(c) Section 3.11(c) of the TAR Disclosure Schedule sets forth a true
and complete list, as of the date of this Agreement, of each person who holds
any TAR Stock Options, together with the number of TAR Shares which are subject
to such option, the date of grant of such option, the extent to which such
option is vested (or will become vested as a result of the Merger), the option
price of such option (to the extent determined as of the date hereof), whether
such option is a nonqualified stock option or is intended to qualify as an
incentive stock option within the meaning of Section 422(b) of the Code, and the
expiration date of such option. Section 3.11(c) of the TAR Disclosure Schedule
also sets forth the total number of such incentive stock options and such
nonqualified options. TAR has furnished PRO with complete copies of the plans
pursuant to which the TAR Stock Options were issued. Other than the automatic
vesting of TAR Stock Options that may occur without any action on the part of
TAR or its officers or directors, TAR has not taken any action that would result
in any TAR Stock Options that are unvested becoming vested in connection with or
as a result of the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
(d) TAR has made available to PRO (i) a description of the terms of
employment and compensation arrangements of all officers of TAR and a copy of
each such agreement currently in effect; (ii) copies of all agreements with
consultants who are individuals obligating TAR to make annual cash payments in
an amount exceeding $60,000; (iii) a schedule listing all officers of TAR who
have executed a non-competition agreement with TAR and a copy of each such
agreement currently in effect; (iv) copies (or descriptions) of all severance
agreements, programs and policies of TAR with or relating to its employees,
except programs and policies required to be maintained by law; and (v) copies of
all plans, programs, agreements and other arrangements of the TAR with or
relating to its employees which contain change in control provisions.
(e) Except as disclosed in Section 3.11(e) of the TAR Disclosure
Schedule there shall be no payment, accrual of additional benefits, acceleration
of payments, or vesting in any benefit under any TAR Employee Plan or any
agreement or arrangement disclosed under this Section 3.11 solely by reason of
entering into or in connection with the transactions contemplated by this
Agreement.
(f) There are no controversies pending or, to the knowledge of TAR
threatened, between TAR or any of its subsidiaries and any of their respective
employees, which controversies have or could reasonably be expected to have a
Material Adverse Effect on TAR. Neither TAR nor any of its subsidiaries is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by TAR or any of its subsidiaries (and neither
TAR nor any of its subsidiaries has any outstanding material liability with
respect to any terminated collective bargaining agreement or labor union
contract), nor does TAR know of any activities or proceedings of any labor union
to organize any of its or any of its subsidiaries' employees. TAR has no
knowledge of any strike, slowdown, work stoppage, lockout or threat thereof by
or with respect to any of its or any of its subsidiaries' employees.
Section 3.12. Environmental Laws and Regulations.
(a) Except as disclosed by TAR, (i) each of TAR and its subsidiaries is
in material compliance with all Environmental Laws, except for non-compliance
that would not have a Material Adverse Effect on TAR, which compliance includes,
but is not limited to, the possession by TAR and its subsidiaries of all
material permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof; (ii)
none of TAR or its subsidiaries has received written notice of, or, to the
knowledge of TAR, is the subject of, any Environmental Claim that could
reasonably be expected to have a Material Adverse Effect on TAR; and (iii) to
the knowledge of TAR, there are no circumstances that are reasonably likely to
prevent or interfere with such material compliance in the future.
(b) Except as disclosed by TAR, there are no Environmental Claims which
could reasonably be expected to have a Material Adverse Effect on TAR that are
pending or, to the knowledge of TAR, threatened against TAR or any of its
subsidiaries or, to the knowledge of TAR, against any person or entity whose
liability for any Environmental Claim TAR or its subsidiaries has or may have
retained or assumed either contractually or by operation of law.
Section 3.13. Tax Matters.
Except as set forth in Section 3.13 of the TAR Disclosure Schedule: (i) TAR and
each of its subsidiaries has filed or has had filed on its behalf in a timely
manner (within any applicable extension periods) with the appropriate
Governmental Entity all income and other material Tax Returns with respect to
Taxes of TAR and each of its subsidiaries and all Tax Returns were in all
material respects true, complete and correct; (ii) all material Taxes with
respect to TAR and each of its subsidiaries have been paid in full or have been
provided for in accordance with GAAP on TAR's most recent balance sheet which is
part of the TAR SEC Documents; (iii) there are no outstanding agreements or
waivers extending the statutory period of limitations applicable to any federal,
state, local or foreign income or other material Tax Returns required to be
filed by or with respect to TAR or its subsidiaries; (iv) to the knowledge of
TAR none of the Tax Returns of or with respect to TAR or any of its subsidiaries
is currently being audited or examined by any Governmental Entity; and (v) no
deficiency for any income or other material Taxes has been assessed with respect
to TAR or any of its subsidiaries which has not been abated or paid in full.
(vi) Management of PRO asserts that any franchise taxes, if owed, by TAR to the
State of Nevada will be paid by PRO.
Section 3.14. Title to Property.
TAR and each of its subsidiaries have good and defensible title to all of their
properties and assets, free and clear of all liens, charges and encumbrances
except liens for taxes not yet due and payable and such liens or other
imperfections of title, if any, as do not materially detract from the value of
or interfere with the present use of the property affected thereby or which,
individually or in the aggregate, would not have a Material Adverse Effect on
TAR; and, to TAR's knowledge, all leases pursuant to which TAR or any of its
subsidiaries lease from others real or personal property are in good standing,
valid and effective in accordance with their respective terms, and there is not,
to the knowledge of TAR, under any of such leases, any existing material default
or event of default (or event which with notice or lapse of time, or both, would
constitute a material default and in respect of which TAR or such subsidiary has
not taken adequate steps to prevent such a default from occurring) except where
the lack of such good standing, validity and effectiveness, or the existence of
such default or event of default would not have a Material Adverse Effect on
TAR.
Section 3.15. Intellectual Property.
(a) Each of TAR and its subsidiaries owns, or possesses adequate
licenses or other valid rights to use, all existing United States and foreign
patents, trademarks, trade names, services marks, copyrights, trade secrets, and
applications therefore that are material to its business as currently conducted
(the "TAR Intellectual Property Rights").
(b) Except as set forth in Section 3.15(b) of the TAR Disclosure
Schedule the validity of the TAR Intellectual Property Rights and the title
thereto of TAR or any subsidiary, as the case may be, is not being questioned in
any litigation to which TAR or any subsidiary is a party.
(c) The conduct of the business of TAR and its subsidiaries as now
conducted does not, to TARis knowledge, infringe any valid patents, trademarks,
tradenames, service marks or copyrights of others. The consummation of the
transactions contemplated hereby will not result in the loss or impairment of
any TAR Intellectual Property Rights.
(d) Each of TAR and its subsidiaries has taken steps it believes
appropriate to protect and maintain its trade secrets as such, except in cases
where TAR has elected to rely on patent or copyright protection in lieu of trade
secret protection.
Section 3.16. Insurance.
TAR does not currently maintain general liability and other business insurance.
Section 3.17. Vote Required.
The affirmative vote of the holders of at least a majority of the outstanding
TAR Shares is the only vote of the holders of any class or series of TAR's
capital stock necessary to approve and adopt this Agreement and the Merger.
Section 3.18. Tax Treatment.
Neither TAR nor, to the knowledge of TAR, any of its affiliates has taken or
agreed to take any action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
Section 3.19. Affiliates.
Except for the directors and executive officers of TAR, each of whom is listed
in Section 3.19 of the TAR Disclosure Schedule, there are no persons who, to the
knowledge of TAR, may be deemed to be affiliates of TAR under Rule 1-02(b) of
Regulation S-X of the SEC (the "TAR Affiliates").
Section 3.20. Certain Business Practices.
None of TAR, any of its subsidiaries or any directors, officers, agents or
employees of TAR or any of its subsidiaries has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the FCPA, or (iii) made any other
unlawful payment.
Section 3.21. Insider Interests.
Except as set forth in Section 3.21 of the TAR Disclosure Schedule, no officer
or director of TAR has any interest in any material property, real or personal,
tangible or intangible, including without limitation, any computer software or
TAR Intellectual Property Rights, used in or pertaining to the business of TAR
or any subsidiary, except for the ordinary rights of a stockholder or employee
stock optionholder.
Section 3.22. Opinion of Financial Adviser.
No advisers, as of the date hereof, have delivered to the TAR Board a written
opinion to the effect that, as of such date, the exchange ratio contemplated by
the Merger is fair to the holders of TAR Shares.
Section 3.23. Brokers.
No broker, finder or investment banker (other than the TAR Financial Adviser, a
true and correct copy of whose engagement agreement has been provided to PRO) is
entitled to any brokerage, finders or other fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of TAR.
Section 3.24. Disclosure.
No representation or warranty of TAR in this Agreement or any certificate,
schedule, document or other instrument furnished or to be furnished to PRO
pursuant hereto or in connection herewith contains, as of the date of such
representation, warranty or instrument, or will contain any untrue statement of
a material fact or, at the date thereof, omits or will omit to state a material
fact necessary to make any statement herein or therein, in light of the
circumstances under which such statement is or will be made, not misleading.
Section 3.25. No Existing Discussions.
As of the date hereof, TAR is not engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to any Third Party
Acquisition (as defined in Section 5.4).
Section 3.26. Material Contracts.
(a) TAR has delivered or otherwise made available to PRO true, correct
and complete copies of all contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which TAR is a
party affecting the obligations of any party thereunder) to which TAR or any of
its subsidiaries is a party or by which any of their properties or assets are
bound that are, material to the business, properties or assets of TAR and its
subsidiaries taken as a whole, including, without limitation, to the extent any
of the following are, individually or in the aggregate, material to the
business, properties or assets of TAR and its subsidiaries taken as a whole,
all: (i) employment, product design or development, personal services,
consulting, non-competition, severance, golden parachute or indemnification
contracts (including, without limitation, any contract to which TAR is a party
involving employees of TAR); (ii) licensing, publishing, merchandising or
distribution agreements; (iii) contracts granting rights of first refusal or
first negotiation; (iv) partnership or joint venture agreements; (v) agreements
for the acquisition, sale or lease of material properties or assets or stock or
otherwise. (vi) contracts or agreements with any Governmental Entity; and (vii)
all commitments and agreements to enter into any of the foregoing (collectively,
together with any such contracts entered into in accordance with Section 5.2
hereof, the 'TAR Contracts"). Neither TAR nor any of its subsidiaries is a party
to or bound by any severance, golden parachute or other agreement with any
employee or consultant pursuant to which such person would be entitled to
receive any additional compensation or an accelerated payment of compensation as
a result of the consummation of the transactions contemplated hereby.
(b) Each of the TAR Contracts is valid and enforceable in accordance
with its terms, and there is no default under any TAR Contract so listed either
by TAR or, to the knowledge of TAR, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by TAR or, to the knowledge of TAR, any other
party, in any such case in which such default or event could reasonably be
expected to have a Material Adverse Effect on TAR.
(c) No party to any such TAR Contract has given notice to TAR of or made a
claim against TAR with respect to any breach or default thereunder, in any such
case in which such breach or default could reasonably be expected to have a
Material Adverse Effect on TAR.
ARTICLE 4
Covenants
Section 4.1. Conduct of Business of PRO.
Except as contemplated by this Agreement or as described in Section 4.1 of the
PRO Disclosure Schedule, during the period from the date hereof to the Effective
Time, PRO will conduct its operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organization, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, except as
otherwise expressly provided in this Agreement or as described in Section 4.1 of
the PRO Disclosure Schedule, prior to the Effective Time, PRO will not, without
the prior written consent of TAR:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) amend the terms of any stock of any class or any other securities (except
bank loans) or equity equivalents.
(c) split, combine or reclassify any shares of its capital stock, declare, set
aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, make
any other actual, constructive or deemed distribution in respect of its
capital stock or otherwise make any payments to stockholders in their
capacity as such, or redeem or otherwise acquire any of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
PRO (other than the Merger);
(e) (i) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings or issuances of letters of credit under
existing lines of credit in the ordinary course of business; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person. (iii) make any loans, advances or capital contributions to, or
investments in, any other person; (iv) pledge or otherwise encumber shares
of capital stock of PRO; or (v) mortgage or pledge any of its material
assets, or create or suffer to exist any material Lien thereupon (other
than tax Liens for taxes not yet due);
(f) except as may be required by law, enter into, adopt or amend or terminate
any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock
appreciation rights or performance units); provided, however, that this
paragraph (f) shall not prevent PRO from (i) entering into employment
agreements or severance agreements with employees in the ordinary course of
business and consistent with past practice or (ii) increasing annual
compensation and/or providing for or amending bonus arrangements for
employees for fiscal 1999 in the ordinary course of year-end compensation
reviews consistent with past practice and paying bonuses to employees for
fiscal 1999 in amounts previously disclosed to TAR (to the extent that such
compensation increases and new or amended bonus arrangements do not result
in a material increase in benefits or compensation expense to PRO) however,
there are no bonuses or salaries being paid at this time;
(g) acquire, sell, lease or dispose of any assets in any single transaction or
series of related transactions (other than in the ordinary course of
business);
(h) except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting principles or
practices used by it;
(i) revalue in any material respect any of its assets including, without
limitation, writing down the value of inventory or writing-off notes or
accounts receivable other than in the ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or assets)
any corporation, partnership or other business organization or division
thereof or any equity interest therein; (ii) enter into any contract or
agreement other than in the ordinary course of business consistent with
past practice which would be material to PRO; (iii) authorize any new
capital expenditure or expenditures which, individually is in excess of
$1,000 or, in the aggregate, are in excess of $5,000; provided, however
that none of the foregoing shall limit any capital expenditure required
pursuant to existing contracts;
(k) make any tax election or settle or compromise any income tax liability
material to PRO;
(l) settle or compromise any pending or threatened suit, action or claim which
(i) relates to the transactions contemplated hereby or (ii) the settlement
or compromise of which could have a Material Adverse Effect on PRO;
(m) commence any material research and development project or terminate
any material research and development project that is currently ongoing, in
either case, except pursuant to the terms of existing contracts or in the
ordinary course of business; or
(n) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through 4.1(m) or any action which would make any
of the representations or warranties of contained in this Agreement untrue or
incorrect.
Section 4.2. Conduct of Business of TAR.
Except as contemplated by this Agreement or as described in Section 4.2 of the
TAR Disclosure Schedule during the period from the date hereof to the Effective
Time, TAR will conduct its operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organization, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, except as
otherwise expressly provided in this Agreement or as described in Section 4.2 of
the TAR Disclosure Schedule, prior to the Effective Time, TAR will not, without
the prior written consent of:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to issue,
sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities (except bank loans) or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights;
(c) split, combine or reclassify any shares of its capital stock, declare, set
aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, make
any other actual, constructive or deemed distribution in respect of its
capital stock or otherwise make any payments to stockholders in their
capacity as such, or redeem or otherwise acquire any of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger consolidation, restructuring, recapitalization or other reorganization of
TAR (other than the Merger);
(e) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings or issuances of letters of credit under
existing lines of credit in the ordinary course of business. (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person; (iii) make
any loans, advances or capital contributions to or investments in, any other
person; (iv) pledge or otherwise encumber shares of capital stock of TAR or its
subsidiaries; or (v) mortgage or pledge any of its material assets, or create or
suffer to exist any material Lien thereupon (other than tax Liens for taxes not
yet due);
(f) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any director,
officer or employee in any manner, or increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation rights or
performance units); provided, however, that this paragraph (f) shall not prevent
TAR or its subsidiaries from (i) entering into employment agreements or
severance agreements with employees in the ordinary course of business and
consistent with past practice or (ii) increasing annual compensation and/or
providing for or amending bonus arrangements for employees for fiscal 2000 in
the ordinary course of year end compensation reviews consistent with past
practice and paying bonuses to employees for fiscal 2000 in amounts previously
disclosed to (to the extent that such compensation increases and new or amended
bonus arrangements do not result in a material increase in benefits or
compensation expense to TAR) at the present time there are no salaries or
bonuses expected for the end of fiscal 2000;
(g) acquire, sell, lease or dispose of any assets in any single
transaction or series of related transactions other than in the ordinary course
of business;
(h) except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting principles or
practices used by it;
(i) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory of writing-off notes or
accounts receivable other than in the ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or assets)
any corporation, partnership, or other business organization or division
thereof or any equity interest therein; (ii) enter into any contract or
agreement other than in the ordinary course of business consistent with
past practice which would be material to TAR; (iii) authorize any new
capital expenditure or expenditures which, individually, is in excess of
$1,000 or, in the aggregate, are in excess of $5,000: provided, however
that none of the foregoing shall limit any capital expenditure required
pursuant to existing contracts;
(k) make any tax election or settle or compromise any income tax liability
material to TAR and its subsidiaries taken as a whole;
(l) settle or compromise any pending or threatened suit, action or claim which
(i) relates to the transactions contemplated hereby or (ii) the settlement
or compromise of which could have a Material Adverse Effect on TAR;
(m) commence any material research and development project or terminate any
material research and development project that is currently ongoing, in
either case, except pursuant to the terms of existing contracts or except
in the ordinary course of business; or
(n) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.2(a) through 4.2(m) or any action which would make
any of the representations or warranties of the TAR contained in this
Agreement untrue or incorrect.
Section 4.3. Preparation of 8-K and the Proxy Statement.
TAR shall promptly prepare and file with the SEC the Proxy Statement, if
required by counsel.
Section 4.4. Other Potential Acquirers.
(a) TAR, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any Third Party Acquisition.
Section 4.5. Meetings of Stockholders.
Each of TAR and PRO shall take all action necessary, in accordance with the
respective General Corporation Law of its respective state, and its respective
certificate of incorporation and bylaws, to duly call, give notice of, convene
and hold a meeting of its stockholders as promptly as practicable, to consider
and vote upon the adoption and approval of this Agreement and the transactions
contemplated hereby. The stockholder votes required for the adoption and
approval of the transactions contemplated by this Agreement shall be the vote
required by the NGCL and its charter and bylaws, in the case of PRO and the
General Corporation Law of its respective state, and its charter and bylaws, in
the case of TAR. PRO and TAR will, through their respective Boards of Directors,
recommend to their respective stockholders approval of such matters
Section 4.6. OTC:BB Listing.
The parties shall use all reasonable efforts to cause the PRO Shares, subject to
Rule 144, to be traded on the Over The Counter Bulletin Board (OTC:BB).
Section 4.7. Access to Information.
(a) Between the date hereof and the Effective Time, PRO will give TAR
and its authorized representatives, and TAR will give PRO and its authorized
representatives, reasonable access to all employees, plants, offices, warehouses
and other facilities and to all books and records of itself and its
subsidiaries, will permit the other party to make such inspections as such party
may reasonably require and will cause its officers and those of its subsidiaries
to furnish the other party with such financial and operating data and other
information with respect to the business and properties of itself and its
subsidiaries as the other party may from time to time reasonably request.
(b) Between the date hereof and the Effective Time, PRO shall furnish
to TAR, and TAR will furnish to PRO, within 25 business days after the end of
each quarter, quarterly statements prepared by such party in conformity with its
past practices) as of the last day of the period then ended.
(c) Each of the parties hereto will hold and will cause its consultants
and advisers to hold in confidence all documents and information furnished to it
in connection with the transactions contemplated by this Agreement.
Section 4.8. Additional Agreements, Reasonable Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (i)
cooperating in the preparation and filing of the Proxy Statement and the 8-K,
any filings that may be required under the HSR Act, and any amendments to any
thereof; (ii) obtaining consents of all third parties and Governmental Entities
necessary, proper or advisable for the consummation of the transactions
contemplated by this Agreement; (iii) contesting any legal proceeding relating
to the Merger and (iv) the execution of any additional instruments necessary to
consummate the transactions contemplated hereby. Subject to the terms and
conditions of this Agreement, TAR and PRO agree to use all reasonable efforts to
cause the Effective Time to occur as soon as practicable after the stockholder
votes with respect to the Merger. In case at any time after the Effective Time
any further action is necessary to carry out the purposes of this Agreement, the
proper officers and directors of each party hereto shall take all such necessary
action.
Section 4.9. Indemnification.
(a) To the extent, if any, not provided by an existing right under one
of the parties' directors and officers liability insurance policies, from and
after the Effective Time, PRO shall, to the fullest extent permitted by
applicable law, indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, a director, officer or employee of the parties hereto or any
subsidiary thereof (each an "Indemnified Party" and, collectively, the
"Indemnified Parties") against all losses, expenses (including reasonable
attorneys' fees and expenses), claims, damages or liabilities or, subject to the
proviso of the next succeeding sentence, amounts paid in settlement arising out
of actions or omissions occurring at or prior to the Effective Time and whether
asserted or claimed prior to, at or after the Effective Time) that are in whole
or in part (i) based on, or arising out of the fact that such person is or was a
director, officer or employee of such party or a subsidiary of such party or
(ii) based on, arising out of or pertaining to the transactions contemplated by
this Agreement. In the event of any such loss expense, claim, damage or
liability (whether or not arising before the Effective Time), (i) PRO shall pay
the reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to PRO, promptly after statements
therefore are received and otherwise advance to such Indemnified Party upon
request reimbursement of documented expenses reasonably incurred, in either case
to the extent not prohibited by the NGCL or its certificate of incorporation or
bylaws, (ii) PRO will cooperate in the defense of any such matter and (iii) any
determination required to be made with respect to whether an Indemnified Party's
conduct complies with the standards set forth under the NGCL and PRO's
certificate of incorporation or bylaws shall be made by independent counsel
mutually acceptable to PRO and the Indemnified Party; provided, however, that
PRO shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld). The Indemnified Parties as a
group may retain only one law firm with respect to each related matter except to
the extent there is, in the opinion of counsel to an Indemnified Party, under
applicable standards of professional conduct, c conflict on any significant
issue between positions of any two or more Indemnified Parties.
(b) In the event PRO or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity or such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then and in either such case, proper provision shall be made so that the
successors and assigns of PRO shall assume the obligations set forth in this
Section 4.11.
(c) To the fullest extent permitted by law, from and after the
Effective Time, all rights to indemnification now existing in favor of the
employees, agents, directors or officers of PRO and TAR and their subsidiaries
with respect to their activities as such prior to the Effective Time, as
provided in PRO's and TAR's certificate of incorporation or bylaws, in effect on
the date thereof or otherwise in effect on the date hereof, shall survive the
Merger and shall continue in full force and effect for a period of not less than
six years from the Effective Time.
(d) The provisions of this Section 4.11 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
Section 4.10. Notification of Certain Matters.
The parties hereto shall give prompt notice to the other parties, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Effective Time, (ii) any material failure of such party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder, (iii) any notice of, or other communication relating to, a default
or event which, with notice or lapse of time or both, would become a default,
received by such party or any of its subsidiaries subsequent to the date of this
Agreement and prior to the Effective Time, under any contract or agreement
material to the financial condition, properties, businesses or results of
operations of such party and its subsidiaries taken as a whole to which such
party or any of its subsidiaries is a party or is subject, (iv) any notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement, or (v) any material adverse change in their respective financial
condition, properties, businesses, results of operations or prospects taken as a
whole, other than changes resulting from general economic conditions; provided,
however, that the delivery of any notice pursuant to this Section 4.12 shall not
cure such breach or non-compliance or limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
ARTICLE 5
Conditions to Consummation of the Merger
Section 5.1. Conditions to Each Party's Obligations to Effect the Merger.
The respective obligations of each party hereto to effect the Merger are subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been approved and adopted by the requisite
vote of the stockholders of PRO and TAR;
(b) this Agreement shall have been approved and adopted by the Board of
Directors of PRO and TAR;
(c) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Merger;
(d) any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired, and any other governmental or regulatory notices or
approvals required with respect to the transactions contemplated hereby shall
have been either filed or received; and
Section 5.2. Conditions to the Obligations of PRO.
The obligation of PRO to effect the Merger is subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) the representations of TAR contained in this Agreement or in any
other document delivered pursuant hereto shall be true and correct (except to
the extent that the breach thereof would not have a Material Adverse Effect on
TAR) at and as of the Effective Time with the same effect as if made at and as
of the Effective Time (except to the extent such representations specifically
related to an earlier date, in which case such representations shall be true and
correct as of such earlier date), and at the Closing TAR shall have delivered to
PRO a certificate to that effect;
(b) each of the covenants and obligations of TAR to be performed at or
before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed in all material respects at or before the Effective Time and
at the Closing TAR shall have delivered to PRO a certificate to that effect;
(d) TAR shall have obtained the consent or approval of each person
whose consent or approval shall be required in order to permit the Merger as
relates to any obligation, right or interest of TAR under any loan or credit
agreement, note, mortgage, indenture, lease or other agreement or instrument,
except those for which failure to obtain such consents and approvals would not,
in the reasonable opinion of PRO, individually or in the aggregate, have a
Material Adverse Effect on TAR;
(e) there shall have been no events, changes or effects with respect to
TAR or its subsidiaries having or which could reasonably be expected to have a
Material Adverse Effect on TAR; and
Section 5.3. Conditions to the Obligations of TAR.
The respective obligations of TAR to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) the representations of PRO contained in this Agreement or in any
other document delivered pursuant hereto shall be true and correct (except to
the extent that the breach thereof would not have a Material Adverse Effect on
PRO) at and as of the Effective Time with the same effect as if made at and as
of the Effective Time (except to the extent such representations specifically
related to an earlier date, in which case such representations shall be true and
correct as of such earlier date), and at the Closing PRO shall have delivered to
TAR a certificate to that effect;
(b) each of the covenants and obligations of PRO to be performed at or
before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed in all material respects at or before the Effective Time and
at the Closing PRO shall have delivered to TAR a certificate to that effect;
(c) there shall have been no events, changes or effects with respect to
PRO having or which could reasonably be expected to have a Material Adverse
Effect on PRO.
ARTICLE 6
Termination; Amendment; Waiver
Section 6.1. Termination.
This Agreement may be terminated and the Merger may be abandoned at any time
prior to the Effective Time, whether before or after approval and adoption of
this Agreement by PRO's or TAR's stockholders:
(a) by mutual written consent of PRO and TAR;
(b) by TAR or PRO if (i) any court of competent jurisdiction in the
United States or other United States Governmental Entity shall have issued a
final order, decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action is or shall have become nonappealable or (ii) the Merger has not
been consummated by December 15, 2000; provided, however, that no party may
terminate this Agreement pursuant to this clause (ii) if such party's failure to
fulfill any of its obligations under this Agreement shall have been the reason
that the Effective Time shall not have occurred on or before said date;
(c) by PRO if (i) there shall have been a breach of any representation
or warranty on the part of TAR set forth in this Agreement, or if any
representation or warranty of TAR shall have become untrue, in either case such
that the conditions set forth in Section 5.2(a) would be incapable of being
satisfied by November 30, 1999 (or as otherwise extended), (ii) there shall have
been a breach by TAR of any of their respective covenants or agreements
hereunder having a Material Adverse Effect on TAR or materially adversely
affecting (or materially delaying) the consummation of the Merger, and TAR, as
the case may be, has not cured such breach within 20 business days after notice
by PRO thereof, provided that PRO has not breached any of its obligations
hereunder, (iii) PRO shall have convened a meeting of its stockholders to vote
upon the Merger and shall have failed to obtain the requisite vote of its
stockholders; or (iv) PRO shall have convened a meeting of its Board of
Directors to vote upon the Merger and shall have failed to obtain the requisite
vote;
(d) by TAR if (i) there shall have been a breach of any representation
or warranty on the part of PRO set forth in this Agreement, or if any
representation or warranty of PRO shall have become untrue, in either case such
that the conditions set forth in Section 5.3(a) would be incapable of being
satisfied by December 15, 2000 (or as otherwise extended), (ii) there shall have
been a breach by PRO of its covenants or agreements hereunder having a Material
Adverse Effect on PRO or materially adversely affecting (or materially delaying)
the consummation of the Merger, and PRO, as the case may be, has not cured such
breach within twenty business days after notice by TAR thereof, provided that
TAR has not breached any of its obligations hereunder, (iii) the PRO Board shall
have recommended to PRO's stockholders a Superior Proposal, (iv) the PRO Board
shall have withdrawn, modified or changed its approval or recommendation of this
Agreement or the Merger or shall have failed to call, give notice of, convene or
hold a stockholders' meeting to vote upon the Merger, or shall have adopted any
resolution to effect any of the foregoing, (v) TAR shall have convened a meeting
of its stockholders to vote upon the Merger and shall have failed to obtain the
requisite vote of its stockholders or (vi) PRO shall have convened a meeting of
its stockholders to vote upon the Merger and shall have failed to obtain the
requisite vote of its stockholders.
Section 6.2. Effect of Termination.
In the event of the termination and abandonment of this Agreement pursuant to
Section 6.1, this Agreement shall forthwith become void and have no effect,
without any liability on the part of any party hereto or its affiliates,
directors, officers or stockholders, other than the provisions of this Section
6.2 and Sections 4.7(c) and 6.3 hereof. Nothing contained in this Section 6.2
shall relieve any party from liability for any breach of this Agreement.
Section 6.3. Fees and Expenses.
Except as specifically provided in this Section 6.3, each party shall bear its
own expenses in connection with this Agreement and the transactions contemplated
hereby.
Section 6.4. Amendment.
This Agreement may be amended by action taken by PRO and TAR at any time before
or after approval of the Merger by the stockholders of PRO and TAR (if required
by applicable law) but, after any such approval, no amendment shall be made
which requires the approval of such stockholders under applicable law without
such approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of the parties hereto.
Section 6.5. Extension; Waiver.
At any time prior to the Effective Time, each party hereto may (i) extend the
time for the performance of any of the obligations or other acts of any other
party, (ii) waive any inaccuracies in the representations and warranties of any
other party contained herein or in any document, certificate or writing
delivered pursuant hereto or (iii) waive compliance by any other party with any
of the agreements or conditions contained herein. Any agreement on the part of
any party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
any party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.
ARTICLE 7
Miscellaneous
Section 7.1. Nonsurvival of Representations and Warranties.
The representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall not
limit any covenant or agreement of the parties hereto which by its terms
requires performance after the Effective Time.
Section 7.2. Entire Agreement; Assignment.
This Agreement (a) constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings both written and oral, between the parties with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise.
Section 7.3. Validity.
If any provision of this Agreement, or the application thereof to any person or
circumstance, is held invalid or unenforceable, the remainder of this Agreement,
and the application of such provision to other persons or circumstances, shall
not be affected thereby, and to such end, the provisions of this Agreement are
agreed to be severable.
Section 7.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
or by registered or certified mail (postage prepaid, return receipt requested),
to each other party as follows:
If to TAR:
Tartam, Inc.
0000 Xxxxxxxxx Xx.
Xxxxx Xxxx, Xxxxxx 00000
If to PRO:
PROMOTIONAL CONCEPTS, INC.
0000 XXXX XXXXXX, XXXXX 000
XXX XXXXX, XXXXXX 00000
(000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 7.5. Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Nevada, without regard to the principles of conflicts of law
thereof.
Section 7.6. Descriptive Headings.
The descriptive 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.
Section 7.7. Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit of each
party hereto and its successors and permitted assigns, and except as provided in
Sections 4.9 and 4.11, nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 7.8. Certain Definitions.
For the purposes of this Agreement, the term:
(a) "affiliate" means (except as otherwise provided in Sections 2.19,
3.19 and 4.13) a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first mentioned person;
(b) "business day" means any day other than a day on which Nasdaq is
closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "knowledge" or "known" means, with respect to any matter in
question, if an executive officer of PRO or TAR or its subsidiaries, as the case
may be, has actual knowledge of such matter;
(e) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
(f) "subsidiary" or "subsidiaries" of PRO, TAR or any other person,
means any corporation, partnership, limited liability company, association,
trust, unincorporated association or other legal entity of which PRO, TAR or any
such other person, as the case may be (either alone or through or together with
any other subsidiary), owns, directly or indirectly, 50% or more of the capital
stock, the holders of which are generally entitled to vote for the election of
the board of directors or other governing body of such corporation or other
legal entity.
Section 7.9. Personal Liability.
This Agreement shall not create or be deemed to create or permit any personal
liability or obligation on the part of any direct or indirect stockholder of
PRO, TAR or Newco or any officer, director, employee, agent, representative or
investor of any party hereto.
Section 7.10. Specific Performance.
The parties hereby acknowledge and agree that the failure of any party to
perform its agreements and covenants hereunder, including its failure to take
all actions as are necessary on its part to the consummation of the Merger, will
cause irreparable injury to the other parties for which damages, even if
available, will not be an adequate remedy. Accordingly, each party hereby
consents to the issuance of injunctive relief by any court of competent
jurisdiction to compel performance of such party's obligations and to the
granting by any court of the remedy of specific performance of its obligations
hereunder; provided, however, that, if a party hereto is entitled to receive any
payment or reimbursement of expenses pursuant to Sections 6.3(a), (b) or (c), it
shall not be entitled to specific performance to compel the consummation of the
Merger.
Section 7.11. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which shall constitute one and the same
agreement.
In Witness Whereof, each of the parties has caused this Agreement to be duly
executed on its behalf as of the day and year first above written.
Promotional Concepts, Inc.
-------------------------
Xxxxx Xxxx, President
President
Tartam, Inc.
-------------------------
Xxxxx Xxxx, President
PRO DISCLOSURE SCHEDULE
Schedule 2.1 Organization See Amended Articles/Bylaws
Schedule 2.6 Consents & Approvals None Provided
Schedule 2.7 No Default Not Applicable
Schedule 2.8 No Undisclosed Liability None Exist
Schedule 2.9 Litigation None Exist
Schedule 2.10 Compliance with Applicable Law None
Schedule 2.11 Employee Benefit Plans None Provided
Schedule 2.12 Environmental Laws and Regs Not Applicable
Schedule 2.13 Tax Matters None Exist
Schedule 2.14 Title to Property None Exist
Schedule 2.15 Intellectual Property None Exist
Schedule 2.16 Insurance None Exist
Schedule 2.17 Vote Required None Required
Schedule 2.18 Tax Treatment Not Applicable
Schedule 2.19 Affiliates None Provided
Schedule 2.20 Certain Business Practices None Exist
Schedule 2.21 Insider Interest None Exist
Schedule 2.22 Opinion of Financial Adviser Waived - None Exist
Schedule 2.23 Broker None Exist
Schedule 4.1 Conduct of Business None Provided
TAR DISCLOSURE SCHEDULE
Schedule 3.2(b) Subsidiary Stock None Exist
Schedule 3.2(c) Capital Stock Rights None Exist other than
as in Articles
Schedule 3.2(d) Securities conversions None Exist
Schedule 3.2 (f) Subsidiaries None Exist
Schedule 3.6 Consents & Approvals Provided
Schedule 3.7 No Default Not Applicable
Schedule 3.8 No Undisclosed Liability None Exist
Schedule 3.9 Litigation None Exist
Schedule 3.10 Compliance with Applicable Law Not Applicable
- fully disclosed in
10SB12G
Schedule 3.11 Employee Benefit Plans
Section 3.11( c) No Options Exist
Section 3.11(e) No Agreements Exist
Schedule 3.12 Environmental Laws and Regs Not Applicable
Schedule 3.13 Tax Matters None Exist
Schedule 3.14 Title to Property None Exist
Schedule 3.15(b) Intellectual Property None Exist
Schedule 3.16 Insurance None Exist
Schedule 3.17 Vote Required See Shareholder
Meeting Certificate
Schedule 3.18 Tax Treatment Not Applicable
Schedule 3.19 Affiliates None Exist
Schedule 3.20 Certain Business Practices None Exist
Schedule 3.21 Insider Interest None Exist
Schedule 3.22 Opinion of Financial Adviser Waived - None Exist
Schedule 2.23 Broker None Exist
Schedule 4.2 Conduct of Business See Amended &
Restated Articles
